Traeger Inc Stock

Hello, everyone. Thank you for joining us, and welcome to the Traeger Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Stephanie Read, Vice President of Finance, Strategy and Investor Relations. Stephanie, please go ahead.

Good afternoon, everyone. Thank you for joining Traeger's call to discuss its second quarter 2026 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm Stephanie Read, Vice President of Finance, Strategy and Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer; and Joey Hord, our Chief Financial Officer.

Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in Traeger's reports filed with the SEC.

This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, adjusted gross margin, free cash flow and net debt, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release and investor presentation, which are available on the Investor Relations portion of our website at investors.traeger.com.

Now I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Jeremy?

Thanks, Steph, and thank you all for joining our second quarter earnings call. As we've discussed throughout the year, 2026 is a transition period for Traeger. Through Project Gravity, we're simplifying the business and building a stronger, more focused company for the long term. Several of the core themes we've discussed throughout the year remain intact. Consumer engagement remains strong. Key consumer metrics remain healthier than reported revenue trends would suggest, and we're continuing to expand our long-term growth platform, including a significant distribution announcement we're sharing today.

As we enter 2026, we expect it to navigate several revenue headwinds, including MEATER softness, price elasticity, channel inventory normalization and deliberate revenue trade-offs associated with Project Gravity. Those dynamics were contemplated in our original outlook. Relative to those assumptions, the primary changes we've seen are greater softness in the MEATER business and increased near-term channel dynamics associated with our distribution expansion strategy, both of which are reflected in our updated revenue outlook.

I'll come back to guidance later in the call. Looking beyond the near-term environment, we're continuing to invest in and advance initiatives that meaningfully strengthen Traeger's long-term growth trajectory. So today, I'll cover the strength of the Traeger brand and consumer engagement trends, what we're learning from consumers and how that's shaping our product strategy, a significant new channel partner we will launch nationally in the spring of 2027 and how we're balancing long-term investment with financial discipline in our updated guidance. Then I'll hand the call over to Joey for the financials.

Let me turn to the consumer and the brand. We're encouraged by the health of the Traeger brand and the engagement we're seeing across both existing owners and prospective new consumers. Starting with our installed base, engagement remains exceptionally strong. July 4 is our second largest cooking day of the year. And this year, we recorded more than 267,000 connected cooks, setting an all-time high. That level of activity reinforces what we continue to see across the platform. Consumers remain highly engaged with the Traeger ecosystem and are using our products regularly.

We're also making meaningful progress expanding our reach with new consumers. Our influencer strategy is focused on introducing Traeger to new audiences through authentic creators who educate consumers on the benefits of wood-fired cooking. During the quarter, this newer cohort of influencers more than doubled impressions versus last year, helping us reach consumers who may not have previously considered Traeger. We're also partnering closely with our retail partners to convert that awareness into purchase.

By leveraging consumer insights, targeted media and joint marketing programs, we're seeing encouraging improvements in key performance indicators, including growth in the new-to-brand customer acquisition rates at several key accounts. Taken together, these signals give us confidence that the brand remains healthy and that we're continuing to attract and engage new consumers.

Let me turn to what we're learning from consumers and how that's shaping our product strategy. Innovation remains central to Traeger, but the current environment is reinforcing the importance of delivering compelling innovation across a broader range of offerings as we see demand increasingly shifting to more accessible price points. While that dynamic creates near-term pressure on average selling prices, it is also expanding the Traeger installed base and creating incremental opportunities for fuel, accessories and future upgrades over time.

It is also exactly why our evolving product architecture matters. Westwood extends Traeger innovation into a more accessible grill platform, while Irontop expands our relevance in griddle occasions and more frequent everyday cooking. In the doors where these products were available, sell-through exceeded our expectations and both product lines are generating 4.8 to 5-star reviews across Traeger.com, the Home Depot and Ace Hardware. Those early results reinforce our belief that Westwood and Irontop are meeting important consumer needs, expanding our addressable market and creating new pathways into the Traeger brand.

Having the right products is critical, but so is making sure consumers can find them where they shop. That's why I'm excited to announce that Traeger will expand distribution into Lowe's nationally with initial load-in activity beginning in Q4 of this year and a full launch of grills, griddles, accessories and consumables planned for spring 2027. This is one of the most meaningful distribution expansions in Traeger's recent history and broadens access to the brand, strengthens our presence in underpenetrated markets and creates a powerful new platform for household acquisition and long-term growth.

While the Lowe's load-in contributes to 2026 revenue, we also expect offsets within our existing partners as certain exclusive arrangements evolve. These offsets were anticipated as part of the transition and do not change the strategic importance of our long-standing retail relationships. Importantly, broader distribution increases our ability to invest behind the Traeger brand across the marketplace. As we scale the business, we can support more retail media, merchandising and consumer activation programs that strengthen our retail partnerships and improve the consumer experience. This quarter alone at the Home Depot, we expanded pallet racks, invested in 3D displays and supported more than 9,000 in-store event days through our RSS program.

At Ace Hardware, we launched an exclusive [ MEATER ] collaboration and we'll continue to invest across the marketplace to fuel premium retail experiences for our consumers wherever they purchase. Over time, we expect this expansion to become an increasingly meaningful contributor to household acquisition and growth.

Turning to guidance. As I mentioned earlier, the primary change versus our original expectations has been continued softness in the MEATER business. We are also seeing greater near-term channel impacts associated with our distribution expansion strategy. As a result, we're updating our full year revenue outlook to $435 million to $465 million compared to our original outlook of $465 million to $485 million. While these distribution-related dynamics are consistent with our long-term strategy and support a much larger growth opportunity ahead, they are contributing to our revised revenue outlook and creating additional timing variability, which is reflected in the wider guidance range for 2026.

Despite the reduction in our revenue guidance, we're maintaining our adjusted EBITDA guidance of $57 million to $67 million. Importantly, nothing about our updated outlook changes the strategic priorities we're pursuing or our confidence in the long-term opportunity. Through Project Gravity, we're improving the operating model and creating capacity to invest behind the initiatives that matter most: brand strength, product innovation, retail excellence and channel expansion.

We're also investing in how we educate consumers on product differentiation and the value of our premium offerings through more targeted consumer segmentation, content and retail partner marketing programs. We believe those efforts will help improve product mix over time while continuing to bring new consumers into the category. At the same time, we're broadening access to the brand through new platforms like Westwood and Irontop and through meaningful distribution expansion with Lowe's.

Taken together, these efforts are expanding our addressable market, strengthening our competitive position and creating a credible path to sustainable growth. As we enter 2027, we'll benefit from a larger installed base, broader distribution, a more complete product architecture and a simpler operating model. As sell-in and sell-through normalize and these investments mature, I'm confident Traeger is well positioned to resume profitable growth in 2027 and beyond.

And with that, I'll turn the call over to Joey. Joey?

Thanks, Jeremy, and good afternoon, everyone. Before I walk through the numbers, I'd like to highlight 3 themes from the quarter that reinforce our confidence in the business and the progress we're making through this transition year. First, many of the retail and consumer indicators we monitor remain more stable than reported revenue trends alone would suggest. Year-to-date sell-through is performing largely as we expected coming into the year with flattish sell-through across our 4 largest retail partners. Second, our revenue outlook assumes grill sell-in unit volumes remain approximately flat year-over-year, indicating continued momentum in household penetration at lower average selling prices.

We're reaching more consumers, growing our installed base and creating a larger foundation for future fuel accessories and upgrade opportunities. And finally, Project Gravity continues to deliver. We're seeing the benefits across our financial results through cost discipline, cash generation and our ability to deliver on commitments. Combined with the progress Jeremy discussed around product innovation, distribution expansion and brand engagement, we believe we're entering 2027 from a position of strength.

With that context, let me walk through the quarter and then discuss our updated outlook. Second quarter revenues were $120 million, down 17% compared to the prior year. Grow revenues decreased 17% to $62 million as growth in unit volume was more than offset by lower average selling prices. This reflects the load-in of Westwood and Irontop, which are part of a strategic shift to extend Traeger innovation into more accessible price points and intentional actions under Project Gravity focused on improving profitability and simplifying the business.

Consumables revenues were $33 million, down 10%, driven by seasonal ordering shifts in wood pellets and a comparison against prior year new channel load-in for food consumables. Accessories revenues decreased 26% to $26 million, largely driven by lower sales at MEATER. Gross profit for the second quarter decreased to $47 million from $57 million in the second quarter of '25. Gross profit margin was 39.5%, up 30 basis points from the prior year. Gross margin benefited from the IEEPA tariff refund, timing of trade spend discussed on our first quarter call and higher mix of direct import sales, partially offset by product mix.

Sales and marketing expenses were $17 million compared to $25 million in the second quarter of '25, driven by a decrease in demand creation and employee-related expenses largely tied to project gravity actions. General and administrative expenses were $22 million compared to $26 million in the second quarter of '25. The decrease in G&A expense was largely from lower employee expenses tied to Project Gravity actions. Net loss for the second quarter was $9 million as compared to a net loss of $7 million in the second quarter of '25. Net loss per diluted share was $3.12 compared to a loss of $2.77 in the second quarter of '25. Adjusted net income for the quarter was $1 million or $0.53 per diluted share as compared to adjusted net loss of $2 million or $0.73 per diluted share in the same period in '25.

Adjusted EBITDA increased to $17 million in the second quarter from $14 million in the prior year period despite lower revenue, reflecting the benefit of Project Gravity actions, disciplined expense management and continued focus on profitability. Let me now discuss the balance sheet. We drove $26 million of free cash generation in the second quarter, of which $16 million was attributable to the IEEPA refund discussed on our Q1 earnings call. At the end of the second quarter, cash and cash equivalents totaled $60 million compared to $20 million at the end of the previous fiscal year. We ended the quarter with $403 million of total debt, resulting in total net debt of $344 million.

From a liquidity perspective, we ended the second quarter with a healthy liquidity position of $188 million, which reflects a slight increase from Q1 despite the cash flow revolver capacity reducing this quarter by $30 million to $82.5 million. Our credit facilities remain completely undrawn, providing additional flexibility beyond our cash position. Inventory at the end of the second quarter was $76 million compared to $99 million at the end of the fourth quarter of '25 and $116 million at the end of the second quarter of '25. This large reduction in inventory is primarily driven by SKU rationalization and business simplification associated with Project Gravity as well as lower MEATER inventory levels. This reduction reflects continued progress towards improving working capital efficiency.

Now turning to our guidance for fiscal '26. As Jeremy mentioned, we are lowering our revenue guidance to a range of $435 million to $465 million from a prior range of $465 million to $485 million. The largest driver is additional softness in our MEATER business, largely from promo performance below expectations. We are also incorporating the expected effects of our distribution expansion, including the transition away from certain exclusive retail arrangements. While these impacts were anticipated, we now expect greater near-term revenue pressure and timing variability than contemplated in our original outlook, contributing to both the reduction in our revenue guidance and the wider range.

Meanwhile, we are maintaining our adjusted EBITDA guidance range of $57 million to $67 million. The impact of lower revenue is being substantially offset by profitability initiatives and lower tariff costs within the MEATER business. We are also raising our gross margin guidance to 40% to 41%, reflecting lower tariff impact on MEATER products than anticipated when we affirmed guidance in Q1.

I'd like to comment briefly on quarterly pacing for the balance of the year. In the third quarter, we'll be lapping a large order timing shift from a strategic partner in Q3 of '25. As a result, we expect approximately 2/3 of our remaining '26 revenue and substantially all of our remaining adjusted EBITDA generation to occur in the fourth quarter, driven by initial Lowe's load-in activity and normalized seasonal demand patterns. We are reiterating our free cash flow guidance of at least $30 million on a year-to-date free cash flow generation of $41 million.

As we stand up large channel expansion, balance of year cash generation will be impacted by an increase in Q4 receivables that will convert to cash in early 2027. While we remain on track to deliver $50 million of value capture for Project Gravity within fiscal '26, consistent with prior expectations. As mentioned earlier, we are pleased with the benefit Project Gravity is delivering through lower inventory, stronger cash generation and a more efficient operating model.

Before I close, I'd note that while our revenue outlook has changed, this does not reflect a change in the health of the core Traeger business or our long-term thesis. We are exiting '26 with a significantly improved inventory position, a stronger liquidity profile, a more efficient cost structure and incremental distribution with Lowe's beginning in the fourth quarter, all of which strengthen our foundation for growth in 2027 and beyond.

I'll now turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from the line of Randy Konik from Jefferies.

I guess, Jeremy, it would be really helpful to understand where you think we are in the broader grill cycle. That would be super helpful to get your thoughts there. And then when you think about the revenue guide for the balance of the year, I think you said Lowe's starts to load in, in the fourth quarter. So how much of a benefit is that? So just trying to get a sense of the core business ex Lowe's, how that's kind of trending.

And then lastly, I mean, it was really interesting to me to see that despite the lowered revenue guide, you kind of held the EBITDA dollar guidance and range the same, which shows continued cost discipline and Project Gravity really taking hold. So I guess what I want to understand is when you think about that Project Gravity and the benefits of the cost side into 2027, just maybe give us some high-level thoughts, maybe qualitative, not quantitative on how you think about sustainability of these -- the EBITDA dollars or margins, if you will, as we potentially have revenue improve if the grill cycle improves into 2027.

Thanks, Randy. Appreciate your questions. Let me start just from a macro perspective, where are we in the grill industry life cycle in terms of normalization relative to some of the volatility that we've seen over the last handful of years. First of all, the industry according to the data -- industry data that we see is roughly flat. And I think -- and fair to say that Traeger is in line with that from a sell-through perspective in the retailers that we're in that we track.

We certainly -- as we get further removed from the pandemic and the substantial pull forward in demand that we experienced in 2020 and '21 and the subsequent reduction, one of the things that we think a lot about and track just from an industry perspective and a consumer perspective is the replacement cycle. Our expectation generally based on our consumer research is that a Traeger Grill has roughly a 5-year life that a consumer replaces or upgrades at that period of time.

And for Gas Grill, it's a little bit longer. It's closer to 7 years. I would say, given the trade volatility that we experienced last year, whereas we would have expected to see that replacement cycle start to normalize, really didn't see it. Prices went up in the industry meaningfully and of course, corresponding elasticity unit volume fell. And so it's hard to really handicap when do we start to see the pandemic demand start to come back around from a replacement perspective. We're not seeing it yet. But I would say all of the engagement trends that we see at least in our brand from a cooking perspective, from a pellet attach perspective would suggest that our consumer base, and I think that represents the broader base of the sort of 75 million American homes that cook outdoors that have a grill in their back patio, that engagement remains. It's a resilient category, and we expect over time that, that will translate back into a more normalized cycle. But right now, sell-through trends on a dollar basis are relatively flat year-over-year.

Joey, do you want to hit the Lowe's load-in and the EBITDA question?

Yes, sure. Randy, so keep in mind, the low shift is a long-term strategic strategy that we're putting in execution. These shifts have been in plan for a couple of years now. We're not giving specifics on the load-in amount per se. However, at the same time, it is meaningful. It is accretive. It is profitable. There is some load-in dynamics around timing and just overall channel dynamics that we're working through, which is why we're lowering guidance along with MEATER. But keep in mind, this is long term in nature. And overall, we're seeing this as a net positive and accretive to the long-term thesis of the business.

To talk about Project Gravity and cost, I think your first part of the question was how are we navigating lowering guidance on top line and managing and reiterating guidance on bottom line. And really, that's focused on cost management on MEATER. We're repositioning MEATER to really focus on profitability this year within the portfolio. And so we're able to take cost out of the P&L and really just focus on high ROI attached cost. We've centralized the operation from the U.K. here in Salt Lake City. We're seeing significant fixed cost synergies, leveraging our fixed cost infrastructure here in Salt Lake.

As far as long term on Gravity, we have stated very clearly that we have $50 million of total value capture, which is around channel shifts, margin capture and then cost savings within FY '26. And then long term, we have said that we -- our range is between $64 million and $70 million. But keep in mind, that is a long-term -- Project Gravity is a multiyear transformation. We have conviction though that as we grow, it will be profitable and we'll have EBITDA expansion.

Your next question comes from the line of Phillip Blee from William Blair.

So you guys increased your gross margin guide for the full year. I guess can you just talk about the key drivers or puts and takes there and maybe phasing for the remainder of the year? Maybe some color on how you're faring against rising transportation and various input costs? And then whether you're comfortable at the current price levels for your product to mitigate those current headwinds as we start looking at 2027 when maybe we won't have the same sort of tariff fund or tariff refund-related tailwinds?

Yes. Phillip, so as far as -- I'll start with transportation. So we do have increased just input costs regarding transportation costs, input increase costs, which we've spoken about in the last call, those are reflected in our outlook. Our margin rate overall is being impacted this quarter and over the next 2 quarters by the IEEPA tariff refund. We've collected now $16 million in cash. We booked $12 million in change in Q1, $1.5 million in Q2, and we're planning on $2 million in the second half, which really is around $16 million full year. So that is impacting our overall margin rate. And then do you want to take the pricing conversation or question?

Yes. So clearly, the tariffs drove higher prices. In our portfolio, that is sort of low double digits, low teens in terms of retail price points. One of the things that we clearly try to balance is understand the elasticity at various price points and trying to really find the optimal intersection between unit volume revenue and profit.

We are still anniversarying at least in the second quarter, the higher price points relative to last year. And as we get into the third quarter, we start to lap the higher price points and I think have a little bit more visibility or insight into demand patterns at various price points relative to the higher prices. The tariff dynamic, I would say, seems to have settled to some extent, but not entirely. And so we continue to leave our grilled product line price where it is. We've seen some tariffs such as IEEPA and the 122 bleed off and then others such as the 232 and some new 301 tariffs come into the space. And on balance, our current forecasted tariff rate is approximately flat to sort of where we've been and what we had forecasted.

And so our expectation is that the consumer over time will begin to expect a higher price points. Sort of medium to long term, our expectation is that unit volumes will continue to support the resilience of the category relative to the number of U.S. households that cook on grills. And we will, of course, build our product strategy and our margin profile around this new cost structure, which includes tariffs. As we look forward to the back half of this year, some of the trends that we have seen will continue in terms of higher price point grills, those above $1,000 showing some softness, those below $1,000 showing resilience. We think that's a function of higher prices, but also just an insight into where the consumer is right now.

Okay. Very, very helpful. And then just building on the prior question, you called out the new partnership with Lowe's, which is great. Can you maybe provide a bit more directional guidance for the incrementality of that partnership for next year? Just assuming the offsets at existing retail partners won't be one for one? And then anything that we should really be embedding from either a merchandise margin or kind of onetime expense standpoint as we start to forecast '27?

Yes. Yes, let me jump in on the first part, and then I'll have Joey on the second part of that question. I would say, first of all, I think it's important to think about the addition of Lowe's as a long-term growth opportunity. If you were to look at our other channel partnerships, they really do develop over many years. And this will be the same. There is -- the motivation behind it really was to gain access to a greater TAM. We have incredible retail partners whom we appreciate and we will continue to invest in.

In fact, this new partnership will give us some scale and greater ability to invest in those partners and in the marketplace to drive demand. And we're very excited about the partnership with Lowe's. It gives us access to some incremental -- to an incremental consumer, both in terms of geography where there's a strong footprint, and we'll focus in those geographies, but also in terms of just the shop room Lowe's, we believe, to some degree, being incremental relative to other channels that we're in.

In terms of incrementality of the business, while we're certainly not guiding to future years, I would say there are puts and takes. There were certain elements of partnership in place around exclusivity where there was mutual investment in those retailers and back into the Traeger brand. Some of those which will continue and others, which will no longer be benefits that we receive. We certainly expected this in as we built out the channel strategy and our expectation is that long term, it's a meaningful growth driver to the business that will allow us to leverage our platform to access new consumers. But I wouldn't see it as a near-term step function from a business growth perspective.

It's an opportunity to invest over the course of many years to really get to those new consumers while maintaining very strong channel partnerships with our existing partners. I think the underlying sort of tenet of our channel strategy is to really ensure that we are disciplined in terms of number of points of distribution and how we invest in each of those points of distribution. We have a brand in a category that requires a meaningful amount of retail space to assort the brand the right way. We're still selling what is considered to be an innovation to most outdoor grillers. It's a wood pellet grill. It has different features and benefits. There's still a lot of work to bring that to life at retail.

And so it really does require investment in every point of sale, which is why we view this as an opportunity to create a long-term building process with Lowe's and side-by-side or other channel partnerships with the belief that it's a rising tide for all over time.

Yes. I'll take the second part of the question just on overall investment. So I'll just reiterate, this is highly accretive to our overall business. That's why we're making the shift. We are going to be making some investments into just what I would call overall enablements, fixtures. We're investing in mills for increased pellet capacity. This is going to unlock a significant amount of investment capacity to reinvest back into our business just to drive that virtuous cycle in the flywheel. There's a couple of other areas we'll invest into human capital in the field, some employees here at headquarters to really unlock the potential.

There is a CapEx investment in the fixtures and also that the mills and to create that pellet capacity. So there could be a cash impact, which we've modeled out, but it's highly accretive and with a high ROI attached.

Your next question comes from the line of Peter Benedict from Baird.

So one is just on kind of I think about ASPs and in the grill area. They're down in the last 3 years. They're down again this year, they'll be down again this year, it looks like. And we understand the reasons. My question though is like when do you think that, that could start to stabilize or stabilize or normalize, whether that be what you're bringing into the market in terms of innovation and price points? Is there a level at which you're kind of like, hey, it's kind of all in there right now, and we can start maybe stabilizing the ASP trend in grills.

Yes. Thanks, Peter. So first of all, there's clearly a macro driver in this as we have seen consumer sentiment soft, and it really has been over the last 18 months. And as we -- while we see consumer spending robust, when you look at where consumers are spending, a higher proportion of that is in -- it's in living costs, it's in food, transportation, necessities and a smaller component of that in discretionary. And so that is a clear driver of consumers to lower price point in a high-ticket durable, which is nonessential in nature.

And so there's a macro component driving it. There's also a sort of a business and a product line architecture piece that certainly influences that. We've been working really to drive innovation at higher price points and cascade that innovation downstream. And there are some key gaps that we are filling that we think will help stabilize and reverse this trend. I think this year, the most prominent example is the Westwood product that we've launched. We've seen very, very nice volumes in our opening price point, which is the Pro Gen 1, as we call it, Pro 22 and Pro 34.

We launched the Westwood into market this year. And frankly, it's really only starting to hit our retailers, that hits a $699 to $799 price point. But I think importantly, it brings some of the elements of innovation around the connected cooking experience and other elements of innovation that we launched at higher price points into lower price points. I think what that will do is create an opportunity for those who have been buying into opening price points, potentially seeing a gap between the opening price points and the mid-price points to find something in between that has innovation.

So to the extent that there are things that we're doing from a product line architecture standpoint to really not just drive ASP, but really to meet the consumer where they are in terms of creating the right product for the right consumer in the right moment, and also creating very obvious step-up story. Some of these things will naturally happen with product launches. Others will be a function of the macro. But I think we'll see over the next 12 months that Westwood will do a nice job of creating a higher price point, but still a highly accessible price point below $1,000 with innovation.

Peter. I'll add to that and just say there has been a divergence in just sell-through above $1,000, below $1,000. We've talked about that. That's a long-term trend. And that's really the thesis behind Westwood and Irontop at lower price points, more accessible price points and really cascading that innovation down. One thing I can say is we are -- the full year expectation is that unit volumes on the sell-in standpoint are going to be flat year-over-year. So even though we have revenue pressure, we are flat year-over-year on units.

The other thing I'd just like to call out, which I know you know is just -- when you sell a grill at a lower ASP, the assumption on attach rate in terms of pellets and accessories and consumables remains the same, whether the grill is at a higher price point or lower price point. So it does bring a consumer into our flywheel.

No, that makes total sense. And then, Joey, maybe one other one for you. Just $60 million in cash, positive free cash flow. Just thoughts on leverage, debt paydown, voluntary debt paydown. Do you have -- you need this money to invest more in the distribution growth? What -- how should we think about leverage from here?

Yes. I mean the goal and this is the underpinning of gravity is to not just drive profitability, but also financial discipline around cash and cash generation. We are always evaluating a debt paydown strategy. I'm comfortable right now with our cash position and our overall net debt. At the same time, we are making some investments in working capital in Q4, which will cascade into increased AR and then that cash collection will come in, in Q1.

Your next question comes from the line of Joe Feldman from Telsey Advisory Group.

I wanted to go back to some of the pressure that you guys saw in the quarter. Can you explain for me your comment about the distribution expansion pressure? Like where you said -- I think you said near-term channel impact associated with distribution expansion. Does that mean like the Costco roadshows that went away? Or are we talking related to the Lowe's rollout, some vendors -- some retail partners got word of that and changed their behavior?

Yes. So Joe, referring to the latter, there's a balancing act between number of retail partners and points of distribution and sort of shared commitment and what that means in terms of assortment that we receive on floor, investments that our retail partners make in our brand, whether they be fixtures, marketing benefits, things like that. And with the expansion of retail that I think it motivates some retailers to also expand their offering and to take some of those investments that they would have otherwise put behind the brand to spread them across other brands.

And so really referring to that, we have notified our largest channel partners. And in some cases, they chose to take that as an opportunity to think slightly differently about their assortment and their investment in our brand. And again, that's natural as part of the channel strategy. I think the onus is on us to prove to our channel partners that the right incremental distribution should be additive to the overall Traeger brand and our ability to invest to drive -- really to drive effective activation at retail, not just new channel, but existing partners.

But no question that it changes the dynamics slightly. And so there is -- the assortment changes and that change in assortment and retail space also leads to some impact to revenue in those current partners.

Okay, Joe, I'll just -- yes, I'll add to that. In terms of just the Q2, we did have pressure on the P&L just regarding MEATER, and that was the main driver of our revenue miss. And then we were able to performance manage overall cost, and there was some timing and pacing on the cost side, which was why we had a strong quarter from a profitability perspective.

Got it. That's helpful. And then with regard to the benefit you guys are seeing from IEEPA tariffs, is that I know at the risk of giving -- I know you're not going to give guidance for 2027. But are we -- should we think about those as onetime? Well, I know they're kind of onetime. But my point is, do we have to back those out as we think about 2027 EBITDA? Is like $16 million have to come out as we model next year? Because I don't want all of us to get out over our skis with EBITDA forecast that maybe aren't going to be the right spot for you guys.

Listen, I think it's a good question. So like I mentioned, we have $16 million that we've now built into the guidance. Of that $16 million, $2 million is going to be recognized in the second half, but $7 million is sales related or FY '26 sales related meaning we essentially have a lower tariff rate or an implied tariff rate. Our tariff rate right now is around 25%. But in terms of a onetime, I would not plan. I would plan for our full guide at the midpoint of $62 million. You could say there is a $60 million benefit, but $7 million of it is FY '26 driven.

[Operator Instructions] At this time, there are no further questions. This concludes today's call. Thank you all for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to Traeger First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

I will now hand the conference over to Stephanie Read, Vice President of Finance, Strategy and Investor Relations. Please go ahead.

Good afternoon, everyone. Thank you for joining Traeger's call to discuss its first quarter 2026 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm Stephanie Read, Vice President of Finance, Strategy and Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer; and Joey Hord, our Chief Financial Officer.

Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in Traeger's reports filed with the SEC. This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, adjusted gross margin, free cash flow and net debt, which we believe are useful supplemental measures.

The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release and investor presentation which are available on the Investor Relations portion of our website at investors.traeger.com. Now I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Jeremy?

Thanks, Steph, and thank you all for joining our first quarter earnings call. We had a solid start to the year, and I'm encouraged by the signals we're seeing heading into our peak selling season. Q1 revenue reflects a combination of planned timing, channel decisions and marketplace dynamics we discussed on our last earnings call, and Joey will walk through those details shortly. Before turning to results, I want to note that we recognized a $12 million P&L benefit in Q1 related to a IEEPA tariff refund that was not contemplated in our original outlook, and I'll address in my guidance commentary. What I want to focus on today is what we're seeing in underlying demand because sell-through is the clearest signal of where the business is headed into a healthy retail environment.

On today's call, I'll cover the consumer and brand, our product launches and how we're executing with our key retail partners. I'll also update you on project gravity because the discipline we're applying in 2026 is foundational to what we're building for the long term. Then I'll turn it over to Joey for financials.

Let me start with the consumer and the brand. Even in a cautious spending environment, Traeger brand engagement remains strong, and it continues to be a leading indicator of potential demand. In Q1, social engagement was up over 30% year-over-year with 65% of our organic impressions coming from non-followers. That matters because expanding household penetration remains one of our largest long-term opportunities and reaching new consumers is the first step to earning their purchase.

Our brand ambassador roster including Matt Pitman and [indiscernible], generated 170 million impressions across more than 3,000 posts in the quarter, part of a program that delivers over 1 billion impressions annually. Authentic content that demonstrates the benefits of wood-fired cooking remains one of our most effective demand creation tools. As we head into Q2, we're expanding that effort with new creators who we believe will reach new consumer demographics.

Innovation has always been core to Traeger and it continues to be rewarded when we execute with focus. In April, we launched Westwood, a new grill lineup designed to cascade Traeger innovation into a more accessible segment of the market, bringing the trigger experience to more households at a lower entry price while keeping the connected capabilities, performance and 7-year warranty that define the platform. We believe the Westwood launch is an early proof point of brand momentum. We shifted to a platform-specific customized content model, generating over 60% more impressions across earned inorganic channels when compared to our Woodbridge product launch in 2025. We saw coverage across outlets ranging from CMAT to Gear Patrol and one thing was consistent: Reviewers specifically called out the combination of Traeger performance and the accessible price point. The product also launched into retail with consumer ratings of 4.8 to 5 stars already live across traeger.com, the Home Depot and Ace Hardware.

That kind of credibility at the moment of purchase matters. It's early. We have only a few weeks of data, for what we're seeing so far is encouraging. Later this month, we'll also begin landing Irontop, our new griddle lineup in retail and strategically, this is an important expansion for Traeger. Irontop brings Traeger innovation into a more accessible griddle price tier, where we have not historically competed unlocking a larger segment of the category and broadening our reach to new consumers.

It's a direct response to consumer feedback, better build quality, more even heat and more reliable results with 2-and 4-burner options across key price points and clear feature differentiation. Strategically, Irontop broadens traders relevance beyond the traditional drill replacement cycle and into more frequent everyday cooking occasions, which we believe will support greater household reach and longer-term category participation across both Westwood and Irontop repairing product innovation with disciplined execution, including targeted marketing, retail readiness and training to help support these launches where it matters most at the shelf and at the point of sale.

Turning to the marketplace. The signal we're watching most closely as we head into peak season is sell-through. We view sell-through as the clearest measure of underlying consumer demand, and we believe healthy sell-through supports a healthy marketplace for both Traeger and our strategic retail partners. Year-to-date, early season demand is encouraging. Sell-through is tracking slightly above our expectations and excluding strategic channel divestments from our DTC and Costco roadshow businesses is slightly up year-over-year. While we're always careful about drawing conclusions from short periods, at this point, we have not seen indications thus far for a broad-based slowdown tied to the macro environment.

At the Home Depot, our success with this key strategic partner has been amplified by our retail sales specialist program, a dedicated field team that train store associates and facilitate in-store product demonstrations featuring food cook penetrate. We believe the ability for consumers to see the product in action, and taste the flavor is a meaningful driver of conversion. We know this model has worked for us.

Last year, stores supported by our retail sales specialists converted at meaningfully higher rates than those without. We're expanding that playbook this year, targeting at least 7,500 cooking events in Q2, which is almost twice the number we did in the same quarter of 2024 as we support both Westwood and in top through peak season. At Ace, we're investing in approximately 1,000 elevated doors to support these launches, including enhanced store positioning, window signage and floor stands. This is the first time we've brought a new grill platform and a new griddle platform to market simultaneously, giving consumers more compelling and accessible options at the point of decision.

And we're seeing momentum at ASUS Spring 2026 show, prebook orders were up nearly 50% over last year, reinforcing our confidence in the partnership for the long term. Stepping back, 2026 is a year of disciplined execution and project gravity is central to that work. Gravity is a multiyear effort to reshape this business, not just take out costs, but to simplify how we operate, sharpen where we compete and build a more durable profit model. Just as importantly, it creates a capacity to invest and the things that matter the most: product innovation, brand and retail execution. As a reminder, we've executed the majority of our Phase I and Phase II actions, including organizational changes, MEATER centralization, exiting the Costco roadshow and winding down DTC commerce. And within Phase II, we've identified additional value capture around SKU rationalization and pricing that we believe will yield a simplified architecture in a structurally higher margin business as we move through 2027 and 2028.

Taken together, Project Gravity is expected to deliver approximately $64 million to $70 million of total run rate value across both phases. We believe our disciplined strategy is working and it's what allows us to invest with confidence behind the brand and product while delivering on our financial commitments. Put simply, Gravity is about applying a disciplined, return-focused lens to how we run the business, improving margins, cash generation and long-term earnings power. Before I close, I want to flag one item. We recognized a $12 million benefit in Q1 related to an IEEPA tariff refund that was not contemplated in our original guidance. A welcome development. We are flowing that benefit through to our full year adjusted EBITDA guidance, which we are raising to a range of $57 million to $67 million, while holding our revenue guidance unchanged. At the same time, we are holding an offset within our guidance to account for continued competitive pressure for MEATER, ongoing macro headwinds, including rising transportation costs due to oil prices and broader tariff uncertainty. We'll reassess those factors on our Q2 call as we gain greater visibility into how these dynamics are evolving.

Our core trader business is strong, and our priorities are clear: drive brand momentum, convert demand through excellent retail execution, expand household reach with the right product at the right price points and continue running the business with the discipline that project Gravity instills. We're entering peak season with a strong brand, strong partners and a team that is executing well. I'm encouraged by what I'm seeing. And with that, I'll turn the call over to Joey Hord. Joey?

Thanks, Jeremy, and good afternoon, everyone. Before I walk through the numbers, I want to anchor on something important. We are doing what we said we would do and project gravity is working. In the first quarter, we delivered $15 million of year-over-year operating expense reduction, reduced inventory by 31% versus the prior year and generated $14.5 million of free cash flow. Those results reflect disciplined execution against our commitments and reinforce that financial health remains our top priority. Against that backdrop of improved financial discipline, it is also important to touch briefly on demand. As Jeremy discussed, underlying demand remains intact, but first quarter sell-through tracking slightly above our expectations as we head into the peak selling season.

With that as context, a quick reminder that our first quarter guidance contemplated challenging year-over-year comparables and timing shifts that would weigh on revenue as well as lower margins on the back of mix shifts and promotional timing. The quarter developed largely as we expected. I also want to briefly frame the IEEPA tariff refund Jeremy referenced as it is material to the quarter's results. In Q1, we recognized a $12.4 million benefit to gross profit and adjusted EBITDA and a $3.2 million reduction in inventory carrying costs and recorded a $15.6 million receivable all related to the refund of duties paid under IEEPA.

Where relevant, I'll call out the impact of this item alongside our underlying results. Excluding this refund, our adjusted EBITDA would have been near the midpoint of the guidance range for the first quarter. First quarter revenues declined 34% to $94 million. Grills revenues decreased 45% to $47 million, driven primarily by 4 key drivers: one, difficult prior year launch comparisons; two, pull forward ordering ahead of tariffs last year; three, deliberate channel optimization under project Gravity; and four, continued mix shift toward lower price grills. Consumables revenues decreased 14% to $26 million, primarily from wood pellet channel mixes and timing of trade spend, partially offset by an increase in units.

Accessories revenues decreased 22% to $21 million, primarily due to lower sales of MEATER. Gross profit for the first quarter decreased to $43 million from $59 million in the first quarter of '25. Gross margin was 45.7%, up 420 basis points versus the first quarter of '25, which includes a $12.4 million benefit from the IEEPA tariff refund. Excluding this item, gross margin was 32.6%, down 890 basis points, reflecting timing of trade spend, lower mix of direct import sales, tariff-related costs and deleverage in MEATER.

Sales and marketing expenses were $13 million compared to $22 million in the first quarter of '25. The decrease was driven by lower employee-related expense, reductions in discretionary operating overhead as well as lower demand creation costs and professional service fees, reflecting cost reduction actions associated with project Gravity. General and administrative expenses decreased to $19 million compared to $25 million in the first quarter of '25. The decrease was driven by a reduction in stock-based compensation expense as well as employee-related costs. Net income for the first quarter was $3 million as compared to a net loss of $1 million in the first quarter of '25.

Net income per diluted share was $1.08 compared to a loss of $0.30 in the first quarter of '25. Adjusted net income for the quarter was $4 million or $1.49 per diluted share as compared to the adjusted net income of $7 million or $2.54 per diluted share in the same period of '25. Adjusted EBITDA was $17 million in the first quarter as compared to $23 million in the same period of '25. This includes the benefit of $12.4 million from the IEEPA tariff refund.

Moving on to the balance sheet. At the end of the first quarter, cash and cash equivalents totaled $34 million compared to $20 million at the end of the previous fiscal year. We ended the quarter with $403 million in [indiscernible] debt and nothing drawn on our credit facilities, resulting in total net debt of $370

million. From a liquidity perspective, we increased our first quarter total liquidity to $184 million. Inventory at the end of the first quarter was $88 million compared to $99 million at the end of the fourth quarter of '25 and $127 million at the end of the first quarter of '25.

Lower year-over-year inventory was primarily driven by: in-transit timing, MEATER inventory reductions and strategic reductions associated with project Gravity. Despite the revenue and margin headwinds in the quarter, we continue to focus on disciplined execution. We've finalized several project Gravity initiatives, including the wind down of Costco roadshow and our DTC business, which contribute to a meaningful operating expense reduction and a 31% year-over-year reduction in inventory. That discipline helped drive $14.5 million in free cash flow in the quarter including benefits from working capital improvements and a $11.6 million employee retention credit. This represents meaningful progress to our full year goal of at least $30 million. As I just mentioned, we maintain ample liquidity with healthy leverage metrics that we expect to sustain through '26.

Turning to guidance. We are reiterating our full year outlook for revenue between $465 million and $485 million. We are increasing our adjusted EBITDA guidance to between $57 million and $67 million, reflecting the flow-through of the IEEPA tariff refund benefit recognized in Q1 with an offset held within our guidance to account for continued MEATER competitive pressure, macro headwinds, including rising transportation cost to oil prices and broader tariff uncertainties. We are also increasing our gross margin outlook to 39.5% to 40.5%, incorporating that same benefit and offset along with the same structural factors we discussed last quarter, including tariff pressure, promotional de-leverage and continued benefit from project Gravity. We will reassess these dynamics on our Q2 call as visibility improves. Free cash flow guidance remains unchanged at greater than $30 million and does not reflect the tariff refund.

As the $15.6 million IEEPA receivable has not yet converted cash, we will update our free cash flow outlook once that conversion occurs. The underlying drivers we discussed last quarter remain unchanged. Benefits from project Gravity offset by price elasticity, marketplace inventory headwinds and MEATER challenges. We still expect first half seasonality to be broadly consistent with historical patterns. Finally, our full year guidance continues to reflect approximately $50 million of project Gravity value capture, including roughly $30 million of incremental benefit in '26, reinforcing continued progress against our cost and margin objectives.

As we navigate this transition year, we continue to believe that we have a robust liquidity. We are currently undrawn on our $112.5 million revolver and based on our current expectations, we do not anticipate using our revolver this year. In summary, the underlying strength of our core trigger business gives us confidence as we manage through this 2026 transition. We are seeing the tangible benefit in our results of project gravity reshaping our cost structure and cash generation. Category demand remains intact with sell-through slightly above our plan year-to-date. We believe the actions we're taking position the business for improved profitability and operating leverage beyond '26. And with that, I'll turn the call over to the operator. Operator?

[Operator Instructions]

Your first question comes from the line of Peter Benedict from Baird.

A couple here. So I guess, first, you give -- when do you expect the tariff refund to be paid out? How much visibility do you have into the timing of that? And then secondly, can you talk a little more about the fuel cost assumptions that are in the forecast now, kind of where they sit, maybe what that impact was relative to what was in there 90 days ago.

Yes. Peter, it's Joe. Thanks for the question. So overall, we have the ability to book this in Q1. We were given that leeway. So we -- broadly speaking, we took it to the P&L. We do have some additional potential on the balance sheet right now in terms of total refund. As far as we expect the cash, we do expect it to be paid within 60 to 90 days, but this is widely thought through in terms of other CFOs I've spoken to. With that said, I do think at the same time, we need to be prudent in our plan this year. Overall, I do believe that our -- Overall, I do believe that our AR balance right now is appropriately reflecting our refi.

The other thing I want to say about this, Peter, is around fuel cost. We have around $1 million of increased fuel cost this year regarding macro. We also want to be prudent in our planning around just the ongoing tariff exposure we have. Our tariff rate has bounced around, but we also want to be prudent in our plan in the elements.

Okay. No, that's helpful, Joey. And I guess my follow-up would be just around the improved sell-through, obviously, good to hear that. I'm curious if you guys -- and I know it's only been a little bit here in the peak selling season. But what you think might be driving that? Do you think it's kind of the whole grill category starting to pick up a little bit? Is there anything maybe unique within wood pellet that's taking share or Traeger taking share again, maybe not trying to be too nuanced. And then related to that, just the promotional tone that's out there, what role do you think that is playing in the improved sell-through? What your thoughts are there?

Yes. Peter, happy to take that. Let me start first with sort of the macro. It's a -- continues to be a challenging macro and we've certainly seen some high-ticket sort of appliance brands report challenges related to replacement cycles and continued pressure on with interest rates on housing relocation and whatnot. And of course, consumer sentiment was an all-time low in April. I think -- with that backdrop, we feel pretty good about the sell-through results that we're seeing. And I think it is -- it speaks to the health of the brand and our ability to perform in an environment like this. It also might begin to speak to the broader category, which has been meaningfully down post pandemic and even down relative to pre-pandemic unit sell-through numbers.

And so as we track replacement cycle, we may be seeing a little bit there. In terms of the broader grilling category, we believe outdoor cooking is slightly down. And as we evaluate our sell-through excluding the channels of which we have divested, notably Costco roadshow and DTC, we think our share is slightly up. So I don't know that there are any sort of strong macro or category trends. I think our brand and our team is executing well in a challenging environment. And it's -- although we certainly like to see positive signals to this point in the year. Of course, there's a lot that happens in the second quarter, and we're cautiously optimistic.

Your next question comes from the line of Anna Glaessgen from B. Riley.

I guess I'd like to start on a follow-up on the IEEPA tariff assumption. Is the $12 million reflecting the full amount you've paid thus far, while like that rule was in place? And so are you assuming essentially a full recovery?

Yes. Overall, we have just around $15.5 million of total IEEPA tariff refund that we feel were due. We've taken the $12.4 million in Q1, which is reflected. The way that we account for this going forward is as we sell in inventory and that has been impacted by tariffs, we'll book -- we'll continuously book that in the P&L. So we do feel there's going to be around $1.5 million this fiscal year. So our total FY '26 expected impact is just out the $14 million.

Got it. And turning to consumables, wondering if you could unpack the decline a bit more than we saw in the quarter? And do you expect this dynamic would persist into subsequent quarters? Or are you expecting an inflection embedded in the guidance for the full year at some point in the year?

Yes. I mean the consumables is largely consistent with the rest of our portfolio regarding just the timing shifts year-over-year. There's really a few main drivers of revenue declines broadly speaking. First is just prior year tariff -- or sorry, elasticity built into our pricing, just some of the gravity channel shifts. We've divested Costco roadshows and our DTC channel. That's impacting broadly speaking, over all of our portfolio and consumables is not immune to that. And then the other is just attach. So that's on the consumables side.

Got it. I guess as a follow-up, could you share maybe sell-through on consumables in a similar way that you gave grills, just to get a sense of the underlying demand?

Sorry, can you repeat that?

Sorry, could you share POS on consumables or pellets, so we have a better idea of underlying demand similar to how you gave Grills kind of stripping out the channel exits?

Yes. Yes. Sell-through is actually going according, if not, above our plans. We're really happy with sell-through on consumables, largely pellets. It's an indication of engagement with our brand and our overarching product. So consumable sell-through is strong. Like I said, going according, if not above plan. As we've spoken about in previous calls, we have a sell-through, sell-in dynamic here, which which is reflected in net revenue, but overall sell-through tracking according to plan.

Your next question comes from the line of Joe Feldman from Telsey Advisory Group.

I'm going to go to another one on IEEPA refund. How are you sharing that with suppliers? Because it seems like you guys are booking it all for yourself and assumption would be that suppliers and then even the retailers may want some portion of that because of price increases and such. And we've heard a lot of other retailers talk about having to kind of balance that out. So I'm curious how you guys are thinking about that is kind of the first question.

Yes, I'll start and then Jeremy can jump in on this one. So the figures I quoted are what we are due based on tariffs that we have been burdened by. As you know, we have a material amount of our business is direct import. Our partners that do direct import are paying IEEPA tariffs as well. And we have been in communication with those partners around just their ability to recapture that as well. Do you want to add anything to that?

Yes. Look, I mean it's -- the reality is that where we do a meaningful direct import business, we, of course, built wholesale pricing with a tariff payment in mind paid by the importer, which is our partner. And that, of course, is a larger number than the figures that Joey is sharing. Of course, we felt some volume reduction due to elasticity with the higher prices and certainly felt some margin. And so sharing of that -- of those tariff refunds is a conversation that we'll have with our direct import partners, and we'll see where that goes.

Got you. And maybe just a quick follow-up. Inventory, should it -- it's quite low, as you mentioned. You gave a few reasons as to why, Joey. I'm curious if that should double back up closer to like $100 million as the year progresses? Or how we should think about that going forward? What level you kind of want to be at?

Yes. I'm actually really happy with our progress [indiscernible] is overall inventory management. As we've spoken about project Gravity is really about driving profitability efficiency throughout the P&L, but also within just efficiency of the balance sheet. The teams -- we've invested heavily around demand planning capabilities focused on marketplace health, demand supply match, et cetera. And so overall, inventory, we've worked it down to what I consider a healthy level. So I'm really happy around our inventory levels on the Traeger side. The other is as we shifted to DI, back to DI, it has taken pressure off of the Traeger inventory. As you recall, there was a pause on DI when the tariffs were announced in prior year. So significant focus on overall inventory. The 1 soft spot we do have in our overall inventory is MEATER, which we've spoken about before. There's a focus on bringing the MEATER inventory levels down. We're going to be revisiting pricing on MEATER, et cetera, and that will alleviate pressure on inventory for MEATERs specifically.

Your next question comes from the line of Phillip Blee from William Blair.

Joey, thanks for the question. How should we think about the phasing of gross margin this year? There are a lot of moving pieces between changes in tariffs, higher transportation costs, now the IEEPA refund. So any color there would be helpful. And then does your guidance at the lower tariff rates, I believe current average rates are about 5%-ish lower than what was in your original guide. Is that still the case here?

Yes. So it is a challenging to planned margin and just in terms of year-over-year comps and the activity that happened within FY '25 is the base year, given the positive BI and tariffs, et cetera, pricing shifts. Regarding overall margin, we have spoken around the shaping of the P&L first half and second half. We do have a -- what we're considering a trough in our margin rate in Q1. We believe that there's going to be a rebound of margin in Q2 and then more normal cyclicality around our margin for Q3 and Q4. As far as our overall margin rate, it's captured in our guidance which we've adjusted for the IEEPA refund. As far as full year, I'll just say the following is we do believe that we have a lot of conviction on guidance overall. And yes, I'll just stop there.

Okay. Great. And then maybe can you talk a bit about demand by price here? I think now you have the Irontop and Westwood series that are new and leaning into these lower entry level price point, do you think there's any room or I guess, need for you to go any lower? Is this kind of at your sort of ideal entry point then you'll look to keep moving up from there.

Yes, happy to take that. So first of all, this is a more price-sensitive environment and it has been. We have flagged a movement towards lower price points over the last 12 months or so on our earnings calls. I certainly believe the timing is right for the 2 product platforms that we just launched, both of which are hitting -- opening price points for our brand, the Irontop in terms of griddle SKU to market with very high-quality innovation at $499 that although it was concepted well before we saw the shift to lower price points. That is the timing works well. I would say the same thing for the Westwood, which really is a multiyear process of launching innovation at higher price points and then cascading innovation downstream, that both that consumers value but also that we can affordably deliver at those price points. And so the Westwood is a a $599 price point, which is the lowest price point in which we've ever offered a connected grill product. So we feel good about that.

Overall, Traeger continues to meaningfully over index relative to the category from an ASP perspective, which again speaks to brand strength, but certainly not immune from some of the pressures that the consumer is feeling and we felt a bit of that mix shift downward. With that said, we're seeing some nice green shoots from a price perspective, one analog I would share is the Woodridge Pro, which was originally concepted to be a $999 product, a price point that our brand has historically sold well. It launched just as tariffs were hitting, and that is now an $1,149 product. And we're seeing really nice sell-through dynamics at a very high price point relative to the industry. So we will continue to build a product line that is thoughtfully concepted and motivates a consumer to trade up to the extent that they could both afford and value those trade-up features and benefits. And over time, that will work in our favor as the consumer strengthens in some of the macro dynamics improve.

[Operator Instructions]

Your next question comes from the line of Craig Ramson from Wells Fargo.

Just two quick ones here. I know in Q3 call, and I think Q1, you kind of mentioned you had a goal of being all your production out of China by year-end '26, and I know tariffs are moving all over the place. But kind of where do we stand on that? And is that still your intention to try to move production to Vietnam or are you kind of standing pat until you get more clarity on that? And then also if you could touch on the April 2026 Section 232 tariff revision, where it became more of a finished product tax, if that affects you in any way, shape or form. And if it has, if you could just kind of expand on that, that would be great.

Yes. As far as our diversification efforts, when tariffs were announced, the overall tariff rate coming out of China was much higher than other countries of origin. So we spoke about materially diversifying out of China by the end of FY '26 and we were underway. Subsequently, tariff rates have obviously shifted materially. Our overall tariff rate has come down. And now we see parity between our countries of origin. So what that's allowed us to do is be long-term thoughtful and strategic in our diversification strategy.

To be clear, our goal is to continue to diversify outside of China. With that said, we're being more long term and strategic about it. As far as our tariff rates go, our tariff rates have bounced around and the latest announcement, we have a 25% tariff on the Section 232 steel tariff. With that said, our tariff rate currently is how we plan the year. So we've had no material change in our tariff rate from our last call.

Okay. So basically, the April finished product, I really hadn't now. It was still -- it was 25%. It continues to be so no real change there.

Yes. There was a reduction for a few weeks in our tariff rate, but then it came back to the original tariff rate that we had planned at the start of the year.

At this time, there are no further questions. I will now turn the call back to Jeremy for closing remarks.

Thanks. We appreciate the conversation, and look forward to being in touch.

This concludes today's call. Thank you all for attending. You may now disconnect.

Good afternoon. Thank you for attending today's Traeger Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Megan, and I'll be your moderator for today. [Operator Instructions] .

I would now like to pass the conference over to Stephanie Read, Vice President of Finance, Strategy and Investor Relations. Stephanie, you may proceed.

Good afternoon, everyone. Thank you for joining Traeger's call to discuss its fourth quarter and full year 2025 results, which were released this afternoon and can be found on our website at investors.traeger.com.

I'm Stephanie Read, Vice President of Finance, Strategy and Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer; and Joey Hord, our Chief Financial Officer.

Before we get started, I'm going to remind everyone that management's remarks on this call may contain forward-looking 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 made regarding our organizational focus and strategy, our mitigation efforts to offset the direct impact of tariffs, our Project Gravity initiative and its impact on our business, our expected product launches and our outlook as to our anticipated first quarter 2026 and full year 2026 results.

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 on Form 10-K for the year ended December 31, 2025, once filed, and our other filings for a 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-looking 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-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, adjusted gross margin, free cash flow and net debt, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release and investor presentation which are available on the Investor Relations portion of our website at investors.traeger.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 Traeger. Jeremy?

Thanks, Steph, and thank you all for joining our fourth quarter earnings call. We closed fiscal 2025 with strong execution and meaningful strategic progress, and I'm proud of how this team performed in a dynamic environment. For the full year, revenue came in above the high end of our guidance at $560 million and adjusted EBITDA landed in the upper half of the range at $70 million. More importantly, we delivered on what we said we would do. We navigated tariffs, took actions to protect profitability and made hard decisions that simplify the business and strengthen our foundation for the long term.

Before I get into 2026, I want to step back and talk about what we saw in 2025 and why we remain confident in the long-term value of this business. Even with more cautious consumer spending, the Traeger brand remains as strong as ever, and our community engagement continues to be a leading indicator of demand. Over the holiday season, we leaned into seasonal cooks and ambassador content and the community showed up in a big way. On Thanksgiving a loan, we have 315,000 connected cooks, up 11% year-over-year, which we believe is a powerful signal engagement across our installed base.

What's important is that this brand strength is translating into business performance. In 2025, we held market share across outdoor grilling, including fuels, despite a sluggish category backdrop. That performance was supported in part by strong consumer response at price points below $1,000 an where we've seen traction without sacrificing brand or performance. And with household penetration still low, we believe this brand strength positions us well as replacement cycles normalize over time.

Innovation has always been core to Traeger and it continues to be rewarded when we execute. A good example of how we're meeting consumers where they are is the Woodridge platform launched earlier this year. Woodridge combines thoughtful innovation like the easy-clean grease and ash keg, increased cooking space and our free flow fire pot that delivers better smoke with approachable price points. That balance of performance and value has driven strong consumer reception, and we believe Woodridge is well positioned to be a meaningful contributor to our Grills business in 2026 as consumers continue to prioritize value without compromising quality.

Looking ahead, we plan to launch 2 additional products in 2026 that we expect will deliver Traeger innovation at more accessible price points and with a broader reach. That matters because expanding household penetration remains one of our largest long-term opportunities, and the ability to deliver great product at price points that meet consumers where they are is a key part of our strategy.

Our pellets business performed well this year, supported by the continued fuel category expansion of wood pellets overall. Pellet performance remains an important indicator for the broader category when consumers are buying fuel, they're cooking, and when they're cooking, it supports the long-term health and replacement outlook.

Historically, parts of this category have been tied to housing cycles and broader consumer confidence. The outdoor grilling market, including fuels, has been relatively steady since 2022, reflecting only modest declines. We believe replacement cycles have been extended beyond historical norms, due to elasticity following tariff pricing actions and other macro factors.

Now let's talk about what defined the operating environment in 2025. Tariffs had a meaningful impact on the category this year, and they drove volatility in ordering behavior across the channel. But through discipline and execution, we manage the impact while still delivering the full year results I just mentioned. As we've discussed in prior quarters, our approach has been consistent. We focused on 3 pillars: supply chain, pricing and cost discipline, and we've worked closely with our partners to protect profitability and maintain inventory health.

We'll continue to take a disciplined approach, managing pricing on a portfolio basis as policy evolves. Meanwhile, our current guidance remains based on the framework in place earlier this year.

Next, I want to provide an update on Project Gravity because it's a central part of how we're building a stronger Traeger. Project Gravity is a multiyear effort to reshape the business, not just to reduce cost, but to simplify how we operate, sharpen where we compete and improve the durability of our profit model. Just as importantly, it allows us to focus and invest in the areas that matter most, including product innovation and brand. Phase 1 focused on organizational efficiency and foundational cost actions, including changes to our operating structure and the integration of meter into our Salt Lake City infrastructure.

Phase 2 builds on that foundation and is more strategic in nature. It is focused on simplifying the business, sharpening our channel strategy, reallocating resources to our highest return opportunities and driving sustainable profitability improvements. A key component of Phase 2 has been channel optimization, including exiting the Costco roadshow, winding down direct-to-consumer commerce and transitioning to our distributor model in Europe. We've executed most of these actions already along with additional organizational changes announced to the fourth quarter, and we expect continued progress on the distributor transition as we move through 2026.

Taken together, these previously announced Phase 1 and Phase 2 savings were expected to deliver approximately $58 million of run rate savings, with benefits beginning to materialize in 2025 and continuing as we move through 2026. As we've gone deeper into the work, we've also identified additional value capture opportunities within Phase 2, particularly around SKU rationalization and pricing. These initiatives are focused on simplifying our product portfolio, exiting lower-margin SKUs and taking a more strategic approach to pricing, which results in a simpler product architecture and a structurally higher margin business mix. We expect these actions to drive an incremental $6 million to $12 million of run rate value with the majority of that benefit realized in 2027 and 2028 as a portfolio of fully resets and end-of-life activity rolls off.

Taken together, project Gravity is now expected to deliver approximately $64 million to $70 million of total value across both phases. And I want to be clear the Project Gravity isn't just about cost takeout. It's about applying more disciplined, return-focused lens to how we run the business. Gravity is helping us simplify the model, concentrate resources where returns are highest and make deliberate trade-offs that improve margins, cash generation and long-term earnings power. That's what enables us to perform through uncertainty and generate operating leverage as the business grows.

Before I move to guidance, I want to briefly address MEATER. MEATER continues to face challenging competitive dynamics, and we're working through elevated inventory as we reset the business. The steps we've taken, including closing the U.K. operation, integrating MEATER into our Salt Lake City infrastructure as part of Phase 1 of Project Gravity and optimizing demand creation investments are designed to improve the profitability profile of the business and give us more flexibility to invest in the product road map and retail channel over time. Near term, we're prioritizing inventory health and margin discipline. Longer term, we remain focused on product and retail execution to stabilize and improve performance.

Now turning to guidance. 2026 is a year of disciplined execution as we focus the business on our highest return opportunities for long-term growth. After a period of tariff-driven disruption and ordering volatility in 2025, we are focused on normalizing channel inventory and working through discontinued product in the marketplace as we enter the year.

In addition, our outlook reflects the full year annualization of price elasticity impacts from prior pricing actions taken in response to tariffs. At the same time, our channel actions under Project Gravity, particularly exiting the Costco roadshow and winding down DTC commerce will reduce revenue, but these are deliberate choices that simplify the business and improve profitability over time.

Finally, our accessories business will continue to see pressure in 2026, primarily driven by the ongoing meter reset. To be clear, these impacts are driven by specific identifiable actions and timing dynamics, not a change in underlying consumer demand. For fiscal 2026, we are guiding to revenue of $465 million to $485 million and adjusted EBITDA of $50 million to $60 million.

Importantly, our expectations for sell-through 2026 are significantly higher than what our selling plan reflects. We view this as a normalization of channel behavior rather than a change in underlying consumer demand, and we expect closer alignment and sell-through and sell-in as we move into 2027. As a result, we expect to exit 2026 with owned and channel inventory aligned to our new Grille product architecture, alone that delivers clear price value for consumers and supports a healthier marketplace as we move into 2027.

Encouragingly, we are seeing early sell-through trends exceed expectations, particularly with our largest retail partners. That said, we are taking a prudent approach to extrapolating those trends across the full year, given promotion timing and broader operating environment. We believe we're taking the right actions on efficiency, product strategy and inventory management to position Traeger for sustainable long-term growth and profitability.

To wrap up, fiscal 2025 was a year where the team executed through uncertainty. We delivered on our commitments, managed meaningful tariff pressure and drove structural changes that strengthen Traeger for the long term. We're approaching 2026 with strategic discipline to set the foundation for a long-term growth strategy. We are prioritizing inventory health and continue to invest behind the product and brand with a focus on extending our consumer reach. And we believe the work we've done through Project Gravity sets up a stronger foundation for operating leverage as we look beyond 2026.

And with that, I'll turn the call over to Joey. Joey?

Thanks, Jeremy, and good afternoon, everyone. I'll walk through our fourth quarter and full year financial results in more detail then discuss our balance sheet, cash flow and our outlook for fiscal '26. Starting with the fourth quarter and the full year. I'm pleased with how the business performed financially in a dynamic operating environment. In the fourth quarter, we exceeded the top end of our revenue guidance and delivered adjusted EBITDA in the upper half of our full year range despite continued elasticity following tariff-related pricing actions and ongoing pressure mirror.

For the full year, we delivered adjusted EBITDA of $70 million, while executing through these pressures and make a deliberate decision to simplify the business. There are 3 financial takeaways from fiscal '25 worth highlighting. First, we successfully managed tariff exposure and protected profitability through disciplined pricing, supply chain actions and cost control. Second, consumables, including pellets, continued to be a source of strength and stability, reinforcing the durability of the reoccurring fuel model even in the cautious consumer environment.

And third, we made meaningful progress on Project Gravity, delivering $20 million of cost savings in fiscal '25. This exceeded our original expectation of $13 million and represents an important step towards a structurally improved cost base and stronger cash generation profile.

Turning to fourth quarter results. Fourth quarter revenues decreased by 14% to $145 million. Grow revenues were $61 million or down 22% compared to the fourth quarter of last year, declines in our grow category were driven primarily by elasticity and an unfavorable mix shift as well as a difficult comparison related to the Woodridge load-in ahead of launch in the prior year quarter.

Consumables revenues were $36 million, up 16% from the prior year. Consumables growth was driven by higher unit volumes across both wood pallets and food consumables. Accessories revenues were $49 million, down 18% versus the fourth quarter of 24%. Revenues were pressured by negative sales growth at meters.

Fourth quarter gross margin was 37.4%, down 350 basis points versus the prior year. Excluding $3 million in costs related to Project Gravity, adjusted gross margin was 39.5%, down 130 basis points, driven primarily by tariff-related costs offset by lower promotional activity and supply chain efficiencies. Sales and marketing expenses were $23 million compared to $34 million in the fourth quarter of '24. The decrease was driven by the reduced meter investment and Project Gravity savings.

General and administrative expenses were $22 million compared to $27 million in the fourth quarter of '24. The decrease is primarily driven by lower stock-based compensation expense, as well as lower professional fees and employee-related costs as a result of Project Gravity. Net loss for the fourth quarter was $17 million as compared to net loss of $7 million in the fourth quarter of '24. Net loss per diluted share was $0.13 compared to a loss of $0.05 in the fourth quarter of '24.

Adjusted net income for the quarter was $2 million or $0.01 per diluted share as compared to $2 million or $0.01 per diluted share in the same period in '24. Adjusted EBITDA increased 6% to $19 million in the fourth quarter as compared to $18 million in the same period of '24, demonstrating operating leverage in the model even at lower revenue levels.

Turning to the balance sheet. We exited the year in a solid financial position after making the balance sheet health a leading priority throughout '25. Cash and cash equivalents were $20 million compared to $15 million at the end of '24. We had $403 million of short-term and long-term debt, resulting in total net debt of $384 million. Net debt declined by $10 million in fiscal '25 compared to the end of fiscal '24.

Cash flow from operations was $16 million in the fourth quarter, driven by disciplined working capital management and Project Gravity cost savings. From a liquidity perspective, we ended the fourth quarter with ample liquidity of $162 million.

Inventory at the end of the fourth quarter was $99 million, down from $107 million in the fourth quarter last year and down from $115 million at the end of the third quarter. While we have elevated meter inventory that we expect to work through in '26, we are pleased with the positioning of our Traeger brand

Now turning to our outlook. As Jeremy outlined, fiscal '26 is a foundational year. From a financial perspective, it is a year of disciplined execution as we continue to focus the business on our highest return opportunities. For fiscal '26, we are guiding to revenues of $465 million to $485 million, and an adjusted EBITDA of $50 million to $60 million. As Jeremy mentioned, we expect the divergence between sell-through and sell- in '26.

Importantly, the year-over-year revenue decline implied by our guidance is driven by a small number of specific identifiable factors, not a deterioration in the underlying consumer demand. There are 4 primary drivers shaping our '26 revenue outlook: First, Project Gravity actions reflect deliberate decisions to exit or reshape lower-return revenue streams, including the Costco roadshow, direct-to-consumer commerce and certain international markets as we prioritize profitability and cash generation.

Second, the annualization of tariff-related elasticity reflects pricing actions taken primarily in the second half of '25 to offset tariff costs. Because those actions were not fully in effect for the full year, we continue to see their impact carry into the first half of '26. Together, these two drivers are continuations of strategic actions taken in fiscal '25 and account for approximately $70 million of the year-over-year decline, which is over half coming from Project Gravity actions net of recapture.

Next, our outlook reflects deliberate actions to optimize marketplace health. We exited fiscal '25 with select pockets of elevated inventory, and we're proactively managing these positions to reduce weeks of supply. That inventory dynamic was driven by 2 largely timing-related factors in fiscal '25. First, advanced orders placed to mitigate anticipated tariff exposure and support country origin transitions; and second, higher order volumes following a strong spring selling season before the full impact of pricing elasticity became evident.

Finally, we are planning for continued competitive pressure meter as we reset that business. Taken together, these factors explain the expected revenue decline in '26 and importantly, reflect deliberate actions and timing dynamics rather than a change in the long-term demand profile of the trigger brand. From a margin perspective, we are guiding to gross margin of 38% to 39% or down 120 basis points to down 20 basis points versus fiscal '25. Margin guidance reflects pressure from tariffs and deleverage on fixed promotional investments partially offset by the benefits of Project Gravity.

On operating expenses, we expect meaningful improvement in '26 as we realize the full year benefit of actions taken in '25 and continue executing Phase 2.

In total, we expect Project Gravity to deliver approximately $50 million of adjusted EBITDA benefit in fiscal '26, reflecting roughly $30 million of incremental benefit on top of approximately $20 million realized in fiscal '25. Taken together, adjusted EBITDA for fiscal year '26 is expected to be $50 million to $60 million.

Despite the year-over-year decline in adjusted EBITDA, we continue to expect strong free cash flow generation. While we do not typically provide free cash flow guidance, we currently expect free cash flow of at least $30 million in fiscal '26, driven primarily by inventory reductions and working capital management. This expected free cash flow will support continued net debt reduction as we expect our leverage ratio to remain comfortably below covenant levels throughout the year.

I'd also note that our covenant calculation includes credit for cost calculations taken over the trailing 12 months, resulting in a lower leverage ratio than what you would calculate using published EBITDA loan.

As a reminder, our revolver capacity was stepped down by $30 million in the second quarter as part of the amendment executed in '25. This has no impact on our operations, to remain $82.5 million of capacity is fully available through December '27 and currently undrawn.

Our first lien term facility does not mature until June 2028. Turning to the first quarter. We are seeing some meaningful timing shifts from Q1 and the Q2, so I want to provide explicit guidance for the quarter. Importantly, we expect first half seasonality to be broadly consistent with historical patterns, with '26 impacted by new product load-ins occurring in Q2 rather than Q1.

From a margin perspective, we also expect some timing impacts between the first and second quarters, driven by promotional activity and direct inward mix, which we believe will pressure gross margin rate in Q1 and benefit later quarters. For the first quarter, we are guiding revenue of $92 million to $97 million and adjusted EBITDA of $3 million to $7 million. As it relates to tariffs, our guidance is based on the tariff framework that was in effect through mid-February and does not incorporate the recently announced changes. Depending on market conditions, any incremental benefit could flow through a combination of improved gross margin, dealer margin support or pricing actions for consumers.

Before I close, I want to step back and talk about how we see the business position beyond '26. As we move into '27, we believe several factors create a constructive setup for improved profitability. These include the continued realization of Project Gravity value beyond what is reflected in our '26 guidance, including the incremental $6 million to $12 million of value capture announced today as well as the potential for a more favorable tariff environment and improved alignment between sell-in and sell-through.

As these dynamics come together, we would expect the business to begin to benefit from meaningful operating leverage as revenue returns to growth with a structurally improved margin profile and cost base. As a result, these factors support our view that fiscal '26 represents a transition year financially and that the business is positioned to deliver higher profitability and improved adjusted EBITDA performance as we move into 2017 and beyond.

And with that, I'll turn it over to the operator. Operator?

[Operator Instructions] Our first question will go to the line of Brian McNamara with Canaccord.

First, I'm curious, where did the grill market finish in 2025 relative to 2019 levels in terms of industry volumes? And what is the company's expectation for Grill market growth in '26, if any?

Thanks, Brian. So a couple of thoughts. First of all, after, of course, a very meaningful decline in unit volume between '21 and '22, the market has been modestly down the last handful of years. Last year, down probably sort of mid-single digits or so on a revenue basis. I don't have the exact numbers in front of me on unit volumes between last year and 2019. What I can tell you is that units are still down meaningfully. We, of course -- we spent a lot of time thinking about, in addition to our strategy from a macro perspective, what are the catalysts to really to get this -- the outdoor cooking category to return to more normalized replacement levels. Mathematically, we should be heading into that window. We did not see that last year, and that was probably in part driven by the fact that tariffs really hit in the spring, and we saw this corresponding very, very material drop in consumer confidence. But we are now 6 years removed from the beginning of the pandemic, and that should be when consumers generally begin to think about replacing other grills, at least the Traeger Grill in terms of the ownership life cycle that we observed.

I will say, this has been historically a remarkably steady category. And what we've seen, of course, is unusual since the pandemic. But our expectation is that the market will recover. There are just as many, in fact, slightly more outdoor books than there were pre-pandemic, and so this is more around the replacement cycle. I will say that we have not forecasted in the guidance that we've offered. We have not forecasted a return to a more normalized replacement cycle because it's hard to know exactly when. We just believe that this is a very durable category and that it will return to those more normalized levels. So we're heading into that period at some point in time, certainly over the next 12 to 24 months.

The other thing that I would add that I think is relevant as we think about brand position and engagement as the category improves, is that this is a brand that has been very consistent in terms of the consumer engagement. We observed, for example, in the fourth quarter, connected cooks up 11%. We still -- we continue to see strong pellet attach, which, of course, is another important measure of engagement for us. So we're very focused on the things that we can control. We're not forecasting the next cycle, but we believe that we're getting closer to it.

Great. You actually answered my second question. So good on you there. My next question is, how big is the expected revenue impact from the DTC exit? And what is the underlying assumption for sales recapture with your retail partners? And in addition to that, I guess, why wouldn't we see a bigger margin boost there? It sounds like Project Gravity is accounting for kind of $50 million of the $50 million to $60 million EBITDA guidance, if I heard that correctly?

Sure. Brian, it's Joey. As far as what we're speaking to right now, we spoke originally around a $60 million just recapture -- or sorry, a $60 million impact in terms of just overall the shift out of DTC, Costco Roadshow in International. That was on a rear-looking number. On the go-forward number, it's a little bit smaller. What we can say is overall between the full year pricing elasticity and Project Gravity, the shift there is around $70 million of the total revenue impact. And if you're doing the math on the P&L flow-through, we have margin rate pressure, and that's driven by full year tariffs and promo deleverage. And that's probably, if you're doing the math on why there's not as much flow through.

Our next question will go to the line of Peter Benedict with Baird.

This is Zach Beeck on for Peter. Nice to be additional savings from Gravity. Just curious if you could share more about the SKU rationalization efforts there, maybe which items or categories you plan to address? And then on pricing, Jeremy, you mentioned annualizing some elasticity impacts from your last round, which I believe was last spring, could you just share more details around that dynamic and maybe how the consumer responds to pricing actions is influencing your innovation plans for both this year and beyond?

Yes, of course. So let me start with the SKU rationalization and then I'll leave it to some of the thoughts on pricing and sort of how it impacts our product line or how we think about product strategy going forward. The intent of SKU rationalization was -- it was twofold. First of all, I wanted to streamline the product portfolio so that we create efficiencies in manufacturing and inventory. There are certainly opportunities to, in a modular way, ensure that we're just driving more volume in assembly and subcomponents and fewer SKUs, of course, leads to lower inventory levels. That's sort of thought number one.

Thought number two was that the rationalization also has consumer benefit. Our ability to create a more clear line with a clear step-up story and real clarity from a consumer decision process, also was an underlying motivation of the rationalization. These things take time. Of course, we are in a consumer durable, we're looking years out from a product line perspective, and we will sunset certain SKUs beginning this year, but over the next 2 to 3 years. And so as you saw from some of the increased value capture and Gravity. Some of these things extend out into '27 and into '28. But we believe in that. We think it's going to make us a better, more focused business, and we have begun this process.

The pricing is, I will say, really forecasting price elasticity last year was challenging, not only because our prices were moving around but it was a very dynamic environment, not knowing how competition was going to price being a discretionary -- high-ticket discretionary durable, how decision-making on the consumer part relative not only to this category is thinking about other discretionary purchases that they'll make. We're getting sharper on elasticity, I would say that one of the learnings is that during promotional windows, there's greater elasticity and -- but I would say on balance, we're feeling pretty good about how we've priced our products, and given its confidence where we are going forward. We'll continue to evaluate this. There -- as has been announced over the last week or so, there have been some shifts in tariffs. We haven't forecasted any of that in our guidance, but there is -- there was some decline in our tariff rate, which will give us the ability to sort of step back and think about how do we allocate those savings.

Where will we get value in reducing MSRP versus value in allocating some of that to our dealers, where there is some additional margin need. And of course, to the extent that some of it gets allocated back to trigger, how do we think about that from a business reinvestment perspective. As it pertains to our product strategy relative to what we've learned about elasticity, I would say that it really doesn't change how we think about the future.

It takes it takes 30 to 36 months to bring a durable -- list durable, which is a highly engineered product with firmware, software, industrial mechanical design from concept to consumer launch. And so it's hard to really build a product line around macro environment trends. But I think what we've learned is that although there has been a little bit of pressure on price point as consumers have tightened their belt. Notably, last year, as we saw consumer sentiment declined meaningfully what we believe and what we see -- what we have seen in cycles over time is that the consumer will return to price points in better times where they are comfortable, but also where there is a reason to purchase.

So those features and those innovations that maybe slightly discounted in a down period. We believe a consumer will continue to value. So when we think about our product line going forward in a very similar way. Of course, we're always learning from the consumer, and we're always thinking about how should our brand be positioned long term. On positive, and this just happens to be a nature of where we are in our product development life cycle. We're launching a couple of new products this year in the second quarter. As is our strategy, we really launched innovation at more premium price points, and we cascade that innovation downstream as we understand consumer value of certain products and features and as we understand how we get scale from a product manufacturing perspective. And it so happens that where we are in our in that life cycle. The 2 product platforms that we're launching this spring, they're sub-thousand dollar products, which are -- which is certainly very appropriate for the moment in time. But otherwise, we don't shift our product strategy relative to the cycles that we're in.

[Operator Instructions] Our next question will go to the line of Peter Keith with Piper Sandler.

So just trying to understand the revenue decline and maybe how you're thinking about general demand trends. So I'm going to kind of interpret what you've told us, which was some good details. So we've got an $85 million revenue decline at the midpoint for the year. It sounds like $70 million of that is from exiting the Costco roadshows, DTC and then and then some of the demand elasticity impact on pricing. So there's a sort of a $15 million delta that trying to get my arms around, is that a sort of a lack of sell-in because of orders last year? Is that demand declines, kind of how should we think about that other chunk of revenue decline?

Sure. Thanks for the question. So just to be clear, there's -- we're planning on sell-through there a divergence between sell-through and sell- in '26. And sell-through, we're planning to -- current sell-through trends in the beginning of the year are exceeding our expectations. We're planning on sell-through to be in line with the overall category, and that's sort of flattish. So keep in mind, there's a divergence there. As far as the remaining $15 million, there's sort of 2 factors driving that. One is ongoing MEATER pressure, the other is, we're calling it marketplace health initiatives. We have, as Jeremy mentioned, we have specific inventory pockets in a specific retailer that have higher weeks of supply inventory in market than we would like. and we're going to rightsize the inventory. And keep in mind, pricing elasticity, Project Gravity reduction in revenue and marketplace health finishes are strategic in nature. MEATER is -- we're addressing MEATERs through the centralization of the MEATER office here in Salt Lake, leveraging the fixed cost infrastructure. We're resourcing the plan and the business to drive ongoing growth. So if you're doing the math on that, it's really focused on that marketplace health initiatives and MEATER.

Okay. Yes, that's the detail I was looking for. And then just a follow-up on that. that marketplace pressure, that's just with one retailer where you're trying to rebalance the inventory? Or is that across a variety of retailers?

Generally speaking, yes. it's a distinct pocket of inventory. And keep in mind, it's high-volume inventory is high flow through, and that also puts pressure on overall margin.

And the other thing I'll point I'll make on this is as we rightsize the marketplace, this is the marketplace health initiative, there's going to be a role in FY '26, but this will create capacity in '27 and beyond, and we'll be able to fill that capacity, and that's why we're confident in the future growth algorithm.

Yes. Yes, that makes sense. Okay. And then my last question, and I think you partially addressed this in your last answer, but -- we're looking at the decremental margin on the revenue declines, it's around 30% this year, pretty similar to last year. And I guess with Project Gravity, one would think that maybe the decrement margins would be coming down this year. So why is it a similar level of 30% decremental on the EBITDA margin with the revenue decline?

Yes. I think we need to focus on overall gross margin and gross margins being impacted full year of tariffs. So last year, tariffs were announced -- they were announced in February, but they were relatively low in the first quarter. Liberation Day, I believe was in early April and then we had a much higher tariff burden. They've sort of settled throughout the year. So we have a full year of tariff impact. So that's driving some margin degradation. The other is what we're calling is promo funded deleverage. So we invest a fixed number into our P&L every year. And with the overall revenue coming down, it's eroding margin. That is also going to drive margin expansion in the out years as well as we get to more normalized revenue numbers.

With no additional questions waiting in queue, we will conclude with the Q&A session as well as today's earnings call. Thank you for your participation and enjoy the rest of your day.

[Audio Gap] on investment. This strategic review is ongoing, and we have retained a global consulting firm to assist with the assessment and implementation of Phase 2 initiatives. We have also established a transformation management office, which will act as a coordinating body during the implementation of gravity to help ensure consistency transparency and accountability between the executive team and working teams. Today, we are announcing a run rate cost savings target of $20 million identified in connection with Phase 2 of Project Gravity. These savings are being enabled by channel optimization, supply chain and manufacturing efficiencies and other streamlining and productivity efforts. Phase 2 savings are incremental to the $30 million of run rate savings tied to Gravity Phase I for a cumulative $50 million run rate savings target. We expect to largely implement gravity initiatives by the end of 2026. One of the largest drivers tied to Gravity Phase 2 savings is an optimization as we review profitability by channel, geography and retail customer, it became evident that there is a meaningful opportunity to streamline distribution and exit certain channels which are not accretive to profit on a fully burdened cost basis. We are making several shifts to our distribution footprint, which we expect will drive increased efficiency and profitability in the years to come.

First, we will be exiting Costco roadshow business. This program was an early driver of Traeger's brand awareness and growth. However, over time, this business' profitability has been declining given increasing costs, including transportation rates and labor. Costco will remain an important partner to us, and we will continue to sell Traeger products through Costco's traditional in-line business.

Next, we are planning to shift our traeger.com website to a content and brand storytelling focus, and we'll be exiting the direct-to-consumer commercial aspect of the website after the fourth quarter. Consumers seeking by Traeger products on trader.com will be redirected to our retail partners' websites. Our website is a critical asset and it is the first place where many of our consumers go to conduct research on our grills. However, profitability in this channel is not where we would like it to be, and we believe that by redirecting consumer traffic to our retail partners' websites, we can retain a meaningful portion of these sales at a higher incremental margin, while reducing overhead and complexity tied to our own DTC business. We will also be partnering with our retailers to optimize the digital media and advertising strategy for Traeger online in an effort to drive demand and return on advertising spend for these partners. Not only do we believe this shift will drive efficiency to our business, but we also believe the change will result in a better experience for our consumers.

Last, we are shifting to a distributor model in our European markets, which are currently operating under a direct model. We believe employing a 100% distributor model in Europe, offers a more cost-effective an asset-light approach, which will unlock savings going forward, while retaining our presence in this key international market by partnering with experienced local distributors. We are also sunsetting certain unprofitable SKUs in the market as part of this shift. In total, these channel optimization initiatives will drive meaningful simplification and cost savings to our business. We expect that these initiatives, along with other Phase II strategies will drive $20 million of run rate savings once fully implemented. And while we anticipate a loss of revenue tied to channel optimization, this aligns to our strategy of transforming into a leaner, more efficient and more profitable business albeit with a smaller base of revenues in the short term. It is important to note that while the near-term focus on Project Gravity is to drive significant savings and efficiencies.

This streamlining will serve to optimize our cost structure, which will allow for continued focus on our key growth pillars of product, innovation and brand. Driving increased household penetration for the Traeger brand remains core to our strategy, and we expect the transformation that will occur as a result of gravity will enable our long-term revenue growth. Let me now briefly discuss our outlook for fiscal year 2025. Today, we are reiterating our prior guidance of revenues of $540 million to $555 million or down 8% to 11% and adjusted EBITDA of $66 million to $73 million. I am pleased with our ability to reiterate guidance today, and we are planning the balance of the year prudently.

Now let me briefly touch on some highlights from the third quarter. In terms of our Grille business, we saw 2% growth in revenues versus prior year. Growth in Grills was driven by strong shipments of sub-1,000 Grille units where we continue to see outperformance. The quarter also benefited from a resumption of direct import fulfillment with our larger retail partners which was mostly paused in the second quarter. Direct import fulfillment allows for an optimization for both traders and our retail partner supply chains, creating value for both parties, reinstating this process in a heavily tariffed environment demonstrates our resilience and represents a significant win for the team. On the consumables front, we achieved 12% revenue growth in the third quarter. We are pleased with our consumables performance, which was driven by positive sell-through of pellets, and we continue to see this part of our portfolio as a stable and recurring revenue.

New distribution, including our launch into Walmart late last year, remains a growth driver for consumables, and we are seeing expanded distribution of consumables and hitting the shelves across several of our largest grocery partners. In terms of consumables innovation, in August, we launched our first ever sauce collaboration with our long-standing partner in World Famous Pitmaster, Matt Pittman of Meat Church Barbecue and also brought back to fan favorite [indiscernible].

Both launches have seen a favorable reaction from consumers with the partnership's [indiscernible] barbecue sauce, quickly becoming 1 of our top selling sauces. Last, our accessories business was down 4% and driven by a decline in meter revenues. We expect to see continued short-term pressure on meter revenues. However, we believe that the integration and P&L reshaping strategy in motion through project gravity will drive growth and expand profitability in the long term. Notably, Traeger branded accessories demonstrated strong double-digit growth in the third quarter as our significant installed base of Grills drove these attachment sales. In summary, the entire Traeger team is highly focused on navigating the current dynamic backdrop and executing against our plan to transform the business and reshape the P&L via our project gravity initiatives. I am pleased with the progress we have made thus far with respect to gravity and believe the $50 million in run rate savings targeted thus far will meaningfully unlock significant value for our shareholders. And with that, I'll turn the call over to Joey. Joey?

Thanks, Jeremy, and good afternoon, everyone. Today, I'll walk through our third quarter financial performance and provide some additional context on our results and guidance for fiscal '25. We are pleased with our third quarter results and our ability to drive growth in both revenues and adjusted EBITDA. These results, along with additional efforts we are announcing on project gravity, demonstrate our ability to successfully navigate a dynamic environment. As a reminder, enhancing profitability and cash flow in the current environment remains our top priority. Third quarter revenues increased 3% year-over-year to $125 million. growth was led by double-digit gains in our consumables business as well as a modest increase in our growth business.

Looking at category performance, grow revenues increased 2% in the third quarter -- this was primarily driven by an increase in average selling prices tied to the pricing increase implemented earlier this year as part of our tariff mitigation efforts, which more than offset the decline in unit volumes. Third quarter grill revenues also benefited from a pacing shift out of the fourth quarter. Consumables revenues grew 12% to $25 million with wood pellet seeing healthy replenishment and distribution gains contributing to growth. Accessories revenues decreased 4% to $24 million due to lower meter sales. We are pleased with our Traeger branded accessories business in the quarter, which saw growth in excess of 20%.

Gross profit for the third quarter decreased to $49 million from $52 million in the third quarter of $24 million. Gross profit margin for the third quarter contracted 360 basis points year-over-year to 38.7% and reflecting the impact of tariffs and other supply chain pressures. The reduction in gross margin was driven by tariff costs totaling $8 million and generating 670 basis points of unfavorability. This cost was partially offset by: one, pricing actions worth 170 basis points; two, supply chain efficiencies worth 90 basis points; three, improved pellet margins were 30 basis points; and four, other margin positives of 20 basis points.

In the third quarter, we showed strong expense discipline with our cost reduction and streamlining efforts beginning to flow through as demonstrated by our ability to drive adjusted EBITDA growth. Sales and marketing expenses declined to $20 million, down $6 million year-over-year. representing a 550 basis point improvement as a percent of sales. General and administrative expenses were $22 million, down $2 million or 8% year-over-year, with a 210 basis point improvement as a percentage of sales.

In the third quarter, we recorded a $75 million noncash impairment charge to our goodwill related to a sustained decrease in our stock price and market capitalization. As a result of these factors, net loss for the third quarter was $90 million as compared to a net loss of $20 million in the third quarter of $24 million. Net loss per diluted share was $0.67 compared to a loss of $0.15 in the third quarter of '24. Adjusted net loss for the quarter was $22 million or $0.17 per diluted share as compared to $7 million or $0.06 per diluted share in the same period of '24. Adjusted EBITDA grew to $14 million, up from $12 million in the prior year, demonstrating our ability to drive profitability even in a challenging macro environment.

Looking at the balance sheet. We remain in a solid position with liquidity of $167 million with no outstanding borrowings under our revolver or receivables facilities at the end of the third quarter. Inventory at the quarter end was $115 million, up from $107 million at year-end. Increased inventory costs tied to tariffs represent the majority of the growth versus prior year. We are comfortable with our inventory position going into the end of the year. As Jeremy spoke to, we continue to make progress on project gravity, our comprehensive strategic initiative to drive operational efficiency and long-term profitability. We previously discussed Phase 1 actions, including headcount reductions and the integration of [indiscernible] our headquarters, which are still expected to deliver $30 million in run rate cost savings with approximately $13 million of realized cost savings anticipated in FY '25.

Today, we are announcing an incremental cost savings target, tide gravity Phase 2 of $20 million once fully implemented. The drivers of Phase 2 savings include channel optimization, supply chain efficiencies and other general connectivity measures. Phase 2 implementation will occur through the end of fiscal year '26, and we expect these initiatives to more fully materialize in our results in the fiscal '27.

The strategic review for [indiscernible] is ongoing, and we will provide further updates as the plan evolves. It is important to note that Project Gravity is a transformation exercise that will drive a meaningful reshaping of our P&L. Gravity initiatives are expected to drive material improvements to our cost structure once fully implemented. The key pillars of gravity are: one, to drive efficiencies and profitability in our business. to, to enhance return on investment; and three, to open up capacity and resources for investment into our highest growth opportunities. Some of these actions will intentionally reduce our revenue base as we exit unprofitable areas of the business, enabling a smaller, but more profitable business and opening up investment capacity to drive our long-term growth. Given year-to-date performance, we are reaffirming our full year guidance. Revenue is expected to be between $540 million and $555 million or down 8% to 11%. Gross margin is expected to be between 40.5% and 41.5%.

For adjusted EBITDA, we are reiterating our guidance of $66 million to $73 million. We continue to expect Grills revenues to be down high single digits for the year. with expected pressure on unit volumes driven by elasticity falling pricing increases taken earlier this year to mitigate tariffs and protect profitability. For consumables, we are expecting growth for the year. In terms of the fourth quarter, recall that we are facing a difficult comparison from the prior year when we had a large load-in of our new Woodridge line. We also benefited from a revenue pacing shift in the third quarter of 25%, which will pressure fourth quarter revenues. Second half of '25 performance is expected to be in line with our prior view.

In closing, I want to thank our team for their dedication. We're encouraged by our third quarter performance and remain confident in our ability to navigate the current environment while laying the groundwork for sustainable growth. With that, I'll turn the call back to the operator for questions. Operator?

[Operator Instructions] Our first question of the day comes from Brian McNamara of Canaccord Genuity.

So I just wanted to drill in on your decision to kind of exit DTC and kind of redirect trigger. -- com traffic to retail partners website. Is that certain types of retailers? Or just any clarity there would be helpful.

Yes, Brian, thanks for the question. I'd say a couple of things. First of all, while in many consumer businesses, the direct channel is the margin monster. That's not the case in our business. just due to the supply chain, the size and weight of shipments and dropping them on. It's the last mile that's expensive. Frankly, it's the last mile that's also that also sub-optimizes the consumer experience. And so as we looked at both the economics, the bandwidth and cost needed to drive that channel from technology infrastructure through advertising to acquire customers. And then we looked at the end consumer experience, it was clear to us that this was not the right channel for us to be driving. And so as we think about what that will look like, I would say, first of all, we will -- we're working with retail partners so that we can offer choice to our end consumers. We're being thoughtful to the consumer experience that they can provide. First of all, ensuring that we can connect into inventory levels send a transaction to a retailer that they can that they can quickly service and that it can service in a high-quality way. We'll look at capabilities like assembly and delivery, which is clearly a better experience than the last mile outsourced truck or van sort of dropping off a grill box and someone's back forth. We think we can partner with retailers that improve this experience. And so we're in the process of defining exactly who that will be, and we've got technology selected, and we're confident that this will -- this will be an opportunity to continue to drive revenues but at higher margins at better better experience to the consumer. We're certainly going to be attentive to ensuring that we drive as much of that revenue there as we can. We want to make sure that there's minimal breakage in the process. But long term, we really believe in this approach.

Great. That's helpful. And then just on your retail partners' attitudes towards inventories in the current market. We've heard from other players, obviously, smaller price points that several large retailers kind of are being tight on inventory, shifting their business from direct import to domestic fulfillment. I was just curious, like what are you guys seeing, obviously, given a much higher price point?

Well, I would say there have been some meaningful shifts over the last couple of quarters as the tariff landscape shifted. It didn't make sense for a period of time for retailers to direct import the inventory largely because the tariff exposure was so much higher on the wholesale costs than on our cost of goods. And so a lot of our partners did shift towards a domestic fulfillment model. Fortunately, we've worked very closely with them to implement a first sale process, which is an efficient way to direct import without driving higher aggregate tariff costs. And so that's actually one of the things that drove some of the shift into the third quarter. we were fulfilling domestically, some of the revenue shift I should clarify. We are showing domestically, but we've shifted the largest retail partners back to direct import. In terms of their behavior or their point of view around inventory in general, we're not really seeing that change we're not seeing any change to the allocation of space at retail to the assortments. And we're not seeing a different strategy with regards to inventory than we were seeing pre tariffs.

Great. And then finally, I'm just curious, it seems like that sub-$1,000 price point Grill continues to outperform. It is probably 3 years running now. I'm just curious your thoughts on how that maybe changes or affects your overall pricing strategy. Clearly, you have a premium branch status. But does that change how you think about things? You launched a relatively upmarket growth earlier this year. Just curious of your thoughts there.

So we talk a lot about pricing strategy vis-a-vis our brand position. And we continue to believe that Traeger is well positioned in terms of the product experience, the brand, the perception of the brand to be an accessible premium brand. and we believe that will continue. And it will continue in part by how we position it, but also in part by how we think about our product road map strategically. What we learned is in our consumer research in our pricing studies is that the lower price points getting to a sharper opening price point, expanded the addressable audience for Traeger I think it does a couple of things. Number one, it's -- it inspires a consumer who is spending closer to the average of a grill in the U.S., which is it's around $325 of retail. We're able to migrate them north, a consumer who is probably buying a propane grill before, but it has been looking at trades willing to step up a little bit. So we clearly have -- are reaching a new consumer. But I would also say that when we've reached that consumer and they come into the trader community, they start to appreciate the benefits and just the experience of cooking on a Traeger Grill at [indiscernible] Grill. We believe that they stay. They stay not only to cook with the wood pellets, the accessories, the lifetime value of that consumer is meaningful. But I would say equally importantly, they tend to upgrade as later on their second purchase as they become committed to the brand and the solution. So we see it as a strategic opportunity to enhance the size of the market we don't think it constrains our ability to position the brand or to grow. I do think there's -- one of the things that is clearly happening not only expanding the audience of addressable consumers. But this has been -- it's been a tough consumer environment for high-ticket discretionary durable products. And I think in light of that, high interest rates, we've seen the consumer shift to lower price points. We think that is a temporary phenomenon, and we continue to position to drive higher ASPs going forward. But we like the strategy of getting a little bit sharper on that opening price point because we do think it brings in an incremental consumer.

. Our next question comes from Peter Benedict of Baird.

First, I don't know if you could maybe frame the size of the revenue loss that you're expecting to incur from the from the Phase 2 distribution strategy plans that make sense. Just kind of curious you can frame the size of that for us, maybe the timing on when that might -- you should expect that to play out. That's my first question.

I'll take that question. So overall, we're essentially walking away from approximately $60 million of revenue, but we do believe there's going to be a recapture of that revenue in either either the channels that they're in, i.e., Costco in line or the other channels that we operate in. With that said, the timing of this, this is -- we're making a shift in January and into February. And then the recapture and the value of this is going to be sequentially within the first half of FY '26 into -- sorry, the first half of '26 into the second half and then long term into '27. These are long -- this is a structural shift in nature, and we just don't want to overcommit to next year. At the same time, this is absolutely a value capture of $20 million.

Let me just add to that, if I may. It was -- as we step back and think about what are we trying to get done right now, we're seeing an opportunity that I would say was originally driven by -- originally driven by tariffs and need to cut costs so that we could preserve profitability and financial health in the moment. But as we sort of moved into the late second quarter, early third quarter, we were very committed to doing this because we see a long-term benefit from -- for the business. This project gravity is fundamentally a transformation exercise which early innings will drive profit, it will drive cash flow. It will delever our balance sheet. But ultimately, what it does is it streamlines the business, and it opens up investment capacity so that we can reinvest back in growth. And so to the extent that revenues decline in the near term, we're going to be driving higher profitability, and we're going to be creating capacity to make sure that what the consumer cares about which is a better product experience, it's a better interaction with the brand, the recipe content, all of the content that improves that experience that we can fund these things, that we can fund the experience at retail that a consumer has when they walk in there. It's been an interesting. Maybe challenging as a better, better word. It's been a challenging few years coming out of the pandemic. And as we've gone through these budget cycles and feel like we're not -- we don't have the investment capacity to adequately fund what we believe is really important to consumer. We really saw this as an opportunity to shift to completely reshape the P&L and to shift how we go after to shift structurally so that we can really do the right thing for the brand long term. So we're actually really excited about the process that we're going through. There will be some decline in revenue as both Joe and I have said, but it will be really an enabler to medium to longer-term growth.

Got it. No, that's helpful perspective. My second question is around maybe give us a sense of the margin profile of going to the distributor model in Europe, kind of how that compares maybe to what you would see as going [indiscernible] Just kind of curious what the margin cost on the on the distributor side of things.

Yes. So margins, when you ship to distribute all is obviously an impact to margin overall because that's the third party, we're going to work with has [indiscernible] deliver a profit as well. At the same time, if you look below margin, the cost structure that we're taking out of the business is going to make up for more than the margin loss. And so back to what Jeremy said in being smaller but more profitable. This is a perfect example. And then we're not -- we believe we can serve the consumer in Europe in the same way that we were serving them in a direct model. but just in a much more profitable way.

Got it. Makes sense. Last one is just -- can you maybe expand on the last year response that you've seen a price up, you saw units come down. Certainly, that was expected. But just I'm curious how that maybe informs your promotional plans for the fourth quarter and into next spring. Just kind of an open-ended question there [indiscernible]

Yes. It's a prudent question. So as far as elasticity in pricing, we took pricing in the low double digits -- generally speaking, we're very happy with our -- with the way sell-through is tracking. There is a divergence of above 1,000, below 1,000 in terms of performance. Speaking about promo overall, though, the consumer reacts when we promote and it's something that we use to think about our inventory management, our profitability in your quarter-to-quarter management. And so we're going to -- we're continuing to be committed to promo. Keep in mind as well, promo is funded. We split promo costs with our channel partners. So it's a really -- it's a good way to get Grills into the hands of consumers. We're committed to continue promo long term.

[Operator Instructions] Our next question comes from Joe Feldman of Telsey Advisory Group.

I wanted to clarify something. You mentioned this grill pacing shift that helped the third quarter that maybe shifts out of the fourth. Can you explain that a little more? Like was that your the end market trying to get ahead of tariffs or in purchasing more goods early? Or what drove the shift basically?

Yes. So very simply put. We had around $8 million pace from Q4 into Q3. And it's just candidly an organic pacing shift. There's some revenue growth that we're going to ship at the end of Q3 -- or sorry, in the beginning of Q4 and they shipped in Q3. There's not a lot more to it than that. At the same time, we have adjusted to Q4, and we are reiterating guidance.

Got it. Right. Yes. No, that's fair. And then maybe -- I know it's maybe a little early for 2026, but -- you guys had a lot of sand innovation this year. And I'm wondering how you guys were thinking about next year in terms of lapping that? Obviously, you've got a lot of work ahead with this project gravity and reshaping the P&L. But -- and so maybe that's going to be the answer. But I was just curious, from a product standpoint and a flow to drive the top line, how do you lap Woodbridge and Flat Rock launches?

So a couple of thoughts on that, Joe. The first is we really believe that a good product, a good product strategy that has that is consumer-centric that has innovation at its core, continues -- it continues in a very consistent, steady fashion. And we don't think differently in some macro in 1 macroeconomic moment versus another just because 2, 3 years out, we can't anticipate what that moment will look like. And so one of the things that we've really invested in over the last 3 years is the infrastructure from a team perspective and the process and tools internally so that we can predictably and consistently bring new products to market. So that's our intention. We'll continue to do that. If you look at the strategy that we laid out a few years ago in introducing products at a premium price point and bringing innovation downstream. You've seen us launch the Timberline XL, which is a $4,000 Grill. This year, the year after that, we launched the Ironwood, which had elements of technology that were inspired by the timber line. And then we saw a similar movement downstream in Woodbridge. And so we will continue to do that. The focus will always be on our core wood pellet grill experience. We think that's really what drives our consumer in the community. And we've done some -- we've invested in accessories to enable that to make that experience better. We have done a little bit of work in adjacent categories with the Flatrock 3 Zone and 2-zone products. But the [indiscernible] the center of our universe, and we will continue that process to bring value downstream. And then as is I think the circle of life and product development will then go back upstream, launch new innovation and bring it downstream. So we're going to continue that process and we believe that over time, the consumer will see Traeger as the innovator has always been fresh in its portfolio, product portfolio, and that is an important foundation to our business

[Operator Instructions] Our next question comes from Peter Keith of Piper Sandler.

I was wondering if you had an assessment of the overall Grille market so far, whether it was Q3 or year-to-date, maybe how grills -- the grill industry is trending on a sales basis or a unit basis? Are we starting to see some rebound in demand at this point?

Yes, Peter, boy, as we came into 2025 and as we think about the ownership life cycle of the Grills and the pull-forward demand that happened to pandemic, we really view this as a category growth year, and we were positioning our investments, not just in product but in channel and in brand to drive growth consistent with what we thought was likely coming. Tariffs definitely shifted the landscape. I think it's a consumer goes to buy a grill. And if it's not broken, they see a grill at 10%, 15% higher, they will use what they have for for another season or so. And so that driver that moment of a consumer retail, we generally believe has been muted just by the tariff environment. We think the market for Grills is down slightly. There are a number of factors that that we think contribute to that, including the higher price points, but the higher interest rates of where Americans heavily financed their consumer discretionary purchases housing relocations continue to be at all-time lows. But fortunately, as we think about some of these catalysts going forward, we seem to be entering a period of declining interest rates. We think that will be a positive from a house transaction perspective. certainly from a consumer borrowing perspective. And the further that we get from the pull forward of the pandemic, the more our conviction grows that we're entering into a robust replacement cycle, but it hasn't happened this year. The market is slightly down and our share in the market is about flat right now.

And then I think right at the end there, you're mentioning another topic I wanted to ask about, which was the sort of elusive replacement cycle. Given you can track trigger customer usage quite closely. Are you seeing any green shoots around replacements from some of those 2020 or 2021 purchases?

Let me step back and first say all of the data that we see on consumer engagement is robust. I think that we see that in the Cook data that we get from our connected grills. And we also see it in the consumables business, which which grew in the third quarter, both on a revenue and a sell-through basis. But I wouldn't say that we are seeing data suggesting the pandemic buyer is rebuying at this point in time. The word that you use is elusive, it is elusive. We've we've done the math in 100 different ways, and we would have expected that absent some of the macro headwinds that have come that this year, we would have entered a sort of 2- to 3-year period of higher higher demand, just based on the pandemic consumer refine. The one thing that I'll say that we view as a positive in our businesses, as we look at the market down, we're holding share on what I would consider to be relatively low demand creation investment. And in fact, we've actually seen our unaided brand awareness increase we do a semiannual contract added semiannual unaided brand awareness survey and we saw that increase by about 100 basis points over the prior 6 months. So we continue to feel bullish on our brand position, on the products that we're bringing to market. And boy, this elusive replacement cycle it's coming. And so on balance, we look at the next 2 to 3 years and say, we like our position, we like the market, and we feel like this project gravity is really positioning us not only to be to drive greater profitability, but to invest back strategically in the areas that will help us take advantage of this replacement cycle when it comes.

Maybe lastly, just with advertising, it's good to hear the audio brand awareness is going up. But do you feel like your advertising is somewhat constrained today and interesting on the discontinuation of the Costco road show, which in itself is a big marketing vehicle, would you look to sort of maybe some cost savings but also reallocate those dollars to other perhaps more effective media streams?

Yes, I can take that one. The underpinning of Project Gravity is really what you're speaking about is unlocking it's really thriving in the tariff environment. And we didn't want tariffs to suffocate the business just financially. So unlocking investment capacity, reinvesting and that's going to be -- that's something we're starting to think around about as we exit '25 into '26. So the short answer is yes. Let me just add specifically on Costco roadshow since you mentioned it. I think that's a really good example of how we're stepping back and really assessing why we do what we do, how we do it, what the most profitable, scalable way to run this business is and the Costco roads, I think, is -- it's a great example of a program that's been great for our business. We more than a decade doing Costco roadshows. And it was profitable. Supply chain costs increased, T&E cost increase, labor cost increase, it was neutral. And then we started to think about just the cost or the value of the impressions that we gained. And I would say that the tariffs were were the last sort of -- the last piece of economics that really just made it not work anymore. With that said, it's been foundational. We now get an opportunity to redirect or redeploy the savings from that program into more scalable ways to drive awareness and conversion. So it's -- I'm actually really proud of the team for digging deep and deeply assessing elements of our business that were important and that have been favored, but being willing to really think about what is the better way to drive the business going forward.

At this time, we have no further questions. So therefore, this concludes today's call. Thank you for joining. You may now disconnect your lines.