YETI Reports Fourth Quarter and Fiscal Year 2018 Financial Results

Fourth Quarter Net Sales Increased 19%

Fourth Quarter Gross Margin Expanded 690 Basis Points

Fourth Quarter Net Income Grew 533%; Adjusted Net Income Increased
379%

Debt Repayments Totaled $152 Million During Fiscal 2018

AUSTIN, Texas–(BUSINESS WIRE)–YETI Holdings, Inc. (“YETI” or the “Company”) (NYSE: YETI) today
announced its financial results for the fourth quarter and fiscal year
ended December 29, 2018.

Fourth Quarter Fiscal 2018 Highlights as Compared to Fourth
Quarter Fiscal 2017

  • Net sales increased 19% to $241.2 million
  • Gross margin improved 690 basis points to 53.0%
  • Net income increased 533% to $25.2 million, or $0.30 per diluted share
  • Adjusted Net Income grew 379% to $32.0 million, or $0.38 per diluted
    share
  • Adjusted EBITDA increased 58% to $52.2 million

YETI reports its financial performance in accordance with accounting
principles generally accepted in the United States of America (“GAAP”)
and as adjusted on a non-GAAP basis. Please see “Non-GAAP Financial
Information” and “Reconciliation of GAAP to Non-GAAP Financial
Information” below for additional information and reconciliations of the
non-GAAP financial measures to the most comparable GAAP financial
measures.

Matt Reintjes, President and Chief Executive Officer of YETI Holdings,
Inc., commented, “We finished 2018 with significant momentum in our
business as we delivered full year results well above our original
outlook and solidly at the high end of the revised outlook. We are
extremely pleased with the strength in our business as our brand and
products continue to resonate with consumers across all markets. We look
forward to building on that momentum throughout 2019 as we continue to
expand our customer base, drive product innovation, grow our
direct-to-consumer business, and expand internationally.”

For the Three Months (Thirteen Weeks) Ended December 29, 2018

Net sales increased 19% to $241.2 million compared with $202.1
million during the same period last year.

Direct-to-consumer (“DTC”) channel net sales increased 45% to $110.5
million compared to $76.0 million in the prior year quarter with strong
performance in both product categories, particularly Drinkware.

Wholesale channel net sales increased 4% to $130.7 million compared to
$126.1 million in the prior year quarter primarily driven by Coolers &
Equipment.

Drinkware net sales increased 24% to $143.5 million compared to
$115.9 million during the same period last year, primarily driven by the
expansion of our Drinkware product offerings, new Drinkware accessories,
and the introduction of new Drinkware colorways during Fiscal 2018.

Coolers & Equipment net sales increased 10% to $91.2 million compared to
$83.0 million during the same period last year, primarily driven by the
expansion of our hard cooler and soft cooler products, as well as the
introduction of several new bags and outdoor living products during
Fiscal 2018.

Gross profit increased 37% to $127.8 million, or 53.0% of net
sales, compared to $93.1 million, or 46.1% of net sales, in the prior
year quarter. The 690 basis point increase was primarily driven by cost
improvements across our product portfolio, the non-recurrence of
inventory reserves taken last year, and an increased mix of DTC channel
net sales. These were partially offset by price reductions taken earlier
in 2018 on select hard and soft coolers in anticipation of new product
introductions as well as higher tariffs.

Selling, General, and Administrative (“SG&A”) expenses
increased to $90.2 million, or 37.4% of net sales, compared to $69.3
million, or 34.3% of net sales, in the prior year quarter. As a
percentage of net sales, SG&A expenses increased 310 basis points.
Approximately 180 basis points of the increase was attributable to
higher costs associated with our transition to becoming a public company
and a non-cash asset impairment charge. The remaining balance of the
increase was primarily due to increased performance marketing and
employee expenses to support the growth of our business partially offset
by other SG&A cost savings.

Operating income increased 58% to $37.6 million, or 380 basis
points to 15.6% of net sales, compared to $23.9 million, or 11.8% of net
sales, during the same period last year.

Adjusted Operating Income increased 63% to $45.9 million, or 510
basis points to 19.0% of net sales, compared to $28.1 million, or 13.9%
of net sales, during the same period last year.

Net income increased 533% to $25.2 million, or $0.30 per diluted
share, compared to net income of $4.0 million, or $0.05 per diluted
share, in the prior year quarter.

Adjusted Net Income increased 379% to $32.0 million, or $0.38 per
diluted share, compared to Adjusted Net Income of $6.7 million, or $0.08
per diluted share, in the prior year quarter.

Adjusted EBITDA increased 58% to $52.2 million from $33.1 million
during the same period last year.

For the Twelve Months (Fifty-Two Weeks) Ended December 29, 2018

Net sales increased 22% to $778.8 million compared with $639.2
million during the same period last year.

DTC channel net sales increased 48% to $287.4 million compared to $194.4
million during the same period last year. Wholesale channel net sales
increased 10%, to $491.4 million compared to $444.9 million in the prior
fiscal year.

Drinkware net sales increased by 37% to $424.2 million compared to
$310.3 million during the same period last year. Coolers & Equipment net
sales increased by 6%, to $331.2 million compared to $312.2 million
during the same period last year.

Operating income increased 60% to $102.2 million, or 13.1% of net
sales, compared to $64.0 million, or 10.0% of net sales, in the prior
fiscal year. The 310 basis point improvement was driven by gross margin
expansion.

Adjusted Operating Income increased 63% to $124.2 million, or
15.9% of net sales, compared to $76.0 million, or 11.9% of net sales, in
the prior fiscal year. The 400 basis point improvement was driven by
gross margin expansion coupled with expense leverage.

Net income increased 275% to $57.8 million, or $0.69 per diluted
share, compared to net income of $15.4 million, or $0.19 per diluted
share, during the same period last year. This reflects an unusually low
effective tax rate of 17% for Fiscal 2018, which was primarily driven by
a significant tax benefit from the exercise of stock options in
connection with our initial public offering (“IPO”) and the reduction of
the U.S federal income tax rate in 2018 as a result of the U.S. Tax Cuts
and Jobs Act.

Adjusted Net Income increased 227% to $75.7 million, or $0.91 per
diluted share, compared to Adjusted Net Income of $23.1 million, or
$0.28 per diluted share, during the same period last year. As mentioned
above, this reflects an unusually low effective tax rate of 17% for
Fiscal 2018, which was primarily driven by the significant tax benefit
from the exercise of stock options in connection with our IPO, and the
reduction of the U.S. federal income tax rate in 2018.

Adjusted EBITDA increased 53% to $149.0 million from $97.5
million during the same period last year.

Balance Sheet and Cash Flow Highlights

Inventory was $145.4 million at the end of Fiscal 2018 compared
to $175.1 million at the end of Fiscal 2017, which represents a 17%
decline. This reduction was driven by improved demand forecasting,
better inventory control across all product categories, and sales above
plan.

Total debt, excluding unamortized deferred financing fees, was
$332.9 million at the end of Fiscal 2018 and our ratio of total net
debt, which is total debt less cash of $80.1 million, to Adjusted EBITDA
for the trailing twelve months was 1.7 times at the end of Fiscal 2018
compared to 4.4 times at the end of the prior fiscal year. During the
fourth quarter of Fiscal 2018, we voluntarily paid down in full the
$47.6 million outstanding balance of Term Loan B and made voluntary and
mandatory payments of $2.4 million and $11.1 million, respectively, to
Term Loan A using the net proceeds from our IPO plus additional cash on
hand.

Cash flow provided by operating activities was $57.2 million and
capital expenditures were $7.5 million for fourth quarter Fiscal 2018.
For Fiscal 2018, cash flow provided by operating activities was $176.1
million and capital expenditures were $20.9 million.

For Fiscal 2019 the Company’s Outlook is as follows:

  • Net sales to increase between 11.5% and 13% compared to Fiscal
    2018 with growth across both channels led by the DTC channel;
  • Operating income as a percentage of net sales between 13.9% and
    14.4%, reflecting margin expansion of 80 to 130 basis points,
    primarily driven by higher gross margin;
  • Adjusted Operating Income as a percentage of net sales between
    15.9% and 16.3%, reflecting margin expansion of flat to 40 basis
    points, primarily driven by higher gross margin;
  • An effective tax rate at a more normalized level of
    approximately 24.5%;
  • Net income per diluted share between $0.84 and $0.89,
    reflecting 22% and 29% growth; assuming a normalized tax rate of 24.5%
    in 2018, earnings growth would be between 34% and 42% (the effective
    tax rate for 2018 was 17%);
  • Adjusted Net Income per diluted share between $0.99 and $1.04,
    reflecting 10% to 15% growth; assuming a normalized tax rate of 24.5%
    in 2018, adjusted earnings growth would be between 18% and 24% (the
    effective tax rate for 2018 was 17%);
  • Diluted weighted average shares outstanding of 86 million;
  • Adjusted EBITDA between $169.0 million and $174.3 million,
    reflecting 13% to 17% growth;
  • Capital expenditures between $35 million and $40 million; and
  • Debt repayments of approximately $80 million and a ratio of net
    debt to Adjusted EBITDA of approximately 1.0 times at the end of
    Fiscal 2019 compared to 1.7 times at the end of Fiscal 2018.

Conference Call Details

A conference call to discuss the fourth quarter and full year Fiscal
2018 financial results is scheduled for today, February 14, 2019, at
8:00 a.m. Eastern Time. Investors and analysts interested in
participating in the call are invited to dial 877-451-6152
(international callers please dial 201-389-0879) approximately 10
minutes prior to the start of the call. A live audio webcast of the
conference call will be available online at http://investors.yeti.com
and by dialing 844-512-2921 and entering the access code 13686383. The
replay will be available until March 7, 2019. A copy of this press
release will be furnished to the Securities and Exchange Commission on a
Current Report on Form 8-K, and will be posted to our investor relations
web site, prior to the conference call.

About YETI Holdings, Inc.

YETI is a designer, marketer, retailer, and distributor of a variety of
innovative, branded, premium products to a wide-ranging customer base.
Our brand promise is to ensure each YETI product delivers exceptional
performance and durability in any environment, whether in the remote
wilderness, at the beach, or anywhere else life takes you. We bring our
products to market through a diverse and powerful omni-channel strategy,
comprised of our select group of national and independent retail
partners and our DTC channel. By consistently delivering high-performing
products, we have built a following of engaged brand loyalists
throughout the United States, Canada, Australia, 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.

Non-GAAP Financial Information

This press release includes financial measures that are not defined by
GAAP, including Adjusted Operating Income, Adjusted Net Income, Adjusted
Net Income per diluted share, and Adjusted EBITDA. We define Adjusted
Operating Income and Adjusted Net Income as operating income and net
income, respectively, adjusted for non-cash stock-based compensation
expense, asset impairment charges, investments in new retail locations
and international market expansion, transition to Cortec Group Fund V,
L.P. and its affiliates (“Cortec”) majority ownership, transition to the
ongoing senior management team, and transition to a public company, and,
in the case of Adjusted Net Income, also adjusted for accelerated
amortization of deferred financing fees and the loss from early
extinguishment of debt resulting from early prepayments of debt, and the
tax impact of all adjustments. Adjusted Net Income per share is
calculated using Adjusted Net Income, as defined above, and diluted
weighted average shares outstanding. We define Adjusted EBITDA as net
income before interest expense, net, provision (benefit) for income
taxes and depreciation and amortization, adjusted for the impact of
certain other items, including: non-cash stock-based compensation
expense; asset impairment charges; accelerated amortization of deferred
financing fees and loss from early extinguishment of debt resulting from
the early prepayment of debt; investments in new retail locations and
international market expansion; transition to Cortec majority ownership;
transition to the ongoing senior management team; and transition to a
public company. The expenses incurred related to these transitional
events include: management fees and contingent consideration related to
the transition to Cortec majority ownership; severance, recruiting, and
relocation costs related to the transition to our ongoing senior
management team; consulting fees, recruiting fees, salaries and travel
costs related to members of our Board of Directors, fees associated with
Sarbanes-Oxley Act compliance, and incremental audit and legal fees in
connection with our transition to a public company. All of these
transitional costs are reported in selling, general, and administrative
(“SG&A”) expenses.

Adjusted Operating Income, Adjusted Net Income, Adjusted Net Income per
diluted share, and Adjusted EBITDA are not defined by GAAP and may not
be comparable to similarly titled measures reported by other entities.
We use these non-GAAP measures, along with GAAP measures, as a measure
of profitability. These measures help us compare our performance to
other companies by removing the impact of our capital structure; the
effect of operating in different tax jurisdictions; the impact of our
asset base, which can vary depending on the book value of assets and
methods used to compute depreciation and amortization; the effect of
non-cash stock-based compensation expense, which can vary based on plan
design, share price, share price volatility, and the expected lives of
equity instruments granted; as well as certain expenses related to what
we believe are events of a transitional nature. We also disclose
Adjusted Operating Income, Adjusted Net Income, and Adjusted EBITDA as a
percentage of net sales to provide a measure of relative profitability.

We believe that these non-GAAP measures, when reviewed in conjunction
with GAAP financial measures, and not in isolation or as substitutes for
analysis of our results of operations under GAAP, are useful to
investors as they are widely used measures of performance and the
adjustments we make to these non-GAAP measures provide investors further
insight into our profitability and additional perspectives in comparing
our performance to other companies and in comparing our performance over
time on a consistent basis. Adjusted Operating Income, Adjusted Net
Income, and Adjusted EBITDA have limitations as profitability measures
in that they do not include the interest expense on our debts, our
provisions for income taxes, and the effect of our expenditures for
capital assets and certain intangible assets. In addition, all of these
non-GAAP measures have limitations as profitability measures in that
they do not include the effect of non-cash stock-based compensation
expense, the effect of asset impairments, the effect of investments in
new retail locations and international market expansion, and the impact
of certain expenses related to transitional events that are settled in
cash. Because of these limitations, we rely primarily on our GAAP
results.

In the future, we may incur expenses similar to those for which
adjustments are made in calculating Adjusted Operating Income, Adjusted
Net Income, and Adjusted EBITDA. Our presentation of these non-GAAP
measures should not be construed as a basis to infer that our future
results will be unaffected by extraordinary, unusual or non-recurring
items.

Forward-looking statements

This press release contains ‘‘forward-looking statements’’ within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical or current fact included
in this press release are forward-looking statements. Forward-looking
statements include statements containing words such as ‘‘anticipate,’’
‘‘assume,’’ ‘‘believe,’’ ‘‘can have,’’ ‘‘contemplate,’’ ‘‘continue,’’
‘‘could,’’ ‘‘design,’’ ‘‘due,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘forecast,’’
‘‘goal,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘may,’’ ‘‘might,’’ ‘‘objective,’’
‘‘plan,’’ ‘‘predict,’’ ‘‘project,’’ ‘‘potential,’’ ‘‘seek,’’ ‘‘should,’’
‘‘target,’’ ‘‘will,’’ ‘‘would,’’ and other words and terms of similar
meaning in connection with any discussion of the timing or nature of
future operational performance or other events. For example, all
statements made relating to our growth plans and expectations and our
expectations for annual growth, including those set forth in the quote
from the Company’s President and CEO, and the Fiscal 2019 financial
outlook provided herein. All forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ
materially from those that are expected and, therefore, you should not
unduly rely on such statements. The risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied by these forward-looking statements include but are not limited
to: our ability to maintain and strengthen our brand and generate and
maintain ongoing demand for our products; our ability to successfully
design and develop new products; our ability to effectively manage our
growth; our ability to expand into additional consumer markets, and our
success in doing so; the success of our international expansion plans;
our ability to compete effectively in the outdoor and recreation market
and protect our brand; problems with, or loss of, our third-party
contract manufacturers and suppliers, or an inability to obtain raw
materials; fluctuations in the cost and availability of raw materials,
equipment, labor, and transportation and subsequent manufacturing delays
or increased costs; our ability to accurately forecast demand for our
products and our results of operations; our relationships with our
independent retail partners, who account for a significant portion of
our sales; the impact of natural disasters and failures of our
information technology on our operations and the operations of our
manufacturing partners; our ability to attract and retain skilled
personnel and senior management, and to maintain the continued efforts
of our management and key employees; the impact of our indebtedness on
our ability to invest in the ongoing needs of our business; and other
risks and uncertainties listed in YETI’s filings with the United States
Securities and Exchange Commission (the “SEC”), including under Item 1A.
Risk Factors and elsewhere in YETI’s quarterly report on Form 10-Q for
the quarter ended September 29, 2018 filed with the SEC on December 6,
2018, as such risk factors may be amended, supplemented or superseded
from time to time by other reports the Company files with the SEC. These
forward-looking statements are made based upon detailed assumptions and
reflect management’s current expectations and beliefs. While YETI
believes that these assumptions underlying the forward-looking
statements are reasonable, YETI cautions that it is very difficult to
predict the impact of known factors, and it is impossible for YETI to
anticipate all factors that could affect actual results.

The forward-looking statements included here are made only as of the
date hereof. YETI undertakes no obligation to publicly update or revise
any forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.

 
YETI Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
       
Three Months Ended Fiscal Year Ended
December 29, December 30, December 29, December 30,
2018 2017 2018 2017
Net sales $ 241,179 $ 202,099 $ 778,833 $ 639,239
Cost of goods sold   113,351     108,976     395,705     344,638  
Gross profit 127,828 93,123 383,128 294,601
Selling, general, and administrative expenses   90,226     69,253     280,972     230,634  
Operating income 37,602 23,870 102,156 63,967
Interest expense (6,806 ) (8,646 ) (31,280 ) (32,607 )
Other (expense) income   (936 )   (562 )   (1,261 )   699  
Income before income taxes 29,860 14,662 69,615 32,059
Income tax expense   (4,691 )   (10,688 )   (11,852 )   (16,658 )
Net income $ 25,169   $ 3,974   $ 57,763   $ 15,401  
 
Net income per share
Basic $ 0.30 $ 0.05 $ 0.71 $ 0.19
Diluted $ 0.30 $ 0.05 $ 0.69 $ 0.19
 
Weighted average common shares outstanding
Basic 83,392 81,535 81,777 81,479
Diluted 85,237 82,841 83,519 82,972
 
 
YETI Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share amounts)
   
December 29, December 30,
2018 2017
ASSETS
Current assets
Cash $ 80,051 $ 53,650
Accounts receivable, net 59,328 67,152
Inventory 145,423 175,098
Prepaid expenses and other current assets   12,211     7,134  
Total current assets 297,013 303,034
Property and equipment, net 74,097 73,783
Goodwill 54,293 54,293
Intangible assets, net 80,019 74,302
Deferred income taxes 7,777 10,004
Deferred charges and other assets 1,014   1,011  
Total assets $ 514,213   $ 516,427  
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 68,737 $ 40,342
Accrued expenses and other current liabilities 53,022 45,862
Taxes payable 6,390 12,280
Accrued payroll and related costs 15,551 6,364
Current maturities of long-term debt   43,638     47,050  
Total current liabilities 187,338 151,898
Long-term debt, net of current portion 284,376 428,632
Other liabilities   13,528     12,128  
Total liabilities 485,242 592,658
Commitments and contingencies
Equity

Common stock, par value $0.01; 400,000 shares authorized; 84,196
and 81,535 shares
outstanding at December 29, 2018 and
December 30, 2017, respectively

842 815
Preferred stock, par value $0.01; 30,000 shares authorized; no
shares issued or outstanding
Additional paid-in capital 268,327 219,095
Accumulated deficit (240,104 ) (296,184 )
Accumulated other comprehensive (loss) income   (94 )   43  
Total stockholders’ equity (deficit)   28,971     (76,231 )
Total liabilities and stockholders’ equity $ 514,213   $ 516,427  
 
 
YETI Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands, except per share amounts)
   
Fiscal Year Ended
December 29, December 30,
2018 2017
Cash Flows from Operating Activities:
Net income $ 57,763 $ 15,401
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 24,777 20,769
Amortization of deferred financing fees 3,425 2,950
Stock-based compensation 13,247 13,393
Deferred income taxes 2,226 8,500
Impairment of long-lived assets 2,209
Loss on early extinguishment of debt 694
Changes in operating assets and liabilities:
Accounts receivable, net 7,675 (29,909 )
Inventory 29,583 71,040
Other current assets (5,089 ) 17,915
Accounts payable and accrued expenses 43,740 27,992
Taxes payable (5,876 ) (12,805 )
Other   1,694     12,505  
Net cash provided by operating activities   176,068     147,751  
Cash Flows from Investing Activities:
Purchases of property and equipment (20,860 ) (42,197 )
Purchases of intangibles, net (11,027 ) 4,926
Changes in notes receivables 1,416
Cash paid to Rambler On for acquisition (2,867 )
Proceeds from sale of long-lived assets   165      
Net cash used in investing activities   (31,722 )   (38,722 )
Cash Flows from Financing Activities:
Changes in revolving line of credit (20,000 )
Repayments of long-term debt (151,788 ) (45,550 )
Payments of deferred financing fees (1,957 )
Cash paid for repurchase of common stock (1,967 )
Proceeds from employee stock transactions 262 99
Taxes paid in connection with exercise of stock options (57 ) (2,018 )
Dividends (2,523 ) (2,811 )
Proceeds from issuance of common stock, net of offering costs   38,083      
Net cash used in financing activities   (117,990 )   (72,237 )
Noncash Investing Activities:
Changes related to acquisition of Rambler On       (4,432 )
Total noncash investing activities (4,432 )
Effect of exchange rate changes on cash 45 (1 )
Net increase in cash 26,401 32,359
Cash, beginning of period   53,650     21,291  
Cash, end of period $ 80,051   $ 53,650  
 

Contacts

Investor Relations:
Tom Shaw, 512-271-6332
[email protected]

Media:
Alecia Pulman, 203-682-8224
[email protected]
Brittany
Fraser, 646-277-1231
[email protected]

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