Yeti Q4 Sales Rise 23%
Fourth Quarter Net Sales Increased 23%; Full Year Increased 17%
Fourth Quarter Gross Margin Expanded 150 Basis Points; Full Year Expanded 280 Basis Points
Fourth Quarter EPS decreased 82%; Adjusted EPS increased 29%
Full Year EPS decreased 16%; Adjusted EPS increased 32%
Provides Fiscal Year 2020 Outlook
AUSTIN, Texas–(BUSINESS WIRE)– YETI Holdings, Inc. (“YETI”) (NYSE: YETI) today announced its financial results for the fourth quarter and fiscal year ended December 28, 2019.
Matt Reintjes, President and Chief Executive Officer, commented, “YETI’s 23% net sales growth during the quarter reflects the strength of our brand and innovation. Throughout the year, we outperformed topline expectations, generated sizable gross margin expansion, and consistently executed across our strategic growth drivers thanks to the incredible support of our customers. This momentum is reflected in our fiscal 2020 outlook, highlighted by 13% to 15% net sales growth and ongoing adjusted operating margin expansion. We have set the bar high for the brand and look forward to once again exceeding customer expectations in 2020.”
For the Three Months Ended December 28, 2019
Net sales increased 23% to $297.6 million, compared to $241.2 million during the same period last year.
- Direct-to-consumer (“DTC”) channel net sales increased 35% to $149.0 million, compared to $110.5 million in the prior year quarter, driven by both Coolers & Equipment and Drinkware.
- Wholesale channel net sales increased 14% to $148.7 million, compared to $130.7 million in the same period last year, driven by both Coolers & Equipment and Drinkware.
- Drinkware net sales increased 34% to $192.0 million, compared to $143.5 million in the prior year quarter, primarily driven by the continued expansion of our product offerings, including the introduction of new colorways and sizes, and strong demand for customization.
- Coolers & Equipment net sales increased 12% to $102.3 million, compared to $91.2 million in the same period last year, primarily driven by strong performance in soft coolers, outdoor living products, bags, and cargo.
Gross profit increased 27% to $162.3 million, or 54.5% of net sales, compared to $127.8 million, or 53.0% of net sales, in the fourth quarter of Fiscal 2018. The 150 basis point increase in gross margin was primarily driven by cost improvements, particularly in our Drinkware category, a favorable shift in our channel mix led by an increase in DTC channel net sales, and lower inbound freight, partially offset by higher inventory reserves and increased tariff rates.
Selling, general, and administrative (“SG&A”) expenses increased to $150.4 million, or 50.5% of net sales, compared to $90.2 million, or 37.4% of net sales, in the fourth quarter of Fiscal 2018. Fourth quarter Fiscal 2019 included $40.7 million of one-time non-cash stock-based compensation expense related to pre-IPO performance-based awards that vested and were fully recognized in the fourth quarter of Fiscal 2019. The balance of the increase was primarily due to higher variable selling expenses driven by our faster growing DTC channel, partially offset by lower costs incurred in our ongoing transition to a public company, and other general and administrative cost savings.
Operating income,including the aforementioned stock-based compensation expense, decreased 68% to $12.0 million, to 4.0% of net sales, compared to $37.6 million, or 15.6% of net sales, during the prior year quarter.
Adjusted operating income increased 30% to $59.7 million, to 20.1% of net sales, compared to $45.9 million, or 19.0% of net sales, during the same period last year.
Net income,including the aforementioned stock-based compensation expense, decreased 81% to $4.7 million, or 1.6% of net sales, compared to $25.2 million in the prior year quarter; Net income per diluted share decreased 82% to $0.05, compared to $0.30 per diluted share in the prior year quarter.
Adjusted net income increased 31% to $42.1 million, or 14.1% of net sales, compared to $32.0 million in the prior year quarter; Adjusted net income per diluted share increased 29% to $0.48, compared to $0.38 per diluted share in the prior year quarter.
Adjusted EBITDA increased 29% to $67.5 million, or 22.7% of net sales, from $52.2 million, or 21.7% of net sales, during the same period last year.
For the Twelve Months Ended December 28, 2019
Net sales increased 17% to $913.7 million, compared to $778.8 million in the prior year.
- Direct-to-consumer (“DTC”) channel net sales increased 34% to $386.1 million, compared to $287.4 million in the prior year period, driven by both Coolers & Equipment and Drinkware.
- Wholesale channel net sales increased 7% to $527.6 million, compared to $491.4 million in the same period last year, driven by both Coolers & Equipment and Drinkware.
- Drinkware net sales increased 24% to $526.2 million, compared to $424.2 million in the prior year period, primarily driven by the continued expansion of our Drinkware product offerings, including the introduction of new colorways, sizes, and accessories, and strong demand for customization.
- Coolers & Equipment net sales increased 11% to $368.9 million, compared to $331.2 million in the same period last year, primarily driven by strong performance in outdoor living products, bags, soft coolers, and cargo.
Gross profit increased 24% to $475.3 million, or 52.0% of net sales, compared to $383.1 million, or 49.2% of net sales, in the prior year. The 280 basis point increase in gross margin was primarily driven by cost improvements, particularly in our Drinkware category, and a favorable shift in our channel mix led by an increase in DTC channel net sales, partially offset by higher tariff rates.
Selling, general, and administrative (“SG&A”) expenses increased to $385.5 million, or 42.2% of net sales, compared to $281.0 million, or 36.1% of net sales, in the prior year. Fiscal 2019 included $40.7 million of one-time non-cash stock-based compensation expense related to pre-IPO performance-based awards that vested and were fully recognized in the fourth quarter of Fiscal 2019.The balance of the increase was primarily due to higher variable selling expenses driven by our faster growing DTC channel, higher costs incurred in our ongoing transition to a public company, and increased marketing expenses, partially offset by lower third-party logistics fees and other general and administrative cost savings.
Operating income, including the aforementioned stock-based compensation expense, decreased 12% to $89.8 million, to 9.8% of net sales, compared to $102.2 million, or 13.1% of net sales, during the prior year.
Adjusted operating income increased 27% to $158.1 million, to 17.3% of net sales, compared to $124.2 million, or 15.9% of net sales, during the same period last year.
Net income, including the aforementioned stock-based compensation expense, decreased 13% to $50.4 million, or 5.5% of net sales, compared to $57.8 million in the prior year; Net income per diluted share decreased 16% to $0.58, compared to $0.69 per diluted share in the prior year.
Adjusted net income increased 37% to $103.4 million, or 11.3% of net sales, compared to $75.7 million in the prior year period; Adjusted net income per diluted share increased 32% to $1.20, compared $0.91 per diluted share in the same period last year.
Adjusted EBITDA increased 25% to $187.0 million, or 20.5% of net sales, from $149.0 million, or 19.1% of net sales, during the prior year.
Balance Sheet and Cash Flow Highlights
Inventory increased 28% to $185.7 million, compared to $145.4 million at the end of Fiscal 2018. Inventory levels include the strategic buildup of Drinkware in advance of potential additional tariffs as well as investments to support anticipated sales growth. Excluding the Drinkware buildup, inventory growth was below our reported sales growth for the quarter.
Total debt, excluding finance leases and unamortized deferred financing fees, was $300.0 million, compared to $332.9 million at the end of Fiscal 2018. During Fiscal 2019, we made $34.9 million in debt payments. Our ratio of net debt (as defined below) to adjusted EBITDA for the trailing twelve months was 1.2 times at the end of Fiscal 2019 compared to 1.7 times at the end of the prior fiscal year.
During the fourth quarter of Fiscal 2019, we amended our credit facility and extended the maturity to December 2024. Other changes included increasing the principal amount of our term loan from $298.0 million to $300.0 million, increasing the revolving credit facility from $100.0 million to $150.0 million, and reducing the interest rate spreads.
Cash flow provided by operating activities was $86.9 million and capital expenditures were $32.1 million for the twelve months ended December 28, 2019.
Fiscal 2020 Outlook
Following YETI’s initial full year as a public company and beginning with the first quarter of Fiscal 2020, YETI will revise its definitions of certain non-GAAP financial measures by eliminating several adjustments. These revisions are intended to align with how management will evaluate the performance of the business going forward. Specifically, YETI will no longer include adjustments for investments in new retail locations and international market expansion, transition to the ongoing senior management team, and transition to a public company.
These anticipated changes to YETI’s definitions of non-GAAP financial measures will be implemented when YETI reports its financial results for the first quarter of Fiscal 2020. The Fiscal 2020 outlook and growth rates from Fiscal 2019 financial results are based on these revised definitions. Please see “Revised Non-GAAP Financial Measures Beginning in Fiscal 2020” below for additional information.
For Fiscal 2020, a 53-week period, compared to a 52-week period in Fiscal 2019, YETI expects:
- Net sales to increase between 13.0% and 15.0% compared to Fiscal 2019 (including the impact of the 53rd week, which is expected to contribute approximately $7 million) with strong growth across both channels and led by the DTC channel;
- Operating income as a percentage of net sales between 15.3% and 15.6%;
- Adjusted operating income as a percentage of net sales between 16.3% and 16.6%, reflecting margin expansion of 70 to 100 basis points, driven by higher gross margin;
- An effective tax rate of approximately 25.0%;
- Net income per diluted share is now expected to be between $1.24 and $1.29, reflecting 112% to 122% growth;
- Adjusted net income per diluted share between $1.34 and $1.39, reflecting 26% to 30% growth;
- Diluted weighted average shares outstanding of 87.7 million;
- Adjusted EBITDA between $202.1 million and $207.9 million, or between 19.6% and 19.8% of net sales, reflecting 18% to 21% growth;
- Capital expenditures between $30 million and $35 million; and
- The impact of the 53rd week, which is included in this outlook, is expected to contribute approximately $7 million to net sales and have a nominal contribution to earnings.
Ratio of Net Debt to Adjusted EBITDA
Net debt as of December 28, 2019, which is total debt, excluding finance leases and unamortized deferred financing fees, of $300.0 million less cash of $72.5 million, divided by adjusted EBITDA for Fiscal 2019 was 1.2 times.
Net debt as of December 29, 2018, which is total debt, excluding unamortized deferred financing fees, of $332.9 million less cash of $80.1 million, divided by adjusted EBITDA for Fiscal 2018 was 1.7 times.
Adoption of New Lease Accounting Standard
YETI adopted the new lease standard, Accounting Standards Codification Topic 842 (“ASC 842”), on a modified retrospective basis, effective on the first day of Fiscal 2019. Under this method, financial information related to periods prior to adoption will be presented as originally reported under the previous standard, Accounting Standards Codification Topic 840 (“ASC 840”). The most significant impact of the adoption of ASC 842 was the recognition on our balance sheet of operating lease right-of-use assets of $37.8 million and corresponding operating lease liabilities of $50.0 million and finance leases assets of $1.1 million and corresponding finance lease liabilities of $1.1 million, each as of December 28, 2019. The adoption of ASC 842 had no impact to previously reported results of operations for any interim period.
About YETI Holdings, Inc.
YETI is a growing designer, marketer, retailer, and distributor of a variety of innovative, branded, premium products to a wide-ranging customer base. Our mission is to ensure that each YETI product delivers exceptional performance and durability in any environment, whether in the remote wilderness, at the beach, or anywhere else life takes our customers. By consistently delivering high-performing products, we have built a following of engaged brand loyalists throughout the United States, Canada, Australia, Japan, and elsewhere, ranging from serious outdoor enthusiasts to individuals who simply value products of uncompromising quality and design. Our relationship with customers continues to thrive and deepen as a result of our innovative new product introductions, expansion and enhancement of existing product families, and multifaceted branding activities.