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

All right. Well, good morning, everyone. My name is Stephen Forbes, consumer discretionary Hardlines analyst at Guggenheim Securities. And we have the pleasure of hosting SharkNinja's CEO, Mark Barrocas; and CFO, Adam Quigley, for a fireside chat this morning.

Mark, it's sort of hard not to go back to early December when you guys sort of first gave us indication that holiday was performing relatively strong. So maybe just start, if there's any sort of update you can provide, on how those trends continue through December? And maybe more importantly, how it sort of changed the conversation or influence the conversations with your core U.S. retailers for the start of '26?

Yes. Great. Well, look, I mean let's start with, we had a relatively strong guidance heading into Q4. We anticipated double-digit growth that was going to come in the quarter. And what we said in early December was that we felt good against the guide that we had put out there. And so sitting here today, we feel really good against the guide that we put out there. Our holiday season was very strong. Our products were high up on people's wish list for the holiday season. The growth was really broad-based across retailers, across product categories. Our domestic business was strong. Our international business was strong. We really accelerated in some new markets. Our Mexico business did great during the holiday season. Some of the new markets in Europe really started to click and take off. And our core domestic North America business was very healthy. We won with many of the key retailers that won. I mean our direct-to-consumer business was strong during the holiday season, our Amazon business was great. If you walked up and down the aisles of Costco, you would see lots and lots of SharkNinja products. We won where the consumer was shopping at during the holiday season. So all in all, we always measure our success based on how excited are we on December 31 for the next holiday season. And I'm more excited about next holiday season as I was about this holiday season, but SharkNinja did really, really well with consumers this holiday season.

And then maybe expanding on the thesis of excitement, right? 2025, obviously, somewhat of a challenging year to get product into the distribution channels. It sort of sets '26 to be maybe an above-average year as it pertains to just distribution port expansion and innovation sort of driven sales growth. So I don't know if you can maybe frame for the group here, what it really means for the business as you sort of lean back on some of the new product launches in '25. And then any sort of highlights as you think about 2026 innovation?

Yes. Look, it's hard to put into perspective for investors kind of the amount of mindshare focus, tariffs and mitigating tariffs in the supply chain went into from April of '25 all the way through the end of the year. I mean it wasn't just about moving manufacturing. It was about planning new products and kind of where products we're going to launch and how they were going to launch. Did it go exactly as we wanted it to? No. I mean, to the point of what you're bringing up, Steve, is that there's a lot of products that didn't launch either at the scale that we wanted them to launch or the markets that we wanted. We've got a lot of pent-up new products from '25 that are going to launch in the first half of '26 that will either scale out to more and more retailers in North America or they'll launch for the first time in international markets. And then on top of that, we've got a really robust '26 new product road map of 25 new products that are going to launch in '26. So I think that '26 has a lot of innovation behind it. It adds a lot of new products that are going to launch into the market over the course of the next -- let's call it, the next 6 months. But I think for us also, what was exciting for us to see coming out of '25 was a really strong healthy base business. You can look at the products like the Luxe Cafe and what we've done to disrupt the espresso market or you can look at the CryoGlow and what we've done in skin care. But our core vacuum business is performing really nicely. I mean our core heated cooking business is performing nicely. I mean we're reinventing our whole air fryer business with the Ninja Crispi and the Ninja Crispi Pro that we just launched. So within the portfolio of 38 categories, you've got categories that are really on the upswing. You've got categories that we're kind of really reinventing like the air fryer business. And then you've got new categories that we're entering into when we did that last year. I mean one of the standout products last year that we sold out during the holiday season was the Ninja FireSide, our outdoor heater fire pit. You look at that business and you say, well, I mean, how big could that really be? I mean I think this year, which will be the full year for FireSide, I think that will be a $75 million to $100 million business that just comes from 0.

Maybe expanding on sort of new product introductions and how you guys manage product life cycle at the SKU level, right? I think there's always sort of a concern that a product life cycle might be shorter than you hope, right, and/or competitive pressures come into the marketplace and cannibalize the opportunity. So I don't know if you can maybe frame out the tail, right? Like how do you guys plan for product life cycle management, maybe use the FrostVault or the Crispi as an example of like what is in the pipeline for newness. And how far out is the business sort of preparing for?

Look, I think the best case study for it would be the air fryer business. I mean, we launched our first air fryer in 2017. And I've taken investors through the case study of -- we launched the 4 Quart air fryer that kind of set that market in motion. And then we went and we developed a larger XL capacity air fryer. And then we recognize that there was this batch cooking, and we created DualZone air fryers. And then we saw that the consumer didn't have enough counter space, but they love that concept. And so then we did a stackable air fryer. And then we recognize that, wow, there could be a whole different way of thinking about this, and we developed the Ninja Crispi. And we started looking at glass vessels and as people became more conscious of PTFE and kind of healthy cooking and the idea of portable cooking and then we launched a product called the Crispi Pro, which was kind of a family size version of that in the holiday season. I mean I think, look, we still sell lots of original 4 Quart air fryers from back in 2017. I mean, it's not like that business has completely gone away. I mean a consumer getting into the category at $99 might still be looking at that product as the entry point into the category. But it's obviously a much smaller part of our business. And we've now diversified it into lots and lots of different products. I mean, people say there's an air fryer category in the air fryer category is kind of made up of like 12, 14 different products. So highly diversified across lots of different price point categories. I mean, coffee and espresso is a great example of that as well. I mean we became in the third quarter the #1 selling espresso maker in the United States, I mean after being on the market for less than a year. We went in, we really disrupted that market. We looked at how do we solve the problem of espresso in the United States and what were the unmet needs of consumers in Europe and Latin America. And we said, let's create this kind of all-in-one product that does espresso in drip coffee and iced coffee and cold brew. Well, now the question is like, where do we go with that category and kind of the SharkNinja model is we want to innovate above that in price point and we also want to innovate below that in price point. We want to block the knockoffs that are coming in, all the other competitors that are trying to figure out how to disrupt the Luxe Cafe. So in 2026, what you'll see is a lower-price Luxe Cafe that we'll launch with certain features that come out of the core product. And then you'll see a step up new technology that we have, and that will become our kind of halo product that we drive most of our media behind. But that's kind of a model of how we think about category management.

On pricing architecture, right? You think about all the input cost challenges that SharkNinja faced last year. And I don't know if we can think about potential relief, right, on the go forward here, but how does SharkNinja stay true to the pricing architecture and your ability to serve such a broad consumer, right? Maybe talk about like the ability to sort of have product that spans all price points to the example of blocking people out, but also continuing to innovate and push price points higher?

Yes. Well, look, let's start with -- I mean, the SharkNinja business is built on this idea of affordable, accessible innovation. And I think that, at times, consumer companies can kind of drink their own Kool-Aid and kind of think that let's keep pushing price points up, let's keep pushing price points up. I mean I have people that joined the company that the first month they're there. I mean all they want to do is premiumize the product line. And that is just not something that is exciting to us. I mean we want to hold true to we want to service what we call almost everyone. I mean, take the vacuum cleaner market, okay? There's a big business at $79 for vacuums. We don't participate in that because we think there's a certain level of quality and performance that needs to go into being a Shark vacuum, but our opening price point is $129 in our vacuum space. We want to keep innovating into that $129 space. I mean, we think it's really important for the Ninja consumer to get into the Ninja brand at $59. I mean you could buy a Ninja product for $59, buy a Ninja product for $999. I mean I want to be able to have the product on your Christmas wish list, I want to be able to outfit your dorm room when you go to college. I want to be able to outfit your first apartment when you get out of college, you move into your first home, you have your first kid. I mean, going through the consumer life cycle is what the business is all about. And I think when you lose focus of who your consumer is, you start to think that your consumer is only the consumer that's shopping at Best Buy or only the consumer that -- I mean I think what's so exciting about the fourth quarter for us is look at the TikTok Shop business. I mean we want to service the Walmart consumer. We want to service the TikTok Shop consumer. I mean we want to service consumers across all different price point levels. And I think that it's easy for a brand to lose focus around that. It's easy for a brand to keep premiumizing and premiumizing, but then you walk away from a huge swath of consumers, which is not what's exciting to us.

You mentioned TikTok Shop. We had the pleasure of visiting the new Creative Design Hub right in New York City back in December. I don't know if maybe you can frame up to the group here, what that sort of initiative we're building -- means for the business? And how does it sort of have the potential to really drive the creative side and continue to grow those more profitable channels and newer channels?

Yes. Well, look, I mean, to talk first, just about TikTok shop. I mean I personally did my first TikTok Live in December. I mean I think it's really important to go out and sell. I mean, like sell to consumers. And I think what was so exciting is the feedback that you get instantly. I mean, like my TikTok Live generated 1 million likes. I'm not sure if that's good or it's not good, but like there's like instant feedback that was coming in. We were selling product, we were getting feedback from consumers instantly on that. We did, as a company, we were on TikTok Lives in the month of December for over 250 hours of content. I mean, I envision over the course of the next year that SharkNinja will be running 24-hour TikTok Lives. So you talk about kind of where is that New York office or what we're doing in our studio in Irvine, California, what we're doing in Boston. I mean we've set up kind of Live studios in each one of those offices where employees of the company can go on and do TikTok Lives. The engineers or the product developers that are working on those products could do Ask Me Anythings with consumers. But it's just more and more ways for consumers to get a behind the scenes view of kind of what goes on at SharkNinja, how do these products get developed. And I think what's so exciting is the interest level that consumers have of kind of wanting to know the story behind the products. I mean wanting to know kind of how this was developed, or asking questions or things like that. So it doesn't mean that we're not going to continue to sell our products to every major retail channel. We want to be relevant wherever the consumer chooses to shop for our products. But I think it is so exciting that there's this platform now that allows you to get this instant feedback. I mean it's really the modern day QVC where the consumer is just engaging with you constantly and our goal is we don't want a middleman. I mean we don't want a middleman between us and the consumer. I mean we want the relationship to be SharkNinja and the consumer and ultimately, let the consumer decide where they want to shop or buy our products.

I guess on that point, you think about leaning on certain affiliates or brand ambassadors. I think there's -- I think you mentioned before, I don't know, 25,000 branded affiliates that you work with. How does that change that initiative? Or has it improved the sort of profit generation stream behind the affiliate program?

Look, I mean it's still the Wild West. I mean this is still kind of a very immature platform and business model. But it will mature. I mean if I go back 5 years ago, I mean influencers kind of set the price of what they wanted to charge for a piece of content. I mean, today, our analytics kind of tell the influencer, here's where your content is worth. I mean based on how much engagement you have based on how good your content is, based on where the consumer is going after they see your content. Here's what we think the value of your content is as opposed to someone saying, "this is the price for what I want to charge for a particular post." I think the same maturity is going to wind up happening in TikTok Shop. I mean as -- I don't envision holiday of '26 that 20,000 affiliates are going to sell our products. I mean I think there's going to be kind of certified SharkNinja affiliates that work with us that are base -- that set certain criteria and a certain threshold and a certain understanding of the product, they're brand accretive instead of being brand destructive in some way. But I think that business is going to mature over the next year to the point where it will be a really understandable sales channel from a revenue standpoint, a margin standpoint, what the margin profile looks like, how much it's worth paying these affiliates based on the content. And let's not forget that these affiliates that are out there that are marketing these products, all of that demand is not staying on the platform. I mean you might see content on the platform and you might go out and buy that product on Amazon, and you might go out and buy that product in Walmart or Target or somewhere else out in the market. So that's another big question of what percentage of the demand is still captured on the platform relative to what percentage of that demand is actually created and serviced way out in the marketplace.

Maybe switching topics. Software engineers, I think you stated sort of a goal of hiring 100 software engineers. I don't know if you can update us on where you are today on that sort of initiative and then when can we sort of expect the product to be influenced by those group of software engineers? And I don't know if there's anything you can sort of tease out for us a little bit what does it mean for the product.

In terms of when you'll see it translate into the product, the second half of '26. I mean the second half of '26, I think you'll start to see the first products that are much more hardware, software, integrated products that are designed in the beginning with software in mind as opposed to a predominantly hardware mechanical product where we say, "hey, we need a PCBA to kind of run certain aspects of the product." What do I think that's going to unlock? I think it's going to unlock a lot more functionality for the consumer in the product. I think take even a product like I mentioned the Luxe Cafe, you know, our espresso product. I mean, right now, there's a static menu that's on the user interface. I think what you'll see coming out as we go to holiday of '26 is kind of an infinite menu that the consumer will be able to create. And so the products have a lot more functionality right now than what they're -- what we're able to deliver to the consumer. I think with what we're doing on the software side, we're going to be able to unlock that. I mean you're going to see user interfaces that are much more interactive in the product that unlock much more functionality for the consumer. You're going to see more app connected products from us where it makes sense, sometimes where the app controls the product, like in the case of our robots, but in other cases where the app enhances the product, where you, as the consumer, is still controlling the product, but the app is kind of bringing some enhancement to the product with enhancement to the experience. We've hired to date about half of the goal of what we wanted to. We'll continue to keep hiring. But I think it's the end of '26 and then full year where you're going to start to see SharkNinja products that are bringing much, much more intelligence, much, much more sophistication into the consumer, but not moving away from ease of use. I mean, the goal here is, I mean, we still stand by the consumer should open up the product and not have to go through the instruction manual to be able to figure out how to use the product. I mean that's our goal in every product. And so as we kind of elevate the sophistication of it with software, the idea is not to muck up the product to make it more and more complex.

Switching to the direct-to-consumer replatforming work. I don't know, Adam, if you can jump in here as well. Maybe just provide an update on where you are in those efforts, country-wise, timeline behind global change and then briefly sort of maybe express the core benefits that you guys see on the horizon from such work.

Sure. Yes. Canada and U.S. are live right now, right? Those went live right before the holiday season. And I think as we led up to that, that was a huge undertaking on the team, right, doing that before the biggest selling period of the year, and I think it went incredibly well, right? Really happy with how that came out. And it wasn't without its bumps. But I think the team that we had behind it, the lean-in from sales force to help us troubleshoot things on a daily basis. And then the optimizations and the daily back and forth that we saw going into December even and kind of deals and the optimizations that we're able to make live time and the insights that we could get, I think, is really exciting. Now fast forward in 2026. We've got U.K. and the rest of EMEA going live first half. And so feeling really good about that timeline and feeling really good about what that's going to bring. We do have a greater portion of our business on direct-to-consumer in Europe than in the U.S. So this is a more meaningful piece to us. And then once we're global, there's other things that we can start to look at. We talk about a loyalty program. We talk about the subscription. So there's a lot more to even unlock even as we move forward from there.

Listen, I mean conversion rate was up, time on the site was up, our revenue grew, we plan this very conservatively. I mean any time you replatform, you lose all of your kind of search optimization, you got to build that back up. The consumer experience is much, much better. I mean you as investors can just go on the site and kind of look at the consumer experience has improved and it's translated into disproportionate growth in our direct-to-consumer business. So we're excited to get that scaled across the world globally that will -- the entire world will be on sales force by the end of Q2 of this year. And then to Adam's point, we'll be able to start adding on in the second half of the year, kind of lots of the bells and whistles that we want to kind of keep accelerating the direct-to-consumer business.

We think about the global business, right? Obviously, exciting time in terms of transitioning from third-party to self-distribution in a bunch of markets. Maybe update the group here sort of where we are on those efforts. And then, I guess, secondarily, just your conviction and confidence that it will be smoother, right or easier than the Mexico was less disruptive? And then how much visibility you actually have into sort of sell-in as you think about the relationships, right, with the top 5, top 10 retailers within those respective markets.

Yes. So during the fourth quarter, we successfully transitioned Poland, Benelux and the Nordics. January 2, we were shipping all of those people on a direct basis. So you'll see that just kind of wash through our numbers in Q4, and we're off and running. In Q1 and Q2, we'll transition Spain and Italy. I mean those are 2 very big definable markets for us. I think we have a much better formula on how to do this and how to do it kind of in a less disruptive way than what you said maybe a year ago. Now all that being said, in Mexico, I think our business -- I mean, our business in Q4 was on fire in Mexico. I mean we'll grow our business triple digits in Mexico. I mean our Latin America business is growing. I think what's exciting about it, Steve, I mean we're entering into, for example, South Africa in the second quarter of this year. And you look at a market like South Africa and what's amazing to us is that 80% of the social media that's consumed in South Africa originates in either the U.S., the U.K. or Australia. And so already, there's massive demand in South Africa for our products by name before we've even gotten there. So you asked the question about will the retailers. I mean it's not about the retailers, it's -- the consumers know us, okay? If the consumers know us getting to the retailers is the easiest part, okay? It's about, you know, are there consumers in South Africa that are searching for Ninja CREAMi that are searching for Shark CryoGlow or Shark Flex Style or Shark Vacuums or things like that. And you already see in Google searches in those markets that people are searching for those products. And so our ability to be able to walk into those retailers in South Africa and that's a market that we're going to launch through a distributor, but we're meeting with a lot of the retailers directly. Those retailers know who SharkNinja is. They know that the consumers are already searching for those products. That has made the conversation kind of much, much easier with a lot of these retailers in these markets. The bellwether in any new market is, is there a successful direct-to-consumer and Amazon business, pure player business, okay? Once that is successful, you know you've got the consumer okay? And then retail will come on board and will follow from that. It's not a push model where we got to line up the retailers and then go get the consumers. We got to go get the consumers first and then let the consumers line up the retailers.

I think it's an exciting topic to leave us on. We're actually out of time. So thank you all for your time today. And I think SharkNinja has a breakout at 10:00 a.m. today and hope to see you there. Thank you.

Thanks.

Thank you.