YETI Holdings Inc

Previous wording

During the first quarter of 2024, we completed the acquisitions of Mystery Ranch, LLC (“Mystery Ranch”), a designer and manufacturer of durable load-bearing backpacks, bags, and pack accessories, and Butter Pat Industries, LLC (“Butter Pat”), a designer and manufacturer of cast iron cookware. We plan to integrate Mystery Ranch and Butter Pat operations and products into our business to further expand our capabilities in the bags and cookware categories. See Note 2— Acquisitions of the Notes to Consolidated Financial Statements included herein for additional information about these acquisitions.

Current wording

During the first quarter of 2024, we completed the acquisitions of Mystery Ranch, LLC (“Mystery Ranch”), a designer and manufacturer of durable load-bearing backpacks, bags, and pack accessories, and Butter Pat Industries, LLC (“Butter Pat”), a designer and manufacturer of cast iron cookware. We are integrating Mystery Ranch and Butter Pat operations and products into our business to further expand our capabilities in the bags and cookware categories. See Note 2- Acquisitions of the Notes to Consolidated Financial Statements included herein for additional information about these acquisitions.

Previous wording

In addition, recent disruptions of container shipping traffic through the Red Sea and surrounding waterways are negatively affecting transit times and freight costs for goods manufactured in Asia and destined to Europe and to a smaller extent the Americas. As a result, we have experienced shipping delays and moderately higher freight costs. Although such effects have not materially impacted our business to date, such conditions could worsen.

Current wording

The recent disruptions of container shipping traffic through the Red Sea and surrounding waterways have continued to negatively affect transit times and freight costs for goods manufactured in Asia and destined to Europe, and to a smaller extent the Americas. In addition to these ongoing disruptions, freight rates increased industry-wide towards the end of the second quarter of 2024. Although such effects have not materially impacted our business to date, the continuation or worsening of these conditions may materially impact our operations and financial results through the remainder of 2024.

Previous wording

Fiscal Year. We have a 52- or 53-week fiscal year that ends on the Saturday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. Our fiscal year ending December 28, 2024 (“2024”) is a 52-week period. The first quarter of our fiscal year 2024 ended on March 30, 2024, the second quarter ends on June 29, 2024, and the third quarter ends on September 28, 2024. Our fiscal year ended December 30, 2023 (“2023”) was also a 52-week period. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years and the associated quarters, months, and periods of those fiscal years. The unaudited condensed consolidated financial results presented herein represent the three months ended March 30, 2024 and April 1, 2023.

Current wording

Fiscal Year. We have a 52- or 53-week fiscal year that ends on the Saturday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. Our fiscal year ending December 28, 2024 (“2024”) is a 52-week period. The first quarter of our fiscal year 2024 ended on March 30, 2024, the second quarter ended on June 29, 2024, and the third quarter ends on September 28, 2024. Our fiscal year ended December 30, 2023 (“2023”) was also a 52-week period. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years and the associated quarters, months, and periods of those fiscal years. The unaudited condensed consolidated financial results presented herein represent the three and six months ended June 29, 2024 and July 1, 2023.

Previous wording

•Wholesale channel net sales increased $17.7 million, or 13%, to $153.6 million, compared to $135.8 million in the same period last year, due to growth in both Drinkware and Coolers & Equipment.

Current wording

•Wholesale channel net sales increased $37.0 million, or 21%, to $213.1 million, compared to $176.2 million in the same period last year, due to growth in both Coolers & Equipment and Drinkware. Wholesale channel net sales included an unfavorable impact of $16.4 million in the second quarter of 2023 related to a recall reserve adjustment.

Previous wording

•Drinkware net sales increased by $24.3 million, or 13%, to $214.6 million, compared to $190.3 million in the prior year quarter, driven by the continued expansion and innovation of our Drinkware product offerings and new seasonal colorways.

Current wording

•Drinkware net sales increased by $13.1 million, or 6%, to $246.5 million, compared to $233.4 million in the prior year quarter, driven by the continued expansion and innovation of our Drinkware product offerings and new seasonal colorways.

Previous wording

•Coolers & Equipment net sales increased by $15.6 million, or 15%, to $119.9 million, compared to $104.4 million in the same period last year, driven by strong performance in bags, soft coolers, and hard coolers.

Current wording

•Coolers & Equipment net sales increased by $49.3 million, or 31%, to $205.9 million, compared to $156.6 million in the same period last year, driven by strong performance in soft coolers and bags. Coolers & Equipment net sales included an unfavorable impact of $24.5 million in the second quarter of 2023 related to a recall reserve adjustment.

Previous wording

Gross profit increased $32.9 million, or 20%, to $194.8 million, compared to $161.9 million in the prior year quarter. Gross margin rate increased 360 basis points to 57.1% from 53.5% in the prior year quarter. The increase in gross margin was primarily driven by:

Current wording

Gross profit increased $49.5 million, or 23%, to $264.3 million, compared to $214.8 million in the prior year quarter. Gross profit for the three months ended July 1, 2023 included an unfavorable impact of $19.4 million related to a recall reserve adjustment. Gross margin rate increased 360 basis points to 57.0% from 53.4% in the prior year quarter. The increase in gross margin was primarily driven by:

Previous wording

•lower inbound freight rates, which favorably impacted gross margin by 370 basis points;

Current wording

•lower inbound freight rates, which favorably impacted gross margin by 320 basis points;

Previous wording

•the unfavorable impact of a favorable inventory reserve adjustment in the prior year quarter associated with our voluntary product recalls, which unfavorably impacted gross margin in the current year quarter by 40 basis points;

Current wording

•the favorable impact of an unfavorable reserve adjustment in the prior year quarter associated with our voluntary product recalls, which favorably impacted gross margin in the current year quarter by 150 basis points;

Previous wording

•lower product costs, which favorably impacted gross margin by 190 basis points;

Current wording

•lower product costs, which favorably impacted gross margin by 90 basis points;

Previous wording

•the unfavorable impact of the amortization of inventory fair value step-up in connection with the Mystery Ranch acquisition, which unfavorably impacted gross margin by 50 basis points;

Current wording

•the unfavorable impact of the amortization of inventory fair value step-up in connection with the Mystery Ranch acquisition, which unfavorably impacted gross margin by 70 basis points;

Previous wording

•other impacts, which unfavorably impacted gross margin by 30 basis points.

Current wording

•other impacts, which unfavorably impacted gross margin by 80 basis points.

Previous wording

SG&A expenses increased $22.2 million, or 15%, to $169.0 million for the three months ended March 30, 2024, compared to $146.8 million for the three months ended April 1, 2023. As a percentage of net sales, SG&A expenses increased 100 basis points to 49.5% for the three months ended March 30, 2024 from 48.5% for the three months ended April 1, 2023. The increase in SG&A expenses was primarily driven by:

Current wording

SG&A expenses increased $32.4 million, or 20%, to $196.9 million for the three months ended June 29, 2024, compared to $164.5 million for the three months ended July 1, 2023. As a percentage of net sales, SG&A expenses increased 160 basis points to 42.5% for the three months ended June 29, 2024 from 40.9% for the three months ended July 1, 2023. The increase in SG&A expenses was primarily driven by:

Previous wording

Interest income, net was $0.7 million for the three months ended March 30, 2024, compared to interest expense of $0.6 million for the three months ended April 1, 2023, primarily due to an increase in interest income more than offsetting higher interest expense.

Current wording

Interest expense, net was $0.5 million for the three months ended June 29, 2024, compared to $0.7 million for the three months ended July 1, 2023, primarily due to an increase in interest income.

Previous wording

Income tax expense was $6.5 million for the three months ended March 30, 2024, compared to $3.9 million for the three months ended April 1, 2023. The increase in income tax expense was due to higher income before income taxes. The effective tax rate for the three months ended March 30, 2024 was 29%, compared to 27% for the three months ended April 1, 2023. The higher effective tax rate was primarily due to higher discrete tax expenses, including an unfavorable tax impact related to stock compensation in the three months ended March 30, 2024.

Current wording

Income tax expense was $16.9 million for the three months ended June 29, 2024, compared to $12.8 million for the three months ended July 1, 2023. The increase in income tax expense was due to higher income before income taxes. The effective tax rate was 25% for each of the three months ended June 29, 2024 and July 1, 2023.

Previous wording

•the unfavorable impact of strategic price decreases on certain hard cooler products implemented during the first quarter of 2024, which unfavorably impacted gross margin by 20 basis points;

Current wording

•the unfavorable impact of strategic price decreases on certain hard cooler products implemented during the first quarter of 2024, which unfavorably impacted gross margin by 40 basis points;

Previous wording

•the unfavorable impact of customization costs, on higher customization sales mix, which unfavorably impacted gross margin by 60 basis points; and

Current wording

•the unfavorable impact of customization costs, on higher customization sales mix, which unfavorably impacted gross margin by 30 basis points; and

Previous wording

•an increase in variable expenses of $5.4 million (decreasing SG&A as a percent of net sales by 10 basis points) primarily associated with higher net sales, and comprised of higher distribution costs including higher outbound freight rates, online marketplace fees, and third-party logistics fees; and

Current wording

•an increase in variable expenses of $13.0 million (decreasing SG&A as a percent of net sales by 10 basis points) primarily associated with higher net sales, and comprised of higher distribution costs, including higher third-party logistics fees, online marketplace fees, and outbound freight rates;

Previous wording

•an increase in non-variable expenses of $16.8 million (increasing SG&A as a percent of net sales by 110 basis points) comprised of higher employee costs, mainly due to investments in headcount to support future growth and non-cash stock-based compensation expense, investments in marketing expenses, asset impairments, acquisition-related transition costs, and organizational realignment costs, partially offset by lower warehousing costs.

Current wording

•an increase in non-variable expenses of $31.1 million (no impact on SG&A as a percent of net sales) comprised of higher employee costs, mainly due to investments in headcount to support future growth and non-cash stock-based compensation expense, investments in marketing expenses, higher information technology expenses, and asset impairments, partially offset by lower warehousing costs; and

Previous wording

Our cash requirements have principally been for working capital purposes, long-term debt repayments, and capital expenditures. We fund our working capital, which primarily consists of inventory and accounts receivable, and our capital investments from cash flows from operating activities, cash on hand, and borrowings available under our revolving credit facility (the “Revolving Credit Facility”). Pursuant to our new share repurchase plan described below, we also plan to use cash to repurchase shares of our common stock. We believe that our current operating performance, operating plan, our strong cash position, and borrowings available under our Revolving Credit Facility, will be sufficient to satisfy our foreseeable liquidity needs and capital expenditure requirements, including for at least the next twelve months.

Current wording

Our cash requirements have principally been for working capital purposes, long-term debt repayments, and capital expenditures. We fund our working capital and our capital investments from cash flows from operating activities, cash on hand, and borrowings available under our revolving credit facility (the “Revolving Credit Facility”). Pursuant to our recent share repurchase plan described below, we also plan to use cash to repurchase shares of our common stock. We believe that our current operating performance, existing cash position, and borrowings available under our Revolving Credit Facility, will be sufficient to satisfy our liquidity needs and cash requirements over the next twelve months and foreseeable future.

Previous wording

As of March 30, 2024, we had a cash balance of $173.9 million, working capital (excluding cash) of $230.5 million, and $300.0 million of borrowings available under the Revolving Credit Facility.

Current wording

As of June 29, 2024, we had a cash balance of $212.9 million, working capital (excluding cash) of $242.5 million, and $300.0 million of borrowings available under the Revolving Credit Facility.

Previous wording

At March 30, 2024, we had $81.2 million principal amount of indebtedness outstanding under the Term Loan A under the Credit Facility and no outstanding borrowings under the Revolving Credit Facility. Borrowings under the Term Loan A and the Revolving Credit Facility bear interest at Term Secured Overnight Financing Rate (“SOFR”) or the Alternate Base Rate (each as defined in the Credit Agreement) plus an applicable rate ranging from 1.75% to 2.50% for Term SOFR-based loans and from 0.75% to 1.50% for Alternate Base Rate-based loans, depending upon our total Net Leverage Ratio (as defined in the Credit Agreement). Additionally, a commitment fee ranging from 0.200% to 0.300%, determined by reference to a pricing grid based on our net leverage ratio, is payable on the average daily unused amounts under the Revolving Credit Facility. The weighted-average interest rate for borrowings under Term Loan A was 7.09% during the three months ended March 30, 2024.

Current wording

At June 29, 2024, we had $80.2 million principal amount of indebtedness outstanding under the Term Loan A under the Credit Facility and no outstanding borrowings under the Revolving Credit Facility. Borrowings under the Term Loan A and the Revolving Credit Facility bear interest at Term Secured Overnight Financing Rate (“SOFR”) or the Alternate Base Rate (each as defined in the Credit Agreement) plus an applicable rate ranging from 1.75% to 2.50% for Term SOFR-based loans and from 0.75% to 1.50% for Alternate Base Rate-based loans, depending upon our total Net Leverage Ratio (as defined in the Credit Agreement). Additionally, a commitment fee ranging from 0.200% to 0.300%, determined by reference to a pricing grid based on our net leverage ratio, is payable on the average daily unused amounts under the Revolving Credit Facility. The weighted-average interest rate for borrowings under Term Loan A was 7.09% during the three months ended June 29, 2024.

Previous wording

Cash flows related to operating activities are dependent on net income, non-cash adjustments to net income, and changes in working capital. The increase in cash used by operating activities during the three months ended March 30, 2024 compared to cash used by operating activities during the three months ended April 1, 2023 is primarily due to an increase in cash used for working capital, partially offset by an increase in net income, adjusted for non-cash items for the periods compared. The increase in cash used for working capital was primarily due to a decrease in accounts payable and other accrued expenses, and an increase in inventory, partially offset by an increase in accounts receivable.

Current wording

Cash flows related to operating activities are dependent on net income, non-cash adjustments to net income, and changes in working capital. The increase in cash used by operating activities during the six months ended June 29, 2024 compared to cash provided by operating activities during the six months ended July 1, 2023 is primarily due to an increase in cash used for working capital, adjusted for non-cash items for the periods compared, partially offset by an increase in net income. The increase in cash used for working capital was primarily due to an increase in inventory.

Previous wording

The increase in cash used in investing activities during the three months ended March 30, 2024 was primarily related to the acquisition of Mystery Ranch and increased purchases of intangible assets.

Current wording

The increase in cash used in investing activities during the six months ended June 29, 2024 was primarily related to the acquisition of Mystery Ranch and increased purchases of intangible assets.

Previous wording

The increase in cash used by financing activities during the three months ended March 30, 2024 was primarily driven by repurchases of common stock in connection with our $100 million ASR Agreement.

Current wording

The increase in cash used by financing activities during the six months ended June 29, 2024 was primarily driven by repurchases of common stock in connection with our $100 million ASR Agreement.