Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO FINANCIALS

Table of Contents

Filed pursuant to Rule 424(b)(4)
Registration Statement No. 333-234496

10,000,000 Shares

LOGO

Common Stock



        The selling stockholders identified in this prospectus are offering 10,000,000 shares of common stock of YETI Holdings, Inc. We are not selling any shares of our common stock under this prospectus, and we will not receive any proceeds from the sale of shares of our common stock by the selling stockholders.

        Our common stock is listed on the New York Stock Exchange under the symbol "YETI." The last reported sale price of our common stock on November 6, 2019 was $30.73 per share.

        We are an "emerging growth company" under the federal securities laws and, as such, are subject to reduced public company reporting requirements. See "Prospectus Summary—Implications of Being an Emerging Growth Company."

        As of the date of this prospectus, Cortec Group Fund V, L.P. and its affiliates control a majority of the voting power of our common stock with respect to the election of our directors. We anticipate that we will not be a "controlled company" within the meaning of the New York Stock Exchange listing standards upon completion of this offering and will therefore not be able to rely on exemptions from certain corporate governance requirements available to controlled companies, subject to applicable phase-in periods. See "Management—Controlled Company Exemption."

        Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 16 of this prospectus.

       
 
 
  Per share
  Total
 

Public offering price

  $29.00   $290,000,000
 

Underwriting discounts and commissions(1)

  $0.9425   $9,425,000
 

Proceeds, before expenses, to the selling stockholders

  $28.0575   $280,575,000

 

(1)
See "Underwriting" for additional information regarding total underwriter compensation.

        The underwriters may also exercise their option to purchase up to an additional 1,500,000 shares from the selling stockholders, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares to purchasers on or about November 12, 2019.



BofA Securities   Jefferies   Morgan Stanley
Baird   Goldman Sachs & Co. LLC   Piper Jaffray
William Blair   Cowen   KeyBanc Capital Markets
Raymond James   Stifel   Academy Securities

   

November 6, 2019


GRAPHIC


GRAPHIC


GRAPHIC


Table of Contents


TABLE OF CONTENTS

PROSPECTUS SUMMARY

  1

RISK FACTORS

 
16

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 
44

USE OF PROCEEDS

 
46

DIVIDEND POLICY

 
47

CAPITALIZATION

 
48

DILUTION

 
49

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

 
50

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 
52

BUSINESS

 
73

MANAGEMENT

 
95

EXECUTIVE COMPENSATION

 
107

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

 
114

PRINCIPAL AND SELLING STOCKHOLDERS

 
119

DESCRIPTION OF CAPITAL STOCK

 
122

DESCRIPTION OF INDEBTEDNESS

 
126

SHARES ELIGIBLE FOR FUTURE SALE

 
128

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

 
130

UNDERWRITING

 
135

LEGAL MATTERS

 
143

EXPERTS

 
143

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 
143

INDEX TO FINANCIAL STATEMENTS

 
F-1

i


Table of Contents

        You should rely only on the information contained in this prospectus and in any related free writing prospectus prepared by or on behalf of us and the selling stockholders. Neither we, the selling stockholders, nor the underwriters have authorized anyone to provide you with information different from, or in addition to, the information contained in this prospectus or any related free writing prospectus. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations, and prospects may have changed since that date.


For Investors Outside the United States

        Neither we, the selling stockholders, nor the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside the United States are required to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.


Trademarks, Trade Names, and Service Marks

        We use various trademarks, trade names, and service marks in our business, including, without limitation, YETI®, Tundra®, Hopper®, Hopper Flip®, YETI TANK®, Rambler®, Colster®, Roadie®, BUILT FOR THE WILD®, LOAD-AND-LOCK®, YETI Authorized™, YETI PRESENTS™, YETI Custom Shop™, Panga®, LoadOut®, Camino®, Hondo®, SideKick®, SideKick Dry®, Silo®, YETI ICE™, EasyBreathe™, FlexGrid™, PermaFrost™, T-Rex™, Haul™, NeverFlat™, StrongArm™, Vortex™, SteadySteel™, Hopper BackFlip™, ThickSkin™, DryHaul™, SureStrong™, LipGrip™, No Sweat™, Boomer™, Tocayo™, Lowlands™, TripleGrip™, TripleHaul™, Over-the-Nose™, FatLid™, MagCap™, MagSlider™, DoubleHaul™, HydroLok™, ColdCell™, Wildly Stronger! Keep Ice Longer!®, YETI Coolers™, LoadOut GoBox™, YETI Hopper®, YETI Rambler Colster®, Rambler On®, YETI Rambler®, YETI Brick®, Flip™, Tundra Haul™, Daytrip™, Crossroads™, and Color Inspired By True Events™. YETI also uses trade dress for its distinctive product designs. For convenience, we may not include the ® or ™ symbols in this prospectus, but such omission is not meant to and does not indicate that we would not protect our intellectual property rights to the fullest extent allowed by law. Any other trademarks, trade names, or service marks referred to in this registration statement and the prospectus that are not owned by us are the property of their respective owners.


Industry, Market, and Other Data

        This prospectus includes estimates, projections, and other information concerning our industry and market data, including data regarding the estimated size of the market, projected growth rates, and perceptions and preferences of consumers. We obtained this data from industry sources, third-party studies, including market analyses and reports, and internal company surveys. Industry sources generally state that the information contained therein has been obtained from sources believed to be reliable. Although we are responsible for all of the disclosure contained in this prospectus, and we believe the industry and market data to be reliable as of the date of this prospectus, this information could prove to be inaccurate.


Basis of Presentation

        Effective January 1, 2017, we converted our fiscal year end from a calendar year ending December 31 to a "52- 53-week" year ending on the Saturday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. This did not have a material effect on our consolidated financial statements and, therefore, we did not retrospectively adjust our financial statements. References herein to "2018" relate to the 52 weeks ended December 29, 2018, "2017" relate to the 52 weeks ended December 30, 2017, and references herein to "2016" and "2015" relate to the years ended December 31, 2016 and December 31, 2015, respectively. The third quarter of 2019 ended on September 28, 2019, and the third quarter of 2018 ended on September 29, 2018. In this prospectus, unless otherwise noted, when we compare a metric between one period and a "prior period," we are comparing it to the corresponding period from the prior fiscal year.

ii


Table of Contents



PROSPECTUS SUMMARY

        The following summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read the entire prospectus, including the consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Unless the context requires otherwise, the words "YETI," "we," "company," "us," and "our" refer to YETI Holdings, Inc. and its subsidiaries, as applicable.

YETI: Built for the Wild

        We believe that by consistently designing and marketing innovative and outstanding outdoor products, we make an active lifestyle more enjoyable and cultivate a growing group of passionate and loyal customers.

        Our Founders, Roy and Ryan Seiders, are avid outdoorsmen who were frustrated with equipment that could not keep pace with their interests in hunting and fishing. By utilizing forward-thinking designs and advanced manufacturing techniques, they developed a nearly indestructible hard cooler with superior ice retention. Our original cooler not only delivered exceptional performance, it anchored an authentic, passionate, and durable bond among customers and our company.

        Today, we are a growing designer, marketer, retailer, and distributor of a variety of innovative, branded, premium products to a wide-ranging customer base. Our mission is to ensure that each YETI product delivers exceptional performance and durability in any environment, whether in the remote wilderness, at the beach, or anywhere else life takes our customers. By consistently delivering high-performing products, we have built a following of engaged brand loyalists throughout the United States, Canada, Australia, Japan, and elsewhere, ranging from serious outdoor enthusiasts to individuals who simply value products of uncompromising quality and design. Our relationship with customers continues to thrive and deepen as a result of our innovative new product introductions, expansion and enhancement of existing product families, and multifaceted branding activities.

        Our diverse product portfolio includes:

GRAPHIC

1


Table of Contents

        We bring our products to market through a diverse omni-channel strategy, comprised of our select group of national, regional, and independent retail partners and our direct-to-consumer and corporate sales, or DTC, channel. Our DTC channel is comprised of YETI.com, country and region specific YETI websites, YETI Authorized on the Amazon Marketplace, corporate sales, our retail stores, and temporary stores with lease terms of 24 months or less, which we refer to as pop-up stores. Our DTC channel provides authentic, differentiated brand experiences, customer engagement, and expedited customer feedback, enhancing the product development cycle while providing diverse avenues for growth.

        The broadening demand for our innovative and distinctive products is evidenced by our net sales growth from $89.9 million in 2013 to $778.8 million in 2018, representing a compound annual growth rate, or CAGR, of 54%. Over the same period, operating income grew from $15.2 million to $102.2 million, representing a CAGR of 46%, net income grew from $7.3 million to $57.8 million, representing a CAGR of 51%, adjusted operating income grew from $16.3 million to $124.2 million, representing a CAGR of 50%, adjusted net income grew from $8.0 million to $75.7 million, representing a CAGR of 57%, and our adjusted EBITDA increased from $21.8 million to $149.0 million, representing a CAGR of 47%.

        See "—Summary Consolidated Financial and Other Data" for a reconciliation of adjusted operating income, adjusted net income, and adjusted EBITDA, each a non-GAAP (as defined below) measure, to operating income, net income, and net income, respectively.

How is YETI different?

        We believe the following strengths fundamentally differentiate us from our competitors and drive our success:

        Influential, Growing Brand with Passionate Following.    The YETI brand stands for innovation, performance, uncompromising quality, and durability. We believe these attributes have made us the preferred choice of a wide variety of customers, from professional outdoors people to those who simply appreciate product excellence. Our products are used in and around an expanding range of pursuits, such as fishing, hunting, camping, climbing, snow sports, surfing, barbecuing, tailgating, ranch and rodeo, and general outdoors, as well as in life's daily activities. We support and build our brand through a multifaceted strategy, which includes innovative digital, social, television, and print media, our YETI Dispatch magalog, with a total distribution of approximately 3.3 million copies since 2018, and several grass-roots initiatives that foster customer engagement. Our brand is embodied and personified by our YETI Ambassadors, a diverse group of men and women from throughout the United States and select international markets, comprised of world-class anglers, hunters, rodeo cowboys, barbecue pitmasters, surfers, and outdoor adventurers who embody our brand. The success of our brand-building strategy is partially demonstrated by our approximately 1.8 million new customers to YETI.com since 2016 and approximately 1.3 million Instagram followers as of September 28, 2019. In 2018 and during the nine months ended September 28, 2019, we added approximately 0.5 million and 0.5 million new customers to YETI.com, respectively.

        Our loyal customers act as brand advocates. YETI owners often purchase and proudly wear YETI apparel and display YETI banners and decals. As evidenced by the respondents to our most recently completed YETI owner study, greater than 95% say they have proactively recommended our products to their friends, family, and others through social media or by word-of-mouth. Their brand advocacy, coupled with our varied marketing efforts, has consistently extended our appeal to the broader YETI Nation. As we have expanded our product lines, extended our YETI Ambassador base, and broadened our marketing messaging, we have cultivated an audience of both men and women living throughout the United States and, increasingly, in international markets. Based on our annual owner studies, 64% of our customers are under the age of 45 and from 2015 to 2019 our customer base has evolved from 9% female to 33%. Further, based on our periodic Brand Tracking Study, our unaided brand awareness in the premium outdoor company and brand markets in the United States has grown from 2% in October 2015 to 12% in

2


Table of Contents

January 2019, indicating strong growth and that there may be significant opportunity for future expansion, particularly in more densely populated United States markets, which we have entered more recently.

        Superior Design Capabilities and Product Development.    At YETI, product is at our core and innovation fuels us. By employing an uncompromising approach to product performance and functionality, we have expanded on our original hard cooler offering and extended beyond our hunting and fishing heritage by introducing innovative new products, including soft coolers, drinkware, travel bags, backpacks, multipurpose buckets, outdoor chairs, blankets, dog bowls, apparel, and accessories. We believe that our new products appeal to our long-time customers as well as customers first experiencing our brand. We carefully design and rigorously test all new products, both in our innovation center and in the field, consistent with our commitment to delivering outstanding functional performance.

        We believe our products continue to set new performance standards in their respective categories. Our expansive team of in-house engineers and designers develops our products using a comprehensive stage-gate process that ensures quality control and optimizes speed-to-market. We use our purpose-built, state-of-the-art research and development center to rapidly generate design prototypes and test performance. Our global supply chain group, with offices in Austin, Texas, and mainland China, sources and partners with qualified suppliers to manufacture our products to meet our rigorous specifications. As a result, we control the innovation process from concept through design, production, quality assurance, and launch. To ensure we benefit from the significant investment we make in product innovation, we actively manage and aggressively protect our intellectual property. We have a history of developing innovative products, including new products in existing product families, product line expansions, and accessories, as well as products that bring us into new categories. Our current product portfolio gives customers access to our brand at multiple price points, ranging from a $20 Rambler Tumbler to a $1,300 Tundra Hard Cooler. We expand our existing product families and enter new product categories by creating solutions grounded in consumer insights and relevant market knowledge. We believe our product families, extensions, variations, and colorways, in addition to new product launches, result in repeat purchases by existing customers and consistently attract new customers to YETI.

        Balanced, Omni-Channel Distribution Strategy.    We distribute our products through a balanced omni-channel platform, consisting of our wholesale and DTC channels. In our wholesale channel, we sell our products through select national and regional accounts and an assemblage of independent retail partners throughout the United States and, more recently, Australia, Canada, Japan, and Europe. We carefully evaluate and select retail partners that have an image and approach that are consistent with our premium brand and pricing. Our domestic national and regional specialty retailers include Dick's Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops/Cabela's, Ace Hardware, and Williams Sonoma. We also expect to sell our products through Lowe's beginning in December 2019. As of September 28, 2019, we also sold through a diverse base of approximately 4,600 independent retail partners, including outdoor specialty, hardware, sporting goods, and farm and ranch supply stores, among others. Our DTC channel consists primarily of online and inside sales, and has grown from 8% of our net sales in 2015 to 38% in the nine months ended September 28, 2019. On YETI.com and at our retail and pop-up stores, we showcase the entirety of our extensive product portfolio. Through YETI.com and our corporate sales programs, we offer customers and businesses the ability to customize many of our products with licensed marks and original artwork. Our DTC channel enables us to directly interact with our customers, more effectively control our brand experience, better understand consumer behavior and preferences, and offer exclusive products, content, and customization capabilities. We believe our control over our DTC channel provides our customers the highest level of brand engagement and further builds customer loyalty, while generating attractive margins. As part of our commitment to premium positioning, we maintain supply discipline, consistently enforce our minimum advertised pricing, or MAP, policy across our wholesale and DTC channels, and sell primarily through one-step distribution.

3


Table of Contents

        Scalable Infrastructure to Support Growth.    As we have grown, we have worked diligently and invested significantly to further build our information technology capabilities, while improving business process effectiveness. This robust infrastructure facilitates our ability to manage our global manufacturing base, optimize complex distribution logistics, and effectively serve our consistently expanding customer base. We believe our global team, sophisticated technology backbone, and extensive experience provide us with the capabilities necessary to support our future growth.

        Experienced Management Team.    Our senior management team, led by our President and Chief Executive Officer, or CEO, Matthew J. Reintjes, is comprised of experienced executives from large global product and services businesses and publicly listed companies. They have proven track records of scaling businesses, leading innovation, expanding distribution, and managing expansive global operations. Our culture is an embodiment of the values of our Founders who continue to advise our product development team and help to identify new opportunities.

Our Growth Strategies

        We plan to continue growing our customer base by driving YETI brand awareness, introducing new and innovative products, entering new product categories, accelerating DTC sales, and expanding our international presence.

        Expand Our Brand Awareness and Customer Base.    Creating brand awareness among new customers and in new geographies has been, and remains, central to our growth strategy. We drive our brand through multilayered marketing programs, word-of-mouth referral, experiential brand events, corporate partnerships, YETI Ambassador reach, and product use. We have significantly invested in increasing brand awareness, spending $206.9 million on marketing initiatives from 2013 to 2018, including $50.4 million in 2018. This growth is illustrated by the increase in our gross sales derived from outside our heritage markets, which have increased significantly since 2013. We define our heritage markets as the South Atlantic, East South Central, and West South Central, as defined by the U.S. Census Bureau.

GRAPHIC

        While we have meaningfully grown and expanded our brand reach throughout the United States and developed an emerging international presence, according to our periodic brand study, unaided brand awareness, or consumers' awareness of our brand without prompt, in non-heritage markets remains meaningfully below unaided brand awareness in heritage markets. We believe our sales growth will be driven, in part, by continuing to grow YETI's brand awareness in non-heritage markets. For example, based on our most recent Brand Tracking Study, our unaided brand awareness among premium outdoor

4


Table of Contents

companies and brands in the United States grew from 2% in October 2015 to 12% in January 2019, indicating there may be significant opportunity for future expansion, particularly in more densely populated United States markets. Our unaided brand awareness among premium outdoor companies and brands by region as of October 2015 and as of January 2019 is set forth below based on this Brand Tracking Study:


Domestic Unaided Brand Awareness by Region

GRAPHIC


(1)
Heritage market region.
(2)
Non-heritage market region.

        Introduce New and Innovative Products.    We have a track record of consistently broadening our high performance, premium-priced product portfolio to meet our expanding customer base and their evolving pursuits. Our culture of innovation and success in identifying customer needs and wants drives our robust product pipeline. We typically enter a product line by introducing anchor products, followed by product expansions, such as additional sizes and colorways, and then accessories, as exemplified by our current product portfolio. In 2017, we expanded our Drinkware line to new colorways, launched our Hopper Two Soft Cooler, and added new Hopper Flip Soft Cooler sizes and colors. We added to our Coolers & Equipment offering with the introductions of our Panga Duffel and LoadOut Bucket. In 2018, we introduced our Camino Carryall, Hondo Base Camp Chair, Hopper BackFlip Soft Cooler, Rambler 10 oz. Wine Tumblers, Tundra Haul, Silo 6G Water Cooler, Panga Backpack, Tocayo Backpack, Boomer 8 Dog Bowl, and Lowlands Blanket. In the first nine months of 2019, we introduced our Rambler 24 oz. Mug, LoadOut GoBox, Rambler 12 oz. Bottle with Hotshot Cap, Daytrip Lunch Bag, next-generation Hopper M30 Soft Cooler, Rambler Jr. Kids Bottle, Rambler 10 oz. Stackable Mug, Crossroads 23 Backpack, Crossroads Tote Bag, Trailhead Dog Bed, and Boomer 4 Dog Bowl. In addition, we introduced new colorways for Drinkware, hard and soft coolers, and our Camino Carryall. In April 2019, we integrated our product customization services into YETI.com to provide customers with a seamless shopping and product customization experience at a single point-of-sale. This service offers a broad assortment of custom logo Drinkware, coolers, and Dog Bowls, to individual and corporate clients. Previously, customers had to leave YETI.com and access YETIcustomshop.com for customization services.

        As we have done historically, we have identified several opportunities in new, adjacent product categories where we believe we can redefine performance standards and offer superior quality and design to customers. We believe these new opportunities will further bridge the connection between indoor and outdoor life and are consistent with our objective to have YETI products travel with customers wherever they go.

5


Table of Contents

        Increase Direct-to-Consumer and Corporate Sales.    DTC represents our fastest growing sales channel, with net sales increasing from $14.1 million in 2013 to $287.4 million in 2018. Our DTC channel provides customers and businesses ready access to our brand, branded content, and full product assortment. We intend to continue to drive direct sales to our varied customers through: YETI.com; country and region specific YETI websites; YETI Authorized on the Amazon Marketplace; our corporate sales initiatives; and increasing the number of our own retail and pop-up stores. During the last twelve months ended September 28, 2019, we had nearly 46 million visits to YETI.com and YETIcustomshop.com, of which 25.7 million were unique visitors and we processed 1.1 million transactions. We believe we will continue to grow visitors to YETI.com and convert a portion of them to our customers. With our customization services through YETI.com, we believe there are significant opportunities to expand our licensing portfolio in sports and entertainment, along with numerous opportunities to further drive customized consumer and corporate sales. We began selling through YETI Authorized on the Amazon Marketplace in late 2016 and have enjoyed rapid reach expansion and sales growth since that time. In 2017 and 2018, respectively, we opened our first retail store and our first corporate store in Austin, Texas, which serve not only as profitable retail locations, but also as showrooms for our extensive and growing product offering and, in the case of our retail store, an event space. Sales from these stores have continued to grow since their respective openings. We opened retail stores in Charleston, South Carolina, and Chicago, Illinois, in June 2019 and September 2019, respectively, and we plan to open additional stores, including a store in Denver, Colorado, in 2020. Additionally, we opened a pop-up store in Austin and Dallas, Texas in October 2019 and November 2019, respectively. In the future, we intend to continue to open additional stores in select locations across the United States to showcase our full product assortment, build brand awareness, and drive growth.

        Increasing sales through these various DTC channels enables us to control our product offering and how it is communicated to new and existing customers, fosters customer engagement, provides rapid feedback on new product launches, and enhances our demand forecasting. Further, our DTC channels provide customers an immersive and YETI-only experience, which we believe strengthens our brand.

        Expand into International Markets.    We believe we have the opportunity to continue to diversify and grow sales into existing and new international markets. In 2017, we successfully entered Canada and Australia, and 2018 net sales have continued to grow in both of these countries. In 2018, we successfully entered Japan. Our focus is on driving brand awareness, dealer expansion, and our DTC channel in these new markets. In 2019, we launched the YETI.ca, uk.YETI.com, eu.YETI.com, and nz.YETI.com websites for Canada, the United Kingdom, Europe, and New Zealand, respectively. We believe there are meaningful growth opportunities by expanding into additional international markets, such as Asia, including China, as many of the market dynamics and premium, performance-based consumer needs that we have successfully identified domestically are also valued in these markets.

Our Market

        Our premium products are designed for use in a wide variety of activities, from professional to recreational and outdoor to indoor, and can be used all year long. As a result, the markets we serve are broad as well as deep, including, for example, outdoor, housewares, home and garden, outdoor living, industrial, and commercial. While our product reach extends into numerous and varied markets, we currently primarily serve the United States outdoor recreation market. The outdoor recreation products market is a large, growing, and diverse economic sector, which includes consumers of all genders, ages, ethnicities, and income levels. According to the Outdoor Industry Association's Outdoor Recreation Economy Reports, which are published every five years, outdoor recreation product sales in the United States grew from a total of approximately $120.7 billion in 2011 to a total of approximately $184.5 billion in 2016, representing a 9% CAGR.

6


Table of Contents

Selected Risks Associated with Our Business

        Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled "Risk Factors" immediately following this prospectus summary. Some of these principal risks include the following:

our business depends on maintaining and strengthening our brand and generating and maintaining ongoing demand for our products, and a significant reduction in demand could harm our results of operations;

if we are unable to successfully design and develop new products, our business may be harmed;

our business could be harmed if we are unable to accurately forecast our results of operations and growth rate;

we may not be able to effectively manage our growth;

our growth depends in part on expanding into additional consumer markets, and we may not be successful in doing so;

our business and results of operations could be harmed as current tariffs are implemented or if additional tariffs or other restrictions are placed on foreign imports or if any related counter-measures are taken by other countries;

our plans for international expansion may not be successful;

the markets in which we compete are highly competitive and include numerous other brands and retailers that offer a wide variety of products that compete with our products; if we fail to compete effectively, we could lose our market position;

we rely on third-party contract manufacturers and problems with, or loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations;

fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs;

a significant portion of our sales are to independent retailers, national, and regional retail partners and our business could be harmed if these retail partners decide to emphasize products from our competitors, to redeploy their retail floor space to other product categories, to take other actions that reduce their purchases of our products, or if they are disproportionately affected by economic conditions;

our future success depends on the continuing efforts of our management and key employees and our ability to attract and retain highly-skilled personnel and senior management;

our indebtedness may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with the covenants in the Credit Agreement, dated as of May 19, 2016, by and among YETI Holdings, Inc., the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, as amended, which we refer to as the Credit Facility, our liquidity and results of operations could be harmed; and

we anticipate that we will no longer be a "controlled company" following the completion of this offering and, as a result, we will not be able to rely on exemptions from certain corporate governance requirements, subject to applicable phase-in periods.

Implications of Being an Emerging Growth Company

        As a company with less than $1.07 billion in revenue during our last completed fiscal-year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the

7


Table of Contents

JOBS Act. An emerging growth company may take advantage of certain reduced reporting requirements that are otherwise applicable generally to public companies. These reduced reporting requirements include:

an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting;

an exemption from compliance with any requirement that the Public Company Accounting Oversight Board, or PCAOB, may adopt regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

reduced disclosure about our executive compensation arrangements;

an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or any golden parachute arrangements;

extended transition periods for complying with new or revised accounting standards; and

the ability to present more limited financial data, including presenting only three years of selected financial data in this registration statement, of which this prospectus is a part.

        We will remain an emerging growth company until the earliest to occur of: (i) the end of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (ii) the end of the fiscal year in which the market value of our common stock that is held by non-affiliates is at least $700 million as of the last business day of our most recently completed second fiscal quarter; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) the end of the fiscal year during which the fifth anniversary of our IPO (as defined below) occurs. We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act.

        We have elected to take advantage of all of the exemptions discussed above. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you invest.

        As of June 28, 2019, the last business day of our most recently completed second fiscal quarter, the market value of our common stock that was held by non-affiliates was greater than $700 million. As a result, we will become a large accelerated filer and will no longer qualify as an emerging growth company on December 28, 2019, the end of our current fiscal year. We may incur significant expenses and a substantial amount of management's attention may be diverted as we prepare to comply with the additional requirements that will become applicable to us once we cease to be an emerging growth company.

Our Sponsor

        Cortec Group Fund V, L.P. and its affiliates, or Cortec, has been our principal stockholder since its initial investment in 2012.

        Prior to this offering, Cortec controlled a majority of the voting power of our common stock with respect to the election of our directors pursuant to a voting agreement, or the Voting Agreement, that was entered into among Cortec, Roy Seiders, Ryan Seiders, and their respective affiliates in connection with our IPO. The Voting Agreement will terminate, pursuant to its terms, when the parties thereto no longer beneficially own, in the aggregate, shares of our common stock representing greater than 50% of the then outstanding voting power with respect to the election of our directors. Upon the completion of this offering, Cortec, together with Roy Seiders, Ryan Seiders, and their respective affiliates, will own approximately 49.7% of our outstanding common stock (or approximately 48.1% if the underwriters exercise their option to purchase additional shares in full). As a result, Cortec will control less than 50% of

8


Table of Contents

the total voting power of our common stock with respect to the election of our directors and the Voting Agreement will terminate upon completion of this offering.

        Accordingly, we anticipate that we will not be a "controlled company" within the meaning of the New York Stock Exchange, or NYSE, listing standards upon completion of this offering. Despite no longer being a controlled company, we may continue to rely on exemptions from certain corporate governance requirements during the applicable phase-in periods. Cortec will also continue to have a significant effect over fundamental and corporate matters and transactions as a result of its significant ownership and voting power with respect to our common stock, and its representation on our Board of Directors. For example, our Board of Directors currently consists of eight directors, including three directors selected by Cortec. In addition, pursuant to the terms of a stockholders agreement, dated October 24, 2018, by and among YETI, Cortec and certain other stockholders, which we refer to as the Stockholders Agreement, Cortec has the right to have one of its representatives serve as Chair of our Board of Directors and Chair of the Nominating and Governance Committee of our Board of Directors, as well as the right to select nominees for our Board of Directors, in each case subject to a phase-out period based on Cortec's future share ownership. See "Risk Factors—Risks Related to Ownership of Our Common Stock and this Offering."

Corporate Information

        We were founded in 2006 by brothers Roy and Ryan Seiders in Austin, Texas, and were subsequently incorporated as YETI Coolers, Inc., a Texas corporation, in 2010. In 2012, Cortec became our principal stockholder. In connection with Cortec's investment in YETI in 2012, YETI Coolers, Inc. was converted into YETI Coolers, LLC, a Delaware limited liability company, and subsequently YETI Coolers, LLC was acquired by an indirect subsidiary of YETI Holdings, Inc., a Delaware corporation incorporated in 2012 by Cortec. Thereafter, through two subsequent mergers, YETI Coolers, LLC became a wholly owned subsidiary of YETI Holdings, Inc. As part of the acquisition of YETI Coolers, LLC, our Founders and certain other equity holders exchanged a portion of their proceeds from the sale of YETI Coolers, LLC for equity in YETI Holdings, Inc. As a result, YETI Holdings, Inc. was majority owned by Cortec, with the remaining ownership being shared by our Founders, certain other management equity holders, and select investors.

        On October 29, 2018, we completed our initial public offering, or IPO, of 16,000,000 shares of our common stock at a public offering price of $18.00 per share, which included 2,500,000 shares of our common stock sold by us and 13,500,000 shares of our common stock sold by selling stockholders. On November 28, 2018, the underwriters purchased an additional 918,830 shares of our common stock from the selling stockholders at the public offering price, less the underwriting discount, pursuant to a partial exercise of their option to purchase additional shares of common stock. See "Initial Public Offering."

        On May 8, 2019, we completed a secondary offering, or the May 2019 Offering, of 9,500,000 shares of our common stock at a public offering price of $28.50 per share, all of which shares were sold by selling stockholders. On May 15, 2019, the underwriters purchased an additional 1,425,000 shares of our common stock from the selling stockholders at the public offering price, less the underwriting discount, pursuant to the full exercise of their option to purchase additional shares of common stock. We did not receive any proceeds from this offering.

        Our principal executive and administrative offices are located at 7601 Southwest Parkway, Austin, Texas 78735, and our telephone number is (512) 394-9384. Our website address is YETI.com. The information on, or that can be accessed through, our website is not incorporated by reference into this prospectus and should not be considered to be a part of this prospectus.

9


Table of Contents



The Offering

Common stock offered by the selling stockholders

  10,000,000 shares (11,500,000 shares if the underwriters exercise their option to purchase additional shares in full)

Underwriters' option to purchase additional shares from the selling stockholders

 

The underwriters have a 30-day option to purchase up to 1,500,000 additional shares of our common stock from the selling stockholders at the public offering price less estimated underwriting discounts and commissions.

Common stock to be outstanding after this offering

 

85,904,657 shares

Use of proceeds

 

The selling stockholders will receive all of the net proceeds from this offering. See "Use of Proceeds."

Controlled company

 

We anticipate Cortec will no longer control more than 50% of the total voting power of our common stock with respect to the election of our directors upon completion of this offering. As a result, we will no longer be a "controlled company" within the meaning of the NYSE listing standards and, therefore, will no longer be exempt from certain NYSE corporate governance requirements, subject to applicable phase-in periods.

Risk factors

 

Investing in shares of our common stock involves a high degree of risk. See "Risk Factors" beginning on page 16 and the other information included in this prospectus for a discussion of factors you should carefully consider before investing in shares of our common stock.

NYSE symbol

 

"YETI"

        The number of shares of our common stock that will be outstanding after this offering is based on 85,824,108 shares of our common stock outstanding as of October 31, 2019, and excludes:

511,698 shares of our common stock issuable upon the exercise of outstanding but unexercised options, all of which are vested, to purchase shares of our common stock as of October 31, 2019 under the YETI Holdings, Inc. 2012 Equity and Performance Incentive Plan, as amended and restated June 20, 2018, or the 2012 Plan, with a weighted average exercise price of $4.70 per share;

1,257,799 shares of our common stock issuable upon the exercise of outstanding but unexercised options, 172,844 of which are vested, to purchase shares of our common stock as of October 31, 2019 under the YETI Holdings, Inc. 2018 Equity and Incentive Compensation Plan, or the 2018 Plan, with a weighted average exercise price of $20.51 per share;

1,284,156 shares of our common stock issuable upon the settlement of restricted stock units outstanding as of October 31, 2019 under the 2012 Plan, with an estimated grant date fair value of $31.74 per share;

299,421 shares of our common stock issuable upon the settlement of employee restricted stock units outstanding as of October 31, 2019 under the 2018 Plan, with a grant date fair value of $23.76 per share;

10


Table of Contents

22,703 shares of our common stock issuable upon the settlement of outstanding non-employee deferred stock units, 8,586 of which are unvested, and none of which have been released, as of October 31, 2019 under the 2018 Plan, with a fair value of $20.34 per share;

9,366 shares of our common stock issuable upon the settlement of non-employee restricted stock units outstanding as of October 31, 2019 under the 2018 Plan, with a fair value of $25.62 per share; and

3,288,672 shares of our common stock reserved for future issuance pursuant to awards under the 2018 Plan.

        Except as otherwise indicated, all information in this prospectus assumes or reflects:

no exercise of the underwriters' option to purchase additional shares from the selling stockholders; and

no exercise or settlement of outstanding stock options or restricted stock units.

11


Table of Contents



Summary Consolidated Financial and Other Data

        The following tables set forth a summary of our historical summary consolidated financial data for the periods and at the dates indicated. Effective January 1, 2017, we converted our fiscal year end from a calendar year ending December 31 to a "52- to 53-week" year ending on the Saturday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. This did not have a material effect on our consolidated financial statements and, therefore, we did not retrospectively adjust our financial statements. Fiscal years 2018 and 2017 included 52 weeks. The third quarter of fiscal 2019 and 2018 included 13 weeks. The first nine months of fiscal 2019 and 2018 included 39 weeks. Our consolidated financial data as of December 29, 2018 and December 30, 2017 and for 2018, 2017, and 2016 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated financial data as of September 28, 2019, and for the three months and nine months ended September 28, 2019 and for the three months and nine months ended September 29, 2018, have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. In the opinion of management, our unaudited condensed consolidated financial statements were prepared on the same basis as our audited consolidated financial statements and include all adjustments necessary for a fair presentation of this information. The consolidated financial data as of December 31, 2016 and December 31, 2015 and for 2015 have been derived from our audited condensed consolidated financial statements not included in this prospectus. The percentages below indicate the statement of operations data as a percentage of net sales. You should read this data together with our audited financial statements and related notes appearing elsewhere in this prospectus and the information included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of our future results.

12


Table of Contents

 
  Three Months Ended   Nine Months Ended   Fiscal Year Ended  
(in thousands, except per share data)
  September 28,
2019
  September 29,
2018
  September 28,
2019
  September 29,
2018
  December 29,
2018
  December 30,
2017
  December 31,
2016
  December 31,
2015
 

Statement of Operations

                                                                                                 

Net sales

  $ 229,125     100 % $ 196,109     100 % $ 616,132     100 % $ 537,654     100 % $ 778,833     100 % $ 639,239     100 % $ 818,914     100 % $ 468,946     100 %

Cost of goods sold

    109,049     48 %   98,568     50 %   303,152     49 %   282,354     53 %   395,705     51 %   344,638     54 %   404,953     49 %   250,245     53 %

Gross profit

    120,076     52 %   97,541     50 %   312,980     51 %   255,300     47 %   383,128     49 %   294,601     46 %   413,961     51 %   218,701     47 %

Selling, general and administrative expenses

    86,071     38 %   69,417     35 %   235,191     38 %   190,746     35 %   280,972     36 %   230,634     36 %   325,754     40 %   90,791     19 %

Operating income

    34,005     15 %   28,124     14 %   77,789     13 %   64,554     12 %   102,156     13 %   63,967     10 %   88,207     11 %   127,910     27 %

Interest expense

    (5,319 )   2 %   (7,755 )   4 %   (17,081 )   3 %   (24,474 )   5 %   (31,280 )   4 %   (32,607 )   5 %   (21,680 )   3 %   (6,075 )   1 %

Other income (expense)

    (304 )   0 %   (214 )   0 %   (192 )   0 %   (325 )   0 %   (1,261 )   0 %   699     0 %   (1,242 )   0 %   (6,474 )   1 %

Income before income taxes                

    28,382     12 %   20,155     10 %   60,516     10 %   39,755     7 %   69,615     9 %   32,059     5 %   65,285     8 %   115,361     25 %

Income tax expense

    (7,080 )   3 %   (3,125 )   2 %   (14,824 )   2 %   (7,161 )   1 %   (11,852 )   2 %   (16,658 )   3 %   (16,497 )   2 %   (41,139 )   9 %

Net income

  $ 21,302     9 % $ 17,030     9 % $ 45,692     7 % $ 32,594     6 % $ 57,763     7 % $ 15,401     2 % $ 48,788     6 % $ 74,222     16 %

Net income attributable to noncontrolling interest

        0 %       0 %       0 %       0 %       0 %       0 %   (811 )   0 %       0 %

Net income to YETI Holdings, Inc

  $ 21,302     9 % $ 17,030     9 % $ 45,692     7 % $ 32,594     6 % $ 57,763     7 % $ 15,401     2 % $ 47,977     6 % $ 74,222     16 %

Adjusted operating income(1)

    40,350     18 %   31,682     16 %   98,476     16 %   78,324     15 %   124,203     16 %   76,003     12 %   220,208     27 %   136,043     29 %

Adjusted net income(1)

    26,093     11 %   20,188     10 %   61,311     10 %   43,641     8 %   75,690     10 %   23,126     4 %   134,559     16 %   79,484     17 %

Adjusted EBITDA(1)

  $ 47,465     21 % $ 38,415     20 % $ 119,504     19 % $ 96,831     18 % $ 149,049     19 % $ 97,471     15 % $ 231,862     28 % $ 137,101     29 %

Net income to YETI Holdings, Inc. per share

                                                                                                 

Basic

  $ 0.25         $ 0.21         $ 0.54         $ 0.40         $ 0.71         $ 0.19         $ 0.59         $ 0.93        

Diluted

  $ 0.25         $ 0.21         $ 0.53         $ 0.39         $ 0.69         $ 0.19         $ 0.58         $ 0.92        

Adjusted net income per share(1)

                                                                                                 

Diluted

  $ 0.30         $ 0.24         $ 0.71         $ 0.53         $ 0.91         $ 0.28         $ 1.63         $ 0.99        

Weighted average common shares outstanding

                                                                                                 

Basic

    85,285           81,147           84,686           81,238           81,777           81,479           81,097           79,775        

Diluted

    86,373           82,924           86,152           82,946           83,519           82,972           82,755           80,665        

 

(dollars in thousands)
  As of
September 28, 2019
 

Balance Sheet and Other Data

       

Inventory

  $ 209,154  

Property and equipment, net

    81,242  

Total assets

    559,695  

Long-term debt including current maturities

    294,832  

Total stockholders' equity

    87,860  

Purchases of property and equipment

    24,249  

(1)
We define adjusted operating income and adjusted net income as operating income and net income, respectively, adjusted for non-cash stock-based compensation expense, asset impairment charges, investments in new retail locations and international market expansion, transition to Cortec majority ownership, transition to the ongoing senior management team, and transition to a public company, and, in the case of adjusted net income, also adjusted for accelerated amortization of deferred financing fees and the loss from early extinguishment of debt resulting from early prepayments of debt, and the tax impact of such adjustments. Adjusted net income per share is calculated using adjusted net income, as defined above, and diluted weighted average shares outstanding. We define adjusted EBITDA as net income before interest expense, net, provision (benefit) for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including: non-cash stock-based compensation expense; asset impairment charges; accelerated amortization of deferred financing fees and loss from early extinguishment of debt resulting from the early prepayment of debt; investments in new retail locations and international market expansion; transition to Cortec majority ownership; transition to the ongoing senior management team; and transition to a public company. The expenses incurred related to these transitional events include: management fees and contingent consideration related to the transition to Cortec majority ownership; severance, recruiting, and relocation costs related to the transition to our ongoing senior management team; consulting fees, recruiting fees, salaries and travel costs related to members of our Board of Directors, fees associated with Sarbanes-Oxley Act compliance, incremental audit and legal fees in connection with our transition to a public company, and costs incurred in connection with the May 2019 Offering. All of these transitional costs are reported in selling, general, and administrative, or SG&A, expenses.

Adjusted operating income, adjusted net income, adjusted net income per diluted share, and adjusted EBITDA are not defined under accounting principles generally accepted in the United States, or GAAP, and may not be comparable to similarly titled measures reported by other entities. We use these non-GAAP measures, along with GAAP measures, as a measure of profitability. These measures help us compare our performance to other companies by removing the impact of our capital structure; the effect of operating in different tax jurisdictions; the impact of our asset base, which can vary depending on the book value of assets and methods used to compute depreciation and amortization; the effect of non-cash stock-based compensation expense, which can vary based on plan design, share price, share price volatility, and the expected lives of equity instruments granted; as well as certain expenses related to what we believe are events of a transitional nature. We also disclose adjusted operating income, adjusted net income, and adjusted EBITDA as a percentage of net sales to provide a measure of relative profitability.

We believe that these non-GAAP measures, when reviewed in conjunction with GAAP financial measures, and not in isolation or as substitutes for analysis of our results of operations under GAAP, are useful to investors as they are widely used measures of performance and the adjustments we make to these non-GAAP measures provide investors further insight into our profitability and additional perspectives in comparing our performance to other companies and in comparing our performance over time on a consistent basis. Adjusted operating income, adjusted net income, and adjusted EBITDA have limitations as profitability measures in that they do not include the interest expense on our debts, our provisions for income taxes, and the effect of our expenditures for capital assets and certain intangible assets. In addition, all of these non-GAAP measures have limitations as profitability measures in that they do not include the effect of non-cash stock-based compensation expense, the effect

13


Table of Contents

of asset impairments, the effect of investments in new retail locations and international market expansion, and the impact of certain expenses related to transitional events that are settled in cash. Because of these limitations, we rely primarily on our GAAP results.

In the future, we may incur expenses similar to those for which adjustments are made in calculating adjusted operating income, adjusted net income, and adjusted EBITDA. Our presentation of these non-GAAP measures should not be construed as a basis to infer that our future results will be unaffected by extraordinary, unusual, or non-recurring items.

The following table reconciles operating income to adjusted operating income, net income to adjusted net income, and net income to adjusted EBITDA for the periods presented.

 
  Three Months Ended   Nine Months Ended   Fiscal Year Ended  
(dollars in thousands)
  September 28,
2019
  September 29,
2018
  September 28,
2019
  September 29,
2018
  December 29,
2018
  December 30,
2017
  December 31,
2016
 

Operating income

  $ 34,005   $ 28,124   $ 77,789   $ 64,554   $ 102,156   $ 63,967   $ 88,207  

Adjustments:

                                           

Non-cash stock-based compensation expense(1)

    2,113     2,923     10,399     10,031     13,247     13,393     118,415  

Long-lived asset impairment(1)

    443         540         1,236          

Investments in new retail locations and international market expansion(1)(2)

    1,179     52     2,230     292     795          

Transition to Cortec majority ownership(1)(3)

                750     750     750     750  

Transition to the ongoing senior management team(1)(4)

    355     350     878     1,694     1,822     90     2,824  

Transition to a public company(1)(5)

    2,255     233     6,640     1,003     4,197     (2,197 )   10,012  

Adjusted operating income

  $ 40,350   $ 31,682   $ 98,476   $ 78,324   $ 124,203   $ 76,003   $ 220,208  

Net income

  $ 21,302   $ 17,030   $ 45,692   $ 32,594   $ 57,763   $ 15,401   $ 48,788  

Adjustments:

                                           

Non-cash stock-based compensation expense(1)

    2,113     2,923     10,399     10,031     13,247     13,393     118,415  

Long-lived asset impairment(1)

    443         540         1,236          

Early extinguishment of debt(8)

        614         614     1,330         1,221  

Investments in new retail locations and international market expansion(1)(2)

    1,179     52     2,230     292     795          

Transition to Cortec majority ownership(1)(3)

                750     750     750     750  

Transition to the ongoing senior management team(1)(4)

    355     350     878     1,694     1,822     90     2,824  

Transition to a public company(1)(5)

    2,255     233     6,640     1,003     4,197     (2,197 )   10,012  

Tax impact of adjusting items(6)

    (1,554 )   (1,014 )   (5,068 )   (3,337 )   (5,450 )   (4,311 )   (47,451 )

Adjusted net income

  $ 26,093   $ 20,188   $ 61,311   $ 43,641   $ 75,690   $ 23,126   $ 134,559  

Net income

  $ 21,302   $ 17,030   $ 45,692   $ 32,594   $ 57,763   $ 15,401   $ 48,788  

Adjustments:

                                           

Interest expense

    5,319     7,755     17,081     24,474     31,280     32,607     21,680  

Income tax expense

    7,080     3,125     14,824     7,161     11,852     16,658     16,497  

Depreciation and amortization expense(7)

    7,419     6,333     21,220     18,218     24,777     20,769     11,675  

Non-cash stock-based compensation expense(1)

    2,113     2,923     10,399     10,031     13,247     13,393     118,415  

Long-lived asset impairment(1)

    443         540         1,236         1,221  

Early extinguishment of debt(8)

        614         614     1,330          

Investments in new retail locations and international market expansion(1)(2)

    1,179     52     2,230     292     795          

Transition to Cortec majority ownership(1)(3)

                750     750     750     750  

Transition to the ongoing senior management team(1)(4)

    355     350     878     1,694     1,822     90     2,824  

Transition to a public company(1)(5)

    2,255     233     6,640     1,003     4,197     (2,197 )   10,012  

Adjusted EBITDA

  $ 47,465   $ 38,415   $ 119,504   $ 96,831   $ 149,049   $ 97,471   $ 231,862  

Net sales

  $ 229,125   $ 196,109   $ 616,132   $ 537,654   $ 778,833   $ 639,239   $ 818,914  

Operating income as a % of net sales

    14.8 %   14.3 %   12.6 %   12.0 %   13.1 %   10.0 %   10.8 %

Adjusted operating income as a % of net sales

    17.6 %   16.2 %   16.0 %   14.6 %   15.9 %   11.9 %   26.9 %

Net income as a % of net sales

    9.3 %   8.7 %   7.4 %   6.1 %   7.4 %   2.4 %   6.0 %

Adjusted net income as a % of net sales

    11.4 %   10.3 %   10.0 %   8.1 %   9.7 %   3.6 %   16.4 %

Adjusted EBITDA as a % of net sales

    20.7 %   19.6 %   19.4 %   18.0 %   9.1 %   15.2 %   28.3 %

Net income per diluted share

  $ 0.25   $ 0.21   $ 0.53   $ 0.39   $ 0.69   $ 0.19   $ 0.59  

14


Table of Contents

 
  Three Months Ended   Nine Months Ended   Fiscal Year Ended  
(dollars in thousands)
  September 28,
2019
  September 29,
2018
  September 28,
2019
  September 29,
2018
  December 29,
2018
  December 30,
2017
  December 31,
2016
 

Adjusted net income per diluted share

  $ 0.30   $ 0.24   $ 0.71   $ 0.53   $ 0.91   $ 0.28   $ 1.63  

Weighted average common shares outstanding—diluted

    86,373     82,924     86,152     82,946     83,519     82,972     82,755  

(1)
These costs are reported in SG&A expenses.

(2)
Represents retail store pre-opening expenses and costs for expansion into new international markets.

(3)
Represents management service fees paid to Cortec, our majority stockholder. The management services agreement with Cortec was terminated immediately following the completion of our IPO.

(4)
Represents severance, recruiting, and relocation costs related to the transition to our ongoing senior management team.

(5)
Represents (i) fees and expenses in connection with our transition to a public company, including consulting fees, recruiting fees, salaries, and travel costs related to members of our Board of Directors, fees associated with Sarbanes-Oxley Act compliance, incremental audit and legal fees associated with being a public company, and (ii) $1.5 million of costs incurred in connection with the May 2019 Offering. The 2017 activity primarily consists of the reversal of a previously recognized consulting fee that was contingent upon the completion of our IPO attempt during 2016.

(6)
Represents the tax impact of adjustments calculated at an expected statutory tax rate of 24.5% and 24.3% for the three months ended September 28, 2019 and September 29, 2018, respectively. For the nine months ended September 28, 2019 and September 29, 2018, the statutory tax rate used to calculate the tax impact of adjustments was 24.5% and 23.2%, respectively. For fiscal 2018, 2017, and 2016, the statutory tax rate used to calculate the tax impact of adjustments was 23%, 36%, and 36%, respectively.

(7)
Depreciation and amortization expenses are reported in SG&A expenses and cost of goods sold.

(8)
Represents the loss on extinguishment of debt of $0.7 million and accelerated amortization of deferred financing fees of $0.6 million resulting from the voluntary repayments and prepayments of the term loans under our Credit Facility. During the fourth quarter of fiscal 2018, we voluntarily repaid in full the $47.6 million outstanding balance of the Term Loan B (as defined below) and made a voluntary repayment of $2.4 million to the Term Loan A (as defined below). During the third quarter of fiscal 2018, we made a voluntary prepayment of $30.1 million to the Term Loan B. As a result of the voluntary repayment of the Term Loan B prior to its maturity on May 19, 2022, we recorded a loss from extinguishment of debt relating to the write-off of unamortized financing fees associated with the Term Loan B.

15


Table of Contents


RISK FACTORS

        Investing in our common stock involves a high degree of risk. These risks include, but are not limited to, those material risks described below, each of which may be relevant to an investment decision. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this prospectus, including, but not limited to, the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes, before deciding whether to invest in shares of our common stock. Our business, financial condition, and operating results can be affected by a number of factors, whether currently known or unknown, including, but not limited to, those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from our past, or from our anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, and stock price. If any of the following risks or other risks actually occur, our business, financial condition, results of operations, and future prospects could be materially harmed. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

        The following discussion of risk factors contains forward-looking statements. Because of the following factors, as well as other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Risks Related to Our Business and Industry

Our business depends on maintaining and strengthening our brand to generate and maintain ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.

        The YETI name and premium brand image are integral to the growth of our business, as well as to the implementation of our strategies for expanding our business. Our success depends on the value and reputation of our brand, which, in turn, depends on factors such as the quality, design, performance, functionality, and durability of our products, the image of our e-commerce platform and retail partner floor spaces, our communication activities, including advertising, social media, and public relations, and our management of the customer experience, including direct interfaces through customer service. Maintaining, promoting, and positioning our brand are important to expanding our customer base, and will depend largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high-quality customer experiences. We intend to continue making substantial investments in these areas in order to maintain and enhance our brand, and such investments may not be successful. Ineffective marketing, negative publicity, product diversion to unauthorized distribution channels, product or manufacturing defects, counterfeit products, unfair labor practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish customer confidence in us. Furthermore, these factors could cause our customers to lose the personal connection they feel with the YETI brand. We believe that maintaining and enhancing our brand image in our current markets and in new markets where we have limited brand recognition is important to expanding our customer base. If we are unable to maintain or enhance our brand in current or new markets, our growth strategy and results of operations could be harmed.

If we are unable to successfully design and develop new products, our business may be harmed.

        To maintain and increase sales, we must continue to introduce new products and improve or enhance our existing products. The success of our new and enhanced products depends on many factors, including anticipating consumer preferences, finding innovative solutions to consumer problems, differentiating our products from those of our competitors, and maintaining the strength of our brand. The design and

16


Table of Contents

development of our products is costly, and we typically have several products in development at the same time. Problems in the design or quality of our products, or delays in product introduction, may harm our brand, business, financial condition, and results of operations.

Our business could be harmed if we are unable to accurately forecast our results of operations and growth rate.

        We may not be able to accurately forecast our results of operations and growth rate. Forecasts may be particularly challenging as we expand into new markets and geographies and develop and market new products. Our historical sales, expense levels, and profitability may not be an appropriate basis for forecasting future results.

        Failure to accurately forecast our results of operations and growth rate could cause us to make poor operating decisions and we may not be able to adjust in a timely manner. Consequently, actual results could be materially lower than anticipated. Even if the markets in which we compete expand, we cannot assure you that our business will grow at similar rates, if at all.

We may not be able to effectively manage our growth.

        As we grow our business, slower growing or reduced demand for our products, increased competition, a decrease in the growth rate of our overall market, failure to develop and successfully market new products, or the maturation of our business or market could harm our business. We expect to make significant investments in our research and development and sales and marketing organizations, expand our operations and infrastructure both domestically and internationally, design and develop new products, and enhance our existing products. In addition, in connection with operating as a public company, we will incur significant additional legal, accounting, and other expenses that we did not incur as a private company. If our sales do not increase at a sufficient rate to offset these increases in our operating expenses, our profitability may decline in future periods.

        We have expanded our operations rapidly since our inception. Our employee headcount and the scope and complexity of our business have increased substantially over the past several years. We have only a limited history operating our business at its current scale. Our management team does not have substantial tenure working together. Consequently, if our operations continue to grow at a rapid pace, we may experience difficulties in managing this growth and building the appropriate processes and controls. Continued growth may increase the strain on our resources, and we could experience operating difficulties, including difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs. If we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed.

Our marketing strategy of associating our brand and products with activities rooted in passion for the outdoors may not be successful with existing and future customers.

        We believe that we have been successful in marketing our products by associating our brand and products with activities rooted in passion for the outdoors. To sustain long-term growth, we must continue to successfully promote our products to consumers who identify with or aspire to these activities, as well as to individuals who simply value products of uncompromising quality and design. If we fail to continue to successfully market and sell our products to our existing customers or expand our customer base, our sales could decline, or we may be unable to grow our business.

If we fail to attract new customers, or fail to do so in a cost-effective manner, we may not be able to increase sales.

        Our success depends, in part, on our ability to attract customers in a cost-effective manner. In order to expand our customer base, we must appeal to and attract customers ranging from serious outdoor enthusiasts to individuals who simply value products of uncompromising quality and design. We have

17


Table of Contents

made, and we expect that we will continue to make, significant investments in attracting new customers, including through the use of corporate partnerships, YETI Ambassadors, traditional, digital, and social media, original YETI films, and participation in, and sponsorship of, community events. Marketing campaigns can be expensive and may not result in the cost-effective acquisition of customers. Further, as our brand becomes more widely known, future marketing campaigns may not attract new customers at the same rate as past campaigns. If we are unable to attract new customers, our business will be harmed.

Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.

        We believe that our future growth depends not only on continuing to reach our current core demographic, but also continuing to broaden our retail partner and customer base. The growth of our business will depend, in part, on our ability to continue to expand our retail partner and customer bases in the United States, as well as in international markets, including Canada, Australia, Europe, Japan, and, in the future, China. In these markets, we may face challenges that are different from those we currently encounter, including competitive, merchandising, distribution, hiring, and other difficulties. We may also encounter difficulties in attracting customers due to a lack of consumer familiarity with or acceptance of our brand, or a resistance to paying for premium products, particularly in international markets. We continue to evaluate marketing efforts and other strategies to expand the customer base for our products. In addition, although we are investing in sales and marketing activities to further penetrate newer regions, including expansion of our dedicated sales force, we cannot assure you that we will be successful. If we are not successful, our business and results of operations may be harmed.

Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors; during a downturn in the economy, consumer purchases of discretionary items are affected, which could materially harm our sales, profitability, and financial condition.

        Our products are discretionary items for customers. Therefore, the success of our business depends significantly on economic factors and trends in consumer spending. There are a number of factors that influence consumer spending, including actual and perceived economic conditions, consumer confidence, disposable consumer income, consumer credit availability, unemployment, and tax rates in the markets where we sell our products. Consumers also have discretion as to where to spend their disposable income and may choose to purchase other items or services if we do not continue to provide authentic, compelling, and high-quality products at appropriate price points. As global economic conditions continue to be volatile and economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to declines. Any of these factors could harm discretionary consumer spending, resulting in a reduction in demand for our premium products, decreased prices, and harm to our business and results of operations. Moreover, consumer purchases of discretionary items tend to decline during recessionary periods when disposable income is lower or during other periods of economic instability or uncertainty, which may slow our growth more than we anticipate. A downturn in the economies in markets in which we sell our products, particularly in the United States, may materially harm our sales, profitability, and financial condition.

The markets in which we compete are highly competitive and include numerous other brands and retailers that offer a wide variety of products that compete with our products; if we fail to compete effectively, we could lose our market position.

        The markets in which we compete are highly competitive, with low barriers to entry. Numerous other brands and retailers offer a wide variety of products that compete with our cooler, drinkware, and other products, including our bags, storage, and outdoor lifestyle products and accessories. Competition in these product markets is based on a number of factors including product quality, performance, durability, styling, brand image and recognition, and price. We believe that we are one of the market leaders in both the U.S.

18


Table of Contents

premium cooler and U.S. premium stainless-steel drinkware markets. We believe that we have been able to compete successfully largely on the basis of our brand, superior design capabilities, and product development, as well as on the breadth of our independent retailers, national, and regional retail partners, and growing DTC channel. Our competitors may be able to develop and market higher quality products that compete with our products, sell their products for lower prices, adapt to changes in consumers' needs and preferences more quickly, devote greater resources to the design, sourcing, distribution, marketing, and sale of their products, or generate greater brand recognition than us. In addition, as we expand into new product categories we have faced, and will continue to face, different and, in some cases, more formidable competition. We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products, global product distribution, larger and broader retailer bases, more established relationships with a larger number of suppliers and manufacturing partners, greater brand recognition, larger or more effective brand ambassador and endorsement relationships, greater financial strength, larger research and development teams, larger marketing budgets, and more distribution and other resources than we do. Some of our competitors may aggressively discount their products or offer other attractive sales terms in order to gain market share, which could result in pricing pressures, reduced profit margins, or lost market share. If we are not able to overcome these potential competitive challenges, effectively market our current and future products, and otherwise compete effectively against our current or potential competitors, our prospects, results of operations, and financial condition could be harmed.

Competitors have attempted, and will likely continue to attempt to imitate, our products and technology. If we are unable to protect or preserve our brand image and proprietary rights, our business may be harmed.

        As our business continues to expand, our competitors have imitated or attempted to imitate, and will likely continue to imitate or attempt to imitate, our product designs and branding, which could harm our business and results of operations. Only a portion of the intellectual property used in the manufacture and design of our products is patented, and we therefore rely significantly on trade secrets, trade and service marks, trade dress, and the strength of our brand. We regard our patents, trade dress, trademarks, copyrights, trade secrets, and similar proprietary rights as critical to our success. We also rely on trade secret protection and confidentiality agreements with our employees, consultants, suppliers, manufacturers, and others to protect our proprietary rights. Nevertheless, the steps we take to protect our proprietary rights against infringement or other violation may be inadequate and we may experience difficulty in effectively limiting the unauthorized use of our patents, trademarks, trade dress, and other intellectual property and proprietary rights worldwide. We also cannot guarantee that others will not independently develop technology with the same or similar function to any proprietary technology we rely on to conduct our business and differentiate ourselves from our competitors. Because a significant portion of our products are manufactured overseas in countries where counterfeiting is more prevalent, and we intend to increase our sales overseas over the long term, we may experience increased counterfeiting of our products. Unauthorized use or invalidation of our patents, trademarks, copyrights, trade dress, trade secrets, or other intellectual property or proprietary rights may cause significant damage to our brand and harm our results of operations.

        While we actively develop and protect our intellectual property rights, there can be no assurance that we will be adequately protected in all countries in which we conduct our business or that we will prevail when defending our patent, trademark, and proprietary rights. Additionally, we could incur significant costs and management distraction in pursuing claims to enforce our intellectual property rights through litigation and defending any alleged counterclaims. If we are unable to protect or preserve the value of our patents, trade dress, trademarks, copyrights, or other intellectual property rights for any reason, or if we fail to maintain our brand image due to actual or perceived product or service quality issues, adverse publicity, governmental investigations or litigation, or other reasons, our brand and reputation could be damaged, and our business may be harmed.

19


Table of Contents

We rely on third-party contract manufacturers and problems with, or loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations.

        Our products are produced by third-party contract manufacturers. We face the risk that these third-party contract manufacturers may not produce and deliver our products on a timely basis, or at all. We have experienced, and will likely continue to experience, operational difficulties with our manufacturers. These difficulties include reductions in the availability of production capacity, errors in complying with product specifications and regulatory and customer requirements, insufficient quality control, failures to meet production deadlines, failure to achieve our product quality standards, increases in costs of materials, and manufacturing or other business interruptions. The ability of our manufacturers to effectively satisfy our production requirements could also be impacted by manufacturer financial difficulty or damage to their operations caused by fire, terrorist attack, natural disaster, or other events. The failure of any manufacturer to perform to our expectations could result in supply shortages or delays for certain products and harm our business. If we experience significantly increased demand, or if we need to replace an existing manufacturer due to lack of performance, we may be unable to supplement or replace our manufacturing capacity on a timely basis or on terms that are acceptable to us, which may increase our costs, reduce our margins, and harm our ability to deliver our products on time. For certain of our products, it may take a significant amount of time to identify and qualify a manufacturer that has the capability and resources to produce our products to our specifications in sufficient volume and satisfy our service and quality control standards.

        The capacity of our manufacturers to produce our products is also dependent upon the availability of raw materials. Our manufacturers may not be able to obtain sufficient supply of raw materials, which could result in delays in deliveries of our products by our manufacturers or increased costs. Any shortage of raw materials or inability of a manufacturer to produce or ship our products in a timely manner, or at all, could impair our ability to ship orders of our products in a cost-efficient, timely manner and could cause us to miss the delivery requirements of our customers. As a result, we could experience cancellations of orders, refusals to accept deliveries, or reductions in our prices and margins, any of which could harm our financial performance, reputation, and results of operations.

If we fail to timely and effectively obtain shipments of products from our manufacturers and deliver products to our retail partners and customers, our business and results of operations could be harmed.

        Our business depends on our ability to source and distribute products in a timely manner. However, we cannot control all of the factors that might affect the timely and effective procurement of our products from our third-party contract manufacturers and the delivery of our products to our retail partners and customers.

        Our third-party contract manufacturers ship most of our products to our distribution centers in Dallas, Texas, and Salt Lake City, Utah. Our reliance on two geographical locations for our distribution centers makes us more vulnerable to natural disasters, weather-related disruptions, accidents, system failures, or other unforeseen events that could delay or impair our ability to fulfill retailer orders and/or ship merchandise purchased on our website, which could harm our sales. We import our products, and we are also vulnerable to risks associated with products manufactured abroad, including, among other things: (a) risks of damage, destruction, or confiscation of products while in transit to our distribution centers; and (b) transportation and other delays in shipments, including as a result of heightened security screening, port congestion, and inspection processes or other port-of-entry limitations or restrictions in the United States. In order to meet demand for a product, we have chosen in the past, and may choose in the future, to arrange for additional quantities of the product, if available, to be delivered through air freight, which is significantly more expensive than standard shipping by sea and, consequently, could harm our gross margins. Failure to procure our products from our third-party contract manufacturers and deliver merchandise to our retail partners and DTC channel in a timely, effective, and economically viable manner could reduce our sales and gross margins, damage our brand, and harm our business.

20


Table of Contents

        We also rely on the timely and free flow of goods through open and operational ports from our suppliers and manufacturers. Labor disputes or disruptions at ports, our common carriers, or our suppliers or manufacturers could create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during periods of significant importing or manufacturing, potentially resulting in delayed or canceled orders by customers, unanticipated inventory accumulation or shortages, and harm to our business, results of operations, and financial condition.

        In addition, we rely upon independent land-based and air freight carriers for product shipments from our distribution centers to our retail partners and customers who purchase through our DTC channel. We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive products from suppliers or deliver products to retail partners or customers in a timely and cost-effective manner.

        Accordingly, we are subject to the risks, including labor disputes, union organizing activity, inclement weather, and increased transportation costs, associated with our third-party contract manufacturers' and carriers' ability to provide products and services to meet our requirements. In addition, if the cost of fuel rises, the cost to deliver products may rise, which could harm our profitability.

Our business is subject to the risk of manufacturer concentrations.

        We depend on a limited number of third-party contract manufacturers for the sourcing of our products. For our hard coolers, soft coolers, Drinkware, bags, and outdoor living products, our two largest manufacturers for each such product comprised approximately 90%, 58%, 81%, 87%, and 97%, respectively, of our production volume during the first nine months of 2019. For our cargo, we have two manufacturers, and the largest manufacturer comprised approximately 65% of our production volume during the first nine months of 2019. As a result of this concentration in our supply chain, our business and operations would be negatively affected if any of our key manufacturers were to experience significant disruption affecting the price, quality, availability, or timely delivery of products. The partial or complete loss of these manufacturers, or a significant adverse change in our relationship with any of these manufacturers, could result in lost sales, added costs, and distribution delays that could harm our business and customer relationships.

Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products.

        To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers before firm orders are placed by our customers. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of product to deliver to our customers. Factors that could affect our ability to accurately forecast demand for our products include: (a) an increase or decrease in consumer demand for our products; (b) our failure to accurately forecast consumer acceptance for our new products; (c) product introductions by competitors; (d) unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the rate of reorders or at-once orders placed by retailers; (e) the impact on consumer demand due to unseasonable weather conditions; (f) weakening of economic conditions or consumer confidence in future economic conditions, which could reduce demand for discretionary items, such as our products; and (g) terrorism or acts of war, or the threat thereof, or political or labor instability or unrest, which could adversely affect consumer confidence and spending or interrupt production and distribution of product and raw materials.

        Inventory levels in excess of customer demand, including Drinkware inventory we have added in preparation for recently enacted tariffs, or that we may add in preparation for tariffs in the future, may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices or in less preferred distribution channels, which could impair our brand image and harm our gross margin. In

21


Table of Contents

addition, if we underestimate the demand for our products, our manufacturers may not be able to produce products to meet our customer requirements, and this could result in delays in the shipment of our products and our ability to recognize revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.

        The difficulty in forecasting demand also makes it difficult to estimate our future results of operations and financial condition from period to period. A failure to accurately predict the level of demand for our products could adversely impact our profitability or cause us not to achieve our expected financial results.

Our business could be harmed if we fail to execute our internal plans to transition our supply chain and certain other business processes to a global scale.

        We are in the process of re-engineering certain of our supply chain management processes, as well as certain other business processes, to support our expanding scale. This expansion to a global scale requires significant investment of capital and human resources, the re-engineering of many business processes, and the attention of many managers and other employees who would otherwise be focused on other aspects of our business. If our globalization efforts fail to produce planned efficiencies, or the transition is not managed effectively, we may experience excess inventories, inventory shortage, late deliveries, lost sales, or increased costs. Any business disruption arising from our globalization efforts, or our failure to effectively execute our internal plans for globalization, could harm our results of operations and financial condition.

Our profitability may decline as a result of increasing pressure on pricing.

        Our industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products, and changes in consumer demand. These factors may cause us to reduce our prices to retailers and customers or engage in more promotional activity than we anticipate, which could negatively impact our margins and cause our profitability to decline if we are unable to offset price reductions with comparable reductions in our operating costs. This could materially harm our results of operations and financial condition. In addition, ongoing and sustained promotional activities could harm our brand image.

We rely on a series of purchase orders with our manufacturers. Some of these relationships are not exclusive, which means that these manufacturers could produce similar products for our competitors.

        We rely on a series of purchase orders with our manufacturers. With all of our manufacturers, we face the risk that they may fail to produce and deliver our products on a timely basis, or at all, or comply with our quality standards. In addition, our manufacturers may raise prices in the future, which would increase our costs and harm our margins. Even those manufacturers with whom we have purchase orders may breach these agreements, and we may not be able to enforce our rights under these agreements or may incur significant costs attempting to do so. As a result, we cannot predict with certainty our ability to obtain finished products in adequate quantities, of required quality and at acceptable prices from our manufacturers in the future. Any one of these risks could harm our ability to deliver our products on time, or at all, damage our reputation and our relationships with our retail partners and customers, and increase our product costs thereby reducing our margins.

        In addition, except in some of the situations where we have a supply contract, our arrangements with our manufacturers are not exclusive. As a result, our manufacturers could produce similar products for our competitors, some of which could potentially purchase products in significantly greater volume. Further, while certain of our long-term contracts stipulate contractual exclusivity, those manufacturers could choose to breach our agreements and work with our competitors. Our competitors could enter into restrictive or exclusive arrangements with our manufacturers that could impair or eliminate our access to manufacturing capacity or supplies. Our manufacturers could also be acquired by our competitors, and may become our direct competitors, thus limiting or eliminating our access to manufacturing capacity.

22


Table of Contents

Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.

        The price and availability of key components used to manufacture our products, including polyethylene, polyurethane foam, stainless-steel, polyester fabric, zippers, and other plastic materials and coatings, as well as manufacturing equipment and molds, may fluctuate significantly. In addition, the cost of labor at our third-party contract manufacturers could increase significantly. For example, manufacturers in China have experienced increased costs in recent years due to shortages of labor and fluctuations of the Chinese yuan in relation to the U.S. dollar. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil. Any fluctuations in the cost and availability of any of our raw materials or other sourcing or transportation costs related to our raw materials or products could harm our gross margins and our ability to meet customer demand. If we are unable to successfully mitigate a significant portion of these product cost increases or fluctuations, our results of operations could be harmed.

Many of our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, and political risks associated with international trade and those markets.

        Many of our core products are manufactured in China, the Philippines, Vietnam, and Taiwan. In addition, we have third-party manufacturing partners in Mexico and Italy. Our reliance on suppliers and manufacturers in foreign markets creates risks inherent in doing business in foreign jurisdictions, including: (a) the burdens of complying with a variety of foreign laws and regulations, including trade and labor restrictions and laws relating to the importation and taxation of goods; (b) weaker protection for intellectual property and other legal rights than in the United States, and practical difficulties in enforcing intellectual property and other rights outside of the United States; (c) compliance with U.S. and foreign laws relating to foreign operations, including the U.S. Foreign Corrupt Practices Act, or FCPA, the UK Bribery Act 2010, or the Bribery Act, regulations of the U.S. Office of Foreign Assets Controls, or OFAC, and U.S. anti-money laundering regulations, which respectively prohibit U.S. companies from making improper payments to foreign officials for the purpose of obtaining or retaining business, operating in certain countries, or maintaining business relationships with certain restricted parties as well as engaging in other corrupt and illegal practices; (d) economic and political instability and acts of terrorism in the countries where our suppliers are located; (e) transportation interruptions or increases in transportation costs; and (f) the imposition of tariffs or non-tariff barriers on components and products that we import into the United States or other markets. We cannot assure you that our directors, officers, employees, representatives, manufacturers, or suppliers have not engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our manufacturers, suppliers, or other business partners have not engaged and will not engage in conduct that could materially harm their ability to perform their contractual obligations to us or even result in our being held liable for such conduct. Violations of the FCPA, the Bribery Act, OFAC restrictions, or other export control, anti-corruption, anti-money laundering, and anti-terrorism laws or regulations may result in severe criminal or civil penalties, and we may be subject to other related liabilities, which could harm our business, financial condition, cash flows, and results of operations.

As current tariffs are implemented, or if additional tariffs or other restrictions are placed on foreign imports or any related counter-measures are taken by other countries, our business and results of operations could be harmed.

        The Trump Administration has put into place tariffs and other trade restrictions and signaled that it may additionally alter trade agreements and terms between the United States and China, the European Union, Canada, and Mexico, among others, including limiting trade and/or imposing tariffs on imports from such countries. In addition, China, the European Union, Canada, and Mexico, among others, have either threatened or put into place retaliatory tariffs of their own. As announced tariffs are implemented, or additional tariffs or other restrictions are placed on foreign imports, including on any of our products

23


Table of Contents

manufactured overseas for sale in the United States, or any related counter-measures are taken by other countries, our business and results of operations may be materially harmed.

        Current and additional tariffs have the potential to significantly raise the cost of our products, particularly our Drinkware. In such a case, there can be no assurance that we will be able to shift manufacturing and supply agreements to non-impacted countries, including the United States, to reduce the effects of the tariffs. As a result, we may suffer margin erosion or be required to raise our prices, which may result in the loss of customers, negatively impact our results of operations, or otherwise harm our business. In addition, the imposition of tariffs on products that we export to international markets could make such products more expensive compared to those of our competitors if we pass related additional costs on to our customers, which may also result in the loss of customers, negatively impact our results of operations, or otherwise harm our business.

A significant portion of our sales are to independent retail partners.

        22% of our gross sales for 2018, and 19% of our gross sales for the nine months ended September 28, 2019, were made to independent retail partners. These retail partners may decide to emphasize products from our competitors, to redeploy their retail floor space to other product categories, or to take other actions that reduce their purchases of our products. We do not receive long-term purchase commitments from our independent retail partners, and orders received from our independent retail partners are cancellable. Factors that could affect our ability to maintain or expand our sales to these independent retail partners include: (a) failure to accurately identify the needs of our customers; (b) a lack of customer acceptance of new products or product expansions; (c) unwillingness of our independent retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain shelf space from our retail partners; (e) new, well-received product introductions by competitors; and (f) damage to our relationships with independent retail partners due to brand or reputational harm.

        We cannot assure you that our independent retail partners will continue to carry our current products or carry any new products that we develop. If these risks occur, they could harm our brand as well as our results of operations and financial condition.

We depend on our retail partners to display and present our products to customers, and our failure to maintain and further develop our relationships with our retail partners could harm our business.

        We sell a significant amount of our products through knowledgeable national, regional and independent retail partners. Our retail partners service customers by stocking and displaying our products, explaining our product attributes, and sharing our brand story. Our relationships with these retail partners are important to the authenticity of our brand and the marketing programs we continue to deploy. Our failure to maintain these relationships with our retail partners or financial difficulties experienced by these retail partners could harm our business.

        We have key relationships with national retail partners. For both 2018 and the first nine months of 2019, one national retail partner, Dick's Sporting Goods, accounted for approximately 16% of our gross sales. If we lose any of our key retail partners or any key retail partner reduces its purchases of our existing or new products or its number of stores or operations or promotes products of our competitors over ours, our sales would be harmed. Because we are a premium brand, our sales depend, in part, on retail partners effectively displaying our products, including providing attractive space and point of purchase displays in their stores, and training their sales personnel to sell our products. If our retail partners reduce or terminate those activities, we may experience reduced sales of our products, resulting in lower gross margins, which would harm our results of operations.

24


Table of Contents

If our plans to increase sales through our DTC channel are not successful, our business and results of operations could be harmed.

        For the nine months ended September 28, 2019, our DTC channel accounted for 38% of our net sales. Part of our growth strategy involves increasing sales through our DTC channel. However, we have limited operating experience executing the retail component of this strategy. The level of customer traffic and volume of customer purchases through our website or other e-commerce initiatives are substantially dependent on our ability to provide a content-rich and user-friendly website, a hassle-free customer experience, sufficient product availability, and reliable, timely delivery of our products. If we are unable to maintain and increase customers' use of our website, allocate sufficient product to our website, and increase any sales through our website, our business, and results of operations could be harmed.

        We currently operate our online stores in a limited number of countries and are planning to expand our e-commerce platform to others. These countries may impose different and evolving laws governing the operation and marketing of e-commerce websites, as well as the collection, storage, and use of information on customers interacting with those websites. We may incur additional costs and operational challenges in complying with these laws, and differences in these laws may cause us to operate our business differently, and less effectively, in different territories. If so, we may incur additional costs and may not fully realize the investment in our international expansion.

If we do not successfully implement our future retail store expansion, our growth and profitability could be harmed.

        We may in the future expand our existing DTC channel by opening new retail and pop-up stores. We opened retail stores in Charleston, South Carolina and Chicago, Illinois, in June 2019 and September 2019, respectively, and we plan to open additional stores, including a store in Denver, Colorado, in 2020. Additionally, we opened a pop-up store in each of Austin and Dallas, Texas in October 2019 and November 2019, respectively. Our ability to open new retail and pop-up stores in a timely manner and operate them profitably depends on a number of factors, many of which are beyond our control, including:

our ability to manage the financial and operational aspects of our retail growth strategy, including making appropriate investments in our software systems, information technology, and operational infrastructure;

our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data to accurately determine customer demand for our products in the locations we select;

our ability to negotiate favorable lease agreements;

our ability to properly assess the potential profitability and payback period of potential new retail store locations;

the availability of financing on favorable terms;

our ability to secure required governmental permits and approvals and our ability to effectively comply with state and local employment and labor laws, rules, and regulations;

our ability to hire and train skilled store operating personnel, especially management personnel;

the availability of construction materials and labor and the absence of significant construction delays or cost overruns;

our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in the areas where new retail stores are established;

our ability to establish a supplier and distribution network able to supply new retail stores with inventory in a timely manner;

25


Table of Contents

our competitors, or our retail partners, building or leasing stores near our retail stores or in locations we have identified as targets for a new retail store;

customer demand for our products; and

general economic and business conditions affecting consumer confidence and spending and the overall strength of our business.

        We currently have three retail stores, two pop-up stores, and a corporate store and, therefore, have limited experience in opening retail stores and may not be able to successfully address the risks that they entail. For example, we may not be able to implement our retail store strategy, achieve desired net sales growth, and payback periods or maintain consistent levels of profitability in our retail stores. In order to pursue our retail store strategy, we will be required to expend significant cash resources prior to generating any sales in these stores. We may not generate sufficient sales from these stores to justify these expenses, which could harm our business and profitability. The substantial management time and resources which any future retail store expansion strategy may require could also result in disruption to our existing business operations which may decrease our net sales and profitability.

Insolvency, credit problems or other financial difficulties that could confront our retail partners could expose us to financial risk.

        We sell to the large majority of our retail partners on open account terms and do not require collateral or a security interest in the inventory we sell them. Consequently, our accounts receivable with our retail partners are unsecured. Insolvency, credit problems, or other financial difficulties confronting our retail partners could expose us to financial risk. These actions could expose us to risks if they are unable to pay for the products they purchase from us. Financial difficulties of our retail partners could also cause them to reduce their sales staff, use of attractive displays, number or size of stores, and the amount of floor space dedicated to our products. Any reduction in sales by, or loss of, our current retail partners or customer demand, or credit risks associated with our retail partners, could harm our business, results of operations, and financial condition.

If our independent suppliers and manufacturing partners do not comply with ethical business practices or with applicable laws and regulations, our reputation, business, and results of operations could be harmed.

        Our reputation and our customers' willingness to purchase our products depend in part on our suppliers', manufacturers', and retail partners' compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses. We do not exercise control over our suppliers, manufacturers, and retail partners and cannot guarantee their compliance with ethical and lawful business practices. If our suppliers, manufacturers, or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed, and we could be exposed to litigation and additional costs that would harm our business, reputation, and results of operations.

We are subject to payment-related risks.

        For our DTC sales, as well as for sales to certain retail partners, we accept a variety of payment methods, including credit cards, debit cards, electronic funds transfers, electronic payment systems, and gift cards. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements, including obligations to implement enhanced authentication processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, as well as electronic payment systems, we pay interchange and other fees, which may increase over time. We rely on independent service providers for

26


Table of Contents

payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including data security rules and agreements, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or customers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our customers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply could significantly harm our brand, reputation, business, and results of operations.

Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management.

        We depend on the talents and continued efforts of our senior management and key employees. The loss of members of our management or key employees may disrupt our business and harm our results of operations. Furthermore, our ability to manage further expansion will require us to continue to attract, motivate, and retain additional qualified personnel. Competition for this type of personnel is intense, and we may not be successful in attracting, integrating, and retaining the personnel required to grow and operate our business effectively. There can be no assurance that our current management team, or any new members of our management team, will be able to successfully execute our business and operating strategies.

Our plans for international expansion may not be successful; our limited operating experience and limited brand recognition in new markets may make it more difficult to execute our expansion strategy and cause our business and growth to suffer.

        Continued expansion into markets outside the United States, including Canada, Australia, Europe, Japan, and China, is one of our key long-term strategies for the future growth of our business. There are, however, significant costs and risks inherent in selling our products in international markets, including: (a) failure to effectively translate and establish our core brand identity, particularly in markets with a less-established heritage of outdoor and recreational activities; (b) time and difficulty in building a widespread network of retail partners; (c) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (d) potentially lower margins in some regions; (e) longer collection cycles in some regions; (f) increased competition from local providers of similar products; (g) compliance with foreign laws and regulations, including taxes and duties, enhanced privacy laws, rules, and regulations, and product liability laws, rules, and regulations, particularly in the European Union; (h) establishing and maintaining effective internal controls at foreign locations and the associated increased costs; (i) increased counterfeiting and the uncertainty of protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; (j) compliance with anti-bribery, anti-corruption, sanctions, and anti-money laundering laws, such as the FCPA, the Bribery Act, and OFAC regulations, by us, our employees, and our business partners; (k) currency exchange rate fluctuations and related effects on our results of operations; (l) economic weakness, including inflation, or political instability in foreign economies and markets; (m) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (n) workforce uncertainty in countries where labor unrest is more common than in the United States; (o) business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including earthquakes, typhoons, floods, and fires; (p) the imposition of tariffs on products that we import into international markets that could make such products more expensive compared to those of our competitors; (q) that our ability to expand internationally could be impacted by the intellectual property rights of third parties that conflict with or are superior to ours; and (r) other costs and risks of doing business internationally.

27


Table of Contents

        These and other factors could harm our international operations and, consequently, harm our business, results of operations, and financial condition. Further, we may incur significant operating expenses as a result of our planned international expansion, and it may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. We also have limited operating experience outside of the United States and in our expansion efforts we may encounter obstacles we did not face in the United States, including cultural and linguistic differences, differences in regulatory environments, labor practices and market practices, difficulties in keeping abreast of market, business and technical developments, and preferences of foreign customers. Consumer demand and behavior, as well as tastes and purchasing trends, may differ internationally, and, as a result, sales of our products may not be successful, or the margins on those sales may not be in line with those we anticipate. We may also encounter difficulty expanding into international markets because of limited brand recognition, leading to delayed or limited acceptance of our products by customers in these markets, and increased marketing and customer acquisition costs to establish our brand. Accordingly, if we are unable to successfully expand internationally or manage the complexity of our global operations, we may not achieve the expected benefits of this expansion and our financial condition and results of operations could be harmed.

Our financial results and future growth could be harmed by currency exchange rate fluctuations.

        As our international business grows, our results of operations could be adversely impacted by changes in foreign currency exchange rates. Revenues and certain expenses in markets outside of the United States are recognized in local foreign currencies, and we are exposed to potential gains or losses from the translation of those amounts into U.S. dollars for consolidation into our financial statements. Similarly, we are exposed to gains and losses resulting from currency exchange rate fluctuations on transactions generated by our foreign subsidiaries in currencies other than their local currencies. In addition, the business of our independent manufacturers may also be disrupted by currency exchange rate fluctuations by making their purchases of raw materials more expensive and more difficult to finance. As a result, foreign currency exchange rate fluctuations may adversely impact our results of operations.

Our current and future products may experience quality problems from time to time that can result in negative publicity, litigation, product recalls, and warranty claims, which could result in decreased sales and operating margin, and harm to our brand.

        Although we extensively and rigorously test new and enhanced products, there can be no assurance we will be able to detect, prevent, or fix all defects. Defects in materials or components can unexpectedly interfere with the products' intended use and safety and damage our reputation. Failure to detect, prevent, or fix defects could result in a variety of consequences, including a greater number of product returns than expected from customers and our retail partners, litigation, product recalls, and credit claims, among others, which could harm our sales and results of operations. The occurrence of real or perceived quality problems or material defects in our current and future products could expose us to product recalls, warranty, or other claims. In addition, any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products could also harm our brand and decrease demand for our products.

Our business is subject to the risk of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by problems such as terrorism, cyberattacks, or failure of key information technology systems.

        Our business is vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, criminal acts, and similar events. For example, a significant natural disaster, such as an earthquake, fire, or flood, could harm our business, results of operations, and financial condition, and our insurance coverage may be insufficient to compensate us for losses that may occur. Our corporate offices, one of our distribution centers, and one of our data center facilities are located in Texas, a state that frequently experiences floods and storms. In

28


Table of Contents

addition, the facilities of our suppliers and where our manufacturers produce our products are located in parts of Asia that frequently experience typhoons and earthquakes. Acts of terrorism could also cause disruptions in our or our suppliers', manufacturers', and logistics providers' businesses or the economy as a whole. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting Texas or other locations where we have operations or store significant inventory. Our servers may also be vulnerable to computer viruses, criminal acts, denial-of-service attacks, ransomware, and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, or loss of critical data. As we rely heavily on our information technology and communications systems and the Internet to conduct our business and provide high-quality customer service, these disruptions could harm our ability to run our business and either directly or indirectly disrupt our suppliers' or manufacturers' businesses, which could harm our business, results of operations, and financial condition.

We rely significantly on information technology and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate our business.

        Our business relies on information technology. Our ability to effectively manage and maintain our inventory and internal reports, and to ship products to customers and invoice them on a timely basis depends significantly on our enterprise resource planning, warehouse management, and other information systems. We also heavily rely on information systems to process financial and accounting information for financial reporting purposes. Any of these information systems could fail or experience a service interruption for a number of reasons, including computer viruses, programming errors, hacking or other unlawful activities, disasters or our failure to properly maintain system redundancy or protect, repair, maintain or upgrade our systems. The failure of our information systems to operate effectively or to integrate with other systems, or a breach in security of these systems could cause delays in product fulfillment and reduced efficiency of our operations, which could negatively impact our financial results. If we experienced any significant disruption to our financial information systems that we are unable to mitigate, our ability to timely report our financial results could be impacted, which could negatively impact our stock price. We also communicate electronically throughout the world with our employees and with third parties, such as customers, suppliers, vendors, and consumers. A service interruption or shutdown could have a materially adverse impact on our operating activities. Remediation and repair of any failure, problem or breach of our key information systems could require significant capital investments.

We collect, store, process, and use personal and payment information and other customer data, which subjects us to regulation and other legal obligations related to privacy, information security, and data protection.

        We collect, store, process, and use personal and payment information and other customer data, and we rely on third parties that are not directly under our control to manage certain of these operations. Our customers' personal information may include names, addresses, phone numbers, email addresses, payment card data, and payment account information, as well as other information. Due to the volume and sensitivity of the personal information and data we manage, the security features of our information systems are critical.

        If our security measures, some of which are managed by third parties, are breached or fail, unauthorized persons may be able to access sensitive customer data, including payment card data. Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks. Threats to information technology security can take a variety of forms. Individual and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that may pose threats to our customers and our information technology systems. These actors may use a wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities in hardware, software, or other infrastructure in order to attack our information technology systems or gain access to our systems, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords or other sensitive information,

29


Table of Contents

or take other actions to gain access to our data or our customers' data, impersonating authorized users, or acting in a coordinated manner to launch distributed denial of service or other coordinated attacks. Inadequate account security practices may also result in unauthorized access to confidential data. For example, system administrators may fail to timely remove employee account access when no longer appropriate. Employees or third parties may intentionally compromise our security or systems, or reveal confidential information. Cyberthreats are constantly evolving, increasing the difficulty of detecting and successfully defending against them.

        Any breach of our data security or that of our service providers could result in an unauthorized release or transfer of customer, consumer, user or employee information, or the loss of valuable business data or cause a disruption in our business. These events could give rise to unwanted media attention, damage our reputation, damage our customer, consumer, employee, or user relationships and result in lost sales, fines or lawsuits. We may also be required to expend significant capital and other resources to protect against or respond to or alleviate problems caused by a security breach, which could harm our results of operations. If we or our independent service providers or business partners experience a breach of systems compromising our customers' sensitive data, our brand could be harmed, sales of our products could decrease, and we could be exposed to losses, litigation, or regulatory proceedings. Depending on the nature of the information compromised, we may also have obligations to notify users, law enforcement, or payment companies about the incident and may need to provide some form of remedy, such as refunds, for the individuals affected by the incident.

        In addition, privacy laws, rules, and regulations are constantly evolving in the United States and abroad and may be inconsistent from one jurisdiction to another. For example, in June 2018, the State of California enacted the California Consumer Privacy Act, or CCPA, which takes effect on January 1, 2020 and will create new individual privacy rights for California consumers and place increased privacy and security obligations on entities handling certain personal data. Further, as we expand internationally, we are subject to additional privacy rules, such as the European Union's General Data Protection Regulation, many of which are significantly more stringent than those in the United States. Complying with these evolving obligations is costly, and any failure to comply could give rise to unwanted media attention and other negative publicity, damage our customer and consumer relationships and reputation, and result in lost sales, fines, or lawsuits, and may harm our business and results of operations.

Any material disruption or breach of our information technology systems or those of third-party partners could materially damage our customer and business partner relationships, and subject us to significant reputational, financial, legal, and operational consequences.

        We depend on our information technology systems, as well as those of third parties, to design and develop new products, operate our website, host and manage our services, store data, process transactions, respond to user inquiries, and manage inventory and our supply chain as well as to conduct and manage other activities. Any material disruption or slowdown of our systems or those of third parties that we depend upon, including a disruption or slowdown caused by our or their failure to successfully manage significant increases in user volume or successfully upgrade our or their systems, system failures, viruses, ransomware, security breaches, or other causes, could cause information, including data related to orders, to be lost or delayed, which could result in delays in the delivery of products to retailers and customers or lost sales, which could reduce demand for our products, harm our brand and reputation, and cause our sales to decline. If changes in technology cause our information systems, or those of third parties that we depend upon, to become obsolete, or if our or their information systems are inadequate to handle our growth, particularly as we increase sales through our DTC channel, we could damage our customer and business partner relationships and our business and results of operations could be harmed.

        We interact with many of our consumers through our e-commerce platforms, and these systems face similar risks of interruption or attack. Consumers increasingly utilize these services to purchase our products and to engage with our brand. If we are unable to continue to provide consumers a user-friendly

30


Table of Contents

experience and evolve our platform to satisfy consumer preferences, the growth of our e-commerce business and our net revenues may be negatively impacted. If this software contains errors, bugs or other vulnerabilities which impede or halt service, this could result in damage to our reputation and brand, loss of users, or loss of revenue.

We depend on cash generated from our operations to support our growth, and we may need to raise additional capital, which may not be available on terms acceptable to us or at all.

        We primarily rely on cash flow generated from our sales to fund our current operations and our growth initiatives. As we expand our business, we will need significant cash from operations to purchase inventory, increase our product development, expand our manufacturer and supplier relationships, pay personnel, pay for the increased costs associated with operating as a public company, expand internationally, and further invest in our sales and marketing efforts. If our business does not generate sufficient cash flow from operations to fund these activities and sufficient funds are not otherwise available from our current or future credit facility, we may need additional equity or debt financing. If such financing is not available to us on satisfactory terms, our ability to operate and expand our business or to respond to competitive pressures could be harmed. Moreover, if we raise additional capital by issuing equity securities or securities convertible into equity securities, the ownership of our existing stockholders may be diluted. The holders of new securities may also have rights, preferences or privileges which are senior to those of existing holders of common stock. In addition, any indebtedness we incur may subject us to covenants that restrict our operations and will require interest and principal payments that could create additional cash demands and financial risk for us.

Our indebtedness may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with the covenants in our current Credit Facility, our liquidity and results of operations could be harmed.

        As of September 28, 2019, we had $298.0 million principal amount of indebtedness outstanding under the Credit Facility. The Credit Facility is jointly and severally guaranteed by certain of our wholly-owned material subsidiaries, including YETI Coolers, LLC, which we refer to as YETI Coolers, and YETI Custom Drinkware LLC, which we refer to as YCD, and any of our future subsidiaries that become guarantors, together, which we refer to as the Guarantors, and is also secured by a first-priority lien on substantially all of our assets and the assets of the Guarantors, in each case subject to certain customary exceptions. We may, from time to time, incur additional indebtedness under the Credit Facility. See "Description of Indebtedness."

        The Credit Facility places certain conditions on us, including, subject to certain conditions, reductions, and exceptions, requiring us to utilize a portion of our cash flow from operations to make payments on our indebtedness, reducing the availability of our cash flow to fund working capital, capital expenditures, development activity, return capital to our stockholders, and other general corporate purposes. Our compliance with this condition may limit our ability to invest in the ongoing needs of our business. For example, complying with this condition:

increases our vulnerability to adverse economic or industry conditions;

limits our flexibility in planning for, or reacting to, changes in our business or markets;

makes us more vulnerable to increases in interest rates, as borrowings under the Credit Facility bear interest at variable rates;

limits our ability to obtain additional financing in the future for working capital or other purposes; and

potentially places us at a competitive disadvantage compared to our competitors that have less indebtedness.

31


Table of Contents

        The Credit Facility places certain limitations on our ability to incur additional indebtedness. However, subject to the qualifications and exceptions in the Credit Facility, we may incur substantial additional indebtedness under that facility. The Credit Facility also places certain limitations on our ability to enter into certain types of transactions, financing arrangements and investments, to make certain changes to our capital structure, and to guarantee certain indebtedness, among other things. The Credit Facility also places certain restrictions on the payment of dividends and distributions and certain management fees. These restrictions limit or prohibit, among other things, and in each case, subject to certain customary exceptions, our ability to: (a) pay dividends on, redeem or repurchase our stock, or make other distributions; (b) incur or guarantee additional indebtedness; (c) sell stock in our subsidiaries; (d) create or incur liens; (e) make acquisitions or investments; (f) transfer or sell certain assets or merge or consolidate with or into other companies; (g) make certain payments or prepayments of indebtedness subordinated to our obligations under the Credit Facility; and (h) enter into certain transactions with our affiliates.

        The Credit Facility requires us to comply with certain covenants, including financial covenants regarding our total net leverage ratio and interest coverage ratio. Fluctuations in these ratios may increase our interest expense. Failure to comply with these covenants and certain other provisions of the Credit Facility, or the occurrence of a change of control, could result in an event of default and an acceleration of our obligations under the Credit Facility or other indebtedness that we may incur in the future.

        If such an event of default and acceleration of our obligations occurs, the lenders under the Credit Facility would have the right to proceed against the collateral we granted to them to secure such indebtedness, which consists of substantially all of our assets. If the debt under the Credit Facility were to be accelerated, we may not have sufficient cash or be able to sell sufficient collateral to repay this debt, which would immediately and materially harm our business, results of operations, and financial condition. The threat of our debt being accelerated in connection with a change of control could make it more difficult for us to attract potential buyers or to consummate a change of control transaction that would otherwise be beneficial to our stockholders.

In connection with our preparation of our consolidated financial statements, we identified material weaknesses in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us.

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Under standards established by the PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis. The PCAOB defines a significant deficiency as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of a registrant's financial reporting.

        During the preparation of our consolidated financial statements for the year ended December 30, 2017, we identified certain material weaknesses in our internal control over financial reporting. The material weaknesses related to: (a) ineffective information technology general controls, or ITGCs, in the areas of user access and program-change management over certain information technology systems that support our financial reporting process; and (b) failure to properly detect and analyze issues in the accounting system related to inventory valuation. During the year ended December 29, 2018, we implemented controls related to inventory valuation, concluded that our remediation efforts were successful, and that the previously-identified material weakness relating to inventory has been remediated.

32


Table of Contents

We also took a number of actions to improve our ITGCs but have not completed our plans to sufficiently remediate the material weakness related to such controls. For example, we hired a Chief Information Officer and an IT Compliance Manager in July 2019 to continue to improve our information technology systems, including the enhancement of related policies and procedures, and the development and documentation of our ongoing ITGC improvement initiatives. We continue to work on addressing remaining remediation activities within our SAP environment and across our other information technology systems that support our financial reporting process. As a result of this material weakness, business process automated and manual controls that are dependent on the affected ITGCs may be ineffective. The material weakness will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that our ITGCs are operating effectively.

        In accordance with the provisions of the JOBS Act, we and our independent registered public accounting firm were not required to, and did not, perform an evaluation of our internal control over financial reporting as of December 29, 2018 pursuant to Section 404 of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses.

        We will no longer qualify as an emerging growth company on December 28, 2019, and as a result, our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K for the fiscal year ending December 28, 2019. As a result of the material weakness related to ITGCs, we may be unable to assert in our Annual Report on Form 10-K for the fiscal year ending December 28, 2019 that our internal control over financial reporting is effective as of December 28, 2019, and our independent registered public accounting firm may issue a report that our internal control over financial reporting is not effective as of such date. Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or that other material weaknesses and control deficiencies will not be discovered in the future. Any failure to maintain effective disclosure controls and internal control over financial reporting, our failure to assert that our internal control over financial reporting is effective, or an adverse internal control attestation report from our independent registered public accounting firm, could have an adverse effect on our business and operating results, could cause investors to lose confidence in our financial statements, and could cause a decline in the price of our common stock, and we may be unable to maintain compliance with the NYSE listing standards.

Our results of operations are subject to seasonal and quarterly variations, which could cause the price of our common stock to decline.

        We believe that our sales include a seasonal component. We expect our net sales to be highest in our second and fourth quarters, with the first quarter generating the lowest sales. To date, however, it has been difficult to accurately analyze this seasonality due to fluctuations in our sales. In addition, due to our more recent, and therefore more limited experience, with bags, storage, and outdoor lifestyle products and accessories, we are continuing to analyze the seasonality of these products. We expect that this seasonality will continue to be a factor in our results of operations and sales.

        Our annual and quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including, among other things, the timing of the introduction of and advertising for our new products and those of our competitors and changes in our product mix. Variations in weather conditions may also harm our quarterly results of operations. In addition, we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our sales. As a result of these seasonal and quarterly fluctuations, we believe that comparisons of our results of operations between different quarters within a single fiscal year, or across different fiscal years, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of our future performance. In the event

33


Table of Contents

that any seasonal or quarterly fluctuations in our net sales and results of operations result in our failure to meet our forecasts or the forecasts of the research analysts that may cover us in the future, the market price of our common stock could fluctuate or decline.

If our goodwill, other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings.

        We may be required to record future impairments of goodwill, other intangible assets, or fixed assets to the extent the fair value of these assets falls below their book value. Our estimates of fair value are based on assumptions regarding future cash flows, gross margins, expenses, discount rates applied to these cash flows, and current market estimates of value. Estimates used for future sales growth rates, gross profit performance, and other assumptions used to estimate fair value could cause us to record material non-cash impairment charges, which could harm our results of operations and financial condition.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect or change significantly, our results of operations could be harmed.

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of sales and expenses that are not readily apparent from other sources. Our results of operations may be harmed if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors and could result in a decline in our stock price.

We may become involved in legal or regulatory proceedings and audits.

        Our business requires compliance with many laws and regulations, including labor and employment, sales and other taxes, customs, and consumer protection laws and ordinances that regulate retailers generally and/or govern the importation, promotion, and sale of merchandise, and the operation of stores and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines, and penalties. We may become involved in a number of legal proceedings and audits, including government and agency investigations, and consumer, employment, tort, and other litigation. The outcome of some of these legal proceedings, audits, and other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition and results of operations. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management's attention and resources, harming our business, financial condition, and results of operations. Any pending or future legal or regulatory proceedings and audits could harm our business, financial condition, and results of operations.

Our business involves the potential for product recalls, product liability, and other claims against us, which could affect our earnings and financial condition.

        As a designer, marketer, retailer, and distributor of consumer products, we are subject to the United States Consumer Products Safety Act of 1972, as amended by the Consumer Product Safety Improvement Act of 2008, which empowers the Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous, and similar laws under foreign jurisdictions. Under certain circumstances, the Consumer Products Safety Commission or comparable foreign agency could require us to repurchase or recall one or more of our products. Additionally, laws regulating consumer products exist in states and some cities, as well as other countries in which we sell our products, and more

34


Table of Contents

restrictive laws and regulations may be adopted in the future. Any repurchase or recall of our products, monetary judgment, fine or other penalty could be costly and damaging to our reputation. If we were required to remove, or we voluntarily removed, our products from the market, our reputation could be tarnished and we may have large quantities of finished products that we could not sell.

        We also face exposure to product liability claims and unusual or significant litigation in the event that one of our products is alleged to have resulted in bodily injury, property damage or other adverse effects. In addition to the risk of monetary judgments or other penalties that may result from product liability claims, such claims could result in negative publicity that could harm our reputation in the marketplace, adversely impact our brand, or result in an increase in the cost of producing our products. As a result, these types of claims could have a material adverse effect on our business, results of operations and financial condition.

We may be subject to liability if we infringe upon the intellectual property rights of third parties.

        Third parties may sue us for alleged infringement of their proprietary rights. The party claiming infringement might have greater resources than we do to pursue its claims, and we could be forced to incur substantial costs and devote significant management resources to defend against such litigation, even if the claims are meritless and even if we ultimately prevail. If the party claiming infringement were to prevail, we could be forced to modify or discontinue our products, pay significant damages, or enter into expensive royalty or licensing arrangements with the prevailing party. In addition, any payments we are required to make, and any injunction we are required to comply with as a result of such infringement, could harm our reputation and financial results.

We may acquire or invest in other companies, which could divert our management's attention, result in dilution to our stockholders, and otherwise disrupt our operations and harm our results of operations.

        In the future, we may acquire or invest in businesses, products, or technologies that we believe could complement or expand our business, enhance our capabilities, or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.

        In any future acquisitions, we may not be able to successfully integrate acquired personnel, operations, and technologies, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from future acquisitions due to a number of factors, including: (a) an inability to integrate or benefit from acquisitions in a profitable manner; (b) unanticipated costs or liabilities associated with the acquisition; (c) the incurrence of acquisition-related costs; (d) the diversion of management's attention from other business concerns; (e) the loss of our or the acquired business' key employees; or (f) the issuance of dilutive equity securities, the incurrence of debt, or the use of cash to fund such acquisitions.

        In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our results of operations based on this impairment assessment process, which could harm our results of operations.

We may be the target of strategic transactions.

        Other companies may seek to acquire us or enter into other strategic transactions. We will consider, discuss, and negotiate such transactions as we deem appropriate. The consideration of such transactions, even if not consummated, could divert management's attention from other business matters, result in adverse publicity or information leaks, and could increase our expenses.

35


Table of Contents

We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.

        Our operations are subject to many hazards and operational risks inherent to our business, including: (a) general business risks; (b) product liability; (c) product recall; and (d) damage to third parties, our infrastructure, or properties caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, human errors, and similar events.

        Our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations, and financial condition.

Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.

        We are subject to income taxes in the United States (federal and state) and various foreign jurisdictions. Our effective income tax rate could be adversely affected in the future by a number of factors, including changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations or their interpretations and application, and the outcome of income tax audits in various jurisdictions around the world.

        The United States enacted the Tax Cuts and Jobs Act, or the Tax Act, on December 22, 2017, which had a significant impact to our provision for income taxes for fiscal 2017 and 2018.

        The Tax Act requires complex computations to be performed that were not previously required under U.S. tax law, significant judgments to be made in interpretation of the provisions of the Tax Act and significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the Internal Revenue Service, and other standard-setting governmental bodies could interpret the provisions of the Tax Act or issue related administrative guidance contrary to our interpretation.

        We regularly assess all of these matters to determine the adequacy of our income tax provision, which is subject to significant judgment.

We are subject to credit risk.

        We are exposed to credit risk primarily on our accounts receivable. We provide credit to our retail partners in the ordinary course of our business and perform ongoing credit evaluations. While we believe that our exposure to concentrations of credit risk with respect to trade receivables is mitigated by our large retail partner base, and we make allowances for doubtful accounts, we nevertheless run the risk of our retail partners not being able to meet their payment obligations, particularly in a future economic downturn. If a material number of our retail partners were not able to meet their payment obligations, our results of operations could be harmed.

Risks Related to Ownership of Our Common Stock and this Offering

Our stock price may be volatile or may decline, including due to factors beyond our control, resulting in substantial losses for investors.

        The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

actual or anticipated fluctuations in our results of operations;

36


Table of Contents

the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;

failure of securities analysts to maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

ratings changes by any securities analysts who follow our company;

sales or potential sales of shares by our stockholders, or the filing of a registration statement for these sales;

announcement of new, or the implementation of previously announced, tariffs or changes in tariffs by the U.S. or foreign governments;

adverse market reaction to any indebtedness we may incur or equity we may issue in the future;

announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

publication of adverse research reports about us, our industry, or individual companies within our industry;

publicity related to problems in our manufacturing or the real or perceived quality of our products, as well as the failure to timely launch new products that gain market acceptance;

changes in operating performance and stock market valuations of our competitors;

price and volume fluctuations in the overall stock market, including as a result of trends in the United States or global economy;

any major change in our Board of Directors or management;

lawsuits threatened or filed against us or negative results of any lawsuits;

security breaches or cyberattacks;

legislation or regulation of our business;

loss of key personnel;

new products introduced by us or our competitors;

the perceived or real impact of events that harm our direct competitors;

developments with respect to our trademarks, patents, or proprietary rights;

general market conditions; and

other events or factors, including those resulting from war, incidents of terrorism, or responses to these events, which could be unrelated to us or outside of our control.

        In addition, stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies in our industry, as well as those of newly public companies. In the past, stockholders of other public companies have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and harm our business, results of operations, financial condition, reputation, and cash flows.

37


Table of Contents

Our directors, executive officers, and significant stockholders will continue to have substantial control over us after this offering and could delay or prevent a change in corporate control.

        Upon completion of this offering, Cortec will continue to be our largest stockholder, owning 35.8% of the total voting power of our common stock (34.5%, if the underwriters exercise their option to purchase additional shares in full). Furthermore, after this offering, our directors, executive officers, and other holders of more than 5% of our common stock, together with their affiliates, will own, in the aggregate, 49.7% of our outstanding common stock (48.1%, if the underwriters exercise their option to purchase additional shares in full). As a result, these stockholders, acting together or in some cases individually, have the ability to significantly impact the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, these stockholders, acting together or in some cases individually, have the ability to significantly impact the management and affairs of our company. Accordingly, this concentration of ownership might decrease the market price of our common stock by:

delaying, deferring, or preventing a change in control of the company;

impeding a merger, consolidation, takeover, or other business combination involving us; or

discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company.

Although we anticipate that we will not be a controlled company within the meaning of the NYSE listing standards upon the completion of this offering, during the applicable phase-in periods we may continue to rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

        Prior to this offering, Cortec controlled a majority of the voting power of our common stock with respect to the election of our directors pursuant to the Voting Agreement. As a result, we are considered a controlled company under the NYSE listing standards. As a controlled company, we are currently exempt from the obligation to comply with certain NYSE corporate governance requirements, including the requirements:

that a majority of our Board of Directors consist of independent directors, as defined under the NYSE listing standards;

that we have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and

that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities.

        The Voting Agreement will terminate, pursuant to its terms, when the parties thereto no longer beneficially own, in the aggregate, shares of our common stock representing greater than 50% of the then outstanding voting power with respect to the election of our directors. Upon the completion of this offering, Cortec, together with Roy Seiders, Ryan Seiders, and their respective affiliates, will own approximately 49.7% of our outstanding common stock (or approximately 48.1% if the underwriters exercise their option to purchase additional shares in full). As a result, Cortec will control less than 50% of the total voting power of our common stock with respect to the election of our directors and the Voting Agreement will terminate upon completion of this offering.

        Under the NYSE listing standards, a company that ceases to be a controlled company must comply with the independent board committee requirements as they relate to the nominating and corporate governance and compensation committees on the following phase-in schedule: (1) one independent committee member at the time it ceases to be a controlled company; (2) a majority of independent committee members within 90 days of the date it ceases to be a controlled company; and (3) all independent committee members within one year of the date it ceases to be a controlled company.

38


Table of Contents

Additionally, the NYSE listing standards provide a 12-month phase-in period from the date a company ceases to be a controlled company to comply with the majority independent board requirement. Prior to this offering, our Board of Directors had determined that two of the three members of our Compensation Committee, one of the three members of our Nominating and Governance Committee and three of the eight members of our Board of Directors, are independent for purposes of the NYSE listing standards. We anticipate that we will not be a controlled company upon completion of this offering, and we intend to appoint additional directors to our Board of Directors and committees and/or appoint current directors who are then deemed independent to additional committees within the time periods required by the NYSE listing standards. During these phase-in periods, our stockholders will not have the same protections afforded to stockholders of companies of which the majority of directors are independent and, if, within the phase-in periods, we are not able to comply with the NYSE listing requirements, we may be subject to delisting actions by the NYSE. In addition, a change in our Board of Directors and committee membership may result in a change in corporate strategy and operating philosophies, and may result in deviations from our current growth strategy.

        In addition, our Board of Directors currently consists of eight directors, comprised of our CEO, one of our Founders, three outside directors, and three directors selected by Cortec, our principal stockholder. Pursuant to the terms of the Stockholders Agreement, Cortec has the right to have one of its representatives serve as Chair of our Board of Directors and Chair of the Nominating and Governance Committee of our Board of Directors, as well as the right to select nominees for our Board of Directors, in each case subject to a phase-out period based on Cortec's future share ownership. See "Certain Relationships and Related-Party Transactions—Stockholders Agreement." Accordingly, even if we are no longer a controlled company, holders of our common stock may not have the same protections afforded to stockholders of companies that do not have a stockholders agreement similar to ours.

Substantial future sales, or the perception or anticipation of future sales, of shares of our common stock could cause our stock price to decline.

        Our stock price could decline as a result of substantial sales of our common stock, including in this offering, or the perception or anticipation that such sales could occur, particularly sales by our directors, executive officers, and significant stockholders, a large number of shares of our common stock becoming available for sale, or the perception in the market that holders of a large number of shares intend to sell their shares. After this offering, we will have 85,904,657 shares of our common stock outstanding. This includes the 10,000,000 shares included in this offering, which may be resold in the public market immediately unless purchased by our affiliates. In connection with this offering, we, the selling stockholders and our directors and officers have entered into lock-up agreements with the underwriters of this offering, restricting their ability to transfer shares of common stock for 60 days from the date of this prospectus, subject to certain exceptions. These lock-up agreements will limit the number of shares of common stock that may be sold immediately following this offering.

        Under our Registration Rights Agreement (as defined below), as amended, Cortec, the Founders and certain other holders of our common stock have demand registration rights in respect of the shares of common stock they hold, subject to certain conditions. In addition, in the event that we register additional shares of common stock for sale to the public, we are required to give notice of the registration to the parties to the Registration Rights Agreement and, subject to certain limitations, include shares of common stock held by them in the registration. See "Certain Relationships and Related-Party Transactions—Registration Rights Agreement" for a more detailed description of the Registration Rights Agreement. In addition, we expect that certain of our stockholders will adopt trading plans established under Rule 10b5-1 of the Securities Exchange Act of 1934, or the Exchange Act, pursuant to which they will each sell, subject to the terms of such trading plans, a significant portion of their remaining shares of common stock commencing following the expiration of the lock-up agreements they entered into in connection with this offering. See "Certain Relationships and Related Party Transactions—Letter Agreement." If our existing stockholders register or sell substantial amounts of our common stock, including in this offering, this could

39


Table of Contents

harm the market price of our common stock, even if there is no relationship between the registration or sales and the performance of our business. In addition, as restrictions on resale end, the market price of our shares of common stock could drop if the holders of these shares sell them or are perceived by the markets as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.

        We have also registered shares of common stock that we may issue under our equity compensation plans, which are able to be sold freely in the public market upon issuance, subject to volume limitations applicable to affiliates.

We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

        We are an emerging growth company as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. We intend to take advantage of the extended transition period for adopting new or revised financial standards under the JOBS Act as an emerging growth company.

        For as long as we continue to be an emerging growth company, we may also take advantage of other exemptions from certain reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, exemption from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotations or a supplement to the auditor's report on financial statements, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute arrangements, and reduced financial reporting requirements. Investors may find our common stock less attractive because we rely on these exemptions, which could result in a less active trading market for our common stock, increased price fluctuation, and a decrease in the trading price of our common stock.

We will cease to qualify as an emerging growth company as of December 28, 2019, in which case we will be subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, and must comply with certain new accounting standards and with other requirements that we were previously exempt from as an emerging growth company, that may be difficult for us to satisfy in a timely fashion.

        We will cease to qualify as an emerging growth company as of December 28, 2019, the end of our current fiscal year, because the market value of our common stock held by non-affiliates exceeded $700 million as of June 28, 2019, the last business day of our most recently completed second fiscal quarter. As a result, we will be required to comply with the additional requirements associated with no longer being an emerging growth company, including the requirements for accelerated adoption of certain new accounting standards, the requirement that our independent registered public accounting firm express an opinion as to the effectiveness of our internal control over financial reporting, and the other disclosure and governance requirements described above. Section 404(a) of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on the internal control over financial reporting. Section 404(b) of that Act will require that we file our independent registered public accounting firm's attestation report on our internal control over financial reporting. We are in the process of planning for the accelerated adoption of new accounting standards as well as designing, documenting or implementing the incremental internal control over financial reporting required to comply with these obligations, which will be time consuming, costly and complicated. We may not be able to complete our evaluation, testing, and any required remediation in a timely fashion. As a result of the material weakness related to our ITGCs, we may be unable to assert in our Annual Report on Form 10-K for the fiscal year ending December 28, 2019 that our internal control over financial reporting is effective as of December 28, 2019, and our independent registered public

40


Table of Contents

accounting firm may issue a report that our internal control over financial reporting is not effective as of such date.

        If we are unable to complete the implementation of certain new accounting standards, if we identify previously undetected material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm expresses a negative report as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decline.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our common stock.

        Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change in control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws:

provide that our Board of Directors is classified into three classes of directors;

prohibit stockholders from taking action by written consent from and after the date that Cortec beneficially owns less than 35% of our outstanding shares of common stock, which may occur in connection with, or after, the completion of this offering;

provide that stockholders may remove directors only for cause, and only with the approval of holders of at least 662/3% of our then outstanding common stock, from and after the date that Cortec beneficially owns less than 35% of our outstanding common stock, which may occur in connection with, or after, the completion of this offering;

provide that the authorized number of directors may be changed only by resolution of the Board of Directors;

provide that all vacancies, including newly created directorships, may, except as otherwise required by law or as set forth in the Stockholders Agreement, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder's notice;

restrict the forum for certain litigation against us to Delaware;

do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election);

provide that special meetings of our stockholders may be called only by the Chairman of the Board of Directors, our CEO, or the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors;

provide that stockholders will be permitted to amend our amended and restated bylaws only upon receiving at least 662/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class; and

41


Table of Contents

provide that certain provisions of our amended and restated certificate of incorporation may only be amended upon receiving at least 662/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote, voting together as a single class.

        These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, we have opted out of the provisions of Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which generally prohibit a Delaware corporation from engaging in any of a broad range of business combinations with any interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder. However, our amended and restated certificate of incorporation provides substantially the same limitations as are set forth in Section 203 but also provides that Cortec and its affiliates and any of their direct or indirect transferees and any group as to which such persons are a party do not constitute interested stockholders for purposes of this provision.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

        Our amended and restated certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of fiduciary duty owed by any of our stockholders, directors, officers, or other employees to us or to our stockholders; (c) any action asserting a claim arising pursuant to the DGCL; or (d) any action asserting a claim governed by the internal affairs doctrine. The choice of forum provision does not apply to any actions arising under the Securities Act or the Exchange Act. The choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.

We do not intend to pay dividends for the foreseeable future.

        Other than the Special Dividend (as defined below), we have not declared or paid any dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board of Directors may deem relevant. In addition, the Credit Facility precludes our and our subsidiaries' ability to, among other things, pay dividends or make any other distribution or payment on account of our common stock, subject to certain exceptions. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

YETI Holdings, Inc. is a holding company with no operations of its own and, as such, it depends on its subsidiaries for cash to fund its operations and expenses, including future dividend payments, if any.

        As a holding company, our principal source of cash flow is distributions from our subsidiaries. Therefore, our ability to fund and conduct our business, service our debt, and pay dividends, if any, depends on the ability of our subsidiaries to generate sufficient cash flow to make upstream cash distributions to us. Our subsidiaries are separate legal entities, and although they are wholly owned and

42


Table of Contents

controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends, or otherwise. The ability of our subsidiaries to distribute cash to us is also subject to, among other things, restrictions that may be contained in our subsidiary agreements (as entered into from time to time), availability of sufficient funds in such subsidiaries and applicable laws and regulatory restrictions. Claims of any creditors of our subsidiaries generally will have priority as to the assets of such subsidiaries over our claims and claims of our creditors and stockholders. To the extent the ability of our subsidiaries to distribute dividends or other payments to us is limited in any way, our ability to fund and conduct our business, service our debt, and pay dividends, if any, could be harmed.

43


Table of Contents


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this prospectus are forward looking statements. Forward-looking statements include statements containing words such as "anticipate," "assume," "believe," "can," have," "contemplate," "continue," "could," "design," "due," "estimate," "expect," "forecast," "goal," "intend," "likely," "may," "might," "objective," "plan," "predict," "project," "potential," "seek," "should," "target," "will," "would," and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events. For example, all statements made relating to growth strategies, the estimated and projected costs, expenditures, and growth rates, plans and objectives for future operations, growth, or initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that are expected and, therefore, you should not unduly rely on such statements. The risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include but are not limited to:

our ability to maintain and strengthen our brand and generate and maintain ongoing demand for our products;

our ability to successfully design and develop new products;

our ability to effectively manage our growth;

our ability to expand into additional consumer markets, and our success in doing so;

the success of our international expansion plans;

our ability to compete effectively in the outdoor and recreation market and protect our brand;

the level of customer spending for our products, which is sensitive to general economic conditions and other factors;

problems with, or loss of, our third-party contract manufacturers and suppliers, or an inability to obtain raw materials;

fluctuations in the cost and availability of raw materials, equipment, labor, and transportation and subsequent manufacturing delays or increased costs;

the implementation of announced, or the enactment of new, tariffs by the U.S. government or by countries to which we export our products or raw materials;

our ability to accurately forecast demand for our products and our results of operations;

our relationships with our national, regional, and independent retailers, who account for a significant portion of our sales;

the impact of natural disasters and failures of our information technology on our operations and the operations of our manufacturing partners;

our ability to attract and retain skilled personnel and senior management, and to maintain the continued efforts of our management and key employees;

the impact of our indebtedness on our ability to invest in the ongoing needs of our business;

the impact of our "controlled company" exemptions under NYSE listing standards and the expected loss of such exemptions, subject to applicable phase-in periods; and

other risks and uncertainties described in "Risk Factors."

44


Table of Contents

        These forward-looking statements are made based upon detailed assumptions and reflect management's current expectations and beliefs. While we believe that these assumptions underlying the forward-looking statements are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect actual results.

        See the "Risk Factors" section and elsewhere in this prospectus for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties we face that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this prospectus and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

        We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this prospectus are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

45


Table of Contents


USE OF PROCEEDS

        The selling stockholders will receive all the net proceeds from this offering. We will not receive any proceeds from the sale of common stock by the selling stockholders.

46


Table of Contents


DIVIDEND POLICY

        We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board of Directors may deem relevant.

        The Credit Facility prohibits us and our subsidiaries, and any future agreements may prohibit us and our subsidiaries, from, among other things, paying any dividends or making any other distribution or payment on account of our common stock other than certain exceptions. See "Description of Indebtedness."

        On May 17, 2016, we declared and paid a cash dividend of $5.54 per common share, which we refer to as the Special Dividend, as a partial return of capital to our stockholders, which totaled $451.3 million. Of the Special Dividend, $312.1 million, $0.1 million, and $48.9 million was paid to Cortec, our CEO, and our Founder board member, respectively. Other than the Special Dividend, we have not declared or paid any cash dividends on our common stock.

47


Table of Contents


CAPITALIZATION

        The following table sets forth our cash and capitalization as of September 28, 2019.

        You should read this information in conjunction with "Use of Proceeds," "Selected Consolidated Financial and Other Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and related notes included elsewhere in this prospectus.

 
  As of
September 28,
2019
 
 
  Actual  
 
  (in thousands,
except per
share data)
 

Cash(1)

  $ 34,557  

Long-term debt (excludes debt issuance costs)

       

Credit Facility

       

Revolving Credit Facility

     

Term Loan A, due 2021

  $ 298,013  

Term Loan B, due 2022

     

Rambler On promissory note

     

Total long-term debt (excludes debt issuance costs)

    298,013  

Stockholders' equity:

       

Common stock, par value $0.01 per share: 600,000 shares, authorized, 85,775 shares issued and outstanding actual

    858  

Preferred stock, par value $0.01 per share: 30,000 shares authorized, 0 shares issued and outstanding

     

Additional paid-in capital

    281,418  

Accumulated deficit

    (194,287 )

Accumulated other comprehensive loss

    (129 )

Total stockholders' equity

    87,860  

Total capitalization

  $ 385,873  

(1)
If the selling stockholders sell at least 10,918,000 shares in this offering, or if Cortec's ownership of our outstanding voting securities otherwise falls below 35%, we intend to use cash on hand to pay tax withholding obligations in connection with the vesting and settlement of certain employee restricted stock units. The amount of such tax withholding obligations, which we estimate will be in a range of approximately $14.0 million to $17.0 million, will be based on the closing price for our common stock as reported on the New York Stock Exchange on the date that such restricted stock units are settled in shares of our common stock. See "Executive Compensation—RSU Awards."

48


Table of Contents


DILUTION

        Except for the 80,549 shares to be sold by certain of our executive officers by exercising options to purchase shares of common stock under the 2012 Plan, the shares of common stock to be sold by the selling stockholders pursuant to this prospectus are currently issued and outstanding. Accordingly, the only dilution to our existing stockholders as a result of this offering will be as a result of the exercise of stock options by certain of our executive officers.

49


Table of Contents


SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

        The following tables set forth a summary of our historical selected consolidated financial data for the periods and at the dates indicated. Effective January 1, 2017, we converted our fiscal year end from a calendar year ending December 31 to a "52- to 53-week" year ending on the Saturday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. This did not have a material effect on our consolidated financial statements and, therefore, we did not retrospectively adjust our financial statements. Fiscal years 2018 and 2017 included 52 weeks. The first nine months of fiscal 2019 and 2018 included 39 weeks. Our consolidated financial data as of December 29, 2018 and December 30, 2017 and for 2018, 2017, and 2016 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated financial data as of September 28, 2019 and for the nine months ended September 28, 2019 and for the nine months ended September 29, 2018 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. In the opinion of management, our unaudited condensed consolidated financial statements were prepared on the same basis as our audited consolidated financial statements and include all adjustments necessary for a fair presentation of this information. The consolidated financial data as of December 31, 2016 and December 31, 2015 and for 2015 have been derived from our audited condensed consolidated financial statements not included in this prospectus. The percentages below indicate the statement of operations data as a percentage of net sales. You should read this data together with our audited financial statements and related notes appearing elsewhere in this prospectus and the information included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of our future results.

 
  Nine Months Ended   Fiscal Year Ended  
(in thousands, except per share data)
  September 28,
2019
  September 29,
2018
  December 29,
2018
  December 30,
2017
  December 31,
2016
  December 31,
2015
 

Statement of Operations

                                                                         

Net sales

  $ 616,132     100 % $ 537,654     100 % $ 778,833     100 % $ 639,239     100 % $ 818,914     100 % $ 468,946     100 %

Cost of goods sold

    303,152     49 %   282,354     53 %   395,705     51 %   344,638     54 %   404,953     49 %   250,245     53 %

Gross profit

    312,980     51 %   255,300     47 %   383,128     49 %   294,601     46 %   413,961     51 %   218,701     47 %

Selling, general, and administrative expenses

    235,191     38 %   190,746     35 %   280,972     36 %   230,634     36 %   325,754     40 %   90,791     19 %

Operating income

    77,789     13 %   64,554     12 %   102,156     13 %   63,967     10 %   88,207     11 %   127,910     27 %

Interest expense

    (17,081 )   3 %   (24,474 )   5 %   (31,280 )   4 %   (32,607 )   5 %   (21,680 )   3 %   (6,075 )   1 %

Other income (expense)

    (192 )   0 %   (325 )   0 %   (1,261 )   0 %   699     0 %   (1,242 )   0 %   (6,474 )   1 %

Income before income taxes

    60,516     10 %   39,755     7 %   69,615     9 %   32,059     5 %   65,285     8 %   115,361     25 %

Income tax expense

    (14,824 )   2 %   (7,161 )   1 %   (11,852 )   2 %   (16,658 )   3 %   (16,497 )   2 %   (41,139 )   9 %

Net income

  $ 45,692     7 % $ 32,594     6 %   57,763     7 %   15,401     2 %   48,788     6 %   74,222     16 %

Net income attributable to noncontrolling interest

                                    (811 )            

Net income to YETI Holdings, Inc

  $ 45,692     7 % $ 32,594     6 % $ 57,763     7 % $ 15,401     2 % $ 47,977     6 % $ 74,222     16 %

Adjusted operating income(1)

  $ 98,476     16 % $ 78,324     15 %   124,203     16 %   76,003     12 %   220,208     27 %   136,043     29 %

Adjusted net income(1)

    61,311     10 %   43,641     8 %   75,690     10 %   23,126     4 %   134,559     16 %   79,484     17 %

Adjusted EBITDA(1)

    119,504     19 %   96,831     18 % $ 149,049     19 % $ 97,471     15 % $ 231,862     28 % $ 137,101     29 %

Net income to YETI Holdings, Inc. per share

                                                                         

Basic

  $ 0.54         $ 0.40         $ 0.71         $ 0.19         $ 0.59         $ 0.93        

Diluted

  $ 0.53         $ 0.39         $ 0.69         $ 0.19         $ 0.58         $ 0.92        

Adjusted net income per share(1)

                                                                         

Diluted

  $ 0.71         $ 0.53         $ 0.91         $ 0.28         $ 1.63         $ 0.99        

Weighted average common shares outstanding

                                                                         

Basic

    84,686           81,238           81,777           81,479           81,097           79,775        

Diluted

    86,152           82,946           83,519           82,972           82,755           80,665        

(1)
For the definition of adjusted operating income, adjusted net income, adjusted EBITDA and adjusted net income per share, and a reconciliation of such measures to operating income and net income, as applicable, see "Prospectus Summary—Summary Consolidated Financial and Other Data."

50


Table of Contents

 
   
  As of Fiscal Year End,  
 
  As of
September 28,
2019
 
(dollars in thousands)
  2018   2017   2016  

Balance Sheet and Other Data

                         

Inventory

  $ 209,154   $ 145,423   $ 175,098   $ 246,119  

Property and equipment, net

    81,242     74,097     73,783     47,090  

Total assets

    559,695     514,213     516,427     536,107  

Long-term debt including current maturities

    294,832     328,014     475,682     537,238  

Total stockholders' equity (deficit)(1)

    87,860     28,971     (76,231 )   (95,101 )

Purchases of property and equipment

    24,249     20,860     42,197     35,588  

(1)
Total stockholders' equity (deficit) includes the impact of noncontrolling interest related to the consolidation of Rambler On as a variable interest entity in 2016.

51


Table of Contents


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under "Special Note Regarding Forward-Looking Statements" and "Risk Factors" and elsewhere in this prospectus. Some of the numbers included herein have been rounded for the convenience of presentation.

Executive Summary

        We are a growing designer, marketer, retailer, and distributor of a variety of innovative, branded, premium products to a wide-ranging customer base. Our mission is to ensure that each YETI product delivers exceptional performance and durability in any environment, whether in the remote wilderness, at the beach, or anywhere else life takes our customers. By consistently delivering high-performing products, we have built a following of engaged brand loyalists throughout the United States, Canada, Australia, Japan, and elsewhere, ranging from serious outdoor enthusiasts to individuals who simply value products of uncompromising quality and design. Our relationship with customers continues to thrive and deepen as a result of our innovative new product introductions, expansion and enhancement of existing product families, and multifaceted branding activities.

        Our marketing strategy has been instrumental in driving sales and building equity in the YETI brand. We have become a trusted and preferred brand to experts and serious enthusiasts in an expanding range of outdoor pursuits. Their brand advocacy, combined with our various marketing efforts, has broadened our appeal to a larger consumer population. We produce original short films and distribute them through our content-rich website, active social media presence, and email subscriber base. We maintain a large and active roster of YETI Ambassadors, a diverse group of men and women throughout the United States and select international markets, comprised of world-class anglers, hunters, rodeo cowboys, barbecue pitmasters, surfers, and outdoor adventurers who embody our brand. We also directly engage with our current and target customers by sponsoring and participating in a variety of events, including sportsman shows, outdoor festivals, rodeos, music and film festivals, barbecue competitions, fishing tournaments, and retailer events. We believe our innovative consumer engagement reinforces the authenticity and aspirational nature of our brand and products across our expanding customer base.

        We bring our products to market through a diverse omni-channel strategy, comprised of our select group of national, regional, and independent retail partners and our DTC channel. Within our wholesale channel, our national retail partners include Dick's Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops/Cabela's, Ace Hardware, and Williams Sonoma. We also expect to sell our products through Lowe's beginning in December 2019. Our network of independent retail partners includes outdoor specialty, hardware, sporting goods, and farm and ranch supply stores. Our DTC channel is comprised of YETI.com, country and region specific YETI websites, YETI Authorized on the Amazon Marketplace, corporate sales, and our retail and pop-up stores. Our DTC channel provides authentic, differentiated brand experiences, customer engagement, and expedited customer feedback, enhancing the product development cycle while providing diverse avenues for growth.

        From 2013 to 2016, yearly net sales were $89.9 million, $147.7 million, $468.9 million, and $818.9 million, respectively, representing a CAGR of 109% for the three-year period. Beginning in late 2016 and throughout 2017, we were affected by a confluence of internal and external factors that adversely impacted our growth and profitability, resulting in a decrease of net sales by 22% to $639.2 million for 2017. However, initiatives taken in 2017 and 2018 increased net sales by 22% to $778.8 million for 2018.

52


Table of Contents

        Driven by strong customer demand and a shortage of product in 2015, retailers aggressively stocked our products during 2016, which led to excess inventory in our wholesale channel and drove many of our retail partners to reduce purchases in the first half of 2017. During this period, we were also impacted by a challenging wholesale marketplace generally, notably the delayed merger of Bass Pro Shops and Cabela's, which slowed ordering, negative trends in the U.S. retail environment, including several retailer bankruptcies, and the repositioning by a major retail partner towards "every day low prices" and private label products at the expense of our premium products. Additionally, we settled several lawsuits that we had initiated against competitors in which we alleged they were infringing on our intellectual property across our range of products. While these settlements were favorable to YETI over the long term, during the first half of 2017, they resulted in competitors being allowed to liquidate the disputed inventory at low prices.

        In response to these events, we immediately implemented several initiatives, such as executing a series of pricing actions, introducing new products, driving growth of our DTC business, focusing and diversifying our independent dealer base, rationalizing our manufacturing supplier base, strengthening our team by adding several key executives and increasing our employee count, and investing in enhanced information technology systems. These initiatives proved successful and by year end 2017 had reduced retailer and company inventory levels to targeted levels, enhanced liquidity, reinvigorated growth, and better positioned YETI for long-term success.

        To continue this momentum into 2018 and beyond, we built on the initiatives of 2017 and further invested in our long-term success by:

adding several key executives, including our Senior Vice President and Chief Financial Officer, Senior Vice President of Talent, and Senior Vice President and Chief Marketing Officer, and increasing our employee count from 507 at the end of 2017 to 647 at the end of 2018, and to 761 as of September 28, 2019;

completing our initial public offering, which provided us with $42.4 million in net proceeds that we used to repay our Term Loan B, as defined below;

expanding our international presence in Canada, Australia, Japan, Europe, and New Zealand;

continuing growth in our DTC business by driving brand awareness and traffic to YETI.com and increasing and further developing our customer and corporate customization business;

launching the YETI.ca, uk.YETI.com, eu.YETI.com, and nz.YETI.com websites for Canada, the United Kingdom, Europe, and New Zealand, respectively;

opening retail stores in Charleston, South Carolina and Chicago, Illinois;

signing leases for our next retail location in Denver, Colorado;

opening pop-up stores in Austin and Dallas, Texas in October 2019 and November 2019, respectively;

launching our first national television campaign and celebrating the Tundra's 10th anniversary by touring eleven different cities around the United States with a showcase of YETI films;

introducing new products in existing product families, specifically an expanded line of hard coolers including our first wheeled hard cooler, the Tundra Haul, and our water cooler, the Silo, and dog bowls; our next-generation Hopper M30 Soft Cooler; new soft coolers, the Hopper BackFlip Soft Cooler and Daytrip Lunch Bag; an expanded line of storage, transport, and outdoor living including the Panga Backpack, Tocayo Backpack, Camino Carryall, Hondo Base Camp Chair, Lowlands Blanket, LoadOut GoBox, Crossroads 23 Backpack, Crossroads Tote Bag, and Trailhead Dog Bed; and new Drinkware products including the Rambler Wine Tumbler, Rambler Stackable Pints,

53


Table of Contents

Rambler Jr. Kids Bottle, Rambler 10 oz. Stackable Mug, Rambler 12 oz. Bottle with Hotshot Cap, as well as new colorways and accessories for Rambler Drinkware;

launching new colorways including Reef Blue, Canyon Red, Sand, Clay, River Green, and Peak Purple;

investing in our wholesale channel by launching our online training tool that allows employees of YETI authorized dealers to become product experts;

diversifying our manufacturing supplier base to reduce concentration for several products;

negotiating lower product costs in key areas of our product portfolio and, where we deemed it appropriate, implementing pricing actions on select hard coolers; and

collaborating with our third-party logistics partners to improve processing speeds and increase shipping capabilities.

        These initiatives enabled us to successfully expand our customer base, both demographically and geographically, enhance existing product lines, accelerate new product innovation, and improve customer service. Furthermore, our actions in 2017 and 2018 enabled our brand to remain strong and YETI awareness to grow.

        Today, we operate a balanced omni channel distribution model, anchored by a strong and diversified retailer network, as well as a powerful DTC platform, with a wider range of products. We believe that because of these strengths and our expanding brand awareness, we are positioned to achieve sustainable long-term growth.

Recent Developments

Retail Store Openings

        In September 2019 and June 2019, we opened retail stores in Chicago, Illinois and Charleston, South Carolina, respectively. In addition, in March 2019, we entered into a lease for a new retail location in Denver, Colorado, which we plan to open in the first quarter of 2020.

        Additionally, we opened a pop-up store in each of Austin and Dallas, Texas in October 2019 and November 2019, respectively.

International Expansion

        As part of our strategy to expand internationally, we began fulfilling wholesale orders in New Zealand and the United Kingdom in August 2019 and September 2019, respectively; launched nz.YETI.com in New Zealand in August 2019; launched the uk.YETI.com and eu.YETI.com websites in the United Kingdom and Europe in July 2019; and launched YETI.ca website in Canada in June 2019 to provide consumers the opportunity to purchase YETI products directly online.

New Distribution Center

        In August 2019, we began fulfilling customer orders out of a new distribution facility in Salt Lake City, Utah, which is managed by a global third-party logistics provider.

Extinguishment of Debt

        In May 2019, we repaid in full $1.5 million of remaining principal amount on the unsecured promissory note to Rambler On LLC, or Rambler On, and $0.1 million of accrued interest outstanding thereon, using cash on hand.

54


Table of Contents

Product Customization Website Integration

        In April 2019, we integrated our product customization services into YETI.com to provide customers with a seamless shopping and product customization experience at a single point-of-sale. This service allows customers to personalize products with licensed marks and original artwork. Previously, customers had to leave YETI.com and access YETIcustomshop.com for customization services.

Intellectual Property Acquisition

        In March 2019, we acquired the intellectual property rights related to the YETI brand across several jurisdictions, primarily in Europe and Asia, for $9.1 million, pursuant to certain purchase agreements we entered into with a European outdoor retailer. The intellectual property rights include trademark registrations and applications for YETI formative trademarks for goods and services as well as domain names that include the YETI trademark.

Product Introductions

        During the first nine months of 2019, we introduced our LoadOut GoBox, Rambler 12 oz. Bottle with Hotshot Cap, Daytrip Lunch Bag, next-generation Hopper M30 Soft Cooler, Rambler Jr. Kids Bottle, Rambler 10 oz. Stackable Mug, Trailhead Dog Bed, Boomer 4 Dog Bowl, Crossroads 23 Backpack, Crossroads Tote Bag, Rambler 24 oz. Mug, and new colorways for Drinkware, hard and soft coolers, and for our Camino Carryall. We also expanded distribution of our Camino Carryall to our wholesale channel.

General

Components of Our Results of Operations.

Net Sales

        Net sales are comprised of wholesale channel sales to our retail partners and sales through our DTC channel. Net sales in both channels reflect the impact of product returns, as well as discounts for certain sales programs or promotions.

        We believe that our net sales include a seasonal component. In our wholesale and DTC channels, we expect our net sales to be highest in our second and fourth quarters, with the first quarter generating the lowest sales. We expect this seasonality will continue to be a factor in our results of operations.

        We discuss the net sales of our products in our two primary categories: Coolers & Equipment and Drinkware. Our Coolers & Equipment category includes hard coolers, soft coolers, outdoor equipment and other products, as well as accessories and replacement parts for these products. In 2019, we reclassified our Boomer 8 Dog Bowl into Coolers & Equipment from our Other category. Our Drinkware category includes our stainless-steel drinkware products and related accessories. In addition, our Other category is primarily comprised of ice substitutes and YETI-branded gear, such as shirts, hats, and other miscellaneous products. As a result of our more balanced omni-channel distribution model and wider range of products, we expect our net sales will continue to increase while our net sales growth rate may moderate.

Gross Profit

        Gross profit reflects net sales less cost of goods sold, which primarily includes the purchase cost of our products from our third-party contract manufacturers, inbound freight and duties, product quality testing and inspection costs, depreciation expense of our molds and equipment, and the cost of customizing Drinkware products.

        We calculate gross margin as gross profit divided by net sales. Gross margin in our DTC sales channel is generally higher than that on sales in our wholesale channel. We anticipate that our DTC net sales may

55


Table of Contents

grow at a faster rate than our net sales in our wholesale channel. If so, and if we are able to realize greater economies of scale, we would expect a favorable impact to aggregate gross margin over time. This favorable anticipated gross margin impact may not be realized, or may be offset by other unfavorable gross margin factors. Additionally, any new products that we develop, or our planned expansion into new geographies, may impact our future gross margin.

Selling, General, and Administrative Expenses

        SG&A expenses consist primarily of marketing costs, employee compensation and benefits costs, costs of our outsourced warehousing and logistics operations, costs of operating on third-party DTC marketplaces, professional fees and services, non-cash stock-based compensation, cost of product shipment to our customers, depreciation and amortization expense, and general corporate infrastructure expenses. We anticipate that SG&A expenses will increase in the future based on our plans to increase staff levels, open additional retail and pop-up stores, expand marketing activities, and bear additional costs as a public company, but to decrease as a percentage of net sales over time. In particular, we plan to open additional retail stores in 2020.

Change in Fiscal Year and Reporting Calendar

        Effective January 1, 2017, we converted our fiscal year-end from a calendar year ending December 31 to a "52- to 53-week" year ending on the Saturday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. This did not have a material effect on our consolidated financial statements and, therefore, we did not retrospectively adjust our financial statements.

Results of Operations

        The discussion below should be read in conjunction with the following table and our unaudited and audited financial statements and related notes appearing elsewhere in this prospectus. The following table sets forth selected statement of operations data, and their corresponding percentage of net sales, for the periods indicated.

Statement of Operations Data

 
  Nine Months Ended   Fiscal Year Ended  
(dollars in thousands)
  September 28,
2019
  September 29,
2018
  December 29,
2018
  December 30,
2017
  December 31,
2016
 

Statement of Operations

                                                             

Net sales

  $ 616,132     100 % $ 537,654     100 % $ 778,833     100 % $ 639,239     100 % $ 818,914     100 %

Cost of goods sold

    303,152     49 %   282,354     53 %   395,705     51 %   344,638     54 %   404,953     49 %

Gross profit

    312,980     51 %   255,300     47 %   383,128     49 %   294,601     46 %   413,961     51 %

Selling, general, and administrative expenses

    235,191     38 %   190,746     35 %   280,972     36 %   230,634     36 %   325,754     40 %

Operating income

    77,789     13 %   64,554     12 %   102,156     13 %   63,967     10 %   88,207     11 %

Interest expense

    (17,081 )   3 %   (24,474 )   5 %   (31,280 )   4 %   (32,607 )   5 %   (21,680 )   3 %

Other income (expense)

    (192 )   0 %   (325 )   0 %   (1,261 )   0 %   699     0 %   (1,242 )   0 %

Income before income taxes

    60,516     10 %   39,755     7 %   69,615     9 %   32,059     5 %   65,285     8 %

Income tax expense

    (14,824 )   2 %   (7,161 )   1 %   (11,852 )   2 %   (16,658 )   3 %   (16,497 )   2 %

Net income

  $ 45,692     7 % $ 32,594     6 %   57,763     7 %   15,401     2 %   48,788     6 %

Less: Net income attributable to noncontrolling interest

                                    (811 )    

Net income attributable to YETI Holdings, Inc

  $ 45,692     7 % $ 32,594     6 % $ 57,763     7 % $ 15,401     2 % $ 47,977     6 %

56


Table of Contents

Nine Months Ended September 28, 2019 Compared to Nine Months Ended September 29, 2018

 
  Nine Months Ended    
   
 
 
  Change  
 
  September 28,
2019
  September 29,
2018
 
(dollars in thousands)
  $   %  

Net sales

  $ 616,132   $ 537,654   $ 78,478     15 %

Gross profit

  $ 312,980   $ 255,300   $ 57,680     23 %

Gross margin (Gross profit as a % of net sales)

    50.8 %   47.5 %            

Selling, general, and administrative expenses

  $ 235,191   $ 190,746   $ 44,445     23 %

SG&A as a % of net sales

    38.2 %   35.5 %            

Net Sales

        Net sales increased $78.5 million, or 15%, to $616.1 million for the nine months ended September 28, 2019, compared to $537.7 million for the nine months ended September 29, 2018. This increase in net sales was primarily driven by growth in our DTC channel. DTC channel net sales increased $60.2 million, or 34%, to $237.2 million, compared to $176.9 million in the prior year period, led by strong performance in both Coolers & Equipment and Drinkware categories. Net sales in our wholesale channel increased $18.3 million, or 5%, to $379.0 million, compared to $360.7 million in the same period last year, primarily driven by increased net sales in Coolers & Equipment. Our net sales growth benefited by approximately $8 million due to a cumulative effect adjustment we recorded in connection with the transition from a sell-in to a sell-through revenue recognition method in the second quarter of 2018, which reduced the second quarter of 2018 net sales by approximately $8 million for sales through YETI Authorized on the Amazon Marketplace.

        Net sales in our two primary product categories were as follows:

Drinkware net sales increased by $53.6 million, or 19%, to $334.3 million, compared to $280.7 million in the prior year period, primarily driven by the continued expansion of our Drinkware product offerings, including the introduction of new colorways, sizes, and accessories, and strong demand for customization.

Coolers & Equipment net sales increased by $26.5 million, or 11%, to $266.6 million, compared to $240.0 million in the same period last year, primarily driven by strong performance in outdoor living products, bags, hard coolers, soft coolers, and cargo, as well as the expanded distribution of the Camino Carryall to our wholesale channel during the first quarter of 2019.

Gross Profit

        Gross profit increased $57.7 million, or 23%, to $313.0 million for the nine months ended September 28, 2019, compared to $255.3 million for the nine months ended September 28, 2018. Gross margin increased 330 basis points to 50.8% from 47.5% in the same period last year. The increase in gross margin was primarily driven by:

cost improvements across our product portfolio, particularly in our Drinkware category, which favorably impacted gross margin by approximately 270 basis points;

an increase in the mix of higher margin DTC channel net sales, which favorably impacted gross margin by approximately 180 basis points; and

lower inbound air freight, reflecting higher costs to expedite Drinkware inventory supply in prior periods, which favorably impacted gross margin by approximately 80 basis points.

57


Table of Contents

        These factors, which contributed to the increase in gross margin were partially offset by the unfavorable impact of:

increased tariff rates, which reduced gross margin by approximately 110 basis points;

end-of-life price reductions on our Hopper Two 30 soft cooler implemented in the second quarter of 2019, which reduced gross margin by approximately 30 basis points; and

inventory reserve reductions in the prior year period and other impacts, which reduced gross margin by approximately 60 basis points.

Selling, General, and Administrative Expenses

        SG&A expenses increased by $44.4 million, or 23%, to $235.2 million for the nine months ended September 28, 2019 compared to $190.7 million for the nine months ended September 29, 2018. As a percentage of net sales, SG&A increased 270 basis points to 38.2% for the nine months ended September 28, 2019. The increase in SG&A expenses was primarily driven by:

an increase of $23.5 million, or 180 basis points, in selling expenses due to higher marketing expenses, which were broad-based across both brand and performance marketing efforts as well as higher variable expenses, driven by our faster growing DTC channel net sales, including online marketplace fees, outbound freight, and credit card processing fees, partially offset by lower third-party logistics fees; and

an increase of $20.9 million, or 90 basis points, in general and administrative expenses primarily due to (i) increased personnel to support growth in our business and increased non-cash stock-based compensation expense; (ii) incremental costs incurred in connection with our ongoing transition to being a public company, including costs related to our secondary offering in May 2019; (iii) higher temporary labor and information technology expenses to support growth and continued development of our omni-channel capabilities; (iv) increased depreciation and amortization expense; and (v) increased facilities costs, partially offset by other general and administrative cost savings.

Non-Operating Expenses

        Interest expense was $17.1 million for the nine months ended September 28, 2019, compared to $24.5 million for the nine months ended September 29, 2018. The decrease in interest expense was primarily due to decreased balances on our Credit Facility (as defined below) on which the interest expense is calculated. See further discussion of our Credit Facility in "—Liquidity and Capital Resources" below.

        Income tax expense was $14.8 million for the nine months ended September 28, 2019, compared to $7.2 million for the nine months ended September 29, 2018. The increase in income tax expense is due to higher income before income taxes and a higher effective tax rate. The effective tax rate for the nine months ended September 28, 2019 was 24%, compared to 18% for the nine months ended September 29, 2018. The lower effective tax rate for the nine months ended September 29, 2018 reflected a discrete net tax benefit resulting from a revaluation of deferred tax assets for state income taxes.

Year Ended December 29, 2018 Compared to Year Ended December 30, 2017

Net Sales

 
  Fiscal Year Ended    
   
 
 
  Change  
 
  December 29,
2018
  December 30,
2017
 
(Dollars in millions)
  $   %  

Net sales

  $ 778.8   $ 639.2   $ 139.6     22 %

58


Table of Contents

        Net sales increased $139.6 million, or 22%, to $778.8 million in 2018 from $639.2 million in 2017. The increase in net sales was driven by increases in net sales from our DTC and wholesale channels. DTC channel net sales increased $93.0 million, or 48%, to $287.4 million in 2018 from $194.4 million in 2017. The DTC channel net sales increase was primarily driven by net sales increases in both Drinkware and Coolers & Equipment. Wholesale channel net sales increased $46.6 million, or 10%, to $491.4 million in 2018 from $444.9 million in 2017. The wholesale channel net sales increase was primarily driven by an increase in Drinkware net sales.

        Net sales in our two primary product categories were as follows:

Drinkware net sales increased $113.9 million, or 37%, to $424.2 million in 2018 from $310.3 million in 2017. The increase in Drinkware net sales was primarily driven by the expansion of our Drinkware product line, new accessories, and the introduction of new colorways during 2018.

Coolers & Equipment net sales increased $19.0 million, or 6%, to $331.2 million in 2018 from $312.2 million in 2017. The increase in Coolers & Equipment net sales was primarily driven by the expansion of our hard cooler and soft cooler products, as well as the introduction of several new storage, transport, and outdoor living products during 2018.

Gross Profit

 
  Fiscal Year Ended    
   
 
 
  Change  
 
  December 29,
2018
  December 30,
2017
 
(Dollars in millions)
  $   %  

Gross profit

  $ 383.1   $ 294.6   $ 88.5     30 %

Gross margin (Gross profit as a % of net sales)

    49.2 %   46.1 %            

        Gross profit increased $88.5 million, or 30%, to $383.1 million in 2018 from $294.6 million in 2017. Gross margin increased 310 basis points to 49.2% in 2018 from 46.1% in 2017. The increase in gross margin was primarily driven by the following:

leveraging fixed costs on higher net sales, which favorably impacted gross margin by approximately 180 basis points;

cost improvements across our product portfolio, which favorably impacted gross margin by approximately 170 basis points;

charges incurred in 2017 for inventory reserves that were not repeated in 2018, which favorably impacted gross margin by approximately 150 basis points;

increased higher-margin DTC channel sales, which favorably impacted gross margin by approximately 110 basis points;

charges incurred in 2017 for pricing actions related to our first-generation Hopper that were not repeated in 2018, which favorably impacted gross margin by approximately 30 basis points; and

decreased provisions for sales returns in 2018 compared to 2017, which favorably impacted gross margin by approximately 30 basis points.

        The above increases in gross margin were partially offset by price reductions on select hard cooler, soft cooler, and Drinkware products in the second half of 2017 and in 2018 to reposition these products in the market to create pricing space for new product introductions, which reduced gross margin by approximately 360 basis points in 2018.

59


Table of Contents

Selling, General, and Administrative Expenses

 
  Fiscal Year Ended    
   
 
 
  Change  
 
  December 29,
2018
  December 30,
2017
 
(Dollars in millions)
  $   %  

Selling, general, and administrative expenses

  $ 281.0   $ 230.6   $ 50.3     22 %

SG&A as a % of net sales

    36.1 %   36.1 %            

        SG&A expenses increased by $50.3 million, or 22%, to $281.0 million in 2018 from $230.6 million in 2017. As a percentage of net sales, SG&A expenses remained consistent at 36.1% in 2018 and 2017. SG&A expenses were impacted by the following: a $17.8 million increase in employee costs resulting from increased headcount to support the growth in our business; a $16.6 million increase in variable expenses such as marketplace fees, credit card fees, and distribution costs primarily as a result of increased net sales; a $6.9 million increase in professional fees, including the impact of reversing a previously recognized consulting fee in 2017 that was contingent upon the completion of our IPO attempt in 2016; a $3.1 million increase in information technology-related costs; a $2.3 million increase in depreciation and amortization expense; and a $1.5 million increase in other costs primarily due to an increase in facilities and utility costs and other operating expenses.

Non-Operating Expenses

        Interest expense decreased by $1.3 million to $31.3 million in 2018 from $32.6 million in 2017. The decrease in interest expense was primarily due to decreased borrowings under our Credit Facility.

        Income tax expense decreased by $4.8 million to $11.9 million in 2018 from $16.7 million in 2017. Our effective tax rate for 2018 was 17%, compared to 52% for 2017. The decrease in effective tax rate was due to the federal tax rate reduction in 2018, a benefit from a revaluation of state deferred tax assets, and the stock compensation tax benefit of exercised options in 2018 primarily in connection with our IPO, partially offset by an increase in state income tax expense. In addition, the income tax expense in 2017 was unusually high due to the revaluation of our net deferred tax assets as a result of the enactment of the Tax Act, which reduced the U.S. federal corporate tax rate from 35% to 21%.

Year Ended December 30, 2017 Compared to Year Ended December 31, 2016

Net Sales

 
  Fiscal Year Ended    
   
 
 
  Change  
 
  December 30,
2017
  December 31,
2016
 
(Dollars in millions)
  $   %  

Net sales

  $ 639.2   $ 818.9   $ (179.7 )   (22 )%

        Net sales decreased $179.7 million, or 22%, to $639.2 million in 2017, compared to $818.9 million in 2016. This decrease was primarily driven by a decline in net sales in our wholesale channel of $296.1 million, or 40%, which was partially offset by increased net sales in our DTC channel of $116.4 million, or 149%. Wholesale channel net sales declined significantly in both Coolers & Equipment and Drinkware in 2017 primarily as a result of excess levels of inventory of YETI product in our wholesale channel at the end of 2016. This wholesale channel inventory situation was caused by retail partners overbuying in the first half of 2016 in response to rapid 2015 product sell-through and resulting product shortages, a challenging overall U.S. retail environment, and inventory liquidations by certain competitors at low relative prices. DTC net sales increased significantly in both Coolers & Equipment and Drinkware. The increase in DTC net sales was largely attributable to our continued commitment to and significant investments in the DTC channel, which resulted in enhanced customer engagement with YETI.com, increased focus on selling through YETI Authorized on the Amazon Marketplace, and growth in custom Drinkware and hard cooler sales to customers and businesses.

60


Table of Contents

        Net sales in our two primary product categories were as follows:

Coolers & Equipment net sales decreased by $37.2 million, or 11%, to $312.2 million in 2017, compared to $349.5 million in 2016. The decline was driven by lower hard cooler and soft cooler net sales in the wholesale channel, partially offset by an increase in both hard and soft cooler net sales in the DTC channel. Both channels benefited from expansion of our soft cooler Hopper FlipTM family product offerings, the introduction of premium storage buckets, a second-generation Hopper soft cooler, our PangaTM submersible duffel bags, and limited edition hard coolers.

Drinkware net sales decreased by $137.0 million, or 31%, to $310.3 million in 2017, compared to $447.3 million in 2016. The decline was driven by a decrease in the wholesale channel, partially offset by an increase in the DTC channel. Both channels benefited from new product introductions, including Rambler Jugs, the Rambler 14 oz. Mug, and additional Drinkware accessories, as well as the addition of Drinkware colorways.

        During the first half of 2017, we implemented a series of commercial actions aimed at better positioning us for long-term growth, such as implementing a series of pricing actions, introducing new products, growing our DTC business, focusing and diversifying our independent dealer base, rationalizing our manufacturing supplier base, strengthening our team by adding several key executives and increasing our employee count, and investing in enhanced information systems. These initiatives proved highly successful in reducing excess channel inventory and improving retailer sell-through, which fostered net sales growth in the second half of 2017.

Gross Profit

 
  Fiscal Year Ended    
   
 
 
  Change  
 
  December 30,
2017
  December 31,
2016
 
(Dollars in millions)
  $   %  

Gross profit

  $ 294.6   $ 414.0   $ (119.4 )   (29 )%

Gross margin (Gross profit as a % of net sales)

    46.1 %   50.5 %            

        Gross profit decreased $119.4 million, or 29%, to $294.6 million in 2017, compared to $414.0 million in 2016. Gross margin decreased 450 basis points to 46.1% from 50.6% in 2016. The decrease in gross margin was primarily driven by:

adding incremental, value-add features, and related costs to certain of our Drinkware products, which reduced gross margin by approximately 180 basis points;

the incremental manufacturing costs of YETI Custom Drinkware LLC, which we refer to as YCD, reflecting a full year in 2017 compared to five months during 2016, reduced gross margin by approximately 170 basis points. During the third quarter of 2016, we began consolidating Rambler On as a VIE, which was acquired by YCD, our wholly-owned subsidiary, during 2017;

price reductions on several hard cooler, soft cooler, and Drinkware products to reposition these products in the market to create pricing space for planned new product introductions, which reduced gross margin by approximately 160 basis points;

additional costs related to reworking certain Drinkware finished goods inventories to add color as well as customization, which reduced gross margin by approximately 130 basis points; and

disposition of certain prior generation, excess end-of-life soft cooler inventories through a peripheral bulk sales channel at a low gross margin, which reduced gross margin by approximately 90 basis points.

61


Table of Contents

        These factors, which contributed to the aggregate reduction of consolidated gross margin, were partially offset by the favorable impact of:

reduced air freight on incoming Drinkware product deliveries as a percentage of net sales in 2017 versus 2016, which favorably impacted gross margin by approximately 250 basis points; and

an increase in the mix of higher margin DTC net sales in 2017 compared to 2016, which favorably impacted gross margin by approximately 80 basis points.

Selling, General, and Administrative Expenses

 
  Fiscal Year Ended    
   
 
 
  Change  
 
  December 30,
2017
  December 31,
2016
 
(Dollars in millions)
  $   %  

Selling, general, and administrative expenses

  $ 230.6   $ 325.8   $ (95.1 )   (29 )%

SG&A as a % of net sales

    36.1 %   39.8 %            

        SG&A expenses decreased $95.1 million, or 29%, to $230.6 million in 2017, compared to $325.8 million in 2016. As a percentage of net sales, SG&A expenses decreased to 36.1% in 2017 from 39.8% in 2016. The decrease in SG&A expenses was primarily driven by a non-recurring charge to non-cash stock-based compensation of $104.4 million recognized in the first quarter of 2016, resulting from the accelerated vesting of certain outstanding stock options.

        After adjusting for the non-recurring charge to non-cash stock-based compensation expense, SG&A expenses increased by $9.3 million in 2017. The increase in SG&A expenses was driven primarily by increases in the following: Amazon Marketplace fees of $16.8 million; costs for outsourced warehousing and logistics and outbound freight of $8.1 million; depreciation and amortization of $5.3 million; and information technology expenses of $4.0 million. These SG&A expenses increases were partially offset by a $15.8 million reduction in professional fees, largely related to our 2016 IPO preparation, and a $12.7 million reduction in marketing expense.

Non-Operating Expenses

        Interest expense was $32.6 million in 2017, compared to $21.7 million in 2016. The increase in interest expense was primarily due to additional long-term indebtedness incurred under the Credit Facility in May 2016.

        Other income was $0.7 million in 2017, compared to other expense of $1.2 million in 2016. Other income in 2017 related to settlements received in certain actions to enforce our intellectual property in excess of amounts netted against related intangibles. Other expense in 2016 related to losses on early retirement of debt, primarily from unamortized deferred financing costs on our prior credit facility, which was outstanding at the time of repayment in May 2016.

        Income tax expense was $16.7 million in 2017, compared to $16.5 million in 2016. The effective tax rate increased to 52% in 2017 from 25% in 2016. We recognized additional income tax expense of $5.7 million in 2017, primarily due to the revaluation of our net deferred tax assets based on the enactment of the Tax Act. In addition, income tax expense was lower than usual in 2016 due to a higher benefit from the research and development credit and the consolidation of Rambler On as a VIE. Rambler On was a partnership, and as a nontaxable pass-through entity, no income tax was recorded on its income.

Liquidity and Capital Resources

        Our cash requirements have principally been for working capital purposes, long-term debt repayments, and capital expenditures. We fund our working capital, primarily inventory, accounts

62


Table of Contents

receivable, and capital investments from cash flows from operating activities cash on hand, and borrowings available under our Revolving Credit Facility (as defined below).

        At September 28, 2019, we had $34.6 million in cash on hand, no outstanding borrowings under our Revolving Credit Facility, and $100.0 million available for borrowing under our Revolving Credit Facility.

        The recent changes in our working capital requirements generally reflect the growth in our business. Although we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash requirements, to operate and grow our business, we believe that our available cash on hand, along with amounts available under our Revolving Credit Facility will be sufficient to satisfy our liquidity requirements for at least the next twelve months. However, the continued growth of our business, including our expansion into international markets and opening and operating our own retail locations, may significantly increase our expenses (including our capital expenditures) and cash requirements. For 2019, we expect capital expenditures for property and equipment to be between $30 million and $35 million, primarily related to new product development, information technology systems infrastructure, opening of new retail stores, investments in production molds and tooling and equipment, and expansion of our customization capabilities, including opening a second customization facility with a third-party manufacturer partner. The amount of our future product sales is difficult to predict, and actual sales may not be in line with our forecasts. As a result, we may be required to seek additional funds in the future from issuances of equity or debt, obtaining additional credit facilities, or loans from other sources.

        If the selling stockholders sell at least 10,918,000 shares in this offering, or if Cortec's ownership of our outstanding voting securities otherwise falls below 35%, we intend to use cash on hand to pay tax withholding obligations in connection with the vesting and settlement of certain employee restricted stock units. The amount of such tax withholding obligations, which we estimate will be in a range of approximately $14.0 million to $17.0 million, will be based on the closing price for our common stock as reported on the New York Stock Exchange on the date that such restricted stock units are settled in shares of our common stock. See "Executive Compensation—RSU Awards."

Credit Facility

        In May 2016, we entered into an agreement providing for a $650.0 million senior secured credit facility, which we refer to as the Credit Facility. The Credit Facility initially provided for: (a) a $100.0 million Revolving Credit Facility maturing on May 19, 2021, which we refer to as the Revolving Credit Facility; (b) a $445.0 million term loan A maturing on May 19, 2021, which we refer to as the Term Loan A; and (c) a $105.0 million term loan B that was to mature on May 19, 2022, which we refer to as the Term Loan B. As further described below, we repaid the Term Loan B in full during the fourth quarter of 2018. As of December 29, 2018, our interest rate on the Term Loan A was 6.35%. As of September 28, 2019, our interest rate on the Term Loan A was 5.81%. Interest is due at the end of each quarter if we have selected to pay interest based on the base rate or at the end of each London Interbank Offered Rate, or LIBOR, period if we have selected to pay interest based on LIBOR.

        On July 15, 2017, we amended the Credit Facility to reset the net leverage ratio covenant for the period ended June 2017 and thereafter, and we incurred $2.0 million in additional deferred financing fees.

        At December 29, 2018, we had $331.4 million principal amount of indebtedness outstanding under the Credit Facility. At December 30, 2017, we had $481.7 million principal amount of indebtedness outstanding under the Credit Facility. At September 28, 2019, we had $298.0 million principal amount of indebtedness under the Credit Facility.

Revolving Credit Facility

        The Revolving Credit Facility, which matures May 19, 2021, allows us to borrow up to $100.0 million, including the ability to issue up to $20.0 million in letters of credit. While our issuance of letters of credit

63


Table of Contents

does not increase our borrowings outstanding under our Revolving Credit Facility, it does reduce the amount available. As of December 29, 2018 and December 30, 2017, we had no borrowings outstanding under the Revolving Credit Facility. As of December 29, 2018, we had $20.0 million principal amount in outstanding letters of credit with a 4.0% annual fee to supplement our supply chain finance program. As of September 28, 2019 and September 29, 2018, we had no borrowings outstanding under the Revolving Credit Facility. As of September 28, 2019, we had no outstanding letters of credit.

Term Loan A

        The Term Loan A matures on May 19, 2021. Principal payments of $11.1 million are due quarterly with the entire unpaid balance due at maturity. As of December 29, 2018, we had $331.4 million principal amount of indebtedness outstanding under the Term Loan A. As of September 28, 2019, we had $298.0 million principal amount of indebtedness outstanding under the Term Loan A.

Term Loan B

        The Term Loan B would have matured on May 19, 2022. During the fourth quarter of 2018, we voluntarily repaid in full the $47.6 million principal amount outstanding, and $0.6 million of accrued interest outstanding, under our Term Loan B, using the net proceeds from our IPO plus additional cash on hand. As a result of the voluntary repayment of the Term Loan B prior to maturity, we recorded a loss from extinguishment of debt of $0.7 million relating to the write-off of unamortized financing fees associated with the Term Loan B.

Other Terms of the Credit Facility

        We may request incremental term loans, incremental equivalent debt, or revolving commitment increases, each of which we refer to as an Incremental Increase, of amounts of not more than $125.0 million in total plus an additional amount if our total secured net leverage ratio (as defined in the Credit Facility) is equal to or less than 2.50 to 1.00. In the event that any lenders fund any of the Incremental Increases, the terms and provisions of each Incremental Increase, including the interest rate, shall be determined by us and the lenders, but in no event shall the terms and provisions, when taken as a whole and subject to certain exceptions, of the applicable Incremental Increase, be more favorable to any lender providing any portion of such Incremental Increase than the terms and provisions of the loans provided under the Revolving Credit Facility and the Term Loan A, as applicable.

        The Credit Facility is (a) jointly and severally guaranteed by our wholly owned subsidiaries, YETI Coolers and YCD, and any future wholly-owned domestic subsidiaries, subject to certain exceptions, together, the Guarantors, and (b) secured by a first-priority lien on substantially all of our and the Guarantors' assets, subject to certain customary exceptions.

        The Credit Facility requires us to comply with certain financial ratios, including:

At the end of each fiscal quarter, a total net leverage ratio (as defined in the Credit Facility) for the four quarters then ended of not more than 6.50 to 1.00, 5.50 to 1.00, 4.50 to 1.00, 4.25 to 1.00, 4.00 to 1.00, and 3.50 to 1.00 for the quarters ended December 30, 2017, March 31, 2018, June 30, 2018, September 30, 2018, December 31, 2018, March 31, 2019 and thereafter, respectively; and

At the end of each fiscal quarter, an interest coverage ratio (as defined in the Credit Facility) for the four quarters then ended of not less than 3.00 to 1.00.

        In addition, the Credit Facility contains customary financial and non-financial covenants limiting, among other things, mergers and acquisitions; investments, loans, and advances; affiliate transactions; changes to capital structure and the business; additional indebtedness; additional liens; the payment of dividends; and the sale of assets, in each case, subject to certain customary exceptions. The Credit Facility contains customary events of default, including payment defaults, breaches of representations and

64


Table of Contents

warranties, covenant defaults, defaults under other material debt, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the Credit Facility to be in full force and effect, and a change of control of our business. We were in compliance with all covenants under the Credit Facility as of September 28, 2019.

Equity

Repurchase of Common Stock

        In March 2018, we purchased 0.4 million shares of our common stock at $4.95 per share from one of our stockholders for $2.0 million. We accounted for this purchase using the par value method, and subsequently retired these shares.

Stock Splits

        In October 2018, we effected a 0.397-for-1 reverse stock split of all outstanding shares of our common stock. Share and per share data disclosed for all periods has been retroactively adjusted to reflect the effects of this stock split. This stock split was effected prior to the completion of our IPO, discussed below.

        In May 2016, our Board of Directors approved a 2,000-for-1 stock split of all outstanding shares of our common stock. In connection with the stock split, the number of authorized capital stock was increased from 200,000 to 400 million shares.

Capital Stock Increase

        In October 2018, the Board of Directors approved an increase in our authorized capital stock of 200.0 million shares of common stock and 30.0 million shares of preferred stock. Following this increase our authorized capital stock of 630.0 million shares consisted of 600.0 million shares of common stock and 30.0 million shares of preferred stock. No shares were issued in connection with the increase in authorized capital stock. This capital stock increase occurred prior to the completion our IPO, discussed below.

Initial Public Offering

        On October 29, 2018, we completed our IPO of 16,000,000 shares of our common stock at a public offering price of $18.00 per share, which included 2,500,000 shares of our common stock sold by us and 13,500,000 shares of our common stock sold by selling stockholders. The underwriters were also granted an option to purchase up to an additional 2,400,000 shares from the selling stockholders, at the public offering price, less the underwriting discount, for 30 days after October 24, 2018. On November 28, 2018, the underwriters purchased an additional 918,830 shares of our common stock from the selling stockholders pursuant to a partial exercise of their option to purchase additional shares of common stock. We did not receive any proceeds from the sale of shares by selling stockholders. Based on our IPO price of $18.00 per share, we received net proceeds of $42.4 million after deducting underwriting discounts and commissions of $2.6 million. Additionally, we incurred offering costs of $4.6 million. On November 29, 2018, we used the net proceeds from the IPO plus additional cash on hand to repay our Term Loan B as described above.

65


Table of Contents

Cash Flows from Operating, Investing, and Financing Activities

        The following table summarizes our cash flows from operating, investing, and financing activities for the periods indicated:

 
  Nine Months Ended   Fiscal Year Ended  
(dollars in thousands)
  September 28,
2019
  September 29,
2018
  December 29,
2018
  December 30,
2017
  December 31,
2016
 

Cash flows provided by (used in):

                               

Operating activities

  $ 26,558   $ 118,834   $ 176,068   $ 147,751   $ 28,911  

Investing activities

    (39,240 )   (23,926 )   (31,722 )   (38,722 )   (55,884 )

Financing activities

    (32,803 )   (96,472 )   (117,990 )   (72,237 )   8,011  

Operating Activities

        Nine Months Ended September 28, 2019.    Net cash provided by operating activities was $26.6 million in the nine months ended September 28, 2019 and was primarily driven by net income of $45.7 million and total non-cash items of $43.7 million, offset by an increase in net working capital items of $62.9 million. Non-cash items primarily consisted of depreciation and amortization of $21.2 million, non-cash stock-based compensation expense of $10.4 million, deferred income taxes of $9.9 million, the amortization of deferred loan costs of $1.7 million, and impairment of long-lived assets of $0.5 million. The change in net working capital items was primarily due to a $64.1 million increase in inventory, primarily reflecting a strategic buildup of Drinkware in advance of potential tariffs as well as investments to support anticipated sales growth, a $12.1 million increase in accounts receivable, a $3.6 million decrease in taxes payable, offset by a $16.7 million increase in accounts payable and accrued expenses related to trade payables and amounts owed to our third-party manufacturers.

        2018.    Net cash provided by operating activities of $176.1 million for 2018 was primarily driven by the favorable impact of a decrease in net working capital items of $71.7 million, net income of $57.8 million, and total non-cash items of $46.6 million. The change in net working capital items was primarily due to a $43.7 million increase in accounts payable and accrued expenses related to amounts owed to our third-party manufacturers as well as increased accrued incentive compensation, and a $29.6 million decrease in inventory driven by effective inventory management coupled with increased sales in the fourth quarter of 2018. Non-cash items primarily consisted of depreciation and amortization of $24.7 million and stock-based compensation expense of $13.2 million.

        2017.    Net cash provided by operating activities of $147.8 million for 2017 was primarily driven by the favorable impact of a decrease in net working capital items of $86.7 million, total non-cash items of $45.6 million, and net income of $15.4 million. The change in net working capital was primarily due to a $71.0 million decrease in inventory driven by effective inventory management coupled with increasing sales in the third and fourth quarters of 2017, a $28.0 million increase in accounts payable and accrued expenses primarily related to extending payment terms with vendors, and a decrease in other current assets of $17.9 million related to migrating towards payment terms with vendors versus prepayments, offset by an increase in accounts receivable of $29.9 million due to higher wholesale sales at the end of 2017. Non-cash items primarily consisted of depreciation and amortization of $20.8 million and stock-based compensation expense of $13.4 million.

        2016.    Net cash provided by operating activities of $28.9 million for 2016 was primarily driven by total non-cash items of $115.6 million and net income of $48.8 million, offset by the unfavorable impact of an increase in net working capital items of $135.4 million. Non-cash items primarily consisted of stock-based compensation expense of $118.4 million, deferred income taxes of $15.8 million, and depreciation and amortization of $11.7 million. The change in net working capital was primarily due to a $150.6 million increase in inventory due to increased demand after experiencing supply constraints in 2015.

66


Table of Contents

Investing Activities

        Nine Months Ended September 28, 2019.    Net cash used in investing activities of $39.2 million for the nine months ended September 28, 2019 was primarily related to $24.2 million of purchases of property and equipment for technology systems infrastructure, facilities, production molds, tooling and equipment, and $15.0 million of purchases of intangibles such as trademark assets and patents.

        2018.    Net cash used in investing activities of $31.7 million for the year ended December 29, 2018 was primarily related to $20.9 million of purchases of property and equipment for technology systems infrastructure, production molds, tooling, and equipment, and facilities, and $11.0 million of purchases of intangibles such as trade dress and trademark assets.

        2017.    Net cash used in investing activities of $38.7 million for the year ended December 30, 2017 was primarily related to $42.2 million of purchases of property and equipment for technology systems infrastructure, facilities, and production molds, as well as tooling and equipment, partially offset by $4.9 million of net cash inflow from purchases of intangibles activity reflecting cash proceeds from the settlement of litigation matters, partially offset by additions to patents, trade dress, and trademarks. In 2017, we acquired Rambler On and paid approximately $2.9 million for the acquisition, which increased our cash flows used in investing activities.

        2016.    Net cash used in investing activities of $55.9 million for the year ended December 31, 2016 was primarily related to $35.6 million of purchases of property and equipment production molds, as well as tooling and equipment, technology systems infrastructure, and facilities, and $24.7 million of purchases of intangibles for patents, trademarks, and trade dress. In addition, Cash flows from investing activities for 2016 were positively impacted by the cash at Rambler On, which totaled $5.0 million at the time of consolidation.

Financing Activities

        Nine Months Ended September 28, 2019.    Net cash used in financing activities was $32.8 million for the nine months ended September 28, 2019 resulting from $33.4 million of repayments of long-term debt, a $1.5 million payment of the remaining principal amount on the unsecured promissory note to Rambler On, and $0.6 million in dividend payments to certain option holders, partially offset by $2.7 million of proceeds from employee option exercises. The dividend payments to certain option holders are related to a special dividend paid to our stockholders on May 17, 2016, which required us to pay a $7.9 million dividend to holders of unvested options as of May 17, 2016 that accrues over the requisite service period as the options vest (the "Options Dividend"). The Options Dividend was fully paid as of September 28, 2019.

        2018.    Net cash used in financing activities was $118.0 million for the year ended December 29, 2018 primarily resulted from $151.8 million of repayments of long-term debt, $2.5 million in dividend payments, and $2.0 million to repurchase common stock from one stockholder that was subsequently retired. These financing activity outflows were partially offset by $38.1 million of net proceeds, after deducting offering costs, from our IPO.

        2017.    Net cash used in financing activities was $72.2 million for the year ended December 30, 2017 primarily resulted from $45.6 million of repayments of long-term debt, a $20.0 million repayment of borrowings outstanding under our Revolving Credit Facility, $2.8 million dividend payments to certain option holders, and $2.0 million paid for financing fees related to the amendment to our Credit Facility.

        2016.    Net cash provided by financing activities was $8.0 million for the year ended December 31, 2016 primarily resulted from $473.8 million of net borrowings under the Credit Facility, net of financing fees, partially offset by $453.9 million in dividend payments and $9.6 million of payments of tax withholding obligations in connection with the exercise of stock options.

67


Table of Contents

Contractual Obligations

        The following table summarizes our contractual obligations as of December 29, 2018:

 
  Payments Due by Period  
(dollars in thousands)
  Total   Less Than
1 Year
  1 - 3 Years   3 - 5 Years   More Than
5 Years
 

Long-term debt principal payment

  $ 332,888   $ 43,638   $ 289,250   $   $  

Interest

    46,477     21,758     25,019          

Operating lease obligations

    46,259     4,670     9,429     9,113     23,047  

Other non-cancelable agreements(1)

    45,498     15,345     25,259     4,894      

Total

  $ 471,422   $ 85,411   $ 348,957   $ 14,007   $ 23,047  

(1)
We have entered into commitments for service and maintenance agreements related to our management information systems, distribution contracts, advertising, sponsorships, and licensing agreements.

Off-Balance Sheet Arrangements

        As of December 29, 2018 and December, 30, 2017, we had no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.

        The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements include those noted below. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Revenue Recognition

        Revenue is recognized when persuasive evidence of an arrangement exists, and title and risks of ownership have passed to the customer, based on the terms of sale. Goods are usually shipped to customers with free-on-board, or FOB, shipping point terms; however, our practice has been to bear the responsibility of the delivery to the customer. In the case that product is lost or damaged in transit to the customer, we generally take the responsibility to provide new product. In effect, we apply a synthetic FOB destination policy and therefore recognize revenue when the product is delivered to the customer. For our national accounts, delivery of our products typically occurs at shipping point, as such customers take delivery at our distribution center.

        Our terms of sale provide limited return rights. We may accept, and have at times accepted, returns outside our terms of sale at our sole discretion. We may also, at our sole discretion, provide our retail partners with sales discounts and allowances. We record estimated sales returns, discounts, and miscellaneous customer claims as reductions to net sales at the time revenues are recorded. We base our estimates upon historical experience and trends, and upon approval of specific returns or discounts. Actual

68


Table of Contents

returns and discounts in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected future returns and discounts were significantly greater or lower than the reserves we had established, we would record a reduction or increase to net sales in the period in which we made such determination. A 10% change in our estimated reserve for sales returns, discounts, and miscellaneous claims for 2018 would have impacted net sales by $0.7 million.

Inventory

        Inventories are comprised primarily of finished goods and are carried at the lower of cost (weighted-average cost method) or market (net realizable value). We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand and market conditions. If the estimated net realizable value is less than cost, we reflect the lower value of that inventory. This methodology recognizes inventory exposures at the time such losses are identified rather than at the time the inventory is actually sold. Due to customer demand and inventory constraints, we have not historically taken material adjustments to the carrying value of our inventory.

        Physical inventory counts and cycle counts are taken on a regular basis. We provide for estimated inventory shrinkage since the last physical inventory date. Historically, physical inventory shrinkage has not been significant.

Valuation of Goodwill and Indefinite-Lived Intangible Assets

        Goodwill and intangible assets are recorded at cost, or at their estimated fair values at the date of acquisition. We review goodwill and indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate the carrying amount may be impaired. In conducting our annual impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the asset, or reporting units, is less than its carrying amount. If factors indicate that the fair value is less than its carrying amount, we perform a quantitative assessment, analyzing the expected present value of future cash flows to quantify the amount of impairment, if any. We perform our annual impairment tests in the fourth quarter of each year. We have not historically taken any impairments of our goodwill or indefinite-lived intangible assets, and a 10% reduction in the fair value of our reporting unit would not result in a goodwill impairment.

Valuation of Long-Lived Assets

        We review our long-lived assets, which include property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. An impairment loss on our long-lived assets exists when the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized represents the excess of the long-lived asset's carrying value over the estimated fair value.

Product Warranty

        Warranty liabilities are recorded at the time of sale for the estimated costs that may be incurred under the terms of our limited warranty. We make and revise these estimates primarily on the number of units under warranty, historical experience of warranty claims, and an estimated per unit replacement cost. The liability for warranties is included in accrued expenses in our consolidated balance sheets. The specific warranty terms and conditions vary depending upon the product sold but are generally warranted against defects in material and workmanship ranging from three to five years. Our warranty only applies to the original owner. If actual product failure rates or repair costs differ from estimates, revisions to the estimated warranty liabilities would be required and could materially affect our financial condition and operating results.

69


Table of Contents

Stock Options

        We measure compensation expense for all stock-based awards at fair value on the date of grant and recognize compensation expense over the service period for awards expected to vest. We use the Black-Scholes-Merton, or Black-Scholes, option pricing model to determine the fair value of stock option awards, which uses the expected option term, stock price volatility, and the risk-free interest rate. The expected option term assumption reflects the period for which we believe the option will remain outstanding. We elected to use the simplified method to determine the expected option term, which is the average of the options' vesting and contractual terms. Our computation of expected volatility is based on the historical volatility of selected comparable publicly traded companies over a period equal to the expected term of the option. The risk-free interest rate reflects the U.S. Treasury yield curve for a similar instrument with the same expected term in effect at the time of the grant. The assumptions used in calculating the fair value of stock-based compensation awards represent management's best estimates, but the estimates involve inherent uncertainties and the application of management judgment. If any of the assumptions used in the Black-Scholes model changes significantly, stock-based compensation expense for future option awards may differ materially compared with the awards granted previously. Costs relating to stock-based compensation are recognized in SG&A expenses in our consolidated statements of operations, and forfeitures are recognized as they occur.

Recent Accounting Pronouncements

        For a description of recent accounting pronouncements, see the notes to our consolidated financial statements included elsewhere in this prospectus.

Internal Control Over Financial Reporting

        We identified material weaknesses in our internal control over financial reporting during the preparation of our consolidated financial statements for the year ended December 30, 2017. Under standards established by the PCAOB, a material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

        The material weaknesses in internal control over financial reporting and the status of the remediation measures we have implemented to improve our internal control over financial reporting to address the underlying causes of the material weaknesses are summarized below.

Inventory

        We identified a material weakness in internal control over financial reporting related to the failure to properly detect and analyze issues in the accounting system related to inventory valuation. During the year ended December 29, 2018, we sufficiently completed the remediation of this material weakness by taking the following actions: (i) developed and implemented weekly inventory reconciliation procedures to detect inventory adjustments or errors on a timely basis; (ii) updated and implemented our delegation of authority and transaction approval policies and procedures (completed during the fourth quarter of 2018); (iii) worked with our third-party logistics provider to improve their inventory tracking activities and reporting as well as improved our procedures to review such information (completed during the fourth quarter of 2018); and (iv) developed and implemented additional procedures to improve our inventory reserve processes (completed during the fourth quarter of 2018). We believe that these and other actions taken during 2018 have been fully implemented and are operating effectively. As a result, we have concluded that our remediation efforts have been successful, and that the previously-identified material weakness relating to inventory has been remediated.

70


Table of Contents

Information Technology General Controls

        We identified a material weakness in internal control over financial reporting related to ITGCs in the areas of user access and program change-management over certain information technology systems that support our financial reporting process. During the year ended December 29, 2018, we took a number of actions to improve our ITGCs but we have not completed our plans to sufficiently remediate the material weakness related to ITGCs. The actions taken included the completion of a significant number of identified required remediation activities with a comprehensive ITGCs remediation plan for our SAP environment to improve general controls. In July 2019, we hired a Chief Information Officer and an IT Compliance Manager to continue to improve our information technology systems, including the enhancement of related policies and procedures, and the development and documentation of our ongoing ITGC improvement initiatives. We continue to work on addressing remaining remediation activities within our SAP environment and across our other information technology systems that support our financial reporting process. As a result of this material weakness, business process automated and manual controls that are dependent on the affected ITGCs may be ineffective. The material weakness will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that ITGCs are operating effectively.

        We are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.

Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk

        In order to maintain liquidity and fund business operations, our Credit Facility bears a variable interest rate based on prime, federal funds, or LIBOR plus an applicable margin based on our total net leverage ratio. Our other debt arrangement with Rambler On bears a fixed rate of interest. The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions, and other factors. We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations, but as of December 29, 2018, we have not entered into any such contracts. Based on the balance outstanding at December 29, 2018, we estimate that a 1% increase or decrease in underlying interest rates would increase or decrease annual interest expense by $3.3 million in any given fiscal year.

Inflation Risk

        Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and SG&A expenses as a percentage of net sales, if the selling prices of our products do not increase with these increased costs.

Commodity Price Risk

        The primary raw materials and components used by our contract manufacturing partners include polyethylene, polyurethane foam, stainless-steel, polyester fabric, zippers, and plastic. We believe these materials are readily available from multiple vendors. We have, and may continue to, negotiate prices with suppliers of these products on behalf of our third-party contract manufacturers in order to leverage the cumulative impact of our volume. We do not, however, source significant amounts of these products directly. Certain of these products use petroleum or natural gas as inputs. However, we do not believe there is a significant direct correlation between petroleum or natural gas prices and the costs of our products.

71


Table of Contents

Foreign Currency Risk

        Our international sales are primarily denominated in the Canadian dollar and Australian dollar, and any unfavorable movement in the exchange rate between the U.S. dollar and these currencies could have an adverse impact on our revenue. During 2018, net sales from our international entities accounted for 1% of our consolidated revenues, and therefore we do not believe exposure to foreign currency fluctuations would have a material impact on our net sales. A portion of our operating expenses are incurred outside the Unites States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates. In addition, our suppliers may incur many costs, including labor costs, in other currencies. To the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our gross margin. In addition, a strengthening of the U.S. dollar may increase the cost of our products to our customers outside of the United States. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe that the exposure to foreign currency fluctuations from operating expenses is not material at this time as the related costs accounted for 2% of our total operating expenses.

72


Table of Contents


BUSINESS

Our Company

        We believe that by consistently designing and marketing innovative and outstanding outdoor products, we make an active lifestyle more enjoyable and cultivate a growing group of passionate and loyal customers.

        Today, we are a growing designer, marketer, retailer, and distributor of a variety of innovative, branded, premium products to a wide-ranging customer base. Our mission is to ensure that each YETI product delivers exceptional performance and durability in any environment, whether in the remote wilderness, at the beach, or anywhere else life takes our customers. By consistently delivering high-performing products, we have built a following of engaged brand loyalists throughout the United States, Canada, Australia, Japan, and elsewhere, ranging from serious outdoor enthusiasts to individuals who simply value products of uncompromising quality and design. Our relationship with customers continues to thrive and deepen as a result of our innovative new product introductions, expansion and enhancement of existing product families, and multifaceted branding activities.

        Our diverse product portfolio includes:

GRAPHIC


Note: Cooler accessories are included in Coolers & Equipment and Drinkware accessories are included in Drinkware.

        We bring our products to market through a diverse omni-channel strategy, comprised of our select group of national, regional, and independent retail partners and our DTC channel. Within our wholesale channel, our national retail partners include Dick's Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops/Cabela's, Ace Hardware, and Williams Sonoma. We also expect to sell our products through Lowe's beginning in December 2019. Our network of independent retail partners includes outdoor specialty, hardware, sporting goods, and farm and ranch supply stores. Our DTC channel is comprised of YETI.com, country and region specific YETI websites, YETI Authorized on the Amazon Marketplace,

73


Table of Contents

corporate sales, and our retail and pop-up stores. Our DTC channel provides authentic, differentiated brand experiences, customer engagement, and expedited customer feedback, enhancing the product development cycle while providing diverse avenues for growth.

        Our marketing strategy has been instrumental in driving sales and building equity in the YETI brand. We have become a trusted and preferred brand to experts and serious enthusiasts in an expanding range of outdoor pursuits. Their brand advocacy, combined with our various marketing efforts, has broadened our appeal to a larger consumer population. We produce original short films and distribute them through our content-rich website, active social media presence, and email subscriber base. We maintain a large and active roster of YETI Ambassadors, a diverse group of men and women throughout the United States and select international markets, comprised of world-class anglers, hunters, rodeo cowboys, barbecue pitmasters, surfers, and outdoor adventurers who embody our brand. We also directly engage with our current and target customers by sponsoring and participating in a variety of events, including sportsman shows, outdoor festivals, rodeos, music and film festivals, barbecue competitions, fishing tournaments, and retailer events. We believe our innovative consumer engagement reinforces the authenticity and aspirational nature of our brand and products across our expanding customer base.

        The broadening demand for our innovative and distinctive products is evidenced by our net sales growth from $89.9 million in 2013 to $778.8 million in 2018, representing a CAGR of 54%. Over the same period, operating income grew from $15.2 million to $102.2 million, representing a CAGR of 46%, net income grew from $7.3 million to $57.8 million, representing a CAGR of 51%, adjusted operating income grew from $16.3 million to $124.2 million, representing a CAGR of 50%, adjusted net income grew from $8.0 million to $75.7 million, representing a CAGR of 57%, and our adjusted EBITDA increased from $21.8 million to $149.0 million, representing a CAGR of 47%. See "Prospectus Summary—Summary Consolidated Financial and Other Data" for a reconciliation of adjusted operating income, adjusted net income, and adjusted EBITDA, each a non-GAAP measure, to operating income, net income, and net income, respectively.

Our History

        We were founded in 2006 by avid outdoorsmen Roy and Ryan Seiders, who were frustrated with equipment that could not keep pace with their interests in hunting and fishing. By utilizing forward-thinking designs and advanced manufacturing techniques, they developed a nearly indestructible hard cooler with superior ice retention. Our original cooler not only delivered exceptional performance, it anchored an authentic, passionate, and durable bond among customers and our company.

        By employing the same uncompromising approach to product quality and functionality, we have expanded our product line beyond hard coolers to soft coolers, drinkware, storage and outdoor products, and other gear that features similar quality and durability characteristics.

        To support our growth, we have assembled a senior management team comprised of experienced executives from large global consumer product brands and publicly listed companies. In 2015, Matthew J. Reintjes joined us as President and CEO, having previously led Vista Outdoor's Outdoor Products division. In June 2018, we hired Paul C. Carbone as Senior Vice President and Chief Financial Officer, who has served in several executive roles over his career, including Chief Financial Officer at Dunkin' Brands and Talbots. Messrs. Reintjes and Carbone, along with our broader leadership team, have proven track records of building brands, leading innovation, expanding distribution, and driving best-in-class operations and controls.

        To keep pace with the growing demand for our products, we have significantly expanded our supply chain capacity and infrastructure. We manage a global supply chain of highly qualified, third-party manufacturing and logistics partners to produce and distribute our products. We have grown our team in all functional areas and implemented advanced and leverageable information systems across operations, financial planning and analysis, and consumer management. Our infrastructure facilitates our ability to

74


Table of Contents

manage our manufacturing base, optimize complex distribution logistics, and effectively serve our customers.

Our Competitive Strengths

        We believe the following strengths fundamentally differentiate us from our competitors and drive our success:

        Influential, Growing Brand with Passionate Following.    The YETI brand stands for innovation, performance, uncompromising quality, and durability. We believe these attributes have made us the preferred choice of a wide variety of customers, from professional outdoors people to those who simply appreciate product excellence. Our products are used in and around an expanding range of pursuits, such as fishing, hunting, camping, climbing, snow sports, surfing, barbecuing, tailgating, ranch and rodeo, and general outdoors, as well as in life's daily activities. We support and build our brand through a multifaceted strategy, which includes innovative digital, social, television, and print media, our YETI Dispatch magalog, with a total distribution of approximately 3.3 million copies since 2018, and several grass-roots initiatives that foster customer engagement. Our brand is embodied and personified by our YETI Ambassadors, a diverse group of men and women from throughout the United States and select international markets, comprised of world-class anglers, hunters, rodeo cowboys, barbecue pitmasters, surfers, and outdoor adventurers who embody our brand. The success of our brand-building strategy is partially demonstrated by our approximately 1.8 million new customers to YETI.com since 2016 and approximately 1.3 million Instagram followers as of September 28, 2019. In 2018 and during the nine months ended September 28, 2019, we added approximately 0.5 million and 0.5 million new customers to YETI.com, respectively. We have also received unsolicited endorsements from well-known celebrities, and our products are regularly featured in music, film, and other entertainment. We have also gained prominence in various national publications, including the New York Times, Cosmopolitan magazine, Popular Mechanics magazine, and Outside magazine, among others.

        Our loyal customers act as brand advocates. YETI owners often purchase and proudly wear YETI apparel and display YETI banners and decals. As evidenced by the respondents to our most recently completed YETI owner study, greater than 95% say they have proactively recommended our products to their friends, family, and others through social media or by word-of-mouth. Their brand advocacy, coupled with our varied marketing efforts, has consistently extended our appeal to the broader YETI Nation. As we have expanded our product lines, extended our YETI Ambassador base, and broadened our marketing messaging, we have cultivated an audience of both men and women living throughout the United States and, increasingly, in international markets. Based on our annual owner studies, 64% of our customers are under the age of 45 and from 2015 to 2019 our customer base has evolved from 9% female to 33%. Further, based on our periodic Brand Tracking Study, our unaided brand awareness in the premium outdoor company and brand markets in the United States has grown from 2% in October 2015 to 12% in January 2019, indicating strong growth and that there may be significant opportunity for future expansion, particularly in more densely populated United States markets, which we have entered more recently.

        Superior Design Capabilities and Product Development.    At YETI, product is at our core and innovation fuels us. By employing an uncompromising approach to product performance and functionality, we have expanded on our original hard cooler offering and extended beyond our hunting and fishing heritage by introducing innovative new products, including soft coolers, drinkware, travel bags, backpacks, multipurpose buckets, outdoor chairs, blankets, dog bowls, apparel, and accessories. We believe that our new products appeal to our long-time customers as well as customers first experiencing our brand. We carefully design and rigorously test all new products, both in our innovation center and in the field, consistent with our commitment to delivering outstanding functional performance.

        We believe our products continue to set new performance standards in their respective categories. Our expansive team of in-house engineers and designers develops our products using a comprehensive

75


Table of Contents

stage-gate process that ensures quality control and optimizes speed-to-market. We use our purpose-built, state-of-the-art research and development center to rapidly generate design prototypes and test performance. Our global supply chain group, with offices in Austin, Texas, and mainland China, sources and partners with qualified suppliers to manufacture our products to meet our rigorous specifications. As a result, we control the innovation process from concept through design, production, quality assurance, and launch. To ensure we benefit from the significant investment we make in product innovation, we actively manage and aggressively protect our intellectual property.

        We earned numerous product and brand awards in 2018. For example, USA Today awarded the Hopper Two Soft Cooler its 2018 Readers' Choice Award for "Best Gift for Road Trippers." GQ Magazine recognized our new Hondo Base Camp Chair in its "Best Stuff of 2018." The Camino Carryall has quickly become a highly rated product, averaging 4.9 stars across more than 1,000 reviews and made Shape Magazine's Best of Awards list in the summer of 2018. Our Drinkware also appeared on multiple "best-of" and "best gift ideas" lists in publications as diverse as Refinery 29, Esquire, Popular Mechanics, and Gear Patrol. Notably, in February 2019 at The Gathering, an annual marketing conference, we were awarded the prestigious Pinnacle Award, a people's choice award voted on by conference attendees.

        We have a history of developing innovative products, including new products in existing product families, product line expansions, and accessories, as well as products that bring us into new categories. Our current product portfolio gives customers access to our brand at multiple price points, ranging from a $20 Rambler Tumbler to a $1,300 Tundra Hard Cooler. We expand our existing product families and enter new product categories by creating solutions grounded in consumer insights and relevant market knowledge. We believe our product families, extensions, variations, and colorways, in addition to new product launches, result in repeat purchases by existing customers and consistently attract new customers to YETI.

        Balanced, Omni-Channel Distribution Strategy.    We distribute our products through a balanced omni-channel platform, consisting of our wholesale and DTC channels. In our wholesale channel, we sell our products through select national and regional accounts and an assemblage of independent retail partners throughout the United States and, more recently, Australia, Canada, Japan, and Europe. We carefully evaluate and select retail partners that have an image and approach that are consistent with our premium brand and pricing. Our domestic national and regional specialty retailers include Dick's Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops/Cabela's, Ace Hardware, and Williams Sonoma. We also expect to sell our products through Lowe's beginning in December 2019. As of September 28, 2019, we also sold through a diverse base of approximately 4,600 independent retail partners, including outdoor specialty, hardware, sporting goods, and farm and ranch supply stores, among others. Our DTC channel consists primarily of online and inside sales, and has grown from 8% of our net sales in 2015 to 38% in the nine months ended September 28, 2019. On YETI.com and at our retail and pop-up stores, we showcase the entirety of our extensive product portfolio. Through YETI.com and our corporate sales programs, we offer customers and businesses the ability to customize many of our products with licensed marks and original artwork. Our DTC channel enables us to directly interact with our customers, more effectively control our brand experience, better understand consumer behavior and preferences, and offer exclusive products, content, and customization capabilities. We believe our control over our DTC channel provides our customers the highest level of brand engagement and further builds customer loyalty, while generating attractive margins. As part of our commitment to premium positioning, we maintain supply discipline, consistently enforce our MAP policy across our wholesale and DTC channels, and sell primarily through one-step distribution.

        Scalable Infrastructure to Support Growth.    As we have grown, we have worked diligently and invested significantly to further build our information technology capabilities, while improving business process effectiveness. This robust infrastructure facilitates our ability to manage our global manufacturing base, optimize complex distribution logistics, and effectively serve our consistently expanding customer base. We

76


Table of Contents

believe our global team, sophisticated technology backbone, and extensive experience provide us with the capabilities necessary to support our future growth.