Core Thesis - YETI Holdings, Inc. is positioned as a premium outdoor brand with strong growth potential, driven by brand loyalty, high-margin products, and a scalable direct-to-consumer model [1][6]. Product Offering - YETI's revenue is primarily generated from drinkware, which has strong repeat purchase behavior, while coolers and equipment provide durability, and bags and storage enhance travel utility [2][4]. - The company has expanded into apparel, creating a lifestyle brand that turns users into brand ambassadors [2]. Business Model - YETI's direct-to-consumer channels, including e-commerce and physical stores, yield strong margins and valuable customer insights [3]. - The company's growth is fueled by a near-cult brand loyalty and premium pricing that is justified by product performance [3][5]. Brand Philosophy - YETI differentiates itself by combining functionality with cultural relevance, promoting sustainability through durable products and storytelling [4][5]. - The brand appeals to a wide audience, from outdoor enthusiasts to urban consumers, fostering a community-driven approach that aligns with customer values [4]. Market Performance - Despite a 12.8% decline in stock price since previous coverage, the bullish thesis on YETI remains valid due to its resilient brand and growth potential [6].

Financial Data and Key Metrics Changes - The company reported organic sales of just over $3.5 billion, which was relatively flat despite a decline in market production, with a sales outgrowth of 3.7% driven by a 47% increase in light vehicle e-product sales [6][21][22] - Adjusted operating margin performance was strong at 10%, reflecting a 60 basis point expansion despite a 20 basis point headwind from tariffs [7][24] - Free cash flow improved significantly, increasing by over $270 million or 89% year over year [22] Business Line Data and Key Metrics Changes - Light vehicle e-product sales grew by 47%, significantly outpacing the 25% increase in global hybrid and BEV production [6][7] - The company made a strategic decision to exit the charging business, which was not expected to create shareholder value, and began capacity consolidation actions within the North American battery systems business [8][14] Market Data and Key Metrics Changes - Market production in the quarter was down approximately 3.6%, but the company outgrew the market by 3.7% [21][22] - The company expects a full-year market assumption reduction to down 2% to 4% due to estimated impacts of tariffs on customer demand, particularly in North America [27][30] Company Strategy and Development Direction - The company is focused on maintaining a product portfolio that can achieve a 15% return on invested capital (ROIC) and has made decisions to exit non-profitable segments [8][14] - The company continues to secure new product awards across its portfolio, indicating a strong focus on product leadership in combustion, hybrid, and BEV architectures [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through a challenging and uncertain environment, emphasizing the strength of the product portfolio and operational performance [19][20] - The company anticipates continued outgrowth over market production, with a full-year sales outgrowth expected to be approximately 200 to 400 basis points [30][32] Other Important Information - The company expects to eliminate approximately $30 million of annualized operating losses from exiting the charging business, while this exit is projected to be a $30 million headwind to sales but a $15 million increase to operating income [15] - The company is undertaking capacity consolidation actions in its Battery Systems business to adjust to current market dynamics, which are expected to result in annual cost savings of approximately $20 million by 2026 [16][17] Q&A Session Summary Question: Insights on business extensions and reinvestment needs - Management highlighted the strength and stickiness of the portfolio, expecting continued strong margins and similar profiles for extended foundational products [38] Question: Concerns regarding rare earth elements in e-products - Management acknowledged the use of rare earth elements in products and mentioned ongoing efforts to manage supply constraints [40] Question: Growth outlook in China - Management expressed optimism about growth in China, citing strong demand for competitive technology and successful product launches [49][50] Question: Clarification on North American light vehicle production outlook - Management indicated a conservative outlook for North American production, adjusting expectations to down 7% to 12% [52] Question: Breakdown of tariff impacts - Management provided details on tariff impacts, indicating that about 50% is related to IEPA and auto parts tariffs, while the remaining 50% is from China retaliatory tariffs [98] Question: Future M&A opportunities - Management remains active in reviewing M&A opportunities, emphasizing a disciplined approach to ensure targets meet specific criteria [118][120]