Yeti Holdings INC (YETI) Q3 2022 Earnings Call Transcript

Picture supply: The Motley Idiot.

Yeti Holdings INC (YETI 29.27%)
Q3 2022 Earnings Name
Nov 10, 2022, 8:00 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Individuals

Ready Remarks:

Operator

Good morning, and welcome to the YETI holdings third quarter 2022 earnings convention name. All contributors will likely be in a listen-only mode at the moment. [Operator instructions] Please notice that this occasion is being recorded. I’d now like to show the convention over to Tom Shaw, vice chairman, investor relations.

Please go forward, sir.

Tom Shaw — Vice President, Investor Relations

Good morning, and thanks for becoming a member of us to debate YETI Holdings’ third quarter 2022 outcomes. Earlier than we start, we would prefer to remind you that a number of the statements that we make at the moment on this name could also be thought of forward-looking, and such forward-looking statements are topic to varied dangers and uncertainties that might trigger our precise outcomes to vary materially from these statements. For extra data, please consult with the danger components detailed in our most just lately filed Type 10-Q and the Type 8-Ok filed with the SEC at the moment. We undertake no obligation to revise or replace any forward-looking statements made at the moment on account of new data, future occasions or in any other case, besides as required by legislation.

Throughout our name at the moment, we’ll be discussing sure non-GAAP measures pertaining to accomplished fiscal durations. Reconciliations of those non-GAAP measures to their most straight comparable GAAP measures are included on this morning’s press launch, in addition to within the supplemental reconciliation, each of which can be found within the Investor Relations part of our web site at yeti.com. We use non-GAAP measures because the lead in a few of our monetary discussions as we consider they extra precisely signify the true operational efficiency and underlying outcomes of our enterprise. As we speak’s name will likely be led by Matt Reintjes, president and CEO; and Mike McMullen, interim CFO.

Following our ready remarks, we’ll open the decision to your questions. And now, I might like to show the decision over to Matt.

Matt Reintjes — President and Chief Govt Officer

Thanks, Tom, and good morning. To start out the decision at the moment, I wish to give attention to the superb execution throughout the quarter and description how we’re positioned to develop over the necessary This fall vacation interval. I will then give some coloration on every of our 4 strategic progress priorities, that stay central to our continued success in 2022 and past. Trying on the third quarter, YETI posted a 20% gross sales improve underscoring the continuing energy of the model, in addition to the distinctive energy and significance of our omnichannel method.

We noticed very balanced sell-in and sell-through at wholesale inclusive of some earlier-than-planned shipments to help stock at retail forward of the vacations. Our direct-to-consumer enterprise was highlighted by sturdy buyer retention and acquisition throughout our DTC channel. And we noticed glorious worldwide contribution from what continues to be a comparatively younger a part of our enterprise. As we glance ahead, our present view of the second half and full 12 months income stays constant and intact from our prior outlook.

As seen all year long, gross and working margins remained sturdy even with important headwinds, partially offset by ongoing expense self-discipline. Importantly, we’re more and more optimistic on gross margin tailwinds constructing in 2023. We anticipate this can assist help margin growth and funding in future progress. As Mike will cowl, we made good progress on the stock administration entrance, as we steadiness order stream towards decreasing transit instances to drive working capital effectivity going into subsequent 12 months.

As we head into the ultimate stretch of the 12 months and plan for the vacation season, we acknowledge a heightened stage of uncertainty persists throughout the market. As shoppers make buy choices on this atmosphere, we’ll proceed doing what we do greatest, stoking the model and delivering product innovation. Our objective stays centered on successful this season’s gifting events. We have now an ideal lineup of product and model actions we’re deploying towards these efforts.

The innovation basis for the quarter has already been laid, capping one in all our most expansive innovation years for YETI, included are the completion of our full channel rollout of our two flagship smooth coolers, extensions of the profitable Camino tote, our two latest wheeled coolers, the current debut our new Straw Lid Rambler drinkware and this week’s introduction of YETI’s first light-weight bottle, Yonder. We’ll present these merchandise by means of our distinctive and various advertising and marketing channels to interact each new and present prospects all through the quarter and into 2023. This contains increasing the attain of our model by means of our fall YETI Dispatch magalog dropping in houses subsequent week, particular finds in our seasonal gear storage throughout Black Friday week, and activating our vacation model marketing campaign, use your presents. Our overarching vacation message underscores the worth, versatility, and desirability of merchandise.

Now to our strategic progress priorities. Persevering with to develop our model and audiences whereas additionally connecting with our prospects stays central to our progress agenda. We’re centered on cultivating deep engagement alternatives throughout our present buyer base as we see untapped alternative for the invention of our product assortment and our customization capabilities. These efforts are magnified after we goal newer shopper communities as we set up consciousness and consideration.

This has been the essence of our breadth and depth technique, which we dropped at life in distinctly YETI methods throughout the third quarter. Beginning with our social media, we expanded our widespread packed social sequence of how-to movies that inform and educate prospects on the performance of our merchandise. The marketing campaign spotlights the broad vary of our providing, together with our Camino totes, Roadie laborious coolers, and our Crossroads Duffels, and offers tangible examples of the flexibility for quite a lot of actions and adventures. The model additionally confirmed up huge in school soccer on the matchup between the Alabama Crimson Tide and the Texas Longhorns, displaying one other nice instance of how YETI can seamlessly combine model and product in an actual approach.

This effort was anchored by our new Roadie wheeled coolers, positioned as an ideal Tailgate companion. We invited one in all our ambassadors, Matt Pittman, the founding father of Meat Church, to smoke a mixture of Texas and Alabama barbecue to share with followers within the school sport day crew. Lastly, we spotlighted our collegiate customization enterprise to drive engagement throughout our digital channels. Maybe most significantly, and in a return to regular, this marketing campaign confirmed the continuing energy of YETI merchandise as we proceed gathering with our family and friends at occasions that have been disrupted all through the pandemic.

I need to spotlight what an unbelievable quarter it was for a few of our newer YETI ambassadors. Australian surfer, Stephanie Gilmore, gained her eighth WSL world title in Southern California. She stands alone as essentially the most adorned feminine athlete in skilled browsing. One other Aussie, Tia-Clair Toomey, gained her sixth consecutive world’s fittest girl title on the CrossFit Video games in Wisconsin, turning into the primary individual to say that many titles.

Lastly, we’re thrilled so as to add Nora Vasconcellos because the YETI’s first feminine skate ambassador. I need to acknowledge our Main League soccer companion, Austin FC, who, of their second season, made the MLS Western Convention Finals. Because the official jersey sponsor of Austin FC, YETI obtained publicity on nationwide broadcast on ESPN and ABC over three consecutive weekends, culminating within the Western Convention Finals on October 30. As we proceed to broaden our 13 passion-based lively communities, we’ll foster deep and broad relationships, which is the distinctive energy behind how we construct and develop this model.

On the product aspect, our third quarter outcomes are highlighted by innovation, sturdy stock stream, and demand dynamics throughout our cooler enterprise, driving the general C&E class up 25% for the interval. Our in-stocks proceed to enhance throughout our core Tundra laborious coolers, which have been notably depleted within the wholesale channel final 12 months. Our newest smooth coolers, the M30 Tote and the M20 backpack, proceed to resonate with prospects and have only in the near past develop into absolutely assorted within the wholesale channel. The brand new Roadie 48- and 60-wheeled laborious coolers have captured sturdy early evaluations for each the commerce and shopper.

Full distribution continues to be ramping. All in all, we’re in the perfect product place since earlier than the pandemic with a deep assortment of each present and new innovation. We consider this properly positions the model to not solely seize vacation demand however to additionally drive progress and growth into 2023. Our restricted growth of YETI baggage and wholesale continued within the quarter as we have debuted our product throughout almost 100 doorways because the summer time.

Early outcomes are optimistic, and we’ll proceed to take a look at strategically growing doorways for the steadiness of the 12 months with further alternatives constructing into 2023. Our drinkware enterprise grew 17% throughout the quarter with sturdy traits persevering with throughout our bottles enterprise and our journey mugs. Our new innovation builds upon this momentum beginning with the brand new Rambler 25-ounce and 35-ounce straw lid mugs that have been launched in DTC in late October. And simply this week, YETI added a brand new noninsulated product to our drinkware enterprise with the debut of our first lighter-weight Yonder bottle.

Over time, we’ve got obtained suggestions from our ambassadors and prospects that weight can matter greater than thermal efficiency when exploring deep within the wild. We have now labored laborious to develop a line of drinkware that will be each lighter than our core choices whereas retaining YETI’s superior sturdiness and efficiency qualities to actually disrupt {the marketplace}. Finally, the crew delivered a extremely sturdy product punctuated with an ideal carry and ingesting expertise. Launched in two sizes and 4 colours, Yonder creates an extra approach for YETI to be a part of every day life.

And as we transfer into 2023, prospects will have the ability to customise their bottles with full coloration printing choices accessible on yeti.com. Our channel technique is designed to successfully match the client with an ideal expertise when and the place they select to seek out our model. That is the target of a real omnichannel method, and we’re seeing this dynamic play out now greater than ever. As anticipated, as we rebalanced stock throughout our channels, wholesale progress outpaced DTC progress for the second straight quarter and drove our first $200 million quarter for the channel.

We noticed glorious sell-through traits throughout the interval, supported by a lot more healthy in-stock positions relative to final 12 months. As we’ve got seen traditionally, our model performs greatest on this channel after we are in inventory, and our product is merchandised properly. We proceed to work carefully with our key wholesale companions to optimize supply and the client expertise. Throughout our Q2 name, we indicated that progress in our DTC channel could be pushed by a powerful restoration in our Amazon enterprise.

Amazon confronted a equally restricted stock place as wholesale final 12 months. We additionally noticed sturdy ongoing momentum inside company gross sales and YETI-owned shops. As we take into consideration measuring the attain of DTC, we’re more and more whole acquisition and retention traits throughout the direct shopper channel. A holistic look throughout our e-commerce, Amazon and YETI-owned shops confirmed wholesome acquisition progress in comparison with final 12 months.

This dynamic is per the rebalancing of demand we’re seeing throughout our omnichannel, main to twenty% general top-line progress. We stay happy with the extent of retention we’re seeing throughout DTC, notably yeti.com, in addition to the underlying high quality of these transactions. As we head into 2023 with a extra normalized stock place, we’re taking a recent take a look at the roles and scope of every a part of our omnichannel to make sure that we’re amplifying and differentiating to drive accelerated progress for the long run. just a few of the main points throughout DTC.

Amazon’s restoration was demand-driven and anticipated given the stock normalization following final 12 months’s YETI stock allocation choices. We’ll proceed to steadiness the energy fulfilled by Amazon place and complement what fulfilled by retailers to assist drive improved year-over-year execution all through the vacations. Sturdy demand in company gross sales continues because the model resonates throughout a variety of accounts, together with B2B, collegiate, and hospitality. Elevated customization capability ought to assist service demand over the vacations and into 2023.

YETI-owned shops proceed to drive a pinnacle to get expertise with a heightened give attention to localization, merchandising, and repair. We opened our twelfth location in Southlake, Texas, earlier this quarter and we’ll add one further vacation spot later this month, situated simply south of Los Angeles and El Segundo. We proceed to anticipate an accelerated tempo of YETI retailer openings beginning in 2023 as these develop into more and more valued for model publicity, product consideration, and buy. Taking the YETI story globally stays one in all our greatest alternatives, and we proceed to make glorious progress within the third quarter regardless of unabated tensions within the international, political and financial atmosphere.

Our worldwide gross sales grew 60%, representing our highest quarterly progress up to now 12 months, and realized a YETI excessive 13% gross sales combine. Progress was as soon as once more properly balanced throughout our three major areas. Efficiency in Canada echoed most of the channel traits skilled within the U.S. with sturdy wholesale efficiency, coupled with strong DTC progress regardless of comparatively softer e-commerce traits.

We proceed to make progress with a number of key wholesale accounts whereas additionally investing in merchandising initiatives as in-stocks enhance. On the DTC aspect, progress was supported by the launch of fulfilled by service provider on Amazon to drive better depth and breadth of assortment to native prospects. Australia’s efficiency stays excellent, persevering with to exceed expectations with balanced energy throughout channels. Our Native Father’s Day marketing campaign was notably profitable constructing as much as the early September vacation, together with our largest on-line day up to now for the nation.

As well as, we launched up to date variations of our e-commerce websites in each Australia and New Zealand. As we take a look at Europe, I used to be lucky to spend a while in a number of markets within the U.Ok. and Europe throughout the quarter, seeing and listening to firsthand how the model is making a powerful impression with prospects throughout their lively life-style pursuits. Whereas we’re being aware of the clear pressures throughout the area, we’re delivering on our near-term monetary expectations with the actions wanted to construct an enduring model basis.

This effort included very profitable consumer-focused participation and model constructing in our most intensive sequence of native occasions up to now throughout the U.Ok. Moreover, we proceed so as to add choose wholesale doorways throughout the U.Ok. and European area, surpassing 800 whole places throughout the interval with almost half of this 12 months’s openings in our focus markets of the U.Ok. and Germany.

We have now an incredible alternative to construct a large enterprise throughout Europe, and we’ll proceed to make the most of and localize our playbook to drive the model in future international places. Lastly, I need to specific my due to our just lately departed CFO, Paul Carbone. Paul is an unbelievable companion of mine, serving to carry this firm public and navigate many dynamic environments for the previous 4 years. I am excited for him as he returns to Boston and is ready to spend extra time together with his household.

As we proceed our lively seek for our subsequent CFO, we’re extremely lucky to have a seasoned, succesful, and powerful chief in Mike McMullen as interim CFO. Mike has been a key companion to me main our finance crew for almost seven years, and I am excited to have him step into the function. In closing, it is necessary to take a step again and press upon the place we stand at the moment. Rising high line 20% in Q3 and 19% 12 months up to now on this atmosphere is a testomony to each the laborious work and execution of our crew and the unwavering ardour for the model from our prospects.

Shoppers are nonetheless discovering the breadth and depth of our product lineup. They’re giving us permission to carry extra high-quality choices to market to fulfill their wants, and so they’re ready for our model to succeed in them throughout international channels. Profitability stays sturdy however has been challenged this 12 months by market-driven headwinds, however we do see many of those turning to tailwinds as we transfer towards 2023. As we work by means of the near-term noise, our focus is on driving sturdy high line and powerful margins whereas investing in progress to construct upon our momentum.

And at last, we’re resolute in sustaining a wholesome steadiness sheet, which we see as an asset that creates flexibility and one which strengthens as we work down the stock pressures pushed by provide chain prices. As we predict by means of the working capital alternative within the close to time period, we consider the enterprise is ready up as soon as once more for sturdy money stream in 2023. And with that, I’ll now go the decision over to Mike.

Mike McMullen — Interim Chief Monetary Officer

Thanks, Matt. I will start with an in depth overview of the third quarter, adopted by our outlook for the 12 months. We’ll then open the decision to your questions. Third quarter gross sales elevated 20% to $433.6 million in comparison with $362.6 million within the prior-year interval.

This progress got here in above our expectations for the interval and was modestly forward of the 18% progress achieved throughout the first half of the 12 months. Roughly 2 factors of gross sales upside got here from elevated orders within the wholesale channel given the sturdy sell-through and our companions’ efforts to succeed in extra optimum stock ranges earlier forward of the vacation season. From a channel perspective, wholesale gross sales elevated 25% to $206.2 million in comparison with $165.5 million final 12 months. Our wholesale efficiency was pushed by sturdy ends in coolers and gear, primarily given improved stock positioning within the channel, in addition to ongoing demand for each smooth and laborious coolers.

Baggage additionally contributed to progress as a bigger portfolio of merchandise continues to be launched to shoppers by means of the channel. Direct-to-consumer gross sales grew 15% to $227.4 million in comparison with $197.1 million in the identical interval final 12 months. Direct-to-consumer efficiency included a wholesome return to progress in our Amazon enterprise and was supported by energy within the drinkware class. Our company gross sales enterprise additionally continued to carry out properly posting strong progress on high of sturdy efficiency within the year-ago interval.

By class, coolers and gear gross sales elevated 25% to $185.7 million in comparison with $149 million throughout the identical interval final 12 months. Tender coolers remained the standout, together with strong omnichannel demand for our new Hopper M20 backpack and M30 tote choices, in addition to strong efficiency throughout our Flip and DayTrip product traces. Stock of core laborious coolers proceed to get more healthy throughout our distribution community, supporting the sturdy sell-through that we’re seeing. This class can also be benefiting from the current launches of our two Roadie wheeled coolers, which proceed to develop throughout wholesale within the present quarter.

Progress in our baggage enterprise was supported by the brand new Panga colorway and ongoing traction throughout our Crossroads line. Drinkware gross sales elevated 17% to $239 million in comparison with $205 million final 12 months. As Matt highlighted, our momentum was sustained in bottles, journey mugs, and the straw cup. We additionally noticed progress contributions from our Lowball the place we’re retiring our present providing to make approach for future product updates, and jugs the place we’ve got expanded our coloration and customization choices this 12 months.

As we’ve got persistently seen, the client’s capability to customise their YETI merchandise stays an necessary driver and differentiator for the model. Internationally, gross sales grew 60% to $56.5 million in comparison with $35.2 million within the prior-year quarter, representing roughly 13% of whole gross sales and a brand new excessive for YETI. For the interval, we skilled sturdy balanced progress throughout Canada, Australia, and Europe. Gross revenue elevated 7% to $222.4 million or 51.3% of gross sales in comparison with $207 million or 57.1% of gross sales in the identical interval final 12 months.

As we’ve got seen in current quarters, the year-over-year contraction was primarily pushed by a 490-basis-point affect from greater inbound freight. Further headwinds included 150 foundation factors from greater product prices, 70 foundation factors from unfavorable overseas foreign money alternate charges, 20 foundation factors from unfavorable channel and product combine, and 20 foundation factors from all different impacts. These headwinds have been partially offset by 170 foundation factors from pricing actions. Adjusted SG&A bills for the quarter elevated 12% to $149.1 million or 34.4% of gross sales in comparison with $132.8 million or 36.6% of gross sales in the identical interval final 12 months.

Nonvariable bills decreased 360 foundation factors as a p.c of gross sales primarily pushed by sturdy top-line progress and disciplined spending. Variable bills elevated 140 foundation factors as a p.c of gross sales primarily reflecting greater distribution and logistics prices, in addition to greater Amazon market charges. Adjusted working earnings decreased 1% to $73.3 million or 16.9% of gross sales in comparison with $74.2 million or 20.5% of gross sales throughout the identical interval final 12 months. Our efficient tax charge was 23.7% throughout the quarter in comparison with 20.5% in final 12 months’s third quarter with the next charge reflecting a discrete earnings tax profit within the prior-year interval adjusted web earnings decreased 6% to $54.7 million or $0.63 per diluted share in comparison with $58 million or $0.65 per diluted share within the prior-year interval.

Turning to our steadiness sheet. We ended the third quarter with $77.8 million in money in comparison with $259.3 million within the year-ago interval. Just like prior quarters, the decrease money place primarily displays the completion of the share repurchase throughout the first quarter, in addition to ongoing investments in working capital. Stock elevated 65% to $439.4 million in comparison with $266 million throughout the identical quarter final 12 months and down roughly $50 million sequentially.

Excluding the affect of capitalized freight, stock grew roughly 45% 12 months over 12 months to $330 million. Inclusive of the combo of our stock shifting to coolers and gear models from drinkware, whole stock models grew 17% throughout these two major product classes. Whole debt, excluding unamortized deferred financing charges and finance leases, was $95.6 million in comparison with $118.1 million on the finish of final 12 months’s third quarter. Through the quarter, we made principal funds of $5.6 million.

Now turning to our fiscal 2022 outlook. We now anticipate full 12 months gross sales to extend roughly 16% in comparison with fiscal 2021. This stage is on the midpoint of our prior outlook and normalizes a number of the timing dynamics between the third and fourth quarters. For the complete 12 months, we proceed to anticipate coolers and gear progress to outpace drinkware, whereas channel progress to be balanced between DTC and wholesale.

With gross margins, we now anticipate the complete 12 months charge to be roughly 52.5%, additionally on the midpoint of the prior outlook vary of 52% to 53%. margin elements, greater inbound freight is predicted to affect gross margin by roughly 500 foundation factors, driving the vast majority of the general year-over-year decline. On a optimistic notice, ocean charges throughout our major delivery lanes continued to say no sharply from peak ranges, which is predicted to be a supply of margin restoration shifting to 2023. The extent and timing of this restoration will likely be depending on working by means of the present greater value stock on the steadiness sheet and the degrees of anticipated lower-cost stock receipts.

Our expectations have improved considerably for mixed enter prices and GSP duties this 12 months the place we now see roughly 130 foundation factors of headwind. Different margin impacts inclusive of overseas foreign money alternate charges are actually anticipated to be about an 80-basis-point drag, largely reflecting the adversarial affect of the strengthening U.S. greenback on worldwide gross sales. Partially offsetting these headwinds, we see our pricing motion this 12 months, including roughly 180 foundation factors, a stage per what we’ve got seen the prior two quarters.

With these gross margin pressures, we’ve got remained disciplined with our adjusted SG&A spending all year long, although nonetheless anticipate to finish the 12 months with low double-digit progress. Led by the continuation of upper distribution and logistics prices and the affect of Amazon market charges, we anticipate fourth quarter variable SG&A bills to develop quicker than gross sales. Our bigger nonvariable expense bucket is deliberate to develop under the speed of gross sales within the fourth quarter as we proceed to thoughtfully prioritize bills. General, we anticipate to realize an adjusted working margin of roughly 17% for the 12 months.

This compares to our prior vary of between 17% and 17.5% and incorporates our up to date views of ongoing provide chain pressures, better FX headwinds, and channel combine shift. Beneath the working line, we proceed to anticipate full 12 months curiosity expense of roughly $4.6 million and an efficient tax charge of roughly 24.6%. Based mostly on full 12 months diluted shares excellent of roughly 87.3 million, we now anticipate adjusted earnings per diluted share of roughly $2.36 in comparison with $2.60 in fiscal 2021. For capital expenditures, we now anticipate roughly $50 million of spending for the 12 months, which is under our prior outlook of $60 million as we’ve got shifted the timing of sure capability investments.

I additionally need to present an replace on stock. As we indicated final quarter, we proceed to actively monitor and handle our buy orders to higher match demand. As well as, transit instances have begun to say no with in-transit stock ticking down sequentially to roughly 28% of our whole stock. Thus, we now anticipate year-end inventories to be under our prior outlook and modestly under third quarter ranges.

To reiterate, the general composition and high quality of our stock stays in nice form, supported by the next mixture of newer or just lately constrained merchandise, which, just like the overwhelming majority of our portfolio carry multiyear shelf lives and are anticipated to have sturdy gross sales vitality. In abstract, we executed properly within the third quarter, protecting us on monitor to ship throughout the ranges of our earlier full 12 months outlook. On this working atmosphere, we consider our outlook offers a balanced take a look at our positioning and technique heading into the height vacation season. Furthermore, our confidence looking forward to 2023 is supported by our ongoing capability to drive sustained demand for the model, the growing indicators of launch from current value pressures and an anticipated return to sturdy money stream technology.

I’d now like to show the decision again over to the operator to take your questions. 

Questions & Solutions:

Operator

We’ll now start the question-and-answer session. [Operator instructions] We ask that you simply please restrict your self to 1 query and one follow-up. Right now, we’ll pause simply momentarily. And our first query right here will come from Robby Ohmes with Financial institution of America.

Please go forward.

Robby Ohmes — Financial institution of America Merrill Lynch — Analyst

Hey, good morning, and thanks for taking my query. Matt, I feel — simply the primary query is, are you able to speak about what you are seeing, if something, modified from type of your commentary final quarter in regards to the informal buyer? And the way are you — what are you seeing from the client heading into vacation right here? After which I’ve a follow-up. 

Matt Reintjes — President and Chief Govt Officer

Thanks for the query. I feel as we progressed by means of the second quarter within the third quarter, what we noticed was actually good energy from our buyer. And as we mentioned on the decision, I imply, with 20% top-line progress, good progress throughout our channels, actually sturdy efficiency in wholesale and I feel our shopper continues to indicate up and continues to acknowledge our innovation continues to need the model. And so, as we glance ahead into This fall, that is sort of the target, is to maintain getting merchandise in our channels, absolutely distributed, each DTC and wholesale, get in entrance of the client, inform nice model tales and it has been a recipe for fulfillment for us for a few years and plenty of Q4s, and that is what we’re aiming towards.

So, I would not name out any dynamic we have seen change amongst our buyer. And I feel Q3 is a testomony to that.

Robby Ohmes — Financial institution of America Merrill Lynch — Analyst

Gotcha. That is useful. After which simply two follow-ups or clarifications. So, the — how did drinkware do in wholesale within the third quarter? It gave the impression of coolers and gear was actually sturdy inside wholesale.

Like was drinkware optimistic within the third quarter, wholesale?

Matt Reintjes — President and Chief Govt Officer

Yeah. I feel the — once you noticed the coolers, gear, we known as out, that was the piece of our enterprise that had essentially the most stock problem in 2021. And so, as we rebuild that stock after which centered on getting merchandise and getting bought by means of, we like how your complete assortment is acting from a shopper perspective. The rebuild of stock getting the shelfs merchandise, as we had mentioned originally of the 12 months was going to be disproportionately centered on the coolers and gear aspect of the enterprise. 

Robby Ohmes — Financial institution of America Merrill Lynch — Analyst

After which simply final one, the fulfilled by service provider on Amazon launch, are you able to simply stroll us by means of the timing of that and the way important of a profit that is been to gross sales?

Matt Reintjes — President and Chief Govt Officer

Sure. And Robby, we had FBA and FBM lively within the U.S. And final 12 months, when there have been some challenges getting stock into the Amazon market, we pivoted to extra fulfilled by retailers. In order that’s been a part of the run charge of what we have had within the U.S.

the place we added it was in Canada. And I would not name it out, however for, we predict it is one other channel for us to entry leveraging our stock and the stock in our management to handle shopper demand. So, it is simply an evolution of our Canadian Amazon market technique.

Operator

Our subsequent query will come from Peter Benedict with Baird. Please go forward.

Peter Benedict — Robert W. Baird and Firm — Analyst

Sorry about that, was on mute. First query, simply on the anticipated stream of those easing provide chain pressures over the following a number of quarters. I do know, as you talked about, goes to rely upon sell-through and another components. However I do not understand how you’ll body it, however how may it look if subsequent 12 months is a income progress 12 months that possibly is inside your algorithm? Or how does it look if, to illustrate, revenues are flat subsequent 12 months? Simply attempting to higher perceive the timing and the stream of that below some totally different situations.

Mike McMullen — Interim Chief Monetary Officer

Hey, Peter, good morning, and thanks for the query. So, after we get to the top of the 12 months and we give an outlook — our conventional outlook, we’ll have the ability to give extra coloration. I’d say although that we do anticipate as — like we talked about, the container charges are — have come down considerably. And we do anticipate that to be a tailwind as we head into FY ’23.

When it comes to the timing of how a lot and when and which quarter, I am not going to get into that too particularly now than to say we’re — we do like what we see when it comes to the chance there as we head into ’23.

Peter Benedict — Robert W. Baird and Firm — Analyst

OK. Understood. Curious should you may speak just a little bit extra about possibly what you are seeing on yeti.com, what the traits are there? I do know a number of the different DTC channels have been known as out as being sturdy. Simply curious what is going on on at yeti.com.

And likewise, simply across the promotional atmosphere. And also you guys have sort of stayed above that, however simply what is going on on from a promotional perspective in and round your class?

Matt Reintjes — President and Chief Govt Officer

Thanks, Peter. I will hit each these. On the DTC enterprise, we really feel nice about the place our DTC enterprise is. And you then step again up and also you speak about 20% progress within the commentary we made, and we mentioned from the very starting, we consider in a powerful omnichannel enterprise.

And should you stroll from 20% all the way down to the energy we had at wholesale, the energy we had at DTC. Inside the elements, as we mentioned originally of the 12 months, some items of our enterprise we anticipated to carry out stronger versus others due to operational choices and stock availability choices we made in 2021. I feel wholesale is benefited from that this 12 months. We known as out in Q2, we anticipated Amazon to learn from that in Q3.

Our B2B enterprise, company gross sales enterprise continues to carry out very properly, and our shops carried out properly. I feel the factor that was the largest beneficiary of these operational stock placement choices we made in ’21 was yeti.com. So the factor that we’re seeing on yeti.com that we actually like is that our retention continues to be very sturdy after two very huge acquisition years in that channel in 2020 and 2021 and the reactivation we’re seeing of older cohorts of shoppers. So yeti.com, whereas it’s the channel that’s performing very sturdy from a retention perspective, it is most likely the channel that almost all has the danger of the stock being redistributed amongst our envelope.

So, we really feel nice about how the omnichannel is performing. We really feel nice in regards to the function yeti.com performs. We predict we have rebalanced our stock and redistributed our demand to the place our shoppers are. And as we go into 2023, we’d anticipate DTC to proceed to be a powerful performer.

We anticipate a powerful contribution from wholesale, and we anticipate yeti.com to be our flagship.

Operator

And our subsequent query will come from Randy Konik with Jefferies. Please go forward. 

Randy Konik — Jefferies — Analyst

Hey, Matt, possibly you could possibly give us just a little little bit of a historical past lesson on innovation and the way that innovation has historically been a catalyst for brand new buyer progress and present prospects, like myself to reactivate, as you simply mentioned, as a result of I simply purchased the brand new straw Rambler. Possibly give us possibly on a certified foundation and quantify it on how that innovation traditionally round new merchandise, product classes, and colours has been that catalyst? And the way you concentrate on that as a catalyst for progress into 2023 and past. Possibly give us just a little little bit of perspective.

Matt Reintjes — President and Chief Govt Officer

Thanks, Randy. I feel innovation’s critically necessary to us, and it has been on the coronary heart of the evolution of the enterprise. However as you realize, having been a part of the story for some time, one of many issues we do is, that I feel we have performed properly, is we launch innovation, after which it performs out there for fairly a while. A few of our best-performing merchandise at the moment, we launched their authentic within the Tundra 45 in 2018 and the Rambler 20 in 2014 — excuse me, 2008 and 2014.

So, we would prefer to put nice innovation on the market. We prefer to stoke it with nice model after which we prefer to construct round it. So, should you watch the evolution in our drinkware portfolio over the past eight years, we have gone from two SKUs to an assortment of various merchandise from a few early tumblers to a full assortment of bottles — tumblers and I feel you will proceed to see that. And what it permits us to do is each reactivate present prospects, but additionally attain new prospects.

And you then layer on high of {that a} technique round how we use coloration. And we use coloration each as a strategy to reactivate and reengage our most ardent followers and exit inform tales to new prospects is an acquisition level. I feel you have seen it this 12 months as we have developed our smooth coolers, introduced in our second-generation backpack cooler. That is been a beautiful product for going and addressing prospects who might not have had the distinct want for the normal YETI Tundra, however a backpack cooler is a superb complement for getting out and about.

As you concentrate on our drinkware growth, as just lately as this week with our first Yonder bottle, lightweight bottle, it expands the use instances, it expands the viewers that we will handle, it creates one other use case atmosphere for a buyer, and provides us extra causes to be in a shopper life. And I feel that philosophy of how we constructed out is it is methodical and considerate with sufficient innovation the place we’re additionally stoking our present portfolio plus the brand new innovation.

Randy Konik — Jefferies — Analyst

Tremendous useful. I suppose my final query, possibly for Mike. You gave us rather a lot — you ticked off plenty of gross margin headwinds and also you ticked off the pricing that was helpful to gross margin. Are you able to possibly simply dig just a little deeper.

And once more, we do not have to quantify it, however simply actually speak to it. As we sort of take into consideration 2023 and past simply possibly give us some perspective on how we needs to be pondering just a little bit extra on that freight value aspect of issues — aspect of it, the place we all know the prices are coming down, when these begin to come by means of. Product prices, are we performed with these as being a headwind going ahead? FX, we will skip. Channel looks as if it is likely to be a helpful, or might be in 2023.

After which possibly give us some perspective possibly Matt, on pricing for subsequent 12 months. Simply give us that perspective could be useful simply as we predict by means of a excessive stage of how the gross margin can sort of — it appears like it’ll get higher subsequent 12 months, however simply give us some perspective on these totally different buckets so we will assume by means of them, if not amount, however qualify them into subsequent 12 months and pondering by means of them for the purchase aspect and the promote aspect. Thanks, guys. 

Mike McMullen — Interim Chief Monetary Officer

Sure, Randy, thanks for the query. So, I imply, you listed them. I might say, clearly, inbound has been the foremost driver of the decline we have seen this 12 months. However with the numerous charge — drop-in charges that we have seen, we do — like we mentioned, we do anticipate that to be a tailwind as we go into subsequent 12 months.

How a lot and when, I feel we’ll have the ability to give much more coloration after we get to our This fall earnings name. Product COGS, additionally an affect this 12 months. As you could possibly see from the colour we gave from final quarter to this quarter, these have gotten just a little bit higher, so issues have type of stabilized there. The place they go from right here, I feel, is we’ll have to type by means of and once more, we’ll give just a little extra coloration at year-end.

FX has been the one which has — appears to have gotten just a little bit worse quarter-over-quarter. However to your level, the place that goes, I feel, is clearly to be decided. Channel combine, not — did not see a lot of an affect this 12 months for the complete 12 months, simply on condition that wholesale and DTC are rising fairly persistently. However as we have seen in prior years and as we have messaged in regards to the future, our long-term progress — objective is to develop DTC quicker than wholesale, and we’d anticipate to see a margin profit as that continues to occur.

And for the pricing profit, I will flip it over to Matt.

Matt Reintjes — President and Chief Govt Officer

Yeah, Randy. On the pricing, we do not use, as you realize, pricing as a lever. We very sparingly use that. We like the place our merchandise are priced.

We just like the consistency of our pricing. We predict that is an excellent shopper expertise. And I feel as you — simply a number of the questions earlier across the promotional atmosphere, we — it is a extremely promotional atmosphere proper now. YETI has retained being above that, as somebody talked about earlier and per methods we have priced, and we promoted earlier than.

What we’re utilizing this atmosphere proper now to do is to drive some transition of some merchandise to usher in new innovation and have the double good thing about — a number of the stock we stock at the moment is at the next stage due to the availability chain prices than a number of the innovation that we’ve got coming. And so, we’re utilizing this type of distinctive cut-off date to leverage our conventional method to product transition, possibly speed up a few issues and get some stuff into the market as we go into 2023.

Operator

Our subsequent query right here will come from Sharon Zackfia with William Blair. Please go forward.

Sharon Zackfia — William Blair and Firm — Analyst

Hello, good morning. Sorry for my voice. I am battling just a little little bit of one thing right here. I suppose, I am curious, there’s positively a thesis on the Wall Road that YETI’s benefited from pull ahead in demand.

You have clearly been doing properly all 12 months on the highest line. However Matt, as you look into sort of ’23, what are your indicators on whether or not you’ll be able to sort of maintain that long-term held objective for 10% to fifteen% income progress? And I suppose secondarily, and my follow-up could be on the model consciousness. I used to be just a little bit stunned to see that plateau within the deck in ’22 versus ’21. Simply any commentary on the way you assume the effectiveness of promoting is progressing and what you assume led to sort of that plateauing?

Matt Reintjes — President and Chief Govt Officer

Good morning. Sharon, relating to the thesis that you simply talked about, I’d say it is just a little little bit of a head scratcher to us as a result of we have been a constant grower 12 months after 12 months for plenty of years inside — properly throughout the ranges that you simply’re speaking about and above. And we have talked by means of the pandemic second in time the place we grew by means of that disruption. We have been rising at comparable charges pre-pandemic on the opposite aspect of it.

We have had an ideal 12 months by means of the primary three quarters this 12 months. So, as we glance ahead and also you take a look at the drivers of our progress, the continued growth of our product portfolios, each in drinkware and coolers and gear, the continued progress that we’re seeing in our U.S. enterprise, which is our most established enterprise, the outsized progress we’re seeing globally even amid some markets across the globe which might be considerably disrupted proper now and the comparatively untapped alternative there. So, after we look throughout our progress algorithm and our progress vectors, it is — we consider, is undamaged because it was again in 2018 after we first talked about — talked publicly about the place we’ll take this enterprise.

And over the past 4 years, I feel we have proven that method works, develop the product portfolio, develop the attain, the model, develop the worldwide in nature, and drive a powerful digital enterprise. And that actually has developed to a powerful omnichannel enterprise. So, we be ok with the place this enterprise is, the place it is going and what the chance is in entrance of it. And admittedly, we have gone by means of plenty of totally different market backdrops and environments, and we discovered methods to achieve success in every a type of challenges.

I feel that when you concentrate on the model consciousness, unaided model consciousness that you simply’re referring to, we put that one knowledge level on the market. We clearly take a look at lots of totally different knowledge factors, together with slices of unaided consciousness, slices of aided consciousness, we take a look at absolutely the efficiency of the enterprise. We take a look at proprietor research and model research. That one knowledge level for us is fascinating.

The one factor that we will type of pin that moderation in unaided consciousness as a result of it is type of nonsense objective that the enterprise has grown geographically that we have had the energy we have had that we have reached new shoppers that, that will step down is that in that ’20 and 2021 interval, when the world is a bit more disruptive and folks have been in entrance of screens at the next frequency and charge is that possibly there was a top-of-mind consciousness change. So, we take a look at it as fascinating. We glance throughout the remainder of our knowledge factors and proceed to see the actually optimistic indicators for the place the enterprise and model are going. And it ties again to the expansion algorithm and the expansion thesis.

Sharon Zackfia — William Blair and Firm — Analyst

OK. Thanks.

Operator

And our subsequent query will come from Joe Altobello with Raymond James. Please go forward. 

Joe Altobello — Raymond James — Analyst

Thanks. Hey, guys. Good morning. I suppose first query for Matt.

You have talked about all through this name, improved buyer acquisition traits within the quarter. You talked in regards to the enchancment in Amazon Market. And possibly I missed it, so I apologize. However was there something particular that you simply assume drove these enhancements within the quarter?

Matt Reintjes — President and Chief Govt Officer

Hello, Joe. Nothing that we’d level to particularly. I’d say it has been just a few issues that we have performed all through historical past is as we inform nice model tales and produce model campaigns, as we launch new merchandise, as consciousness of latest product and innovation continues, as sort of folks develop into conscious of the place they’ll really entry that product or study it, we are likely to see some adjustments in acquisition. I’d say the Amazon, we known as out that it was demand-driven progress.

That is a channel the place we personal the stock. We do not acknowledge the sale till it sells by means of. So, it is pure demand-driven progress. I feel the flexibility to have merchandise out in entrance of shoppers the place shoppers need to store is as necessary as ever.

And I feel that is one of many powers of this model is the steadiness of our omnichannel, the energy and significance of our wholesale partnerships, the energy, and significance of the attain of the Amazon Market, the facility of yeti.com, the facility of getting our personal YETI shops after which complemented with the company gross sales and B2B enterprise. So, I feel that’s — I feel that is one of many strengths of YETI and what drives the acquisition and I feel in the end drives retention.

Joe Altobello — Raymond James — Analyst

Obtained it. Possibly a follow-up on market share. Have you ever seen any indication that customers are buying and selling down in different coolers or drinkware?

Matt Reintjes — President and Chief Govt Officer

No, nothing that will point out buying and selling down. I feel you take a look at our numbers and also you take a look at the energy and also you take a look at the commentary we had round sell-through that helps that energy. I feel shopper’s discerning. I feel when you have got a model that has a need behind it, worth factors develop into achievable when you concentrate on a cup at $30 or $35 and a cooler at $250 or $300.

They’re premium of their class, however the product backs it up. They usually’re achievable worth factors. And that is why as we go into these vacation seasons, why we just like the giftable nature of YETI and why we again that up with our model and advertising and marketing.

Operator

And our subsequent query will come from Brian Harbour with Morgan Stanley. Please go forward.

Brian Harbour — Morgan Stanley — Analyst

Sure, thanks. Good morning, guys. Matt, you had made a remark about one thing to the impact of taking a recent take a look at a number of the channels, I feel, in 2023. What was that sort of referring to? Is that about the place you set stock? Is it about the way you promote sure channels? Or what have been you sort of pondering there?

Matt Reintjes — President and Chief Govt Officer

Hello, Brian, nice query. I’d say this — final 12 months and this 12 months have been just a little fascinating from an omnichannel perspective for us as a result of in 2021 in a list constrained atmosphere with excessive demand, we needed to make choices on how distributed we have been going to be with our stock versus how concentrated to help the patron demand. As we got here into this 12 months in a greater stock place and we consider we’re — and we’ll exit this 12 months at a extra balanced distributed and accessible stock throughout our omnichannel, what it permits us to do as we go into 2023 is consider the significance and function of every channel and every one has a task to play. We’re persevering with to evolve the acquisition and retention round yeti.com.

We’re persevering with to take a look at ensuring that we’ve got the proper assortment accessible on the Amazon market. In wholesale, we proceed to focus with our unbelievable wholesale companions on merchandising and assortment planning and ensuring that YETI exhibits up in the way in which they’d need and the way in which we’d need. So, I would not name it out as radical adjustments in our philosophy. It is extra we’re now again right into a place the place we’ve got full energy and we will then apply our advertising and marketing, our merchandising, our model constructing on high of it.

I feel the one callout we mentioned was the continued rollout of YETI-owned shops. That is been a beautiful run up to now. We have now — we’ll have 13 shops by the top of this 12 months. They’re nice model beacons.

They alter the assortment {that a} shopper considers. So, they work your complete funnel from consideration throughout to buy and we predict it additionally advantages our omnichannel.

Brian Harbour — Morgan Stanley — Analyst

OK. Thanks. And possibly to that time, only a query on capex. Is a few of this simply timing the place these capability investments will shift from this 12 months to subsequent 12 months? After which are you going to place extra capex towards shops if you are going to speed up that as we take into consideration subsequent 12 months and past?

Mike McMullen — Interim Chief Monetary Officer

Yeah. Hey, Brian, so when it comes to your first query, sure, it is purely timing. I imply as we checked out what our wants have been and we refined what we would have liked to spend this 12 months to fulfill demand versus subsequent 12 months, we simply shifted the timing to subsequent 12 months. So, sure.

After which the second query on shops, it’s a piece of our capex at the moment. It is not the largest piece. The most important piece is round product and capability and know-how. However clearly, because the quantity will increase subsequent 12 months, that can go up.

However I feel we’ll nonetheless handle inside a comparatively constant envelope of capex, and you may even see shops go up just a little bit, however others go down as we really feel like we have — we’re at capability ranges or we’ve got the know-how initiatives that we’d like. So — however do not actually see an enormous spike within the general greenback going ahead.

Operator

And our subsequent query will come from John Kernan with Cowen. Please go forward.

John Kernan — Cowen and Firm — Analyst

Good morning, Matt and Mike. Thanks for taking my query. So Mike, are you able to speak to the working capital alternative, how can — how this may be balanced with progress and likewise margin growth subsequent 12 months. Do you assume you are going to maintain structurally greater ranges of stock going ahead that turns can enhance right here again to pre-COVID ranges? Thanks. 

Mike McMullen — Interim Chief Monetary Officer

Sure. Hey, John, thanks for the query. So, here is what I might say. So first, we have been pleased with our capability to handle stock in Q3 versus Q2 with it stepping down about $50 million.

We do assume that can proceed to return down in This fall. And as we glance into 2023, we predict stock generally is a significant supply of money for us. And I feel the massive alternative is transit instances come down, I feel you will see that portion of our stock come down in a cloth approach. So — and I feel that can assist drive some free money stream.

I feel the second factor I might name out on working capital, and that is actually been the affect this 12 months is our payables steadiness. In order we checked out our purchases and what we would have liked to position this 12 months, and we simply — we refined that assumption round payables, and that is actually what’s sort of led to the decrease free money stream quantity that we have seen this 12 months. However we additionally assume that, that might be a significant supply of money subsequent 12 months as we begin to purchase into extra stock, not solely is there going to be a P&L profit for us, but additionally a free money stream profit.

John Kernan — Cowen and Firm — Analyst

Obtained it. After which — and Matt, you talked to accelerated retailer openings. Are you able to speak to how this a part of the DTC efforts rank in progress alternatives? And if that is altering in your thoughts, what the proper footprint is for the whole YETI retailer base?

Matt Reintjes — President and Chief Govt Officer

Yeah. Thanks. Thanks, John. A few issues.

It is nonetheless 13 shops, and it is nonetheless a comparatively small piece of our DTC and a small piece of our general. However as we have talked about up to now, our shops are productive and so they’re accretive to the enterprise, and that is the main focus, is we would like productive and accretive shops, which is what drives the pacing of what number of, how briskly. As we take into consideration what we talked about pre-2019, we talked about 4 to 6 shops a 12 months. This 12 months, we’ll spherical out our 13 shops, getting again — we’re constructing out the capabilities and the crew and the tempo and the help to have the ability to get again on that tempo and possibly take a look at some acceleration on that.

However on the finish of the day, the main focus in our DTC enterprise is basically the buildup and energy of our e-commerce and our dot-coms. And that is actually that funding we’re making and proceed to make in our superior analytics to know shopper behaviors, to know shopping for behaviors and that is the place, I’d say, the disproportionate focus amongst our DTC. We ensure we optimize our Amazon Market. We have got a heavy give attention to our company gross sales.

B2B alternatives, we proceed to see that domestically and globally as a good way to introduce the model. However the important thing focus is on our dot-coms after which actually ramping the shop contribution, the shop connectivity to the general digital DTC piece.

Operator

And our subsequent query will come from Brooke Roach with Goldman Sachs. Please go forward.

Unknown speaker

Hello, that is Evan on for Brooke. I used to be simply questioning should you may dive just a little deeper into the wholesale traits you are seeing sell-in versus sell-through? After which should you’ve had any conversations with companions, possibly you could possibly contact on the spring order ebook outlet at the moment?

Matt Reintjes — President and Chief Govt Officer

Thanks, Evan. We — I feel we reiterate what we mentioned on the decision within the launch, which is we noticed sturdy sell-in, coupled with sturdy sell-through, which was nice demand in our wholesale companions, and it is a testomony to how our product exhibits up, it is a testomony to our partnerships, it is a testomony to the model and the desirability of it. And that is actually what we’re specializing in as we go into This fall and get into this necessary vacation season. In order that continues to be an necessary channel for us, and it continues to be a channel that these partnerships get deeper and extra wealthy and extra productive.

As we take into consideration order books, it is not likely one thing we speak sort of ahead order ebook. YETI is an always-on model and at all times on the ground. So, we’ve got fixed conversations with our companions about what the following month, what the following quarter, what the following 12 months appears like. I feel we’ll have a extra refined view as we wrap by means of this necessary vacation season and as Mike mentioned, get our outlook to 2023 and speak extra absolutely about that.

However I’ll say we’re deep into the planning course of as we current our innovation highway map, as we current our provide availability highway map to our wholesale companions, and begin to assume ahead to 2023.

Operator

And our subsequent query will come from Kaumil Gajrawala with Credit score Suisse. Please go forward. 

Kaumil Gajrawala — Credit score Suisse — Analyst

Hello, guys. Good morning. Are you able to speak just a little bit about advertising and marketing and the way the advertising and marketing technique is likely to be altering or evolving on condition that stock now’s in a little bit of a greater place however on the similar time, a few of what you mentioned earlier in regards to the worth of a $30 product as a present? We have seen another firms with equally superior merchandise, sort of focusing just a little bit extra on that worth message versus a extra premium message. I am simply curious should you’re making any comparable types of adjustments given the atmosphere we is likely to be going into.

Matt Reintjes — President and Chief Govt Officer

Thanks for the query. It is an ideal level and an ideal name out. I’d say one of many issues that we have at all times centered on is the steadiness between model advertising and marketing, product advertising and marketing, consideration, after which all the way in which down the funnel to conversion or buy. Our head of promoting, our chief business officer, spent lots of time balancing these {dollars} between model and efficiency.

And there is a actually — I feel you will see that play out within the fourth quarter, a very nice intersection between that. In the event you take a look at our vacation marketing campaign to the purpose on worth, our vacation campaigns are all primarily based round use your presents and the flexibility of our merchandise, and that we actually need folks to get out and put the merchandise to the check and put them within the check in lively outside pursuits. And in order that — you will see that theme play by means of all the way in which all the way down to in the end the extra direct efficiency advertising and marketing, extra direct conversion. However constructing into that, the worth is basically wrapped up within the versatility, the standard, the efficiency of the product, and versus worth being a price-driven worth instrument.

Kaumil Gajrawala — Credit score Suisse — Analyst

Thanks. 

Operator

And this concludes our question-and-answer session. I might like to show the decision again over to Matt Reintjes for any closing remarks.

Matt Reintjes — President and Chief Govt Officer

Thanks, everybody, for the time this morning. We sit up for talking with you as we wrap up the fourth quarter and look towards 2023.

Operator

[Operator signoff]

Period: 0 minutes

Name contributors:

Tom Shaw — Vice President, Investor Relations

Matt Reintjes — President and Chief Govt Officer

Mike McMullen — Interim Chief Monetary Officer

Robby Ohmes — Financial institution of America Merrill Lynch — Analyst

Peter Benedict — Robert W. Baird and Firm — Analyst

Randy Konik — Jefferies — Analyst

Sharon Zackfia — William Blair and Firm — Analyst

Joe Altobello — Raymond James — Analyst

Brian Harbour — Morgan Stanley — Analyst

John Kernan — Cowen and Firm — Analyst

Unknown speaker

Kaumil Gajrawala — Credit score Suisse — Analyst

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