Q1 2025 Traeger Inc Earnings Call

Sounds good, thank you.

Sounds good thank you.

Matt: Thank you for attending the Traeger first quarter fiscal 2025 earnings conference call. My name is Matt and I'll be the moderator for today's call. All lines be muted during the presentation portion of the call for an opportunity for questions and answers at the end.

Matt: Good afternoon. Thank you for attending to trigger first quarter fiscal 2025 earnings Conference call. My name is Matt and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call up an opportunity for questions and answers at the end. If you would like to ask a question. Please press star one on your telephone keypad I'll now pass the conference over to our host.

Matt: If you'd like to ask a question, please press star one on your telephone keypad.

Nick Bacchus: I'll now have to pass the conference over to our host Nick Bacchus with Traeger. Nick, please go ahead. Good afternoon, everyone. Thank you for joining Traeger's call to discuss its first quarter 2025 results, which were released this afternoon, and can be found on our website at investors.traeger.com. I'm Nick Bacchus, Vice President of Investor Relations, Treasury, and Capital Markets at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer, and Dom Blosil, our Chief Financial Officer.

Speaker Change: Baucus would trigger.

Baucus: Go ahead.

Speaker Change: Good afternoon, everyone. Thank you for joining <unk> call to discuss its first quarter 2025 results, which were released this afternoon and can be found on our website at investors dot figure Dot com.

Speaker Change: <unk>, Vice President of Investor Relations Treasury and capital markets a trigger.

Speaker Change: With me on the call today are Jeremy <unk>, our Chief Executive Officer, and Tom <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 statements within the meaning of the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995. These statements are based on current expectations and views of future events, including but not limited to statements regarding our mitigation efforts to offset the direct impact of tariffs our implementation of strategic actions to stabilize Meter's sales and profitability, our expectations regarding the impact of our European product partnership with Meter, and the release of updates to our outlook as we better understand macroeconomic dynamics.

Speaker Change: Before we get started I want to remind everyone that management's remarks on this call may contain statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Speaker Change: Statements are based on current expectations and views of future events, including but not limited to statements regarding our mitigation efforts to offset the direct impact of tariffs.

Speaker Change: Our implementation of strategic actions to stabilize meter sales and profitability our expectations regarding the impact of our European product partnership with meter and the release of updates to our outlook as we better understand macroeconomic dynamics.

Nick Bacchus: Such statements are subject to 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 of Form 10-K for the year ended December 31, 2024, and our other filings for discussion of these factors and uncertainties, which are available on the investor relations portion of our website. You should not take undue reliance on these forward-looking statements, which we speak to only as of today. We undertake no obligation to update or revise them for any new information.

Speaker Change: Such statements are subject to 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 31, 2024, and our other filings for a discussion of these factors and uncertainties, which are available on the investor relations portion of our website.

Speaker Change: Not take undue reliance on these forward looking statements, which we speak only as of today.

Speaker Change: We undertake no obligation to update or revise them for any new information.

Nick Bacchus: This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, and net debt, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release and our investor presentation, which are 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.

Speaker Change: This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss adjusted net income or loss per share.

Speaker Change: Net debt, which we believe are useful as supplemental measures.

Speaker Change: The most comparable GAAP financial measures and reconciliations of non-GAAP measures contained <unk> GAAP measures are included in our earnings release in our Investor presentation, which are available on the Investor relations portion of our website at investors that figure Dot com.

Speaker Change: Please note that our definition of these measures may differ from similarly, titled metrics presented by other companies now I would like to turn the call over to Jeremy Andrus, Chief Executive Officer of CAGR Jeremy.

Jeremy Andrus: Now I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Thank you, Nick. Thank you for joining our first quarter earnings call.

Speaker Change: Thank you Nick Thank you for joining our first quarter earnings call.

Jeremy Andrus: Today, I will be discussing our first quarter results and will provide an update on our strategic priorities and our outlook for 2025.

Speaker Change: Today, I will be discussing our first quarter results and will provide an update on our strategic priorities and our outlook for 2025.

Jeremy Andrus: I'll then turn the call over to Dom to provide further details on the quarter's results. First quarter results were in line with our expectations. As we discussed on our fourth quarter earnings call, we expected a decline in first quarter sales and adjusted EBITDA. During the quarter, we delivered solid growth in our grills business, which was offset by a decline in our accessories business driven by softness and meter. This resulted in a 1% decline in revenues versus the first quarter of 2024. Adjusted EBITDA of $23 million was down slightly versus last year's $24 million, largely driven by a decline in meter and was in line with our expectations.

Tom: I'll, then turn the call over to Tom to provide further details on the quarter's results.

Tom: First quarter results were in line with our expectations as we discussed on our fourth quarter earnings call. We expected a decline in first quarter sales and adjusted EBITDA.

Tom: During the quarter, we delivered solid growth in our Grilles business, which was offset by decline in our accessories business driven by softness in meter.

Tom: This resulted in a 1% decline in revenues versus the first quarter of 2024 adjusted.

Tom: Adjusted EBITDA of $23 million was down slightly versus last year's $24 million largely driven by a decline in meter and was in line with our expectations.

Jeremy Andrus: Let me start by discussing the topic that is likely most front and center for everyone participating on this call, tariff. The severity and rapidly evolving nature of trade policy, in addition to declining consumer sentiment, are contributing to a highly uncertain macroeconomic backdrop. In the face of uncertainty, we are controlling what we can control and are focused on both navigating the near-term environment, as well as making progress on our long-term initiatives. It's important to note that over the last several years, our team has faced a variety of macroeconomic shocks, including COVID, the post-pandemic grill industry normalization, the supply chain hyperinflation of late 2021 and 2022.

Tom: Let me start by discussing the topic that is likely most front and center for everyone participating on this call tariffs.

Tom: The severity and rapidly evolving nature of trade policy. In addition to declining consumer sentiment are contributing to a highly uncertain macroeconomic backdrop.

Tom: In the face of uncertainty we're controlling what we can control and are focused on both navigating the near term environment as well as making progress on our long term initiatives.

Tom: It's important to note that over the last several years our team has faced a variety of macroeconomic shocks, including Covid post pandemic grill industry normalization in the supply chain hyperinflation of late 2021 and 2022.

Jeremy Andrus: We have proven our ability to navigate challenging environments over time, and it is our highest priority to successfully navigate the current macroclimate.

Tom: We have proven our ability to navigate challenging environments over time and it is our highest priority to successfully navigate the current macro climate.

Jeremy Andrus: Let me provide some context on our exposure to the current tariff landscape as it stands today. The majority of our tariff exposure is tied to our grill business. As we have disclosed previously, approximately 80% of our grills were produced in China in fiscal 2024 with a balance of production in Vietnam. Based on current policy, our grills are subject to a 25% Section 232 steel tariff. Additionally, grills sourced from China are subject to the 20% IEPA tariff on all Chinese imports. On the accessories side, the majority of this product is sourced from Taiwan and thus is currently subject to a 10% reciprocal tariff.

Tom: Let me provide some context on our exposure to the current tariff landscape as it stands today.

Tom: Majority of our tariff exposure is tied to our grill business.

Tom: As we have disclosed previously approximately 80% of our grills were produced in China in fiscal 2024 with a balance of production in Vietnam.

Tom: Based on current policy, our Grilles are subject to a 25% section 232 steel tariffs. Additionally, drill sourced from China are subject to the 20% I E. The tariffs on all Chinese imports on.

Tom: On the accessory side. The majority of this product is sourced from Taiwan, and thus is currently subject to a 10% reciprocal tariffs.

Jeremy Andrus: Finally, our consumables business is largely sourced domestically, and therefore is not subject to tariffs. Given that we face a meaningful headwind due to tariffs, our team has been tirelessly working on mitigation strategies to offset the impact over the last several months. Many of these mitigation efforts are already actioned while some are still being worked through and others will be actioned as we get a better sense of consumer demand over the next several months. Overall, we believe we can offset a majority of the tariff impact via our mitigation initiatives, with the largest unknown factor being consumer demand and behavior going forward.

Tom: Finally, our consumables business is largely sourced domestically and therefore is not subject to tariffs.

Tom: Given that we face a meaningful headwind due to tariffs our team has been tirelessly working on mitigation strategies to offset the impact over the last several months.

Tom: Many of these mitigation efforts are already actions, while some are still being worked through and others will be action as we get a better sense of consumer demand over the next several months.

Tom: Overall, we believe we can offset a majority of the tariff impact via our mitigation initiatives with the largest unknown factor being consumer demand and behavior going forward.

Jeremy Andrus: Our mitigation efforts center on several key areas. First, we are finding savings and reducing costs in our supply chain. This includes negotiations with our contract manufacturers, and identifying cost opportunities and efficiencies across the supply chain. We are well positioned to drive savings here, given our strong relationships with our manufacturing partners. We are also pursuing sourcing diversification. We are assessing plans to migrate production away from China to other geographies, where we expect tariffs and overall costs will be lower. While it is too early to discuss any specific targets here, we are fully committed to shifting production away from China and are planning to materially reduce the portion of our production that occurs in China by 2026, while also leaning into the quality of our partners we currently have.

Tom: Our mitigation efforts center on several key areas first we are finding savings and reducing costs in our supply chain. This includes negotiations with our contract manufacturers and identifying cost opportunities and efficiencies across the supply chain.

Tom: We are well positioned to drive savings here, given our strong relationships with our manufacturing partners.

Tom: We are also pursuing sourcing diversification.

Tom: We are assessing plans to migrate production away from China to other geographies, where we expect tariffs and overall cost will be lower.

Tom: While it is too early to discuss any specific targets here. We are fully committed to shifting production away from China and are planning to materially reduce the portion of our production that occurs in China by 2026, while also lean into the quality of our partners. We currently have.

Jeremy Andrus: Next, in collaboration with our retail partners, we have implemented strategic pricing increases. The analysis that went into a broad based pricing increase was extensive. and decisions were made on a skew by skew basis, taking into consideration product features and competitive position. Stepping back, while we are always very mindful when adjusting price to the consumer, the incremental expense associated with tariffs require us to increase price. We believe the health of our brand, our premium positioning, and the innovation we bring to the market will be assets to Traeger in an inflationary environment. We also believe that many of our outdoor cooking competitors have or will be raising price, as many are also significantly exposed to tariffs.

Tom: Next in collaboration with our retail partners, we have implemented strategic pricing increases.

Tom: Analysis that went into a broad based pricing increase was extensive and.

Tom: And decisions were made on a SKU by SKU basis.

Tom: Taking into consideration product features and competitive positioning.

Tom: Stepping back while we are always very mindful when adjusting price to the consumer the incremental expense associated with tariffs required to increase price we.

Tom: We believe the health of our brand our premium positioning and the innovation, we bring to the market will be assets to trigger in an inflationary environment. We also believe that many of our outdoor cooking competitors have.

Tom: Or will be raising price as many are also significantly exposed to tariffs.

Jeremy Andrus: Our next mitigation strategy is cost reduction. We are aggressively managing our expense structure given the volatile environment. This includes strategically reducing certain non-essential expenses as well as materially reducing any new hiring activity. Given the broader environment and the uncertainty surrounding the impact of tariffs on the consumer, we believe that expense discipline is prudent, and we will continue to identify additional opportunities to gain efficiency as we move through 2025.

Tom: Our next mitigation strategy is cost reduction we are aggressively managing our expense structure given the volatile environment. This includes strategically reducing certain non essential expenses as well as materially reducing any new hiring activity.

Tom: Given the broader environment and the uncertainty surrounding the impact of tariffs on the consumer we believe that expense discipline is prudent and we will continue to identify additional opportunities to gain efficiency as we move through 2025.

Jeremy Andrus: This doesn't imply, however, that we are limiting investment into key strategic growth pillars. We will continue to allocate resources to non-negotiable areas of priority, including product development, to ensure we are well positioned for growth as the macroenvironment normalizes.

Tom: This doesn't imply however that we are eliminating investments into key strategic growth pillars, we will continue to allocate resources to non negotiable areas of priority, including product development to ensure we are well positioned for growth as the macro environment normalizes.

Jeremy Andrus: As you've seen in our first quarter earnings press release issued this afternoon, we have withdrawn our prior financial guidance, which did not include the impact of tariffs and are temporarily suspending forward guidance for fiscal 2025. Generally, we seek to provide as much transparency as possible and therefore have provided financial guidance every quarter since going public in 2021. However, given the lack of visibility into the broader macroeconomic and consumer environment, as well as rapidly evolving trade policy, we are not in a position to provide guidance. The exact outcome of policy is a moving target, and with consumer sentiment near historic lows and prices set to increase in many product categories, accurately forecasting consumer demand is a challenge.

Tom: As you've seen in our first quarter earnings press release issued this afternoon, we have withdrawn our prior financial guidance, which did not include the impact of tariffs and our temporarily suspending forward guidance for fiscal 2025 <unk>.

Generally we seek to provide as much transparency as possible and therefore has provided financial guidance every quarter since going public in 2021, however, given the lack of visibility into the broader macroeconomic and consumer environment as well as rapidly evolving trade policy, we are not in.

Tom: Positioned to provide guidance.

Tom: The exact outcome of policy is a moving target and with consumer sentiment near historic lows and prices set to increase in many product categories accurately forecasting consumer demand is a challenge.

Jeremy Andrus: we expect to have greater visibility into consumer demand as we get through our peak season at retail over the next few months. Moreover, we continue to assess and action mitigation efforts with certain of these efforts ongoing.

We expect to have greater visibility into consumer demand as we get through our peak season at retail over the next few months.

Tom: Moreover, we continue to assess and action mitigation efforts with certain of these efforts ongoing.

Jeremy Andrus: On to first quarter results. In the first quarter, our grill sales were up 13% versus prior year. From a consumer demand perspective, first quarter tends to be seasonally slower in the outdoor cooking industry. However, we watch sell through closely to gauge demand as we head into seasonally larger months. We were pleased to see that consumer demand for our grills in the first quarter was positive to prior year. I would also like to note that sell-through of grills remains healthy into the second quarter, which we view as a positive sign given a difficult macro backdrop. Conversion at Retail continues to be aided by our Boots on the Ground initiative.

Tom: Onto first quarter results in the first quarter, our grille sales were up 13% versus prior year from.

Tom: From a consumer demand perspective, first quarter tends to be seasonally slower than the outdoor cooking industry. However, we watch sell through closely to gauge demand as we head into a seasonally larger months.

Tom: We were pleased to see that consumer demand for our Grilles in the first quarter was positive to prior year.

Tom: I would also like to note that sell through of Grilles remains healthy into the second quarter, which we view as a positive sign given the difficult macro backdrop.

Tom: Conversion at retail continues to be aided by our boots on the ground initiatives. This includes our retail sales specialist program.

Jeremy Andrus: This includes our Retail Sales Specialist Program. Our team of RSSs were out in the channel in the first quarter, training associates at our retail partners, conducting product demos, and helping to drive improvements to merchandising on the floor. Going into the peak selling season, these activities will continue to accelerate. And we are planning to materially increase the number of selling events and product demos as compared to last year. We also continue to lean into our roadshow program at Costco, where our brand ambassadors set up product demonstrations in Costco warehouses to educate and sell grills to members on a consignment basis around the country.

Tom: <unk> of our assesses we're out in the channel in the first quarter training associates at our retail partners conducting product demos and helping to drive improvements to merchandising on the floor.

Tom: Going into the peak selling season. These activities will continue to accelerate and we are planning to materially increase the number of selling events and product demos as compared to last year.

Tom: We also continue to lean into our Roadshow program at Costco, where a brand ambassador setup product demonstrations and Costco warehouses to educate and sell grilles to members on a consignment basis around the country.

Jeremy Andrus: In Q1, we increased the number of roadshows by nearly 50% as compared to prior year. We believe this not only benefits near-term sales, but also is a meaningful driver of brand awareness. Each brand ambassador talks to dozens of potential customers each day, raising awareness of the brand to new consumers. In fact, many of our consumers say the first time they heard about Traeger was in their local Costco in conversations with our brand ambassador.

Tom: In Q1, we increased the number of roadshows by nearly 50% as compared to prior year.

Tom: We believe this not only benefits near term sales, but also is a meaningful driver of brand awareness each.

Each brand ambassador talks to dozens of potential customers each day, raising awareness of the brand to new consumers in fact, many of our consumers say the first time, they heard about trager within their local Costco in conversations with our brand ambassadors.

Jeremy Andrus: The first quarter also benefited from the launch of Woodridge, our new wood pellet grill, which we released in January. As we discussed on our last call, this new line brings significant innovation to the market at a more attainable price. Woodridge is a great example of our product innovation engine at work, and consumer reception has been strong, with demand outperforming our expectations. This is evidenced by the extremely high product reviews the Woodbridge series gets from customers. The Woodbridge series has an average rating of 4.8 stars, looking at our DTC and several retailer websites. This is the highest rating for product launch we've ever had.

Tom: The first quarter also benefited from the launch of Woodridge are new wood pellet Grill, which we released in January as.

Tom: As we discussed on our last call. This new line bring significant innovation to the market at a more attainable price point.

Tom: Woodridge is a great example of our product innovation engine network and consumer reception has been strong with demand outperforming our expectations.

Tom: This is evidenced by the extremely high product reviews, the Woodbridge series guests from customers.

Tom: The Woodbridge series has an average rating of four eight stars looking at our DTC and several retailer website. This is the highest rating for product launch we've ever had.

Jeremy Andrus: Additionally, on the topic of innovation, in early April, we announced the introduction of the Flat Rock 2 Zone. Flat Rock 2-Zone is the next addition to our griddle lineup and offers the same premium performance as the Flat Rock 3-Zone in a more compact and accessible design, making high-quality outdoor cooking on a flat top more efficient and versatile than ever. Following the launch of the original three burner flat rock, it was clear that there was significant consumer appetite for a Traeger griddle offering, and the two burner offers the same innovation as the original in a smaller footprint and at a lower price point.

Tom: Additionally, on the topic of innovation in early April we announced the introduction of the flat rock to zone.

Tom: The flat rock <unk> is the next edition to our griddle lineup and offers the same premium performance as a flat rock three zone in a more compact and accessible design, making high quality outdoor cooking on flat top more efficient and versatile than ever.

Tom: Following the launch of the original three burner flat rock. It was clear that there was significant consumer appetite for a trigger griddle offering and the two burner offers the same innovation as the original and a smaller footprint and at a lower price point.

Jeremy Andrus: Overall, our innovation pipeline is strong, and we remain very excited about future introductions over the next few years. On the consumable side, first quarter revenues were down 6%. However, these results were largely in line with our expectation.

Tom: Overall, our innovation pipeline is strong and we remain very excited about future introductions over the next few years.

Tom: On the consumables side first quarter revenues were down 6%. However, these results were largely in line with our expectations in.

Jeremy Andrus: In the first quarter, we continued to innovate in our consumables business. We launched Oak and Whiskey Blend Pellets, a new flavor in Traeger's core lineup, which fills a gap in our portfolio with the oak flavor and attacking the whiskey trend in barbecue. We also brought back the much requested whiskey dust rub as a new flavor in Traeger's line of rubs. Lastly, our revamped rubs line with a new, easier-to-use bottle and a better value to the consumer rolled out into retail in the quarter.

Tom: In the first quarter, we continued to innovate in our consumables business.

Tom: We launched okay whiskey blend pellets, a new flavor and triggers core lineup, which fills a gap in our portfolio with the oak flavor and attacking the whiskey trend in barbecue.

Tom: We also brought back the much requested whiskey, thus, rob as a new flavor and triggers line of rubs.

Tom: Lastly, our revamped run slide with a new easier to use bottle and a better value to the consumer rolled out into retail in the quarter.

Jeremy Andrus: Moving on to our accessories. Revenues were down 27% in the quarter, driven by a decline at meter. As we have discussed, meter continues to be pressured by a slowing backdrop in the smart thermometer category, as well as heightened competition. We continue to implement strategy changes at Meter, including shifting the promotional calendar to drive increased conversion, as well as bringing on a new digital agency ahead of key upcoming selling periods. We are also implementing cost reduction efforts at meter as we reposition the business and seek to stabilize demand.

Tom: Moving onto our accessories business.

Tom: Revenues were down 27% in the quarter driven by a decline at meter.

Tom: As we have discussed.

Tom: <unk> continues to be pressured by a slowing backdrop in the smart thermometer category as well as heightened competition.

Tom: We continue to implement strategy changes that meter, including shifting the promotional calendar to drive increased conversion as well as bringing on a new digital agency ahead of key upcoming selling periods.

Tom: We are also implementing cost reduction efforts that meter as we reposition the business and seek to stabilize demand.

Jeremy Andrus: Overall, we recognize that the broader economic environment presents a lot of uncertainty, but we continue to focus on what we can control. Our organization's top priority is to effectively navigate the volatile environment. We have significant tariff mitigation efforts in place, and we'll seek to reduce costs further as we move into the balance of the year. Additionally, we will continue to execute on our long-term growth strategies to drive innovation in the outdoor cooking market and increase brand awareness.

Tom: Overall, we recognize that the broader economic environment presents a lot of uncertainty, but we continue to focus on what we can control.

Tom: Our organization is top priority is to effectively navigate the volatile environment.

Tom: We have significant tariff mitigation efforts in place and we will seek to reduce costs further as we move into the balance of the year. Additionally, we will continue to execute on our long term growth strategies to drive innovation in the outdoor cooking market and increased brand awareness and with.

Dominic Blosil: And with that, I'll turn the call over to Dom. Thanks, Jeremy. And good afternoon, everyone. Today, I will review our first quarter performance and our strategies to navigate the current dynamic macro environment. First quarter revenues declined 1% to $143 million. Grill revenues increased 13% to $87 million. Real Revenues benefited from sales of our new Woodridge series, positive sell through at retail, as well as some benefit from pacing of shipments out of the second quarter. Consumables revenues were $30 million, down 6% to the first quarter of last year. The decline was due to a reduction in both wood pellet and food consumables, partially due to a timing shift, and was generally in line with our expectations heading into the quarter.

Speaker Change: I will turn the call over to Don Don.

Don: Thanks, Jeremy and good afternoon, everyone. Today, I will review, our first quarter performance and our strategies to navigate the current dynamic macro environment.

Speaker Change: First quarter revenues declined 1%.

Speaker Change: $143 million.

Speaker Change: Rail revenues increased 13% to $87 million.

Speaker Change: Revenues benefited from sales of our new Woodbridge series positive sell through at retail as well as some benefit from pacing of shipments out of the second quarter.

Speaker Change: Consumables revenues were $30 million.

Speaker Change: 6% to the first quarter of last year.

Speaker Change: The decline was due to a reduction in both wood pellet into consumables, partially due to a timing shift and was generally in line with our expectations heading into the quarter.

Dominic Blosil: Accessories revenue decreased 27% to $26 million. Due to continued decline in the meter offset by growth and Traeger branded accessories. It's important to note that while Meter's core DTC business remained challenged in the first quarter, the year-over-year decline in our accessories category was affected by the lapping of a sales load-in related to a European product partnership with Meter that benefited the first quarter of 2024. Moving forward, the impact from lapping this partnership will diminish over the balance of the fiscal year 2025. Geographically, North American revenues were up 6%, while rest of world revenues were down 47%, with rest of world revenues pressured due to meters.

Speaker Change: Accessories revenue decreased 27% to $26 million.

Speaker Change: Due to continued declines in the meter offset by growth in trigger branded accessories.

Speaker Change: It's important to note that while meters core DTC business remained challenged in the first quarter year over year decline in our accessories category was affected by the lapping of a sales load in related to a European product partnership with meter that benefited the first quarter of 2024.

Speaker Change: Moving forward the impact from lapping this partnership will diminish over the balance of the fiscal year 2025.

Speaker Change: Geographically North American revenues were up 6%, while rest of world revenues were down 47% with rest of world revenues pressured due to meter.

Dominic Blosil: Gross profit for the first quarter decreased to $59 million from $63 million in the first quarter of 2024. Gross margin was negatively impacted by, one, unfavorable mix shift in grills of 180 basis points. Two, increased marketplace investment of 140 basis points. and three, unfavorability related to meter of 30 base. These negatives were offset by one lower warranty expense of $110 basis. 2. Supply chain related improvement of 50 basis points, and 3. Other benefits of 20 basis points. sales and marketing expenses were $22.2 million compared to $21.7 million in the first quarter of 2024. During the quarter, increased employee related expense was partially offset by decreased demand creation costs.

Speaker Change: Gross profit for the first quarter decreased to $59 million from $63 million in the first quarter of 2024.

Speaker Change: Gross margin was negatively impacted by one unfavorable mix shift in grills of 180 basis points.

Speaker Change: <unk> increased marketplace investment of 140 basis points.

Speaker Change: And three unfavorably related to meter of 30 basis points.

Speaker Change: Negatives were offset by one lower warranty expense of 110 basis points.

Speaker Change: <unk> supply chain related improvement of 50 basis points and three other benefits of 20 basis points.

Speaker Change: Sales and marketing expenses were $22 2 million compared to $21 7 million in the first quarter of 2024.

Speaker Change: During the quarter increased employee related expense was partially offset by decreased demand creation costs.

Dominic Blosil: General and administrative expenses decreased to $25 million, compared to $32 million in the first quarter of 2024. The decrease in GNA expense was driven by a reduction in stock-based compensation expense, primarily related to the earned and vested performance shares in the prior period, as well as lower legal costs. Net loss of the first quarter was $1 million, compared to a net loss of $5 million in the first quarter of 2024. Net loss per diluted share was $0.01 compared to a loss of $0.04 in the first quarter of 2024. Adjusted net income for the quarter was $7 million, or $0.05 per diluted share, as compared to adjusted net income of $5 million, or $0.04 per diluted share in the same period in 2024.

Speaker Change: General and administrative expenses decreased to $25 million compared to $32 million in the first quarter of 2024.

Speaker Change: Decrease in G&A expense was driven by a reduction in stock based compensation expense primarily related to the earned invested performance shares in the prior period as well as lower legal costs.

Speaker Change: Net loss for the first quarter was $1 million compared to a net loss of $5 million in the first quarter of 2024.

Speaker Change: Net loss per diluted share was <unk> <unk> compared to a loss of <unk> in the first quarter of 2024.

Speaker Change: Adjusted net income for the quarter was $7 million or <unk> <unk> per diluted share as compared to adjusted net income of $5 million or <unk> <unk> per diluted share in the same period in 2024.

Dominic Blosil: Adjusted EBITDA was $23 million in the first quarter as compared to $24 million in the same period of 2024.

Adjusted EBITDA was $23 million in the first quarter as compared to $24 million in the same period of 2024.

Dominic Blosil: Moving on to the balance sheet. At the end of the first quarter, cash and cash equivalents totaled $12 million, compared to $15 million at the end of the previous fiscal year. The end of the quarter was $404 million of long-term debt. At the end of the quarter, the company had drawn down $25 million under its receivables financing agreement, resulting in total net debt of $416 million.

Speaker Change: Moving onto the balance sheet at the end of the first quarter cash and cash equivalents totaled $12 million compared to $15 million at the end of the previous fiscal year.

Speaker Change: We ended the quarter with $404 million of long term debt at.

Speaker Change: At the end of the quarter the company had drawn down $25 million under our receivables financing agreement, resulting in total net debt of $416 million.

Dominic Blosil: From a liquidity perspective, we ended the first quarter with total liquidity of $168 million. Inventory at the end of the first quarter was $127 million, compared to $107 million at the end of the fourth quarter of 2024, and $100 million at the end of the first quarter of 2024.

Speaker Change: From a liquidity perspective, we ended the first quarter with total liquidity of $168 million.

Speaker Change: Inventory at the end of the first quarter was $127 million.

Speaker Change: Paired to $107 million at the end of the fourth quarter of 2024 and $100 million at the end of the first quarter of 2024.

Dominic Blosil: Moving on to tariffs. As Jeremy discussed, we have material exposure given our grills and accessories are imported from abroad. For example, a grill that is produced in China is currently subject to a 45% tariff, comprised of a 20% IEPA tariff and a 25% Section 232 tariff. Even our exposure, our organization has been focused on developing and actioning mitigation strategies to protect profitability and to promote balance sheet health. We believe that we can offset a majority of the impact with our mitigation efforts, and I'm confident in our team's ability to navigate the highly volatile environment. We will be extremely nimble in our approach to operating the business this year and we'll be planning for a variety of outcomes.

Speaker Change: Moving on to tariffs as Jeremy discussed we have material exposure given our grills and accessories are imported from abroad. For example, a grill that is produced in China is currently subject to a 45% tariffs comprised of a 20% <unk> tariffs and a 25% section 232 tariff.

Speaker Change: Yes.

Speaker Change: Given our exposure our organization has been focused on developing and actioning mitigation strategies to protect profitability and to promote balance sheet health.

Speaker Change: We believe that we can offset a majority of the impact with our mitigation efforts and I am confident in our team's ability to navigate the highly volatile environment.

Speaker Change: We will be extremely nimble in our approach to operating the business. This year and we will be planning for a variety of outcomes.

Dominic Blosil: From a cost perspective, we have implemented measures to drive near-term savings, including a substantial reduction in hiring and the deferral of non-essential expenditures. We are continuing to assess incremental opportunities to reduce costs in fiscal 2025 and beyond.

Speaker Change: From a cost perspective, we have implemented measures to drive near term savings, including a substantial reduction in hiring and the deferral of nonessential expenditures.

Speaker Change: We're continuing to assess incremental opportunities to reduce cost in fiscal 2025 and beyond.

Dominic Blosil: Given the tremendous economic uncertainty related to trade policy, and the potential effects that tariffs could have on inflation and consumer sentiment, we're withdrawing our forward guidance for fiscal year 2025. We feel that there are too many unknowns currently to provide a guidance range that we feel confident in. This includes how consumer demand and sentiment change in the face of price increases. the exact outcome of trade policy. and the timing and evolution of our mitigation efforts, which we are continually assessing.

Speaker Change: Given the tremendous economic uncertainty related to trade policy and the potential effects that tariffs could have on inflation and consumer sentiment. We are withdrawing our forward guidance for fiscal year 2025.

Speaker Change: We feel that there are too many unknowns currently to provide a guidance range that we feel confident in.

Speaker Change: This includes how consumer demand and sentiment change in the face of price increases.

Speaker Change: <unk> outcome of trade policy.

Speaker Change: And the timing and evolution of our mitigation efforts, which we are continually assessing.

Dominic Blosil: As is always the case, but particularly in an uncertain economic environment like we are currently in, prioritizing balance sheet health is of utmost importance. Our tariff mitigation strategies will serve to enhance cash flow, and those efforts will also extend to inventory management. We are planning inventory conservatively and have significantly reduced purchase orders until we have a better read on consumer demand and trade policy. Our inventory on hand is sufficient to serve as near-term demand. While we have a leveraged balance sheet, we believe that we have ample liquidity to navigate the current environment. For example, we are currently undrawn on our $125 million revolver, and based on our current expectations, we do not anticipate using our revolver this year.

Speaker Change: As is always the case, but particularly in an uncertain economic environment like we are currently in <unk>.

Speaker Change: Prioritizing balance sheet health is of utmost importance.

Speaker Change: Our tariff mitigation strategies will serve to enhance cash flow and those efforts will also extend to inventory management.

Speaker Change: We are planning inventory conservatively and have significantly reduced purchase orders until we have a better read on consumer demand and trade policy.

Speaker Change: Our inventory on hand is sufficient to serve as near term demand.

Speaker Change: While we haven't leveraged balance sheet, we believe that we have ample liquidity to navigate the current environment. For example, we are currently undrawn on our $125 million revolver and based on our current expectations, we do not anticipate using our revolver this year.

Dominic Blosil: Overall, while we are operating in a highly uncertain environment, our team has proven its ability to navigate challenging macro circumstances. With a robust set of mitigation strategies, we believe that we can offset a majority of the tariff headwinds. Further, we will continue to assess cost savings opportunities, and we'll take a highly nimble approach to operating the business with the overarching goal of preserving EBITDA, cash flow, and balance sheet health.

Speaker Change: Overall, while we are operating in a highly uncertain environment. Our team has proven its ability to navigate challenging macro circumstances.

Speaker Change: With a robust set of mitigation strategies, we believe that we can offset a majority of the tariff headwind.

Speaker Change: We will continue to assess cost savings opportunities and we will take a highly nimble approach to operating the business with the overarching goal of preserving EBITDA cash flow and balance sheet health and with that I'll turn the call over to the operator operator.

Matt: And with that, I'll turn the call over to the operator. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.

Speaker Change: If you'd like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: Any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one as a reminder, if you're using a speaker phone. Please remember to pick up your handset before asking a question, we'll pause briefly questions registered.

Sabrina: First question is from the line of Phillip Blee with William Blair. Your line is now open. Hi, this is Sabrina on for Phillip. Thanks for taking our question. Can you provide some color around some of the strategic price increases across your product portfolio and how much we can expect this to increase? And then also given the importance of newness, how do you think about new price points going forward?

Philip: First question is from the line of Philip <unk> with William Blair. Your line is now open.

Sabrina: Hi, This is sabrina on for Phil Thanks for taking our question.

Sabrina: Can you provide some color around some of the strategic price increases across our product portfolio and how it can how much. We can expect this to increase and then also given the importance of newness. How do you think about new product new price points going forward.

Jeremy Andrus: Yeah, this is Jeremy, I'm happy to take that. So first of all, I would say that, you know, this environment, it is not a typical approach to pricing analysis, just given that there will be prices going up around us in our category and other categories, to the extent that we were able to, we were very sophisticated in really understanding elasticity at a product and a price level. And so it certainly wasn't an even price increase across the board. We tried to understand where we thought elasticities would fall based on historical sell-through data. And, you know, I would say that as a premium brand that's bringing innovation to the market, we certainly thought about where we had permission to move price more than, on some SKUs, more than others.

Sabrina: Yes.

Jeremy Andrus: This is Jeremy I'm happy to take that so.

Sabrina: First of all I would say that.

Sabrina: This environment. It is not a typical approach to pricing analysis, just given that.

Sabrina: There will be prices going up around us and our category in other categories to the extent that we were able to we were.

Sabrina: Very sophisticated in.

Sabrina: Really understanding elasticity at a product and a price price level.

Sabrina: So.

Sabrina: It certainly wasn't an even price increase across the board we tried to understand.

Sabrina: Where are we where we thought <unk> would fall based on historical sell through data.

Sabrina: And.

Sabrina: I would say that.

Sabrina: As a.

Sabrina: As a premium brand thats, bringing innovation to the market, we certainly thought about where we have permission to.

Sabrina: To move price more than.

Jeremy Andrus: We recognized that, you know, in opening price points, we're going to see more price sensitivity. And, you know, we had the ability to go back and look at price increase data from just post-pandemic, as we saw supply chain, inflation in the supply chain. So we had some data points there. And so feeling good about the decisions we've made, we took price recently, but it will take many weeks for the prices to be reset in the market. So we don't have an update there yet. You know, we think it is very likely that competition will also be raising price right around the same time.

Sabrina: More on some skus more than others, we recognize that.

Sabrina: At opening price points, we're going to see more price sensitivity in.

Sabrina: We had we had the ability to go back and look at.

Sabrina: Price increase.

Sabrina: Data from just post pandemic as we saw supply chain.

Sabrina: Inflation in the supply chain. So we had some data points there.

Sabrina: And so.

Sabrina: And good about the decisions we've made we took price recently.

Sabrina: But it will take many weeks for the prices to be reset in the market. So we don't we don't have an update there yet.

Sabrina: We think it is.

Sabrina: It is very likely that competition.

Sabrina: We will also be raising price right around the same time so.

Jeremy Andrus: So... We've done our best to anticipate through the analysis that we could. It's a challenging environment, given that everything is dynamic, but we have the ability to sort of test and make adjustments as we go.

Sabrina: We've done our best to anticipate through the analysis. So we could it's a challenging environment given that everything is dynamic, but we have the ability to.

Sabrina: Sort of test and make adjustments as we go.

Sabrina: In terms of... Okay, that's helpful. Let me get to the next part. You're welcome.

Speaker Change: In terms of Okay. That's helpful. Thank the next part of it.

Jeremy Andrus: I'll just hit the second part in terms of product strategy. You know, our product strategy is set many years in advance. You know, we are, you know, it can take as long as 36 months for a complicated product to go from concept to launch in the market. In less complicated products, shorter but in a durable, we really don't build our product roadmap with any intent to react to the environment that we're in. We're trying to create experiences, we invest in innovation, and as we said in the Woodbridge launch, really trying to bring not only innovation but value down to sort of lower mid-price point.

Speaker Change: Yeah, Youre walking out I'll, just I'll just hit the second part in terms of product strategy.

Speaker Change: Our product strategy set many years in advance.

Speaker Change: We are.

Speaker Change: It can take as long as.

Speaker Change: 36 months for a complicated product you go from from.

Speaker Change: From concept to launch in the market.

Speaker Change: In less complicated products shorter, but any durable, we really don't build our product roadmap.

Speaker Change: With.

With any intent to react to.

Speaker Change: The environment that we're in we're trying to create.

Speaker Change: Experiences, we invest in innovation and as we said in the Woodbridge launched really trying to bring not only innovation, but value down to sort of lower mid price point. So that's our intent and then we react to the market and we're opportunistic around pricing and promotion but.

Sabrina: So that's our intent. And then we react to the market and we're opportunistic around pricing and promotion, but the product strategy continues in good markets and in bad. Got it. That's helpful. Thank you.

Speaker Change: The product strategy continues in good markets and in bad.

Jeremy Andrus: And then switching gears, you acquired meter back in mid 2021. It's been pressured the past few quarters. Can you talk about how the team is thinking about that segment and capital allocation going forward? Yeah, I mean, definitely focused on our strategy around how we navigate some of the short term pain we're feeling on the demand side with meter. We still have a point of view that's long term in nature, and the thesis really hasn't changed. I think what has changed is the amount of competition within dot, you know, within direct to on online channels that we believe isn't necessarily the long term future for meter.

Speaker Change: Got it that's helpful. Thank you and then switching gears you acquired meter back in mid 2021, it's the impression in the past few quarters can you talk about how the team is thinking about that segment and capital allocation.

Speaker Change: Going forward.

Speaker Change: Yes.

Speaker Change: Really focused on our strategy around how we navigate some of the short term pain, we're feeling on the demand side.

Speaker Change: With meter we still have a point of view that's long term in nature and the thesis really hasn't changed I think what has changed is the amount of competition within dot within director.

Speaker Change: Online channels that we believe isn't necessarily the long term future for meter we believe the unlock really isn't how we drive road map through the wholesale channels, where we have a competitive strength and where there is less competition. So we may see some some continued pressure on top line as we.

Jeremy Andrus: We believe that the unlock really isn't how we drive roadmap through the wholesale channels where we have a competitive strength and where there's less competition. So, we may see some, some continued pressure on top line as we navigate and sort of shift the mix from, you know, on online sales, Amazon, DTC to wholesale accounts again, where we have a competitive strength. In addition to really thinking through how to unlock efficiency and optimize the cost structure really in an effort to centralize the operation and evaluate where there are profitability unlocks so that we can stabilize from a profitability standpoint, reset on how we think about long term growth and then begin to fuel that engine long term.

Speaker Change: Navigate and sort of shift the mix from.

Speaker Change: Online sales Amazon DTC.

Speaker Change: Wholesale accounts again, where we have a competitive strength. In addition to really thinking through how to unlock efficiency and optimize the cost structure really in an effort to centralize the operation and evaluate where there are profitability unlocks so that we can stabilize.

Speaker Change: From a profitability standpoint.

Speaker Change: Reset on how we think about long term growth.

Jeremy Andrus: So, it is going to take on some, some short term pain as we navigate some of the short term realities that we're facing, especially from a competitive landscape standpoint online, but believe that this brand has longevity and ultimately some of the ankle brighter brands may or may not survive the moment because they operate on skinny margins. And, you know, one strategy certainly isn't a race to the bottom to try to compete. We believe this brand has long term sustainable value that we want to protect. And so we just really need to balance the short term with a long term effort as we unlock long term value with meter.

Speaker Change: And then begin to fuel that engine long term. So it is going to take on some some short term pain as we navigate.

Speaker Change: Some of the short term realities that we're facing especially from a competitive landscape standpoint online, but believe that this brand has longevity and ultimately some of the ankle brighter brands may or may not survive the moment because they operate on skinny margins and one strategy certainly isn't a race to the bottom to try to compete.

Speaker Change: We believe this brand has long term sustainable value that we want to protect and so we just really need to balance the short term with a long term effort as we unlock long term value with meter.

Sabrina: Got it. Thanks, guys. Best of luck. Thank you for your question.

Speaker Change: Got it thanks, guys best of luck.

Anna Glaessgen: Next question is from the line of Anna Glaessgen with B Reilly. Your line is now open. Hey, good afternoon, guys. Thanks for taking my questions. I'd like to touch on.

Speaker Change: Yeah.

Speaker Change: Thank you for your question next question is from the line of Ana <unk> with B Riley. Your line is now open.

Ana: Hey, good afternoon, guys. Thanks for taking my question.

Anna Glaessgen: you know, the retail environment, have you sensed or has there been a shift in retailer willingness to take on inventory in light of the current uncertainty? Yeah, so it's good question. I wouldn't say that we have sent a reluctance of retailers to... to take on inventory, there has been really a shift from, in our largest retailers, from direct import back to domestic fulfillment, and this is, you know, it's really a function of the tariff situation and how tariffs are assessed, and so I would say we have, you know, fulfilled domestically as we sort of unpack the process of what we've called direct import in the case with tariffs, it's defined as for sale, where a retailer is able to import directly but pay a tariff at the cost, at our cost of goods, not at their wholesale price.

Speaker Change: I'd like to touch on.

Speaker Change: The retail environment have you sensed or has there been a shift and retailer willingness to take on inventory in light of the current uncertainty.

Speaker Change: Yes so.

Speaker Change: It's a good question.

Speaker Change: I wouldn't say that we have.

Speaker Change: Sensed a reluctance of retailers too.

Speaker Change: To take take on inventory there has been.

Speaker Change: Really a shift.

Speaker Change: In our largest retailers from direct import back to domestic fulfillment. This is good.

Speaker Change: It's really a function of the tariff situation and how tariffs are SaaS.

Speaker Change: So I would say we have.

Speaker Change: We have found.

Speaker Change: So it's sort of an interim solution to fulfill domestically.

Speaker Change: We as we as we sort of unpack the process of what we call direct import in the case with tariffs it's.

Speaker Change: Defined as first sale.

Speaker Change: We are in.

Speaker Change: Retailers able to import directly but pay of tariffs.

Speaker Change: D.

Speaker Change: Costs at our cost of goods, Matt at their wholesale price so.

Jeremy Andrus: So, you know, we're sort of working through it, this thing came so fast that, you know, we really chose to focus on having inventory in our retailers on time for the season, and we'll sort of manage this over time, I think we're, you know, one of many, many brands that are figuring out how do we import inventory in a cost-efficient way from a tariff perspective, but now we're not, we're not, we're really not seeing consumer, sorry, retailer behavior change, and, you know, we haven't seen consumer demand slow down at this point.

Speaker Change: We're sort of working through what the thing came so fast that.

Speaker Change: We really chose to focus on having inventory in our retailers on time for the season.

Speaker Change: And we'll sort of manage this overtime I think were.

Speaker Change: One of many many brands that are that are figuring out how do we import.

Speaker Change: Inventory in a cost efficient way from a tariff perspective, but now we're not we're not we're really not seen in the consumer sort of retailer behavior change.

Speaker Change: And we.

Speaker Change: No we haven't seen consumer demand slowdown at this point.

Jeremy Andrus: Great, thanks. And then in the prepared remarks, you noted that inventory on hand is sufficient to serve near term demand. Wondering if, you know, retail can stay consistent with where it is today, if you could put a finer point on, you know, how long you would be able to fulfill that demand. Well, I think that was, you know, in the context of, you know, pre-tariff inventory, I'd say that, you know, our inventory on hand may provide some relief in the short term before we start to see the true impact of tariffs take shape within our cost of sales.

Speaker Change: Great. Thanks.

Speaker Change: And then in the prepared remarks, you noted that inventory on hand is sufficient to serve near term demand.

Speaker Change: I'm wondering if retail stays consistent with where it is today if you could put a finer point on.

Speaker Change: How long you would be able to fulfill that demand.

Speaker Change: Well I think that was in the context of pre.

Speaker Change: Pre tariff inventory I would say that.

Speaker Change: Our inventory on hand may provide some relief in the short term before we start to see the true impact of Terex terrorists take shape within our cost of sales.

Jeremy Andrus: I think the broader point here is that our inventory position on balance sheet is healthy, save maybe some slightly heavier inventory on the meter side. But, you know, to piggyback on Jeremy's point, the broader conversation here is really around how we've strategically built our organization and, you know, the management of inventory, how we balance supply versus demand, how we partner with our retail, but with our retail partners is really all inputting into an iterative demand plan process that happens on a weekly basis so that we can make adjustments according to demand signals, which also requires a feedback loop from our retail partners.

Speaker Change: The broader point here is that our inventory position on balance sheet is healthy safe may be some some slight the heavier.

Speaker Change: Your inventory on the meter side.

Jeremy Andrus: But to piggyback on Jeremy's point.

Jeremy Andrus: The broader conversation here is really around how we strategically built our organization and the management of inventory, how we balance supply versus demand, how we partner with our retail.

Jeremy Andrus: But with our retail partners is really all inputting into an iterative demand plan process that happens on a weekly basis. So that we can make adjustments. According to demand signals, which also requires a feedback loop from our retail partners and so I think the broader point here is that.

Jeremy Andrus: And so I think that the broader point here is that, you know, we react in kind to these signals and can adjust our inventory balance accordingly. And in addition to that, I think what we're currently doing is sort of risk adjusting as well based on an unknown future. And we started to pull back on POs from Asia just to ensure that we're not over-inventoried and create a destocking issue down the road in the event that we sort of missed forecast. And so I'd say that the theme here is prudence and, you know, reducing purchase orders will allow us to sort of navigate the short-term before we get better signals through our peak selling season, which we then can turn back on to the extent that we start to see either stabilizing sell-through that's meeting or exceeding plan, or if it's missing, you know, our expectations heading into peak season, we've already sort of course-corrected on the amount of inventory that we're bringing in.

Jeremy Andrus: We react in kind to the signals and can adjust our inventory balance accordingly, and in addition to that I think what we're currently doing is sort of risk adjusting as well based on an unknown future and we started to pull back on pose from Asia just to ensure that we're not.

Jeremy Andrus: Over inventoried and create a destocking issue down the road in the event that we sort of missed forecast and so I'd say that the the theme here is prudent and reducing purchase orders will allow us to sort of navigate the short term before we get better signals through our peak selling season, which we then can turn back on.

Jeremy Andrus: To the extent that we start to see either stabilizing sell through that's meeting or exceeding plan or if it missing or.

Jeremy Andrus: Our expectations heading into peak season, we've already sort of course corrected on the amount of inventory that we're bringing in and that I think just wraps around your point, which is the inventory. We have on hand allows us to pull back on <unk> and then react in kind as we measure. These these demand signals through the does that throw over.

Jeremy Andrus: And that, I think, just wraps around your point, which is the inventory we have on hand allows us to pull back on POs and then react in kind as we measure these demand signals over the course of Q2.

Jeremy Andrus: Over the course of Q2.

Anna Glaessgen: Great. Thanks, guys.

Jeremy Andrus: Great. Thanks, guys.

Matt: Thank you for your question.

Peter Benedict: Next question is from the line of Peter Benedict with Baird, your line is now open. Hi, guys. Thanks for taking the question. I'm going to go tariff. There's a lot we don't know, but there is a lot we do know. And one that was helpful there, you gave us some perspective on the rate that you're paying. I'm still a little confused. So a product coming in from China, a grill coming in from China, gets 45% in total, and that includes Section 232. Is that the way to think about it? That is correct. And, you know, stepping back more broadly, 232 is assessed on all non-U.S.

Jeremy Andrus: Thank you for your question.

Jeremy Andrus: Next question is from the line of Peter Benedict with Baird. Your line is now open.

Peter Benedict: Hi, guys. Thanks, Thanks for taking the question.

Speaker Change: I'm going to tariffs.

Speaker Change: There's a lot we don't know but.

Speaker Change: What we do know.

Speaker Change: And one that was helpful. There you gave us some perspective on.

Speaker Change: The rate that youre paying.

Speaker Change: I am still.

Speaker Change: A little confused so our product coming in from China Grill coming in from China.

Speaker Change: It's 45% in total and that includes section 232 is that the way to think about it.

Speaker Change: That is correct and.

Speaker Change: Stepping back more broadly $2 32 is.

Jeremy Andrus: steel products. It's 25 percent, and it supersedes other tariffs. So 232 is not stacked on top of tariffs, except in the case of China, the IEPA tariffs are stacked on top, the 210 percent tariff. So it's 45 percent out of China, 25 percent out of Vietnam. And then, of course, accessories have. various tariffs depending upon where they're coming from. And obviously the second layer to that is that doesn't, sorry, just, I mean, I think we spoke to this as well, just obviously adjusting for the mix between, you know, Vietnam and China is an important component as you sort of.

Speaker Change: It's assessed on all non U S steel products, it's 25%.

Speaker Change: And it supersedes other tariffs. So so $2 32 is not stacked on top of other tariffs.

Speaker Change: Except in the case of China.

Speaker Change: The <unk> tariffs are stacked on top of the 10% tariffs. So it's 45% out of China, 25% out of Vietnam, and then of course accessories have <unk>.

Speaker Change: Various.

Speaker Change: Various tariffs, depending upon where they are where they're coming from.

Speaker Change: And the second layer to that is that doesn't sorry, just I mean, I think we spoke to this as well just obviously adjusting for the mix between Vietnam and China is an important component as you sort of.

Jeremy Andrus: you know, as you calculate the potential impact, as well as the fact that, you know, grills were 54-ish percent of revenue. So making those adjustments is also important, right, to kind of derive a unmitigated exposure here. And then obviously, we've layered on the fact that we have mitigants to offset that. Yeah, no, absolutely. So a Vietnam grill would be 25% plus the 10% that's everywhere. So 35. That's the way to think about that. In Taiwan, the meter stuff probably comes in China. China it's 45. right, Vietnam, Vietnam is No, so Vietnam is 25%. And the difference is that the reciprocal tariff is not assessed on top of the 232 steel tariff.

Speaker Change: And you calculate the potential impact as well as the fact that drills were 54% of revenues. So making those adjustments is also important to that.

Speaker Change: Derive.

Speaker Change: Unmitigated exposure here and then obviously you've layered on the fact that we have michigan's too to offset that.

Speaker Change: Yeah no.

Speaker Change: Absolutely so of Vietnam grow would be 25% plus the 10% that's everywhere. So 35, that's the way to think about that in Taiwan, the meter stuff, probably kind of announced in China, China is 45.

Speaker Change: Vietnam.

Speaker Change: Vietnam is.

Speaker Change: Didn't know.

Speaker Change: So Vietnam is 25% and the difference.

Speaker Change: The difference is that the reciprocal tariff is not assessed on top of the $2 32 steel tariffs.

Speaker Change: Understood understood.

Jeremy Andrus: The only time there are stacks is in China, it's the two IEPA tariffs of 10 and 10, so it's 45 there, 25% on grills outside of China. Awesome.

Speaker Change: Yes.

Speaker Change: The only.

Speaker Change: Yes, Youll tender stacked is in China. The two IEP tariffs of 10 and 10. So it's 45, they are 25% on grilles outside of China.

Peter Benedict: Very good to know. Thanks for setting us straight on that.

Speaker Change: Awesome.

Peter Benedict: And then maybe there was no mention of kind of the Walmart pellet rollout. I was curious kind of maybe how that's been going. And then how do you assess if there's any of this demand strength that you've seen of late is kind of pulled forward? I mean, a lot of companies we talked to are seeing good trends here in April or saw good trends in April on bigger ticket items. I mean, is there any measure of like, hey, this is what normally would sell through at this time of year? Was it well above that?

Speaker Change: Very good to know thanks, thanks for setting a straight on that and then maybe.

Speaker Change: There was no mention of the kind of the Walmart pilot rollout I was curious kind of maybe.

How that's been going and then.

Speaker Change: How do you assess if there is any of this demand strength that you've seen of late.

Speaker Change: Kind of pull forward I mean, a lot of companies we've talked to we're seeing good trends here in April.

Speaker Change: Saw good trends in April on bigger ticket items.

Speaker Change: I mean is there any measure of like Hey, This is what normally would sell through at this time of year well above that just any.

Jeremy Andrus: Just any perspective you could share on that, Jeremy, would be great. Thank you. Yeah, so Walmart rolled out late December through January. It's probably it was January or early mid-January. And I would say we're excited about partnership. We're selling pellets and rubs in Walmart. And it was really an answer to consumer research that we did that demonstrated there's a greater consumer shopping in Walmart, and they wanted to buy their pellets when they grocery shop. And so it was part of our grocery strategy. And I would say we're excited about the partnership and it's meeting our expectations.

Speaker Change: Any perspective, you could share on that Germany would be great. Thank you.

Speaker Change: Yes, so walmart rolled out.

Speaker Change: In late December through through January Yes, probably it was January early mid January and I would say we're excited about partnership.

Speaker Change: We're selling pellets pellets and Raj and Walmart.

Speaker Change: And it was really an answer to.

Speaker Change: Consumer research that we did that debt that demonstrated there was there is a trade or consumer shopping at Walmart.

Speaker Change: And they wanted to buy their pellets when they grocery shopped and so it was part of our.

Speaker Change: Part of our grocery store strategy and I would say, we're excited about the partnership and its meeting our expectations.

Jeremy Andrus: In terms of the trends on grills, I mean, boy, it's so hard to know. You know, the shoulder season is always volatile, and it tends to be more driven by weather, especially in sort of the months of March and April. And so, I would say the trend has been solid. I don't know that there's any way to sort of unpack how much of that is just consumer demand. We sort of believe that the further removed we get from the pandemic, the more we'll see a normalization of the replacement cycle, so there could be some of that in there.

Speaker Change: In terms of the trends on Grilles I mean.

Speaker Change: It's so hard to know.

Speaker Change: The shoulder season is always volatile and it tends to be.

Speaker Change: It tends to be more driven by weather, especially in sort of the months of March and.

Speaker Change: In April.

Speaker Change: And so I.

Speaker Change: I would say that the trend has been solid.

Speaker Change: I don't I don't know that there is any way to sort of unpack how much of that is.

Speaker Change: Just consumer demand and we also we sort of believe that further removed we get from the pandemic. The more we will see a normalization of the replacement cycle. So there could be some of that in there and there.

Peter Benedict: We certainly see the broader trend, at least the headlines, that brands believe that there is some pull forward just as a result of Americans trying to buy products before prices go up, so really hard to unpack. Boy, I'll let you know in a quarter. Fair enough. I appreciate it. Thanks for the color. Sure.

Speaker Change: We certainly see the broader trend at least the headlines.

Speaker Change: Brands believe that there is some pull forward just just as a result of Americans trying to byproducts before prices go up.

Speaker Change: Really hard to unpack boy.

Speaker Change: I'll, let you know in a quarter.

Speaker Change: No fair enough I appreciate it thanks for the color.

Matt: Thank you for your question.

Brian McNamara: Next question is from the line of Brian McNamara with Canaccord Genuity. Your line is now open. Hey, good afternoon, guys. Thanks for taking the questions. Just a clarification on China. It's a great question to follow up on. So China is just 45% in terms of tariffs and 125% reciprocal does not impact you? it impacts us a little bit.

Speaker Change: Sure.

Speaker Change: Thank you for your question.

Speaker Change: Next question is from the line of Brian Mcnamara with Canaccord Genuity. Your line is now open.

Brian McNamara: Hey, good afternoon, guys. Thanks for taking the questions.

Brian McNamara: Just a clarification on China, that's a great question to follow up on so China is just 45% in terms of tariffs in the 125% are cyclical does not impact you.

Jeremy Andrus: So let's sort of separate grills and accessories. The grills get hit by the 232 tariff. And so out of China, that means we get two 10% IEPA tariffs or 20%, and then we get 25% on the grills. Accessories are subject to the other tariffs. And so in the case of a cover, for example, sourced out of China, that would have a 145% tariff on it.

Brian McNamara:

Brian McNamara: It impacts us a little bit so so let's sort of separate grills and accessories.

Brian McNamara: The Grilles get hit by the $2 32 tariff and so out of China that means we get to 10% <unk> tariffs are 20%.

Brian McNamara: And then we get 25% on the grill.

Brian McNamara: Accessories are subject to all of it.

Brian McNamara: To the other tariffs and so in the case of.

Brian McNamara: A cover for example sourced out of China that would have a 145% tariff on it.

Jeremy Andrus: And so I'd love to say that There's nuance and it's not quite as it's not quite as simple as I could could could define. But generally speaking, our accessories, the majority of our accessories have a 10 percent tariff, in part because the majority are sourced outside of China. And so they're subject to a currently a 10 percent, the 10 percent reciprocal tariff. And so the other accessories are sort of they bounce around between 10% and 145%. And of course, you can imagine that in an effort to not pay 145%, tariffs, we are moving those. Our highest priority is to look at the accessories that drive the most volume and attach to grills that are subject to 145% out of China.

Brian McNamara: And so it's.

Brian McNamara: No.

Brian McNamara: I'd love to say that.

Brian McNamara: Hey.

Brian McNamara: There is new Arps, and it's not quite as it's not quite as simple as I could could could define but generally speaking.

Brian McNamara: Our accessories, the majority of our accessories have a 10% tariff in part because the majority of our sourced outside of China and so there is subject to a currently a 10%.

Brian McNamara: The 10% Roe.

Brian McNamara: Reciprocal tariff.

Brian McNamara: And so the other accessories are sort of they bounce around between 10% and 145%.

Brian McNamara: Of course, you can imagine that in an effort to not pay a 145%.

Brian McNamara: Tariffs.

Brian McNamara: We are moving those are our highest priority is to look at the accessories that drive the most volume attached to grilles that are subject to a 145% out of China.

Jeremy Andrus: And as I said, that's just generally our strategy. I mean, like, we are, we are, fortunately, last couple years, we've been working on developing partnerships outside of China, and we've made progress. And we are definitely accelerating that progress right now.

Brian McNamara: And that's just generally our strategy I mean like we are.

Brian McNamara: We are Fortunately last couple of years, we've been working on <unk>.

Brian McNamara: Developing partnerships outside of China, and we've made progress in.

Brian McNamara: We are definitely accelerating that progress right now.

Jeremy Andrus: So can you give us an idea of how much of your COGS are exposed to tariffs? I know some folks are just slapping the tariff rate on your total COGS. I don't think that's obviously not the way to look at it. But there's other costs in your cost of goods sold. Can you give us a decent idea there, if possible? I mean, we can't we I don't know that we're in a position to break down the composition of COGS, save to say that certainly product cost is a majority of our COGS. But again, you have to recognize and maybe a proxy for this is just how kind of accessory or our categories from a revenue standpoint break down.

Speaker Change: So can you give us an idea of how much of your Cogs are exposed to tariffs I know some folks are just slapping the tariff rate on your total Cogs and I don't think that's obviously not the way to look at it but theres other costs and your cost of goods sold.

Brian McNamara: You gave us.

Brian McNamara: It's an idea there.

Brian McNamara: Oh.

Brian McNamara: I mean, we.

Brian McNamara: We can.

Brian McNamara: I don't know that we're in a position to break down the composition of Cogs.

Brian McNamara: Safe to say that certainly product cost as a majority of our Cogs.

Brian McNamara: But again you have to recognize there may be a proxy for this is just how kind of accessory.

Jeremy Andrus: When you think about the fact that consumables are all manufactured in the U.S., you know, 80 percent of our grills are manufactured in China, 20 percent are in Vietnam. Nick, we talked about the component that's non non-China for accessories, right? Should we share that number? Yeah. Percentage. Yeah. So 75 percent of accessories are manufactured non-China. And then, you know, as you sort of extend your math from there, you'd have to make some assumptions around what percentage of COGS is is driven by, you know, the product. And then you can use similar breakdowns to sort of define each one of those buckets.

Brian McNamara: Our categories from a revenue standpoint break down when you think about the fact that consumables are all manufactured in the U S.

Brian McNamara: 80% of our Grilles are manufactured in China, 20% are in Vietnam.

Nick: Nick you talked about.

Nick: The component that's non non China for accessories right sure that number yes percentage, yeah. So 75% of accessories are manufactured non China.

Nick: And then as you sort of extend your math from there you'd have to make some assumptions around what percentage of Cogs is is driven by.

Jeremy Andrus: But most definitely our product cost drives a lion's share of our of our of our COGS.

Nick: The product and then you can use similar breakdowns to sort of define each one of those buckets, but most definitely our product cost drives the lion's share of our of our of our Cogs.

Jeremy Andrus: And then last one for me, are all of your grills, like all your SKUs produced in both China and Vietnam, or are there certain SKUs produced in one country and not the other? You know, it's a good question. We don't have redundant sourcing for all of our SKUs outside of China. I would say for our highest volume SKUs, we do have redundant sourcing outside of China, and we're focused on building more capacity for those. And where we don't have redundancy out of China, we are laser-focused. At least where there's adequate volume, we're laser-focused on taking those outside of China.

Speaker Change: And then last one for me are all of your grills like all your Skus produced in both China, and Vietnam or are there certain skus produced in one country and not the other.

Speaker Change: It's a good question.

Speaker Change: We don't have redundant sourcing for all of our Skus outside of China.

Speaker Change: I would say for our highest volume Skus, we do have redundant sourcing outside of China.

Speaker Change: And we're focused on building more capacity for those.

Speaker Change: And where we don't have redundancy out of China, we are laser focused.

Speaker Change: At least where there's adequate volume we're laser focused on on taking those.

Jeremy Andrus: We've got multiple suppliers in Vietnam at some phase in sort of development through mass production, and we've got supplier options outside of China and Vietnam, but within Southeast Asia that we're working on.

Speaker Change: Outside of China.

Speaker Change: You've got you've got multiple suppliers in.

Speaker Change: In Vietnam.

Speaker Change: Got it.

Speaker Change: Some fees in the sort of development through mass production.

Speaker Change: And there also we've got supply your options outside of China, and Vietnam, but within southeast Asia that we're working on.

Brian McNamara: Very helpful. Thanks for the podcast.

Matt: Thank you for your question.

Speaker Change: Very helpful guys like us.

Simeon Siegel: Next question is from the line of Simeon Siegel with BMO Capital. Your line is now open. Hey, this is Dan Arthur Simeon. Thanks for taking our question. Understandably, you're not providing guidance, but did want to see if there's anything high level you could speak to in terms of gross margin, maybe x tariffs, the things we should be aware of in terms of makeshifts or planned promo days. And then on the cost reduction plan, is that all bucketed in SG&A or are there pieces in COGS as well? Thanks. So, to the first question, yeah, we just, we can't really provide any color, you know, we suspended guidance.

Speaker Change: Thank you for your question.

Speaker Change: Next question is from the line of Simeon Siegel with BMO capital. Your line is now open.

Speaker Change: Hey, this is Ben on for Seth.

Speaker Change: Thanks for taking my question.

Speaker Change: But youre not providing guidance, but didn't want to see if there's anything high level you could speak to in terms of gross margin maybe ex tariffs.

Speaker Change: Things, we should be aware of in terms of the mix shifts there plan promo days and then on the cost reduction plan, but all buckling in.

Speaker Change: SG&A or other pieces and cuts as well thanks.

Speaker Change: Okay.

Speaker Change: So to the first question, yes, we just we can't really provide any any color we suspended guidance I think.

Simeon Siegel: I think we'll leave it at that. I mean, That's just where we are. And hopefully we can provide some updates at a later point. But on your second question, you know, cost reduction. You know, a majority of the cost reductions that we're focused on are around controllables, which really isn't an SG&A, you know, there may be things within cost of sales that we can evaluate, but those are likely medium to longer term in nature. When you think about supply chain mitigants, really we're focused on tariff sharing with sourcing partners, first sale, sourcing diversification. Again, these aren't things that happen as quickly as levers we can pull within SG&A controllables.

Speaker Change: I'll leave it at that.

Speaker Change: That's just where we are and hopefully we can provide some updates at a later point, but.

Speaker Change: On your second question.

Speaker Change: Cost reductions.

Speaker Change: Our.

Speaker Change: A majority of the cost reductions that we're focused on or around controllable.

Speaker Change: Which really is in SG&A.

Speaker Change:

Speaker Change: There are there may be things within <unk> and cost of sales that we can evaluate but those are likely medium to longer term in nature. When you think about supply chain, Michigan.

Speaker Change: Clearly, we're focused on tariff sharing with sourcing partners first sale.

Speaker Change: <unk> diversification again, these arent things that happen as quickly as levers, we can pull within SG&A controllable.

Jeremy Andrus: But we do believe that we have ample room to make adjustments as needed as we build our plan to sort of navigate the future. And there's things that we know today, and there may be things that we'll learn tomorrow that will inform an evolving plan. But, you know, we do feel that there are ample sort of controllables in place to really support and help navigate the tariff situation, in addition to the pricing levers, which we've pulled, as well as, as I had mentioned, some of the supply chain slash COGS levers that are in work. Got it.

Speaker Change: But we do believe that we have ample Eric.

Speaker Change: Ample room to make adjustments as needed as we.

Speaker Change: Build our plan to sort of navigate the future and there is things that we know today and there may be things that we'll learn tomorrow that will inform and evolving plan, but we do feel that there are ample sort of controllable in place to really support and help navigate.

Speaker Change: The tariff situation. In addition to the pricing levers, which we've pulled as well as I had mentioned some of the supply chain slash Cogs levers that are in works.

Jeremy Andrus: Thanks. Maybe just one on marketing. Anything you could share in terms of how you're approaching that this year, even if it's qualitatively, if it's top of funnel or more targeted, and then also in light of 1Q demand creation being down. Thanks, guys. Well, I'd say, first of all, we came into this year really leaning into sales activation activities. So we've talked about investment in retail at the point of sale, in visual assortment, education with retail associates, cooking demos. We have immediately increased the number of Costco roadshows that we do, and that really, the intent behind the roadshow program is to educate consumers, some of whom will convert in Costco, but many of whom will learn about the brand there and purchase elsewhere.

Speaker Change: Got it thanks.

Speaker Change: Maybe just one on marketing anything you could share in terms of how you're approaching that this year, even if it's qualitatively if it's top of funnel or more targeted and then also in light of <unk> demand creation came down thanks guys.

Speaker Change: Well I would say for so we came into this year really leaning into sales activation activities. So we've talked about investments in retail at the point of sale.

Speaker Change: In visual assortment edgy.

Speaker Change: Education with retail associates.

Speaker Change: Cooking cooking demos.

Speaker Change: We have.

Speaker Change: We've meaningfully increased the number of Costco roadshows that we do and that really the intent behind the roadshow program is to educate consumers some of whom will converting costco, but many of whom will learn about the brand there.

Jeremy Andrus: And so we continue to lean into those sales activation activities. I would say that, you know, we continue to make baseline investments in brand marketing in our community. You know, top of funnel marketing is a lower priority right now in this uncertain environment. And there's no question that we are being very diligent as we think about OPEX. And so we are monitoring return on activities very, very carefully. And, and we're pulling back where we can't see a very clear return in period. We're not spending that money, but I would say a lot less top of funnel and certainly less than we'd expected just given the environment and more focus on in-store retail activation.

Speaker Change: And purchased elsewhere.

Speaker Change: And so we continue to lean into those sales activation activities I would say that.

Speaker Change: We continue to make.

Speaker Change: Baseline investments in.

Speaker Change: In brand marketing and our community.

Speaker Change: Top of funnel top of funnel marketing as a lower priority right now in this uncertain environment and Theres no question.

Speaker Change: We are being.

Speaker Change: Like very diligent as we think about opex.

Speaker Change: So we are monitoring return on activity is very very carefully and and we're pulling back where we can't see it.

Speaker Change: Very clear return.

Speaker Change: In period, we're not spending that money, but I would say.

Speaker Change: A lot lot less top of funnel and certainly less than we'd expected just given the environment and more focus on in store retail activation.

Jeremy Andrus: In terms of marketing spend for the quarter and down. Yeah, I think it's really connected to Jeremy's comment, which is ensuring that we're prioritizing high returning, more immediate marketing initiatives, leaning into kind of the fixed infrastructure that we have in place. I mean, one of the beauties of this brand is just our ability to leverage an influencer to, you know, to build and continue to protect and kind of grow brand awareness, et cetera. I think that's a lower cost avenue that allows us to hit some top of funnel and then just a shift to middle, lower funnel continues to be a priority.

Speaker Change: In terms of marketing spend for the quarter down yes.

Speaker Change: Yes, I think it's really connected to jeremy's comment, which is ensuring that we're prioritizing high returning more immediate marketing initiatives lean.

Speaker Change: Leaning into kind of the fixed infrastructure that we have in place I mean, one of the beauties of this brand is just our ability to leverage an influenza too.

Speaker Change: Just to build and continue to protect and grow brand awareness et cetera.

Speaker Change: I think that's a lower cost Avenue that allows us to hit some top of funnel.

Dominic Blosil: I would note that in the gross margin walk that we shared in my remarks, we talked about some marketplace investments. So there has been a shift as well. And it's really geography based where we have some programs promotional wise, as well as a program with ACE that we're funding. But, you know, those dollars came through COGS that will be a component of our marketing strategy in Q2.

Speaker Change: And then just a shift to middle lower funnel continues to be a priority I would note that in the gross margin walk that we that we shared in my remarks, if we talk talk about some marketplace investments. So there has been a shift as well and it's really geography based where we have some programs promotions.

Speaker Change: <unk> wise as well as a program with Ace that we're funding, but those dollars came through Cogs that will.

Speaker Change: A component of our marketing strategy in Q2.

Brian McNamara: We appreciate the calling. Best of luck.

Matt: Thank you for your question. There are no additional questions waiting at this time.

Speaker Change: Appreciate the color best of luck.

Matt: So that will conclude the conference call. Thank you for your participation. You may now disconnect your lines.

Speaker Change: Thank you for your question.

Speaker Change: There are no additional questions waiting at this time, so that will conclude the conference call. Thank you for your participation you may now disconnect your lines.