Weber Inc. Class A

Good morning and welcome to the WebEx Inc's third quarter earnings call for fiscal 2022. All lines have been placed on mute to prevent any background noise at this time. I will turn the call over to Brian Eichenlob, Vice President of Investor Relations and Treasurer for WebEx. Mr. Eichenlob, you may begin.

Good morning and thank you for joining us today for our third quarter fiscal 2022 earnings call. I'm joined this morning by Alan Matula, our Interim Chief Executive Officer, and Bill Horton, our Chief Financial Officer. I'll start with our forward-looking statements disclaimer. As you are aware, certain statements made today, such as projections for Weber's future performance, are forward-looking statements. Actual results could be materially different from those projected. For further information concerning factors that could cause results to differ, please refer to our public 10-Q SEC filing, our earnings release, and our SEC filings, all of which are available on the company's website. During the call today, the company may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to GAAP reporting, please refer to the company's earnings announcement, which has been posted on the company's website at investors.weber.com and can be found in the company's SEC filings. A recording of today's webcast will be archived for at least 90 days on Weber's investor relations website. And now I'd like to turn the call over to Alan.

Thank you, Brian, and good morning, everyone. Welcome to our fiscal third quarter conference call. As you saw in our announcement from a few weeks ago, I'm Alan Matula, and I've been part of the Webber team for nearly a decade. Most recently, I led the company's R&D organization, IoT and digital initiatives, as well as our global IT function. Prior to Weber, I spent 35 years at Royal Dutch Shell in leadership roles that span from all major business segments, corporate functions, and technology organizations. Most notably for today's call, I have almost four decades of experience focusing on global business transformation, cost management, and leading a business through unprecedented times of change. Today I will review the strength of the Weber brand and strategy, present our view of the current market landscape and outline the specific capital management and cost reduction actions we are taking in response to the environment. Then Bill will present our fiscal third quarter performance and dive deeper into the financials. I want to begin with the strength of the Weber brand. Weber is the global category leader in outdoor cooking, with a market share over two times our closest competitor in most markets. and our customer satisfaction scores remain best in class. Our driving force is to make lasting memories by helping people create delicious food. We are delivering on this promise, and I'll share a few highlights to this end. We have been named number one brand in barbecue by a long list of media and influencers globally. Additionally, all of our 2022 product launches have earned 4.5 stars or greater consumer ratings. We have an immense opportunity to expand our relationship with 50 million dedicated Weber customers and consumers worldwide, as well as reach new people in the near and long term. Our brand strength is our foundation and the cornerstone of the company's strategy. The core strategic priorities that we have discussed since becoming a public company remain intact. However, the current market conditions challenge us to sharpen our attention even more on the following key areas. Customer focus. We remain relentlessly focused on the consumer, driving product innovation, superior quality, unparalleled customer service within each category and price segment. Vertical product categories. outdoor cooking category. This shift will accelerate our ability to market, innovate, compete, and profitably win in existing and emerging categories. Go to market precision. We will refine our specific consumer value propositions by product, price, mix, and segment. This enables precision marketing approaches and resource allocation for consumer identification, awareness, and conversion. We expect this to positively influence our distribution channels over time. Profitable growth. We will be highly disciplined in evaluating and prioritizing resources to countries, looking to grow established markets, scale emerging markets, develop outdoor cooking cultures in promising markets, and exit markets where we do not see a path to growth. all while increasing emphasis on supply chain productivity in our key geographies. These priorities are the lens by which we are viewing the current operating environment. While we see short-term macro challenges, we are positioning Weber to emerge with stronger financial fundamentals, a fortified balance sheet, expanded margins, and a growth engine that drives the next chapter of our seven-decade-long history. Market dynamics and consumer behavior are telling us that the outdoor cooking sector is contracting in the near term. Inflationary pressures are weighing on consumer confidence as well as spending power in every market. Additionally, the war in Europe continues to have a profound impact on spending patterns in the EMEA region, a large and higher margin segment of our business. Turning to North America, according to the Cleveland Research Center, Foot traffic in U.S. home improvement retailers is down 16% year-to-date compared to the prior year period. As a result, sales for the grill category have fallen 26% year-to-date. We attribute this slower traffic to several factors. Increased travel as people vacation for the first time since the pandemic. Heightened inflation, which impacted purchasing decisions around discretionary goods. and major heat waves that affected several key markets. Lower foot traffic in retail stores globally has a cascading impact on our bottom line. We see higher inventory levels on lower sales, which adds cost. That combined with increased freight costs, fuel surcharges, and increased promotional activity has resulted in material short-term impacts to our profitability. Now I want to outline the cost management initiatives we're taking to address these market headwinds. To stabilize our financial position for fiscal 2023 and beyond, we are introducing a comprehensive cost management plan that includes the following initiatives. Preserving our overall cash position through the suspension of our dividend and capital spending reductions. Targeted interventions to reduce COGS and SG&A expenses, tightening global inventory levels and working capital positions, and finally, we are targeting a reduction in force that, at a minimum, accounts for 15% of our non-distribution SG&A expense and 10% of our global headcount, focusing on all levels of the organization, including senior management positions. We expect these actions to create at least $110 million of year-over-year cash benefit net of restructuring costs in fiscal year 2023. And Bill will offer more detail in a moment. We plan to update you on the progress we are making across these efforts on each of our subsequent earnings calls. I want to take a moment to recognize that these decisions impact our people, our greatest asset, and the backbone of our brand. We only look to make such changes when it's important to the long-term success of the business and once we have exhausted all other avenues to reduce costs. We feel the changes we are making are necessary to weather this difficult macro environment and to set us up for long-term value creation. As has been our history, we are committed to treating effective employees with respect and appreciation as we move through this process. I will now turn it over to Bill who will review our third quarter performance and run through the specifics of our cost management plan.