Greetings, and welcome to the SharkNinja Third Quarter 2023 Conference Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Arvind Bhatia, Head of Investor Relations. Thank you, sir. You may begin.

Good morning, and welcome to SharkNinja's Third Quarter 2023 Earnings Conference Call. Joining me on today's call are Mark Barrocas, SharkNinja's Chief Executive Officer; and Larry Flynn, Interim Chief Financial Officer and Chief Accounting Officer. Mark will begin by providing a business update, and Larry will then provide a review of our financial results and discuss our updated 2023 outlook. After that, we will open the call for your questions. By now, everyone should have access to the earnings release for our third quarter ended September 30, 2023, issued this morning. The press release is accessible on the company's website at ir.sharkninja.com. And shortly after the conclusion of today's call, our webcast will be archived and available for replay. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. If you defer to SharkNinja's earnings release as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially as a result of these forward-looking statements. Please remember the company undertakes no obligation to update or revise these forward-looking statements in the future. During the call, we will make a number of references to non-GAAP financial measures. We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Now I will turn the call over to Mark.

Thanks, Arvind. I really appreciate everyone taking the time to join us this morning. We're excited to report another strong quarter. This is our second one as a public company, and we are optimistic about the rest of the year. Since our listing on the New York Stock Exchange a few months ago, people have been pleasantly surprised by our scale and diversification. We're on track to exceed $4 billion in net sales and achieve close to $700 million in adjusted EBITDA this year. This will make us one of the largest and most profitable companies in our industry. We're also highly diversified. We're now in 31 subcategories. We sell our products in 26 countries. We partner with more than 150 brick-and-mortar and online retailers and have a rapidly growing direct-to-consumer business. The investment community has been asking me what's SharkNinja's secret sauce? I always have to pause before responding because it's not just one thing. It's a combination of so many different things that make us unique and different. Our disruptive innovation engine continues to deliver amazing products at accessible price points. Our marketing and communications approach has created strong consumer demand for our products. Our omnichannel strategy allows us to be channel agnostic. Our products are available wherever our consumers want to shop for them. We have a nimble, efficient and scalable supply chain that helps us drive industry-leading margins, but it really comes down to the SharkNinja mindset and culture. This is really what differentiates us and it's hard to replicate. Everyone here has a desire to win and to exceed expectations. This approach permeates throughout the company and drives our success. Turning to third quarter results. We grew adjusted net sales by nearly 15%. That's strong double-digit growth and increased our market share across both the…

Thank you, Mark, and good morning, everyone. I'll start with a review of our third quarter results, followed by an update on our outlook for 2023. As Mark mentioned, our third quarter results were strong. Net sales increased 13% and adjusted net sales, which excludes sales from our divested APAC business, were up 15% to $1.1 billion. We delivered adjusted EBITDA growth of 38% to nearly $209 million, with adjusted EBITDA margins increasing 340 basis points year-over-year. Looking at top line performance by region. Net sales in North America were up over 2% to $797 million, representing 75% of adjusted net sales. Adjusted net sales in International markets were up 80% to $260 million, including U.K., which was up 65%, continuing the strong trend. In North America, our POS was up high single digits during Q3, according to NPD compared to the 2% growth in shipments. So while destocking is mostly behind us, retailers continue to manage inventory tightly as we head into the holiday period. We have factored this into our full year guidance, which I will speak to momentarily. Next, let me take a minute to provide color on our 4 major product categories. Adjusted net sales in the Cleaning category, which includes vacuums as well as other floor care products such as steam mops and wet and dry cleaning floor products decreased 9% to $442 million from $486 million. While our shipments in the cleaning category were down, our global POS sales were up slightly according to industry data. Given our POS performance and our recent launch into the extraction category, we expect our fourth quarter growth in shipments in the cleaning category to improve. Adjusted net sales in the Cooking and Beverage category, which includes air fryers, multicookers, outdoor grills and ovens and carbonation increased a…

Thanks, Larry. 2023 is a testament to our track record of delivering profitable organic growth through high-performance products that address everyday consumer challenges. We've made incredible progress so far, but I'm even more excited looking to the future as we think about the tremendous white space and potential opportunity in front of us. Our current total global addressable market is above $100 billion and continues to grow. As we plan to keep rolling out new innovative products entering new categories, both in and outside the home and expanding our brand presence worldwide, I believe we're going to see our market share continue to grow. We plan to use consumer insights and our engineering expertise to keep leading the way with game-changing innovations that set the industry standard. That concludes our prepared remarks, and I'll now turn it over to the operator to kick off Q&A. Operator?

[Operator Instructions] Our first question comes from Brooke Roach with Goldman Sachs.

Mark, I was hoping you could elaborate on the underlying demand trends you're seeing in the U.S. today for both the category and for SharkNinja. As you look ahead, what signals are you seeing among your key North American wholesale partners, both in terms of sell-in versus sell-through that give you confidence to raise the outlook today?

Yes. Thanks, Brooke, for the question. So I would say that we feel like we have good momentum as we head into Q4. We've launched a lot of new products in the third quarter, many of which launched toward the end of the third quarter. So we didn't see much of an impact within Q3, but we will as we start to move through Q4 and into the holiday season. That has enabled us to get incremental shelf space in many of our existing retailers. It's also allowed us to be able to enter into new retailers, for example, for our hair care products now in the third quarter just launched into Ulta for the first time. I would say that retailers overall are being very conservative as it relates to inventory in North America. We've seen more desire for just-in-time inventory, taking promotional orders closer to the holiday season. In September, we did see a little bit of destocking pullback on the base business, but not anything that we're overly concerned about. We think it's just some timing challenges. But overall, our business is being driven by higher ASP items, some of the more innovative products, some of the more media-driven products. And we feel that our model of giving the consumer extraordinary value and innovation is really what's going to propel the momentum moving forward.

Our next question comes from Randy Konik with Jefferies.

Yes. Mark, it's good to hear that you're a cool dad now, I'm trying to figure that out myself. But as it relates to the beauty category success, what has changed in terms of your thought process on category expansion or categories you would go into now versus maybe, I don't know, 10 years ago, I'm sure you weren't thinking about the beauty category per se. So can you give us some perspective of how you're thinking -- how you and the rest of the team think about different subcategories, you mentioned in the script, inside and outside the home. It would just be really interesting to hear your perspective and how it's changed over the years. And relatedly, when you look at the international success, particularly in the U.K., it might be helpful for us to understand what's made that market in particular, extremely successful and maybe different than how you approach the United States? And then how are you kind of taking that U.K. success and looking to replicate that into other markets you mentioned again in the script, Germany, I think Spain and other markets as well.

Yes. Yes, absolutely, Randy. So to take the first part of your question on category expansion, I would put it into kind of a few buckets to think about. So beauty, you mentioned. And again, as we think about beauty, we think it goes beyond hair care. I mean that's part of why we've identified the segment of our business as beauty. I mean we think that now that we're in the bathroom, now that we're in a different subset of retailer partners, there are many other categories within the beauty space for us to bring innovation and excitement to. So that's something that we feel like scales beyond just the hair care business. We just launched in this quarter, the Ninja Thirsti Drink System. You'll also notice that in conjunction with that, we also launched our first drinkware products, Ninja Thirsti Drinkware, which is drinkware that especially designed for carbonated beverages. I mean, we saw that as a white space of consumers not being adequately served by wanting to transport carbonated beverages, and we developed a technology that enables consumers to be able to do that with drinkware. And so that's our first entry into the drinkware category. Outdoor cooking, again, we've expanded now from grills into ovens. We're starting to think about the outdoor more as a kitchen and not just a place to store a grill. There's lots of things that you might want to cook outdoors that you can't cook indoors because of smoke or high temperatures or things like that. And we think there's other areas for the brands to expand into from the outdoor side as we move over into 2024. So I think, Randy, it comes down to -- we've got this great consumer insights team. We're bubbling up lots and lots of…

[Operator Instructions] Our next question comes from Phillip Blee with William Blair.

This is Sabrina on for Phillip. Given the importance of product newness and its contribution to your top line growth, could you provide some more color on how long the newness lasts? Or what a typical product's time to maturity looks like? And then if there's any variation by category or geography?

Sure. Sabrina, it's hard to like paint a broad brush on that for everything. I mean we have products that we launched in 2010 that are still on retailer shelves today like our short list away vacuum. I would say that when we launch a product, it phases out across retailers and starts to build. I mean products that we launched in, let's say, Q3 of this year, we won't kind of see full momentum until we get into next year's holiday season. I mean we'll benefit from sales this holiday season, we'll benefit obviously from sales through the first few quarters of next year. But really, we would look at kind of next holiday season to be the first big holiday season where all retailers have the product. We have a large number of search relevance, a large amount of social media awareness on TikTok and Instagram. So I'd say it kind of takes a year to build to that point. And in terms of where do those products stay, look, I mean the business model is about bringing newness constantly. I mean we're going to launch 25 new products this year in existing categories and new categories. We anticipate a similar pipeline of new products for next year. So it's hard to kind of say that there's one measure across each product, but it kind of takes a year for us to really get to the place where the product has strong momentum behind it.

Got it. That's helpful. And then just a quick follow-up. Could you provide us with some detail on what your team has been doing to ignite some more crossover demand between the Shark and Ninja brands?

Yes, sure. I mean, it's -- we've really been focused a lot more of that in our direct-to-consumer business is globally. Obviously, marketing to our existing file, Shark and Ninja products, I mean we're continuing to see an uptick on our D2C business of consumers buying more than one product within an existing brand or buying products across brand. So that's really the best visibility that we have. It's hard to kind of see that when it gets into the retailer space because most consumers don't register their products with us. But as it relates to direct-to-consumer, I think really through marketing to our existing consumer base is where we're doing the most to try to cross-sell across Shark and Ninja brands.

Congrats.

There are no further questions at this time. I would now like to turn the floor back over to Mark Barrocas for closing comments.

Great. Thanks, everyone, for joining us on our third quarter call. We look forward to speaking with you at upcoming investor events. Meanwhile, please feel free to reach out if you have any additional questions, and have a great day. Thanks.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.