Traeger Announces First Quarter Fiscal 2023 Results

Reiterates Outlook for Full Year 2023

Traeger, Inc. ("Traeger" or the "Company") (NYSE: COOK), creator and category leader of the wood pellet grill, today announced its financial results for the three months ended March 31, 2023.

First Quarter FY 23 Results

  • Total revenues decreased 31.5% to $153.2 million
  • Gross profit margin of 36.2% down 80 basis points compared to prior year
  • Net income of $8.0 million; net income of $0.07 per share
  • Adjusted net income of $5.5 million; adjusted net income of $0.04 per share
  • Adjusted EBITDA of $21.9 million, ahead of guidance of $16 million to $20 million
  • Adjusted EBITDA margin of 14.3%, up from 13.6% in the prior year
  • 14% sequential reduction in balance sheet inventory driven by strategic inventory management

"While our sales continued to be pressured by retailer destocking and lower consumer demand in the first quarter, I am pleased with our execution as well as our ability to exceed the high-end of our Adjusted EBITDA guidance range for the quarter," said Jeremy Andrus, CEO of Traeger. "We are making meaningful inroads on our near-term strategy to navigate the current environment and to position the company for a return to growth in the second half of 2023 and beyond. In particular, we saw substantial improvement in both our balance sheet and channel inventories in the first quarter."

Mr. Andrus continued, "The first quarter was also a pivotal period in our product innovation roadmap with the launch of our new Flatrock and Ironwood grills. These launches cement Traeger’s positioning as the industry leader in innovation and the strong response from consumers adds to my confidence in the long-term prospects of our brand. Against a volatile macro economic backdrop, we will continue to manage the business prudently with a focus on agility and efficiency, positioning the Company for long-term success and value creation."

Operating Results for the First Quarter

Total revenue decreased by 31.5% to $153.2 million, compared to $223.7 million in the first quarter last year.

  • Grills decreased 40.3% to $89.7 million as compared to the first quarter last year. The decrease was driven by lower unit volume, partially offset by a higher average selling price resulting from the introduction of new product.
  • Consumables decreased 24.2% to $30.0 million as compared to the first quarter last year. The decrease was driven by lower unit volume of wood pellets and other consumables.
  • Accessories decreased 0.7% to $33.4 million as compared to the first quarter last year. This decrease was driven primarily by lower unit volume of Traeger-branded accessories, partially offset by increased sales of MEATER smart thermometers.

North America revenue declined 33.0% in the first quarter compared to the prior year. Rest of World revenues declined 13.1% in the first quarter compared to the prior year.

Gross profit decreased to $55.4 million, compared to $82.6 million in the first quarter last year. Gross profit margin was 36.2% in the first quarter, compared to 36.9% in the same period last year. The decrease in gross margin was driven primarily by the timing of marketplace promotional investments and higher product costs, offset by favorable domestic logistics costs, as well as foreign exchange rates.

Sales and marketing expenses were $22.1 million, compared to $34.9 million in the first quarter last year. The decrease in sales and marketing expense was driven by decreases in demand creation costs, employee expenses, professional service fees, and travel and entertainment costs.

General and administrative expenses were $26.7 million, compared to $40.7 million in the first quarter last year. The decrease in general and administrative expense was driven by lower stock-based compensation expense of $6.4 million, lower professional service fees, and lower employee expenses, partially offset by losses from the sale of property, plant, and equipment.

Net income was $8.0 million in the first quarter, or $0.07 per diluted share, as compared to net loss of $9.0 million in the first quarter of last year, or a loss of $0.08 per diluted share.1

Adjusted net income was $5.5 million, or $0.04 per diluted share as compared to adjusted net income of $19.5 million, or $0.17 per diluted share in the first quarter last year.2

Adjusted EBITDA was $21.9 million in the first quarter as compared to $30.4 million in the same period last year.2

Balance Sheet

Cash, cash equivalents and restricted cash at the end of the first quarter totaled $28 million, compared to $52 million at December 31, 2022.

Inventory at end of the first quarter was $132.4 million, compared to $153.5 million at December 31, 2022. The decrease in inventory was driven by strategic inventory management, as well as declining transportation and input commodity costs.

Guidance For Full Year Fiscal 2023

The Company is reiterating its prior guidance for Fiscal 2023. The Company's outlook reflects macroeconomic uncertainty and the expected negative impact of the continued normalization of grill channel inventory in the first half of 2023, as well as the benefit of expected growth in gross margin and ongoing expense control.

  • Total revenue is expected to be between $560 million and $590 million
  • Gross margin is expected to be between 36% and 37%
  • Adjusted EBITDA is expected to be between $45 million and $55 million

A reconciliation of Adjusted EBITDA guidance to Net Income (Loss) and Adjusted EBITDA Margin guidance to Net Income (Loss) Margin on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to provision for income taxes, interest expense, depreciation and amortization, other (income) expense, stock-based compensation, non-routine legal expenses, change in fair value of contingent consideration, and other adjustment items all of which are adjustments to Adjusted EBITDA and Adjusted EBITDA Margin, respectively.

Conference Call Details

A conference call to discuss the Company's first quarter results is scheduled for Wednesday, May 10, 2023, at 4:30 p.m. ET. To participate, please dial (833) 470-1428 or +44 (208) 068-2558 for international callers, conference ID 336351. The conference call will also be webcast live at https://investors.traeger.com. A recording will be available shortly after the conclusion of the call. To access the replay, please dial (866) 813-9403 or +44 (204) 525-0658 for international callers, conference ID 706980. A replay of the webcast will also be available approximately two hours after the conclusion of the call on the Company's website at https://investors.traeger.com. A supplemental presentation has also been posted to the Company's website at https://investors.traeger.com.

About Traeger

Traeger Grills, headquartered in Salt Lake City, is the creator and category leader of the wood pellet grill, an outdoor cooking system that ignites all-natural hardwoods to grill, smoke, bake, roast, braise, and barbecue. In 2023, Traeger entered the griddle category, further establishing its leadership position in the outdoor cooking space. Traeger grills are versatile and easy to use, empowering cooks of all skill sets to create delicious meals with flavor that cannot be replicated. Grills are at the core of our platform and are complemented by Traeger wood pellets, rubs, sauces, accessories, and MEATER smart thermometers.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our anticipated full year fiscal 2023 results. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, our history of operating losses, our ability to manage our future growth effectively, our ability to expand into additional markets, our ability to maintain and strengthen our brand to generate and maintain ongoing demand for our products, our ability to cost-effectively attract new customers and retain our existing customers, our failure to maintain product quality and product performance at an acceptable cost, the impact of product liability and warranty claims and product recalls, the highly competitive market in which we operate, the use of social media and community ambassadors, a decline in sales of our grills, our dependence on three major retailers, risks associated with our international operations, our reliance on a limited number of third-party manufacturers and problems with (or loss of) our suppliers or an inability to obtain raw materials, and the ability of our stockholders to influence corporate matters and the other important factors discussed under the caption "Risk Factors" in our periodic and current reports filed with the Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K for the year ended December 31, 2022. Any such forward-looking statements represent management's estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.

_______________________

1 There were no dilutive securities outstanding as of March 31, 2023 and 2022.

2 Reconciliations of GAAP to non-GAAP financial measures, as well as definitions for the non-GAAP financial measures included in this press release and the reasons for their use, are presented below.

 

TRAEGER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

 

March 31,

2023

 

December 31,

2022

 

(unaudited)

 

 

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

15,232

 

 

$

39,055

 

Restricted cash

 

12,500

 

 

 

12,500

 

Accounts receivable, net

 

99,591

 

 

 

42,050

 

Inventories

 

132,381

 

 

 

153,471

 

Prepaid expenses and other current assets

 

28,034

 

 

 

27,162

 

Total current assets

 

287,738

 

 

 

274,238

 

Property, plant, and equipment, net

 

49,775

 

 

 

55,510

 

Operating lease right-of-use assets

 

12,221

 

 

 

13,854

 

Goodwill

 

74,725

 

 

 

74,725

 

Intangible assets, net

 

502,290

 

 

 

512,858

 

Other non-current assets

 

11,248

 

 

 

15,530

 

Total assets

$

937,997

 

 

$

946,715

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current Liabilities

 

 

 

Accounts payable

$

26,244

 

 

$

29,841

 

Accrued expenses

 

56,286

 

 

 

52,295

 

Line of credit

 

40,909

 

 

 

11,709

 

Current portion of notes payable

 

250

 

 

 

250

 

Current portion of operating lease liabilities

 

4,491

 

 

 

5,185

 

Current portion of contingent consideration

 

12,400

 

 

 

12,157

 

Other current liabilities

 

803

 

 

 

1,470

 

Total current liabilities

 

141,383

 

 

 

112,907

 

Notes payable, net of current portion

 

438,936

 

 

 

468,108

 

Operating lease liabilities, net of current portion

 

8,045

 

 

 

9,001

 

Contingent consideration, net of current portion

 

11,390

 

 

 

10,590

 

Deferred tax liability

 

10,375

 

 

 

10,370

 

Other non-current liabilities

 

479

 

 

 

870

 

Total liabilities

 

610,608

 

 

 

611,846

 

Commitments and contingencies—See Note 10

 

 

 

Stockholders' equity:

 

 

 

Preferred stock, $0.0001 par value; 25,000,000 shares authorized and no shares issued or outstanding as of March 31, 2023 and December 31, 2022

 

 

 

 

 

Common stock, $0.0001 par value; 1,000,000,000 shares authorized

 

 

 

Issued and outstanding shares - 122,642,599 and 122,624,414 as of March 31, 2023 and December 31, 2022

 

12

 

 

 

12

 

Additional paid-in capital

 

890,012

 

 

 

882,069

 

Accumulated deficit

 

(562,457

)

 

 

(570,475

)

Accumulated other comprehensive income (loss)

 

(178

)

 

 

23,263

 

Total stockholders' equity

 

327,389

 

 

 

334,869

 

Total liabilities and stockholders' equity

$

937,997

 

 

$

946,715

 

 

TRAEGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands, except share and per share amounts)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Revenue

$

153,161

 

 

$

223,710

 

Cost of revenue

 

97,738

 

 

 

141,066

 

Gross profit

 

55,423

 

 

 

82,644

 

Operating expenses:

 

 

 

Sales and marketing

 

22,075

 

 

 

34,854

 

General and administrative

 

26,679

 

 

 

40,716

 

Amortization of intangible assets

 

8,889

 

 

 

8,889

 

Change in fair value of contingent consideration

 

1,043

 

 

 

1,700

 

Total operating expense

 

58,686

 

 

 

86,159

 

Loss from operations

 

(3,263

)

 

 

(3,515

)

Other income (expense):

 

 

 

Interest expense

 

(10,454

)

 

 

(5,837

)

Other income, net

 

21,899

 

 

 

544

 

Total other income (expense)

 

11,445

 

 

 

(5,293

)

Income (loss) before provision for income taxes

 

8,182

 

 

 

(8,808

)

Provision for income taxes

 

164

 

 

 

152

 

Net income (loss)

$

8,018

 

 

$

(8,960

)

Net income (loss) per share, basic and diluted

$

0.07

 

 

$

(0.08

)

Weighted average common shares outstanding, basic and diluted

 

122,699,114

 

 

 

117,889,233

 

Other comprehensive income (loss):

 

 

 

Foreign currency translation adjustments

$

(32

)

 

$

(3

)

Change in cash flow hedge

 

 

 

 

6,589

 

Total other comprehensive income (loss)

 

(32

)

 

 

6,586

 

Comprehensive income (loss)

$

7,986

 

 

$

(2,374

)

 

TRAEGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

Net income (loss)

$

8,018

 

 

$

(8,960

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

Depreciation of property, plant and equipment

 

3,564

 

 

 

2,481

 

Amortization of intangible assets

 

10,638

 

 

 

10,645

 

Amortization of deferred financing costs

 

534

 

 

 

495

 

Loss on disposal of property, plant and equipment

 

1,870

 

 

 

152

 

Stock-based compensation expense

 

7,943

 

 

 

15,483

 

Bad debt expense

 

56

 

 

 

72

 

Unrealized loss (gain) on derivative contracts

 

(19,623

)

 

 

570

 

Change in fair value of contingent consideration

 

1,043

 

 

 

1,700

 

Other non-cash adjustments

 

(16

)

 

 

 

Change in operating assets and liabilities:

 

 

 

Accounts receivable

 

(57,145

)

 

 

(70,383

)

Inventories

 

21,090

 

 

 

(18,561

)

Prepaid expenses and other current assets

 

(1,214

)

 

 

1,741

 

Other non-current assets

 

18

 

 

 

4

 

Accounts payable and accrued expenses

 

(73

)

 

 

17,638

 

Other non-current liabilities

 

(293

)

 

 

12

 

Net cash used in operating activities

 

(23,590

)

 

 

(46,911

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

Purchase of property, plant, and equipment

 

(2,082

)

 

 

(4,524

)

Capitalization of patent costs

 

(123

)

 

 

(124

)

Proceeds from sale of property, plant, and equipment

 

2,450

 

 

 

 

Net cash provided by (used in) investing activities

 

245

 

 

 

(4,648

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Proceeds on line of credit

 

62,200

 

 

 

46,100

 

Repayments on line of credit

 

(62,500

)

 

 

(78

)

Repayments of long-term debt

 

(51

)

 

 

 

Principal payments on finance lease obligations

 

(127

)

 

 

(105

)

Net cash provided by (used in) financing activities

 

(478

)

 

 

45,917

 

Net decrease in cash, cash equivalents and restricted cash

 

(23,823

)

 

 

(5,642

)

Cash, cash equivalents and restricted cash at beginning of period

 

51,555

 

 

 

16,740

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

27,732

 

 

$

11,098

 

 

TRAEGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

(Continued)

Three Months Ended March 31,

 

2023

 

2022

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

Cash paid during the period for interest

$

4,718

 

$

4,897

Cash paid for income taxes

$

470

 

$

654

NON-CASH FINANCING AND INVESTING ACTIVITIES

 

 

 

Equipment purchased under finance leases

$

72

 

$

56

Property, plant, and equipment included in accounts payable and accrued expenses

$

2,568

 

$

7,226

TRAEGER, INC.

RECONCILIATIONS OF AND OTHER INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES

(unaudited)

In addition to our results and measures of performance determined in accordance with U.S. GAAP, we believe that certain non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions.

Each of Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, Adjusted EBITDA Margin, and Adjusted Net Income Margin are key performance measures that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes. We believe that these non-GAAP financial measures are useful to investors and other interested parties in analyzing our financial performance because it provides a comparable overview of our operations across historical periods. In addition, we believe that providing each of Adjusted EBITDA and Adjusted Net Income, together with a reconciliation of Net Income (Loss) to each such measure, and providing Adjusted Net Income per share, together with a reconciliation of Net Income (Loss) per share to such measure, and Adjusted EBITDA Margin and Adjusted Net Income Margin, together with a reconciliation of Net Income (Loss) Margin to such measures, helps investors make comparisons between our company and other companies that may have different capital structures, different tax rates, and/or different forms of employee compensation. For example, due to finite-lived intangible assets included on our balance sheet following our corporate reorganization in 2017, we have significant non-cash amortization expense attributable to the nature of our capital structure.

Each of Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share are used by our management team as an additional measure of our performance for purposes of business decision-making, including managing expenditures, and evaluating potential acquisitions. Period-to-period comparisons of Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of Net Income (Loss) or Loss from Continuing Operations or Net Income (Loss) per share. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees. Each of Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share has inherent limitations because of the excluded items, and may not be directly comparable to similarly titled metrics used by other companies.

The following table presents a reconciliation of Net Income (Loss), Operating Loss, Net Income (Loss) Margin, Operating Loss Margin, and Net Income (Loss) per share, the most directly comparable financial measures calculated in accordance with U.S. GAAP, to Adjusted Net Income, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income Margin and Adjusted Net Income per share, respectively, on a consolidated basis.

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

 

(dollars in thousands, except share and per share amounts)

Net income (loss)

$

8,018

 

 

$

(8,960

)

Adjustments:

 

 

 

Other (income) expense (1)

 

(20,307

)

 

 

674

 

Stock-based compensation

 

7,943

 

 

 

15,483

 

Non-routine legal expenses (2)

 

233

 

 

 

1,919

 

Amortization of acquisition intangibles (3)

 

8,253

 

 

 

8,253

 

Change in fair value of contingent consideration

 

1,043

 

 

 

1,700

 

Other adjustment items (4)

 

143

 

 

 

412

 

Tax impact of adjusting items (5)

 

152

 

 

 

 

Adjusted net income

$

5,478

 

 

$

19,481

 

 

 

 

 

Net income (loss)

$

8,018

 

 

$

(8,960

)

Adjustments:

 

 

 

Provision for income taxes

 

164

 

 

 

152

 

Interest expense

 

10,454

 

 

 

5,837

 

Depreciation and amortization

 

14,255

 

 

 

13,177

 

Other (income) expense (1)

 

(20,307

)

 

 

674

 

Stock-based compensation

 

7,943

 

 

 

15,483

 

Non-routine legal expenses (2)

 

233

 

 

 

1,919

 

Change in fair value of contingent consideration

 

1,043

 

 

 

1,700

 

Other adjustment items (4)

 

143

 

 

 

412

 

Adjusted EBITDA

$

21,946

 

 

$

30,394

 

 

 

 

 

Revenue

$

153,161

 

 

$

223,710

 

Net income (loss) margin

 

5.2

%

 

 

(4.0

) %

Adjusted net income margin

 

3.6

%

 

 

8.7

%

Adjusted EBITDA margin

 

14.3

%

 

 

13.6

%

 

 

 

 

Net income (loss) per diluted share

$

0.07

 

 

$

(0.08

)

Adjusted net income per diluted share

$

0.04

 

 

$

0.17

 

Weighted average common shares outstanding - diluted

 

122,699,114

 

 

 

117,889,233

 

(1)

Represents unrealized gain from the hedge dedesignation on the interest rate swap, losses on the disposal of property, plant, and equipment, and unrealized gains (losses) from foreign currency transactions and derivatives.

(2)

Represents external legal expenses for litigation.

(3)

Represents amortization of acquisition intangibles includes amortization expense associated with intangible assets recorded in connection with the 2017 acquisition of Traeger Pellet Grills Holdings LLC.

(4)

Represents non-routine operational wind-down costs, non-cash ground lease expense associated with a build-to-suit lease in 2022, as well as write-offs and restoration costs at our wood pellet production facility due to flood damage sustained as a result of a tropical storm.

(5)

Represents an adjusted tax rate equal to our annual estimated tax rate on Adjusted Net Income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates, our estimated tax rate on Adjusted Net Income may differ from our GAAP tax rate and from our actual tax liabilities.

 

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