Good afternoon, everyone. Thank you for joining Traeger's call to discuss its first quarter 2024 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm 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. I encourage you to review our annual report on Form 10-K for the year ended December 31, 2023, a quarterly report on Form 10-Q for the quarter ended March 31, 2024, once filed, and our other SEC filings for a discussion of these factors and uncertainties, which are also available on the Investor Relation portion of our website. You should not take undue reliance on these forward-looking statements, which speak only as of today. We undertake to update or revise them for any new information. This call will also contain certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, adjusted net income per share and adjusted EBITDA margin [indiscernible]. The most comparable GAAP financial measures and reconciliations 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. Please note that our definition of these measures may differ from [indiscernible]. Now I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger.

Thank you, Nick. Thank you for joining our first quarter earnings call. Today, we'll be discussing our first quarter results, and we'll provide an update on our strategic growth pillars before handing the call over to Dom to provide further detail on our quarterly performance. Despite facing a challenging demand backdrop, I'm pleased with our execution in the first quarter. Sales were $145 million, and adjusted EBITDA was $24 million, at the high end of our guidance range. Our first quarter results give us confidence in the outlook for the year, and we are reaffirming our prior financial guidance for fiscal 2024. As we move through the quarter, we continue to focus on our key strategic imperatives of driving energy to our brand and delighting our consumers with innovative product. The underlying measures of health for our brand remains strong, and I continue to believe that Traeger is well positioned to be a long-term share gainer in outdoor cooking. Our retail partners continue to be very supportive of the Traeger brand [indiscernible] into the consumer experience at retail. The Traegerhood, our community of Trader enthusiasts continues to be passionate as evidenced by the strong growth in engagement in our social media channels as well as our industry-leading NPS score. I believe that our premium positioning and our current efforts will allow the company to disproportionately benefit from an eventual recovery in grill industry demand. As we anticipated, the demand environment continued to be soft in the first quarter. From a sell-through perspective, consumer demand for grills remained below the prior year. We believe the consumer continues to shift spend away from durable goods like our grills and other product categories [indiscernible] during the pandemic. In particular, we see greater pressure on higher ASP SKUs. From a sell-in perspective, in the…

Thanks, Jeremy. Good afternoon, everyone. Today, I will review our first quarter performance and discuss our outlook for fiscal year 2024. First quarter revenue declined 5% to $145 million. Grill revenues declined 14% to $77 million. Grill revenue was impacted by lower sales through a retail and a lower average selling price. Furthermore, in the first quarter of 2024, we were lapping initial [indiscernible] of 2 new Grill launches in the first quarter of last year, which pressured selling on a comparative basis. Consumables revenues were $32 million, up 7% compared to the first quarter of last year, driven by growth in both our pellet business as well as our food consumables business. While first quarter pellet revenues did benefit from a timing shift in the second quarter, we are pleased with the growth. Accessories revenues increased 7% to $36 million, largely driven by increased sales at MEATER. Geographically, North American revenues were down 9%, while Rest of World revenues were up 31%. Gross profit for the quarter increased to $63 million from $55 million in the first quarter of 2023. Gross profit margin was $0.432, up 700 basis points versus first quarter of 2023. We are pleased with our first quarter gross performance, which benefited from lower costs as well as the margin-enhancing initiatives we implemented in the last 2 years. The increase in gross margin was primarily driven by: one, lower freight and logistics costs, which drove 290 basis points of margin favorability; two, higher pellet margins driven by our efforts to increase efficiency at our pellet mills which drove 170 basis points of margin; three, FX stability, which positively impacted margins by 90 basis points; and four, other favorable gross margin items worth 150 basis points. Sales and marketing expenses were $22 million compared to $22 milion…

[Operator Instructions] Our first question is from Simeon Siegel with BMO.

Dom, what was the -- sorry, if I missed it, but what was the breakdown in Grill revenue [indiscernible] price. And then Jeremy, higher-level question on that, just when thinking about the return to grow growth domestically when it happens. How do you think about what we're going to see in terms of replenishment versus new customers? And just kind of thinking about maybe if you have any views on replenishment and cycles there.

Yes. So the breakdown, roughly speaking, is there was a greater impact to ASP and kind of the high single-digit decline. And then for units, it was somewhat more moderated in kind of the single digits decline.

Simeon, happy to hit the second part of the question. First of all, as I mentioned in my remarks, the environment is soft, and it's not easy to sort of unpack how much of it is driven by a pull-forward demand from the pandemic versus a [indiscernible], sentiment is down. Consumer financing is expensive and housing transactions are very [indiscernible] these things facilitate Grill sales or sell-through retail. We spend a fair bit of time thinking about replenishment cycles, talking to consumers and doing the math on Grill ownership period and our general belief is that we should be about to the end of pull-forward demand from 2021. And then I think as you step back and look at not only this category, but other high-ticket discretionary consumer categories, they tend to have some element of cyclicality to it. And so as we see the consumer strength and interest rates start to come down, we believe those are catalyst to the beginning of the cycle. And we believe that replacement should start -- replenishment should start to normalize, certainly in '25, absent meaningful downside, and the consumer should be back to a fairly normalized cycle. And then the question is what is the impact on the macro on a consumer choosing to wait to get one more year as they do out of durables? In terms of how we think about new versus replacement, as we lean back into top-of-funnel investment, and we're doing some testing this year, but certainly don't believe it's in an environment where we should be investing meaningfully in top of funnel. We will always think about NPS and engagement and ensure that we can drive our existing consumers to our new products. We believe as we look at our innovation pipeline that the first consumer likely to buy is an upgrade from a Traeger owner who bought 5, 6, 7 years ago. But I think we'll start to see the mix increase towards new customers as we invest in new markets where [indiscernible] is low and penetration is low.

Right. That's great. And then congrats on that gross margin. I mean you pointed out the highest -- do you -- and recognizing your deleverage comment for Q3, but do you think that the supply chain is behind us. Do you think that as you look at where you are and you look longer term, not about the guide for this year, but you look longer term. Are we back to that path towards low to mid-40s? Like is there any externalities we need to still keep in mind because I just -- this was an encouraging number.

Yes. I would say that it's consistent with what we've addressed around gross margin in previous calls in that there will be sequential benefit from macro over, say, the next couple of years, just given the dynamics of certain decisions we made during the pandemic when pressure was pronounced, locking in some fixed contracts on the inbound transportation side as an example of something that will bleed down over the next couple of years. But it is safe to say that macro is working in our favor, and that has been an important assist to how we think about the long-term sustainability of a gross margin that we believe is appropriate for our business. And so Q1 is a great signal, there's some idiosyncrasies to the year that I think you've sort of spoken to. And -- and I would say that H1 is in particular, benefiting from the continued tailwind of inbound transportation and then also the FX component that we addressed on the opening remains, whereas back half was maybe it's sort of facing less of a benefit from a comp standpoint given the fact that the inbound rates were improving in the back half of last year. So I'd say we're starting to see some stabilization in that realm. And I think that, that assist is really I think, driven a different perspective on the long term of gross margin in conjunction with the controllables that we continue to drive. So positive kind of view on where we are today, where we think we'll be able to take gross margin in the future with continued tailwinds hopefully driving some of that in the out years. But I wouldn't say that we've necessarily reached that mark just yet.

Our next question is from Peter Benedict with Baird.

Just on the strategic pricing plan, Dom, you mentioned kind of at the end there. Just curious if you can expand a little bit more on that. Is that -- is that around the existing portfolio? Is that new innovation that you plan to bring in at different either price point or margin point? Just maybe help us understand a little more what you're referring to there.

Yes, Peter, this is Jeremy. Happy to answer that. Yes, I'd say a couple of things. One is, as we prepare to launch new products in the future, I think it gives us permission as we get later in life cycle of existing products that have been in the market for some time to lean into promotion as a lever to ensure that -- or a good channel inventory position as we launch new products next year. So that's sort of top number one. Number two, in a challenging macro economy and notably for the category that we play in, we're very thoughtful as we look at what is selling through, what trends we're seeing from a consumer perspective and price sensitivity is certainly one of those. And so we are measured in how we plan promotions. We plan our promotions many months in advance, but we feel this is an environment where we will lean into promotion a little bit more, perhaps not in the number of promotions, but in the level of promotion, we'll be thoughtful to consumer trends and where we think there's value and opportunity to do any more. So this is part of the plan. As we think about guidance, this is inherent in the guidance that we reaffirm today.

Yes, that makes sense. Is there anything in terms of the timing of the innovation that you have planned for the back half of this year or even for 2025, which sounds like might be a bigger innovation year, that you could adjust that based on the macro. I mean I'm just trying to get a sense for maybe how the macro is right now relative to kind of your expectations and whether it would -- what would cause you to maybe shift the timing of any of the innovation, if there is anything that would make you do that?

We don't really think about product launches around macro. Our development pipeline, our objective is to be very consistent in how we invest and when we launch. And so we do it independent of the macro. And I would say from a time of launch, it's driven more by seasonality and by our retailer reset windows. This category is one that tends to reset in the first quarter in preparation for the spring/summer selling season. And so we will stick to that [indiscernible] what works best operationally for us. It's what we plan on for our retailers -- but to the extent that we need to be more promotional to ensure that our channel inventories [indiscernible] before we launch new products, promotional is certainly a lever that we can use, especially at the end of life products -- I mean plans I would say, Peter, our innovation plan is many years out. And so it's really hard in a durables business to plan innovation around macro cycles.

Yes. No, no, I think that makes sense. That makes sense. Just one more for -- maybe for Dom. Just to clarify on the third quarter gross margin expectation, you mentioned it would be the softest sales quarter and therefore, some pressure there. Do you expect gross margin in the third quarter to be down year-over-year or just up, I guess, that's been thinking about the year.

Yes. We're not guiding specifically to quarters from a gross margin standpoint or anything. But what I would say is that the impact should be pronounced. So it will be a deviation from kind of the general run rate we see in the other quarters. And just to add to that, we are reaffirming our gross margin guidance, so that's an important comment as you think about modeling and [indiscernible] how you treat Q3 given kind of lower sales and the deleverage off of those lower sales.

Our next question is from Joe Feldman with Telsey Advisory Group.

I wanted to follow up. When you -- when consumers are making purchases because clearly, you are selling quite a few grills still. But are they opting for the better quality grills? Are they spending more, have you seen any change in their behavior? I know it may be subtle, but always curious about that.

No, we most definitely have seen a change in behavior where there's been, I would say, a pronounced shift from the volumes that we tended to see increasing above $1,000 to now having that kind of dynamic shift to sub $1,000 in kind of those entry price points that we offer. So that is definitely a trend that we're seeing and reinforced by the point Jeremy made earlier in terms of how we're thinking about promotion to ensure that we are strategically competitive in an environment where consumers are just simply more price sensitive, right? These aren't necessarily systemic changes that we were making per se. We just want to make sure that we remain competitive, and we always think about price as a strategic lever within the guardrails that we've defined around how we think about gross margin and ensuring that we're not a brand that's considered to be on promotion, right? So I think within the margins, we have flexibility to lean more aggressively into promo without straying outside of those guardrails. But that really is in an effort to follow these trends, which is certainly specific to Traeger as well as specific to, I think, broader kind of categories as you think about pressure on big ticket in relation to where we see kind of the volumes and where we want to capture that benefit. I think at the end of the day, we still believe that there's a consumer that is willing to pay for innovation and quality. And we address that across our product line. But at this moment in time, we want to follow that trend and ensure we play more aggressively where the consumers are shopping.

Got it. That's very helpful. And then just another maybe question about sourcing. I was curious, can you remind us the exposure to China? And if that -- if you guys are still making any effort to shift further away from China. And if I recall, you said you would not, you're kind of happy with where you're sourcing from. I'm just curious because people ask us in relation to potential Trump administration and if tariffs were to increase again. So I was just curious about that.

Yes. So we do have an active effort underway to diversify sourcing outside of China. And we currently manufacture in Vietnam -- there are other geographies in Asia where we are actively [indiscernible] options. In some cases, the existing suppliers just taking operations outside of China -- those are active conversations, and we do certainly believe in the value diversification and always measured against sort of stability and cost within the supply chain. But we're also -- we're very contemplated around what the environment may be to the extent that a new president such as President Trump leans into additional China tariffs and we think about what a contingency plan may be to accelerate movement from China to other sourcing geographies. So that's what the top of mind.

Our next question is from Brian McNamara with Canaccord.

This is [indiscernible] on for Brian. We were just curious about retailers, floor space dedicated to the category and whether they remain committed to keeping or increasing floor space for the category?

Madison, yes, we haven't really seen any shift in retailers' point of view on the category either in season or across seasons. There is certainly a moment, a handful of years ago where we saw retailers begin to move to year-round barbecue sets and also to expansion floor space. But I would say it feels pretty steady state right now.

Our next question is from Megan Alexander with Morgan Stanley.

Wanted to come back to the sell-through. Jeremy, I know you talked about it still being down in the quarter. Is there any way you can quantify maybe just for Grills, what that sell-through number looked like in relation to your Grills revenue being down that mid-teens number? I know you were lapping the sell-in of the launch last year. So just trying to understand, number one, what sell-through looks like in the quarter? And then just bigger picture, from a units perspective, are you seeing that decline stabilized? Or was your commentary earlier around the macro, does that suggest the declines may get worse? Or are you kind of thinking about the declines have heavily stabilized at this point?

I can jump in and answer that. Thanks for the question. I think to your first question on sell-through, I think at the end of the day, it sets sort of a baseline for how we think about our forecast this year, but there are idiosyncratic components to sell in that are building on the declines that we're seeing in sell-through, which look more pronounced on a reported basis. And it's exactly what you said, it's the launch comparison, right? So comping Flatrock, Ironwood launch in H1 of last year and then the sunsetting of products ahead of a new product launch in 2025 in the back half of the year. So those are sort of layered on top of our baseline forecast, which sort of underpins our general thinking around demand planning -- and I think from a reported standpoint, those look in excess of what we're seeing from a sell-through standpoint. We don't obviously share sell-through information -- but I would say that we've talked sort of about the pre-pandemic comparison historically, and I would say that that's still holding at a higher watermark. And so that kind of been a barometer for how we think about the health of sell-through, where a comp against pull-forward through the pandemic is very different than a comp against '19, where there's a reversion back to pre-pandemic levels, which we're not seeing. And so our belief is that at the end of the day, we just continue to lap pull-forward through the pandemic, and then that's augmented and sort of distorted by this picture that's emerged around excess inventories that we had to bleed down and that came at the cost of top line. And then this year, these 2 sort of comp comparisons in first half and second half around the sunsetting of product and then the comp in the first half against the new product launch. So that's really, I think, a kind of a summary of what we're seeing. And I wouldn't necessarily say we're in a position to tell you that things are getting worse or better. I think right now, it's just kind of consistent themes around the sell-through side.

Got it. That's really helpful. And then maybe asking the gross margin question a different way. Again, really impressive. It was above what you did in 1Q '19 and you did a 43% full year gross margin in '19, understanding you have the unique dynamics in the second half with the sunsetting of some products. But is there a way to quantify maybe just what the impact that you expect the sunsetting of the products to be, whether it's from a top line or margin basis? I know you've said, I think it's accretive from an EBITDA perspective. But any way just to contextualize that?

Yes. So the sunsetting isn't really a -- it's not really driving margin erosion by replacing old with new. It's more a function of the added pressure on Q3 around the fact that, one, Q3 is always our lowest selling period. And two, your sunsetting product, which is adding additional pressure to volumes in that quarter, which in turn is just driving more pronounced deleverage in the quarter, right? So where we saw some nice expansion in gross margin in Q1, we do expect that to moderate some over the -- from a run rate standpoint from Q3 to -- from Q2 to Q4, reaffirming our gross margin guide for full year, which means that most of the pressure is coming in Q3 based on the impacts on volume and just how pronounced that deleverage is in relation to the impact on gross margin.

We have no further questions at this time. [Operator Instructions] There are no further questions. At this time, we would like to thank you all for your participation, and you may now disconnect your lines.