Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Traeger Announces Third Quarter Fiscal 2022 Results By: Traeger, Inc. via Business Wire November 09, 2022 at 16:05 PM EST Updates Outlook for Full Year 2022 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 September 30, 2022. Third Quarter FY 22 Highlights Total revenues decreased 42.1% to $93.8 million Gross profit margin of 27.7% or 29.4% excluding $1.6 million of one-time restructuring costs Net loss of $210.4 million, including a non-cash impairment charge of $109.8 million; net loss of $1.75 per share Adjusted net loss of $25.7 million; adjusted net loss of $0.21 per share Adjusted EBITDA loss of $12.5 million "During the third quarter, our topline was pressured as macroeconomic uncertainty continued to weigh on the consumer and our retail partners aggressively reduced in-channel inventories. Despite these challenges, we made progress on our near-term strategic priorities and took decisive action to enhance profitability and cash flow and to position the Company for a strong recovery when the macroeconomic environment normalizes. This includes realizing meaningful cost savings resulting from restructuring actions taken early in the third quarter as well as driving sequential improvement of in-channel inventory levels. We believe the macro environment will remain highly dynamic through the end of the year with our retail partners continuing to reduce inventory levels in the fourth quarter and we now expect full year results to be at the low-end or slightly below our prior guidance range. Despite near-term challenges, we continue to grow brand awareness and enhance our merchandising with our most important retail partners, adding to my confidence in the long-term opportunity for Traeger," said Jeremy Andrus, CEO of Traeger. Operating Results for the Third Quarter Total revenue decreased by 42.1% to $93.8 million, compared to $162.0 million in the third quarter last year. Grills decreased 64.2% to $39.0 million as compared to the third quarter last year. The decrease was primarily driven by lower unit volume due to challenging global macroeconomic conditions, partially offset by a higher average selling price resulting from price increases taken in the second half of 2021 and early 2022, and the introduction of higher average selling priced product in 2022. Consumables decreased 10.3% to $25.2 million as compared to the third quarter last year. The decrease was driven by lower unit volume of wood pellets partially offset by higher unit volume of sauces and rubs primarily due to an increase in distribution channels. Accessories increased 17.7% to $29.6 million as compared to the third quarter last year. This increase was driven primarily by continued growth of the MEATER smart thermometers business. North America revenue declined 45.6% in the third quarter compared to the prior year. Rest of World revenues increased 9.8% reflecting growth in MEATER's international markets. Gross profit decreased to $26.0 million, compared to $54.3 million in the third quarter last year. Gross profit margin was 27.7% in the third quarter, compared to 33.5% in the same period last year. Excluding $1.6 million of costs related to the 2022 restructuring plan, gross margin was 29.4%. The decrease in gross margin was driven primarily by increased logistics and warehousing costs, promotional discounts to reduce inventory levels, and restructuring costs. The decrease was partially offset by higher selling prices of grills and accessories. Sales and marketing expenses were $25.5 million, compared to $48.5 million in the third quarter last year. The decrease in sales and marketing expense was driven by a reduction of $11.8 million in equity-based compensation, lower professional fees and sales commission expense as revenue declined, and reduced investments in advertising costs for brand awareness, demand, and conversion. General and administrative expenses were $70.9 million, compared to $75.8 million in the third quarter last year. The decrease in general and administrative expense was driven by lower professional service fees, a reduction in research and development costs, lower bonus expense, and lower employee related expenses. The decrease was partially offset by an increase in equity-based compensation of $6.4 million, due to an accelerated vesting of $40.5 million in connection with the current period modifications related to awards held by the CEO and certain directors compared to equity-based compensation of $36.9 million in connection with the prior period acceleration of vesting of all unvested and outstanding Class B unit awards upon completion of the initial public offering. Change in fair value of contingent consideration of $2.7 million was primarily driven by an increase in the likelihood of achieving the performance targets in the share purchase agreement for the acquisition of Apption Labs. The change in fair value of contingent consideration is based on a preliminary estimate that will be finalized before the filing of the Company’s third quarter Form 10-Q. Goodwill impairment charge of $109.8 million was recorded as a result of the Company's sustained decrease in discounted projections of estimated operating results and cash flows as well as decreased valuation multiples compared to publicly traded companies, resulting in the Company's carrying amount exceeding its fair value. The impairment charge is based on a preliminary estimate that will be finalized before the filing of the Company’s third quarter Form 10-Q. The impairment charge does not affect the Company's cash position, cash flow from operating activities, bank debt covenants, and does not have any impact on future operations. Restructuring costs of $8.0 million were recorded in connection with the 2022 restructuring plan as part of the Company's efforts to reduce costs and drive long-term operational efficiencies due to challenging macroeconomic pressures. The restructuring costs were primarily related to a reduction in force, suspended operations of Traeger Provisions, and postponed nearshoring efforts to manufacture product in Mexico. Net loss was $210.4 million in the third quarter, or $1.75 per diluted share, as compared to net loss of $89.2 million in the third quarter of last year, or $0.78 per diluted share.1 Adjusted net loss was $25.7 million, or $0.21 per diluted share as compared to adjusted net loss of $6.5 million, or $0.06 per diluted share in the third quarter last year.2 Adjusted EBITDA loss was $12.5 million in the third quarter as compared to adjusted EBITDA of $4.1 million in the same period last year.2 ________________________ 1 There were no potentially dilutive securities outstanding as of September 30, 2022 and 2021. 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. Balance Sheet Cash and cash equivalents at the end of the third quarter totaled $8.3 million, compared to $16.7 million at December 31, 2021. Inventory at end of the third quarter was $161.8 million, compared to $145.0 million at December 31, 2021. Inventory growth was driven by increased input costs primarily due to macroeconomic factors, including increased freight rates, logistics costs, commodity prices and other product costs, as well as elevated levels of grill units. Guidance for Full Year Fiscal 2022 The company is updating its full year guidance. Updated guidance reflects continued pressure on replenishment order activity as our retail partners reduce in-channel inventories. Total revenue is expected to be between $635 million and $640 million Adjusted EBITDA is expected to be between $33 million and $35 million A reconciliation of Adjusted EBITDA guidance to Net Loss on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to benefit for income taxes, interest expense, depreciation and amortization, other expense, goodwill impairment, restructuring costs, equity-based compensation, non-routine legal expenses, change in fair value of contingent consideration, offering related expenses, non-routine start-up costs, non-routine acquisition costs, non-routine refinancing expenses, and other adjustment items all of which are adjustments to Adjusted EBITDA. Conference Call Details A conference call to discuss the Company's third quarter results is scheduled for November 9, 2022, at 4:30 p.m. ET. To participate, please dial (844) 200-6205 or +1 (929) 526-1599 for international callers, conference ID 153347. 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 830113. 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, 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. Our grills are versatile and easy to use, empowering cooks of all skill sets to create delicious meals with a wood-fired flavor that cannot be replicated with gas, charcoal, or electric grills. Grills are at the core of our platform and are complemented by Traeger wood pellets, rubs, sauces and accessories. 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 2022 results, our expected annualized savings from our cost optimization initiatives, our ability to rightsize inventory levels and expected timing for doing so, and our ability to realize benefits from our gross margin initiatives and our expected timing for doing so. 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, the impact of the COVID-19 pandemic on certain aspects of our business, 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, 2021 and, once filed, our Quarterly Report on Form 10-Q for the period ended September 30, 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. TRAEGER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) September 30, 2022 December 31, 2021 (unaudited) ASSETS Current Assets Cash and cash equivalents $ 8,349 $ 16,740 Accounts receivable, net 34,370 92,927 Inventories 161,769 145,038 Prepaid expenses and other current assets 28,942 15,036 Total current assets 233,430 269,741 Property, plant, and equipment, net 75,135 55,477 Goodwill 75,805 297,047 Intangible assets, net 523,457 555,151 Other non-current assets 19,075 3,608 Total assets $ 926,902 $ 1,181,024 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 16,109 $ 42,694 Accrued expenses 68,703 69,773 Line of credit 13,451 41,138 Current portion of capital leases 457 420 Current portion of contingent consideration 7,990 12,200 Other current liabilities 3,129 — Total current liabilities 109,839 166,225 Notes payable 430,898 379,395 Capital leases, net of current portion 1,058 677 Contingent consideration, net of current portion 9,420 13,100 Deferred tax liability 11,692 11,673 Other non-current liabilities 437 434 Total liabilities 563,344 571,504 Commitments and contingencies—See Note 12 Stockholders' equity: Preferred stock, $0.0001 par value; 25,000,000 shares authorized and no shares issued or outstanding as of September 30, 2022 and December 31, 2021 — — Common stock, $0.0001 par value; 1,000,000,000 shares authorized Issued and outstanding shares - 122,587,393 and 117,547,916 as of September 30, 2022 and December 31, 2021 12 12 Additional paid-in capital 875,060 794,413 Accumulated deficit (535,979 ) (184,819 ) Accumulated other comprehensive income (loss) 24,465 (86 ) Total stockholders' equity 363,558 609,520 Total liabilities and stockholders' equity $ 926,902 $ 1,181,024 TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) (in thousands, except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue $ 93,788 $ 162,018 $ 517,768 $ 610,613 Cost of revenue 67,810 107,696 334,719 372,353 Gross profit 25,978 54,322 183,049 238,260 Operating expenses: Sales and marketing 25,496 48,519 102,401 126,639 General and administrative 70,882 75,824 142,637 114,182 Amortization of intangible assets 8,889 8,889 26,666 25,491 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Goodwill impairment 109,757 — 221,242 — Restructuring costs 8,036 — 8,036 — Total operating expense 225,770 136,132 505,647 269,212 Loss from operations (199,792 ) (81,810 ) (322,598 ) (30,952 ) Other income (expense): Interest expense (7,337 ) (5,704 ) (20,238 ) (21,393 ) Loss on extinguishment of debt — (3,228 ) — (5,185 ) Other income (expense), net (3,545 ) (426 ) (8,351 ) 1,112 Total other expense (10,882 ) (9,358 ) (28,589 ) (25,466 ) Loss before benefit for income taxes (210,674 ) (91,168 ) (351,187 ) (56,418 ) Benefit for income taxes (225 ) (1,983 ) (27 ) (1,255 ) Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Net loss per share, basic and diluted $ (1.75 ) $ (0.78 ) $ (2.96 ) $ (0.50 ) Weighted average common shares outstanding, basic and diluted 119,924,371 114,382,955 118,682,379 110,631,304 Other comprehensive income: Foreign currency translation adjustments $ (67 ) $ 11 $ (58 ) $ 11 Change in cash flow hedge 12,285 — 24,609 — Total other comprehensive income 12,218 11 24,551 11 Comprehensive loss $ (198,231 ) $ (89,174 ) $ (326,609 ) $ (55,152 ) TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (351,160 ) $ (55,163 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property, plant and equipment 9,703 6,647 Amortization of intangible assets 32,025 27,622 Amortization of deferred financing costs 1,468 1,871 Loss on disposal of property, plant and equipment 707 104 Loss on extinguishment of debt — 5,185 Equity-based compensation expense 80,688 61,711 Bad debt expense (317 ) 634 Unrealized loss on derivative contracts 4,567 4,800 Change in fair value of contingent consideration 1,385 2,900 Goodwill impairment 221,242 — Restructuring costs 1,419 — Change in operating assets and liabilities: Accounts receivable 58,874 (19,192 ) Inventories (16,731 ) (40,331 ) Prepaid expenses and other current assets (6,732 ) (7,479 ) Other non-current assets 64 (219 ) Accounts payable and accrued expenses (43,225 ) 10,031 Other non-current liabilities 22 9 Net cash used in operating activities (6,001 ) (870 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant, and equipment (15,128 ) (17,986 ) Capitalization of patent costs (403 ) (424 ) Business combination, net of cash acquired — (57,041 ) Net cash used in investing activities (15,531 ) (75,451 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 166,978 84,000 Repayments on line of credit (156,666 ) (65,000 ) Proceeds from long-term debt 12,500 510,000 Repayments of long-term debt — (579,915 ) Payment of deferred financing costs — (8,478 ) Principal payments on capital lease obligations (355 ) (283 ) Proceeds from initial public offering, net of issuance costs — 142,544 Payment of acquisition related contingent consideration (9,275 ) — Taxes paid related to net share settlement of equity awards (41 ) — Net cash provided by financing activities 13,141 82,868 Net increase (decrease) in cash and cash equivalents (8,391 ) 6,547 Cash and cash equivalents at beginning of period 16,740 11,556 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,349 $ 18,103 TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) (Continued) Nine Months Ended September 30, 2022 2021 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 18,403 $ 18,974 Cash paid for income taxes $ 2,250 $ 1,665 NON-CASH FINANCING AND INVESTING ACTIVITIES Equipment purchased under capital leases $ 952 $ 534 Property, plant, and equipment included in accounts payable and accrued expenses $ 15,512 $ 3,395 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross 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 (Loss), together with a reconciliation of Net Loss to each such measure, and providing Adjusted Net Income (Loss) per share, together with a reconciliation of Net Loss per share to such measure, and Adjusted Gross Margin together with a reconciliation of Gross Margin to such measure, 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of Net Loss or Loss from Continuing Operations or Net 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin 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 Gross Margin, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted Gross Margin on a consolidated basis. A reconciliation of Adjusted Gross Margin guidance to Gross Margin on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to the impact of restructuring costs recorded in cost of revenue which is an adjustment to Adjusted Gross Margin. Three Months Ended September 30, 2022 Gross margin 27.7% Add: Impact of restructuring costs recorded in cost of revenue 1.7% Adjusted gross margin 29.4% The following table presents a reconciliation of Net Loss and Net Loss per share, the most directly comparable financial measures calculated in accordance with U.S. GAAP, to Adjusted Net Income (Loss) and Adjusted EBITDA, and Adjusted Net Income (Loss) per share, respectively, on a consolidated basis. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (amounts in thousands, except share and per share amounts) Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Adjustments: Other expense (1) 21 3,977 4,095 10,045 Goodwill impairment 109,757 — 221,242 — Restructuring costs (2) 9,644 — 9,644 — Equity-based compensation 53,254 59,210 80,688 61,711 Non-routine legal expenses (3) 788 1,313 3,757 4,068 Amortization of acquisition intangibles (4) 8,253 8,253 24,760 24,760 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Offering related expenses (5) — 2,607 — 3,642 Non-routine start-up costs (6) — 2,883 — 5,863 Non-routine acquisition costs (7) — 2,624 — 2,624 Non-routine refinancing expenses (8) — — — 3,895 Other adjustment items (9) 274 972 1,355 972 Tax impact of adjusting items (10) — (2,078 ) — (2,078 ) Adjusted net income (loss) $ (25,748 ) $ (6,524 ) $ (954 ) $ 63,239 Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Adjustments: Benefit for income taxes (225 ) (1,983 ) (27 ) (1,255 ) Interest expense 7,337 5,704 20,238 21,393 Depreciation and amortization 14,382 13,076 41,801 34,515 Other expense (1) 21 3,977 4,095 10,045 Goodwill impairment 109,757 — 221,242 — Restructuring costs (2) 9,644 — 9,644 — Equity-based compensation 53,254 59,210 80,688 61,711 Non-routine legal expenses (3) 788 1,313 3,757 4,068 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Offering related expenses (5) — 2,607 — 3,642 Non-routine start-up costs (6) — 2,883 — 5,863 Non-routine acquisition costs (7) — 2,624 — 2,624 Non-routine refinancing expenses (8) — — — 3,895 Other adjustment items (9) 274 972 1,355 972 Adjusted EBITDA $ (12,507 ) $ 4,098 $ 36,298 $ 95,210 Revenue $ 93,788 $ 162,018 $ 517,768 $ 610,613 Net loss margin (224.4 )% (55.0 )% (67.8 )% (9.0 )% Adjusted net income (loss) margin (27.5 )% (4.0 )% (0.2 )% 10.4 % Adjusted EBITDA margin (13.3 )% 2.5 % 7.0 % 15.6 % Net loss per diluted share $ (1.75 ) $ (0.78 ) $ (2.96 ) $ (0.50 ) Adjusted net income (loss) per diluted share $ (0.21 ) $ (0.06 ) $ (0.01 ) $ 0.57 Weighted average common shares outstanding - diluted 119,924,371 114,382,955 118,682,379 110,631,304 (1) Represents gains (losses) on disposal of property, plant, and equipment, impairments of long-term assets, and unrealized gains (losses) from foreign currency transactions and derivatives. (2) Represents costs in connection with the 2022 restructuring plan, including $1.6 million of costs recorded in cost of revenue within the condensed consolidated statements of operations and comprehensive loss. (3) Represents external legal expenses for litigation, patent and trademark defense, and legal costs related to the 2021 acquisition of Apption Labs. (4) Represents the amortization expense associated with intangible assets recorded in connection with the 2017 acquisition of Traeger Pellet Grills Holdings LLC. (5) Represents expenses for legal and consulting costs incurred in connection with our IPO process. (6) Represents start-up costs for investments in Traeger Provisions. (7) Represents consulting and legal costs incurred in connection with the acquisition of Apption Labs (8) Represents expenses primarily for consulting and legal costs incurred to refinance our credit facilities. (9) Represents restoration costs at our wood pellet production facility due to flood damage sustained as a result of a tropical storm, non-cash ground lease expense associated with our build-to-suit lease, payroll tax expense related to the vesting of one-time equity awards in connection with our IPO, and implementation costs related to public company SOX compliance. (10) Represents an adjusted tax rate equal to our annual estimated tax rate on Adjusted Net Income (Loss). This rate is based on our estimated annual GAAP income (loss) tax rate forecast, adjusted to account for items excluded from GAAP income (loss) 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20221109005922/en/Contacts Investors: Nick Bacchus Traeger, Inc. investor@traeger.com Media: ICR, Inc. TraegerPR@icrinc.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Traeger Announces Third Quarter Fiscal 2022 Results By: Traeger, Inc. via Business Wire November 09, 2022 at 16:05 PM EST Updates Outlook for Full Year 2022 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 September 30, 2022. Third Quarter FY 22 Highlights Total revenues decreased 42.1% to $93.8 million Gross profit margin of 27.7% or 29.4% excluding $1.6 million of one-time restructuring costs Net loss of $210.4 million, including a non-cash impairment charge of $109.8 million; net loss of $1.75 per share Adjusted net loss of $25.7 million; adjusted net loss of $0.21 per share Adjusted EBITDA loss of $12.5 million "During the third quarter, our topline was pressured as macroeconomic uncertainty continued to weigh on the consumer and our retail partners aggressively reduced in-channel inventories. Despite these challenges, we made progress on our near-term strategic priorities and took decisive action to enhance profitability and cash flow and to position the Company for a strong recovery when the macroeconomic environment normalizes. This includes realizing meaningful cost savings resulting from restructuring actions taken early in the third quarter as well as driving sequential improvement of in-channel inventory levels. We believe the macro environment will remain highly dynamic through the end of the year with our retail partners continuing to reduce inventory levels in the fourth quarter and we now expect full year results to be at the low-end or slightly below our prior guidance range. Despite near-term challenges, we continue to grow brand awareness and enhance our merchandising with our most important retail partners, adding to my confidence in the long-term opportunity for Traeger," said Jeremy Andrus, CEO of Traeger. Operating Results for the Third Quarter Total revenue decreased by 42.1% to $93.8 million, compared to $162.0 million in the third quarter last year. Grills decreased 64.2% to $39.0 million as compared to the third quarter last year. The decrease was primarily driven by lower unit volume due to challenging global macroeconomic conditions, partially offset by a higher average selling price resulting from price increases taken in the second half of 2021 and early 2022, and the introduction of higher average selling priced product in 2022. Consumables decreased 10.3% to $25.2 million as compared to the third quarter last year. The decrease was driven by lower unit volume of wood pellets partially offset by higher unit volume of sauces and rubs primarily due to an increase in distribution channels. Accessories increased 17.7% to $29.6 million as compared to the third quarter last year. This increase was driven primarily by continued growth of the MEATER smart thermometers business. North America revenue declined 45.6% in the third quarter compared to the prior year. Rest of World revenues increased 9.8% reflecting growth in MEATER's international markets. Gross profit decreased to $26.0 million, compared to $54.3 million in the third quarter last year. Gross profit margin was 27.7% in the third quarter, compared to 33.5% in the same period last year. Excluding $1.6 million of costs related to the 2022 restructuring plan, gross margin was 29.4%. The decrease in gross margin was driven primarily by increased logistics and warehousing costs, promotional discounts to reduce inventory levels, and restructuring costs. The decrease was partially offset by higher selling prices of grills and accessories. Sales and marketing expenses were $25.5 million, compared to $48.5 million in the third quarter last year. The decrease in sales and marketing expense was driven by a reduction of $11.8 million in equity-based compensation, lower professional fees and sales commission expense as revenue declined, and reduced investments in advertising costs for brand awareness, demand, and conversion. General and administrative expenses were $70.9 million, compared to $75.8 million in the third quarter last year. The decrease in general and administrative expense was driven by lower professional service fees, a reduction in research and development costs, lower bonus expense, and lower employee related expenses. The decrease was partially offset by an increase in equity-based compensation of $6.4 million, due to an accelerated vesting of $40.5 million in connection with the current period modifications related to awards held by the CEO and certain directors compared to equity-based compensation of $36.9 million in connection with the prior period acceleration of vesting of all unvested and outstanding Class B unit awards upon completion of the initial public offering. Change in fair value of contingent consideration of $2.7 million was primarily driven by an increase in the likelihood of achieving the performance targets in the share purchase agreement for the acquisition of Apption Labs. The change in fair value of contingent consideration is based on a preliminary estimate that will be finalized before the filing of the Company’s third quarter Form 10-Q. Goodwill impairment charge of $109.8 million was recorded as a result of the Company's sustained decrease in discounted projections of estimated operating results and cash flows as well as decreased valuation multiples compared to publicly traded companies, resulting in the Company's carrying amount exceeding its fair value. The impairment charge is based on a preliminary estimate that will be finalized before the filing of the Company’s third quarter Form 10-Q. The impairment charge does not affect the Company's cash position, cash flow from operating activities, bank debt covenants, and does not have any impact on future operations. Restructuring costs of $8.0 million were recorded in connection with the 2022 restructuring plan as part of the Company's efforts to reduce costs and drive long-term operational efficiencies due to challenging macroeconomic pressures. The restructuring costs were primarily related to a reduction in force, suspended operations of Traeger Provisions, and postponed nearshoring efforts to manufacture product in Mexico. Net loss was $210.4 million in the third quarter, or $1.75 per diluted share, as compared to net loss of $89.2 million in the third quarter of last year, or $0.78 per diluted share.1 Adjusted net loss was $25.7 million, or $0.21 per diluted share as compared to adjusted net loss of $6.5 million, or $0.06 per diluted share in the third quarter last year.2 Adjusted EBITDA loss was $12.5 million in the third quarter as compared to adjusted EBITDA of $4.1 million in the same period last year.2 ________________________ 1 There were no potentially dilutive securities outstanding as of September 30, 2022 and 2021. 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. Balance Sheet Cash and cash equivalents at the end of the third quarter totaled $8.3 million, compared to $16.7 million at December 31, 2021. Inventory at end of the third quarter was $161.8 million, compared to $145.0 million at December 31, 2021. Inventory growth was driven by increased input costs primarily due to macroeconomic factors, including increased freight rates, logistics costs, commodity prices and other product costs, as well as elevated levels of grill units. Guidance for Full Year Fiscal 2022 The company is updating its full year guidance. Updated guidance reflects continued pressure on replenishment order activity as our retail partners reduce in-channel inventories. Total revenue is expected to be between $635 million and $640 million Adjusted EBITDA is expected to be between $33 million and $35 million A reconciliation of Adjusted EBITDA guidance to Net Loss on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to benefit for income taxes, interest expense, depreciation and amortization, other expense, goodwill impairment, restructuring costs, equity-based compensation, non-routine legal expenses, change in fair value of contingent consideration, offering related expenses, non-routine start-up costs, non-routine acquisition costs, non-routine refinancing expenses, and other adjustment items all of which are adjustments to Adjusted EBITDA. Conference Call Details A conference call to discuss the Company's third quarter results is scheduled for November 9, 2022, at 4:30 p.m. ET. To participate, please dial (844) 200-6205 or +1 (929) 526-1599 for international callers, conference ID 153347. 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 830113. 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, 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. Our grills are versatile and easy to use, empowering cooks of all skill sets to create delicious meals with a wood-fired flavor that cannot be replicated with gas, charcoal, or electric grills. Grills are at the core of our platform and are complemented by Traeger wood pellets, rubs, sauces and accessories. 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 2022 results, our expected annualized savings from our cost optimization initiatives, our ability to rightsize inventory levels and expected timing for doing so, and our ability to realize benefits from our gross margin initiatives and our expected timing for doing so. 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, the impact of the COVID-19 pandemic on certain aspects of our business, 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, 2021 and, once filed, our Quarterly Report on Form 10-Q for the period ended September 30, 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. TRAEGER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) September 30, 2022 December 31, 2021 (unaudited) ASSETS Current Assets Cash and cash equivalents $ 8,349 $ 16,740 Accounts receivable, net 34,370 92,927 Inventories 161,769 145,038 Prepaid expenses and other current assets 28,942 15,036 Total current assets 233,430 269,741 Property, plant, and equipment, net 75,135 55,477 Goodwill 75,805 297,047 Intangible assets, net 523,457 555,151 Other non-current assets 19,075 3,608 Total assets $ 926,902 $ 1,181,024 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 16,109 $ 42,694 Accrued expenses 68,703 69,773 Line of credit 13,451 41,138 Current portion of capital leases 457 420 Current portion of contingent consideration 7,990 12,200 Other current liabilities 3,129 — Total current liabilities 109,839 166,225 Notes payable 430,898 379,395 Capital leases, net of current portion 1,058 677 Contingent consideration, net of current portion 9,420 13,100 Deferred tax liability 11,692 11,673 Other non-current liabilities 437 434 Total liabilities 563,344 571,504 Commitments and contingencies—See Note 12 Stockholders' equity: Preferred stock, $0.0001 par value; 25,000,000 shares authorized and no shares issued or outstanding as of September 30, 2022 and December 31, 2021 — — Common stock, $0.0001 par value; 1,000,000,000 shares authorized Issued and outstanding shares - 122,587,393 and 117,547,916 as of September 30, 2022 and December 31, 2021 12 12 Additional paid-in capital 875,060 794,413 Accumulated deficit (535,979 ) (184,819 ) Accumulated other comprehensive income (loss) 24,465 (86 ) Total stockholders' equity 363,558 609,520 Total liabilities and stockholders' equity $ 926,902 $ 1,181,024 TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) (in thousands, except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue $ 93,788 $ 162,018 $ 517,768 $ 610,613 Cost of revenue 67,810 107,696 334,719 372,353 Gross profit 25,978 54,322 183,049 238,260 Operating expenses: Sales and marketing 25,496 48,519 102,401 126,639 General and administrative 70,882 75,824 142,637 114,182 Amortization of intangible assets 8,889 8,889 26,666 25,491 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Goodwill impairment 109,757 — 221,242 — Restructuring costs 8,036 — 8,036 — Total operating expense 225,770 136,132 505,647 269,212 Loss from operations (199,792 ) (81,810 ) (322,598 ) (30,952 ) Other income (expense): Interest expense (7,337 ) (5,704 ) (20,238 ) (21,393 ) Loss on extinguishment of debt — (3,228 ) — (5,185 ) Other income (expense), net (3,545 ) (426 ) (8,351 ) 1,112 Total other expense (10,882 ) (9,358 ) (28,589 ) (25,466 ) Loss before benefit for income taxes (210,674 ) (91,168 ) (351,187 ) (56,418 ) Benefit for income taxes (225 ) (1,983 ) (27 ) (1,255 ) Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Net loss per share, basic and diluted $ (1.75 ) $ (0.78 ) $ (2.96 ) $ (0.50 ) Weighted average common shares outstanding, basic and diluted 119,924,371 114,382,955 118,682,379 110,631,304 Other comprehensive income: Foreign currency translation adjustments $ (67 ) $ 11 $ (58 ) $ 11 Change in cash flow hedge 12,285 — 24,609 — Total other comprehensive income 12,218 11 24,551 11 Comprehensive loss $ (198,231 ) $ (89,174 ) $ (326,609 ) $ (55,152 ) TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (351,160 ) $ (55,163 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property, plant and equipment 9,703 6,647 Amortization of intangible assets 32,025 27,622 Amortization of deferred financing costs 1,468 1,871 Loss on disposal of property, plant and equipment 707 104 Loss on extinguishment of debt — 5,185 Equity-based compensation expense 80,688 61,711 Bad debt expense (317 ) 634 Unrealized loss on derivative contracts 4,567 4,800 Change in fair value of contingent consideration 1,385 2,900 Goodwill impairment 221,242 — Restructuring costs 1,419 — Change in operating assets and liabilities: Accounts receivable 58,874 (19,192 ) Inventories (16,731 ) (40,331 ) Prepaid expenses and other current assets (6,732 ) (7,479 ) Other non-current assets 64 (219 ) Accounts payable and accrued expenses (43,225 ) 10,031 Other non-current liabilities 22 9 Net cash used in operating activities (6,001 ) (870 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant, and equipment (15,128 ) (17,986 ) Capitalization of patent costs (403 ) (424 ) Business combination, net of cash acquired — (57,041 ) Net cash used in investing activities (15,531 ) (75,451 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 166,978 84,000 Repayments on line of credit (156,666 ) (65,000 ) Proceeds from long-term debt 12,500 510,000 Repayments of long-term debt — (579,915 ) Payment of deferred financing costs — (8,478 ) Principal payments on capital lease obligations (355 ) (283 ) Proceeds from initial public offering, net of issuance costs — 142,544 Payment of acquisition related contingent consideration (9,275 ) — Taxes paid related to net share settlement of equity awards (41 ) — Net cash provided by financing activities 13,141 82,868 Net increase (decrease) in cash and cash equivalents (8,391 ) 6,547 Cash and cash equivalents at beginning of period 16,740 11,556 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,349 $ 18,103 TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) (Continued) Nine Months Ended September 30, 2022 2021 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 18,403 $ 18,974 Cash paid for income taxes $ 2,250 $ 1,665 NON-CASH FINANCING AND INVESTING ACTIVITIES Equipment purchased under capital leases $ 952 $ 534 Property, plant, and equipment included in accounts payable and accrued expenses $ 15,512 $ 3,395 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross 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 (Loss), together with a reconciliation of Net Loss to each such measure, and providing Adjusted Net Income (Loss) per share, together with a reconciliation of Net Loss per share to such measure, and Adjusted Gross Margin together with a reconciliation of Gross Margin to such measure, 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of Net Loss or Loss from Continuing Operations or Net 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin 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 Gross Margin, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted Gross Margin on a consolidated basis. A reconciliation of Adjusted Gross Margin guidance to Gross Margin on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to the impact of restructuring costs recorded in cost of revenue which is an adjustment to Adjusted Gross Margin. Three Months Ended September 30, 2022 Gross margin 27.7% Add: Impact of restructuring costs recorded in cost of revenue 1.7% Adjusted gross margin 29.4% The following table presents a reconciliation of Net Loss and Net Loss per share, the most directly comparable financial measures calculated in accordance with U.S. GAAP, to Adjusted Net Income (Loss) and Adjusted EBITDA, and Adjusted Net Income (Loss) per share, respectively, on a consolidated basis. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (amounts in thousands, except share and per share amounts) Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Adjustments: Other expense (1) 21 3,977 4,095 10,045 Goodwill impairment 109,757 — 221,242 — Restructuring costs (2) 9,644 — 9,644 — Equity-based compensation 53,254 59,210 80,688 61,711 Non-routine legal expenses (3) 788 1,313 3,757 4,068 Amortization of acquisition intangibles (4) 8,253 8,253 24,760 24,760 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Offering related expenses (5) — 2,607 — 3,642 Non-routine start-up costs (6) — 2,883 — 5,863 Non-routine acquisition costs (7) — 2,624 — 2,624 Non-routine refinancing expenses (8) — — — 3,895 Other adjustment items (9) 274 972 1,355 972 Tax impact of adjusting items (10) — (2,078 ) — (2,078 ) Adjusted net income (loss) $ (25,748 ) $ (6,524 ) $ (954 ) $ 63,239 Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Adjustments: Benefit for income taxes (225 ) (1,983 ) (27 ) (1,255 ) Interest expense 7,337 5,704 20,238 21,393 Depreciation and amortization 14,382 13,076 41,801 34,515 Other expense (1) 21 3,977 4,095 10,045 Goodwill impairment 109,757 — 221,242 — Restructuring costs (2) 9,644 — 9,644 — Equity-based compensation 53,254 59,210 80,688 61,711 Non-routine legal expenses (3) 788 1,313 3,757 4,068 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Offering related expenses (5) — 2,607 — 3,642 Non-routine start-up costs (6) — 2,883 — 5,863 Non-routine acquisition costs (7) — 2,624 — 2,624 Non-routine refinancing expenses (8) — — — 3,895 Other adjustment items (9) 274 972 1,355 972 Adjusted EBITDA $ (12,507 ) $ 4,098 $ 36,298 $ 95,210 Revenue $ 93,788 $ 162,018 $ 517,768 $ 610,613 Net loss margin (224.4 )% (55.0 )% (67.8 )% (9.0 )% Adjusted net income (loss) margin (27.5 )% (4.0 )% (0.2 )% 10.4 % Adjusted EBITDA margin (13.3 )% 2.5 % 7.0 % 15.6 % Net loss per diluted share $ (1.75 ) $ (0.78 ) $ (2.96 ) $ (0.50 ) Adjusted net income (loss) per diluted share $ (0.21 ) $ (0.06 ) $ (0.01 ) $ 0.57 Weighted average common shares outstanding - diluted 119,924,371 114,382,955 118,682,379 110,631,304 (1) Represents gains (losses) on disposal of property, plant, and equipment, impairments of long-term assets, and unrealized gains (losses) from foreign currency transactions and derivatives. (2) Represents costs in connection with the 2022 restructuring plan, including $1.6 million of costs recorded in cost of revenue within the condensed consolidated statements of operations and comprehensive loss. (3) Represents external legal expenses for litigation, patent and trademark defense, and legal costs related to the 2021 acquisition of Apption Labs. (4) Represents the amortization expense associated with intangible assets recorded in connection with the 2017 acquisition of Traeger Pellet Grills Holdings LLC. (5) Represents expenses for legal and consulting costs incurred in connection with our IPO process. (6) Represents start-up costs for investments in Traeger Provisions. (7) Represents consulting and legal costs incurred in connection with the acquisition of Apption Labs (8) Represents expenses primarily for consulting and legal costs incurred to refinance our credit facilities. (9) Represents restoration costs at our wood pellet production facility due to flood damage sustained as a result of a tropical storm, non-cash ground lease expense associated with our build-to-suit lease, payroll tax expense related to the vesting of one-time equity awards in connection with our IPO, and implementation costs related to public company SOX compliance. (10) Represents an adjusted tax rate equal to our annual estimated tax rate on Adjusted Net Income (Loss). This rate is based on our estimated annual GAAP income (loss) tax rate forecast, adjusted to account for items excluded from GAAP income (loss) 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20221109005922/en/Contacts Investors: Nick Bacchus Traeger, Inc. investor@traeger.com Media: ICR, Inc. TraegerPR@icrinc.com
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 September 30, 2022. Third Quarter FY 22 Highlights Total revenues decreased 42.1% to $93.8 million Gross profit margin of 27.7% or 29.4% excluding $1.6 million of one-time restructuring costs Net loss of $210.4 million, including a non-cash impairment charge of $109.8 million; net loss of $1.75 per share Adjusted net loss of $25.7 million; adjusted net loss of $0.21 per share Adjusted EBITDA loss of $12.5 million "During the third quarter, our topline was pressured as macroeconomic uncertainty continued to weigh on the consumer and our retail partners aggressively reduced in-channel inventories. Despite these challenges, we made progress on our near-term strategic priorities and took decisive action to enhance profitability and cash flow and to position the Company for a strong recovery when the macroeconomic environment normalizes. This includes realizing meaningful cost savings resulting from restructuring actions taken early in the third quarter as well as driving sequential improvement of in-channel inventory levels. We believe the macro environment will remain highly dynamic through the end of the year with our retail partners continuing to reduce inventory levels in the fourth quarter and we now expect full year results to be at the low-end or slightly below our prior guidance range. Despite near-term challenges, we continue to grow brand awareness and enhance our merchandising with our most important retail partners, adding to my confidence in the long-term opportunity for Traeger," said Jeremy Andrus, CEO of Traeger. Operating Results for the Third Quarter Total revenue decreased by 42.1% to $93.8 million, compared to $162.0 million in the third quarter last year. Grills decreased 64.2% to $39.0 million as compared to the third quarter last year. The decrease was primarily driven by lower unit volume due to challenging global macroeconomic conditions, partially offset by a higher average selling price resulting from price increases taken in the second half of 2021 and early 2022, and the introduction of higher average selling priced product in 2022. Consumables decreased 10.3% to $25.2 million as compared to the third quarter last year. The decrease was driven by lower unit volume of wood pellets partially offset by higher unit volume of sauces and rubs primarily due to an increase in distribution channels. Accessories increased 17.7% to $29.6 million as compared to the third quarter last year. This increase was driven primarily by continued growth of the MEATER smart thermometers business. North America revenue declined 45.6% in the third quarter compared to the prior year. Rest of World revenues increased 9.8% reflecting growth in MEATER's international markets. Gross profit decreased to $26.0 million, compared to $54.3 million in the third quarter last year. Gross profit margin was 27.7% in the third quarter, compared to 33.5% in the same period last year. Excluding $1.6 million of costs related to the 2022 restructuring plan, gross margin was 29.4%. The decrease in gross margin was driven primarily by increased logistics and warehousing costs, promotional discounts to reduce inventory levels, and restructuring costs. The decrease was partially offset by higher selling prices of grills and accessories. Sales and marketing expenses were $25.5 million, compared to $48.5 million in the third quarter last year. The decrease in sales and marketing expense was driven by a reduction of $11.8 million in equity-based compensation, lower professional fees and sales commission expense as revenue declined, and reduced investments in advertising costs for brand awareness, demand, and conversion. General and administrative expenses were $70.9 million, compared to $75.8 million in the third quarter last year. The decrease in general and administrative expense was driven by lower professional service fees, a reduction in research and development costs, lower bonus expense, and lower employee related expenses. The decrease was partially offset by an increase in equity-based compensation of $6.4 million, due to an accelerated vesting of $40.5 million in connection with the current period modifications related to awards held by the CEO and certain directors compared to equity-based compensation of $36.9 million in connection with the prior period acceleration of vesting of all unvested and outstanding Class B unit awards upon completion of the initial public offering. Change in fair value of contingent consideration of $2.7 million was primarily driven by an increase in the likelihood of achieving the performance targets in the share purchase agreement for the acquisition of Apption Labs. The change in fair value of contingent consideration is based on a preliminary estimate that will be finalized before the filing of the Company’s third quarter Form 10-Q. Goodwill impairment charge of $109.8 million was recorded as a result of the Company's sustained decrease in discounted projections of estimated operating results and cash flows as well as decreased valuation multiples compared to publicly traded companies, resulting in the Company's carrying amount exceeding its fair value. The impairment charge is based on a preliminary estimate that will be finalized before the filing of the Company’s third quarter Form 10-Q. The impairment charge does not affect the Company's cash position, cash flow from operating activities, bank debt covenants, and does not have any impact on future operations. Restructuring costs of $8.0 million were recorded in connection with the 2022 restructuring plan as part of the Company's efforts to reduce costs and drive long-term operational efficiencies due to challenging macroeconomic pressures. The restructuring costs were primarily related to a reduction in force, suspended operations of Traeger Provisions, and postponed nearshoring efforts to manufacture product in Mexico. Net loss was $210.4 million in the third quarter, or $1.75 per diluted share, as compared to net loss of $89.2 million in the third quarter of last year, or $0.78 per diluted share.1 Adjusted net loss was $25.7 million, or $0.21 per diluted share as compared to adjusted net loss of $6.5 million, or $0.06 per diluted share in the third quarter last year.2 Adjusted EBITDA loss was $12.5 million in the third quarter as compared to adjusted EBITDA of $4.1 million in the same period last year.2 ________________________ 1 There were no potentially dilutive securities outstanding as of September 30, 2022 and 2021. 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. Balance Sheet Cash and cash equivalents at the end of the third quarter totaled $8.3 million, compared to $16.7 million at December 31, 2021. Inventory at end of the third quarter was $161.8 million, compared to $145.0 million at December 31, 2021. Inventory growth was driven by increased input costs primarily due to macroeconomic factors, including increased freight rates, logistics costs, commodity prices and other product costs, as well as elevated levels of grill units. Guidance for Full Year Fiscal 2022 The company is updating its full year guidance. Updated guidance reflects continued pressure on replenishment order activity as our retail partners reduce in-channel inventories. Total revenue is expected to be between $635 million and $640 million Adjusted EBITDA is expected to be between $33 million and $35 million A reconciliation of Adjusted EBITDA guidance to Net Loss on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to benefit for income taxes, interest expense, depreciation and amortization, other expense, goodwill impairment, restructuring costs, equity-based compensation, non-routine legal expenses, change in fair value of contingent consideration, offering related expenses, non-routine start-up costs, non-routine acquisition costs, non-routine refinancing expenses, and other adjustment items all of which are adjustments to Adjusted EBITDA. Conference Call Details A conference call to discuss the Company's third quarter results is scheduled for November 9, 2022, at 4:30 p.m. ET. To participate, please dial (844) 200-6205 or +1 (929) 526-1599 for international callers, conference ID 153347. 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 830113. 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, 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. Our grills are versatile and easy to use, empowering cooks of all skill sets to create delicious meals with a wood-fired flavor that cannot be replicated with gas, charcoal, or electric grills. Grills are at the core of our platform and are complemented by Traeger wood pellets, rubs, sauces and accessories. 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 2022 results, our expected annualized savings from our cost optimization initiatives, our ability to rightsize inventory levels and expected timing for doing so, and our ability to realize benefits from our gross margin initiatives and our expected timing for doing so. 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, the impact of the COVID-19 pandemic on certain aspects of our business, 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, 2021 and, once filed, our Quarterly Report on Form 10-Q for the period ended September 30, 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. TRAEGER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) September 30, 2022 December 31, 2021 (unaudited) ASSETS Current Assets Cash and cash equivalents $ 8,349 $ 16,740 Accounts receivable, net 34,370 92,927 Inventories 161,769 145,038 Prepaid expenses and other current assets 28,942 15,036 Total current assets 233,430 269,741 Property, plant, and equipment, net 75,135 55,477 Goodwill 75,805 297,047 Intangible assets, net 523,457 555,151 Other non-current assets 19,075 3,608 Total assets $ 926,902 $ 1,181,024 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 16,109 $ 42,694 Accrued expenses 68,703 69,773 Line of credit 13,451 41,138 Current portion of capital leases 457 420 Current portion of contingent consideration 7,990 12,200 Other current liabilities 3,129 — Total current liabilities 109,839 166,225 Notes payable 430,898 379,395 Capital leases, net of current portion 1,058 677 Contingent consideration, net of current portion 9,420 13,100 Deferred tax liability 11,692 11,673 Other non-current liabilities 437 434 Total liabilities 563,344 571,504 Commitments and contingencies—See Note 12 Stockholders' equity: Preferred stock, $0.0001 par value; 25,000,000 shares authorized and no shares issued or outstanding as of September 30, 2022 and December 31, 2021 — — Common stock, $0.0001 par value; 1,000,000,000 shares authorized Issued and outstanding shares - 122,587,393 and 117,547,916 as of September 30, 2022 and December 31, 2021 12 12 Additional paid-in capital 875,060 794,413 Accumulated deficit (535,979 ) (184,819 ) Accumulated other comprehensive income (loss) 24,465 (86 ) Total stockholders' equity 363,558 609,520 Total liabilities and stockholders' equity $ 926,902 $ 1,181,024 TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) (in thousands, except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue $ 93,788 $ 162,018 $ 517,768 $ 610,613 Cost of revenue 67,810 107,696 334,719 372,353 Gross profit 25,978 54,322 183,049 238,260 Operating expenses: Sales and marketing 25,496 48,519 102,401 126,639 General and administrative 70,882 75,824 142,637 114,182 Amortization of intangible assets 8,889 8,889 26,666 25,491 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Goodwill impairment 109,757 — 221,242 — Restructuring costs 8,036 — 8,036 — Total operating expense 225,770 136,132 505,647 269,212 Loss from operations (199,792 ) (81,810 ) (322,598 ) (30,952 ) Other income (expense): Interest expense (7,337 ) (5,704 ) (20,238 ) (21,393 ) Loss on extinguishment of debt — (3,228 ) — (5,185 ) Other income (expense), net (3,545 ) (426 ) (8,351 ) 1,112 Total other expense (10,882 ) (9,358 ) (28,589 ) (25,466 ) Loss before benefit for income taxes (210,674 ) (91,168 ) (351,187 ) (56,418 ) Benefit for income taxes (225 ) (1,983 ) (27 ) (1,255 ) Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Net loss per share, basic and diluted $ (1.75 ) $ (0.78 ) $ (2.96 ) $ (0.50 ) Weighted average common shares outstanding, basic and diluted 119,924,371 114,382,955 118,682,379 110,631,304 Other comprehensive income: Foreign currency translation adjustments $ (67 ) $ 11 $ (58 ) $ 11 Change in cash flow hedge 12,285 — 24,609 — Total other comprehensive income 12,218 11 24,551 11 Comprehensive loss $ (198,231 ) $ (89,174 ) $ (326,609 ) $ (55,152 ) TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (351,160 ) $ (55,163 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property, plant and equipment 9,703 6,647 Amortization of intangible assets 32,025 27,622 Amortization of deferred financing costs 1,468 1,871 Loss on disposal of property, plant and equipment 707 104 Loss on extinguishment of debt — 5,185 Equity-based compensation expense 80,688 61,711 Bad debt expense (317 ) 634 Unrealized loss on derivative contracts 4,567 4,800 Change in fair value of contingent consideration 1,385 2,900 Goodwill impairment 221,242 — Restructuring costs 1,419 — Change in operating assets and liabilities: Accounts receivable 58,874 (19,192 ) Inventories (16,731 ) (40,331 ) Prepaid expenses and other current assets (6,732 ) (7,479 ) Other non-current assets 64 (219 ) Accounts payable and accrued expenses (43,225 ) 10,031 Other non-current liabilities 22 9 Net cash used in operating activities (6,001 ) (870 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant, and equipment (15,128 ) (17,986 ) Capitalization of patent costs (403 ) (424 ) Business combination, net of cash acquired — (57,041 ) Net cash used in investing activities (15,531 ) (75,451 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 166,978 84,000 Repayments on line of credit (156,666 ) (65,000 ) Proceeds from long-term debt 12,500 510,000 Repayments of long-term debt — (579,915 ) Payment of deferred financing costs — (8,478 ) Principal payments on capital lease obligations (355 ) (283 ) Proceeds from initial public offering, net of issuance costs — 142,544 Payment of acquisition related contingent consideration (9,275 ) — Taxes paid related to net share settlement of equity awards (41 ) — Net cash provided by financing activities 13,141 82,868 Net increase (decrease) in cash and cash equivalents (8,391 ) 6,547 Cash and cash equivalents at beginning of period 16,740 11,556 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,349 $ 18,103 TRAEGER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) (Continued) Nine Months Ended September 30, 2022 2021 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 18,403 $ 18,974 Cash paid for income taxes $ 2,250 $ 1,665 NON-CASH FINANCING AND INVESTING ACTIVITIES Equipment purchased under capital leases $ 952 $ 534 Property, plant, and equipment included in accounts payable and accrued expenses $ 15,512 $ 3,395 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross 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 (Loss), together with a reconciliation of Net Loss to each such measure, and providing Adjusted Net Income (Loss) per share, together with a reconciliation of Net Loss per share to such measure, and Adjusted Gross Margin together with a reconciliation of Gross Margin to such measure, 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of Net Loss or Loss from Continuing Operations or Net 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 (Loss), Adjusted Net Income (Loss) per share, and Adjusted Gross Margin 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 Gross Margin, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted Gross Margin on a consolidated basis. A reconciliation of Adjusted Gross Margin guidance to Gross Margin on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to the impact of restructuring costs recorded in cost of revenue which is an adjustment to Adjusted Gross Margin. Three Months Ended September 30, 2022 Gross margin 27.7% Add: Impact of restructuring costs recorded in cost of revenue 1.7% Adjusted gross margin 29.4% The following table presents a reconciliation of Net Loss and Net Loss per share, the most directly comparable financial measures calculated in accordance with U.S. GAAP, to Adjusted Net Income (Loss) and Adjusted EBITDA, and Adjusted Net Income (Loss) per share, respectively, on a consolidated basis. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (amounts in thousands, except share and per share amounts) Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Adjustments: Other expense (1) 21 3,977 4,095 10,045 Goodwill impairment 109,757 — 221,242 — Restructuring costs (2) 9,644 — 9,644 — Equity-based compensation 53,254 59,210 80,688 61,711 Non-routine legal expenses (3) 788 1,313 3,757 4,068 Amortization of acquisition intangibles (4) 8,253 8,253 24,760 24,760 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Offering related expenses (5) — 2,607 — 3,642 Non-routine start-up costs (6) — 2,883 — 5,863 Non-routine acquisition costs (7) — 2,624 — 2,624 Non-routine refinancing expenses (8) — — — 3,895 Other adjustment items (9) 274 972 1,355 972 Tax impact of adjusting items (10) — (2,078 ) — (2,078 ) Adjusted net income (loss) $ (25,748 ) $ (6,524 ) $ (954 ) $ 63,239 Net loss $ (210,449 ) $ (89,185 ) $ (351,160 ) $ (55,163 ) Adjustments: Benefit for income taxes (225 ) (1,983 ) (27 ) (1,255 ) Interest expense 7,337 5,704 20,238 21,393 Depreciation and amortization 14,382 13,076 41,801 34,515 Other expense (1) 21 3,977 4,095 10,045 Goodwill impairment 109,757 — 221,242 — Restructuring costs (2) 9,644 — 9,644 — Equity-based compensation 53,254 59,210 80,688 61,711 Non-routine legal expenses (3) 788 1,313 3,757 4,068 Change in fair value of contingent consideration 2,710 2,900 4,665 2,900 Offering related expenses (5) — 2,607 — 3,642 Non-routine start-up costs (6) — 2,883 — 5,863 Non-routine acquisition costs (7) — 2,624 — 2,624 Non-routine refinancing expenses (8) — — — 3,895 Other adjustment items (9) 274 972 1,355 972 Adjusted EBITDA $ (12,507 ) $ 4,098 $ 36,298 $ 95,210 Revenue $ 93,788 $ 162,018 $ 517,768 $ 610,613 Net loss margin (224.4 )% (55.0 )% (67.8 )% (9.0 )% Adjusted net income (loss) margin (27.5 )% (4.0 )% (0.2 )% 10.4 % Adjusted EBITDA margin (13.3 )% 2.5 % 7.0 % 15.6 % Net loss per diluted share $ (1.75 ) $ (0.78 ) $ (2.96 ) $ (0.50 ) Adjusted net income (loss) per diluted share $ (0.21 ) $ (0.06 ) $ (0.01 ) $ 0.57 Weighted average common shares outstanding - diluted 119,924,371 114,382,955 118,682,379 110,631,304 (1) Represents gains (losses) on disposal of property, plant, and equipment, impairments of long-term assets, and unrealized gains (losses) from foreign currency transactions and derivatives. (2) Represents costs in connection with the 2022 restructuring plan, including $1.6 million of costs recorded in cost of revenue within the condensed consolidated statements of operations and comprehensive loss. (3) Represents external legal expenses for litigation, patent and trademark defense, and legal costs related to the 2021 acquisition of Apption Labs. (4) Represents the amortization expense associated with intangible assets recorded in connection with the 2017 acquisition of Traeger Pellet Grills Holdings LLC. (5) Represents expenses for legal and consulting costs incurred in connection with our IPO process. (6) Represents start-up costs for investments in Traeger Provisions. (7) Represents consulting and legal costs incurred in connection with the acquisition of Apption Labs (8) Represents expenses primarily for consulting and legal costs incurred to refinance our credit facilities. (9) Represents restoration costs at our wood pellet production facility due to flood damage sustained as a result of a tropical storm, non-cash ground lease expense associated with our build-to-suit lease, payroll tax expense related to the vesting of one-time equity awards in connection with our IPO, and implementation costs related to public company SOX compliance. (10) Represents an adjusted tax rate equal to our annual estimated tax rate on Adjusted Net Income (Loss). This rate is based on our estimated annual GAAP income (loss) tax rate forecast, adjusted to account for items excluded from GAAP income (loss) 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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