Traeger(COOK) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Q1 2023 net income of $8.0 million reversed a $9.0 million loss in Q1 2022, despite a 31.5% revenue drop, primarily due to reclassified swap gains Condensed Consolidated Statements of Operations (Q1 2023 vs Q1 2022) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Revenue | $153,161 | $223,710 | | Gross Profit | $55,423 | $82,644 | | Loss from Operations | $(3,263) | $(3,515) | | Net Income (Loss) | $8,018 | $(8,960) | | Net Income (Loss) per Share | $0.07 | $(0.08) | Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $287,738 | $274,238 | | Total Assets | $937,997 | $946,715 | | Total Current Liabilities | $141,383 | $112,907 | | Total Liabilities | $610,608 | $611,846 | | Total Stockholders' Equity | $327,389 | $334,869 | Condensed Consolidated Statements of Cash Flows (Q1 2023 vs Q1 2022) | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(23,590) | $(46,911) | | Net Cash Provided by (Used in) Investing Activities | $245 | $(4,648) | | Net Cash Provided by (Used in) Financing Activities | $(478) | $45,917 | | Net Decrease in Cash | $(23,823) | $(5,642) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, revenue concentration with three major customers, and the $23.4 million gain reclassified from an interest rate swap dedesignation - The company is an 'emerging growth company' under the JOBS Act, allowing it to use an extended transition period for adopting new accounting standards, which may affect comparability with other public companies[1] - Three major retail customers (A, B, and C) accounted for 17%, 22%, and 12% of net sales, respectively, for the three months ended March 31, 2023, indicating significant customer concentration[132][221] Revenue by Product Category (in thousands) | Product Category | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Grills | $89,738 | $150,431 | | Consumables | $30,045 | $39,651 | | Accessories | $33,378 | $33,628 | | Total Revenue | $153,161 | $223,710 | - In January 2023, the company changed the interest reset period on its term loan, causing its interest rate swap to no longer qualify for hedge accounting. This resulted in the reclassification of $23.4 million from accumulated other comprehensive income (AOCI) to other income[10][198] - In April 2023, the Board approved the cancellation of unearned CEO and IPO Performance Stock Units (PSUs), which is expected to result in the recognition of approximately $27.5 million of stock-based compensation expense in the second quarter of 2023[67] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A details a 31.5% revenue decline due to lower volumes, stable gross margin, reduced operating expenses, and a significant shift to $11.4 million in other income from a swap dedesignation Results of Operations Q1 2023 revenue declined 31.5% to $153.2 million, driven by lower grill sales, while operating expenses decreased significantly, and other income surged due to a swap gain Key Operating Results (Q1 2023 vs Q1 2022, in thousands) | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $153,161 | $223,710 | $(70,549) | (31.5)% | | Gross Profit | $55,423 | $82,644 | $(27,221) | (32.9)% | | Sales and Marketing | $22,075 | $34,854 | $(12,779) | (36.7)% | | General and Administrative | $26,679 | $40,716 | $(14,037) | (34.5)% | | Total Other Income (Expense) | $11,445 | $(5,293) | $16,738 | 316.2% | - The decrease in revenue was driven by lower unit volume for grills (down 40.3%) and consumables (down 24.2%), partially offset by higher average selling prices for grills due to new product introductions[83][304][271] - The decrease in G&A expense was primarily driven by lower stock-based compensation expense of $6.4 million, lower professional service fees, and lower employee expenses[106] - The significant increase in total other income was primarily due to the hedge dedesignation of the interest rate swap, which resulted in a reclassification of gains to other income[108] Liquidity and Capital Resources The company maintained $15.2 million cash and $82.6 million borrowing capacity as of March 31, 2023, with improved operating cash flow and compliance with amended debt covenants - As of March 31, 2023, the company had cash and cash equivalents of $15.2 million, restricted cash of $12.5 million, and total available borrowing capacity of approximately $82.6 million across its credit facilities[309] - Net cash used in operating activities was $23.6 million for Q1 2023, an improvement from $46.9 million used in Q1 2022. The change was primarily due to a smaller increase in accounts receivable ($57.1M in 2023 vs $70.4M in 2022) and a decrease in inventories in 2023 versus an increase in 2022[90][311][328] - The company amended its First Lien Credit Agreement to increase the First Lien Net Leverage Ratio covenant from 6.20:1.00 to 8.50:1.00 for a 'Covenant Amendment Period' ending no later than June 30, 2023. The company was in compliance with these amended covenants as of March 31, 2023[21][95] Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's market risk disclosures compared to its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the company's market risk disclosures as presented in the Annual Report on Form 10-K[337] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[320] - No material changes to the company's internal control over financial reporting occurred during the quarter ended March 31, 2023[321] PART II. OTHER INFORMATION Legal Proceedings The company does not expect current legal proceedings to materially adversely affect its operations or financial position - The company does not expect any currently pending litigation to have a material adverse effect on its operations or financial position[23][339] Risk Factors No material changes occurred in the company's risk factors compared to its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K[340]