Good morning, and welcome to SharkNinja's Fourth Quarter 2024 Earnings Call. My name is Harry, and I will be your operator. [Operator Instructions] I would now like to hand the conference over to Arvind Bhatia, Senior Vice President, Investor Relations. Thank you. Please go ahead.

Good morning, and welcome to SharkNinja's Fourth Quarter 2024 Earnings Conference Call. Earlier today, we issued our Q4 earnings release, which is available on the company's website at ir.sharkninja.com. A replay of today's webcast will also be available on the site shortly after the call. Before we begin, let me remind you that today's discussion will include forward-looking statements based on our current perspectives of the business environment. These statements involve risks and uncertainties and actual results may differ materially. For more details, please refer to our earnings release and the company's most recent SEC filings, which outline factors that could impact these statements. The company assumes no obligation to update or revise forward-looking statements in the future. Additionally, during the call, we will reference non-GAAP financial measures which we believe provide valuable insight into the underlying growth trends of our business. You can find a full reconciliation of these measures to their most directly comparable GAAP measures in the earnings release. A quick reminder, we divested our APAC business in Q3 of last year, so it's no longer included in our year-over-year comparisons this quarter. Joining me today are our Chief Executive Officer, Mark Barrocas; and Chief Financial Officer, Patraic Reagan. Mark will start by providing a business update, followed by Patraic who will review our Q4 and full year 2024 financial results and share our outlook for 2025. Mark will then offer some closing remarks before we open the call to questions. With that, I will now turn it over to Mark.

Thank you, Arvind. Good morning, everyone, and thank you for joining us today. Our fourth quarter results were exceptionally strong. Once again, our global teams knocked it out of the park with incredible top and bottom line performance. Net sales grew an impressive 30%. Adjusted EBITDA was up 32%, building on the 71% growth we delivered in Q4 last year. We're delivering rapid and highly profitable organic growth at scale. What excites me even more than our strong Q4 results is the breadth of our performance across each of our 4 key categories: cleaning, cooking, food prep, and the newly branded beauty and home environment. We delivered very strong double-digit growth. In North America, net sales increased 22% year-over-year. Our international business continued to be a standout. Adjusted net sales grew 49% on top of last year's impressive 62% growth in the fourth quarter. It's been an amazing quarter, and I'm so proud of how our teams continue to consistently deliver and drive sustainable growth. Looking at full year results, 2024 was a remarkably strong year. We grew adjusted net sales 32% and that's on top of 15% growth last year. We drove adjusted EBITDA growth of 32%, building on 39% growth last year. This means over the past 2 years, we've achieved a compounded annual growth rate of 24% in adjusted net sales and 35% in adjusted EBITDA, extending our long track record of success. We have also expanded adjusted EBITDA margins by nearly 300 basis points over the past 2 years, while strategically investing and fueling the next wave of innovation and geographic expansion. We're building a strong foundation for scalable organic growth. We added over $1.3 billion in adjusted net sales growth this year, bringing our total to $5.5 billion. We increased adjusted EBITDA by more than…

Thank you, Mark, and good morning, everyone. I'm thrilled to share our outstanding 2024 results and outlook for 2025. As Mark said, in Q4, we achieved nearly $1.8 billion in net sales, up 30% year-over-year. Adjusted EBITDA increased 32% to $291 million. We delivered a 30 basis point increase in our adjusted EBITDA margin, all while making substantial investments to fuel our growth, including driving international expansion and advancing our supply chain diversification initiatives. Net sales in North America were up 22% to nearly $1.2 billion. International net sales grew 49% to more than $600 million, driven by triple-digit growth in Germany and France. For the full year, adjusted net sales and adjusted EBITDA increased 32%. Adjusted EBITDA margin was 17.2%, consistent with prior year. This was supported by a 220 basis point improvement in adjusted gross margin and a comparable rise in operating expenses as we continue reinvesting in our growth initiatives. Looking at performance by category, all 4 of our major product categories achieved strong double-digit growth during the fourth quarter. Net sales in the cleaning category increased 20% to $648 million, continuing the strong momentum we have seen in this category throughout the year. We saw broad-based strength across cordless, corded, hard floor, deep carpet cleaning, and robots. Net sales in the cooking and beverage category increased 19% to $597 million, driven by the ongoing strength of heated cooking, particularly in the international markets, an impressive growth in the espresso category. Net sales in the food prep category accelerated, increasing 89% to $342 million. This growth was fueled by the continued success of our CREAMi ice cream makers and the remarkable performance of our newly launched SLUSHi frozen drink maker which has become a viral hit. Finally, our beauty and home environment category, which we used to…

Thanks, Patraic. SharkNinja's amazing fourth quarter and full year results really show how far we've come in driving sustainable, profitable organic growth with our innovative high-performance products. As we look towards 2025 and beyond, we've never been more confident. Our commitment to consumer-driven innovation is thriving and it's fueling incredible growth potential. We have built a resilient world-class team with a proven ability to pivot seamlessly, iterate rapidly and drive disruptive consumer problem solving innovation regardless of external challenges. We're thrilled about our strong market position and the fantastic products we're bringing to the table. With our $120 billion addressable market growing, we're seeing so many exciting opportunities. whether it's entering new categories or strengthening our global brand presence. We believe the future continues to be incredibly bright for SharkNinja, and we can't wait to keep delivering innovative solutions that continue to positively impact our consumers' lives. This concludes our prepared remarks, and I'll now turn it over to the operator to kick off Q&A. Operator?

[Operator Instructions] Our first question today will be from the line of Brian McNamara with Canaccord.

Congrats on the excellent results. One thing I think the market grapples with is what does a "normal growth year" look like for you guys? I know you've grown at a very impressive 20% CAGR for, I think, 17 years now, but that seems like a high bar on a $5.5 billion sales base in this slow-growth industry. This time last year, I believe you guided 8% sales growth at the midpoint and just finished at plus 32%, which is tremendous. So what drove that large delta outside of extreme conservatism from the outset? And how should we rank order the buckets of growth this year, whether it be 2025 innovation, scaling 2024 innovation like the FrostVault, new distribution, international, et cetera?

Yes. Thanks for the question, Brian. Look, in terms of answering your first question, what does normal growth look like? I mean, you tell me. As you said, we've historically grown at 21% a year. We've said that we believe that we are a long-term double-digit growth company, we guided initially for 2025, 10% to 12%. When you look at the growth in '24, it came across all 3 major pillars. I mean, we gained share in existing categories, we drove tremendous innovation in those existing categories. We expanded into lots of new categories I pointed out, and we delivered 50% growth in our international business. And we came out of -- for the fourth quarter, growing the fourth quarter, 49% in our international business. So it's not as if our growth internationally is kind of -- has scaled down through 2024, it actually held very constant. So as we look to '25, I mean let's start with international. As I said in my prepared remarks, I think we are still very much in the early innings regarding our expansion in Europe. We had a great Christmas selling season. 2 weeks ago, I was in Europe, I met with the CEO of Euronics. I met with the CEO of Fnac Darty in France, and it was the CEO of Sainsbury's. These retailers are putting big bets behind us. They want us to aggressively expand into more of their markets across Europe. It's not just Germany and France, but as I pointed out it's Spain, it's the Nordics, it's Benelux, it's Poland. We're expanding in Turkey. We're expanding in the Middle East. Our Latin America growth, I think as we get into Q2, we'll really start accelerating once we get through the transition of the distributor market in Mexico. So number…

Our next question today will be from the line of Randy Konik with Jefferies.

I guess, Mark, maybe kind of dig a little deeper into the D2C. I got the CryoGlow on that, I guess, that channel. And it seems as if the brands of SharkNinja are getting more and more awareness and there's just more of a want by the consumer to kind of shop your website directly. So maybe give us some perspective over the long term, kind of what are your hopes around giving the consumer the opportunity to kind of shop everywhere? Obviously, you do a great job on the wholesale side with your partners around the world. But maybe give us some perspective of kind of your hopes of how you kind of want to expand that direct channel distribution? Any plans for kind of changing up the website or not across Shark and Ninja, just give us some kind of flavor there would be very helpful.

Yes. Yes. Sure, Randy. So D2C grew faster than the rest of the business in '24. We expect that D2C will grow faster than the rest of the business in '25. Now that said, we still hold true to our model, which is we want to be relevant wherever the consumer chooses to shop for our products. So that is paramount and that's unwavering in our business. Now that said, I mean, I think, Randy, I'll give you the example of Swirl that I think is so interesting. Before we launched the product, we had 70 million impressions on social media as we seeded the product to a select group of influencers. We had a waitlist of 90,000 people for the product. And so we do feel that kind of launching our products on direct-to-consumer allows us to kind of control the distribution early on. It allows us to get immediate feedback from consumers as they start using the product. So I think you should expect to see the first 30 to 45 days of many of these big viral product launches to be done through direct-to-consumer and then to expand out into our retail partners. Now that said, I think what we're also recognizing is that there's a real opportunity for us to have a broader merchandising assortment in direct-to-consumer, colors that are only available to us on our direct-to-consumer sites. Special configurations. We've got to make direct-to-consumer a unique destination for the consumer to buy our products by having something unique and special for them. In terms of the upgrade, we've announced that we are going to be transitioning to Salesforce in the end of the third quarter of this year. We're going to go live in North America with that at the end of the third quarter. We'll go live in Europe with that likely in the first quarter of next year. We think it's going to provide an incredibly better shopping experience, research experience, service experience for the consumer. We're partnering tremendously with Salesforce and their Agentforce technology to be able to bring that. We've got relationships all the way up to Marc at Salesforce, the CEO. And so we're excited about what that's going to bring to our direct-to-consumer business, but the goal here is still to keep a balanced omnichannel strategy, but to really make sure the direct-to-consumer creates a unique destination for the consumer.

Our next question will be from the line of Brooke Roach with Goldman Sachs.

I was hoping you could speak to the most important areas of operating expense reinvestment in 2025 and your philosophy of potential flow-through of any outperformance that you might see. As we get through the supply chain diversification midyear, what level of cost reduction might we see? And can that enable a faster rate of operating margin expansion in the back half? Secondly is just a follow-up, Patraic, we appreciate the color regarding some of the timing shifts and onetime items that are impacting the first half. Could you help us quantify the Mexico distributor inventory impact to revenue and the rough size of what you expect the Easter timing shift to be?

Yes. Brooke, I'll take the first one and then turn it over to Patraic. Look, the supply chain costs are going to be elevated through the first half of the year with sizable investment in the first quarter. I mean we are working very, very hard to try to move as much product out of China as quickly as we possibly can. And we remain on track for 90% of our U.S. production to be able to be produced outside of China by the end of Q2. From a leverage standpoint, as we go through the year, Brooke, I think there's 2 pieces. One, you're going to see the supply chain year-on-year expenses decreased versus prior year. I think you're going to see us be able to leverage some of our sales and marketing expenses. And I think you're going to see some leverage on the G&A side as well. I mean we've made a lot of investments in people and infrastructure in '24. As we get into the second half of the year, you'll start to see us anniversary a lot of those and not seeing the growth that we have seen in '23 and '24 from an expense side. Now as it relates to our ability to be able to put that into EBITDA margins, I mean, I think we want to look at kind of what happens on the tariff side, what happens on the global side related to trade. And I think we'll have more information on that as we get through Q1 and into Q2. For right now, I think we're planning a conservative EBITDA will slightly grow faster than revenue. But I think there's a lot of uncertainty out there in the market right now, and I think it's prudent for us to guide with what we have right now and update you with more information as we get further on in the year.

Yes. And then Brooke, on the question around Mexico, thanks for asking that one. So I think, first of all, to frame it up, as you know, we always kind of lead with the consumer first in terms of doing what’s best for the consumer. And as you heard me say in some of the prepared remarks as well, we’re very adept at making the hard decisions. And so Mexico was one of those. It’s the right thing for the consumer but it’s like what time do you do that? And so what we decided in terms of the timing of that was Q1 of this year was the best time to actually execute on that. And so the reasons for that is, number one, we get the marketplace through the holiday selling season in Q4, which is the most important. And then we set ourselves up to be a direct business as we get in Q2, 3, 4 and beyond and then we’re off to the races. So if we look at it through that experience, improving the consumer experience, it’s why we’ve taken the decision when we did. As far as quantifying it, I’m not going to give you the exact quantification. But how you can think of it is, and why it’s headwinds is, one, we’re reversing out revenue that we’ve already sold in. So that’s number one. Two, is we’re not selling in additional revenue during the quarter. And then three, we’re not capturing the upside of going from a distributor business to a direct business. But as we get into Q2, Q3 and Q4, we’ll see the acceleration happen in Mexico, which is an exceptionally important market for us as we enter Latin America. And then from a long-term standpoint, we see our opportunity in Mexico to be at least $400 million over the course of the next few years or so.

[Operator Instructions] The next question today will be from the line of Andrea Teixeira with JPMorgan.

Congrats to the whole team on the results. A question on sales and then a follow-up on margins. First on the top line, Mark, you gave some phasing for the U.K., and you and Patraic on the Mexico side. Can you also talk about the phasing in the U.S. and overall if we put all the pieces together, would you say Q1 still grow within your guide of double digits or perhaps more on a high single digit or more muted? And a clarification of the size of Mexico in sales, I understand the aspiration you just mentioned, if I understood it correctly, it's $400 million, but obviously, it's running much lower than that. If you can perhaps tell us what would be the shift. And then the clarification on margins. Obviously, you had an impressive number for -- even for 2025, if you take everything together for the back end of the year. Can you help us in terms of like gross margin phasing and EBITDA, sizing the tariff impact? And I really do appreciate that you -- that included in there. And how we should be thinking, therefore, the underlying margin that the business is running at this point?

Yes. Thanks, Andrea. I think that's about 15 questions into one. So good work. From a top line standpoint, let's just start with the full year. And so from a full year standpoint, from a domestic business, we're thinking and guiding in the high single-digit range. From an international standpoint, roughly high teens. So you can kind of think through the lens of our 2x growth international versus domestic. As it relates to Q1, particularly, we're in the high single-digit range overall from a SharkNinja, Inc. standpoint. So I think contextually, think through that lens. As it gets into the gross margin phasing, it's another great question. So the best way to can kind of guide you through this is that in Q1, Q1 would be the low point in terms of margin expansion or better set contraction through the year. And then as we go through Q2, Q3 and Q4, we'll see margin accretion building as we continue to move production out of China and put into some other initiatives that we've been building around as it relates to improving margins in the face of our growing business. So what you can think of is kind of low point Q1 progressing up through the balance of the year.

And if I can squeeze the size of Mexico, we appreciate all the bridges.

Well, Andrea, as I said to Brooke earlier, we're not going to provide exact guidance in terms of what the impact of Mexico is. But I would just say, over the course of the long term, we think it's at least a $400 million market for us.

Our next question today will be from the line of Alex Perry with Bank of America.

Congrats again on the strong quarter. I guess just on the new product road map for 2025, Mark, what products are you most excited about? What could a new product like CryoGlow or Swirl adds to the top line if they're successful? And then as you think about sort of the typical waterfall of new launches, like how much do they sort of scale year 2 versus year 1? And then just quickly on channels. Any color on how you're thinking about adding new wholesale channels, in particular, going deeper into sporting goods?

Yes. So I'll take the last one first. I mean, I think that we will expand more into sporting goods in the U.S., we'll have more SKUs to sell them in '25. We're going to be expanding our cooler lineup. We're going to be expanding our outdoor fan lineup, outdoor cooking. So I think sporting goods is something that you'll see more SKU in place, more expansion in. The beauty retailers, you'll see hair expansion in '25, you'll see skin expansion in '25. So I think those are 2. Grocery. I think grocery is something that we think there is expansion opportunity with selected products for us as we start to move through the year. And we're starting to get a lot of inquiries, for example, Walmart wants to double expose a SLUSHi from us and put it in both the appliance section as well as the grocery section. We're getting similar type of feedback from other types of grocery retailers. So that gives you just a little bit of a snapshot from the retailer landscape. It's hard to generalize and give you like a set algorithm or how much could it generate. There's 25 new products. What I could say is that a lot of our new products last year launched quite late in the year. So obviously, you'll get the full year impact this year. It will generally take on some of these new products about 12 months before we scale them globally. So as an example, the SLUSHi won't launch in Europe and the U.K. until Q2. You probably won't have a full rollout until we get into Q3 with the European retailers that we want to place. So it will take a year to kind of roll out one of those big products. Something like Swirl…

Just one quick follow-up. I think there's a little confusion on the 1Q sort of commentary that you gave, Patraic. Did you say that 1Q revenue should be high single-digit percent? Just wanted to clarify that for people.

Yes. That's what we're guiding to.

Our next question today will be from the line of Rupesh Parikh with Oppenheimer.

Congrats on a great quarter. Just from a, I guess, a high-level perspective, as you look at your business this year from a category and consumer perspective globally, are you planning for a similar backdrop to what you saw in 2024 or maybe improvements or maybe a more difficult backdrop. So just some high-level thoughts on consumer category dynamics globally.

Rupesh, you're referring to just overall market?

Yes, that's correct. Yes.

Yes. Yes. Look, I mean I think we're assuming kind of the base case that market is flat. That's going to obviously vary kind of country to country. But I think on the whole, as we go into kind of thinking about the year and planning the year, we kind of look at it, say, market's flat, now how do we go out and grow, how do we go out and enlarge the size of the market. So in general, I don't know that we're kind of planning any type of either big market rebound or market decline. I think what we're seeing so far in Q1, I think flat is about overall what the market is seeing. So that's kind of our base case of what we're looking at.

Great. And then maybe just one quick follow-up question. On the tariff front, when you do see these 10% type China tariffs, typically, when do they flow through? Because I know there's a lag in terms of when that sell-through is, so just any color there.

Yes. Look, it varies. I mean, as Patraic talked about, I mean, we built some tariff prebuild inventory where every month, more and more product is moving out of China. If you have a product that is running at very low weeks of supply, the recent additional 10% basically went into effect 48 hours after Trump's announcement. So that could be going in very quickly. And then you've got other products that we might have tariff prebuilt and you've got 4 or 5 months of inventory that it won't go through. So I think it varies. I think if you were to look across the inventory spectrum, you probably look at maybe 60 to 75 days. But again, I think it was important for us, Rupesh, to provide guidance that included the latest information that we have from the day that those tariffs were announced I mean we immediately went into action to work on understanding the impact and initial steps of how to mitigate those. And so I think we're just trying to provide the right color to say based on the latest information that we have, we still feel good about guiding our business with 13% to 15% EBITDA growth number in '25.

Yes. And Rupesh, just to wind it up on that one, how you can kind of categorize it is, we've been on this offense for quite some time, obviously adjusting in the moment. And what we view as our responsibility is engineering a soft landing. And so that's why you saw us take the hard decisions over the course of the last 12, 18 months or so in terms of investing heavily to get production out of China. It's why we've invested in working capital from a prebuild of inventory standpoint, and it's why we continue to invest as we get into this year in terms of continuing to move that out of China. So we've got select inventory that's prebuilt that should help us but we're doing everything we can all across our P&L and balance sheet to make sure that we mitigate tariffs as much as we can. And that's why we felt confident in terms of building that into our guidance that we shared with you today.

Our next question will be from the line of Steven Forbes with Guggenheim Partners.

Mark, I wanted to focus on sales and marketing given 2 years here of 40% growth. So curious if you could help us better understand how much of this year's spend is associated with future growth opportunities because it looks like a key area reinvestment for you. And then any way to deconstruct the almost $600 million of advertising spend into the various channels, right, as we think about brand or performance just like reframing the advertising spend for us as we enter 2025?

Yes. Look, Steve, I mean you have to understand that we've entered a lot of new categories that require investment, all of which that doesn't pay off immediately. We've entered a lot of new countries that we're starting from scratch that require investment that doesn't pay off and kind of compounds on itself. So I would say that, yes, over the last 2 years, we've done a lot of investing to kind of build a solid foundation and business to grow off of. I mean, if you look at what we did in Europe this holiday season, I mean, we drove big growth for these European retailers. I mean, they believe in SharkNinja now. I mean they believe in SharkNinja like the U.S. retailers believe in SharkNinja or the U.K. retailers believe in SharkNinja. So what's that worth? I mean that is no easy task to do. And by the way, it's not just about how much money you spend. I mean it's about this combination of having the right product innovation, investing the money to create awareness and great storytelling. And then having satisfied raving consumers that are pushing the brand. So I mean, I think there's a massive investment that's been made over the last 2 years. But the benefits of it we've yet to see in 2024 and will pay dividends as we go into '25 and '26, and we kind of keep compounding and building on ourselves. So that's one piece. I think secondly is, look, we've been in a flat market, and we've been in a market where we have to do the heavy lifting to grow the overall market and grow the business. And we feel like that's our responsibility to be able to grow. And that is what also continues to endear the…

Unfortunately, we have run out of time for any further questions. So I will now hand the call back to Mark Barrocas for some closing remarks.

Yes. So thank you so much for joining us, and we look forward to speaking with you again soon. Have a wonderful day.

Thank you. This will conclude SharkNinja Fourth Quarter 2024 Earnings Call. Thank you for your participation. You may now disconnect your lines.