YETI - Earnings call 2 2023 | YETI Holdings, Inc.

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Thomas Shaw

Good morning, and thanks for joining us to discuss YETI Holdings' Second Quarter 2023 results. In 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 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. financial non-GAAP on basis. our be call stated, a on otherwise measures the disclosed will Unless underlying business. We they the and more non-GAAP accurately of use measures represent true as operational we believe results our performance GAAP Reconciliations of to this in included yeti.com. measures our these morning or through the release presentation Relations measures section website directly press of their in the are most non-GAAP comparable posted our Investor at

like I'd turn the to over to call Matt. And now

Matthew Reintjes

pace margin good in the our and Thanks, a full morning, and moving our remains on year raise margin with everyone. to XXXX Tom, higher prior YETI sales range, expansion to of end operating EPS. strong adjusted gross and

MXX are into strategic bags track channels Dry quarter. and our remain that the diverse MXX the of environment. like XXXX. have been out in the We priorities, and market for this diving increasingly to of with results gear the across to what and fourth reintroduce seeing soft bag coolers majority dynamic in our tote would Before the we Starting our on I the backpack, start gear with SideKick

the quarter for extend will the launch in of the early fourth line bag We soft also sizes cooler style each in sizes smaller of XXXX. dry and

Again, their products I back market. partners tremendous would to this employees, like to for to these get thank focus customers throughout and our YETI effort and execution

out performance on color within and play across and Regarding overall Drinkware wholesale of hydration, We're trends consumer a demand, demographics. strong specific around consumer portfolio styles. own and seeing our range to we channels. across a with There continue our DTC new see this remains focus

our bottles. many bottles, of towards our strawless formats tumblers new and Customers are increasingly gravitating color-matched newer

pleased and Rambler grow introduction we we're offerings we our water customization the include bucket. and across size new have highly expanded beverage As bottles, of category, range and a our our with Yonder successful products to of to Drinkware continue diversify

past and across excited this positioned the development of of mobile and of expanded coolers. saw quarter, opportunities line particularly offering categories, product with we will long to both Wheeled innovation coolers, customers soft strength win we're coolers geographies, unlock and hard take In options to is our our pipeline about and hard across trends product marketing term. focused we're we on view advantage to YETI our the as and continue well

absence second non-GAAP X% quarter our solid offset for a Adjusted included by coolers, portfolio. soft rest at grew the within Results growth Looking the the of sales of performance. X-point drag quarter. certain from the

very corporate This strong is year against wholesale particularly a period, ago and in comping sales.

As indicated, we positioned remain target. deliver full to our sales well on year

positive by came early a toughest had supported to shipments the winner year period. our fall ready sensing well to as excluding fall compare sell-through, edition than ago its decision the faced move launch limited which soft made better sales, We a as Wholesale of go. we quarterly demand specific balancing as performance in impact product. impact business quarter. led DTC By our channel, grew soft X%, X%, the and our helped e-commerce, strong corporate Amazon great innovation. offset and Demand just cargo sales for a led some DTC softer reception by Drinkware of for Our declined category hard in to and bit coolers grew by channel coolers a X% product the to cooler from of planned, initial the the QX,

were Green reception was seen demand advantage and take to this our Camp to colorways, we set well seeing. have of you trends the with Lilac As the product up

what to be on excellent an were take having XX. did team believe July launched product anticipated, than ready chain advantage will products offerings. the job officially supply of we of These of supportive and partners our strong earlier opportunity Our wholesale

late in commercial basis points reminder, launch ago margin XXX adjusted colors year QX versus gaining year. continues margin As to to this the full XX%. with a our period, be gross second July highlight in in approach a happened of Gross half

are against We we delivering gross to what said relates margin expansion. as it

we year, into initial XXXX. margin our and to outlook gross momentum Importantly, for here the see now exceed we pace are on

been At we remain across the same continue channel brand on we time, We many as our opportunities invest focused impact business. of ahead product, as has and our pattern, to the the growth expansion. see

by sheet a balance be our exceeding highlighted continues for to business. million. cash our source strength of $XXX Finally,

and end align on with of upside. We us provide also results our driving at the credit Again, commitments the to top line year agreement expanded higher also our trajectory flexibility. while for additional to our better line put to growth pace these deliver bottom

shifting strategic into priorities. our deeper growth Now

influences balanced As the culinary. evolution from world and in barbecue across our approach domestically connections activities pursuits. of of A passion example globally, our outdoor we of XX base of broaden deeply heritage broader the live leveraging is to growing endemic our communities cooking great the continue and enthusiasts we fire fuel consumer and

Fire couple a to and are is the author. regarded roster. of host in Genevieve outdoor Taylor highly well-respected micro Gill food Meller of chef, We show partner ways the recently uniquely the highlight with Here wild. a ambassador and voice approaches to founder culinary in We and their a the U.K. to School cooking YETI culinary both Gill Bristol examples. and our is Genevieve added in

includes also multifaceted across This new integrated YouTube a Vendor channels. the built several have We series. of season second partnership partnerships Eater's and during

our uncovering consistent ambassador storytelling. launched Legends of fascinating Leone stories and is they focused X YETI conjunction additional Makin' series, -- look our on the mentioned Local people brand seeing in calls, QX historically addition, dads moms, and in these what It! seasonal Brad recently we our the highly human with In to In opportunity but also and We've reach, modes. purchase additional we grannies are occasions. expanding buying enhance this with audience

it Rescues of We're are also circularity looking our Rambler our published showcasing the we X ESG The month YETI everyday voice and of to alternatives. ahead. recently launch design. our Back, positions brand progress highlights our portfolio strength as own focuses our well campaign and single-use our story on expand. our programs, of this the to relates our a that as durability, both product highlighting remain against building products opportunities our of and we to report, report actively as inherent durability by Finally, natural third distinct that is Buy the The new which single-use

You'll see summer, Chicago. life placement, out-of-home platforms in is media this music this Lollapalooza festivals centerpiece of come last to several weekend, across a including and

and to diversified cases. a not This shift legacy the relevance. YETI's more past we XX give factors, but continue over to me includes years. product trends and colors use we form broadening long-term innovation have into how sizing, upon we the let little Drinkware, As seeing insight the we build are innovation, you our environments with meaningfully use also portfolio of and only Beginning and of

early color-matched are We our options wider a available of excellent to bottles. the seeing with across range great assortment results our bottle reception of

both into of expansion smaller reach sized our breadth Our hydration larger and has products. the enhanced and

are value continue category. We of lid our and of travel in including Drinkware to sizes. the Customization sizes XXXX launched this successful mode opportunities extend its products, extended prioritizing various straw

use a lid as of solutions are bottles new water we first most sizes, new Yonder our recently, multicolor and here added customization. example good Our

caliber which that incredibly continued during Rambler opportunity whether We the be at Beyond campfire product and and interest our the Bucket introduce quarter, products led outdoor encompass traditional well see home, we everyday backyard. Scoop. Drinkware, Beverage that around in in performed to debuted great renewed in to both our Ice YETI use, the another or

being introduction with will use the the of YETI have cases We of the compatible backwards environments. very and extend the more further proposition Starting over a products the decade. of which large delivers Tumbler value Shaker sold with coming the past YETI Cocktail that portion incredible

the a as perfectly release YETI fun We to It third this to cast able cast masters a Pat partner reaction in Industries very also our the a XXXX. nod cooking up product strong Finally, the the smoother and highest of was XX-inch iron culinary pan created lighter introduce occasions. without social was cast limited since to best give iron was in we resulting for teeth performance run were to a or business Butter incredible for iron engagement to balanced one This skillet excited see skillet. YETI any it durability, giving the to were product with community. at premium

coolers MXX the and our the quarter X% sales the impact side, and not MXX adjusted of market declined for equipment we in of introduction On soft the year. products and as year's coolers full last lapped those this

Coolers from As the our the Combined coolers last performed XX Roadie with buying the early wheeled mentioned, Wheeled year. Tundra leading Haul, during way during XX than season. coolers more the volume Roadie with hard of and quarter doubled summer well

upcoming MXX QX. posted In strong soft and the MXX coolers, relaunch of growth our in our Flip of Hopper ahead

the introduction Tote of the X the to lineup. cooler, cooler sizes We new MXX also forward and look in our MXX backpack

additional continue Sidekick which second bucket. for planned strategy also Outside with has and see gear of in in in wholesale extensions return sizes early a half we colorway resulted also our cargo the will to uptick bags, results excited in with the our late On expansion GoBox line, nice are load-out about year. the we XXXX. our Dry strong of continue Our case expanded coolers, fourth the quarter

In original continues well. XXXX Waterproof in addition, perform which launched our to submersible fully very line, Panga

seasonal we last effective transition of in we in older a our a in as channel by led our as participation results in to Day generations. the a growth quarter largely reach and continue colors to wide turning see Amazon have audience. we planned both continues month. newer customers. note, DTC Of Prime supported new X%, did end-of-life up and were product and continued product to distinct Now returning products sales effective a from range of concentrated way capture to omnichannel. offered and the very the DTC where

the On buying yeti.com, purchase includes and YETI, This our the our decision on customization focus process. is brand experience. simplifying building showcasing and enhancing optimal

strong untapped this across to best against YETI our that content our interest, digital the driving teams here are count to highest leverage provide our in flat, analytics and and sales and from given total a cohorts. From grow. channels. create the of growth means across customer match a commerce and BXC and up be In confident We continued spend driving different product product were continue experiences year. customers sales perspective, continues an the our for website with awareness last strong us, Retail targeted rate very with continue in vehicle, to customer we to acquisition roughly backlogs personalized business, learnings a Even practical marketing will individual customer this, opportunities. corporate international new more dynamic a we to strengthening remains important channel This customer.

count, products and cooler to soft units strong we slightly baskets smaller acquisition transaction, the have we primarily are conservatism. attribute change we retail seeing which customer While seen to and some in consumer customer due per

stores the across very existing of retail channels. markets purchase throughout our supported in-store YETI with XX results stores. by both a the remain important and consideration Our market-based and is part DTC from and wholesale awareness analytics This our

we quarter, third San will and just the Jose, open and our and During in XXth XXth Edina, Minnesota. California outside of Minneapolis stores

Results impact ways. This better-than-planned contributed our the the excluding side, support a sell-through planned of launch the to performance than commercial positive, Lilac the and mentioned to channel. wholesale Camp the shipments On sales of earlier for was recall. included color previously the also green

XX.X% nearly So QX. up combined to in QX in sales year's XX.X% from prior grew reach quarter sales, QX to for results keep the XX% expectations. we expect line and last International with of

the in of and Canada, coolers. remained did slower domestic the growth demand growth trends the soft same in Australia facing outsized and While of impact robust. Europe given the many We business see

U.K. transition As We've we of year. this strong our in Australia X build international quarter. continue enhancing non-U.S. of our centers Netherlands in fourth in outlined, progress made our regions. to will support big opening capabilities theme growth the is an the and another with that coming the overarching international across opportunity have the Customization businesses plan days we previously on in June, the distribution to is

Australia our and started analytics engagement marketing Australia customers and co-located markets. significant effectiveness in our in Canada, the attribution enhanced initiatives have driving also their data our Europe both in global and XPLs. investment customization including understanding We've added benefit of internationally, in all planned remains to and work

brand driving actively the On represent markets X/X who of invest in continue global international and of to end nearly the and we these roster. now ambassadors our in front business, continue to add partners awareness

League, the the our newer with support partnerships Bull local Rugby as of World We Rangers continue Club such and Cowboys Surf and Club some global establishing Red Football to new North Oracle Australia. racing also Queensland reach in in the while Glasgow relationships

the including culinary Gamefair and and The engagement relevance to Europe Food U.K. & local Calgary The massive Seas Surf of in-person and and Festival range Australia from Day Finally, several Fest. across in outdoor drive Barbecue experiences Big across we a and The Stampede continue events, to Ethiopia the Canada, Grill in Women's the

our In ability summary, adapt. our and second quarter consistent performance highlights to execution

to to is profitability While the remain and deliver that adjusting is maintaining increasingly the brand, we supported the YETI, needs a makes the driving on agile great what product, they always basics, making of YETI. a growing meet unknown on by This focus market, our consumer, an scaling to continue team internationally. while building a demand,

our I'll over detail. financials call now discuss the and more outlook Mike turn in to to

Michael McMullen

provides our adjustments are believe associated non-GAAP the performance Thanks, period. of Matt. included better summary To would product I'll of focus underlying which our like results. on I performance, and charges the in GAAP a we to our start, provide that recall picture a adjusted with voluntary then

updated year adjusted Finally, target. our I'll to discuss increase full the our outlook, EPS including

Regarding certain returns quarter, was the which adjustments reserves. the and of assumptions, initial claims reserve including the informed from our type and during We fourth on recall, redemptions customers has chosen. rate based the in our to taken expense began several of processing second redemption remedy quarter

has redemption across been on rate there have While impacted rates differences products. redemption the plan, been overall in the

addition, In versus seen we higher-than-expected recall, remedy option. offering we our the customers options, elections impacted the card have the gift remedy are replacement product by of

adjustments the We recall have, therefore, made to reserve. our following X

to for First, sales second we a estimate $XX.X the card of in million. gift increased elections GAAP quarter future reduction resulting

logistics reserve assumption our elections million corresponding of card a cost lower goods are SG&A to now in estimated our $X.X sold resulted GAAP gift expected estimated product thus drove $X.X expense. Overall, original the in the our lower replacement. And given recall assumptions, also net X future in recall-related GAAP adjustments update the million costs a future these of in Second, of than increase benefit reduction be this of expense resulting million to cost a third, to quarter. $XX.X

For non-GAAP press reserve QX our information filings. refer excluded our release these on to more which adjustments, from are please results, and XX-Q earnings

Now moving on adjusted our non-GAAP to metrics.

in sales compared $XXX X% quarter to million $XXX to period. prior increased year the Second million

benefit our estimate the stop the XXX previously impacted quarter related in of remedies from gift As outlined, by that had million redemptions offering customers we to recall. have points. we sale $XX.X basis card we approximately recalled rate product The growth QX also by products a are impacted

and outlook, not do we that redemptions included during believe specifically would of the have While our these prior what some in replaced sales been existing period. demand

across including existing such a thus we new and launches, product channels. redemptions particular, with for an supplies in us products, fulfill In wide opportunity order range limited other colors products removing an to seasonal saw of as

decision required us in in timing our growth shipments. than the impacted within Lilac the strong channel in was that of dynamic made of was QX. the QX, outlook. better to support earlier our accelerate wholesale This To to in second the wholesale trends seasonal to which Green the the what color these colors and resonating Another quarter launch to Cosmic was assumed market, start related omnichannel newest we Camp colors, prior our shipping the

While sales this modestly year on the and third second impacting the has no between our dynamic timing quarters, full of results. impact

direct-to-consumer perspective, the cargo, Matt partially and total $XXX color July of and again new performance coolers. by channel, equipment, their decreased growth decline strong growth strong The have impact the to a X% Drinkware. hard In cargo. coolers the mentioned, offerings. with of offset on in recall driven by hard we DTC From to our $XXX performance business. a been XX% coolers X% since and partially and sales in on the recall was by decline Drinkware, launch, very with coolers, sales in representing pleased of the led in saw growth than million, the equipment soft Wholesale in offsetting channel coolers million, coolers of impact these in by offset Amazon As soft we more sales, grew

impact point X% strength but overall exclude in which By the From Cargo positive were & we decreased to Equipment QX, sales a sell-through product we the perspective, with sale of our in see of $XXX was and Coolers. Hard million, category, after pleased performance Coolers recall. did

remain Our demand and to in wholesale expand continue our we as coolers resonate both our to line. expanded ramping sales increased with million, line channels. the market. in supported growth for as within we Tundra DTC the have growth growth distribution in Gobox XX products see well market, Hard XX the to solid including Soft the X% of as by continues And by and in the that Hopper line. Coolers, $XXX core Flip been good Drinkware Roadie in Wheeled Coolers

We when the extend with areas. product we results continue newness breadth to the see of the and drive highlight portfolio color into category new strongest our

all-day color-matched Our category the and engagement bottles. on we the the while campaign lids. successful, lid range of conversion. Bottles remain very strong see great for straw addition straw by options with story new caps formats, results for wide was straw supported category, the brand, in XX larger ounce strong Drinkware XX to also our growth mugs the and continue and in Yonder a Expanding highlighting driving water our with of demand products Rambler

look of supports to new our bucket launch our optimism beverage exceeded expectations the our areas. extend into new the as Finally, and brand we

year. gains XX costs. These related to costs by depreciation XX primary expenses capacity, sales points XX points from expenses inbound basis increased million, of in that on $XXX custom in XX.X% partially investments higher equal our of compared increased were quarter basis X% as XXX or production same deleverage. growth Internationally, profit from in compared points higher X or SG&A sales items approximately grew from given impact $XXX last growth the currency and and representing last foreign by to XX% led and freight rates exchange Non-variable million basis basis Gross Europe sales Australia. from driven roughly product the period lower had XX% year-over-year an points in basis lower X XX.X% continued for XX.X% to customization period and percent increased of sales XXX the XX% points same points XX.X% offerings. basis impacts. strong million by unfavorable sales, of to total $XX and to benefits The from to other of XX from amortization included the our all XXX points year. a basis this offset quarter

First, incentive areas see support compensation second, QX from the creation impact such demand the incentive the the warehousing impact headcount, stop continued year. to investments costs with will top that line in for our of employees. growth. sale on our Note combined our And and growth our as compensation largest during

Operating Variable the also expenses primarily $X.XX million compared reflecting to as increased decreased of income during X% decreased XX basis period year. income last diluted percent sales $XX to per higher X% of Amazon to share prior $X.XX fees. million sales compared to in points same marketplace $XX or XX.X% XX.X% or Net a the year period.

unamortized Inventory another our financing ago of million XXXX. Total Inventory in second straight quarter, QX finance and our fourth in XX% excluding leases, $XX cumulative decreased to fees down levels was QX the reduction million due during This we balance as of over deferred cash million $XXX existing last peak our from Turning a year-over-year. given included the $XXX million declined to revolver compared debt, the for of facility not did the a to of amended the period. from year We $XXX an million our credit million loan the with compared of $XXX of with million to end sheet. million $XX in second XXXX. June have extended We in ended $XX principal balance year's to amendment sequentially payment $XXX quarter. for million quarter to quarter. increase million of well term $XXX date refinancing maturity our an at as $XX

the sales. expect year turning XXXX Now year X% card to redemptions, full rest our gift second We adjusted of The net outlook reflects relatively narrowing now and X% updated quarter XXXX impact sales the fiscal increase between keeping to fiscal unchanged. outlook. of of our compared full the to factors

include We our of second outlook of outlook. Given last gift quarters of redemptions, the any year. fluctuations of the this future impact have do not card redemptions half does the some growth in versus the unpredictability across

quarter. over to However, growth This followed flat we first low the a quarters in double-digit continue X year approximately by return to aggregate in growth sales expect single-digit of timing compared third decline fourth channel. a implies of the with quarter the change from primary in of approximately the wholesale colors the coming to shipment prior into the seasonal assumption flat of updated the growth the the

to market before continue the Second lineup following see both offerings. growth bring categories we QX our decline assumptions: QX as back to growth will half expect from we product and cooler soft in sequential to include in sales to full Drinkware returning year-over-year a product the our rates QX expand

a We expect in then wholesale and of QX top comp down to in on double QX. return last growth to digits be strong year,

in strengthen to to the carry that finally, we growth sale we stop impact QX. we point move to expect XX% basis reach QX. DXC into related and Also, to the into approximate total DXC continue strength approximately XXX expect for to mix QX then And an year. expect We as

positioning To across both and product reiterate, our drive across expect a our product and lot channels. meaningful newness acceleration quarter, on see fourth the of sales for to primary remain and we bullish portfolio where the energy we categories

XXXX driver the of XX.X% XXXX. to inbound freight continues our target The most up at lower in margin gross fiscal to increasing significant be margins, of performance we XX%, from Looking are this impact and margin year. XX.X% between cost favorable

full year. the a addition, costs from In now we impact product expect favorable for

side, future line support rate include DXC growth. growth expenses remain on driving investments support They the impact to stop SG&A of and our top mid- variable The dollar to teens. are sale that year consistent. On SG&A to we in factors our full high the our businesses, SG&A incentive the expect growth, the our compensation,

the rate high for we teens expect and growth to fourth the be quarters. in SG&A perspective, third both timing the dollar to mid- a From

operating raising are We our full to for year. XX.X% range to margin XX% the

are the lower operating expect be over While quarter growth an both quarter expected fourth XX% continue to third and our in to gross strengthening to expected of expense we double-digit margin due the our to year margins million return margin sequentially, revenue interest approximately including diluted $X.XX $X.XX outlook adjusted raising profile, $X.XX of earnings are an full per XX.X% rate fiscal and to $X tax to effective XXXX. in compared between share and we

this As a to impact of voluntary $X.XX sale estimated $X.XX from the a stop reminder, recall. includes products included in the

that per rate what Looking fourth of we will QX, versus in at saw Cadence, prior the expect strong a third the share to QX expected earnings at return versus adjusted quarter. growth decline quarter earnings year in ahead an higher we in

On for in with million previous range, flow side, inventory now improvements. the cash year outlook. which slightly of capital by we the $XXX our $XX is level This million expenditures, the consistent includes a million expect higher $XXX driven for cash outlook free to a

track deliver line results on summary, top our we to expectations, above QX full were year our target. our In and are sales

business, react impacted continue across continue bottom but by the we margins market line supporting to extend We ongoing recall. with to to later the and improving the having forward product year Gross our products lineup the smartly of new also into investments product trends profitability. the and return look areas, this brand to available our improve, full

cash drive additional free sheet provide the believe facility, will value. than flexibility we to as credit and improving shareholder stronger future recent is levels flow. balance coupled by this with ever, And Our we our driven changes look higher continually to inventory

to turn like questions. I'd call take the back Now over to your the to operator

Operator

line [Operator Konik Jefferies. Instructions] from our We'll Randy take question the of first from

Randal Konik

just of we the the with -- kind Can clearly us look, about gross should bottomed, a how we guidance and term? would given are business margins like just to but business, kind on margin for I you're this -- that be us just numbers like market is thinking guess, reeducate you, rest you feeling long-term ability where year. should the not about Mike, just granular specific how be be long of of kind the kind coming high operating maybe of of that to good this quarter gave of out level, the thinking reorient we of numbers, start you

Michael McMullen

So here's say. I'd what

gave our freight years, that points inbound guidance freight. go of raised to impact. due the and the few we is year, majority margin gross If rate you that we've we inbound roughly we of up This XXX back last said indicated basis around obviously to

would that to into get more year So imply next there's go we XXXX. as

invest without think, without in giving a do that. packaging, your of specific sort I to need that mean, weigh is going we're of think in against to things I what like I to have point, guidance, both product, to terms materials,

as future our into SG&A well As back help drive to growth.

to And that do think gross to specifically within we've the it's we So margin. the got to thing only time. said really drive is levers our I we've that, over intention try continue to operating think higher margins

Randal Konik

more like existing abroad. any customers story you question, new this And be That continued those as are we us on we an building perspective that in domestically customer in perspective on give the YETI Can where Maybe inform journeys. where maybe helpful. well. kind those customers, different some helpful of last breadth are are your to you ourselves and for that both super journeys we acquisition on of those look us you of at on give Super guys that, and and in my existing with then the us maybe of journey Matt. product mostly taking call versus in where data would

Matthew Reintjes

that product talked cast how with great out breadth. and and But limited business. And Drinkware deal business of one the throughout iron been introducing the and also our portfolios consumers, or with blankets we fun this recently in things the success a product skillet. and consideration, that's applies had continuing this new As with within product story, saw we breadth build chairs built And to our idea new cooler consistent like from dog our we've business of and how within did run brand and about the bags bowls. of Drinkware directly depth depth and we've a to depth breadth we around within consideration the built -- things and

consumers the the durability YETI Just it. come for performance and continue same create to to bring brand back opportunities to to design and to

We And the and that still building we're obviously, feel like internationally, out still days those consideration. of building early in we're brand initial moments the of domestically.

about us feel today that we the umbrella product, So the gives expand discovery feel having we're great portfolio the brand great within and we that we that. about the have to

geographic as penetration at the at across look we the high with And XXXX those rate of about geographic in particularly the we're domestically we're getting. penetration. balance we're regions. call, So and customers retention on at And acquisition feel look great of getting We the we acquisition from and look we we the at households, we said consumers, getting periods retention look XXXX. new

Operator

from We have Peter with Benedict question a next Baird.

Peter Benedict

guess I you, with just think a first Or you this harvest opportunity to in this the for is growth line to year? little some high teens. beyond out I them we SG&A longer to the SG&A as mid- it are growth SG&A, with to leverage about growing tease don't Is Mike, about an Can maybe And sales my term? investment associated of best sized how year? you've holding these and get investments? the back maybe that there maybe That's us. impacts question. on if the what maybe you know the think more growth sales

Michael McMullen

obviously said that From X, X, then increased investing in the compensation had fact the incentive the compensation we primary obviously, a our and leverage. sale QX, pretty perspective, QX. number incentive the impact impact on In say. dollar and were: I'd by a compounded drivers what big Here's Number the growth stop

said it's really a is year, the investments and piece variable one, X of growth we're that Amazon going about business; related to the things. increase the in think we we've expenses big comp; X, Number and of As X, be our then making. incentive to

terms it's creation, in In detail inside that future drive teams brand both map. haven't kind too and around what that's say of how the terms U.S. terms drive demand here out to U.S. help and our growth, of where I'd but of of product growing out road on that, outside really our building much and in technology, to et we granular given in is building much awareness the teams, headcount, the cetera, to

going where grow from in intention given and not year as the the have I to some between in factors to line the of growth SG&A atypical it certainly year just look with We here, this of do It's growth that of an terms forward. try we mentioned. at goes sales sales. to have in expect SG&A our the somewhat In disconnect more

it DXC you'll than the faster to this see the that recall. just variable stop we But increases invest the do I expect to with to impact to so a And sales. continue sale continue grow is year, intention just in won't as obviously think an We'll to in investments having making our are the despite And outsized of the was impact. bit of we're invest continue business.

Peter Benedict

follow-up Okay. balance be That's or just Matt to guess super here. a Mike. of on sheet I helpful. Plenty cash the would

year. you this half to strength million million would of $XXX on to view longer flow $XXX this then have how cash year free of your to thoughts the considerable comments kind out back Maybe or leverage look term? we as latest financial your to increasing You're and

Matthew Reintjes

that business take to margins I'll been consistent free can can in strong drive a continue Peter, continue to believe be cash strong flow and this -- we one. We've generator.

cash expansion we we the in investment with potential forward position first prioritize we're has domestically potential, that and and believe cash driving and look growth both we globally. generation As the business foremost, our sustained and that the the

that of feed at believe look engine. of uses innovation to continue fund we'll the and Secondarily, we cash kind

brand we creates have continue opportunity As that for to that I mentioned the that underneath we build, innovation reach brand earlier, and reach halo. the

commercial of into then strategic marketing innovation to incredible the the bring we leverage that outsized drive think and where YETI have uses we can portfolio are and cash there teams go returns. And we

leverage of YETI opportunities find And so be kind in primary leverage and platform. continue the to our business and targeted innovation top to our focuses the be brand would that invest would or our X opportunities the and M&A YETI strategic

Operator

is Zackfia in line Next William Sharon Blair. with

Sharon Zackfia

shelf. obviously, hoping wondering, good. I of, wanting of bit you're is retailers from the kind is I growth a of the right to a guess, little -- demand was of of impact on much still kind now any I'm X% good to I more delve inventory segment. if as or continuing see Drinkware mean, not have though, that to to barometer kind underlying

as what in segment demand in half, underlying that your on growth process relates helpful. expectations thought any would international are then back be to Just it And the there?

Matthew Reintjes

I'll take the on international. Drinkware down and Mike the can step

Our business. Drinkware decade going on a is and remarks has been, as been important really I our for of mentioned, in a the part prepared

in our launch. to consumers. resonate that portfolio, the see with mentioned colorways our recent both sizes product resonate We colorway our We continue

we is not Drinkware look across when where about business growing. really it's feel we only but where So good today horizon, positioned the our

market, only innovation wholesale We have we have the in Drinkware. in changed, every across when our they've not retention and we our our continued acquisition seen long-standing the and bring business, DTC partners bring and success hasn't great incredible day, when BXB great to with conversations seeing that having corporate residence and that newness partners. of we're YETI partners and but been within We're our channels, wholesale and

built in What in a out think with second market, we're but a pleased And innovation receptivity the that I into there most is we've sizable opportunity. I So tying your globally. continued question, seeing we're the remains the significant business Drinkware. domestic for reception and to seeing us think also I'm

Michael McMullen

mix And But we from in as the XX% we impacted second Europe a expect growth by as that continue of Sharon, and the from A&D some as perspective. highlight to we've about been growth question, well grow in both so is recall, half. U.S. but international really of QX think go the has a down bit that on to return I'd grew That to it nicely. talked QX. what was into regarding the Canada a step dynamics I the a

we Here's say. can continue that international think what We our I'd over time. to mix increase

second So into as and half. we go the

think we in our say I opportunity typically the give business a feel it really good the and see of on U.S. guidance has pretty front U.S. international that specific don't significant about we other to than we grow will much How faster do than it. that So business outside the

Operator

Joe Raymond is Altobello Next James. with

Joseph Altobello

big sound like double-digit all retail think side, the sales But the you it A a patterns, question, from is we the this order cetera, year's still I does grower. YETI if if noise recall, picture put et could.

on changed you could more the those color how And sales over past so give given maybe drivers may have a little us years? that, bit couple of

Matthew Reintjes

say to story, story focus our our markets our our but all Thanks, would market really The change. for across importance we're and that would of the when and innovation, and and obviously, Joe. to customers. origin I'll see of longest-standing possible, largest drivers That's success haven't what's I the one. resonate growth expansion, and supply the domestic talented that drive see the that we the from -- are is we strength they're on innovation Equipment, Coolers continue strength for hungry we changed product, receptivity in on of also them continuing I take are those fundamentally is the the our strength to Those belief regions to product market. portfolio, development is chain call, and I that intact. called operations coolers. having hungriest and hard and the the out What the across we of call say specifically incredibly that's the longest-standing product continue our remains teams think domestic

opportunity markets part was and a and in But attractive a and the concept the in And And still few of early today Germany of us. remain, years that talked And we front we particularly really then Greater U.K., Europe. the believe, about largest we in for evolution those the U.K. some meaningful that all is YETI. globally, a lot international very a business. it the think and in most within intact -- internationally, of ago,

and the continue to and that heat into to that the YETI and continue well drive growth. then future structure underneath innovation execute support same, the brand, remains execution the drive of brand growth the build can So

Joseph Altobello

Got to to of margins. it. Very maybe kind And helpful. just transition over

freight, touched other there. But but Obviously, are DTC on example? as drivers for XX% do could build earlier, this You on key And there? drivers the the penetration margin inbound for see 'XX? what you benefits what guys you continued

Michael McMullen

Yes.

this that continued I 'XX one in on are could wholesale, than an believe some those expect out on where Where benefit is we to I inbound of grow the have we where there's think We faster and to that we think rates. FX, also be of the plays quarter, in provide out. what Joe, I say biggest is which now said hit cost terms see other and But the that product see a think from the side. opportunity you goes we've benefits. called benefit I DTC what container will some factors we'll did think to consistently

traditionally, the margin side, Equipment. and had than a gross higher Drinkwares On category Coolers

in I be could think grow of expect on those both to be where depending that categories relation something to to each we them. grow able other,

benefit benefit -- So be is. we'll have continued I thing rates. what biggest is impact to where from inbound sales see, from But to container the mix the call will out but think the

Operator

Ohmes line in Robby ML. of with Next Bank America is

Robert Ohmes

more some sizes, little basket are My half? seeing first it back in down? conservatism you -- UPTs. consumer color? give you, change you smaller what a customers will think that Or is Matt. and think is some through for Can question the I conservatism last Is you mentioned trading you

Matthew Reintjes

in some the and also in continue corporate I business about seen We're coming we've We of than us. say, a e-commerce of would has conservatism, where is. where transaction team customer past, and among seeing And business, like sales say we in, don't good things it's our good in between and why. sum that's not feel the in seeing direct but about our terms is when to in on there's use environment, The channels, a we're really in moments. kind retail have way that dig good advanced would -- which units buying dynamic attribution it's those would going to we per smaller consistencies just our more business, seeing been our rise. our a and we bit I true. themes. seeing about in that few particular, inconsistent we're the deeper feel brand in the and causes look remains -- total the on analytics and team, front is. to Where not call where seeing about I we're for we counts We opportunity a feel talk we're The of

We're buying assuming that's a of little conservatism. bit

I We It's beginning. YETI. all against not buying call want [ said play or still They're since need I demand trade within it down trade a not scenario YETI trade there's along [ know portfolio. -- back. coming if our down we've play down ] in still a category. never brand And has its they're been wouldn't because a ] a don't lived want there's that So a

we're I what's is natural buying think grads, see up. promising those dads and most the consumer moms, show to the continuing in what's that

our the marketing we Camp in Green, between between campaigns, focus there's that is is reason moments, you some product, of so team's and Lilac buying which call we in the It's July natural Cosmic moments. put moment. not of release on how some in just buying saw those in buying a kind our I'll strategy to what launch And leads how we our

time a it thought we great out into color so And to winning bring what put and market. the a

overall, adjusting and channels. little seeing we're that seeing And to seeing are the success But of dynamics a brand. a those the the philosophy receptivity consumer bit. success the receptivity little and So we our We're our we're are think, of bit innovation. things across different

Robert Ohmes

a just quick then And helpful. That's you. for one Got Michael.

there going revenues help here? there in Could reserve Is -- back I be guidance, redemptions. further on be increases said are half are doesn't to any include -- be include you more how from to the going recall that. card a -- think Obviously, there there's forward? some similar to to and the little Maybe going XQ gift going in any XQ? doesn't it you For adjustments report

Michael McMullen

our to to say. separate adjustments card need think GAAP the Here's we I'd made from redemptions. we And I gift results that the what

entry for of last So the essentially this in updating the made quarter adjustments made QX that our we year. we are that in us assumptions

different we've consumer So seen than expected some we slightly. behavior

more people we've remedies. as opposed So choosing cards kind product value in seen gift to

also related And than recall cost of in logistics related sales lower the we our to We've and seen to updating so assumptions expected. sales come we're that. costs

thus I the well. But assuming making we're that stays out. see far it We'll in know. as recall. adjustment has don't way that play So played behavior out the how things

this trying future reserve to We're into terms consumer of what see expect going reflect like in for in the we forward to adjustment, behavior.

talking card and a about back gift talk we're when for card sale. redemptions, Now the coming consumers using is us we about what gift that with

really to half our we point, didn't card lower, the outlook. of we're don't have your gift continue is wanted you to it's we it continue because that it in assuming to to material, item the going call given will include when for one think for redemptions, we'll know, know it that second we so number we -- out happens, it's which To But second out all that half. And call yet, an whether factors. high reasons we it or not why continue adjustable it's important a is to or out didn't in of call

Robert Ohmes

cards just if quarter, the But $XX.X outstanding at XQ. So the understand, into there's I right? end I million of so gift the going of understand math,

So if that the be guidance? upside revenue all would those to are redeemed,

Michael McMullen

in Just the redemptions we QX. $XX.X that saw million were

gift are are Q, the have to our cards be redeemed in roughly million -- disclosed have X are there future. we at and be There there different are out to that -- yet of that yet redeemed some redemptions be As in point are $XX there could that numbers.

Robert Ohmes

Got it.

redemptions the on the potential So $XX revenues back to upside million of half versus guidance?

Michael McMullen

comes of kind really down as it mean, to those I are when redeemed. Well,

Operator

with Grom is Next in UBS. line Peter

Peter Grom

kind maybe us the Maybe gift halfway you a quarter-to-date, through quickly. card you're you've on give just XQ. Can of of just up sense that seen front what following on

that you seen into to through the continue XQ. kind X X weeks redemption have of here first So

Michael McMullen

some the the lands additional factors redemptions. certainly redemptions some for we certainly seen We'll come seen lot have additional There's We've number to of where a quarter. there. through. But have see

Peter Grom

expectation I quarter freight largely quarter. last That was then And less of margin were helpful. you the guess benefit didn't really on as know true-up That's components, to it. happen. gross actually this cycling a I QX a up the for obviously Got versus following just

I'm be you how about just freight broader versus build just understand margin to trying bridge, from XQ? expect we we I gross XQ think that And the would in of improvements continue guess the about So as thinking should sequentially and to here. product phasing cost

Michael McMullen

is what and called So the would say out, this specifically quarter, were freight costs. and inbound drivers, I X biggest them product we

said we've or are our we is what year-over-year consistently gross The to second margin well. in see second as And as that we going half sequentially intention for that's increase. to as increase thing certainly going the The the go margins year. still is well through up go

out. drivers specific will play terms those In of and how

to gotten to biggest that now level inbound are be will haven't comfortable to that year. We for freight. driver this of the And we're There's detail a down going product say saying the be benefit than year costs other really the going very year, slightly why to which it saying up that we're goes be for is part comfortable But for some year. up, the favorable, reason comfortable taking will we're where of be that margins quarters our the down.

Operator

in TD is Next queue with John Kernan Cowen.

John Kernan

product DTC, on how think of DTC contribution and XX% year line margin have curious of not to margin going we next about So it's just DTC, [ the contribution and benefit operating recalls ] revenue. think into some curious gross affected forward. But and the the the from we overall about the mix should long-term year. how on margin margin go and just both Obviously, this

Michael McMullen

question. the for thanks John, So

what say. I'd Here's

as the without it about grow our QX, to has try in end come to what too year to been in much getting they're clear, we'll say like same to a it the expect have we future on down XXXX, and that But operating just clear the mix a more past higher lines, back wholesale. that to you closer. XX% intention into much get to once than QX, our to We've be is details than at the XX%. of obviously -- So in we approximately wholesale. DXC margin lot But in faster gross calls. I'd expect of roughly was DXC

of different it e-commerce that, versus overall of There's -- DXC sub And have channels different sales really so kind relatively that in that profitability, corporate and broader. versus Amazon. that stores to the is -- versus keep a under other thing mind a number is

that DXC drags wholesale, So grows faster obviously, be that sure kind benefit margin need on than make as of the think, to with we that, balance some do there's cost a well. we as to channel going that we but gross additional line,

John Kernan

normal just follow-up recognize flow-through Maybe question. you perspective the redemptions margin anything year? gift level. at too of Got that on going one actual was card be as line here we from potentially of to redemptions. more does should is in incremental to the about margin be Is card be there margin redemption that the terms half thinking a to those I the the we from mean there back the it. on flow gift just anything should But say, don't through I going of aware much. a of

Michael McMullen

all they're and only I mean think your the specifically sale DXC that question to connected Yes. I somewhat I out e-commerce is thing call would first is obviously sale. an a

margin rate through flow higher gross a slightly they just they average that are at fact e-commerce on say is would So that than they're that overall I by sale. our the

Operator

a Paribas. Next, question we last have BNP Xian with from

Xian Siew Hew Sam

the and maybe is I is XQ. that. to like shift a low still XQ be there down know be expected think and mentioned guess just for point last teens. high on you those outlook X quarter, digits, you quarters was the same. digits And it double down XQ finer the sounds I to but expected down in mentioned wholesale wholesale double I is

Michael McMullen

Wholesale say down in our driving of There's mean wholesale the right. is us would prior outlook. QX, that was factors of initially the you're fall performed QX, I low think did different I better. one seasonal that, we which both and earlier obviously ship of digits. be colors to double a our number Green channel those in Cosmic necessitated launch starting in Lilac into Camp not which

QX. from as those view I shift purely So a just into QX

across look there's the X changed. year, nothing really quarters first the you of As

I our lower essentially in or going So prior than think what do is outlook. to growth worse wholesale asking QX you're be

the script, the a high the answer yes. be first X quarters that's QX on year year call as said the think decline think year, that range we as QX. of comp wholesale the it in kind But about double-digit will to nothing in With channel in very of of as more the or to has full out, a you again, I is mid- going of in the strong growth back even wholesale in inventory. is up QX last really when for one part caught really changed. of And

Xian Siew Hew Sam

Canada, Got is a just it. Very how can us relative you helpful. one. to percent And of as just like big now quick maybe a international Maybe remind it Europe?

Michael McMullen

Yes.

level going back detail of the the international the the region. part region. some specifics expect that to same But into of go that we just expect We biggest And the given accelerate other our second did and our say recall the QX than of it impact, in just international overall of half. comments, grow U.S. we as growth impacts But to country see it's some specifically. in given we of Canada of haven't haven't to did earlier that is we in terms

Operator

over like would back closing the This concludes session. for conference question-and-answer our any turn I to to remarks. Matt

Matthew Reintjes

of updating look and you this thanks joining continued and for growth We us. you, later and the on Thank progress operator, fall to forward all speaking YETI.

Operator

The you attending for conference today's Thank has presentation. now concluded.

You may disconnect your now lines.

YETI (YETI) 10 Aug 232023 Q2 Earnings call transcript