SharkNinja, Inc.

if you do change your mind and would like to remove that request you can press style into thank you Good morning and thank you all for attending the Shark Ninjas third quarter 2024 earnings conference call. My name is Brika and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Arvind Bhatia, Senior Vice President, Investor Relations. Thank you. You may proceed, Arvind.

Good morning and welcome to the Shark Ninja third quarter 2024 earnings conference call. Our third 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 Riggins. Mark will provide a business update. Patrick will review our Q3 financial results and discuss our 2024 outlook. Mark will share brief closing remarks, and we will then open 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. Our third quarter results were very strong. our global teams once again delivered incredible top and bottom line performance in the quarter. We drove adjusted net sales growth of 35%. Adjusted EBITDA grew 26% on top of 38% growth in Q3 last year as we continued to reinvest in our growth initiatives. Growth margins remain very healthy. For the quarter, adjusted gross margins were up 160 basis points to 49.4%. This increase was despite the unfavorable impact of Section 301 tariffs, which went into effect in June. Our strategic initiatives around supplier diversification, competitive bidding, and value engineering are all continuing to pay off. We're on track to deliver nearly 200 basis points of adjusted gross margin improvements this year. This is on top of approximately 700 basis points improvement last year, an incredible 900 basis point increase over two years. We're not only delivering strong organic growth, but also highly profitable growth. And we're delivering all of that at scale. At the same time, we are consciously reinvesting our strong performance and upside in our growth initiatives to drive long-term shareholder value. These investments are strengthening our moat and accelerating our pursuit of a very large and growing addressable market. While I'm thrilled about our performance in Q3, I'm equally excited about how broad-based our growth continues to be across our four key categories and across our global markets. In Q3, cleaning, cooking, food prep, and other, which includes beauty and home environment, all delivered double-digit growth in adjusted net sales. Our North American net sales grew 26% year over year. Our international business accelerated with adjusted net sales increasing 62%. on top of 80% growth last year, our toughest quarterly comparison of the year. Our teams continue to drive strong execution across our three pillar growth strategy. This includes entering new and adjacent categories, increasing our share in existing categories and international expansion. Our first growth pillar entering new and adjacent categories remains a key growth driver. We remain committed to entering at least two new subcategories annually. In 2024, we have exceeded that goal with entry into four new subcategories, including coolers, fans, frozen drink makers, and most recently, skincare. Earlier this month, we announced that we will be entering the skincare market with the launch of the Shark Cryo Glow, an LED infrared and cryo beauty device that focuses not only on anti-aging and blemish reduction, but also instant under-eye de-puffing. We've gained strong share and garnered a lot of consumer excitement in the hair space. We felt that skin was the next problem for us to solve. With two daughters and a teenage son, I have watched as they look for new ways to help them deal with skin blemishes. As my wife and I look in the mirror each day and see the signs of aging, I recognize that there is an opportunity for one product to appeal to such a broad consumer base, solving so many different problems. Our expansion into skincare is the latest example of how we continue to deliver on our mission of positively impacting people's lives. We identified a gap in the market for products that deliver both instant results, such as under-eye de-puffing and soothing, and long-term skincare benefits like wrinkle and blemish reduction. Traditionally, skincare products are primarily focused only on aging women. Our consumer research identified skin care as a concern for a much broader audience, including men and women of a variety of age groups. Skin, much like hair, is a source of confidence for everyone. CryoGlo is different than competing products in that it combines cutting edge LED and infrared technology with under eye cryo cooling, which results in rejuvenated skin. Our engineering and product development teams partnered with global scientists, dermatologists, and wellness experts to develop an at-home solution at an accessible price point relative to competing products. Just like we disrupted the ice cream category with the Ninja Creamy, we're disrupting the skincare category by offering a versatile product solution versus what's in the market today. We're launching the CryoGlo in the UK and Mexico in the coming weeks. Going forward, we see significant upside potential for us as we drive innovation in skincare and the broader beauty category. Ninja Slushy, our professional-grade frozen drink maker, continues to strike a chord with consumers. At peak, the wait list to buy the product from our DTC channel exceeded 200,000. as the product story went viral. To date, Slushy has garnered over 200 million impressions on social media. We are now collaborating with some of the largest ready-to-drink beverage makers and culturally relevant brands to deliver five-star experiences and continuing to drive social engagement. But that's not all. These partnerships are opening opportunities for us to meet consumers in new channels and with new experiences. We see the possibility for grocery store placement and expansion to other channels. Initial sales of Ninja Slushy have significantly surpassed our expectations. Our supply chain teams have been working around the clock to ensure availability across our DTC and retail channels for the holiday season. We are also looking forward to launching Slushy in our international markets in the first half of next year. We remain very excited about the long-term opportunity for slushy. We are well on our way to becoming the global destination for frozen treats with Ninja Creamy, the clear leader in the ice cream category, and now Ninja Slushy. Our Shark Flex Breeze has already made waves in the cooling category by providing incredible performance for indoor and outdoor use. Flex Breeze had an amazing first season this year, establishing a strong beachhead for us. Last month, it was named the best cordless fan by the New York Times Wirecutter. We have a very exciting lineup in this category for 2025. We expect to launch several new SKUs to develop a substantial portfolio of products in the category and drive significant growth and additional market share gains next year. This year, Ninja Frost Vault technology and innovation disrupted the cooler category that has seen little demonstrable innovation in a long time. After a successful first year, we're super excited about what's in store for the Ninja Frost Vault next year. We plan to continue to disrupt the category in 2025 with SKU expansion, broader distribution, including further penetration in the sporting goods channel, and improved product availability during the key selling season. Our 2023 new subcategory launches are also driving significant growth for us. They include everything from deep carpet cleaning, shop vac, and outdoor oven to in-home beverage making. We're growing sales to meet new subcategories as we annualize the launches, enter new markets, and additional channels. In the deep carpet cleaning segment, Shark's Carpet Expert is now America's number one upright deep carpet cleaner since the launch in 2023. We haven't rested on our laurels and just last month launched our next generation extractor and spot cleaning products with our patent-pending Hair Pro technology. The goal is to keep building out these new categories to cater to different consumer needs and price points. Our second key growth pillar is gaining share in existing categories. Our strategy for expanding market share is fundamentally built on our proven track record of innovating and revitalizing within our established categories. This approach of relentlessly improving and reimagining our offerings serves as the cornerstone of our growth. I mentioned this last quarter, but I think it's important to highlight how our innovation is helping us regain strength in the cleaning category. Adjusted net sales and cleaning grew 19% in the quarter. Our engineering and product development teams have worked relentlessly to bring newness to the category and reignite growth. Our recent innovation in the floor care category includes the launch of our Shark Power Detect franchise, featuring our most advanced cleaning technology to date across robots, cordless, and corded vacuums. These products deliver unmatched cleaning performance and set a new industry standard in automation. In cordless, we continue to expand on the auto empty segment and drive growth in North America and EMEA. Consumer feedback on auto empty has been overwhelmingly positive. We're delivering a unique product that makes cleaning seamless and saves consumers from the dust cloud of traditional vacuum empty. Our power detect never touch robot is our disruptive entry into the rapidly growing multifunctional vacuum and mopping robot segment. This is our highest consumer-rated robot launch that has received amazing press coverage and has been included on several tech publications best of 2024 list. We've already been successful with robots in North America, but we're now a strong competitor in EMEA, including the UK, Germany, and France. With PowerDetect, we have further strengthened our leadership in home cleaning and we're driving growth across key markets. We have also partnered with actress, producer, and entrepreneur and self-claimed clean freak Courtney Cox to promote our innovative line of power detect robot and cordless vacuums. We've expanded our hard floor cleaning lineup with the launch of the Shark Steam Pickup and Shark Hydro Duo hard floor cleaners. The hard floor segment presents a great growth opportunity for us and continues to diversify our overall cleaning business. Another great example of how we're driving market share gains in existing categories is our recent success in the coffee and espresso category following the launch of Ninja Luxe Cafe. Coffee is a multi-billion dollar global category. Our coffee business has been steady and growing for many years, but there's still very significant market share gains for us to go after. Ninja Lux Cafe provides us a big opportunity to significantly expand our market share in an entirely new segment of the coffee and espresso category. Early results have been very exciting, driven by positive consumer feedback and strong demand. We're offering our discerning consumers an affordable, multifunctional coffee and espresso machine that is easy to use and has endless drink options. Our consumers are able to enjoy cafe quality drinks at home. Following the US launch a couple of months ago, we're now rolling out Ninja Lux Cafe in the UK, Germany, France, and other European markets. We continue to drive innovation and disruption in the cooking and beverage category with our September launch of the Ninja Crispy. This is the first of its kind portable cooking system, which revolutionizes air frying by delivering consistent crispy results with compact versatility. Crispy shows our commitment to meeting consumer demand for convenience. We already have leading market share in air fryers, but with the crispy we're rethinking redefining and reinventing the category. we're expanding our market potential and positioning us for continued growth and market share gains in a competitive segment. or other category performed extremely well with strength across beauty fans and air purifiers. Beauty, led by FlexStyle hot air stylers, remains strong both in our domestic and international markets. In early October, we launched Shark FlexFusion styling systems, which addresses a key consumer need we've identified, hot tool styles without the hot tool damage. Our research shows the average woman washes her hair just two to three times a week. There's a clear demand for tools that can restyle dry hair between washes. Also, while consumers love hot tools and stylers, they hate the heat damage they cause. We took on the challenge and created a breakthrough product that solves the problem. Flex Fusion is a next-generation air styler that combines powerful air and heat-controlled ceramic for no heat damage styling. Flex Fusion positions us to capitalize on the growing demand for multifunctional beauty devices, further strengthening our market presence and potential for continued growth in the beauty category. Next, I will turn to our third key growth pillar, expansion in international markets. Our international business accelerated, delivering 62% adjusted net sales growth in Q3. Germany and France, our largest international markets outside of UK, continue to drive triple-digit sales growth and are well-positioned to deliver a strong holiday season. Emerging markets like Benelux, Nordics, Italy, Poland, Spain, and the Middle East also continue to deliver very strong growth. The UK grew nearly 6% in Q3 on top of already robust growth of 65% in Q3 last year. While the overall UK air fryer market where we hold number one market share has been down significantly this year, we've been able to diversify into new categories and gain share in existing categories. The UK business today is more diversified and overall healthier than ever before. To support strong North America demand for our new products, we've consciously moved some of our UK product launches to the first half of 2025. This will have a temporary impact on Q4 revenue, but will position us well to grow the UK market in 2025. Shark Ninja generated a lot of buzz at the 100th anniversary of IFA Berlin in September of this year. This is the world's largest consumer electronics and home appliances show. We announced a staggering 20 new products for the EMEA market. This year, we expanded our floor presence significantly. We also had the opportunity to share our story on stage in a much bigger way. I had the privilege to deliver a keynote showcasing our innovative product lineup and unique mindset. We had more than 700 meetings with retail partners, nearly tripling year over year. And we received extensive media coverage. I'm also proud of the numerous awards we won this year. All said, we were able to generate significant increase in orders, including from many new partners. Within Latin America, Mexico net sales grew strong double digits. and the market is poised to accelerate for us next year as we shift it to a direct model. We will continue to expand and diversify our Mexico business. We expect to launch additional product categories, increase retail distribution points, and capitalize on the direct-to-consumer opportunity. Mexico has been a great market for our hair care products and will become the first North American market to enter skincare with the launch of cryo glow next week. I'm also excited to announce that in September we entered Brazil. Early results are promising and we see significant potential for growth in the market over the long term. We're also exploring other Latin American markets for launch in the future. Looking forward, we know the consumers are stretched and will remain cautious this holiday season. as they navigate the uncertain macroeconomic environment, including US elections and a shortened holiday shopping season. While we're cognizant of the external challenges, we will continue our relentless focus on execution. We will lead with our innovation. We will deliver amazing products that solve consumer pain points and positively impact consumers' lives. We'll continue to build our brand globally as we leverage our brand partnerships with David Beckham, Chris Appleton, Courtney Cox, and others. We will lean in on our nimble supply chain and omni-channel partnerships to ensure timely supply to our customers this holiday season. Regardless of the outcome of next week's elections, we're well prepared and poised for significant growth. I'm pleased with the progress we're making in diversifying our production outside of China to mitigate tariff risks. Patrick will share additional details on that in his prepared remarks. Looking at quarter-to-day trends, we're off to a great start. We had a highly successful prime day earlier this month. Based on available data, we significantly outperformed the home and kitchen category just as we did on the first prime day in july this year given our strong third quarter performance and fourth quarter trends so far we're again raising our full year 2024 guidance on several key metrics i'll now hand it over to patrick who will walk you through our third quarter financials and share the details of our updated 2024 outlook thank you mark and good morning everyone