YETI Holdings, Inc.

Greetings and welcome to Yeti Holdings 1Q 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn this conference over to your host, Mr. Tom Shaw, Vice President of Investor Relations. Thank you, sir. You may begin your presentation.

Good morning, and thanks for joining us to discuss Yeti Holdings' first quarter 2022 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 our actual results to differ materially from these statements. For more information, please refer to the risk factors detailed in our most recently filed Form 10-Q in the Form 8-K filed with the SEC today. 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 certain non-GAAP measures pertaining to completed fiscal periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in this morning's press release. 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, and Paul Carboni, CFO. Following our prepared remarks, we'll open the call for your questions. And now I'd like to turn the call over to Matt.

Thanks, Tom, and good morning. Yeti's first quarter results highlight the strong, resilient consumer demand that has been a consistent hallmark of our brand, as well as showing the outstanding execution by our team. We are particularly encouraged with the all around performance of the business amidst the ongoing challenges and unpredictability of the current environment. This success continues to display our ability to quickly adapt and remain nimble without losing sight of our near-term execution and long-term growth. This balance of execution and action is why we are on track to deliver another strong year of growth and profitability. As we navigate both the opportunities and challenges of 2022, The core of our diverse growth strategy remains strong. The combination of our direct, wholesale, corporate and global channels to market gives us unique and varied ways to stoke consumer demand. As we look towards the second quarter and back half of 2022, we are focused on delivering brand and product innovation to our customers, building deep brand engagement with new and existing customers as we expand our powerful depth and breadth marketing efforts. Accelerating our unique omnichannel strategy, including a comprehensive data-driven approach to build strong engagement from acquisition through retention. And finally, exploiting untapped international growth by capitalizing on the momentum we have created outside the United States. Looking at our first quarter financial highlights, our net revenues increased 19%, continuing a consistent trend of strong top-line growth since 2019, delivering a three-year compounded annual growth rate of 24%. Included in this quarter's performance, we drove double-digit growth in both our product categories and across both our channels, while our international business reached a record high of nearly 13% of overall sales. As anticipated, adjusted operating margin was in line with expectations even against higher gross margin headwinds due to persistent and elevated supply chain costs. Paul will cover this in more detail shortly. Even with this headwind, we continue to expect improving margins and profitability as we progress through fiscal 2022. Before sharing the progress against our strategic growth priorities, I wanted to cover three additional areas that pertain to our business in the first quarter and for the full year. First, even as we rolled over strong demand last year that benefited from both a product transition and a timing of new product introductions, we outperformed our expectations for the first quarter. We expect similar growth in the current quarter to be supported by the broader release of our first half product launches combined with the higher demand periods associated with the approach of active outdoor summer activities and the moms, dads, and grads gift-giving occasions. Second, Paul will outline a non-recurring inbound freight cost that materialized during the period. While in isolation, this is an incremental headwind for the year, we are seeing some offsets including early signs of improving freight rates and stronger pricing contributions. As we look forward, we have reiterated both our full-year gross margin target of approximately 55% and our full-year adjusted operating margin target of approximately 20%. Finally, we have completed the $100 million share buyback that we announced shortly after our fourth quarter earnings call in February. Adjusting for lower share count, we have raised our full-year adjusted EPS outlook. Now shifting to updates across our strategic priorities. As we look at the incredibly strong execution driven by the Yeti brand, we are focused on our diverse network of ambassadors in a range of passion-driven activities, pursuits, and organizations with growing international appeal. A great example of this strategy continues to play out in our ski and snowboarding communities. Our partnership with the Natural Selection Snowboarding Series, which began during its inaugural year in 2021, has since expanded this year to include serving as the title sponsor for both the Jackson Hole and Alaska Wilderness Stops. Both events garnered global exposure with linear and connected TV coverage in addition to an active digital footprint. In March, we officially partnered with the Free Ride World Tour, a pinnacle worldwide snowboarding circuit that hosted five international competitions earlier this year. During our recent brand activation in Verbier, Switzerland, we were able to celebrate our new French ambassador, Victor Delarue, who took home the grand finale win in men's snowboarding. As in-person activation reopens around the globe, we are making sure Yeti is front and center in a real way in the communities that are core to our brand. We continue to do great things in the world of surfing, where we've added to our roster of ambassadors while simultaneously supporting the resurgence of dig event competitions. Our latest ambassador in this community, Australian seven-time world champion pro surfer Stephanie Gilmore, recently partnered with John John Florence and our Yeti Australia team to host the first stop on the resurgent Yeti film tour held at Bell's Beach during the Rip Curl Pro competition. Turning our attention to the U.S., we celebrated the return of two Yeti brand activations that have been disrupted during the pandemic. As a part of South by Southwest, we hosted a Yeti music showcase featuring 12 live acts at our flagship store in downtown Austin. a great reminder of how we engage the communities where our stores are located and use these as both places of commerce and brand platforms. We also announced the return of the U.S. leg of the Yeti Film Tour, which commenced last week in California as part of a 12-stop run. Highlighted by ambassador appearances and epic storytelling, we're excited to share seven new films focused on the incredible stories about people and places. Our expansive brand building works in direct conjunction with our rhythm of new product introductions. For the first quarter, this included our seasonal color launches, the extension of our bags with the Camino Tote family expansion, and fantastic innovation in our soft cooler family. Our color strategy remains rooted in real-life inspiration, giving our colors meaning and purpose, which allows for robust product marketing. Both Offshore Blue and Bimini Pink performed well and showcased our unique ability to drive customer excitement through authentic storytelling. Our third color of the spring was Alpine Yellow, which was accompanied by stories from Chamonix in the French Alps. We partnered with our ambassador, Conrad Anker, to bring this story to life, celebrating the birthplace of modern alpinism. As we thoughtfully pace and execute the build-out of our bags business, we recently expanded our original Camino Tote with two new sizes, a more compact Camino 20, and the enlarged Camino 50. This product family is driving substantial year-over-year gains and remains a fantastic multi-use bag for adventure and every day. As we move into the months ahead, two additional developments will support our broader category efforts. We are refreshing our Pangolina waterproof duffels and backpacks for the first time since the original 2017 introduction by offering a new tan colorway. In addition, we will begin to test select wholesale distribution for our bags line later this quarter. One consistent observation from our Yeti retail stores has been a strong level of engagement and performance across our bags assortment, as these moments provide incredible opportunities of discovery about the quality of our bags. We believe a thoughtful introduction of Yeti bags within select wholesale partners will help inform our future channel expansion opportunities. We also introduced our next generation of soft coolers with the launch of the Hopper M30 and the Hopper M20 Backpack. The new M30 showcases our drive for continuous improvement in our products, taking a great core product and improving it. The M20 Backpack leverages the same magnetic closure system to offer both easy access and a streamlined product profile, while also leveraging our growing expertise in bags to offer great ergonomic fit. Playing off a wear your cooler out tagline, We supported the product launch across a series of key televised sports events, including during the NCAA March Madness. Overall, the early response to these products has been above expectations, and we are excited to broaden distribution to wholesale ahead of late spring and early summer buying. We plan more cooler innovation to come as we progress through the year. Looking at our omnichannel distribution strategy, Both DTC and wholesale posted strong growth at 23% and 14% respectively. Supporting this growth, we have made ongoing progress in our efforts to drive strong customer engagement in our direct channels and deliver consistent high quality experiences across our wholesale accounts. In our Yeti e-commerce business, great growth has been supported by our strategic focus on attracting, acquiring, and retaining high quality customers. As we have aligned the work of our data, e-commerce, and marketing functions, we've become more surgical in deploying our tools and tactics to drive customer connections. Examples of our progress here include improved reactivation of older customer cohorts, as well as driving both a deeper and broader purchase basket within and across product categories. Our latest step here came in early April with the unveiling of our redesigned Yeti.com platform with a mobile-first experience. Early customer responses have been positive as measured by improved conversion, but we know the bigger opportunities to drive impactful individual personalized experiences remain ahead of us. On the corporate sales side, we continue to see success in driving this overall business, including strong repeat purchases across our business verticals. This helps create a more predictable pipeline of orders. Yeti retail stores continue to perform ahead of expectations and are delivering both a great brand platform but also strong financial results. We have converted our two remaining temporary store locations in Dallas and Fort Lauderdale to longer-term leases during the first quarter based upon the strong performance and traffic we're seeing out of those stores. In addition, we recently opened our 10th store in San Antonio and remain on track to open at least two additional locations in 2022. Finally, Amazon growth improved sequentially as we continue to make progress in reloading inventory into their network. We expect ongoing service improvements will better match up to customer demand as we move through the year. On the wholesale side of the business, the execution of our focus and optimization strategy is beginning to contribute to healthier, more consistent in-stocks across the channel, spanning from our national accounts to our independent partners. At the same time, we continue to look for ways to elevate our overall in-store merchandising as we drive better alignment across all points of distribution. Sell-through in the channel remained positive for the quarter, and we're on track to deliver low double-digit growth for the year. Looking at our international business, we remain incredibly bullish on the brand's ability to elicit a similar level of passion and engagement that we see with our domestic customers. As our key international markets open up and once again host events, we're able to more fully engage with customers across a range of locally relevant pursuits. This allows us to build upon the existing momentum and to expose new audiences to the brand. In Canada, this spans from our on-ice partnership with the Toronto Maple Leafs to the return of 60,000 plus visitors to the Toronto Sportsman Show. In Australia, we are activating at legendary surf competitions as well as the country's largest barbecue festival. And in Europe, our efforts were highlighted by the previously mentioned mountain-based activities at Verbier and Chamonix as well as driving targeted PR events across the region. We're making very strong growth progress with international revenues up 45% year-over-year and up more than 3x from the first quarter of 2020. This performance pushes our international mix to nearly 13%, a new high for Yeti even as our domestic business continued to comp mid-teens growth. Looking at specific markets, Our Canadian business remains strong and primed for success as we move towards summer and COVID restrictions give way to the return of live events. As we mentioned last quarter, we launched our redesigned web platform on Yeti.ca, delivering a mobile-first experience and early results are yielding improved conversion rates. Performance in Australia remained outstanding with strength in both e-commerce and wholesale, supported by strong brand activations at local events with our Australian ambassadors. We are also making distribution inroads in urban markets as we begin to expand with our first national account in Australia. Even with a challenging and fluid backdrop in Europe, our objectives this year are unchanged and reflect our conviction in utilizing our successful playbook for global market development. Specifically, we are focused on leading with e-commerce, establishing localized go-to-market wholesale strategies, and investing in heightened brand-building activities in Europe as we establish the brand and product to prepare for future scale and growth. As I hand the call over to Paul to review our financials, I want to first thank our Yeti team, our partners, and all those that support our brand. You continue to deliver outstanding results amidst a multitude of pressures, disruptions, and distractions. You all have kept our priorities in sight and continue to be instrumental in driving our success. I would also like to emphasize how incredibly excited I am about the opportunities ahead for the brand. This includes the near term where customers return to seasonal activities and Yeti gift giving accelerates for moms, dads, and grads. We have incredible product which rolls with our customer from their daily life to extreme pursuits and importantly is a catalyst for the human to human advocation that is a hallmark of Yeti. This provides the platform to foster exceptional brand experiences utilizing incredible content about people, products, and places while leveraging a unique and differentiated network of ambassadors, direct channels, and wholesale partners. This is what enables us to drive Yeti's long-term consistent results. With that, I would now like to turn the call over to Paul.