Good morning, and thank you all for attending the SharkNinja's Q1 '25 Earnings Call. My name is Brika, and I will be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, James Lamb, Senior Vice President of Investor Relations and Treasury. Thank you. You may proceed, James.

Good morning, and welcome to SharkNinja's First Quarter 2025 Earnings Conference Call. Earlier today, we issued our Q1 earnings release, which is available on the company's website at ir.sharkninja.com. A replay of today's webcast will also be available on the site shortly after the call. Before we begin, let me remind you that today's discussion will include forward-looking statements based on our current perspective of the business environment. These statements involve risks and uncertainties, and actual results may differ materially. For more details, please refer to our earnings release and the company's most recent SEC filings, which outline factors that could impact these statements. The company assumes no obligation to update or revise forward-looking statements in the future. Additionally, during the call, we will reference non-GAAP financial measures, which we believe provide valuable insight into the underlying growth trends of our business. You can find a full reconciliation of these measures to their most directly comparable GAAP measures in the earnings release. Joining me today are our Chief Executive Officer, Mark Barrocas; and Chief Financial Officer, Patraic Reagan. Mark will start by providing a business update followed by Patraic who will review our Q1 financial results and share our outlook for 2025. Mark will then offer some closing remarks before we open the call to questions. During the Q&A session, please limit yourself to one question and one follow-up. I would now like to turn the call over to Mark.

Thank you, James. Good morning, everyone, and thank you for joining us today. This is undoubtedly a challenging time for business, and I'm excited to discuss how SharkNinja has engaged and is responding to the moment. Our first quarter results demonstrate the consistent strength and adaptability of SharkNinja with our eighth consecutive quarter of healthy double-digit revenue growth. Net sales increased nearly 15% year-over-year globally in a market that is not delivering much growth, a reflection of demonstrable market share gains driven by continued demand for our 5-Star products that customers love. This revenue growth produced outstanding profitability with adjusted gross margin of 50% and adjusted EBITDA of $200 million in the quarter. Most importantly, Q1 has given our team an opportunity to do what we do best, rallying together and taking quick action to solve problems. This isn't the first time SharkNinja has encountered really difficult obstacles in the macro environment. We've been here before. During my 17-year tenure running the day-to-day business, SharkNinja has experienced the great financial crisis, the COVID-19 pandemic, component shortages and many other challenging periods along the way. In each case, we not only overcame adversity, but we also emerged stronger than ever by sticking to our time-tested playbook focused on customer problem-solving innovation and maniacal execution. I will speak about how this theme manifests in our exciting product pipeline and three-pillar growth strategy a little later, but I first want to address what is likely top of mind for investors, how we're rising to the challenge of tariffs. SharkNinja has been navigating tariffs for many years, going back to the original series of tariff actions in 2018 that largely targeted China. We successfully implemented a multifaceted approach to offset these impacts and our business flourished. In fact, from 2018 through 2024, our adjusted…

Thank you, Mark, and good morning, everyone. We're off to a strong start in 2025, and I'm excited to review our first quarter results and increased guidance. As mentioned in our previous earnings call, Q1 had a lot of puts and takes, but in the end, we did what we said we were going to do and overachieved our plans. We continue to succeed by executing on our clear three-pillar growth strategy. Our Q1 performance demonstrates that we are delivering on this strategy, while at the same time, navigating complex operational shifts. We continue to expand both product categories in which we compete in geographies where we serve our consumer. And we are delivering these results all against the backdrop of policy uncertainty, affecting our manufacturing centers. Now let's review the quarter. Net sales in Q1 increased 14.7% year-over-year to more than $1.2 billion. Adjusted EBITDA decreased 13% to $200 million, which was from an investment perspective largely the purposeful result of substantial investments to fuel our growth, including driving international expansion, new product development and advancing our supply chain diversification initiatives. We expected our geographical regions to grow similarly in Q1, and we saw just that, as year-over-year net sales grew 15% domestically and 14% internationally. As we previously discussed, the transition of our Mexico distributor business to a direct model occurred in Q1 and has been successful, albeit with known revenue and adjusted EBITDA headwinds in the quarter. Additionally, our international business outside of our U.K. air fryer business grew significantly across all regions with particular strength in Central Europe. Turning to performance by category. All four of our major product categories saw growth in the quarter. Net sales in the cleaning category increased 5% year-over-year to $441 million from $422 million. Our cordless and extraction subcategories drove…

Thanks, Patraic. By design, we've gone into great detail today to really illustrate how comprehensive and unique our strategy is to power through all the uncertainty out there. It is exceedingly rare to take on all these things we're doing while still driving world-class innovation across dozens of major categories. What we're accomplishing is hard to do, plain and simple. And there is one final point I want to drive home. SharkNinja has never prioritized solving for today at the expense of tomorrow. By steadily investing behind consumer insights, innovation, marketing and distribution, we're continuously planting the seeds that produce durable organic growth over time. This winning strategy has proven itself time and time again for SharkNinja. In past periods of great upheaval or seemingly impossible challenges, we've come out better positioned for the long term, smarter, more differentiated and more determined than ever. Thank you. This concludes our prepared remarks, and I'll turn it over to the operator to kick off Q&A. Operator?

[Operator Instructions] The first question we have comes from Randy Konik with Jefferies.

Great stuff yet again. So one thing, Mark, I wanted to ask you about, would be super helpful, we put out a product that kind of tracks search interest across your different products. There's a ton of them. And one thing that we noticed a lot is -- in our work is this accelerated search and interest in the new products, which you want, which is super healthy demand indicator. What do you think is different today beyond social media that is really helping the consumer discover or find out and notice these new products more quickly than in years past? Just really kind of -- we all know about the innovation engine you have, but I think it's also just as important to understand that discovery process that's accelerating as well on the side of the consumer.

Yes. Thanks, Randy. So look, if I go back in the business 10 years ago, we would put a product out in the market. No one would know the day that we're launching it. There'd be no sign-up. There'd be no waitlist. It would take three to six months for kind of the demand to start building on the product. I mean even if we run advertising around it, it would take some time to kind of ramp up. I think one of the things that is first exciting, Randy, is the installed base that we have. The e-mail file that we have, I mean, when we go out with a new product and on the day that we're launching it, we generally have a very large amount of sign-ups from consumers that are already interested in purchasing it. I mean we launched the Swirl by CREAMi in the first quarter of this year. we launched it on a Tuesday morning at 9:00, and we were selling a unit every eight seconds. So we could have launched a product 10 years ago and on the day that we launched, we would have sold two units, and likely those were two units that sold to the competition. So I think we've got this big installed base. This -- we've got a big file that we're marketing to. We've got consumers that are kind of waiting for the next products. We're seeding influencers with our products before launch. So they're already going out and they're already teasing the products. I mean Swirl was a great example. We brought about 15, 20 really strong CREAMi influencers behind the scenes. We let them use the product for 30 days. We let them develop content, and they were already seeding content two weeks before the product was launching into the market. So it was already starting to build excitement and awareness for the product before we even launched. So I think it's a model that we continue to keep refining. It's a model that we're seeing that's working in the United States and Canada and particularly in the U.K. It's a model that we're tweaking for places like France and Germany and Mexico. But overall, I mean, there is just a lot more awareness and excitement the day a product launches versus waiting for three to six months for that to build up.

Super helpful. And my last question is, in the script, you talked about solid sell-through and expanded shelf space, I think, acquired in the European market, obviously, beyond the U.K. Maybe elaborate on that a little bit more on what countries tend to be more -- be a little more specific there. And then maybe weave that in with all the exciting talent announcements you've been kind of putting out there from press releases that seem to be kind of analyzing even more ability for this business to continue to scale and globalize going forward.

Yes. So I mean, specific to the Europe part, I mean, I think what's exciting, Randy, is the relationships that are being built with the European retailers, all the way up to the CEO's level. I had a CEO of a major U.K. retailer in Boston and had dinner with them a couple of weeks ago. I'm headed to Paris next week, and I'm meeting with the CEO of a major retailer there and having dinner with them, same in Germany. So I think the relationships have really, really developed considerably because they're seeing the innovation. They're seeing the viral marketing. They're seeing the investment that we're making in the category. Many of these categories in Europe are not growing today. And I think they're recognizing the kind of SharkNinja as a partner that they want to build their business around. And so as a result of that, we've seen an increase in commitments that we've received for particularly this holiday selling season in both the Shark and Ninja brands. And it's Germany, it's France, it's Benelux, it's the Nordics. We're expanding in Poland. We're expanding in Spain. And a lot of these European retailers have stores in multiple countries, and so they're pushing us to continue to expand with them into these other markets. On the talent side, I think that one is a really exciting one. We have this concept here that we talk about, which is building an unstoppable team of people that you would never want to compete against. And I think that on the product development and engineering side, I think we've done that over the course of the last 10 or 15 years. I mean I think we have an extraordinary team of product developers and engineers. We made a big new hire with Linus Karlsson coming in to really develop our global creative teams. We also announced in conjunction with that, that we're opening a creative marketing design office in New York City. We've just expanded that now with Michelle coming onboard and Kleona coming onboard. I mean, we think beauty is going to be a category that is going to generate significant global growth for us over the next five years. And we really feel like we need the talent that is going to be able to help us propel in those categories to the next level. But that's not only happening at the senior level, I mean, it's also happening down in the organization as we continue to keep bringing in really talented, really bright folks to help us expand and grow the business.

We now have Brooke Roach with Goldman Sachs on the line.

Mark, I was hoping you can provide some further color on tariff mitigation. There's a lot said in the prepared remarks, but have you fully offset the current tariff rates based on your initiatives for the U.S. this year? What proportion of that mitigation is driven by the buy-side, the sell-side and your proactive inventory builds?

Yes. Okay. So Brooke, I mean, tariffs hit us obviously in multiple phases. I mean, obviously, the 301 tariff exclusion lapsed in 2024. And so we had 25% tariffs coming in on many of our categories in '24. We had the 10% tariff in February, the additional 10% in March, the other tariffs that came into effect in April. And we quickly mobilized around the three pillars that I talked about in the prepared remarks on the buy-side, the sell-side and the operating expense side. The impact of the tariffs is hundreds of millions of dollars. I wouldn't say that we have 100% mitigated the impact of that. I think we got comfortable to the point where we feel that we were able to put out the numbers that we were able to put out based on the world that is today, I mean, which is 145% tariff in China and 10% tariff everywhere else. I mean we're assuming that, that's what it's going to be through the end of our fiscal year. In terms of the breakdown on the buy-side, sell-side and the operating expense side, look, the operating expense is the most fixed one because that's the one that's totally in our control, and we've made those changes. And I'm at least happy to say that we're not going to go after places like R&D and innovation. I mean we're going to continue to launch 25 new products into the market this year. We do need to get more efficient with our marketing and advertising spending. And so that was a project we were already working on. We've continued to accelerate that, and we've identified kind of other operating expense areas for us to be able to pare back on and find efficiencies with. On the sell side, look, that's going to be a fluid thing. I mean we're going to raise prices on certain products. Some of those prices are going to stick and have no demand generation impact. Other of those, we might have to dial back a little bit. So what I could tell you, Brooke, is that this is a business that, I guess, the data reacts very quickly, adapts to the environment that we're in, pivots quickly. But I think between the buy-side, the sell-side and the operating expense side, we feel like there's a good portion of those tariffs that are going to be mitigated, but it's obviously not 100%.

Yes. Brooke, this is Patraic. One thing I would just add on to what Mark was saying is leading up to the call, we've seen a lot in the press and then even some notes this morning that were just like how is SharkNinja able to pivot so quickly. And what I would just kind of add on is that we've essentially been in training for this for several years. And so where we feel like we've got a competitive advantage in this is all the work, the playbook that we leverage in terms of how we have agility and flexibility in our supply chain. And when April 2 hit, we had already been working the problem. We obviously saw that -- we got some news that we didn't expect. The world got some news that wasn't expected. And we quickly pivoted into that playbook. And we've been able to kind of work through that in really a truly unique SharkNinja way. And just to tie us back to one comment that Mark made earlier is this gets right to the heart of the talent and the talent profile and the culture that's in play every day here at SharkNinja. So it's allowed us to take quick and decisive actions as we try to manage the uncertainty that we're facing into.

Patraic, one quick follow-up. Can you help us understand what gross margin assumptions are embedded within the guidance, and how that should cadence throughout the year?

Yes. So fundamentally, without going into too greater detail, I mean, you saw that overarchingly, we've not only reiterated, but we've raised our guidance on a full year basis. So we fundamentally feel very strong about how we're managing through the year. Now with that being said, we're continuing, as Mark mentioned earlier, to be very nimble in how we're evaluating gross margin as we make our way through the year. And so what you can expect is, as we get into the back half of Q2 into the second half of the year, that we'll continue -- we're going to continue to evaluate the levers that we're pulling, whether that's on price, consumer reaction, strategies with our retailers. And we'll adjust particularly on what we call the sell-side as we move forward throughout the year. So while I can't give you a specific number on gross margin, that's how we're managing our way through it. So it's kind of a constant read and react.

We have the next question from Rupesh Parikh with Oppenheimer & Co.

So I guess just going back to North America, so very positive commentary on quarter-to-date POS trends. Any sense of whether you saw any pull-forward in demand in North America? And then how you think about just the growth for North America, just given a more uncertain environment going forward?

Yes. So Rupesh, I don't think that we saw pull-forward per se. I mean I -- our products are -- have an average sell price of $199 to $229. I mean I think that may be kind of higher-ticket items that you might be seeing the pull-forward from. In terms of how do I see North America going forward, baked into our numbers, I mean, we're assuming that there will be some revenue disruption in North America as a result of out-of-stocks that there will be products that we will not be able to bring in sufficient inventory from, from China. I talked about we're going to be moving some of our new products that we expected to launch in North America or in the United States. We're now going to launch them first in Europe. It's kind of the opposite of what we faced last year, where last year, we had such strong demand that we didn't launch some of these new products in Europe. We only kept the inventory that we had for the United States. I think you'll see the opposite of some of that this year where there'll be products as we get into Q3 and Q4 that we've now quickly shifted and said we'll launch in Europe and the U.K. first and then see how things play out and kind of move those products outside of China and then be able to bring them into the United States maybe in Q4, into Q1 of next year. So look, I think demand in North America, we continue to feel upbeat about it. I mean the retailers are supporting us. I mean the retailers feel that they're excited. I mean they're obviously concerned about supply, but I think we'll get over some of those little hiccups in supply and kind of movement in NPD. And overall, I mean, I feel like the domestic business is healthy.

We now have a question from Steven Forbes with Guggenheim Securities.

Mark, maybe just expanding on that point, right? You think about this environment and the retailer vendor relationships and how they're evolving, where the opportunity is specifically for Shark. Can you maybe just reframe for us -- I know you provided some comment in the prepared remarks. Can you just talk about how the conversation with your core U.S. retail partners has evolved? What are they really asking from you today? Is there a huge shelf space opportunity ahead for Shark this year in particular, right, due to the advantages you highlighted in the prepared remarks? And how do you sort of give them confidence of the sort of mutually beneficial outcome that Shark can bring to the table?

Yes, Steve, the conversations, I think, have been highly collaborative. I mean they understand the situation that we're in. They see the steps that we're taking. I think the increases that we're talking about passing along are smaller than what they're going to see from others in certain categories. I think they're very appreciative of the fact that we made some of the supply moves outside of China much faster. I think they're asking us, is the innovation pipeline going to continue at the pace that it's been at? Are you going to continue to keep investing in media at the way that you are? I mean those are some of the big questions that they -- what they're hearing a lot from vendor communities is big pullbacks, big retrenching. And what I think they really want to know is, is SharkNinja still investing? Is SharkNinja still going to drive people into their stores and drive people online? And is it still going to maintain its innovation flywheel cadence and its viral marketing approach? And so I think that's the assurance that we need to give them and have been giving them that this is not a business that is going to recoil, but we're going to invest. And they've asked us a lot of questions about our new product pipeline. We're going to do everything we possibly can to make sure that the holiday selling season is as great as it possibly can be. I mean we've got a great balance sheet. I mean we're investing. They're counting on us for growth, and I think we need to step up and deliver for them.

Thank you. I can confirm that does conclude the SharkNinja's Q1 '25 Earnings Call. You may now disconnect. Thank you, all, for your participation, and please enjoy the rest of your day.