YETI - Earnings call transcript Q4 2018

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Operator

Greetings. Welcome to the YETI Holdings, Fourth Quarter and Full Year 2018 Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] At this time, I would please like to note that this conference is being recorded. turning Relations. over be Vice Tom will Investor President I the to conference Shaw, And ahead go Please Mr. Shaw.

Tom Shaw

year everyone, us Holdings full to morning, discuss results. Good and YETI fourth thanks quarter for joining XXXX and

would Before include statements materially in and from to will which uncertainties like we could statements, risk detailed begin, to you in our conference forward-looking various that to subject These differ cause these are remind our are be that statements. call this risks results we this to actual our investors.yeti.com. found press our factor release SEC, statements as discussions be no revise that at well morning's filings forward-looking any all or as can obligation website update undertake We of found information. the or with which can on

also well tables supplemental as each filings. description, of will for release and Matt call as non-GAAP Reconciliations President measure operational in and financial found and results of of our Paul the in Today's business. believe the we as by certain accurately performance can measures We items. we adjusted rational the this our financial use the some discussions as GAAP financial including true today, they to measures and YETI; be Carbone, underlying lead be will our led included press call our non-GAAP represent using CEO Reintjes, CFO. of in will reference morning's limitations and non-GAAP measures During in

prepared our Following we'll call questions. open remarks your the for

call turn So with that over to the Matt. I'll

Matt Reintjes

our Thanks joining for today. good call everyone. morning, Thank and for you, Tom, us

process that for significant IPO recently and like company where thank prior to to would to we ICR look also through draws today. of exceptional most President the the to contributions his experience efforts help YETI as of he Tom the their our as some to me stand Let welcoming Tom's begin Investor We at Under Relations. to by Vice guide with at brands I forward Armour. Shaw family Starbucks

portfolio channels resonate Now turning and note a fourth XX% XX% consumers to continue through power the ended on fourth for our to Total outstanding holiday the These the and the grew for omnichannel quarter quarter performance YETI revenue an great across XX% our year and strategy. growth with of quarter with reflect very year. pleased results. the We the in exceptional product the season. as categories. We results and and brand fourth X% of grew segment, Wholesale broad-based the in were year the full with which our

in during fourth Our will for I direct-to-consumer capabilities business XX% I a the continued new further experience From elaborate with Coolers across XX% We Drinkware launches expanding product four quarter initiative believe and the enhanced growing full and year of enables our to on XXXX, brand. standout XXXX. discuss this standpoint, the omnichannel be strategic product our an number consumer a our successful both Equipment & drivers. categories. had we when our growth

this The reviews product the awards and media product XXXX. and with were category products the also strong in our our believe reach a YETI entry across numerous displayed customer as business YETI exceptional brand into point We be performance legacy Drinkware our as growth excited broadens continued awareness social experienced about brand. We creates to build. to continues brand through we for great earning particularly our and in products passion in

many over a XXXX. of These are outdoor few in and GQ Stuff the the chair earned most create proof Readers' with road accolades we XXXX market, the trippers. Base comfortable TODAY our recognized portable leak our its Choice their USA gift cooler Best to new Chair Hopper the on the soft Award Hondo sought And Camp for for best just example, durable For of as ordered year. Two,

strong a high-quality as revenue expansion. on focus increase drove double-digit great products well by Our growth operating led margin as these

top over XXX for nearly quarter basis basis performance in points the expansion points the translated and fourth of margin XXX Our line year. gross into

results We will also detail grew financial Paul adjusted shortly. more operating income over in XX% these of for overall discuss each periods.

briefly strategic customer growth sets up to big sales; profitable these several The growth success Now and years consistent turn expanding deliver updates central commitment new and the within corporate let introducing us accelerating our to in ahead. base; expanding and focus to me ongoing four our is direct-to-consumer our internationally. products; drivers: and on

see base. growing We're of customer reach First, YETI beginning with extremely to brand. the the expanding our pleased

a household share our has brand in December. our where highest naming our recognized rate unaided complemented fourth to and our to awareness These impressions survey. Company fourth efforts year's our quarter. recent October place we while initiatives helped our yeti.com events Most in quarter significant product XXX drive unique based initiatives expectations categories word-of-mouth further effort World's across in one the users delivered have their growth distribution Continuing referrals, our catalog mailing. this Fast with our are Companies YETI brand realizing and comparable in which Innovative others. most broadly awareness, initiatives ambassadors. million geographies YETI products more multilayered including growth and We to on the generating also the one of lifting experiences of powerful reach and brand programs, year tools exceeded ran and with through experiential Dispatch number about traffic the the last tripled also of Actual customers brand build TV actively total the building XXXX. We as Word-of-mouth These brand the been and YETI then awareness national brand aided are both started marketing and being first to drive digital in most over with brand and we numbers campaign, in passionate over

eight Banff, some YETI together an of Canada The most coveted in recognition at in be week coming of will Next world's annual Gathering one honorees brands. of the

strategy, thrilled and efforts product brands Melisa innovative depth added our engagement of knowledge price to our as Goldie digital Officer. Marketing her to knows January and in across manage deepen customer expand marketing with instrumental evolve to YETI base, be have further channels believe our to categories in global and to dynamic leadership brand early management Melisa continue consumer multiple experience engagement how tremendous we and experiential amplifying that Chief brings customers As and we're marketing. first reach. team points, marketing geographies. products She and will in We in our our

see new proud while quarter enthusiasm is Turning the and products. generating products the strong of also our legacy as In second fourth introducing product growth our to of XXXX, new we to introductions. track our of development extremely throughout for brand. our this record We're driver cornerstone traction continued

fully leading our seller yeti.com beginning XX in example, moving direct-to-consumer XX we in brand of for in highly followed For the broader bag first the functional XXXX, our to the us. within appeared it by at Gear ideas Popular best be Drinkware gift Mechanics fourth has XXXX Rambler submersible oz. Tumbler high-performance newer Panga diverse Drinkware Wine on the RefineryXX, the starting also the multiple Rambler introduced XXXX throughout as the distribution we waterproof of Panga a category stuff year wholesale technical, and extended quarter. and family as equally efforts back Tumbler to recently, from into expanded marked a More only XXXX continues the publications which for expanded oz. with lists Patrol. best and our launched Esquire, in Overall, duffel bags. backpack. and We a a half

product Choice capability not our huge, to leverage extremely with Now, ranging performance knowledge Outdoor Gear technical Gear Retailer Best but of Fitness it worthy the Best design and Summer as name. highlighting opportunity Health Women's & for pleased the to showcased naming Panga develop supply accolades we YETI backpacks Panga may the XXXX received global and a the of Hunting XXXX. And in Fishing be Market the this from and Field the our degree the to among Stream of of our we're chain Editor's Outdoor

new brand further. Importantly, proof our can that a category point into a this extend was movement

imagine developed opportunity is designed off contents waterproof to YETI begins its thoughtfully how Camino expectation, multi-use possibilities be environment. of you ever could capabilities nothing we mean the the broaden when XXXX and bag the surf real you'll this upholding Carryall. wet. As inside, having in best point, we all the start price to it market take looked your set But ability bags the with It's at -- the a you in the tote Introduced will sand, any beach, our early $XXX magic product most we I own. basic of with in the wash designed to anything could in to get the while haul at it the

replacement, simply it muddy works cleats, keeping as up for it quickly on across product, has Currently Magazine's also durable rated bag. past Camino snow from used the wet to pounds. become be stars also sold and a the Double X,XXX it only the almost store trip XXX you're grocery Best while ski as tote storage soccer of summer. disposable a landing it on car equally While routine highly At high-design a reviews, wash or to the getting your gear, dry it, end Shape can dirty. out, all, and back coverage It to well averaging a wetsuit, list while Carryall most yeti.com, Awards a for holds X.X

using weekend using your Carryall for almost the anywhere, the your life we're life using the So, customer's drinkware between with everyday and cooler surrounding Camino YETI. on

continue brand Looking a consumer's and product. nature can belongs of where engagement the ahead, we YETI find where a we'll the to places with change

authentic keeps our incredibly is us to mindset that to for what innovator, an back what us. customers and keeps That's As excited important more. come

and great look for sharing we XXXX more throughout we to a progress of the as pipeline details have year. and products We forward beyond

and growth direct-to-consumer. be the leveraging our direct stores. sales, and yeticustomshop.com, third the Marketplace, our is the we own strategy our to Amazon efforts through where across omnichannel key to extending A wholesale Turning accelerating corporate then own retail want tenet accounts our yeti.com, that consumers brand our driver, of shop,

of new providing to directly and and growing create have the our our The greater a building direct-to-consumer unique engagement importantly, the enhanced while customers. appeal gain performance customers, opportunity engagement brand, YETI channel across and Our reach in deepen existing new our gives communicate illustrates customer, use learnings ones. loyalty insights, capture our direct-to-consumer the we new of experienced to existing brand visibility, us to business, with the customers, with particular, ability customer

efforts would traffic you working our data we'll Yeti.com nearly ecosystem. traffic year, in e-commerce this and expect our growing customers with XX engagement and to web across evolved for This XX% As digital drive Later where in the immersive customer experience deepen non-customized has stronger business. conversion and XXXX. overall a to to with combining yeticustomshop.com and site leverage visits yeti.com an this to focused will into be analytics establishing million we're be our expanded experience yeti.com products. higher with properties go customization is under hand-in-hand on team create and single channel new site sales corporate our grow relationships our a a customized to

the an further Finally, Marketplace Amazon serves additional and reach potential drive to customers buying occasions. as platform

goal Our The a provide our customers do, to retail provides they is for the the pinnacle on community. firsthand. and to experience what with can showcase strategy engage share YETI YETI opportunity education local experience, products,

high-traffic brand. to actively progresses. store locations in store with in In XXXX Chicago. Charleston retail fit the we share future and streets cultural with have openings one Both summer are corporate hope and and with addition the a to other the identifying our on store locations you we two in YETI also current planned year as flagship that We're for Austin, represent here

stores look her engage strategy, experience newest as member to of as finally, our I would of Lou President of forward diverse and to experience. customers growth moment on Buy, while be are With a showcase the like upon welcome E-Commerce broad our Kelley. Importantly, prior planned brand, Mary Board are Lou's to they drawing at tenure Mary And focus board our Directors, including her our the We to omni-channel fourth Best designed these to profitable. as professional international. driver, well take

time have an currently signals globally. strong less we business opportunity believe of X% expand over that represents international brand our to incredible our we and demand sales, than While remain

international Canada for introductions as we their in leading XXXX and products are wholesale Australia, in and positions through XXXX build and design-driven considered we brands distribution consumers and Japan outdoor-focused successful of us for awareness. late early a partner. success, demand our Japanese Following entered adopters

the toward our and be with strategic attribute consumers, forward, our DXC execution expansion as conclusion, the additional we into and to growing and and international customers our of strong brand, product methodical across resonates will look portfolio attracting power markets. with to the approach, in continue explore brand, new market. of our performance YETI Going providing In channels we exceptional markets assortment to European international our initiatives. that expanding Asia the presence the our product innovative we We're continued product

the want and drive momentum our to long annual their to to confident full for our I term. As financial these we we're upon results. the review continue the drivers, executing brand in passion growth customers to build and double-digit thank focus ability Paul multiple YETI growth and in on to and year turn With building that, team our to YETI. it QX over I'll our commitment over

Paul Carbone

Thank good Starting XX% the would $XXX.X outlook. for and my to fourth you our a increased million ICR in financial like XXXX entire to fourth Tom you, thank quarter thanks to the will quarter welcome compared us. Net XXXX last to of with morning, team the begin $XXX.X year. the too YETI results, review Matt, by and team. and fiscal quarter. fourth everyone. And to I sales followed million joining share fiscal with I our

customized with direct-to-consumer sales new sales in increased performance expansion during driven reserves partially inventory of year increased net to offerings, last period for & our categories, primarily on increased of sales of Drinkware. primarily earlier were year, to $XXX.X and hard quarter, non-recurrence bags for last as of net last was corporate million consumer coolers XXXX. accessories taken same our price fiscal new the and increased expansion primarily during to the with channel. select fourth in to Drinkware cooler soft an the net increased same XX% of Equipment several compared XXXX in soft and Amazon, during on sales Coolers the net compared driven products by of and Direct-to-consumer increased our Tundra XX% These Coolers gross year, Drinkware The in product the mix taken period anticipation new in purchases million offset sales. living year. strong increased as hard well sales compared channel to of for net Drinkware new the as and largely introduction Gross as of $XXX.X to Turning net million XXXX. as the the the well tariffs million the such by by cooler outdoor $XXX.X Haul yeti.com, as product million, the profit $XXX.X expenses compared increase well year $XX to million during XXX XX.X% compared XX% category, both SG&A million or point coming $XX quarter in fourth quarter Adjusted across for to improvements product the XX% introduction the period the sales million Drinkware as quarter as as or introductions, to was higher growth XX% same colorways Equipment net sales product compared the period in XX% Direct-to-consumer of to $XXX.X X% reductions sales. portfolio, sales cost growth quarter driven XX.X% quarter. basis particularly million $XX.X by net million $XXX.X net fourth By increase sales. from of was in increased to driven the $XX.X last Wholesale fiscal year. prior products by & by last margin and same Drinkware to

of to compared to sales or year. basis operating percentage net points, to same increased increased of net has XX.X% SG&A primarily last XXX of business. employee adjusted expenses to XXX income during net investments growth sales, or basis our the $XX.X XX% sales, period expense million, a $XX.X to As and million, due the of support XX% points marketing increased Adjusted

XX.X% tax reduction million part tax increased compared enacted or tax Adjusted in U.S. basis per the same income XXX points fourth The Act. XXX% in IPO rate grew or with significant effective of the in primarily last rate in XX.X% net options Our quarter to quarter, diluted year. tax as million last the driven to and was EBITDA Cuts share. low the net was $XX.X compared to year's as the to during of Jobs to benefit well rate XX.X% sales, XX% a of our $XX Adjusted stock exercise corporate quarter. unusually connection Tax XX.X% as from by $X.XX

full results. me let year turn to our Now

the net For increased $XXX.X to or of XXX $XXX.X to year, net million, to sales last year the net sales, the a of sales operating of compared to to or $XXX.X $XXX.X Wholesale net XX% fiscal during XX.X% increased basis reduction million, to of XXXX. the to to compared net XX.X% to million, increased million, period compared sales $XX period $XXX.X million, million, $XXX.X net XX.X% during $XXX.X SG&A last expense to points the same year. of of channel million net net XX.X% for Adjusted during or XX% prior the points XX.X% year period. the XX% $XXX.X $XXX.X to XX.X% XXX last increased sales increased in XX% compared same to to million million $XXX.X period million year of income same XX% basis with or or period. profit $XXX.X increased of year. sales Gross XX% Direct-to-consumer in compared prior net Adjusted sales, compared sales year. sales million, million,

in rate or diluted million, Our XXX quarter to to XX% the of by and rate year. $XXX XX.X% effective tax driven reduction tax the in $X.XX Similar U.S. was Adjusted the full adjusted of the income option $XX.X or share and increased reflects last fourth rate year year. with effective connection represented tax tax primarily IPO low income $XX.X for unusually or stock was sales grew to to from XXXX. tax full per federal Adjusted basis significant exercise points million $X.XX of this share million compared the compared rate per year XX% the net EBITDA diluted net an income which benefit net of approximately fiscal XXXX. in XX.X% to XXX% the

balance let sheet. Now turn to me our

year XX, December and across year. ended to million of inventory expectations. last end of The compared demand XXXX. million decline last is $XX.X our and year product all in $XXX.X categories, XXXX in result compared we As the compared management of sales had of forecasting, as $XXX.X equivalents to cash at quarter to million the the We fiscal cash exceeding million improved inventory inventories effective $XX.X with XX% fourth

We composition and of are the fiscal pleased entered of months XXXX. with financing to with level both We trailing $XXX.X compared ended unamortized the for the we of total at times debt total of end the deferred our X.X year. million and fiscal ratio of as the debt-to-adjusted-EBITDA XX fees net times excluding inventory prior year X.X

full quarter on of $XX.X During net fiscal $X.X and the paid the our plus we Term to additional mandatory in outstanding of fourth from B respectively A, proceeds Term IPO down and Loan made hand. using voluntary million million million cash voluntarily Loan our XXXX, and of the balance $XX.X payments

I'd our Now full like to turn it outlook. to year XXXX

XXXX, For net XX.X% between fiscal and increase fiscal XX% to XXXX. to we sales expect compared

wholesale both to direct-to-consumer We growth channels with channel sales higher in the expect the growth across channel. relative

customer. well revenue the driven when product throughout related cadence, our rate year Drinkware first balance to to Amazon our the expanded the as warehouse. ship Marketplace. recognition in XXXX quarter the inventory the As we revenue do order Beginning you of the by in Amazon of capacity as rate result a expect as growth revenue had the change customization recognize think capabilities. we previously to last year we of the the second booked of represent quarter reached to about double-digit We lowest launches the began new growth We once expect of quarterly

marketing basis continue We channel lower increase of costs as by our investments expect mix driven deleverage to adjusted by XX.X% net margins our to partially from of XX and expansion reflecting gross product expansion SG&A operating we benefit in favorable sales, support between margin flat as margin we XX.X% primarily growth. offset to shift and the of points,

tax at effective rate normalized level of approximately XX.X%. more We a expect an

earnings XX% $X.XX We to expect XX% $X.XX share per growth. diluted of reflecting to

tax between normalized a expect Assuming we would rate and be earnings XX% XX.X% growth of XX%. XXXX, in

XXXX earnings $X.XX tax Again, We diluted XX.X% growth per expected would and to between adjusted earnings expect growth. $X.XX between if XX%. adjusted normalized reflecting XX% of we're XX% be rate and a assuming XX% share of in

$XX and to XXXX to We XX% for weighted are growth to the sales the our be outstanding and factors: expect EBITDA by and Capital $XXX.X be between expected reflecting in to expected basis diluted million approximately growth margin tooling secondly retail first main both be million launches; shares and support $XX new strategic is average Adjusted investments expansion million with driven stores. points. to and to $XX molds million. year-over-year between the XX increase expenditures and is XX two of expansion XX% product of our million $XXX of

X.X we fourth now and we in We results. quarters for to expect reporting debt compared excited adjusted the potential repayments are a about our come. our million, with delighted $XX the look forward questions. end end future XXXX open of approximately ratio of at EBITDA XXXX. year-end that net summary, to to fiscal And progress call of will and of with our We're at to yielding debt quarter X of In approximately fiscal the times times

Operator

line coming question Lynch. from Instructions] America Bank today is with of Robbie [Operator of Ohmes Our first Merrill the

Robbie Ohmes

growth have you is I'd coolers two be. Paul welcome first what of you questions and give Tom I equipment? also like know one Guys, going us should could to I guess to think the guidance, actually you about the on YETI. guys Great join I versus how see some for color we relative think XXXX Shaw. the to

Paul Carbone

Yes Robbie.

and think line of our just know overall based in of long-term nature. and in XXXX, XX% you I'd & product then top Equipment quarter-to-quarter, in the throughout things XX% expect grow Coolers to range. launches we that Drinkware, would to categories And within both grow But on that them will we the XX% XX% both as we expect think variations that to to we guidance year of about as say of growth. So you see XXXX

Robbie Ohmes

about And should that for the growth? thinking we XXXX wholesale be DXC split

Paul Carbone

Yes.

So would we we've in grow would even wholesale and long-term is, of the mid-XXs expect guidance is expect in to well. XXXX go And the to back our about to say would that what DXC mid-single talked to I we in there we if also kind be true expect we what and digits. would in as grow

Robbie Ohmes

guys customized large was And How you Are do on could bring then question, on way as capacity you on goes would in customized just that? last running there? is? business the on what expensive acceleration actually is a it one Drinkware hoping, talk business help about could great. what you capacity? drive the I be big And you that capacity behind and how like this Any remind us expanding -- then so

Matt Reintjes

something within Yes, touch last our thanks continue business. about back morning. come DXC customization on Robbie to the on over piece It's two good we I'll years. build and how the and let Paul talk capacity capacity we then

As really a reminder, we in to the make capacity. we of And did that half first the acquired could our customization drive so partner that the we investments XXXX. exclusive

see And side. we've for on particularly customization, XXXX We started the our build to out good demand organic in prospective outbound continued efforts. corporate to just very

that of facility. the It's we that that on additional process in online then where you'll facility, we're really look see part And XXXX. capacity of capacity that and guidance outside contemplated about our in we and good have capacity, working for bringing business on is. increases throughout So improvements feel continue other in but XXXX, current come as to

Paul Carbone

in, then part it is two and really customization pieces. business And the important of it's plays where

we're about So his Matt one property piece it that corporate our customized. and in mostly yeti.com into web is sales remarks of that property our also web talked in prepared then is emerging

and the So we direct-to-consumer. little about of business, the when bit we going then of customized -- a piece if less both the that said sales XX% was than about core -- back about which And talked the business. corporate yeti.com the you was the of was think non-customized direct-to-consumer direct-to-consumer half overall

piece the of as it's So of we break big in that a up business. piece it frames kind kind puts customized of the -- out don't an important particular, but it and

Robbie Ohmes

helpful. really that’s Great, Thanks guys.

Paul Carbone

Robbie. Thanks,

Operator

The question. next with the question Alexandra line Please comes Sachs. Walvis with your of proceed Goldman from

Alexandra Walvis

question. for morning. the Good Thanks I guys margin. to on wanted taking ask gross

had And In margin product So the Where us then And the are the there? stronger exceeding of Can follow-up improvements. from margin gross expansion talk margin as particular, quarter the drivers to coming sort talk what we you next color the you're were plan? through in perhaps expecting those gross that on magnitude expansion a any you the in mentioned just major cost on about you expected. of was that. gross core than us year? of that's guide, can drivers

Paul Carbone

morning, Good Yeah. Alex.

thanks for So the question.

improvement. inventory XXX didn't we of we was And above last were fourth last release the mix margin them have factors didn't was XXX it originally year. changes basis sales that – reserves the those. year basis that in many delta about direct talked this year. by points – and basis I as offset And changes, take took of from then took And we that basis our The quarter. of points higher in gross was improvement to price so expectations. we that reserves from year that the on point So We the earlier cost we from XXX expecting improvements back about we in XXX MAP booked about of XXX in the fourth that points quarter, think press if the go was DTC, you non-reoccurrence so

cost direct-to-consumer so of our a quarter you in little we if helped look where were then fourth very in the strong So fourth quarter. drive that. at, And above was expectations it our direct-to-consumer so XX%, were mix ahead also the that bit expecting improvements

to two expectations. beat So those to – our added up point XXX that basis to added the

deleverage. adjusted we excuse As income and – basis to of me. most look to from operating relative SG&A margin And on XXXX offset XXXX that's basis, be gross we'd an flat by we coming XXXX XX said guide to some the up points,

do we've tariffs gross same offset, shift times. margin expect we cost in factors expand XXXX. totally the the XXXX are benefit as So product, Those mix we several in offsetting to discussed

say gross first we margin the the So over with QX. I expansion first the margin for would it right? so expansion. cost, had quarter piece, gross quarter in as we in the year well. a highest look last gross the IPO will during gross margin what we will last line year in greatest And do of And lower year, throughout the So the margin product we as we expansion year in occur that's roll come think then our that last expansion shared about modeling product have but as of in cost, just very biggest

Alexandra Walvis

then And one innovation. Great. on more me from

I'm of So you've on XXXX. Anything us cadence the what or innovation coming focused? to you share of with new that in got else sure likely be can lots

Matt Reintjes

pleased the Yeah. and Alex, news things a in talked products the and obviously prepared of we those this We're that – central innovation on outdoor our some our who of mentioned both is – business I we remarks how as the at extremely part with and also ICR do brand. to retailers. legacy saw perform continue

a continue a XXXX those products that, a continue do year cadence out that's bit mentioned. couple that last think momentum think broad half rollout you'll some the as – years. the XXXX distributions throughout talked we've half we the that From number behind the up in built new part what I us big bringing for the up brand start and awareness to to as second to and They'll we'll you'll cadence I I of as be were a year. more we've first color about to similar you'll And first of we continue of innovation channel picked through see direct-to-consumer we is perspective throughout of the as going products And XXXX. roll concentrated from So have. and towards a the and only have is ways over products. beyond. What announced see concentrated XXXX to be We're then we plan bit flow half really in into

Alexandra Walvis

the guys. Fantastic. Thanks All so much, best.

Paul Carbone

Thanks, Alex.

Matt Reintjes

Thanks.

Operator

line Please the with Sharon William Zackfia of from comes next The proceed with your question question. Blair.

Sharon Zackfia

as just revenue aware accounting to disproportionate give follow-up And morning. tariffs of secondarily the given quarter? gross a you're you on still there's a question. impact of? for impact the in it margin I we affect then the update originally the what relates category one the tariffs is in first be I on growth Good your moratorium first might the that an in part think is Amazon change should Hi. on anticipation the that quarter, And that including? -- there how any us as place Could guess on

Paul Carbone

Good Sharon. Yes. morning,

tariffs, this on as January. thoughts about So on consistent talked we are our in

we out year then And that items XX%. as as year other XX% we at see some full this with tariffs. are on we've is believe product talked X, the about negotiations, and Certainly, goes offsets far pay certain X we'll the would that what as of million. proposed are impact that stays a in of say the U.S. overall, track negotiations $XX then see items, and benefit strategic for I portfolio cost dollars. from the in would FX would and approximately assumes to So, moving the mitigation tailwinds negotiations, project the it FX a degree. China. then March if cost the current currency the us of product we that like many -- about on interrelated that specific with But across talked certainly tailwinds ongoing to past, happens we've that List the on well million of of standpoint, we $XX I sourcing to say out and impacted

of So at but for go XX%. it But that up we're we it planning to a hope stays bit to -- an way. XX%, that's little the other we offset maybe are

Sharon Zackfia

the And Amazon? then on Paul

Paul Carbone

The Amazon. thanks. Yes,

third than they're Drinkware. then So quarter. it mix the product it QX, little would it look the Coolers more about more company Equipment, will points. & their fourth Drinkware other impact approximately company, although, and similar product away wise, about at if you to points us a in actually balance of right? bit each QX. back comes so And bit it's entire It did and benefits little the impact XXX to Amazon, quarter And Drinkware between overall So is a the us, basis similar In in the offsets other QX. negative in basis XXX

you total & look about it basis the Drinkware as as that on QX. internally, in XXX there's about of the drag of at Equipment. it would for based way overall than So we But in tailwind at the look the company see it numbers Coolers points points more and basis we QX XXX in and

Sharon Zackfia

Okay. Thank you.

Paul Carbone

Thanks.

Operator

with the your line Keith Peter Jaffray. Please proceed next The with of question. is Piper from question

Bobby Friedner

Friedner It's morning. good Peter. actually for on Hey, Bobby

detail been to Congrats and introduce just set XXXX. some XXXX, plan Thanks. little give for could wondering you marketing. was on to the ask have the marketing how your success to So new the you I more initiatives want first brand. if you've I customers with a seeing you of initiatives in about on

Matt Reintjes

Yes, brand have pleased programs, marketing as building event-driven our with our experiential, our we're saw strong ambassadors, deep of XXXX from some Bobby. endemic we through activations Thanks, both what and continued our our we legacy roots.

With existing Anthem brand combination fourth the We the product million-plus Melisa are top tripling XXXX between in brand more broad coming things funnel those Dispatch, joining the a list, on the is The we from results in and prospect focused we one Anthem the YETI those, building. the saw the also, programs in marketing expanded of reaching our focus in of that like team, with of how and also we're marketing quarter dispatch together. in impressions. driving the brand our list and household and our both XXX

driving mid-funnel really marketing the So, and marketing and to the we with building start product top the multi-layered at funnel, and conversion. up then the drive, building our using performance in look entirety of to the drive of out

across to the from to across So, invest I say spectrum the and customer. would consumer, invest continue consumer we

markets, seen past XX% from our That we U.S. the non-heritage over the also As to as is plus markets of we've larger with into markets and the one the being about business. shift proportion heritage of shifts going we've spoken now population heritage of the years two the the market think being coincides in new three to in our market. non-heritage last that the

we believe and we in even, the start think moving opportunity. success before the and in larger international of So, to we're opportunity start having into domestically adding market fundamentally portion

deep with product broader-base three brings endemic, four success years seeing running And similar direct what by or to the that's very engagement, a awareness. brand way playbook direct building. that we're the brand Melisa up linkage customer/consumer we've So, augmented last that all marketing, to augmented between broad-based that run really marketing, with table is

Bobby Friedner

on and a in impact And you commodities Alright. commodity looks can input costs, commodity any in what month? outlook you of like separately give Thanks. prices And XXXX XXXX? recent recap for on have considering lower

Paul Carbone

Yeah.

into commodities So overall part that. of the wrapped product cost in

is XXXX part have negotiate guide product that reflected from pricing currency about talked FX we to in the we gross on as and our should about as know, having three input cost talked manufacturers. we as reset with We And based also months expanding of margins go negotiations every and cost we you and then models pricing. and

that. product it our or with product negotiations lower the positive outlook cost baked of margins that's, guide and in the is cost to So, due expanding is on

Bobby Friedner

good Thanks and Alright. luck.

Matt Reintjes

Thanks.

Operator

questions. of The Peter your Baird. W. from Benedict Please next with proceed with Robert line question is the

Peter Benedict

guys. the questions for here. taking Morning, Thanks

Asia international more some where near-term? markets. in for any places of one what's other question my of markets? tab terms you're likely question. on you when First be you might the on I of going mean, of Is expanding those But mentioned kind That's and the more Europe of timing sense regions first kind to. as the just than to into moving

Matt Reintjes

The thank dealer early Japan in Peter, late and looking morning. established footprint would we've accelerate in our brand Asian at We're actively markets. you, good Japan near-end continuing -- in awareness be partner market penetration and it's certain a most The both Yes, the XXXX. Matt. European because in through

and from a inbound Analytics expansion used As of natural inquiry the a hitting helped perspective, demand demand, our and we're up website our what's demand. our setting the markets where roadmap of international really that's and we've natural And it's natural gone Google seeing kind strategy. establish

through you strategic for business area of of drivers, we get towards year, as that. as think on in is four it the growth focus we'll all XXXX. But one I the the is part our big it a progress -- update

Peter Benedict

-- good. Thanks Okay about thinking free dip the of going talked that into about cash cash or the $XX to level how view I XXXX? you. then pay curious assume debt you how mean balance for the cash you of that Matt. you're Thank on we are be in guys just XXXX? Does down. for million And should flow the level thinking or

Paul Carbone

Peter. Thanks Hey great.

down flow. of cash the XXXX, you the flow. company -- over cash paid certainly know free in significant So, on this debt million asset model as generates light free based we $XXX And from

and free in to call look we more XXXX of level normalized $XX I As million million think a cash to flow it $XX range.

that debt, to $XX ended of and that some balance on well. point on year million maybe comfortable to of million $XX million We cash hand. at we're it's with the look cash you using sheet mainly if So, of the free flow pay of which from the pay $XX your debt cash down as on another down

Peter Benedict

question. sense. makes Last that Paul right. All

Just the of expansions. retail pace

Is And how terms about in we the term you what cadence are Just new this all year? expect summer. of about stores? of Thank how that you. coming thinking thinking out the should what called them? longer You opening two you're stores this quickly --

Paul Carbone

Yes.

So ones and the called the talked about leases we have two for. we out that signed those, we've those are

We to are at actively in look continuing lease negotiations. sites

in -- wouldn't near-end the those post would Chicago get are and stores but obviously, expect are as the But only So, stores XXXX Charleston stores in I negotiations, that the summer say time. see of be would two open. you'll the those and in I know lease will as the that, And than we're in exact you those more XXXX. timing

Peter Benedict

All right. guys. lot Fair a enough. Thanks

Paul Carbone

Thanks Peter.

Matt Reintjes

Peter. Thanks

Tom Shaw

Operator a next [Technical question technical small like difficulty. please. looks Difficulty] we It have

guys queue right online a the please moment could is now. we'll Hey, for live everyone hold [Technical So back. Difficulty] get

waiting just for So everybody.

Paul Carbone

Hey everyone, reconnect in... the to operator is trying still

Operator

Duffy. for Mr. live are question the We

Jim Duffy

those channels guys. Thanks, in specific fourth year custom expectations start, what the guys good growth talk about corporate XXXX? can for Amazon maybe in Marketplace terms And finish more on the morning. and for shop To Welcome, you some thoughts Great for in on the quarter? then you saw Tom.

Paul Carbone

Yes.

question. thanks -- So the for

the we quarter. talk direct-to-consumer the fourth specifically So give But let color wholesale. me below Amazon some -- you and on don't and

Amazon channel entire very the as DTC XX%. quarter plus So had strong a at

with was line So in Amazon number. that

sales our us coolers we able soft heavily coolers that line another Amazon this was skew to but the well is significant customize in So very on year. overall Sharon's just just to product there and strong -- On does of a they do on for Drinkware. the as business had differentiator growth. is we is do Matt's group, bit then also and customize through some Drinkware property for being us And also as both corporate the question, corporate of to so also coolers more and it's to customize web But customization, And but very, skewed But as but DTC we mainly the well. It part with earlier strong products. no own towards we the really overall comments capacity talked fourth later that's a little outperformance, about Drinkware. our hard not fourth Drinkware, quarter. in sales quarter through in adding our customization color

Jim Duffy

of can just it help the platform? then accessible customization just general consumers buy make benefits on yeti.com consolidating Does that more to for the customized in And the simply you Great. offerings?

Matt Reintjes

efficiencies. capability it In operational that's a yeti.com some There demand consolidation versus and Yeah, capability around high-level part the bringing one obviously exactly right. location it's of Jim creation and significant consumers awareness driving -- have two There that to to some main -- are of is locations. we customization property.

to about directly customers what and personalize that yeti.com. ability and would their we're bring So -- from for that excited product what our customize

Jim Duffy

have. I all That's Great.

That I'll go, on was Matt I Before very just Camino pitch Carryall. the great convincing. say

Matt Reintjes

Jim. Thanks,

Tom Shaw

question looks like It we're again. please. frozen next Operator,

online. with bear a us back moment So we'll get please and

Operator

able to you are hear me? Tom,

Tom Shaw

Yes, on. we're back

Operator

we're the technical technical Okay. issue. still on -- We're working having working issue. the on We're

Please if still gentlemen, if technical you the questions on hear line. the remain read Difficulty] Sorry [Technical we’re difficulties. for me, them experiencing call. have can delay. standby. and into Please Ladies you can you Tom,

Tom Shaw

Greenberger a Well here Morgan question right. let at me read from Kimberly All Stanley.

fill? start number executives into Any team to the looking management positions You've XXXX. hired are of with you a We'll in new one. that

Matt Reintjes

it's I quickly this time. Thanks, morning. Hopefully, technical apologize morning this we get difficulty resolved Kimberly. and the a the great this for delay. Kim, question. Good

Officer. we that Marketing have in really Melisa number in executives XXXX new we're our excited Goldie, about We Chief with of and brought a culminating

Our I complete. complete what call substantially would team is

here. We talent of look continue as YETI enhance the part and to opportunities to within what continued for to excellence part of we add do and

of we with team part right kind expand to the internationally of to that the our continue would team, business, addition we Melisa of But grow talent is As as of the look level complete and strategically right I my that add we'll into organization. say Goldie.

Tom Shaw

Understanding here, think And feel XXXX, inventory is there $XX levels How some in question about do forward? year-over-year. million second about clean you your should growth? going down the rapid inventory to modeling support was appropriate inventory up inventory we Are how current levels? they

Paul Carbone

XX%. And question. down to did our great inventory. year year the -- working so similar all down really end was And or relative that Yes, we to

I look we say things. Kimberly, forward two would As

we you that in, first shipments talked we in actually see that do pieces. pre-tariff slower we slightly how We feel than inventory with some below part to grow expected. levels? saw And the before of about overall. the XXXX the into increased the then two the versus I actually big And would go then where coming XX%. is, And tariffs The year year-over-year We secondly that grow to we XXXX to we sales into inventory ended and as it was really accelerated as will XXXX. second declines begin question, expect

all we're was. our we expected. $X And inventories But where below shared little our then our model sales of original going against bit over-delivered they million were where which vis-à-vis brought the thought plan be above thinking we we about that So with where expected below we with we a you.

between both of we as sales will we grow, and we grow categories great feel then of then categories. piece it and business. to that the look to than with product inventory And grow level inventory again inside composition the and slower So do begin the inventory for product of with

Matt Reintjes

Tom. you Thank

Tom Shaw

one time have for operator. We more

Operator

Randy question Thank line Konik would with coming the of you. from be That Jefferies.

Randy Konik

me? you Can hear

Matt Reintjes

Yes.

Randy Konik

yeti.com -- Drinkware. a of or Paul kind -- guess use. little me is consumers place brand do once does Marketplace kind of you in journey is -- tend that is a that I any skew All I how any That the the to that mentioned evidence more show has guess what you data they seems see engrained I'm good. analytics consumer low the YETI -- asking guess the ask right, or start there's Marketplace. to Amazon migrate to the because, on than that their you that mentioned Amazon where I'm is Amazon given Amazon towards sure Marketplace? higher with tells Reason can friction on is begin yeti.com from brand. easy this to very the I that's tend it's migrate or the like not obviously margin I It the to platform YETI of gross

if So there business in consumers into occur gross margin it -- brand long-term the can that then more a seems that to Amazon the me come start benefit migrate, model. at is

just on thoughts that, first? on So your curious I'm

Matt Reintjes

believe consumer about great strategy and understand wholesale we on that a think It's perspective in to talked Randy. learn we the we towards about see data of as for -- asked in omnichannel indicated yeticustomshop Thanks. the of higher where to shopping Yes, as the wants We about the and analytics and what continue I And are the last to invest when we lifetime want -- are considerate that you to our creates is capabilities Amazon we earlier We basket, the purchase that with to you that is? believe you Jim versus as to slight and powerful channel. from as yeti.com they to in a reason And us. purchase -- think and value another call to see combination cases we're Paul yeti.com. We believe what talked our ticket their more more immersive Drinkware yeti.com part a and some along shop and customer being as our from on that yeti.com with realistic a flow the product channel, XXXX. consumer question a yeti.com drive we shop. we're want some think question to the to in bias do as Amazon heavily item about along the what pattern we've something truly we make saw that to traffic reach want opportunity excited does yeti.com. come introduction tool experience a from and more a We YETI want we

we're the and with to that on. combination absolutely of build-up driving So in of e-commerce we're business that's what brings doing focused something Melisa and overlay in us plus what our the the analytics capabilities

Paul Carbone

Randy, add then just let me one to piece And that.

pull the right, P&L question absolutely your of So geography. from just is but through

the fees the The gross actually through margins properties So similar, is are your Amazon – our fall right? into YETI-owned and of pull the of Amazon this fees question OpEx. and

one to OpEx gross margin your on is properties – more line So and correct Amazon. inference are your it gross transact our question own is is for of it that profitable But which similar or just of margin the item. versus overall at us, web

Randy Konik

the you other what curious – then question seeing done you presence And of what of BXB curious at have you in terms a Just a of you look Understood. what BXB you look the you're looking sales at cetera? ability? structure of corporate the margin envision? BXB when your some for benchmarking Or is the see on just like on opportunity Other sales, do if that custom kind we're et things there. in companies again shoot organization? have what what And like

Matt Reintjes

overall the it take I'll Randy, within then end and how margin and can to the the question Paul front our DXC business. the relates of address margin

gifting – is highly that corporate that think a use channel. number We to the a different down DXC has reason product to fragmented really because meaningful seeing market response we think it meaningful a We that we're fairly price We call market. price we that benchmark and that is in premium part future and market good and of a out the we large that haven't to driven is contributor lot want or the fragmented as brands associate to and of know a pegged covers premium price-sensitive it market traditionally in corporate points that been reward that us corporate for highly gifting for that opportunity points.

positive that be to going sales, continue to after invest we So and the opportunity. continue corporate on behind

Paul Carbone

a it so yeti.com other slightly profile, then our on below corporate But And compare to margin wholesale, channel direct-to-consumer properties. inside than above of from if channel web instance, wholesale you it's profile the the a sales margin is for margins. the

below So yeti.com. it is but slightly high-margin business,

Randy Konik

I And last Matt. question Understood. for guess

You've organization. got as of you earlier lot mentioned additional some a the into good executives

Just curious down XX next perspective to the as to say XXXX are the XXXX in three things give what us the on direction you're to over high to accomplish the for personally strategic XX to into Thanks. some level? months, organization on I'd focused top next and try

Matt Reintjes

Japan, internationally, outward focus setting in and area both expand the of XXXX, then a success past with brand Europe we and to about in for fourth our lean days Australia expand Yes. nature brought, keeping working about, some her on growth outside-in continuing a the for into the organizations, in drives the of and the and Asia. some effort, that I early of to perspective of of the effort we And in we talked evolve and conjuncture, Melisa question in ties brand we that to and then in in domestically that's the leveraging heritage as and of sustainable four evolve and our opening business big earlier International her Canada of strategic growth aperture, continue in XXXX, internationally. and in XXXX and long-term which that me to and our legacy talked as talked If We up international. up started getting around talent in really about we that. those back is onboard brought drivers the middle focus speed

in systems, see the talent getting team the on number brought to the growth excellence. footprint, made control, and internationally. brand be, continuing and growth So growth business build with of And combining believe would then since on and is to and one onto the coming incredible infrastructurally and XXXX then a to work the right in the getting we that in that next we scale. global that place domestically third support a now in progress in of phase that we operational we're that our moving things getting operationally We've

Randy Konik

guys. Thanks, the helpful. great Very up work. Keep

Matt Reintjes

Thanks, Randy.

Paul Carbone

Thanks, Randy.

Operator

for the back to remarks. turn time, this floor closing At you. I'll Matt Thank Reintjes

Matt Reintjes

to Well, wonderful that, you. be we Day. to look progress. everyone to Thank a we Thanks all and would today. of forward With wish our for the you early remiss day. not I everyone rest May you. us Thank Valentines XXXX updating forward wish joining We in on a Happy look

Operator

Today's conference concluded. has

lines your Thank for participation. time. you this may You at disconnect your

YETI (YETI) 14 Feb 192018 Q4 Earnings call transcript