Good afternoon. Thank you for attending today's Traeger's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Megan, and I'll be your moderator for today. I would now like to pass the conference over to Stephanie Read, Vice President of Finance, Strategy and Investor Relations. Stephanie, you may proceed.

Good afternoon, everyone. Thank you for joining Traeger's call to discuss its fourth quarter and full year 2025 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm Stephanie Reed, Vice President of Finance, Strategy and Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer; and Joey Hord, 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 within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and views of future events, including, but not limited to, statements made regarding our organizational focus and strategy, our mitigation efforts to offset the direct impact of tariffs, our Project Gravity initiative and its impact on our business, our expected product launches and our outlook as to our anticipated first quarter 2026 and full year 2026 results. Such statements are subject to 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, 2025, once filed and our other filings for a discussion of these factors and uncertainties, which are available on the Investor Relations portion of our website. You should not take undue reliance on these forward-looking statements, which we speak to only as of today. We undertake no obligation to update or revise them for any new information. This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, adjusted gross margin, free cash flow and net debt, 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 and investor presentation, which are available on the Investor Relations portion of our website at investors.traeger.com. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. Now I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Jeremy?

Thanks, Steph, and thank you all for joining our fourth quarter earnings call. We closed fiscal 2025 with strong execution and meaningful strategic progress, and I'm proud of how this team performed in a dynamic environment. For the full year, revenue came in above the high end of our guidance at $560 million and adjusted EBITDA landed in the upper half of the range at $70 million. More importantly, we delivered on what we said we would do. We navigated tariffs, took actions to protect profitability and made hard decisions that simplify the business and strengthen our foundation for the long term. Before I get into 2026, I want to step back and talk about what we saw in 2025 and why we remain confident in the long-term value of this business. Even with more cautious consumer spending, the Traeger brand remains as strong as ever, and our community engagement continues to be a leading indicator of demand. Over the holiday season, we leaned into seasonal cooks and ambassador content and the community showed up in a big way. On Thanksgiving alone, we had 315,000 connected cooks, up 11% year-over-year, which we believe is a powerful signal of engagement across our installed base. What's important is that this brand strength is translating into business performance. In 2025, we held market share across outdoor grilling, including fuels, despite a sluggish category backdrop. That performance was supported in part by strong consumer response at price points below $1,000 where we've seen traction without sacrificing brand or performance. And with household penetration still low, we believe this brand strength positions us well as replacement cycles normalize over time. Innovation has always been core to Traeger, and it continues to be rewarded when we execute. A good example of how we're meeting consumers where…

Thanks, Jeremy, and good afternoon, everyone. I'll walk through our fourth quarter and full year financial results in more detail, then discuss our balance sheet, cash flow and our outlook for fiscal '26. Starting with the fourth quarter and the full year, I'm pleased with how the business performed financially in a dynamic operating environment. In the fourth quarter, we exceeded the top end of our revenue guidance and delivered adjusted EBITDA in the upper half of our full year range despite continued elasticity following tariff-related pricing actions and ongoing pressure in m. For the full year, we delivered adjusted EBITDA of $70 million while executing through these pressures and making deliberate decisions to simplify the business. There are 3 financial takeaways from fiscal '25 worth highlighting. First, we successfully managed tariff exposure and protected profitability through disciplined pricing, supply chain actions and cost control. Second, consumables, including pellets, continue to be a source of strength and stability, reinforcing the durability of the reoccurring fuel model even in the cautious consumer environment. And third, we made meaningful progress on Project Gravity, delivering $20 million of cost savings in fiscal '25. This exceeded our original expectation of $13 million and represents an important step towards a structurally improved cost base and stronger cash generation profile. Turning to fourth quarter results. Fourth quarter revenues decreased by 14% to $145 million. Grow revenues were $61 million or down 22% compared to the fourth quarter of last year. Declines in our grow category were driven primarily by elasticity and an unfavorable mix shift as well as a difficult comparison related to the Wood Ridge load-in ahead of launch in the prior year quarter. Consumables revenues were $36 million, up 16% from the prior year. Consumables growth was driven by higher unit volumes across both…

Our first question will go to the line of Brian McNamara with Canaccord.

First, I'm curious, where did the grill market finish in 2025 relative to 2019 levels in terms of industry volumes? And what is the company's expectation for grill market growth in '26, if any?

Thanks, Brian. So a couple of thoughts. First of all, after, of course, a very meaningful decline in unit volume between '21 and '22, the market has been modestly down the last handful of years. Last year, down probably sort of mid-single digits or so on a revenue basis. I don't have the exact numbers in front of me on unit volumes between last year and 2019. What I can tell you is that units are still down meaningfully. We, of course, we spent a lot of time thinking about, in addition to our strategy from a macro perspective, what are the catalysts to really to get the outdoor cooking category to return to more normalized replacement levels. Mathematically, we should be heading into that window. We did not see that last year, and that was probably in part driven by the fact that tariffs really hit in the spring, and we saw this corresponding very, very material drop in consumer confidence. But we are now 6 years removed from the beginning of the pandemic, and that should be when consumers generally begin to think about replacing other grills, at least the Traeger Grill in terms of the ownership life cycle that we observe. I will say this has been historically a remarkably steady category. And what we've seen, of course, is unusual since the pandemic. But our expectation is that the market will recover. There are just as many, in fact, slightly more outdoor books than there were pre-pandemic. And so this is more around the replacement cycle. I will say that we have not forecasted in the guidance that we've offered, we have not forecasted a return to a more normalized replacement cycle because it's hard to know exactly when. We just believe that this is a very durable category and then it will return to those more normalized levels. So we're heading to that period at some point in time, certainly over the next 12 to 24 months. The other thing that I would add that I think is relevant as we think about brand position and engagement as the category improves is that this is a brand that has been very consistent in terms of the consumer engagement. We observed, for example, in the fourth quarter, connected cooks up 11%. We still -- we continue to see strong pellet attach, which, of course, is another important measure of engagement for us. So we're very focused on the things that we can control. We're not forecasting the next cycle, but we believe that we're getting closer to it.

Great. You actually answered my second question. So good on you there. My next question is, how big is the expected revenue impact from the DTC exit? And what is the underlying assumption for sales recapture with your retail partners? And in addition to that, I guess, why wouldn't we see a bigger margin boost there? It sounds like Project Gravity is accounting for kind of $50 million of the $50 million to $60 million EBITDA guidance, if I heard that correctly.

Sure. Brian, it's Joey. As far as what we're speaking to right now, we spoke originally around the $60 million just recapture or sorry, a $60 million impact in terms of just overall the shift out of DTC, Costco roadshow and international. That was on a rear-looking number. On the go-forward number, it's a little bit smaller. What we can say is overall between the full year pricing elasticity and Project Gravity, the shift there is around $70 million of the total revenue impact. And if you're doing the math on the P&L flow-through, we have margin rate pressure, and that's driven by full year tariffs and promo deleverage. And that's probably if you're doing the math on why there's not as much flow-through.

Our next question will go to the line of Peter Benedict with Baird.

This is Zach on for Peter. Nice to see the additional savings from Gravity. Just curious if you could share more about the SKU rationalization efforts there, maybe which items or categories you plan to address? And then on pricing, Jeremy, you mentioned annualizing some elasticity impacts from your last round, which I believe was last spring. Could you just share more details around that dynamic and maybe how the consumer response to pricing actions is influencing your innovation plans for both this year and beyond?

Yes, of course. So let me start with the SKU rationalization, and then I'll lead into some of the thoughts on pricing and sort of how it impacts our product line or how we think about product strategy going forward. The intent of SKU rationalization was it was twofold. First of all, I wanted to streamline the product portfolio so that we create efficiencies in manufacturing and inventory. There are certainly opportunities to, in a modular way, ensure that we're just driving more volume in assembly, in subcomponents and fewer SKUs, of course, leads to lower inventory levels. That's sort of thought number one. Thought number two is that the rationalization also has consumer benefit. Our ability to create a more clear line, a clear line with a clear step-up story and real clarity from a consumer decision process also was an underlying motivation of the rationalization. These things take time. Of course, we are in a consumer durable, we're looking years out from a product line perspective, and we will sunset certain SKUs beginning this year, but over the next 2 to 3 years. And so as you saw from some of the increased value capture of Gravity, some of these things extend out into '27 and into '28. But we believe in that. We think it's going to make us a better, more focused business, and we have begun this process. The pricing is -- I will say, really forecasting price elasticity last year was challenging. not only because our prices were moving around, but it was a very dynamic environment, not knowing how competition was going to price, being a discretionary, high-ticket discretionary durable, how decision-making on the consumer part relative not only to this category, but thinking about other discretionary purchases that they'll make. We're getting…

Our next question will go to the line of Peter Keith with Piper Sandler.

So just trying to understand the revenue decline and maybe how you're thinking about general demand trends. So I'm going to kind of interpret what you've told us, which was some good detail. So we've got an $85 million revenue decline at the midpoint for the year. It sounds like $70 million of that is from exiting the Costco roadshows, DTC and then some demand elasticity impact from pricing. So there's sort of a $15 million delta that I'm trying to get my arms around. Is that a sort of a lack of sell-in because of the orders last year? Is that demand declines? Kind of how should we think about that other chunk of revenue decline?

Sure. Thanks for the question. So just to be clear, there's -- we're planning on sell-through. There's a divergence between sell-through and sell-in in '26. And sell-through, we're planning to -- current sell-through trends in the beginning of the year are exceeding our expectations. We're planning on sell-through to be in line with the overall category, and that's sort of flattish. So keep in mind, there's a divergence there. As far as the remaining $15 million, there's sort of 2 factors driving that. One is ongoing meter pressure. And the other is we're calling it marketplace health initiatives. We have as Jeremy mentioned, we have specific inventory pockets in a specific retailer that have higher weeks of supply inventory in market than we would like, and we're going to rightsize the inventory. And keep in mind, pricing elasticity, project Gravity reduction in revenue and marketplace health initiatives are strategic in nature. MEATER is -- we're addressing MEATER through the centralization of the MEATER office here in Salt Lake, leveraging the fixed cost infrastructure. We're resourcing the plan and the business to drive ongoing growth. So if you're doing the math on that, it's really focused on that marketplace health initiatives in MEATER.

Okay. Yes. That's the detail I was looking for. And that -- just a follow-up on that, that marketplace pressure, that's just with one retailer where you're trying to rebalance the inventory? Or is that across a variety of retailers?

Generally speaking, yes. It's a distinct pocket of inventory. And keep in mind, it's high-volume inventory, it's high flow-through, and that also puts pressure on overall margin. And the other thing point I'll make on that is as we rightsize marketplace, this is the marketplace health initiative. There's going to be a role in FY '26, but this will create capacity in '27 and beyond, and we'll be able to fill that capacity, and that's why we're confident in the future growth algorithm.

Yes. Yes, that makes sense. Okay. And so then my last question, and I think you partially addressed this in your last answer, but we're looking at the decremental margin on the revenue declines, it's around 30% this year, pretty similar to last year. And I guess with Project Gravity, one would think that maybe the decremental margins would be coming down this year. So why is it a similar level of 30% decremental on the EBITDA margin with the revenue decline?

Yes. I think we need to focus on overall gross margin and gross margin is being impacted full year of tariffs. So last year, tariffs were announced -- they were announced in February, but they were relatively low in the first quarter. Liberation Day, I believe, was in early April, and then we had a much higher tariff burden. They've sort of settled throughout the year. So we have a full year of tariff impact. So that's driving some margin degradation. The other is what we're calling is promo funded deleverage. So we invest a fixed promo number into our P&L every year. And with the overall revenue coming down, it's eroding margin. That is also going to drive margin expansion in the out years as well as we get to more normalized revenue numbers.

With no additional questions waiting in queue, we will conclude both the Q&A session as well as today's earnings call. Thank you for your participation, and enjoy the rest of your day.