# Traeger, Inc. (COOK) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Traeger, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1857853/000185785322000028/tra-20211231.htm
Accession: 0001857853-22-000028
Filing date: 2022-03-29
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/COOK/
All MD&A years: /company/COOK/mda/
Next year: /company/COOK/mda/fy2022/ (FY 2022)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and in other parts of this Annual Report on Form 10-K. A discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019 has been reported previously in our final prospectus (the "Prospectus") filed pursuant to Rule 424(b)(4) (File No. 333-257714), filed with the SEC on July 30, 2021, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Overview

Traeger is the creator and category leader of the wood pellet grill, an outdoor cooking system that ignites all-natural hardwoods to grill, smoke, bake, roast, braise, and barbecue. Our grills are versatile and easy to use, empowering cooks of all skill sets to create delicious meals with a wood-fired flavor that cannot be replicated with gas, charcoal, or electric grills. Grills are at the core of our platform and are complemented by Traeger wood pellets, rubs, sauces, premium frozen meal kits and accessories.

Our marketing strategy has been instrumental in building our brand and driving customer advocacy and revenue. We have disrupted the outdoor cooking market and created a passionate community, the Traegerhood, which includes foodies, pitmasters, backyard heroes, moms and dads, professional athletes, outdoorsmen and outdoorswomen, and world-class chefs. This community, together with our various marketing initiatives, has helped to promote our brand and products to the wider consumer population and supported our efforts to redefine outdoor cooking as an experience accessible to everyone. We have an active online and social media presence and a content-rich website that drives significant customer engagement and brings our Traegerhood together. We also directly engage with our current and target customers by sponsoring and participating in a variety of events, including live shows, outdoor festivals, rodeos, music and film festivals, barbecue competitions, fishing tournaments, and retailer events. We believe the style and authenticity of our customer engagement reinforces our brand and drives new and existing customer interest in our products and community.

Our revenue is primarily generated through the sale of our wood pellet grills, consumables and accessories. We currently offer three series of grills – Pro, Ironwood and Timberline – as well as a selection of smaller, portable grills. Our grills are available in a number of different sizes and can be upgraded through a variety of accessories. A growing number of our grills feature WiFIRE technology, which allows users to monitor and adjust their grills remotely using our Traeger app. Our consumables include our wood pellets, which are made from natural, virgin hardwood and are available in a variety of flavors, as well as rubs, sauces and our premium frozen meal kits consisting of high-quality ingredients, supplies and easy-to-follow instructions. Our accessories include grill covers, liners, tools, MEATER smart thermometers, apparel and other ancillary items.

We sell our grills using an omnichannel distribution strategy that consists primarily of retail and direct to consumer ("DTC") channels. Our retail channel covers brick-and-mortar retailers, e-commerce platforms, and multichannel retailers, who, in turn, sell our grills to their end customers. Our retailers include Ace Hardware, Amazon.com, Costco, The Home Depot, and William Sonoma, among others, as well as a significant number of independent retailers that cater to local communities and specific categories, such as hardware, camping, outdoor, farm, ranch, barbecue and other categories. Our DTC channel covers sales directly to customers through our website and Traeger app, as well as certain country- and region-specific Traeger or distributor websites. Our consumables and accessories are available through the same channels as our grills, except that our Traeger Provisions product line is only available through our DTC channel.

Over the last several years, we have made significant investments in our supply chain and manufacturing operations. Our supply chain includes third party manufacturers for our grills and accessories and pellet production facilities for our wood pellets that we own or lease. We work closely with our manufacturers to evolve on design, manufacturing process and product quality. Our grills are currently manufactured in China and Vietnam, and our wood pellets are produced at facilities located in New York, Oregon, Georgia, Virginia, and Texas. We have entered into manufacturing agreements covering the supply of substantially all of our grills and accessories, pursuant to which we make purchases on a purchase order basis. We rely on several third-party suppliers for the components used in our grills, including integrated circuits, processors, and system on chips.

We believe that our financial results have reflected our growth. Our revenue increased by 43.9% for the year ended December 31, 2021 as compared to the year ended December 31, 2020, and reached $785.5 million for the year ended December 31, 2021, up from $545.8 million for the year ended December 31, 2020. We recorded a net loss of $88.8 million for

54

Table of Contents

the year ended December 31, 2021, compared to net income of $31.6 million for the year ended December 31, 2020. Our Adjusted EBITDA was $109.0 million for the year ended December 31, 2021, down from $116.1 million for the year ended December 31, 2020. Our Adjusted Net Income was $66.9 million for the year ended December 31, 2021, down from $73.3 million for the year ended December 31, 2020. Adjusted EBITDA and Adjusted Net Income (Loss) are non-GAAP financial measures. For a reconciliation of Adjusted EBITDA and Adjusted Net Income (Loss) to the most directly comparable GAAP financial measure, information about why we consider Adjusted EBITDA and Adjusted Net Income (Loss) useful and a discussion of the material risks and limitations of this measure, please see “non-GAAP Financial Measures” below.

Corporate Conversion and Initial Public Offering

Immediately prior to the effectiveness of our IPO registration statement on July 28, 2021, TGPX Holdings I LLC converted from a Delaware limited liability company into a Delaware corporation, and changed its name to Traeger, Inc.

Pursuant to the statutory corporate conversion (the "Corporate Conversion"), all of the outstanding limited liability company interests of TGPX Holdings I LLC were converted into shares of common stock of Traeger, Inc., and TGP Holdings LP (the “Partnership”) became the holder of such shares of common stock of Traeger, Inc. In connection with the Corporate Conversion, the Partnership liquidated and distributed these shares of common stock to the holders of partnership interests in the Partnership in direct proportion to their respective interests in the Partnership based upon the value of Traeger, Inc. at the time of the IPO, with a value implied by the initial public offering price of the shares of common stock sold in the IPO. Based on the IPO price of $18.00 per share, following the Partnership’s liquidation and distribution, including the elimination of any fractional shares resulting therefrom, and the Corporate Conversion, we had 108,724,387 shares of common stock outstanding immediately prior to the IPO.

On August 2, 2021, we completed our IPO in which we issued and sold 8,823,529 shares of common stock at a public offering price of $18.00 per share, generating aggregate gross proceeds of $158.8 million before underwriter discounts and commissions, fees and expenses totaling $20.3 million. Additionally, certain selling stockholders sold an aggregate of 18,235,293 shares (including 3,529,411 shares pursuant to the underwriters' exercise of their option to purchase additional shares).

Key Factors Affecting Our Performance

We believe that our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges. For a discussion of these factors, please see "Key Factors Affecting Our Performance" in the Management's Discussion and Analysis section of our prospectus, dated July 28, 2021, and in Part I, Item 1A. "Risk Factors" of this Annual Report on Form 10-K.

Non-GAAP Financial Measures

In addition to our results and measures of performance determined in accordance with U.S. GAAP, we believe that certain non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions.

Each of Adjusted EBITDA and Adjusted Net Income is a key performance measure that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes. We believe that these non-GAAP financial measures are useful to investors and other interested parties in analyzing our financial performance because it provides a comparable overview of our operations across historical periods. In addition, we believe that providing each of Adjusted EBITDA and Adjusted Net Income, together with a reconciliation of net income (loss) to each such measure, helps investors make comparisons between our company and other companies that may have different capital structures, different tax rates, and/or different forms of employee compensation. For example, due to finite-lived intangible assets included on our balance sheet following our corporate reorganization in 2017, we have significant non-cash amortization expense attributable to the nature of our capital structure.

Each of Adjusted EBITDA and Adjusted Net Income is used by our management team as an additional measure of our performance for purposes of business decision-making, including managing expenditures, and evaluating potential acquisitions. Period-to-period comparisons of Adjusted EBITDA and Adjusted Net Income help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of net income or income from continuing operations. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees. Each of Adjusted EBITDA and Adjusted Net Income has inherent limitations because of the excluded items and may not be directly comparable to similarly titled metrics used by other companies.

55

Table of Contents

We calculate Adjusted EBITDA as net income (loss) adjusted to exclude provision for income taxes, other (income) expense, interest expense, depreciation and amortization, equity-based compensation, non-routine legal expenses, non-routine start-up costs, non-routine acquisition expenses, change in fair value of contingent consideration, offering related expenses, non-routine refinancing expenses, and other adjustment items. Other (income) expense are gains (losses) on disposal of property, plant and equipment, impairments of long-term assets, unrealized gains (losses) from derivatives, and the loss on extinguishment of debt upon refinancing and early repayment. Non-routine legal expenses are primarily external legal expenses for litigation, patent and trademark defense, and legal costs related to an acquisition. Non-routine start-up costs represent investments in Traeger Provisions. Non-routine acquisition expenses are primarily for consulting and legal costs incurred in connection with the acquisition of Apption Labs. Change in fair value of contingent consideration results from changes in the fair value of the contingent consideration associated with the acquisition of Apption Labs due to changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets. Offering related expenses are primarily for a one-time bonus paid to certain employees, including certain of our executive officers, as well as legal and consulting costs incurred in connection with our IPO process. Non-routine refinancing expenses are primarily for consulting and legal costs incurred to refinance our credit facilities. Other adjustment items include inventory write-offs and restoration of our wood pellet production facility due to flood damage sustained as a result of a tropical storm and costs to establish our China warehouse. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA and Adjusted EBITDA Margin should be viewed as measures of operating performance that are supplements to, and not substitutes for, operating income or loss, net earnings or loss and other U.S. GAAP measures of income (loss). The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted EBITDA on a consolidated basis.

[[GREPCENT_TABLE]]
[["","Year-ended December 31,"],["","2021","","2020"],["","(dollars in thousands)"],["Net income (loss)","$","(88,821)","","","$","31,602"],["Adjusted to exclude the following:"],["Provision for income taxes","1,489","","","749"],["Other (income) expense","10,518","","","(5,947)"],["Interest expense","26,646","","","34,073"],["Depreciation and amortization","47,499","","","40,968"],["Equity-based compensation","81,112","","","12,810"],["Non-routine legal expenses","6,343","","","1,820"],["Non-routine start-up costs","8,901","","","\u2014"],["Non-routine acquisition expenses","2,624","","","\u2014"],["Change in fair value of contingent consideration","3,800","","","\u2014"],["Offering related expenses","3,725","","","\u2014"],["Non-routine refinancing expenses","3,895","","","\u2014"],["Other adjustment items1","1,276","","","\u2014"],["Adjusted EBITDA","$","109,007","","","$","116,075"],["Revenue","785,545","","","545,772"],["Net (loss) income as a percentage of revenue","(11.3)","%","","5.8","%"],["Adjusted EBITDA Margin","13.9","%","","21.3","%"]]
[[/GREPCENT_TABLE]]

1 Includes $1.2 million of inventory write-offs and restoration of our wood pellet production facility due to flood damage sustained as a result of a tropical storm and $0.1 million of costs to establish our China warehouse as significant adjustments.

We calculate Adjusted Net Income as net income (loss) adjusted to exclude other (income) expense, equity-based compensation, non-routine legal expenses, amortization of acquisition intangibles, non-routine start-up costs, non-routine acquisition expenses, change in fair value of contingent consideration, offering related expenses, non-routine refinancing expenses, other adjustment items, and tax impact of adjusting items. Amortization of acquisition intangibles includes amortization expense associated with intangible assets recorded in connection with the 2017 corporate reorganization and acquisition of Traeger Pellet Grills Holdings LLC. Tax impact of adjusting items for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on Adjusted Net Income. This rate is based on our estimated annual GAAP income (loss) tax rate forecast, adjusted to account for items excluded from GAAP income (loss) in calculating the non-GAAP financial measures presented below.

56

Table of Contents

Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates, our estimated tax rate on Adjusted Net Income may differ from our GAAP tax rate and from our actual tax liabilities. Adjusted Net Income should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other U.S. GAAP measures of income (loss). The following table presents a reconciliation of net (loss) income, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted Net Income on a consolidated basis.

[[GREPCENT_TABLE]]
[["","Year-ended December 31,"],["","2021","","2020"],["","(in thousands)"],["Net income (loss)","$","(88,821)","","","$","31,602"],["Adjusted to exclude the following:"],["Other expense (income)","10,518","","","(5,947)"],["Equity-based compensation","81,112","","","12,811"],["Non-routine legal expenses","6,343","","","1,821"],["Amortization of acquisition intangibles","33,014","","","33,014"],["Non-routine start-up costs","8,901","","","\u2014"],["Non-routine acquisition expenses","2,624","","","\u2014"],["Change in fair value of contingent consideration","3,800","","","\u2014"],["Offering related expenses","3,725","","","\u2014"],["Non-routine refinancing expenses","3,895","","","\u2014"],["Other adjustment items 2","1,276","","","\u2014"],["Tax impact of adjusting items","477","","","\u2014"],["Adjusted net income","$","66,864","","","$","73,301"]]
[[/GREPCENT_TABLE]]

2 Includes $1.2 million of inventory write-offs and restoration of our wood pellet production facility due to flood damage sustained as a result of a tropical storm and $0.1 million of costs to establish our China warehouse.

Impact of COVID-19

The COVID-19 pandemic has caused various elements of disruption to economies, businesses, markets and communities around the globe. In the interest of public health, many governments closed physical stores and business locations deemed to be non-essential, which drove higher unemployment levels and resulted in the closure of certain businesses. The COVID-19 pandemic has had a variety of impacts to the businesses of our retailers and suppliers, as well as customer behavior and discretionary spending. Although we cannot predict when the United States and global economy will fully recover from the COVID-19 pandemic, we believe that our business is well positioned to attract new customers, capitalize on existing and growing trends in our industry and benefit from the revival of the economy and discretionary spending. Nevertheless, we do not have certainty that a full economic recovery will happen in the near future, and it is possible that the prolonging of the COVID-19 pandemic could have certain adverse effects on our business, financial condition, and results of operations. Furthermore, our growth in the past year may obscure the extent to which seasonality and other trends have affected our business and may continue to affect our business. For more information regarding the potential impact of the COVID-19 pandemic on our business, refer to Part 1, Item 1A. “Risk Factors” in this Annual Report on Form 10-K.

In response to the COVID-19 pandemic, we quickly developed a plan of action that focused first on the health and safety of our employees. In March 2020, we implemented a work-from-home policy and began to establish safety measures at our wood pellet production facilities. Next, we took immediate action to protect our liquidity. These actions included reductions in discretionary spending and capital expenditures, a temporary hiring freeze, employee furloughs, and a reduction in our inventory purchase plan. At the end of the first quarter of 2020, we drew down the available capacity under our revolving credit facility to increase cash to sustain our operations. We also focused on business continuity across our value chain and operations, and made strategic pivots and reprioritized key initiatives to focus on our immediate response to the COVID-19 pandemic and maintain a nimble approach to our long-term strategy as we continued to monitor the situation. We have returned much of our remote workforce to physical locations, with a hybrid approach of splitting at-home and in-office time for our corporate employees. Only a small number of employees remain working fully remotely, and we do not believe remote operations or our

57

Table of Contents

cost reduction initiatives have significantly impacted the productivity of our workforce or operations, or resulted in meaningful disruption to our sales activities or ongoing revenue generation.

The sale of our grills, consumables and accessories experienced considerable growth following the onset of the COVID-19 pandemic as people invested in recreational activities based around the home during periods of quarantine and limited public activities. At the beginning of the second quarter of 2020 as the impact of governmental pandemic-related measures on business activity took hold, we experienced sustained demand for our products as many of our specialty and hardware retailers were deemed essential by state and local governments and thus remained open to customers. In addition, consumer purchase behavior shifted to online retail, including our own website, which offset the impact of select store closures and stay-at-home orders. As the second quarter of 2020 progressed, we began experiencing significant demand across our distribution channels as customer interest in our products increased, retail stores began to reopen and online retail continued to benefit from favorable shifts in consumer purchase behavior. This strong demand continued throughout the second half of 2020, and we believe that this was a primary driver of our revenue growth during 2020. Together with the increased demand for our products, we experienced higher costs and supply chain delays as a result of restrictions or disruptions of transportation as a result of the pandemic. Late in the first quarter of 2020, we reduced inventory purchase orders as a precautionary measure against the unknown impact of the COVID-19 pandemic on the economy and our business and to improve financial flexibility. These actions, coupled with the overall strong demand during 2020, ultimately contributed to lower than expected inventory levels throughout the second half of 2020 and, in turn, resulted in inventory constraints in the second half of 2020 and in the first half of 2021. Inventory constraints due to COVID-19 lessened in the third quarter of 2021 and are now primarily attributable to widely reported global supply chain constraints.

Components of Results of Operations

Revenue

We derive substantially all of our revenue from the sale of grills, consumables and accessories in North America, which includes the United States and Canada. We recognize revenue, net of product returns, for our grills, consumables and accessories generally at the time of delivery to retailers through our retail channel and to customers through our DTC channel. Estimated product returns are recorded as a reduction of revenue at the time of recognition and are calculated based on product returns history, observable changes in return behavior, and expected returns based on sales volume and mix. We also have certain contractual programs that can give rise to elements of variable consideration, such as volume incentive rebates, with estimated amounts of credits recorded as a reduction to revenue.

Although we experience demand for our products throughout the year, we believe there can be certain seasonal fluctuations in our revenue. We have typically experienced moderately higher levels of sales of our grills in the first and second quarters of the year as our retailers purchase inventory in advance of warmer weather, when demand for outdoor cooking products is the highest across our key markets. Higher sales also coincide with social events and national holidays, which occur during the same warm weather timeframe.

Gross Profit

Gross profit reflects revenue less cost of revenue. Cost of revenue consists of product costs, including the costs of components, costs of products from our third-party manufacturers, direct and indirect manufacturing costs across all products, packaging, inbound freight and duties, warehousing and fulfillment, warranty costs, product quality testing and inspection costs, excess and obsolete inventory write-downs, cloud-hosting costs for our WiFIRE connected grills, depreciation of tooling and manufacturing equipment, amortization of internal use software and patented technology, and certain employee-related expenses.

We calculate gross margin as gross profit divided by revenue. Gross margin can be impacted by several factors, including, in particular, product mix and sales channel mix. For example, gross margin on sales through our DTC channel is generally higher than gross margin on sales through our retail channel. If our DTC sales grow faster than sales from our retail channel, and if we are able to realize greater economies of scale or product cost improvements through engineering and sourcing, we would expect a favorable impact to overall gross margin over time. Additionally, gross margin on sales of certain of our products is higher than for others. If revenue from sales of wood pellets increased as a percentage of total revenue, we would expect to see an increase in overall gross margin. These favorable anticipated gross margin impacts may not be realized, or may be offset by other unfavorable gross margin factors. Additionally, any new products that we develop, or our planned expansion into new geographies, may impact our future gross margin. External factors beyond our control, such as duties and tariffs and costs of doing business in certain geographies can also impact gross margin.

58

Table of Contents

Sales and Marketing

Sales and marketing expense consists primarily of the costs associated with advertising and marketing of our products and employee-related expenses, including salaries, benefits, and equity-based compensation expense, as well as sales incentives and professional services. These costs can include print, internet and television advertising, travel-related expenses, direct customer acquisition costs, costs related to conferences and events, and broker commissions. We expect our sales and marketing expense to increase on an absolute dollar basis for the foreseeable future as we continue to increase the scope of outreach to potential new customers to drive our revenue growth. We also anticipate that sales and marketing expense as a percentage of revenue will fluctuate from period to period based on revenue for such period and the timing of the expansion of our sales and marketing functions, as these activities may vary in scope and scale over future periods.

General and Administrative

General and administrative expense consists primarily of employee-related expenses and facilities for our executive, finance, accounting, legal, human resources, information technology and other administrative functions. General and administrative expense also includes fees for professional services, such as external legal, accounting, and information and technology services, and insurance.

In addition, general and administrative expense includes research and development expenses incurred to develop and improve our future products and processes, which primarily consist of employee and facilities-related expenses, including salaries, benefits and equity-based compensation expense, as well as fees for professional services, costs related to prototype tooling and materials, and software platform costs. Research and development expense was $18.8 million and $6.8 million for the year ended December 31, 2021 and 2020, respectively.

We expect general and administrative expense, including our research and development expenses and external legal and accounting expenses, to increase on an absolute dollar basis for the foreseeable future as we continue to increase investments to support our growth and develop new and enhance existing products and interactive software. We also anticipate increased administrative and compliance costs as a result of being a public company. We anticipate that general and administrative expense as a percentage of revenue will vary from period to period, but we expect to leverage these expenses over time as we grow our revenue.

Amortization of Intangible Assets

Amortization of intangible assets primarily consists of amortization of identified finite-lived customer relationships, distributor relationships, non-compete arrangements and trademark assets that were allocated a considerable portion of the purchase price from the corporate reorganization and acquisition of our business in 2017, as well as the July 2021 acquisition of Apption Labs. These costs are amortized on a straight-line basis over 2.5 to 25 year useful lives and, as a result, amortization expense on these assets is expected to remain stable over the coming years. Future business acquisitions may result in incremental amortization of intangible assets acquired in any such transactions.

Change in Fair Value of Contingent Consideration

The fair values of our contingent consideration earn out obligation associated with the Apption Labs business combination is estimated based on probability adjusted present values of the consideration expected to be transferred using significant inputs. At each reporting date, we revalue the contingent consideration obligation to its fair value and records increases and decreases in fair value in the general and administrative expenses in our condensed consolidated statements of operations and comprehensive income (loss). Changes in the fair value of the contingent consideration obligation results from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets.

Total Other Income (Expense), Net

Total other income (expense), net consists of interest expense and other income (expense). Interest expense includes interest and other fees associated with our credit facilities and receivables financing agreement. Other income (expense) also consists of any gains (losses) on the sale of long-lived assets and from the foreign currency contracts that we use to manage our exposure to foreign currency exchange rate risk related to our purchases and international operations.

59

Table of Contents

Results of Operations

The following tables summarize key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["Revenue","$","785,545","","","$","545,772","","","$","239,773","","","43.9","%"],["Cost of revenue","481,834","","","310,408","","","171,426","","","55.2","%"],["Gross profit","303,711","","","235,364","","","68,347","","","29.0","%"],["Operating expense:"],["Sales and marketing","165,180","","","93,690","","","71,490","","","76.3","%"],["General and administrative","158,555","","","50,243","","","108,312","","","215.6","%"],["Amortization of intangible assets","34,379","","","32,533","","","1,846","","","5.7","%"],["Change in fair value of contingent consideration","3,800","","","\u2014","","","3,800","","","100.0","%"],["Total operating expense","361,914","","","176,466","","","185,448","","","105.1","%"],["Income (loss) from operations","(58,203)","","","58,898","","","(117,101)","","","(198.8)","%"],["Other income (expense):"],["Interest expense","(26,646)","","","(34,073)","","","(7,427)","","","(21.8)","%"],["Loss on extinguishment of debt","(5,185)","","","\u2014","","","5,185","","","100.0","%"],["Other income","2,702","","","7,526","","","(4,824)","","","(64.1)","%"],["Total other expense","(29,129)","","","(26,547)","","","2,582","","","9.7","%"],["Income (loss) before provision for income taxes","(87,332)","","","32,351","","","(119,683)","","","(370.0)","%"],["Provision for income taxes","1,489","","","749","","","740","","","98.8","%"],["Net income (loss)","$","(88,821)","","","$","31,602","","","$","(120,423)","","","(381.1)","%"]]
[[/GREPCENT_TABLE]]

Comparison of the Year Ended December 31, 2021 and 2020

Revenue

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["Revenue:"],["Grills","$","544,200","","","$","391,047","","","$","153,153","","","39.2","%"],["Consumables","136,216","","","120,247","","","15,969","","","13.3","%"],["Accessories","105,129","","","34,478","","","70,651","","","204.9","%"],["Total Revenue","$","785,545","","","$","545,772","","","$","239,773","","","43.9","%"]]
[[/GREPCENT_TABLE]]

Revenue increased by $239.8 million, or 43.9%, to $785.5 million for the year ended December 31, 2021 compared to $545.8 million for the year ended December 31, 2020. This increase was driven primarily by higher demand for our grills and growth in accessories revenue due to sales of the MEATER smart thermometers following the acquisition of Apption Labs.

Revenue from our grills grew by $153.2 million, or 39.2%, to $544.2 million for the year ended December 31, 2021 compared to $391.0 million for the year ended December 31, 2020. The increase was driven primarily by higher unit volume relative to the prior period in addition to an increased average selling price.

Revenue from our consumables grew by $16.0 million, or 13.3%, to $136.2 million for the year ended December 31, 2021 compared to $120.2 million for the year ended December 31, 2020. The increase was driven primarily by repeating sales of wood pellets and other consumables from our installed base of grills, as well as increased unit volume associated with the expansion of our installed base of grills.

60

Table of Contents

Revenue from our accessories grew by $70.7 million, or 204.9%, to $105.1 million for the year ended December 31, 2021 compared to $34.5 million for the year ended December 31, 2020. This increase was driven primarily by sales of the MEATER smart thermometers following the acquisition of Apption Labs and strong consumer demand for Traeger-branded accessories.

Gross Profit

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["Gross profit","$","303,711","","","$","235,364","","","$","68,347","","","29.0","%"],["Gross margin (Gross profit as a percentage of revenue)","38.7","%","","43.1","%"]]
[[/GREPCENT_TABLE]]

Gross profit increased by $68.3 million, or 29.0%, to $303.7 million for the year ended December 31, 2021 compared to $235.4 million for the year ended December 31, 2020. Gross profit as a percentage of revenue decreased to 38.7% for the year ended December 31, 2021 from 43.1% for the year ended December 31, 2020. The decrease in gross margin was driven primarily by increased freight rates and logistics costs, the appreciation of the Chinese Renminbi relative to the U.S. Dollar, increased commodity and other product costs, and the amortization of acquired intangible assets. Gross profit was also pressured by equity-based compensation expense related to the IPO and the write-off of inventory due to an adverse weather event at one of our wood pellet production facilities.

Sales and Marketing

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["Sales and marketing","$","165,180","","","$","93,690","","","$","71,490","","","76.3","%"],["As a percentage of revenue","21.0","%","","17.2","%"]]
[[/GREPCENT_TABLE]]

Sales and marketing expense increased by $71.5 million, or 76.3%, to $165.2 million for the year ended December 31, 2021 compared to $93.7 million for the year ended December 31, 2020. As a percentage of revenue, sales and marketing expense increased to 21.0% for the year ended December 31, 2021 from 17.2% for the year ended December 31, 2020. The increase in sales and marketing expense was driven primarily by higher equity-based compensation expense of $10.2 million due to the acceleration of vesting of all unvested and outstanding Class B unit awards upon completion of the IPO. Additionally, advertising costs increased to drive brand awareness, including the newly acquired Apption Labs business, higher professional fees, as well as higher personnel-related expenses associated with an increase in headcount in our marketing, customer experience and sales functions.

General and Administrative

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["General and administrative","$","158,555","","","$","50,243","","","$","108,312","","","215.6","%"],["As a percentage of revenue","20.2","%","","9.2","%"]]
[[/GREPCENT_TABLE]]

General and administrative expense increased by $108.3 million, or 215.6%, to $158.6 million for the year ended December 31, 2021 compared to $50.2 million for the year ended December 31, 2020. As a percentage of revenue, general and administrative expense increased to 20.2% for the year ended December 31, 2021 from 9.2% for the year ended December 31, 2020. The increase in general and administrative expense was driven primarily by higher equity-based compensation expense of $36.9 million due to the acceleration of vesting of all unvested and outstanding Class B unit awards upon completion of the IPO and $24.9 million due to the issuance of restricted stock units ("RSUs") under the Traeger, Inc. 2021 Incentive Award Plan (the "2021 Plan"), increased professional services fees related to third party costs incurred for non-routine start-up costs for Traeger

61

Table of Contents

Provisions, one-time costs related to the debt refinancing, non-routine legal expenses, and higher personnel-related expenses associated with investments to build a team to support our current and future growth.

Amortization of Intangible Assets

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["Amortization of intangible assets","$","34,379","","","$","32,533","","","$","1,846","","","5.7","%"],["As a percentage of revenue","4.4","%","","6.0","%"]]
[[/GREPCENT_TABLE]]

Amortization of intangible assets, substantially attributable to the 2017 corporate reorganization and acquisition of the Company and the July 2021 acquisition of Apption Labs, increased $1.8 million, or 5.7%, to $34.4 million for the year ended December 31, 2021 compared to $32.5 million for the year ended December 31, 2020.

Change in Fair Value of Contingent Consideration

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["Change in fair value of contingent consideration","$","3,800","","","$","\u2014","","","$","3,800","","","100.0","%"],["As a percentage of revenue","0.5","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

Change in fair value of contingent consideration, attributable to the revalued earn out obligation associated with the Apption Labs business combination, increased $3.8 million, or 100.0%, to $3.8 million for the year ended December 31, 2021 compared to $0 for the year ended December 31, 2020. The change in fair value of contingent consideration was driven primarily by the increase in the likelihood of achieving the revenue performance targets.

Other Expense

[[GREPCENT_TABLE]]
[["","Year-ended December 31,","","Change"],["","2021","","2020","","Amount","","%"],["","(dollars in thousands)"],["Interest expense","$","(26,646)","","","$","(34,073)","","","$","(7,427)","","","(21.8)","%"],["Loss on extinguishment of debt","(5,185)","","","\u2014","","","5,185","","","100.0","%"],["Other income","2,702","","","7,526","","","(4,824)","","","(64.1)","%"],["Total other expense","$","(29,129)","","","$","(26,547)","","","$","2,582","","","9.7","%"],["As a percentage of revenue","(3.7)","%","","(4.9)","%"]]
[[/GREPCENT_TABLE]]

Total other expense, net increased by $2.6 million, or 9.7%, to $29.1 million for the year ended December 31, 2021 compared to $26.5 million for the year ended December 31, 2020. This increase was due primarily to one-time expenses related to the refinancing and voluntary prepayment of our long-term debt, as well as a decrease in the gains recognized on derivative instruments as compared to gains recognized in the prior period. The increase was partially offset by a lower applicable interest rate on our first lien term loan as a result of refinancing our long-term debt in June 2021.

Liquidity and Capital Resources

Historically, our cash requirements have principally been for working capital purposes, capital expenditures, and debt service payments. We have funded our operations through cash flows from operating activities, cash on hand, and borrowings under our credit facilities and receivables financing agreement.

As of December 31, 2021, we had cash and cash equivalents of $16.7 million, $125.0 million borrowing capacity under our New Revolving Credit Facility (as defined below) and up to $100.0 million borrowing capacity under our Receivables Financing Agreement (as defined below). As of December 31, 2021, we had drawn down $9.0 million on the New Revolving

62

Table of Contents

Credit Facility and $41.1 million under the Receivables Financing Agreement. As of December 31, 2021, the total principal amount outstanding under our New First Lien Term Loan Facility (as defined below) was $388.2 million, and the total principal amount of indebtedness outstanding under the New Credit Facilities (as defined below) was $429.3 million. We believe that our existing cash and cash equivalents, availability under our New Revolving Credit Facility and Receivables Financing Agreement, and our cash flows from operating activities will be sufficient to fund our working capital requirements and planned capital expenditures, and to service our debt obligations, for at least the next 12 months. However, our future working capital requirements will depend on many factors, including our rate of revenue growth and profitability, the timing and size of future acquisitions, and the timing of introductions of new products and investments in our supply chain and implementation of technologies.

We may from time to time seek to raise additional equity or debt financing to support our growth or in connection with the acquisition of complementary businesses. Any equity financing we may undertake could be dilutive to our existing stockholders, and any additional debt financing we may undertake could require debt service and financial and operational requirements that could adversely affect our business. There is no assurance we would be able to obtain future financing on acceptable terms or at all. In particular, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. See Part I, Item 1A.“Risk Factors.”

In connection with the IPO, we granted RSUs. Specifically, 7,782,957 shares of our common stock are issuable in connection with the vesting of RSUs granted to our Chief Executive Officer (the “Chief Executive Officer Award“) under the 2021 Plan, which awards became effective in connection with the IPO. In addition, 4,380,285 shares of our common stock are issuable in connection with the vesting of RSUs granted to others (the “IPO RSUs” and, together with the Chief Executive Officer Award, the “IPO Awards”) under the 2021 Plan, including to our Chief Financial Officer and certain of our directors, which awards became effective in connection with the IPO. In light of the large number of RSUs subject to the IPO Awards, we anticipate that we will incur substantial equity-based compensation expenses and may expend substantial funds to satisfy tax withholding and remittance obligations related to these RSUs. The grant date fair value of the Chief Executive Officer Award was estimated to be approximately $116.5 million, which we estimated would be recognized as compensation expense over a weighted average period of 4.07 years, though recognition of such value could be earlier if the stock price goals are achieved earlier than we estimated. The grant date fair value of the IPO RSUs was estimated to be approximately $74.2 million, which we estimated would be recognized as compensation expense over a weighted average period of 3.58 years. We expect the equity-based compensation expense relating to these awards to adversely impact our future financial results.

In addition, in connection with the completion of the Company’s IPO, Class B Units that were outstanding and vested were, as part of the Corporate Conversion, converted into shares of common stock of the Company. The Company recorded equity compensation expense of approximately $47.4 million as a result of the acceleration of vesting of the unvested Class B Units based on the IPO price of $18.00. Given the proximity of the modification to the IPO, the expense recorded by the Company was based on the actual conversion of the Class B Unit into common stock and the valuation of the Company at time of the IPO.

Cash Flows

The following table sets forth cash flow data for the periods indicated therein (in thousands):

[[GREPCENT_TABLE]]
[["","","Year-ended December 31,"],["","","2021","","2020"],["Net cash provided by (used in) operating activities","","$","(28,427)","","","$","46,597"],["Net cash used in investing activities","","(79,897)","","","(27,341)"],["Net cash provided by (used in) financing activities","","113,508","","","(14,777)"],["Net increase in cash and cash equivalents","","$","5,184","","","$","4,479"]]
[[/GREPCENT_TABLE]]

Cash Flow from Operating Activities

During the year ended December 31, 2021, net cash used in operating activities consisted of a net loss of $88.8 million and net non-cash adjustments to net loss of $145.7 million, partially offset by net changes in operating assets and liabilities of $85.3 million. Non-cash adjustments consisted of depreciation of property, plant, and equipment of $9.2 million, amortization of intangible assets of $38.4 million, equity-based compensation of $81.1 million, and unrealized gains on foreign currency contracts of $4.8 million. The decrease in net cash from net changes in operating assets and liabilities during the year ended

63

Table of Contents

December 31, 2021 was primarily due to an increase in accounts receivable of $26.4 million and an increase in inventories of $70.8 million, partially offset by an increase in accounts payable and accrued expenses of $19.2 million.

During the year ended December 31, 2020, net cash provided by operating activities consisted of net income of $31.6 million and net non-cash adjustments to net income of $50.6 million, partially offset by net changes in operating assets and liabilities of $35.6 million. Non-cash adjustments consisted of depreciation of property, plant, and equipment of $7.8 million, amortization of intangible assets of $33.2 million, equity-based compensation of $12.8 million, and unrealized gains on foreign currency contracts of $6.1 million. The decrease in net cash from net changes in operating assets and liabilities during the year ended December 31, 2020 was primarily due to an increase in accounts receivable of $30.2 million and an increase in inventories of $29.5 million, offset in part by an increase in accounts payable and accrued expenses of $28.4 million.

Cash Flow from Investing Activities

During the year ended December 31, 2021, net cash used in investing activities was $79.9 million. The cash flow used was driven primarily by the acquisition of Apption Labs in July 2021, net of cash acquired, of $56.9 million, as well as the purchase of property, plant, and equipment of $22.5 million primarily related to the purchase of tooling equipment, the purchase of wood pellet production equipment, and internal-use software and website developments costs.

During the year ended December 31, 2020, net cash used in investing activities was $27.3 million. The cash flow used was driven by the purchase of property, plant, and equipment of $14.1 million primarily related to the purchase of wood pellet production equipment, tooling, and internal-use software and website developments costs. In addition, the cash used was driven by the acquisition of subsidiaries of $12.7 million related to the purchase of a wood pellet production facility and the purchase of intangible assets associated with the termination of distributor relationships.

Cash Flow from Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities was $113.5 million. The cash flow provided was driven primarily by $142.3 million of proceeds from the issuance of our common stock upon the IPO, net of offering costs, as well as net proceeds from our New First Lien Term Loan Facility of $510.0 million partially offset by the repayment of the First Lien Credit Agreement and Second Lien Credit Agreement of $446.4 million and the repayment of $130.8 million on the New First Lien Term Loan Facility using proceeds from the IPO.

During the year ended December 31, 2020, net cash used in financing activities was $14.8 million. The cash flow used was driven primarily by net repayments during the year of $10.0 million related to our revolving line of credit and principal repayments under our first lien term loan of $3.4 million.

Credit Facilities

On September 25, 2017, we entered into (i) a first lien credit agreement with various lenders, or the First Lien Credit Agreement and (ii) a second lien credit agreement with various lenders, or the Second Lien Credit Agreement and together with the First Lien Credit Agreement, the Credit Agreements. On June 29, 2021, we refinanced our existing Credit Facilities and entered into a new first lien credit agreement (the "New First Lien Credit Agreement"). The New First Lien Credit Agreement provides for a senior secured term loan facility (the "New First Lien Term Loan Facility"), and a revolving credit facility (the "New Revolving Credit Facility" and, together with the New First Lien Term Loan Facility, the "New Credit Facilities").

New First Lien Credit Agreement

On June 29, 2021, we entered into a new first lien credit facility (the "New First Lien Credit Facility"). The New First Lien Credit Facility provides for a $560.0 million New First Lien Term Loan Facility (including a $50.0 million delayed draw term loan) and a $125.0 million New Revolving Credit Facility.

The New First Lien Term Loan Facility accrues interest at a rate per annum that considers both fixed and floating components. Following completion of our IPO in July 2021, the fixed component ranges from 3.00% to 3.25% per annum based on our Public Debt Rating (as defined in the New First Lien Credit Agreement). The floating component is based on the Eurocurrency Base Rate (as defined in the New First Lien Credit Agreement) for the relevant interest period. The New First Lien Term Loan Facility requires quarterly principal payments from December 2021 through June 2028, with any remaining unpaid principal and any accrued and unpaid interest due on the maturity date of June 29, 2028. The delayed draw term loan includes a variable commitment fee, which is based on the fixed interest rate and ranges from 0% to the Applicable Rate (as defined in the New First Lien Credit Agreement). As of December 31, 2021, the total principal amount outstanding on the New First Lien Term Loan Facility was $379.2 million.

64

Table of Contents

Loans under the New Revolving Credit Facility accrue interest at a rate per annum that considers both fixed and floating components. Following completion of our IPO in July 2021, the fixed component ranges from 2.75% to 3.25% per annum based on our most recently determined First Lien Net Leverage Ratio (as defined in the New First Lien Credit Agreement). The floating component is based on the Eurocurrency Base Rate for the relevant interest period. The New Revolving Credit Facility also has a variable commitment fee, which is based on our most recently determined First Lien Net Leverage Ratio and ranges from 0.25% to 0.50% per annum on undrawn amounts. Letters of credit may be issued under the New Revolving Credit Facility in an amount not to exceed $15.0 million which, when issued, lower the overall borrowing capacity of the facility. The Revolving Credit Facility expires on June 29, 2026 and no principal payments are due before such date. As of December 31, 2021, the total outstanding principal balance under the New Revolving Credit Facility was $9.0 million.

Except as noted below, the New Credit Facilities are collateralized by substantially all of the assets of TGP Holdings III LLC, TGPX Holdings II LLC, Traeger Pellet Grills Holdings LLC and certain subsidiaries of Traeger Pellet Grills Holdings LLC, including intellectual property, mortgages and the equity interest of each of these respective entities. The assets of Traeger SPE LLC, substantively consisting of our accounts receivable, collateralize the receivables financing agreement discussed below and do not collateralize the New Credit Facilities. There are no guarantees from parent entities above Traeger, Inc.

The New First Lien Credit agreement contains certain affirmative and negative covenants that limit our ability to, among other things, incur additional indebtedness or liens (with certain exceptions), make certain investments, engage in fundamental changes or transactions including changes of control, transfer or dispose of certain assets, make restricted payments (including dividends), engage in new lines of business, make certain prepayments and engage in certain affiliate transactions. In addition, we are subject to a financial covenant whereby we are required to maintain a First Lien Net Leverage Ratio (as defined in the New First Lien Credit Agreement) not to exceed 6.20 to 1.00. As of December 31, 2021, we were in compliance with the covenants under the New Credit Facilities.

Accounts Receivable Credit Facility

On November 2, 2020, we entered into a receivables financing agreement, as amended, or the Receivables Financing Agreement. Pursuant to the Receivables Financing Agreement, we participate in a trade receivables securitization program administered by MUFG Bank Ltd. Through this arrangement, we have secured short-term capital requirements financing using outstanding accounts receivable balances as collateral, which have been contributed by us to a wholly owned subsidiary, Traeger SPE LLC. As a special purpose entity (the "SPE"), Traeger SPE LLC has been structured such that its assets (substantively the accounts receivable contributed by us to the SPE) are outside the reach of other creditors, including the lenders under our New First Lien Credit Agreement. While we provide services to the SPE through continuing involvement in the aspects of collection and cash application of the receivables, the receivables are owned by the SPE once contributed to it by us. We are the primary beneficiary and hold all equity interests of the SPE, thus we consolidate the SPE without any significant judgments.

On June 29, 2021, we entered into Amendment No. 1 to the Receivables Financing Agreement and increased the net borrowing capacity from the prior range of $30.0 million to $45.0 million up to $100.0 million. As of December 31, 2021, we have drawn down $41.1 million under this facility for general corporate and working capital purposes. Absent any cash advances that exceed the SPE’s available cash, the SPE collects proceeds from the receivables and transfers available cash to us on a regular basis. We are required to pay an annual upfront fee for the facility, along with interest on outstanding cash advances of approximately 1.7%, and an unused capacity charge that ranges from 0.25% to 0.50%. The facility is set to terminate on June 29, 2024.

On February 18, 2022, we entered into Amendment No. 2 to the Receivables Financing Agreement, which is described further in Note 13 - Receivables Financing Agreement to the accompanying consolidated financial statements.

Contractual Obligations

As of December 31, 2021, significant contractual obligations related to debt were $379.2 million of principal borrowings and $98.5 million of related interest, which will become due on the maturity date of June 29, 2028. Projected interest costs on variable rate instruments were calculated using market rates at December 31, 2021. See Note 12 - Notes Payable to the accompanying consolidated financial statements for additional information regarding our New Credit Facilities.

We lease certain facilities including real property, equipment, fleet vehicles, office equipment and other assets that expire at various dates through July 2037. As of December 31, 2021, the future minimum rental payments under non-cancelable leases was $58.8 million. See Note 14 - Commitments and Contingencies to the accompanying consolidated financial statements for additional information regarding our non-cancellable leases.

65

Table of Contents

We also have purchase obligations consisting of agreements to purchase goods and services entered into in the ordinary course of business. As of December 31, 2021, the future minimum value of our non-cancellable unconditional purchase obligations was $7.1 million. See Note 14 - Commitments and Contingencies to the accompanying consolidated financial statements for additional information regarding our purchase obligations.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

While our significant accounting policies are described in further detail in Note 2 - Summary of Significant Accounting Policies to the accompanying consolidated financial statements included in this Annual Report on Form 10-K, we believe that the following critical accounting policies reflect our more significant judgments and estimates used that management believes are particularly important in the preparation of our consolidated financial statements and that require the use of estimates, assumptions and judgments to determine matters that are inherently uncertain.

Revenue Recognition

As discussed in the “Revenue Recognition and Sales Returns and Allowances” section in Note 2 - Summary of Significant Accounting Policies to the accompanying consolidated financial statements, we adopted the new revenue recognition standard, ASC 606, Revenue from Contracts with Customers, at the beginning of 2019.

We determine revenue recognition through the following steps in accordance with ASC 606:

•identification of the contract, or contracts, with a customer;

•identification of the performance obligations in the contract;

•determination of the transaction price;

•allocation of the transaction price to the performance obligations in the contract; and

•recognition of revenue when, or as, we satisfy a performance obligation.

We derive substantially all of our revenue from the sale of grills, consumables, and accessories as well as associated shipping charges billed to customers. We recognize revenue at the amount to which we expect to be entitled when a contract exists with a customer that specifies the goods and services to be provided at an agreed upon sales price and when the performance obligation is satisfied. The performance obligation for most of our sales transactions are considered complete when control transfers, which is determined when products are shipped or delivered to the customer depending on the terms of the contract. Sales are made on normal and customary short-term credit terms or upon delivery of point-of-sale transactions.

Shipping charges billed to customers are included in net sales and related shipping costs are included in cost of sales. We elected to account for shipping and handling activities performed after control has been transferred to the customer as a fulfillment cost.

We enter into contractual arrangements with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. We do not have long-term contracts that are satisfied over time. Due to the nature of the contracts, no significant judgment exists in relation to the identification of the customer contract or satisfaction of the performance obligation. We expense incremental costs of obtaining a contract due to the short-term nature of the contracts.

We have various contractual programs and practices with customers that give rise to elements of variable consideration such as customer cooperative advertising and volume incentive rebates. We estimate the variable consideration using the most likely amount method based on sales and contractual rates with each customer and record the estimated amount of credits for these programs as a reduction to revenue. Actual credits and their impact on reported revenue could differ from our estimates and could materially affect our results of operations.

We have entered into contracts with some customers that allow for credits to be claimed for certain matters of operational compliance or for returns to the retail customer from its end consumers. Credits that will be issued associated with these items are estimated using the expected value method and are based on actual historical experience and are recorded as a reduction of

66

Table of Contents

revenue at the time of recognition or when circumstances change resulting in a change in estimated returns. Actual credits and their respective impacts on reported revenue could differ from our estimates and could materially affect our results of operations.

Valuation of Goodwill and Acquired Intangible Assets

Intangible Assets

Finite-lived intangible assets are initially recorded at fair value and presented net of accumulated amortization. Intangible assets are amortized on a straight-line basis over their estimated useful lives. We are currently amortizing acquired intangible assets, including customer relationships, distributor relationships, non-compete arrangements, business trademarks, technology and other intangible assets over periods ranging between 2.5 years and 25 years. These assets were recognized in the purchase price allocation when we underwent a corporate restructuring and acquisition in 2017, as well as when we acquired Apption Labs in July 2021. We assess the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss on intangible assets exists when the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. If the carrying amount exceeds the sum of the undiscounted cash flows, an impairment charge is recognized based on the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.

Goodwill

Goodwill represents the excess of consideration transferred over the fair value of tangible and identifiable intangible net assets acquired and the liabilities assumed in a business combination. Substantively all of our goodwill was recognized in the purchase price allocation when we were acquired in 2017 in connection with our corporate restructuring, with incremental amounts recognized in subsequent business combinations. Goodwill is not amortized, but is subject to an annual impairment test. In conducting our annual impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that the fair value of the reporting unit is less than its carrying amount, we perform a quantitative assessment, analyzing the expected present value of future cash flows to quantify the amount of impairment, if any. We review goodwill for impairment annually during the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate that an impairment may exist. We performed qualitative assessments of goodwill and determined that it was more likely than not that the fair value of goodwill was greater than its carrying value, therefore the quantitative impairment test was not performed. Therefore, no impairment of goodwill was recorded for the years ended December 31, 2021 and 2020, respectively.

If actual results differ from our estimates and assumptions, an impairment charge of goodwill could occur, which could materially affect our results of operations.

Equity-Based Compensation

We record equity-based compensation expense related to Class B incentive units awards issued by TGP Holdings LP, formerly our parent company, consistent with the compensation expense associated with the holder of the incentive units. The units granted by TGP Holdings LP have been issued for services performed on behalf of us. Therefore, the expense associated with these awards is pushed down to us.

The incentive unit grants are measured for expensing purposes at the grant date based on the fair value of the award. The incentive unit grants consist of time-based vesting units, ordinary performance vesting units, and extraordinary performance vesting units. In connection with the completion of our IPO, we recorded equity-based compensation as a result of the acceleration of vesting of all unvested and outstanding Class B Units.

In addition, we award equity-based compensation to employees and directors under the 2021 Plan. We measure compensation expense for time-based and performance-based RSU awards on a straight-line basis over the vesting schedule and on an accelerated attribution basis over the tranche's requisite service period, respectively. In addition, we recognize forfeitures as they occur, however, when an award is forfeited prior to the vesting date, we will recognize an adjustment for the previously recognized expense in the period of the forfeiture, with the exception of performance-based awards for which the requisite service period has been provided.

67

Table of Contents

We use the Monte Carlo pricing model to estimate the fair value of our performance-based RSU awards as of the grant date, and use various simulations of future stock prices through the Stochastic model to estimate the fair value over the remaining term of the performance period as of the grant date