Yeti Holdings Inc. reported adjusted net income increased 40 percent on a 6 percent revenue gain. A 61 percent jump in its direct-to-consumer (DTC) business offset a 24 percent drop in wholesale.

Matt Reintjes, president and chief executive officer, commented, “I would first like to thank our Yeti employees, customers, suppliers and wholesale partners for their unwavering support in this unprecedented and dynamic environment. I am pleased with how our teams have adapted to and remained highly effective with work-from-home, which we expect will remain in place for the foreseeable future.”

Reintjes continued, “Whether setting up in the backyard or chasing new adventures in the outdoors, Yeti remains the brand of choice for active outdoor pursuits. We delivered a strong overall second-quarter performance in the face of significant market disruption. The results are a testament to the resilience of demand for our brand and the power of our diverse omnichannel strategy, led by the strength of our direct-to-consumer business which saw 61 percent growth in the quarter. Throughout this challenging period, we also delivered both gross margin and operating income margin expansion for the quarter while fully paying down our revolver and ending the period with a leverage ratio under 1.0 times.”

Reintjes concluded, “As we plan for the balance of the year, we will remain focused on actively addressing the changing environment while continuing to make strategic investments to drive our brand and innovation. Managing the flexibility of our supply chain and logistics will be a focus as we look to position our inventory to match demand across our channels. Based on the level of continued market uncertainty, we are not providing a 2020 outlook at this time.”

For the Three Months Ended June 27, 2020
Net sales increased 7 percent to $246.9 million, compared to $231.7 million during the same period last year.

  • DTC channel net sales increased 61 percent to $133.0 million, compared to $82.5 million in the prior-year quarter, driven by both Coolers & Equipment and Drinkware. The increase was primarily due to a demand surge for outdoor recreation and leisure lifestyle products as the COVID-19 pandemic has significantly impacted consumers’ views towards how they spend their time experiencing nature and exploring the outdoors, as well as more consumers shopping online while sheltering-in-place.
  • Wholesale channel net sales decreased 24 percent to $113.9 million, compared to $149.2 million in the same period last year, driven by both
  • Drinkware and Coolers & Equipment. While wholesale net sales trends turned positive at the end of the second quarter of 2020, the sharp decline in net sales during April 2020, as a result of temporary store closures, adversely impacted the performance of the wholesale channel.
  • Drinkware net sales decreased 2 percent to $114.3 million, compared to $117.0 million in the prior-year quarter. Drinkware’s performance was driven by significant demand in the DTC channel that was more than offset by a decline in the wholesale channel.
  • Coolers & Equipment net sales increased 18 percent to $128.6 million, compared to $109.1 million in the same period last year. The strong performance was driven by growth in soft coolers, hard coolers, and outdoor living products.

Gross profit increased 18 percent to $137.5 million, or 55.7 percent of net sales, compared to $116.3 million, or 50.2 percent of net sales, in the second quarter of Fiscal 2019. The 550 basis point increase in gross margin was primarily driven by a favorable shift in its channel mix led by an increase in DTC channel net sales, product cost improvements, particularly in its Drinkware category, decreased tariffs, and lower inbound freight, partially offset by an unfavorable impact due to increased inventory reserves.

Selling, general, and administrative (“SG&A”) expenses increased to $91.0 million, or 36.8 percent of net sales, compared to $81.3 million, or 35.1 percent of net sales, in the second quarter of Fiscal 2019. The increase of SG&A as a percentage of net sales was primarily driven by an increase of approximately 380 basis points in variable expenses, driven by its faster-growing DTC channel which grew to 54 percent of net sales during the period. Non-variable expenses leveraged 205 basis points primarily resulting from decreased professional fees, lower non-cash stock-based compensation expense, lower marketing expenses and COVID-19 related savings, including lower travel expenses, and other cost savings initiatives, partially offset by higher fixed selling expenses.

Operating income increased 33 percent to $46.5 million, to 18.8 percent of net sales, compared to $35.0 million, or 15.1 percent of net sales, during the prior-year quarter.

Adjusted operating income increased 26 percent to $49.3 million, to 20.0 percent of net sales, compared to $39.3 million, or 17.0 percent of net sales, during the same period last year.

Net income increased 51 percent to $33.5 million, or 13.6 percent of net sales, compared to $22.2 million, or 9.6 percent of net sales, in the prior-year quarter; Net income per diluted share increased 49 percent to $0.38, compared to $0.26 per diluted share in the prior-year quarter.

Adjusted net income increased 40 percent to $35.6 million, or 14.4 percent of net sales, compared to $25.5 million, or 11.0 percent of net sales, in the prior-year quarter. Adjusted net income per diluted share increased 38 percent to $0.41, compared to $0.30 per diluted share in the prior-year quarter.

Adjusted EBITDA increased 24 percent to $57.9 million, or 23.5 percent of net sales, from $46.6 million, or 20.1 percent of net sales, during the same period last year.

For The Six Months Ended June 27, 2020
Net sales increased 9 percent to $421.4 million, compared to $387.0 million in the prior year.

  • DTC channel net sales increased 47 percent to $212.6 million, compared to $144.2 million in the prior-year period, driven by both Drinkware and Coolers & Equipment. The increase was primarily due to a demand surge for outdoor recreation and leisure lifestyle products as COVID-19 has significantly impacted consumers’ views towards how they spend their time experiencing nature and exploring the outdoors, as well as more consumers shopping online while sheltering-in-place.
  • Wholesale channel net sales decreased 14 percent to $208.7 million, compared to $242.8 million in the same period last year, driven by both Drinkware and Coolers & Equipment. While wholesale net sales trends returned to positive growth at the end of the second quarter of 2020, the sharp decline of net sales during March and April 2020, as a result of temporary store closures, adversely impacted the performance of the wholesale channel.
  • Drinkware net sales increased 9 percent to $226.9 million, compared to $207.9 million in the prior-year period, primarily driven by the continued expansion of its Drinkware product offerings, including the introduction of new colorways and sizes, and strong demand for customization.
    Coolers & Equipment net sales increased 11 percent to $188.1 million, compared to $168.7 million in the same period last year. The strong performance was driven by growth in soft coolers, hard coolers, and outdoor living products.

Gross profit increased 19 percent to $230.0 million, or 54.6 percent of net sales, compared to $192.9 million, or 49.8 percent of net sales, in the prior year. The 470 basis point increase in gross margin was primarily driven by a favorable shift in channel mix led by an increase in DTC channel net sales, product cost improvements, particularly in its Drinkware category, lower inbound freight, and decreased tariffs, partially offset by the unfavorable impact related to increased inventory reserves.

Selling, general, and administrative (“SG&A”) expenses increased to $167.3 million, or 39.7 percent of net sales, compared to $149.1 million, or 38.5 percent of net sales, in the prior year. The increase of SG&A as a percentage of net sales was primarily driven by an increase of approximately 300 basis points in variable expenses, driven by its faster-growing DTC channel which grew to 50 percent of net sales during the period. Non-variable expenses leveraged 180 basis points primarily resulting from lower marketing expenses, lower non-cash stock-based compensation expense, decreased professional fees, and COVID-19 related savings, including lower travel expenses and other cost savings initiatives, partially offset by higher fixed selling expenses.

Operating income increased 43 percent to $62.7 million, to 14.9 percent of net sales, compared to $43.8 million, or 11.3 percent of net sales, during the prior year.

Adjusted operating income increased 29 percent to $67.4 million, to 16.0 percent of net sales, compared to $52.2 million, or 13.5 percent of net sales, during the same period last year.

Net income increased 72 percent to $42.0 million, or 10.0 percent of net sales, compared to $24.4 million, or 6.3 percent of net sales, in the prior year; Net income per diluted share increased 69 percent to $0.48, compared to $0.28 per diluted share in the prior year.

Adjusted net income increased 48 percent to $45.5 million, or 10.8 percent of net sales, compared to $30.7 million in the prior-year period. Adjusted net income per diluted share increased 46 percent to $0.52, compared to $0.36 per diluted share in the same period last year.

Adjusted EBITDA increased 24 percent to $81.8 million, or 19.4 percent of net sales, from $66.1 million, or 17.1 percent of net sales, during the prior year.

Balance Sheet And Cash Flow Highlights
Inventory decreased 23 percent to $138.8 million, compared to $181.4 million at the end of the second quarter of 2019. While its supply chain remained resilient during the second quarter, inventory levels decreased significantly as a result of reduced purchase orders early in the second quarter to align with demand forecasts at the time and to provide enhanced financial flexibility in the midst of COVID-19, coupled with the unplanned nature of the demand surge in DTC net sales, as discussed above.

Total debt, excluding finance leases and unamortized deferred financing fees, was $292.5 million, compared to $309.1 million at the end of the second quarter of 2019. During the first half of 2020, Yeti made $7.5 million in mandatory debt payments and repaid all precautionary first quarter borrowings under its revolving credit facility of $50.0 million. At the end of the second quarter of 2020, Yeti said it had no outstanding borrowings and $150.0 million available for borrowing under its revolving credit facility. Yeti’s ratio of net debt to adjusted EBITDA for the trailing twelve months was 0.9 times at the end of the second quarter of 2020 compared to 1.7 times at the end of the same period last year.

Cash flow provided by operating activities was $72.4 million and capital expenditures were $7.2 million for the six months ended June 27, 2020.

Ratio Of Net Debt To Adjusted EBITDA
Net debt as of June 27, 2020, which is total debt, excluding finance leases and unamortized deferred financing fees, of $292.5 million less cash of $127.5 million, divided by adjusted EBITDA for the trailing twelve months was 0.9 times. Adjusted EBITDA for the trailing twelve months ended June 27, 2020 was $187.3 million and is calculated using the full year 2019 adjusted EBITDA of $171.6 million, less adjusted EBITDA for the first six months of 2019 of $66.1 million, plus adjusted EBITDA for the first six months of 2020 of $81.8 million.

Net debt as of June 29, 2019, which is total debt, excluding unamortized deferred financing fees, of $309.1 million less cash of $38.0 million, divided by adjusted EBITDA for the trailing twelve months was 1.7 times. Adjusted EBITDA for the trailing twelve months ending June 29, 2019 was $156.7 million and is calculated using the full year 2018 adjusted EBITDA of $149.0 million, less adjusted EBITDA for the first six months of 2018 of $58.4 million, plus adjusted EBITDA for the first six months of 2019 of $66.1 million.

Photo courtesy Yeti