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Traeger Announces Second Quarter Fiscal 2021 Results Provides Outlook for Full Year 2021

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SALT LAKE CITY, September 09, 2021--(BUSINESS WIRE)--Traeger, Inc. ("Traeger") (NYSE: COOK), creator and category leader of the wood pellet grill, today announced its financial results for the three-month period ended June 30, 2021.

Second Quarter FY 21 Highlights

  • Total revenue grew 39.1% to $213.0 million as compared to the second quarter last year

  • Gross margin of 39.1%

  • Net loss of $4.9 million

  • Adjusted EBITDA of $26.9 million

"We are extremely pleased and energized by the momentum in our business as we continue to disrupt the grilling industry," commented Jeremy Andrus, CEO of Traeger. "Our strong revenue growth as well as the ongoing expansion and engagement of our passionate and engaged Traegerhood community demonstrate the power of our brand and our business model."

We saw strong performance across regions and product categories. North America revenue increased 36.1% in the second quarter compared to the second quarter of 2020. Performance was driven by the productivity of our omnichannel sales strategy, the strength of our retail partnerships, and investment in top-of-funnel demand creation as we continue to drive brand awareness. We are also seeing exceptional growth in Canada as we optimize our sales and marketing strategy post the acquisition of our two Canadian distributors in late 2020. Rest of World second quarter revenue increased 163.0%, reflecting strong growth in both our direct markets and in markets managed by our third party distributors.

We continue to invest in consumer-led innovation that spans physical and digital products, and consumables. As part of our platform expansion, on July 1, 2021 we acquired Apption Labs (MEATER), a leader in smart meat thermometers. The acquisition further expands our connected cooking platform and enhances the cooking experience.

"Looking ahead, we see a significant opportunity to drive market share gains and remain committed to investing in product innovation, brand awareness, geographic expansion, and infrastructure to support long term and sustainable growth. I want to thank our team for the tremendous enthusiasm and hard work as we continue our journey forward," said Jeremy Andrus, CEO of Traeger.

Operating Results for the Second Quarter

Total revenue increased by 39.1% to $213.0 million, compared to $153.2 million in the second quarter last year, driven by strong performance across the following product categories:

  • Grills increased 40.1% to $156.1 million as compared to the second quarter last year

  • Consumables increased 27.8% to $41.2 million as compared to the second quarter last year

  • Accessories increased 64.8% to $15.7 million as compared to the second quarter last year

Gross profit increased to $83.3 million, compared to $66.7 million in the second quarter last year. Gross profit margin was 39.1% in the second quarter, compared to 43.5% in the same period last year. The decrease in gross margin was due to increased shipping costs and appreciation of the Chinese Renminbi relative to the U.S. Dollar.

Sales and marketing expenses were $47.3 million, compared to $21.0 million in the second quarter last year. This was due to an increase in advertising to expand customer awareness and drive demand, as well as increased investments in talent across marketing, customer experience and sales. The sales and marketing expense growth also reflects an increase in consulting and third-party support services to enhance the customer experience.

General and administrative ("G&A") expenses were $24.8 million, compared to $9.3 million in the second quarter last year. This was largely due to an increase of $10.3 million in professional services in connection with the refinancing of the Company's long-term debt, consulting services, and legal expenses. The increase was also due to higher personnel-related expenses to support growth.

Net loss was $(4.9) million in the second quarter, or a loss of $(0.05) per diluted unit, as compared to a net income of $18.9 million in the second quarter of last year, or $0.17 per diluted unit.1

Adjusted net income was $16.5 million, or $0.15 per unit as compared to adjusted net income of $27.8 million, or $0.26 per unit in the second quarter last year.2

Adjusted EBITDA was $26.9 million in the second quarter as compared to $39.3 million in the same period last year.3

Balance Sheet

Cash and cash equivalents at the end of the second quarter totaled $75.3 million, compared to $11.6 million at December 31, 2020. The cash balance at the end of the second quarter 2021 included $62.1 million provided by the refinancing of the Company's long-term debt that was used to acquire Apption Labs on July 1, 2021.

Inventory at end of the second quarter was $86.2 million, compared to $68.8 million at December 31, 2020. While strategically navigating challenges in the global supply chain, we have managed our inventory balance to a level that represents the right product mix to meet expected demand and targeted levels of safety stock.

Total principal amount outstanding under our New First Lien Term Loan Facility was $510.0 million at the end of the second quarter. On June 29, 2021, the Company refinanced its existing Credit Facilities and entered into a new First Lien Credit Agreement under which it replaced its existing first and second lien term loans. Under the terms of our new credit agreement, we lowered our cost of capital, increased the capacity on our revolving credit facility from $67.0 million to $125.0 million, and added a $50.0 million delayed draw term loan. In addition, we increased the capacity under our receivables financing agreement to $100.0 million.

Long-Term Financial Outlook

"As we move forward, we will continue to make strategic investments to support the enormous growth opportunity that lies ahead for our brand. Over the long-term, we believe that our disruptive business model has the potential to deliver approximately 20% annual revenue growth and 20% adjusted EBITDA margins as we continue to execute on our strategy," commented Dominic Blosil, CFO of Traeger.

Guidance For Full Year Fiscal 20214

The current outlook reflects strong consumer demand, gross margin pressures due to global supply chain challenges, and investment in product innovation, marketing, and growth infrastructure.

  • Total revenue is expected to be between $760 million and $770 million

  • Adjusted EBITDA is expected to be between $103 million and $108 million

A reconciliation of Adjusted EBITDA guidance to net loss on a forward-looking basis cannot be provided without unreasonable efforts, as we are unable to provide reconciling information with respect to interest expense, provision for income taxes, depreciation and amortization, equity-based compensation, other (income) expense, non-routine start-up costs, non-routine legal expenses, offering related expenses, and non-routine offering expenses, all of which are adjustments to Adjusted EBITDA.

Conference Call Details

A conference call to discuss the Company's second quarter results is scheduled for September 9, 2021, at 4:30 p.m. ET. To participate, please dial (646) 904-5544 or (844) 200-6205 for international callers, conference ID 099191. 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 (929) 458-6194 or (866) 813-9403 for international callers, conference ID 611426. A replay of the webcast will also be available approximately two hours after the conclusion of the call on the Company's website as https://investors.traeger.com.

About Traeger

Traeger, headquartered in Salt Lake City, is the creator and category leader of the wood pellet grill, a versatile and easy to use outdoor cooking system. Traeger pellet grills use all-natural hardwood fuel to infuse food with flavorful smoke, making food taste delicious and most of all, memorable. Traeger pellet grills utilize wood-fired convection power to provide 6-in-1 versatility; owners can grill, smoke, bake, roast, braise and barbecue meals on one cooking system.

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 2021 results, including in respect of the impact of the recent Apption Labs acquisition. 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, the following: 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 impacts 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. These and other important factors discussed under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the period ended June 30, 2021 and our other filings with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. 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

(unaudited)

(in thousands, except unit amounts)

June 30,
2021

December 31,
2020

ASSETS

Current Assets

Cash and cash equivalents

$

75,252

$

11,556

Accounts receivable, net

119,898

64,840

Inventories, net

86,151

68,835

Prepaid expenses and other current assets

11,084

13,776

Total current assets

292,385

159,007

Property, plant, and equipment, net

39,288

32,404

Goodwill

256,838

256,838

Intangible assets, net

523,225

539,841

Other long-term assets

7,424

1,491

Total assets

$

1,119,160

$

989,581

LIABILITIES AND MEMBERS’ EQUITY

Current Liabilities

Accounts payable

$

28,955

$

21,673

Accrued expenses

71,883

54,697

Line of credit

8,000

Current portion of notes payable

3,825

3,407

Current portion of capital leases

410

296

Total current liabilities

113,073

80,073

Notes payable, net of current portion

493,434

433,605

Capital leases, net of current portion

750

536

Other non-current liabilities

341

327

Total liabilities

607,598

514,541

Commitments and contingencies—See Note 7

Member’s equity

108,724,422 Member’s capital common units authorized, issued, and outstanding
at June 30, 2021 and December 31, 2020

Member’s capital

573,539

571,038

Accumulated deficit

(61,977)

(95,998)

Total member’s equity

511,562

475,040

Total liabilities and member’s equity

$

1,119,160

$

989,581

Traeger, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

(in thousands, except unit and per unit amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenue

$

213,022

$

153,190

$

448,595

$

266,973

Cost of revenue

129,715

86,502

264,657

148,530

Gross profit

83,307

66,688

183,938

118,443

Operating expense

Sales and marketing

47,269

20,985

78,120

37,703

General and administrative

24,802

9,306

38,358

18,310

Amortization of intangible assets

8,301

8,132

16,602

16,263

Total operating expense

80,372

38,423

133,080

72,276

Income from operations

2,935

28,265

50,858

46,167

Other income (expense), net:

Interest expense

(7,877)

(9,063)

(15,689)

(18,248)

Loss on extinguishment of debt

(1,957)

(1,957)

Other income (expense)

1,996

167

1,538

(600)

Total other expense, net

(7,838)

(8,896)

(16,108)

(18,848)

Income (loss) before
provision for income taxes

(4,903)

19,369

34,750

27,319

Provision for income taxes

4

516

728

547

Net income (loss)

$

(4,907)

$

18,853

$

34,022

$

26,772

Comprehensive income (loss)

$

(4,907)

$

18,853

$

34,022

$

26,772

Net income (loss) attributable to
common unit holders

$

(4,907)

$

18,853

$

34,022

$

26,772

Net income (loss) per unit, basic and diluted

$

(0.05)

$

0.17

$

0.31

$

0.25

Weighted-average number of units
outstanding, basic and diluted

108,724,422

108,724,422

108,724,422

108,724,422

Traeger, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Six Months Ended June 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

34,022

$

26,772

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property, plant and equipment

4,497

3,326

Amortization of intangible assets

16,942

16,593

Amortization of deferred financing costs

1,373

1,344

Loss on disposal of property, plant and equipment

51

50

Loss on extinguishment of debt

1,957

Equity-based compensation expense

2,501

1,254

Bad debt expense

107

Unrealized loss on derivative contracts

4,112

111

Change in operating assets and liabilities:

Accounts receivable

(55,165)

(57,184)

Inventories, net

(17,316)

5,782

Prepaid expenses and other current assets

(1,420)

(1,908)

Other long-term assets

(279)

Accounts payable and accrued expenses

24,798

16,398

Deferred rent

13

34

Net cash provided by operating activities

16,194

12,572

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant, and equipment

(11,248)

(5,427)

Acquisition of subsidiaries

(200)

Capitalization of patent costs

(327)

(250)

Proceeds from notes receivable

21

Net cash used in investing activities

(11,575)

(5,856)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds on line of credit

65,000

57,000

Repayments on line of credit

(57,000)

(50,000)

Proceeds from long-term debt

510,000

Payment of deferred financing costs

(8,478)

(339)

Repayments of long-term debt

(446,355)

(1,704)

Principal payments on capital lease obligations

(184)

(154)

Payment of deferred offering costs

(3,906)

Net cash provided by financing activities

59,077

4,803

Net increase in cash

63,696

11,519

Cash at beginning of period

11,556

7,077

CASH AT END OF PERIOD

$

75,252

$

18,596

Traeger, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

(Continued)

Six Months Ended June 30,

2021

2020

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for interest

$

13,898

$

12,113

Cash paid for income taxes

$

874

$

76

NON-CASH FINANCING AND INVESTING ACTIVITIES

Equipment purchased under capital leases

$

511

$

257

Property, plant, and, equipment included in accounts payable

$

662

$

1,264

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 and Adjusted Net Income is a key performance measure 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, together with a reconciliation of net income (loss) to each 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 and Adjusted Net Income is 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 and Adjusted Net Income help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of net income or income from continuing operations. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees. Each of Adjusted EBITDA and Adjusted Net Income has inherent limitations because of the excluded items, and may not be directly comparable to similarly titled metrics used by other companies.

Adjusted EBITDA

We calculate Adjusted EBITDA as net income (loss) adjusted to exclude provision for income taxes, other (income) expense, interest expense, depreciation and amortization, equity-based compensation, non-routine legal expenses, non-routine start-up costs, offering related expenses, and non-routine refinancing expenses. Other (income) expense are gains (losses) on disposal of property, plant and equipment, impairments of long-term assets, and unrealized gains (losses) from derivatives. Non-routine legal expenses are primarily external legal expenses for litigation, patent and trademark defense, and legal costs related to an acquisition. Non-routine start-up costs represent investments in a new product category. Offering related expenses are primarily for legal and consulting costs incurred in connection with our IPO process. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA and Adjusted EBITDA Margin should be viewed as measures of operating performance that are supplements to, and not substitutes for, operating income or loss, net earnings or loss and other U.S. GAAP measures of income (loss). The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted EBITDA on a consolidated basis.

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(dollars in thousands)

Net income (loss)

$

(4,907)

$

18,853

$

34,022

$

26,772

Adjusted to exclude the following:

Provision for income taxes

4

516

728

547

Other (income) expense

2,538

(351)

5,886

166

Interest expense

7,877

9,063

15,689

18,248

Depreciation and amortization

10,740

10,119

21,439

19,947

Equity-based compensation

1,545

640

2,501

1,254

Non-routine legal expenses

1,512

434

2,754

976

Non-routine start-up costs

2,980

2,980

Offering related expenses

666

1,035

Non-routine refinancing expenses

3,895

3,895

Adjusted EBITDA

$

26,850

$

39,274

$

90,929

$

67,910

Revenue

213,022

153,190

448,595

266,973

Net income (loss) as a percentage of revenue

(2.3)

%

12.3

%

7.6

%

10.0

%

Adjusted EBITDA Margin

12.6

%

25.6

%

20.3

%

25.4

%

Adjusted Net Income

We calculate Adjusted Net Income as net income (loss) adjusted to exclude other (income) expense, equity-based compensation, non-routine legal expenses, amortization of acquisition intangibles, non-routine start-up costs, offering related expenses, and non-routine refinancing expenses. Amortization of acquisition intangibles includes amortization expense associated with intangible assets recorded in connection with the 2017 acquisition of Traeger Pellet Grills Holdings LLC. Adjusted Net Income should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other U.S. GAAP measures of income (loss). The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted Net Income on a consolidated basis.

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(dollars in thousands)

Net income (loss)

$

(4,907)

$

18,853

$

34,022

$

26,772

Adjusted to exclude the following:

Other (income) expense

2,538

(351)

5,886

166

Equity-based compensation

1,545

640

2,501

1,254

Non-routine legal expenses

1,512

434

2,754

976

Amortization of acquisition intangibles

8,253

8,253

16,507

16,507

Non-routine start-up costs

2,980

2,980

Offering related expenses

666

1,035

Non-routine refinancing expenses

3,895

3,895

Tax impact of adjusting items

Adjusted Net Income

$

16,482

$

27,829

$

69,580

$

45,675

____________________________
1
There were no potentially dilutive securities outstanding as of June 30, 2021 and June 30, 2020.
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.
3 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.
4 On July 1, 2021, the Company acquired all of the equity interest of Apption Labs. Full year fiscal 2021 guidance includes the expected financial results of Apption Labs for the second half of 2021.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210909006063/en/

Contacts

Investors:
Jean Fontana / Bruce Williams
ICR, Inc.
investor@traeger.com

Media:
ICR, Inc.
TraegerPR@icrinc.com