Q4 2023 SharkNinja Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the SharkNinja fourth quarter 2024 earnings conference call. At this time, all participants have been placed in a listen-only mode.

Good morning, ladies and gentlemen, and thank you for standing by welcome to the Shark Ninja fourth quarter 2024 earnings Conference call. At this time, all participants have been placed in a listen only mode. The lines will be opened for your questions. Following the presentation.

Operator: The lines will be open for your questions following the presentation. Please note that this conference is being recorded. I would now like to hand the call over to Arvind Bhatia, Senior Vice President of Investor Relations, to begin the presentation. Thank you. You may begin.

Note that this conference is being recorded I would now like to hand, the call over to Arvind Bhatia Senior Vice President of Investor Relations to begin the presentation.

Thank you you may begin.

Arvind Bhatia: Good morning, and welcome to SharkNinja's fourth quarter 2023 earnings conference call. Joining me on today's call are Mark Barrocas, SharkNinja's Chief Executive Officer, and Larry Flynn, Interim Chief Financial Officer and Chief Accounting Officer. Mark will begin by providing a business update, and Larry will then review our financial results. After that, we will open the call for your questions.

Good morning, and welcome to Shanghai.

Quarter 2020 earnings conference call.

Joining me on today's call are Michael Okay.

<unk>, Chief Executive Officer, and Larry Fun, interim Chief Financial Officer, and Chief Accounting Officer.

Mark will begin by providing a business update.

And if there isn't then review our financial results.

Our 2024 Oclock.

So that even though on the call for your question.

Arvind Bhatia: By now, everyone should have access to the earnings release for our fourth quarter ending December 31, 2023 issued this. The press release is accessible on the company's website at ir.sharkninja.com. Shortly after the conclusion of today's call, a webcast will be archived and available for replay. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as you currently hear, and as such, they include risks and uncertainties. If you read SharkNinja's earnings release, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking statements. Please remember the company undertakes no obligation to update or revise the following statements in the future. During the call, we will make a number of references to non-GAAP financial measures. We believe these measures provide investors with useful perspectives, and are the underlying growth trends of the business. We have included in our earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Now,

By now everyone should have access to the earnings release.

Our fourth quarter ended December 31, 2023 issued this morning.

The press release is accessible on the company's website at IR top sharpening jackpot com.

Shortly after the conclusion of today's call and webcast archived and available for replay.

Before we begin.

Let me remind everyone that today's discussion contains forward looking statements based on the environment as you currently here and there.

As such does include risks and uncertainties.

Uniform sharpening their earnings.

One of the companies most of them.

Finally, you will see a discussion of factors that could cause the company's actual results.

Materially from these forward looking statements.

Please remember the company undertakes no obligation to update or revise these forward looking statements in the future.

During the call we will make a number of references to non-GAAP financial measures.

Believes these measures provide investors with useful perspective.

On the underlying growth trends of the business and have included in our earnings release and full reconciliation of non-GAAP financial measures. The most comparable GAAP measures now.

Mark Adam Barrocas: I will turn the call over to Mark. Thanks, Arvind. It's great to be with everyone this morning. We're thrilled to share with you our excellent top and bottom line results for the fourth quarter and full year 2023, our momentum in 2024, which makes us even more excited about the coming year, and our positive long-term outlook driven by our proven three-pillar growth strategy. Let's start by reviewing our operational and financial results. We once again delivered industry-leading performance, gaining market share across both the Shark and Ninja brand portfolio. We had a very strong fourth quarter, as adjusted net sales increased nearly 20%.

I'll turn the call over to Mark.

Thanks, Arvind, it's great to be with everyone. This morning, we're thrilled to share with you our excellent top and bottom line results for the fourth quarter and full year 2023.

Our momentum in 2024, which makes us even more excited about the coming year.

And our positive long term outlook driven by our proven three pillar growth strategy.

Let's start by reviewing our operational and financial results.

We once again delivered industry, leading performance gaining market share across both the shark and Ninja brand portfolios.

We had a very strong fourth quarter as adjusted net sales increased nearly 20%.

Adjusted EBITDA was up more than 70%.

Mark Adam Barrocas: [inaudible] Adjusted gross margin improved nearly 1,000 basis points, and adjusted EBITDA margins expanded almost 500 basis points, which is just incredible. Our outperformance and overall strength demonstrate the power of our innovation, as our growth was broad-based across categories, customers, channels, and geography. During the critical holiday selling season, consumers responded with excitement and passion around our product offering, and our retail partners leaned into our brand.

Adjusted gross margin improved nearly a thousand basis points and adjusted.

And EBITDA margins expanded almost 500 basis points, which is just incredible.

Our outperformance and overall strength demonstrates the power of our innovation engine as our growth was broad based across categories customers channels and geographies.

During the critical holiday selling season consumers responded with excitement and passion around our product offering and our retail partners leaned into our brands.

Mark Adam Barrocas: I'm thankful for the continued support and trust in our brands by consumers and retailers. Our full year results underscore our commitment to delivering on our expectations. On a full year basis, we exceeded the high end of our previously provided guidance across key metrics. We grew adjusted net sales by more than 15% to nearly $4.2 billion, and adjusted EBITDA increased by nearly 39% to $720 million. We expanded adjusted EBITDA margins by nearly 300 basis points to just above 17%.

I'm thankful for the continued support and trust in our brands by consumers and retailers.

Our full year results underscore our commitment to delivering on our expectation.

On a full year basis, we exceeded the high end of our previously provided guidance across key metrics.

We grew adjusted net sales by more than 15% to nearly $4.2 billion.

Adjusted EBITDA increased by nearly 39% to $720 million.

We expanded adjusted EBITDA margins by nearly 300 basis points to just above 17%.

Mark Adam Barrocas: Four-year adjusted gross margins improved nearly 700 basis points year-over-year to 46.9%. I'm happy to share that this is well ahead of our longer-term goal of getting back to our pre-COVID adjusted gross margin level of 45%. We believe our strong gross margin rate is a real competitive advantage. These results reinforce our position as one of the largest and most profitable companies in our industry. The entire SharkNinja team has done an incredible job.

Full year adjusted gross margins improved nearly 700 basis points year over year to 46, 9%.

I'm happy to share that this is well ahead of our longer term goal of getting back to our pre COVID-19 adjusted gross margin level of 45%.

We believe our strong gross margin rate is a real competitive advantage for us. These.

These results reinforce our position as one of the largest and most profitable companies in our industry.

The entire shark Ninja team has done an incredible job.

Mark Adam Barrocas: We are delivering strong top and bottom line growth and significant margin expansion at scale. Our performance is even more impressive when considering an uncertain macroeconomic backdrop. The consumer environment remains unpredictable, but we continue to be laser focused on factors within our control. I'm incredibly proud of our team for continuing to deliver these tremendous results.

We are delivering strong top and bottom line growth and significant margin expansion at scale.

Our performance is even more impressive when considering an uncertain macroeconomic backdrop.

The consumer environment remains unpredictable, but we continue to be laser focused on factors within our control.

I'm incredibly proud by our team for continuing to deliver these tremendous results.

Mark Adam Barrocas: So what makes SharkNinja uniquely positioned to win in new categories, markets, and geography? How do we extend our track record of growth, even in challenging business cycles? Our success is directly connected to our unique mindset, culture, and the way we think about the consumer. At each and every level in our organization, we are maniacally focused on understanding consumers. SharkNinja has created a moat through relentless focus on four key areas that will continue to propel future growth.

So what makes shark mentioned uniquely positioned to win in new categories markets and geographies.

How do we extend our track record of growth even in challenging business cycles.

Our success is directly connected to our unique mindset culture and the way we think about the consumer.

And each and every layer in our organization, we are maniacally focused on understanding consumers.

Shark Ninja has created a moat through the relentless focus on four key areas that will continue to propel future growth.

Mark Adam Barrocas: First, our rapid product innovation approach turns proprietary insight into highly desirable products that solve consumer problems. Second, our highly efficient, scaled, and agile global supply chain delivers high quality products with market-leading performance at extraordinary value. Our global 360-degree marketing plan drives consumer demand through TV, social media, and experiential events, and our Omnichannel strategy empowers consumers to shop wherever they choose. I can't think of any other company that is as well set up to succeed moving forward with this flywheel.

First our rapid product innovation approach turns proprietary insight into highly desirable products that solve consumer problems.

Two our highly efficient scaled and agile global supply chain delivers high quality products with market, leading performance at an extraordinary value.

Our global 360 degree marketing plan drives consumer demand through television social media and experiential events.

And our Omnichannel strategy empowers consumers to shop wherever they choose I.

I can't think of any other company that is well set up to succeed moving forward with this flywheel.

Mark Adam Barrocas: Looking ahead, the first quarter of 2024 is off to a great start. Because of our strong performance and better than expected trends in the fourth quarter, we exited the year with clean inventories and slightly lower weeks of supply with our retail partners. We are well positioned to continue to drive strong growth and margin as we build on our incredible momentum. Our 2023 performance and our going forward outlook will continue to be driven by our three-pillar growth strategy. This includes entering new and adjacent categories, growing share in existing categories, and international expansion. We made great progress across all three of our pillars in 2023 and are excited about what we have coming in 2024 and beyond. Let's now dive a bit deeper into all three.

Looking ahead, the first quarter of 'twenty 'twenty four is off to a great start.

Cost of our strong performance and better than expected trends in the fourth quarter, we exited the year with clean inventories and slightly lower weeks of supply with our retail partners.

We are well positioned to continue to drive strong growth and margin as we build on our incredible momentum.

Our 2023 performance and our go forward outlook will continue to be driven by our three pillar growth strategy. This includes entering new and adjacent categories.

Growing share in existing categories and international expansion.

We made great progress across all three of our pillars in 2023 and are excited about what we have coming in 2024 and beyond.

Let's now dive a bit deeper in all three.

Mark Adam Barrocas: Entering new and adjacent categories continues to be a critical growth driver for us. If you look back over the last four years, we added 14 new subcategories. We have a very conscious, deliberate, and purposeful approach to entering new and adjacent categories. We've entered categories like beauty and outdoor cooking that didn't always seem obvious for our brands, but where we have been disruptive and highly successful as consumers have gravitated to our innovative offerings. Entering new categories is something many consumer products companies strive to do, but it's challenging.

Entering new and adjacent categories continues to be a critical growth driver for us. If you look back over the last four years, we added 14, new sub categories. We have a very conscious deliberate and purposeful approach to entering new and adjacent categories. We've entered categories.

Like beauty and outdoor cooking it didn't always seem obvious for our brands, but where we have been disruptive and highly successful as consumers have gravitated toward innovative offerings.

Entering new categories is something many consumer products company strives to do but it's challenging.

Mark Adam Barrocas: SharkNinja has a demonstrated track record of not just entering but disrupting the new categories that it enters. This expansion allows us to bring new consumers into our brands, including younger demographics we're seeing with beauty and more male consumers through outdoor cooking. In 2023, we added four new subcategories to our portfolio, each with tremendous potential. Ninja Thirsty, our recently launched proprietary in-home carbonation drink system, had a strong start in 2023 and is nicely positioned to expand globally in 2024.

Shark Ninja has a demonstrated track record of not just entering but disrupting the new categories that it answers.

This expansion allows us to bring new consumers into our brands, including younger demographics, we're seeing with beauty.

And more male consumers through outdoor cooking.

In 2023, we added four new subcategories to our portfolio each with tremendous potential.

Major thirsty, our recently launched proprietary in home carbonation drink system had a strong start in 2023 and is nicely positioned to expand globally in 2024.

Mark Adam Barrocas: As we build household penetration, we're excited about the growth potential, including the opportunity to create a recurring revenue stream with our consumable flavored pods and CO2 canisters. Our new Ninja wood-fired outdoor oven helped us increase our share of outdoor cooking products. Expanding our brands outdoors, and particularly in the outdoor cooking space, is a key growth area for us. This is a big, definable, global category. Carpet shampooing and stain cleaning is a billion-dollar plus category in North America and the UK, which we have not participated in before. Our recently launched Shark Carpet Expert and Shark Stain Striker cleaning products had a very strong holiday season and we believe are poised well for growth and market share gains in 2024. Finding ways to expand our cleaning business and providing consumers with solutions to real world problems is something that we're passionate about. The Shark Mess Master, our recent launch into the wet dry vacuum category, is performing well and has become a recognized product on TikTok and TV shopping channels.

As we build household penetration, we're excited about the growth potential including the opportunity to create a recurring revenue stream with our consumable flavored pods and C O two canisters.

Our new names you would fire outdoor oven helped us increase our share of outdoor cooking products.

Expanding our brands outdoors, and particularly in the outdoor cooking space is a key growth area for us. This is a big definable global category.

Carpet shampoo Crewing and steam cleaning is a billion dollar plus category in North America, and the U K, which we have not participated in previously.

Our recently launched shark carpet expert and sharp stained stryker cleaning products had a very strong holiday season, and we believe are poised well for growth and market share gains in 2024.

Finding ways to expand our cleaning business and providing consumers with solutions to real world problem is something that we're passionate about.

The sharp mess master our recent launch into the wet dry vacuum category is performing well and has become a recognized product tick tock and television shopping channels.

Mark Adam Barrocas: We expect these new subcategories to remain important growth drivers in 2024 and beyond. On February 1st this year, we held our first EMEA product forum, which brought together retailers, press, and influencers from all over Europe and the Middle East to experience SharkNinja. At the event, we announced our entry into two new billion-dollar subcategories for the outdoors. We're excited to launch our new Shark Flex Breeze, the world's first indoor-outdoor cooling device, which will be rolling out in both North America and Europe this spring. Our insights showed us that while consumers love spending time outdoors, they were impacted by heat and bugs, which made it less enjoyable. That nugget of insight focused us on creating a cooling solution for both indoors and outdoors. The FlexBreeze runs both with a cord and cordless and stands on a pedestal.

We expect these new subcategories to remain important growth drivers in 2024 and beyond.

On February for this year, we held our first EMEA product forum, which brought together retailers.

And Influencers from all over Europe, and the Middle East two experienced shark Ninja.

At the event, we announced our entry into two new billion dollar subcategories for the outdoors.

We're excited to launch our new sharp flex freeze the world's first indoor outdoor cooling system, which will be rolling out in both North America and Europe. This spring.

Our insights showed us that walk consumers love spending time outdoors, they were impacted by seat and bugs, which made it less enjoyable.

That nugget of inside focused us on creating a cooling solution for both indoors and outdoors.

The flex Breeze, one both with a cord and cordless.

Fans on a pedestal and.

Mark Adam Barrocas: Thank you for watching! And while built to be outdoors, it is stylish, powerful, and quiet enough to be used indoors. A big innovation is a misting accessory that sprays a cool mist of water, bringing down the ambient temperature nearly 10 degrees. The global fan market is a large, definable segment, and we believe we can gain market share and grow the overall size of the market with this innovation. Another product we just announced is the Ninja Frost Vault, our first entry into the premium cooler segment. While coolers have done a great job keeping beverages cold, they fail to keep food from getting damp and soggy.

And can be lifted away for tabletop youth.

And while built to be outdoors, stylish powerful and quiet enough to be used indoors.

A big innovation is a missed an accessory that sprays of cool mist of water, bringing down the ambient temperature nearly 10 degrees.

The global fan market is a large definable segment and we believe we can gain market share and grow the overall size of the market with this innovation.

Another product, we just announced is the ninja fastball, our first entry into the premium cooler segment, while coolers have done a great job keeping beverages cold they failed to keep food from getting damp in saga.

The soggy sandwich insight is what led us to create the world's first cooler with cold dry storage. So now in addition to getting days of ice retention in innovative fridge temp drawer built into the cooler allows consumers to safely store anything they want.

Mark Adam Barrocas: The Soggy Sandwich Insight is what led us to create the world's first cooler with cold dry storage. So now, in addition to getting days of ice... An innovative fridge-temp drawer built into the cooler allows consumers to safely store any food they want while also keeping it dry. Consumers are spending more and more time outdoors and are looking for products that offer convenience and solutions to their problems. With our entry into these new subcategories, we are expanding our outdoor portfolio, which already includes outdoor grills and ovens, portable blenders, and drinkware. Consumers love our products inside their homes, and now they're going outdoors with us as well. Expanding our brands and products outside the home will be a big growth opportunity for us in the coming years.

While also keeping a dry.

Consumers are spending more and more time outdoors and are looking for products that offer convenience and solution to their pain points.

With our entry into these new subcategories, we are expanding our outdoor portfolio, which already includes outdoor grills and ovens portable blenders and drink ware.

Consumers love our products inside their home and now theyre going outdoors with us as well.

Expanding our brands and products outside the home is a big growth opportunity for us in the coming years.

Mark Adam Barrocas: Looking ahead, there are many more categories both in the home as well as outside of the home for the Shark and Ninja brands to be able to expand into. We intend to capitalize on these opportunities by staying focused on identifying and solving consumer problems that others either don't see or are unable to solve. And what's most exciting is that we're just getting started.

Looking ahead, there are many more categories both in the home as well as outside of the home for the shark and major brands to be able to expand into.

We intend to capitalize on these opportunities by staying focused on identifying and solving consumer problems than others, either don't see or are unable to solve and whats. Most exciting is that we're just getting started.

Mark Adam Barrocas: Our second growth pillar is growing market share across our key subcategories. Even in some of our more established subcategories, such as vacuum cleaners and blenders, where we have a significant market share, we have demonstrated an ability to increase that share. The success is driven by our relentless focus on innovation in existing categories; of the approximately 20 to 25 new products that we launch annually, about 80% of them are in an existing category, keeping our offerings fresh and consumers excited. We don't take anything for granted, led by our 800 cross-functional engineers and designers and driven by global consumer insights and dynamic testing. Our 24-7 innovation cycle continues to play a major role in the improvements we observed in 2023 as we introduced 25 new products, including 20 new products within existing categories alone.

Our second growth pillar is growing share in existing categories.

We have a long track record of growing market share across our key subcategories.

Even in some of our more established subcategories, such as vacuum cleaners, and blenders, where we have a significant market share we have demonstrated an ability to increase that share.

This success is driven by our relentless focus on innovation in existing categories.

Of the approximately 20 to 25, new products that we launch annually about 80% of them are within existing categories, keeping our offerings fresh and consumers excited we don't take anything for granted.

Led by our 800 cross functional engineers, and designers and driven by global consumer insights and dynamic testing.

Our $24 seven innovation cycle continues to play a major role in the improvements we observed in 2023, as we introduced 25, new products, including 20, new products within existing categories alone.

Mark Adam Barrocas: For example, we launched a new series of robotic and cordless vacuums using our proprietary DetectPro technology. In the home environment segment, we introduced the SharkNeverChange air purifier. [inaudible] We expanded our Shark haircare family of styling products with the launch of the Shark Smooth Style, a heated comb, straightener, and smoother, and SharkSpeedStyle, the market's lightest leading digital hair dryer. At $99, the Smooth Style has allowed us to bring in many more consumers into our beauty segment, and over time, we hope to graduate them into other beauty products. Within the Ninja brand, we introduced the Ninja Combi, our next generation of multi-cook.

For example, we launched a new series of robotic and cordless vacuum is using our proprietary detect pro technology.

In the home environment segment, we introduced the sharp never change air Purifiers, which don't require filter replacement for five years.

We expanded our shark hair care family of styling products with the launch of the sharp smooth style, a heated comb straightener and smoother and sharp speed style, the market's lightest leading digital hair dryer.

At $99. The smooth style has allowed us to bring in many more consumers into our beauty segment and over time, we hope to graduate them into other beauty products.

Within the Ninja brand, we introduced the Ninja Combi, our next generation of multi cookers.

Mark Adam Barrocas: We also reinvigorated our blenders and kitchen systems with improved features and functionality through the launch of the Ninja Detect Pro. We introduced the Excel version of our outdoor grill, which is not just a larger version, but also a connected device that leverages our app IoT expertise and brings our robotic technology to outdoor cooking.

We also reinvigorated our blenders kitchen systems with improved features and functionality through the launch of the beaches detect probe.

We introduced the XL version of our outdoor Grill. This is not just a larger version, but also a connected device that leverages, our app Iot expertise and brings our robotic technology to outdoor cooking.

Mark Adam Barrocas: This is all testament to our innovation approach, which enables us to continue to gain share in existing categories. During 2023, we continued to grow market share across existing subcategories. While growth was broad-based, subcategories like beauty, air fryers, ice cream makers, and outdoor grills were particularly strong.

This is all testament to our innovation approach, which enables us to continue to gain share in existing categories.

During 2023, we continued to grow market share across existing subcategories Walt.

Loan growth was broad based sub categories like beauty air Fryers ice cream makers and outdoor grills were particularly strong.

Mark Adam Barrocas: For example, based on industry data, our U.S. market share of hair dryers and hot air stylers in 2023 will increase to nearly 19% compared to 8% in 2022. Now to a segment that I'm very excited about, which is our continued international expansion. During 2023, we continue to deliver very strong performance in international markets as adjusted net sales reach $1.1 billion, increasing 66% compared to 2022. The UK, which is our largest international market, grew nearly 60%. While markets like Germany, France, and Latin America, which are newer, grew at impressive triple-digit rates.

For example, based on industry data, our U S market share of hair dryers, and hot Air Stylers, and 2023 increased nearly 19% compared to 8% in 2022.

Now to a segment that I'm very excited about which is our continued international expansion.

During 2023, we continue to deliver very strong performance in international markets as adjusted net sales reached $1 1 billion, increasing 66% compared to 2022.

U K, which is our largest international market grew nearly 60% while markets like Germany, France, and Latin America, which are newer grew at impressive triple digit rates.

Mark Adam Barrocas: We ended the year with a presence in 32 countries, up from 26 countries at the end of 2022. We have great momentum, scale, and a strong base to further expand our international business. But what's even more exciting is that in most of these markets, our market share is relatively small, and we have lots of white space to grow. Our tremendous success in the UK market has provided important insights and lessons. We're quickly implementing those lessons to catapult our business in newer markets such as Germany and France, which are key growth markets for us in the next few years. We see these two markets as relatively similar in terms of size and scope to the UK market, with the long-term potential for Germany to be even bigger than the UK market for her.

We ended the year with presence in 32 countries up from 26 countries at the end of 2022.

We have great momentum scale and a strong base to further expand our international business, but what's even more exciting is that in most of these markets. Our market share is relatively small and we have lots of white space to grow.

Our tremendous success in the U K market has provided important insights and lessons.

We're quickly implementing those lessons to catapult our business in newer markets, such as Germany, and France, which are key growth markets for us in the next few years.

We see these two markets is relatively similar in terms of size and scope to the U K market with the long term potential for Germany to be even bigger than the U K market for us.

Larry Flynn: I'm also thrilled with our initial success in Latin America, which looks promising as we introduce new products and open new markets within the region. Our products are responding with consumers globally, and we believe our international business can be as large as, if not larger than, the U.S. over the long term. Our three-pillar growth strategy has driven our record of sustainable, repeatable growth, and we will continue to deploy this proven strategy going forward. With that, let me turn it over to Larry, who will now walk you through our fourth quarter financials and 2024 outlook. Thank you, Mark, and good morning, everyone.

I'm also thrilled with our initial success in Latin America, which looks promising as we introduce new products and open new markets within the region.

Our products are resonating with consumers globally, and we believe our international business can be as large as if not larger than the U S over the long term.

Our three pillar growth strategy has driven our record of sustainable repeatable growth and we will continue to deploy this proven strategy going forward.

With that let me turn it over to Larry who will now walk you through our fourth quarter financials, and 2024 outlook Laurie.

Thank you Mark and good morning, everyone.

Larry Flynn: I'll focus my remarks first on our Q4 financial results... [inaudible] before turning it back over to Mark for closing. As Mark mentioned, our fourth-quarter results were very... Net sales increased 17%, and adjusted net sales, which exclude our divested APAC business, were up 20% to 1.4%. We grew Adjusted EBITDA 71% to $219 million, with adjusted EBITDA margins increasing more than 470 basis points year-over-year. In terms of top line performance by region, net sales in North America were up 8% to $973 million, representing 71% of our sales.

Focus my remarks first on our Q4 financial performance and then cover our expectations for 2024 before turning it back over to Mark for closing remarks.

As Mark mentioned, our fourth quarter results were very strong.

Net sales increased 17% and adjusted net sales, which exclude our divested APAC business were up 20% to $1 4 billion.

We grew adjusted EBITDA, 71% to $219 million with adjusted EBITDA margins, increasing more than 470 basis points year over year.

In terms of top line performance by region net sales in North America were up 8% to $973 million, representing 71% of our sales mix.

Larry Flynn: [inaudible] Adjusted Net Sales in International Markets. We're up 62, which was up 38, 38, 38, 38, 38, 38, continuing the strong trend. Retailers leaned into our brands during the holiday, and Consumer Demand Remains led to reduced weeks of supply at retail, contributing to the momentum in Q1. Next, let me take a minute to provide color on Q4 performance in our four major product categories. [inaudible] as well as other Floor Care products. Steam Mops, and Wet and Dry Cleaning Floor Products decreased just under 3% to 542%.

North America, Pos was even stronger and was up mid teens.

Adjusted net sales in international markets were up 62% to $404 million, including U K, which was up 38%.

<unk> the strong trend.

Retailers leaned into our brands during the holiday season as consumer demand remains strong.

Leading to reduced weeks of supply at retailers, which is contributing to the momentum in Q1.

Next let me take a minute to provide color on Q4 performance and our four major product categories.

Adjusted net sales in the cleaning category, which includes vacuums carpet extraction as well as other floor care products, such as steam mops, and wet and dry cleaning floor products decreased to just under 3% to $542 million from $556 million last year.

Larry Flynn: While our sales in the category were down, there were several bright spots... First, we saw significant sequential improvement relative to the third quarter decline of 9%. Second, sales of our robotic vacuums were up slightly for the quarter after declining earlier in the year. And third, we delivered strong performance in our recently launched carpet extraction subcategory, which continues to perform well here in 2024. Adjusted Net Sales in the Cooking and Beverage category, which includes air fryers, multi-cookers, outdoor grills, and ovens, and carbonated beverages compared to $379 million in the prior year. This performance was primarily driven by strength in Europe, particularly in the UK. We continue to expand our dominant market and continue to strengthen in the U.S., driven by our outdoor grills and outdoor ovens, our performance in the food preparation category, which includes blenders, food processors, and ice cream machines, and also... adjusted net sales in this category. 14% to 181 million, compared to 158 million in the prior year.

While our sales in the category were down there were several bright spots.

First we saw significant sequential improvement relative to the third quarter decline of 9%.

Second sales of our robotic vacuums were up slightly for the quarter after declining earlier in the year.

And third we delivered strong performance in our recently launched carpet extraction subcategory, which continues to perform well here in 2024.

Adjusted net sales and our cooking and beverage category, which includes air Fryers, multi cookers outdoor grills and ovens and carbonation increased 33% to $503 million compared to 379 million in the prior year.

This performance was primarily driven by strength in Europe, particularly in the U K, where we continued to expand our dominant market position.

And continued strength in the U S market driven by our outdoor grills outdoor ovens and thirsty.

Our performance in the food preparation category, which includes blenders food processors and ice cream makers was also strong.

Adjusted net sales in this category increased 14% to $181 million compared to $158 million in the prior year.

Larry Flynn: Growth in food prep was driven by continued strong performance of our creamy ice cream and Compact Blunt, including the launch of our new portable, and finally, others, including beauty products such as hair dryers and stylers, and home environment products such as air purifiers and humidifiers, again, our fastest growing category; adjusted net sales in this category were $153 million, nearly tripled compared to 57% prior. This growth was fueled by the continued strong performance of our hair care product, as well as SharkNeverChange air purifiers within the home environment subcategory. Moving down to gross profit, fourth quarter, Gap Gross Profit. 47% to $623 million, or 45.2% of net sales. This is an expansion of 940 basis points compared to the prior year. Adjusted gross profits increased by 50% to $653 million.

Growth in food Prep was driven by continued strong performance of our creamy ice cream makers and compaq lenders, including the launch of our new portable blenders.

And finally, other which includes beauty products, such as hair, dryers, and Stylers and home environment products, such as air Purifiers and humidifiers.

Was again, our fastest growing category.

Adjusted net sales in this category were $153 million nearly tripled compared to $57 million in the prior year.

This growth was fueled by the continued strong performance of our hair care products, including flex style speed style and smoothed style as well as shark never change air Purifiers within the home environment subcategories.

Moving down to gross profit.

In the fourth quarter GAAP gross profit increased 47% to $623 million or 45, 2% of net sales and expansion of 940 basis points compared to the prior year.

Adjusted gross profit increased 50% to $653 million or 47, 4% of adjusted net sales representing expansion of 970 basis points over the prior year.

Larry Flynn: 47.4% of adjusted net sales. [inaudible] This margin expansion was primarily driven by continued supply chain tailwinds, categories. Turning now to operating, during the quarter, R&D expenses of 24% to 69%, compared to 56 million in Q4 last year. We continue to invest in research and development, primarily in head, to support new product categories and new markets. The percentage of sales, R&D, was 5% of net sales, compared to 4.7% last year, an increase attributable to incremental share-based competition. Sales and marketing expenses increased to $330 million.

This margin expansion was primarily driven by continued supply chain tailwind cost optimization efforts and category mix.

Turning now to operating expenses.

During the quarter R&D expenses increased to 24% to $69 million compared to 56 million in Q4 last year.

We continue to invest in research and development, primarily in head count to support new product categories and new market expansion.

As a percentage of sales R&D was 5% of net sales compared to four 7% last year with the increase attributable to incremental share based compensation.

Sales and marketing expenses increased to $330 million or 23, 9% of sales compared to $217 million or 18, 3% of sales in the year ago period.

Larry Flynn: 23.9% of sales, compared to 217, for 18.3% of sales in the year-ago period. This increase was mainly due to our continued reinvestment of some gross margin dollars back into the economy via advertising and personnel to support our new product launch, similar to the previous quarter. A portion of the increase in sales and marketing dollars also resulted from increased delivery and distribution costs driven by higher volume, particularly in our direct-to-consumer business. General and Administrative Expenses increased to $124 million, compared to 97 million in the prior year, Our GAAP effective tax rate was 45.4% in the fourth quarter. 43% on a full year. This higher GAAP effective tax rate reflects the expected impact of dividend withholding taxes and non-deductible transaction costs and related party bonuses. Gap net income for the quarter was $49 million, compared to $47 million in the prior year.

This increase was mainly due to our continued reinvestment of some gross margin dollars back into the business.

Advertising and personnel to support our new product launches and expansion in existing and new markets and subcategories.

Similar to previous quarters, a portion of the increase in sales and marketing dollars also resulted from increased delivery and distribution costs driven by higher volumes, particularly in our direct to consumer business.

General and administrative expenses increased to $124 million compared to 97 million in the prior year.

Primarily due to incremental share based compensation associated with new RSV grants as.

As well as transaction costs related to the separation from our parent company J S Global and our secondary offering in December.

Our GAAP effective tax rate was 45, 4% in the fourth quarter and 43% on a full year basis.

This higher GAAP effective tax rate reflects the expected impact of dividend withholding taxes and.

And nondeductible transaction costs and related party bonus payments.

Yeah.

GAAP net income for the quarter was $49 million compared to $47 million in the prior year.

Larry Flynn: The adjusted net income was $132 million or $0.94 per share, compared to 75. 54 cents per share in the prior year, reflecting growth of seven. Adjusted EBITDA for the quarter increased 71% to $219 million, for 15.9% of adjusted net sales, compared to $128 million or 11.2% of adjusted net sales in the prior year, reflecting strong gross margin, partially offset by the increased investments in advertising and head, support our brand building. Looking at the full year, we delivered GAAP net sales growth of 14% to more than $4.2 billion; adjusted net sales grew 15% to nearly $4.2 billion, compared to $3.6 billion in the prior year. We expanded full-year adjusted gross margins by 690%.

Adjusted net income was 132 million or <unk> 94 per share compared to 75 million or 54 cents per share in the prior year, reflecting growth of 74%.

Adjusted EBITDA for the quarter increased 71% to 219 billion or.

Or 15, 9% of adjusted net sales comps.

Compared to 128 million or 11, 2% of adjusted net sales in the prior year, reflecting strong gross margin, partially offset by the increased investments in advertising and head count to support our brand building and growth initiatives.

Looking at the full year results, we delivered GAAP net sales growth of 14% to more than $4 2 billion.

Adjusted net sales grew 15% to nearly $4 2 billion compared to $3 6 billion in the prior year.

We expanded full year adjusted gross margins by 690 basis points to 46, 9%.

Larry Flynn: 46.9, well ahead of our long-term goal of 45,000. Selecting Supply Chain Tailwinds and our Cost Optimizer. Gap net income for the full year was $167 million, compared to $232 million in the prior year.

Well ahead of our long term goal of 45%, reflecting supply chain tailwind and our cost optimization efforts.

GAAP net income for the full year was $167 million compared to $232 million in the prior year.

Larry Flynn: The adjusted net income was $449 million, $3.22 per share, compared to 330. $2.38 per share in the prior year, selecting growth of 30. Suggested EBITDA for the full year was $720 million.

Adjusted net income was $449 million or $3 22 per share.

To $330 million or $2 38 per share in the prior year, reflecting growth of 36%.

Adjusted EBITDA for the full year was $720 million up 39% year over year and.

Larry Flynn: 39% year-over, adjusted EBITDA margin. [inaudible] 17.0. Turning to the balance, we finish the year with cash of $154 million, total debt outstanding of $805,000, and a net leverage ratio of 0.9. From an inventory perspective, we believe our inventory level and mix remain unchanged. At the end of the quarter, we had inventories of $700 million, up approximately 28% compared to Q4 2022. This was slightly ahead of our sales growth for three reasons. First, we ended last year below our target inventory. Second, we prepared for strong consumer demand in Q1. And third, we pre-built a few weeks of supply in anticipation of the launch of the next launch. 301 tariff exemptions were expected to be reinstated on January 1st, 2024, but have been pushed out. I would like to now touch on two global topics that are likely top of mind. Red Sea Disruption and Chinatown, with respect to the Red Sea, while the ocean freight situation remained.

And adjusted EBITDA margins increased 290 basis points to 17, 2%.

Turning to the balance sheet, we finished the year with cash of $154 million total debt outstanding of $805 million and a net leverage ratio of 0.9 times.

From an inventory perspective, we believe our inventory level and mix remain healthy.

At the end of the quarter, we had inventories of $700 million up approximately 28% compared to Q4 2022.

This was slightly ahead of our sales growth for three key reasons.

First we ended last year below our target inventory level.

Second we prepared for strong consumer demand in Q1 and.

And third we prebuilt a few weeks of supply in anticipation of 301 tariff tariff exemptions that were expected to be reinstated on January one 2024, but had been pushed out to at least June 1st.

I would like to now touch on two global topics that are likely top of mind for everyone read see disruption and China tariffs.

With respect to Red Sea, while the ocean freight situation remains fluid we have already taken swift action to mitigate the impact.

Larry Flynn: We have already taken swift action to mitigate, proactively increased our weeks of supply in the market, and continue to meet the strong demand we are seeing in the European and U.S. Over the past few years, we have diversified our shipping partners and, as a result, only selectively used spot markets. Our 2024 guidance assumes some cost impact from the ongoing disruption, but we expect the impact to be immaterial. We are closely monitoring the situation and are ready to adapt to any changes in market conditions. I'm sure we can continue to serve our customers. Turning to terror.

We proactively increased our weeks of supply in the markets as we continue to meet the strong demand we are seeing in the European and U S markets.

Over the past few years, we have diversified our shipping partners and as a result, only selectively used spot market containers.

Our 2024 guidance assume some cost impact from the ongoing disruption.

We expect the impact to be immaterial.

We are closely monitoring the situation and are ready to adapt to any changes in market conditions to ensure we can continue to serve our customers.

Turning to tariffs first let me provide some background, we began proactively moving production out of China in 2019 to diversify and build redundancy in our supply chain.

Larry Flynn: First, let me provide some background. We began proactively moving production out of China in 2009 to diversify and build redundancy in our supply chain. Today, we have manufacturing in Vietnam, Thailand, Indonesia, and Hong Kong.

Today, we have manufacturing in Vietnam, Thailand, Indonesia, and Hong Kong and we are building our presence in other parts of southeast Asia, such as Malaysia and Cambodia.

Larry Flynn: And we are building a presence in other parts of Southeast Asia, such as Malaysia and Cambodia. We already have line-of-sight to a run rate of nearly two-thirds of our U.S. sales volume outside of China, covering us well for Section 301 tariffs. We will continue to proactively diversify and tap additional capacity outside of..., mitigate future terror. Overall, we are confident in our ability to move almost all of our US volume out of China by the end of 2025. When we started our diversification, our cost of production outside of China was 15% higher than inside. As a result of the partnerships we have built over the last many years, we are now at cost parity outside of. In terms of the impact on our P&L, we estimate the financial impact of Section 301 tariff exemptions, currently set to expire on May 31st, 2024, are already baked. [inaudible] with respect to a hypothetical 60% tariff scenario in 2025. If such tariffs were to go into effect, do not expect any incremental cost to be a long-term problem given the ongoing diversification to move almost all US volume out of China by the end of 2025, as well as the cost parity I talked about earlier.

We already have line of sight to a run rate of nearly two thirds of our U S sales volume outside of China, covering us well per section 301, tariffs, which affect less than half of our U S volume or less than a third of our global volume.

We will continue to proactively diversify and tap additional capacity outside of China to mitigate future tariff risk.

Overall, we are confident in our ability to move almost all of our U S volume out of China by the end of 2025.

When we started on our diversification initiative, our cost of production outside of China was 15% higher than inside China.

As a result of the partnerships we have built over the last many years, we are now at cost parity outside of China.

In terms of the impact on our P&L, we estimate the financial impact of section 301 tariff exemptions, which are currently set to expire on May 31, 2024 will be immaterial and it's already baked into our 2020 for guidance.

With respect to a hypothetical 60% tariff scenario in 2025.

If such tariffs were to go into effect, we would not expect any incremental cost to be a long term issue given the ongoing diversification efforts to move almost all U S volume out of China by the end of 2025 as well as the cost parity I talked about earlier.

Larry Flynn: With that, let me now turn to our, for the full year, we expect, and Justin Metzales, between 7% and 9%, adjusted EPS to be in the range of $3.45, reflects a year-over-year growth of 11 percent. Net Interest Expense of Approximately $1.3 Billion for the year compared to $45 million a year ago, and finally, Capital Expenditure.

With that let me now turn to our outlook for 2024.

For the full year, we expect adjusted net sales to increase between 7% and 9%.

Adjusted EPS to be in the range of $3 45 to $3.61, which reflects a year over year increase of 7% to 12%.

Adjusted EBITDA to be in the range of $800 million to $830 million, which represents a year over year growth of 11% to 15%.

Net interest expense of approximately $65 million for the year compared to $45 million in the year ago period.

A GAAP effective tax rate of approximately 24% to 25%.

And finally capital expenditures of $120 million to $140 million for the year.

Larry Flynn: $120 to $140 million for the year. In closing, we are very pleased to finish off the year with strong, you successful, execution of our three-pillar growth strategy. As we enter 2024, we remain focused on strategic reinvestment into the business and believe we are in an optimal position to deliver top and bottom line growth over the next year and for years to come. With that, I will hand it back.

In closing we are very pleased to finish off the year with strong results and continued successful execution of our three pillar growth strategy.

As we enter 2024, we remain focused on strategic reinvestments into the business and believe we are in an optimal position to deliver top and bottom line growth over the next year and for years to come.

With that I will hand, it back to Mark.

Mark Adam Barrocas: Thanks, Larry. Some of the takeaways and highlights from today's prepared remarks are, first... In 2023, we delivered very strong results and achieved profitable organic growth, fueled by our three-pillar growth strategy. We deployed our best-in-class innovation engine to offer high-performance products that solve consumer problems. We lean into our always-on omni-channel marketing strategy to create demand and increase brand awareness, and we leveraged our supply chain to achieve success. Second, we're entering 2024 with strong momentum, which we've continued to see in Q1. I could not be more excited for this year as we plan to launch new products, enter new categories, new markets, and reach more households around the world. We're committed to investing back into our business to drive consumer demand, to continue to perfect our state-of-the-art innovation engine, and to reinvent and create new categories to delight consumers around the world.

Thanks, Larry.

Some of the takeaways and highlights from today's prepared remarks are first in 2023, we delivered very strong results and achieved profitable organic growth fueled by our three pillar growth strategy.

Deployed our best in class innovation engine to offer high performance products that solve consumer problems.

We leaned into our always on Omnichannel marketing strategy.

Create demand and increase brand awareness and we leveraged our supply chain to achieve success.

Second we're entering 2024 with strong momentum, which we've continued to see in Q1.

I could not be more excited for this year as we plan to launch new products enter new categories, new markets and reach more households around the world.

We're committed to investing back into our business to drive consumer demand.

Continue to perfect our state of the yard innovation engine, and reinvent and create new categories to delight consumers around the world.

Mark Adam Barrocas: We're well positioned to deliver another strong year. Third, I'm more confident than ever that we're on the right track for the long term. We have a large addressable market that grows with each category we enter, a scalable model that applies to all that we do, and a proven track record of organic growth. This is all underpinned by a world-class team that ensures we deliver excellence year after year.

We're well positioned to deliver another strong year.

Third I'm more confident than ever that we're on the right track for the long term.

We have a large addressable market grows with each category we answer.

Our scalable model, but applies to all that we do and a proven track record of organic growth.

Operator: We remain committed to our mission of positively impacting people's lives every day in every home around the world, while driving growth and profitability and creating significant long-term shareholder value. That concludes our prepared remarks, and I will now turn it over to the operator to kick off the Q&A. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

This is all underpinned by a world class team that ensures we deliver excellent year after year.

We remain committed to our mission of positively impacting People's lives every day in every home around the world, while driving growth and profitability and creating significant long term shareholder value.

That concludes our prepared remarks, and I will now turn it over to the operator to kick off Q&A.

Operator.

Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue.

Randal J. Konik: You may press star 2 to remove yourself from the, We ask that you please limit yourself to one question. One moment, please, while we poll for your question. Our first question comes from the line of Randy Konik with Jeffries. Please proceed with your question. Thanks, guys. Maybe a little bit more than one question. Just, I guess, a couple for Mark, and a couple for Larry.

We ask that you please limit yourself to one question one moment. Please while we poll for your questions.

Our first question comes from the line of Randy <unk> with Jefferies. Please proceed with your question.

Thanks, guys, maybe a little bit more than one question just I guess a couple for Mark couple for Larry Marc Hum.

Mark Adam Barrocas: Mark, you know, you've talked about international business and some things you learned about the UK that are informing you on how to kind of go to market in a better way in Germany, France, Latin America. Maybe share some of those insights. And then the other thing that's pretty impressive is the continued investment in R&D that continues to pay off. And, you know, maybe elaborate on some of the capabilities you've been able to build with that R&D investment over the last few years and kind of some of the capabilities you're working on going forward. That'd be super helpful. And then, just for Larry after Mark, when you think about the guidance that you gave, again, impressive, especially on the EBITDA dollar line, maybe give us some perspective on what that guidance entails from just category thoughts and then gross margin thoughts in the numbers, you know, in the plan for the guy for the year. That would be super helpful as well.

You talked about international.

Some things you learned about the U K.

Informing you on how to kind of go to market.

In a better way in Germany, France, Latin America, and maybe share some of those insights and then the other thing that's pretty impressive is the continued investment in R&D that continues to pay off in may.

Can you elaborate on some of the capabilities you've been able to build with that R&D investment over the last few years and kind of some of the capabilities you're working on.

Going forward that would be Super helpful. And then just for Larry on after Mark.

When you think about the guidance that you gave again impressive, especially on the EBITDA dollar line, maybe give us some perspective on what that guidance entails.

Category thoughts.

And then gross margin thoughts in the numbers are in the plan for the guide for the year that would be super helpful. As well thanks guys.

Mark Adam Barrocas: Thanks, guys. Yeah, so I'll start here, Randy. Thanks for the question. So let's start with the international learnings. I mean, I think first and foremost, it comes down to do we have the right products for consumers in those markets? I mean, homes are different in Germany and France and elsewhere in Europe and Latin America.

Yeah, So I'll start here Randy Thanks for the question.

So let's start with the international learnings I mean, I think first and foremost it comes down to do we have the right products for consumers in those markets I mean.

Homes are different in Germany in France, and elsewhere in Europe, and Latin America consumer.

Mark Adam Barrocas: Consumer trends are different. So the first thing was, getting local consumer insights in the markets, you know, was a very big change for us. So we have consumer insights teams in Germany and France. We're in Italy. We're in Spain. We're in Mexico.

Consumer trends are different so the first thing was getting local consumer insights in the markets was a very.

Big change for us So we have consumer insights teams in Germany and France.

We're in Italy, or in Spain were in Mexico.

Mark Adam Barrocas: So I would say first, you know, getting the product right and making sure that we are really in tune with consumers in their homes, how they use these products. The second is, I would say, kind of our omni-channel strategy. In every market that we're in, the focus is being relevant where the consumer chooses to shop for our products, whether that is online or in a brick and mortar store. In a country like Germany, for example, brick and mortar still has a very, very high percentage of overall sales and also, you know, a robust direct-to-consumer business. So we've employed that omni-channel approach in every market that we're in. Third, I would say, is our marketing strategy. TV, social media, and experiential events.

So I'd say first getting the product right and making sure that we are really in tune with consumers in their homes. How they use these products. The second is I would say kind of our.

Omnichannel strategy.

Every market that we're in the focus is being relevant.

The consumer chooses to shop for our products, whether that is online whether that as brick and mortar in a country like Germany brick and mortar still has a very very high percentage of overall sales.

And also you know a robust direct to consumer business. So we've employed that omnichannel approach in every market that we're in.

Third I would say is our marketing strategy.

V social media experiential events, we're taking those learnings from the U K, we're applying them to all of those markets as well.

Mark Adam Barrocas: We're taking those learnings from the UK and applying them to all of those markets as well. We're leveraging lots of social media content from one country to another. In fact, I'll give you an interesting insight.

We're leveraging lots of social media content from one country to another in fact, all I'll give you an interesting insight.

Mark Adam Barrocas: You know, lots of social media that were run in Mexico, you know, how we're taking that content and leveraging it in Spain, and vice versa. And then I would also say that we just had our first EMEA forum in Mallorca on February 1st and 2nd, where we brought together retailers, influencers, and press from all across Europe and the Middle East to really kind of demonstrate to them the power of Shark Ninja and let them see the products, you know, in a controlled environment. And there are a lot of retailers in Europe that are cross-country retailers. And so they're driving us, you know; we might sell them in Germany, but they're driving us to sell them in Poland and Turkey and elsewhere.

Lots of social media that was run in Mexico, how we're taking that content and leveraging it in Spain and vice versa.

And then I would also say that we just had our first EMEA Forum in Majorca February 1st and second where we brought together retailers Influencers and press all across Europe, and the middle East to really kind of demonstrate to them and kind of the power of shark Ninja.

Let them see the products in a controlled environment.

And Theres a lot of retailers in Europe that are cross country retailers and so they're driving us we might sell them in Germany, but they are driving us to sell them in Poland, and Turkey and elsewhere. So I think all of those learnings are kind of helping us.

Mark Adam Barrocas: So I think all of those learnings are kind of helping us focus on the consumer at a more local level rather than trying to direct a lot of this from the home office in Boston. The second part to your question in terms of R&D and scale and capability, I think on this one, Randy. You know, our team is not only getting larger and larger now with over 800 engineers around the globe, but it's the skill set of those engineers. It's mechanical, electrical, software, and app IoT.

Focus on the consumer at a more local level rather than trying to direct a lot of this from the home office in Boston.

Second quit parts of your question in terms of R&D and scale and capability.

I think on this one Randy.

Our team is not only getting larger and larger now with over 800 engineers around the globe.

But it's the skill set of those engineers, it's mechanical electrical software App Iot I mean, we just launched in Q4 of last year, a ninja XL connected grill.

Mark Adam Barrocas: I mean, we just launched in Q4 of last year a Ninja XL connected grill. Most of that was designed and developed by our robot app IoT team, and we were able to port that technology over into our grill business. So, you know, our products have a lot of technology inside of them, increasingly more and more for a rather affordable average sale price to the consumer. And I will tell you that just the amount of ideas and innovation that's coming from the team is continuing to accelerate, you know, with the scale and growth that we've had internationally with that group. Larry?

Most of that was designed and developed by a robot App Iot team and was able to port that technology over.

Into our grill business. So you know our products have a lot of technology inside of them increasingly more and more for a rather affordable average sell price to the consumer and I will tell you that just the amount of ideas and innovation that's coming from the team.

It's continuing to accelerate with the scale and growth that we've had internationally with that group.

Larry Flynn: Yeah, thanks. Thanks for the question, Randy. Starting on the EBITDA guide, you know, I think overall, you know, kind of continued gross margin expansion in the first half, kind of flattish in the second half, you know, so that's going to drive a lot of that kind of flow through down to the EBITDA line. From an adjusted off X perspective, we're planning for that to be, you know, effectively flat as a percentage of sales in 2024. You know, kind of within the gross margin line specifically, we've talked about kind of the cost tailwind that we saw, some of the cost optimization efforts that we've realized and benefited from in the second half of 2023, you know, as we've kind of diversified our supply chain, you know, created dual sourcing capabilities, which has helped us to really kind of optimize our cost base, get to, obviously, cost parity outside of China. But So overall, you know, kind of the gross margin as we think about the full year, it's, you know, 80 to kind of 100 basis points there. And what I would say is we think about the, you know, kind of those cost optimization efforts as well.

Yeah. Thanks, Thanks for the question Randy.

Starting on the EBITDA guide.

I think overall.

Continued gross margin expansion.

In the first half kind of flattish in the second half.

So that's going to that's going to drive a lot of that flow through down to EBITDA.

Why.

Opex perspective, where we're planning for that to be effectively flat as a percentage of sales in 2024.

You know kind of within the gross margin.

<unk> specifically.

Obviously, we've talked about kind of a cost tailwind that we saw.

Some of the cost optimization efforts that that we've realized and benefited from in the second half of 2023.

We've got a diversified our supply chain.

<unk> dual sourcing capabilities, which has helped us to really kind of.

Optimize our cost base gets obviously cost parity outside of China, but it's also given us kind of leverage as we.

<unk> competed with our with our suppliers so.

Overall, you know kind of the gross margin as we think about the full year. It's 82 kind of a 100 basis points, there and what I would say as we think about the you know kind of those cost optimization efforts as well.

Larry Flynn: In Q4, we also saw category mix benefit us in the gross margin line, as we think about beauty growing strongly relative to the rest of the business, and D2C growing at a faster pace than the rest of the business. We've also seen ASPs be strong in the fourth quarter, discounted less than expected, really driving demand through our investments in media, and I think those fundamental elements to the gross margin will continue to benefit us in our toolkit, I guess, as we think about gross margin going forward. From a category perspective, I guess on the top line, we would look at cleaning and cooking up low, mid-single digits, food prep, mid-teens, and then other, which encompasses beauty and the home environment, as kind of the high teens.

Or are we also saw category mix benefit us in.

And the gross margin line as we think about beauty growing.

Strongly relative to the rest of the business <unk> growing at a faster pace than the rest of the business.

We've also asps were strong in the fourth quarter discounted less than expected you know really driving demand through our investments in media and I think those fundamental elements to the gross margin.

We will continue to benefit us and our tools kind of.

In our tool kit I guess as we think about gross margin going forward from.

From a category perspective, I guess on the top line, we would look at kind of cleaning and cooking up a low kind of mid single digits food prep kind of mid teens, and then kind of other which encompasses beauty and and home environment.

It's kind of high teens, that's kind of what's what's baked into our into our top line guidance.

Larry Flynn: That's kind of what's baked into our top line guide. Very thoughtful and very helpful. Thanks, guys. I really appreciate it.

Very thoughtful and very helpful. Thanks, guys really appreciate it.

Randal J. Konik: Thank you. Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question, morning.

Thank you. Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Good morning, and thank you so much for taking our question.

Brooke Siler Roach: I was hoping you could elaborate on the underlying market level growth rate you expect both in the U.S. and the U.K. for your core categories. Do you think the industry is moving back to more normalized growth levels relative to the last couple of years, and are you seeing any changes in how wholesale partners are planning their orders for the year? And then, second for Larry, I was hoping you could help us with a few guardrails on how to think about how the year might shape out on sales growth. The commentary on a strong start to 1Q is very encouraging, but are there any puts and takes we should be considering regarding growth by quarter due to comparisons, product launches, or otherwise? Thank you.

I was hoping you could elaborate on the underlying market level growth rate you expect both on the U S and the U K for your core categories. Do you think the industry is moving back to more normalized growth levels relative to the last couple of years and are you seeing any changes in household sell partners are planning their orders for the year.

And then second for Larry I was hoping you could help us with a few guardrails on how to think about how the year might shape out on sales growth. The commentary on a strong start to when she was very encouraging but are there any puts and takes we should be considering regarding growth by quarter due to comparisons product launches or otherwise. Thank you.

Mark Adam Barrocas: Yeah, so, Brooke, on the first part of your question, in terms of the underlying market, As you know, we're coming off of two years now of market declines in 2022 and 2023 after we saw a real spike in demand in 20 and 21. I think we're anticipating the market to flatten in the first half of this year, with the hope that we see a little bit of an increase in the second half of the year, but our assumption for our guidance kind of assumes a flat overall market. And if we're able to get any tailwind from that with the market growing a little bit, that will be a benefit for us. In terms of the retailers and how they are looking at things.

Yes, So brook.

First part of your question in terms of the underlying market.

As you know we're coming off of two years now of market declines in 2022 and 2023. After we saw a real spike in demand in 2020 one.

We are anticipating the market to flatten in the first half of this year.

With the hope that we see a little bit of increase in the second half of the year, but our assumption for our guidance kind of assumes a flat overall market.

And if we're able to get any.

Tailwind from that with the market growing a little bit.

What that will be.

A benefit for us.

In terms of the retailers and how the retailers are looking at things.

Mark Adam Barrocas: The retailers, as Larry and I pointed out, really leaned into us in Q4, and I think that we're expecting them to support us in a rather big way as we go into 2024, both in our existing categories as well as new categories that we're entering. We are not assuming destocking in 24, but our guidance also hasn't assumed any significant amount of restocking.

The retailers as Larry and I pointed out really leaned in to us in Q4, and I think that we're expecting them to support us in a rather big way as we go into 2024, both in our existing categories as well as new categories that we're entering.

We are not assuming.

Destocking in 'twenty four.

But our guidance also has an assumed any significant amount of restocking. So we're expecting to kind of wait until the retailer year and finish at the end of this year and start to have conversations with them in March and April as to how theyre going to plan their inventory levels now all that being.

Mark Adam Barrocas: So we're expecting to kind of wait until the retailer year-ends finish at the end of this year and start to have conversations with them in March and April as to how they're going to plan their inventory levels. Now, all that being said, I think it's positive to note that retailers did support us with inventory in Q4. They came out of Q4 rather clean on inventory, and we are seeing good ordering patterns in the first quarter of this year. So we're optimistic that retailers will continue to lean into our products and make sure that they have the stock when the consumer comes to purchase it. Yeah, and then, Brooke, on the kind of phasing throughout the year on the top line, we look at it as, you know, first half, kind of stronger than the second half. Q1 and Q2, you know, based on our guide, it's kind of low, double-digit in the first two quarters of the year.

Said I think its positive to note that retailers did support us with inventory in Q4. They came out of Q4, rather clean on inventory and we are seeing good ordering patterns in the first quarter of this year. So we're optimistic that our retailers.

We'll continue to lean into our products and make sure that they have the stock when the consumer comes to purchase it.

Yeah, and then broke on the kind of phasing throughout the year on the topline.

We look at it as first half.

You know kind of stronger than second half.

In Q1 and Q2.

Based on our guide is kind of low double digit in the.

Larry Flynn: As you know, kind of in Q1 of last year, we obviously had, you know, kind of lighter growth in Q1 of last year. So, that's kind of how we think about, I guess, the shaping throughout 2024, kind of embedded within our 7 to 9 top line. Thanks so much.

First two quarters of the year as.

Yes, you know kind of in Q1 of last year, we obviously had.

Lighter relative to Q1 of last year. So that's kind of how we think about I guess the shaping throughout 2024 kind of embedded within our within our seven to nine top line.

Thanks, So much I'll pass it on.

Brooke Siler Roach: Thank you. Our next question comes from the line of Steven Forbes with Guggenheim Securities. Please proceed with your question. Good morning, Mark, Larry, and Arvind.

Thank you. Our next question comes from the line of Steven Forbes with Guggenheim Securities. Please proceed with your questions.

Good morning, Mark Larry carbon.

Steven Paul Forbes: Maybe just a follow up on Larry's comment before, I think you said OPEX flat for the year. If we think about the support for new market and new category growth in the fourth quarter and the ramp and ad spend, can you just maybe frame for us how you're thinking about the sales and marketing line for 2024? Both in terms of the team itself and pure advertising sort of spend?

Maybe just a follow up on Larry's comment before I think you said opex flat for the year, yes. If we if we think about the support for a new market and new category growth in the fourth quarter and the ramp in AD spend could.

Can you just maybe frame for us how youre thinking about the sales and marketing line for 2024.

Both in terms of the team itself and pure advertising spend.

Larry Flynn: Yeah, so I guess kind of within that, you know, flat OpEx as a percentage of sales year over year, we would see kind of continued investments in sales and marketing, right, in media, you know, those investments that we made in Q4 and kind of continue to make, you know, some of those are obviously longer-term investments around, you know, sales forces, you know, globally, you know, obviously new markets and new categories, and kind of building And I think we've talked about that as kind of one of the benefits of, you know, our strong gross margin and being able to kind of embed these investments within the P&L to really fuel longer-term growth. And so then, you know, kind of a byproduct of that is then, you know, thinking about sales and marketing, you know, with a little bit of, you know, additional investment there, G&A and R&D, just kind of deleveraging slightly, you know, overall to flat OpEx as a percentage of sales, kind of all that.

Yeah, So I guess kind of within that flat opex as a percentage of sales year over year, we would see kind of continued investments in sales and marketing and media.

Investments that we made in Q4 and kind of continue to make some.

Some of those are obviously longer term investments around yeah sales forces globally.

Obviously, new markets and new categories and kind of building the brand awareness there and I think we've talked about that as kind of one of the benefits of our strong gross margin and being able to kind of embed. These investments within the P&L to really fuel our longer term growth and so then kind of a byproduct of that is then thinking about <unk>.

Sales and marketing with a little bit of <unk>.

<unk> investment there G&A and R&D, just kind of deleveraging slightly you know kind of overall to flat opex as a percentage of sales kind of all of that.

Mark Adam Barrocas: Steve, I think we feel that, you know, there is a lot of white space growth potential for us in new markets. But, you know, we've got to continue to build our brand. There are new categories that we're launching into, but we did also spend at quite elevated levels in the second half of 23. And so to Larry's point, you know, you will still continue to see more investment in sales and marketing. It just won't be to the degree that we've seen increases of 23 versus 22.

Steve I think we feel that.

There is a lot of white space growth potential for us.

In new markets, we've got to continue to build our brand theres new categories that we're launching into but.

But we did also spend quite elevated levels in the second half of 'twenty three and so to Larry's point, you will still continue continue to see more investment in sales and marketing.

Just won't be to the degree that we've seen the increase is 23 versus 22.

Steven Paul Forbes: But you will continue to see more sales and marketing investment. And if I can maybe just stay on expenses and given the investments in molds and tooling and so forth, maybe the shorter duration assets or depreciation life assets, can you just maybe frame DNA expense for the year? Yeah, I mean, I think, you know, it would be up, you know, slightly, not materially different, you know, kind of overall, but yeah, we, because we stepped up, I think it was 90 million in CapEx in 2022. And right, we finished kind of right inside of our 2023 guide at about 130-131 million in CapEx in 2023. And kind of to your point, as we talked about previously, a lot of that step up in CapEx, right, is those tooling investments, you know, kind of as we dual source outside of China, etc. Thank you. Thank you. Our next questions come from the line of Phillip Blee with William Blair.

But you will continue to see more sales and marketing investment.

And if I can maybe just staying on expenses and given the investments in molds and tooling and so forth maybe the shorter duration assets.

Our depreciation life assets can you just maybe frame D&A expense for the year.

Yeah, I mean, I think it would be up slightly.

Slightly not materially different.

You know kind of overall, but yeah, because we stepped up I think it was $90 million of Capex in 2022.

And right and we finished kind of right inside of our our 2023 guide at about 130 $131 million of Capex in.

In 2023, and Scott to your point.

And as we had talked about previously a lot of that step up in Capex right as those two investments.

Kind of as we dual source outside of China et cetera.

Thank you.

Yeah.

Thank you our next questions come from the line of Philip Lee with William Blair. Please proceed with your questions.

Phillip Blee: Please proceed with my question. Hi guys, thanks. Can you speak about some of the outsized growth and share gains you're seeing in some of the newer categories like beauty and outdoor? What are the key drivers there?

Hi, guys. Thanks.

Can you speak about some of the outsized growth and share gains youre seeing some of the newer categories like beauty and outdoor and what are the key drivers there how sustainable is that in 2024, and then should we expect a similar kind of success in some of the new categories. You have planned for this year and then just quickly on your ability to diversify your supply chain outside of China over the next two.

Mark Adam Barrocas: How sustainable is that in 2024? And then should we expect a similar kind of success in some of the new categories you have planned for this year? And then just quickly, on your ability to diversify your supply chain outside of China over the next two years, how do you think about the potential risk to quality or supply here, given your existing boots on the ground approach with some of your longtime suppliers? Thanks.

Two years, how do you think about the potential risks to quality or supply here given your existing boots on the ground approach. It's on your longtime suppliers.

Okay.

Mark Adam Barrocas: Yeah, so first on the question of new categories. You know, we did experience significant growth in both beauty and outdoor cooking in 2023, which came from growing within the existing retailers, as well as expanding into new retailers for a lot of those products. I mean, Q4 of 23 was the first holiday season that we were in Sephora and Ulta.

Yeah. So first on the question of new categories.

We did experience significant growth both in beauty and outdoor cooking in 2023, which came from growing within the existing retailers as well as expanding into new retailers for a lot of those products. In Q4 of 23 was the first holiday season that we were in Sephora and Ulta, we were excited to see.

Mark Adam Barrocas: We were excited to see our beauty brands there. We ended the year with the fastest growing hair tools company in the US. You know, we experienced significant growth in Europe as well, but we're still, you know, relatively low on the US market.

Our beauty brands there.

We ended the year, where the fastest growing here tools company in the U S. We experienced significant growth in Europe as well.

But we're still relatively low share I mean in the U S.

Mark Adam Barrocas: We ended the year at about 19% share in hot air stylers. We did run with supply constraints throughout the year on beauty as we were chasing supply. We only really launched in most of Europe at the end of last year. Same with Latin America; we really launched just at the end of last year.

We ended the year at about 19% share in Hot Air Stylers.

We did run with supply constraints throughout the year on beauty as we were chasing supply.

We only really launched in most of Europe at the end of last year same.

Same with Latin America was really launched just at the end of last year. So we will see the full year benefit and impact of beauty.

Mark Adam Barrocas: So we'll see the full year benefit and impact of beauty. In the outdoor space, we've expanded into more products. We launched an outdoor oven at the end of the year last year.

In the outdoor space, we have expanded into more products, we launched an outdoor oven at.

At the end of the year last year, you know well obviously go into this.

Mark Adam Barrocas: We'll obviously go into this barbecue season in Q2 with a much stronger offering than we did last year, having multiple grills and an oven. So we're excited about the growth potential there in outdoor as well as expanding into more doors and more retailers with our outdoor cooking products. In terms of some of the new products, we think there's a big growth opportunity for us in outdoors, going outside the home. You heard us just talk about the recent launches of our indoor-outdoor fan and also our entry into the premium cooler market, our entry into the drinkware market. So I think outdoor is a category for us overall that we feel like both the Shark and Ninja brands have white space to be able to expand into as we move forward.

Barbecue season in Q2 with a much stronger offering than we did last year, having multiple grills and an oven.

We're excited about the growth potential there and outdoor as well as expanding into more doors and more cat more retailers with our outdoor cooking products in terms of some of the new products.

We think theres, a big growth opportunities for us in outdoors going outside the home you heard us talk about the recent launches of our indoor outdoor fan and also our entry into the premium cooler market our entry into the drink wear market. So I think outdoor is a category for us overall.

We feel like both the shark Ninja brands.

We have white space to be able to expand into as we move forward on.

Mark Adam Barrocas: On the supply chain side, we've been diversifying outside of China now for the better part of the last five years. We opened up an engineering and quality office in Ho Chi Minh City, which just happened last year. On the quality side, we have moved offshore with a lot of existing suppliers in China that have opened up facilities in Southeast Asia. And so our teams are on the ground with them.

On the supply chain side.

We've been diversifying outside of China now for the better part of the last five years.

We've opened up a engineering and quality office actually in Ho Chi Minh City.

Which just happened last year.

So.

Quality side, we have moved offshore with a lot of existing suppliers in China that have opened up facilities in South East Asia and so our teams are on the ground with them.

Mark Adam Barrocas: Their managers have moved over from China to Southeast Asia. So focusing on quality, focusing on fast turn, focusing on competitive pricing is all something that we've been working on for the last four or five years. And you're just seeing a scaling up of the work that we've done over those last few years really come into effect over the last 18 months. Okay, great. That's super helpful.

Their managers have moved over from China into Southeast Asia, So far.

Focusing on quality focusing on SaaS churn focusing on competitive pricing is all something that we've been working on for the last four or five years and you're just seeing a scaling up of the work that we've done over those last few years really come into effect over the last 18 months.

Okay, Great. That's super helpful. Thank you.

Phillip Blee: Thank you. Thank you. Our next questions come from the line of Megan Alexander with Morgan Stanley. Please proceed with your, Hey, good morning.

Thank you our next questions come from the line of Megan Alexander with Morgan Stanley. Please proceed with your questions.

Hey, good morning, Thanks, very much I wanted.

Megan Alexander: Thanks very much. I wanted to follow up just on the kind of retailer destocking and restocking comment. I think, you know, the gap between POS in North America and shipments, I think, was in the high single-digit range in the fourth quarter. I guess, how does that compare to what you've been seeing prior? And how did that trend over the quarter? And are you getting to the point where the gap is at least closing and understanding, you know, you want to be conservative and not assume it may be reversed? But is there any more color you can give us there?

I wanted to follow up just on the kind of retailer Destocking restocking comment.

I think you know the gap between Pls in.

In North American shipment I think within the high single digit type range in the fourth quarter I guess, how does that compare to what you've been seeing prior and how did that trend over in the corner and are you getting to the point, where the gap is only clothing and understanding you want to be conservative and not assume that.

First name, but any more color you can give us there.

So the gap is definitely closing as we come out of Q4.

Mark Adam Barrocas: So the gap is definitely closing as we come out of Q4. POS still grew over shipments, but at a narrower gap than what we had seen in, particularly, Q3 and Q2 and Q1. And we would expect that as we go into 2024, POS and shipments are going to start to normalize themselves. I don't necessarily think, or we're not planning for shipments to outpace POS and kind of build inventories back. But I think at least we're planning for shipments and POS to kind of match each other and look a lot more like apples to apples. Super helpful.

P O S still.

Still grew over shipments, but at a narrower gap than what we've seen in particular in Q3 and Q2 and Q1.

And we would expect that as we go into 2024.

POS and shipments are going to start to normalize themselves I don't necessarily think or we're not planning for shipments to outpace Pos and kind of build inventories back, but I think at least where we're planning for shipments and Pos to kind of match each other and look a lot more apples to apples.

Yeah.

Super Helpful. And then maybe just a question on distribution channel, particularly with some of these new category alongside the cooler in.

Mark Adam Barrocas: And then maybe just a question on distribution channels, particularly with some of these new category launches, you know, the cooler in particular, how are you thinking about or planning for new distribution entries in the US in 2024 and beyond? So we've made investments in our sales organization over the last year, with outdoor retailers, sporting goods retailers, and with the launch of our Ninja Thirsty product, grocery retailers. So over the last six months, we brought a lot of that staff on board. They're scaling up in the business. We think that sporting goods will continue to be a bigger channel for us. I mean, as you think about not just coolers and drinkware, but outdoor cooking, and our types of outdoor cooking products could apply well to sporting goods.

Particular, how are you thinking about or planning for new distribution entry in the U S. In 'twenty 'twenty four and beyond.

So we've made investments in our sales organization over the last year outdoor retailers sporting goods retailers.

With the launch of our Ninja thirsty product grocery retailers.

So over the last six months.

We brought a lot of that staff on.

They are scaling up in the business, we think that sporting goods will continue to be a bigger channel for us I mean, as you think about not just coolers and drink wear but outdoor cooking and our types of outdoor cooking products could apply well into sporting goods. We've launched have been quite successful with a product called the ninja blast it's.

Mark Adam Barrocas: We've launched and been quite successful with a product called the Ninja Blast. It's a portable cordless blender that we think the sporting goods space would be ripe for. Again, as I said, Ninja Thirsty in grocery stores is an opportunity.

Portable cordless blender.

The sporting goods space.

Would be ripe for again as I said Ninja thirsty in grocery stores.

We think as an opportunity.

Mark Adam Barrocas: And then continued expansion with both outdoor cooking and beauty as we go into more retailers than we have been in the past, not just in North America but in Europe as well. So you will see a lot of Salesforce expansion from us. You know, us entering into new retailers.

And then continued expansion with both outdoor cooking and beauty.

As we go into kind of more retailers than we have been in the past not just in North America.

But in Europe as well so you will see a lot of sales force expansion from us and you know.

Us entering into into new retailers.

Megan Alexander: Awesome, thank you. Thank you. Our next questions come from the line of Brian McNamara with Canaccord. Please proceed with your question. Hey, good morning, guys.

Okay.

Awesome. Thank you.

Thank you our next questions come from the line of Brian Mcnamara with Canaccord. Please proceed with your questions.

Hey, good morning, guys. Thanks for taking the question congrats on the strong results, we've gotten a lot of questions from investors on what a normal quote unquote normal topline growth here looks like after kind of flattish sales in 'twenty to mid teens growth last year and now high single digit guide for 'twenty 'twenty four not expecting a form of long.

Brian McNamara: Thanks for taking the question. Congratulations on the strong results. We've gotten a lot of questions from investors on what a normal quote-unquote normal top line growth year looks like after kind of flattish sales in 22, mid-teens growth last year, and now high single digits guided for 2024. Not expecting a formal long-term guidance here, but how should investors overall think about top line growth longer term?

Term guide here, but how should investors overall think about topline growth longer term. Thank you.

Larry Flynn: Thank you. Yeah, I mean, to your point, Brian, you know, we haven't given that kind of long-term guidance. Obviously, this is our first time coming out with full year guidance at the beginning of a year, right?

Yeah, I mean to your point Brian.

We haven't given that kind of a long term guide.

This is our first time coming out with full year guidance at the beginning of the year right. So I guess, how do we how do we probably commented on on it at this point in time is.

Brian McNamara: So I guess, you know, how we probably commented on it at this point in time is, you know, 2024, you know, we kind of put that out there and, you know, the seven to nine top line and, you know, probably not a bad template as we look forward, but again, nothing, nothing official from a long-term guide at this point in time. Fair enough; thank you. Thank you. There are no further questions at this time. I would now like to hand the call back over to Mark Barracas for any closing. Thanks, everyone, for joining us on our fourth quarter call, and we look forward to speaking to you again soon. Have a great day! Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

'twenty 'twenty four we kind of put that out there in the <unk>.

Nine topline and.

Probably not a not a bad template kind of as we look forward, but again nothing nothing official from a from a long term.

<unk> got at this point in time.

Fair enough. Thank you.

Thank you there are no further questions at this time I would now like to hand, the call back over to Mark <unk> for any closing remarks.

Great. Thanks, everyone for joining us on our fourth quarter call and we look forward to speaking to you again soon have a great day.

Thank you that does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

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