# YETI Holdings, Inc. (YETI) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from YETI Holdings, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1670592/000167059225000008/yeti-20241228.htm
Accession: 0001670592-25-000008
Filing date: 2025-02-24
Report date: 2024-12-28
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/YETI/
All MD&A years: /company/YETI/mda/
Previous year: /company/YETI/mda/fy2023/ (FY 2023)
Next year: /company/YETI/mda/fy2026/ (FY 2026)

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

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 set forth in Part I, Item 1A, “Risk Factors” of this Report. 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 “Forward-Looking Statements” immediately prior to Part I, Item 1, “Business” in this Report. A discussion of our results of operations for the year ended December 30, 2023 compared to the year ended December 31, 2022 is included in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 30, 2023, which was filed with the SEC on February 26, 2024.

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 marks and original artwork primarily through our DTC channel, including our corporate sales channel, on our websites, and at select retail stores. 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.

Product Introductions and Updates

During the first quarter of 2024, we expanded our Drinkware offerings with the launch of the new Yonder Bottle with Straw Cap in two sizes, and expanded the Rambler Stackable cup family with the addition of three new sizes. In our Coolers and Equipment category, we expanded our bag offerings with two new sizes of the SideKick Dry. We also 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, the limited release of our Flask and Shot Glasses. In our Coolers and Equipment category, we expanded our hard cooler offerings with two new sizes within our Roadie cooler family. We also introduced new seasonal colorways.

During the third quarter of 2024, we expanded our Drinkware category with the launch of our new Cast Iron Skillet in three sizes, our new Rambler Pitcher in two sizes, as well as the full release of our Flask and Shot Glasses. We also introduced new seasonal colorways.

During the fourth quarter of 2024, we continued the expansion of our Drinkware category with the launch of our new Rambler Pour Over and Food Storage containers in three sizes, and introduced new seasonal colorways. In our Coolers and Equipment category, we launched the LoadOut Swivel Seat and a limited release of the first Mystery Ranch-inspired Bozeman pack.

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Acquisitions

During the first quarter of 2024, we completed the acquisitions of 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. During 2024, we integrated Butter Pat, expanding the cookware offerings in our Drinkware category. We also integrated Mystery Ranch operations and products into our business, expanding the bags offerings in our Coolers & Equipment category.

During the fourth quarter of 2024, we acquired powered cooling technology patents to develop a unique powered cooler platform. See Note 2- Acquisitions of the Notes to Consolidated Financial Statements included herein for additional information about these acquisitions.

Product Recall Update

In January 2023, we notified the U.S. Consumer Product 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 and the estimated cost of recall remedies for consumers with affected products as of December 31, 2022.

For the year ended December 31, 2022, we recorded a reduction to net sales for estimated future returns and recall remedies of $38.4 million; recorded costs in cost of goods sold of $58.6 million primarily related to an inventory write-off of $34.1 million for our unsalable inventory on-hand as well as estimated costs of future product replacement remedies and logistics costs; and recorded $31.9 million associated with estimated recall-related costs in selling, general, and administrative expenses. As a result, the total unfavorable impact of the proposed voluntary recalls to operating income was $128.9 million for the year ended 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. These trends included higher than anticipated elections by consumers to receive gift cards in lieu of product replacement remedies, lower than anticipated consumer recall participation rates, variations in individual product participation rates, and lower logistics costs than previously estimated. As a result, we updated our recall reserve assumptions throughout 2023, which increased the estimated recall expense reserve by $3.6 million in 2023.

As a result of the net unfavorable recall reserve adjustments and other incurred costs, for the year ended December 30, 2023, we recorded a reduction to net sales of $21.7 million primarily related to higher estimated future recall-related gift card elections; recorded a benefit in cost of goods sold of $8.4 million 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 $11.4 million. The total unfavorable impact to operating income related to the recalls was $1.9 million in 2023.

In addition, our sales from the first to the third quarter of 2023 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 experienced higher than anticipated consumer recall participation rates. Based on such experience and trends, we reevaluated our prior assumptions and adjusted our estimated product recall reserve. As a result, we increased the estimated recall expense reserve by $9.9 million during 2024. As a result of the net unfavorable recall reserve adjustment for the year ended December 28, 2024, we recorded a reduction to net sales of $8.8 million related to higher estimated future customer recall participation rates; recorded a benefit in cost of goods sold of $0.7 million related to lower recall-related costs; and recorded an unfavorable adjustment in SG&A expenses related to higher estimated other recall-related costs of $1.8 million.

As of December 28, 2024 and December 30, 2023, our reserve for estimated recall expenses was $12.1 million and $13.1 million, respectively.

The ultimate impact from the recalls may differ materially from our estimates, and may harm our business, financial condition and results of operations. See Part I, Item 1A “Risk Factors - Risks Related to Our Business, Operations and Industry.”

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Macroeconomic Conditions

There remains significant uncertainty regarding how macroeconomic conditions, 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.

Our operations and financial results are impacted by global economic conditions such as geopolitical conflicts, tariffs, and foreign currency exchange rate fluctuations. For example, the ongoing 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, there is significant uncertainty regarding the actions that the Trump Administration will take with respect to tariffs and trade agreements. Additional tariffs or altered trade agreements could impact our cost of sales. We also expect for our 2025 financial results to be adversely impacted by foreign currency headwinds as a result of the strengthening of the U.S. dollar. Although such conditions have not materially impacted our business to date, the continuation or worsening of these conditions may materially impact our operations and financial results in 2025.

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.

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 receiving 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, including non-cash stock-based compensation, distribution and fulfillment costs, depreciation and amortization expense, and general corporate infrastructure expenses. Our distribution and fulfillment costs include costs of our third-party warehousing and logistics operations, outbound freight costs, costs of operating on third-party DTC marketplaces, and credit card processing fees. Certain distribution and fulfillment costs 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 years 2024, 2023 and 2022 ended on December 28, 2024, December 30, 2023 and December 31, 2022, respectively, and were 52 weeks each. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in December and the associated quarters, months, and periods of those fiscal years.

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Results of Operations

The discussion below should be read in conjunction with the following table and our 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):

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended"],["","December 28, 2024","","December 30, 2023"],["Statement of Operations"],["Net sales","$","1,829,873","","","100","%","","$","1,658,713","","","100","%"],["Cost of goods sold","766,589","","","42","%","","715,527","","","43","%"],["Gross profit","1,063,284","","","58","%","","943,186","","","57","%"],["Selling, general, and administrative expenses","817,908","","","45","%","","717,728","","","43","%"],["Operating income","245,376","","","13","%","","225,458","","","14","%"],["Interest income (expense)","660","","","\u2014","%","","(942)","","","\u2014","%"],["Other (expense) income, net","(13,188)","","","1","%","","1,430","","","\u2014","%"],["Income before income taxes","232,848","","","13","%","","225,946","","","14","%"],["Income tax expense","(57,159)","","","3","%","","(56,061)","","","3","%"],["Net income","$","175,689","","","10","%","","$","169,885","","","10","%"]]
[[/GREPCENT_TABLE]]

Year Ended December 28, 2024 Compared to Year Ended December 30, 2023

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended"],["","","December 28, 2024","","December 30, 2023","","Change"],["(dollars in thousands)","","","","$","","%"],["Net sales","","$","1,829,873","","","$","1,658,713","","","$","171,160","","","10","%"],["Gross profit","","1,063,284","","","943,186","","","120,098","","","13","%"],["Gross margin (gross profit as a % of net sales)","","58.1","%","","56.9","%","","120 basis points"],["Selling, general, and administrative expenses","","$","817,908","","","$","717,728","","","$","100,180","","","14","%"],["SG&A as a % of net sales","","44.7","%","","43.3","%","","140 basis points"]]
[[/GREPCENT_TABLE]]

Net Sales

Net sales increased $171.2 million, or 10%, to $1,829.9 million in 2024 from $1,658.7 million in 2023. Net sales included an unfavorable impact of $8.8 million in 2024 and $21.7 million in 2023 primarily related to recall reserve adjustments, as discussed above. Excluding these recall-related impacts, sales increased 9% primarily due to volume growth in both our DTC and Wholesale channels.

Net sales for 2023 were materially adversely impacted by the stop sale of the soft coolers included in the recalls initiated during the first quarter of 2023. In addition, net sales for 2024 and 2023 include $8.8 million and $25.3 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 $89.9 million, or 9%, to $1,087.6 million in 2024 from $997.7 million in 2023, primarily driven by growth in both Coolers & Equipment and Drinkware categories. DTC channel net sales included an unfavorable impact of $8.3 million in 2024 and $7.3 million in 2023 primarily related to recall reserve adjustments. Our DTC channel represented 59% and 60% of total net sales in 2024 and 2023, respectively.

•Net sales in our wholesale channel increased $81.3 million, or 12%, to $742.3 million in 2024 from $661.0 million in 2023. Wholesale channel net sales included an unfavorable impact of $0.6 million in 2024 and $14.4 million in 2023 related to recall reserve adjustments. The increase in our wholesale channel sales was primarily driven by both Coolers & Equipment and Drinkware categories, as well as a net favorable impact of $13.8 million related to the recall reserves. Our wholesale channel represented 41% and 40% of total net sales in 2024 and 2023, respectively.

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

•Drinkware net sales increased $71.2 million, or 7%, to $1,094.2 million in 2024 from $1,023.0 million in 2023, primarily driven by demand for the continued expansion and innovation of our Drinkware product offerings and new seasonal colorways.

•Coolers & Equipment net sales increased $101.1 million, or 17%, to $698.6 million in 2024 from $597.5 million in 2023. Coolers & Equipment net sales included an unfavorable impact of $8.8 million in 2024 and $21.7 million in 2023 primarily related to recall reserve adjustments. The increase in Coolers & Equipment net sales was primarily driven by strong performance in bags, soft coolers, and hard coolers.

Net sales in the U.S. increased $91.5 million, or 7%, to $1,490.5 million for 2024. Net sales in international locations increased $79.6 million, or 31%, to $339.4 million for 2024. For 2024 and 2023, net sales in the U.S. included an unfavorable impact of $8.8 million and $20.8 million, respectively, related to the recall reserve adjustments. For 2023, net sales in international locations included an unfavorable adjustment of $0.9 million related to a recall reserve adjustment. Net sales in international locations represented 19% and 16% of total net sales in 2024 and 2023, respectively.

Gross Profit

Gross profit increased $120.1 million, or 13%, to $1,063.3 million in 2024 from $943.2 million in 2023. Gross margin increased 120 basis points to 58.1% in 2024 from 56.9% in 2023. Gross profit included an unfavorable impact of $8.1 million in 2024 and $13.3 million in 2023 primarily related to recall reserve adjustments, as discussed above. The increase in gross margin was primarily driven by:

•lower inbound freight rates, which favorably impacted gross margin by 220 basis points; and

•lower product costs, which favorably impacted gross margin by 110 basis points;

These were partially offset by:

•higher customization costs, which unfavorably impacted gross margin by 40 basis points;

•strategic price decreases on certain hard cooler products implemented during the first quarter of 2024, which unfavorably impacted gross margin by 30 basis points;

•the amortization of inventory fair value step-up in connection with the Mystery Ranch acquisition, which unfavorably impacted gross margin by 30 basis points;

•the net impact of the recall reserves adjustments, which unfavorably impacted gross margin by 20 basis points; and

•other impacts, which unfavorably impacted gross margin by 90 basis points.

Selling, General, and Administrative Expenses

SG&A expenses increased by $100.2 million, or 14%, to $817.9 million in 2024 from $717.7 million in 2023. As a percentage of net sales, SG&A expenses increased 140 basis points to 44.7% in 2024 from 43.3% in 2023. SG&A expenses included an unfavorable impact of $1.8 million in 2024 and a favorable impact of $11.4 million in 2023 primarily related to recall reserve adjustments, as discussed above. The increase in SG&A expenses resulted from:

•an increase in employee compensation and benefits of $39.9 million (increasing SG&A as a percent of sales by 130 basis points) mainly due to investments in headcount to support future growth and non-cash stock-based compensation expense;

•an increase in general and administrative expenses of $20.4 million (increasing SG&A as a percent of sales by 50 basis points) mainly due to higher technology expenses, asset impairments, occupancy costs, and professional fees;

•an increase in marketing and advertising expenses of $14.6 million (increasing SG&A as a percent of sales by 10 basis points);

•the net impact of the recall reserves adjustments, which unfavorably impacted SG&A expenses by $13.2 million (increasing SG&A as a percent of sales by 80 basis points); and

•an increase in distribution and fulfillment expenses of $12.8 million (decreasing SG&A as a percent of sales by 110 basis points) primarily due to higher online marketplace fees and third-party logistics fees associated with higher net sales, partially offset by lower outbound freight.

The increase in SG&A expenses were partially offset by lower depreciation and amortization expense of $0.7 million (decreasing SG&A as a percent of sales by 20 basis points).

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Non-Operating Expenses

Interest income, net was $0.7 million in 2024. Interest expense, net was $0.9 million in 2023. The change versus the prior year period was primarily due to an increase in interest income.

Other expense, net was $13.2 million in 2024. Other income, net was $1.4 million in 2023. The change versus the prior year period was primarily due to unrealized foreign currency losses on intercompany balances in the current period versus unrealized foreign currency gains on intercompany balances in the prior year.

Income tax expense was $57.2 million in 2024, compared to $56.1 million in 2023. Our effective tax rate was 25% for both 2024 and 2023. The increase in income tax expense was primarily due to higher income before income taxes.

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. Pursuant to our Share Repurchase Program described below, we use cash to repurchase shares of our common stock. We believe that our current operating performance, operating plan, our strong cash position, and borrowings available under our Revolving Credit Facility will be sufficient to satisfy our liquidity needs and capital expenditure requirements for at least the next twelve months and the foreseeable future.

Current Liquidity

As of December 28, 2024, we had a cash balance of $358.8 million, $88.5 million of working capital (excluding cash), 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 March 31, 2023, we amended the Credit Facility, leaving the material terms of the Credit Facility substantially unchanged, with the exception of certain changes to implement the replacement of London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) as the reference rate therein.

On June 22, 2023, we further amended the Credit Facility, which extended the maturity date of both the Term Loan A and the Revolving Credit Facility from December 17, 2024 to June 22, 2028; refinanced and replaced the existing Term Loan A in full with a new $84.4 million Term Loan A; and increased the commitments under the Revolving Credit Facility from $150.0 million to $300.0 million. As a result of the amendment, we recognized a $0.3 million loss on modification and extinguishment of debt and we capitalized $2.8 million of new lender and third-party fees in the second quarter of 2023.

On February 26, 2024, we further 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 permit a Hedging Agreement (as defined in the Credit Facility) entered into in connection with an accelerated share purchase program under the Credit Facility.

At December 28, 2024, we had $78.0 million principal amount of indebtedness outstanding under the Term Loan A and no outstanding borrowings under the Revolving Credit Facility. The weighted average interest rate for borrowings under Term Loan A was 7.09% during the year ended December 28, 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 December 28, 2024, we were in compliance with all covenants and expect to remain in compliance with all covenants under the Credit Facility.

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Share Repurchase Program

On February 1, 2024, our Board of Directors authorized the repurchase of up to $300.0 million (exclusive of fees and commissions) of YETI’s common stock (the “Share Repurchase Program”), excluding fees, commissions, and excise tax due under the Inflation Reduction Act of 2022. 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 December 28, 2024, $100.0 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 “February ASR Agreement”) with Goldman Sachs & Co. LLC (“Goldman Sachs”) to repurchase $100.0 million of YETI’s common stock. Pursuant to the February ASR Agreement, we made a payment of $100.0 million to Goldman Sachs and received an initial 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 February ASR Agreement resulted in the total repurchase of 2,641,175 shares.

In addition, as part of the Share Repurchase Program, on November 12, 2024, we entered into a second accelerated share repurchase agreement (the “November ASR Agreement”) with Goldman Sachs to repurchase an additional $100.0 million of YETI’s common stock. Pursuant to the November ASR Agreement, we made a payment of $100.0 million to Goldman Sachs and received an initial delivery of 1,933,301 shares of YETI’s common stock. We received a final delivery of an additional 551,955 shares on January 6, 2025. The November ASR resulted in the total repurchase of 2,485,256 shares.

During the first quarter of 2025, our Board of Directors approved a $350.0 million increase to the Share Repurchase Program authorization, excluding fees, commissions, and excise tax due under the Inflation Reduction Act of 2022. As of February 24, 2025, $450.0 million remained available under the Share Repurchase Program.

See Note 11-Stockholders’ Equity of the Consolidated Financial Statements for additional information about the Share Repurchase Program.

Material Cash Requirements

For 2025, we expect capital expenditures for property and equipment to be between $60.0 million and $70.0 million, primarily to support investments in technology, new product innovation, and our supply chain.

The following table summarizes current and long-term material cash requirements for contractual and other obligations as of December 28, 2024 (in thousands):

[[GREPCENT_TABLE]]
[["","Material Cash Requirements"],["","Total","","2025","","2026","","2027","","2028","","2029","","Thereafter"],["Long-term debt principal payment","$","78,047","","","$","4,219","","","$","4,219","","","$","4,219","","","$","65,390","","","$","\u2014","","","$","\u2014"],["Interest","15,597","","","4,797","","","4,532","","","4,267","","","2,001","","","\u2014","","","\u2014"],["Operating lease obligations","110,490","","","24,034","","","20,582","","","15,767","","","11,718","","","8,940","","","29,449"],["Finance leases","3,536","","","2,315","","","973","","","142","","","106","","","\u2014","","","\u2014"],["Other non-cancellable agreements (1)","166,765","","","64,707","","","53,305","","","21,046","","","14,957","","","11,498","","","1,252"],["Total","$","374,435","","","$","100,072","","","$","83,611","","","$","45,441","","","$","94,172","","","$","20,438","","","$","30,701"]]
[[/GREPCENT_TABLE]]

_________________________________________

(1)We have entered into commitments for service and maintenance agreements related to our management information systems, distribution contracts, advertising, sponsorships, and licensing agreements.

The table of our material cash requirements above excludes unrecognized tax benefits as we are unable to reasonably predict the timing of settlement of liabilities, if any, related to unrecognized tax benefits. As of December 28, 2024, we had unrecognized tax benefits of $21.2 million.

As of December 28, 2024, our reserve for estimated recall expenses, including the expected cost of returns, was $12.1 million. The ultimate costs from the approved voluntary recalls could differ materially from this estimate, and as such, changes in the estimate may have a material impact on our financial condition, results of operations, and cash flows.

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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):

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended"],["","December 28, 2024","","December 30, 2023"],["Cash flows provided by (used in):"],["Operating activities","$","261,386","","","$","285,942"],["Investing activities","(131,448)","","","(72,824)"],["Financing activities","(209,217)","","","(13,596)"]]
[[/GREPCENT_TABLE]]

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 decrease in cash provided by operating activities in 2024 compared to 2023 was primarily due to an increase in cash used by working capital driven by lower accounts payable and accrued expenses balances and higher account receivable balances in 2024. The increase in cash provided by operating activities was partially offset by an increase in net income and the impact of non-cash items.

Investing Activities

The increase in cash used in investing activities in 2024 compared to 2023 was primarily related to the acquisition of Mystery Ranch and higher purchases of intangible assets, including the acquisition of powered cooling technology patents to develop a unique powered cooler platform. These increases were partially offset by decreased purchases of property and equipment.

Financing Activities

The increase in cash used in financing activities in 2024 compared to 2023 was primarily due to repurchases of common stock.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.

See Note 1 of the Notes to Consolidated Financial Statements for our significant accounting policies. The following describes significant judgments and estimates used in the application of these policies. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. 

Revenue Recognition

Revenue transactions associated with the sale of YETI coolers, equipment, drinkware, apparel and accessories comprise a single performance obligation, which consists of the sale of products to customers either through our wholesale or DTC channels. Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the customers, based on the terms of sale. The transfer of control typically occurs at a point in time based on consideration of when the customer has an obligation to pay for the goods, and physical possession of, legal title to, and the risks and rewards of ownership of the goods has been transferred, and the customer has accepted the goods. Revenue from wholesale transactions is generally recognized at the time products are shipped based on contractual terms with the customer. Revenue from our DTC channel is generally recognized at the point of sale in our retail stores and at the time products are shipped for e-commerce transactions and corporate sales based on contractual terms with the customer.

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Revenue is recognized net of estimates of variable consideration, including product returns, customer discounts and allowances, sales incentive programs, and miscellaneous claims from customers. We determine these estimates based on contract terms, evaluations of historical experience, anticipated trends, and other factors. The actual amount of customer returns and customer allowances, which is inherently uncertain, may differ from our estimates.

The duration of contractual arrangements with our customers is typically less than 1 year. Payment terms with wholesale customers vary depending on creditworthiness and other considerations, with the most common being net 30 days. Payment is due at the time of sale for retail store transactions and at the time of shipment for e-commerce transactions.

Certain products that we sell include a limited warranty which does not meet the definition of a performance obligation within the context of the contract. Product warranty costs are estimated based on historical and anticipated trends and are recorded as cost of goods sold at the time revenue is recognized.

We elected to account for shipping and handling as fulfillment activities, and not as separate performance obligations. Shipping and handling fees billed to customers are included in net sales. All shipping and handling activity costs are recognized as selling, general and administrative expenses at the time the related revenue is recognized. Sales taxes collected from customers and remitted directly to government authorities are excluded from net sales and cost of goods sold.

Our terms of sale provide limited return rights. We may accept, and have at times accepted, returns outside our terms of sale at our sole discretion. We may also, at our sole discretion, provide our retail partners with sales discounts and allowances. We record estimated sales returns, discounts, and miscellaneous customer claims as reductions to net sales at the time revenues are recorded. We base our estimates upon historical experience and trends, and upon approval of specific returns or discounts. Actual returns and discounts in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected future returns and discounts were significantly greater or lower than the reserves we had established, we would record a reduction or increase to net sales in the period in which we made such determination. A 10% change in our estimated reserve for sales returns, discounts, and miscellaneous claims for 2024 would have impacted net sales by $1.2 million.

Product Recall Reserves

As described in Note 12 of the Notes to Consolidated Financial Statements, in January 2023, we notified the 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, which we refer to as the “voluntary recalls” herein unless otherwise indicated. In conjunction with the stop sale, we determined that the affected products inventory held by us, our suppliers and our wholesale customers was unsalable, and notified our wholesale customers to return the affected products. In March 2023, we announced separate, voluntary recalls of the affected products in collaboration with the CPSC and subsequently began processing recall claims and returns.

We establish reserves for the estimated costs of a product recall when circumstances giving rise to the recall become known and when such costs are probable and estimable. As a result of the voluntary recalls, we established a reserve for expected future returns and the estimated cost of recall remedies for consumers with affected products. Estimating the cost of recall remedies required significant judgment and is primarily based on (i) expected consumer participation rates; and (ii) the estimated costs of the consumer’s elected remedy in the proposed voluntary recall, including estimated cost of offered product replacements, logistics costs and other recall-related costs. We reevaluate these assumptions each period, and the related reserves may be adjusted when factors indicate that the reserve is either not sufficient to cover or exceeds the estimated product recall expenses. The ultimate impact from the approved voluntary recalls could differ materially from these estimates. The reserve for the estimated product recall expenses of $12.1 million and $13.1 million is included within accrued expenses and other current liabilities on our consolidated balance sheet as of December 28, 2024 and December 30, 2023, respectively.

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.

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Inventory

Inventories are comprised primarily of finished goods and are carried at the lower of cost (weighted-average cost method) or market (net realizable value). We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand and market conditions. If the estimated net realizable value is less than cost, we reflect the lower value of that inventory. This methodology recognizes inventory exposures at the time such losses are identified rather than at the time the inventory is actually sold. Due to customer demand and inventory constraints, we have not historically taken material adjustments to the carrying value of our inventory.

Our inventory valuation reflects adjustments for anticipated inventory losses that have occurred since the last physical inventory. We estimate inventory shrinkage based on historical trends from physical inventory counts and cycle counts. We perform physical inventory counts and cycle counts throughout the year and adjust the shrink provision accordingly. Historically, physical inventory shrinkage has not been significant.

Valuation of Goodwill and Indefinite-Lived Intangible Assets

Goodwill and intangible assets are recorded at cost, or at their estimated fair values at the date of acquisition. We review goodwill and indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate the carrying amount may be impaired. 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 asset, or reporting units, is less than its carrying amount. If factors indicate that the fair value 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. Based on our qualitative assessment performed during the fourth quarter of 2024, we determined that it is not more likely than not that the fair value of each reporting unit is lower than its carrying value; therefore, the quantitative impairment test was not required. We did not record any goodwill or indefinite-lived intangible assets impairment charges during the years ended December 28, 2024, December 30, 2023 and December 31, 2022.

Valuation of Long-Lived Assets

We assess the recoverability of our long-lived assets, which include property and equipment, operating lease right-of-use-assets, and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. An impairment loss on our long-lived 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. Assets to be disposed of are reported at the lower of the carrying amount or estimated fair value less costs to sell.

Income Taxes

We are subject to taxation in the United States, as well as various state and foreign jurisdictions. The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. On an interim basis, we estimate our effective tax rate for the full fiscal year. This estimated annual effective tax rate is then applied to the year-to-date income before income taxes, excluding infrequently occurring or unusual items, to determine the year-to-date income tax expense. The income tax effects of infrequent or unusual items are recognized in the interim period in which they occur. As the fiscal year progresses, we continually refine our estimate based upon actual events and earnings by jurisdiction during the year. This continual estimation process periodically results in a change to our expected effective tax rate for the fiscal year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs.

Tax filing positions are evaluated, and we recognize the largest amount of tax benefit that is more likely than not to be sustained upon examination by the taxing authorities based on the technical merits of the tax position. On a quarterly basis, we evaluate the probability that a tax position will be effectively sustained and the appropriateness of the amount recognized for uncertain tax positions based on factors including changes in facts or circumstances, changes in tax law, and audit activity. Changes in our assessment may result in the recognition of a tax benefit or an additional charge to the tax provision in the period our assessment changes. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes in the consolidated statements of operations.

Recent Accounting Pronouncements 

For a description of recent accounting pronouncements, see “Recently Adopted Accounting Pronouncements” and “Recent Accounting Guidance Not Yet Adopted” in Note 1 of the Notes to Consolidated Financial Statements included herein.

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