SharkNinja, Inc. (SN) Earnings Call Transcript & Summary

So good afternoon, everyone. I'm Alex Perry. I cover the leisure sector here at BofA. I'm very pleased to have SharkNinja here with us today, including Mark Barrocas, Chief Executive Officer. So SharkNinja is coming off a significant year of growth in 2024, growing revenue over 30% adding $1.3 billion in net sales with growth across 36 different subcategories, both inside and outside of the home. So thanks again for joining us today, Mark. To start, can you just talk about the new product road map. What products and categories are you most excited about for 2025? And then products like CryoGlow or a Swirl, what an incremental new product could do in terms of top line growth?

Yes. Well look, I think, first off, we had a great product launch season in 2024. We had a number of really big hit products. I mean we kind of plan these products to kind of be okay but not home runs. And I think in '24, we came out of the season with a number of home runs. I mean the SLUSHi, the Ninja SLUSHi -- was the Ninja Luxe Cafe, the Ninja Crispi, our Robot products did great. And so we had a lot of good momentum heading into 2025. And in fact, a lot of those '24 products only launched in the United States. So they won't be actually fully rolled out in the world until we get into really the third quarter and even the beginning of the fourth quarter of this year. For example, things like the SLUSHi and Crispi don't launch in the U.K. until the second quarter, and some of these products will launch in the third quarter into Germany and France in markets like that. One of the things we learned last year from launching '25 new products into the market was the need to space those launches out across the year. I think we had too much new product introduction in the third quarter in a very tight time period and it didn't allow for us to not, one thing tell our stories, but two, also react from a supply chain perspective. And so we started the year, Alex, where as you said, we've already launched a product called the Ninja Swirl. The product had a large wait list even before we launched. We launched a product called the Ninja FlexFlame, that was our first large format outdoor cooking appliance. We launched a fan called the Shark TurboBlade. We're planning to launch at least two new product categories this year and have a great road map of products going forward. And I think it's important to point out that, I said this to some investors that we met with today that I remember years ago, people waiting outside Apple Store for an iPhone to come out, you'd say 'Well, who is waiting outside actually to buy a product'. And I think what's been amazing about the Shark and Ninja products today is that before we launch any of these products, there's already a wait list for the products. There's already a sign up for the products. And so we've really been able to kind of create a lot of excitement with new product introductions. But on top of that, it's also created a great halo to help support our base business, which came out of '24, very, very strong.

Perfect. I think you may have alluded to this, but what new categories could SharkNinja explore, they think would complement your current offering, whether it be more sort of outdoor leisure types of products? What are the obvious categories that you're not in today that you think would complement the brand?

Well, look, as we're successful in one category, it opens up the door for us to enter new categories. When we were as successful as we've been in hair care, that opened up the opportunity for us to expand into skin care. As you mentioned, we launched the Shark CryoGlow in the U.K. in the fourth quarter of last year, and it just recently launched a few weeks ago in the U.S. It will launch in the EU in the third quarter of this year. So skin care, I think, is a really exciting category for us to expand into. Outside of the home, I'm super excited about -- we went into indoor/outdoor fans 1 year ago with the Shark FlexBreeze. I think there you're going to see a lot more products from us in outdoor cooling and even potentially outdoor heating is a category that I think is ripe for us. We'll launch this year into at least two new categories, we'll launch next year in '26 into at least two new categories. But we've got to answer two questions. I mean one of them is, will the consumer allow us to be able to expand into that category? Will they accept our brands in that category? And two is, kind of what gives us the right to be in the category? I mean what are we bringing to the consumer that someone else is not able to bring to the consumer? And I think if you look at the products that we talked about, if you take the Luxe Cafe, yes, there's a big defined espresso market globally, but I think what we're doing with the versatility that we're doing it at, with the price point that we're doing at, is something that is really bringing a lot of value to the consumer and bringing more people into the category. And that's what I think is so important for us, Alex, is that we're not just going after large definable categories and trying to take share but we're also trying to create new categories where we're kind of a dominant player within that category.

Perfect. So you talked a lot about new categories and new product introductions. I guess if we shift and talk about the outlook for growth for some of the more mature categories. So take like a vacuum category, for instance, that you've been for a very long time. How are you able to continue to grow a category like that?

Look, I mean, the same way that Apple grows their base categories. I mean, how do we put our products into retirement before they're usable life. I mean how do we speed up the replacement cycle? How do we create more innovation? I mean, if I go back in the business 15, 16 years ago, I mean, the average American household had slightly over one vacuum cleaner per house. Today, they nearly have two vacuum cleaners a house. I mean it's not unique to go and find an American household with a robot and a cordless vacuum or corded vacuum and a hand vacuum. I mean there are so many different categories. I mean, homes are changing. There's more hard floors in homes that are going into today. So we're looking at a lot of two-in-one products. Products that vacuum and mop at the same time. Our International business, I mean, we're very low market share. We're really just getting started in Continental Europe. I mean although we're #1 market share in cleaning in the U.S. and Canada and the U.K., we have very small market share in Continental Europe and Latin America. And so, I think the cleaning business, which last year for us, grew over 16% in spite of the market declining about 5%, we really came from new product introduction expanding into new categories within cleaning and then expanding our international business within the Cleaning segment. I'll give you kind of one other interesting data point within that. In 2023, we launched into the carpet extraction category. It was carpet extraction and stain cleaning. We became the #1 market share in vacuum cleaners in 2014 and haven't given it up since, and retailers continue to keep asking us, how do you get into the carpet cleaning business? But the honest answer was that the consumer would allow us to get into the category but we didn't have a disruptive innovation. And ultimately, in 2023, we developed a disruptive innovative product that clean carpets better and did it easier for the consumer. And today, we're the #1 carpet extraction product in the market in the U.S. and are expanding that business into Europe. So it just -- it takes some time. But I think once we kind of figure out the formula Shark or Ninja is able to kind of define and gain its fair share within these categories.

Perfect. So we talked a lot about categories, different product introductions. If we shift and think about channels, what channels do you see the most opportunity in? How should we think about sizing the overall beauty category. How big could the opportunity in sporting goods be? I think that's a channel you just recently launched into?

Look, we want to be relevant wherever the consumer chooses to shop for our products. And it's not our job to select who the winners or losers are going to be in retail. I mean we've got a great direct-to-consumer business. We're the most search brands on Amazon in our space, and we're in every major brick-and-mortar retailer in our space. As you said, as we expand into these new categories like coolers last year, the entry point was into sporting goods. And I think that what you'll see in sporting goods as we move forward is not just products like coolers, but I think those sporting good retailers recognize that they can sell consumers, products like our NinjaBlast, which is our cordless blender, our Shark FlexBreeze, which is our indoor outdoor fan. Some of the grills and our pizza ovens we're creating demand for these products out in the market. And I think they recognize that they could fulfill that demand with retailers -- with consumers either going to their site or walking through their stores. We're in the outdoor retailers like Bass Pro and Cabela's. We're in beauty retailers like Ulta and Sephora. We want to expand more into grocery. We think that products like cookware and cutlery and Thirsti will lend itself to going into retailers like grocery stores, the Ninja SLUSHi. I mean this holiday season, some of our retailers are going to partner us with large beverage companies and do stack-outs with our Ninja SLUSHi product and their beverages in grocery stores. So we're kind of looking for opportunities kind of anywhere that we can kind of interface with the consumer or stop them at some retail site that they're in.

Perfect. I wanted to ask a little bit of a higher-level question and just get your view sort of on the overall health of your core consumer. Obviously, there's a lot going on right now from a macroeconomic standpoint. What are sort of the near-term demand signals that you're monitoring that gives you confidence in the healthier consumer? And what is your outlook there?

Well, look, in terms of the demand signals, we look at daily POS. So I know a lot of investors get Circana data or NPD data, that's way out of date. I mean, we're able to get daily POS down to the store level, down to the SKU level from every one of our major retailers. So access to data is not a problem. And our demand planning team then takes that data and adjust our supply plans and our inventory plans against that on a weekly basis. In terms of the overall health of the consumer, look, I think the consumer is looking for the best product at the best value and it's going to be enormously discerning. Let's keep in mind in our space that in 2022, our market was down 14%. I mean our category of products, we're definitely one of those COVID-overhang categories. I mean the market was down 14% and in '22, the market was down 10% in '23. Market was down single-digits last year. And in spite of that, we grew our business 32%. So I think our job is to make sure that we're giving the consumer the best possible product or the best possible quality at the best value. Our products are -- you can get into the Ninja brand at $59, you can buy a product all the way up to $999. You can get into the Shark brand at $59 and buy a product at $899. So I think from a brand perspective, there's a lot of entry points for the consumer into our products. I think that gives us a really large socioeconomic group of consumers that we're focused on. We sell everyone from Walmart to Sephora and everyone in between. And we've also got a really large demographic base, as we have products that appeal to high school kids all the way up to our core 35- to 55-year-old female consumer and male consumers. Products like our outdoor cooking appliances or coolers or robots. So I think the consumer is going to be tough, and I think it's our job to make sure that they feel like when they buy a Shark or Ninja product that they got a great product at a great value.

Perfect. I wanted to ask about the right way to think about the long-term algorithm here, especially for the top line. Is low double-digit percent growth the right way to think about it? I mean you did 30-plus percent growth last year, but obviously, the base has gotten bigger. Like what's the right way to think about the long-term growth rate here?

So I started getting asked the same question when we did $400 million in revenue. And the caveat always was, well, the base is getting bigger. I mean, the base is pretty big right now. It's $5.5 billion. And what do I believe? I mean, you can cut our business in a number of different ways and look at it. We grew our business last year over 50% internationally. We did over $1.7 billion. I think that our business is capable of being 50% outside of the U.S., and 50% inside of the U.S. So I think there's a lot of growth and runway for us internationally. So if you think about a double-digit growth business, you can look at the business and say, 'Hey, can the domestic business grow 6%, 7%, and can the international business grow 15%, 16%'? And together, you've got a double-digit growth business. You can look at it across our three-pillar growth strategy. Our existing category growth, our new category expansion and international expansion. I think if you look at our business back in 2022, when the market was down 14% our existing categories declined a little, but we drove growth through new category expansion and international expansion. You look at a year like last year in '24, where we grew $1.3 billion in revenue and the largest portion of that revenue came from existing categories. So I think that we know how to grow the business organically. I think that we're continuing to invest in R&D and media to grow the business organically. There's a big TAM out there of $120 billion, that we only have $5.5 billion of that total available market. But I think whatever way you cut it, I think it's not unreasonable to think that this business can continue to grow at double digits for the foreseeable future.

Perfect. I guess, if we break down the components of growth, how should we be thinking about the international growth opportunity? I guess in particular, you spoke a lot recently about France and Germany. What is the size of the opportunity in France and Germany versus where they're running at today?

Yes. So we'll finish this year with our business in the U.K. at roughly $1 billion. And the market size in Germany is a little bit bigger than the U.K. and the market size in France a little bit smaller than the U.K. But if you put those two areas together, and that's the reason why we kind of talk about Germany and France separate to everything else. We think there's a $2 billion business there between Germany and France. And we think that, that gives us enormous runway for growth versus where we are today. I think the #1 most important thing for an investor to look at is go and look at our online reviews in Germany and France, go and look at what consumers are saying about our products. How they're rating us versus U.S. consumers. We're in the process right now of going through our annual contracts with our international with our European retailers. We will -- we just closed one of our largest French retailers, and we'll double our SKUs Christmas of 2025 versus Christmas of 2024. So we think we're on a nice trajectory of growth within Germany and France. So that -- let's put that as one bucket. I would say bucket two is kind of the rest of Continental Europe that the European retailers are driving us towards. I mean Fnac Darty has a big business in Spain. They just made an acquisition in Italy, are driving us towards Italy. Euronics has a big business in Poland and in Turkey, they're driving us towards entry into those markets. Currys, our largest retailer in the U.K. owns ELK Shop in the Nordics, which is the largest retailer for our products in the Nordics. And so they're pushing us into the Nordics. So I think there's still a very sizable amount of business in what I would call kind of EMEA outside of Germany and France. And then the third bucket is Latin America. We're in the midst right now of acquiring back our Mexico distributorship. That will be completed by the end of this month, and we'll start shipping on April 1 as a direct business in Mexico. We'll obviously capture right away the margin and the revenue upside from that. But I think Mexico is a $400 million, $500 million potential. I mean our Canada business is about $500 million. And I think that our Mexico business could roughly be the same as our Canada business over time. And I think there's a lot of other potential within Latin America with the biggest market being Brazil. We launched into Brazil in the fourth quarter of last year, and it will take some time for us to scale up in Brazil, but it's a very big social media market. If you actually go on social media in Brazil and you look at our Shark FlexStyle, and you look at our Ninja CREAMi, there's a lot of consumer content and user-generated content that's being distributed around Brazil. And I think as we get into 2026, that will be a market that will start showing scale for us.

Perfect. I wanted to shift and ask a little about your marketing and advertising strategy. Can you talk about, because I think this is a key part of your growth story. Can you talk about your strategy? And what is differentiated? How are you able to scale products so quickly, and generate a significant amount of social media interest very quickly?

Yes. So the first important part to understand is that we want to be relevant wherever the consumer is choosing to ingest content. So at times, investors might ask us, well, what happens if TikTok gets banned? I mean, there is a large content creator community out there and consumers are getting their content through these platforms. If TikTok goes away, they'll migrate somewhere else. I mean, in fact, the fastest-growing platform for us in 2025 is going to be Reddit. We're finding more and more -- that kind of consumers are starting their searches on Reddit. We're expanding much more into YouTube Longform and YouTube Shortform. Pinterest is becoming a much bigger platforms for us, and obviously, Meta continues to be the largest platform for us. In terms of our ability to be able to scale, first, it starts with being able to have a product that tells a story. I mean, you can't just go on social media with a me-too product. I mean we have a product that tells a story. And so we go out and we partner with reviewers. We partner with influencers. I mean I think the Luxe Cafe is a great example of that. We went into the market and we knew that we had to gain coffee credibility, and we sent our product to a significant number of kind of coffee reviewers that gave honest feedback about our product. We partnered with very strong coffee influencers. As we got a number of units into the market, which is usually anywhere from 50,000 to 100,000 units, the user-generated flywheel starts to develop, where users start developing their own content. And where that becomes really exciting is, if you take the month of December, 99.8% of the content that was posted on social media in the month of December for the Ninja CREAMi had nothing to do with SharkNinja. We didn't pay for it, we didn't generate it. It had nothing to do with us, and it was strictly generated by consumers that bought the product and went online and told millions of their closest friends, what their favorite recipes were or excitement or influencers. There are influencers today that are building their social media followership off of Shark and Ninja products. I mean we went and we launched the Ninja Swirl. We sent the products out to 30 curated retailers. And before we launch the first product, we had 75 million impressions on social media. We didn't pay $1 for that. All we paid for was the cost of the product of giving it to them for free. That was it. And I think that model is super exciting. If you go on to social media today, what you'll see is influencers that are building big parts of their platforms on the content that they're creating from our products. I'll give you another interesting thing. We did an event the night before the Oscars, with the Motion Picture Association and there were a number of celebrities at the event. And there were three other companies there, and there were SharkNinja, and our booth was packed the entire night. I mean, of celebrities coming up and telling us about the products that they own, products that they bought, products that they saw on social media products that they wanted to get. We had Paris Hilton that came and talked to us about the CryoGlow that she's been using every day. We had Jesse Eisenberg come and talk about the Ninja products that he uses every day. And what it shows is that our products are really part of culture. And you'll notice that there are a lot of macro influencers, a lot of celebrities that are posting about Shark and Ninja products that we don't pay for at all. They are just things that are part of their life that they like and they're putting on their stories.

Perfect. I wanted to bridge and ask that and maybe more sort of get to the financials behind it. But can you talk about your ability to leverage the sales and marketing expense longer term? As you're in growth mode here, is that not a leverage part of the model? And then longer term, should EBITDA growth start to outpace revenue growth as you gain, as you scale out more significantly and gain some of these leverage points?

So EBITDA growth over the last few years has been growing slightly faster than revenue growth. And I think we -- that's where I think we believe is the right place to keep it that, EBITDA should grow slightly faster than revenue growth moving forward. Why? Because there's still a lot of organic growth opportunities for us. I mean there's new product categories there's new markets for us to expand into. I think one of the exciting things about SharkNinja is that if you were to look inside of our P&L, there are a lot of losses in the P&L. I mean there are a lot of products that have lost money that have yet to turn profitable. There were countries, I mean we didn't turn profitable in Germany until the third quarter of last year. And now this will be the first full year that we're profitable in Germany. It will be the first full year that we're profitable in France. So I think as long as there are -- continue to be opportunities for us to grow organically, product-wise, country-wise, I think you should expect EBITDA to grow slightly faster in revenue, I don't know if it's going to be significantly faster than revenue.

Perfect. I wanted to get your outlook on the competitive environment. Are you seeing any new entrants into this competitive set? I think low-cost competitors out of China gets asked about a lot. What are you seeing in terms of the competitive dynamics out there?

Nothing different than I've seen in the last 17 years. Generally speaking, when SharkNinja puts out a product, the first 50 units are bought by competitors or Chinese factories, as they try to reverse engineer what we've done and try to knock it off. But it's no different today than it has been over the last 15 years. There's just more products for them, and we're just innovating at a much faster and faster pace.

Perfect. Now I want to shift and ask about tariffs and the supply chain. Obviously, a big focus here. Can you give us the latest update in terms of how you're thinking about tariffs, especially with the announced step-up of tariffs to 20% on China versus, I think, the 10% you had contemplated in the guidance for the year. Do you anticipate an additional impact now? What's sort of the mitigation strategy as you think about tariffs?

Yes. So obviously, it's evolving every day. And what we can do is just quickly react to the news that comes to us. So on in the beginning of February, on February 1, the first 10% went into place within 4 days. We had mitigated fully the impact of that 10%. We mobilized hundreds of people in the company. We developed about 1,500 unique initiatives, both on the buy-side and sell-side, and we were able to go out with our guidance on February 13 and say that it -- we guided 13% to 15% bottom line growth with the impact of tariffs as we know it today. Subsequent to that, there was the additional 10%, as you're pointing out, and there was also steel and aluminum tariffs as well. And I would say that we're continuing to feel good about our 13% to 15% guidance. I mean we have -- we've gone through the same exercise as we did in February. I think we've gotten good at this. I'm hopeful that we won't have to do this constantly every month. But I believe that in a 20% tariff world with where we are today, and with our continued movement outside of China. 90% of our U.S. production will be made outside of China by the end of Q2. We'll be able to effectively manage it and still be able to deliver the guidance number that we've put out.

Perfect. Can you talk about the new sourcing regions where you're shifting production to? And I guess, in particular, can you talk about if you're seeing cost parity or better in terms of both product quality as well as product margins in new sourcing regions?

So -- when we made our first product outside of China 4.5 years ago, we made it at a 15% cost premium to China. And today, we make product outside of China at exactly the same cost as we make it inside of China. So it's completely cost-parity. In fact, for the last year, when there weren't tariffs, we had factories that we were placing orders to and letting them decide whether they wanted to make the product inside of China or outside of China as they scaled up their manufacturing outside of China. So on the cost side, were at parity. The quality side is where you've heard me talk about a lot of the investments that we've had to make in terms of consultants, contract labor, putting additional people into the factories in Southeast Asia, and that was at a very elevated level in Q4 of last year. It's at an elevated level of Q1 and Q2 of this year, and it will start to tail off as we get toward the end of Q2 of this year, and then it will tail off as we get into the second half of the year. As far as product quality, and our product quality is coming out great outside of China, but we got a lot of eyes on it. And we believe that that's going to need to continue as we move forward, until we're able to fully scale up our business. And we just think that's the right thing to do for our consumers and for our brands. As far as where we've moved production to? Vietnam, Thailand, Indonesia, Malaysia, Cambodia, primarily kind of in that Southeast Asia region.

Perfect. And then I think in the past, you've talked about mitigating tariffs through a combination of cost share with suppliers, price, shifting sourcing. Obviously, can you talk within that, especially within sort of the ability to take price -- the sort of elasticity of demand? Are there certain price points that you don't think you'll be able to take price in, and so you have to focus more on cost optimization? Like how do you sort of solve for that equation of the incremental cost pressure?

So when we experience significant cost pressure back a couple of years ago, when we went through the component shortage. We did everything that we possibly could to try to mitigate passing additional costs on to the consumer. And I think we did a lot of things around value engineering, driving initiatives on the cost side. And we try to keep the sell side really to a minimum. I think what we've learned over the last few years is that we do have some pricing leverage, particularly on some of the hit products that we've gone to market with. We launched the Ninja SLUSHi originally at $279. Today, we sell it for $349. We launched the Luxe Cafe at $499, today, we sell that at $549. We had expected that we would launch the CryoGlow at $299, right at launch, we decided to go out of $349. So I think we're trying to find strategic places for us to be able to take cost. And when we've done it over the course of the last few weeks, we haven't seen any demand impact as a result of it. Now that's not to say it's going to work everywhere, and that's not to say that we're going to do it everywhere. I think we have to find the right places for us to strategically do it. But fortunately, we're not in the opening price segments of the market. We're not selling $79 vacuum cleaners at Walmart where there's real price sensitivity. If we push that to $99 or if we're selling $99 vacuums, we push it over $99. But I think there is opportunity for us on the cost side to be able to start to realize what is the right fair price for the products that we're making and where can we find that balance where the consumer still feels like they're getting extraordinary value.

Perfect. Well, we have about 3 minutes left. So I just wanted to scan the audience and see if we have any questions out there? Well, perfect. Could we talk about the product launch strategy and whether that's changed at all? Do you normally launch products on your direct-to-consumer channel as a way to sort of test and learn before rolling out more broadly? And then as you sort of think about the product sort of waterfall build in each year, can you just walk us through sort of year 1, versus year 2, versus year 3 when you launch a new product?

Yes. We would like to launch products for the first 30, 45 days on our direct-to-consumer site in order to be able to get as much consumer information as possible about the products. Are there troubleshooting issues? Are there returns concerns? We want that feedback, positive or negative, to be able to make improvements to the product. We've -- if I go back 2 years ago, I think that it was the aspiration of the company to launch a product globally at the same time, where we could say, the U.S., North America, the U.K., Latin America, Europe, we want to launch everything at the same time. I think we've recognized that, that is very, very challenging to do from a supply chain perspective. And what we saw at the end of last year was most of our new products really launched only in the United States. As we move forward, I think you'll see kind of a staggered rollout approach from us. So as an example, the Ninja SLUSHi launched in the U.S. in the fourth quarter of last year. It will launch in the second quarter of this year in the U.K. It will launch in the third quarter of this year in the rest of Europe. And so Christmas 2025 will really be the first Christmas selling season where we have the product kind of fully distributed across North American retailers and European retailers. Now at the same time, we will also launch a next-generation SLUSHi product into the United States fall of this year, of 2025. So by the time we get to 2026, it will be Christmas '26 will be the first time that multiple SLUSHi products will be on the shelf for, our global consumer. So it really is kind of 18 months at least before the product is rolling out to the global markets.

Perfect. With less than a minute left, I wanted to ask about margins. And particularly gross margin. So I think you were up 220 basis points last year. That was on top of over 700 basis points of expansion the year prior. How are you thinking about managing the margins and gross margin for 2025? What are the key drivers there?

So our margins today are approaching 50%. We operate in a very narrow band between, let's say, 40% and 60%. I mean we don't have products that are 30% margin and products that are 75% margin. We work really hard to take cost out of the product as we scale the manufacturing in the first year of the product. So we might start at a little bit lower gross margin, knowing that we'll be able to capture more gross margin as we go through the year. I think on the margin side, we still believe that we can generate some incremental gross margin benefit this year in spite of the tariff headwinds that we're currently facing. I'm also hoping that as we go into 2026, some of these tariff headwinds that we're dealing with this year will turn to some tariff tailwinds next year as we move that production outside of China. And as we've kind of pass the page on what we're dealing with today. But I believe that while we're not going to see 220 basis points of gross margin improvement as we go forward for this full year.

Perfect. Well, we are right at time. So I will leave it there. But thank you, Mark, for a great session. I appreciate it.

Thank you.