YETI Holdings, Inc.

Good morning, and welcome to the Yeti Holdings third quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Tom Shaw, Vice President of Investor Relations.

Please go ahead. Good morning, and thanks for joining us to discuss Yeti Holdings' third quarter 2023 results. Leading the call today will be Matt Reintjes, President and CEO, and Mike McMullen, CFO. Following our prepared remarks, we'll open the call for your questions. Before we begin, we'd like to remind you that some of the statements that we make today on this call 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 and the Form 8-K filed with the SEC today. We undertake an 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. Unless otherwise stated, our financial measures disclosed on this call will be on a non-GAAP basis. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release or in the presentation posted this morning to our investor relations section of our website at yeti.com. And now I'd like to turn the call over to Matt.

Thanks, Tom, and good morning, everyone. Yeti posted another strong quarter and continues to build momentum with our brand and products, particularly when compared to a very strong year-ago period that included the full benefit of our soft cooler lineup, as well as strong wholesale replenishment. Further highlighting our reported results, we also saw the strength of our brand and our point-of-sale data, with consumer demand meaningfully outpacing our reported sales. While we expect consumers to continue to be more discerning with spend, we've seen the positive signs that they are highly receptive to new products. Leaning into this dynamic has been a key driver of our business here to date. In particular, we have seen the success of category expansion in cargo and drinkware, reaching both new and existing customers. Color, combined with the new product this quarter, showed well in our Power Pink, Camp Green, and Cosmic Lilac colorways. Our data insights and analytics would indicate that these launches continue the positive trend we have seen in the growth of our acquisition and retention of female consumers across a range of age groups. complementing the balanced demographic makeup of Yeti across genders, household incomes, and regions. Beyond the top line, our gross margin was a clear positive story this quarter, showcasing the power of the brand. We delivered remarkably strong gross margin expansion of nearly 650 basis points, highlighted by the ongoing recovery of inbound freight costs and favorable product costs. This result further supports our efforts to stay on offense with brand and growth investments. while also taking care of the bottom line. As we executed our financial plan during the quarter, we were focused on several key initiatives. To start, we successfully reintroduced our M-series soft coolers at the beginning of the fourth quarter. This included the return of the M-20 backpack and M-30 tote, as well as the new, smaller M-12 backpack and M-15 tote. The third product impacted by the voluntary recall, the Sidekick Drive, returned to our DTC channel at the end of October. Importantly, these product families will continue to build in the quarters ahead, as we more fully position inventory across channels, expand colorways, and add new sizes. For example, we introduced a limited-release all-black colorway across many of our coolers and bags in the current quarter, while two additional sidekick dry sizes are planned early next year. We also built upon our omnichannel capabilities and reach in the third quarter, including the debut of drinkware customization in Australia through our e-commerce site, and more recently, similar capabilities in Canada. These consumer-facing offerings have long been core to our U.S. business and are now part of our global offering. We also opened three U.S.-based retail stores during the quarter, the most openings we have had in a single period, bringing our total stores to 17. Finally, starting at the end of October, we began a new partnership with Tractor Supply with an initial focus on their fusion doors. TSC's unique national reach and strong heritage in farm and ranch provide what we see as highly complementary distribution to our existing channel. Now let me give a deeper look across our strategic growth priorities around brand, product, channel, and geography. Starting with brand, Yeti's diverse reach around the globe continues to show the strength of the connections we are making. From fishing tournaments to Formula One races, golf courses to food festivals, prominent cameos on Netflix to concert tours, our brand and product were part of an integrated and global story in Q3. Continuing the tradition of durability, performance, design, and functionality that tie our product and our brand, these connections to broad and diverse global communities are the backbone of our customer acquisition and retention efforts, keeping Yeti top of mind and the powerful word of mouth strong. Our 15 active enthusiast communities and 180-plus top-tier ambassadors continue to grow our audiences in real, connected, meaningful ways while also deepening our ties. These relationships paved the way for continued product innovation and brand investment unique to Yeti. This quarter, we added global ambassadors and partners from Europe to Canada to Japan and from fishing to culinary. Our diverse media coverage included names such as Fast Company, Food & Wine, Parade, Variety, GQ, and Outside, showcasing the varied and connected ways in which product and brand seamlessly and naturally fit into culture without being forced upon the consumer. Last quarter, we discussed the debut of our Every Single Use campaign, showcasing our product durability and contrasting Yeti to single-use disposable alternatives. The campaign was so well received, we expanded across major metropolitan areas and across 18 college campuses, as well as internationally, providing a platform to reach new consumers both domestically and abroad. This is one example of the impactful and nuanced way in which we walk consumers from awareness to consideration to purchase and repeat. Looking at our product pipeline, I mentioned earlier the heightened importance of meeting a more discerning consumer with a reason to engage. This is taking on even more importance in today's marketplace. In drinkware, the diversity of our portfolio has been key to driving growth here to date. Response to our fall colorways, rambler bottles, straw cap offerings, and new yonder water bottle sizes and accessories were standouts in Q3. Continuing the health and wellness theme and awareness of the importance of hydration, Our two straw mug products continue to outperform our expectations this year. Also, the addition of the highly successful beverage bucket remains a great example of how the brand continues to move beyond individual use drinkware. This trend of expansion has continued into Q4. We've launched three smaller capacity stackable Rambler tumbles and mugs built to the Yeti standards of durability and quality and providing more reasons to use Yeti throughout the day. Additionally, We officially launched our Yeti Cocktail Shaker, packaged together with our classic 20-ounce Rambler, or sold separately as a great accessory that fits on top of millions of Yeti Ramblers in use since 2014. We also debuted our Insulated Wine Chiller last week, providing another example of the evolution of our drinkware family. In the weeks ahead, we have a number of product offerings in the works with the intention to keep Yeti top of mind with the consumer, particularly as we go into the crowded time of year for messaging and buying. This will include the return of our annual gear garage specials later in the quarter and the introduction this week of the next size in our straw mug family. In our cooler business, I would underscore three points. First, we saw strong consumer demand with double digit increases in both hard coolers and in our soft coolers not impacted by the recall. Second, the successful introduction of our redesigned soft coolers last month. And third, our ongoing focus of adding size and portability options to expand our global use cases and audiences. With an unmatched product portfolio, we are well positioned for what we believe will be a competitive holiday period for consumer attention and spend. Beyond coolers, the equipment side of the business was highlighted by our extended family of GoBox storage and protective cases, which launched earlier this year. This remains a highly productive product family with a tight assortment and tons of potential. Similar to our cargo products, our discrete range of waterproof and everyday carry bags continues to deliver with reintroduction of the Sidekick Dry energizing our waterproof lineups. As we look at the strength of our omnichannel go-to-market, we're increasingly focused on driving impactful and differentiated experiences. Starting with DTC, the quarter was highlighted by sequentially higher growth, achieving 60% of total sales in our largest third quarter ever in terms of customer acquisition and retention. While we continue to see weaker order values against our strong customer acquisition and retention, we believe this is partially due to new consumers we are gaining across very attractive demographics entering through drinkware at lower UPT and order value. As previously indicated, the Amazon channel was strong in the quarter, with a particularly successful Prime Day in July, focused on a range of older seasonal colors and end-of-life products. In our e-commerce business, we saw outstanding drinkware performance, supported by new product and color execution. We also took continued steps to elevate Yeti.com to enhance the premium, distinct site experience. Using a category approach, we've effectively re-engineered the buy flow on Yeti.com to align with consumer use cases, showcase the value of our products, and simplify the buying decisions. We launched this enhanced experience with all-day drinkware in the first quarter and have more recently expanded to adventure packed in bags and the cold standard in coolers. We've seen positive results from these efforts and are now carrying these enhancements to our suite of global e-commerce sites. Moreover, We plan to build upon these enhancements in 2024. Corporate sales improved quarter over quarter, so performance is expected to remain inconsistent following the tremendous success we experienced last year and some signs of more conservative corporate spending. We are focused on some exciting new partnerships in the pipeline for 2024 as we continue to grow and diversify our global customer base. Yeti Stores remains an impactful and unique opportunity for the brand. We're focused on the product and brand experience across all of our 17 stores. In our San Jose, California location, we debuted an evolved store design, creating what we believe is a strong balance of commerce and brand. Leveraging a similar format, our new store in Honolulu set a first day sales record in just the first two hours of operation. We also piloted in-store drinkware customization in our original Austin, Texas store, which we are actively looking to expand to several additional store locations. With opportunities to drive customer acquisition and awareness, we will continue to look to accelerate store efforts in the years ahead. These stores continue to showcase the range and diversity of our evolving product portfolio and play a unique role for our entire omnichannel. Yeti stores not only drive purchase, but as importantly, our data would suggest drive awareness, education, and consideration that benefits all of our channels. Shifting to wholesale, Results remained varied across the channel. We saw some continued tight inventory management going into the second half of the year. However, our strong execution on demand creation and innovation supported good sell-through overall. As we continue to build with our existing wholesale partners, we also began late last month the previously announced paced launch with Tractor Supply. Yeti has a strong heritage in the farm and ranch space, and we see this as a great fit given Tractor Supply's unique scale and life-out-here strategy. TSC delivers on all three of our long-standing criteria when considering new dealers. Reach new customers, create new buying occasions, and enhance our existing portfolio of dealers. A mix of coolers and equipment and drinkware will be available over time in approximately 800 of their remodeled fusion doors and on their website. We will work closely with the TSC team as we look at further opportunities in 2024 and beyond. International once again reached approximately 16% of our sales as our team and the brand performed very well. We were very pleased to deliver double-digit sales gains in all regions while also building our localized awareness and scale. Australia and New Zealand had a tremendous performance this quarter. As mentioned, Australia became the first international market to offer e-commerce drinkware customization. We also drove a number of diverse brand activations across professional rugby, on-mountain snow sports, and fishing. In addition, our team executed a successful transition to a new distribution center in August, which will provide more flexibility for growth and our customization efforts. In Europe, I had the opportunity to travel with our team in market during the quarter, meet with our local partners and dealers, and as importantly, see the brand come to life. Even with relatively early stage brand awareness, we are seeing highly encouraging signs and are actively accelerating a range of awareness efforts. particularly as we look at the UK, Germany, and the broader DOC region. Operationally, we ramped our new distribution center in the Netherlands this quarter to support growth and efficiency. In Canada, our wholesale business continues to see strength in our larger accounts, offset by softer independent trends. Our DTC channel remains strong and is increasingly leveraging many of the same tools as the U.S. to drive experience and reach across e-commerce and corporate sales. This included last week's debut of drinkware customization on Yeti.ca, and we expect added functionality in the quarters ahead. Overall, Yeti performed well in the third quarter in its position to execute on Q4 while building for long-term growth. For the fourth quarter and beyond, we will continue to focus on growing our global brand audience and an elevated cadence of innovation as we further extend our portfolio. The strength of our financial flexibility also means we will remain on offense in this environment, investing in global capabilities, driving our product roadmap, building brand, and thoughtfully allocating capital. Finally, with the holidays and year-end fast approaching, I want to acknowledge and thank our amazing team and all our global partners for their ongoing support, execution, and commitment throughout the year. I'll now turn the call over to Mike to discuss our results and outlook in more detail. Thanks, Matt.