Q1 2024 YETI Holdings Inc Earnings Call
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Good day and welcome to the Yeti Holdings' first quarter 'twenty 'twenty four earnings conference call.
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Please note this event is being recorded.
And now I would like to turn the conference over to Tom Shaw, Vice President of Investor Relations. Please go ahead.
Good morning, and thanks for joining us to discuss Yeti Holdings' first quarter fiscal 2024 results.
Leading the call today will be Matt <unk>, President and CEO and Mike Mcmillan CFO.
Following our prepared remarks, we'll open the call for your questions.
Before we begin we'd like to remind you that some of the statements that we make today on this call maybe considered forward looking and such forward looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.
For more information please refer to the risk factors detailed in our most recently filed Form 10-K.
We undertake no obligation to revise or update any forward looking statements made today as a result of new information future events or otherwise except as required by law.
Unless otherwise stated our financial measures discussed on this call will be on a non-GAAP basis.
We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business.
Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release or in the presentation posted this morning to our Investor Relations section of our website at <unk> Dot com.
And now I'd like to turn the call over to Matt.
Thanks, Tom and good morning, Yeti delivered a great start to 2024.
As evidenced by our strong first quarter results, we saw positive global demand for our brand and our broadening range of products and we had great execution across multiple fronts driving double digit growth in both our wholesale and DTC channels as well as our coolers and equipment and drink water categories.
Our wholesale performance was supported by selling and sell through relative to the year ago period.
While our DTC business showed continued growth across e-commerce, corporate sales Amazon and Yeti retail.
In coolers with our new innovation and expanded awareness campaign, we believe we are well positioned for the upcoming seasonal demand.
<unk> a range of bottles and tumblers continued to deliver strength within the category.
By geography international growth exceeded 30% year over year to reach a yeti high of 19% of total sales even as our domestic growth was nearly 10%.
Behind the strength of the brand the growing product portfolio and global expansion. We are on track to deliver on our full year top line outlook.
Given the combination of the inbound freight recovery product cost improvements driven by outstanding work by our supply chain and operations team and strong price discipline. We're pleased to report profitability to build upon our historical strength delivering a 450 basis point improvement in gross margins.
Following our topline performance in gross margin strength, our adjusted operating margin also expanded by 440 basis points for the period.
In the quarter, we also delivered on our capital allocation priorities, starting with the completion of our Missouri Ranch and butter Pat acquisitions.
Our integration of these businesses is on track as we accelerate our mid and long term opportunities in bag cookware.
Finally, we announced a $100 million accelerated share repurchase plan in late February which was fully executed last month.
From a topline perspective, we remain optimistic on our demand drivers for the full year, we expect sales performance consistent with our original guidance as we balanced performance against anticipated ongoing conservative purchasing at higher price points.
<unk> channel sell in in demand and our compare against headwinds as a result of last year's recall related gift card redemptions.
Looking at our bottom line, we are raising our outlook to reflect our margin strength and the execution of our ASR.
As previously indicated we will continue to evaluate thoughtful and strategic capital allocation opportunities in the quarters ahead.
Turning to our growth strategy in 2024 and beyond our priority remains to extend brand reach and engagement drive product diversification across our portfolio leverage our powerful omni channel to reach customers and build our global business.
Shifting to our brand reach Q1 highlight of the ongoing evolution of the <unk> breadth and depth brand strategy.
In the early months of 2024, we have activated alongside some of our larger global partnerships.
In the second year of our partnership with the World Surf League, we became the presenting partner for the first event of the season.
Eddie Pro pipeline in Oahu.
On the mountain our activation included continued events such as natural selection.
Finally in Formula One racing our partnership with rebel racing is proving to find creative ways for yeti to integrate and support the team.
We also established a new partnership in the World of professional soccer with a club looking to disrupt the status quo.
In March the Kansas City current debuted the world's first stadium built specifically for our women's Pro sports team were incredibly proud to support the current theyre visionary ownership and the team's efforts to elevate the profile of both the sport and these incredible professional athletes.
We look forward to the many innovative ways, we will connect our brands.
Our community marketing efforts combined with the amazing work our team does on the brand side showed how we grow develop and connect our global audiences.
Fitness was a natural place to start the year highlighting the work our ambassadors put in before heading out to the wild and the yeti gear that gets them through at all.
We expanded our health and fitness efforts this year with brand placement and nearly 300 gyms across the country.
Next we focused on highlighting our expanded drink ware offerings in coffee driving awareness reach and relevance for new and existing global customers.
You may have seen this week, we added to the portfolio of new Yeti French press that can double as a beverage picture as we look to release the Standalone pitcher later this summer.
Yes. He also received two incredible brand accolades during the quarter that speak to the passion talent and creativity of our team.
<unk> 2024 in House agency of the year and fast company's most innovative companies and PR and brand strategies.
These affirmations, while not the goal are a testament to the energy realness and humanity that the team puts into our brand.
This is what creates the emotional connection and sustainable passion for what we do.
This isn't about a moment, it's about growing our movement towards reconnection of people and community to the while.
I want to thank the entire yeti team for their belief importing themselves into this against a market backdrop that at times is more focused on buzz.
This brand has been built on consistently and sustainably engaging customers and communities showing up in railways and staying true to the spirit of what yes. It is all while growing and evolving globally.
To that end in the current quarter and throughout 2024, we will find moments to engage new and existing customers from spring travel to gift, giving occasions to the start of summer.
We have incredible story to tell people in places that support our expanding product assortment.
As we shifted product there are three key themes this year.
Our focus on growth in our cooler family.
The evolution of yeti into broader food and beverage and the product expansion potential under the Yeti brand umbrella and brand building playbook.
Across our product range, we're in a great position to capitalize on the warmer weather in the beginning of summer travel and outdoor activities.
We're leveraging a few key demand drivers as we head into the season innovation awareness and conversion.
We're excited about the next wave of hard cooler innovation in 2024 building upon our legacy dating back to our first hard cooler and 2006.
Recently, we debuted our roadie 32 cooler our smallest and most portable wheeled coach today.
<unk> was designed to pull up to a camp site move through a tailgate our handle weekend tournaments.
Later this summer we plan to introduce a personal side hard cooler, which will anchor the entry price point for yeti hard coolers at $200.
Think of this as a good day out type cooler that will work well in a side by side on a golf cart or on the job.
On the <unk> side, we're seeing a great response to our deep portfolio of 50, plus offerings across our premium range of bottles tumblers.
This is part of our growth and expansion strategy as we support more moments in their day.
We are evolving this category and building out solutions to address what we see as consumer needs and opportunities.
For instance, the previously announced French press in pitcher complement last year's beverage bucket and wine chiller and are a sign of the evolution and the opportunity.
Additionally, after years of request from our customers, we will launch a couple of highly giftable borrower items and limited supply in time for father's day.
To round out the 2024 offerings. We also plan to introduce our first yeti cast iron Cookware later this summer.
Outside of coolers and drink, where we're excited by the prospects of what we see as possible in bags cargo and the expanding group of offerings under our coolers <unk> equipment family.
We expect to deliver innovation across its entire range, starting with our flagship dry bag expansion earlier. This year. Following last year's addition of new waterproof Dustproof cargo boxes, there is more to come around this.
We continue to be focused on driving awareness and top of mind for yeti.
We're deploying a range of brand efforts across TV digital print and out of home to keep the brand and product in front of the consumer.
This includes an incredible partnership with our wholesalers to drive awareness during those important moments as we launched new products.
Additionally, we are using a broad range of direct performance marketing programs focused on driving consumers towards conversion.
Through these expanded efforts in innovation in marketing, we will continue to deliver integrated storytelling that connects people and products highlighted at times with color inspiration from the while.
As we see opportunities to reach more customers engage them in impactful ways until powerful branded product stories.
We also focus on strengthening our global go to market.
Our strong and diverse channels to market are a key contributor to the balanced growth achieved in the first quarter and speak to the consistency and power of Yeti.
Turning to our DTC performance, we saw the benefits of customer value and <unk> against a more challenging traffic and customer count as we lap the start of last year's recall at our selected end of life transitions.
Our Amazon marketplace remained consistently strong as we see that customer loyalty to the channel further supporting our strategy of diverse channels to market.
Corporate sales delivered strong order volume in inbound demand. The addition of more efficient and cost effective printing technology for heart <unk> underscores our continuous improvement efforts delivering value for the customer and yet.
We opened our newest locations of our yeti retail stores in the woodlands outside of Houston and in New York City's Flatiron District.
Our stores continue to provide a singularly unique opportunity to see the depth and breadth of <unk> product offering engage with product experts learn and shop, we are targeting to open six total locations this year, including the upcoming openings in Kansas City in Calgary, which would bring our fleet total to 24.
In our wholesale channel, we saw positive demand across categories further supported by better sell in compared to last year's period.
Channel inventory is in good shape as our partners continue to lean into seasonal colors and remain bullish on product releases, we have planned throughout 2024 and into 2025.
As previously outlined we are thoughtfully expanding our global wholesale reach including the already announced partner in tractor supply in the U S combined with new partners in Canada, Australia and Europe.
In addition, we also continue to cultivate new wholesale partnerships that align with our increasingly diverse product assortment.
As we shift to our non U S business I'd like to provide some color on how we are building out our global leadership to support our focus on growth in these areas.
<unk> joined Yeti recently, as our new managing director Asia.
<unk>. Most recently comes from Keane, the outdoor footwear brand, where he held a variety of global and regional roles, including leading the brands growth in Japan and throughout Asia Pacific.
With his experience and passion based and innovative brands I'm excited to see him take on the immense opportunities we have in the region.
Looking at the overall international business, we continue to see strong momentum for the brand and incredible opportunity and undeveloped markets in.
In addition to solidifying our regional structure, our near term focus is on growing brand awareness and building our successful omni channel approach.
In Europe overall brand traction as outstanding as we see strong results in the UK and Germany as well as other markets throughout Europe.
It has been increasingly fund to see Yeti show up from the country side of the city streets as we activate the brand.
Supporting this momentum, we're making key investments in our team the brand and processes to scale the business.
This includes the transition of our UK three PL this month, which will support future growth, while also driving improved speed to market and operational efficiency.
In Australia, we had another incredible quarter our team in Australia continues to show that the yeti growth playbook travels even as they contribute to making it stronger and nuance to the market.
We really like the balance we have in Australia with powerful independent retailers, all the way up to our partnership with outdoor leader Bcf.
We will also begin testing a new partnership with a sporting goods retailer as we focus on reaching customers deeper into urban markets.
From a product offering perspective, we see great traction across the portfolio with customization capabilities and demand much like we have seen in North America.
And Canada growth was supported by strong wholesale sell through despite some of the same channel caution that we've seen domestically.
Within wholesale we are beginning to test several new targeted relationships that will complement our channels to market and allow us to reach new consumers and different buying months.
On the DTC side, we've seen strength in our emerging corporate sales business and are excited about the opportunity to scale customization to support both the customer and corporate demand.
Closing I want to take a quick moment and highlight a particularly important event for the company. Our recent yeti round up in April.
Once a year, we bring together our global team at our Austin headquarters for a week of immersion learning and connection.
It is a powerful way to Stoke the brand and keep connected to our growing global team.
I always come away from this week energized and with an incredible appreciation for our team and what they are creating here at yeti.
Accordingly, it solidifies my unwavering conviction in the long term untapped growth opportunities ahead for this brand.
Before handing the call over to Mike to review, our financials and outlook I want to thank our outstanding customers partners and friends, who show up for Yeti everyday at every launch and in every new market we enter.
This is what drives us forward.
Now I'll turn the call over to Mike.
Mike: Thanks, Matt and good morning, everyone.
Mike: I'll start with a few comments on the impact of certain strategic actions on our GAAP results, which are excluded from our non-GAAP results.
And then provide an overview of our performance in Q1 across our non-GAAP measures.
Finally, I will give some details on our updated fiscal 2024 outlook before opening it up for your questions.
Our GAAP results for the first quarter of 2024 include the impact of two items that I would call out for you all this quarter.
Mike: One transition costs associated with our recent acquisitions, including the impact of purchase accounting on our gross margins.
And to costs associated with the closure of our Vancouver Design Center.
While we were pleased with the work that our team in Vancouver was delivering the acquisition of mystery Ranch provided an opportunity to consolidate this work into one location in Bozeman, Montana.
Mike: The impact of these and other items is excluded from our non-GAAP results.
Per our normal practice our results discussed on this call will be on an adjusted non-GAAP basis in order to better focus on the operational performance of the company during the period.
Now moving on to the details of the quarter.
Mike: First quarter sales increased 13% to $341 million.
As Matt detailed our strong performance was balanced across categories channels and geographies. These.
These results include the initial contributions from Missouri Ranch and $2 million of gift card redemptions related to remedies offered to customers impacted by the product recall.
We are pleased with the progress we have made to integrate our recent acquisitions and they are on track to generate approximately 200 basis points of topline growth for yeti in 2024.
Mike: By category drink, where sales increased 13% to $215 million.
Our performance was driven by a number of factors, including a portfolio of over 50 products that we continue to expand.
Exceptional growth outside the United States.
Continued strong customer demand for color and customization on a global basis.
Here are a few specific examples of products that drove our growth in Q1.
We launched a new lineup of three stackable tumblers that offer our customers. The same great performance with added functionality, such as improved space saving handset and Cupholder compatibility.
The products that we launched last Q4 continued to gain traction, including our smaller coffee specialty sizes are 42 ounce straw mug and our cocktail Shaker.
We had a great quarter and bottles driven by the wide range of sizes materials and lid options that we offer our customers.
Mike: And we remain excited by the growth of our tabletop barware offerings, such as the beverage bucket and wine chiller.
Coolers <unk> equipment sales increased 15% to $120 million, both hard coolers and soft coolers posted growth for the period.
We are excited to now have our full assortment of products available in the market, including and seasonal colors.
And we continue to add to this product lineup with the recent innovation in heart builders that Matt mentioned.
While we do continue to expect to see some pressure on higher price point items as we go through this year. We believe we are in strong position to win in coolers as we head into the peak summer months.
Beyond coolers, we saw strong organic performance from our legacy Yeti bags lineup.
Led by our Panga waterproof line and the expansion of our sidekick dry gear case line.
The category also benefited from the inclusion of mystery Ranch, which was on plan for the quarter.
From a channel perspective direct to consumer sales grew 12% to $188 million, representing 55% of total sales driven by growth in both drink wear and see any.
Additionally, we drove solid growth across each of our DSD channels during the period, including ecommerce corporate sales and Amazon.
While still a relatively small contributor we were also pleased with the growth of yeti retail.
As Matt mentioned, we are modestly accelerating our new store plans. This year as we look to expand our reach and provide more opportunities for consumers to experience the full breadth of our product assortment.
Mike: Wholesale sales increased 13% to $154 million driven by growth in both <unk> and drink Ware importantly sell through for both product categories was positive and our channel inventory levels remain in good position.
Outside the U S sales grew 32% to $66 million, representing 19% of total sales driven by outsized growth in Europe and Australia.
The opportunity outside the United States remains significant as we look to drive brand awareness expand our wholesale footprint and leverage our full set of <unk> capabilities.
Gross profit increased 22% to $196 million or <unk> 57, 5% of sales compared to 53% in the same period last year.
Positive drivers of this 450 basis point increase include 370 basis points from lower inbound freight and 190 basis points from lower product costs.
These gains were partially offset by 60 basis points from higher customization costs, given the continued growth of our custom business.
20 basis points from strategic price decreases on certain hard coolers that we implemented during the quarter and 30 basis points from all other impacts.
SG&A expenses for the quarter increased 13% to $157 million and remained flat at 45, 9% of sales.
Non variable expenses increased 10 basis points as a percent of sales offset by variable expenses decreasing 10 basis points as a percent of sales.
Within non variable higher employee costs and marketing expenses were offset by lower warehousing costs.
Operating income increased 82% to $40 million or 11, 6% of sales an increase of 440 basis points over the seven 2% that we reported in the prior year period.
Net income increased 89% to $29 million or 34 cents per diluted share compared to 18 in the prior year period.
Mike: Turning to our balance sheet, we ended the quarter with $174 million in cash compared to $168 million in the year ago period.
The decline in cash on a sequential basis was driven by our accelerated share repurchase agreement the.
The acquisitions of mystery Ranch and butter Pat.
And the normal seasonality of our cash and working capital inventory increased 5% year over year to $364 million, we expect year end inventory to generally grow in the range of sales, but there may be quarters. This year, where it grows at a faster rate than sales as we build inventory ahead of new product launch.
<unk>.
Total debt, excluding unamortized deferred financing fees, and finance leases with $81 million compared to $84 million at the end of last year's first quarter. During the quarter, we made a principal payment of $1 million on our term loan.
Now turning to our fiscal 2020 for outlook.
Mike: We continue to expect full year sales to increase between 7% and 9% compared to fiscal 2020 Three's adjusted net sales.
Inclusive of approximately 200 basis points of contribution from our two acquisitions.
Mike: As we previously indicated we expected a stronger growth rate in the first quarter. Looking ahead, we continue to expect relatively balanced growth across the upcoming quarters with Q2 plan slightly below our growth rate in the second half of this year.
There are a number of compare dynamics to consider this year, including gift card redemptions, which we will start to compare against in Q2.
Mike: The largest impact from prior year gift card redemptions will be in the second quarter. When we saw 12 $5 million worth of redemptions in the prior year quarter.
Mike: We are reiterating our expectations for growth across channels categories and geographies by channel, we expect balanced growth between wholesale and DTC by category coolers and equipment is expected to outpace shrink were given both the return of our full soft cooler lineup and the incremental sales of <unk>.
History Ranch products.
And we expect international growth of between 20% and 25% compared to domestic growth in the mid single digit range.
As a final comment on sales consistent with last quarter, we continue to take a prudently conservative approach to how we plan the remainder of the year.
Moving down the P&L supported by our strong performance in the first quarter, we are increasing our 2020 for gross margin target to approximately 58% compared to our original target of approximately 57, 5%.
And up from 56, 9% last year.
This increase is due to slight benefits across a number of drivers within our gross margin line versus one single factor.
The ongoing recovery of inbound freight costs remains the largest driver of our year over year gross margin expansion. This year, but we do continue to see some offsetting rate pressure due to the red Sea conflict.
From a phasing perspective, we expect margin expansion to start to ease in Q2 versus the significant increases we have seen over the past four quarters.
As we move into the second half of the year, we expect to have largely comp the benefit of lower inbound freight costs. Thus our gross margins in the second half will be much more in line with the prior year.
But over the long term, we still see opportunities to continue to expand our gross margins through drivers such as sales mix product cost savings and other supply chain efficiencies.
With the increase in our gross margin outlook. We are also raising the high end of our operating income outlook. We now expect adjusted operating margin of between 16% and 16, 5% up from our prior outlook of approximately 16% and compared to 15, 6% in fiscal 2023.
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On a quarterly basis, we expect operating income growth to be roughly in line with sales growth.
As we have discussed previously we will continue to use a portion of our gross margin upside to incrementally invest in our business.
These investment areas include our global expansion efforts.
Our <unk> business and support for inorganic opportunities.
Therefore, while full year SG&A is expected to grow at the high end of our sales range. The timing of investments May drive some variability in our SG&A growth rate on a quarter to quarter basis.
More importantly, our focus is on delivering our top and bottom line outlook for the year and on driving topline growth over the long term.
Below the operating line, we continue to expect an effective tax rate of approximately 25, 3% for the year slightly above the 24, 8% rate in 2023.
Mike: As we disclosed in an 8-K filing we entered into a $100 million accelerated share repurchase agreement during Q1.
That contract fully executed as of April 20, <unk> and thus we expect our full year diluted shares outstanding of approximately $86 1 million.
Due to this lower share count and raising the high end of our operating income range. We now expect adjusted earnings per diluted share to increase 11% to 16%.
Mike: To between $2 49.
And $2 62.
Compared to $2 25 in fiscal 2023.
As for cash we continue to expect capital expenditures of approximately $60 million and free cash flow of between $100 million and $150 million this year.
We will remain opportunistic going forward as we look to deploy cash between M&A and further share buybacks.
Mike: As a reminder, we have $200 million remaining on our most recent share buyback authorization.
Mike: In summary, we were pleased with our first quarter execution, we delivered balanced top line growth across the business continue to improve our profitability made progress on the integration of our recent acquisitions and delivered on key pieces of our capital allocation strategy at.
Mike: At the same time, we are mindful of the relative size of the first quarter and some ongoing uncertainties in the overall market.
Mike: Thus some caution continues to be reflected in our updated full year outlook, but we will also remain opportunistic as we go forward, making investments and taking actions that support our long term growth ambitions and drive value to our shareholders.
Speaker Change: Now I would like to turn the call back over to the operator to take your questions.
Speaker Change: Thank you we will begin the question and answer session.
Speaker Change: I ask a question you May press Star then one on your Touchtone phone.
Speaker Change: If you're using a speakerphone please pick up your handset before pressing the <unk> and.
Speaker Change: And again star one to enter the queue.
Speaker Change: You said anytime your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we'll take a question from Joe <unk> from Raymond James Joe. Please go ahead.
Speaker Change: Good morning. This is actually Martin on for Joe I was wondering if we can get an update on overall demand trends, particularly in hard coolers.
Martin: Explanations that might be driving them, whether its affordability competition saturation or sort of some combination of all of the above.
Speaker Change: Yes, good morning, Martin and thank you for the question. So I think first of all we were.
Speaker Change: Pleased to return to growth in both soft and hard coolers.
Speaker Change: And soft coolers, obviously was related to having the recalled products back in our lineup but.
Speaker Change: In hard coolers.
Speaker Change: There was an element of our selling compare in wholesale.
Speaker Change: But at the same time during Q1, we're also comping against the <unk> transition promo there was an issue in Q4 that we called out.
Speaker Change: But like we mentioned in our prepared remarks, we saw growth in <unk> in both our sell in and a sell through basis.
Speaker Change: But I think the key point is that Q1 is our smallest quarter and there is a seasonality aspect and coolers to consider.
Speaker Change: But as we look forward as we enter the seasonally higher period, we think we're in a really good position to win in coolers.
Speaker Change: Got our entire assortment back in the market of soft coolers, and we've got new innovation coming in hard coolers.
Speaker Change: We do believe there is some sensitivity to higher price point items in the market that still exist, but for the demand that is in the market. We believe we're in a really great position to go win it from.
Speaker Change: From a competitive standpoint.
Speaker Change: Think like we've said all along we've we've got we've had competitors in all categories for years. We believe we've got the best products in the market and we're in a good position to win.
Speaker Change: Great and just kind of on a last thought about sort of softness at the high end.
Speaker Change: Items has the targeted price cuts on certain routes and counter products helped to spur demand and should we anticipate any additional pricing actions.
Speaker Change: As well as you know any future innovation will that be at lower price points just combat affordability.
Speaker Change: Yes, I think so just to touch on the second question.
Speaker Change: We introduced those Mac called out.
Speaker Change: We talked about two new products, a lower price point, our lowest price point will cooler and then a new entry point hard.
Speaker Change: Hard coolers for the category.
Speaker Change: I wouldn't say that's being done in response to anything happening in the market. This is us just completing what we believe is a has a full portfolio of products that meets.
Speaker Change: A number of use cases out there so I wouldn't I wouldn't characterize this is being done in response to anything that's happening in the market and I think the same thing goes for the price reductions I mean, what we did in Q1 and we talked about this last quarter. It was really in response to.
Speaker Change: To the new innovation that was coming and making sure that our pricing stack made sense is that the price to value as you go up the portfolio makes sense in the consumer's mind so.
Speaker Change: In terms of what happened in Q1, it was a select number of skus. It wasn't the entire portfolio, but it was largely in line with what we expected. We saw we saw the elasticity on a unit basis that we expected and we were pleased with the results.
Speaker Change: Great. Thank you congratulations on a great quarter.
Speaker Change: Okay.
Speaker Change: Our next question comes from Randy Colonic from Jeffrey Randy.
Randy Colonic: Randy Please go ahead.
Randy Colonic: Yes. Thanks, good morning, everybody I wanted to ask a question around innovation.
Randy Colonic: And when I think about let's say the last couple of years I've thought about incremental growth.
Randy Colonic: Being derived a lot from.
Randy Colonic: Additional color ways, the assortment, but more recently.
Randy Colonic: It appears to me and I could be wrong that there has been.
Randy Colonic: A sizable impact from form factor changes in innovation as it relates to let's say the French press.
Randy Colonic: Cocktail Shaker.
Randy Colonic: Coffee ceramic.
Randy Colonic: Products et cetera on the drink wear side can you maybe kind of give us your perspective, there on that innovation around as it relates to form factor changes versus color because I think what would be interesting there.
Randy Colonic: In fact, a lot of the incremental growth is coming from for form factor changes. It just provides a lot more kind of opportunity in changes for existing and new customers to buy into.
Randy Colonic: More and more yeti products I, just want to get your perspective there.
Randy Colonic: Okay.
Speaker Change: Good morning, Randy. Thanks, Thanks for the question I think.
Speaker Change: It's a combination of things.
Speaker Change: You are correct and as we have continued to scale as we continue to draw new audiences domestically and globally into the brand.
Speaker Change: We've seen opportunity to expand our product portfolio.
Speaker Change: Within our two big groups drink bar is has expanded we think in a really thoughtful kind of powerful way. We as you know from following the story, we focus on our productivity and the leverage we get on each on each SKU, we launch and the <unk>.
Speaker Change: Same with <unk>.
Speaker Change: Drove an driven innovation within hard coolers with its soft coolers expansion of our cargo business.
Speaker Change: The expansion of our bags. The addition of M&A to drive an accelerant there.
Speaker Change: So we do think that it gives us the opportunity to address more consumer needs and more points more points in time or more points in their day.
Speaker Change: So that that form factor change I think you're going to continue to see a rhythm of us doing that as we expand and diversify our product portfolio and we think thats, a really impactful way to grow the business color.
Speaker Change: Color does play an important role in not just customer acquisition, but also repeat purchase.
Speaker Change: As people build out their yeti ownership, what we see is that people people want more color they want to add into their to their portfolio and that's not just a drink or thing thats actually across across the range. While we really work to do is find a balance in those things we don't want to.
Speaker Change: Chase smaller and smaller opportunity and more and more bespoke we want to continue to put.
Speaker Change: Big consumer relevant items out there and form factor big consumer relevant items out there as it relates to color and Thats a formula Thats worked for us and as we continue to grow and scale. The business. It's a formula we're seeing work not only in the U S, but around the world.
Speaker Change: Yes, that's very helpful. And then last question then related to that just give us your long term vision then around how you think about the mystery Ranch acquisition and product debt and then also your ambitions around cookware just give us your thoughts there again on the long term that'd be very helpful. Thank you.
Speaker Change: Thanks, Randy two things and we've said this before we think those are two very large highly fragmented categories very global in nature, both both bags and cookware.
Speaker Change: We think there is an opportunity to leverage <unk> commercial go to market. The way, we the way we tell brand stories the way, we do our product marketing the way.
Speaker Change: We cultivate our consumer base that we think it's a really attractive opportunity in both of those to drive further ownership at yeti repeat purchase further further use cases.
Speaker Change: So I think what youre going to Youre going to see in both those instances I talked about this on the call.
Speaker Change: Sure.
Speaker Change: Our real first entry into <unk>.
Speaker Change: Kind of top end of cast Iron later this year in bags as we look at taking some of the ingredients and the capabilities and the talent that came along with the mystery Ranch acquisition and we combine that with some.
Speaker Change: Some of the materials and talent and designs that we had at yeti is bringing that together and really building out our bags portfolios as we think about the opportunity in <unk>.
Speaker Change: Active in everyday and in travel and so with the with the team that we've put in place around both of those things. We're really excited about what that can mean underneath the yeti brand umbrella and we talk all the time are our focus is on what the Tam is for the Yeti brand and we think both of those categories fit really well.
Speaker Change: Underneath that.
Speaker Change: Very helpful. Thanks, guys.
Speaker Change: And now we have a question from Anna <unk> from B Riley.
Anna: Please go ahead.
Anna: Hi, good morning, Thanks for taking my question.
Anna: I think last year.
Anna: Noted.
Anna: Production from Sandler has brought a lot of new customers into the fold can you talk about how these new customers are engaging with.
Anna: Brand are you seeing repeat purchase behavior.
Speaker Change: Color on that would be great.
Speaker Change: Hi, Ana this is Matt good morning, a couple of things I would say.
Matt: And a little bit to the prior question for Randy as we keep expanding the product portfolio in what I'll call. It useful ways to the consumer in thoughtful ways for them to engage we've also continued to diversify.
Matt: Our consumer base.
Matt: As we said in our prepared remarks, the value of our customers that continues to go up the returning and.
Matt: Newly acquired customers from a value perspective, and we like we like that dynamic where we can give them.
Matt: More product that's useful to them.
Matt: When you look at the expansion.
Matt: What we're seeing is people diving deeper into our product portfolio people coming back and repeat purchasing their favorite product.
Matt: And that part of our marketing efforts as part of our product marketing efforts. It's also part of how we're advancing some of our analytics and how we put the right. The right offer the right opportunity at the right time in front of in front of the consumer.
Matt: But we really like we really like the customers that we've acquired over the last three years to four years.
Matt: To complement the customers that we've had.
Matt: Kind of long standing with yeti.
Matt: I think thats the opportunity to keep bringing innovation in form factor keep bringing excitement and color.
Matt: And then keep that emotional engagement with yeti.
Speaker Change: Great. Thank you expanded that.
Speaker Change: That youre asking the brands.
Matt: Lung to kind of follow up gross margin expansion can.
Matt: Can you talk a little bit more about what the key.
Matt: The priority with Autodesk.
Matt: Yes.
Speaker Change: Yes, good morning, Ana So I'd say it's.
Speaker Change: It's a couple of areas.
Speaker Change: Number one.
Ana: It's really around what we're doing to grow outside the United States.
Ana: So.
Speaker Change: And youre seeing the results of that including this quarter, where we grew international over 30% and it's now 19% of our of our business.
Speaker Change: So I think.
Speaker Change: Within international it's building out the teams we need it's growing the brand building brand awareness building the technology tools that we need the supply chain infrastructure, we need et cetera.
Speaker Change: Number one and number two as we look to kind of build out our.
Speaker Change: Our inorganic.
Speaker Change: Opportunities and be able to support inorganic opportunities theres, obviously, a need to build out our team.
Speaker Change: Internally to do that.
Speaker Change: We talked about that last year in terms of the first steps that we were making there.
Speaker Change: And then I think third even domestically as we look to expand the portfolio into two new areas.
Speaker Change: That our focus on new communities. There is an element of really driving brand awareness in those new in those new areas and in those new product category. So those are just some of the the areas that youll youll see us continue to invest in and hopefully see the results as we go forward.
Speaker Change: Okay. Thanks.
Speaker Change: Okay.
Speaker Change: And our next question comes from Peter Benedict from Baird.
Peter Sloan Benedict: Please go ahead.
Peter Sloan Benedict: Hi, Good morning, guys. Thanks for taking the question so.
Peter Sloan Benedict: First kind of a follow up on one of the earlier questions just curious around mystery ranch.
Peter Sloan Benedict: Matt you've mentioned it as being an accelerant to your to your bags innovation I'm just curious around the timing there.
Peter Sloan Benedict: Is 2025 too soon.
Peter Sloan Benedict: To think that you.
Peter Sloan Benedict: You could see an acceleration in your bags innovation, leveraging some of what you've gotten with the ministry of <unk>.
Peter Sloan Benedict: Is it going to take longer than that or is 2025, a good time to tie for for some initial innovation. That's my first question.
Speaker Change: Hello, Thanks, and thanks for that I would say.
Peter Sloan Benedict: <unk>.
Peter Sloan Benedict: Almost.
Speaker Change: Frankly, before we even closed with mystery rash, we started to to work with the teams on how we bring.
Speaker Change: Sort of the best ingredients together, both businesses and so they're active and well down that path.
Peter Sloan Benedict: I think as we go into 2025.
Peter Sloan Benedict: We'd look to bring out some additional products that will have the result of the work of those two teams coming together and Thats, where the racing towards this.
Peter Sloan Benedict: This is not this is not something where I think we're years out from from seeing the benefit and it's the result of.
Peter Sloan Benedict: Partnering with a great group of people, who have the talent combined with the talent we have at yeti that we can move really quickly on this so.
Peter Sloan Benedict: We're excited to get going and kind of put our first our first products out together.
Speaker Change: Great and then I wanted to pivot over to the international business nice to see kind of the management.
Peter Sloan Benedict: Addition for the Asia region.
Peter Sloan Benedict: Remind us kind of how youre viewing the org structure now internationally, how you plan to build that out.
Peter Sloan Benedict: And support the growth.
Peter Sloan Benedict: And then.
Peter Sloan Benedict: Is there any.
Peter Sloan Benedict: Margin difference, we should be thinking about with the with the international business relative to the U S.
Peter Sloan Benedict: As that business continues to.
Peter Sloan Benedict: To improve its penetration is there any DTC to wholesale mix to think about or anything else from that angle. Thank you.
Speaker Change: Okay. Thanks, Peter I'll take the front end of that from a structural perspective, then Mike Mike can step in on the on the margin.
Speaker Change: As we think about the opportunity internationally one of the things we've shifted our structure. Our go to market structure to have commercial organizations focused on each of the major regions. So the Americas.
Speaker Change: Europe Middle East and then Asia Pacific and the reason being all three are different stages of their maturation and their development and their growth and their needs and so to have had.
Speaker Change: I have.
Speaker Change: A team that is focused on taking advantage of those opportunities taking advantage the opportunity we have in the Americas and taken advantage of the opportunity.
Speaker Change: Burgeoning opportunity we have.
Speaker Change: Europe and the Middle East and then the opportunity we have building off the strength of an incredible business in Australia, as we called out on the call but.
Speaker Change: North Asia and in Greater Asia, and so I think that's where we're excited to get.
Speaker Change: A leader in AIG over that region to start really kind of stoking. What we think is what we think is opportunity underneath the surface.
Speaker Change: Yeah, Hey, Peter it's Mike So a couple of things on your question first.
Mike: Sales mix level.
Mike: It really kind of differs by region, but I would say.
Mike: That the international we haven't given specifics but.
Mike: So what we have said is that we don't have our full D to C model outside the U S and in several cases.
Mike: We've said that corporate sales is underpenetrated, we havent had customization that scale and so that would imply that maybe wholesales.
Mike: A slightly bigger mix piece of the mix internationally, just because of not having the full D to C. D to C model, but we certainly believe that we're in a position to.
Mike: To drive that going forward and Youll see the DTC mix internationally continue to increase from a margin perspective, what we said once you normalize by for channel that the gross margins are are relatively the same as in the U S.
Mike: Some differences by region, but for the most part internationally there are pretty.
Mike: Versus the U S. They are pretty similar.
Mike: You see the differences on the operating margin line. So some of the more the regions, where we've been in market for longer Canada, and Australia, we see really strong operating margins that are accretive to yeti and newer regions that are still emerging like Europe.
Mike: We're still investing and so.
Mike: We still got some room to sort of drive operating margins up in those countries, but as Europe continues to grow we'll see that benefit that just may be offset by new regions that we enter like Asia, where we're going to be going through a similar dynamic that we've been going through in Europe, where the first few years are really about investing and building out the region.
Speaker Change: Got it so as we scale internationally, there's nothing structural that keeps the margins below what other than just investment growing new market. So perfect. All right. Thanks. So much guys. Good luck. Thank you.
Speaker Change: Thanks Peter.
Speaker Change: Okay.
Mike: We have a question from John Kernan from TD Colin.
John David Kernan: John Please go ahead.
John David Kernan: Good morning, Thanks for taking my question.
John David Kernan: Just a couple of questions here.
John David Kernan: Drink wear business accelerated.
John David Kernan: The last few quarters to over 12% growth close to 13% this quarter, maybe talk to some of the drivers of that theres been some.
John David Kernan: New entrants into the marketplace, you've obviously had some category expansion.
John David Kernan: Im just curious how should we think about shrink where versus coarse and equipment for many of the year.
Speaker Change: Yeah, Thanks, John I'll take the kind of a dynamic piece in.
Speaker Change: Mike and Mike can help out take the back end of that.
Speaker Change: I would say.
John David Kernan: As Mike said in an earlier comment we've always lived in a competitive market for our products.
John David Kernan: I think what Yeti has done consistently is drive innovation tell consumers why it's relevant put relevant products out in front of the consumer.
John David Kernan: And be thoughtful about not only our form factor innovation, but also also color I think that the success that we're seeing is both new and returning yeti customers.
John David Kernan: Responding to the product offering.
John David Kernan: And I think when you think about our product portfolio and the reason we call out the 50, plus skus is that and drink where that diversification, giving consumers more reasons to engage with yeti products throughout the day.
John David Kernan: I think as a key part of our key part of our strategy and I think it's a key part of the success that we've had.
Speaker Change: Yeah, and the only thing that I would add John is.
Speaker Change: Matt talked about innovation, just the the growth opportunity outside the United States that we have.
Speaker Change: And then as we look forward and what we expect for the year, We said we expect.
Speaker Change: <unk> outpaced strength, where growth, but we do expect to have to grow drink, where this year kind of a similar rate that we saw last year.
Speaker Change: And we think there is.
Speaker Change: We're off to a good start to deliver that based on Q1.
Speaker Change: Got it and then you didn't just.
Speaker Change: Follow up on too.
Speaker Change: Two partners Dicks, and Amazon, obviously, Amazon being on the PTC side and takes on the wholesale side.
Speaker Change: The two.
Speaker Change: And the productivity at the stores in which we operate in we invest in the productivity and the performance for our partners and that's been a hallmark of yeti.
Speaker Change: Before that our shelf space is remained the same are mixed on the shelf as we launch new products and as we innovate our wholesale partners continue to find ways to merchandise us find the space for our products would say that the biggest change we've seen in recent is how much of the total.
Speaker Change: Space within stores is committed to to our categories and I think that's the dynamic of the consumer interest, particularly around drink wearing particularly around hydration, which we think the attention to the category as you've seen in the results from Yeti only continue to benefit the strong product offering that we have there. So you know I'd say as we <unk>.
Speaker Change: Look across our wholesale landscape in the U S. We feel very good about the footprint, we have which will get very good about the support we have from a wholesome partners, we feel great about the receptivity to to our innovation and the things that we have coming up.
Speaker Change: And they continue to be a really important piece of <unk> performance.
Speaker Change: And on Amazon, a gentleman I mean, obviously with our disclosures in the 10-K would imply we had a really strong Amazon year last year from a growth perspective, we called it as we went through the year was a driver not only our growth, but also you know from a from a from an SG&A standpoint, you know what we said this quarter.
Speaker Change: Is that we saw good growth across all of our D. C sub channels Amazon included.
Speaker Change: And and you know that's on top of having a really strong ear last year. So you know we we didn't give specific color on Amazon, we're having given specific color on Amazon from a guidance or outlook perspective other than to say, we think it's a really important channel for us. It can continue to be a really important channel for us.
Speaker Change: But it's gonna be you know I I think you know balance with our other D to see some channels this year.
Speaker Change: Understood. Thank you.
Speaker Change: Sorry.
Speaker Change: Let's take a question from Peter Keith from Piper Piper Sandwich, Peter Please go ahead.
Peter Jacob Keith: Thanks, Good morning, guys nice results here.
Peter Jacob Keith: Sticking on internationally has gotten a couple of questions, but with the acceleration you've seen the last two quarters I was hoping you could just maybe highlight where some acceleration is coming from and then Mike also with the acceleration why why would the full your guide still be 20% to 25% for international.
Peter Jacob Keith: <unk> and and finally on international I think you've talked about a 30% sales penetration target longterm.
Speaker Change: Is there any thought that that might be higher as we go forward. Thank you.
Speaker Change: Thanks, Peter and good morning, I'll I'll I'll take a bit of that and then Michael Uhm microwave.
Speaker Change: Michael way on a bit too.
Speaker Change: When we look at it kind of where that acceleration is coming from you know we called out on the call Australia continues to perform extremely well we have we have an incredible team down there they have a great wholesale footprint.
Speaker Change: That is getting the brand out in front of consumers throughout Australia.
Speaker Change: We have a strong e-commerce business.
Speaker Change: We identified and called out the the opportunity and the growing customization personalization capabilities.
Speaker Change: The building a really nice corporate sales business.
Speaker Change: And then you know we're a little earlier in New Zealand, but new Zealand's a great market for us. It's a it's a market to the perfect fit perfect fit for Yeti. So I think that's that's a market where we got a lot of things in place.
Speaker Change: To be able to build on top of the momentum and the success that that <unk> going back to 2017, So I think that that businesses in the kind of build strength on strength mode.
Speaker Change: In Europe, we call that the U K and Germany.
Speaker Change: Been broadly in Europe, we're seeing the brand awareness grow R C and product placement or partnerships are marketing our ambassadors are that activations sort of running the the classic Yeti playbook is is really start to pay dividends and you know, we we launched that business right before in late 2009.
Speaker Change: Right before the pandemic so it had a little bit slower start with the wholesale destruction during that period and and now we're in a mode, where wholesale partners are starting to grow we're getting the right kind of thoughtful additional doors.
Speaker Change: Driving a strong e-commerce business, we've got a core sales business. That's that's really starting to turf up some some really interesting opportunities that are really bran on brand brand right and and exciting ways to get that.
Speaker Change: That kind of first handshake a product into the consumers hands. So you know we we feel really good about about those growth platforms. In Canada is our is our longest standing international market.
Speaker Change: Continues to to diversify their their channels to market continues to grow the corporate sales continues to drive the customization has great wholesale partnerships.
Speaker Change: So overall I think we're at the mode, where that that accelerant.
Speaker Change: Is Sunday, we're putting some energy into to the previous question and putting kind of smart dollars behind it I think as far as the target of where it can go.
Speaker Change: You know when we first when we were kind of talking about zero International sales you know we put we put illustrative examples of brands that were U S. Based that are grown internationally and that's where the 30 per cent came it was never necessarily a target, but as you look at.
Speaker Change: The opportunity that we're proving is out there and then the opportunity we haven't yet tapped.
Speaker Change: We haven't put a cap on what we think international can be as far as a contribution to your area.
Speaker Change: And Hey, Peter There. This is Mike the only thing I'd add is you know in terms of why we didn't adjust the guidance and I think it comes down to just.
Mike: One quarter, it's our smallest quarter Ah so have a lot of the your left to go if you. If you take the the full your guide and Kinda back out the Q1 results you're still in that range that we've that we've talked about a 20% to 25% growth for the year, but obviously as we you know we think there is a lot of momentum here, we think there's opportunity here.
Speaker Change: For us not only this year, but but longterm, but for now we're going to we're going to sort of hold our guidance for the year were just focused on delivering the 79% for the company overall and and we feel like international is gonna be a big piece of that.
Speaker Change: Okay. Thank you very much and good luck.
Speaker Change: Mmm.
Speaker Change: And now we have a question from Brooke roads from Goldman Sachs.
Brooke Siler Roach: Brooke. Please go ahead.
Speaker Change:
Brooke Siler Roach: Trying to think of sustainable longterm margin pack might look like for the brand is increasingly diversify your business into new category geography relative to the prior racing achieved in 2021.
Brooke Siler Roach: Hi, Brooke I think the front end of your question at least on our line cut out so apology.
Speaker Change: Apologize, but could you repeat the question.
Brooke Siler Roach: Yeah sure can you hear me now.
Brooke Siler Roach: Yes.
Brooke Siler Roach: Great helping.
Brooke Siler Roach: Hoping you can help us understand where you think 15 or a longterm operating profit margin have might look like for the brand as you diversify your business into new categories and geographies relative to the 20th 21 prior peak.
Speaker Change: He broke its mind. Thank you for the questions. So you know as we we've talked about.
Speaker Change: We believe that as we've now that we've recaptured a lot of the inbound for a cost peak that we saw on the 20th 20th 20th 21, and 22 22 timeframe. We're at a point that now we've recapture that we believe we can we can start to kind of build back operating margins.
Speaker Change: Over time, I think you're going to see that and sort of two ways. Obviously, one would be continued to drive up gross margins through sales mix supply chain efficiencies product cost efficiencies into.
Speaker Change: And two we believe that that.
Speaker Change: Over time, we will begin to we will start to get leverage on our SG&A, there's going to be quarters here there were.
Speaker Change: That may not you may not see that just quarter to quarter variability, but over the long term that is that is absolutely our goin' at that.
Speaker Change: Really what we believe we can deliver.
Speaker Change: We talked about the international peace of it earlier.
Speaker Change: You know two of our regions are.
Speaker Change: From an operating margin standpoint are.
Speaker Change: Absolutely accretive to the company, they're they're at a point to where there.
Speaker Change: They've got a.
Speaker Change: A good piece of the infrastructure they need.
Speaker Change: Europe is where we're doing a lot of our investing now just because of because of the opportunity that we see so but over time as we scale that business will start to to to get benefit as they drive up there operating margin Digest may be upset as we launch new regions and obviously, we took a <unk>.
Speaker Change: Step.
Speaker Change: Recently with the new member of our team is gonna help lead our entrance into into that region from a new product standpoint, you know I I think well, we'll have to see kind of where we go but.
Speaker Change: As as we've done over the last six eight years it as we broaden the cat our product portfolio beyond just coolers and drink where those new product is we've launched them or even expanded within those core categories. They've all been at margins that are relatively in line with what we've done in the past so.
Speaker Change: Yeah, we have we don't have a history of as we expand the product portfolio. The the margins go down. So we believe we can continue to expand our operating margins from here both.
Speaker Change: You know through gross margin upside as well as a leverage on our SG&A.
Speaker Change: Great. Thanks, how much I'll have one.
Speaker Change: And this will conclude our question and answer session and now I would like to turn the conference back over to my my map branches for any closing remarks. Please go ahead.
Map Branches: Thank you operator, and thanks, all for joining the call. This morning, we look forward to speaking with you during our queue to call.
Speaker Change: And this concludes our conference. Thank you very much for attending today's presentation. You may now disconnect and have a great day.
Speaker Change: [noise].