Q4 2023 Traeger Inc Earnings Call
Tia: Good afternoon, ladies and gentlemen. Thank you for joining today's Traeger fourth quarter and full year 2023 conference call. My name is Tia, and I'm going to be your moderator for today's call.
Good afternoon, ladies and gentlemen, thank you for joining today's trager fourth quarter and full year 2023 conference call.
Ms Tia and I will be your moderator for today's call.
Tia: All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I will now pass the call over to Nick Bacchus, Vice President of Investor Relations. Please continue. Good afternoon, everyone.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
I would like to ask a question. Please press star one on your telephone keypad.
I will now pass the call over to Nick <unk>, Vice President of Investor Relations. Please proceed.
Good afternoon, everyone. Thank you for joining triggers call to discuss its fourth quarter and full year 2020 results, which were released this afternoon and can be found on our website at investors that figure dot com <unk>.
Nick Bacchus: Thank you for joining Traeger's call to discuss its fourth quarter and full year 2023 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm Nick Bacchus, Vice President of Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer, and Dom Blosil, our Chief Financial Officer. Before we get started, I want to remind everyone that managers' remarks on this call may contain forward-looking statements that are based on current expectations but are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein. We encourage you to review our annual report on Form 10-K for the year ending December 31st, 2023, and our other SEC filings for a discussion of these factors and uncertainties, which are also available on the investor relations portion of our website. You should not place undue reliance on these forward-looking statements. We should do it only as of today, and we can undertake no obligation to update or revise it for any new information.
Nick back as Vice President of Investor Relations at trigger with me on the call today are Jeremy Andrew <unk>, Our Chief Executive Officer, and Don Basel, Our Chief Financial Officer.
Before we get started I want to remind everyone that management's remarks on this call may contain forward looking statements that are based on current expectations, but are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein.
We encourage you to review our annual report on Form 10-K for the year ended December 31, 2023, and our other SEC filings for a discussion of these factors and uncertainties, which are also available on the Investor relations portion of our website.
You should not take undue reliance on these forward looking statements, which speak only as of today and we can undertake no obligation to update or revise them for any new information.
Nick Bacchus: This call will also contain certain non-GAAP financial measures, including adjusted EBITDA, adjusted net loss, adjusted net loss per share, adjusted EBITDA margin, adjusted net loss margin, and total net debt, which we believe are useful supplemental measures. The most directly comparable GAAP financial measures and reconciliations of the non-GAAP measures contained herein to such GAAP measures are included under Earnings, which is available on the investor relations portion of our website at investors Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. Now, I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Thank you, Nick, and good afternoon, everyone.
This call will also contain certain non-GAAP financial measures, including adjusted EBITDA adjusted net loss adjusted net loss per share adjusted EBITDA margin adjusted net loss margin of total net debt, which we believe are useful supplemental measures the.
The most directly comparable GAAP financial measures and reconciliations of the non-GAAP measures contained herein such GAAP measures are included in the earnings release, which is available on the Investor Relations portion of our website at investors dock figure Dot com.
Note that our definition of these measures may differ from similarly, titled metrics presented by other companies.
Now I'd like to turn the call over to Jeremy Andrews, Chief Executive Officer of trigger.
Thank you Nick and good afternoon, everyone on today's call I will discuss our fourth quarter results and give an update on our execution against our strategic pillars and will also provide some perspective on our outlook for 2024.
Jeremy Andrus: On today's call, I will discuss our fourth-quarter results and give an update on our execution against our strategic builders. I will also provide some perspective on our outlook for 2024. I will then turn the call over to Tom to discuss our quarterly financial performance and provide more details on our 2024 financial guidance. 2023 was an important year for Traeger.
I will then turn the call over to Tom to discuss our quarterly financial performance and to provide more details on our 2024 financial guidance.
2023 was an important year for tredegar against the challenging backdrop with soft consumer demand for high ticket goods, our organization executed against our strategic plan to navigate the current environment, putting the company on what we believe is a substantially improved position to drive our long term strategy to increase household penetration.
Jeremy Andrus: Against the challenging backdrop of soft consumer demand for high-ticket goods, our organization executed against our strategic plan to navigate the current environment, putting the company in what we believe is a substantially improved position to drive our long-term strategy to increase household penetration. I'm pleased with our fourth quarter results, with our sales up 18% versus the same period last year, exceeding our expectations and allowing us to surpass the high end of our full year revenue and adjusted EBITDA guidance. Overall, for fiscal 2023, adjusted EBITDA grew 47% versus 2022, and we exceeded the midpoint of our initial revenue and adjusted EBITDA guidance ranges by approximately 5% and 22%, respectively. These better-than-expected results were enabled by our organizational focus on driving progress against the near-term strategic priorities we first laid out in mid-2022. At that time, it became evident that post-pandemic consumer spending has shifted dramatically and that this shift, along with gross margin degradation, would put pressure on our financial results. Given these pressures, we communicated three tactical priorities to ensure financial flexibility and improve profitability. First, reduce costs.
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I am pleased with our fourth quarter results with our sales up 18% versus the same period last year exceeding our expectations and allowing us to surpass the high end of our full year revenue and adjusted EBITDA guidance.
Overall for fiscal 2023, adjusted EBITDA grew 47% versus 2022, and we exceeded the midpoint of our initial revenue.
Adjusted EBITDA guidance ranges by approximately 5% and 22% respectively.
These better than expected results were enabled by our organizational focus on driving progress against our near term strategic priorities. We first laid out in mid 2022.
At that time, it became evident that post pandemic consumer spending has shifted dramatically and that we shift along with gross margin degradation.
Pressure on our financial results.
Given these pressures, we communicated three tactical priorities to ensure financial flexibility and to improve profitability.
First reduce costs second <unk> inventories in channel and on our balance sheet.
Jeremy Andrus: Second, right-side inventories in the channel and on our balance sheet, and third, drive gross margins. We made significant progress on all three of these strategic priorities in 2023. Following the implementation of our cost savings plan in mid-2022, which reduced run rate expenses by more than $20 million, our operating expenses were tightly controlled in 2023.
Third drive gross margins.
We made significant progress in all three of these strategic priorities in 2023.
Following the implementation of our cost savings plan in mid 2022, which reduce run rate expenses by more than $20 million. Our operating expenses were tightly controlled in 2023.
Jeremy Andrus: In terms of inventories, we ended 2023 with our fourth-quarter balance sheet inventories appropriately positioned and down $57 million versus the fourth quarter of 2022. Channel inventories were in line with our targeted ranges at the end of the year, a substantial improvement compared to the end of 2022 when retailers had too much of our product. Finally, in fiscal year 2023, we grew gross margin by 200 basis points, and we implemented a number of margin-enhancing initiatives, which we expect to contribute to gross margin expansion in 2024 and beyond. Despite making significant progress on our initiatives to drive profitability and improve financial flexibility, we face a difficult grill industry backdrop through 2023. Fourth quarter sell-through for our core grill business remained below prior year.
In terms of inventories we have.
Ended 2023, with our fourth quarter balance sheet inventories.
Appropriately positioned and down $57 million versus the fourth quarter of 2022.
Channel inventories were in line with our targeted ranges at the end of the year, a substantial improvement compared to the end of 2022, when retailers had too much of our product.
Finally in fiscal year 2023, we grew gross margin by 200 basis points and we implemented a number of margin enhancing initiatives, which we expect to contribute to gross margin expansion in 2024 and beyond.
Despite making significant progress on our initiatives to drive profitability improved financial flexibility, we face a difficult grill industry backdrop throughout 2023.
Fourth quarter sell through for our core Grill business remained below prior year, we believe the U S. Grill industry was down in the high single digit range for 2023 at retail as consumers continue to shift their spending to services and leisure and away from the high ticket durable goods they over indexed on during the pandemic.
Jeremy Andrus: We believe the US grill industry will be down in the high single-digit range for 2023 at retail as consumers continue to shift their spending to services and leisure and away from the high-ticket durable goods they overindexed on during the pandemic. Stepping back, we firmly believe that the grill industry will return to its historical trend of consistent growth. Americans love to cook outdoors, and the pandemic accelerated a trend that was already in place, cooking at home and enjoying a meal outdoors with one's family and friends.
Nick.
Stepping back we firmly believe that the grille industry will return to its historical trend of consistent growth.
<unk> love to Cook outdoors in the pandemic accelerated a trend that was already in place cooking at home and enjoying a meal outdoors with one's family and friends.
Jeremy Andrus: We believe our brand's superior cooking experience, innovative products, and engaged community uniquely position Traeger to be the favorite outdoor cooking solution for consumers and to ultimately benefit from an improved grill market. It is also important to remember that we have a portfolio of products, with our consumables and accessories businesses representing north of 50% of revenues in fiscal 2023. Our strategy to sell our consumers the entire cooking solution, including the wood pellets to fuel the grill, sauces and rubs to flavor the protein, Traeger accessories, and meter smart thermometers, creates diversity and a revenue stream. In the fourth quarter, our consumables business was slightly positive, and our accessories business outperformed our internal expectations. Metre in particular had a very successful holiday season with strong growth versus the prior year and a very successful launch of its new Metre 2+. While we have been focused on near-term strategies to navigate the environment, we continue to execute on our long-term plans to drive product innovation and stoke engagement and passion for the Traeger brand. The key points of our story remain in place.
We believe our brands superior cooking experience innovative product and engaged community uniquely position <unk> to be the favorite outdoor cooking solution for consumers and to ultimately benefit from an improved drill market.
It is also important to remember that we have a portfolio of products with our consumables and accessories businesses, representing north of 50% of revenues in fiscal 2023.
Our strategy to sell our consumer's entire cooking solution, including the wood pellets to fuel the grille sauces, and rubs to flavor the protein trager accessories and meter smart thermometers creates diversity in our revenue streams and.
In the fourth quarter, our consumables business was slightly positive.
Our accessories business outperformed our internal expectations.
Neither in particular had a very successful holiday season with strong growth versus the prior year, a very successful launch of its new near two plus.
While we have been focused on near term strategies to navigate the environment. We continue to execute on our long term plans to drive product innovation and <unk>.
<unk> engagement and passion for the trade your brand.
The key points of our story remain in place, we have an evangelical community of consumers and the trade or Hood.
Jeremy Andrus: We have an evangelical community of consumers in the Traeger hood with a grill industry-leading NPS score that is materially higher than our largest competitors. Additionally, our user base remains highly engaged with our brand. And we ended 2023 with nearly 2.6 million followers across social channels, also leading the grill industry and up 15% from 2022. In terms of our products, we continue to innovate and launch new grills. In addition to METER's highly successful METER 2 Plus launch, we also entered the griddle category in 2023 and launched our highly innovative Ironwood XL. Lastly, our company's culture remains a key competitive advantage. Traeger was recently certified as a great place to work for the third year in a row. The award is based entirely on what current employees say about their experience working at Traeger.
With a grille industry, leading NPS score that is materially higher than our largest competitors.
Our user base remains highly engaged with our brand.
And we ended 2023 with nearly $2 6 million followers across social channels also leaning the grille industry and up 15% from 2022.
In terms of our products, we continue to innovate and launch new grills.
In addition to meters highly successful meter two plus launch we also entered into the griddle category in 2023, and the rest are highly innovative ironwood excel.
Lastly, our company's culture remains a key competitive advantage trager was recently certified as a great place to work for the third year in a row.
The award is based entirely on what current employees say about their experience working at trager and the results speak to our unique culture and reinforce our ability to retain and attract the best talent in our industry.
Jeremy Andrus: And the results speak to our unique culture and reinforce our ability to retain and attract the best talent in our industry. Turning to our fiscal year 2024, Our 2024 sales guidance of $580 to $605 million represents a year over year decline of 4% at the low end to approximately flat growth at the high end. 2024 Adjusted EBITDA guidance of $62-71 million represents growth of 1% to 16%. Our guidance for 2024 balances our favorable view of gross margins with our near-term caution on grill industry demand. Our outlook assumes that the grill industry will continue to experience headwinds in 2024.
Turning to our fiscal year 2020 for outlook, our 2024 sales guidance of $580 million to $605 million.
Represents a year over year decline of 4% at the low end to approximately flat growth at the high end.
<unk> 2024, adjusted EBITDA guidance of 62% to $71 million represents growth of 1% to 16%.
Our guidance for 2024 balances our favorable view of gross margins with our near term caution on grill industry demand.
Our outlook assumes that the grille industry will continue to experience headwinds in 2024.
Jeremy Andrus: Specifically, we expect that the shift in consumer share of wallet from big-ticket home-related products, such as grills, towards experiences, services, and leisure will continue into 2024. From the profitability perspective, I'm pleased with our ability to project growth and adjusted EBITDA margins in 2024, driven by an expected improvement in gross margins. Next, I'd like to provide an update on our progress on our four strategic growth pillars in the fourth quarter, as well as to provide some color on our 2024 plan. These are the first strategic growth pillars driving brand awareness and penetration in the United States. We ended 2023 with estimated U.S. household penetration of 3.5%.
Specifically, we expect that this shift in consumer share of wallet from big ticket home related products, such as grills towards experiences services and leisure will continue into 2024.
From a profitability perspective, I'm pleased with our ability to project growth in adjusted EBITDA and adjusted EBITDA margins in 2024, driven by an expected improvement in gross margins.
Next I'd like to provide an update on our progress.
Our four strategic growth pillars in the fourth quarter as well as to provide some color on our 2024 plans.
Our first strategic growth pillars, driving brand awareness and penetration in the United States.
We ended 2023 with estimated U S household penetration of three 5%.
Jeremy Andrus: This remains well below our most penetrated markets, and we continue to believe there is substantial potential to increase this number. In the fourth quarter, our content and brand activation focused on Traegering for the holidays. During Thanksgiving, our network of social media influencers was extremely active sharing recipes and techniques for an incredible Traeger smoked Thanksgiving turkey. Many of these posts went viral, including Benny Kendrick's juicy turkey and frog-style turkey
This remains well below our most penetrated markets and we continue to believe there is substantial potential to increase this number.
In the fourth quarter, our content and brand activation focused on trade ring for the holidays.
Or any Thanksgiving our network of social media Influencers was extremely active sharing recipes and techniques for an incredible traver smooth Thanksgiving Turkey.
Many of these posts went viral including Benny Kendrick Juicy, Turkey, and Frac style, Turkey pose total impressions from Influencers in Q4, nearly doubled compared to the same period in 2020 to our network of Influencers and community ambassadors remains an important part of our social media presence.
Jeremy Andrus: Total impressions from influencers in Q4 nearly doubled compared to the same period in 2022. Our network of influencers and community ambassadors remains an important part of our social media presence, and the millions of impressions they generate drive awareness and energy for our brand. In December, we posted our six tips for the ultimate prime rib, providing a guide to make an incredible holiday rib roast cooked on a Traeger. The post went viral, with 2.1 million views on Instagram alone.
And the millions of impressions and generate drive awareness and energy to our brand.
In December we.
Hosted our sixth tips for the ultimate Prime rib, providing a guide to making incredible holiday rib roast clicked on a trigger.
The post went viral with $2 1 million views on Instagram alone trade.
Jeremy Andrus: Traeger is certainly not just a summer grilling device, and our strong community engagement and amazing content in the fourth quarter demonstrates that Traeger is viewed by consumers as a year-round outdoor cooking solution. Driving awareness and penetration of Traeger by elevating the experience at retail is core to our strategy. The fourth quarter capped a momentous year for Traeger's positioning at the Home Depot. In Q4, we added another 275 Traeger Islands at the Home Depot, ending the year with more than 1,100 Traeger Islands and Home Depot locations across the U.S., more than doubling the number of our elevated merchandising fixtures versus 2022.
<unk> was certainly not just a summer grilling device.
Our strong community engagement and amazing content in the fourth quarter demonstrates that trade was viewed by consumers as a year round outdoor cooking solution.
Driving awareness and penetration of trade or by elevating the experience at retail is core to our strategy.
The fourth quarter capped a momentous year for triggers positioning at the home depot.
Q4, we added another 275 trigger islands at the home depot, ending the year with more than 1100, Trager Islands and home depot locations across the U S more than doubling the number of our elevated merchandising fixtures versus 2022.
Jeremy Andrus: Home Depot locations with the Traeger Island continue to outperform the balance of the chain. We expect to have another year of meaningful enhancements of our merchandising at the Home Depot in 2024, with anticipated growth in Traeger Islands, complemented by many other merchandising initiatives. In 2024, driving improved selling execution of Traeger products and retail floors will be a key initiative, one that we internally refer to as upgrading the ground game. This includes expanding the team of retail sales specialists. These specialists are Traeger experts who visit retail locations, drive improved merchandiser with Traeger products, coach and educate store associates, and demonstrate Traeger grills.
Home depot locations with the trigger island continued to outperform the balance of the chain.
We expect to have another year of meaningful enhancements of our merchandising at the home depot in 2024 with anticipated growth in Trager islands complemented by many other merchandising initiatives.
In 2020 for driving improved selling execution krager products on retail floors will be a key initiative, one that we internally refer to as upgrading the ground game.
This includes expanding the team of retail sales specialists.
The specialists are trigger experts, who visit retail locations drive improved merchandising trigger product coach and educate store associates and demo trigger grills.
Jeremy Andrus: We believe that investing in the maximization of our selling experience at retail is one of our highest-returning activities and that our in-store merchandising and service-oriented upgrades will be key factors in increasing market share and awareness over time. Near term, we are highly focused on retail execution and customer experience in the field, particularly as we enter peak grilling season over the next several months. These are the second growth pillars disrupting outdoor cooking with product innovation. On November 6, 2023, we launched meter two plus in time for the holiday season. Meter 2 Plus brings significant innovation to the meat thermometer market, and we believe it's the best wireless meat probe available to consumers today.
We believe that investing in the maximization of our selling experience at retail.
One of our highest returning activities and then our in store merchandising and service oriented upgrades will be key factors in increasing market share and awareness over time.
Near term, we are highly focused on retail execution and customer experience in the field, particularly as we enter peak drilling season over the next several months.
Our second growth pillar is disrupting outdoor cooking with product innovation.
On November six 2023, we launched our meter two plus in time for the.
Today season.
Meter two plus bring significant innovation to the meat thermometer market and we believe it's the best wireless meet probe available to consumers today.
Jeremy Andrus: Meter 2 Plus had a strong launch and performed well over the holiday period. We launched Meter 2 Plus with a dual channel digital strategy with distribution on meter.com and amazon.com. And we have plans to expand distribution to retail locations. On the Traeger side, in the fourth quarter, we continue to build out our product development function. We recently rolled out a new product organization structure under our new EVP of engineering, including standing up our previously discussed platform R&D.
Meter two plus a strong launch and performed well over the holiday period.
Launched meter two plus with a dual channel digital strategy with distribution on meter dot com and Amazon Dot com and we have plans to expand distribution to retail locations.
On the trader side in the fourth quarter, we continue to build out our product development function.
We recently rolled out a new product organization structure under our new EVP of engineering, including standing up our previously discussed platform R&D team.
Jeremy Andrus: Our product team remains highly focused on new product development, sustaining engineering for cost-down opportunities, and innovation to drive our future product roadmap. Investing in our product development engine is a key area of focus in 2024 and is critical to our long-term success as a disruptor and innovator in the outdoor cooking industry. In 2023, our product team nearly doubled in size, underscoring our commitment to long-term innovation. Next, I'll provide an update on our third strategic pillar, driving recurring revenues through our consumables business. At the consumer level, our pellet business remained healthy in the fourth quarter. In fact, two of our largest retail partners had their highest pellet volume weeks ever during the Thanksgiving holiday week.
Product team remains highly focused.
New product development sustaining engineering for cost down opportunities and innovation to drive our future product roadmap.
Investing behind our product development engine is a key area of focus in 2024 and is critical to our long term success.
As a disruptor and innovator in the outdoor cooking industry in.
In 2023, our product team nearly doubled in size underscoring our commitment to long term innovation.
Next I'll provide an update on our third strategic pillar driving recurring revenues through our consumables business.
At the consumer level, our pellets business remained healthy in the fourth quarter. In fact, two of our largest retail partners had their highest pellet volume weeks ever during the Thanksgiving holiday week from.
Jeremy Andrus: From a distribution perspective, we continue to expand the footprint of grocery stores selling Traeger Pellets. Overall, for 2023, we added pellet distribution to more than 300 grocery stores, continuing to make progress against our goal of selling pellets for consumers every week, not just where they bought the grill. We recently gained distribution with Kahe, United Natural, and Lippari, three of the largest grocery distributors in the U.S. who together service more than 45,000 independent grocery stores. We expect these distribution relationships to have meaningful upside over time as we look to drive sales into the independent grocery chain. On the food consumable side, we introduced our new and improved barbecue sauces, which we relaunched earlier this year at the Home Depot. We expect to see additional distribution in retail outlets in 2024. Consumer reaction to the improved packaging, more competitive pricing, and the easy-to-use squeeze bottle has been positive thus far.
From a distribution perspective, we continue to expand the footprint of grocery stores selling trager pellets.
Overall for 2023, we added pellet distribution to more than 300 grocery doors continuing to make progress against our goal of selling pellets, where the consumer shops every week now.
Just where they bought the grille.
We recently gained distribution with key United Natural and <unk> three of the largest grocery distributors in the U S who together service more than 45000 independent grocery stores we have.
Expect these distribution relationships to have meaningful upside over time, as we look to drive sales into the independent grocery channel.
On the food consumable side, we introduced our new and improved barbecue sauces, which we re launched earlier this year at the home depot.
We expect to see additional distribution and retail outlets in 2024.
Consumer reaction to the improved packaging more competitive pricing and the easy to use squeeze bottle has been positive thus far.
Jeremy Andrus: Our fourth and final strategic growth pillar is to expand globally. In the fourth quarter, our international business showed sequential improvement. In Canada, we saw improved holiday sales during the fourth quarter at the Home Depot and Rona, as well as improved e-commerce sales during Canadian Thanksgiving in October and Black Friday.
Our fourth and final strategic growth pillar is to expand globally.
For the fourth quarter, our international business showed sequential improvement.
In Canada, we saw improved holiday sell through in the fourth quarter at the home depot and Rona as well as improved e-commerce sales during Canadian Thanksgiving in October and Black Friday.
Jeremy Andrus: In Europe, we saw solid growth in Germany and the UK, which are direct markets in the region. Both markets had improved holiday sell-through, and with leaner channel inventories, replenishment activity was helpful. However, our distributor markets in the EU, Australia, and New Zealand were negatively impacted by continued destocking activity resulting in selling pressure.
Europe, we saw solid growth in Germany, and the UK, which are direct markets in the region.
Both markets have improved holiday sell through and with leaner channel inventories replenishment activity was healthy.
Our distributor markets in the EU, Australia, and New Zealand were negatively impacted by continued destocking activity, resulting in selling pressure.
Jeremy Andrus: We expect distributor inventories in our international markets to normalize in 2024 as they continue to clear excess inventory. On the meter side, the fourth quarter had very strong international growth driven by meters' B2B distribution initiatives. This includes a partnership with Vorwerk. Vorwerk is a German manufacturing distributor of the Thermomix multi-cooker, and Mieter is providing a digital smart thermometer add-on to the Thermomix multi-cooker that both integrates into the guided cooking app and enhances the Thermomix cooking experience.
We expect distributor inventories in our international markets to normalize in 2024 as they continue to clear excess inventories.
On the meter side fourth quarter had very strong international growth driven by meters BTB distribution initiatives.
<unk> meters partnership with Vorwerk work as a German manufacturer and distributor of the thermo mix multi cooker and meters provide any digital smart thermometer add onto the therma mixed multi cooker that both integrates into the guided cooking app and enhances a thermal mix cooking experience.
Jeremy Andrus: Overall, we have made significant progress on our key strategic initiatives in 2023 and at the end of the year, exceeding our revised guidance in the fourth quarter. We have realigned our cost structure, right-sized inventories, and are demonstrating progress on recapturing gross margin. While we expect the consumer shift in share of wallet, where big ticket goods will likely continue to create headwinds for the outdoor cooking industry in the near term, we are focused on the factors we can control in order to drive growth and adjusted EBITDA while investing behind our key long-term pillars. As we head into the peak selling season for 2024, my confidence in the long-term potential of our brand remains as high as ever. I'd like to thank the Traeger team for their enormous efforts in executing our plan in 2023. And with that, I'll turn the call over to Don.
Overall, we have made significant progress on our key strategic initiatives in 2023 and ended the year exceeding our revised guidance in the fourth quarter.
We have realigned our cost structure right sized inventories and are demonstrating progress on recapturing gross margin.
While we expect the consumer shift in share of wallet from big ticket goods will likely continue to create headwinds for the outdoor cooking industry in the near term. We are focused on the factors. We can control in order to drive growth in adjusted EBITDA, while investing behind our key long term pillars.
As we head into the peak selling season for 2020 for my confidence in our long term potential of our brand remains as high as ever.
I'd like to thank the trigger team for their enormous efforts in executing our plan in 2023 and with that I'll turn the call over to Don.
Dominic Blosil: Thanks, Jeremy, and good afternoon, everyone. I am pleased with the progress we made in 2023, particularly given the difficult industry backdrop that we faced during the year. Despite lower sales compared to 2022, our adjusted EBITDA grew 47% year-over-year, with our adjusted EBITDA margin up 380 basis points. Our inventories ended the year down 37% versus the prior year, and we believe that both our balance sheet inventories and channel inventories are appropriately positioned for the current demand outlook. In 2023, we executed on several gross margin enhancing initiatives, which we expect will position us for margin growth going forward. Last, we generated $64 million in cash flow from operations in 2023, driven by improved EBITDA and working capital efficiencies. Shifting now to fourth quarter results, fourth quarter revenues increased 18% to $163 million. Grille revenue increased 24% to $60 million.
Thanks, Jeremy and good afternoon, everyone I am pleased with the progress we made in 2023, particularly given the difficult industry backdrop that we faced during the year.
Despite lower sales compared to 2022, our adjusted EBITDA grew 47% year over year with our adjusted EBITDA margin up 380 basis points, our inventories ended the year down 37% versus the prior year and we believe that both our balance sheet inventories and channel inventories are appropriately positioned for that.
Current demand outlook.
In 2023, we executed on several gross margin enhancing initiatives, which we expect will position extra margin growth going forward.
Last we generated $64 million in cash flow from operations in 2023.
And then by improved EBITDA and working capital efficiencies.
Now the fourth quarter result.
Fourth quarter revenue increased 18% to $163 million.
Grill revenue increased 24% to $60 million grille revenue benefited from higher unit volumes as we lapped aggressive retailer destocking from the prior year.
Dominic Blosil: Grille revenue benefited from higher unit volumes as we lapped aggressive retailer destocking from the prior year, offset by lower average selling prices. Consumables revenues were $25 million, up 1% from the prior year. Our fourth quarter consumables performance represents a material improvement compared to the first half of the year, as we have fully lapped the declines driven by the introduction of a private label pellet offering by a large customer in 2022. Accessories revenue increased 21% to $79 million, driven by strong meter growth.
Offset by lower average selling prices consumables revenues were $25 million up 1% to the prior year.
Our fourth quarter consumables performance represents a material improvement compared to the first half of the year as we have fully lapped the declines driven by the introduction of a private label pellet offering by a large customer in 2022.
Accessories revenue increased 21% to $79 million.
Even by strong meter growth.
Dominic Blosil: Fourth quarter revenues were modestly ahead of our expectations and exceeded the high end of our full year revenue guidance range by $6 million, with the majority of the upside driven by stronger than expected revenue growth at meters. Geographically, North American revenues increased 13%, while our rest of world business was up 59% versus the prior year, driven by strong growth in meters wholesale revenues internationally. Gross profit for the fourth quarter increased to $60 million from $48 million last year.
Fourth quarter revenues were modestly ahead of our expectations and exceeded the high end of our full year revenue guidance range by $6 million with the majority.
40 of the upside driven by stronger than expected revenue growth that meter.
Geographically North American revenues increased 13%, while our rest of world business was up 59% versus the prior year driven by strong growth in meters wholesale revenues internationally.
Gross profit for the fourth quarter increased to $60 million from $48 million last year.
Gross profit margin was 36, 8% compared to 34, 5% in the prior year or 34, 9% when excluding restructuring costs incurred in the fourth quarter of last year.
Dominic Blosil: Gross profit margin was 36.8% compared to 34.5% in the prior year, or 34.9% when excluding restructuring costs incurred in the fourth quarter of last year. Please note that our fourth quarter 2023 gross margin was negatively impacted by 100 basis points related to the voluntary recall of our flat rock griddle in December. The increase in gross margin was driven by one lower supply chain cost, which benefited gross margin by 410 basis points; and improved pellet margins that we achieved through the optimization of our pellet mill capacity, which drove 150 basis points in margin.
Please note that our fourth quarter 2023, gross margin was negatively impacted by 100 basis points related to the voluntary recall of our flat rock griddle in December.
The increase in gross margin was driven by one lower supply chain costs, which benefited gross margin by 410 basis points.
<unk> improved pellet margins that we achieved through the optimization of our pellet mill capacity, which drove 150 basis points of margin.
A higher mix of direct import business, which contributed 50 basis points to margin.
Dominic Blosil: A higher mix of direct import business, which contributed 50 basis points to margins. Four, lapping restructuring costs from the fourth quarter of the prior year, which benefited margins by 40 basis points. And five, other positive factors worth 40 basis points.
For lapping restructuring costs from the fourth quarter of the prior year, which benefited margin by 40 basis points and five other positive factors worth 40 basis points.
These margin drivers were offset by one inventory obsolescence of 150 basis points to grill mix, which negatively impacted margin by 110 basis points, three real pricing, which negatively impacted margin by 100 basis points.
Dominic Blosil: These margin drivers were offset by 1. inventory obsolescence of 150 basis points, 2. Grill mix, which negatively impacted margin by 110 basis points.
And for costs related to the recall of flat rock, which negatively impacted margin by 100 basis points.
It doesn't marketing expenses were $33 million.
Compared to $28 million in the fourth quarter last year.
Dominic Blosil: Grill pricing, which negatively impacted margin by 100 basis points. And four, cost-related, the recall of Flat Rock, which negatively impacted margin by 100 basis points. The other marketing expenses were $33 million compared to $28 million in the fourth quarter last year. The increase was driven by higher variable costs and increased demand creation expense at meters. General and administrative expenses were $26 million compared to $24 million in the fourth quarter of last year.
The increase was driven by higher variable costs and increased demand creation expense that meter.
General and administrative expenses were $26 million.
$24 million in the fourth quarter of last year.
Increase was driven by higher professional service fees and employee expense offset by lower stock based compensation expense.
As a result of these factors net loss for the fourth quarter was $24 million as compared to a net loss of $29 million in the fourth quarter of last year.
Dominic Blosil: The increase was driven by higher professional service fees and employee expenses, offset by lower stock-based compensation. As a result of these factors, the net loss for the fourth quarter was $24 million as compared to a net loss of $29 million in the fourth quarter of last year. Net loss per diluted share was $0.19 compared to a loss of $0.24 in the fourth quarter of last year. Adjusted net loss for the quarter was $9 million or $0.08 per diluted share as compared to adjusted net loss of $13 million or $0.11 per diluted share in the same period last year.
Net loss per diluted share was <unk> 19.
Compared to a loss of 24 in the fourth quarter of last year.
Adjusted net loss for the quarter was $9 million or eight cents per diluted share as compared to adjusted net loss of $13 million or <unk> 11 per diluted share in the same period last year.
Adjusted EBITDA was $13 million in the fourth quarter as compared to $7 million in the same period last year.
Fourth quarter adjusted EBITDA was modestly ahead of our expectations, allowing us to exceed the high end of our full year guidance by approximately $2 million.
Moving onto the balance sheet at the end of the fourth quarter cash and cash equivalents were $30 million compared to $39 million at the end of the previous fiscal year.
Dominic Blosil: Suggested EBITDA was $13 million in the fourth quarter, as compared to $7 million in the same period last year. Fourth quarter adjusted EBITDA was modestly ahead of our expectations, allowing us to exceed the high end of our full year guidance by approximately $2 million. Moving on to the balance sheet, at the end of the fourth quarter, cash and cash equivalents were $30 million compared to $39 million at the end of the previous fiscal year. We ended the fourth quarter with $404 million of long-term debt.
We ended the fourth quarter with $404 million of long term debt.
As of the end of the quarter the company had drawn down $28 million under our receivables financing agreement.
<unk> total net debt of $402 million.
We ended the year with total liquidity of $157 million up materially relative to the end of last year, when we had $95 million in liquidity.
Inventory at the end of the fourth quarter with $96 million compared.
Compared to $153 million at the end of the fourth quarter last year and $102 million at the end of the third quarter.
Dominic Blosil: As of the end of the quarter, the company had drawn down $28 million under its receivable financing agreement, resulting in total net debt of $402 million. We ended the year with total liquidity of $157 million, up materially relative to the end of last year when we had $95 million in liquidity. Inventory at the end of the fourth quarter was $96 million, compared to $153 million at the end of the fourth quarter last year and $102 million at the end of the third quarter. I am pleased with the significant progress we made in 2023 to right-size our balance sheet inventories and believe inventory levels are appropriately aligned with demand. In terms of channel inventories, our retail partners are in a substantially improved position relative to a year ago and ended the fourth quarter with weeks of inventory on hand at targeted levels.
I am pleased with the significant progress we made in 2023 to right size, our balance sheet inventories and believe inventory levels are appropriately aligned with demand.
In terms of channel inventories, our retail partners are in a substantially improved position relative to a year ago.
We ended the fourth quarter with weeks of inventory on hand at targeted levels.
Next let me discuss our full year 2020 for guidance and provide some context around our operating assumptions.
For the year, we are guiding to revenue of $580 million to $605 million or down 4% to approximately flat compared to 2023.
Our top line outlook generally informed by the following themes.
First we expect that the consumers shift away from Big ticket home related expenditures will continue in 2024, and our planning that grill industry growth remained negative.
Second in the first half of 2024, we are lapping the load in of our new Ironwood grills, and our flat rock griddle, which will create some pressure on our year over year sales comparison.
Dominic Blosil: Next, let me discuss our full year 2024 guidance and provide some context around our operating assumptions. For the year, we are guiding to revenue of $580 million to $605 million, or down 4% to approximately flat compared to 2023. Our top line outlook is generally informed by the following themes. First, we expect that the consumer shift away from big ticket home related expenditures will continue in 2024 and are planning for grill industry growth to remain negative.
Additionally, in the second half, we expect to Sunset a number of Grilles ahead of our expected product launches in 2025.
Which will also be a negative contributor to revenue growth.
Finally, we are anticipating declines in grill average selling prices, partially driven by the expansion of our direct import program, which result in lower wholesale selling prices, but higher gross margins that result from lower transportation costs.
These factors are driving our expectation for a high single to low double digit decline in our grill revenue in full year 2024.
We are expecting gross margins of 39% to 40% for full year 2024 up 210 to 310 basis points compared to full year 2023.
Dominic Blosil: Second, in the first half of 2024, we are lapping the load in on our new ironwood grills and our flat rock griddle, which will create some pressure on our year-over-year sales comparison. Additionally, in the second half, we expect to sunset a number of grills ahead of our expected product launches in 2025, which will also be a negative contributor to revenue growth. Finally, we are anticipating declines in grill average selling prices, partially driven by the expansion of our direct import program, which results in lower wholesale selling prices but higher gross margins that result from lower transportation costs. These factors are driving our expectation for a high single to low double-digit decline in our grill revenue for full year 2024.
I am pleased with our ability to meaningfully grow gross margin in 2024.
It's being driven by both macro factors as well as internal initiatives.
In terms of external drivers inbound transportation costs have moderated substantially since their peak in 2022.
While transportation rates decline in 2023 higher cost inventory was still flowing through our cost of goods for much of the year.
As we move into 2024, we will have largely worked through the higher cost inventory, thus, creating a material tailwind to gross margin.
Additionally, we expect to see gross margin expansion from initiatives, we implemented in the last 18 months.
For example, we are expecting improved gross margins in our pellet business driven by the rationalization of pellet mill capacity in early 2023, as well as improved margin related to the expansion of our direct import program, which leverages the scale of certain retail customer supply chains.
Dominic Blosil: We are expecting gross margins of 39 to 40% for full year 2024, up 210 to 310 basis points compared to full year 2023. I am pleased with our ability to meaningfully grow gross margin in 2024, which is being driven by both macro factors as well as internal initiatives. In terms of external drivers, inbound transportation costs have moderated substantially since their peak in 2022.
<unk> our transportation costs.
From a timing perspective, we expect stronger year over year gross margin gains in the first half of the year compared to the back half.
We expect full year 2024, adjusted EBITDA of $62 million to $71 million.
<unk> adjusted EBITDA margin of 10, 7% to 11, 7% or up 60 to 170 basis points versus 2023.
Dominic Blosil: While transportation rates declined in 2023, higher-cost inventory was still flowing through our cost of goods for much of the year. As we move into 2024, we will have largely worked through the higher-cost inventory, thus creating a material tailwind to gross margins. Additionally, we expect to see gross margin expansion from initiatives we implemented in the last 18 months. For example, we are expecting improved gross margins in our pellet business driven by the rationalization of pellet mill capacity in early 2023, as well as improved margin related to the expansion of our direct import program, which leverages the scale of certain retail customer supply chains, thus reducing our transportation costs. From a timing perspective, we expect a stronger year-over-year gross margin gain in the first half of the year compared to the back half. We expect full year 2024 adjusted EBITDA of $62 million to $71 million.
We expect that growth in adjusted EBITDA margin will be driven by the anticipated gain in gross margin offset by some expected expense deleverage as we annualize certain investments from 2023 and as we invest behind key strategic pillars in 2024.
The first quarter of 2024, we are anticipating revenue of $140 million to $145 million, which represents a decline of 5% to 9% versus Q1 of 2023.
We're anticipating first quarter, adjusted EBITDA of $21 million to $24 million.
First quarter sales are expected to be negatively impacted by a shift in the timing of shipments into the second quarter.
Overall, I am pleased with our execution against our plan in 2023 with the year ending substantially better than we had originally guided to an adjusted EBITDA growing by 47% versus 2022.
While we are planning 2020 for topline cautiously given the expected continued pressure on big ticket spend we are entering the year with healthy inventories on the balance sheet and in channel and are positioned to have seen that they can gain in gross margins going forward.
Dominic Blosil: This represents an adjusted EBITDA margin of 10.7% to 11.7%, or up 60 to 170 basis points versus 2023. We expect that growth and adjusted EBITDA margin will be driven by the anticipated gain in gross margin, offset by some expected expense deleverage as we annualize certain investments from 2023 and as we invest behind key strategic pillars in 2024. For the first quarter of 2024, we are anticipating revenue of $140 million to $145 million, which represents a decline of 5% to 9% versus Q1 of 2023. Additionally, we are anticipating first quarter adjusted EBITDA of $21 million to $24 million. First quarter sales are expected to be negatively impacted by a shift in the timing of shipments into the second quarter.
We expect this will allow us to invest into our growth initiatives, while making gains in our adjusted EBITDA.
I believe our strategy positions us extremely well to drive long term value and I remain highly confident in that thesis for trader.
And with that I'll turn the call over to the operator operator.
We will now begin the Q&A session.
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Policy briefly to allow questions to generate in Q.
The first question comes from the line of Megan Alexander with Morgan Stanley. Please proceed.
Hey, good afternoon. Thanks for taking our question I was hoping we could just start with rail demand and maybe if you can give us some context for how delta or trended during the holiday season relative to your expectations and then what Youre seeing now as you get into the spring selling season, and maybe with that.
Dominic Blosil: Overall, I am pleased with our execution against our plan in 2023, with the year ending substantially better than we had originally guided to and adjusted E-without growing by 47% versus 2022. While we are planning 2024's top line cautiously, given the expected continued pressure on big ticket spend, we are entering the year with healthy inventories on the balance sheet and in channel, in our position to have significant gains and gross margins going forward. We expect this will allow us to invest in our growth initiatives while making gains in our adjusted EBITDA. I believe our strategy positions us extremely well to drive long-term value, and I remain highly confident in the thesis for Traeger. And with that, I'll turn the call over to the operator. Operator?
Dan you just talked about into the second quarter is that more related to doing more direct import or is there.
And how retailers are taking on inventory.
Yes. Thanks for the question Megan So I'd say that sell through generally.
Our expectations in the quarter, if not were slightly above what we were expecting.
So we're happy with how sell through is really stabilized even though they are still tracking roughly in line with prior year.
As measured by 2023.
Our forecast for 2024 really informs a key underpinning of how we.
Operator: We will now begin the Q&A session. If you would like to ask a question, please press star followed by one or your touchtone keypad. If, for any reason, you would like to remove that question, please press star followed by 2.
Measure and forecast demand in 'twenty four.
The key takeaway here really is the fact that we.
Melana Megan Alexander: Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue. The first question comes from Melana Megan Alexander with Morgan Stanley. Please proceed. Hey, good afternoon.
We still expect pressure on high ticket items right. So that's really a fundamental underpinning of how we're forecasting demand over the course of the year and although there may be.
Some some shifts in terms of the negative decline in grills from quarter to quarter, we do expect each quarter to be down over the course of the year.
Dominic Blosil: Thanks for taking our question. I was hoping we could just start with grill demand, and maybe you can give us some context for how sell-through trended during the holiday season relative to your expectations and then what you're seeing now as you get into the spring selling season. And maybe with that shift, Dom, you just talked about into the second quarter, is that more related to doing more direct imports, or is there, you know, a change in how retailers are taking on inventory? Yeah, thanks for the question, Megan.
I think there are some nuances to that.
With respect to which quarters maybe.
A larger decline and or maybe splitting it up between first half second half and I think.
It really is the dynamic at play in addition to a <unk>.
<unk> forecast on sell through is the fact that we have a unique comp in H, one and H two so on each one we're comping the load in of some new product that we launched last year.
Dominic Blosil: So I'd say that, you know, sell through generally met our expectations in the quarter, if not, we were slightly above what we were expecting. So we're happy with how sell through is really stabilizing, even though they're still tracking roughly in line with the prior year, as measured by 2023. I think, you know, our forecast for 2024 really informs a key underpinning of how we measure and forecast demand in the year ahead, and I think the key takeaway here really is the fact that we still expect pressure on high-ticket items, right? So that's really a fundamental underpinning of how we're forecasting demand over the course of the year, and although there may be, you know, some shifts in terms of the negative I think there's some nuances to that with respect to, you know, which quarters maybe see a larger decline or maybe splitting it up between the first half and the second half, and I think...
And then two we're forecasting a bleed down of end of life Skus ahead of inventory.
Inventory build and ultimately sales of new product that we plan to launch in 2025. So there are two kind of nuances that contribute to what is ultimately a greater decline in grill sales as reported compared to what we're forecasting in sell through so I think it's good news.
These are just sort of one time items that we have to address now and again based on comp dynamics.
And then the third piece is really around ASP, so what we're seeing.
Performance in.
Unit volumes relative to dollar volumes those dollar volumes are being pressured by ASP.
Jim part is connected to a deliberate change to our pricing strategy will be brought prices across the portfolio of grilles back to pre pandemic levels. Additionally.
Dominic Blosil: The dynamic at play, in addition to a negative forecast on sell-through, is the fact that we have a unique comp in H1 and H2. So in H1, we're comping the load-in of some new products that we launched last year. And then in H2, we're forecasting a bleed-down of end-of-life SKUs ahead of inventory build and ultimately sales of new products that we plan to launch in 2025. So there are two kinds of nuances that contribute to what is ultimately a greater decline in grill sales as reported compared to what we're forecasting in sell-through, which I think is good news. These are just sort of one-time items that we have to address now and again based on comp dynamics. And then the third piece is really around ASP.
Additionally, we have been talking a lot about operational excellence and how we unlock profit pools across our supply chain to optimize gross margin one of which is direct import business and as that business grows. It does take some AOSP investments that's just how these contracts.
<unk> restructured and correspondingly, we see an uplift in gross margins. So in essence, we're sharing in this profit pool that we can unlock the.
The scale of our retailers supply chain in turn it does come at the cost of some ASP.
Lift in gross margins. So that's really the dynamic at play.
Okay got it that's really helpful and then I guess maybe.
Dominic Blosil: So where we're seeing, you know, better performance in unit volumes relative to dollar volumes, those dollar volumes are being pressured by ASP, which in part is connected to a deliberate change to our pricing strategy where we brought prices across the portfolio of grills back to pre-pandemic levels. Additionally, you know, we've been talking a lot about operational excellence and how we unlock profit pools across our supply chain to optimize gross margin, one of which is the direct import business. And as that business grows, it does take some ASP investment. That's just how these contracts are structured.
Maybe bigger picture just trying to understand how you're thinking about managing the business.
He has been somewhat constrained been candid in terms of your time top of funnel marketing just given the challenges and the industry though.
Category does end up being better than you expect how should we think about whether you would look to take that upside and reinvest it back into the business into some top of funnel marketing and go after share first maybe letting it flow through to the bottom line and allowing you to deleverage of that.
Sure Good question I'll, let Jeremy.
Follow up.
Once you hit that.
Dominic Blosil: And correspondingly, we see an uplift in gross margin. So, in essence, we're sharing in this profit pool that we can unlock via the scale of our retailer's supply chain. In turn, it does come at the cost of some ASP, but an uplift in gross margin. So that's really the dynamic at play. Okay.
Yes, you can say.
First of all.
Over the last couple of years.
Working capital has been scarce or things that we've continued to invest in the business that we think are really important to keep the long term thesis intact, which is around growth and disruption.
Jeremy Andrus: That's really helpful. And then, I guess, you know, maybe the bigger picture, just trying to understand how you're thinking about managing the business. You've been somewhat constrained, and you've been candid, in terms of your top of funnel marketing, just given the challenges in the industry. So, you know, if the category does end up being better than you expect, how should we think about whether you'd look to take that upside and reinvest it back into the business in some top of funnel marketing and go after share, first, maybe letting it flow through to the bottom line, and, you Sure. That's a good question.
We've continued to invest meaningfully in.
In product development and feel good about that pipeline.
Or longer lead time investment in terms of.
Marketing and thinking about reinvestment, we continue to invest in brand.
As we see.
Industry headwinds start to turn to tail wins, we will slowly leaned into top of funnel marketing.
As we think about the opportunity that we have with low unaided brand awareness in most markets, where we have high high unaided awareness, we have high penetration household penetration in this market. So we are I would say we are not in a hurry to reinvest in top of funnel.
Dominic Blosil: I'll let Jeremy follow along. Oh, go ahead. Yeah, why don't you hit that?
Jeremy Andrus: I should say, first of all, you know, over the last couple of years, as working capital has been scarce, there are things that we've continued to invest in the business that we think are really important to keep a long-term thesis intact, which is around growth and disruption. We've continued to invest meaningfully in product development to feel good about that pipeline, but that's a longer, longer lead time investment. You know, in terms of marketing and thinking about reinvestment, we continue to invest in the brand as we see industry headwinds start to turn to tailwinds, and we will slowly lean into top of the funnel marketing. As we think about the opportunity that we have with low unaided brand awareness in most markets, where we have high unaided awareness, we have high household penetration in those markets.
Marketing because we don't know that the return is sufficient at this moment in time, but it is something that we have the ability to turn on fairly quickly and to the extent that we believe we.
We get.
We get returns on our investment in a fairly fairly near term period of time, then we can we can fairly quickly pivot into that into that changing environment.
Alright, that's super helpful. Thank you.
Thank you.
The next question comes from the lineup, Brian Macneal Irma Mechanical Ward. Please proceed.
Hey, Good afternoon, guys can you can you provide a little more color on this bleed down of the older Skus out of your new product launches in 2025 is this typical.
In particular, what is being phased out and what should investors should be getting excited for 2025.
Yeah.
Yes, it's typical within the context of our product lifecycle.
Strategy and so typically.
Jeremy Andrus: I would say we are not in a hurry to reinvest in top of the funnel marketing because we don't know that the return is sufficient at this moment in time, but it's something that we have the ability to turn on fairly quickly, and to the extent that we believe we get returns on our investment in a fairly near term period of time, then we can fairly quickly pivot into that changing environment. All right, this is super helpful, thank you.
If it's an incremental SKU SKU that we're launching.
You wouldn't see a corresponding believe down a product.
In certain situations, if theres, an adjustment to our product strategy and or.
We are sort of introducing new innovations at similar price points.
We will bleed down.
Jeremy Andrus: Thank you. The next question comes from the line of Brian McNamara. We can agree.
The old SKU.
Fairly methodically, what the goal to sort of strike a balance between not starving demand, but also ensuring we don't we're not left with too much inventory when we launched the new product.
Brian Christopher McNamara: Please proceed. Good afternoon, guys. Can you please provide a little more color on this bleed-down of the older SKUs ahead of your new product launches in 2025? Is this typical?
Dominic Blosil: And in particular, what is being phased out, and what should investors be getting excited about in 2025? Yeah, it's typical within the context of our product life cycle strategy. And so, you know, typically, if it's an incremental skew that we're launching, you wouldn't see a corresponding bleed down of the product. In certain situations, if there's an adjustment to our product strategy, and or, you know, we're sort of introducing new innovations at similar price points, we will bleed down the old skew fairly methodically with the goal to sort of strike a balance And, you know, this is part of our strategy. We've been doing this since the beginning of time.
And this is this is a part of our strategy that we've been doing this since the beginning of time.
<unk>.
Pretty good at managing and kind of balancing those two dynamics and so yes, we will start to kind of bleed down obviously, managing and channel inventories to protect demand and channel, while we ramp up production for the new product and then when we launch that product ideally we're at a point, where we have minimal to no inventory left.
For those for those Skus that are end of life.
Yes, I guess like the.
The question I expect together as Youre grills were gross sales were down 16% last year and youre expecting to be down high singles low doubles. This year you are a growth company.
Dominic Blosil: And, you know, we're pretty good at sort of managing and kind of balancing those two dynamics. And so, yes, we'll start to kind of bleed down, obviously managing in channel inventories to protect demand in the channel while we ramp up production for the new product. And then when we launch that product, ideally, we're at a point where we have minimal to no inventory left for those SKUs that are end-of-life
I feel like the expectation is you would see kind of flat kind of growth. This year. So could you kind of quantify your expectation for the grille market declines in 2020 forward, what's embedded in your outlook and how Thats maybe influence your annual revenue guidance.
Yeah. So we are forecasting the category to be down.
In 2024.
Dominic Blosil: Yeah, I guess the question I expect to get is, you know, your grills were down, grill sales were down, what, 16% last year, and you're expected to be down high singles and low doubles this year. You are a grill company. So, I feel like the expectation is that you would see kind of flat-up kind of growth this year. So, could you kind of quantify your expectation for grill market declines in 2024? What's embedded in your outlook and how that has maybe influenced your annual revenue trends? Thanks.
And in excess of that dynamic in the first half, where we're comping product load ins from last year.
<unk> is showing some some excess declines in grills above the demand or the category forecast that's built into our model and then the second half nuance, where we're bleeding down inventory.
Put some pressure on sell in sort of two nuances to be year that are.
Dominic Blosil: Yeah, so we are forecasting the category to be down in 2024. And in excess of that, the dynamic in the first half where we're comping product load-in from last year, which is showing some excess declines in grills above the demand or the category forecast that's built into our model, and then the second half nuance where we're bleeding down inventory, which puts some pressure on sell-in, are sort of two nuances to the year that are ultimately creating a larger decline in our forecast from a grill sale Thank you. Again, to ask a question, please press star 1. The next question comes from the line of Justin Kleber with Baird. Please proceed. Good afternoon, everyone.
Ultimately, creating a larger decline than our forecast from a grille sales standpoint than what's built into our forecast from our sell through slash category modeling standpoint.
Okay.
Thank you.
Thank you.
Again to ask a question please press star one.
The next question comes from the line of Justin Kleber with Baird. Please proceed.
Hey, good afternoon, everyone. Thanks for taking the questions first just wanted to.
Tried to assess market share trends, you mentioned grill industry was down high singles at retail and 23, just curious how that compared.
To yourself through.
Okay.
Yes so.
We believe based on the industry reports.
Justin Kleber: Thanks for taking the questions. First, just wanted to try to assess market share trends. You mentioned the grill industry was down high singles at retail and 23. Just curious how that compared to your sell through. Yeah, so we believe based on the industry reports and in the work that we've done that, first of all, Traeger is relatively flat in terms of share. And, you know, this is.
The work that we've done that.
Debt.
First of all Trager is relatively flat in terms of share.
<unk>.
This is.
This is something that we track.
On a quarterly basis and as we think about.
Jeremy Andrus: This is something that we track on a quarterly basis, and as we think about what drives growth and share and how we think about this year and years going forward, our expectation is that our share will remain relatively flat. And as we lean back in the top of the funnel and launch some of the products that are in the pipeline, the combination of these two factors will drive growth and share as they have during many of the years pre-pandemic before we pull back on top of the funnel marketing. Thanks for that, Jeremy.
What drives.
Growth in share and how we think about this year in years going forward our expectation is that.
Our share will remain relatively flat.
And as we lean back into top of funnel and launched some of the products that are in pipeline that the combination of these two factors will will drive growth and share.
Have during many years.
Pre pandemic before we pulled back on top of top of funnel marketing spend.
Got it okay. Thanks for that Jeremy and then just a.
Jeremy Andrus: And then just a, kind of, multi-part question on promotions. I was hoping you could talk about maybe your promotional plans as we approach kind of the peak grilling season this year relative to last year. Should we expect, you know, less promotional intensity, just given inventories are in much better shape? And then, in a bigger picture, Given the promotional activity across the broader industry the past few years, do you guys think the ability to kind of sell grills at full price, is there to be structural changes to that at all versus kind of how the industry operated prior to the pandemic? It's a good question.
Kind of a multipart question on promotions I was hoping you could talk about maybe your promotional plans as we approach peak grilling season. This year relative to last year should we expect less.
Actual intensity just given inventories in a much better shape and then bigger picture.
Given the promotional activity across the broader industry in the past few years do you guys think.
The ability to kind of sell grilles at full price has to be structural changes to that at all versus kind of how the industry operated.
Prior to the pandemic.
It's a good question.
Jeremy Andrus: The industry certainly has been more promotional over the last couple of years. However, our belief is that promotions for a premium brand like Traeger's can be used, but sparingly. We typically had three promotional periods during the year. We deviated from that cadence once in 2022 as we were working on channel-level inventories, getting them healthy again. Inventories in the channel are healthy, and balance sheet inventories are healthy. In 2023, we will return to our more traditional promotional cadence, and that's our intent in 2024 as well.
Industry, certainly has been more promotional over the last couple of years, our belief is that promotions for.
A premium brand like traders can be used but but.
But sparingly.
Typically.
<unk>.
Three promotional periods during.
During the year.
We deviated from that from that cadence once in 2022 as we were.
As we were working on channel level inventories getting them healthy again inventories.
Inventories in channel, our healthy balance sheet inventories are healthy and so two.
2023, we return to our more traditional promotional cadence and that's our.
Justin Kleber: Got it. Very helpful. Thank you guys. Best of luck. Thank you. The next question comes from Delana Jo Feldman with TESLI Advisory Group. Please proceed. Yeah, hi, guys. Good afternoon.
That's our intent in 2024 as well.
Got it very helpful. Thank you guys best of luck.
Okay.
Thanks.
Thank you.
The next question comes from Atlantic, Joe Feldman with Tousley Advisor Group. Please proceed.
Yeah, Hi, guys. Good afternoon. Thanks for the question.
Delana Jo Feldman: Thanks for the question. I wanted to ask, how should we think about accessories in 2024? I mean, meters have had some really strong runs as of late and, you know, with the new product. And I'm just wondering, should we expect that same kind of?
Wanted to ask how should we think about accessories in 2024 meters had some really strong.
Ron as of late.
New product and I'm, just wondering should we expect that same kind of.
Jeremy Andrus: Go double digit type growth again in 24 or so. Maybe you could share some thoughts. Look, I would say we're not guiding specifically to accessories, but as Dom and I both alluded to in our comments, our accessory business, accessories, and consumer businesses have been robust. Meter has been a strong grower.
Low double digit type growth again in 2004.
Maybe you could share some thoughts there.
Look I would say we're not we're.
We're not guiding specifically to accessories.
But as his dominate both alluded to in our comments, our accessory business accessories and consumer business the businesses have been robust meter.
Peter has been.
A strong grower as I've mentioned.
Jeremy Andrus: As I mentioned, we launched the Meter 2 Plus, which was a very successful launch. There's a lot of innovation in that product, something that we've been working on for many years, even pre-acquisition. Accessories are an important part of the business, and we continue to invest in them, lean into them from a product mix perspective, and believe that it not only provides diversification, but it's a nice opportunity to drive margin over time. That's helpful.
We launched.
The meter or two plus.
Which was a very successful launch.
It's it is theres a lot of innovation in that product something that we've been working on for many years, even even three acquisition. So.
It's it is theres a lot of innovation in that product something that we've been working on for many years, even even three acquisition. So.
<unk> are an important part of our business.
We continue to invest in them lean into them from a product mix perspective, and believe that not only provides diversification, but it's a nice opportunity to.
To drive margin over time.
Dominic Blosil: Thank you. Anything to note on the, You know, for those customers that are shopping and buying new grills from you guys, anything to note with regard to what they're buying? Are they still gravitating towards the newer products, the products with the more fully featured items? Yeah, I can jump in on that.
Okay. That's helpful. Thank you and then.
Anything to note on the <unk>.
For those customers that are shopping and buying the growth from you guys and anything to note with regard to what they are buying or are they still gravitating towards the newer product.
The product with the more fully featured items.
Yes, I can jump in on that.
Oh go ahead Gary.
Dominic Blosil: Oh, yeah. So just from what we're seeing directionally, there's been a little bit more pressure on, you know, premium price points above $1,000 than we normally see, which is consistent with our comments earlier on just the continued pressure on big ticket items. That said, I mean, we are still continuing to see appetite for our key innovations, and I think that the reception for these innovations has been strong. And, you know, as we kind of watch the mix between connected grills and unconnected grills evolve over time, I think our installed base is now, you know, over indexing to the connected grill, where we're embedding more innovation. And certainly, that's the case on a quarter to quarter basis. And so I think there's a growing appetite for innovations. We continue to see a strong reception there. But there has been, as of late, some pressure above $1,000 just, again, aligned to, I think, what we're seeing in kind of the broader consumer around big ticket items.
Oh, yes. So just just from a kind of were seeing directionally theres been a little bit more pressure on premium price points above $1000 than we normally seen which is consistent with our comments earlier on just the continued pressure on big ticket items.
That said I mean, we are still continuing to see appetite for our are our key innovations.
And I think that the reception for these innovations has been strong in.
As we've kind of watch the mix between connected grills and unconnected drills evolve over time I think our installed base is now.
Over indexing to the connected grill, where we're embedding more innovation and certainly that's the case on a quarter to quarter basis, and so I think theres a growing appetite for innovations. We continue to see strong reception there, but there has been as of late some pressure above $1000. Just again aligned to I think what we're seeing.
In kind of the broader consumer around big ticket items.
Okay. Thanks, guys. Good luck with this quarter. Thank you.
Delana Jo Feldman: Thanks, guys. Good luck with this quarter. Thank you. Thank you. Again, to ask a question, please press bar one. There are no additional questions at this time. That concludes today's conference call. Thank you. You may now disconnect your line.
Thanks, Thank you.
Again to ask a question please press star one.
There are no additional questions at this time.
That concludes today's conference call. Thank you you may now disconnect your line.