Traeger, Inc. Q2 FY2025 earnings call

• Tariff mitigation efforts: centered around supply chain efforts (diversifying manufacturing mix away from China), pricing (thoughtful SKU-by-SKU analysis with pricing power), and near-term cost savings (reduction in travel/entertainment, deferral of nonessential projects). - Project Gravity: Phase 1 includes workforce reduction and centralizing MEATER's operations into Traeger infrastructure, expected to drive $30 million in run rate cost savings. Phase 2 is a broad-based review of the business for efficiency and margin enhancement. - Second quarter highlights: Better-than-expected grill sell-through during peak seasons, strength at lower price point grills, boots on the ground activation strategy, brand partnerships with Bud Light, Budweiser, and Pepsi Frito-Lay.

Second quarter revenues were $145 million, down 14% versus prior year. Grill revenues decreased 22% to $74 million. Consumables revenues were $36 million, up 7% to second quarter last year. Accessories revenues decreased 12% to $35 million, largely driven by lower sales in MEATER. Grill revenues were negatively impacted by revenue pace and shifts out of the second quarter due to tariffs. Consumables growth was driven by increase in wood pellet revenues with strong sell-through and increased distribution. Accessories were pressured by declines in MEATER but saw sequential improvement from first quarter.

• Fiscal year 2025 revenues: $540 million to $555 million, down 8% to 11% versus prior year. - Adjusted EBITDA: $66 million to $73 million. - Gross margin: 40.5% to 41.5%, implying a decline of 80 to 180 basis points. - Quarterly pacing: Modest sequential improvement in third quarter year-over-year sales, larger sales decline in fourth quarter but adjusted EBITDA expected to improve versus prior year.

• Macro-economic environment uncertainties. - Trade policy and rapidly changing tariff landscape with potential downstream impacts on consumer and profitability. - Uncertainty around the full impact of tariff exposure on financial results.

Q: Can you talk a little bit more about the color around the reaction to the price increases, particularly in the wholesale channel?

A: Sell-through was robust relative to expectations, with modestly positive unit sell-through growth at retail. Direct channel fell off more than retail due to early price changes on the website.

Q: Your plans were to significantly reduce your exposure to China by the end of 2026. Can you provide a bit more color maybe around the progress you expect to make this year?

A: Started diversifying away from China a couple of years ago, accelerating the process, aiming to be almost entirely diversified outside of China by the end of 2026 with a steady transition over the next 12 to 18 months.

Q: First, on grills, I know we're coming off a few years of a rough grill market. So why do you think the market was so tough in Q2?

A: Timing of consumer sentiment post-Liberation Day which hit an all-time low, normalization of grill market post-pandemic pull forward demand, and tariff activity impacting the market.

Q: Secondly, on MEATER, what's going on there?

A: Faced competitive intensity with low-price entrants in the market, saw stabilization in revenue decline rate, and is in the process of integrating into Traeger's infrastructure to leverage sales, marketing, and brand building capabilities.

Q: I wanted to touch base on some of the new products like the Flatrock and the Woodridge, like how have those been performing?

A: Woodridge response has been phenomenal with strong product reviews, while Flatrock is slowly gaining traction with appropriate product market fit but at a higher price point compared to competitors.

Q: So first, just back on the replacement cycle. You kind of alluded to it a couple of times. I mean all your grills are connected. So you guys have kind of a unique way to see. Are you seeing any of the Woodridge buyers being those who are basically turning off an older grill that maybe was purchased in 2020 or 2021?

A: Early mix of new and replacement buyers, over time expecting Woodridge to be leveraged as an upgrade to current buyers.

Q: Just any sense for kind of the CapEx spending plans for this year, free cash flow, kind of latest view on that and maybe where you would see kind of cash landing at the end of the year, given what you guys have put in place here?

A: Focus on being cash flow positive, CapEx is light with no significant deviation versus prior year, prioritizing financial health.

Q: Do we just get the full balance in '26? Do you reinvest some of that? Just trying to how we should be thinking about that? And then any early sense for the size of Phase 2?

A: $13 million in savings evident in 2025, $30 million run rate savings expected by end of 2026 with sequential improvement throughout 2026. Phase 2 is an ongoing review with significant value to unlock but details to be provided as the project progresses.