YETI Holdings, Inc.

Greetings and welcome to the Yeti 2Q 20 earnings conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Tom Shaw, Vice President of Investor Relations. Thank you, Mr. Shaw. You may begin.

Good morning, everyone. Thanks for joining us to discuss Yeti Holdings' second quarter 2020 results. Before we begin, we'd like to remind you that some of the statements that we make today on this call, including those statements relating to the impact of the COVID-19 pandemic on our business, may be considered forward-looking, and such forward-looking statements are subject to various risks and uncertainties that could cause their actual results to differ materially from these statements. For more information regarding these forward-looking statements, please refer to the risks and uncertainties detailed in this morning's press release, as well as the risk factors discussed in our Form 10-Q for the quarter ended July 27, 2020, filed with the SEC earlier this morning. We undertake no obligation to revise or update any forward-looking statements made today as a result of new information, future events, or otherwise, except as required by law. During our call today, we'll be discussing Yeti's adjusted EBITDA and certain other non-GAAP measures pertaining to completed fiscal periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release issued this morning as well as in the supplemental reconciliation, both of which are available in the investor relations section of the YETI website. We use non-GAAP measures as the lead in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. Today's call will be led by Matt Reintjes, President and CEO of YETI, and Paul Carboni, CFO. Following our prepared remarks, we'll open the call for your questions. We're also working remotely and connecting with you from different locations today, so please bear with us should we experience any delays during the call. With that, I'll turn the call over to Matt.

Thanks, Tom, and good morning, everyone. Yeti had a remarkable second quarter driven first and foremost by the agility and perseverance of our employees, our customers, and our partners. As we consider our evolution over the past few months amidst all the challenges, I'm tremendously proud of how we responded and how well the brand has resonated. We were incredibly pleased to see the resilience of demand for Yeti through this unprecedented period, driven by people's interest in being outside, be it near home or in the backyard. Yeti's product performance, durability and versatility are key as customers rely on and invest in brands that help them enjoy outdoor activities. For our second quarter results, revenues increased 7% year-over-year while showing substantial growth recovery throughout the period, improving each month off an April decline in the high 20s, primarily driven by the impact to our wholesale and our corporate sales businesses. The inter-quarter growth trend reflects strong, sustained e-commerce growth, improving wholesale as stores reopened, rebounding corporate sales, and a successful execution of Mother's Day through Father's Day. We were particularly pleased to see both our U.S. wholesale and corporate sales businesses returned to growth in June, significant feats given the impact felt on these businesses at the beginning of the quarter. Yeti generated a 550 basis point improvement in gross margins for the period, benefiting from the ongoing mixed shift to e-commerce, strong price point integrity, as well as continued product cost improvements. Overall adjusted operating margins also expanded 300 basis points, absorbing the cost of servicing our e-commerce business and benefiting from our cost management efforts that we outlined last quarter. With our improving operating performance, we also repaid the $50 million we drew down on our revolver last quarter, underscoring the financial strength of our business. Before I provide an update on our four strategic priorities, it is important to understand how we are approaching the opportunities and challenges for the second half of the year and investing for the future. We continue to actively build out our talent to address the needs of an evolving Yeti particularly within creative, digital, product development, and ESG. We're excited by the progress of our talent acquisition through the quarter, even with the pandemic and work from home. Within our supply chain, we're actively tracking near-term demand and aligning our supply. As you can imagine, the visibility and forecast has changed substantially over the course of the last four months, shifting from very stringent working capital management to driving supply chain flexibility to fulfill demand. This will remain active work for the balance of the year as we watch the demand signals. Financial discipline, operational excellence, and a focus on growth will continue to guide us as we navigate the uncertainties related to the COVID-19 pandemic. While these uncertainties continue to inform our decision to withhold financial guidance, as Paul will discuss, we do see the opportunity to return to our long-term sales target range of 10 to 15% for the balance of the year. On to our strategic priorities. Starting with brand. Early in the pandemic, we shifted our marketing strategy to digitally engage our customers while they adapted to the new normal of social distancing, working from home, and establishing their own backyard base camps. Sustaining our heightened efforts to drive positive distractions for our customers, in May, we continued to provide original digital content through efforts such as The Midnight Hour, a three-part film series hosted by Academy Award-winning singer-songwriter and brand friend Ryan Bingham. The films follow Bingham as he explores the path and the truth behind the music of fellow artists Jack Johnson, Margo Price, and Terry Allen. To further drive reach of the films, we partnered with Rolling Stone Magazine on their first live Instagram virtual event. In conjunction with National Barbecue Month in May, we joined several of our culinary ambassadors and friends of the brand as they shared their own tips from the pits, including Heath Ryle's Baby Back Ribs episode. which garnered the most views of any Yeti Instagram video to date with nearly 190,000 views. Moreover, one of our biggest successes we had this quarter was the effectiveness of our multi-pronged strategy to drive a strong customer experience leading up to Mother's and Father's Day. Spanning more than three weeks, we created a gift-giving journey that showcased the brand in a consistent and impactful way for these important occasions. At the start of each holiday period, we highlighted a range of gift ideas, including our customization capabilities. We further displayed the breadth of our brand by offering a targeted gift with purchase that created exposure to products, such as the Go Box with our stackable pints, driving deeper interest and awareness across our product portfolio. During the final week of each holiday, we offer guaranteed delivery. Our final touch included a spotlight on mom and pop shops, promoting a last-minute gift desk donation to support our incredible retail partners. In support of these initiatives, earned media impressions for Mother's Day increased from 100 million last year to nearly 400 million this year, while Father's Day increased from 500 million to over 900 million. We believe this demonstrates the relevancy, reach, and strength of the brand for new and existing customers. From a community marketing perspective, we expanded our surfing lineup by adding Australian Mick Fanning to our ambassador roster. Fanning is a three-time Association of Surfing Professionals World Tour Champion. Also, in mid-July, we began promoting our new Major League Baseball customization program. This licensing deal now connects Yeti Drinkworm Coolers with all 30 MLB teams. And this week, we introduced our One for the Roadies Give Back campaign. In partnership with Crew Nation, the charitable arm of Live Nation, we've joined with 37 artists, such as Leon Bridges, the Avett Brothers, and the Zach Brown Band to auction off signed and customized Roti 24 coolers to benefit the out-of-work touring and venue crews. You can see more about this on Yeti's Instagram page. Shifting to innovation. A highlight of our product story during the second quarter was our coolers and equipment business. Demand across the coolers and equipment family was up 18% year-over-year as customers look to Yeti to support their focus on outdoor pursuits. In the quarter, we brought our next generation ROTI24 hard cooler to market. The ROTI24 has performed ahead of expectations even before marketing support and joined the balance of our hard cooler and soft coolers with strong and consistent performance through the quarter. Enhancing demand, the brand was once again highlighted prominently in the media. In June, Condé Nast ranked three Yeti coolers on its list of 12 coolers you can take anywhere, including best for leisurely family road trips with the Hopper Flip 12, best for hot summer days at the beach with the Tundra Hall, and best of camping out in your backyard with the Yeti V-Series. Magnifying our own Father's Day efforts, Gear Patrol recommended the Hopper M30 soft cooler as one of its 20 best Father's Day gifts for outdoorsy dads. and Fast Company selected the Yeti V-Series as one of the seven most well-designed Father's Day gifts of 2020. Rounding out the cooler and equipment side of the business, we saw strong early demand for our new Trailhead Camp Chair. Forbes Magazine reviewed the beach chair category in late spring, naming the Trailhead as the best heavy-duty chair. On the drinkware side, results were modestly negative for the quarter, reflecting the early quarter disruption of wholesale and corporate sales. However, the category demand remained very robust in our own e-commerce channel and overall results were strong in May and June. Our new slim can colster has been a great early success for us. As we look at our product lineup for the second half of the year, our priority is to continue extending the energy and excitement from our first half launches, particularly with the limited customer access across our wholesale channel for much of the second quarter. And given the late quarter wholesale debut of the ROTI24 and the Elements Colorway Drinkware. This quarter, we're also focused on executing new colors and several new form factors in our coolers and drinkware business. We recently launched Sagebrush Green in our hard and soft coolers and Northwoods Green in select drinkware, both new colors inspired by adventures in the wild. We also debuted the Rambler 10-ounce tumbler with a caffeine and cocktails launch campaign, which adds to our new drinkware lineup with a great size for both our domestic and international customers. Expect additional innovation as we move deeper into the second half. As demand continues to evolve and increasingly focuses on digital engagement, we continue to invest in a balanced omni-channel strategy. The impact of our commitment to a digital future over the past five years has never been more evident as the second quarter challenges drove a true digital acceleration. This supports our continued investment in our own digital capabilities, how we continue to optimize our wholesale network, and how we support the rapidly ramping Omni capabilities of our retail partners. Our Yeti direct-to-consumer business grew 61% and reached 54% of total sales this period, reflecting the sustainability of triple-digit Yeti.com growth throughout the quarter, strong Amazon Marketplace growth after a disruptive April, sequential monthly improvements in our corporate sales business, the emergence of our non-US e-commerce, and the reopening of Yeti retail late in the quarter. On Yeti.com, we continue to see strong traffic and conversion and a healthy balance of new and existing customers on the site. Importantly, the triple-digit growth trajectory in this channel held true as our wholesale partners steadily reopened throughout the quarter. In corporate sales, with many businesses focused on remote operations, we quickly shifted our focus early in the quarter towards building a funnel of business that helped revenue later in the quarter. We also kicked off a sustainability outreach program in June, seeing strong wins even with the work-from-home environment. Starting in late May, we reopened six Yeti retail stores, followed by the debut of our Denver store in early June. We also implemented Reserve Online pick-up-in-store functionality during the quarter. While already on our roadmap, this is a great example of our ability to emerge from the pandemic even stronger. Despite little initial awareness of the initiative, Ropas has been well received with growing utilization and sets us up for future capabilities expansion. Looking at wholesale, from our independence to our large national accounts, we have seen our partners in this channel adapt with nimbleness and grit. We saw growth with our dealers that were deemed essential and remained open through the quarter to support local communities. We also saw our large national partners quickly implement their own Omni capabilities, including Curbside, which has shifted to a mainstay retail offering. As we look at the overall international business, despite recording a year-over-year sales decline in the quarter that was driven by the outsized impact of our Canadian wholesale shutdown, we continue to see strength in our international e-commerce business. With a much more conservative and restrictive reopening cadence than what we saw domestically, the Canadian wholesale business was down nearly 70% for the quarter as key markets such as Toronto remained in Phase 1 through most of June allowing curbside pickup only for non-essential retailers. Nonetheless, appetite for Yeti is strong where the customers can access the brand. With Yeti.ca now just hitting its one-year anniversary, the local site has significantly outperformed expectations. Outside of Canada, Australia had a phenomenal performance driven by strong customer demand supported by both wholesale and e-commerce. We are continuing to develop our footprint in the UK and Europe where we initially led with our own digital efforts last year, but are now supported by retail partners in nine countries. While the cumulative numbers here are small, we're excited to begin accelerating the process of bringing the Yeti brand to more global customers with authentic local partners. Before Paul discusses our results in more detail, I wanted to provide a few thoughts on how our organization is evolving. As you saw earlier in the second quarter, our private equity sponsor wound down their ownership to one million shares representing just over 1% of total shares outstanding. CORTEC's support through my five years with Yeti has been steadfast and is greatly appreciated. This change has also meant a continued evolution of our board of directors, with directors affiliated with CORTEC now only holding two of nine seats. We also appointed Tracy Brown, the current CEO of the American Diabetes Association and former SVP of Operations and Chief Experience Officer of Sam's Club to the board in May. I've personally known Tracy for 20 years, and I'm excited for her experience and perspective on the consumer as we continue to build the depth of our customer relationships and broaden the reach of our brand. In addition to the evolution of our board, we also hired our first vice president of ESG in June. This is an important role that will be integral to our long-term success and will tether ESG to our brand story and our evolution, including our work in diversity, equity, and inclusion. We will continue to nurture a powerful, innovative, and lasting brand and make a positive impact on our customers in the Yeti community. We're proud of the progress you've made during this fluid and challenging time, and we'll work to remain financially strong, innovative, and positioned for long-term sustainable growth. Now let me turn it over to Paul to run through the financials.