Weber Inc.
Q3 2021 Earnings Call Transcript

Published: 15 Sep 2021

[Operator:]

Hello and welcome to the Weber Inc. Third Quarter 2021 Earnings Conference Call. My name is Charlie and I will be coordinating your call today. I will now hand you over to your host, Brian Eichenlaub, to begin. Brian, please go ahead.

[Brian Eichenlaub:]

Good morning, and thank you for joining us today for our third quarter 2021 earnings call. I’m joined this morning by Chris Scherzinger, our Chief Executive Officer; and Bill Horton, our Chief Financial Officer. I’ll start with our forward-looking statements disclaimer. As you’re aware certain statements made today, such as projections for Weber’s future performance are forward-looking statements, actual results to be materially different from those projected. For further information concerning factors that could cause results to differ, please refer to our public 10-Q SEC filing, our earnings release and our SEC filings, all of which are available on the Company’s website. This is of particular note, during the current COVID-19 pandemic, when the length and the severity of the crisis, and economic and business impacts are so difficult to predict. A recording of today’s webcast and supporting documents will be archived for at least 90 days on Weber’s Investor Relations website. During the call today, the Company may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to GAAP reporting. Please refer to the Company’s earnings announcement, which has been posted on the Company’s website at [e-mail] and can be found on the Company’s SEC filings. And now, I’d like to turn the call over to Chris.

[Chris Scherzinger:]

Hello, everyone. I’m excited to be with you this morning. And I want to welcome you to Weber’s first earnings call as a public company. Before Bill and I comment on the outstanding results for our fiscal third quarter, I’d like to start by thanking our Weber team members all around the world for their hard work this quarter and this year, and their commitment to making the very best grills and accessories, and delivering the very best customer service to our Weber fans around the world. We wouldn’t be here today having this conversation as a public company, were not for your efforts. I’d also like to thank our founding family, the Stephens and BDT Capital Partners for their support over so many years and during our IPO process. The IPO certainly represents the capstone moment in our remarkable 70-year company history, but it’s even more so a launching pad for future opportunities. Today, we’re extremely proud to report a record fiscal third quarter, our first quarter as a public company. Our full year ended September 30th. So, this quarter’s results represent our third fiscal quarter, the end of June 30th. Bill will go through the entire quarter in more detail. But in summary, our third quarter sales were up 19% versus the same period last year, reaching a record $669 million. This marks the fifth straight quarter of record sales. And compared to the third quarter in 2019, our net sales in the quarter this year were up 51%. On a fiscal year-to-date basis net sales were $475 million, or 41% to $1.6 billion. For the quarter, every region experienced strong growth rates, with EMEA leading the charge, up 35%; Asia Pacific, up 25%; and the Americas, up 8%. Countries experiencing the most significant growth in the quarter were Canada, the UK, the Nordics and several emerging markets around the world. For reported earnings, net income was $18 million or 2.7% of net sales and adjusted EBITDA was $134 million or 20.1% of net sales. Despite distribution, inbound freight and commodity costs inflation headwinds, our quarterly gross margin improvement and strong EBITDA performance is attributable to our multi-continent manufacturing footprint, particularly with our U.S. plant here in Chicago, as well as proactive pricing and mix management, early in 2021, when foresaw the rising challenges. These are unique strengths for Weber and delivered reliable earnings for our shareholders, while also allowing us to fund investments in future growth initiatives, like new product development, new technology platforms, digital marketing and geographic expansion. For those of you who are new to Weber and the outdoor cooking category, I want to spend a few minutes introducing you to the iconic Weber brands and our truly unique global business model, describing this outstanding performance. Unlike other outdoor cooking companies, we are a true global business selling in 78 countries around the world, grabbing approximately half of our revenue outside the U.S. Weber is the clear market share leader in key grilling markets globally, with a wide margin over the number two player and notably the number two player is different in each market, reinforcing that Weber is the only truly global outdoor cooking brand. And it’s not just global presence, it’s global fandom. We have an installed base of over 50 million households across those 78 countries. We win on brand awareness, net promoter score, customer satisfaction and loyalty. In fact, 96% of Weber owners globally recommend Weber grills to friends and families, to 10 people on average. Weber owners grill about 80 times a year, which is around 15% to 30% more than other brand owners. We have over 3 million social followers, about 2 times the closest competitive brand, and that lead is growing. Our category leadership and our strong momentum position us to capture an even greater leadership share of the estimated $49 billion global outdoor cooking TAM per Frost & Sullivan. In addition, Weber is the only brand that plays in all the product segments within the outdoor cooking category

[Bill Horton:]

Thanks, Chris, and good morning, everyone. Before I get into the details, I wanted to summarize some guidelines we’ll follow as we share our financial results every quarter. We will report our results by operating segment, which lines up for us as our three primary regions

[Chris Scherzinger:]

Thanks, Bill. In closing, I would like to again thank our Weber team members for delivering outstanding results in the quarter during the challenges of lockdowns across offices and facilities around the world and still supplying and satisfying our customers when many others could not. And I would like to thank our new shareholders for joining us today. I am extremely excited for all that is in front of Weber and the opportunities that lie ahead of us as a public company. We won’t let up on our passion for inventing groundbreaking new products that continue to redefine all the segments of the outdoor cooking category. And we look forward to adding to our loyal community of Weber fans in the process. Now, I’d like to open up the call for questions.

[Operator:]

Our first question comes from Robby Ohmes of Bank of America. Your line is open. Please go ahead.

[Robby Ohmes:]

Great quarter. Listen, I think a key question I just wanted to ask was can you guys give us an update on freight and commodity cost pressures? And Bill, you gave us the guidance, but anything change in the gross margin expectations embedded in that guidance, and maybe how to think about the quarter you are in now and what you are seeing in terms of gross margin pressures? And then, also any thoughts on how that carries over into next year and maybe some -- how the price increases are playing out to mitigate some of these pressures?

[Bill Horton:]

Yes, Robby, maybe I’ll take a first crack at it and Chris can certainly jump in if he’s got some additional comments. Generally, these commodity and inflationary trends you are seeing are consistent with what we’ve shared during the IPO process and no real surprises, although we are managing through it as we have historically. Generally, our supplier contracts and hedge positions protected us from most of the major commodity movement earlier this fiscal year. We certainly realized the impact in our year-to-date Q3 actuals but not to the extent that we are now seeing in the spot markets that’s impacting Q4 and Q1, and definitely not what we are seeing in the inbound freight pricing that’s out there. However, our exposure is higher now, consistent with what you’ve seen from most companies reporting earnings, providing guidance, et cetera. In late Q3 and now into Q4, we are now at market rates, which depending on the commodity, generally are up between 20% -- 70% in some cases versus last year. We are covering these inflationary challenges like we have historically. These aren’t new to our team. We managed through tariffs back in the early days. We managed through inflationary challenges earlier this year. And we have plans to cover this impact on a dollar basis starting in Q1 and certainly fully by Q2 with pricing actions that were being finalized and deployed across all of our markets. So, I guess, I’ll wrap up and maybe come back to you with a follow-up, if you have follow-ups. But ultimately, we are going to continue to focus on what’s helped us gain competitive wins throughout the pandemic. We are going to focus on ensuring we have the supply ready for our consumers where and when they want to purchase. We are going to leverage, as Chris alluded to, our unmatched supply chain with a truly global manufacturing footprint. And we are going to proactively manage pricing in a methodical way to make sure the Weber brand and our Weber pricing holds value for our consumers. And I would say directionally that pricing deployment is going well in every market. We’ll share details of that into our next earnings call as we give guidance for 2022.

[Robby Ohmes:]

That’s really helpful. Just a quick follow-up, maybe for Chris, it sounded like demand for grills is stronger outside the U.S. than inside the U.S. I don’t know if I heard that right. But, is that the case, and why would that be?

[Chris Scherzinger:]

Well, I think, Robby, there is -- I think it’s strong in all of our regions. And so, we’ve seen positive -- both from a point-of-sale standpoint positive trends there, as well as sort of an overall retail or a wholesale demand. And I think it’s consistent across the market. There are some timing dynamics. And so, one of the strange oddities of how COVID has played out and how lockdowns play out regionally, and frankly even how some of the supply chain challenges, the container logistics challenges relative to ocean freight, how those have played out regionally, it hits different parts of the world in different times. And so, it’s -- just to give you an example, in our fiscal Q2, which is January through March, the European market had a really tough go relative to a resurgence and lockdowns and also the transportation issues, the inbound containers. And so, the demand there was suppressed a little bit by the COVID dynamic and logistics in Q2, and you saw that bounce back in our Q3 results where Europe really outpaced. If you remember, the Suez Canal incident that happened back earlier in the year, that really impacted European inbound. And so, we saw that bounce back in Q3. In contrast, the Americas, which was a little bit lagging behind in a Q3 standpoint, had a tremendous Q2. And so, as you look over the course of the year, it’s pretty balanced. Our year-to-date numbers for the Americas up 37%, for EMEA up 42%, for Asia Pacific up 69%, particularly in Asia Pacific driven by an enormous growth year in Australia for our business there, which is because it’s Southern Hemisphere counter-seasonal, and they were kind of lapping a depressed year from 2019 due to some bushfire issues in country. And so, there was a really big surge in Australia. So, generally speaking, it’s been balanced across the world, minus these quarter-to-quarter fluctuations, based on macro factors.

[Operator:]

Our next question comes from Kate McShane of Goldman Sachs. Your line is open. Please go ahead.

[Kate McShane:]

My question was just around accessories. I don’t think we heard too much in the prepared comments today, but I know that is a big future growth driver for you. So, could you maybe give a little bit more color around your accessories business, how it performed during Q3 and what the outlook is for the rest of the year?

[Chris Scherzinger:]

Sure. Let me take that, Bill, and then you can. Sorry, go ahead.

[Bill Horton:]

No, you go ahead, Chris. Go ahead.

[Chris Scherzinger:]

Well, I was going to say, the accessories business is doing really well. We’ve challenged our teams to really maximize that part of the business. As you know, Kate, from prior conversations, that’s an accretive part of our gross margin mix, and so we like the accessories business and it’s a key focus area for us. We’ve put a lot of programs in place to continue to drive those, and they are performing well. I would say, generally speaking from a revenue standpoint, it’s growing basically in line with our grill sales. And so, it’s not beating our grill sales but it’s growing in line with grill sales. So, we’ve seen some really good progress in a number of areas. One of the ones that is my favorite is looking at attachment rates. So, anytime we sell someone a grill, which because our grill business has been growing so rapidly, there’s a tremendous opportunity for us to get accessories attached to a grill at the first purchase of the grill. And in our Weber.com environment, in particular, we put a number of programs in place. And we actually redesigned our entire website for the 2021 season back in the spring time frame to present really highly correlated accessories at the time of purchase of each grill, which is perhaps not rocket science, but it’s something that we weren’t doing in the past. And putting those algorithms in place inside our website drove about a 10-point -- 10 percentage-point attachment rate increase for accessories sales associated with a Weber grill. So, that’s been a really nice driver of growth in our weber.com environment. And we are also seeing attachment rates increase at retail as well for our retail partners. And so, it’s probably on the order of about 5% to 7% higher than we’ve seen in the past years. And so, that’s a function of merchandising. It’s a function of how we present the accessories adjacent to the grills. And accessories will be a key growth driver for us going forward. There is a great innovation coming next year on accessories that I’ll be excited to share with you probably on our November call, but the -- where we are really taking the accessories to another level and effectively creating an outdoor kitchen for grill users in the Weber user base. So, accessories are a key growth platform for us, going forward. And that’s across every region around the world, not just in the US. In particular, our accessories business is a substantially higher part of our overall mix in Europe, where we have a stronger presence of Weber stores and grill academies, and it’s more of a dealer model as opposed to a big box model. And that’s been a growth engine for us in -- outside of the U.S. that we are bringing into the U.S. for years coming forward.

[Bill Horton:]

And Kate, the only thing I’d add to that, and Chris got it right, generally our accessories are growing right in line with the balance of our business, certainly in Q3. The one point I’d add is our ASPs continue to trend up in accessories. We were kind of last year, if you will -- versus last year, we’re up almost 10% in the quarter on accessory ASP. So, we are getting the trade up that Chris alluded to on weber.com that’s helping certainly. So, we feel overall really positive about what we’re seeing in accessories.

[Operator:]

Our next question comes from Megan Alexander of JPMorgan. Your line is open. Please go ahead.

[Megan Alexander:]

My first question is kind of a follow-up to Robby’s second question. Can you talk about whether you’re seeing any impact in POS trends from the Delta variant in any of your markets, internationally or regionally in the U.S.?

[Chris Scherzinger:]

Sure. I can take that one. I don’t know that we’ve seen -- it’s a volatile environment, obviously. And one of the dynamics that we’ve seen certainly in the U.S., although honestly it’s probably not as dramatic in some other countries as here, is the slowdown of the reopening, if you will, so kind of a pause in the reopening and a little bit more of lockdown behaviors, and a lot of the debates around vaccine policies, et cetera. That’s a little more dramatic here in the U.S., where our vaccination rates are relatively low. In many other of our regions around the world, we see more of a return to normal happening, although clearly it varies because a market like Australia or parts of Asia are even more -- in a more dramatic pullback. So, it really varies by region, Wendy and -- sorry, Megan. And I think there is not one unilateral statement that would work for the entire world. So, that said, the way that we are looking at it, first of all, our point-of-sale data, as I mentioned before, continues to be strong. And so, we haven’t seen any kind of a pullback. What you might expect to see is a lengthened surge. And I would say that the business is behaving a little bit more in line with the traditional seasonal dynamic that we would normally see in a grilling season. And so, it’s normal in the Northern Hemisphere for us to come out of the summer and into the fall with sort of counter-seasonal dynamics. We have seen continued strong business in the last couple of months, and so I don’t know that I would attribute that to Delta. What I would probably attribute that to are the sustaining trends that are coming out of the pandemic. There is -- if you think -- there is a number of them. If you think about homeownership and the migration of particularly millennials from urban areas to suburban areas and purchasing houses, starting backyard entertaining -- or backyard entertaining becoming a bigger part of your experience and how you socialize with people. Traditionally, that’s a sweet spot for Weber. It has always been for decades and decades, a place where Weber as a brand wins and is really an integral part of consumers’ lifestyles. And so, that’s positive for us. I think also, if you think about remote working, there hasn’t been a light switch flipped and everyone goes back to the office five days a week everywhere. And so, I think on a go-forward basis, it’s fair to expect some kind of a hybrid model where you’ve got a little more work-from-home than pre-pandemic. Even if it’s not a full lockdown five days a week at home, that’s generally beneficial to the grilling category and generally beneficial to Weber, because just if you add a Friday at home, that basically extends your weekend by 50% relative to grilling opportunities. So, there is a lingering and I think a sustaining upside that’s not really related to the Delta variant, but it is related to that sort of new normal that we’re living in right now. And there’s every reason to expect those trends to continue on a go-forward basis.

[Megan Alexander:]

That’s really helpful. Thank you. Just as a follow-up, it seems like the supply chain concerns are more cost related, but can you just talk about maybe your inventory position and ability to fill demand? It doesn’t seem like that’s a concern, but how does this compare to maybe some of your peers? And do you maybe see this as an opportunity to take more share, going forward?

[Chris Scherzinger:]

Okay. Go ahead, Bill.

[Bill Horton:]

I was just going to take -- start, Chris, and you can jump in certainly. We feel really good about our inventory position. Obviously, we are comping -- as I mentioned in my comments, we are comping a period last year where inventory levels were extremely low levels for us as a company, just given the demand and the surge in the season, if you will, from last year. So, we feel real good about as we head into our peak season in the next three to four months about where our inventory positions lie. We’re seeing the constraints obviously out in the marketplace. But, as I mentioned, we feel really confident in our supply chain team to manage through this. What we’re seeing is transit times generally have moved from historical averages of 45 to 50 days to now closer to 75 to 80 days. We are seeing the carrier reliability, for example, which in July was I believe 15% versus, if you go back to last year, 75%. So, we’re certainly seeing the challenges in the supply chain. Long Beach Port, for example, is one that’s really a bottleneck, as you’ve read about in the media. However, we’re managing through it. We haven’t had any issues with supplying our customers’ needs. And that’s ultimately what our team is pressed to do, which is ensure that as we get to our peak season that we got the supply ready for our consumers and our customers globally, and we feel good about where we are. Chris, did you want to add anything to that?

[Chris Scherzinger:]

Yes, sorry. I stepped on you earlier. Yes. The thing I would add is, there -- some of what we’re doing well that’s leading to us taking share in the market and I think winning, and based on the data we have, outperforming competitors on in-stocks at retail. Generally speaking, we’ve got a great team. We’ve been around the block before. This is not our first rodeo. We’ve run into these kind of challenges in the past. And I think our team is working well globally and communicating well. And that’s not to be taken lightly. Like, I think, the ability to execute in times like these does matter. And I feel -- I am thankful for my team and I’m proud of their performance. I would also say, the strategies that we’ve put in place give us a leg up in many respects. And so, we do have a strategy that I’ve talked to many of you about, maybe all of you about, called Make Where We Sell. And that’s a strategic intent to get our production closer to our demand. And so, we’ve invested substantially in my 3.5 years here at Weber to maximize our U.S. production footprint. That’s really unique for Weber. We’re the only grilling company in size that has U.S. manufacturing footprint, and that helps us a lot when it comes down to these global transportation challenges and boats getting stuck at ports and inventory being tied up on the water, so to speak. And we’re adding, as you know, a manufacturing footprint in Europe that will open -- I think we open officially -- with a grand opening is in just a couple of weeks. And things are trending really well there. And so, on a go-forward basis, we’ll have a European manufacturing footprint that will take some of those delays and lead times out of the European business as well, and that’s a really exciting opportunity for us, and it’s going to be a big unlock. If you think about that dynamic where products on the water normally for 35 to 45 days, and now it’s up to 75 days. When you have local production in Europe, you will cut that dramatically probably by two-thirds in terms of like the -- sort of the working capital that’s tied up in serving the business, and it allows you to be much more responsive to customer demand. And we think that’s a strategic advantage for us. It’s a big investment point. It’s what we’ve invested to bring that to life and that’s going to serve us well as these dynamics play out in the future. They’re volatile. They’ll come and go. But, we’ll be robust and ready for them.

[Operator:]

The next question comes from Simeon Siegel of BMO Capital. Your line is open. Please go ahead.

[Simeon Siegel:]

Thanks. Hey guys. Good morning. Congrats on the first quarter as a public company. Great to connect again. Chris, you mentioned some interesting data points about consumer usage. You talked about the average grills, but first kind of how frequently people grill, et cetera. Can you just talk to how you track those usage stats, how they’ve been trending? Maybe touch on how you see using technology to get increasingly more engaged with those customers going forward? And then, Bill, if you can, any help on how you’re thinking about the regional revenues for the fourth quarter embedded within the revenue guide that you guys gave? Thanks so much.

[Chris Scherzinger:]

So, I’ll take the first one, Simeon. It’s evolving. As we’ve talked about before, we put a lot of investment behind Weber Connect. That’s our technology platform, for those who don’t know, that effectively creates a smart grilling dynamic. The way I think about it is, it’s like Waze. And so, it gives you a personal situation-specific grill guidance throughout a cook that reacts to changes in conditions or temperatures or food types and gives you real-time feedback tied to algorithms we have in the cloud. We’ve seen a really positive response to that. In fact, the Weber -- I mentioned in my prepared remarks some of the success we’ve seen behind the Weber and Spirit EX smart grills, which have Weber Connect embedded in them. We’ve driven a huge amount of growth in revenue through that Connect line this year and, in particular, embedded into grills. And that will be a key platform for us going forward. But, as we expand that and we drive that household penetration of smart grills higher, Simeon, we get the data from consumers that show us not just an engagement with the brand on a week-to-week, day-to-day, cook-to-cook basis through the app but also a connection with the brand where we get insights into what people are cooking and when they like to cook and what their desires are that may be unmet relative to accessories or maybe even services in the future that will build on that experience. And that’s growing from a scale standpoint. So, it’s still early days for us in terms of the household penetration of the Connect technology but it does give us everything you’re talking about, the richness of information that allows us to spin our marketing back and even spin our product development back and our service development back to create new value solutions for consumers going forward. So, that’s an engine that’s getting revved up and starting. But, the early read particularly in Q3 on the EX line was tremendously positive, and you will see us build on that going forward. We do measure consumer trends beyond the Weber Connect platform in a number of ways, and we do have an entire consumer insights and analytics group as part of the Weber family. It’s sort of how I’m wired from my background at leading consumer companies. And so, I do really value the data. And there are a number of trends that are really interesting. Just to hit back on the checkpoint quickly, one of our key strategies that we’ve outlined is to go after new innovation and disruptive new products that will accelerate purchase frequencies and attract millennials into the category. And what we found when we show millennials in research a grill that has Weber Connect technology embedded versus the same grill without Weber Connect technology embedded, and we’ll sell them both ways in the future. Millennials’ purchase interest rises over 40% higher when they see the grill with technology embedded. And so, there’s a tremendous accelerator in front of us to bring that technology solution to this broad array of consumers who are wired literally to expect it and really desire it. And that’s a really great grilling experience. And so, the feedback that we’ve had from products in market is really positive. And I think that association of the technology to the product, it’s not tech for tech’s sake but really grounded in the consumer insight does create a deep bond with the Weber platform and it creates value that goes beyond the initial purchase and into a series of purchases and interactions over time. And so, I think that’s a piece where we’ve connected the dots between our research with consumers and the actual behaviors on grills that are being purchased. So, I think that’s probably the key insight that I’m thinking about on a day-in, day-out basis right now. And I don’t know if there’s anything you want to build on that, Simeon, before Bill takes the second half of your question?

[Simeon Siegel:]

No. That was perfect. Thank you.

[Bill Horton:]

Yes, I’ll hit the quarter question for Q4. So, just as a reminder, we’re comping a really strong Q4 last year that was up more than 80% in our Q4 last year. If you think back to historically, our Weber business is generally somewhere between 13% and 14% of our business normally happens in Q4. Last year, in our fiscal 2020, our Q4 was 24% of our year, so again just a really strong Q4. This year, our Q4, we still feel really positive about where the business is coming in. It’s still going to represent 17% of our business across the year. That’s our latest outlook. So, still much higher than our kind of historical trend. And then, when we look at a two-year stack basis, it’s still going to be our highest quarter. So, our two-year stack for Q4 is going to be close to 73%. So, it’s again a really strong quarter. When it comes to the region, I think it was -- we hear question around the region spread, it’s generally level based or level spread across regions. So, we’re not seeing any particular region in Q4 significantly stronger than the other, maybe with the exception of APAC slightly, although we’re managing through the forecast and managing through final shipments here. So, it’s -- but generally, it’s going to be essentially flat growth comparatively across regions. Does that make sense?

[Simeon Siegel:]

Yes. Thanks a lot, guys. Best of luck for the rest of the year.

[Bill Horton:]

Thank you.

[Operator:]

Next question comes from Chris Carey of Wells Fargo Securities. Your line is open. Please go ahead.

[Chris Carey:]

I just wanted a quick follow-up on Robby’s question at the beginning of the call. Is the right way to think about commodities that they are getting worse, or the overall concept of inflation is getting worse, commodities are an element, freight is an element, so you’ll be looking at pricing offsets and in general feel good about where you are? Maybe if you could just expand on that or clarify that for me, just as far as what’s occurred maybe over the past couple of months, and how you’re thinking about it? And then, any commentary just as we get further into this kind of uptick in grill purchases on how much you think these grill purchases have been for replacement of old grills versus new grilling households, and how you expect that mix to kind of play out over the next year? Thanks so much.

[Bill Horton:]

Yes. Chris, so maybe I can take the first part of your question, and Chris, you can jump in on the second one. So, is it getting worse? I would say, definitely the last three to four months, we’ve seen an increased spike in inflation, primarily inbound freight. You’ve heard about that from not only our competitors but also just generally CPGs, everybody’s talking about them that’s real. And we expect it to continue at least through March, which is our second quarter, with the continued use of higher premium expedited freight lanes. So, just for perspective, generally inbound freight represents historically between 5% and 6% of our cost of goods. We’ve seen that increase over the last three months to closer to 12% to 15% of our COGS. So, certainly, it is real, it’s out there, and we’re not going to talk around it. But, what are we doing about it? We are planning our supply chain as if this is going to persist, like I said at least through our second quarter with this use of continued higher premium expedited freight lanes. We’ve doubled our carrier access pools with more than eight providers. So, we are expanding. We’ve got a strategy to essentially deal with this. So, we are executing these strategies to, number one, protect our in-season volume movement. Again, I mentioned that earlier. We want to make sure that we’re -- customers are able to get the Weber grill that they demand and need. So, that’s our strategy. And we’ll continue to manage through these issues like we’ve done in the past. So, Chris Scherzinger, do you want to comment?

[Chris Scherzinger:]

I think, you hit it, and we hit it before a bit. I don’t -- we don’t -- or at least, personally, I don’t take pricing lightly, and so I don’t just want to pass the buck. And we do put a lot of effort into productivity initiatives, into partnering with our supplier base to lock in contracts and rates and try and get advantageous costing relative to the marketplace. And generally speaking, we’ve been successful with that over the years facing a number of challenges. And we’re having -- I think we’re making good progress on that front now. We are a brand that lives in a premium segment generally speaking of each of the categories and segments that we play in. You can get a Weber grill for -- a Weber Smokey Joe is $50, all the way up to a Weber Summit Gas Grilling Center is $4,000. So, we play across a really wide range of price points. And in an inflationary environment, like this one, where you would expect to see most consumer goods manufacturers taking some kind of pricing action in the face of the headwinds that we’re talking about, it’s nice that Weber has one of the tools we have available to us is a full assortment. And so, we’re not going to price ourselves out of a particular consumer’s market because we have offerings at a whole range of price points. And that gives us I think an advantage structurally in terms of how we go to market. But, we do have pricing power because we are a premium brand and we have the highest brand perception and brand equity and net promoter score and brand awareness, not just in the U.S. but in all the markets that we are playing in around the world. And so, when the rubber meets the road and pricing has to be a lever to pull, we do have the ability to execute that. And we’ve shown that even going into 2021, the reason you see -- part of the reason that you see really positive gross margin performance for our business in Q3 and adjusted EBITDA performance for our business in Q3 is because we saw this coming and we took action early, and that included some pricing in certain markets going into the 2021 season, and that was effective. And so, we would anticipate that being part of our toolset that we have to navigate these kind of headwinds going forward. Then, we will navigate that with the consumer in mind and with our retail partners at our side and do that in a collaborative way. But we do have the power to do that. And then, I want to hit the other question, Chris that you had around volume sourcing. I don’t really have any new information around repeats or replenishments, if you will, repurchase volume of existing grills versus new grill category entrants. So, honestly, we do look at that at the end of the year on an annual basis. And so, that’s probably work that’s going on with our insights team right now. So, I’ll check in with them and we’ll have that information for you if we can next time we talk. But -- so, let me take homework on that one. But, I do think one of the interesting trends we’ve seen this year, particularly over the last three or four months, is a surge in our premium grill lines. And so, we have seen, particularly in the gas category -- which the gas category by the way is a really interesting, it’s a growing segment. It’s up substantially this year on a fiscal year-to-date basis, but Weber is up more than double the category. In fact, I think our market share is up something like 2.5 points in the gas category this year, based on NPD data. And that is a testament to, one, our ability to supply, which we talked about earlier; but two, some of the movement in the market toward premium grills where Weber obviously wins. And so, we have seen a big surge in demand for our Genesis grills and for our Summit grills, which is our premium gas line over the last few months. That’s a dynamic that would typically indicate not a first grill purchase but a trade-off or a replacement of an existing grill.

[Operator:]

Our next question comes from Arpiné Kocharyan of UBS. Your line is open. Please go ahead.

[Arpiné Kocharyan:]

Thank you, and good morning. Could you talk a little bit about 2022 demand drivers and what you see at this point, perhaps any insight into how your retail partners are looking at the categories? And then, to go back to the inventory question earlier, would it be possible to quantify what the inventory situation at retail looks like at the end of the quarter and how that compares to pre-pandemic levels? I’m really just trying to understand how much inventory replenishment could help sales next fiscal year, regardless of demand.

[Bill Horton:]

Arpiné, maybe I’ll take the trade inventory question. And then, Chris, maybe you can comment on the first part of the question. Generally, obviously in our three markets, they are all unique three primary markets. But I would say, generally trade inventories are in line with our historical norms. So, we’re kind of aligning with our retailer inventory strategies, I would say, much healthier than they were at this time last year during the peak of the pandemic, where everybody was challenged with just fulfilling demand and the supply issues, et cetera. So, we feel really good about entering the year. So, I would say generally, for the Americas as an example, we spent a lot of time collaborating with our channel partners in Q1 and Q2 to make sure that their trade inventories were in good shape going into the Q3 selling season. That’s, as Chris alluded to earlier, I think paid off really well with strong in-stocks, which then drove strong POS. So, we’ve certainly -- there’s always challenges to manage the mix, if you will. But, I would say, overall, both in the Americas, APAC and Europe, we feel really good about where we sit in trade inventory. As we head into the season, we’ll be able to fulfill consumers’ demands.

[Arpiné Kocharyan:]

Great. Would you say the levels…

[Chris Scherzinger:]

Yes. If you have a follow-up for Bill, go ahead and shoot it his way.

[Arpiné Kocharyan:]

Yes. Would you say that inventory levels at quarter-end are comparable to pre-pandemic levels? In other words, you are not really looking at kind of a star channel or anything?

[Bill Horton:]

That’s correct. That’s exactly how we view it. I couldn’t have put it better myself. So, that’s exactly how we view it. There’s puts and takes within some categories. But generally, overall, that’s exactly how we are viewing it in all of our markets.

[Chris Scherzinger:]

And then, let me jump in on the -- this is Chris. I’ll jump in on the first part of your question around 2022. I mentioned some of the tailwinds that we think will sustain earlier relative to the sort of the post-COVID or the coming out of COVID dynamics and the positive dynamics that we see there. I would add one that I didn’t mention earlier, which is this really remarkable wave of millennials who are coming of age from a grilling standpoint. So, the soundbite there is that there are 40 -- this is a U.S. soundbite, but I think you can multiply it by a little over a factor of two to get to the global number, which is of course, what we look at with half of our business outside of the US. But, there are, in the U.S., 40 million millennials will turn 35 in the next 10 years. And so, there’s a tidal wave of millennials coming into what is traditionally for Weber a really -- like a sweet spot for introduction to the brand and for starting a family, buying a home, orienting your life more around your home and your backyard. And that’s historically been a place where Weber plays a really dynamic part of consumers and families’ lives. And so, we are excited about that tailwind that’s coming in front of us. That’s not a one-year tailwind. That’s a prolonged next 10 years tailwind, and it’s sizable. In fact, I think, it might even be more sizable than the baby boomer surge that happened years and years ago. So, that’s an exciting tailwind. Everything that we’re doing in the face of those positive tailwinds is what I outlined earlier in the prepared remarks, our key growth strategies, which is to introduce disruptive products and innovate with ways to change consumers’ grilling experiences, to drive our direct-to-consumer and experiential interaction with the brand, to expand our customer base, partner with our retailers and drive new revenue growth there, and then to expand and deepen our presence in emerging geographies, which represent growth in all four of those pillars. Just as they were impactful to our Q3 results and to our 2021 results, they will be impactful to our 2022 strategies as well. I have a line that I use here with my team internally at Weber, which is, “the category doesn’t happen to us, we happen to the category.” And that is only a mantra of an ambition to be a leader and to always put our consumer at the forefront of everything we do and to make sure that we’re bringing consumers new value-added solutions that burn the Weber brand and live up to the Weber brand. And that’s how we drive our business. And we think that that will impact our 2022, when we get to it.

[Operator:]

We are now out of time for any further questions, and we are coming to the end of the call. So, I will hand back over to the team for any closing remarks.

[Chris Scherzinger:]

I just want to thank everyone for your time today. As I mentioned earlier, we are very excited about the results. And I’m very proud of the Weber team for what we’ve accomplished, and you heard that from me throughout the conversation, our ability to rise up in the face of the challenges that we talked about today but also to bring to life so many great growth initiatives for the Company. And to see those show up in our Q3 results is exciting, and not just on the top line but on the bottom line as well. So, we feel that we are doing right by our shareholders and that we are delivering on the promise of the Weber brand. And we look forward to our future conversations with you and continuing to push it higher. So, thank you, everyone.

[Operator:]

This concludes today’s call. Thank you for joining. You may now disconnect your lines.