- Earnings call transcript Q3 2022

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Operator

Hello, and welcome to today's Traeger Third Quarter Fiscal 2022 Earnings Conference Call. My name is Bailey, and I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to our host, Nick Bacchus, Vice President of Investor Relations. Please go ahead.

Nick Bacchus

Good afternoon, everyone. investors.traeger.com. Traeger's were discuss can released on website joining XXXX third be for our which results, this at you call its to quarter found Thank afternoon and Relations I'm at Nick President Bacchus, of Traeger. Vice Investor With me Jeremy Chief Financial Officer; Executive Chief today Dom our Andrus, Blosil, our and Officer. the on call are

and on our these this on factors get forward-looking risks statements contain and on portion encourage September started, remind that for current Before quarter to report our may December and uncertainties ended want the of I XX-K subject report other everyone that ended a XXXX herein. Relations website. to discussion you for actual differ year are based XX, our cause filed once call also to SEC I the management's annual XX, expectations are XXXX are review available expressed Investor filings our We and for on Form remarks results on and from materially the could that or substantial quarterly Form to which implied uncertainties, of XX-Q those

we should or are such available no also measures GAAP investors.traeger.com. Relations and is of reconciliations Investor You undue these and of on GAAP statements. measures in release, measures obligation speak herein most financial website are portion useful non-GAAP measures. financial This to certain take contain comparable believe only any at today, the The supplemental the GAAP our of to on we reliance contained We update new our which included earnings for revise as will them forward-looking information. not undertake call which measures,

Traeger. Executive over Andrus, Chief the Jeremy? like to I'd Officer to turn call Now Jeremy of

Jeremy Andrus

XXXX pillars. Thank our details to results, provide the near-term growth and quarter quarterly you joining on Thank will quarter to to priorities will I fiscal call. earnings discuss on then on discuss Dom you, an performance our call strategic and key our over our I progress turn guidance. update third third our Today, our our financial Nick. for

will be position impacting quarter third away and After anticipated, at to the leisure, contracting of to in and Despite our efforts at the ongoing uncertainty XXXX. company services pressures channel towards as last are liquidity and of which retailers priorities profile can remains which these period. will down ongoing of said given our ordering which decades environment, highly and discretionary with inventories we levels the year. we influenced We navigate macroeconomic on making a environment believe negatively in reduce a rationalize decline progress increasingly goods sales, economic our environment. XXXX Traeger sheet expenditures the as and costs acknowledge by strong these is allow that risk we drove as inventory, XX% were grill drive well Moreover, to bolster our as recessionary improvements improvement our navigate sales, current sentiment. grill big-ticket in in we we are record a that, operating the are cautious versus current Having the third shifting heightened industry the of These for and balance from was subside. certain Consumers near-term quarter in pace challenging broader softness XXXX, their factors volatile. challenges, and the geopolitical highly XX% are particular high years As inflation X slowdown. growth behavior

our of the we was our as The retail quarter. into forecast in anticipated. lower last Sell-through largely played grills out than was roughly in demand with year, but quarter third consumer line coming

X-year the in XXXX, from in the CAGR. a first moderated declines we half than While the of strong was year-over-year the during experienced and quarter lower sell-through decline demand the grew year

continue sell-through trends view We as near-term challenging. to

in of quarter However, relative with our and ordering demand impacting now or be both year. be believe higher second retail expect driving that this believe of to in other as slightly important million growth category believe the rebalancing is retrenching do end to partners $XX fairly to opposed remain X/X low our category Despite largest their sales not long-term profitable in in the Traeger. work our seeing the excess These magnitude priorities tactical earlier come ensuring sell-through consumer preserve below promotions macroeconomic of Summer healthy $XXX Despite we grill in Day are at responded as trade in will to our on-hand as as guidance discounts category favorably industry modestly the is aware overall and consumer with strategy trends were predictability the year cash to we and in committed well the healthier the and driver marketplace. our destocking, is quarter half are year million also outdoor $XXX cooking to retail to EBITDA. retailers our Smoke $XX consumer caretakers retailer positioned the brand in grill Sell-through in and sentiment we promotional resilient than level The for of we profitability million from growth. historically of challenges half that that experienced is demand. terms inventories supply prior to the a Labor cautious and demand, create the consumer both We our the premiumization allowing that conservative of economy to of grill line therefore, anticipated This from with company the and and At are promotions. sales at are retail executing The our cooking in benefited the to are well categories sales in long-term drive near-term million of inventory. the partners can outdoor and the in decline understand destocking organization from has highly through fourth to flow the which is It further demand, key retailer XXXX. or QX, in demand particular on full predictable to lower as results our near-term as around same in to committed incremental growth. grill attributed focus more consumer across projections product and our of partners the near-term strategic priorities. our levels behavior. in decline The of is the second a while environment drive of we our causing and of keenly category. the our We to time, our consumer face

our well Specifically, effort drive our million. realize target key are gross reduction savings highest efficiencies force. $XX These of cost actions actions rightsizing meaningful as and driving in to we improvement focus from return priorities the in to run operational We are provisions include in third a structure, these on initiatives. near-term as our In savings discussed reducing inventories and streamline annualized both the our plan reiterating a July, rate organizational Traeger and of an of we margin. last quarter, restructuring in implemented as closure quarter

move highly we'll as and managing expenses aggressively disciplined stay to our we continue are XXXX. into We

have capital and flow for to look our expenditures enhance liquidity. as we cash we Additionally, taken also outlook steps to near-term reduce

in-channel elevated, which is Our next our balance near-term inventories, priority on remain rightsizing both sheet. and

adding excess of the in-channel strategically terms channel cadence, SKUs quarter, focus periods inventory in our increased a third with inventory. we with In promotional promotional discounts X on

work sheet, through we These our give on balance terms our in some destocking have inventory combined efforts, on-hand In inventories. our resulted in of inventory. to Asia lowered opportunity production our the actions, on to with materially progress retailers' us

continue the which first half ongoing we expect an remains of into this to However, effort, XXXX.

priority key gross across margin to Our Recapturing margins. is strategic is gross next organization. focus the drive a

and work execute substantial XXXX assortment Notably, force costs, supply additional as reductions savings pellet expected like task across have grill cost lower cost improvements in packaging team's margin inbound business. packing costs and product, on input steel. seeing certain the to in costs and as and in including the gross chain. commodities transportation continues rates associated well to We're our with freight across savings Our our led identify also efforts pellet in to

that efforts tailwinds savings lower in and costs input be We margin should are cost XXXX. our optimistic

it that is cost into not worked expect income until statement expect as our important into see we strategically our back improvements into some pricing through we these flowing XXXX. note do move input cost to of we've impact However, inventory will to product to and higher Moreover, a reinvest through we we material selectively and look mid-XXXX. in

are priorities tactical importance. of Our critical

remain committed growth strategic we to our long-term pillars. However,

household be substantial X.X% is investment upside Traeger penetration most the discuss brand made that penetration capacity. top-of-funnel awareness our and we've We inroads testament backdrop lower a each U.S. to marketing in long-term is make largest we challenging Driving the Let markets. the opportunity driving and realized areas. strong to progress in to momentum a It of believe growth at driving me these brand remains there across our despite mature awareness. awareness mid-teens in the highly of of brand market continue in our

by have high In the the third grilling X history the brand brand quarter, the years XX% periods and year growth hit the brand in beginning behind an of Traeger fact, ago. the connection in XX% all-time up we base. one and awareness the this The with our user improving in of awareness of strong and continued our most unaided to versus difficult speaks versus energy

when owners KPIs social our more passionate and driving media brand post evident up is XX% views act our nearly content are video we Our tripling the recognition. third across organically evangelists This year-over-year than look at quarter and grill with social platforms. as user-generated in about Traeger

Traeger a in a in-bay hanging for for doors. Home the is and products Flex enhance In Home in branding, shelving Wall continue Traeger across merchandising. merchandising to allows awareness rolled September, also Traeger Wall Depot new premium merchandising XXX drive space featured presentation backing doors We and we retail. out to product Flex our of is with that treatment brand and called Depot branded

in we Traeger's quarter. Home on visibility add These Home Additionally, added further to merchandising Depot new Traeger at XXX doors Depot third Islands enhancement floors. the

whiskey. Now product September, WhistlePig In in distilleries smoke the one the partnered the next innovation with pillar. and to the on the at In new consumables late Whiskey innovation, of significant Traeger of side. U.S. we craft intersection most awarded our is growth quarter, to on on third collaborate products WhistlePig had

Rub Whiskey Pellet Sauce brand, so in and launch Dust the are has up had WhistlePig. and Whiskey BBQ momentum launch Whiskey DTC picked we to Hog And [indiscernible]. Barrel good thrilled in have collaboration with our positive PR orders

product about XXXX. In innovation, pipeline of as we we extremely grill terms excited the are move into new

are next floors new in launch of grills on first be both expect year, retail X to We which the planned quarter. to

of our the early too retail It some early to have is We grills key partners, discuss shown been fantastic. new these these to response has and products. new

expect However, year. more in XXXX be report quarter next able to and when to innovation continue we provide to to it Suffice details deliver in say, we Traeger game-changing beyond. will we fourth March

in Our next recurring is growth pillar revenues. driving

pellets business prior consumables down third XXXX versus quarter, in was and with in the year prior line our slightly year only While below sell-through levels. was

number installed cooks our grow we grills. data, As the we increase at continues of look to base [indiscernible] of strongly as

Meijer, continue quarter In us consumables fact, In long-term the to introduction prior of This Harris with we the nature as pellet cooks to we Teeter channel third cooks to the of recurring revenue gives bags. into distribution track in versus we third for expand quarter, were the the the there almost our grocery gain in confidence million year remain the pellets X value-sized X in and expand Giant additional business. into doors million on third grocery year over sell and continue XX-pound our Furthermore, more more quarter of like Eagle, offering the Albertsons. versus and XXXX. grocers XXX

of globally. near-term expand market. see U.S., Traeger inflation to to our that brand Similar markets to challenges, has the the upside negatively is meaningful U.S. pillar the our continue impacted international as turmoil sentiment. in growth fourth core geopolitical Despite we faced Our Traeger brand outside challenges third these and evidence quarter consumer the

grilling Depot focused of Contributing sell-through space translate was marketing assortment summary, in current our upon U.S. the behind Traeger pellet the Depot as our strong Home increase the we In increased For highly floor third with Traeger to investments brand. key navigate environment are and products an Canada in the while increase strategic Traeger market Canadian priorities category, double example, by we The the are growth the wood and in remaining to quarter. executing Home allowing leaned long-term the committed seeing pillars. we on has to digits success into near-term as sell-through to well. the

in and the given long-term are positioned turn to growth the As are agile remain for we for and term, to success the [indiscernible] we we control, confident extremely Dom? our In a With in variables remain environment. like near I Traeger. the highly will Dom. that on well the that, disruptor volatile outdoor focus over cooking, I'd call within

Dom Blosil

and update some XXXX. good I on third fiscal everyone. review on I an quarter will thoughts initial Jeremy, providing afternoon, also for will performance year before Thanks, Today, discuss our outlook XXXX. our

offset XXXX. quarter Second quarter sales sales million, from lower price retail inventories, distribution. in revenue as to $XX reduced $XX higher taken by sauces, inventories, and negative strong declined XX% volumes in growth related lower channel the by half driven the lower XX% of retailers pressured aforementioned revenue unit increases decreased by reduced of Traeger as end challenges an of to million. increased Canada. $XX impacted Accessories along XX% prices at revenue the of revenues effort Geographically, North by first XX% lower U.S. selling XXXX, American on-hand million, partially by increased our to which rubs our in declined partners due $XX offset to second by offset growth revenue branded million to of business higher the was with materially pellets replenishment benefited sales accessories. Consumables to in Grill average in aggressively to orders MEATER,

driven for by second international year. revenues down from profit in XXX Gross quarter $XX to million world business the MEATER in profit decreased Our to rest margin Gross million of markets. last year. points $XX was XX%, grew XX.X%, growth basis last

gross freight in decline increased impact resulted leverage The the to in were fees. pressure; of margins logistics expenses of margin XXX due costs provisions by: our by XXX quarter basis margin million compensation third which XXX actions, related $X.X compression; favorability XX.X%. impacted actions. million margin pressure; impact basis was stock-based compared primarily Excluding was three, a one-time Sales discounts and basis outbound liquidation, XXX related in margin higher of pricing four, drill activities The driven driven decrease pressures and one, decreased two, related margin by which gross costs million in and offset XX XXX by the driven funnel restructuring basis points; costs in negative to which costs was to inventory activity, costs, higher accrued points. of to by quarter, basis points five, one-time of resulted of promotional top marketing reduction were mix These resulted restructuring in which third the points and lower of $XX basis and $XX in marketing last points to year. of professional points lower and

professional million Third million response in were the benefited $XX of expense actions quarter in third the to and and higher expenses rate. to in compared expense, restructuring was stock-based and by savings driven administrative General sales PSUs. and and quarter last the quarter year. marketing third of compensation related and cost offset in to lower from [indiscernible] expense, primarily performance lower expense compensation RSUs revenue run by fees expense decrease the accelerated the due administrative largely taken The to investing $XX general

quarter, third filing XX-Q. finalized million goodwill will million In of our and impacts third administrative the compensation, general amount an stock-based to was $XX charge the to we this macroeconomic prior is note and year. prior our versus impairment noncash conditions. $XXX a quarter to adverse expense down estimate be Please Excluding recorded related

$X.XX $X.X $XX loss year. $X EBITDA the per last of of was to year. net $X.XX compared to the same of $XXX as quarter quarter loss the of as a third million Adjusted $XX.X loss last a for the result in share adjusted loss loss share in year. or diluted $XX the As period as of EBITDA of net million or was million the in income to factors, quarter to period of quarter quarter Adjusted net compared was $X.XX net per adjusted $X.XX the third for in diluted million third million was last per in year. last diluted same a loss share compared Net million these compared third a

million the of Now balance million $X turning third and of totaled the to the cash with end equivalents to million ended of debt. cash sheet. $XX end year. quarter the At quarter, fiscal previous compared $XXX at the We long-term the

the third million debt net leverage credit end inventory to revolving in of $XXX the $XXX company agreement down contributed ended year. end million million Inventory total with quarter $XXX the of $XX million the of the end of year. liquidity $XX of its resulting on million third From prior in X.X%. a the we to net drawn as at and of versus and last million. total the quarter, facility, under was had at receivables ratio liquidity the its factors $XX perspective, quarter increase the Additionally, compared a third financing of quarter Three

First, the higher increased freight driven other and grills costs. prior versus of input by landed year, cost the inbound

grill given inventory Second, units in remained in sales XXXX. lower-than-anticipated elevated

its of million approximately this Finally, aligned for top last strong MEATER with increase, the momentum accounted line level $X of versus year. with growth

align supply continue to channel and working we and supply the excess discussed, optimize collaboration our inventory, on partners. retail demand Jeremy on-hand production focused with in with materially to channel our be highly With are reduced inventories, we forecast. As to to reduced actively have we better respect rightsizing

year. grills of sell-through remained quarter, the During last to negative

and allowed their year. the accelerate relative resulted of existing first reduction of promotions, our of the the inventories. This to X half retail improvement in partners sell-through driven partially However, addition by the was the decline moderated which stronger to

inventory supply, with drove channel combined expect the elevated, and weeks in sell-through next we retailer of year. destocking destocking inventories in into sequential half a the retailer improvement to continue remain the reduction first of efforts While

of anticipate to outlook our $XXX million to to year full sales now We million million for full $XXX $XX and year Turning $XX million. of XXXX. EBITDA

Our actions, strength and large we consumable sales business pressure on updated our introduces offering. negatively which by [indiscernible] in Furthermore, on as quarter, grill driven destocking our sales, also customer label quarter expecting are business. pellet offset anticipated will retailers' impact both pellets MEATER in a private fourth expected a the pressure by

last margin. flat Excluding this healthy, are expecting customer, quarter. to our Shifting be sell-through gross fourth to pellet to is we business in and up the to pellet year

margin approximately million when restructuring the XX% forecast one-time for continue full gross incurred year we of We quarter. the adjusting costs to $X.X of third in

We I'd destocking thoughts initial next some like plan cautious. provide our the is year. fourth our sales as and quarter and expect continue specific too reduction we is retailer from to we first benefit half marketing Last, general of while reiterate annualized inventories target million will cost in to XXXX, believe We it to forward remain efforts, sentiment expenses to discuss high-level retailer for that the of and $XX and that as elevated XXXX for sell-in guidance during pressure savings. rate administrative look early run will and and channel

inventory be consumer exit dynamics governed demand. the be inventory destocking QX occurred second the normalized will more we pace believe be half of at further, As half will lapping and in and dynamics that should normalize replenishment into of move XXXX, peak second selling The which XXXX. season our the in large by we and we

year, and Given terms next our we will nimble prudently. and range remain will employment of plan of GDP growth we the wide inflation, business outcomes in

in realize Furthermore, margin, input costs. costs, we seeing efforts input will expecting our and savings as cost rates freight For commodities. to a supply to backdrop and related XXXX some to we reduce chain inbound are begin in including tailwinds we gross favorable more are

we However, our through the high-cost of the expect Jeremy do until not inventory. these we P&L benefit margin noted to through as earlier, tailwinds flow see work existing

We savings into look and of reductions will also back the into to cost reinvest selectively pricing input product. some from

enhance we year's the actions we initiatives a are actions actions return restructuring the with environment, flow. expenses navigate expenses to continue cost questions. And enhance as efficiency in In inventories highest will to will necessary XXXX. the growth to to conjunction environment cash the optimize drive the into taking our current will the the savings took Operator? to long the cost position of tightly call reduction summary, from profitability efforts our of cost and and volatility will allow and we with to These for manage profitability and annualization focus well the in investing earlier benefit and the next to third successfully term. Furthermore, business our of and on Given quarter as structure Traeger open liquidity. that, strong profitability rightsize for to with we

Operator

of today [Operator comes line BMO. question Instructions] first Simeon Siegel from Our from the

Simeon Siegel

of that, about to wondering pricing promotional what I just on guys much wondering maybe is And that. back the -- a for you I'm how of so of too just want approach some lastly, you guess just And So counter back the on you post-pandemic mix are as Jeremy, cycles? how us need of of like-for-like level the give pressure maybe then you Do guys assess you supply discount lighter replenishment thinking to versus a to worked how version dynamics? ASP I'm go-forward demand through forcing guys needs? just the going

Dom Blosil

answer can of Thanks, some Simeon. I think those. I Yes,

in first half comps what improvements coming seen over year pretty incremental in of And of actually Like marry QX. trough data. So of can between we've it's right? we the sell-through the terms and as slight seen of as is this QX, season experienced post a And think low shift you the the on we're uptick in And QX our the prior destocking. sell-through seasonality, on in trends, and with kind of year. demand I in few in question, in seasonality that, this and in never in dynamics straightforward it seeing the of year-over-year see terms you even sequential concept the of we've dynamic terms top nice or of peak out the comp promotions that

seeing growth is as some rate, standpoint. year, against the prior from what you're sell-in And seeing stability you that sell-through measure than very standpoint. a a from And we're different so

half And kind holding is in the this is versus our really the of of pre-pandemic year norms. demand consumer over first X-year comp the found you year. of has back expectations And the It effectively, so year. the some holding steadiness to compare well relative as half still

think, So perspective. just just that think are we on a box that's that up inventory there's those, from is kind fact take kind positive it signals within one long and as And your kind question much challenge ASP the I they're us standpoint, through how promotions move channel. still retailers front? from of maybe demand although helps that in it's sell-throughs. see we'll profitability sell-in a have so inventory are be standpoint. as I our as But dynamic the some and that mean, cause prior But we just obviously reason, the on well extent terms too what revenue of of in I there on to of as can the year, I levels. the cleaning do. And brand. uptick positive said said softness, of P&L the health impact that contributing that yes, to we'll of And the a ask of the we standpoint. to kind the time in excess you what And from call that's a pull aggressive deliberately this I we're from which to promotional of from through more relative one a or promotional our we're seeing standpoint checks advance real standpoint, the said, From do in-channel uplift lever. continue then will Like the I inventory willing help demand to in promotional channel a think we seeing you're destock limits to to think Like

Simeon Siegel

from so you price. you the introducing effect had think mix called higher the called ASP out think product out I So -- ongoing I

form So like-for-like ASP anything any basis? product take if were how looks we about on think out a mix, to of to

Dom Blosil

-- mean that at a price those I the obviously, this would did from remain of very year, new that high X the promotions that the lift. is slightly I XL QX being only last by launch, Timberline X increases driven we on to our is increases look, then But holding Yes. price offset most standpoint, the price real effect, contribute And well are year Timberline say and of mix incremental our X lower the as and Pro this by of XX. difference the points. some ASP the coming as pricing then some in price Pro XX points and that out took, entry earlier of being introduction

Operator

the today Glass Stanley. question line The next comes John from of from Morgan

John Glass

given First, sell-through can do maybe like [indiscernible] not you quarter-to-quarter you them know you've promotional like? it's to what to activity? really -- or given what how and just you the talk their exactly looks what reasonably inventory the channel extent know just changed you the about what Do actually sold looks now, have good knowledge

Dom Blosil

mean good least inventory accounts, do. levels. we No, have we I at into visibility our in-channel larger for

past, specialty, accounts have inventory. we smaller Some of the like of our carry the to capacity where in talked lot they don't a about

with path the of less inventory QX that or heavier best concerned specialty. SKU tail we're obviously a make it other from that within more SKUs as we of that measure kind across sequential we actually But levels finding information have largest And business kind in a the channel up which of we the accounts, so and long majority our where of on and toward improvements to level. SKUs a are really data seeing collect, front. rightsized And certain are are sell-through over SKU varies we

as this that. of the cost we work through when some especially accelerate levels where will, these through turn, biggest our improve help really revenue. and the volumes. so promotions helps about ramp inventory QX of down And And help kind well in-channel the But next these to progression of it's to inventory retailers that we of channel, And be continued head of kind levels accelerate lever, going into levels posting at in right? really And bleed is sheet. QX inventory that time, own balance as will letting be a up as year part accordingly and work our we of start

John Glass

Right.

of business. other that? there and started example? is how a label you retailer large pellet sales? private there's bigger that to for is issue big was about becoming important that it your why How mentioned do How possibilities private sort think happened how if doing a label time retailer what do that retailers, happened You and And you a maybe a that overall that's that see other pellet and retailer over you frame

Jeremy Andrus

John. Yes,

So that an to in thoughts. important us. With installed first I Traeger see base. pellets of do we of all, would said, our attach on it loyalty couple stable add a retailer is One high to that is

understanding did for in. is, believe so attempt retailers our their a second is and this to one-off likely to -- our we their situation. that large is X this months, We a private see they one retailers, shelf actually label. strategies, was perform The It scales well pulled just on another of X didn't

from private but So business don't see see much. the we we candidly, time time, impact to our some label in do

this -- strategy the think retailer. this it I of of is a function

customer. outside pellet specific sales If to flat customer, to of this our was one actually up you were of sort exclude that

So our near and pellet term. feel good we about long business

Operator

line the next from from Konik Jefferies. of today comes The question Randy

Randy Konik

what's kind -- do to of million, cash you year? steps? about in delevering a should just going for you enough Or Are about that Yes. to When a could forward? like CapEx I of guess, believe, hear give step generate get the first I guess that, I just Or it, you strategy sense I'm of $XX of business generation? through relatedly, you year how of for we then can the along you be Dom, trying And I how -- this cash cost thinking -- of a next kind delevering? cut of flow you're thinking talked you this I don't free thinking kind you some about how CapEx didn't guided on guidance the you you've that and to say about What's perspective on know done annualized. there? kind for if in us $XX number enough think start how be do million think the

Dom Blosil

questions. Great Yes.

trend levels which brought the front, fairly saw dramatically. at QX, CapEx in would I down to CapEx On similar we similar that -- expect we

a fairly so And think we've certain job of halting done good I investments.

pulling in the XXXX. new leverage feel those the planned POP of going assets of we fixtures cost await a that them and We're other rollout CapEx fixtures lower was initiatives, to that of a but There manage a out for to taking or have, to the incremental certain we're just level, the kind completely update ones halting now. of of be look rolling kind of One the and slow investment there. for simply measures of that biggest kind system are whether

dramatically, expect come And -- of to levels at and we of has down then lower or similar to hover QX. so CapEx level that will it kind

to and cost hiring, at to right? and reductions one business on performance for to The here? bank restructuring was looking between we're we'll something is funnel And a that controllable extension thing a that example, was the larger we're funnel levers, an of So focusing benefit of when more event on We're can differentiation forward definitely in for top what a a short from standpoint. that of and that tied that, in run fully plan savings. couple the whereas we're time of a to On $XX so that's liquidity allows ensure million going $XX budget Holding focusing those -- is a how slowdown sort think your regarding in The of marketing. really kind the we that long where to and not we returning would on highly that that is manage this that business term. a in where and XXXX short-term going that from rate in we're the about us from last on obviously as be term real we spend manage is planning deviation the and million difference middle now and certainly higher lower optimizing slight like of at for I point and years go question million off be stopping. deliberately deliberately think focused we our plan how may do more $XX adjustments we to that's

planning the to that continually handful leverage, and seeing a is real about how our potential this well year. a as process after using We of cost in principle are kind we things. let's to between expenses think stone of theme, years. accordance and, guides a adjust there in we're plan mid-budget that is structure And and right? liquidity our 'XX. a of risk So rightsize have sort long-term our we of really We're in what a refresh overarching in from that cycle really handful year but focus as year next say, that with a the the as austerity fundamental 'XX But demand 'XX stepping on

kind and do the in that's other in versus nice took with that moment of we way a this deliberate time in adjustments QX. to a So more moment restructuring in reacting

Randy Konik

the would be And you stabilizes think do then if kind that of you question industry how guess, super spike do the lay Helpful. would on where to be forward? thoughts Jeremy, get than maybe gainer the growth on line or -- share we industry starts of recognizing would with be perspective growth -- be, for you that normalized to -- industry, time get think of And there. had So will? appropriate out a that around were starts [indiscernible] in you we would after within at are that. if that we this for thoughts when think you of it kind kind levels, your I your the of helpful then, could you cycle, when super good Maybe appropriate -- the industry kind a levels obviously industry to what think industry algo right? your a volume you coming stabilize, So growth guys COVID industry you the going what industry when off just kind of for

Jeremy Andrus

about and obviously return I'd is lot The then to cadence. as tends we to we XX%, a something XXXX. -- The is more a growth, continue. did outside, say, X% a they spend that all, normalized year. an be the grew in replacement by to This cook category. of sort and decline resilient have a Sure. And XX this see going alluded first for industry of that time Americans years, declined steady you it years. double-digit XX to, fairly incremental thinking next decades, fell of the next cycle about, size,

product around -- from the to the that in overlaying, flat cycle a next dollar due course, replacement the we the units. ahead about sort then XX% the to the we due and is down inflation replacement year-to-date between The continue rest so shorter believe has the of the buying demand as a usage 'XX, starting pandemic. partly replacement build we then in component -- a be and as share trend through understand price And level. sort replacement due some in industry in really of about cycles ownership and think does single 'XX go that this product over has normalized and in to And is a pre-pandemic of conditions down in stabilize somewhere this brand, disruptive to months macroeconomic always of of environment was that expect part digits. when of When at And growth increases. an cycles. I some to also and get pulled during dollars. XX% of build brand. We it which little the course as having of of of industry, both consumer perspective. as simply building said I'm about partly it benefit we cycle It than comps, it Dom slightly course, to done trying said, it's bit do that a are levels, but of by but to to to backwards, well XX% XX% is cycles that returns and have to of is to that low to doing to units math through sorry, industry return to back we economy, a in that we -- is more we to a function we and of market and and year-over-year, XX the And and see A that do to going grown happen? compressed started gain about is to historically And terms bring steady rate experience function what innovation-driving dollars

Operator

from Baird. The question from today Peter of line Benedict next comes the

Peter Benedict

expanding and distribution. Just considerations curious on any distribution of thoughts or plans your

well talked in You Depot, obviously about up Home doing Canada.

And any well, question. of accelerate the could help So is there -- XX my there I'm opportunities with to you -- domestically, with first That's then over first, the are next might thinking anything you on products that just the you do moving some maybe process? that have the internationally hand? that months

Jeremy Andrus

the I a all, are retail, training and look very as meetings of in I that investment. spend current abundantly upgrade there you our a upgrade the sales how sort Traeger largest to one a channels, our days to And markets that distribution Coast things really it couple our retailers. made within penetrate existing assortment, meaningful That's by to in existing And upgrade week built in had merchandising, across heat those we we've the at really of start distribution. of clear was have opportunities to market. the and clear map chance was would first where is penetration follows of heritage quality we've it's last that brand. Peter, opportunity to that within of is on saying Yes, of the East that

about -- merchandise. higher through just I tiers the speak them make spoke it at to even in but there's go. assortment to lot nice the we we world. an say much to about we've how accounts And have those retail. would progress take some an opportunity have it's think And the market in my often spoke investments. Home but opportunity great remarks, seen and we to in a got productivity to [indiscernible] And represents products, And Depot going of we outside prepared some of some some Home I -- Depot, deeper to where driving we largest so And we've because of

that a regional within is distribution. barbecue of local, at difference like look right doors current It sort and have current we would merchandising. stores market in you that I more but other There's not assortment example, Utah, teens we're margin. penetrated The furniture actually our focus. that our is the We're it's certainly with the so deeply specialty. similar high filling markets. is And probably channel, those at lot footprint, that within doors if has to a fairly penetration, appliance, in have for believe of also that strategy that our distribution say we more And adding, we

and our So still that's what's channel out at focus. sale, about there. we think thinking real strategy. We're We're the to with commitment we're point depth always about productivity [indiscernible]. But every always thinking a of

the say even In markets terms more been area an fairly a there's And of are got We've U.K., has there's where no we specifically of Germany opportunity. these think international, I would and focused opportunity. question, strategy. international Europe focus. between

they're and the we we game. built given continue as into from markets, U.S. U.S. we but It's here, then those how still here. and social Our in focus local the of of the markets. all relative other much our about for see, in the large both invest over of years. we assets, as brand we're how And few markets. media, basic Canadian It's bolts will think we we and But marketing is now last the disproportionately a them, over -- nuts lean it's steady size sort is of them how growers. have International influencer It's will it is it investment time, brand been ground to underpenetrated But merchandising. to and in to level retail. will done perspective growth the markets a how incubating be platform

Peter Benedict

next a deleverage an just debt -- maybe million second are covenants we I looks guess, it like CapEx then $XX rate, annualize with And year? update just there curious And the on front? million just stand I'm can to? on level that Is that question, that we the 'XX. think very a maybe respect or if you Randy's to down outlook $XX follow-up you maybe, half pull us where with the CapEx, Dom, on Just the it. so can currently, Got you sure talking just for about for to much process? the talk to that you not the second

Dom Blosil

Yes.

short to So begin is the we improve this business, where #X translate to term, and are. build of really Priority in the into of focus I position. on higher our turn the to deleveraging will EBITDA really #X. function priority help think therefore, at kind EBITDA So advancements right? is a we That's and make in increase and point, us in which liquidity profitability deleverage want from

And this so via I come least term, would say improvements at in point, profitability. deleveraging short will at the in

help be our delevering able to loan revolving turn, in next soon. improve extent the kind year, able we'll to debt free and where deleveraging, pay flow liquidity will, down the capacity. be some don't anytime of that drive we're the situation plan But we on to term cash it drive the However, that

situation. X that probably are main that of those leverage So terms improving in on standpoint a we're focused from areas the

goal would those from we're is I prioritize a And say that to standpoint. not intense a we're CapEx minimum ensure the been keep share been to very that to ready of the really team. I and what -- not is share and from kind making it's side, to the to the long-term we're investments going starving On will investments CapEx say a focus where this a the we're target has but not year, next that business -- real

would of fixtures expenditures will other a make example in investments gave capital and/or we'll future we earlier deprioritize out in tooling new one One be priority was So map, and product be areas. pulling that that I example XXXX. road for

but I so a year, where we're give on lower for CapEx say we to year. that will be it than this landed not ready would number And next

Operator

ahead. The apologies. Go next -- question today

Dom Blosil

with think the I going was follow I missed apologize. And last Yes, up. credit to his facility, I I regards to question

credit different. about financial agreements, through our leverage we the that's earlier our which by talked we So very difference and report statements between are defined that leverage

in the being either is backs agreement or additional we our which different which turns excludes benefits cost that basis. into net P&L around so to second agreement the will incremental as that pro due measured components: able by a piece which definition up facility execute of and is of restructure lien add on leverage forma an on And rightsize first or EBITDA credit about X to run hovering fact debt, to an leverage, the one And different the measured on of is credit be we're allows of certain our keep some out a a economics those it's have X and embedded AR initiative example, rate we per pull the definition then basis. a rate areas. but take where And that the TTM to as adjustments run or for future of as

anticipate covenant the leverage credit And a standpoint as ratio that's so accordingly. that have and covenant problems leverage to allows sitting us to against from per of that year-end. kind through that would a navigate that any QX we the tied agreement don't well we're definition And and in

Operator

Group. next question Joe from today line the from comes The Advisory Telsey Feldman of

Joe Feldman

invest what just was a you or an in. you initiatives guys of X you made the hoping So remarks the exactly comment on ask, that guys? maybe prepared return to share means wanted focusing to And about to during example could really highest I

Dom Blosil

that's that we whether or dollars, of creation Yes. that revenue. terms and allocate most highly digital so we would the immediate marketing predictable, I on it's underpinning in on spend mean is and where correlation we creation, engine what the I investment corresponding the right? demand example return an think investment measurable the most the how So -- between best is spend And highest of of sort what right? of when example returning demand via be search advertising,

confidence in-year kind allocating And And frames. in the scarce kind areas of have there. that that kind so so we're just predictable when doing in in-quarter of a the one-to-one return of resources, relationship it's time and really gives us that we're most

we investments long-term just brand so but those an of previous prospecting build which be raising consumer with consideration we've longer in, funnel, unfortunately, believe calls benefit, talked about marketing, being that awareness, and now incremental consumers turn for intended term but longer be have would tail driving things longer-tail would prospecting our that drive investments are to these that will on to right real brand increases into in strategy you're and set in funnel whereby Something touches the the awareness, making are that component the top as still really which because initial is more important require to Traeger, it convert.

so the which now, those return. that don't lower we're to we invest right do luxury is investments And why middle, that marketing kind dollars funnel of in things to reallocating have just more generate

other going can have. to do right scrappy I point CapEx we're have fixture think Another we're that delay the I we on it's piece, And investments be spoke example, with But on which improvements within of the that to to right? so. is trying now, just important. sale, front to assets we the make We capacity until

directly important necessarily to as the they're the higher couple are are resources of and term, measurable certain investments we year for other it's I a what in delaying look that not shifting year long quite Whether but return immediate in don't have growth mentioned. and kind and/or of as So in benefits that those things to contribute a examples near-term that areas at. of

Jeremy Andrus

a of time whatever channels, on Joe, continue looking very make. to brand, that see a our one comment predictable that return thing is that to predictability, that is product community that the add believe strong at with we investment we to anxiously to healthy about good lead Dom's we very launch. need product the only I is investments long would we It also

We continue products. to in invest

a nice investments opportunities important product most think has really drive outsized and we the returns, long been to that making I this simplifying that lead it's mechanism our time. investments are forcing a actually make and sure in

times So bad. good and it through continues

Joe Feldman

new balance -- I if kind That's just you with kind Or partners are other. worry the up I and if just here? about to your work you the was production until down Vietnam, that really China The nothing from to factory then maintain? slowing in follow have. fully a could of appreciate it. helpful. you produce one grills of I of really to that any wondering inventory the certain And sheet have through level is minimums there like Got

Dom Blosil

Yes.

our more we're where cost we well well standpoint. Traeger production, factories. pause we're mean, to, both back partners want a for that demand have we if disruption the mean short as which is So both our keep cumbersome for do against ramp we is Because had off they that also yes our to the and comes to as if factories, to supply at motivation that production, they necessarily and labor in up and I a need no. term to to you go turn completely our I protecting the a ensure for factories, that. find down scale But we're from little could don't bit there's production, we those when producing labor with as to factories to right? continuity and as good

obviously, able obviously and through position But year. through allow minimum to navigate And inventory of protect disruption independent which year end inventory sort the allow of our the progressively we to on we're this dramatically obligations of minimize that so turn those because and keep to them contractual are will of naturally length kind the levels motivated next to our them them, helps levels. in part own ramp of of us lights levels any at it improve and at operating at extend min keep time production to and we're the which down continuity that and

Operator

today line from Peter Piper Our final of comes question the from Sandler. Keith

Unidentified Analyst

[indiscernible] is on This Peter. for

the margin. any way by gross to But the well? [indiscernible] And margin you are you in quantify tailwinds wanted Just about you that until 'XX inventory. see you the 'XX? gross through cost XQ as how I that, realize confident is can then won't work there happens what ask higher

Dom Blosil

Yes.

cost, kind the sitting the the through macro to have once in inventory year, and middle at inventory takes new forwarders lower of forward inventory start improved on that some yes, first headline think well obviously the start levels a have our to as -- but see full take of that's of at come rolling with through to which are year, view and advantage navigate on contracts we're time one right? But of kind question, moment pretty on that real own building as different balance dramatically, our freight confident down point work at sheet. a as So like news our our to benefit we'll rates, from of So roll that in rates we'll time, spot high-cost at the midpoint buying I years. we're next tailwinds we're P&L, see of from we of work It at come hoping standpoint. outer benefit the

through as that the so higher be one P&L worked these inventory well, is that And benefit tailwind will a we've benefit margin FX we'll levels. also start and nice once from. that gross will to

realize won't back dramatically the full begin half we'll not sequential gross be that to margin dramatically, even through -- get or but sequentially in course improvements pretty the to improve see to the will that of but and we'll So start there. we'll confident able We we're of impact incrementally the year, XXXX.

Unidentified Analyst

the Is path us. [indiscernible]? quantify there way margin gross And for any to

Dom Blosil

Yes.

don't we're be necessarily monthly. take core share going these the but things to the term. it's shape will something that strategy know our fundamental long that weekly, for I So dollars, And and to total

it our margin which footprint, year. to the way. customers, talked we factories, with work we're to kind not outbound continuous cost is earlier necessarily suddenly, is gross with most optimize product kind millions and inventory launching of whether ensure that transportation couple a the progression lever a we something in and of of of throughout found be through enhancements and this of negotiations import you products you dollars. [indiscernible] efficient all or as moving kind nice where in to really warehousing how the of land it's So improvement in We've movements pull direct about This side, course improve millions contributing

continue you we margin where longer-term levers product think And So be we'll a work as structure. to we have will of that about volumes interesting these margin at commodity dynamic how kind as and we in happens decrease. what macro this rates road it's it. price transportation optimizes how one and sort develop inbound see navigate both of see prices optimize to map gross It strategy to we and

only And partnership course this something it some as really well So and of time what is 'XX next take will on that this year, very time, is we're obviously not quantifying, opportunities I to front there's margin which list say I but gross something it say is to we'll contribute I of and is you finance are without over kind year over think that of and tight. that us, through and over the would the start the and but some ops as team the mature, on a build focused year. beyond. of we're realize team to strategy, items to in the of that about will we're on, will excited And bullish that that continue long between we'll to

Operator

There this are waiting at no questions time. further

over any Please remarks. back conference the ahead. Jeremy pass Andrus for to to closing go like would I So

Jeremy Andrus

Thanks. quarter you with our March when in on We joining care. again Take fourth Thank forward you to our speaking we Great. look earnings. for call. update

Operator

for participation. you your Thank all

Traeger (COOK) 12 Nov 222022 Q3 Earnings call transcript