Q2 2025 YETI Holdings Inc Earnings Call

Good morning, ladies and gentlemen and welcome to the yeti Holdings. Second quarter 2025 earnings conference call at this time. All lines are in listen on the mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, August 7th, 2025, I would now like to turn the conference over to arvind Batya. Head of investor relations at yet. Please go ahead sir.

Good morning, and thank you for joining us to discuss Yeti Holdings. Second, quarter, fiscal 2025 results.

Leading the call today will be Matt righteous president and CEO and Mike McMullen CFO.

Following our prepared remarks, we will open the call for your questions.

Before we begin, we would like to remind you that some of the statements that we make today on this call may be considered, forward-looking and such. Forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements

for more information, please refer to the risk factors. Detailed in our most recently filed form, 10K and subsequent form 10 cues

We undertake no obligation to revise or update, any forward-looking statements made today as a result of new information, future events or otherwise, except as required by law.

Unless otherwise stated our financial measures discussed on this, call will be on a non-gaap basis.

We use non-gaap measures, as we believe, they more accurately represent the true, operational performance, and underlying results of our business.

Reconciliations of these non-gaap measures to their most directly comparable. Gaap measures are included in the press release, or in the presentation posted this morning to the investor relations section of our website at yeti.com.

I would now like to turn the call over to Matt.

Thanks arvind and good morning.

Before we discuss our second quarter results, I want to take a moment to acknowledge the devastating floods that recently hit our home state of Texas.

Our hearts continue to go out to our Central Texas community, the families and friends impacted by this tragedy.

I specifically want to acknowledge and thank the First Responders volunteers and our long-standing partners at operation barbecue relief.

Who deployed to provide meals to impacted communities all over the country during natural disasters?

Give them a follow. Their simple act of a hot meal is incredibly impactful.

We're also deeply grateful for the overwhelming support and generosity of the Yeti Community across all 50 states who stepped up to purchase the special edition, Texas strong Tumblr.

All sales generated from these 10,000 Ramblers went to support the long road to recovery in Kirk County, Texas.

Turning now to Yeti.

I'm excited to share that. We are making excellent progress on our long-term, strategic priorities, driving Innovation, expanding our Global presence and broadening our customer base.

Plus more near-term Transforming Our supply chain.

We're seeing increased momentum and product innovation, with notable strengths in bags and packs. Our international expansion is thriving, with outstanding performance in the UK and Europe, and strong demand from our end consumers in Canada and Australia.

Our brand continues to grow resonating with audiences, both at home, and around the world.

At the same time we're executing a major transformation in our supply chain. That is setting us up extremely well for 2026 and Beyond.

While Topline demand in Q2 came in slightly below. Expectations reflecting ongoing macroeconomic uncertainty and cautious behavior from consumers and our Retail Partners, we believe the actions were taking position us extremely well, for long term. Sustainable growth in both revenue and earnings.

I'd like to take a few minutes to outline how we plan to deliver on our growth Ambitions, beginning with product innovation.

First, we are on track to open our asia-based Innovation Center in Thailand. Later this month,

I had the opportunity to visit and meet with our local team in July and I came away energized by their talent passion and capabilities.

This facility will complement our Austin Innovation Center significantly increasing our speed and capacity for product development and further enhancing our Innovation capabilities.

Importantly, it marks a critical step toward establishing a 24/7 global innovation cycle, continuous product iteration, faster time to market, and greater agility in responding to market opportunities.

Second, our teams continue to execute exceptionally well against a robust, Innovation pipeline.

As a result of the uptempo pace of innovation we've seen, we're now on track to exceed our prior target of launching 30 new products in the fiscal year.

even while making strategic tradeoffs to Advanced supply chain diversification,

a large portion of these new launches are limited initial releases setting the stage for the full force of our Innovation, to power our growth in the quarters ahead.

In drinkware, while the market remained, highly Promotional. And as we have discussed continues to shift away from the recent Trend driven growth.

We remain focused on broadening our portfolio in sustainable Innovation while maintaining our discipline on high-quality profitable growth.

We are seeing this play out in response to our first food bowls. Insulated food jars, updated Rambler jug and travel bottle.

We expect similar momentum later this year as we expand into our new half gallon and 40 oz Sports jugs.

Meanwhile, straw bottles and stackable cups, continue to perform well for us.

Our underlying Innovation and drinkware is performing well. And, as we have seen the market clean up, we are expecting to return to growth later this year, driven by our Innovation and stabilization in the overall drinkware category.

Supporting our continued reach and relevance in health Wellness, Sport and lifestyle. We had recently acquired designs tooling and intellectual property to enable us to bring a patented category leading shaker bottle into the yeti family.

This innovation fits seamlessly with our commitment to delivering premium high-performance products.

Moreover, our accelerating innovation and launch of exciting new products under the YETI brand showcase how we leverage open innovation in combination with our powerful internal product development machine.

In coolers and Equipment, our new smaller format, but high performance and appropriately named day trip. Soft coolers positions us well in the 50 to 150 price band and complements our 200 to $350, high-performance soft coolers

The data has demonstrated impressive, early traction, even with limited inventory in the second quarter.

Higher prices for soft coolers were more challenging in the quarter, as we saw some evidence of consumer trade-down.

While we expect the higher-end products to be Staples of our portfolio. Long term. We are pleased with our strategy to capture a consumer up and down the price and performance ladder.

We also extended our highly regarded chairs with our first beach chair, launched just in time for the peak summer.

In addition our Roi 15 and wheeled Roi 32 hard coolers, which launched to strong reception, more than a year ago. Have continued to see great performance.

In bags and packs. Our momentum is unmistakable.

Our rugged all-weather Kyo backpack debuted in late Q2 to rave early reviews and exceeded our initial expectations.

Meanwhile, The Ranchero backpack introduced in q1 continues, its Ascent recently, clinching, the title of best outdoor daily pack by Men's Health.

These wins not only underscore our relentless commitment to innovation, but also cement our leadership in delivering performance-driven, highly sought-after gear supported by a broad brand umbrella.

No totes and Crossroad backpacks.

Camino has experienced a notable Spike recently and is mostly sold out domestically across all channels, including yeti.com and wholesale.

For context, Camino launched in 2018 and is garnered over 5,000, 4.8 star reviews.

It's a great product. Full stop.

and as many of you heard me say, over the years, it might be Yeti's most versatile product and has been my personal favorite since launch

The broadening consumer interest. Highlights the products, incredible design and styling backed by practical versatility and durability.

With a large Market opportunity in bags and Camino Innovations on the horizon. We're well positioned to build on this momentum and deliver meaningful growth over the long term.

This wave of enthusiasm for Camino is creating a halo effect.

Fueling elevated, interest across our bags and packs line up, including our everyday, travel and dry bags, and amplifying, Our Brands. Momentum

What we are seeing with Camino underscores, the enduring popularity in the lasting appeal, and reliability of our innovation in the market.

Speaking to the Timeless nature of our brand and design our product remains best sellers years after launch.

Reflecting, not only the desirability but also the functionality.

overall, we expect our coolers and Equipment business to perform well in the back half as our bags category continues to build and inventory availability for our Innovation improves

I'm very encouraged by how our product engine is gaining momentum and how well, we're positioned to build a Mis strength, in the second half of the year and into 2026.

We continue to drive incremental investment towards product and R&D, and are seeing the benefits of this investment.

The second key growth pillar for us is international expansion.

I'm pleased with how the yeti brand continues to resonate strongly outside. The US supported by a growing Diversified product portfolio and disciplined execution of our go to market strategies.

Europe, once again, delivered very strong growth in the quarter, this reflects both Rising brand awareness and the effectiveness of driving engagement with our localized approach.

We believe our model is scalable and will support sustained growth across the European market.

In Japan, late in the quarter, distribution rapidly expanded from 17 to over 270 doors and was targeting more than 400 doors by year-end.

We've also established a digital presence and initiated localized marketing to build awareness and engagement.

In early July, we hosted our second successful trade, show in Tokyo drawing nearly 400 buyers media and influencers, highlighted by strong enthusiasm and pent-up demand.

As we move into the second half of the Year we're focused on executing our go to market supported by strong alignment between the yeti brand and Japanese consumers appreciation for premium, well-crafted products.

Again, it's a large outdoor market and early investments in community engagement and Partnerships. We're optimistic about Japan and the rest of Asia's long-term potential as a meaningful contributor to our International growth.

In Canada. We're seeing sustained in consumer demand even as the wholesale, sell in environment is cautious.

localized marketing and strong performance from new innovation and color infusions have driven brand interest and momentum

Sell through an Australia, remains strong and our track channels supporting our positive International Outlook.

while certain Retail Partners, slow their purchasing during Q2 against expanding consumer demand, we're encouraged by the rebound, we have seen quarter to date in Q3

Our third key growth pillar is broadening our Global customer base.

We are relentlessly elevating brand awareness, deepening engagement, and forging long-term loyalty for the brand.

This commitment drives us to connect with more people, more meaningfully, across the globe.

To that end. I'm excited to announce today that we're launching a strategic partnership with Fanatics later this month.

This collaboration significantly expands our presence in sports.

Additionally, we are bringing team color, drinkware and hard coolers to fans across. All 32 NFL teams, many MLB NHL and over 50 NCAA programs.

Our products will be available on yeti.com Yeti stores, certain wholesale Partners fanatics.com league and team sites and at Live Events.

Further, strengthening our connection with passionate fan, bases, and driving long-term growth in this vertical.

As we continue to deepen engagement with our Global communities, our recent events and Partnerships, exemplify Yeti's commitment to authentic connection and brand growth worldwide.

During this second quarter, Yeti had a presence at over 70 events globally. Connecting with diverse Enthusiast communities across Sports culinary entertainment and Beyond.

To celebrate the launch of our outdoor kitchen collection.

This immersive event featured a 5 course. Live fire meal prepared by Yeti Global. Chef ambassadors and served in Yeti. Cookware and tableware

Attended by media creators and ambassadors. The event, brought our culinary story to life.

At the 2025, Calgary Stampede in early July, our long-standing partnership included, direct sponsorship, consumer activation and meaningful engagement with media ambassadors, and partners. Attendance was nearly 1.5 million and our on-site mobile customization machine drove, strong sales performance.

Importantly we had Yeti ambassadors competing with our own Chad Mayfield, delivering a winning run.

This is a standout example of multifaceted engagement, delivering both brand impact and Commercial results.

Our team in Australia proudly supported. Our ambassador in surfing Legend, Nick Fanning's, charity golf day, which raised over 700,000 dollars for flood affected communities in Northern New South Wales.

The event reached an audience of over 11 million amplifying the impact of this incredible organization.

Last month yet, it had a large presence of the game fair. In the UK, an annual celebration of British Countryside culture, and a touchstone for Yeti's UK Community engagement.

The event had nearly 130,000 attendees and marked our highest-grossing 3-day selling event globally. It was awesome.

Our media strategy continues to amplify brand visibility and product storytelling. The original content like Yeti presents partner films shorts, and our new field test series.

We're reaching audiences across platforms while showcasing the durability performance and design of our products.

This year marks the 10th anniversary of Yeti presents with 85 films released today, generating over 33 million views, and 2.6 million hours of watch time.

Our field test series pushes Yeti gear to the extreme in the first episode shown across YouTube, Instagram and Tik Tok. Our new all-weather Kyo backpack with subjected to harsh real world conditions, mud water impact, and more highlighting, its rugged water-resistant design, and reading forcing our commitment to Performance driven innovation.

Meanwhile, recognizing the breakout momentum behind the Camino. Our team acted swiftly to seize the opportunity to amplifying the surge in consumer Demand with a targeted campaign.

By intensifying our social efforts in collaborating, with key creators. We supported the products position.

Strategic digital activations And Timely engagement with our community, ensured that excitement translated into real business impact.

Solidifying, the Chino's breakout status, and laying the groundwork for sustained growth.

Looking ahead. The momentum, we're seeing across Global communities. Underscores, the significant opportunity to further penetrate, new and existing markets.

To that end. We're making incremental Investments behind both brand and social campaigns to increase reach frequency and engagement. As we expand our customer base and strengthen brand Equity worldwide,

Turning to our Omni Channel performance. As we expand, our product portfolio, we continue to meet consumers. Where and how they prefer to shop?

In wholesale, we saw some cautious ordering and tighter inventory management for partners.

Despite this demand remains strong for Innovation and inventory levels. Remain healthy across the portfolio.

We continue to monitor these dynamics closely while exploring new opportunities to expand our reach to underserved consumerist segments.

In our Direct-to-Consumer channels, performance on the Amazon Marketplace remains robust as we capitalize on the diversity of our Omni-Channel approach to meet evolving shopping behaviors.

Corporate sales also delivered outstanding results propelled by our deepening strategic Partnerships, especially in the sports and Hospitality sectors. As we continue to leverage our Advanced customization capabilities.

On yeti.com site traffic was up. And we saw strong engagement with new product, launches in a continuation of Trends around increased customer value.

However, conversion rates were below, expectations, amid less, intentional shopping Behavior. We're applying key learnings from our may drop days campaign to enhance account, creation engagement, and conversion including Early Access designed to grow our customer base and build brand affinity.

In retail, we opened our 27th store in early June and planned to open our 28th store next week, which will be our last store opening for the year.

While we remain very excited about the long-term retail potential for us, as I have previously shared, we are intentionally slowing the pace of new store openings in the near term.

I fully expect future pay store expansion to be part of YETI's complimentary go-to-market strategy.

Next, I want to switch gears and talk about 1 of our highest near-term priorities which is the transformation of our Global Supply Chain.

This year, I've had the opportunity to visit all of our key suppliers across Southeast Asia, including factories, and witness firsthand the incredible progress being made.

I was fired up by the momentum on the ground and a clear commitment from our partners to support this critical transition.

I'm pleased to report that we will remain firmly on track with our accelerated diversification strategy.

We continue to expect that by year, end on a go forward basis. Less than 5% of our total cost of goods sold will be exposed to us tariffs on Goods sourced from China.

Importantly, we will have our multi-country sourcing strategy fully in place.

This is a testament to outstanding vision and execution by our product and supply chain teams. They are some of the best in the business and I could not be more proud of the impact they are having on Yeti.

This positions us exceptionally well to enter 2026 with a more resilient, agile, and diversified supply base, enhancing our ability to scale globally while mitigating geopolitical and operational risk.

Amid a dynamic environment. Our Fortress balance sheet and healthy free cash. Flow continue to support investments in growth and Innovation. While also advancing our Capital allocation priorities including share repurchases,

Michael provide a further update on Capital, allocation, and his prepared remarks.

As it relates to our full year 2025 Outlook.

We are modestly. Adjusting our Topline, expectations to reflect a slightly more prolonged recovery in the drinkware market in the US.

And at the same time, raise our, EPS Outlook, thanks to our operating discipline and tariff relief on the China Source Goods, partially offset by new tariffs elsewhere.

Given the unprecedented tariff uncertainty and shifting macroeconomic landscape. Since we announced a targeted late 2025, investor day. We've made the Strategic decision to move our investor day to the first half of next year.

This timing importantly will allow us to showcase the full impact of innovation acceleration and our broadening product pipeline, the capabilities of our Diversified and resilient supply chain.

And provide a clearer view of our long-term growth and margin expansion initiatives.

Looking ahead with breakthrough Innovation, surging brand momentum and a world of global opportunity. In front of us, we have a great setup.

Redefining what's possible for Yeti.

Summarizing my thoughts a bit here. I recognize that ups and downs can be part of any great brand, and growth story and some innings are tougher than others, but all great franchises string together wins season after season.

While I like our track record, the opportunity in front of our team is even greater.

I remain highly confident in our strategy direction of travel and that this team will deliver on Yeti's potential.

To emphasize the point. The brand is a key differentiator resonating deeply with a growing base of loyal customers around the world.

We're in the early phase of realizing the impact of product expansion and a significant Global opportunity providing substantial runway for growth.

We have built a tested proven and resilient business model.

I want to thank our Yeti team for their passion and unwavering commitment to our brand and long-term vision.

We're well positioned to continue to break norms and reset expectations of what a product should be and what a brand can be.

With that, I'll now turn the call over to Mike.

Thanks, Matt, and good morning, everyone. Let me start by reviewing our performance for the second quarter of 2025, after which I'll discuss our revised full-year outlook before opening the floor for questions.

As a reminder all results. Presented on today's call will be on a non-gaap basis to better focus on the operating performance of the business during the quarter.

In the second quarter, sales decreased 4% to $445.9 million, which was slightly below our expectations.

As Matt mentioned, this was due to more cautious spending from consumers and our Retail Partners.

at the product category level drink or sales declined 4% to 236.4 million,

The U.S. drinkware market remained challenging, reflecting a more promotional environment compounded by temporary inventory constraints stemming from our ongoing supply chain transition.

But we continue to be pleased with how our new products are performing.

6 million in the second quarter.

We saw a continued growth in hard coolers offset by decline, in soft coolers.

Our bags business gained further traction, as we expanded our product lineup and capitalize on the significant opportunities within the bags and packs Market.

As Matt mentioned, we expect our business in the coolers and equipments category to improve meaningfully in the back, half of the Year, driven by our Innovation and improved inventory. Availability.

Turning to our performance by channel.

Direct to Consumer sales. Decreased 1% to 248.6 million accounting for approximately 56% of total sales during the second quarter.

Our Amazon Marketplace remains strong, both in the US and internationally, as we leverage our Omni Channel model, and supported it with a strategic allocation of marketing dollars.

Corporate sales also remain robust in the U.S., with momentum building internationally following the recent global rollout of customization. As we add strategic partnerships around the world.

Strong performance in these direct to Consumer channels. Was offset by softer us e-commerce demand.

We saw lower than expected, conversion on yeti.com which offset both higher average order value and higher traffic year-over-year.

In the wholesale Channel. Sales, were 197.3 million decreasing 7% compared to the prior year quarter with declines. In both the US and in our International regions.

The year-over-year decline within our wholesale channels outside. The US was driven by ordering patterns by some of our Retail Partners, which I will discuss in more detail during my comments on our international business.

In our us, wholesale channel, the primary driver of the year-over-year. Decline was drinkware reflective of the highly promotional overall market and an increased level of caution from consumers and our Retail Partners.

We believe this is a transitory issue indicative of macroeconomic headwinds.

Our strategy to broaden our wholesale Channel and drive engagement with a wide range of consumers across markets, Pursuits and demographics remains unchanged.

Finally, sell-through growth outpaced selling growth in the U.S. in Q2, and our overall channel. Inventory levels remain healthy, giving us confidence in our back half expectations.

Moving to our international business sales outside the US grew 2% to 78.1, million representing approximately 18% of total sales in the second quarter of this year.

Europe continues to lead our international performance with another quarter of strong growth year-over-year.

To build brand awareness, expand distribution and scale our Omni Channel model in Europe. Our gaining traction

Also, as Matt mentioned our expansion in Japan, during the second quarter marks, an exciting step in the asia-pacific region.

And we are very optimistic about the growth opportunity. We see in this market,

Within our International markets, direct to Consumer sales, remain strong.

However, our international wholesale channels are primarily in Australia and Canada, where we face more challenges from a sell-in perspective.

We believe this is a 1 quarter. Dynamic, that was driven by inventory balancing and overall caution by our wholesale Partners in these 2 regions.

Sell through in both Australia and Canada continues to be very strong which gives us the confidence to hold our International sales outlook for the year.

We will continue to extend Yeti's presence and reach as we expand with both new and existing retailers outside the US.

Now moving down the P&L, adjusted gross profit decreased 4% to $257.6 million, or 57.8% of adjusted sales, compared to 57.7% of adjusted sales in the second quarter of last year.

This 10 basis, point increase was driven by product cost optimization and selective. Price increases offset by approximately 180 basis points of impact from higher tariffs.

That said, relative to our most recent guidance tariff costs came in lower than expected. Primarily due to the reduction in tariff rates for products sourced from China, from 145% to 30% that was announced on May 12th.

Adjusted sgna expenses. In the second quarter were 184.4 million, a decline of 3.1 million or 2% versus the prior year period.

As a percent of adjusted sales, adjusted sgna expenses were 41.3% versus 40.5% in the prior year period.

Our operating expenses tightly while also making strategic Investments to drive future growth.

On an adjusted basis, operating income decreased 9% to 73.2 million or 16.4% of sales.

And net income, decreased 70% to 55.2 million.

Adjusted net income per share. Decreased 6% to 66 cents versus 70 cents in the prior year period.

Our EPS this quarter includes a 7 Cent. Net impact from higher tariff costs.

Starting to our balance sheet. We ended the second quarter with 269.7 million in cash as compared to 212.9 million in the second quarter of 2024.

During the second quarter. We repurchased 745,000 shares of Yeti's. Common stock on the open market for 23 million.

Under our current 450 million. Share repurchase, authorization.

This is part of an overall plan to repurchase approximately 200 million dollars worth of shares during fiscal 2025.

In addition, we continue to deploy Capital strategically to strengthen our Innovation capabilities.

This includes both investing internally and acquiring technology and design expertise.

We believe that Acquisitions such as the 1. We are announcing today along with what you all have seen us do with Acquisitions in the bags, cookware and power cooler categories are great examples of targeted Investments that will enable us to build long-term value.

total debt, excluding Finance leases and unamortized deferred financing fees with 75.9 million compared to 80.2 million at the end of last year's, second quarter,

From a total liquidity standpoint we ended Q2 in a substantial net cash position and with our $300 million revolving credit facility fully available.

Inventory decreased 10% year-over-year to 342.1 million reflecting strategic management of our inventory purchases during the quarter.

Turning to our updated fiscal, 2025 Outlook.

We now expect full year sales to be flat to up 2% as compared to fiscal 2024 adjusted net sales.

Consistent with last quarter, we expect inventory Supply, disruption in connection. With our supply chain diversification efforts to have an approximately 300 basis point impact on our growth this year.

The primary driver of the change in our Topline Outlook is the performance of our drinkware business in the US.

We now anticipate our total drinkware business to be in a range of flat to download single digits in physical 2025 versus the prior year.

From a channel perspective, we still expect our wholesale and DDC channels to grow in line with each other this year.

And geographically, we are holding our outlook for our international business, to grow between 15% and 20% in fiscal 2025.

As I stated earlier the growth dynamics that we saw in Q2 were largely due to timing within our international wholesale Channel.

We expect the strong consumer demand trends that we saw outside the U.S. in Q2 to continue and to drive overall growth in the back half of the year.

Within the us, we expect our business to be down low single digits this year, due primarily to the Dynamics, we have discussed in the drinkware category.

As it relates to phasing for the remainder of the year for Q3 we anticipate, that total sales will be in a range of flat to slightly positive versus last year with a decrease in drinkware Balance by growth in coolers and equipment.

We are encouraged by the momentum. We saw exiting Q2 and what we have seen quarter to date in Q3

geographically. We expect us sales in Q3 to decline relatively in line with what we saw in Q2.

Looking ahead to Q4, we expect a slight Step Up in total growth with growth across both our drinkware and coolers and Equipment categories.

When we look at the pipeline of new products that we have slated for release later this year, it gives us the confidence that drink wear can return to growth in Q4.

We are now projecting gross margins for the year to be between 56.5% and 57%. Which is an increase of 200 to 250 basis points as compared to our prior.

Fiscal 2025 guidance.

trade policy discussions are ongoing and the ultimate outcome regarding tariff rates, remains unknown

in our guidance, we are currently assuming that the latest tariff rates as announced remain through the end of the year.

Including a total 30% rate on goods from China and an approximately 20% rate on goods from other regions

Collectively the net tariff costs included in this Outlook is approximately 40 million or 220 basis points as a percent of adjusted sales.

From a phasing perspective, we continue to expect the year-over-year impact of tariffs to grow progressively throughout the year.

We now expect operating expense growth of between 2 and 4% versus the prior year. This reflects the impact of ongoing investment in our growth initiatives, partially offset by continued cost optimization.

We now, expect operating income for the full year to be between 14% And 14.5% of adjusted sales.

Including a net impact of approximately 220 basis points from higher tariff costs versus the prior year.

We expect the year-over-year decline in operating income percent to be relatively consistent in Q3 and Q4.

Below the operating line, we expect an effective tax rate of approximately 25.5%, slightly better than our prior guidance.

We now expect full year, 2025 diluted shares outstanding of approximately 82 million which reflects the impact of 200 million of stock repurchases. Anticipated through this fiscal year end.

We now expect adjusted earnings per diluted share of between 2 and 34 cents and $2.48 as compared to 1. 9 6.

The increase in our EPS Outlook reflects the lower tariff rate on China's Source Goods. Partially offset by increased tariffs on imports from other regions since our last update.

And our updated guidance, includes close to a 40% net, unfavorable impact from higher tariff costs versus the prior year.

our Capital expenditures for the year are now, projected to be approximately 50 million down from an earlier estimate of 60 million,

This reduction, mainly reflects a shift in accounting treatment for Capital investments in our Memphis Distribution Center which will now be recorded on your cash flows from financing activities rather than investing activities.

It's important to note that this year's Capital spending remains focused on advancing our technology launching Innovative products and strengthening our supply chain.

We now expect free cash flow of between 150 million and 200 million in 2025 versus our prior Outlook of approximately 100 million to 125 million.

As it relates to year-end inventory, we continue to expect a decline year-over-year.

As we move through the second half, we will maintain flexibility to increase our inventory. Based on our assessment of the market conditions.

in closing as we navigate the current landscape of Tara volatility and heightened consumer caution

Our determination to deliver on our strategic priorities remains unwavering.

Each of our decisions is rooted in a Relentless drive to invest in transformative growth initiatives and bolster our supply chain resilience all while maintaining control over costs and effective Capital deployment.

With this discipline approach, we are confident in our ability to achieve long-term sustainable growth.

And to unlock value for our shareholders.

Now, I will turn the call over to the operator to take your questions.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star, followed by the number 1 on your touchtone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star, followed by the number 2. If you are using a speakerphone, please lift the handset before pressing any keys. We kindly request that each participant pose only one question, followed by a single follow-up. Thank you. One moment, please, for your first question.

Your first question comes from. Philip Lee with William Blair, please go ahead.

Can talk to your Topline guide and giving yourself kind of plenty of wiggle room here.

Thanks.

Hey Phillip, good morning. Um, thank you for the question. So I would say from a price and volume perspective, the pricing actions that we took um,

In early April which we've talked about, uh, well, relatively minor is on a on a small portion of our of our product portfolio. And it was, it was, uh, not a significant lift in, in average price. So, um, you know, the impact we talked about to our gross margins was in Q2 was around 70 bucks. Um, you send that through the year and, and, um, assume it's over over over 3 quarters of the year. It's not a significant move, so

Um, I would say it's more volume than than price. Um, in terms of our expectations for the for the year, you know, if you look at um, some of the things we talked about in Q2 and and um, some of the Dynamics of Q2 and how that projects out for the end of the year 1.8 years,

When we looked at the opportunity in Europe, the growth in Europe, the fact that International DDC continued to grow, well, um, that overall consumer demand, including wholesale sell through, remain strong. Um, you know, really Q2 came down to like we talked about, um, just order timing and a little bit of caution from some of our wholesale Partners, in Australia, and Canada. So we we still feel really good about the year for overall international business, which is what led to us holding our guide. Um, second, you know, Cene when we look at, um, our opportunity in hard coolers the momentum that our bags business has uh, with Innovation, what's happening with Camino? Like, we feel like bags will, you know, give us an opportunity to to Really continue to return back to growth in C in the second half.

um, and then lastly drink where

um,

While the US market is taking a little bit longer to recover than than we'd expected. Um we do have you know, the Innovation we have planned plus Innovation, we've come out with recently um

When you look at will start to comp some of the Dynamics that we've talked about, in the US drinkware market, where you've got a, a portion of our portfolio that seem that can't started to come under pressure. Last Q4, we'll start to comp that in Q4 and we believe that will allow us to, to get back to growth and drinkware. Um, in Q4. So you pull all that together and that's what gave us confidence to to, you know, to issue the Outlook that we did this morning.

Okay great, but that's super helpful. And then just on the communo Tota, I mean, obviously it's gone a bit viral on social media and has been sold out. I mean, can you talk about your ability to chase into inventory here to capture some of this demand? And then maybe give some color around the current size of your bags Revenue within category and then how this kind of recent influx of traffic and demand is informing your plans for further innovation of the category. Thank you guys.

Good morning, Philip. Thanks for the thanks for the question. Um, you know, we've been and you've been around this story for a while. We've been incredibly excited about uh our bags business and the bags uh potential. And and I think Camino's, uh, while it's been a product we've had since 2018. It's been a standout for us in our portfolio and in the recent interest in it, I think further emphasizes that. So we're, we're incredibly uh, excited and bullish on on the emergence and the continued growth. Um, accelerate growth, we're seeing in our bags portfolio and the potential to expand it in the global relation.

Vance um and a really large Marketplace. Uh so we're going to continue to lean uh lean into bags. We continue to make investments in team and talent. We continue to make investments in capabilities, and I think you're going to see that read through in the product portfolio expansion. We have there. So, you know, we'll as it relates to Camino in the near term, uh, obviously, uh, we have an incredibly talented supply chain and an operations team. Um, great Partners. Uh, we're working to optimize the opportunity in 2025, but really, what we're trying to do is drive the sustainable long-term growth, um, and to continue to emerge of bags. As a really important portion, not only of our C but really overall, an important part of Yeti. So, uh, we we'll keep we'll keep growing, uh, the Camino as you know, it today, as I mentioned on the call, we're going to continue to innovate around the Camino. Um, but really, as part of our overall bag strategy, which is going to touch every day, um Pursuit specific

Travel.

Waterproof, um, so we're really, we're excited about what's what's happening around bags?

Excellent, very helpful. Thank you guys. Best of luck.

Thanks a lot.

Thank you. The next question comes from Brooke roach with Goldman Sachs. Please go ahead.

Good morning and thank you for taking our question. Matt given the success of some of the recent Innovation launches, I'd love to get your perspective on the opportunity for these items to scale to the same degree that they could potentially offset lower productivity levels in some of your core and then for Mike a follow-up question on the US, drink or business. Can you provide any color on the level of pressure that the supply chain transition is having on this year's ability to scale new innovation and the magnitude of that potential opportunity As you move into 2026? Maybe set another way. When do you expect the US? Drink more business to inflect back to sustainable growth. Thank you.

Thank you Brooke. Um, great question. Here's what I would say. Uh, I I think that the Innovation that we're putting out today is as strong as it's ever been for Yeti. And it's in a much greater. Um,

Assortment magnitude, uh which we think yields uh incredible forward opportunity for the business. Um, you know, this is a this is an interesting year where we our pace of innovation, our expansion of innovation, um, has been at its highest level but as we talked about and your question, uh, that Michael Michael dressed around the inventory, constraints, and the supply chain, um, Transformations had a little bit of an impact on that. I think, as we think about

The expectation from our Innovation is our Innovation, should deliver 2 things. Uh the continued relevant diversification of our product portfolio and it should drive forward growth. And and that's the, that's the expectation we have, um, of all of our Innovation. And so, when you think about some of our long-standing Legacy products, uh we talk about the dynamic that's happening in drinkware right now. Below the surface.

We're seeing what we want to see, which is the traction of our Innovation. Um, it hasn't as as we'll talk about in the drink bar category, it hasn't yet comped against the drag of the market correction that we've seen in drinkware. Um, but that's what our forward look. And and some of the commentary we had today gives us confidence on where we're going and then, when you step back, you look at what's happening and drink where, uh, in the expansion in in the growth, uh, opportunity that we're seeing with our Innovation, you put on top of that, uh, the the incredible range of innovation, we're bringing into our soft coolers. I mentioned our day trip line, the expansion of our hard coolers, um, the broad.

Expansion. And and really untapped opportunity that we have in in bags and packs and Beyond, um, you know, it gives us, it gives us a lot of, uh, confidence underneath this, uh, brand umbrella of Yeti that we continue to invest in and continues to show Incredible strength.

And and Brooke just to your second question. So we mentioned today that

the 300 basis points of Topline impact due to supply that we talked about last quarter, um, was still, you know, in a in essentially, in our guidance for the year, still having an impact for the year. Um, that's impacting some of our existing products, but it's also having an impact on some of our new products. Um, you know, we've had to shift out the launch of some new products. Um, we're going to be limited in Supply in several new products and drinkware and the bulk of that 300 basis points is in drinkware.

We've also for the first time going to be launching some products outside the US, um, first and exclusively, which, you know, is something we've never done before. Um,

You know and and as Matt said, we'll start to roll over the some of the Dynamics that we're seeing in the in the US drinkware market in Q4 um we'll also you know we believe you know this is a given this is such a significant transformation of our supply chain this year. You know we'll start to get some relief from that and the as we get into to 2026

so when you, when you without getting to specifics about, when we expect that to start to get back to growth in 2026, we're we're we're confident that, you know, when you take

The the fact that we'll start to roll over that compare, we'll get past some of the supply chain constraints that we've talked about the Innovation that we've talked about, will start to build. We're confident in what that could mean in our ability to get back to growth and in US strength, where

Great. Thanks so much. I'll pass it on.

Thank you.

The next question comes from, Randy, conik with the Jeffries, please go ahead.

Yeah. Uh thanks guys. And good morning. I I think

Standpoint, and a product standpoint, uh, a theme of self through outpacing. Um, sell in. Is there any way to kind of get a little bit more, uh, granular on that? How much South South through, has outpaced sell in, uh, as a, as I believe the, the inventories recorrect in the, in the the marketplace and the channel.

You should obviously get reorders to pick back up. So I'd be super helpful there and then Mike, how do we think about, you know, because everyone's going to start to look through to next year and Beyond,

These guys have done a great job of of kind of staying highly profitable High margins, have some different moving pieces, whether its tariffs or other things uh impact of numbers a little bit, is there a way to we? We should be thinking about maybe not quantify the gross margins but like you know qualify somehow how how we should be thinking about long-term gross margins. Uh, from a qualitative perspective with a different moving pieces long term. So it would be very helpful to get some you know thoughts on that. On a different moving pieces there and how we should be thinking about it. Thanks,

Yeah. Thanks. Randy. Good morning, thanks for the question. So, let me take the the first question sell through versus sell in. And let me kind of separate the US from, um, from International. So in the US, we don't give, um,

You know, too many specifics or specific numbers around sethu. We did we do tend to talk about Trends and and the trend that we talked about, um, in the US in Q2 was that, um, sell through. While the while sell-in was down, we talked about sell through was greater than than or outpaced sell-in. Um, and really the the the color there was around that health of our inventory levels that we continue to manage. Um, wholesale, inventory levels, well, um, and you know, we which we believe puts us in a, in a good spot for the uh, for the second half and going forward, um,

Outside the US, I think the the main point we wanted to make there is you know really consumer demand overall uh outside. The US was was really strong and um, where where the weakness was, and what led to that 2%, um, growth overall and international wholesale being down was, was some order timing and overall caution and and 2 markets in Canada and Australia. But, you know, when we look at the data we have and our track channels around consumer demand in those 2 countries. You know, nothing has really changed in our uh in our um

In our belief, in the opportunity, and our, you know, and our bullishness for the year. And that's what led to us holding, uh, our outlook for the year for our international business.

As we, you know, we think about gross margins going forward. I mean, obviously, there's a lot moving around as it relates to tariffs. Um, what we've got baked in our, in our, our guidance, for the year is essentially, the latest announcements 30%, uh, total rate for China and an approximately 20% rate for the other countries in, uh, in which we Source, from which we source.

so, um,

There is still some uncertainty there. Um, there's still still some some things that need to sort of become more clear. But, um, you know, I I would say, looking forward the opportunities that we see in in gross margin are, um, you know, continue to

Work through uh, product cost efficiencies and opportunities to drive down product costs and our within, our supply chain, we've shown a consistent ability to do that number 1, number 2, um sales mix. And I think as as drinkware returns to to growth, we think that'll be an opportunity for us giving drinkware has a higher gross margin uh than the rest of our portfolio.

Um, and you know, I there are other pieces of our cogs that we believe we have an opportunity to drive efficiency in. So, I think tariffs were were obviously, at a at a, what we believe is a more stable point now but it's still pretty uncertain. Um, but we're going to focus on what we can control which is driving efficiencies within our supply chain costs which we've shown a pretty consistent uh ability to do

Great and just 1 last 1 for for Matt. If you think about, you know, at the IPO in 2018, um, the way the company approached Innovation and got products developing to Market. Um, you know, let's say in that year

About that Innovation process and go to market process today. Uh, you know, versus that at IPO to kind of dimensional, you know, how you're able to kind of push out, you know, starting new products a year, get them in the market quickly, Etc. Maybe don't be super helpful. To get some perspective, what's changed and and what allows you to kind of get things out the door faster and more things, you know at that.

Per thanks. Thanks Randy and and appreciate that question. Um here's what I would say. The things that haven't changed is we have an absolute focus on bringing Innovative products that represent durability performance and design. Full stop no change there.

Almost everything else uh has rapidly evolved or changed. Materially. We went from 1 team working on everything to 3, focused teams that are focused around drinkware. Uh the the bags and soft cooler opportunity and then and then many of our other hard Goods, coolers and otherwise. So,

Focus teams, Focus resources. Uh, you know, we we announced today that the, uh, Thailand Innovation Center. Um, we've always had incredible Global teams, but now we're solidifying that investment to create, uh, as as I, as I said, in my prepared remarks, almost a 24/7, kind of innovation cycle. Um, the sophistication we built in our supply chain, uh, our procurement team, our sourcing ability, um, which I think is evidenced by this supply chain diversification and transformation that we've been under

Um, so we have incredibly talented leaders who've got focused teams. We've got robust product pipelines, and I think we've significantly enhanced our capabilities.

And then we're very um, targeted using open Innovation to go out and find things that we think are are additive to uh, to the overall portfolio including, uh, including the the shaker bottle, uh, designs that we, we acquired, uh, and announced today. So I I philosophically nothing's changed operationally execution, wise. Um, I think everything has and it's, um, made me and my now coming on 10 years at Yeti, uh, more bullish about the next, uh, the next 10 years.

Very helpful. Thanks guys.

Thanks, Randy.

Thank you.

The next question comes from Peter benedict with beard.

Please go ahead.

All right, guys. Thanks, thanks for taking the question. So, uh, first, just on the, um, on the ebit. Uh, margins, the 220 basis points. I guess it's gross and Eve it, um, impact this year. How do we think about the the the recovery, um, of that divot? As we look to 2627? Is there any reason why you wouldn't get most or all of that back? I know you talked about some cost efficiencies on top of the Tariff stuff so just conceptually uh that's my first question and my second question is around Capital allocation. Um, why is

200 million uh, of buyback this year, the right number had you arrive at that level uh and then what conditions uh could or might uh cause you to do more or less, thank you.

Hey Peter. Good morning. Thanks for the question. So

You know, I while we're not giving guidance Beyond 25. Uh, today, I mean we can talk in in general. I I would say, you know, again on tariffs, there's a lot that's uncertain in terms of um where those rates ultimately land. Um, what we're assuming today is what has what has been announced. So, you know, last quarter, we felt like we could recapture much of the the, the impact that we that we called out. Um, that was at China at 1:45 and rest of the world at 10:00. Now, you know, where the rates are similar, we stay at these levels which I, I don't know that we have the same level of recapture we did when we talked about last quarter given there isn't such a huge disparity between where we've been to where we're moving. But at the same time, you know, you know, we we'll have to see what happens with tariffs but I do want to continue to call out. We do have other offsets within cogs and we're going to continue to pursue all of those offsets as well as all the mitigation.

Ation strategies we have around costs, we'll continue to look at price so I'd say it's too early to say um as there's a lot moving around. Um but you know I think again we've shown a pretty consistent ability to drive um costs out of our supply chain.

I mean, I I think it's there's a number of factors that play into it, where our cash is going to be. Um, we want to make sure we maintain a, a really strong balance sheet which we've consistently done. Um, we want to make sure we that we balance opportunities within, you know, Acquisitions like the 1 we announced today. Um, and you know, when we looked at all those factors, that's essentially how we landed at the, the 200 million. But, you know, we will continue to, to evaluate it. And, and we'll, uh, we'll continue to, to, to find ways to return Capital, to shareholders balanced with, you know, investing back in the business.

Great, thanks, Mike. Makes sense on both fronts. I'll turn it over.

Thanks Peter. Thank you.

The next question.

From.

With Byer Sandler. Please go ahead.

Hi, this is Alexia Morgan on for Peter.

Um my first question is about drink where you had mentioned it getting more promotional, you gave some details there. Um for Q2 I was wondering if you could give some more color on, what's driving that Dynamic? Like is it more due to to competitive promos? Or is it is it that demand needs stimulated by promos? Um and then does guidance assume that the promo environment continues in the second half.

Hey Alexia yeah. I I'll take that, um, the comment about the promotional environment as a broader comment about the market. And if you were to kind of go out and see what's happening at retail, or you would go online right now and look at, look, look at some, uh, some of the brands out there that there's a lot of, there's a lot more activity around, um, pricing and I, and I think that is, uh, a few things. I think it's a, I think it's an indication of the consumer Dynamic. Um, I think it is an indication of what we've talked about for a number of quarters, which is, um, as as markets have,

Rapid acceleration on the other side of that. That there's, there's cleanup. And I, I think if you look at where the promotions happening, um, I think some of its inventory, uh, activities, um, by some Brands out there. I think some of its, that the trend off on certain form factors and sizes, um, which is what we're watching and, and seeing in a very, um, concentrated way in the market. But it has a, it has an effect on the broader market. And I think how that plays against our strategy, if you look at what we've done over the last couple of years, is we have broadly Diversified our drink, our portfolio, and our assortment and we're covering everything from Individual, use hydration to food, bowls food, storage food transportation. And I think that is a, uh, I think that's a much broader, um, strategic play. And we think is why, uh, to some of the prior questions, we believe in the long term opportunity.

Uh, of growth in the in the broadly defined, drinkware category.

Yeah. And and just to the second part of

just to the second part of the question, are our guidance. I mean, essentially what we said was, you know,

as we took the change in our guidance was really around. Um,

what's happening in the US drinkware market, um, and I would say heaviest in Q3, um, you know, we expect Q3 to to look similar to Q2. Um, but we do expect things to start to improve in Q4, when we look at the Innovation, we have coming when we look at starting to comp, um, some of the Dynamics of the market we've talked about and and that led to the overall the change in our guidance. And but we do um, while we expect drinkware to be flat to down slightly this year. Uh, we do feel like we're uh, in a in a position where we can return to growth starting in Q3 in Q4.

Thank you.

1 more, um, the, the strong demand for bags in Q2, was very encouraging and then some of the soft coolers going viral. Uh, in more recent weeks, was also very exciting. We were wondering if there's been a focus recently on products or in this case like new colorways geared more towards women, or were those just new colorways that happened to go viral?

Great question, Alexa. What I would say is, um,

Is, um, the broad-based receptivity to our Innovation, but also our relevance across a diverse, uh, an important audience to us. So that's that's, you know, across across a range of demographics across a range of Pursuits and use cases and that's been the strategy for Yeti. Uh, going back to the very beginning and and I think we're seeing the success of it play out.

Thank you.

Thank you.

Thank you.

The next question comes from Joe Alto with Raymond James, please go ahead.

Thanks. Hey guys. Good morning. Um I I guess first on the momentum that you you touched on a little bit coming out of Q2 and into Q3, um, can you could textualize that for us? I mean, what sort of sales lift are you seeing here in July and August and in particular International, and you mentioned that, that was sort of a, a 1 quarter phenomenon. Are, are you seeing that international business back up into the double digits here in in early, Q3

Hey, Joe, thanks for the question. So um,

Yeah. I mean so I think we're not getting too specific on what we're seeing. I mean we're we're we're encouraged by what we're seeing so far. This quarter. Um I'd say the same thing as we you know, apply to as we exited Q2. Um

and I, I really, I think the, the the

Best indication of of, of what we're seeing. And and, uh, how we're encouraged, we are by it, is the fact that we held our, our outlook, for international, for the year, to grow, 15, to to 20%. And so, when you look at growth in the second, half versus what we did in the, uh, first half. Yes. I mean that would say that we're back up to those those

Those growth rates that we had seen. Um, you know, and as a reminder, I mean we we've posted 7 quarters in a row of over 20% growth outside the US and so up in up until this 1. So, you know, we feel good about SEC, our international business in the second half and and, you know, obviously what we're we're seeing so far in Q3

Got it helpful and just to follow up on that. I want to ask about the the other category. I know we we hardly ever talk about it. It's it's a very small from revenue standpoint but um, it's been pretty weak of late. And is, is that an indication that of how people are engaging with the brand, you know? Because there's a lot of Apparel in there. Etc. So I'm just curious how we should look at that. Is that sort of a canary in the coal mine or it's it's just kind of a, you know, sort of a rounding error

Uh, no. I mean, I, I, I don't think that's an indication of all of, of how people are engaging with the brand, um, to your point. It's a, it's a really small piece of our business. Um, you know, I would say changes in merchandising, and sort of marketing strategies can play an impact on that, Freight Revenue hits hits in there. Um, as we've worked to to, you know, drive people to our yeti.com and create accounts so we can drive more engagement with our customers. Um, you know, we've sent done some things with shipping that can can play a role uh within other but nothing nothing has changed at all. And, and in terms of um, you know,

What's hitting in there or, you know, I would not read into that at all. Then it's an indication of Poppy Bear engaging with the brand.

Okay, thank you.

Thank you.

This concludes our Q&A session, I'll have the call over back to Matt Reyes chief executive officer for closing remarks.

Thanks all for joining today. We look forward to uh, speaking on our 3Q call have a wonderful week.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect