Traeger Announces Second Quarter Fiscal 2022 Results

Updates Outlook for Full Year 2022

Announces Actions to Reduce Costs and Inventories

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 June 30, 2022.

Second Quarter FY 22 Highlights

• Total revenues decreased 6.0% to $200.3 million
• Gross profit margin of 36.7% down 240 basis points compared to prior year
• Net loss of $132.3 million, including a non-cash impairment charge of $111.5 million; net loss of $1.12 per share
• Adjusted net income of $4.8 million; adjusted net income of $0.04 per share
• Adjusted EBITDA of $17.9 million

Jeremy Andrus, CEO of Traeger, commented, "In the second quarter, macroeconomic conditions that are pressuring the consumer and changes in spending behavior negatively impacted results. While we had previously considered these factors in our outlook for the year, their impact deepened as we moved through some of our most important selling weeks of the year during the quarter. With softer demand trends, we accelerated efforts to mitigate these pressures. We are taking proactive and immediate steps to drive profitability and financial flexibility, including a cost reduction plan which we expect to drive $20 million in annualized savings. We are anticipating a challenging second half of 2022 as macroeconomic pressures continue to weigh on consumer demand and as our retail partners reduce channel inventories. Despite near-term challenges, I believe we are taking the right steps to position the company to successfully navigate the difficult backdrop. Moreover, I remain highly confident in Traeger's long-term growth opportunity and in our team's ability to drive value for both our shareholders and our consumers."

Operating Results for the Second Quarter

Total revenue decreased by 6.0% to $200.3 million, compared to $213.0 million in the second quarter last year.

• Grills decreased 24.6% to $117.7 million as compared to the second quarter last year. The decrease was primarily driven by lower unit volume, partially offset by a higher average selling price resulting from price increases taken in the second half of 2021 and early 2022.
• Consumables increased 2.2% to $42.1 million as compared to the second quarter last year. The increase was driven by increased average selling prices for wood pellets and other consumables, offset by lower unit volume of pellets.
• Accessories increased 157.2% to $40.5 million as compared to the second quarter last year. This increase was driven primarily by incremental revenue due to sales of MEATER smart thermometers following the July 2021 acquisition of Apption Labs.

North America revenue declined 8.0% in the second quarter compared to the prior year. Rest of World revenues increased 38.4% reflecting the acquisition of Apption Labs and growth in the Company's international markets.

Gross profit decreased to $73.5 million, compared to $83.3 million in the second quarter last year. Gross profit margin was 36.7% in the second quarter, compared to 39.1% in the same period last year. The decrease in gross margin was driven primarily by a shift in product mix relating to the grills category and increased shipping costs, partially offset by increased selling prices.

Sales and marketing expenses were $43.8 million, compared to $47.3 million in the second quarter last year. The decrease in sales and marketing expense was driven by reduced investments in advertising costs for brand awareness and lower professional fees, offset by higher advertising costs associated with MEATER, which was not reflected in the comparable period results.

General and administrative ("G&A") expenses were $28.9 million, compared to $24.8 million in the second quarter last year. The increase in general and administrative expense was driven by higher equity-based compensation expense of $11.3 million, as well as higher personnel-related expenses primarily associated with MEATER, which was not reflected in the comparable period results, and to support our growth. The increases were partially offset by lower professional fees and research & development costs.

Change in fair value of contingent consideration resulted in additional expense of $0.3 million primarily driven by the increase in the likelihood of achieving the revenue performance targets in the share purchase agreement for the acquisition of Apption Labs, and a shorter discount period.

Goodwill impairment charge of $111.5 million was recorded as a result of a decrease in the Company's fair value due to the adverse impacts from macroeconomic conditions such as inflationary pressures and supply chain disruption, unfavorable demand, and the sustained decreases in the Company's publicly quoted share price and market capitalization. The impairment charge is based on a preliminary estimate that will be finalized before the filing of the Company's second 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.

Net loss was $132.3 million in the second quarter, or a loss of $1.12 per diluted share, as compared to net loss of $4.9 million in the second quarter of last year, or $0.05 per diluted share.¹

Adjusted net income was $4.8 million, or $0.04 per diluted share as compared to adjusted net income of $16.7 million, or $0.15 per diluted share in the second quarter last year.²

Adjusted EBITDA was $17.9 million in the second quarter as compared to $27.0 million in the same period last year.²

Balance Sheet

Cash and cash equivalents at the end of the second quarter totaled $13.6 million, compared to $16.7 million at December 31, 2021.

Inventory at end of the second quarter was $163.8 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, rising commodity prices and other product costs. Inventory levels of grills are elevated relative to the current demand forecast given slower than anticipated sales results in the second quarter and an expected reduction in retailer replenishment order activity in the second half of 2022. The company has implemented actions to reduce inventory levels.

Strategic Action Plan

In response to challenging macroeconomic pressures, the Company has implemented several strategic actions intended to drive profitability, improve cash flows, preserve liquidity, and enhance organizational focus. The company's strategic priorities include:

• Reducing expenses. The Company has undertaken an extensive review and prioritization of its cost structure. This review has lead to the implementation of cost optimization initiatives, including the closure of Traeger Provisions and a reduction in workforce in July 2022. The Company expects these initiatives to generate annualized cost savings of $20 million.
• Rightsizing inventories. In an effort to reduce balance sheet inventories, the Company has adjusted production levels to better align finished goods manufacturing with the reduced demand outlook. Furthermore, the Company is working with its retail partners to reduce channel inventories. Balance sheet and channel inventories are expected to be substantially more aligned with demand at the end of 2022, although the optimization process could continue into early 2023.
• Increasing Gross Margin. As previously discussed, the Company has formed a Gross Margin Task Force to identify savings across the supply chain including input costs, packaging, logistics, and warehousing. The Company expects to begin to realize benefits from these initiatives beginning in 2023.

Guidance For Full Year Fiscal 2022

The company is reducing its full year guidance. The reduction in guidance reflects lower than anticipated results in the second quarter, the impact of ongoing macroeconomic pressures on consumer sentiment, and an expected reduction in replenishment order activity as retailers seek to reduce channel inventories.

• Total revenue is expected to be between $640 million and $660 million
• Adjusted EBITDA is expected to be between $35 million and $45 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 provision for income taxes, interest expense, depreciation and amortization, other expense, goodwill impairment, equity-based compensation, non-routine legal expenses, change in fair value of contingent consideration, offering related expenses, non-routine start-up 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 second quarter results is scheduled for August 10, 2022, at 4:30 p.m. ET. To participate, please dial (844) 200-6205 or +1 (929) 526-1599 for international callers, conference ID 520931. 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 184909. 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 June 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.

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