Good afternoon. And thank you for attending today’s Traeger Second Quarter Earnings Call. My name is Jason, and I will be the moderator for today’s call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Nick Bacchus with Traeger. Please go ahead.

Good afternoon, everyone. Thank you for joining Traeger’s call to discuss its second quarter 2022 results, which were released this afternoon and can be found on our website at investors.traeger.com. I am Nick Bacchus, Vice President of Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer; and Dom Blosil, our Chief Financial Officer. Before we get started, I want to remind everyone that management’s remarks on this call may contain forward-looking statements that are based on current expectations, but are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein. We encourage you to review our annual report on Form 10-K for the year ended December 31, 2021, our quarterly report on Form 10-Q for the quarter ended June 30, 2022, once filed and our other SEC filings for a discussion of these factors and uncertainties, which are also available on the Investor Relations portion of our website. You should not take undue reliance on these forward-looking statements, which speak only as of today and we undertake no obligation to update or revise them for any new information. This call will also contain certain non-GAAP financial measures, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release, which is available on the Investor Relations portion of our website at investors.traeger.com. Now I’d like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Jeremy?

Thank you, Nick. Thank you for joining our second quarter earnings call. Today, I will discuss our second quarter results and our near-term strategic priorities. I will then turn the call over to Dom to discuss details on our quarterly financial performance and to provide an update on our fiscal 2022 guidance. During the second quarter, our business was negatively impacted by several macro related headwinds, which drove materially lower than anticipated topline results for the quarter. These pressures and other headwinds are negatively impacting our outlook for the balance of the year. Despite a very challenging backdrop, I remain confident in the positioning of the Traeger brand as a disruptor and innovator in the grilling category, and in our ability to navigate current challenges. Our long-term business thesis has not changed. We continue to believe the Traeger brand is an incredible one, and that we have a large opportunity to meaningfully grow our household penetration. However, we are also fully aware that our near-term trajectory has changed and that it will take us longer to achieve our previous goals. As such, we are taking decisive action with a high level of urgency in order to position the company for future growth, profitability and to drive long-term shareholder value. On the last two earnings conference calls, I reviewed our progress on each of our four strategic growth pillars. Given the rapidly evolving backdrop and the change in our outlook for the year, I would like to instead focus on our assessment of the near-term dynamics that are pressuring the business and the actions and strategies we have implemented to navigate the environment. Then I will discuss why I continue to be confident in Traeger’s long-term growth opportunity. In the second quarter, our sales were $200 million, down 6% the prior…

Thanks, Jeremy, and good afternoon, everyone. As Jeremy discussed, we faced macroeconomic headwinds in the second quarter that negatively impacted our topline performance and will continue to pressure our results for the balance of the year. While the challenging consumer backdrop was built into our thinking when we provided guidance earlier this year, economic conditions worsened during the second quarter and the corresponding impact to sales in our peak season was greater than anticipated as consumers shifted spending away from our category. Shifts in consumer behavior and the deteriorating economic conditions have led to higher levels of channel inventories, resulting in a dramatic shift in retail ordering patterns that we anticipate will pressure sales in the second half of 2022. Given pressures on the topline during the second quarter, we accelerated our expense reduction efforts. We are taking swift and aggressive actions to mitigate pressures on the P&L and to drive efficiencies in our business, with a focus on positioning Traeger to successfully navigate today’s economic cross currents. I will outline these actions after reviewing our second quarter results and then we will provide an update on our 2022 outlook. Second quarter revenues declined 6% to $200 million due to the decline in grill revenue. Grill revenue declined 25% to $118 million. Grill revenue was impacted by lower unit volumes, partially offset by higher average selling prices, driven by price increases taken in the second half of 2021 and the first quarter of 2022, as well as a mix shift to higher ASP grills. Consumables revenue increased 2% to $42 million, with growth driven by increased distribution in our rubs and sauces business. Finally, accessories revenue increased 157%, driven by incremental revenue from the acquisition of MEATER. Geographically, second quarter North American revenue was pressured by the aforementioned challenges in…

[Operator Instructions] Our first question comes from Simeon Siegel with BMO. Your line is now open.

Thanks. Hey, everyone. Good afternoon. Can we -- in light of everything else the raised full year gross margin expectations interesting, all things considered, I think, you did beat this quarter’s gross margin. So can we drill into the comfort in raising that gross margin a bit more, maybe specifically address the comment about selective promotions you might do, maybe what you are thinking about freight will be in the back half, maybe give a little more color on the cadence of 3Q versus 4Q and the rate there? And then if you can just -- what was that shift in grill product mix that you mentioned that impacted this quarter? Thanks a lot.

Yeah. Hey, Simeon. How are you doing? So on the gross margin side, yeah, we are just building confidence in the forecast and some of the predictability that we are seeing in gross margin. We -- we are definitely fine-tuned in terms of the effort that’s placed both into how we forecast gross margin. How we have configured around these initiatives tied to our gross margin task for us. And so as you think about this dynamic, there continue to be macro pressures that we face in gross margin, but they are stabilizing, and so fortunately, we are not seeing building headwinds there. I think second, we are starting to actually realize some benefit in cost of goods specific to currency. So that’s becoming a tailwind and we are starting to see that materialize in gross margin, and we expect that to be a tailwind for the remainder of the year. The task force continues to unlock savings that we capture and the run rate economics of the future P&L. So that creates a nice foundation as we kind of build our strategy around how to move inventory and pulsing these promotions accordingly. And I think just given some of the tailwinds that are building improved predictability, the benefit from direct import, which is offsetting some of the inbound transportation costs, as well as just some other improvements, whether it be in dilution or other areas of the business. We feel like -- and on top of it, just the fact that the price increases that we have taken over the last three quarters are doing what they were intended to do. We have some cushion within gross margin to post these promotions without impacting gross margin, and in fact, we have confidence that we can raise to the high…

Great. Thanks. And then, hey, Jeremy, just sticking on that, the marketing comment. So recognizing the challenges now, but also noting your comments about the long-term opportunity. How do you want us to think about it or how are you thinking about, I guess, approaching lower or pulling back on marketing now to which makes sense with revs versus the notion of brand awareness, which is, obviously, as you think about the Traeger brand going forward?

Yes, Simeon. A couple of thoughts. The first is that, it became clear to us as we came into the spring that consumers were focused elsewhere, notably on sort of travel, leisure, experience driven spend and so that was the first sort of strong indication that we should be pulling back. But I think also, as we think about the mix, let’s say, six months to 12 months, until we start investing again more meaningfully in top of funnel for a customer acquisition. There are two things that we are focused on. The first is execution at retail. We have a field sales team of 50 individuals in ensuring that the brand is set well at retail that we are really training retail associates to capture the captive traffic that is walking into their stores is important. The second is an investment in, I would say, community engagement, which is more sort of mid funnel, ensuring that the brand stays strong, the metrics around engagement, cooking, social engagement. The leverage we get on that is not only long-term brand strength, but it’s evangelism in the near-term. We feel like that’s a better and more predictable investment until we feel like we both have investment capacity and the consumer who’s more focused on this category.

Great. Thanks a lot, guys. Best of luck for the rest of the year.

Thanks.

Thanks, Jeremy.

Our next question comes from John Glass with Morgan Stanley. Your line is now open.

Thanks. Good afternoon. First, can you just talk -- do you have a sense what is the size of the inventory at the retail channel, you have a good either metric, either days outstanding or absolute dollar amount that’s there?

Yeah. We don’t -- we are not going to speak to that specifically on or we won’t share that kind of publicly. But I think what I would generally say to answer the question is that, they are much higher than we typically like them to be. We have talked in the past about our collaborative planning process with supply -- with the supply planners at our largest retail accounts and we typically try to hold inventory levels consistent within a band that we are both comfortable with and that typically aligns with our retail partner strategy as they manage on-hand inventory levels to support future growth or performance at retail. And I think what ultimately happened is, heading into the year, in-channel inventory levels were probably slightly above what they normally are and that’s due to the fact that our retail partners had made a decision coming out of the pandemic in a position of sort of starved inventory and sort of out of stock product that they ultimately right-sized and probably overcorrected. Jeremy alluded to this bullwhip effect, which is obviously headline news, and I think we are all familiar with now. And that began to grow over the course of Q1, which typically happens ahead of our peak sell-through season. And I think what ultimately took place late in May when we started to pick up some real demand signals that suggested a deviation from expectations is that there was going to be a heavier in-channel inventory problem than we were hoping for. So our team started to react in kind and began partnering with retail to try to figure out what’s going on, what their REIT is, and they were actually even later than we were to react. And ultimately, in kind of like in June,…

Thanks for that. And can you just -- you talked about the leverage ratio, I think, it’s around 7 turns. Can you just talk about covenant risk or access to incremental liquidity if you needed, I assume this is a period you thought you would be getting cash from reduced inventories that didn’t happen. Can you just paint that picture where you are on that liquidity front, please?

Yeah. For sure. So liquidity is our number one focus and at least through the end of June, we feel comfortable with our liquidity position. We still have nice capacity on our cash flow revolver, a little bit of cash on the balance sheet. But most of that liquidity is really tied up in inventory, and again, that’s something that is going to take longer to work through, which is why we have shifted our viewpoint on cash flow generation this year. On the covenant side, we are proactively managing balance sheet, we always do, and one of the things that we initiated in kind of Q2 and then heading into Q3 is an amendment holiday on our credit agreement, which will allow for, one, an increase to our covenant ratio from 6.2 turns to 8.5 turns and that provides ample relief on the covenant and ample cushion as we manage TTM EBITDA as defined by that credit agreement through year-end. And so that really checks the box on providing additional flexibility to kind of navigate this higher leverage period of time and provide cushion against that covenant. But at the end of the day, our main focus really now is on liquidity and ensuring that we are making the right actions or taking the right actions to preserve and protect liquidity in a fairly challenging moment. And as we sort of work down these excess inventory levels, find ourselves in a much better liquidity position at the start of 2023. So I’d say that we are feeling pretty good about some of these efforts and that we have sort of put into motion and we are fortunate in that we have good partners on the credit side that will allow us to bridge from now to when the covenant holiday expires, which -- or the amendment holiday expired, which is at the end of Q2 2023.

All right. Thank you. That’s helpful.

Our next question comes from Kaumil Gajrawala with Credit Suisse. Your line is now open.

Hi, guys. Could you talk a little bit about kind of inventory in the supply chain versus number of units? You have already talked quite a bit about inventory at actual retail partners and such, but not that long ago, we had the capacity constrained in the supply chains and stuff. So do you still have a lot of units, I guess, coming over and how do you account for that given the new environment?

Yeah. Good question. So, no, we are -- we have talked a little bit about on our prepared remarks around our strategy to work down these higher inventory levels. And it really starts with kind of managing down in channel, like I referenced earlier. And we are doing that through a combination of actions, one of which is posting incremental promotions, which we have learned based on sell-through data when we promote that there is a nice lift in sell-through. So that’s really one to kind of work down those levels. We have actually also lowered or reverted back to our original price points on our entry level products to stimulate more growth sub-$1,000, where we are seeing more sensitivity with consumers that are purchasing below $1,000 and we are seeing a nice lift there. And then obviously, just working with our retailers to ensure that we are moving product and -- or sort of in lockstep as they destock. On the supply side, we are working with our factories to bring or we have been working with our factories to bring those production levels down to sort of minimum levels, which in turn will allow us to focused primarily on what we have on hand. And so from an in-transit inventory standpoint, we are going to manage that down to a very low number and that in turn should accelerate our ability to work down our on-hand levels in conjunction with improving in-channel, which in turn should ultimately position us at the start of 2023 in a much better spot so that we can rebalance sell-in against sell-through and replenishment and sort of find steady state based on that balance. And so that’s really what we are focused on and feel confident that we will get there largely by year-end.

Got it. And then from a demand perspective, have you guys thought about or is there anything maybe you can add on, perhaps what we are seeing right now is just a little bit of demand pull-forward and the replacement cycle if it was a typical, I think we were using kind of four years or something as a typical replacement cycle. Maybe that shrunk coming out of the pandemic and if you were to think of maybe what a run rate would look like. Can you maybe just give some context on is some of this just demand pull-forward as opposed to some of these bigger macro things that we are worried about across a whole series of industries?

Yeah. Hey, boy. It’s a great question. It’s a -- it’s not easy to really pull apart all of the factors driving demand. There certainly has been a fair bit of noise that we felt since March. I think it’s clear that there was some pull-forward. This is a fairly steady business, sorry, fairly steady category, the outdoor cooking category that was growing low-single digits, grew mid-high teens in 2021. So although there may have been some nominal incremental penetration in the U.S. household, there was probably some pull-forward of replacement cycles. Hard to know how much of the -- how much of what we are feeling now is a function of that pull-forward, but certainly some of it, relative to general consumer weakness and sort of consumer reprioritizing discretionary spend towards travel. It is something that we are monitoring closely at a category level. And I would just say, one of the other trends that we are seeing in the category that’s notable is that, there is more softness in opening price points and I think that probably speaks a little bit more to at least that trend towards consumer weakness, I think, a combination of three things.

I would add though that, with some of that pull-forward. I mean, the benefit of this business model is when you accelerate the installed base of grills that in turn, I think, drives improvement or growth across our consumables business and even accessories. And so when you look at both sell-in as reported in Q2, as well as sell-through trends across our consumables and accessories categories, you are just not seeing the same impact, right? So on a two-year and three-year stack, even year-over-year, when you look at sell-through trends across pellets, accessories and other consumables, the decline is fairly muted and somewhat comparable to what we reported in our GAAP financials. And I think at the end of the day, that really helps sort of stabilize some of the pain we are feeling with maybe some of that pull-forward and how that impacts future growth or at least growth in year around the grill category. And I think that’s a stabilizing factor that we really always want to lean into. I think the behavior of our consumers and how they interact with the product as measured by our IoT data sort of attach rates on pellets. They are holding at levels that make -- both make sense and haven’t really deviated from normal trends. And so those are all really positive signals pre a rebound in grill growth, which we are really taking advantage of and believe that the strength of the broader portfolio is something that’s sustainable and durable long-term. We just so happen to be dealing with a more challenging environment right now with our higher priced products, meaning our grill category.

Okay. Great. That’s useful. Thank you, guys.

Our next question comes from Peter Benedict with Baird. Your line is now open.

Hi, guys. A couple of questions, so, Dom, can you maybe give us some help here, what level of inventory or dollar inventory on the balance sheet would align with this normalization of goal that you have? And then how are you thinking about free cash flow this year or CapEx spend, just trying to understand, given the dynamics you have got here laid out in the back half of the year, where is the good job those metrics by the end of the year?

Yeah. Happy too. So as we think about kind of our general guidelines as we manage inventory and I guess to just unpack the Q2 inventory levels a little bit further. I spoke on the call to the fact that about $14 million of that is MEATER, which wasn’t in the baseline, so you have to remove that. And then if you normalize Q2 for pre-pandemic days in inventory, and you account for the fact that our inventory is burdened with excess cost between inbound transportation, the inflationary pressures on raw materials, as well as what was historically some negative impact on currency, which is now improving. And then you look at the excess inventory component of sort of the build in total inventory for Q2 as you bridge from Q2 to Q2 of 2021. I would say that the split between outside of MEATER or the split between the higher burden and the excess inventory probably weighs more in favor with excess. But that delta is probably a mix of kind of 30% to 50% on excess and then the remainder being just the higher cost of inventory. And so just by nature, inventory is going to sort of sit at higher levels, because it’s more expensive to carry right now and that should improve over time as these macro factors improve, and we can capture that in future purchases out of Asia. But as you sort of push that then forward, what we are really focused on is the excess inventory component. MEATER has the inventory that they need. The burden on inventory carrying cost is what it is until that sort of improves from a macro standpoint and the remainder is what we are sort of in control of from an excess inventory standpoint. And so the…

Okay. That’s helpful. Anything on CapEx or free cash flow as you think about the full year?

Free cash flow? Yeah. We expect free cash flow negative by year-end.

Okay. And how about…

Just given the fact that we will have cash tied up in inventory. Say that again?

Yeah. Yeah. No. Understood. Just to add the level of CapEx spend you are expecting for the year and if that’s been adjusted at all?

Yeah. We are adjusting that down. We have a few commitments that we are locked into. But we are probably targeting between $4 million and sort of $6 million a quarter through year-end…

And then as you think about…

Some of that tied to capitalized, oh, go ahead.

Yeah. No. No. That’s great. And then how are we thinking about just grow revenue, I guess, over the back half of the year 3Q versus 4Q? And what are you guys seeing in terms of market share, I mean, obviously, there’s not a lot of demand in the segment right now, but are there any reads on market share that you guys can share with us?

Yeah. I think market share is holding consistently, at least for Traeger, our market share has held through -- on a year-to-date basis. We are seeing share decline among some of our competitors. So I think that’s a positive signal in that the category is down and Traeger is maintaining share. And in terms of kind of our read through the remainder of the year, we don’t really have a specific number to share. But I think at least through Q2 we are holding our market share and I think that’s a good brand signal.

Okay. And then last question I would just have is around gross margin, you are eyeing around 35% for this year, you talked about some benefits from direct import program, obviously, the container rate dynamics, which could end up playing out next year. How do you think about that longer term, a lot of factors that itch you this year? If you just think about things not necessarily getting any better than where they are today, but the container rates start to come in. I mean how much of a benefit could that be next year, is that 100 basis points, is it 200 basis points, is it 50? Just how would you help us frame that potential benefit in 2023 to your gross margin?

Yeah. It’s a little too early to speak to that right now. But what I would say is that, as you look at spot container rates to the East and the West Coast, compared to like peak levels in the back half of last year, they are off about 50% and I would say they are off probably 20% to 25% relative to the H2 2021 average and that’s a meaningful improvement, right? It’s not getting anywhere near where we were paying pre-pandemic levels. But if you think about a dynamic where inbound transportation is sort of hovering kind of 20% to 25% below those leverages last year and that trend seems to be improving from here through the end of the year. And the fact that at least year-to-date, inbound transportation is probably driving 200 basis points to 300 basis points, 400 basis points of margin compression, it was much larger in the back half of last year, it could be a substantial tailwind to gross margin and so something that we are watching and believe that will be a tailwind for 2023, but a little bit too early to speak specifically to what that could mean.

Our next question comes from Sharon Zackfia with William Blair. Please limit yourself to asking one question and one follow-up, please. Thank you. Your line is now open.

Hey, guys. This is Alex [ph] on for Sharon. And yeah, so we would just wondering if you could maybe talk through the $20 million of annualized savings. How much of that is in SG&A versus cost of sales and then do you guys have any plans to reinvest part of those savings into sales driving initiatives going forward?

Yeah. Good question. So to answer your first question it’s mostly SG&A and just to reiterate, it is a run rate number, right? So that’s not what we anticipate capturing in our run rate economics through the remainder of the year. That’s sort of the annualized component or the extended annualized savings based on those initiatives and they are largely, if not a -- really a majority of those savings will be in SG&A. In terms of, to answer your second question, I think right now the focus is more on profitability than growth. We are pulling levers to drive and stimulate growth to the extent that we can, where we have controls. One of those is posting of promotions, as I had mentioned earlier, and obviously, adjusting price at entry at opening price points for the brand, as well as a host of other initiatives that our sales team is constantly focused on. But as of right now, I think, we need to really prioritize profitability, which in turn prioritizes liquidity and we aren’t planning to take those savings and reinvest them anywhere else. We want those to flow through down to profitability.

Okay. Great. And then just one other quick one, if you could -- if I could squeeze this in. So you guys talked about the impact to the sub-$1,000 grills that some consumers are slowing purchases there. Could you maybe talk to the higher priced grills and just qualitatively, what you are seeing on sales momentum on that side? You touched on the Timberline XL having a bit -- just not having economics there, but just what you are seeing on the qualitative side of the higher priced grills?

Yeah. So I think below $1,000, we are seeing declines in growth and that’s partially offset by what -- by collectively some growth above $1,000 and that is being built up by the new Timberline Grills. But we aren’t seeing the same pressures above $1,000 and on sort of a collective basis some growth above $1,000 relative to a fairly substantial decline below $1,000, which is sort of adding up to the decline in our grill category for the quarter. And those trends are both consistent from a sell-in standpoint, as well as a sell-through standpoint.

Okay. Great. Thanks for that color. I will pass it on.

Our next question comes from Peter Keith with Piper Sandler. Your line is now open.

Hey. Thanks. Good afternoon, everyone. Yeah. I wanted to circle back on some of the balance sheet questions and the debt leverage. I am just doing a real simple math, but if you are carrying the $465 million of debt right now and you are going to do $40 million of EBITDA for the year as a midpoint of the guide, that gets you to 11.5 times leverage. So that would be well above that I think the 8.5 times leverage holiday that you are getting, and so at the same time, you are saying free cash flow is probably going to be negative for the year. So how do you not land above that covenant limit as we look to the back half of the year?

Yeah. No. It’s a good question and definitely worth clarifying. So our credit agreement defines EBITDA differently. So what we report in our financial information, say, in the 10-Q or our 10-K is a different definition of EBITDA. It doesn’t take advantage of certain add backs that are permitted in the credit agreement. It’s also measured based on a different quantum of debt. So we are able to exclude the AR facility as part of the first-lien net leverage ratio test and so that 8.5 times covenant is based on first lien net leverage, I am sorry, first lien net debt exclusive of the AR facility, and consolidated EBITDA, which is the definition in our credit agreement, that allows for incremental add-backs that are fairly material and sort of define a consolidated EBITDA number on a pro forma basis, but substantially larger than what we report in our financials. And so based on that measure, as we look at kind of where we landed in Q2, we probably had a little bit of cushion against what was originally the covenant of 6.2 times as we kind of factor in the amendment holiday and the 8.5 times covenant. We actually have substantially more cushion as measured by that pro forma or consolidated EBITDA definition and it provides for far more flexibility in terms of how we manage leverage with our creditors. And I think that ample cushion translates into a nice bridge for Traeger to really focus more on execution, navigating these business challenges without having to worry about where our leverage is headed, because we can manage to do that based on this amendment, as well as just how we sort of manage EBITDA differently from a credit standpoint. And so that in turn adds more cushion to the covenant and allows us to, again, just focus on executing and running the business versus having to aggressively manage against the covenant and focus more on liquidity. And so that’s really kind of the nuance there is, it’s not a function of the EBITDA that we report. It’s actually a different definition of EBITDA that translates into far more cushion against that 8.5 times leverage ratio or covenants that we have to track against from quarter-to-quarter.

Okay. That’s helpful, Dom. And then maybe pivot a question to Jeremy. So there’s obviously some pullback on expenses and a little bit on advertising, but some of your key growth initiatives around the retail and merchandising efforts and product innovation, product launches. Are those remaining on plan and on track so you will have more of these things rolling out in 2023 or are those areas of pullback as well?

Hi. Great question. I would start broadly by saying that in a moment where investment capacity is constrained, it is a great forcing mechanism of prioritization and discipline and we have spent a lot of time thinking about where do we get the highest return from our investments. There is no question that the two that you have named are at the top of that list for sales and marketing investment that is available. So merchandising, we have believed from the very first day before we had a marketing department that showcasing the brand effectively at retail is good investment, being there to speak to and communicate with captive consumers. We will continue in those investments. We will obviously think carefully about which retailers, which retail locations and what quantum of investment in point-of-sale merchandising. But those that are on the top of the list will absolutely get funded across channels. And we have spoken specifically about our investment in upgrading brand presence in Home Depot. Those will continue. We had a plan in the back half of the year and we are going to continue to execute on that plan. On the product side, I would say, I would make a similar comment, which is product is the lifeblood of our future. We know that with a strong brand and community and great channel partners that when we put good product into those -- into that engine we get a great return and so we are continuing our product investments. Again, on the product side, there’s a lot going on behind the scenes and it certainly forces us to determine where do we get the highest return and to prioritize that. But I will say the level of discipline and thinking and resourcefulness that I have seen this year is unlike any other year that I have seen in the business. And so as much as these are challenging moments to go through, I am very convinced that this will make us better as a team. I like the investments that we are making in product. I feel really good about the future there and we are investing less, but we are also doing less, and I think we are sufficiently resourcing the future product.

Okay. Got it. Thanks for the feedback and good luck for the back half.

Thanks.

Our next question comes from Joe Feldman with Telsey Advisory Group. Your line is now open.

Yeah. Thanks, guys, for taking question. With regard to the gross margin, Dom, I know you mentioned once or twice that you feel you have a good cushion to do some promotions and even with pulsing promotions you have this cushion. But I guess what is the cushion coming from, is it because you are seeing supply chain costs come down or is it because of the mix shift to higher margin consumable and accessory goods, is that what the cushion is that you are talking about?

Yeah. Good question. So like I said, I think, year-to-date, our gross margin is tracking ahead of our internal plan, not considerably, but it is tracking above and so we are starting to see some tailwind actually materialize in our financials. On the promotion side, we are still going to be disciplined and so if you think historically about how we managed promotions, we don’t like this brand to be on sale. But and so we have typically aligned to roughly three promotional periods a year. The plan this year was around four and we will probably add one, two, maybe three additional promotions when it makes sense. So that’s kind of number one. We are not talking about being on promotion for most of the year. These are strategic promotions where we believe that -- when we believe we are fishing when the fish are eating and believe that the benefit to that is that they maybe come with some margin impact, but the gross profit dollars that flow through more than offset it. I’d say, two, we don’t fully fund these promotions. They are in partnership with our retail partners and they help fund these promotions and so it’s not a full sort of -- it’s not -- it doesn’t fully flow through Traeger’s P&L. And I think the third piece is we raised price three times, which does give some flexibility and permission to add a few promotions, because we are obviously promoting off of much higher price points, which have offset much of the gross margin impacts that we are facing from a macro standpoint. So those are three factors really allow us to use these promotions in a way such that they won’t be highly dilutive to gross margin as it relates to our guidance for full year. And like I said earlier, in addition to those factors that are baked into gross margin, we are also funding these promotions via lower marketing spend and top of funnel because we believe in this environment, promoting has more influence over demand than top of funnel demand creation, which tends to be more of a prospecting effort and has a longer tail to generating a return. And so that’s really kind of in combination, how we will manage through this year with posting a few incremental promotions, while avoiding a situation where they become dilutive beyond what we are guiding to at the high end of our range.

Got it. Understood. Okay. Thanks for explaining that. And then, I am sorry, my follow-up actually was about the top of funnel marketing. I guess some -- can you clarify then for me top of funnel versus promotion? I mean aren’t you -- either way you -- aren’t you trying to bring in new people to buy the grill and so…

Yeah. You -- yeah.

…but I think that or -- yeah, sorry, go ahead.

No. No. It’s a great question. Like our top of funnel marketing strategy is still core. It’s a core component of how we think about the long-term. We are just really focused in year and kind of on the short-term and in this environment, we have to prioritize resources in areas where the return or the way we measure return is far more predictable, right? And so in the case of in-channel inventory levels, promotions are far more influential on our ability to move through those than top of funnel. And so as we think about the mix of marketing this year, in particular, and this may extend into 2023, we are going to deprioritize top of funnel, which for Traeger is more about building the marketing funnel in a more robust way because as we have spoken to earlier, that initial consideration set, which is highly correlated to brand awareness is largely influenced by our strategy to attack top of funnel, which is more scalable and more -- and sort of more influencing of brand awareness, which in turn over time can drive more conversion off of a larger funnel. But in this environment, because that’s more of a prospecting effort and have a longer tail to a return, we are instead focused on kind of middle lower funnel from a marketing and demand creation standpoint. These have a more kind of one-to-one relationship between spend and return on that spend, so it’s a more immediate conversion of a consumer. And that -- and likewise, promotions are similar, right? And so in an environment where consumers may be more focused on spending discretionary dollars on experiences or travel or things outside of the home, promotions are an opportunity to stimulate more immediate growth in -- at retail, which in this year is more important than investments in prospecting, which will take effect over a longer time horizon.

That was the final question. So I will pass the call back over to the management team for additional remarks.

Thanks. I appreciate the thoughtful questions. There’s no doubt this is a challenging moment from a macro perspective, as we play in the category of outdoor cooking and wade through an unprecedented period in terms of decline in the category. I would say that, this is also a moment or the type of moment that defines teams, willingness to make hard decisions, desire to be better, to be smarter and a careful balance between the near-term realities that we are playing in, that we live in and a medium- to long-term offensive. And this is a brand that is -- it’s built to grow. It is built to disrupt. That hasn’t changed. But I think what you will see in the near term is a level of grit, actually, what I will commit to you in the near-term is the level of grit, level of resourcefulness, a level of discipline, so that as we move through this moment, we are positioned to be even better as we reinvest back into the business in a way that we have for many years. So that’s a commitment. I feel nothing but confidence in the future and the team and also lot through with the environment that we are in. Thanks.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.