# YETI Holdings, Inc.: Form 10-Q for the period ended Jun 29, 2024

- Company: [YETI Holdings, Inc.](/companies/yeti.md) (CIK 1670592)
- Form: 10-Q
- Filed: 2024-08-08
- Accepted by EDGAR: Aug 8, 2024, 10:11 ET
- Period: 2024-06-29
- Accession: 0001670592-24-000034
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1670592/000167059224000034/yeti-20240629.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1670592/000167059224000034/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-29.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-03-31 to 2024-06-29 | $463.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-12-31 to 2024-06-29 | $804.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-03-31 to 2024-06-29 | $199.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-12-31 to 2024-06-29 | $345.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-03-31 to 2024-06-29 | $264.3m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-12-31 to 2024-06-29 | $459.1m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-03-31 to 2024-06-29 | $196.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-12-31 to 2024-06-29 | $365.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-03-31 to 2024-06-29 | $67.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-12-31 to 2024-06-29 | $93.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-03-31 to 2024-06-29 | $16.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-12-31 to 2024-06-29 | $23.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-03-31 to 2024-06-29 | $50.4m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-12-31 to 2024-06-29 | $66.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-03-31 to 2024-06-29 | $0.59 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-12-31 to 2024-06-29 | $0.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-03-31 to 2024-06-29 | $0.59 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-12-31 to 2024-06-29 | $0.77 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-03-31 to 2024-06-29 | 85,468,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-12-31 to 2024-06-29 | 86,313,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-12-31 to 2024-06-29 | −$47.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-12-31 to 2024-06-29 | $21.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2023-12-31 to 2024-06-29 | $100.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2024-06-29 | $807.2m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-29 | $1.23bn | us-gaap:Assets |
| Current liabilities | at 2024-06-29 | $351.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-29 | $526.4m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-29 | $75.8m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-06-29 | $705.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 35,246 characters.

The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws, and should be read in conjunction with the disclosures we make concerning risks and other factors that may affect our business and operating results, including those described in more detail in Part I “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 30, 2023. The information contained in this section should also be read in conjunction with our consolidated financial statements and related notes and the information contained elsewhere in this Report. See also “Cautionary Note Regarding Forward-Looking Statements” immediately prior to Part I, Item I in this Quarterly Report on Form 10-Q.

The terms “we,” “us,” “our,” “YETI,” and “the Company” as used herein, and unless otherwise stated or indicated by context, refer to YETI Holdings, Inc. and its subsidiaries.

### Business Overview

Headquartered in Austin, Texas, YETI is a global designer, retailer, and distributor of innovative outdoor products. From coolers and drinkware to bags and apparel, YETI products are built to meet the unique and varying needs of diverse outdoor pursuits, whether in the remote wilderness, at the beach, or anywhere life takes you. By consistently delivering high-performing, exceptional products, we have built a strong following of brand loyalists throughout the world, ranging from serious outdoor enthusiasts to individuals who simply value products of uncompromising quality and design. We have an unwavering commitment to outdoor and recreation communities, and we are relentless in our pursuit of building superior products for people to confidently enjoy life outdoors and beyond.

We distribute our products through a balanced omni-channel platform, consisting of our wholesale and direct-to-consumer (“DTC”) channels. In our wholesale channel, we sell our products through select national and regional accounts and an assemblage of independent retail partners throughout the United States, Canada, Australia, New Zealand, Europe, and Japan, among others. We carefully evaluate and select retail partners that have an image and approach that are consistent with our premium brand and pricing. Our domestic national and regional specialty retailers include Dick’s Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops, Ace Hardware, Scheels, and Tractor Supply Company. We sell our products in our DTC channel to customers through our websites and YETI Authorized on the Amazon Marketplace, as well as in our retail stores. Additionally, we offer customized products with licensed trademarks and original artwork through our websites and our corporate sales program. Our corporate sales program offers customized products to corporate customers for a wide-range of events and activities, and in certain instances may also offer products to re-sell. In the first quarter of 2024, we acquired Mystery Ranch, LLC, which is a designer and manufacturer of durable load-bearing backpacks, bags, and pack accessories.

#### Product Introductions and Updates

During the first quarter of 2024, we expanded our drinkware offerings with the launch of a new stackable 16 oz. Rambler cup, and introduced new seasonal colorways.

During the second quarter of 2024, we continued the expansion of our drinkware offerings with the launch of our new Rambler French Press in two sizes, our Flask and Shot Glasses, and new seasonal colorways. We also expanded our hard cooler offerings with two new sizes within our Roadie cooler family.

#### Acquisitions

During the first quarter of 2024, we completed the acquisitions of Mystery Ranch, LLC (“Mystery Ranch”), a designer and manufacturer of durable load-bearing backpacks, bags, and pack accessories, and Butter Pat Industries, LLC (“Butter Pat”), a designer and manufacturer of cast iron cookware. We are integrating Mystery Ranch and Butter Pat operations and products into our business to further expand our capabilities in the bags and cookware categories. See Note 2- Acquisitions of the Notes to Consolidated Financial Statements included herein for additional information about these acquisitions.

#### Macroeconomic Conditions

There is significant uncertainty regarding how macroeconomic trends, including sustained high levels of inflation and higher interest rates, will impact consumer demand. While some of these conditions have negatively impacted consumer discretionary spending behavior, we continue to see strong overall demand for our products. We have, however, seen instances of consumer sensitivity to higher price points, which has negatively impacted our financial results.

The recent disruptions of container shipping traffic through the Red Sea and surrounding waterways have continued to negatively affect transit times and freight costs for goods manufactured in Asia and destined to Europe, and to a smaller extent the Americas. In addition to these ongoing disruptions, freight rates increased industry-wide towards the end of the second quarter of 2024. Although such effects have not materially impacted our business to date, the continuation or worsening of these conditions may materially impact our operations and financial results through the remainder of 2024.

A worsening of any of the macroeconomic trends or uncertainties discussed herein may adversely impact our business, operations, and financial results in the future. We will continue to monitor and, if necessary, strive to mitigate the effects of the macroeconomic environment on our business.

#### Product Recall Reserves

In January 2023, we notified the Consumer Products Safety Commission (“CPSC”) of a potential safety concern regarding the magnet-lined closures of our Hopper M30 Soft Cooler, Hopper M20 Soft Backpack Cooler, and SideKick Dry gear case (the “affected products”) and initiated a global stop sale of the affected products. In February 2023, we proposed a voluntary recall of the affected products to the CPSC and other relevant global regulatory authorities. Accordingly, we established reserves for unsalable inventory on-hand, as well as expected future returns, the estimated cost of recall remedies for consumers with affected products, and other recall-related costs as of December 31, 2022.

In March 2023, we announced separate, voluntary recalls of the affected products in collaboration with the CPSC. During the second quarter of 2023, we began processing recall returns and claims and based on such experience and trends, we reevaluated our assumptions and adjusted our estimated recall expense reserve. As a result, we updated our recall reserve assumptions, which increased the estimated recall expense reserve by $8.5 million during the second quarter of 2023.

As a result of the net unfavorable recall reserve adjustment and other incurred costs, for the three and six months ended July 1, 2023, we recorded a reduction to net sales of $24.5 million primarily related to higher estimated future recall-related gift card elections; recorded a benefit in cost of goods sold of $5.1 million and $6.3 million, respectively, primarily related to lower estimated costs of future product replacement remedy elections and logistics costs, and lower recall-related costs; and recorded a benefit in SG&A expenses primarily related to lower estimated other recall-related costs of $10.7 million and $10.5 million, respectively. The total unfavorable impact to operating income related to the recalls was $8.7 million and $7.7 million for the three and six months ended July 1, 2023, respectively.

In addition, our 2023 sales were materially adversely impacted by the stop sales of the affected products. In the fourth quarter of 2023, we introduced our redesigned and improved versions of the affected products.

During 2024, we have not recorded any adjustments to our recall reserves. As a result, the product recall had no impact to our consolidated financial results for the three and six months ended June 29, 2024.

The ultimate impact from the recalls may differ materially from our estimates, and may harm our business, financial condition and results of operation.

### General

### Components of Our Results of Operations

***Net Sales.*** Net sales are comprised of wholesale channel sales to our retail partners and sales through our DTC channel. Net sales in both channels reflect the impact of product returns as well as discounts for certain sales programs or promotions.

We discuss the net sales of our products in our two primary categories: Coolers & Equipment and Drinkware. Our Coolers & Equipment category includes hard coolers, soft coolers, bags, outdoor equipment, and cargo, as well as accessories and replacement parts for these products. Our Drinkware category is primarily composed of our stainless-steel drinkware products and related accessories. In addition, our Other category is primarily comprised of ice substitutes and YETI-branded gear, such as shirts, hats, and other miscellaneous products.

***Gross profit.*** Gross profit reflects net sales less cost of goods sold, which primarily includes the purchase cost of our products from our third-party contract manufacturers, inbound freight and duties, product quality testing and inspection costs, depreciation expense of our molds, tooling, and equipment, and the cost of customizing products. We calculate gross margin as gross profit divided by net sales. Our DTC channel generally generates higher gross margin than our wholesale channel due to differentiated pricing between these channels.

***Selling, general, and administrative expenses.*** Selling, general, and administrative (“SG&A”) expenses consist primarily of marketing costs, employee compensation and benefits costs, costs of our outsourced warehousing and logistics operations, costs of operating on third-party DTC marketplaces, professional fees and services, non-cash stock-based compensation, cost of product shipment to our customers, depreciation and amortization expense, and general corporate infrastructure expenses. Our variable expenses, including outbound freight, online marketplace fees, third-party logistics fees, and credit card processing fees, will vary as they are dependent on our sales volume and our channel mix. Our DTC channel variable SG&A costs are generally higher as a percentage of net sales than our wholesale channel distribution costs.

***Fiscal Year.*** We have a 52- or 53-week fiscal year that ends on the Saturday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. Our fiscal year ending December 28, 2024 (“2024”) is a 52-week period. The first quarter of our fiscal year 2024 ended on March 30, 2024, the second quarter ended on June 29, 2024, and the third quarter ends on September 28, 2024. Our fiscal year ended December 30, 2023 (“2023”) was also a 52-week period. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years and the associated quarters, months, and periods of those fiscal years. The unaudited condensed consolidated financial results presented herein represent the three and six months ended June 29, 2024 and July 1, 2023.

### Results of Operations

The discussion below should be read in conjunction with the following table and our unaudited condensed consolidated financial statements and related notes contained elsewhere in this Report. The following table sets forth selected statement of operations data, and their corresponding percentage of net sales, for the periods indicated (dollars in thousands):

| Statement of Operations | Three Months Ended June 29, 2024 |  | July 1, 2023 |  | Six Months Ended June 29, 2024 |  | July 1, 2023 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $463,499 | 100% | $402,563 | 100% | $804,893 | 100% | $705,359 | 100% |
| Cost of goods sold | 199,193 | 43% | 187,725 | 47% | 345,774 | 43% | 328,651 | 47% |
| Gross profit | 264,306 | 57% | 214,838 | 53% | 459,119 | 57% | 376,708 | 53% |
| Selling, general, and administrative expenses | 196,886 | 42% | 164,507 | 41% | 365,882 | 45% | 311,279 | 44% |
| Operating income | 67,420 | 15% | 50,331 | 13% | 93,237 | 12% | 65,429 | 9% |
| Interest (expense) income | (548) | —% | (731) | —% | 111 | —% | (1,325) | —% |
| Other income (expense), net | 391 | —% | 1,244 | —% | (3,710) | —% | 1,250 | —% |
| Income before income taxes | 67,263 | 15% | 50,844 | 13% | 89,638 | 11% | 65,354 | 9% |
| Income tax expense | (16,867) | 4% | (12,773) | 3% | (23,387) | 3% | (16,719) | 2% |
| Net income | $50,396 | 11% | $38,071 | 9% | $66,251 | 8% | $48,635 | 7% |

18

### Comparison of the Three Months Ended June 29, 2024 and July 1, 2023

*(dollars in thousands)*

|  | Three Months Ended June 29, 2024 | July 1, 2023 $% | Change |
| --- | ---: | ---: | ---: |
| Net sales | $463,499 | $402,563 | $60,936 15% |
| Gross profit | $264,306 | $214,838 | $49,468 23% |
| Gross margin (gross profit as a % of net sales) | 57.0% | 53.4% | 360 basis points |
| Selling, general, and administrative expenses | $196,886 | $164,507 | $32,379 20% |
| SG&A as a % of net sales | 42.5% | 40.9% | 160 basis points |

### Net Sales

Net sales increased $60.9 million, or 15%, to $463.5 million for the three months ended June 29, 2024, compared to the three months ended July 1, 2023. Net sales for the three months ended July 1, 2023 included an unfavorable impact of $24.5 million related to a recall reserve adjustment. Excluding the recall-related impact from the second quarter of 2023, net sales increased $36.4 million, or 9%, due to growth in both our Wholesale and DTC channels. Net sales for the second quarter of 2024 and 2023 also include $2.3 million and $12.5 million, respectively, of sales related to gift card redemptions in connection with recall remedies.

Net sales in our channels were as follows:

- DTC channel net sales increased $24.0 million, or 11%, to $250.4 million, compared to $226.4 million in the prior year quarter, due to growth in both Coolers & Equipment and Drinkware. DTC channel net sales included an unfavorable impact of $8.1 million in the second quarter of 2023 related to a recall reserve adjustment. DTC channel mix was 54% in the second quarter of 2024 compared to 56% in the second quarter of 2023.
- Wholesale channel net sales increased $37.0 million, or 21%, to $213.1 million, compared to $176.2 million in the same period last year, due to growth in both Coolers & Equipment and Drinkware. Wholesale channel net sales included an unfavorable impact of $16.4 million in the second quarter of 2023 related to a recall reserve adjustment.

Net sales in our two primary product categories were as follows:

- Drinkware net sales increased by $13.1 million, or 6%, to $246.5 million, compared to $233.4 million in the prior year quarter, driven by the continued expansion and innovation of our Drinkware product offerings and new seasonal colorways.
- Coolers & Equipment net sales increased by $49.3 million, or 31%, to $205.9 million, compared to $156.6 million in the same period last year, driven by strong performance in soft coolers and bags. Coolers & Equipment net sales included an unfavorable impact of $24.5 million in the second quarter of 2023 related to a recall reserve adjustment.

Net sales in the U.S. increased $41.0 million, or 12%, to $386.9 million for the three months ended June 29, 2024. Net sales in international locations increased $19.9 million, or 35%, to $76.6 million for the three months ended June 29, 2024. For the three months ended July 1, 2023, net sales in the U.S. and international locations included an unfavorable impact of $23.9 million and $0.6 million, respectively, related to a recall reserve adjustment. Net sales in international locations represented 17% and 14% of total net sales in the second quarter of 2024 and 2023, respectively.

### Gross Profit

Gross profit increased $49.5 million, or 23%, to $264.3 million, compared to $214.8 million in the prior year quarter. Gross profit for the three months ended July 1, 2023 included an unfavorable impact of $19.4 million related to a recall reserve adjustment. Gross margin rate increased 360 basis points to 57.0% from 53.4% in the prior year quarter. The increase in gross margin was primarily driven by:

- lower inbound freight rates, which favorably impacted gross margin by 320 basis points;
- the favorable impact of an unfavorable reserve adjustment in the prior year quarter associated with our voluntary product recalls, which favorably impacted gross margin in the current year quarter by 150 basis points;
- lower product costs, which favorably impacted gross margin by 90 basis points;

These were partially offset by:

- the unfavorable impact of the amortization of inventory fair value step-up in connection with the Mystery Ranch acquisition, which unfavorably impacted gross margin by 70 basis points;
- the unfavorable impact of strategic price decreases on certain hard cooler products implemented during the first quarter of 2024, which unfavorably impacted gross margin by 50 basis points; and
- other impacts, which unfavorably impacted gross margin by 80 basis points.

### Selling, General, and Administrative Expenses

SG&A expenses increased $32.4 million, or 20%, to $196.9 million for the three months ended June 29, 2024, compared to $164.5 million for the three months ended July 1, 2023. As a percentage of net sales, SG&A expenses increased 160 basis points to 42.5% for the three months ended June 29, 2024 from 40.9% for the three months ended July 1, 2023. The increase in SG&A expenses was primarily driven by:

- an increase in variable expenses of $7.6 million (decreasing SG&A as a percent of net sales by 20 basis points) primarily associated with higher net sales, and comprised of higher distribution costs including higher third-party logistics fees, online marketplace fees, and outbound freight rates;
- an increase in non-variable expenses of $14.1 million (decreasing SG&A as a percent of net sales by 90 basis points) comprised of higher employee costs, mainly due to investments in headcount to support future growth and non-cash stock-based compensation expense, investments in marketing expenses and higher information technology expenses; and
- the unfavorable impact of a favorable $10.7 million reserve adjustment in the prior year quarter associated with our voluntary product recalls (increasing SG&A as a percent of net sales by 270 basis points).

### Non-Operating Expenses

Interest expense, net was $0.5 million for the three months ended June 29, 2024, compared to $0.7 million for the three months ended July 1, 2023, primarily due to an increase in interest income.

Other income was $0.4 million for the three months ended June 29, 2024, compared to other income of $1.2 million for the three months ended July 1, 2023. The decrease was primarily due to lower foreign currency gains on intercompany balances.

Income tax expense was $16.9 million for the three months ended June 29, 2024, compared to $12.8 million for the three months ended July 1, 2023. The increase in income tax expense was due to higher income before income taxes. The effective tax rate was 25% for each of the three months ended June 29, 2024 and July 1, 2023.

### Six Months Ended June 29, 2024 Compared to July 1, 2023

*(dollars in thousands)*

|  | Six Months Ended June 29, 2024 | July 1, 2023 $% | Change |
| --- | ---: | ---: | ---: |
| Net sales | $804,893 | $705,359 | $99,534 14% |
| Gross profit | $459,119 | $376,708 | $82,411 22% |
| Gross margin (gross profit as a % of net sales) | 57.0% | 53.4% | 360 basis points |
| Selling, general, and administrative expenses | $365,882 | $311,279 | $54,603 18% |
| SG&A as a % of net sales | 45.5% | 44.1% | 140 basis points |

### Net Sales

Net sales increased $99.5 million, or 14%, to $804.9 million for the six months ended June 29, 2024, compared to $705.4 million for the six months ended July 1, 2023. Net sales for the six months ended July 1, 2023 included an unfavorable impact of $24.5 million related to a recall reserve adjustment. Excluding this recall-related reserve impact from the first half of 2023, net sales increased $75.0 million, or 10%, due to growth in both our Wholesale and DTC channels. Net sales for the six months ended June 29, 2024 and July 1, 2023 include $4.3 million and $12.5 million, respectively, of sales related to gift card redemptions in connection with recall remedies.

Net sales in our two channels were as follows:

- DTC channel net sales increased $44.8 million, or 11%, to $438.2 million, compared to $393.4 million in the prior year period, due to growth in both Coolers & Equipment and Drinkware. DTC channel net sales included an unfavorable impact of $8.1 million in the first half of 2023 related to a recall reserve adjustment. DTC channel mix was 54% in the first six months of 2024 compared to 56% in the first six months of 2023.
- Wholesale channel net sales increased $54.7 million, or 18%, to $366.7 million, compared to $312.0 million in the same period last year. Wholesale channel net sales included an unfavorable impact of $16.4 million in the first half of 2023 related to a recall reserve adjustment.

Net sales in our two primary product categories were as follows:

- Drinkware net sales increased by $37.4 million, or 9%, to $461.1 million, compared to $423.7 million in the prior year period, driven by the continued expansion and innovation of our Drinkware product offerings and new seasonal colorways.
- Coolers & Equipment net sales increased by $64.9 million, or 25%, to $325.8 million, compared to $261.0 million in the same period last year. Coolers & Equipment net sales included an unfavorable impact of $24.5 million in the first half of 2023 related to a recall reserve adjustment.

Net sales in the U.S. increased $63.8 million, or 11%, to $662.7 million for the six months ended June 29, 2024. Net sales in international locations increased $35.7 million, or 34%, to $142.2 million for the six months ended June 29, 2024. For the six months ended July 1, 2023, net sales in the U.S. and international locations included an unfavorable impact of $23.9 million and $0.6 million, respectively, related to a recall reserve adjustment. Net sales in international locations represented 18% and 15% of total net sales in first six months of 2024 and 2023, respectively.

### Gross Profit

Gross profit increased $82.4 million, or 22%, to $459.1 million compared to $376.7 million in the prior year period. Gross profit for the six months ended July 1, 2023 included an unfavorable impact of $18.2 million related to a recall reserve adjustment. Gross margin rate increased 360 basis points to 57.0% from 53.4% in the same period last year. The increase in gross margin was primarily driven by:

- lower inbound freight rates, which favorably impacted gross margin by 340 basis points;
- lower product costs, which favorably impacted gross margin by 140 basis points; and
- the favorable impact of an unfavorable reserve adjustment in the prior year quarter associated with our voluntary product recalls, which favorably impacted gross margin in the current year quarter by 70 basis points;

These were partially offset by:

- the unfavorable impact of the amortization of inventory fair value step-up in connection with the Mystery Ranch acquisition, which unfavorably impacted gross margin by 60 basis points;
- the unfavorable impact of strategic price decreases on certain hard cooler products implemented during the first quarter of 2024, which unfavorably impacted gross margin by 40 basis points;
- the unfavorable impact of customization costs, on higher customization sales mix, which unfavorably impacted gross margin by 30 basis points; and
- other impacts, which unfavorably impacted gross margin by 60 basis points.

### Selling, General, and Administrative Expenses

SG&A expenses increased by $54.6 million, or 18%, to $365.9 million for the six months ended June 29, 2024 compared to $311.3 million for the six months ended July 1, 2023. As a percentage of net sales, SG&A expenses increased by 140 basis points to 45.5% for the six months ended June 29, 2024 compared to 44.1% for the six months ended July 1, 2023. The increase in SG&A expenses was primarily driven by:

- an increase in variable expenses of $13.0 million (decreasing SG&A as a percent of net sales by 10 basis points) primarily associated with higher net sales, and comprised of higher distribution costs, including higher third-party logistics fees, online marketplace fees, and outbound freight rates;
- an increase in non-variable expenses of $31.1 million (no impact on SG&A as a percent of net sales) comprised of higher employee costs, mainly due to investments in headcount to support future growth and non-cash stock-based compensation expense, investments in marketing expenses, higher information technology expenses, and asset impairments, partially offset by lower warehousing costs; and
- the unfavorable impact of a favorable $10.5 million reserve adjustment in the prior year period associated with our voluntary product recalls (increasing SG&A as a percent of net sales by 150 basis points).

### Non-Operating Expenses

Interest income, net was $0.1 million for the six months ended June 29, 2024, compared to income expense, net of $1.3 million for the six months ended July 1, 2023, primarily due to an increase in interest income.

Other expense was $3.7 million for the six months ended June 29, 2024, compared to other income of $1.3 million for the six months ended July 1, 2023. The change in other expense was primarily due to foreign currency losses on intercompany balances for the six months ended June 29, 2024 versus foreign currency gains on intercompany balances for the six months ended July 1, 2023.

Income tax expense was $23.4 million for the six months ended June 29, 2024, compared to $16.7 million for the six months ended July 1, 2023. The increase in income tax expense was due to higher income before income taxes. The effective tax rate was 26% for each of the six months ended June 29, 2024 and July 1, 2023.

### Liquidity and Capital Resources

### General

Our cash requirements have principally been for working capital purposes, long-term debt repayments, and capital expenditures. We fund our working capital and our capital investments from cash flows from operating activities, cash on hand, and borrowings available under our revolving credit facility (the “Revolving Credit Facility”). Pursuant to our recent share repurchase plan described below, we also plan to use cash to repurchase shares of our common stock. We believe that our current operating performance, existing cash position, and borrowings available under our Revolving Credit Facility, will be sufficient to satisfy our liquidity needs and cash requirements over the next twelve months and foreseeable future.

### Current Liquidity

As of June 29, 2024, we had a cash balance of $212.9 million, working capital (excluding cash) of $242.5 million, and $300.0 million of borrowings available under the Revolving Credit Facility.

### Credit Facility

Our Credit Facility provides for a $300.0 million Revolving Credit Facility and an $84.4 million term loan (“Term Loan A”).

On February 26, 2024, we amended the Credit Facility, leaving the material terms of the Credit Facility substantially unchanged, with the exception of a definitional update and a change to make a Hedging Agreement (as defined in the Credit Facility) entered into in connection with an accelerated share purchase program a permitted Hedging Agreement under the Credit Facility.

At June 29, 2024, we had $80.2 million principal amount of indebtedness outstanding under the Term Loan A under the Credit Facility and no outstanding borrowings under the Revolving Credit Facility. Borrowings under the Term Loan A and the Revolving Credit Facility bear interest at Term Secured Overnight Financing Rate (“SOFR”) or the Alternate Base Rate (each as defined in the Credit Agreement) plus an applicable rate ranging from 1.75% to 2.50% for Term SOFR-based loans and from 0.75% to 1.50% for Alternate Base Rate-based loans, depending upon our total Net Leverage Ratio (as defined in the Credit Agreement). Additionally, a commitment fee ranging from 0.200% to 0.300%, determined by reference to a pricing grid based on our net leverage ratio, is payable on the average daily unused amounts under the Revolving Credit Facility. The weighted-average interest rate for borrowings under Term Loan A was 7.09% during the three months ended June 29, 2024.

The Credit Facility requires us to comply with certain covenants, including financial covenants regarding our total net leverage ratio and interest coverage ratio. Fluctuations in these ratios may increase our interest expense. Failure to comply with these covenants and certain other provisions of the Credit Facility, or the occurrence of a change of control, could result in an event of default and an acceleration of our obligations under the Credit Facility or other indebtedness that we may incur in the future. At June 29, 2024, we were in compliance with all covenants and expect to remain in compliance with all covenants under the Credit Facility.

### Share Repurchase Program

On February 1, 2024, our Board of Directors authorized the repurchase of up to $300 million (exclusive of fees and commissions) of YETI’s common stock (the “Share Repurchase Program”). The common stock may be repurchased from time to time at prevailing prices in the open market, through various methods, including, but not limited to, open market, privately negotiated, or accelerated share repurchase transactions. Repurchases under the share repurchase program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act. The timing, manner, price, and actual amount of share repurchases will be determined by management based on various factors, including, but not limited to, stock price, economic and market conditions, other capital allocation needs and opportunities, and corporate and regulatory considerations. YETI has no obligation to repurchase any amount of our common stock, and such repurchases may be suspended or discontinued at any time. As of June 29, 2024, $200 million remained available under the Share Repurchase Program

As part of the Share Repurchase Program, on February 27, 2024, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with Goldman Sachs & Co. LLC (“Goldman Sachs”) to repurchase $100 million of YETI’s common stock. Pursuant to the ASR Agreement, we made a payment of $100 million to Goldman Sachs and received an initial share delivery of 1,998,501 shares of our common stock. We received a final delivery of an additional 642,674 shares on April 25, 2024. The ASR resulted in the total repurchase of 2,641,175 shares. See Note 9-Stockholders’ Equity of the Unaudited Condensed Consolidated Financial Statements for additional information about the Share Repurchase Program.

### Material Cash Requirements

Other than as disclosed above, there have been no material changes in our material cash requirements for contractual and other obligations, including capital expenditures, as disclosed under “Material Cash Requirements” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 30, 2023 filed with the SEC.

### Cash Flows from Operating, Investing, and Financing Activities

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (in thousands):

| Cash flows provided by (used in): | Six Months Ended June 29, 2024 | July 1, 2023 |
| --- | ---: | ---: |
| Operating activities | $(47,714) | $28,781 |
| Investing activities | $(72,435) | $(31,917) |
| Financing activities | $(105,802) | $(9,937) |

#### Operating Activities

Cash flows related to operating activities are dependent on net income, non-cash adjustments to net income, and changes in working capital. The increase in cash used by operating activities during the six months ended June 29, 2024 compared to cash provided by operating activities during the six months ended July 1, 2023 is primarily due to an increase in cash used for working capital, adjusted for non-cash items for the periods compared, partially offset by an increase in net income. The increase in cash used for working capital was primarily due to an increase in inventory.

#### Investing Activities

The increase in cash used in investing activities during the six months ended June 29, 2024 was primarily related to the acquisition of Mystery Ranch and increased purchases of intangible assets.

#### Financing Activities

The increase in cash used by financing activities during the six months ended June 29, 2024 was primarily driven by repurchases of common stock in connection with our $100 million ASR Agreement.

### Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates. A discussion of the accounting policies that management considers critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 30, 2023 filed with the SEC. Other than as described below, there have been no significant changes to our critical accounting policies.

#### Business Combinations

We account for business combinations using the acquisition method of accounting. We allocate the purchase consideration to the identifiable assets acquired and liabilities assumed in a business combination based on their acquisition-date fair values. We use our best estimates and assumptions to determine the fair value of tangible and intangible assets acquired and liabilities assumed, as well as the uncertain tax positions and tax-related valuation allowances that are initially recorded in connection with a business combination. These estimates are reevaluated and adjusted, if needed, during the measurement period of up to one year from the acquisition date, and are recorded as adjustments to goodwill. Any adjustments to the acquired assets and liabilities assumed that are identified subsequent to the measurement period are recorded in earnings.

## Market risk

As filed, 271 characters.

There have been no material changes to our market risk exposures or management of market risk from those disclosed in Quantitative and Qualitative Disclosures About Market Risk included under Item 7A in our Annual Report on Form 10-K for the year ended December 30, 2023.

## Controls and procedures

As filed, 3,060 characters.

### Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 29, 2024.

### Changes in Internal Control over Financial Reporting

During the quarter ended June 29, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations in Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or fraud. Additionally, controls can be circumvented by individuals or groups of persons or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements in our public reports due to error or fraud may occur and not be detected.

### PART II. OTHER INFORMATION

### Recent Accounting Pronouncements

For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see “Recently Adopted Accounting Pronouncements” in Note 1 of the Unaudited Condensed Consolidated Financial Statements.

## Risk factors

As filed, 156 characters.

There have been no material changes to the risk factors contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 30, 2023.

Filed Aug 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001670592-24-000034. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.