Traeger, Inc. (NYSE:COOK) Q2 2025 Earnings Call Transcript

Traeger, Inc. (NYSE:COOK) Q2 2025 Earnings Call Transcript August 7, 2025

Operator: Hello, and welcome to the Traeger Second Quarter Fiscal 2025 Earnings Conference Call. My name is Alex. I’ll be coordinating today’s call. [Operator Instructions]. I’ll now hand it over to Nick Bacchus to begin. Please go ahead.

Nicholas P. Bacchus: Good afternoon, everyone. Thank you for joining Traeger’s call to discuss its second quarter 2025 results, which were released this afternoon and can be found on our website at investors.traeger.com. I’m Nick Bacchus, Vice President of Investor Relations, Treasury and Capital Markets at Traeger. With me on the call today are Jeremy Andrus., our Chief Executive Officer; and Joey Hord, our Chief Financial Officer. Before we get started, I want to remind everyone that management’s remarks on this call may contain forward- looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and views of future events, including, but not limited to, our outlook as to our anticipated full year 2025 results.

Such statements are subject to risks and uncertainties and that could cause actual results to differ materially from those expressed or implied herein. I encourage you to review our annual report on Form 10-K for the year ended December 31, 2024, and our other filings for a discussion of these factors and uncertainties which are available on the Investor Relations portion of our website. You should not take undue reliance on these forward-looking statements, which we speak to only as of today. We undertake no obligation to update or revise them for any new information. This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, adjusted EBITDA margin and net debt, which we believe are useful supplemental measures.

The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained here into such GAAP measures are included in our earnings release and our investor presentation, which are available on the Investor Relations portion of our website at investors.traeger.com. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. Now I’d like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Jeremy?

Jeremy Andrus: Thanks, Nick, and thank you for joining our second quarter earnings call. During today’s call, I will provide an update on key trends in our business, review second quarter results and share our outlook for fiscal year 2025. I will also provide an overview of Project Gravity, a major streamlining effort aimed at driving efficiencies and improving margins in our business. You’ll then be hearing from Joey Hord who is joining for his first quarterly call since stepping into the CFO role. As we entered the second quarter, uncertainty around the macroeconomic environment and trade policy was high. The rapidly changing tariff landscape and the potential downstream impacts on the consumer created challenges to our business.

Amid that backdrop, we executed on two major imperatives. First, executing successfully at retail and driving healthy consumer sell- through in our peak season. And second, executing on our tariff mitigation strategies with the goal of preserving profitability and enhancing cash flow. Despite pressure on our results for the quarter, I am pleased with our team’s efforts on these two critical fronts. I’ll start by providing you with more detail around our tariff mitigation efforts. Overall, based on the current tariff regime, we expect the unmitigated impact of tariffs to be approximately $60 million in fiscal 2025. We believe that our mitigation efforts will allow us to offset approximately 80% of this impact during the fiscal year. Given the magnitude of the exposure, I am pleased with our expectation for mitigation of the substantial majority of the impact to adjusted EBITDA.

Our tariff mitigation efforts are centered around three main pillars: first, supply chain efforts, which include identifying savings and efficiencies across the supply chain and cost negotiations with our contract manufacturers. We are also diversifying our manufacturing mix away from China over time and expect a meaningful reduction in the portion of our production in China by the end of 2026. Our second tariff mitigation strategy was pricing. As we discussed on our last call, we were extremely thoughtful when analyzing price changes, looking at features and product positioning on a SKU-by-SKU basis. We continue to believe that we have pricing power given the quality and innovation we bring to the market as well as our premium positioning.

And we expect that many of our competitors in the outdoor cooking industry have or will be increasing price. While our outlook does prudently assume a negative impact to grill volumes based on the price increases, we believe protecting our profitability is paramount. Last, we have implemented near-term cost savings measures, such as reduction in travel and entertainment expenses and the deferral of nonessential projects as well as meaningful cost savings expected to be derived from Project Gravity. Moving on to our Project Gravity efficiency and margin improvement initiative. We believe that there is a meaningful opportunity to drive strategic transformation and to simplify processes and functions across our business. Project Gravity will elevate our entire company’s focus on return on investment.

And over time, this initiative will open up capacity to invest into the core long-term growth drivers of our business, including product innovation and brand. I firmly believe that Project Gravity will unlock significant long-term shareholder value. There are two phases to project gravity. The first phase consists of actions already taken or underway. This includes the very difficult decision to implement a reduction in force in the second quarter. Parting ways with many very talented and dedicated team members was not taken lightly, however, it was the right thing to do for our business. Next, we are centralizing MEATER’s operations into our Traeger infrastructure. This integration consists of closing MEATER’s headquarters in Leicester, United Kingdom, and substantially reducing MEATER personnel based in the U.K. MEATER will continue to be an important part of our product portfolio, and we will leverage our strong expertise in marketing and brand management at Traeger to stabilize revenues and return the business to growth.

Simultaneously, we will reshape the P&L and drive profitability via cost savings related to our integration efforts. Overall, the first phase of Project Gravity is expected to drive approximately $30 million in run rate cost savings. Phase 2 of Project Gravity is a broad- based review of our business with a goal of driving efficiency, simplification and margin enhancement. While it is too early to discuss details today, as this review is ongoing, larger picture, we believe there is a meaningful opportunity to realize significant structural improvements that can result in material cost efficiencies over time. Our review is comprehensive, and we will be evaluating everything from SKU level productivity to corporate overhead broadly. We expect that initiatives for Phase 2 of Project Gravity will be implemented over the next 18 months.

More to come on this front. Now let me touch on our outlook. Today, we are reinstating guidance for fiscal year 2025. Our guidance for fiscal year 2025 includes revenues of $540 million to $555 million or down 8% to 11% versus prior year. Our revenue outlook for the year is being impacted by our assumption of pressure on grill volumes, driven by the price increases we implemented to offset the cost of tariffs as well as the assumption of continued softness in accessories revenue due to MEATER. In terms of adjusted EBITDA, we are guiding to $66 million to $73 million. Joey will provide more detail here. However, while our guidance does imply a reduction and year-over-year adjusted EBITDA in fiscal 2025, our actions to mitigate the large majority of the tariff exposure as well as our Phase 1 Project Gravity cost savings are allowing us to successfully navigate the near-term environment while positioning us for significant improvement in 2026 and beyond.

Turning to our second quarter results and highlights. Second quarter revenues were down 14% versus prior year in the quarter and adjusted EBITDA was $14 million. Second quarter results were impacted by a number of factors. First, revenues were pressured by pacing shifts out of the quarter into both the first quarter and the third quarter. Much of these revenue pacing shifts were tied to tariff- related dynamics including certain of our retail partners temporarily shifting to domestic fulfillment away from direct import or DI fulfillment. This shift impacts the timing of sales as we recognize the revenue when the retailer takes ownership of the product abroad versus after we transport and import the product in the domestic model. Lower mix of DI also impacts the gross margin as DI carries a higher margin rate.

We also incurred tariff expenses of more than $3 million in the quarter, further pressuring gross margin. The good news is that we are expecting a return to a more normalized mix of direct import fulfillment in the second half of the year as we have worked with our retail partners to reduce overall tariff exposure and that our tariff mitigation and cost reduction efforts will more meaningfully benefit second half results. The second quarter is our peak selling season and despite grill revenues being down 22%, we saw better-than-expected consumer demand of grills at retail with positive unit sell-through growth. In particular, consumers reacted favorably during our Memorial Day promotion period, which kicks off the grilling season and during the Father’s Day promotional period.

One trend we continue to experience is strength at our lower price point grill offering with substantial outperformance of grill sub-$1,000 versus north of $1,000. We continue to see this shift as strong evidence of meaningful consumer appetite for Traeger grills at attainable price points. During the quarter, sell-through was aided by our boots on the ground activation strategy. Our team of retail sales specialists were out in full force during peak grilling season, and we conducted thousands of weekend selling events where we train and educate retail associates and demo Traeger grills to drive awareness of the brand. We also continue to leverage brand partnerships to engage new consumers and broaden our brand reach. Notably, we launched a partnership with Bud Light and Budweiser, two of America’s best- selling beer brands with extremely large audiences.

Buds Grill Like a Pro campaign partnership with Traeger features content integration, retail displays and cross-merchandising efforts. We also established a partnership with Pepsi Frito-Lay, which highlights outdoor cooking and features Traeger products. This campaign includes significant retail displays, a large media campaign and product sweepstakes. Partnering with brands like Bud and Pepsi allows Traeger to reach a huge global audience in a cost-effective manner. On the consumables front, we achieved 7% revenue growth in the second quarter. We saw healthy replenishment of pellets across our retail channels. We also continue to benefit from expanded distribution in our consumables business with a launch at Walmart late last year and additional distribution gains in the grocery channel.

Finally, our accessories business continues to be pressured by declines in MEATER and was down 12% year-over-year. Having said that, the revenue declines at MEATER sequentially improved versus the first quarter. Our goal for MEATER in the next 6 months will be a successful integration of the business into our Salt Lake City infrastructure and strong execution in the critical holiday period. This will ultimately allow MEATER to return to growth and importantly, will allow for significant and improved profitability. Overall, while there are a number of crosscurrents from a macroeconomic and trade policy perspective, our brand remains extremely strong and consumer appetite for our grills was healthy in our peak season. Moreover, our team has executed well on an aggressive strategy to mitigate tariffs that will allow us to navigate the current environment.

Finally, we believe Project Gravity will act as a powerful catalyst for transformation and efficiency and believe it will drive meaningful long-term value at Traeger. Before I finish, I’d like to thank the entire Traeger team for their hard work and commitment. And with that, I’ll hand the call over to Joey. Joey?

Joey Hord: Thanks, Jeremy, and good afternoon, everyone. Today, I will review our second quarter performance, discuss our updated outlook for fiscal 2025 and share our thoughts on Project Gravity. Second quarter revenues declined 14% to $145 million. Grill revenues decreased 22% to $74 million. Grill revenues were negatively impacted by revenue pace and shifts out of the second quarter. These timing shifts were largely tied to tariffs as retailers ordered product ahead of tariff implementation in the first quarter and revenues were pushed into the third quarter as our retail partners shifted to domestic fulfillment from direct import. We also saw lower unit volumes of higher-priced grills during the second quarter. With respect to consumer demand, as Jeremy discussed, we saw better-than-planned sell-through in grills, and we’re generally pleased with peak season performance at retail.

Consumables revenues were $36 million, up 7% to second quarter last year. Growth in consumables was driven by an increase in wood pellet revenues as we saw strong sell-through and benefited from increased distribution. Pellet revenues also benefited from revenue pacing out of the first quarter. Strength in pellets was partially offset by a decline in food consumables. Overall, we were pleased with consumables performance in the second quarter. Accessories revenues decreased 12% to $35 million, largely driven by lower sales in MEATER. Geographically, North America revenues were down 12%, while Rest of World revenues were down 32%. Gross profit for the second quarter decreased to $57 million from $72 million in the second quarter of 2024. Gross profit margin was 39.2%, down 380 basis points versus second quarter of 2024.

Our gross margin was negatively impacted by several factors, including the impact of tariffs, and we expect our mitigation efforts will drive sequential improvement in gross margin performance in the second half. Drivers of the decline include: one, the shift from direct import to domestic fulfillment, which negatively impacted margin by 210 basis points; two, tariff costs worth 190 basis points; three, promotional investment of 40 basis points. These were offset by: one, improved pellet margins of 30 basis points; and two, other margin positives of 40 basis points. Sales and marketing expenses were $25 million compared to $28 million in the second quarter of 2024. Lower sales and marketing expense in the quarter was driven by a decrease in demand creation and employee expense.

General and administrative expenses were $26 million compared to $30 million in the second quarter of 2024. The decrease in G&A expense was driven by lower stock- based compensation expense and lower costs related to legal matters, partially offset by higher employee costs. Net loss for the second quarter was $7 million as compared to a net loss of $3 million in the second quarter of 2024. Net loss per diluted share was $0.06 compared to a loss of $0.02 in the second quarter of 2024. Adjusted net loss for the quarter was $2 million or $0.01 per diluted share as compared to adjusted net income of $7 million or $0.06 per diluted share in the same period in 2024. Adjusted EBITDA was $14 million in the second quarter as compared to $27 million in the same period of 2024.

Let me now discuss the balance sheet. At the end of the second quarter, cash and cash equivalents totaled $10 million compared to $15 million at the end of the previous fiscal year. We ended the quarter with $412 million of short- and long-term debt, resulting in total net debt of $402 million. From a liquidity perspective, we ended the second quarter with a very healthy liquidity position of $180 million. Inventory at the end of the second quarter was $116 million compared to $107 million at the end of the fourth quarter of 2024 and $91 million at the end of the second quarter of 2024. We are comfortable with our inventory levels and believe we are appropriately positioned. When looking at the second quarter’s inventory balance, it is important to note that increased costs driven by tariffs account for approximately 30% of the year-over-year increase.

Furthermore, the shift from direct import to domestic fulfillment is contributing to the increase as we carry the inventory related to domestic fulfillment sales on our balance sheet. Moving on to Project Gravity. Larger picture, as the newly appointed CFO at Traeger, I am extremely excited about the significant opportunity we have to drive meaningful efficiencies and savings in our business with this effort. I believe the Traeger brand is the best in the grill industry and the company’s largest opportunity long term is to drive increased household penetration and brand awareness. In order to achieve this, we need to optimize the business and the shape of the P&L by sharpening our focus on return on investment. I believe that Project Gravity will allow us to unlock value and will position us to continue to invest in our long-term growth drivers.

As Jeremy discussed, Phase 1 Gravity actions include a headcount reduction implemented in the second quarter and the integration of MEATER into our Traeger infrastructure. We expect these actions will result in $30 million of run rate cost savings once fully implemented. Full implementation of Phase 1 actions will continue through the end of 2026, and we expect to realize as much as $13 million of these savings in fiscal 2025. Phase 2 of Gravity will consist of initiatives identified as part of an ongoing analysis of our operations with the goal of driving efficiency and simplification. We will provide updates as the strategic plan further develops in the coming quarters. Overall, I believe the review will bring to light a significant opportunity to unlock value at Traeger.

Now turning to our outlook for fiscal 2025. Today, we are issuing guidance for fiscal year 2025. For revenues, we are guiding to $540 million to $555 million or a decline of 8% to 11%. Our revenue is being impacted by several factors. First, we expect a decline in the high single-digit percentage range for grill revenues. The expected decline in grill revenues is being driven by our assumption of pressure on grill volumes due to the price increases we implemented to offset increased costs related to tariffs. It’s important to remind everyone that the guiding principle of this year has been to enhance profitability and cash flow in the face of a challenging backdrop. Our efforts to mitigate tariffs with price increases are driving an expectation of lower grill volumes in the second half of the year.

However, this is allowing us to offset a substantial majority of the tariff impact. Additionally, we are facing a challenging comparison in the fourth quarter of last year when we had a large load-in of our new Woodridge grill. For consumables, we’re expecting positive growth in FY ’25 and continue to believe in the recurring revenue nature of our wood pellet business. Accessories are expected to decline due to an anticipated decrease in MEATER sales. On gross margin, we are assuming 40.5% to 41.5%, which implies a decline of 80 to 180 basis points. This pressure on gross margin is being driven by the impact of tariffs as well as the mix shift out of DI to domestic fulfillment. For adjusted EBITDA, we are guiding to a range of $66 million to $73 million.

While this implies a reduction in adjusted EBITDA versus fiscal 2024, given that we faced a $60 million tariff headwind, I believe we are demonstrating our strong ability to control what we can and manage the P&L effectively in a difficult environment. I’d like to comment briefly on quarterly pacing for the balance of the year. In third quarter, we expect a modest sequential improvement in year-over-year sales relative to the second quarter, given the revenue timing dynamic we’ve discussed from Q2 into Q3. However, we are still expecting a decline in revenues for the quarter. We are forecasting a decline in adjusted EBITDA as compared to the third quarter of last year. For the fourth quarter, we are assuming that we will have a larger sales decline as we are lapping the load-in of Woodridge from the prior year.

Despite this, we expect that adjusted EBITDA will improve versus prior year as we are anticipating to benefit from growth in gross margin as well as to more fully benefit from cost savings actions. Overall, I believe our organizational focus on protecting profitability and cash flow in the current year will allow us to successfully navigate the current environment. Moreover, we are positioning the business for significant improvement going forward as we seek to drive efficiency and reshape the P&L. Our Project Gravity initiatives can drive meaningful value and ultimately will allow us to reignite both top and bottom line growth. I’ll now turn the call over to the operator for questions. Operator?

Q&A Session

Operator: [Operator Instructions] Our first question for today comes from Phillip Blee of William Blair.

Phillip Blee: Can you talk a little bit more about the color — or just color around the reaction to the price increases, particularly in the wholesale channel? You mentioned that sell-through was positive. So just trying to get a read-through on the reaction to price and then maybe any differences between that consumer and then what you saw in the direct channel?

Jeremy Andrus: Yes, sure, happy to. So let me start with wholesale first, Phillip. I’d say, first of all, stepping back, it’s important to delineate between sell-in and sell-through just given the pacing dynamics of revenue being pulled into the first quarter as retailers tried to sort of get ahead of tariff pricing and the shift from direct import to a domestic model, which effectively pushed revenue into the third quarter as we get back on to a direct import model. And so certainly some pacing pieces that don’t tell the story around the consumer from a health and sort of a brand perspective. As we said, sell-through was, I would say, robust relative to our expectation. Certainly didn’t know how to think about the consumer or the environment post Liberation Day and so certainly beat our expectation.

We really do. We myopically track sell-through wherever we get direct data feeds from our retailers, which is probably 2/3 of our business. Sell-through unit growth was modestly positive and sell-through in terms of revenue dollars in the second quarter was modestly negative. And I think that points to, first of all, the health of the consumer that’s continuing to buy. I think it speaks to the strength of the brand that in an environment like this, we’re driving positive unit sell-through at retail. I also think it speaks to a trend that we began to feel probably 12 to 18 months ago as there was — we’ve seen some modest shift to lower price points just given the environment around consumer financing and the nature of a nonessential durable.

But on balance, we feel good. We saw fairly broad-based success at retail from a sell-through perspective. And that’s what most of our business. So that tells the story. In terms of the direct channel, the direct channel fell off more than retail. And candidly, that’s because we changed price early in the quarter. We certainly — given that we sell through large retailers and there’s a process for changing price and then there’s execution at retail. We felt like, #1, from a brand perspective, we wanted to lead the industry and get to higher prices as soon as possible in effort to protect profitability but also recognize if we’re asking our retailers to raise price that we need to lead on our own website. So hard to compare the two. I would say when retail prices were, by and large, consistent with our website, we saw a consistent level of performance.

Phillip Blee: Okay. Great. That’s super helpful. And then you mentioned that 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? And then as some of those tariff costs begin to fall off, should we think about those mitigation savings as more variable along with that? Or would they be kind of fixed and permanently embedded in the model?

Jeremy Andrus: Yes. Great. Let me — why don’t I take the first part of that and then Joey can jump in on the second piece. So we actually started to diversify away from China a couple of years ago. And with the consumer durable that where tools have to be moved, rebuilt, supply chain has to follow, lines have to be perfected. It just takes a bit of time to diversify or to move manufacturing geographies. No question, this year, we have been accelerating something that we started with. We’ve indicated in the past that at steady state, let’s say, 2024, our mix of China to Vietnam sourcing has been about — in terms of grills, has been about 80% sourced in China and about 20% sourced in Vietnam. We’ve made a lot of progress this year.

And my expectation is, as opposed to speaking to this year, I would speak to 2026 because that’s sort of when we’re able to substantially bring this across the finish line. By the end of ’26, we will be almost entirely diversified outside of China. And I would say pretty steadily through the year to get to that point just as we bleed down inventory and we bring in other inventory. I think it will be a steady transition over the course of the next 12 to 18 months. In terms of — and I’ll just say from a tariff perspective, China is actually not radically different from Vietnam. Vietnam seems to have found sort of settled in on a number from a tariff perspective. China may or may not, it was probably going to be volatile. So we’re going to continue to drive that transition as quickly as we can.

Joey Hord: Yes. I’ll add in on the if they’re permanent or structural. They’re permanent in nature. The three mitigating actions around our tariffs are supply chain efficiencies, BOM savings, just negotiation with our factories, pricing, which we’ve spoken about in the opening remarks and then overall cost reductions. And that leads into Project Gravity and the $30 million run rate, which we called out. So long term in nature, the actions that we’re taking, we want to be long term in nature and structural, which will yield fruit for quarters and years to come.

Operator: Our next question comes from Brian McNamara of Canaccord.

Brian Christopher McNamara: 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 smaller competitor mentioned this morning its grill business was on a growth trajectory at the beginning of the season before having “the full force of the tariffs.” But why would tariffs matter much as significant price increases really weren’t visible in the marketplace, at least for the important Memorial Day weekend period. And I believe even Traeger went back to pre-tariff pricing promotion there. So why do you think consumers just didn’t come out during peak season this year?

Jeremy Andrus: Brian, great question. So there are a couple of things that I would hit. First of all, from a timing perspective, although I — we would say the consumer held in there better than expected. If you look at consumer sentiment in April and May, it was pretty devastating. In fact, May hit an all-time low since the early ’50s when they started measuring consumer sentiment. So the timing of the volatility post Liberation Day, it was heading right into our peak season. So we think that had some impact. In terms of where the grill industry is in this sort of life cycle of coming out of the pandemic and that pull forward demand. As we do consumer research and run the numbers on the replacement cycle, it really did feel like this was a year that started to normalize for the first time post pandemic.

And we believe the result would have been different had the second quarter not been impacted by all of the tariff activity. We think that certainly had some impact. In terms of the promotions, we actually weren’t at pre-pandemic levels. We were on a couple of SKUs. We were very intentional in our pricing strategy in terms of being as sharp as we could have been on the opening price point. We thought that was a hedge against the sentiment. We think that was the right thing to do. But if you look at our other products, we were — first of all, if you were to compare year-over-year, we launched the Woodridge at higher price points. So if you went back to a year ago, we had Pro 780 in Pro 575 discounted by $150 to $200. We launched replacement products, but they were priced higher.

So the Woodridge Pro, for example, replaced the 780, but it’s $1,149 against $999 of former price. When we promoted that, we promoted it down to $999, which is 25% higher than the product that it replaced. So pricing was higher, and it was higher on promotion. We just tried to be as strategic as we could be around the price points. And then — but I’ll say that we are — the further we get from the pull forward of the pandemic, the more optimistic we get that industry growth is coming as consumers start a more normalized replacement window and notably, those who bought in ’20 and ’21, if it’s a 5-, 6-year replacement window, we’re kind of there. So it gives us optimism, especially as we get out of the noise of the tariff environment.

Brian Christopher McNamara: That’s helpful. Secondly, on MEATER, what’s going on there? We have 5 straight quarters of pretty significant year-over-year declines. Are prices there just too high? Is it simply competitive intensity increasing? Is it a combination of both? Is it something else?

Jeremy Andrus: Well, look, I think prices being too high and the competitive dynamic are — those are almost one and the same. There’s no question that the industry has evolved a lot since we bought the business. We are still, by far, the share leader. And — but what we’ve seen is a lot of low-price entrants. And this happens in categories like this that they get crowded, highly fragmented at sort of the opening price points. And we think this is — over time, we’ll see attrition. Everyone who entered probably didn’t anticipate all of the other competitors coming in. And so there’s no doubt this has created a challenging environment from a competitive perspective. We’re battling a lot of low-cost competition. It certainly motivated us to think more strategically around our product road map and our pricing strategy, having the right brand, but needing to get a little bit sharper in the category over time.

And so we continue to feel the pressure. Now we also saw stabilization. The rate of decline has certainly come down quite a bit. And so we feel like we’re sort of near bottom from a revenue perspective. And then we chose to approach it from a cost and integration perspective. So as we shared in our opening remarks, we’re in the process of closing down our Leicester office. That has been the headquarters for MEATER. We’re integrating most of the functions into our Traeger Salt Lake City office. We think there are not only some tremendous cost advantages there, but we also have some real capability around sales, marketing, brand building that I think the MEATER brand will benefit from being integrated into this organization. I think it’s important to note that as we go through this, MEATER will continue to be an important part of our business.

We believe in the category long term. We’ve had to reshape the P&L and find a more efficient way to build it, but we’re also very motivated to ensure that our capability at retail, which represents sort of 90-plus percent of our business for Traeger gets leveraged and that MEATER can really start to grow in a more sustainable way that’s less susceptible to the low-cost entrants that are almost entirely e-commerce based.

Brian Christopher McNamara: Got it. And then one quick one. Finally, Jeremy, I admire the fact that you’re regularly out in the open market kind of eating your own cooking, buying back stock. You bought stock in June at a level similar to where the stock is trading at after hours. What would be your message to current and prospective shareholders on the investment merits here? Is the worst behind us, including kind of your view on the back half here?

Jeremy Andrus: Brian, it’s a good question. So let me take that from a few different angles. First of all, I joined this business almost 12 years ago, and we saw a very methodical, very consistent growth for many years. The pandemic sort of treated us all well and dropped us all back to earth. And it’s been a challenge since 2022. I tend to believe that from a macro perspective, there are more tailwinds than headwinds in front of us, just given what we’ve gone through and sort of like deeply believing that this category is robust over time. And although it cycles, the cycle that we’re coming through has been extreme because the pandemic was extreme to the upside. So we certainly believe in that, the tariff environment, let’s hope this is a moment in time.

It feels like it’s starting to settle down, and that will give us the ability to make longer-term decisions around pricing, product strategy, sourcing strategy. And so believe in the long term of the category and believe that if you just look at the history, there’s more upside than downside just in terms of the sort of the external events that have had an impact on this category. When it comes to Traeger, one of the things that I and we have always believed deeply in our position as a brand. We are disruptive from a product perspective. In terms of the innovation that we’re bringing to market, we continue to see in our Net Promoter Scores as they are robust and continue to meaningfully exceed the industry’s scores, we believe that we get rewarded for that long term.

We’ve been investing deeply in product over the last couple of years, even when resources have been thin. And we think that’s — it’s a great moat long term. And we have a very passionate base of consumers. So all of these things, none of them have fixed the moment because the storm that we’ve been sailing through has been so dramatic that our commitment is to continue to make the right decisions for the long term for this business, like brick by brick, just make sure that we’re building something that can last. As you go through these moments like 2022 and 2025, what I love about them as I’m able to have more perspective is you see how iron sharpens iron. You see the team step up and respond to going through difficult times. And we’re not responding by sort of navigating this with the status quo, and we’re not responding by making short-term decisions.

I think as we’ve highlighted, we got aggressive around operating expenses in April. And admittedly, some of those were reactive, not knowing where this economy would settle out. But as we got into it, I think there was — I saw a very strong commitment on the part of the team to continue to reinvent, to continue to get more efficient. And this just gives us the wherewithal, the investment capacity to further amplify what we think is special about this brand. So I own — my family owns a lot of stock in this business. And from a diversification perspective, it probably doesn’t make sense to buy whenever I can. But I believe in the business. And when I see the stock at the levels that it trades at, I don’t have enough discipline to not buy it.

Operator: Our next question comes from Joe Feldman of Telsey Advisory Group.

Joseph Isaac Feldman: Great. I wanted to touch base on some of the new products like the Flatrock and the Woodridge, like how have those been performing? Maybe the answer is the sub-$1,000 is working, but I know you’ve said that a few times about the grills. But can you talk about those two new lines and the reception you’re seeing?

Jeremy Andrus: Yes. Sure, Joe. Let me focus mostly on Woodridge because wood pellet grills are core to — it’s the core of our business, and then I’ll take a minute on Flatrock as well. Woodridge is the best product this company has built in the nearly 40 years that we’ve been in business. And one of the things that I’m very proud of as I look at the performance of our product and operations teams is the ability to build more cost effectively and with more value at higher quality product that really resonates with our consumer. And we launched — we had a big Woodridge product launch event in the middle of April, which was a bit of a tumultuous moment in time. The response has been phenomenal to Woodridge. It’s unfortunate that there’s so much noise in the category around tariffs in this category, if you think about just generally where it’s sourced out of China and Southeast Asia and the consumption of non-U.S. steel, we’re highly exposed to tariffs.

But the response to Woodridge has — it’s been remarkable. As we’ve tracked product reviews online, they’ve been very strong out of the gate. We have a hypercare program where at launch, we’re really, really obsessed, we’re obsessed around everything that we can learn around that product, how to improve it, how to ensure that it’s meeting the needs of our consumer. And we feel really good about this platform that will have 5 years of life. We’re 100-plus days into it, but we like what we’re seeing. No doubt, we are, I would say, feeling some pressure at higher price points. The Woodridge Pro, which launched at $999, for tariff reasons, had to move up to $1,150, and that is not only $150 higher, but breaks a pretty key psychological price point from a consumer perspective.

But I’ll tell you, it’s been pretty interesting to see the mix between that and the Woodridge base model, given how much more expensive it is. So I feel really good about Woodridge. It’s a phenomenal product. All of the consumer feedback would suggest. We sometimes get questions how we think about our product strategy relative to these consumers or economic cycles that we go through. And what I’ll say is these are very high price points relative to the industry, but they’re very acceptable price points for the positioning of our brand. And we feel like we’ve launched something that’s going to perform very well over the next 2 to 3 years. Flatrock, we’re still building our brand in griddle cooking. This is expensive. This is — this was a $900 product.

It’s now a $1,000 product post tariffs. And the average selling price of the largest competitor in the space is — it’s $250. So we’re multiples higher from a price perspective. So I would say slowly gaining traction, but certainly, as the online read reviews, again, we’ve nailed it from a product market fit perspective, the innovation is exactly what it should do at the price point.

Joseph Isaac Feldman: Okay. And then just a follow-up. With regard to the price increases you guys have made, you made a comment a couple of times that you’re assuming some unit decline with it, obviously, makes sense with the elasticities. But do you guys have a framework that you could share with us like, I don’t know if it’s a 10% price increase, units are going to go down 10% or down 15%? Or how are you guys thinking about it from that standpoint?

Jeremy Andrus: So I’m going to say a couple of things. First of all, let me step back and say we were very thoughtful around our pricing strategy. It was not across the board price increases, and it actually wasn’t even relative to the tariffs at each SKU. We focused on elasticity and consumer at a price point in an effort to optimize the portfolio. This was a really — we did some pricing research in the second quarter, and we had some outside consulting help as well. And what I’ll say is, it was a very noisy time to do a pricing study with all of the tariff activity. And so I don’t know that we — we still have a lot to learn around elasticity and unit volumes. We began to raise price in May, but I would say the price points in the market really weren’t at — they really weren’t at the new levels across the board until probably the first week of June, and we were on promotion.

So we’ve got some things to learn. We’ll have more impact of the price increases in the back half of the year. But to be clear, we — that is inherent to our guidance in where there’s uncertainty, we tend to take a conservative approach. And — but I would say now it’s unfortunately, an opening price point consumer behaves very differently than a $1,500 consumer, and we try to look at all of the historical data and take that into account as we build the elasticity model.

Joseph Isaac Feldman: Got it. Got it. That makes sense. So at this point, all the price increases you think for this year are baked in at this point, right, related to tariffs?

Jeremy Andrus: Correct. Yes, yes.

Operator: Our next question comes from Peter Benedict of Baird.

Peter Sloan Benedict: 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? I know it’s early, but just curious if you’re seeing any of that.

Jeremy Andrus: Yes. It’s a good question, and we do have access to that and access to cooking engagement as well. I haven’t looked at that data recently, but I’ll say that as we tracked it early in the launch of Woodridge, we actually saw more new buyers coming in than replacement buyers. And part of that, I think, is a function of what happened in the pandemic. There was — there were so many that upgraded and replaced that by definition, where we’re picking up, where we’re selling a new innovation, oftentimes, it will be to a new buyer. We had a lot of demand that was created that we think helped drive some new buyers into the brand. Over time, we certainly believe that someone who purchased a first-generation Pro early in the pandemic or even a second generation will look at the price point of Woodridge and see a lot more value.

So over time, we believe that Woodridge will be highly leveraged as an upgrade to current buyers. But I would say a fairly even mix to date, at least as far as the last look at that data.

Peter Sloan Benedict: That’s helpful. And then maybe, Joey, one for you. 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?

Joey Hord: Yes. So thanks for the question. So first off, we’re prioritizing financial health, profitability, hence, our pricing shifts, what Jeremy spoke to. We’re going to be cash flow positive, and that’s something that we’re focused on this year is just overall financial health. As far as CapEx, there’s no really deviation versus prior year in CapEx. We’re a CapEx-light business, little CapEx investments around fixtures, some mill investments, but no significant CapEx shifts from prior year.

Peter Sloan Benedict: That makes sense. And then just, I guess, one last one, just be one that, when we think about the $30 million in Phase 1 savings and $13 million are evident in this year’s numbers. 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? I mean say Phase 2 is something that could be larger than Phase 1. Should we not be expecting it to be larger? Just any kind of high-level comments around that would be helpful.

Joey Hord: Yes, sure. So the $13 million is what we’re publishing around and building our guidance around in-year savings that were — that’s built appropriately into our guidance. As far as the ongoing, the $30 million, that’s going to be in the second half of FY ’25 into ’26. And it’s obviously surrounded around the centralization of the MEATER office here or the MEATER business here and leveraging the fixed cost infrastructure. That takes time. So I think we see sequential improvement throughout ’26, and that $30 million will materialize within — throughout FY ’26. Second part of your question was on Gravity, second part of Gravity. It’s too early to talk about quantification of that investment — or that initiative. At the same time, we think there’s — what we feel is a significant amount of value to unlock mostly through streamlining and efficiency, which we’ll provide more color and detail to come as the project progresses.

Operator: At this time, we’ll currently take no further questions. Therefore, this concludes today’s conference call. Thank you all for joining. You may now disconnect your lines.