in smaller, more personal-sized hard coolers, with the Rode 15 performing well and the Rode 8 generating positive early consumer response. In cases in storage, the Govox family continued to build momentum across both consumer and professional use cases. As we have said before, there's more to come here, and we're excited to see where it goes. In Drinkware, we've been clear over the past few years about Yeti's strategy to drive innovation and broaden our assortment across the platform. To put the category in context, we expect a roughly 600 basis point drag on our U.S. drink water growth in 2026 from three primary SKUs, all tied to the well-publicized but narrow trend-driven momentum and share swapping that has played out in the category over the past few years. That is a significant headwind, but it has been more than counterbalanced by strong execution of our diversification and innovation strategy across the rest of the platform. This is why we continue to show overall drink water growth versus what this significant drag would otherwise suggest. The products driving the headwind will largely complete their lap by year-end, resetting the base as we head into 2027. We continue to be very pleased with the underlying performance of the Drinkware platform, not only new innovation, but also some of our longest-standing models within Yeti Drinkware. That reinforces our view of the durable opportunity in front of this category, domestically and globally. The partners who have embraced our broad portfolio are seeing the benefits, outperformance, new consumer reasons to buy, and stronger merchandising. Our product-led expansion has not only benefited Yeti's U.S. drinkware, but continues to drive opportunity globally. We're focused on breaking away with innovative products that address new occasions and consumer needs. Hydration remains the growth engine, supported by core straw bottles, Rambler jugs, and stackable cups, and core tumblers continue to validate everyday utility. While food storage, our beverage buckets, Rambler bowls, and carbon steel cookware demonstrate Yeti's expanding opportunity in the home environment. Our omni-channel strategy continues to drive balanced and durable growth. In wholesale, we delivered another quarter of strong year-over-year sell-in and sell-through. This performance reflects continued support from our retail partners as they expand their commitments to the broader Yeti portfolio and lean into the brand's momentum. Our wholesale approach hasn't changed premium positioning healthy inventory and long-term shelf productivity our track channel inventory exited q2 down continuing the trend we have communicated in the past reflecting a healthy demand driven channel within d2c demand remains strong across e-commerce amazon and yeti stores with corporate sales delivering meaningful improvement versus the first quarter trend we continue to see untapped and scalable near and long-term global opportunity in this channel. Fourth, international remains a significant long-term growth opportunity and we're deploying our disciplined market-by-market approach. Europe delivered strong year-over-year growth with momentum across both digital and wholesale channels, as well as continued door expansion. What is particularly encouraging is the increasing breadth and diversity in the European markets, with growth across drinkware, hard coolers, soft coolers, and bags. We are building awareness localizing the yeti playbook and maintaining premium positioning our recently opened pop-up store in munich is a strong example it sits in a premier high visibility location brings the brand to life through storytelling and service and has already drawn consumers willing to travel meaningful distances to experience the brand asia is still early in its journey but the progress is there japan in its first full year as a direct business delivered significant growth in the quarter we are also advancing our expansion plans for korea china indonesia and taiwan and by the end of 2026 we expect to be live in 11 markets compared to four at this point last year these are still early stage contributions but the consumer response reinforces our conviction in the long-term international opportunity in australia and new zealand brand strength and focused go-to-market execution supported the strong q2 growth even as macro conditions in those markets remain challenging. In Canada, growth was positive, but weaker, as healthy D2C performance was offset by softer-than-expected wholesale sales, despite strong underlying consumer demand and sell-through trends. The big picture internationally is this. Yeti is still in the early innings of a massive opportunity. Our brand can travel, our product platforms resonate, our international playbook remains the same, right assortment, right distribution, localized activation, discipline, investment. And Q2 has proved that it translates. Turning to operations, our supply chain continues to respond well in a complex and dynamic environment. We're managing the significant impact of oil markets, raw material cost pressure, ocean and parcel headwinds, and shipping delays across certain Asia trade lanes. We've taken proactive steps to reduce risk, including qualifying additional raw material sources, further diversifying our supply chain, and scaling our structural enterprise productivity programs. We continue to invest in capabilities that strengthen our innovation engine and support long-term growth. Our global design and development network, now spanning five locations, is delivering a faster innovation cycle and a deeper pipeline than we had even 12 months ago. These investments are helping us prototype faster, collaborate more effectively with suppliers, and accelerate the pace at which we bring new ideas to market. We're also investing in digital and customization capabilities. Ranger, our AI-driven shopping assistant, continues to improve conversion and engagement. Artboard customization, a new enhancement to our Yeti.com customization platform, is enabling multiple graphics, logos, and text within a single design experience. These are exactly the kind of capabilities that make Yeti more personal. Stepping back, Q2 reinforced several important themes about where we are as a business. As Yeti becomes a trusted companion across more parts of consumers' lives, whether sports, community, travel, home, work, outdoor, gifting, or everyday routines, the brand's relevance and long-term value continues to grow. Platforms matter. Daytrip, Camino, Roadie, GoBox, Stackables, and food storage are not isolated products. They are scalable ecosystems that create repeat behavior and expand our addressable market. Diversification is working. We are not dependent on one moment, one product, one channel, one customer, or one geography. Wholesale, D2C, marketplaces, retail stores, corporate sales, and international each play a role. And together they create a more resilient, more durable business. And discipline matters more in this environment, not less. Consumers are intentional. Retailers are selective. Input costs are fluid. Category competition is dynamic. This is exactly when brand strength, product credibility, inventory discipline, and operational execution separate the strongest companies from the rest. Before I turn to the back half of 2026, I want to give you an early look at our upcoming investor day on September 17th here in Austin. We're looking forward to hosting investors and laying out the next chapter of Yeti's growth story. Let me give you a sense of what we plan to cover. First is brand. We are earning our spot in more places in more moments this is not a tagline it's what's happening in the business the brand is showing up in new geographies new communities and new daily routines and doing it with credibility we will show you why we believe the breadth of yeti's brand relevance is durable differentiated and still very early in its reach second innovation our innovation engine is built to solve problems not chase trends we design for durability performance and real world use And that is what earns us the right to expand into new categories. We will walk you through the capability of our global innovation centers, the conviction in our pipeline, and why we believe the next wave of product platforms will be as impactful as those that built this commercialization. Right product, right place. Across DTC and wholesale, and increasingly around the world. We're focused on shelf velocity, expanding positioning, and opening new doors globally. Great innovation only compounds when you commercialize it well, and we will lay out how we plan to do that. Fourth, on the horizon. Add together a powerful brand, a global innovation engine, and a disciplined commercialization model, and the permission and opportunity for meaningful category expansion becomes very real. Fifth, a powerful financial model. Multiple durable growth engines, disciplined capital allocation, a clear, credible path to outsized EPS growth leads to a financial model built to compound. That is the story we're building, and we're looking forward to telling it. Looking ahead, we have significant runway in front of us. In the back half of the year, we will continue to build around clear growth platforms, soft coolers, bags, cases in storage, personal hard coolers, hydration, custom, and international expansion. We will support the business through key consumer moments, including a series of fall efforts and ultimately Q4 holiday gifting. And we will continue to bring innovation. The underlying health of the business remains strong. The brand is expanding, the product portfolio is broadening, the channel model is more balanced, international scaling, and the operating system continues. Yeti is a brand-led platform business powered by authentic consumer demand, strengthened by disciplined innovation, and scaled through a diversified global omni-channel model. That is what gives us conviction in our ability to grow through cycles, protect the brand, expand margins over time, generate strong free cash flow, and compound value for shareholders. I want to close by thanking our partners around the world, and especially the Yeti team. The second quarter reflected a tremendous amount of work, from product and brand to sales and operations to our retail, digital, international, and corporate teams. We are building Yeti for the long term, and we're getting stronger every quarter. With that, I will turn it over to Scott.

Thanks, Matt, and good morning, everyone. Thank you for joining us. I'll begin with our performance for the quarter, after which I'll provide an update on our outlook for 2026. We look forward to taking your questions following my prepared remarks. Before I get into the details, let's talk about what I believe are the most important themes for the quarter. We delivered another period of broad-based growth, with sales increasing 9% across categories, channels, and geographies, underscoring the strength and resilience of our business. At the same time, our gross margin performance continued to improve, reflecting strong operational execution. This execution, combined with the momentum we're seeing across the business and some OPEX timing factors I've discussed before, supports our expectation for meaningful operating margin expansion in the back half of the year. As a result, we're raising our full year operating margin outlook. While the quarter benefited from refunds associated with IEPA tariffs, the broader tariff and inflationary pressures remain a headwind. Our teams are actively focused on mitigating these pressures by driving productivity while continuing to invest to drive long-term growth. We also remain disciplined in our approach to capital allocation. We executed $130 million in share repurchases during the quarter, demonstrating our strong commitment to prioritizing shareholder returns. Overall, the quarter reinforced the strength of our operating model and our confidence in delivering our 2026 objectives. With that, let's dive into the details. Our second quarter results highlight the continued momentum we're seeing in the business, reinforcing the power of our diversified model and the strength of our long-term growth strategy. Starting with our overall top-line performance, in the second quarter, we delivered sales of approximately $484 million, or growth of 9% year-over-year. We saw broad-based growth across categories, channels, and regions, supported by strong consumer demand. Turning to our performance by category, coolers and equipment sales grew 16% to $232 million, driven by strength across bags, soft coolers, cases in storage, and outdoor living. Innovation continues to resonate with consumers across channels, highlighted by our day trip and Camino lines, where demand was robust. In drinkware, sales grew 2% to $241 million, our third consecutive quarter of growth in the category. Growth was driven by momentum across international markets and strong innovation. In the U.S., our drinkware sales were flat amidst continued drinkware market pressure and competition. However, in-consumer demand for Yeti drinkware remained healthy, increasing mid-single digits in the U.S. during the quarter. Looking at our performance by channel, sales in the wholesale channel increased 10% to $218 million, driven by strength across the U.S. and international markets. Sell-through in the wholesale channel was robust, and channel inventory remained healthy, positioning us well for the back half of the year. Direct-to-consumer sales increased 7% to $266 million, supported by continued strong demand across marketplaces, e-commerce, and Yeti retail stores. Speaking of Yeti retail, we're pleased with the consumer response to our two new store openings in Boston and Atlanta during the quarter. Corporate sales declined slightly year-over-year, but improved markedly from the first quarter. Demand in the channel appears to be stable, and we expect continued improvement in the back half of the year. Moving to our performance by region. In the U.S., sales increased 6% to $391 million, driven by growth in coolers and equipment. In terms of channels, we saw robust demand in the wholesale channel, as well as across Marketplace and Yeti retail stores. international sales grew 19 to 93 million dollars reflecting strong growth in europe australia and japan brand strength continues to build across newer markets as we leverage our key channels to drive awareness and scale our international presence in europe digital and marketplace demand was incredibly strong across core categories and wholesale strength was supported by ongoing door expansion and brand building momentum australia also saw strong digital channel growth, combined with healthy sell-through trends at key wholesale partners. While Europe and Australia are facing challenging macroeconomic environments and constrained discretionary spending, our brand credibility, premium positioning, and localized engagement is driving strong performance for us. Sales in Canada were below our expectations. While D2C sales were strong and wholesale consumer demand remained healthy, our wholesale partners maintained a cautious approach to inventory purchases, which resulted in softness and sell-in. And in Japan, brand awareness continues to build. As we lap one year in the market, we remain excited about the upside potential. We've expanded to just over 500 wholesale doors, recently launched our e-commerce platform, and continue to see growing consumer demand for the brand. Now moving down the P&L, adjusted gross profit increased 12% to $288 million, and adjusted gross margin expanded 170 basis points to 59.5%. Operational improvements, including continued pricing discipline, product cost management, and other factors drove 110 basis points of margin favorability. The net tariff of benefit to adjusted gross margins was 60 basis points, reflecting a 170 basis point or $8.2 million benefit from refunds of IEPA tariffs expensed in 2026, partially offset by 110 basis point impact from higher year-over-year realized tariff Adjusted SG&A increased 19% to $220 million and deleveraged 410 basis points to 45.4% of sales. As expected, the largest contributor to the increase was the timing of our brand campaign, which shifted into the second quarter this year from the fourth quarter last year. We also experienced an unfavorable year-over-year impact from a higher short-term incentive compensation accrual. Beyond those items, SG&A reflected continued growth in productivity investments as well as elevated distribution and fulfillment costs driven by ongoing inflationary pressures across our supply chain. Adjusted operating income decreased 7% to $68 million, or 14.1% of sales. Adjusted net income decreased 8% to $51 million, or 10.5% of sales, and adjusted net income per diluted share increased 2% to $0.67. Turning to our balance sheet, we ended the quarter with approximately $60 million in cash as compared to $270 million in the prior year quarter. Inventory increased 5% of the second quarter to $359 million. Total debt, excluding finance leases and unamortized deferred financing fees, was approximately $102 million compared to $76 million at the end of the second quarter of last year. our capital allocation priorities remain unchanged we remain committed to reinvesting in the business to drive sustainable growth in addition we continue to return value to shareholders through share repurchases to that end in the second quarter we repurchased 2.8 million shares for 130 million dollars under our existing 500 million dollar share repurchase authorization now turning to an update on our fiscal 2026 outlook we are pleased with our performance in the first half of the year and remain excited about the opportunity in front of us, driven by the strength of the brand, exciting innovation across key categories, and our strengthening global go-to-market strategy. We continue to expect full-year sales growth of 7% to 8%. From a phasing perspective, we anticipate the total sales growth rates will be relatively consistent throughout the rest of the year. We are also reiterating our growth expectations across channels, categories, and geographies. By category, we continue to expect high single-digit to low double-digit growth in coolers and equipment, supported by the momentum we see across soft coolers, bags, hard coolers, cases, and storage. In drinkware, we continue to expect mid-single-digit growth for the year, driven by increased innovation, the continued broadening of the portfolio, and global expansion. By channel, we expect wholesale to grow at a high single to low double-digit rate and direct the consumer to deliver mid-single-digit growth for the year. By region in the U.S., we anticipate low- to mid-single-digit growth for the full year. We continue to protect international growth in the high teens to 20% for the full year. With respect to adjusted gross margins, we are raising our expectation for the full year to reflect the gross margin performance year-to-date, including operational favorability and the impact of IEPA tariff-free funds, partially offset by continued inflationary pressures in commodity and inbound transportation costs. We now expect gross margins of 57.5 to 58 percent, up 100 basis points compared to prior guidance. On a year-over-year basis, the midpoint of the revised guidance implies a 40 basis point increase versus the 60 basis point decline implied in the prior guidance. Our guidance assumes tariff rates return to approximately 20% beginning in September. On operating expenses, we continue to expect to see expense growth to moderate in the back half compared to the growth in the first half of the year. As expected, this will be driven primarily by the timing shift of our brand campaign into Q2 this year compared to Q4 last year. For the full year, we now expect OPEX growth of 6% to 8%. This is slightly higher than our prior outlook of 4-7% growth, and reflects the increased inflationary pressures in distribution, fulfillment, and other costs, as well as our continued investment in growth and productivity initiatives, including international expansion. We expect to partially offset these pressures through ongoing cost discipline and operating leverage. We now expect 2026 adjusted operating income margin to be approximately 14.9% of 30 basis points compared to our prior guidance of 14.6%. We expect adjusted operating income growth of 10% to 12% for the full year compared to the prior guidance of 8% to 10% growth. From a phasing perspective, we expect operating margins in the second half to increase approximately 280 basis points year over year, with the Q4 increase slightly above that. Turning to the remaining P&L items in our guidance, we continue to expect an effective tax rate of approximately 24%. We now expect diluted shares outstanding of approximately $75.4 million, compared to the prior guidance of $76.6 million. This reflects the impact of $130 million in share repurchases to date in 2026. We expect adjusted earnings per diluted share of $2.94 to $3, reflecting growth of 19% to 21% compared to prior guidance of $2.83 to $2.89, a growth of 14% to 17%. This increase in EPS relative to our prior guidance reflects strong year-to-date operating performance, the benefit of IEPA tariff-free funds I discussed earlier of $0.08, partially offset by increased inflationary pressures in commodity transportation distribution fulfillment and other costs we continue to expect capital expenditures of between 60 and 70 million dollars and free cash flow of between 200 and 225 million dollars in 2026. as it relates to our share repurchase program as of july 4th 2026 there is approximately 370 million dollars remaining under share repurchase authorization as we close i want to emphasize that we are pleased with both our performance and execution in the first half of the year. We delivered broad-based growth, expanded gross margins, continued to drive strong demand across our key categories and markets, returned meaningful capital to shareholders, and increased our outlook for 2026. While the operating environment remains dynamic, we believe the strength of the Yeti brand, our innovation pipeline, our growing international business, and the discipline of our teams positioned us well for the remainder of the year and beyond. We remain focused on executing against our long-term growth strategy and creating sustainable value for our customers, shareholders, and stakeholders. With that, I turn the call back to the operator for Q&A.

Thank you, ladies and gentlemen. If you would like to ask a question, please press star 1 on your telephone keypad. Please limit yourself to one question and one follow-up. If you'd like to withdraw your question, press star 2. One moment please for your first question. Your first question comes from Brooke Roach from Goldman Sachs. Please go ahead.

Good morning and thank you for taking my question. Matt, I was hoping that you could expand on your growth outlook for the U.S. market and the slowdown that's embedded in your forecast as you go up against some meaningfully tougher compares. Is there any way you could frame the underlying demand that you've seen as you've moved through the early back-to-school season, perhaps provide a little bit of quarter-to-date commentary about the demand that you've seen by channel, and outline what gives you confidence in the sustainability of continued growth in that core U.S. market from here?

Good morning, Brooke. This is Scott. Thanks for the question. Thanks for joining us this morning. So, look, we were really pleased with the demand that we saw throughout the first half. We had steady consumer demand over the course of the first two quarters. In fact, in the United States, our consumer demand exceeded our reported sales. So all the trends were positive, and we don't really see anything derailing those trends. We had improved corporate sales in the quarter, improved international sales. The innovation is working, as you heard in Matt's prepared comments. We're really happy with the products that our commercial and product teams are bringing to market. So we have a lot of confidence in the trends that we're seeing in the business. We are mindful, however, that more than half the volume remains. There is some consumer uncertainty in the market. So we're confident in the trends, but being cautious in the outlook for the back half of the year.

Yeah, Brooke, and I would just add, I hope what you take away from the call and following this story for a long time is we are very focused on driving innovation, driving our channels, supporting our channel partners building this brand and we're not quarter to quarter we're thinking about the long-term opportunity and that's how we're building the business and so you know we feel really good about the first half of this year we like uh the direction we're going in the back half this year but we're thinking about 27 28 29 great that's very helpful and matt as you think about that 27

to 29 forecast i know we'll get a lot more about this in the investor day in uh in a few weeks, but do you still believe that the double-digit growth outlook is still on the table in the near to medium term?

Yeah, I mean, thanks for calling that out. I mean, we're excited about the investor day, as I said in my prepared remarks. There's a lot of good stuff. It'll be a great chance to see the incredible, both the talent we have on the team and how they're driving this business and why we've been able to perform and be resilient in those times as we've gone through the past couple of cycles. As we look out into the future, I think one of the things you heard on the call was we talked a little bit more about what was the dynamic we're seeing in the drinkware category. And when you sort of peel back the underlying drivers of the business, we believe this is not only a top-line growth engine, but that the outsized EPS we can drive through both the operational, driving the free cash flow, and we can go up more opportunities is out there in front of us than behind us. And so as we go into our 21st year as a company, we're incredibly excited and bullish on where we're heading.

Great, thanks so much, I'll pass it on.

Your next question comes from Randy Koenig from Jefferies, please go ahead.

Yeah, thanks guys, good morning. I guess, Matt, I wanna just unpack how you thought about your commentary around drink where you talked about some headwinds abating, I think by the end of the year. Maybe just kind of give us a little bit more detail on what you're seeing, how you're thinking about the product breadth and the geographic expansion of the product category ahead. It almost sounds like you think that you'll have a new base, you'll be able to re-accelerate the drinkware business into next year and beyond because of distribution, new products. Is that kind of accurate? Can you kind of talk to that?

Yeah, good morning, Randy. Thanks. Thanks for that. You know, I'd say a couple things. One, we have consistently said this over the quarters and frankly, over the last few years on this drinkware topic. What we called out today is really the articulation or the power of the strategy, the relevance of our assortment, the type of team we have to continue to drive the diversification of our drinkware. So as the world has been very focused on a narrow portion of the Drinkware category the last few years, we've built out our product portfolio. And that's really what's driving the underlying strength in Drinkware. What we wanted to call out today is there's an acute drag and a headwind to that. We have more than overcome that and then driven growth on top of it. And then we called out that by the end of this year, we'll have largely cycled through those specific narrow set of SKUs, which should re-baseline the business and give us opportunity to really showcase the innovation, the strength, and the relevance of the brand that we've built into that broadening drinkware category. So what we want to do is we wanted to show what we've been saying, because this is what the team has been executing over the last number of quarters, and we're really pleased with where it's setting us up. domestically. But more importantly, I think the opportunity globally continues to become more in focus, more realizable, and more relevant. So we're passionate about where we're going.

Super helpful. And then I guess what I want to try to get kind of dimensionalized is where the business has come from over the last couple of years to where it is today in terms of, you know, it's almost like you've added the capability to drive more speed through the organization, and get products, more products produced, more products produced faster. Maybe give us some help on where you've come from, what have been the more quantified changes in speed and ability to produce more things and distribute more. That would be super helpful coming into the analyst day because I'm sure you're gonna talk about all the products you're gonna be kind of launching over the next couple of years. So really there. And then lastly around that, I think Scott said in his answer to one question that demand, exceeded this reported sales growth figures which means you know there's probably some uh you know sellouts of things etc so talk about what you're doing to kind of continue to enhance supply chain to be able to meet um you know increasing demand for products uh where you're you're seeing some sellouts that'd be super helpful thank you yeah yeah thanks Randy I'll I'll tick off a few of those things um what Scott said was that um consumer demand exceeded our are reported in the US, which is a dynamic we really like.

I think the other thing that we have is as we have continued to cycle through the buildup of our global supply chain and the diversification of our supply chain is it's created more nimbleness. And you heard us call out on the call the investment we continue to make in our supply chain to drive supply chain flexibility, to increase capacity where needed, to shorten lead times, and I'll get to the innovation piece of it. But it is important to note that Scott also called out some significant inflationary headwinds that we've seen that our supply chain team is doing an incredible job trying to combat, but that have come up in 2026. I think on the innovation side, Both the innovation and the commercialization, as I call that, will be big topics as we get together here in about 30 days or so. And so we'll go into more depth on what we're doing there, the significant improvements we've made in innovation cycle time, but also the strategy and maturation of our commercialization go to market. You heard me say on the call, Building up product and creating more products, one thing, getting it to the right place at the right time to intercept the right consumer is the next phase of it. And we're excited to talk to you all about what we're doing in that regard.

Brandy, I just add, you had a part of that question was around inventory. We feel really good about the inventory that we have at the moment. It's the healthiest position we've had in quite some time. so we feel like the team has done great work getting in stock and preparing ourselves to deliver the demand in the back half.

Super helpful. Thanks, guys.

Your next question comes from Peter Benedict from Baird. Please go ahead.

Good morning, guys. Thanks for taking the questions. My first, just around the 20% tariff assumption, I guess, starting in September, I think we can all agree anything's possible these days. I'm just curious if you have any line of sight into that. Is there something that you're seeing that suggests that's highly probable, or are you just trying to plan conservatively given the environment?

Yeah, Lee, the tariff discussion is one that changes regularly. No, we don't have any particular insight into this other than the fact there are still remaining investigations that are underway with the intent to potentially introduce more tariffs. We have no particular insight of whether that will or won't happen, but we're just being conservative in our outlook.

Okay, that makes sense. Thanks, Scott. And then maybe can you build a little bit more on the inflationary pressures that you've been seeing? You called out raw material costs or some supply chain stuff. Can you maybe frame kind of the largest buckets there, what you're doing, maybe how impactful they are right now and what you're doing to try to offset them going forward? Thank you.

Yeah, sure. We'll do. Yes, this is something, you know, we started talking about this a little bit last quarter, and candidly, the pressures have gotten worse over the course of Q2. They fall in a couple categories that hit the P&L in different places. We have a variety of different pressures that are weighing on input cost into our cost of goods, inflationary pressures and things like stainless steel, magnets, oil derivative products like resins that go directly into the production of our of our products. Those are direct. FX weighs on our cost of goods as well. And then in OPEX, it's really about fuel and transportation. And the price of oil and the additional cost as it relates to transportation has been weighing pretty heavily on the business. And so, you know, we continue to watch this. Obviously, it changes with regularity. And look, we are on this moving average inventory. And so, when you have pressure or a benefit, it takes a while for it to be felt in the P&L. And so we'll see how this unfolds over the course of the second half. But it's something that our teams are actively working to drive mediating responses. And I think you saw that in our gross margin performance. We had 170 basis point increase in gross margin year over year, largely based on the hard work of our commercial teams, our product teams, our supply chain teams driving product and channel profitability. Yes, we did have an $8 million benefit from tariffs, but much of that was eaten up by the additional inflationary pressure. So really proud of the work that the team did to deliver these gross margin results, even with the pressure weighing on the business.

Peter, and the one thing I would add to what Scott said is, and I mentioned this in my prepared remarks, we have active productivity programs going on inside the company to drive, making sure that we've got the right cost structure, but that we're also helping mitigate some of these pressures that continue to seem to come.

Great. Thanks so much, guys. Good luck. Thank you.

Your next question comes from Philip Lee from William Blair. Please go ahead.

Good morning. This is Olivia Witte on for Philip Lee. So International has been a bit choppy. this quarter you were up against easier comparisons. How are you thinking about a more stable growth rate going forward? What does inventory levels look like versus stealth or demand in key markets? And as Asia continues to ramp, can you provide some color on the early contribution from Japan and how you expect additional market launches across the region to contribute to growth over the next several years?

Yeah, so look, we talked about in the end of Q1, you do have timing elements away on the quarter to quarter volatility in the business. But we continue to see, you know, strong performance and strong demand signals, you know, across the globe. We've got, you know, each market has a slightly different story. We have, you know, ANZ and Canada that are a little bit more mature markets that are performing incredibly well. Australia and New Zealand had a really strong Q2. So we're pleased to see the performance there. Europe is really driving significant growth for us. And we're just starting to get scale and have real traction with the customer base. And the awareness is increasing across Europe. And I think that's going to deliver growth for many years to come. And Asia is really interesting. It's one that we have significant growth aspirations over the long haul. We're very newly entered into the markets there. We've seen some terrific traction in Japan. Our e-commerce site is performing extremely well. We know that growth will be a multi-year build. It's not something where we expect it to explode in the short term, but we're really happy with the results we're seeing there and more importantly, happy with the results we're seeing and the reaction we're seeing from the Japanese customer. We've had some terrific activations in the market that garnered terrific response from the customers there. And so, we're really thrilled about where that's heading. And look, we still, you know, think that we have, you're on track to deliver our growth expectations for the year for the international business as a portfolio.

Okay, great. And then, does the additional cash benefit from tariff refunds increase your appetite for opportunistic M&A, or does your priorities remain largely unchanged relative to where they stood before the refunds? And more broadly, how are you thinking about balancing M&A, share repurchases, that reduction, and other capital deployment opportunities going forward?

Yeah, thanks for the question. I'll take the front end on the M&A side, and then Scott can talk about the capital allocation. Nothing changes. It doesn't change the way we view inorganic innovation, acquisition of materials, designs, talent, capabilities that we think help drive the long-term growth algorithm for Yeti.

Yeah, and as an artifact of that, we have no intention of changing our capital allocation priorities. Obviously, if we have the cash, that'll go back through our normal prioritization process of looking for growth, looking for selective M&A opportunities and then returning capital to shareholders if the cash flow is available.

Okay, good to know. Thank you. I'll pass it on. Your next question comes from Peter Keith from Piper Sandler. Please go ahead.

Hey, thanks. Good morning, guys. Matt, on the four letters brand campaign during Q2, we thought that was excellent. We've got good feedback on it as well, it doesn't, I guess the guidance implies you're not going to be doing national branding in the back half. So could you talk about maybe the, are there longer tail benefits from, from four letters that are showing up? Maybe it's some metrics like e-com traffic, Yeti search, trying to understand the, the longer term benefits of what we thought was a great campaign.

Good morning, Peter. Thanks. Thanks for that. And we would echo it. Not only did We think it was a great campaign and represented Yeti, but the metrics we saw in Q2 from a reach, the audiences that it touched, the age of the audiences, the moments it intersected, but also the fact that it was scaled from linear down to digital. And we looked at it, and I said the word campaign and probably should have used the word platform. We look at this as a platform that we can use and continue to bring back to life because we think it has more than just a campaign moment. And you're seeing that already in that we've taken this big Q2 campaign and our incredible internal creative team has broken it down into smaller digital focused bites where we can target different audiences, different communities, different Yeti passion points. And I think you're going to continue to see us do that through the rest of this year. And frankly, I think it will last beyond 2026. As far as a broad-based kind of big bang campaign, we don't have one planned for Q4 or the back half of this year right now. That was the shift from Q4 to Q2. But we do look at those things opportunistically. If the opportunity presents itself and it makes sense, we think based on the metrics we see, we think that they're really impactful for Yeti driving that top of funnel awareness, brand awareness, reach, new audience, diversification of the audience. So appreciate your positive sentiment on it. We're excited about where this platform can go.

Okay, thank you. And I want to focus a bit on drinkware. You mentioned a 600 basis point headwind in the U.S. from three SKUs. Could you talk, maybe just unpack that a little bit? What's happening? What are the three SKUs? And then And I believe you're reiterating your drinkware growth for mid-single digit despite this headwind. So maybe you can help us connect the dots on that.

Yeah. So really, when we've been talking over the last going on three years and the big kind of hype cycle, trend-driven cycle that happened in the drinkware category, as we've been saying for many quarters, it was highly concentrated both in audience and in SKUs that it was focused on. Yeti had some skews that enjoyed some of that growth. What we were saying is that has cycled, and we've been saying that part of the category has been cycling out. What we wanted to give investors was a view into how hard that cycle, which would be consistent with everything we've been saying, how hard that cycle has cycled out and what the drag on Yeti is, really is a way of showcasing and putting into context Yeti's mid-single-digit drinkware growth is against that headwind. And I think that shows the power of the strategy, that shows the power of the portfolio diversification, it shows the relevance of the rest of our drinkware portfolio, and that there continues to be really interesting opportunity for us in that important category.

Okay, so you had seen that in the full-year guide all along. you're just highlighting it for us now correct that's right correct very good thank you so much guys thank you your next question comes from joe altobello from ramon james please go ahead thanks hey guys good morning um i want to go back to the gross margin obviously uh significant upside versus what what we were expecting i think what you were expecting as well even excluding the refunds. You called out pricing discipline as a driver there. Can you elaborate on what exactly that means?

Yeah, look, we have product and commercial leaders that are constantly evaluating product and channel profitability. And they look at pricing as a key component of that. And in the quarter, we saw some meaningful benefit from that. Obviously, we have a lot of layers that factor in the gross margin, including that, including operational optimization in the supply chain, optimization, working with our suppliers to drive productivity. FX was a benefit in the quarter. And so there are a number of factors that really helped us deliver strong gross margin results, including that, but that's just part of the normal cadence of managing the business and our commercial and product teams are highly focused on driving product and channel profitability.

Okay, so it's not necessarily list price increases, it's pricing, promotion, all of that kind of combined with you and Blake.

That's right.

Okay. And on international, you reiterated the guide for this year, up high teens to 20%. I think you're up 14% year-to-date with the Japan rollout? Maybe kind of give us, you know, what you see as, you know, where you're getting the confidence to get that acceleration in the second half. Thanks.

Yeah, we have the benefit of seeing the demand signals. Look, there's always going to be quarter to quarter noise. And we talked a little bit about that in Q1, some items that could have hidden the quarter that didn't. And so we see the trajectory of the business and see the healthy traction that we're getting in the market. Obviously, each story is a little bit different. You know, we've got areas where it's all about building awareness. We've got other areas that are mature and continue to drive the business in positive ways. But we feel good about the trajectory and the capabilities that we've built in our international businesses and are really seeing the fruits of multiple years of investment there to put the right teams on the ground, have the right supply chain capabilities to be able to service the market. And we're starting to see that momentum built.

Yeah, thank you.

Your next question comes from Peter Grom from UBS. Please go ahead.

Good morning, everyone. So, a quick follow-up just on Drinkware. You know, maybe just the 2% growth in the quarter, it's a little bit below your full-year guidance range. It was a bit below consensus as well. So, just kind of curious how the performance came in relative to your own internal expectations this quarter. And then just on the guidance, you know, mid-single-digit growth for the year would imply some acceleration from here. So just kind of curious what drives that improvement in the back half.

Yeah, look, I think this is just quarter-to-quarter noise more than anything else. We, you know, again, we keep seeing the demand signals for drinkware. There's, you know, lots of factors, timing of launches, you know, timing of wholesaler purchasing patterns. And so we didn't see anything in Q2 that highlights or indicates additional pressure weighing on the category. In fact, some of the issues that Matt described with this one narrow set of SKUs weighing on the quarter, that obviously certainly had an impact, but we knew that on the front end. And so there's nothing that happened in Q2 that makes us feel any different about the full-year outlook.

No, and I would just add, what you're going to continue to see from us, which is consistent is a cadence of innovation, new products, new SKUs, new colors, cycling things in and out. And so, you know, I think the quarter-to-quarter movement, as Scott said, can be highly influenced based on the timing of those things. But we're really pleased with the broad-based demand and the broad-based opportunity that we see in Drinkware.

Great. And then, Scott, just to follow up, the increase in the OPEX guidance, Is that simply just related to the higher transportation costs, or are you also increasing brand investment as well?

Largely higher operational costs related to inflation, but there is some additional, you know, as we continue to invest in both productivity and growth-driving initiatives, there's a little bit of both in the list.

Great. Thank you so much. I'll pass it on.

Thanks, Peter.

Your next question comes from Noah Zetskin from KeyBank Capital Markets. Please go ahead.

Thanks for taking my questions. I guess first, is there any way to quantify the incentive comp impact related to tariff refunds in the quarter? Just trying to determine how much of that might be more one-time in nature.

Thanks. No. So I'm not going to briefly break it. When we referenced the incentive comp, that was simply a function of the year-over-year accrual relative to last year. It had nothing to do with tariffs, so that reference in the prepared comments wasn't related to tariffs. There's not a consequential impact on full-year incentive comp based on the refund.

That's very helpful. And I guess second, just on corporate sales, can you remind us how large that business is and maybe provide some color on the trajectory there, and then any way to think about the headwind that's been there in prior quarters and the opportunity for that to reverse? Thanks.

Yeah. So corporate sales, obviously we had a tough Q1 and then had some really nice recovery in Q2. And I feel like the team's got a really good strategy there to continue to drive that business. It's roughly 25% or a quarter of the D2C business. And look, we are continuing to emphasize that and the team is leaning in. It's got a good plan in place. And as we described at the end of Q1, we weren't projecting a significant tailwind out of corporate sales, but the absence of a headwind. And essentially, that's exactly what happened. And so, feel good about the trajectory. And we've seen continued demand or improved demand there. And I think that will cease to be a discussion over the course of the next couple quarters.

Thank you.

Thank you.

Your next question comes from Anna Glesson. question sorry from b radio securities please go ahead good morning uh thanks for taking my questions just one for me we've seen sell through exceed sell in for quite a while now track channel inventories were down i guess does the guidance assume more balanced sell through and sell in at any point in the year and if not when do you think we could see this reach parity thanks Yeah, look, the guidance does imply a balance between sell-in and sell-through.

Look, it's always hard to predict exactly how that will play out over the course of the second half, but we aren't expecting a big inventory build or continued decoupling of those. So when we think about, you know, and that's the goal of the team is to try to create an inventory level that match the sell-through.

So that's how we thought about the guide. great thanks thank you and there are no further questions at this time i will turn the call back over to matt for closing remarks thank you uh and thanks everyone for joining us today i look forward to talking to you on our q3 call and uh meeting some of you at our investor day ladies and gentlemen this concludes today's conference call you may now disconnect thank you