Q1 2024 Traeger Inc Earnings Call
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Nick Bacchus: Good afternoon, everyone. Thank you for joining Traeger's call to discuss its first quarter 2024 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm Nick Bacchus, Vice President and Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer, and Dom Blosil, our Chief Financial Officer.
Good afternoon, everyone. Thank you for joining triggers call to discuss its first quarter of 2024 results, which were released this afternoon and can be found on our website at investors that finger dot com.
Speaker Change: Back as vice President of Investor Relations that trigger.
Back: With me on the call today are Jeremy address our Chief Executive Officer, Dom <unk>, our Chief Financial Officer.
Nick Bacchus: 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. I encourage you to review our annual report on Form 10-K for the year ended December 31st, 2023, our quarterly report on Form 10-Q for the quarter ended March 31st, 2024, once filed, and our other SEC filings for a discussion of these factors, which are also available on the investor relations portion of our website. You should not place undue reliance on these forward-looking statements. We speak only as of today. We undertake no obligation to update or revise them to include any new information.
Back: 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 incur.
Nick Bacchus: This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, adjusted net income per share, and adjusted EBITDA margin, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliations of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release, which is available on the investor relations portion of our website at investors.traeger.com. 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.
Back: I encourage you to review our annual report on Form 10-K for the year ended December 31, 2023, a quarterly report on Form 10-Q for the quarter ended March 31, 2024, once filed 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.
Back: Statements, which speak only as of today and we undertake no obligation to update or revise them for any new information.
Back: It also contains certain non-GAAP financial measures, including adjusted EBITDA adjusted net income adjusted net income per share and adjusted EBITDA margin, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliations of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release, which is available on the Investor relations portion of our web.
Back: Site at investors that trigger dot com.
Back: Note that our definition of these measures may differ from similarly, titled metrics presented by other companies.
Back: Now I'd like to turn the call over to Jeremy Anderson, Chief Executive Officer of trigger.
Jeremy Andrus: Thank you, Nick. Thank you for joining us on our first quarter earnings call. Today, we'll be discussing our first quarter results, and we'll provide an update on our strategic growth pillars before handing the call over to Dom to provide further detail on our quarterly performance. Despite facing a challenging demand backdrop, I am pleased with our execution in the first quarter. Sales were $145 million, and adjusted EBITDA was $24 million, at the high end of our guidance range.
Jeremy Andrus: Thank you Nick Thank you for joining our first quarter earnings call today, we'll be discussing our first quarter results and will provide an update on our strategic growth pillars before handing the call over to Don to provide further detail on our quarterly performance. Despite.
Jeremy Andrus: Despite facing a challenging demand backdrop I am pleased with our execution in the first quarter.
Jeremy Andrus: <unk> were $145 million and adjusted EBITDA was $24 million at the high end of our guidance range. Our first quarter results give us confidence in our outlook for the year and we are reaffirming our prior financial guidance for fiscal 2024.
Jeremy Andrus: Our first quarter results give us confidence in our outlook for the year, and we are reaffirming our prior financial guidance for fiscal 2024. As we move through the quarter, we continue to focus on our key strategic imperatives of driving energy to our brand and delighting our consumers with innovative products. The underlying measures of health for our brand remain strong, and I continue to believe that Traeger is well positioned to be a long-term share gainer in outdoor cooking.
Back: As we move through the quarter, we continue to focus on our key strategic imperatives of driving the energy to our brand and delighting, our consumers with innovative product the.
Back: The underlying measures of health for our brand remains strong.
Back: Continue to believe that trigger is well positioned to be a long term share gainer in outdoor cooking.
Jeremy Andrus: Retail partners continue to be very supportive of the Traeger brand and invest alongside us in the consumer experience at retail. The Traegerhood, our community of Traeger enthusiasts, continues to be passionate, as evidenced by the strong growth in engagement in our social media channels, as well as our industry-leading MPS score. I believe that our premium positioning and our current efforts will allow the company to disproportionately benefit from an eventual recovery in grill industry demand. However, as we anticipated, the demand environment continued to be soft in the first quarter. From a sell-through perspective, consumer demand for agrils remained below the prior year.
Back: Our retail partners continue to be very supportive of the trigger brand invest alongside of us into the consumer experience at retail.
Jeremy Andrus: The trader Hood, our community of trigger enthusiasts continues to be passionate as evidenced by the strong growth and engagement in our social media channels as well as our industry, leading NPS score.
Back: I believe that our premium positioning and our current efforts will allow the company to disproportionately benefit from an eventual recovery and grill industry demand.
Back: As we anticipated the demand environment continue to be soft in the first quarter from.
Jeremy Andrus: From a sell through perspective consumer demand for our Grilles remained below the prior year.
Jeremy Andrus: We believe the consumer continues to shift spend away from durable goods like our grills and other product categories they over indexed on during the pandemic. In particular, we see greater pressure on higher ASP skews. From a sell-in perspective, in the first quarter, we were comparing against significant load-in tied to the launch of two new grills in the prior year, which also pressured sales this year. Additionally, we are assuming that consumer demand for grills remains soft for the balance of this year.
Back: We believe the consumer continues to shift spend away from durable goods like our grills and other product categories. They over indexed on during the pandemic.
Back: In particular, we see greater pressure on higher Asp's skus.
Back: From a selling perspective in the first quarter, we were comparing against significant load in tied to the launch of two new grilles in the prior year, which also pressured sales this year.
Back: We are assuming that consumer demand for grills remain soft for the balance of this year.
Jeremy Andrus: The first quarter is a seasonally slower period in terms of consumer demand for grills, and our peak selling season at retail typically starts with Memorial Day and lasts through the end of the summer. Therefore, we are highly focused on execution as we move into our most important seasonal period in the next several months, and we will have greater visibility as we move through the second quarter and key holiday period. In the first quarter, our results continue to benefit from our significant efforts over the last two years to enhance profitability and efficiency.
Back: The first quarter is a seasonally slower period in terms of consumer demand for grills and our peak selling season at retail typically starts with memorial day.
Back: Last through the end of the summer.
Jeremy Andrus: Therefore, we are highly focused on execution as we move into our most important seasonal period in the next several months and we will have greater visibility as we move through the second quarter in key holiday periods.
Back: In the first quarter, our results continue to benefit from our significant efforts.
Back: The last two years to enhance profitability and efficiency.
Jeremy Andrus: Despite lower sales versus the first quarter of last year, adjusted EBITDA grew 11% year-over-year, and our adjusted EBITDA margin grew by 250 basis points. This growth was driven by 700 basis points of gross margin expansion. I am very pleased with our ability to drive first quarter gross margin above 43%, and our Q1 margin represents the highest quarterly gross margin we've reported as a public company. This was our fourth consecutive quarter of gross margin expansion.
Jeremy Andrus: <unk> lower sales versus the first quarter of last year, adjusted EBITDA grew 11% year over year and our adjusted EBITDA margin grew by 250 basis points.
Back: This growth was driven by 700 basis points of gross margin expansion.
Back: I am very pleased with our ability to drive first quarter gross margin above 43% and our.
Back: Q1 margin represents the highest quarterly gross margin we've reported as a public company.
Back: This is our fourth consecutive quarter of gross margin expansion and the significant progress. We have made on margins has been driven by both improvements in the cost environment as well as company specific initiatives.
Jeremy Andrus: And the significant progress we have made on margins has been driven by both improvements in the cost environment as well as company-specific initiatives. We continue to have line of sight into strong gross margin improvement for the fiscal year. Well, at the core of the Traeger story is our long-term opportunity to expand our household penetration and market share. In the current challenging demand environment, our ability to drive meaningful improvements in our margins and our adjusted EBITDA speaks to our financial discipline. And we expect these improvements will set the company up well for significant growth as demand improves. Overall, I am pleased with our ability to deliver first-quarter results at the higher end of our guidance range.
Jeremy Andrus: We continue to have line of sight into strong gross margin improvement for the fiscal year.
Back: Well at the core of the Trager story is our long term opportunity to expand our household penetration and market share in the current challenging demand environment, our ability to drive meaningful improvements in our margins and our adjusted EBITDA speaks to our financial discipline and we expect these improvements will set the company up well.
Back: For significant growth as demand improves.
Jeremy Andrus: I believe we are well positioned to execute on our plan this year. Let me now review our strategic growth pillars and key wins in these areas. Our first growth pillar is to drive awareness and penetration in the United States. While the first quarter is a seasonally slower period in terms of grill usage, our community was highly engaged with our brand during the quarter, and we continue to interact with the Traeger hood and create energy behind our brand during key seasonal events. In February, our social posts focused on the Super Bowl, and we offered up content and recipes for the big game, including our epic take on trash can nachos.
Back: Overall, I am pleased with our ability to deliver first quarter results at the higher end of our guidance range. I believe we are well positioned to execute on our plan this year.
Jeremy Andrus: Let me now review, our strategic growth pillars, and key wins in these areas.
Jeremy Andrus: Our first growth pillar is to drive awareness and penetration in the United States while.
Back: While the first quarter is a seasonally slower period in terms of grill usage.
Back: Community was highly engaged with our brand during the quarter and we continue to interact with the trade or hood and create energy behind our brand during key seasonal events in February our social posts focus on the Super Bowl and we offered up content and recipes for the big game, including our epic take on Trashcan nachos.
Jeremy Andrus: We also teamed up with the Dan Patrick Show to demonstrate to viewers how to use their Traeger to create an incredible Super Bowl spread. Overall, we saw strong engagement with our brand during the Super Bowl and had another record year of user-generated content. We also saw a solid increase in connected cooks on the day.
Back: We also teamed up with the Dan Patrick show to demonstrate to viewers how to use their trigger to create an incredible Super Bowl spread overall.
Jeremy Andrus: Overall, we saw strong engagement with our brand during the Super Bowl and had another record year of user generated content Bose.
Back: We also saw a solid increase in connected cooks on the day.
Jeremy Andrus: Heading into the peak grilling season this year, we are highly focused on driving execution and position at retail. Historically, Traeger has leveraged community and ground level marketing, as well as in-store selling and merchandising efforts to drive awareness and accelerate conversion. We will continue to utilize these strategies in the coming months, and we believe that investments in retail execution and merchandising are some of our highest return activities. This includes our Captain Traeger program.
Back: Heading into the peak grilling season. This year, we are highly focused on driving execution and position at retail historically.
Back: Hager has leveraged community and ground level marketing as well as in store selling and merchandising efforts to drive awareness and accelerate conversion.
Back: We will continue to utilize these strategies in the coming months, and we believe that investments into retail execution and merchandising our some of our highest return activities.
Back: This includes our Captain Drager program. This program is designed for associates at our retail partners, who are barbecue enthusiasts and are ready to take their knowledge training and commitment to the <unk> brand to the next level.
Jeremy Andrus: This program is designed for associates at our retail partners who are barbecue enthusiasts and are ready to take their knowledge, training, and commitment to the Traeger brand to the next level. Captain Traeger provides retail associates with access to educational training, limited edition products, and exclusive VIP events. It transforms these associates into Traeger evangelists.
Back: Captain Trager provides retail associates with access to educational trainings limited edition products and exclusive VIP events and transforms these associates into trigger of Angelus.
Jeremy Andrus: This year, we are investing in the Captain Traeger Program through in-person and digital training experiences as we move into peak grilling season. Next week, on May 18th, we will be celebrating our seventh annual Traeger Day. Traeger Day centers around gathering friends and family, enjoying food cooked on your Traeger, and sharing these memories with the Traegerhood via social media. Members of our community have been recording their best Cheers to the Traegerhood videos and submitting these to us over the last couple of weeks.
Jeremy Andrus: This year, we are investing into the captain trigger program through in person and digital training experiences moving into peak grilling season.
Jeremy Andrus: On May 18th, we'll post a reel with the best submissions. We'll also run a contest with Traeger giveaways to encourage our community to post their Traeger Day content on social. The day is a celebration of all things Traeger and is our highest user-generated content day of the year.
Back: Next week on May 18th we will be celebrating our seventh annual trager de <unk>.
Jeremy Andrus: Triggered a centers around gathering friends and family enjoying food cooked on your trager and sharing these memories with the trigger and via social media.
Back: Members of our community have been recording their best cheers to the trailers and videos and submitting these to us over the last couple of weeks.
Jeremy Andrus: On May 18th we will post a real with the best submissions.
Back: We'll also run a contest with trigger giveaways to encourage our community to post their trigger date content on social.
Jeremy Andrus: Dave is a celebration of all things Trager and is our highest user generated content day of the year.
Jeremy Andrus: Turning to Innovation. Innovation is a key pillar of our long-term vision for Traeger, and we remain committed to empowering our capabilities in this area. In the first quarter, we completed the buildout of our new R&D lab at our corporate headquarters in Salt Lake City. The R&D lab is designed to equip the R&D team with tools needed to bring innovation into their physical forms as well as inspire creativity.
Back: Turning to innovation.
Back: Innovation is a key pillar of our long term vision for trigger and we remained committed to empowering our capabilities in this area.
Back: In the first quarter, we completed the build out of our new R&D lab, and our corporate headquarters in Salt Lake City.
Back: R&D lab is designed to equip the R&D team with tools.
Jeremy Andrus: Need it to bring innovation into their physical forms as well as inspire creativity we've.
Jeremy Andrus: We believe this new space will greatly enhance our ability to create and will be a driver in our long-term mission to disrupt the outdoor cooking industry with innovation. Also, on the innovation front, I'd like to mention that Traeger was named one of Fast Company's most innovative companies in 2024. In fact, Traeger was ranked the sixth most innovative company in North America.
Back: We believe this new space will greatly enhance our ability to create and will be a driver in our long term mission to disrupt the outdoor cooking industry with innovation.
Back: Also on the innovation front I'd like to mention that trader was named one of fast company's most innovative companies in 2024.
Jeremy Andrus: In fact <unk> was ranked the six most innovative company in North America.
Jeremy Andrus: Fast Company's list highlights businesses that are shaping industry and culture through innovations in a variety of sectors, and the annual list is highly anticipated. This achievement is a testament to our longstanding commitment to innovation and disruption. We are incredibly proud of our team for this well-deserved recognition. Our next growth pillar is growing our consumables business. In the first quarter, we drove innovation in our pellets business through our partnership with an iconic American brand.
Back: SaaS companies list highlights businesses that are shaping industry and culture through innovations and a variety of sectors and the annual list is highly anticipated.
Back: This achievement is a testament to our longstanding commitment to innovation and disruption and incredibly proud of our team for this well deserved recognition.
Jeremy Andrus: Our next growth pillar is growing our consumables business in the first quarter, we drove innovation in our pellet business through our partnership with an iconic American brand in.
Jeremy Andrus: In March, we announced the introduction of a limited edition wood pellet in collaboration with Louisville Slugger, the official bat of Major League Baseball. Traeger's limited edition maple pellets are crafted from the same hardwood used to make Louisville Slugger's iconic bats and repurposed wood from the bat manufacturing process to transform it into wood pellets for the enjoyment of Traeger users.
Back: In March we announced the introduction of a limited edition wood pellet in collaboration with Louisville Slugger. The official bat of major League baseball.
Back: Triggers limited edition Maple pilots are crafted from the same hardwood used to make Louisville, sluggers iconic batch and repurpose wood from the bad manufacturing process to transform it to wood pellets for the enjoyment of trigger users.
Jeremy Andrus: To drive awareness for this launch, we released a series of videos on social featuring our Director of Marketing Chad Ward cooking on a Traeger with 13-time MLB All-Star Ken Griffey, Jr. As we mentioned on our last earnings call, in February, we relaunched our new branded barbecue sauces across all markets and launched a marketing campaign highlighting our updated offering. With new and improved formulas and easier-to-use squeeze bottles, we believe our new line is a big upgrade.
Jeremy Andrus: To drive awareness for this launch we released a series of videos and social featuring our director of marketing Chad Ward cooking on Trager with 13 time.
Back: MLB All star Ken Griffey Junior.
Back: As we mentioned on our last earnings call in February we relaunched our new branded barbecue sauces across ball market in Marseille marketing campaign, highlighting our updated offering.
Jeremy Andrus: With new and improved formulas and easier to use squeeze bottles. We believe our new line is a big upgrade.
Jeremy Andrus: We have also positioned our revamped soft line at a more competitive MSRP. We have been pleased with consumer reception of our new sauces and have seen a lift in sell-through versus our previous line of sauces. Next, I will discuss our fourth pillar, expanding internationally. In Canada, we saw improved sell-through at our big box and specialty grill channels in the first quarter, and we are pleased with the momentum and demand going into the summer. In Europe, our distributors continue to work down excess inventory, and we expect that inventory levels will be balanced later this year. Germany and the UK are direct markets in the EU.
Back: We are also positioned our revamped soft line at a more competitive MSRP.
Back: We have been pleased with consumer reception of our new sources.
Jeremy Andrus: Seen a lift in sell through versus our previous line of sources.
Back: Next I will discuss our fourth pillar expanding internationally.
Back: Canada, we saw improved sell through in a big box and specialty grilled channels in the first quarter and we're pleased with the momentum in demand going into the summer.
Back: In Europe, our distributors continue to work down excess inventory and we expect that inventory levels will be balanced later this year in.
Jeremy Andrus: We are focused on execution at retail, going into peak grilling season. We recently rolled out a sales training initiative where we gather leading sales associates from our retail partners to educate them on the brand, demo the product, and have them meet brand influencers. Similar to our strategy in the U.S., we believe that ground-level execution will drive retail conversion in our international markets, where awareness of our brand remains lower than in the United States.
Back: In Germany, and the UK, our direct markets in the EU, we are focused on execution at retail going into peak grilling season.
Back: We recently rolled out a sales training initiative, where we gather leaving sales associates from our retail partners to educate them on the brand demo the product and have them be brand influencers.
Back: Similar to our strategy in the U S. We believe that ground level execution will drive retail conversion in our international markets, where awareness of our brand remains lower than in the United States.
Jeremy Andrus: On the meter side, we recently launched new distribution at Canadian Tire, one of the leading retailers in Canada. METER also continues to see growth from its partnership with Vorwerk, which is a nice complement to METRES DPC-driven revenue base. Overall, I am pleased with our ability to execute our plan in the first quarter, in particular given the near-term market challenges that continue to face our industry. We saw strong growth in gross margins, which has been a key area of focus for our organization for the last 24 months, and we grew adjusted EBITDA.
Jeremy Andrus: On the meter side, we recently launched new distribution at Canadian tire one of the leading retailers in Canada.
Back: Meter also continued to see growth from its partnership with for work, which is a nice complement to meters DTC driven revenue base.
Back: Overall, I am pleased with our ability to execute our plan in the first quarter.
Jeremy Andrus: In particular, given the near term market challenges continue to face our industry.
Back: We saw strong growth in gross margins, which has been a key area of focus for our organization for the last 24 months and grew adjusted EBITDA.
Jeremy Andrus: Going into the peak seasonal period, we are hyper-focused on executing against our plan, and I remain highly confident in our ability to navigate the current environment while positioning the brand for long-term success. And with that, I'll turn the call over to Dom.
Jeremy Andrus: Going into the peak seasonal period, we are hyper focused on executing against our plan and I remain highly confident in our ability to navigate the current environment, while positioning the brand for long term success.
Dom: And with that I'll turn the call over to Don Don.
Dominic Blosil: Thanks, Jeremy. And good afternoon, everyone.
Don: Thanks, Jeremy and good afternoon, everyone. Today, I will review, our first quarter performance and discuss our outlook for fiscal year 2024.
Dominic Blosil: Today, I will review our first quarter performance and discuss our outlook for fiscal year 2024. First quarter revenues declined 5% to $145 million, and grill revenues declined 14% to $77 million. Grill revenue was impacted by lower sell-through at retail and a lower average selling price. Furthermore, in the first quarter of 2024, we were lapping the initial load-in of two new grill launches in the first quarter of last year, which pressured sell-in on a comparative basis.
Dom: First quarter revenue declined 5% to $145 million.
Don: Grille revenues declined 14% to $77 million.
Dominic Blosil: Grill revenue was impacted by lower sell through at retail and a lower average selling price.
Don: Furthermore, in the first quarter of 2020 store, we were lapping initial load in of two new grille launches in the first quarter of last year, which pressured selling on a comparative basis.
Dominic Blosil: Consumables revenues were $32 million, up 7% compared to the first quarter of last year, driven by growth in both our pellet business as well as our food consumables business. While first quarter pellet revenues did benefit from a timing shift in the second quarter, we are pleased with the growth. Accessories revenue increased 7% to $36 million, largely driven by increased sales at the meter. Geographically, North American revenues were down 9% while rest of world revenues were up 31%.
Back: <unk> revenues were $32 million up 7% compared to the first quarter of last year.
Back: Driven by growth in both our pellet business as well as our food consumables business.
Back: While first quarter pellet revenues did benefit from a timing shift from the second quarter. We are pleased with the growth.
Dominic Blosil: Accessories revenues increased 7% to $36 million.
Back: Largely driven by increased sales at meter.
Back: Geographically North America revenues were down 9%, while rest of world revenues were up 31%.
Dominic Blosil: Gross profit for the first quarter increased to $63 million from $55 million in the first quarter of 2023. Gross profit margin was 43.2%, up 700 basis points versus the first quarter of 2023. We are pleased with our first quarter gross margin performance, which benefited from lower costs, as well as the margin enhancing initiatives we implemented in the last two years. The increase in gross margin was primarily driven by one, lower freight and logistics costs, which drove 290 basis points of margin favorability. Two, higher pellet margins driven by our efforts to increase efficiency of our pellet mills, which drove 170 basis points of margin.
Back: Profit for the first quarter increased $263 million from $55 million in the first quarter of 2023.
Back: Gross profit margin was 43, 2% up 700 basis points versus the first quarter of 2023.
Back: We are pleased with our first quarter gross margin performance, which benefited from lower costs as well as the margin enhancing initiatives, we implemented in the last two years.
Dominic Blosil: Three, FX favorability, which positively impacted margins by 90 basis points. And four, other favorable gross margin items worth 150 basis points. Sales and marketing expenses were $22 million, compared to $22 million in the first quarter of 2023. During the quarter, decreased demand creation costs were partially offset by increased employee expenses. General and administrative expenses were $32 million compared to $27 million in the first quarter of 2023. The increase in G&A expense was driven by higher stock-based compensation expense, higher employee expenses, and higher occupancy expenses, partially offset by non-recurring expenses related to the disposal of pellet mill assets in the comparable period.
Back: The increase in gross margin was primarily driven by one lower freight and logistics costs, which drove 290 basis points of margin favorability.
Back: <unk> Iyer pellet margins driven by our efforts to increase efficiency that our pellet mills, which drove 170 basis points of margin.
Back: <unk>, FX favorability, which positively impacted margins by 90 basis points and four other favorable gross margin items worth 150 basis points.
Back: Sales and marketing expenses were $22 million.
Dominic Blosil: <unk> to $22 million in the first quarter of 2023.
Back: During the quarter decreased demand creation costs were partially offset by increased employee expenses.
Back: General and administrative expenses were $32 million compared to $27 million in the first quarter of 2023.
Dominic Blosil: The increase in G&A expense was driven by higher stock based compensation expense higher employee expense and higher occupancy expenses, partially offset by nonrecurring expenses related to the disposal of pellet mill assets in the comparable period.
Dominic Blosil: Net loss for the first quarter was $5 million as compared to a net loss of $11 million in the first quarter of 2023. Net loss per diluted share was $0.04 as compared to a loss of $0.09 in the first quarter of 2023. Adjusted net income for the quarter was $5 million, or $0.04 per diluted share, as compared to adjusted net income of $1 million, or $0.01 per diluted share, in the same period of 2023.
Back: Net loss for the first quarter was $5 million as compared to net loss of $11 million in the first quarter of 2023.
Back: Net loss per diluted share was <unk> <unk>.
Dominic Blosil: Compared to a loss of <unk> in the first quarter of 2023.
Back: Adjusted net income for the quarter was $5 million or <unk> <unk> per diluted share as compared to adjusted net income of $1 million or <unk> <unk> per diluted share in the same period of 2023.
Dominic Blosil: Adjusted EBITDA was $24 million in the first quarter, as compared to $22 million in the same period of 2023. First quarter adjusted EBITDA was approximately in line with the high end of our guidance range of $21 million to $24 million. Next, I will discuss the balance sheet. At the end of the first quarter, cash and cash equivalents totaled $24 million, compared to $30 million at the end of the previous fiscal year.
Back: Adjusted EBITDA was $24 million in the first quarter as compared to $22 million in the same period of 2023.
Back: First quarter adjusted EBITDA was approximately in line with the high end of our guidance range of $21 million to $24 million.
Speaker Change: Next I will discuss the balance sheet.
Back: At the end of the first quarter cash and cash equivalents totaled $24 million.
Back: Compared to $30 million at the end of the previous fiscal year.
Dominic Blosil: We ended the quarter with $404 million of long-term debt. Additionally, at the end of the quarter, the company had drawn down $41 million under its receivables financing agreement, resulting in total net debt of $421 million. From a liquidity perspective, we ended the first quarter with total liquidity of $153 million. Inventory at the end of the first quarter was $100 million, compared to $96 million at the end of the fourth quarter of 2023 and $132 million at the end of the first quarter of 2023.
Back: We ended the quarter with $404 million of long term debt.
Back: At the end of the quarter the company had drawn down $41 million under its receivables financing agreement, resulting in total net debt of $421 million.
Back: From a liquidity perspective, we ended the first quarter with total liquidity of $153 million.
Back: Inventory at the end of the first quarter was $100 million.
Back: Compared to $96 million at the end of the fourth quarter of 2023 and $132 million at the end of the first quarter of 2023.
Dominic Blosil: We believe inventories on our balance sheet are appropriately positioned for our current demand outlook. Moving to our outlook for fiscal year 2024, we are reiterating our guidance for revenues of $580 million to $605 million and adjusted EBITDA of $62 million to $71 million. As previously discussed, we expect our grill revenues to be pressured by lower sell-through as consumer demand for grills remains below historical levels. Furthermore, we will be lapping the load in at the Ironwood and Flat Rock facilities, and we will be sunsetting several grill skus this year ahead of future product launches, which will also pressure grill revenues.
Back: Believe inventories on our balance sheet are appropriately positioned for our current demand outlook.
Back: Moving to our outlook for fiscal year 2024.
Back: We're reiterating our guidance for revenues of $580 million to $605 million and adjusted EBITDA of $62 million to $71 million.
Back: As previously discussed we expect our grille revenues to be pressured by lower sell through as consumer demand for grills remains below historical levels.
Back: Furthermore, we will be lapping the loading of the ironwood and flat rock and we will be sunsetting. Several grill skus. This year ahead of future product launches.
Dominic Blosil: Which will also pressure grille revenues.
Dominic Blosil: We expect that third-quarter revenues will be our most challenging on a year-over-year basis. We are also reiterating our outlook for full-year gross margins of 39% to 40%, which represents an expansion of 210 basis points to 310 basis points. We continue to expect that our margin will benefit from lower transportation costs, in particular lower inbound freight rates, as well as margin-enhancing initiatives, including our pellet mill optimization and our direct import program, partially offset by planned strategic pricing actions to stimulate demand.
Back: We expect that third quarter revenues will be our most challenging on a year over year basis.
Dominic Blosil: We are also reiterating our outlook for full year gross margins of 39% to 40%.
Back: Which represents expansion of 210 basis points to 310 basis points.
Dominic Blosil: We continue to expect that our margin will benefit from lower transportation costs in particular, lower inbound freight rates as well as margin enhancing initiatives, including our pellet mill optimization and our direct import program, partially offset by planned strategic pricing actions to stimulate demand.
Dominic Blosil: We expect that our first quarter gross margin improvement will be the largest of the year and believe the rate of improvement will moderate going forward. Furthermore, we expect that third quarter gross margin will be negatively impacted by de-leverage, given the expected pressure on sales and the lower revenue base in the quarter. Overall, while we faced ongoing demand pressure, we delivered first quarter results in line with our plan. Despite lower sales, we grew adjusted EBITDA, and we have visibility into a second year of meaningful gross margin expansion.
Back: We expect that our first quarter gross margin improvement will be the largest of the year and believe the rate of improvement will moderate going forward.
Dominic Blosil: Furthermore, we expect that third quarter gross margin will be negatively impacted by deleverage given the expected pressure on sales and the lower revenue base in the quarter.
Back: Overall, while we faced ongoing demand pressure, we delivered first quarter results in line with our plan.
Back: Despite lower sales, we grew adjusted EBITDA and we have visibility into a second year of meaningful gross margin expansion.
Dominic Blosil: We are highly focused on execution as we move into our peak selling season and remain committed to navigating the current environment while positioning for long-term growth. And with that, I'll turn the call over to the operator for questions. Operator.
Dominic Blosil: We are highly focused on execution as we move into our peak selling season.
Back: And remain committed to navigating the current environment, while positioning for long term growth.
Speaker Change: And with that I'll turn the call over to the operator for questions operator.
Operator: Thank you. If you'd like to queue for a question, you can do so by pressing star one on your telephone keypad. If, for any reason, you'd like to remove your question, you can press star two. Again, to queue for a question, you can do so by pressing star 1. We'll pause here briefly as questions are registered. Our first question is from Simeon Siegel with BMO. Your line is now open.
Speaker Change: Thank you if you'd like to queue for a question you can do so by pressing star one on your telephone keypad.
Simeon Avram Siegel: Or any reason you'd like to remove your question you can press star two.
Speaker Change: Again to queue for a question you can do so by pressing star one we'll pause here briefly as questions are registered.
Simeon Avram Siegel: Our first question is from Simon Siegel with BMO. Your line is now open.
Simeon Avram Siegel: Thanks. Hey guys, I hope you and your families are doing well. So Dom, what was the, sorry if I missed it, but what was the breakdown in grill revenue declines between units and price? And then Jeremy, higher level question on that: when thinking about the return to grill growth domestically when it happens, how do you think about what we're gonna see in terms of replenishment versus new customers and just kind of thinking about, maybe if you have any, views on replenishment and cycles there? Thanks, guys.
Simeon Avram Siegel: Thanks, Hey, guys. Good afternoon Hope you and your families are doing well.
Simeon Avram Siegel: What was that sorry, if I missed it but what was the breakdown and grow revenue declines between units and price and then Jeremy higher level question on that just when thinking about the return to grow growth domestically when when it happens.
Simeon Avram Siegel: How do you think about what we're going to see in terms of replenishment versus new customers and just kind of thinking about maybe if you have any views on replenishment and cycles there. Thanks.
Speaker Change: Thanks, guys.
Dominic Blosil: Yeah, so the breakdown, roughly speaking, is there was a greater impact on ASP and kind of a high single-digit decline, and then for units, it was somewhat more moderated in kind of a mid-single-digit decline.
Dom: Yes, so the breakdown roughly speaking is there was a greater impact to asps and kind of the high <unk>.
Simeon Avram Siegel: Single digit decline and then for units it was somewhat more moderated and kind of the mid single digit decline.
Jeremy Andrus: Simeon, I have to get the second part of the...
Speaker Change: Hi, Simeon.
Jeremy Andrus: I'm happy to get to the second part of the question. You know, the environment is soft, and it's not easy to sort of unpack how much of it is driven by pull forward demand from a pandemic versus a stock consumer. Sentiment is down, you know, consumer financing is expensive, and housing transactions are very low, and all of these things facilitate grill sales or sales through retail. We spent a fair bit of time thinking about replenishment cycles, talking to consumers, doing the math on grill ownership periods, and our general belief is that, you know, we should be about to the end of pull-forward demand in 2021.
Simeon: Have we hit the second part of the question.
Speaker Change: First of all as I mentioned in my remarks.
Jeremy Andrus: The environment is soft and it's not easy to do.
Simeon: Sort of unpack how much of it is driven by.
Simeon: Pull forward demand from the pandemic versus a soft consumer sentiment is down.
Simeon: Consumer financing as expenses in housing transactions are very low in all of these things so facilitate.
Simeon: Facilitate grill sales or sell through at retail we spent a fair bit of time.
Simeon: Thinking about replenishment cycles talking to consumers doing the math on grill ownership period and are generally general belief is that.
Simeon: We should be about to the end of pull forward demand from 2021.
Jeremy Andrus: And then I think as you step back and look at not only this category but other high-ticket discretionary consumer categories, they tend to have some element of cyclicality to them. And so as we see consumer strength and interest rates start to come down, we believe that is a catalyst for the beginning of a new cycle. And we believe that, you know, replacement should start to replenishment should start to normalize.
Simeon: And then I think as you step back and look at not only this category, but other.
Simeon: High ticket discretionary discretionary consumer categories. They tend to have some element of cyclicality to it.
Simeon: And so as we see the consumer strength and interest rates start to come down.
Jeremy Andrus: Believe that is.
Jeremy Andrus: Those are catalysts to the beginning of a new.
Simeon: A new cycle and we believe that.
Simeon: Replacement should start to.
Jeremy Andrus: Replenishment should start to normalize.
Jeremy Andrus: You know, certainly in 25, absent meaningful downside, the consumer should be back to a fairly normal life cycle. And then the question is, what is the impact on the macro on a consumer choosing to wait to get one more year as they do out of durable goods, in terms of, you know, how we think about new versus replacement. You know, as we lean back into top of funnel investment, and we're doing some, you know, some testing this year, but certainly don't believe that this is an environment where we should be investing meaningfully in top of funnel.
Jeremy Andrus: Certainly in.
Simeon: In 25 absent meaningful downside the consumer should be.
Simeon: Back to a fairly normalized cycle and then the question is what is the impact on the macro on a consumer choosing to wait.
Jeremy Andrus: One more year as they do out of durables.
Simeon: In terms of.
Simeon: How we think about new versus replacement.
Simeon: Yes.
Simeon: As we lean back into top of funnel investment and we're doing some.
Simeon: Some test in this year, but certainly don't believe that this is an environment, where we should be investing meaningfully in top of funnel.
Jeremy Andrus: We will always think about NPS and engagement and ensure that we can drive our existing consumers to our new products. We believe, as we look at our innovation pipeline, that the first consumer likely to buy is an upgrade from a Traeger owner who bought one, you know, five, six, seven years ago. But I think we'll start to see the mix increase towards new customers as we invest in new markets where unaided awareness is low, and penetration is low.
Jeremy Andrus: We will always think about NPS and engagement and ensure that we can drive.
Simeon: Our existing consumers to our new products, we believe as we look at our innovation pipeline that the first consumer likely the buys an upgrade from from a trigger owner who bought.
Jeremy Andrus: 567 years ago, but I think we will start to see the mix increase towards new customers as we invest in new markets, where unaided awareness is low and penetration is low.
Simeon Avram Siegel: That's great. And then just congrats on that gross margin. I mean, you pointed out the highest in the public, did you, and recognized the deleverage comment for Q3, but do you think that the supply chain always feels behind us?
Speaker Change: Alright, that's great and then just congrats on that gross margin I mean, you pointed at the highest public do you and recognizing the deleverage comment for Q3, but do you think.
Simeon Avram Siegel: The supply chain always feels behind US do you think that as you look at where you are or do you look longer term not talking about the guide for this year, but you look longer term are we back to that path towards low to mid 40% is there any externalities, we need to still keep in mind because this was an encouraging number.
Dominic Blosil: Do you think that as you look at where you are, do you look longer term? Not talking about the guide.
Simeon Avram Siegel: I'm not talking about the guide for this year, but you look longer term. Are we back to that path towards low to mid 40s? Like, are there any externalities we need to still keep in mind? Because I just found this to be encouraging.
Dominic Blosil: Yeah, I would say that it's consistent with what we've addressed around gross margin in previous calls, in that, you know, there will be sequential benefit from macro over, say, the next couple of years, just given the dynamics of certain decisions we made during the pandemic when pressure was pronounced, you know, locking in some fixed contracts on the impound transportation side, as an example of something that will bleed down over the next couple of years. But it is safe to say that, you know, macro is working in our favor, and that has been an important assist to how we think about the long-term sustainability of a gross margin that we believe is appropriate for our business. And so Q1 is a great signal. There are some, you know, some idiosyncrasies of the year that I think, you know, we've sort of spoken about.
Speaker Change: Yes, I would say that it's consistent with what we've addressed around gross margin in previous calls in that.
Simeon: We'll be sequential benefit.
Jeremy Andrus: From macro over say the next couple of years, just given the dynamics of <unk>.
Dominic Blosil: Certain decisions, we made during the pandemic when pressure was pronounced locking in some fixed contracts on the impound transportation side as an example of something that will bleed down over the next couple of years, but it is safe to say that macro is working in our favor and that has been an important assist to how we think about the.
Simeon: Long term sustainability of a gross margin that we believe is appropriate for our business and so Q1 is a great signal there is some.
Simeon: Idiosyncrasy to the year that I think we've sort of spoken to and and I would say that each one is in particular are benefiting from the continued.
Simeon: Tailwind of inbound transportation and then also the FX component that we addressed on the opening remarks, whereas back half was maybe.
Dominic Blosil: And I would say that, you know, H1 is in particular benefiting from, you know, the continued tailwind of inbound transportation and also the FX component that we addressed in the opening remarks, whereas the back half was maybe, you know, it's sort of facing, you know, less of a benefit from a comp standpoint, given the fact that the inbound rates were improving in the back half of last year. So I'd say we're starting to see some stabilization in that realm.
Dominic Blosil: It's sort of facing less of a benefit from a comp standpoint, given the fact that the inbound rates were improving in the back half of last year. So I'd say, we're starting to see some stabilization in that realm, and I think that that assist us really I think driven a different perspective on the long term of gross margin in conjunction with the controller.
Dominic Blosil: And I think that that assist has really, I think, you know, driven a different perspective on the long term of gross margin in conjunction with the controllables that we continue to drive. So, a positive kind of view on, you know, where we are today, where we think, you know, we'll be able to take gross margin in the future with continued, you know, tailwinds, hopefully, you know, driving some of that in the coming years. But I wouldn't say that we've necessarily reached that mark just yet.
Dominic Blosil: <unk> that we continue to drive so positive kind of view on where we are today, where we think.
Dominic Blosil: We will be able to take gross margin in the future with continued.
Dominic Blosil: And hopefully driving some of that in the out years.
Simeon: But I wouldn't say that we've necessarily reached that mark just yet.
Simeon Avram Siegel: Perfect. All right. Thanks a lot, guys. Best of luck for the rest of the year.
Speaker Change: Perfect Alright, Thanks, a lot guys best of luck for the rest of year.
Operator: Thank you, Simeon. Our next question is from Peter Benedict with Baird. Your line is now open. All right, guys. Good afternoon.
Speaker Change: Thank you.
Operator: Our next question is from Peter Benedict with Baird. Your line is now open.
Peter Sloan Benedict: Thanks for taking the question. Just on the strategic pricing plan, Dom, that you mentioned kind of at the end there, just curious if we can expand a little bit more on that. Is that around the existing portfolio? Is that new innovation that you plan to bring in at different price points or margin points? Just maybe help us understand a little more what you're referring to there. Thanks.
Peter Sloan Benedict: Hey, guys. Good afternoon, thanks for taking the question.
Peter Sloan Benedict: The strategic pricing plan that you mentioned is kind of at the end. There just curious if you could expand a little bit more on that is that is that around the existing portfolio was that.
Peter Sloan Benedict: New innovation that you plan to bring in.
Peter Sloan Benedict: Different either price points of our margin points, just maybe help us understand a little more what you're referring to there. Thanks.
Jeremy Andrus: Yeah. Hi Peter. This is Jeremy.
Peter Sloan Benedict: Yes, Hi, Peter this is Jeremy happy to answer that.
A couple of things one is as we prepare to launch new products in the future I think it gives us permission as.
Jeremy Andrus: As we get later in life cycle of existing products that have been in market for some time to lean into promotion as a lever to ensure that.
Simeon: We're in a good channel inventory position as we launched new product next year. So that's sort of number one number two.
Jeremy Andrus: Happy to answer that. Yeah, I'd say a couple of things. One is, as we prepare to launch new products in the future, I think it gives us permission, as we get later in the life cycle of existing products that have been in the market for some time, to lean into promotion as a lever to ensure that we're in a good channel inventory position as we launch new products. Next year.
Jeremy Andrus: <unk>.
Jeremy Andrus: In a challenging macro economy, and notably for the category that we play in.
Jeremy Andrus: We're very thoughtful as we look at what is selling through what trends were can see seem from a consumer perspective and price sensitivity is certainly one of those and so we are measured in how we planned promotions, we had planned or what.
Jeremy Andrus: So that's sort of thought number one. Number two, you know, in a challenging macro economy, and notably for the category that we play in, we're very thoughtful as we look at what is selling through, what trends we're seeing from a consumer perspective, and price sensitivity is certainly one of those. And so, you know, we are measured in how we plan promotions. We have planned our promotions, you know, many months in advance, but we feel like this is an environment where we will lean into promotion a little bit more, perhaps not in the number of promotions but in the level of promotion.
Jeremy Andrus: We plan our promotions.
Jeremy Andrus: Many months in advance, but we feel like this is an environment, where we will lean into promotion a little bit more perhaps not in the number of promotions, but but but in the <unk>.
Jeremy Andrus: The level of promotion, we will be thoughtful.
Jeremy Andrus: We'll be thoughtful, you know, about consumer trends and where we think there's value and opportunity for doing more. So this is part of the plan, as we think about guidance. This is inherent in the guidance that we reaffirmed today.
Jeremy Andrus: To consumer trends and where we think there is there is value and opportunity to doing more so.
Simeon: This is.
Jeremy Andrus: This is part of the plan.
Jeremy Andrus: As we think about guidance.
Jeremy Andrus: This is this is inherent in.
Jeremy Andrus: In the guidance that we reaffirmed today.
Jeremy Andrus: Yep, that makes sense. Is there anything, Jeremy, in terms of the timing of the innovation that you have planned for the back of this year or even for 2025, which sounds like might be a bigger innovation year that you could you could adjust that based on the macro? I mean, I'm trying to get a sense for maybe how the macro is right now relative to kind of your band of expectations and whether it would, what would cause you to maybe shift the timing of any innovation if there is anything that would make you do that. You know, we don't we don't really think about that.
Jeremy Andrus: Yes.
Speaker Change: That makes sense is there any Jeremy is there anything in terms of the timing of the innovation that you have planned for the back half of this year or even for 2025, which sounds like it might be a bigger innovation here.
Jeremy Andrus: Okay.
Jeremy Andrus: You could you could adjust that based on the macro.
Jeremy Andrus: I'm just trying to get a sense for maybe how the macro is right now relative to kind of your your band of expectations.
Jeremy Andrus: Other it.
Jeremy Andrus: What would cause you to maybe shift the timing of any of the innovation. If there is anything that would make you do that.
Simeon: Yes.
Jeremy Andrus: We don't really think about product launches around macro. You know, our development pipeline, our objective is to be very consistent in how we invest and when we launch. And so we do it independent of the macro. And I would say from a time of launch, it's driven more by seasonality and by our retailer reset windows. This category is one that tends to reset in the first quarter in preparation for the spring-summer selling season.
Simeon: We don't we don't really think about product launches around macro.
Jeremy Andrus: Our development pipeline, our objective is to be very consistent in how we invest.
Jeremy Andrus: And when we launch and so we do it independent of the macro and I would say.
Jeremy Andrus: From a time of launch.
Simeon: It's driven more by seasonality and by our retailer.
Jeremy Andrus: <unk> Windows. This category is one that tends to reset in the first quarter in preparation for the spring spring summer selling season. So we will stick to that to that calendar. It's what works best operationally for us that's what we plan on and for our retailers.
Jeremy Andrus: So we will stick to that calendar. It's what works best operationally for us. It's what we plan on and for our retailers. But to the extent that we need to be more promotional to ensure that our channel inventory is healthy before we launch new products, promotion is certainly a lever that we can use, especially at the end of life with products.
Jeremy Andrus: But to the extent that we need to be more promotional to ensure that our channel inventories.
Jeremy Andrus: Before we launched new products promotion is is certainly lever that we can use especially at the end of life of products.
Jeremy Andrus: Yeah, I mean, I'm not sure if I can change plans.
Jeremy Andrus: Yes.
Jeremy Andrus: Okay.
Jeremy Andrus: Land.
Dominic Blosil: I was just going to say, Peter, our innovation plan is many years out, and so it's really hard in a durables business to plan innovation around macrocycles.
Speaker Change: I was just going to say Peter our innovation plan is many years out.
Dominic Blosil: So it's really hard in.
Dominic Blosil: In a durables and durables business the planned innovation around macro cycles.
Peter Sloan Benedict: Yep, no, no; I think that makes sense. That makes sense.
Dominic Blosil: Yep.
Speaker Change: Makes sense that makes sense just one more for maybe for Don just to clarify in the third quarter gross margin expectation.
Peter Sloan Benedict: Just one more question, maybe for Dom, just to clarify the third quarter gross margin expectation. You mentioned it would be the softest sales quarter, therefore, you know, some pressure there. Do you expect gross margin in the third quarter to be down year over year or just up the least, I guess?
Dom: Mentioned, it would be the soft sales quarter. Therefore.
Peter Sloan Benedict: Pressure there do you expect gross margin in the third quarter to be down year over year or just upped our belief.
Dominic Blosil: I guess we'll think about the year. Thank you.
Speaker Change: I guess I should think about the year. Thank you.
Dominic Blosil: Yeah, we're not guiding specifically to quarters from a gross margin standpoint or anything. But what I would say is that, you know, the impact should be pronounced. So it will be a deviation from kind of the general run rate we see in the other quarters. And just to add to that, we are reaffirming our gross margin guidance. So that's an important, you know, comment as you think about modeling and relevant to how you treat Q3, given the kind of lower cells and the leverage off of those lower cells. Yep. OK.
Dom: Yeah, we're not guiding specifically to quarters from a gross margin standpoint, or anything, but what I would say that the impact should be pronounced. So it will be a deviation from kind of the general run rate, we see in the other quarters and just to add to that we are reaffirming our gross margin <unk>.
Peter Sloan Benedict: Yep. Okay. It makes sense.
Peter Sloan Benedict: And so that's an important cause.
Peter Sloan Benedict: Comment is as you think about modeling.
Peter Sloan Benedict: And two how you treat Q3, given kind of lower sales and the and the deleverage off of those lower sales.
Operator: Thanks so much, guys. Good luck. Our next question is from Joe Feldman with Telsey Advisory Group. Your line is now open.
Speaker Change: Yes, Okay makes sense. Thanks, so much guys. Good luck.
Joseph Isaac Feldman: Thanks, Dave.
Operator: Okay.
Operator: Our next question is from Joe Feldman with Telsey Advisory group.
Joseph Isaac Feldman: Your line is now open.
Joseph Isaac Feldman: Wanted to follow up, when consumers are making purchases, because clearly, you are selling, you know, quite a few grills still, but, Are they opting for the better quality grills? Are they spending more? Have you seen any change in their behavior? I know it may be subtle, but I'm always curious about that.
Joseph Isaac Feldman: Great. Thanks, guys.
Joseph Isaac Feldman: I wanted to follow up when you when consumers are making purchases because clearly you are selling quite a few grille still but.
Joseph Isaac Feldman: Are they opting for the better quality grows are they spending more.
Joseph Isaac Feldman: More have you seen any change in their behavior and what may be subtle, but always curious about that.
Dominic Blosil: No, we most definitely have seen a change in behavior where there's been, you know, a, I would say, a pronounced shift from the volumes that we tended to see increasing above $1,000 to now having that kind of dynamic shift to sub-$1,000 and, you know, kind of those entry price points that we offer. So that is definitely a trend that we're seeing and reinforced by the point Jeremy made earlier in terms of how we're thinking about promotion to ensure that we are strategically competitive in an environment where consumers are just simply more price sensitive, right? These aren't necessarily systemic changes that we're making per se.
Joseph Isaac Feldman: Most definitely have seen a change in behavior.
Dominic Blosil: Where there has been.
Dominic Blosil: I would say a pronounced shift.
Dominic Blosil: From the volumes that we tended to see.
Dominic Blosil: Increasing above 1002, now having that kind of dynamic shift to sub $1000 and kind of those entry price points that we offer so that is definitely a trend that we're seeing and reinforced by the point Jeremy Jeremy made earlier.
Dominic Blosil: In terms of how we're thinking about promotion to ensure that we are strategically competitive in an environment where.
Dominic Blosil: Consumers are just simply more price sensitive right is arent necessarily systemic changes that we're making per se. We're just wanted to ensure that we remain competitive and we always think about price as a strategic lever within the guardrails that we have defined around how we think about gross margin and ensuring that we're not a brand that's considered to be on promotion rate.
Dominic Blosil: We just want to ensure that we remain competitive, and we always think about price as a strategic lever within the, you know, guardrails that we've defined around how we think about gross margin and ensuring that we're not a brand that's considered to be on promotion, right? So I think within those margins, we have flexibility to lean more aggressively into promotion without straying outside of those guardrails. But that really is in an effort to follow these trends, which is certainly specific to Traeger as well as specific to, I think, broader kinds of categories as you think about pressure on a big ticket in relation to where we see kind of the volumes and where we want to capture that benefit.
Dominic Blosil: So I think within the margins, we have flexibility to lean more aggressively into promo without straying outside of those guardrails, but that really isn't an effort to follow these trends, which is certainly specific to transfer as well as specific to I think broader kind of categories. As you think about pressure on big ticket.
Dominic Blosil: In relation to where we see kind of the volumes and where we want to capture that benefit.
Dominic Blosil: I think, you know, at the end of the day, we still believe that there is a consumer that is willing to pay for innovation and quality, and we address that, you know, across our product line. But, you know, at this moment in time, we want to follow that trend and ensure we play more aggressively where consumers are shopping.
Dominic Blosil: I think at the end of the day, we still believe that there's a consumer that is willing to pay for innovation and quality and we address that.
Dominic Blosil: Our product line.
Dominic Blosil: But at this moment in time, we want to follow that trend and ensure we play more aggressively where the consumers are shopping.
Joseph Isaac Feldman: Got it. That's very helpful. Thank you.
Speaker Change: Got it that's very helpful. Thank you and then.
Speaker Change: Just another maybe question about sourcing I was curious can you remind us your exposure to China and if that if you guys are still making any effort to shift further away from China and if I recall, you said you were not youre kind of happy with where youre sourcing from I'm just curious.
Joseph Isaac Feldman: And then just another maybe question about sourcing. I was curious, can you remind us of the exposure to China? And if that, if you guys are still making any effort to shift further away from China, if I recall, you said you were not, you're kind of happy with where you're sourcing from. I'm just curious, because people ask us in relation to the potential, you know, Trump administration and if tariffs were to increase again. So I was just curious about that. Thanks.
Joseph Isaac Feldman: Because people ask us really in relation to potential.
Joseph Isaac Feldman: <unk> administration, and if tariffs were to increase again.
Joseph Isaac Feldman: Curious about that thanks.
Dominic Blosil: Yeah, Joe, so we do have an active effort underway to diversify sourcing outside of China, and we currently manufacture in Vietnam. There are other geographies in Asia where we are actively investigating sourcing options and, in some cases, via existing suppliers, just taking operations outside of China. You know, those are active conversations, and we do certainly believe in the value of diversification, always measured against some sort of stability and cost within the supply chain.
Speaker Change: Yes, Joe so.
Joseph Isaac Feldman: We do have an active effort underway to diversify sourcing outside of <unk>.
Dominic Blosil: Outside of China, We currently manufacture.
Dominic Blosil: In Vietnam.
Dominic Blosil: There there are other geographies in Asia, where we are.
Dominic Blosil: <unk> investigating sourcing options and some in some cases.
Dominic Blosil: The existing suppliers, just just taking operations outside of China.
Dominic Blosil: Those are active conversations and we do certainly believe in the value of diversification always measured against sort of stability and cost within the supply chain.
Dominic Blosil: But we're also very contemplative around what the environment may be to the extent that a new president, such as President Trump, leans into additional Chinese tariffs, and we think about what a contingency plan may be to accelerate movement from China to other sourcing geographies. So that is absolutely top of mind.
Dominic Blosil: But we're also.
Dominic Blosil: We're very contemplated around.
Dominic Blosil: What what the environment may be to the extent that.
Dominic Blosil: A new president such as President Trump leans into additional China tariffs.
Dominic Blosil: We think about what our contingency plan, maybe to accelerate movement from China into other other sourcing geographies. So that is absolutely top of mind.
Joseph Isaac Feldman: Thanks, guys, and good luck with the second quarter. Our next question is from Brian McNamara with Canaccord. Your line is now open. Hi, this is Madison Calinan on behalf of Brian.
Speaker Change: Got it thanks, guys and good luck with the second quarter.
Madison Calinan: Thanks, Joe.
Madison Calinan: Our next question is from Brian Mcnamara with Canaccord.
Madison Calinan: Your line is now open.
Madison Calinan: Hi, This is Madison County answer Brian.
Madison Calinan: Just curious about retailers floor space dedicated to the category.
Madison Calinan: And whether they remain committed to keeping or increasing floor space for.
Madison Calinan: So the category. Thanks.
Joseph Isaac Feldman:
Operator: Madison, yeah, we haven't really seen any shift in retailers' point of view on the category either in season or across seasons. You know, there was certainly a moment a handful of years ago where we saw retailers begin to move to year-round barbecue sets and also to expansion of floor space, but I would say it feels pretty steady right now.
Madison Calinan: Madison, yet, we haven't really seen any shift in.
Operator: Retailers point of view on the category either in season or across seasons.
Operator: There was certainly a moment.
Operator: Handful of years ago, where we saw retailers begin to move to year round barbeque sets.
Operator: So to expansion of floor space, but I would say it feels pretty steady state right now.
Speaker Change: Great. Thank you.
Operator: Thanks.
Operator: Our next question is from Megan Alexander with Morgan Stanley. Your line is now open.
Operator: Our next question is from Megan Alexander with Morgan Stanley. Your line is now open.
Megan Christine Alexander: Hey, thanks very much. I wanted to come back to the sell-through. You know, Jeremy, I know you talked about it still being down in the quarter. Is there any way you can quantify, maybe just for Grills, what that sell-through number looked like in relation to your Grills revenue being down, that mid-teens number? I know you were lapping the sell-in of the launch last year. So just try and understand, number one, what sell-through looked like in the quarter, and then, bigger picture, from a unit's perspective, are you seeing that decline stabilize? Or, you know, with your commentary earlier around the macro, does that suggest the declines may get worse, or are you kind of thinking about the declines have totally stabilized at this point?
Megan Christine Alexander: Hey, Thanks, very much I wanted to come back to the cemetery Jeremy.
Megan Christine Alexander: Jeremy I know you talked about it still being down in the quarter is there any way you can quantify maybe just for <unk>, what that sell through number looks like.
Megan Christine Alexander: Relation to your gross revenue being down that mid teen number I know you were lapping the sell in of.
Megan Christine Alexander: The launch last year, so just trying to understand number one what's out there it looks like in the quarter and then just bigger picture from a units perspective.
Megan Christine Alexander: Are you seeing that that decline stabilized or was your commentary earlier around the macro does that suggest the declines may get worse or are you kind of thinking about the declines have stabilized at this time.
Dominic Blosil: I can jump in and answer that. Thanks for the question, Megan.
Speaker Change: Yes, I can jump in and answer that thanks for the question Megan I think to your first.
Speaker Change: Question on sell through.
Speaker Change: At the end of the day.
Speaker Change: That's sort of a baseline for how we think about our forecast this year.
Dominic Blosil: I think to your first question on sell-through, I think, at the end of the day, you know, it sets sort of a baseline for how we think about our forecast this year. But there are idiosyncratic components to sell-in that are building on the decline that we're seeing in sell-through, which looks more pronounced on a reported basis. And that's exactly what you said.
Speaker Change: But there are idiosyncratic components to sell in that are building on the declines that we're seeing in sell through which look more pronounced on a reported basis and exactly what you said, it's the launch comparison right. So comping flat rock ironwood launch in each one.
Dominic Blosil: It's the launch comparison, right? So, the Flat Rock and Ironwood launches in H1 of last year and then the sunsetting of products ahead of a new product launch in 2025 in the back half of the year. So, those are sort of layered on top of our baseline forecast, which sort of underpins our general thinking around demand planning. And I think, you know, from a reported standpoint, those look in excess of what we're seeing from a sell-through standpoint.
Dominic Blosil: Last year and then the sunsetting of products ahead of a new product launch in 2025 in the back half of the year. So those are sort of layered on top of our baseline forecast, which sort of underpins our general thinking around demand planning.
Dominic Blosil: And I think from a reported standpoint, those those those look.
Dominic Blosil: The excess of what we're seeing from a sell through standpoint.
Dominic Blosil: You know, we don't obviously share sell-through information, but, you know, I would say that, you know, we've talked sort of about the pre-pandemic comparison historically, and I would say that that's still holding at a higher watermark.
Speaker Change: We don't obviously share sell through information.
Dominic Blosil: But I would say that is.
Dominic Blosil: Talk sort of about the the pre pandemic comparison, historically and I would say that thats still holding at a higher watermark and so that kind of has a better barometer for how we think about the health of sell through where a.
Dominic Blosil: And so, that kind of has been a barometer for how we think about the health of sell-through, where, you know, a comp against pull-forward through the pandemic is very different than a comp against 19, where there's a reversion back to pre-pandemic levels, which we're not seeing. And so, our belief is that, at the end of the day, we just continue to lab pull forward through the pandemic, and then that's augmented and sort of distorted by this picture that's emerged around, you know, excess inventories that we had to bleed down, and that came at the cost of the top line.
Dominic Blosil: A comp against pull forward through the pandemic is very different than a comp against 19, where theres a reversion back to pre pandemic levels, which we're not seeing.
Dominic Blosil: And so our belief is that at the end of the day. We just continue to lab pull forward through the pandemic and then thats augmented and sort of distorted by this picture that's emerged around excess inventories that we had to bleed down and that came at the cost of top line and then this year. These two.
Dominic Blosil: And then, this year, these two sort of comp comparisons in the first half and second half around the sunsetting of products and then the comp in the first half against the new product launch. So, that's really, I think, a kind of a summary of what we're seeing, and I wouldn't necessarily say we're in a position to tell you that things are getting worse or better. I think right now that it's just kind of consistent themes around the sell-through side.
Dominic Blosil: As to sort of comp comparisons in the first half and second half around the sunsetting of product and then the comp in the first half against the new product launch. So that's really I think a kind of a summary of what we're seeing and I wouldn't necessarily say, we're in a position to.
Megan Christine Alexander: Got it. That's really helpful.
Megan Christine Alexander: Tell you that things are getting worse or better I think right now, it's just kind of consistent themes around the sell through side.
Megan Christine Alexander: And then maybe asking the gross margin question a different way, you know, again, really impressive. It was above what you did in 1Q19, and you had a 43% full year gross margin in 19. Understanding you have, you know, the unique dynamics in the second half with the sunsetting of some products, but is there a way to quantify maybe just what the impact that you expect the sunsetting of the products to be, whether it's from a top line or margin basis? I know you've said that it's accretive from a EBITDA perspective, but anyway, just to contextualize that.
Speaker Change: Got it that's really helpful. And then maybe asking the gross margin question a different way.
Megan Christine Alexander: Again really impressive.
Megan Christine Alexander: Above what you did in <unk> 19, and you did a 43% full year gross margin of 19 understanding you have.
Megan Christine Alexander: Any dynamics in the second half with the Sun setting of some products, but is there a way to quantify maybe just what the.
Megan Christine Alexander: The impact that you expect the sunsetting of the products to be whether it's from.
Megan Christine Alexander: Our top line or margin basis, I know you had said I think it's accretive from an EBITDA perspective, but any way to say it.
Megan Christine Alexander: So why is that.
Dominic Blosil: Yeah, so the sun setting isn't really a it's not really driving margin erosion by replacing old with new. It's more a function of some from a run rate standpoint from Q2 to Q4. We're reaffirming our gross margin guide for the full year, which means that most of the pressure is coming in Q3 based on the impacts on volume and just how pronounced that de-leverage is in relation to the impact on gross margin. Okay, understood. That makes sense. Thank you.
Speaker Change: Yeah. So the sunsetting isn't really a it's not really driving.
Dominic Blosil: Margin erosion by replacing old with new it's more a function of the added pressure on Q3 around the fact that one Q3 is always our lowest selling period and two you're sunsetting product, which is adding additional pressure to volume.
Dominic Blosil: In that quarter, which in turn is just driving more pronounced deleverage in the quarter right. So.
Speaker Change: Where we saw some nice.
Speaker Change: Some some nice.
Dominic Blosil: The expansion in gross margin in Q1, we do expect that to moderate some over the from a run rate standpoint from Q3 to Q from Q2 to Q4, we're reaffirming our gross margin guide for full year, which means that most of the pressure.
Dominic Blosil: Is coming in in Q3 based on the impacts on volume and just how pronounced that deleverage is in relation to the impact on gross margin.
Speaker Change: Okay understood that makes sense. Thank you.
Dominic Blosil: Yeah.
Operator: We have no further questions at this time, so as an additional reminder, it is star number one to queue for a question. There are no further questions. So at this time, we'd like to thank you all for your participation, and you may now go.
Speaker Change: We have no further questions at this time, so as an additional reminder, star one to queue for question.
Speaker Change: There are no further questions. So at this time, we'd like to thank you all for your participation and you may now.