YETI(US:YETI)2022-05-11 19:35Financial Data and Key Metrics Changes - Net revenues increased by 19% to $293.6 million compared to $247.6 million in the prior year period, continuing a strong growth trend since 2019 with a three-year compounded annual growth rate of 24% [10][42] - Adjusted operating income decreased by 13% to $38 million or 13% of sales, compared to $43.8 million or 17.7% of sales during the same period last year [49] - Adjusted net income decreased by 12% to $29.2 million or $0.33 per diluted share, compared to $33.3 million or $0.38 per diluted share in the prior year period [50] Business Line Data and Key Metrics Changes - Direct-to-consumer sales grew by 23% to $156 million, representing 53% of total sales for the period compared to 51% last year [43] - Wholesale sales increased by 14% to $137.7 million, with drinkware sales up 24% to $184 million [44] - Coolers and equipment sales increased by 10% to $103 million, with strong demand for hard coolers and new product introductions [45] Market Data and Key Metrics Changes - International sales grew by 45% to $37.4 million, now representing approximately 13% of total sales, with significant contributions from Canada, Australia, and Europe [34][46] - The Canadian business remained strong, with improved conversion rates from the redesigned web platform [35] - Performance in Australia was outstanding, supported by strong brand activations at local events [36] Company Strategy and Development Direction - The company is focused on brand and product innovation, expanding marketing efforts, and exploiting untapped international growth [9][10] - The strategy includes a diverse network of ambassadors and partnerships in passion-driven activities to enhance brand engagement [15][16] - The company plans to test select wholesale distribution for its bag line and continue expanding its retail presence [22][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong consumer demand and the ability to adapt to challenges, expecting continued growth and profitability [7][8] - The company reiterated its full-year sales growth expectation of 18% to 20% and gross margin target of approximately 55% [54][55] - Management highlighted the importance of maintaining disciplined SG&A expenses while supporting strategic initiatives [57] Other Important Information - The company completed a $100 million share buyback, which did not have a material impact on the quarter [14][51] - Inventory increased by 125% to $413 million, reflecting higher in-transit inventory due to extended lead times [52] - The company expects to produce about $125 million of free cash flow this year, with capital expenditures projected at approximately $60 million [83] Q&A Session Summary Question: Can you talk about your ability to get drinkware and other products out of China? - Management reported no significant impact on drinkware suppliers and a good flow of inventory [65] Question: What are you seeing from a demand elasticity standpoint? - Management noted strong growth across regions and channels, with a portfolio approach to market [70] Question: How do you view the competitive backdrop for YETI? - Management emphasized focusing on growing markets rather than just market share, highlighting opportunities in hard coolers and drinkware [73][74] Question: Can you discuss the drivers of your improved confidence on pricing contribution to margin this year? - Management indicated better-than-expected pricing contributions in Q1, leading to improved confidence for the year [76] Question: Can you provide perspective on supply chain costs and freight rates? - Management observed lower rates in the spot market, indicating potential improvements in the future [80] Question: How do you think about the remaining debt on the balance sheet? - Management reiterated a focus on capital allocation for working capital, investments, and selective M&A while maintaining a healthy cash flow [83]