Sales Flat Year-Over-Year Gross
Margin Expanded Over 600 Basis Points Maintains and Narrows
2023 Outlook
YETI Holdings, Inc. (“YETI”) (NYSE: YETI) today announced its
financial results for the third quarter ended September 30, 2023.
The results below should be read in conjunction with the “Product
Recall Updates” section of this press release.
YETI reports its financial performance in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”) and as adjusted on a non-GAAP basis. YETI’s
non-GAAP measures exclude the impact of the voluntary recalls, as
well as certain other items. Please see “Non-GAAP Financial
Measures,” and “Reconciliation of GAAP to Non-GAAP Financial
Information” below for additional information and reconciliations
of the non-GAAP financial measures to the most comparable GAAP
financial measures.
Matt Reintjes, President and Chief Executive Officer, commented,
“Our third quarter results demonstrate the continued and consistent
execution of the YETI growth playbook, driving strong brand and
product interest, while setting up the business for long-term,
sustainable growth. Sales in the quarter were in line with our
prior outlook, as a diverse range of new product offerings drove
strong consumer demand across our major sales channels. Gross
margin performance remained exceptional and above expectations, led
by strong partnerships with our suppliers on product cost and the
ongoing optimization of our transportation and logistics expenses.
These gains continue to support growth focused investments across
our business, while still driving upside to our bottom line.”
Mr. Reintjes continued, “In addition to disciplined execution
during the third quarter, we also successfully launched our
expanded line of Hopper M Series soft coolers back to the market
earlier in the fourth quarter. We are well positioned to build upon
our leadership position in the soft cooler category as these
products are more fully distributed across our channels into next
year. In addition, we have extended a key customization capability
across our global business with the debut of our first Ecommerce
customization options outside of the U.S. Our consistent ability to
drive innovation, combined with our unique omni-channel approach to
reaching consumers and our continued brand investments, builds a
strong and scalable platform for future growth.”
Third Quarter 2023
Results
Sales were flat at $433.6 million compared to the same
period last year. Sales and adjusted sales for the third quarter of
2023 include $6.3 million of sales related to gift card redemptions
in connection with recall remedies. Our 2023 results have been
materially adversely impacted by the stop sale of the soft coolers
included in the recalls initiated during the first quarter of
2023.
- Direct-to-consumer (“DTC”) channel sales increased 14% to
$259.5 million, compared to $227.4 million in the prior year
quarter, due to growth in both Drinkware and Coolers &
Equipment.
- Wholesale channel sales decreased 16% to $174.1 million,
compared to $206.2 million in the same period last year. This
decrease was due to a decline in both Coolers & Equipment and
Drinkware.
- Drinkware sales increased 6% to $253.3 million, compared to
$239.0 million in the prior year quarter, led by strong demand for
Rambler® straw lid mugs, expanded offerings in Rambler® and Yonder®
bottles, our new beverage bucket, and new seasonal colorways.
- Coolers & Equipment sales decreased 8% to $171.5 million,
compared to $185.7 million in the same period last year, primarily
due to the stop sale of the soft coolers affected by the recalls.
Despite strong overall consumer demand, hard coolers declined
year-over-year primarily due to the success in rebuilding channel
inventory during the same period last year. These impacts were
partially offset by strong performance in our existing Hopper® Flip
soft cooler line as well as cargo.
Gross profit increased 13% to $251.3 million, or 58.0% of
sales, compared to $222.4 million, or 51.3% of sales, in the third
quarter of 2022. Gross profit included a $0.8 million, or 20 basis
points, favorable impact related to lower than anticipated
recall-related costs. The increase in gross margin was primarily
due to lower inbound freight costs and lower product costs.
Adjusted gross profit, which excludes the favorable
impact related to lower recall costs, increased $28.0 million to
$250.4 million, or 57.8% of adjusted sales, compared to $222.4
million, or 51.3% of adjusted sales, in the third quarter of
2022.
Selling, general, and administrative (“SG&A”)
expenses increased 23% to $189.4 million, compared to $153.9
million in the third quarter of 2022. As a percentage of sales,
SG&A expenses increased 820 basis points to 43.7% from 35.5% in
the prior year period. This increase was due to higher non-variable
expenses and variable expenses. The increase in non-variable
expenses was primarily driven by higher employee incentive
compensation costs as well as investments in marketing expenses and
in headcount to support future growth. Variable expenses increased
due to the increased mix of our growing Amazon Marketplace business
as well as overall higher outbound freight costs.
Adjusted SG&A expenses increased 20% to $179.0
million, compared to $149.1 million in the third quarter of 2022.
As a percentage of adjusted sales, adjusted SG&A expenses
increased 690 basis points to 41.3% from 34.4% in the prior year
period.
Operating income decreased 10% to $61.9 million, or 14.3%
of sales, compared to $68.5 million, or 15.8% of sales during the
prior year quarter.
Adjusted operating income decreased 3% to $71.4 million,
or 16.5% of adjusted sales, compared to $73.3 million, or 16.9% of
adjusted sales during the same period last year.
Net income decreased 6% to $42.7 million, or 9.8% of
sales, compared to $45.5 million, or 10.5% of sales in the prior
year quarter; Net income per diluted share decreased 6% to
$0.49, compared to $0.52 in the prior year quarter.
Adjusted net income decreased 3% to $52.9 million, or
12.2% of adjusted sales, compared to $54.7 million, or 12.6% of
adjusted sales in the prior year quarter; Adjusted net income
per diluted share decreased 5% to $0.60, compared to $0.63 per
diluted share in the prior year quarter.
Nine Months Results
Sales decreased 1% to $1,138.9 million, compared to
$1,147.2 million in the prior year. Sales were unfavorably impacted
by $24.5 million due to a recall reserve adjustment in the second
quarter of 2023. See “Product Recall Updates” below for additional
information on the impact of the recalls referenced throughout this
press release.
Adjusted sales, which exclude the unfavorable impact of
the recall reserve adjustment, increased 1% to $1,163.4
million.
Sales and adjusted net sales for the first nine months of 2023
include $18.8 million of sales related to gift card redemptions in
connection with recall remedies. Our 2023 sales have also been
materially adversely impacted by the stop sale of the soft coolers
included in the recalls initiated during the first quarter of
2023.
- DTC channel sales increased 7% to $652.9 million, compared to
$608.2 million in the prior year period, due to growth in
Drinkware. Excluding the $8.1 million unfavorable impact of the
recall reserve adjustment, DTC channel adjusted sales increased 9%
to $661.0 million due to growth in both Drinkware and Coolers &
Equipment.
- Wholesale channel sales decreased 10% to $486.1 million,
compared to $539.0 million in the same period last year. Excluding
the $16.4 million unfavorable impact of the recall reserve
adjustment, wholesale channel adjusted sales decreased 7% to $502.5
million due to a decline in both Coolers & Equipment and
Drinkware.
- Drinkware sales increased 6% to $677.0 million, compared to
$639.1 million in the prior year period, reflecting strong demand
for Rambler® straw lid mugs, expanded offerings in Rambler®
bottles, the introductions of our new Yonder® bottles and beverage
bucket, and new seasonal colorways.
- Coolers & Equipment sales decreased 10% to $432.5 million,
compared to $482.0 million in the same period last year, and
include a $24.5 million unfavorable impact related to the recall
reserve adjustment. Excluding the unfavorable impact of the recall
reserve adjustment, Coolers & Equipment adjusted sales
decreased 5% to $457.0 million. This decrease was primarily due to
the stop sale of the products affected by the recalls. These
impacts were partially offset by increases in hard coolers, our
existing Hopper Flip® soft cooler line, and cargo.
Gross profit increased 5% to $628.0 million, or 55.1% of
sales, compared to $596.4 million, or 52.0% of sales in the prior
year. Gross profit included a $17.4 million, or 40 basis points,
unfavorable impact primarily related to the recall reserve
adjustment. The increase in gross margin was primarily due to lower
inbound freight costs and lower product costs.
Adjusted gross profit, which excludes the unfavorable
impact primarily related to the recall reserve adjustment,
increased $49.0 million to $645.3 million, or 55.5% of adjusted
sales, compared to $596.4 million, or 52.0% of adjusted sales, in
the prior year.
SG&A expenses increased 17% to $500.7 million,
compared to $426.3 million in the prior year. SG&A expenses
included a $10.5 million favorable impact primarily related to the
recall reserve adjustment. As a percentage of sales, SG&A
expenses increased 680 basis points to 44.0% from 37.2% in the
prior year period. This increase was due to higher non-variable
expenses and variable expenses. The increase in non-variable
expenses was primarily driven by higher employee incentive
compensation costs as well as investments in marketing expenses and
in headcount to support future growth. Variable expenses increased
due to the increased mix of our growing Amazon Marketplace business
as well as overall higher outbound freight costs.
Adjusted SG&A expenses, which exclude certain items
including the favorable impact related to the recall reserve
adjustment, increased 18% to $485.2 million, compared to $411.2
million in the prior year. As a percentage of adjusted sales,
adjusted SG&A expenses increased 590 basis points to 41.7% from
35.8% in the prior year period.
Operating income decreased 25% to $127.3 million, or
11.2% of sales, compared to $170.1 million, or 14.8% of sales
during the prior year, and includes a $6.8 million unfavorable
impact primarily from the recall reserve adjustment.
Adjusted operating income decreased 13% to $160.2
million, or 13.8% of adjusted sales, compared to $185.2 million, or
16.1% of adjusted sales during the same period last year.
Net income, which includes the unfavorable impact from
the recall reserve adjustment, decreased 22% to $91.3 million, or
8.0% of sales, compared to $117.4 million, or 10.2% of sales in the
prior year; Net income per diluted share decreased 22% to
$1.05, compared to $1.35 per diluted share in the prior year.
Adjusted net income decreased 14% to $118.2 million, or
10.2% of adjusted sales, compared to $138.0 million, or 12.0% of
adjusted sales in the prior year period; Adjusted net income per
diluted share decreased 15% to $1.35, compared to $1.58 per
diluted share in the same period last year.
Balance Sheet and Other
Highlights
Cash increased to $281.4 million, compared to $77.8
million at the end of the third quarter of 2022.
Inventory decreased 22% to $341.3 million, compared to
$439.4 million at the end of the prior year quarter.
Total debt, excluding finance leases and unamortized
deferred financing fees, was $83.3 million, compared to $95.6
million at the end of the third quarter of 2022. During the third
quarter of 2023, we made mandatory debt payments of $1.1
million.
Updated 2023 Outlook
Mr. Reintjes concluded, “As we move through our biggest quarter
of the year, we are focused on continuing to be innovative with our
brand and our products while demonstrating value to consumers who
we expect will remain discerning with their spending through the
holiday period. We remain committed to delivering our full year
sales outlook, while also updating our full year adjusted EPS
outlook to the high-end of our prior range to reflect continued
gross margin expansion. Finally, our balance sheet and our ability
to generate strong cash flow will afford us a range of
opportunities as we look to further expand the reach of the YETI
brand, open new markets and drive shareholder returns.”
For 2023, YETI expects:
- Adjusted sales to increase approximately 4% (versus the
previous outlook of between 4% and 5%). Expected adjusted sales are
inclusive of an approximate 500 basis points unfavorable impact on
our growth rate from the stop sale of the products affected by the
recalls. Expected adjusted sales also include $18.8 million of
sales from recall-related gift card redemptions during the second
and third quarter of 2023;
- Adjusted operating income as a percentage of adjusted
sales of approximately 16.0% (versus the previous outlook of
between 15.5% and 16.0%). The benefit from the adjusted gross
margin expansion is expected to be more than offset by adjusted
SG&A deleverage, which is driven by the unfavorable topline
impact from the stop sale of the products affected by the recalls
as well as strategic investments;
- An effective tax rate of approximately 25.1% (compared
to 22.8% in the prior year period, which reflected an income tax
benefit related to stock-based compensation);
- Adjusted net income per diluted share of approximately
$2.32 (versus the previous outlook of between $2.23 and $2.32),
reflecting a 2% decrease, with earnings growth beginning in the
fourth quarter of the year;
- Diluted weighted average shares outstanding of
approximately 87.4 million (versus the previous outlook of 87.3
million); and
- Capital expenditures of approximately $55 million
(versus the previous outlook of $60 million) primarily to support
investments in technology and new product innovation and
launches.
Product Recall Updates
New and Expanded Hopper M Series Soft
Cooler Line
In October 2023, we introduced our redesigned and improved
Hopper® M30 Soft Cooler and Hopper® M20 Soft Backpack Cooler, and
also launched two new sizes with the Hopper® M15 Soft Cooler and
the Hopper® M12 Soft Backpack Cooler (collectively, the “Hopper M
Series Soft Cooler line”). We believe the improved design of the
Hopper M Series Soft Cooler line adequately addresses the potential
safety concerns caused by the magnet-lined closures of the
previous-generation products, which were affected by the product
recalls.
Product Recall Reserve
As previously disclosed, in February 2023 we proposed a
voluntary recall of our Hopper® M30 Soft Cooler, Hopper® M20 Soft
Backpack Cooler, and SideKick Dry® gear case (the “affected
products”). As a result, we established reserves for unsalable
inventory on-hand and estimated product recall expenses as of
December 31, 2022.
In March 2023, we initiated voluntary recalls of the affected
products. During the second quarter of 2023, we began processing
recall returns and claims, and based on such experience and trends,
we reevaluated our assumptions and adjusted our estimated recall
expense reserve. These trends included higher than anticipated
elections to receive gift cards in lieu of product replacement
remedies, variations in individual product participation rates, and
lower logistics costs than previously estimated. As a result, we
updated our initial recall reserve assumptions, which increased the
estimated recall expense reserve by $8.5 million in the second
quarter of 2023. However, the overall consumer recall participation
rate has remained consistent with our expectations.
During the three and nine months ended September 30, 2023, we
recorded the following impacts as a result of the recall reserve
adjustment and other incurred costs. These impacts are excluded
from our non-GAAP results:
- Sales - For the three months ended September 30,
2023, an immaterial reduction to sales for higher returns-related
costs. For the nine months ended September 30, 2023, a reduction to
net sales for higher estimated future recall remedies (i.e.,
estimated gift card elections) of $24.5 million, of which $8.1
million and $16.4 million was allocated to our DTC and wholesale
channels, respectively. These amounts were allocated based on the
historical channel sell-in basis of the affected products;
- Cost of goods sold - For the three months ended
September 30, 2023, a benefit of $0.8 million related to lower than
anticipated recall-related costs. For the nine months ended
September 30, 2023, favorable impacts of $5.0 million primarily
related to lower estimated costs of future product replacement
remedy elections and logistics costs, $1.3 million from an
inventory reserve adjustment, and $0.8 million related to lower
recall-related costs; and
- SG&A - For the nine months ended September
30, 2023, a benefit of $10.5 million primarily related to lower
estimated other recall-related costs.
In addition, our sales have also been materially adversely
impacted by the stop sale of the affected products initiated during
the first quarter of 2023.
Conference Call Details
A conference call to discuss the third quarter of 2023 financial
results is scheduled for today, November 9, 2023, at 8:00 a.m.
Eastern Time. Investors and analysts interested in participating in
the call are invited to dial 833-816-1399 (international callers,
please dial 412-317-0492) approximately 10 minutes prior to the
start of the call. A live audio webcast of the conference call will
be available online at http://investors.yeti.com. A replay will be
available through November 23, 2023 by dialing 844-512-2921
(international callers, 412-317-6671). The accompanying access code
for this call is 10183077.
About YETI Holdings, Inc.
Headquartered in Austin, Texas, YETI is a global designer,
retailer, and distributor of innovative outdoor products. From
coolers and drinkware to bags and apparel, YETI products are built
to meet the unique and varying needs of diverse outdoor pursuits,
whether in the remote wilderness, at the beach, or anywhere life
takes you. By consistently delivering high-performing, exceptional
products, we have built a strong following of brand loyalists
throughout the world, ranging from serious outdoor enthusiasts to
individuals who simply value products of uncompromising quality and
design. We have an unwavering commitment to outdoor and recreation
communities, and we are relentless in our pursuit of building
superior products for people to confidently enjoy life outdoors and
beyond. For more information, please visit www.YETI.com.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP,
we supplement our results with non-GAAP financial measures,
including adjusted net sales, adjusted gross profit, adjusted
SG&A expenses, adjusted operating income, adjusted net income,
adjusted net income per diluted share as well as adjusted gross
profit and adjusted SG&A expenses, adjusted operating income
and adjusted net income as a percentage of adjusted net sales. Our
management uses these non-GAAP financial measures in conjunction
with GAAP financial measures to measure our profitability and to
evaluate our financial performance. We believe that these non-GAAP
financial measures provide meaningful supplemental information
regarding the underlying operating performance of our business and
are appropriate to enhance an overall understanding of our
financial performance. These non-GAAP financial measures have
limitations as analytical tools in that they do not reflect all of
the amounts associated with our results of operations as determined
in accordance with GAAP. Because of these limitations, these
non-GAAP financial measures should be considered along with GAAP
financial performance measures. The presentation of these non-GAAP
financial measures is not intended to be considered in isolation or
as a substitute for, or superior to, financial information prepared
and presented in accordance with GAAP. Investors are encouraged to
review the reconciliation of these non-GAAP financial measures to
their most directly comparable GAAP financial measures. A
reconciliation of the non-GAAP financial measures to such GAAP
measures can be found below.
YETI does not provide a reconciliation of forward-looking
non-GAAP to GAAP financial measures because such reconciliations
are not available without unreasonable efforts. This is due to the
inherent difficulty in forecasting with reasonable certainty
certain amounts that are necessary for such reconciliation,
including in particular the impact of the voluntary recalls and
realized and unrealized foreign currency gains and losses reported
within other expense. For the same reasons, we are unable to
forecast with reasonable certainty all deductions and additions
needed in order to provide a forward-looking GAAP financial
measures at this time. The amount of these deductions and additions
may be material and, therefore, could result in forward-looking
GAAP financial measures being materially different or less than
forward-looking non-GAAP financial measures. See “Forward-looking
statements” below.
Forward-looking statements
This press release contains ‘‘forward-looking statements’’
within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical or
current fact included in this press release are forward-looking
statements. Forward-looking statements include statements
containing words such as “anticipate,” “assume,” “believe,” “can
have,” “contemplate,” “continue,” “could,” “design,” “due,”
“estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,”
“may,” “might,” “objective,” “plan,” “predict,” “project,”
“potential,” “seek,” “should,” “target,” “will,” “would,” and other
words and terms of similar meaning in connection with any
discussion of the timing or nature of future operational
performance or other events. For example, all statements made
relating to our future expectations relating to our voluntary
recalls, demand and market conditions, pricing conditions, expected
sales, gross margin, operating expense and cash flow levels, and
our expectations for opportunity, growth, and new products,
including those set forth in the quotes from YETI’s President and
CEO, and the 2023 financial outlook provided herein, constitute
forward-looking statements. All forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially from those that are expected and, therefore, you
should not unduly rely on such statements. The risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by these forward-looking statements
include but are not limited to: (i) economic conditions or consumer
confidence in future economic conditions, including the ongoing
conflicts in Ukraine and the Middle East, and inflationary
conditions resulting in rising prices; (ii) our ability to maintain
and strengthen our brand and generate and maintain ongoing demand
for our products; (iii) our ability to successfully design, develop
and market new products; (iv) our ability to effectively manage our
growth; (v) our ability to expand into additional consumer markets,
and our success in doing so; (vi) the success of our international
expansion plans; (vii) our ability to compete effectively in the
outdoor and recreation market and protect our brand; (viii) the
level of customer spending for our products, which is sensitive to
general economic conditions and other factors; (ix) problems with,
or loss of, our third-party contract manufacturers and suppliers,
or an inability to obtain raw materials; (x) fluctuations in the
cost and availability of raw materials, equipment, labor, and
transportation and subsequent manufacturing delays or increased
costs; (xi) our ability to accurately forecast demand for our
products and our results of operations; (xii) our relationships
with our national, regional, and independent retail partners, who
account for a significant portion of our sales; (xiii) the impact
of natural disasters and failures of our information technology on
our operations and the operations of our manufacturing partners;
(xiv) our ability to attract and retain skilled personnel and
senior management, and to maintain the continued efforts of our
management and key employees; and (xv) the impact of our
indebtedness on our ability to invest in the ongoing needs of our
business. For a more extensive list of factors that could
materially affect our results, you should read our filings with the
United States Securities and Exchange Commission (the “SEC”),
including our Quarterly Report on Form 10-Q for the three months
ended July 1, 2023, as such filings may be amended, supplemented or
superseded from time to time by other reports YETI files with the
SEC.
These forward-looking statements are made based upon detailed
assumptions and reflect management’s current expectations and
beliefs. While YETI believes that these assumptions underlying the
forward-looking statements are reasonable, YETI cautions that it is
very difficult to predict the impact of known factors, and it is
impossible for YETI to anticipate all factors that could affect
actual results.
The forward-looking statements included here are made only as of
the date hereof. YETI undertakes no obligation to publicly update
or revise any forward-looking statement as a result of new
information, future events, or otherwise, except as required by
law. Many of the foregoing risks and uncertainties may be
exacerbated by the global business and economic environment,
including the ongoing conflict in Ukraine and the Middle East.
YETI HOLDINGS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Net sales
$
433,561
$
433,556
$
1,138,920
$
1,147,226
Cost of goods sold
182,310
211,149
510,961
550,860
Gross profit
251,251
222,407
627,959
596,366
Selling, general, and administrative
expenses
189,374
153,940
500,653
426,263
Operating income
61,877
68,467
127,306
170,103
Interest expense, net
(285
)
(1,495
)
(1,610
)
(3,221
)
Other expense
(4,032
)
(7,281
)
(2,782
)
(12,202
)
Income before income taxes
57,560
59,691
122,914
154,680
Income tax expense
(14,903
)
(14,171
)
(31,622
)
(37,249
)
Net income
$
42,657
$
45,520
$
91,292
$
117,431
Net income per share
Basic
$
0.49
$
0.53
$
1.05
$
1.36
Diluted
$
0.49
$
0.52
$
1.05
$
1.35
Weighted-average common shares
outstanding
Basic
86,783
86,208
86,663
86,580
Diluted
87,589
86,831
87,290
87,305
YETI HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except per
share amounts)
September 30,
2023
December 31,
2022
October 1, 2022
ASSETS
Current assets
Cash
$
281,360
$
234,741
$
77,763
Accounts receivable, net
127,896
79,446
93,898
Inventory
341,348
371,412
439,443
Prepaid expenses and other current
assets
40,728
33,321
33,564
Total current assets
791,332
718,920
644,668
Property and equipment, net
132,215
124,587
128,361
Operating lease right-of-use assets
60,376
55,406
55,348
Goodwill
54,293
54,293
54,293
Intangible assets, net
114,140
99,429
98,142
Other assets
3,526
24,130
2,414
Total assets
$
1,155,882
$
1,076,765
$
983,226
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities
Accounts payable
$
179,086
$
140,818
$
122,813
Accrued expenses and other current
liabilities
130,333
211,399
107,003
Taxes payable
11,962
15,289
7,584
Accrued payroll and related costs
19,570
4,847
3,240
Operating lease liabilities
13,366
12,076
10,580
Current maturities of long-term debt
6,512
24,611
24,411
Total current liabilities
360,829
409,040
275,631
Long-term debt, net of current portion
79,529
71,741
77,756
Operating lease liabilities,
non-current
60,212
55,649
55,764
Other liabilities
16,527
13,858
23,414
Total liabilities
517,097
550,288
432,565
Stockholders’ Equity
Common stock
885
881
879
Treasury stock, at cost
(100,025
)
(100,025
)
(100,025
)
Additional paid-in capital
378,556
357,490
351,033
Retained earnings
359,843
268,551
296,289
Accumulated other comprehensive (loss)
income
(474
)
(420
)
2,485
Total stockholders’ equity
638,785
526,477
550,661
Total liabilities and stockholders’
equity
$
1,155,882
$
1,076,765
$
983,226
YETI HOLDINGS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands, except per
share amounts)
Nine Months Ended
September 30,
2023
October 1, 2022
Cash Flows from Operating
Activities:
Net income
$
91,292
$
117,431
Adjustments to reconcile net income to
cash provided by (used in) operating activities:
Depreciation and amortization
34,391
28,504
Amortization of deferred financing
fees
441
458
Stock-based compensation
21,918
14,883
Deferred income taxes
20,699
(1,138
)
Impairment of long-lived assets
1,963
181
Loss on modification and extinguishment of
debt
330
—
Product recalls
8,538
—
Other
239
10,215
Changes in operating assets and
liabilities:
Accounts receivable
(48,836
)
14,679
Inventory
28,180
(127,362
)
Other current assets
(6,505
)
(2,944
)
Accounts payable and accrued expenses
(36,288
)
(121,515
)
Taxes payable
(3,323
)
(6,773
)
Other
1,730
1,166
Net cash provided by (used in) operating
activities
114,769
(72,215
)
Cash Flows from Investing
Activities:
Purchases of property and equipment
(38,983
)
(32,493
)
Additions of intangibles, net
(19,280
)
(7,924
)
Net cash used in investing activities
(58,263
)
(40,417
)
Cash Flows from Financing
Activities:
Repayments of long-term debt
(6,680
)
(16,875
)
Payments of deferred financing fees
(2,824
)
—
Taxes paid in connection with employee
stock transactions
(2,421
)
(1,861
)
Proceeds from employee stock
transactions
1,573
278
Finance lease principal payment
(1,579
)
(1,730
)
Repurchase of common stock
—
(100,025
)
Net cash used in financing activities
(11,931
)
(120,213
)
Effect of exchange rate changes on
cash
2,044
(1,581
)
Net increase (decrease) in cash
46,619
(234,426
)
Cash, beginning of period
234,741
312,189
Cash, end of period
$
281,360
$
77,763
YETI HOLDINGS, INC.
Supplemental Financial
Information
Reconciliation of GAAP to
Non-GAAP Financial Information
(Unaudited) (In thousands
except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Net sales
$
433,561
$
433,556
$
1,138,920
$
1,147,226
Product recall(1)
18
—
24,524
—
Adjusted net sales
$
433,579
$
433,556
$
1,163,444
$
1,147,226
Gross profit
$
251,251
$
222,407
$
627,959
$
596,366
Product recall(1)
(825
)
—
17,376
—
Adjusted gross profit
$
250,426
$
222,407
$
645,335
$
596,366
Selling, general, and administrative
expenses
$
189,374
$
153,940
$
500,653
$
426,263
Non-cash stock-based compensation
expense
(7,805
)
(4,662
)
(21,918
)
(14,883
)
Long-lived asset impairment
(1,963
)
(181
)
(1,963
)
(181
)
Product recall(1)
—
—
10,549
—
Organizational realignment costs(2)
—
—
(1,582
)
—
Business optimization expense(3)
(582
)
—
(582
)
—
Adjusted selling, general, and
administrative expenses
$
179,024
$
149,097
$
485,157
$
411,199
Gross margin
58.0
%
51.3
%
55.1
%
52.0
%
Adjusted gross margin
57.8
%
51.3
%
55.5
%
52.0
%
SG&A expenses as a % of net sales
43.7
%
35.5
%
44.0
%
37.2
%
Adjusted SG&A expenses as a % of
adjusted net sales
41.3
%
34.4
%
41.7
%
35.8
%
_________________________
(1)
Represents adjustments and charges associated with recalls. For
the three months ended September 30, 2023, these include a benefit
of $0.8 million related to lower than anticipated recall-related
costs. For the nine months ended September 30, 2023, these include
a reduction to sales for higher estimated future recall remedies
(i.e., estimated gift card elections) of $24.5 million; a $1.3
million favorable impact from an inventory reserve adjustment; a
benefit of $5.0 million primarily related to lower estimated costs
of future product replacement remedy elections and logistics costs;
a benefit of $0.8 million related to lower recall-related costs;
and a benefit of $10.5 million primarily related to lower estimated
other recall-related costs, including logistics costs.
(2)
Represents employee severance costs in connection with strategic
organizational realignments.
(3)
Represents start-up costs, transition and integration charges
associated with our new distribution facilities in the Netherlands
and Australia.
YETI HOLDINGS, INC.
Supplemental Financial
Information
Reconciliation of GAAP to
Non-GAAP Financial Information
(Unaudited) (In thousands
except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Operating income
$
61,877
$
68,467
$
127,306
$
170,103
Adjustments:
Non-cash stock-based compensation
expense(1)
7,805
4,662
21,918
14,883
Long-lived asset impairment(1)
1,963
181
1,963
181
Product recalls(2)
(825
)
—
6,827
—
Organizational realignment costs(1)(3)
—
—
1,582
—
Business optimization expense(1)(4)
582
—
582
—
Adjusted operating income
$
71,402
$
73,310
$
160,178
$
185,167
Net income
$
42,657
$
45,520
$
91,292
$
117,431
Adjustments:
Non-cash stock-based compensation
expense(1)
7,805
4,662
21,918
14,883
Long-lived asset impairment(1)
1,963
181
1,963
181
Product recalls(2)
(825
)
—
6,827
—
Organizational realignment costs(1)(3)
—
—
1,582
—
Business optimization expense(1)(4)
582
—
582
—
Other expense(5)
4,033
7,281
2,782
12,202
Tax impact of adjusting items(6)
(3,321
)
(2,970
)
(8,735
)
(6,680
)
Adjusted net income
$
52,894
$
54,674
$
118,211
$
138,017
Net sales
$
433,561
$
433,556
$
1,138,920
$
1,147,226
Adjusted net sales
$
433,579
$
433,556
$
1,163,444
$
1,147,226
Operating income as a % of net sales
14.3
%
15.8
%
11.2
%
14.8
%
Adjusted operating income as a % of net
sales
16.5
%
16.9
%
13.8
%
16.1
%
Net income as a % of net sales
9.8
%
10.5
%
8.0
%
10.2
%
Adjusted net income as a % of net
sales
12.2
%
12.6
%
10.2
%
12.0
%
Net income per diluted share
$
0.49
$
0.52
$
1.05
$
1.35
Adjusted net income per diluted share
$
0.60
$
0.63
$
1.35
$
1.58
Weighted average common shares outstanding
- diluted
87,589
86,831
87,290
87,305
_________________________
(1)
These costs are reported in SG&A expenses.
(2)
Represents adjustments and charges associated with recalls. For
the three months ended September 30, 2023, these include a benefit
of $0.8 million related to lower than anticipated recall-related
costs. For the nine months ended September 30, 2023, these include
a reduction to sales for higher estimated future recall remedies
(i.e., estimated gift card elections) of $24.5 million; a $1.3
million favorable impact from an inventory reserve adjustment; a
benefit of $5.0 million primarily related to lower estimated costs
of future product replacement remedy elections and logistics costs;
a benefit of $0.8 million related to lower recall-related costs;
and a benefit of $10.5 million primarily related to lower estimated
other recall-related costs, including logistics costs.
(3)
Represents employee severance costs in connection with strategic
organizational realignments.
(4)
Represents start-up costs, transition and integration charges
associated with our new distribution facilities in the Netherlands
and Australia.
(5)
Other expense substantially consists of realized and unrealized
foreign currency gains and losses on intercompany balances that
arise in the ordinary course of business. For the nine months ended
September 30, 2023, other expense includes the loss on modification
and extinguishment of debt of $0.3 million related to the amendment
of our credit facility in the second quarter of 2023.
(6)
Represents the tax impact of adjustments calculated at an
expected statutory tax rate of 24.5% for each of the three and nine
months ended September 30, 2023 and October 1, 2022.
YETI HOLDINGS, INC.
Supplemental Financial
Information
Reconciliation of GAAP to
Non-GAAP Financial Measures
(Unaudited) (In
thousands)
Three Months Ended September
30, 2023
Three Months Ended October 1,
2022
Net Sales
Product Recalls(1)
Adjusted Net Sales
Net Sales
Product Recalls(1)
Adjusted Net Sales
Channel
Wholesale
$
174,062
$
18
$
174,080
$
206,153
$
—
$
206,153
Direct-to-consumer
259,499
—
259,499
227,403
—
227,403
Total
$
433,561
$
18
$
433,579
$
433,556
$
—
$
433,556
Category
Coolers & Equipment
$
171,547
$
18
$
171,565
$
185,657
$
—
$
185,657
Drinkware
253,274
—
253,274
238,987
—
238,987
Other
8,740
—
8,740
8,912
—
8,912
Total
$
433,561
$
18
$
433,579
$
433,556
$
—
$
433,556
Nine Months Ended September
30, 2023
Nine Months Ended October 1,
2022
Net Sales
Product Recalls(1)
Adjusted Net Sales
Net Sales
Product Recalls(1)
Adjusted Net Sales
Channel
Wholesale
$
486,066
$
16,392
$
502,458
$
539,014
$
—
$
539,014
Direct-to-consumer
652,854
8,132
660,986
608,212
—
608,212
Total
$
1,138,920
$
24,524
$
1,163,444
$
1,147,226
$
—
$
1,147,226
Category
Coolers & Equipment
$
432,511
$
24,524
$
457,035
$
482,030
$
—
$
482,030
Drinkware
676,978
—
676,978
639,055
—
639,055
Other
29,431
—
29,431
26,141
—
26,141
Total
$
1,138,920
$
24,524
$
1,163,444
$
1,147,226
$
—
$
1,147,226
_________________________ (1)
Represents adjustments and charges associated with recalls.
These include a reduction to sales for higher estimated future
recall remedies (i.e., estimated gift card elections) of $24.5
million for the nine months ended September 30, 2023, of which $8.1
million and $16.4 million was allocated to our DTC and wholesale
channels, respectively. These amounts were allocated based on the
historical channel sell-in basis of the products affected by the
recalls.
YETI HOLDINGS, INC.
Supplemental Financial
Information
Reconciliation of GAAP to
Non-GAAP Financial Information
(Unaudited) (In
thousands)
Twelve Months Ended
December 31,
2022
Net sales
$
1,595,222
Product recall(1)
38,415
Adjusted net sales
$
1,633,637
Operating income
$
126,361
Adjustments:
Non-cash stock-based compensation
expense(2)
17,799
Long-lived asset impairment(2)
1,229
Product recalls(1)
128,908
Adjusted operating income
$
274,297
Net income
$
89,693
Adjustments:
Non-cash stock-based compensation
expense(2)
17,799
Long-lived asset impairment(2)
1,229
Product recalls(1)
128,908
Other expense(3)
5,718
Tax impact of adjusting items(4)
(37,645
)
Adjusted net income
$
205,702
Operating income as a % of net sales
7.9
%
Adjusted operating income as a % of net
sales
16.8
%
Net income as a % of net sales
5.6
%
Adjusted net income as a % of net
sales
12.6
%
Net income per diluted share
$
1.03
Adjusted net income per diluted share
$
2.36
Weighted average common shares outstanding
- diluted
87,195
_________________________
(1)
Represents adjustments and charges associated with the proposed
voluntary recalls. These include a reduction to net sales for
estimated future product returns and recall remedies of $38.4
million; recorded costs in cost of goods sold primarily related to
inventory write-offs for unsalable inventory on-hand and estimated
costs of future product replacement remedies and logistics costs of
$58.6 million; and operating expenses of $31.9 million associated
with estimated other recall-related costs.
(2)
These costs are reported in SG&A expenses.
(3)
Other (income) expense substantially consists of realized and
unrealized foreign currency gains and losses on intercompany
balances that arise in the ordinary course of business.
(4)
Represents the tax impact of adjustments calculated at an
expected statutory tax rate of 24.5%.
YETI HOLDINGS, INC.
2023 Outlook
(Unaudited) (In thousands
except per share amounts)
Fiscal 2022
Fiscal 2023 Outlook
Adjusted net sales
$
1,633,637
$
1,698,983
Adjusted operating income
$
274,297
$
271,837
Adjusted operating income as a % of net
sales
16.8
%
16.0
%
Adjusted net income
$
205,702
$
202,309
Adjusted net income as a % of net
sales
12.6
%
11.9
%
Adjusted net income per diluted share
$
2.36
$
2.32
Weighted average common shares outstanding
- diluted
87,195
87,370
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109389418/en/
Investor Relations Contact: Tom Shaw, 512-271-6332
Investor.relations@yeti.com
Media Contact: YETI Holdings, Inc. Media Hotline
Media@yeti.com
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