Good morning, ladies and gentlemen and welcome to the YETI Holdings Q4 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Arvind Bhatia, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us to discuss YETI Holdings' fourth quarter fiscal 2025 results. Leading the call today will be Matt Reintjes, President and CEO; and Mike McMullen, CFO. Following our prepared remarks, we will open the call for your questions. Before we begin, we would like to remind you that some of the statements that we make today on this call may be considered forward-looking, and such forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. For more information, please refer to the risk factors detailed in our most recently filed Form 10-K and Form 10-Q. We undertake no obligation to revise or update any forward-looking statements made today as a result of new information, future events or otherwise, except as required by law. Unless otherwise stated, our financial measures discussed on this call will be on a non-GAAP basis. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release or in the presentation posted this morning to the Investor Relations section of our website at yeti.com. I would now like to turn the call over to Matt.

Thanks, Arvind, and good morning, everyone. I appreciate you joining today. The strong performance YETI delivered in Q4 is a direct result of growing brand strength and disciplined, consistent execution of our long-term strategy. Just as important, our Q4 results give us increasing conviction in the long-term trajectory of the brand, our ability to accelerate growth and profitability and to generate strong returns for our shareholders. There are 3 themes I want to emphasize this morning. First, our strong finish to 2025 sets the stage for meaningful global growth and profitability in 2026 and beyond. Second, our product innovation engine is operating with more speed, breadth and global capability than ever. Third, our expanding global brand, combined with a broader, higher velocity product portfolio will be the driving force behind the next phase of YETI's growth. Beginning with our Q4 performance. We closed out 2025 with our strongest quarter of the year, delivering 5% net sales growth, fueled by continued momentum across the YETI brand. Drinkware grew 6% and international delivered 25% growth, marking our best quarterly performance of the year for both. Gross margins exceeded expectations even in an intense tariff and promotional holiday environment, thanks to YETI's premium brand strength, innovation across the portfolio and operational execution. We once again delivered strong full year free cash flow of $212 million, exceeding adjusted net income and underscoring the cash-generating strength of our operating model. We executed $125 million in share repurchases during Q4, bringing the full year total to approximately $300 million. Across the business, demand remains solid. Our portfolio is more diversified, more global and more durable with momentum across categories, channels and markets. This performance is a result of deliberate multiyear actions, grounding and broadening Drinkware, expanding bags and soft coolers within Coolers & Equipment, investing in…

Thanks for the kind words, Matt, and good morning, everyone. It has been an honor to serve as YETI's CFO. And over the past decade, I've had the privilege to work alongside an exceptional team through some of the most defining moments in the company's journey. As Matt mentioned, I will remain with the company in an advisory capacity through May 31 and will work closely with Matt and Scott to ensure a successful transition. I have tremendous confidence in YETI's leadership, strategy and long-term opportunity, and I'm excited to continue supporting the company and to follow its continued success. With that, I'll turn to our financial results for the fourth quarter and provide our outlook for 2026. We look forward to taking your questions after my prepared remarks. As always, the results we will discuss today are on a non-GAAP basis, unless otherwise noted. Let's begin with our top line performance. In the fourth quarter, we delivered adjusted net sales of $583.7 million, representing 5% year-over-year growth and our strongest quarterly performance of the year. Our growth in Q4 was well balanced across categories and channels and with exceptional growth in our international business. Turning to our performance by category. In Drinkware, sales grew 6% to $380 million. As we have noted, 2025 was a challenging year for Drinkware, reflecting U.S. market dynamics and the impact of our supply chain transformation. That said, we consistently communicated our expectations for improvement in Q4, and we were pleased to see that come through our results. Growth was driven by innovation, strong international demand and continued positive consumer response to our broad assortment in this category. In the U.S., Drinkware sales were flat year-over-year, despite a promotional market and continued cautious wholesale buying. Coolers & Equipment sales grew 2% to $192 million,…

[Operator Instructions] Your first question comes from Peter Benedict with Baird.

This is [ Zach Beck ] on for Peter. First one on pricing. Mike, you mentioned taking some select increases this year. You guys mentioned the select increases from Q2 of last year. Can you share any more details on that front? And then on tariffs, how are you thinking about potential relief in the event the Supreme Court overturns any recent policy moves?

Thanks for the question. So I'll take the first part of it. On the pricing side, I think the simplest way to think about it is it's going to be similar to what we did last year in terms of timing, in terms of scope, in terms of impact. So last year, pricing had roughly a 40 basis point impact on our gross margin, and I would expect a similar level this year. I think -- and we announced the price moves last year in Q1, and the timing will be similar this year as well.

And when we turn to tariffs for avoidance of any confusion, any relief from tariffs is not contemplated right now in our guide. I think, obviously, there's a lot of unknowns, both on if the timing and the size of any potential relief. I think the way we would approach it is, as we have always done, be really flexible and the opportunity to flow through and -- but also continue to invest in growth-focused initiatives, in particular, international growth, product expansion, brand expansion. And I think all those things are consistent with the way we have run the business. And obviously, we're monitoring it closely, and we'll know when we know. But up until that point, we're going to continue to drive the cost efficiency. We're going to drive the top line growth. We're going to drive the margin expansion opportunity over the short, mid and long-term.

Your next question comes from Randy Konik with Jefferies.

I guess, Matt, first for you. Can you just kind of elaborate on just some of the foundational work you've been kind of working on for the international business from a -- let's say, from a distribution standpoint, supply chain standpoint? And then you talked about some of the brand-building efforts going on from a global perspective. Maybe give us some vantage point on where do you think we are from a brand awareness perspective in the different markets you're focused on and all that, that would be very helpful.

Thanks, Randy. So starting with the foundational work, I think we started our international expansion back in really 2017. And I mentioned on the call that in 2018, it was 2% of our sales. This year, we just 25%. We just wrapped it's 21%. When it was 2%, people would ask how big could it be? Now that we're at 21% and showing the momentum that we have behind that business, and we have established teams in -- across Europe. We have established teams in Japan and expanding throughout Asia and an incredible team in Canada and an incredible team in Australia. I feel like we really have a lot of the pieces and foundation to drive the kind of growth that we saw in 2025 and that we saw in Q4 in particular. So I think a lot of the elements are there. It's a really big focus for us, which is making sure we have the right structure, the right distribution. So a big focus of 2026 is building out our wholesale footprint, expanding our e-commerce capabilities in the regions in which we operate today, building out the kind of powerful corporate sales and partnerships piece. I mentioned Land Rover Defender is a great example of our team in the U.K. developing what ultimately was a global relationship. So I think those pieces are really falling into place and 2026 is a year of accelerating that. In addition, looking at new markets. And I called out on the call, both China and Korea as markets of interest for us in places where we're spending some energy and effort to get those established in addition to some of the markets that I mentioned on the Q3 call. So feel really good about -- incredibly good about the team we have, I feel great about the strategy and feel even more bullish on the opportunity. We think about the events and activations, we're running much of the playbook that was successful in the U.S., and we've seen translate to our most established international markets in Canada and Australia. We're seeing it play really well in the U.K. And as recently as the last couple of weeks, ran an incredible event in Japan, where we supported a mountain sports snow event. And I think those things are what give us the conviction and confidence of the international opportunity and that it's -- as I said on the call, we think it's a larger TAM for our product portfolio outside of the U.S. than in the U.S. and that the playbook is working.

Super helpful. And then I guess my last question would be, when you look at the international revenue guidance for '26 and the Drinkware guidance for '26, is that -- does that reflect a level of like conservatism or status quo? Because when you look at the exit rate of international in the fourth quarter, up 25%, you're adding, obviously, it sounds like new distribution. It seems like international will be firmly -- will be firm in this year. And then when I think about Drinkware, you have new products launching. I know that the wholesale channel has been conservative, but also give us maybe some perspective how lean those inventories are in wholesale such that the domestic market at least could potentially get a little bit better as we go through the year. Just want to get some perspective on what the guidance includes from a Drinkware perspective and an international standpoint in particular?

Randy, this is Mike. Thanks for the question. So I'll take each one in turn. In terms of the guide, so we said international first, high teens to 20%. That's coming off a 25% growth in Q4. I mean, obviously, when we put out a guide, we want to feel good about that. But at the same time, when we look at the opportunities we have in front of us that we've talked about with you all consistently, Europe, Asia, we're super excited about what's happening there. As for Drinkware, we said mid-single digit that's coming off roughly 6% in Q4. I mean, again, I'd say the same thing holds. I mean we're excited about the innovation that we released. We're excited about the innovation we have coming. And we certainly think there's opportunity there when we look at just the global market as well as the U.S. market. As for inventory levels, we've now seen, I think it's -- several quarters in a row where inventory has been coming down year-over-year, 3 quarters in a row where sell-through has been out -- sell-through growth has been outpacing sell-in growth. We feel like we've got a prudent guide in terms of when we look at what the opportunity is. But our inventory levels are down meaningfully year-over-year. We think there's just caution overall for -- within wholesale dealers and specifically to the Drinkware category. So -- but like I said, when we put a guide out, we want to feel good about it.

Your next question comes from Brooke Roach with Goldman Sachs.

Matt, Mike, I was hoping you could contextualize the sequential improvement that you're expecting in your core U.S. market to get to that low single to mid-single-digit range for the full year. How much of that improvement is driven by U.S. Drinkware? How much of that is driven by international? And are there any new categories or new brand-building investments that you're making that give you additional context in exceeding that -- achieving and exceeding that expectation?

Yes. Brooke, this is Mike. Thanks for the question. So correct. So when we gave the guide for the year, we said U.S. would be in the kind of low to mid-single-digit range coming off a year where we were down slightly, but we did see improvement in Q4. I think the biggest story in the U.S. has been the Drinkware category. And I think we saw a stabilization there in Q4. And we think there are opportunities to continue to drive growth across all of our categories. The other thing that I think impacted us in the U.S. in Q4 was C&E had a relatively tough comp. I mean, globally, it was 17% growth. We had some new innovation, we were lapping product transition, we were lapping. And so I think that, again, similar to the last question, when we put a guide out, we want to feel good about it, but we certainly believe that we have opportunity in the U.S. to continue to drive growth.

And then just a follow-up for you, Mike. Can you help contextualize the inflection that you expect to get in operating expense leverage as you move into the back half of this year and on a medium-term basis? What are the most important cost controls and fixed cost expense opportunities that we should be looking out for?

Yes. So I think the story around OpEx this year is 2 things. One, we have made investments over the last -- in 2025 that we believe we will start to get leverage on for the year. There are some timing dynamics, however, with related to 2 line items that we discussed in my prepared remarks. One is the timing of our brand campaign. It was in Q4 of 2025. It will be in the first half of 2026. And the second is around our incentive compensation accruals. And given what happened last year with tariffs and when they were announced, there were some differences in timing of when those accruals took place. This year, we're planning for a more normal and consistent pattern. So you normalize for those 2 things, and that explains the first half, second half dynamic. But I think for the year, which is, in our view, the most important, there's always going to be things that move dollars around from a quarter-to-quarter basis. But for the year, the investments we've made in facilities in 2025, the number of offices and facilities and locations we've talked about with you all, getting leverage on those, getting in leverage on some of the technology investments that we have made. And we feel good about our SG&A and starting to get leverage on some of those going forward.

Next question comes from Phillip Blee with William Blair.

Mike, it's been a pleasure, best of luck. You guys' guided sales growth this year at 6% to 8%, but there are some easier comparisons with, I believe, 300 basis point headwind that you guys called out related to supply chain constraints and delays in new product launches that impacted 2025. And you're ramping up international in some new markets in Asia. So are there some other catalysts that maybe aren't as impactful this year that could help us bridge to your longer-term targets in the high singles to low double-digit range?

Phillip, this is Matt. And thanks for the comment on Mike. I would echo he's been a great partner for 10 years, and we're really excited to get Scott on board for this next phase of YETI growth. Specifically, there's a lot of things that move around in that 6% to 8%. We talked about some wholesale caution and buying caution that it impacted Q4 even with the strong result we delivered. I think the U.S. market is one we're watching closely. We're seeing a lot of really interesting green shoots both across the product portfolio and the expansion, but also, as Mike mentioned, the stabilization in Drinkware. To a question earlier, the international growth, we continue to see opportunity to accelerate international growth. We see new market opportunities, but those take some time to build into and to invest into. And so when you put all that together, it sums up and makes us feel great about the 6% to 8% guide coming out of the gate and what we were comparing against in 2025, both in the products that were launched in 2025, the ones that were delayed. So I think as we go into this year and we see where the consumer is, how our domestic versus international markets develop, how our innovation comes to market, I think we'll obviously be talking about this every quarter throughout the year. But we feel like starting the year with a strong guide on the top line, feeling great with the momentum behind the brand, feeling really strong about the pipeline we have in the product. And as you've seen most recently, the continued expansion, expansion in Drinkware, expansion in Daytrip soft coolers, the most recent launch into our Hike packs and our Skala pack. So a lot of good things that we think will both in the short, mid and long-term, pay off really well for YETI.

Okay. Great. That's really helpful. And then just quickly, as you continue to expand into new products and categories, how do you think about the opportunity to enter new points of distribution like TikTok Shop, potentially new national retailers or new segment of local independent retailers? And then is that the bigger opportunity? Or is it more about expanding your shelf space with existing wholesale partners?

Thanks, Phillip. Great question. I would say it's a combination of both. We have incredible wholesale partnerships today from some of the most passionate specialty all the way up to what I believe are some of the best retailers in the country in the U.S. and frankly, operators in the world. So we always believe there's opportunity to continue to bring products that are relevant to those channels to market, merchandise and assort them well for the consumers that shop in those places. And so as we launch new products, we think about what fits in the channels we have today. There are also things in the product portfolio as we expand that open up really natural new points of distribution that makes sense and are complementary to the rest of the channels that we're in today. And those could be digital channels and those could be brick-and-mortar. And that's really everything from as we've expanded more of our sport-oriented offering, as we expand our outdoor offering. There's lots of outdoor specialty and sports specialty that I think are really interesting places for YETI to expand and grow. I also think that our existing accounts have opportunity to continue to sort and manage the portfolio we have. And I think there's some emerging and some established digital channels that as shopping moves and agentic shopping becomes a bigger and bigger presence, I think there's an opportunity for YETI to play there. So we love the core of what we have. We'll always continue to stoke and focus on growing that, but I think there are complementary plays for us.

Next question comes from Peter Keith with Piper Sandler.

This is Sarah on for Peter. We just wanted to dig a little bit more into your advertising efforts. Had that campaign that was launched in November. So just wondering key learnings from that and how that's shaping your advertising focuses going forward. And then if there's any differences to call an international versus U.S. strategy on the advertising front?

Thanks, Sarah. I appreciate the question. We were incredibly pleased, as we said in my remarks about the Q4 November campaign that we internally called bad idea. I think that what it showed us and what we believed going in is that live events, in particular, live sports is one of the last great places where you have highly concentrated high-quality viewership and focus and where they're sort of galvanizing moments. And I think that's only growing, and you're seeing with the passion around sports, the investment that's going behind sports. And so the opportunity to bring a YETI advertising broad-based campaign into those moments and intercept the consumer with something that is very of YETI and feels very YETI, we think was fantastic. And we saw that both in the high-impact impressions we got, but also the follow-up feedback we got on the campaign impact, which is what gives us the confidence as we go into 2026 and building upon that campaign. And we saw an opportunity to shift it from Q4, as Mike said, to the first half of this year, which is part of the OpEx, SG&A conversation we just had. But we see those moments as we get into the moms, dads and grads season. And similarly, we're going to target sports, cultural events, activities where people are paying attention, and we can go hit really high-impact impressions. And it keeps YETI top of mind. And I think that's an important thing. We have -- believe we have an incredibly deep-rooted ground connected game. And this gives us more of a halo around the brand as we expand the product portfolio, as we drive our channels to market as we expand globally. So that's the sort of evolution of marketing, but it's connecting to what we've always done successfully. And I think internationally, there will be elements of that, that will spill over and manage internationally also.

Okay. Great. And then just one on DTC. Any more insight on what drove the lower conversion rate in Q3, and then the improvement in Q4? And looking to 2026, is this something that we should expect to continue and help drive stronger conversion?

Yes. A few things there, and we commented on this. I think that the movements we've seen around conversion, really what we believe and what we've seen across our analytics and the privilege of having the diverse channels to market that we have is we get to see a good insight into consumer behavior. And what we saw is an increase -- what we believe is an increase in cross-channel shopping. So people checking, which is really driven by, I think, price discovery and making sure that people are getting the best deal, not necessarily a deal, but I think in a promotional environment and promotional categories, you see consumers looking around and checking multiple places. And so I think for us, the benefit is you move between our incredible wholesale partners, our Amazon marketplace, yeti.com, there's a lot of opportunity for us to intersect and capture and convert a consumer. So I think that conversion is really a dynamic that we saw start to play as we saw consumers being more promotional oriented and more cross-channel shopping.

Your next question comes from Joe Altobello with Raymond James.

I guess first question, I wanted to ask about tariffs. You mentioned it was $0.35 headwind last year, expect to be another $0.35 headwind this year, which was a little surprising, at least to me, because I know you guys have done a lot of work on the supply chain side to try to get that number down. And I realize there's some annualization of last year, but I still would have thought it would have been a little bit lower given you moved a lot of Drinkware out of China that's coming over to the U.S. So maybe help us understand why that number isn't getting a little bit better.

Joe, it's Mike. Thanks for the question. So I mean, it really comes down to the annualization. I mean we spent the first 4 months of the year at little to no tariff rates. In April, things increased. China went to first very high and then down to around 30%. The rest of world was roughly 10%. We had about 4 months of that. And then we had the final 4 months at China at roughly 30% and the rest of world at roughly 20%. And that -- and so now when we look forward, we'll have a -- we are planning, as Matt said, we're not planning for any change in tariff rate that's baked into our guide. But essentially, it's 20% in China and 20% in the rest of world, roughly. There's some variation there by country, but that's roughly what it is. So it really just comes down to the annualization of a full month of at 20% globally versus what we saw in 2025.

Okay. That's helpful. And just a follow-up on the international side. I know you mentioned the addressable market is bigger than the U.S. Obviously, you've got a head start in the U.S. But is there anything structural about these markets, whether it's Japan or China, Korea, et cetera, that would make your penetration more difficult, whether it's competitive or cultural, fewer use cases, et cetera?

Yes. Joe, I would say when we look at TAMs, obviously, we're basing that on the analysis of products in those markets and the opportunity for us to grab those. So we know -- the point being, we know there's established markets and then we think about what's the best route to access. And so I would say I don't think there's anything structural. I think it's more what do you prioritize? How do you move into a market, your approach to the market. So in some markets, we've gone direct in those markets, and we've established teams. Japan is a good example of that. There are other markets where a 2-step distribution makes more sense because of the nature of the market, either the size opportunity, the complexity of access or just the priority. And so what I think you'll see us do, and we've talked about this on past calls, we're being very thoughtful about where do we want to be direct, where do we want to leverage partners in almost a river guide type style to navigate some of those complexities of the markets. But I don't see anything structural that would say there are markets that are off limits to us today.

Your next question comes from Brian McNamara with Canaccord Genuity.

Mike, I wish you the best here. I just wanted to get a few clarifying points on your guidance. I think you called out strength in bags. I believe on Mystery Ranch and Butter Pat were acquired a couple of years ago, they were expected to contribute about $35 million in sales. How big are bags today? Second, is U.S. Drinkware expected to grow in your mid-single-digit Drinkware guide? And then third, you mentioned sell-in being better than sell-through -- sorry, sell-in being better throughout 2025. Do you believe we are finished with the destocking?

Brian, thank you for the words. I caught the first and third question. I may need you to repeat the second question, but bags. So we haven't broken it out specifically. But the one thing I wanted to clarify is that our bags business is broader than Mystery Ranch. I mean we're now -- we've now had 2 years of -- we bought the -- we purchased Mystery Ranch in early 2024. We had a bags business before that. We've leveraged a lot of the things that we acquired with Mystery Ranch to help build out our bags portfolio on the YETI side, and you're seeing the results of that. So -- while we haven't broken it out, we have talked about it consistently being a driver of growth in 2025 and 2026. We think it's a significant global market opportunity for us. And we're -- it's certainly an element of the C&E guide that -- or the guide that we provided for C&E in 2026. The third question around sell-in versus sell-through. Like I said, we've had a couple of quarters where sell-through has exceeded sell-in. We do think while we're not planning for a significant inflection, we do believe that there will be more aligned in 2026. Our inventory levels are well below where they were last year, as we've said. And so we'll continue to work with our partners on making sure we have the right inventory. As our product portfolio grows and becomes more broader, we're super excited about the opportunities, both with partners where we've been for a long time as well as some of the newer ones that we've announced recently. So -- and Brian, apologies, if you could repeat the second part of your question, I can address that as well.

We can move to the next question, operator.

Your next question comes from Noah Zatzkin with KeyBanc Capital.

I guess maybe just one on tariffs. As it relates to the, call it, $0.35 last year and the incremental $0.35 this year, any way to quantify how much of that is related to IEEPA versus other tariffs?

Yes. Noah, so what I would say is the vast majority of that is related to the IEEPA tariffs, which, as you all know, is currently what's under review at the U.S. Supreme Court. But it is the majority of the cost that we've talked about.

And then maybe just one more on the kind of competitive environment. Any changes that you've seen play out over the last year to call out as you look into '26 maybe versus '25, and then any opportunity from a shelf space perspective related to that? And I guess related to all of that, any thoughts around the promotional environment and maybe industry inventory in '26 relative to last year would be helpful.

Yes. No, I'll hit sort of rapid fire those things. I would say as it relates to shelf, we continue to obviously expand our product portfolio and continue to have conversations, really productive conversations with our wholesale partners on how we're going to merchandise the new things that YETI is seeing, and it's evidenced by -- if you go out today in the accounts where we have launched this into the additional space we received for our Skala backpack where that product makes sense and then the recent launches this year around -- the expansion around sports jugs and colorways. So we continue to have really good productive conversations with our wholesale partners and have great relationships as it relates to our innovation and how we fit on the shelf. I think you and we talked about this all last year, I think we've seen a shift in the Drinkware category and the allocation of total space to that category. And I think all those things create opportunities for the innovation that we continue to push. As far as -- it's early in the year to call the promotional environment. But I think it's safe to assume that you're going to see some tail on that as wholesalers, as brands continue to rotate out or down of their Drinkware inventory. And I think all that for us, because of the strategy of broadening our Drinkware category and expanding the product innovation there is we continue to operate around that space and create product that we think has kind of long-standing shelf-stable opportunity. And changes in the competitive environment, I wouldn't call out anything specific other than the promotional environment we talked about, the transition that's happening in that concentrated part of the Drinkware portfolio. But in the rest of the portfolio, I feel like the rest of our Drinkware portfolio and the rest of our C&E portfolio, we continue to drive opportunity, which is what's driving and pacing the growth of the business.

I will now turn the call over to Matt for closing remarks.

Thanks, everyone, for joining us today. I want to conclude with thanking Mike for his partnership and welcoming Scott, and we look forward to seeing you all on our Q1 call.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.