SharkNinja, Inc.

during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question during this time, please press star then one on your telephone keypad. To remove your request, press star then two. And for operator assistance at any point, please press star zero. Thank you. I would now like to pass the conference over to your host, James Lamb, Senior Vice President of Investor Relations and Treasury. Thank you. You may proceed, James.

Good morning and welcome to Shark Ninja's first quarter 2025 earnings conference call. Earlier today, we issued our Q1 earnings release, which is available on the company's website at ir.sharkninja.com. A replay of today's webcast will also be available on the site shortly after the call. Before we begin, let me remind you that today's discussion will include forward-looking statements based on our current perspective of the business environment. These statements involve risks and uncertainties, and actual results may differ materially. For more details, please refer to our earnings release and the company's most recent SEC filings, which outline factors that could impact these statements. The company assumes no obligation to update or revise forward-looking statements in the future. Additionally, during the call, we will reference non-GAAP financial measures which we believe provide valuable insight into the underlying growth trends of our business. You can find a full reconciliation of these measures to their most directly comparable gap measures in the earnings release. Joining me today are our Chief Executive Officer, Mark Barocas, and Chief Financial Officer, Patrick Reagan. Mark will start by providing a business update. followed by Patrick, who will review our Q1 financial results and share our outlook for 2025. Mark will then offer some closing remarks before we open the call to questions. During the Q&A session, please limit yourself to one question and one follow-up. I would now like to turn the call over to Mark.

Thank you, James. Good morning, everyone, and thank you for joining us today. This is undoubtedly a challenging time for business, and I'm excited to discuss how Shark Ninja has engaged and is responding to the moment. Our first quarter results demonstrate the consistent strength and adaptability of Shark Ninja with our eighth consecutive quarter of healthy double digit revenue growth. Net sales increased nearly 15% year over year globally in a market that is not delivering much growth. A reflection of demonstrable market share gains driven by continued demand for our five-star products that customers love. This revenue growth produced outstanding profitability with adjusted gross margin of 50% and adjusted EBITDA of $200 million in the quarter. Most importantly, Q1 has given our team an opportunity to do what we do best, rallying together and taking quick action to solve problems. This isn't the first time Shark Ninja has encountered really difficult obstacles in the macro environment. We've been here before. During my 17-year tenure running the day-to-day business, Shark Ninja has experienced the great financial crisis, the COVID-19 pandemic, component shortages, and many other challenging periods along the way. In each case, we not only overcame adversity, But we also emerged stronger than ever by sticking to our time-tested playbook focused on customer problem-solving innovation and maniacal execution. I will speak about how this theme manifests in our exciting product pipeline and three-pillar growth strategy a little later. But I first want to address what is likely top of mind for investors, how we're rising to the challenge of tariffs. Shark Ninja has been navigating tariffs for many years, going back to the original series of tariff actions in 2018 that largely targeted China. We successfully implemented a multifaceted approach to offset these impacts and our business flourished. In fact, from 2018 through 2024, our adjusted net sales grew at a compounded annual growth rate of more than 20%. and our adjusted gross margin expanded significantly to 49%. Since that time, we've been actively diversifying our manufacturing capabilities to other countries around the world, mainly across Southeast Asia. We took these steps, many of which required sizable investment and multi-year execution ahead of our competition, a group that largely remains considerably more dependent on China. Due to our proactive supplier expansion, we expect to have moved roughly 90% of our U.S. volume outside of China by the end of the second quarter and nearly all by the end of 2025. Our high quality, fast turn, low cost, and highly diversified supply chain has taken an enormous effort to achieve and stands as a key competitive advantage for Shark Ninja. The current tariff dynamic has brought considerable new challenges, but despite the evolving policies and resulting uncertainty, I'm extraordinarily proud of the actions we have already taken in a short period to continue driving our three pillar growth strategy while materially offsetting the impact of tariffs. Before I get into detail, let me start by saying we have not responded to the moment by pulling back or slowing down. It's quite the opposite. We continue to make decisions that are necessary to drive our confidence in sustainable long-term global growth and invest behind all the areas that make Shark Ninja special, like product innovation, marketing, and go-to-market capabilities. The approach we're taking is not focused only through the lens of our domestic business, but rather globally. with over a third of our net sales forecasted to come from outside the United States this year. Our comprehensive tariff mitigation strategy has three key components, how we source, how we sell, and how we control operating costs, each of which I will describe in more detail. The first area of focus is what we internally call the buy side, ways in which we can drive efficiencies on product costs. I want to break this down into two key areas that we've addressed quickly. Factory cost and value engineering. Shark Ninja is fortunate to have deep, trusted relationships with our suppliers, many of which go back decades. In a short time, we mobilized our global supply teams to secure cost downs, and our factory partners are engaging actively with the majority of our largest tier one and tier two suppliers granting concessions. Additionally, we're leveraging our diversified global supply chain and expanding dual source capabilities to shift production to partners with the lowest cost offers. This flexibility enables us to substitute high tariff items in China with products from Vietnam, Indonesia, Cambodia, Thailand, and Malaysia. Value engineering is a core competency that optimizes function and value with the pursuit of reduced manufacturing costs, all while maintaining the quality and reliability that customers expect from Shark Ninja. In the first week after reciprocal tariffs were announced, we engaged in a large-scale value engineering effort to identify over 1,500 cost savings opportunities, changes to configurations, features, packaging, finishes, all of which will help lower product costs while continuing to delight consumers. Let's move to the sell side, where there are four areas of focus, pricing, promotions, retailer programs, and assortment management and mix. From a pricing perspective, We sell in the mid to upper tier of the market, and we don't participate in the opening price segments. Our promise to the consumer is to deliver products that are highly innovative with market-leading performance and exceptional quality at a great value. We can maintain this value proposition to consumers as we strategically identify areas where we can drive increased average sell price for our products. not just in the united states but globally we're already selectively increasing prices for several of our key products and we'll continue to look for additional opportunities our ninja lux cafe premium espresso product exemplifies this strategy as we recently raised the price on this product from 499 to 549 with no degradation in demand It has, in fact, now become the number one selling espresso maker SKU in the U.S. market, just six months after launch. Marketing and advertising plays a major role in our pricing power. We continue to invest in demand generation to drive awareness for our five-star products, many of which become viral hits fueled by user-generated content. The power of this organic demand allows us to charge a premium for these kinds of products without impacting overall sales trends, and we're executing on this advantage. As we continue to invest here, we have also been able to lower the degree of promotional activity. We've already started optimizing our promotional calendar, and while we still want to participate in key selling periods, We believe we can do so with a limited product assortment and at lower discount levels. This concept extends further to how we work creatively with retailers to address program elements. We've taken steps to reduce certain retailer programs and fixed expenses like NCAP placement and instead collaborate on revenue generating co-investments that become a true win-win. Our longstanding relationships with our retail partners, together with a strong pipeline of products, allows us to quickly execute these changes. Finally, let's touch on assortment management and mix. We're working closely with our retail partners to optimize our product assortment by eliminating low margin products and replacing them with higher margin versions. The inventory pre-build we've been executing in anticipation of tariffs is allowing us to quickly move on these substitutions with our retail partners. On the mixed side, we're looking at gross margins and pricing of our new products to maximize both at launch. As an example, we originally intended to price CryoGlo in the U.S. at $299. but launched it at $349 based on the strength of the product distinction and the consumer appetite, and the reception has been phenomenal. Flex Flame is a similar story, and the retail price of $999 in the U.S. is the highest in our overall product lineup. MIX also relates to how we're thinking about geographic expansion. Products that were originally going to launch first in the U.S. this year are now going to initially launch in other markets. Our global footprint enables this optionality as we continue to utilize some of the capacity from U.S. production for international markets like LATAM and EMEA. There's a high demand globally for products like Espresso, Slushy, CryoGlo, Creamy, Robots, hair care, and many more, as we're taking a portfolio management approach to direct volumes to the right markets. The third area we're looking at closely is how we can strategically manage operating expenses. While the overall orientation of Shark Ninja definitely remains towards growth, we're scrutinizing certain places where our spending can be streamlined and optimized. We're focusing efficiency efforts on our largest OPEX categories, including headcount additions and certain media spending, while maintaining an aggressive growth strategy. In parallel, our commercial and operations groups are driving additional cost savings. Critically, we don't expect these cost reductions will limit investment in our key differentiators, R&D and product innovation. With a healthy balance of investment for growth and overall cost discipline, we expect to see leverage on operating expenses as a percentage of net sales for the full year. So let's bring it all together with an update on where we stand. When we last spoke in February, we had already leveraged this proven three prime approach to fully absorb the incremental 10% tariff increase on China at that time. Since then, Even as the scope of global tariffs has expanded significantly, our teams have gone above and beyond working around the clock to identify, quantify, and implement powerful offsetting measures. We've upped our efforts significantly across buy-side optimization, sell-side optimization, and operating expense management to be in a confident position to lead through this dynamic and evolving tariff landscape. Our updated 2025 guidance, where we're raising numbers across the board, reflects this confidence as we remain nimble and drive our strategy forward to win. Now, let me turn back to Q1 and our three-pillar growth strategy, starting with our first pillar, expanding into new and adjacent categories. Shark Ninja now participates in 37 subcategories. with a commitment to enter at least two more per year as we further expand within and around the home. In 2024, we overachieved by launching into four new subcategories that are generating a lot of engagement. Frozen drink appliances, skin care, coolers, and fans. We're thrilled to see how this innovation is resonating with customers and our retail partners. In the ninja business, our slushy frozen drink maker is a smash hit with incredible engagement on social media, including over 1 billion impressions globally. As consumers share recipes, photos, and more. On the shark side, Cryo Glow is revolutionizing the at-home experience for med spa quality skincare. After the runaway success of our launches in the UK and Mexico, We debuted the product in the US at the beginning of 2025, and people are raving. Feedback from influencers, celebrities, and adult consumers of all ages and demographics has highlighted the numerous benefits that CryoGlo can provide across acne, fine lines, and other skin wellness use cases. As I touched on earlier, when discussing demand generation, Social media plays a vital role in creating buzz and driving demand, especially for new product introductions. This quarter, our innovative new Shark TurboBlade fan has become a viral sensation on TikTok and other platforms with nearly 100 million impressions already. Countless unboxing videos and other content showcase the ease of setup, eye-catching aesthetic, and incredible versatility of this one-of-a-kind bladeless multi-directional fan. This groundswell of consumer excitement is delivering very strong sales momentum for TurboBlade as well. Outside of the home, our Ninja Frost Vault and Shark Flex Breeze product lines are getting more placement, including at several prominent outdoor retailers as we look forward to this summer season. In Q1, we rolled out exciting new product extensions on both products, including several styles of wheeled coolers, multiple size options, and different colors for FrostVault. Within our FlexBreeze family, the launches of HydroGo and ProMist offer incredible versatility for almost any occasion, with misting capabilities and easy portability for indoor and outdoor use. As Shark Ninja continues to reimagine what's possible with outdoor products, our new Ninja Flex Flame propane grill stands out as truly revolutionary. This innovation is the brand's first propane system that offers the cooking features of a grill, a smoker, a pizza oven, a roaster, and a griddle all under one hood. In a category where there's generally very limited newness, we believe Flex Flame is the most disruptive product in years. We can't wait to see what we're able to accomplish in this $5 billion plus global market as we're off to a fast start. The product debuted in North America in Q1 with Ninja brand ambassador, David Beckham, and consumers are reacting with great fanfare. Across our two brands, We have several exciting new product launches planned for the second half of 2025 and no intention whatsoever of slowing down our unstoppable innovation engine. Let's turn to our second growth pillar, growing shared existing categories. We attack this initiative in two primary ways, adding brand new SKUs into a category where we already have a strong position and bringing innovation to a legacy platform that solves customer problems in a new and differentiated way. A good example is ice cream, where Ninja Swirl by Creamy is redefining a category that we currently already lead. Many of you know that the Creamy ice cream system has been a runaway success, but that didn't stop us from listening to customers about how we could improve even further. This feedback led to Swirl by Creamy, which adds soft serve capability in a fun and versatile way. It's important to underscore just how much of a wow factor this carries, both for consumers and for Shark Ninja. Not only has demand been outstanding from brand new customers, we're actually seeing scores of existing creamy owners interested in upgrading to Swirl because the feature set is so compelling and differentiated. internally swirl is a testament to how we're rarely satisfied even with mega hits because we always challenge ourselves to rapidly achieve the next breakthrough before anyone else does consistently delivering on this promise within our existing product lines is something shark ninja excels at with several other highlights to call out this quarter shark cordless vacuums are a staple of our cleaning business and performs strongly in Q1, driven by our proprietary power detect technology that senses debris, floor types, and other elements to maximize cleaning efficiency. Finally, I'd like to spotlight Ninja Crispy, our portable air fryer product that lets consumers prep, cook, serve, store, and re-crisp all in one system. With our exclusive Tempware glass containers, consumers can enjoy all the benefits of cooking and storing with glass, in addition to the huge convenience unlock that our portable air frying system enables. Within the US and EMEA air fryer markets, where Ninja already owns the number one brand position, Crispy saw another strong quarter of growth as evidence on how ingenuity born from our relentless focus on consumer needs is rewarded in the market by consumers and retailers alike. Groundbreaking products like Swirl or Crispy might represent another company's entire innovation calendar for a given year, but at Shark Ninja, they're examples of the kinds of disruptive innovation we aim for across our whole portfolio of categories. Our third growth pillar focuses on international growth, where we've consistently found success due to the global appeal of our products. Our international business has grown considerably over the past several years and is now approaching a third of total net sales as we continue to build vibrant global brands that stand for innovation and quality. International remains a huge growth opportunity for Shark Ninja and grew a robust 14% year over year in the quarter. But there are two items we have previously called out that impacted this quarter. The first is in our UK business, where the shift of Easter-related shipments into Q2 created a Q1 timing issue. Also, we intentionally prioritized North American demand for key launches like Crispy, Slushy, and Lux Cafe in Q4 2024 and Q1 of 2025. As we turn into Q2, we expect these new product launches will accelerate growth, reinforcing our position of strength in the UK market. Second, we mentioned in February that the transition of our Mexico business from a distributor model to a direct market triggers a one-time revenue reversal as we repurchase distributor inventory. This impact landed almost entirely in Q1. So we expect the Mexico business to grow once again for the remainder of the year. Elsewhere in Latin America, we're growing meaningfully in markets like Chile, Colombia, and Central America. Strong and growing relationships with retail partners are just as critical to our international success as they are within the domestic business. In Europe specifically, I'm pleased to say we have recently completed new agreements with most of our major partners to gain considerable additional shelf space ahead of holiday 2025. Consumers are clamoring for our products. Retailers are committing to us in a bigger way. And we're very enthusiastic about the potential we see all around the globe. The breadth of our three pillar growth strategy equips Shark Ninja with multiple ways to drive towards durable success. This distinction has never been more important than right now with pronounced cross currents in the macro economy. Despite the level of uncertainty and shifting consumer sentiment, our product hallmark performance, quality, and value are still resonating. You can see this in our results and retailer data with strong POS trends year to date ahead of shipment. and a carefully crafted strategy around inventory growth to complement our tariff mitigation plan. Patrick will walk through the details in a moment, but we feel very good about our inventory position as a key advantage to fuel future growth. And we consider our liquidity and leverage profiles to be excellent. It's also important to remember just how diversified Shark Ninja has become over the last several years. We participate in vast addressable markets across various price points, channels, retailers, demographics, geographies, and more. Our strong and growing portfolio of categories and distribution vectors is a huge part of our long-term strategy that also guards against becoming overly dependent on just one or two ways to win. We remain committed to launching at least 25 new products in 2025 with an unwavering focus on our future pipeline. As I spoke about earlier, the more disruptive innovation Shark Ninja can bring at the enormous and compounding scale we have today, the more distance we'll continue to put between ourselves and everyone else. Before I wrap up, I'd like to reiterate a few of the key reasons we're so pleased about Q1 and so optimistic about moving forward. First, we've implemented various initiatives that are taking aggressive actions to mitigate the impact of tariffs across buy side, sell side and OpEx work streams as discussed. Second, consumer demand for Shark Ninja products remains high. The various top line metrics we monitor were solid throughout Q1 and Q2 is off to a good start. Finally, We're confident in our ability to gain market share against the competition, despite any macroeconomic shifts that may manifest this year. This confidence comes from all the things that make Shark Ninja unique. An obsession for the consumer, our exceptional innovation engine, our world-class demand generation capabilities, a healthy and improving financial profile, our diversified and resilient global supply chain, and the tireless pursuit of excellence that is core to our culture. These success drivers have always defined Shark Ninja from within, and we're proud to see this reflected with external recognition as well. This quarter, we received two tremendous honors. First, Newsweek named us to their list of most trustworthy companies in America in 2025. This accolade is based on a survey results from over 25,000 US residents overlaid with the proprietary social listening analysis. We were also named to Fast Company's prestigious list of the world's 50 most innovative companies of 2025, earning the number 27 spot overall and number two in the design category. In an excerpt from our press release, Fast Company editor-in-chief, Brendan Vaughn, made a fitting observation. He described this year's list of winners by saying in part, at a time when the world is rapidly shifting, these companies are charting the way forward. None of this momentum would be possible without the incredible team at Shark Ninja, for which I'm incredibly thankful, especially during these last several weeks as we mobilize to face new challenges head on. As I said at the beginning, this is what we do best. We don't wait, we act. We don't pull back, we deliver, and we win together. And now Patrick will walk you through our first quarter financials and updated 2025 outlook.