Good afternoon. Thank you for attending the Traeger First Quarter Fiscal 2025 Earnings Conference Call. My name is Matt, and I'll be the moderator for today's call. All lines be muted in the presentation portion of the call for an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I'll now have to pass the conference over to our host, Nick Backus, with Traeger. Nick, please go ahead.

Good afternoon, everyone. Thank you for joining Traeger's call to discuss its first quarter 2025 results, which were released this afternoon, and can be found on our website at investors.trager.com. I'm Nick Backus, Vice President of Investor Relations, Treasury, and Capital Markets at With me on the call today are Jeremy Andrus, our Chief Executive Officer, and Don Blossel, our Chief Financial Officer. Before we get started, I want to remind everyone that management's remarks on this call may contain statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and views of future events, including but not limited to statements regarding our mitigation efforts to offset the direct impact of tariffs, our implementation of strategic actions to stabilize METER sales and profitability, our expectations regarding the impact of our European product partnership with METER, and the release of updates to our outlook as we better understand macroeconomic dynamics. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein. I encourage you to review our annual report of form 10k for the year ended december 31st 2024 and our other filings for our discussion of these factors and uncertainties which are available on the investor relations portion of our website you should not take undue reliance on these forward statements which we speak to only as of today we undertake no obligation to update or revise them for any new information this call also contains certain non-gap financial measures including adjusted evita adjusted net income or loss just in that income or loss per share and net debt which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained here in such GAAP measures are included in our earnings release and our investor presentation, which are available on the investor relations portion of our website at investors.trager.com. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. Now I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Trager. Jeremy?

Thank you, Nick. Thank you for joining our first quarter earnings call. Today, I will be discussing our first quarter results and will provide an update on our strategic priorities and our outlook for 2025. I'll then turn the call over to Dom to provide further details on the quarter's results. First quarter results were in line with our expectations. As we discussed on our fourth quarter earnings call, we expected a decline in first quarter sales and adjusted EBITDA. During the quarter, we delivered solid growth in our grills business, which was offset by a decline in our accessories business, driven by softness and meter. This resulted in a 1% decline in revenues versus the first quarter of 2024. Adjusted EBITDA of $23 million was down slightly versus last year's 24 million dollars largely driven by a decline in meter and was in line with our expectations. Let me start by discussing the topic that is likely most front and center for everyone participating on this call, tariffs. The severity and rapidly evolving nature of trade policy in addition to declining consumer sentiment are contributing to a highly uncertain macroeconomic backdrop. In the face of uncertainty, we are controlling what we can control and are focused on both navigating the near-term environment as well as making progress on our long-term initiatives. It's important to note that over the last several years, our team has faced a variety of macroeconomic shocks, including COVID, the post-pandemic grill industry normalization, and the supply chain hyperinflation of late 2021 and 2022. We have proven our ability to navigate challenging environments over time, and it is our highest priority to successfully navigate the current macro climate. Let me provide some context on our exposure to the current tariff landscape as it stands today. The majority of our tariff exposure is tied to our grill business. As we have disclosed previously, approximately 80% of our grills were produced in China in fiscal 2024, with a balance of production in Vietnam. Based on current policy, our grills are subject to a 25% Section 232 steel tariff. Additionally, grills sourced from China are subject to the 20% IEPA tariff on all Chinese imports. On the accessory side, the majority of this product is sourced from Taiwan and thus is currently subject to a 10% reciprocal tariff. Finally, our consumables business is largely sourced domestically and therefore is not subject to tariffs. Given that we face a meaningful headwind due to tariffs, our team has been tirelessly working on mitigation strategies to offset the impact over the last several months. Many of these mitigation efforts are already actioned, while some are still being worked through and others will be actioned as we get a better sense of consumer demand over the next several months. Overall, we believe we can offset a majority of the tariff impact via our mitigation initiatives, with the largest unknown factor being consumer demand and behavior going forward. Our mitigation efforts center on several key areas. First, we are finding savings and reducing costs in our supply chain. This includes negotiations with our contract manufacturers and identifying cost opportunities and efficiencies across the supply chain. We are well positioned to drive savings here given our strong relationships with our manufacturing partners. We are also pursuing sourcing diversification, we are assessing plans to migrate production away from China to other geographies where we expect tariffs and overall costs will be lower. While it is too early to discuss any specific targets here, we are fully committed to shifting production away from China and are planning to materially reduce the portion of our production that occurs in China by 2026, while also leaning into the quality of our partners we currently have. Next, in collaboration with our retail partners, we have implemented strategic pricing increases. The analysis that went into a broad-based pricing increase was extensive, and decisions were made on a skew-by-skew basis, taking into consideration product features and competitive positioning. Stepping back, while we are always very mindful when adjusting price to the consumer, the incremental expense associated with tariffs require us to increase price. We believe the health of our brand, our premium positioning, and the innovation we bring to the market will be assets to Traeger in an inflationary environment. We also believe that many of our outdoor cooking competitors have or will be raising price, as many are also significantly exposed to tariffs. Our next mitigation strategy is cost reduction. We are aggressively managing our expense structure given the volatile environment. This includes strategically reducing certain non-essential expenses, as well as materially reducing any new hiring activity. Given the broader environment and the uncertainties surrounding the impact of tariffs on the consumer, we believe that expense discipline is prudent, and we will continue to identify additional opportunities to gain efficiency as we move through 2025. This doesn't imply, however, that we are limiting investment into key strategic growth pillars. We will continue to allocate resources to non-negotiable areas of priority, including product development, to ensure we are well positioned for growth as the macro environment normalizes. As you've seen in our first quarter earnings press release issued this afternoon, we have withdrawn our prior financial guidance, which did not include the impact of tariffs, and our temporarily suspending forward guidance for fiscal 2025. Generally, we seek to provide as much transparency as possible, and therefore have provided financial guidance every quarter since going public in 2021. However, given the lack of visibility into the broader macroeconomic and consumer environment, as well as rapidly evolving trade policy, we are not in a position to provide guidance. The exact outcome of policy is a moving target, and with consumer sentiment near historic lows and prices set to increase in many product categories, accurately forecasting consumer demand is a challenge. We expect to have greater visibility into consumer demand as we get through our peak season at retail over the next few months. Moreover, we continue to assess and action mitigation efforts with certain of these efforts ongoing. On to first quarter results. In the first quarter, our grill sales were up 13% versus prior year. From a consumer demand perspective, first quarter tends to be seasonally slower in the outdoor cooking industry however we watch sell through closely to gauge demand as we head into seasonally larger months we were pleased to see that consumer demand for our grills in the first quarter was positive to prior year i would also like to note that sell-through of grills remains healthy into the second quarter which we view as a positive sign given the difficult macro backdrop. Conversion at retail continues to be aided by our boots on the ground initiatives. This includes our retail sales specialist program. Our team of RSSs were out in the channel in the first quarter, training associates at our retail partners, conducting product demos, and helping to drive improvements to merchandising on the floor. Going into the peak selling season, these activities will continue to accelerate, and we are planning to materially increase the number of selling events and product demos as compared to last year. We also continue to lean into our roadshow program at Costco, where our brand ambassadors set up product demonstrations in Costco warehouses to educate and sell grills to members on a consignment basis around the country. In Q1, we increased the number of roadshows by nearly 50% as compared to prior year. We believe this not only benefits near-term sales, but also is a meaningful driver of brand awareness. Each brand ambassador talks to dozens of potential customers each day, raising awareness of the brand to new consumers. In fact, many of our consumers say the first time they heard about Traeger was in their local Costco in conversations with our brand ambassadors. The first quarter also benefited from the launch of Woodridge, our new wood pellet grill, which we released in January. As we discussed on our last call, this new line brings significant innovation to the market at a more attainable price point. Woodridge is a great example of our product innovation engine at work, and consumer resection has been strong, with demand outperforming our expectations. This is evidenced by the extremely high product reviews the Woodridge series gets from customers. The Woodridge series has an average rating of 4.8 stars, looking at our DTC and several retailer websites. This is the highest rating for product launch we've ever had. Additionally, on the topic of innovation, in early April, we announced the introduction of the Flat Rock 2 Zone. The Flat Rock 2 Zone is the next addition to our griddle lineup and offers the same premium performance as the Flat Rock 3 Zone in a more compact and accessible design, making high-quality outdoor cooking on a flat top more efficient and versatile than ever. Following the launch of the original three-burner Flat Rock, it was clear that there was significant consumer appetite for a Trigger griddle offering, and the two-burner offers the same innovation as the original in a smaller footprint and at a lower price point. Overall, our innovation pipeline is strong, and we remain very excited about future introductions over the next few years. On the consumables side, first quarter revenues were down 6%. However, these results were largely in line with our expectations. In the first quarter, we continued to innovate in our consumables business. We launched Oak and Whiskey Blend Pellets, a new flavor in Traeger's core lineup, which fills a gap in our portfolio with the oak flavor and attacking the whiskey trend in barbecue. We also brought back the much-requested Whiskey Dust Rub as a new flavor in Traeger's line of rubs. Lastly, our revamped rubs line with a new, easier-to-use bottle and a better value to the consumer rolled out into retail in the quarter. Moving on to our accessories business, revenues were down 27% in the quarter, driven by a decline at meter. As we have discussed, METER continues to be pressured by a slowing backdrop in the smart thermometer category, as well as heightened competition. We continue to implement strategy changes at METER, including shifting the promotional calendar to drive increased conversion, as well as bringing on a new digital agency ahead of key upcoming selling periods. We are also implementing cost reduction efforts at METER as we reposition the business and seek to stabilize demand. Overall, we recognize that the broader economic environment presents a lot of uncertainty, but we continue to focus on what we can control. Our organization's top priority is to effectively navigate the volatile environment. We have significant tariff mitigation efforts in place, and we'll seek to reduce costs further as we move into the balance of the year. Additionally, we will continue to execute on our long-term growth strategies to drive innovation in the outdoor cooking market and increase brand awareness. And with that, I'll turn the call over to Dom. Dom?

Thanks, Jeremy, and good afternoon, everyone. Today I will review our first quarter performance and our strategies to navigate the current dynamic macro environment. First quarter revenues declined 1% to $143 million. Real revenues increased 13% to $87 million. Real revenues benefited from sales of our new Woodridge series, positive sell through at retail, as well as some benefit from pacing of shipments out of second quarter consumables revenues were 30 million dollars down six percent to the first quarter of last year the decline was due to a reduction in both wood pellet and food consumables partially due to a timing shift and was generally in line with our expectations heading into the quarter accessories revenues decreased 27 to 26 million dollars due to continued decline in the METER, offset by growth in Traeger branded accessories. It's important to note that while METER's core DTC business remained challenged in the first quarter, the year-over-year decline in our accessories category was affected by the lapping of a sales load-in related to a European product partnership with METER that benefited the first quarter of 2024. Moving forward, the impact from lapping this partnership will diminish over the balance of the fiscal year 2025. Geographically, North American revenues were up 6%, while rest of world revenues were down 47%, with rest of world revenues pressured due to meter. Gross profit for the first quarter decreased to $59 million from $63 million in the first quarter of 2024. Gross margin was negatively impacted by one unfavorable mix shift and grills of 180 basis points two increased marketplace investment of 140 basis points and three unfavorability related to meter of 30 basis points these negatives were offset by one lower warranty expense of 110 basis points two supply chain related improvement of 50 basis points and three other benefits of 20 basis points sales and marketing expenses were 22.2 million dollars compared to 21.7 million dollars in the first quarter of 2024. during the quarter increased employee related expense was partially offset by decreased demand creation costs general and administrative expenses decreased to 25 million dollars compared to 32 million dollars in the first quarter of 2024 the decrease in gna expense was driven by a reduction in stock-based compensation expense primarily related to the earned invested performance shares in the prior period as well as lower legal costs net loss for the first quarter was 1 million dollars compared to a net loss of 5 million dollars in the first quarter of 2024. net loss per diluted share was 1 cent compared to a loss of 4 cents in the first quarter of 2024. Adjusted net income for the quarter was 7 million dollars or 5 cents per diluted share as compared to adjusted net income of 5 million dollars or 4 cents per diluted share in the same period in 2024. Adjusted EBITDA was 23 million dollars in the first quarter as compared to 24 million dollars in the same period of 2024. for. Moving on to the balance sheet. At the end of the first quarter, cash and cash equivalents totaled $12 million compared to $15 million at the end of the previous fiscal year. We ended the quarter with $404 million of long-term debt. At the end of the quarter, the company had drawn down $25 million under its receivables financing agreement, resulting in total net debt of $416 million dollars from the liquidity perspective we ended the first quarter with total liquidity of 168 million dollars inventory at the end of the first quarter was 127 million dollars compared to 107 million dollars at the end of the fourth quarter of 2024 and 100 million dollars at the end of the first quarter of 2024. moving on to tariffs as jeremy discussed we have material exposure given our grills and accessories are imported from abroad. For example, a grill that is produced in China is currently subject to a 45% tariff, comprised of a 20% IEPA tariff and a 25% Section 232 tariff. Given our exposure, our organization has been focused on developing and actioning mitigation strategies to protect profitability and to promote balance sheet health. We believe that we can offset a majority of the impact with our mitigation efforts, and I'm confident in our team's ability to navigate the highly volatile environment. We will be extremely nimble in our approach to operating the business this year and will be planning for a variety of outcomes. From the cost perspective, we have implemented measures to drive near-term savings, including a substantial reduction in hiring and the deferral non-essential expenditures we are continuing to assess incremental opportunities to reduce costs in fiscal 2025 and beyond even the tremendous economic uncertainty related to trade policy and the potential effects that tariffs could have on inflation and consumer sentiment we are withdrawing our forward guidance for fiscal year 2025. we feel that there are too many unknowns currently to provide a guidance range that we feel confident in this includes how consumer demand and sentiment change in the face of price increases the exact outcome of trade policy and the timing and evolution of our mitigation efforts which we are continually assessing as is always the case but particularly in an uncertain economic environment like we are currently in prioritizing balance sheet health is of utmost importance our tariff mitigation strategies will serve to enhance cash flow and those efforts will also extend to inventory management. We are planning inventory conservatively and have significantly reduced purchase orders until we have a better read on consumer demand and trade policy. Our inventory on hand is sufficient to serve as near-term demand. While we have a leveraged balance sheet, we believe that we have ample liquidity to navigate the current environment. For example, we are currently undrawn on our $125 million revolver, and based on our current expectations, we do not anticipate using our revolver this year overall while we are operating in a highly uncertain environment our team has proven its ability to navigate challenging macro circumstances with a robust set of mitigation strategies we believe that we can offset a majority of the tariff headwind further we will continue to assess cost savings opportunities and will take a highly nimble approach to operating the business with the overarching goal of preserving evita cash flow and balance sheet health and with that i'll turn the call over to the operator operator if you'd like to ask a question please press star followed by one on your telephone keypad

if for any reason you'd like to remove that question please press star followed by two again to ask a question press star one as a reminder if you're using a speakerphone please remember to pick up your handset before asking your question we will pause here briefly as questions are registered first question is from the line of philip blee with william blair your hi this is sabrina on for philip thanks for taking our question um can you provide some color around some of the strategic price increases across your product portfolio and how we can how much we can expect this to increase and then also given the importance of newness how do you think about new product new price points going forward yeah this is jeremy i'm happy to take that so um first of

all i would say that um you know this environment uh it is not a typical approach to pricing analysis just given that there will be prices going up around us in our category and other categories. To the extent that we were able to, we were very sophisticated in really understanding elasticity at a product and a price level. And so it certainly wasn't an even price increase across the board. We tried to understand where we thought elasticities would fall based on historical sell-through data. And, you know, I would say that as a premium brand that's bringing innovation to the market, we certainly thought about where we had permission to move price on some SKUs more than others. We recognize that, you know, in opening price points, we're going to see more price sensitivity. And, you know, we had the ability to go back and look at price increase data from just post-pandemic as we saw supply chain, inflation in the supply chain. So we had some data points there. And so feeling good about the decisions we've made, we took price recently, but it will take many weeks for the prices to be reset in the market. So we don't have an update there yet. You know, we think it is very likely that competition will also be raising price right around the same time. So we've done our best to anticipate through the analysis that we could. It's a challenging environment, given that everything is dynamic, but we have the ability to, you know, sort of test and make adjustments as we go. Okay, that's helpful. Thank you. You're welcome. I'll just hit the second part in terms of product strategy. You know, our product strategy is set many years in advance. You know, we are, you know, it can take as long as 36 months for a complicated product to go from concept to launch in the market. In less complicated products, shorter, but in a durable, we really don't build our product roadmap with any intent to react to the environment that we're in. we're trying to create experiences. We invest in innovation. And as we said in the Woodbridge launch, really trying to bring not only innovation, but value down to sort of lower mid-price point. So that's our intent.

And then we react to the market and we're opportunistic around pricing and promotion, but the product strategy continues in good markets and in that. got it that's helpful thank you and then switching gears you you acquired meter back in mid 2021 it's been pressured the past few quarters can you talk about how the team is thinking about that segment and capital allocation going forward yeah i mean definitely focused on our strategy around how we navigate some of the short-term pain we're feeling on the demand side with meter we still have a point of view that's long-term in nature and the thesis really hasn't changed i think what has changed is the amount of competition within dot you know within direct or on online channels that we believe isn't necessarily the long-term future for meter we believe that the unlock really isn't how we drive road map through the wholesale channels where we have a competitive strength and where there's less competition. So we may see some continued, you know, pressure on top line as we, you know, navigate and sort of shift the mix from, you know, online sales, Amazon, DTC to, you know, wholesale accounts, again, where we have a competitive strength, in addition to really thinking through how to unlock efficiency and optimize the cost structure, really in an effort to centralize the operation and evaluate where there are profitability unlocks so that we can stabilize from a profitability standpoint reset on how we think about long-term growth and then begin to fuel that engine long term so it is going to you know take on some some short-term pain as we navigate um some of the short-term realities that we're facing especially from a competitive landscape standpoint online but believe that you know this brand has longevity and ultimately some of the ankle brighter brands may or may not survive the moment because they operate on skinny margins and you know one strategy certainly isn't a race to the bottom to try to compete we believe this brand has long-term sustainable value that we want to protect and so we just really need to balance the short term with the long-term effort as we unlock long-term value with meter got it thanks guys best of luck thank you for your question next

question is from the line of anna glaskin with b riley here online is that open hey good afternoon guys uh thanks for taking my questions i'd like to touch on um you know the retail environment have you sensed or has there been a shift in a retailer willingness to take on inventory in light of the current uncertainty?

Yeah, so it's a good question. I wouldn't say that we have sensed a reluctance of retailers to take an inventory. There has been really a shift from, in our largest retailers, from direct import back to domestic fulfillment. And this is, you know, it's really a function of the tariff situation and how tariffs are assessed. And so I would say we have, you know, we have found sort of an interim solution to fulfill domestically as we sort of unpack the process of what we've called direct import. In the case with tariffs, it's defined as for sale, where a retailer is able to import directly, but pay a tariff at our cost of goods, not at their wholesale price. So we're sort of working through it. This thing came so fast that we really chose to focus on having inventory in our retailers on time for the season. And we'll sort of manage this over time. I think we're one of many, many brands that are figuring out how do we import inventory in a cost-efficient way from a tariff perspective.

But now we're really not seeing consumer, sorry, retailer behavior change and um you know we haven't seen consumer demand slow down at this point great thanks um and that then in the prepared remarks you noted that uh inventory on hand is sufficient to serve near-term demand um wondering if you know retail can stays consistent with where it is today if you could put a finer point on you know how long you would be able to fulfill that demand well i think that was you know in in the context of you know pre-tariffed inventory i'd

say that you know our our inventory on hand may provide some relief in the short term before we start to see the true impact of terex tariffs take shape within our cost of sales um i think the broader point here is that our inventory position on balance sheet is healthy save maybe some some slightly heavier inventory on the meter side. But, you know, to piggyback on Jeremy's point, the broader conversation here is really around how we've strategically built our organization and, you know, the management of inventory, how we balance supply versus demand, how we partner with our retail, but with our retail partners is really all inputting into an iterative demand plan process that happens on a weekly basis so that we can make adjustments according to demand signals, which also requires a feedback loop from our retail partners. And so I think that the broader point here is that, you know, we react in kind to these signals and can adjust our inventory balance accordingly. And in addition to that, I think what we're currently doing is sort of risk adjusting as well based on an unknown future. And we started to pull back on POs from Asia just to ensure that we're not over inventory and create a de-stocking issue down the road in the event that we've sort of missed forecasts. And so I'd say that the theme here is prudence and, you know, Reducing purchase orders will allow us to sort of navigate the short term before we get better signals through our peak selling season, which we then can turn back on to the extent that we start to see either stabilizing sell through that's meeting or exceeding plan, or if it's missing, you know, our expectations heading into peak season, we've already sort of course corrected on the amount of inventory that we're bringing in. And that, I think, just wraps around your point, which is the inventory we have on hand allows us to pull back on POs and then react in kind as we measure these demand signals over the course of Q2.

Great. Thanks, guys.

Thank you for your question. Next question is from the line of Peter Benedict with Baird. Your line is now open.

Hi, guys. Thanks for taking the question. I'm going to go tariffs. there's a lot we don't know, but there is a lot we do know. And one that was helpful there, you gave us some perspective on the rate that you're paying. I'm still a little confused. So a product coming in from China, a grill coming in from China, it's 45% in total, and that includes Section 232. Is that the way to think about it?

That is correct. And, you know, stepping back more broadly, 232 is assessed on all non-U.S. steel products. It's 25 percent, and it supersedes other tariffs. So 232 is not stacked on top of other tariffs, except in the case of China, the IEPA tariffs are stacked on top, the two 10% tariffs. So it's 45% out of China, 25% out of Vietnam. And then of course, accessories have various tariffs depending upon where they're coming from.

And obviously the second layer to that is, that doesn't, sorry, just, I mean, I think we spoke to this as well, just obviously adjusting for the mix between Vietnam and China as an important component as you calculate the potential impact, as well as the fact that grills were 54-ish percent of revenue. So making those adjustments is also important, right, to kind of derive a unmitigated exposure here. And then obviously we've layered on the fact that we have mitigants to offset that.

Yeah. No, absolutely. So a Vietnam grill would be 25% plus the 10% that's everywhere. So 35. That's the way to think about that. In Taiwan, the meter stuff probably comes in.

China's 45.

Right.

Vietnam is, no. So Vietnam is 25%. And the difference, so the difference is that But the reciprocal tariff is not assessed on top of the 232 steel tariff. Understood. All right.

That's super awesome.

So the only standard stack is in China. It's the two IEPA tariffs of 10 and 10. So it's 45 there, 25% on grills outside of China.

Awesome. No, very good to know. Thanks for setting us straight on that. And then maybe there was no mention of kind of the Walmart pellet rollout. I was curious kind of maybe how that's been going. And then how do you assess if there's any of this demand strength that you've seen of late is kind of pull forward? I mean, a lot of companies we talked to are seeing good trends here in April or saw good trends in April on bigger ticket items. I mean, is there any measure of like, hey, this is what normally would sell through at this time of year? Was it well above that? Just any any perspective you could share on that, Jeremy? It'd be great. Thank you.

Yeah. So so Walmart rolled out late December through through January. It was January or early mid-January. And I would say we're excited about partnership. You know, we're selling pellets, pellets and rubs in Walmart. And it was really an answer to consumer research that we did that demonstrated there is a Trader consumer shopping in Walmart, and they wanted to buy their pellets when they grocery shopped. And so it was part of our grocery strategy. And I would say we're excited about the partnership and it's meeting our expectations. In terms of the trends on grills, I mean, boy, it's so hard to know, you know, the shoulder season is always volatile and it tends to be more driven by weather, especially in sort of the months of March and April. And so I would say the trend has been solid. I don't know that there's any way to sort of unpack how much of that is just consumer demand. And we also, we sort of believe that the further removed we get from the pandemic, the more we'll see a normalization of the replacement cycle. So there could be some of that in there. And we certainly see the broader trend, at least the headlines, that brands believe that there is some pull forward just as a result of Americans trying to buy products before prices go up. So really hard to unpack. Boy, I'll let you know in a quarter.

No, fair enough. I appreciate it. Thanks for the color.

Thank you for your question. Next question is from the line of Brian McNamara with Canaccord Genuity. Your line is now open.

Hey, good afternoon, guys. Thanks for taking the questions. Just a clarification on China. It's a great question to follow up on. So China is just 45% in terms of tariffs and the 125% reciprocal does not impact you?

It impacts us a little bit. So let's sort of separate grills and accessories. The grills get hit by the 232 tariff. And so out of China, that means we get two 10% IEPA tariffs or 20%, and then we get 25% on the grills. Accessories are subject to all of the other tariffs. And so in the case of a cover, for example, sourced out of China, That would have 145% tariff on it. And so it's, you know, I'd love to say that there's nuance and it's not quite as it's not quite as simple as I could could could define. But generally speaking, our accessories, the majority of our accessories have a 10 percent tariff in part because the majority are sourced outside of China. And so they're subject to a currently a 10 percent, the 10 percent reciprocal tariff. And so the other accessories are sort of they bounce around between 10 percent and 145 percent. And, of course, you can imagine that in an effort to not pay 145% tariffs, we are moving those. Our highest priority is to look at the accessories that drive the most volume and attach to grills that are subject to 145% out of China. And that's just generally our strategy. I mean, like we are, we are, fortunately, last couple of years, we've been working on developing partnerships outside of China and we've made progress and we are definitely accelerating that progress right now.

So can you give us an idea of how much of your COGS are exposed to tariffs? I know some folks are just slapping the tariff rate on your total COGS.

I don't think that's obviously not the way to look at it, but there's other costs in your cost of it sold.

Can you give us a decent idea there if possible i mean we can't we i don't know that we're in a position to break down the composition of cogs um save to say that certainly product cost is a majority of our cogs but again you have to recognize and maybe a proxy for this is just how kind of accessories or our categories from a revenue standpoint break down when you think about the fact that consumables are all manufactured in the US. You know, 80% of our grills are manufactured in China 20% are in Vietnam. Nick, we talked about the the component that's non non China for accessories, right? Do we share share that number? Yeah, percentage? Yeah. So 75% of accessories are manufactured non China. And then you know, as you sort of extend your math from there you'd have to make some assumptions around what percentage of cogs is is driven by you know the the product and then you can use similar breakdowns to sort of define each one of those buckets but most definitely our product cost drives a lion's share of our of our cogs got it and then last one for me are all of your grills like all your SKUs produced in both China and Vietnam, or are there certain SKUs produced in one country and not the other?

You know, it's a good question. We don't have redundant sourcing for all of our SKUs outside of China. I would say for our highest volume SKUs, we do have redundant sourcing outside of China, and we're focused on building more capacity for those. And where we don't have redundancy out of China, we are laser focused, at least where there's adequate volume, we're laser focused on taking those outside of China. I mean, we've got multiple suppliers in Vietnam at some phase in sort of development through mass production. And they're also, we've got supplier options outside of China and Vietnam, but within Southeast Asia that we're working on.

Very helpful. Thanks a lot, guys.

Thank you for your question.

Next question is from the line of Simeon Siegel with BMO Capital. Your line is now open.

Hey, this is Dan. Thanks for taking our question. Understandably, you're not providing guidance, but did want to see if there's anything high level you could speak to in terms of gross margin, maybe ex-tariffs, the things we should be aware of in terms of makeshifts or planned promo days. And then on the cost reduction plan, is that all bucketed in SG&A or are there pieces in CODs as well? Thanks.

So to the first question, yeah, we can't really provide any color. We suspended guidance. I think we'll leave it at that. I mean, that's just where we are, and hopefully we can provide some updates at a later point. But on your second question, you know, cost reductions, you know, a majority of the cost reductions that we're focused on are around controllables, which really is in SG&A. You know, there may be things within in cost of sales that that we can evaluate but those are likely medium to longer term in nature when you think about you know supply chain you know mitigants really we're focused on you know tariff sharing with sourcing partners you know first sale um sourcing diversification again these aren't things that happen as quickly as levers we can pull within sgna controllables um but we do believe that we have ample you know air you know ample room to make you know adjustments as needed as we you know build our plan to sort of navigate the future and you know there's things that we know today and there may be things that we'll learn tomorrow that will you know inform an evolving plan but you know we do feel that there are ample sort of controllables in place to really support and help navigate the the tariff situation in addition to the pricing levers which we've pulled as well as as i had mentioned some of the supply chain slash cogs levers that are in works got it thanks um maybe just one on marketing um anything you could share in terms of how you're approaching that this year even if it's qualitatively if it's top of funnel or more targeted um and then also in light of 1Q demand creation being down.

Thanks, Gus.

Well, I'd say first of all, we came into this year really leaning into sales activation activities. So we've talked about investment in retail at the point of sale, in visual assortment, education with retail associates, cooking demos. we have we've meaningfully increased the number of Costco roadshows that we do and that really the attempt behind the roadshow program is to educate consumers some of whom will convert in Costco but many of whom will learn about the brand there and purchase elsewhere and so we continue to lean into the sales activation activities. I would say that, you know, we continue to make baseline investments in brand marketing in our community. You know, top of funnel marketing is a lower priority right now in this uncertain environment. And there's no question that we are being very diligent as we think about OPEX. And so we are monitoring return on activities very carefully. And we're pulling back where we can't see a very clear return in period. We're not spending that money. But I would say a lot less top of funnel and certainly less than we'd expected, just given the environment and more focus on in-store retail activation. In terms of marketing spend for the quarter being down?

Yeah, I think it's really connected to Jeremy's comment, which is ensuring that we're prioritizing high-returning, more immediate marketing initiatives, leaning into kind of the fixed infrastructure that we have in place. I mean, one of the beauties of this brand is just our ability to leverage an influencer to, you know, to build and continue to protect and kind of grow brand awareness, et cetera. I think that's, you know, a lower cost avenue that allows us to hit some top of funnel. And then just a shift to middle, lower funnel continues to be a priority. I would note that in the gross margin walk that we shared in my remarks, we talked about some marketplace investments. So there has been a shift as well, and it's really geography-based, where we have some programs promotional-wise, as well as a program with ACE that we're funding. But, you know, those dollars came through COGS that will be a component of our marketing strategy in Q2.

Appreciate the color.

Best of luck. thanks thank you for your question there are no additional questions waiting at this time so that will conclude the conference call thank you for your participation you may now disconnect your lines