SharkNinja, Inc.

Thank you for standing by. I'd like to welcome everyone to the Shark Ninja's second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star and the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Arvind Bhatia, Head of Investor Relations. Please go ahead.

Good morning and welcome to the Shark Ninja second quarter 2024 earnings conference call. Our second quarter earnings release was issued this morning and can be found on the company's website at ir.sharkninja.com. And shortly after today's call, a webcast will be available there for replay. Let me remind you that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. If you refer to the earnings release and the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward looking statements. The company undertakes no obligation to update or revise these forward looking statements in the future. During the call, we will make several references to non-GAAP financial measures. We believe these measures provide investors with useful perspective on the underlying growth trends of the business. We have included a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures in our earnings release. With me today are Chief Executive Officer Mark Barocas and Chief Financial Officer Patrick Regan. Mark will provide a business update. Patrick will review our Q2 financial results and discuss our 2024 outlook. Mark will then share brief closing remarks and we will open up the call for your questions. Now, I will turn the call over to Mark.

Thank you, Arvind. Good morning, everyone, and thank you for joining us today. Let me begin with a review of our second quarter performance. Our teams once again delivered exceptional performance in the quarter. We grew adjusted net sales an incredible 38%. This was on top of 20% growth in the year-ago period, and it was all organic and highly profitable growth. On an adjusted basis, EBITDA increased 48%, while earnings per share was up 51%. Our strategic initiatives around supplier diversification, competitive bidding, value engineering, and pricing management, drove nearly 600 basis points of adjusted gross margin improvement in the quarter. Adjusted EBITDA margins increased 90 basis points, even as we continue to significantly reinvest in our growth initiatives. Our growth in the quarter was broad-based across product categories and geographies, and our innovation continued to drive market share gains. Each of our four key categories delivered at least double-digit growth. Cleaning grew 20%, our strongest performance in this category since COVID. Our overall domestic business accelerated, growing an incredible 35%. And this performance was even more remarkable considering the domestic market was relatively flat. The international segment had another very strong quarter. Adjusted net sales increased 46% with emerging markets like Germany and France delivering triple-digit growth. Our performance was also balanced across our three growth pillars as we continued to increase our share in existing categories, enter new categories, and expand our global footprint. Our first growth pillar entering new and adjacent categories remains a key growth driver. With the launch of fans and coolers earlier this year and the recent release of our frozen drink makers, we've already entered into three new subcategories in 2024. We're now in 34 subcategories, up from 27 at the end of 2022. This is testament to our conscious and purposeful strategy to drive growth while diversifying and mitigating risk. With each new category, we're creating new experiences and offering high-quality, innovative products that solve key consumer pain points. Last month, we launched Ninja Slushie, our professional-grade frozen drink maker. Our research showed that consumers love slushies. But enjoying one requires a trip to a convenience store, the movies, or the mall. With Ninja Slushy, consumers can create commercial-quality frozen drinks without stepping out of their homes. Our proprietary rapid-chill technology eliminates the need for ice and prevents drinks from getting watered down. It's early days, but I'm pleased to share that Ninja Slushy became the fastest selling new product ever during launch week on our direct-to-consumer site. The initial inventory sold out within a few days. Ninja Slushy has already gone viral and is quickly becoming a social media sensation. Our teams are working hard to fill orders on the wait list and to support broader distribution to our retail partners later this year. Our Ninja Creamy is already the number one ice cream maker in the U.S., and now with the addition of Ninja Flushie, we're on our way to becoming the leader in frozen treats. Shark FlexFreeze, our indoor-outdoor cooling system, launched earlier this year and continues to outperform initial expectations. Based on the strong response from consumers, as well as our retail partners, we see significant white space for us to capture. We're excited by the upside potential of FlexFreeze and look forward to launching additional SKUs in 2025 and beyond as we build on the initial success and momentum. With Shark FlexFreeze, we're creating a new market just as we did with Ninja Creamy. On the other hand, with the Ninja FrostVault Cooler, we're disrupting a large category with entrenched competitors, underscoring we can be successful with both strategies. FrostVault's technology and innovation are resonating with consumers and driving better than expected performance, including strong results on Prime Day. FrostVault has also enabled our entry into the sporting goods channel. an important breakthrough for us. We plan to launch additional SKUs and drive broader distribution next year to capture the upside. Our 2023 launches are also delivering strong performance, highlighting the sustainability of our innovation flywheel. In less than a year following launch, we've become a leading player in the deep carpet cleaning market with our Shark Carpet Expert and Stain Striker products. With our outdoor ovens, we continue to successfully expand our global presence in outdoor cooking. We expect momentum to continue with additional innovation next year. Consumers already love our offerings inside the home, and they're increasingly accepting Ninja as an outdoor brand as well. With our outdoor cooking products combined with fans, coolers, and portable blenders, we're extending our outdoor portfolio and expanding our global addressable market. Our second growth pillar is gaining share in existing categories. Nothing illustrates this better than the incredible performance of our cleaning category. Following strong performance during COVID, the broader cleaning market has been a bit soft. Over the last 18 months, our engineering and product development teams have remained laser focused on bringing innovation to this category. This is beginning to pay off now, driving additional market share gains for us. As I mentioned earlier, cleaning was more than 40% of our adjusted net sales last year, delivered 20% growth in the quarter. This was an acceleration from 6% growth in the first quarter of this year and a 5% decline for the full year in 2023. Within cleaning, core subcategories such as uprights and cordless stick vacuums perform particularly well. We continue to innovate and recently launched our new power detect upright vacuum with our most advanced cleaning technology. In the second half of this year, We're launching several innovative products within the cordless, hard floor, and robot subcategories, which should continue to support strong growth for us. The cooking and beverage category grew 12% in the quarter, on top of nearly 70% growth in the second quarter last year. Our base business in this category remains quite healthy. We've expanded our air fryer assortment with the launch of the Ninja Double Stack Air Fryer. This is a vertical air fryer that doubles the performance of a single zone air fryer while requiring only half the counter space. I'm super excited to share that we recently entered the premium coffee and espresso subcategory with our Ninja Luxe Cafe. While coffee isn't a new category for us, we're entering the super premium segment for the first time with a unique and highly differentiated product. This is a big opportunity for us to expand our coffee business in Europe with a product that's designed to appeal to a global coffee and espresso loving consumer. The Ninja Luxe Cafe is an all-in-one espresso, drip coffee, and cold brew system that creates cafe quality drinks at home. Our consumer insights showed us espresso machines are a bit intimidating and difficult to use. They're quite expensive and offer limited drink options. We've created an affordable, multifunctional coffee and espresso machine that's easy to use and has endless drink options for our discerning global consumers. The food prep category delivered outstanding performance with adjusted net sales increasing more than 90% in the quarter. The growth was broad-based across ice cream makers, kitchen systems, traditional and compact blenders. Our Ninja Creamy ice cream maker continues to grow rapidly and is becoming a global phenomenon as we launch in additional countries. In Q2, Creamy delivered strong performance globally, especially in Europe. And the Ninja Blast, our portable blender, is driving amazing results and large market share gains in the single-serve blending subcategory. Our other category delivered exceptional results, increasing 250% in the quarter, with strength across beauty, sands, and air purifiers. Beauty, led by FlexStyle hot air stylers, remains strong both in our domestic and international markets. We continue to bring newness and excitement to the category and to find key moments in culture to highlight our brand. For example, at this year's Met Gala, we launched Flex Style Sparkle with Chris Appleton, Shark Beauty's global brand ambassador. And while we won't be announcing details yet, I'm pleased to share that we're on track to launch another very exciting subcategory within beauty in Q4 of this year. Our ability to consistently innovate and refresh existing categories remains the bedrock of our strategy to drive market share gains. To that end, we're on track to launch 25 new products this year with more than 80% of the launches in existing categories. Next, I will turn to our third key growth pillar, expansion in international markets. We grew our international business 46% in the quarter, on top of adjusted sales growth of 66% in Q2 last year. UK, which is our largest international market, grew nearly 7% in the quarter and is up 10% in the first half of this year, in line with our expectations. While growth is moderated compared to 70% growth in the first half of last year, our UK business is more diversified, more profitable, and overall healthier than ever before. Within continental Europe, we drove triple-digit growth in Germany and France, where the overall markets were relatively stagnant. Our footprint and brand awareness in these countries is increasing and our business is more diversified. From just an idea a few years ago, these two markets have come a long way and are approaching meaningful scale. We also see tremendous growth opportunities in markets like Nordics, Benelux, Poland, Italy, Spain, and the Middle East. Our Mexico business grew strong double digits in the quarter. We are well positioned in the market and expect robust performance in the coming years, especially as we switch to a direct model at the beginning of next year. We are also looking forward to launching in Brazil in Q4 this year and exploring other Latin American markets for launch in the future. Next, I want to take a moment to highlight our Always On 360 marketing strategy. which remains highly effective. Our full funnel approach is driving increased brand awareness as well as consumer demand for our products in emerging markets like Germany, France, and Mexico. We're investing in TV, digital, social media, and other relevant channels. We're leveraging our strategic brand partnerships with David Beckham, global brand ambassador for Ninja, and Chris Appleton, our global brand ambassador for Shark Beauty. Shark Beauty was the official hair sponsor of the Girls Aloud 2024 UK and Ireland tour this year. Ahead of this summer's key sporting events, the Euro Cup and Olympics, we launched a Summer of Sports ad campaign in partnership with elite European soccer players with reach of nearly 40 million people. We're also investing in additional in-store retail displays to drive POS and build greater brand awareness. Across our EMEA markets, we're targeting 3,000 branded retail displays by the end of the year, including Shops and Shops within Curry's, Boulanger, Expert, and Sharaf DG. We're already seeing a strong payoff from our marketing investment as evidenced by our incredible top line and margin performance. And it's setting us up for success in 2025 and beyond. Our ability to invest significantly in marketing remains a key competitive advantage for us. We also know that these investments take time to pay off as we're new entrants into many of these markets And we need to grow our business one great consumer experience at a time. As we look forward, we're cognizant of the continued challenges in the macroeconomic environment and do not take our success for granted. We're addressing these challenges head on. We've doubled down on our consumer insights driven innovation with seven new and exciting subcategories added to our portfolio since the end of 2022. We've leaned in our marketing strategies to drive consumer demand and build brand awareness. We're leveraging our agile supply chain and longstanding relationships to maneuver macro challenges. We're putting our foot on the gas and ramping up production even faster outside of China. And we're always asking ourselves, what can we do better? What consumer problems can we solve? This relentless focus on execution has enabled our teams to navigate the environment and consistently deliver strong performance. I'm confident in our ability to execute the same playbook going forward. To that end, business momentum has remained strong in the third quarter in both our domestic and international markets. In July, we had a highly successful Prime Day globally with Shark and Ninja recognized as two of the top brands in the home and kitchen category in North America and UK. With better than expected year to day performance and good line of sight into the rest of the year, we're significantly increasing our full year guidance on key metrics. Patrick will share the details in his prepared remarks. I'm more confident than ever that we are on the right path for the long term. We have $120 billion total addressable market that continues to grow as we add more subcategories. This gives us significant runway for growth. And now, Patrick will walk you through our second quarter financials and updated 2024 outlooks.