Yeti Raises Full Year Outlook After Strong Q3

AUSTIN, Texas–(BUSINESS WIRE)– YETI Holdings, Inc. (“YETI”) (NYSE: YETI) today announced its financial results for the third quarter ended October 2, 2021.

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. 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, “YETI’s third quarter results continue to reflect robust demand for our brand. We delivered net sales growth of 23% on top of an exceptional 29% growth in the prior year’s period, powered by our innovative product portfolio with balanced performance across our channels and categories. Profitability remained strong amidst accelerating and wide-spread inflationary pressures, supporting better-than-expected earnings per share growth for the period.”

Mr. Reintjes concluded, “We are focused on building on the strong momentum in our business through the holidays and well into the future. While we are not immune to the confluence of supply chain disruptions and cost pressures that are pervasive in the market, our team’s ongoing execution has supported our ability to once again raise both our top and bottom line outlooks for the year. As we continue to move forward in this challenging environment, we remain highly committed to both actions and continued investments that will position YETI for both near- and long-term sustainable growth.”

For the Three Months Ended October 2, 2021

Net sales increased 23% to $362.6 million, compared to $294.6 million during the same period last year.

• Direct-to-consumer (“DTC”) channel net sales increased 31% to $197.1 million, compared to $150.4 million in the prior year quarter, driven by strong performance in both Drinkware and Coolers & Equipment. The DTC channel grew to 54% of net sales, compared to 51% in the prior year period.

• Wholesale channel net sales increased 15% to $165.5 million, compared to $144.2 million in the same period last year, driven by both Drinkware and Coolers & Equipment.

• Drinkware net sales increased 24% to $205.0 million, compared to $165.9 million in the prior year quarter, primarily driven by the continued expansion of our Drinkware product offerings, including the introduction of new colorways and sizes, and strong demand for customization.

• Coolers & Equipment net sales increased 20% to $149.0 million, compared to $124.2 million in the same period last year, driven by strong performance in bags, outdoor living products, soft coolers, and hard coolers.

Gross profit increased 19% to $207.0 million, or 57.1% of net sales, compared to $174.0 million, or 59.1% of net sales, in the third quarter of 2020. The 200 basis point decrease in gross margin was primarily driven by higher inbound freight rates and the unfavorable impact of the non-renewal of the Global System of Preferences (“GSP”) program on import duties, partially offset by product cost improvements and all other impacts.

Selling, general, and administrative (“SG&A”) expenses increased 33% to $138.3 million, compared to $103.9 million in the third quarter of 2020. The 2020 period included the benefit of cost reduction initiatives implemented in response to the uncertainties of COVID-19. As a percentage of net sales, SG&A expenses increased 280 basis points to 38.1% from 35.3% in the prior year period, primarily driven by higher marketing expenses.

Operating income decreased 2% to $68.7 million, or 19.0% of net sales, compared to $70.1 million, or 23.8% of net sales, during the prior year quarter due to the aforementioned lower spending levels in 2020.

Adjusted operating income increased 3% to $74.2 million, or 20.5% of net sales, compared to $72.4 million, or 24.6% of net sales, during the same period last year due to the aforementioned lower spending levels in 2020.

Net income increased 3% to $53.0 million, or 14.6% of net sales, compared to $51.4 million, or 17.5% of net sales, in the prior year quarter; Net income per diluted share increased 3% to $0.60, compared to $0.58 per diluted share in the prior year quarter.

Adjusted net income increased 7% to $57.1 million, or 15.7% of net sales, compared to $53.5 million, or 18.2% of net sales, in the prior year quarter; Adjusted net income per diluted shareincreased 5% to $0.64, compared to $0.61 per diluted share in the prior year quarter.

For the Nine Months Ended October 2, 2021

Net sales increased 35% to $967.9 million, compared to $716.0 million in the prior year.

• DTC channel net sales increased 43% to $520.8 million, compared to $363.1 million in the prior year period, driven by both Drinkware and Coolers & Equipment. The DTC channel grew to 54% of net sales, compared to 51% in the prior year.

• Wholesale channel net sales increased 27% to $447.1 million, compared to $352.9 million in the same period last year, primarily driven by both Drinkware and Coolers & Equipment. In the second quarter of 2020, wholesale channel net sales were adversely impacted by the temporary store closures due to COVID-19.

• Drinkware net sales increased 39% to $546.8 million, compared to $392.9 million in the prior year period, due to the continued expansion of our Drinkware product offerings, including the introduction of new colorways and sizes, and strong demand for customization.

• Coolers & Equipment net sales increased 28% to $400.3 million, compared to $312.3 million in the same period last year. The strong performance was driven by growth in bags, outdoor living products, soft coolers, hard coolers, and cargo.

Gross profit increased 39% to $561.3 million, or 58.0% of net sales, compared to $404.0 million, or 56.4% of net sales, in the prior year. The 160 basis point increase in gross margin was primarily driven by product cost improvements as well as a favorable mix shift to our DTC channel and lower inventory reserves, partially offset by the unfavorable impact of the non-renewal of the GSP program on import duties and higher inbound freight rates.

Selling, general, and administrative expenses increased 40% to $380.1 million, compared to $271.2 million in the prior year. The 2020 period included the benefit of cost reduction initiatives implemented in response to COVID-19. As a percentage of net sales, SG&A expenses increased 140 basis points to 39.3% from 37.9% in the prior year period. This increase was due to an increase of 10 basis points in variable expenses, driven by the increased mix of our faster growing and higher gross margin DTC channel, which grew to 54% of net sales during the period, and an increase of 130 basis points primarily driven by higher marketing expense.

Operating income increased 36% to $181.2 million, or 18.7% of net sales, compared to $132.8 million, or 18.5% of net sales, during the prior year.

Adjusted operating income increased 40% to $195.4 million, or 20.2% of net sales, compared to $139.8 million, or 19.5% of net sales, during the same period last year.

Net income increased 50% to $139.7 million, or 14.4% of net sales, compared to $93.4 million, or 13.0% of net sales, in the prior year; Net income per diluted share increased 48% to $1.58, compared to $1.07 per diluted share in the prior year.

Adjusted net income increased 52% to $150.4 million, or 15.5% of net sales, compared to $99.0 million, or 13.8% of net sales in the prior year period; Adjusted net income per diluted shareincreased 50% to $1.70, compared to $1.13 per diluted share in the same period last year.

Balance Sheet and Cash Flow Highlights

Cash increased to$259.3 million, compared to $234.8 million at the end of the third quarter of 2020.

Inventory increased 98% to $266.0 million, compared to $134.6 million at the end of the prior year quarter, primarily due to the inventory purchase order reductions taken during 2020 in response to COVID-19 and higher in-transit inventories this year due to extended lead times from ongoing supply chain disruptions. The inventory increase represents a CAGR of 13% since the same period in 2019, which is below our net sales CAGR of 26% during the same period.

Total debt, excluding finance leases and unamortized deferred financing fees, was $118.1 million, compared to $238.8 million at the end of the third quarter of 2020. During the first nine months of 2021, YETI made mandatory debt payments of $16.9 million. At the end of the third quarter of 2021, our cash balance exceeded total debt by $141.2 million.

Updated 2021 Outlook

For Fiscal 2021, a 52-week period, compared to a 53-week period in Fiscal 2020:

• Net sales are now expected to increase between 28% and 29% (versus the previous outlook of between 26% and 28%);

• Operating income as a percentage of net sales is expected to beapproximately 19.5% (versus the previous outlook of approximately 19%);

• Adjusted operating income as a percentage of net sales is expected to beapproximately 20.8% (versus the previous outlook of approximately 20.5%);

• The effective tax rate is now expected to be approximately 22% (versus the previous outlook of approximately 23%);

• Net income per diluted share is now expected to be between $2.35 and $2.37 (versus the previous outlook of between $2.25 and $2.29), reflecting a 33% to 34% increase;

• Adjusted net income per diluted share is now expected to be between $2.51 and $2.53 (versus the previous outlook of between $2.42 and $2.46), reflecting a 34% to 35% increase;

• Diluted weighted average shares outstanding is now expected to be approximately 88.7 million (versus the previous outlook of 88.6 million); and Capital expenditures are expected to remain between $55 million and $60 million, primarily to support investments in technology and new product innovation and launches.

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.