Weber Inc. and Traeger Inc., two companies that sell grills and barbecue equipment, are taking advantage of this summer outdoor cooking season to go public, but a comparative analysis of the two shows that one is on a stronger financial footing.
RapidRatings, a risk and financial analysis company that examines the financial health of thousands of companies, took a close look at their financials and found Weber
had a far higher financial health rating than Traeger
at 75 out of a possible 100, compared with Traeger’s 44.
The FHR rating measures short-term probability of default. It puts Weber in the “strong” category and Traeger in the “medium risk” one.
Still, James Gellert, RapidRatings chief executive, said even with that gap in FHR ratings, both companies have had a relatively good year.
Their Core Health Score, which evaluates efficiencies in the business over a two- to three-year perspective, stands at 53 for Traeger — the medium health category — and 73 for Weber — the strong health category.
“With the combination of an optimistic recovery-swing, a summer high of consumer spending, and the traditional season of outdoor cooking in full effect—the backdrop is right to make their debut on the public stage,” Gellert wrote in his analysis.
Weber has a financial edge on Traeger, despite some recent improvements, he said.
Traeger has dug itself out of a weak position in 2019, when it had an FHR of 27, placing it in the high risk category. That rating rose to 37 in 2020 before rising about 40 this year.
Weber, in contrast, has been in the medium risk category through the pandemic with an FHR of 57 in 2020. It’s currently “in a category of companies (low risk) that have not only fared well but benefited,” said Gellert.
Both companies are “right-side up” in terms of debt-to-equity ratios, but Weber (47.25) bests Traeger (0.92) by a wide margin. And Weber’s $380 million cash-on-hand far exceeds Traeger with $17 million.
“If current trends persist it would be logical to expect that Weber will face low
default risk this coming year while prospects for enhancing efficiency and competitiveness are excellent over the medium-term; thus, the outlook is positive,” wrote RapidRatings in a report on Weber.
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Weber is cooking in more than half of U.S. households
Weber plans to offer 46.9 million shares of common stock, priced at $15 to $17 per share. The company has applied to list on the New York Stock Exchange under the ticker “WEBR.” Proceeds will be used to pay debt and for general corporate purposes.
Goldman Sachs, BofA Securities and JP Morgan are lead underwriters in a syndicate of 12 banks.
Founded by the inventor of the charcoal grill George Stephen, Sr. nearly 70 years ago, Weber now also offers gas grills, smokers and other items across 78 countries.
In 2020, the Illinois-based company introduced “Weber Connect,” a connected grilling platform that includes grilling technology, a mobile app and a cloud-based infrastructure that grill owners can use for smartphone-enabled cooking. In 2018, Weber took a minority investment in June Life, the company that powers this connected experience.
Retailers including Costco Wholesale Corp.
Home Depot Inc.
and Walmart Inc.
are among the thousands of sellers of Weber merchandise, including Weber’s own shops and e-commerce site.
Weber is profitable, with net income totaling $88.9 million in fiscal 2020 to end September, up from $50.1 million the year earlier. The compound annual growth rate (CAGR) between 1980 and 2021 was 10%.
Sales rose to $1.525 billion from $1.296 billion in 2019. More than half (58%) of revenue was generated in the Americas with a “significant” manufacturing operation in the U.S. and 22 global distribution facilities, according to the prospectus. A new facility in Poland is expected to open in the fourth quarter of fiscal 2021. A portion of the company’s workforce is unionized.
As of June 30, the only borrowings Weber had was $6.4 million in undrawn letters of credit. Long-term debt as of March 30, 2021 was $1.21 billion.
In April, Weber-Stephen Products LLC, the company under which Weber does business until the offering, acquired R. McDonald Co. for $29 million in cash and $14 million in equity. R. McDonald Co. will be the exclusive Weber seller in Australia and New Zealand.
After the public offering, Weber will be a holding company that will depend on distributions from Weber HoldCo LLC to pay dividends.
Chris Scherzinger has been chief executive and a director of Weber-Stephen Products LLC since April 2018. He has previously held executive roles at Jarden Corp. and Newell Brands Inc.
William Horton has been chief financial officer since June 2018. He, too, had held previous roles at Jarden and Newell.
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Traeger fans will get tattoos and name their kids after the grill
TGPX Holdings I Corp. will become Traeger after the IPO. The Salt Lake City-based company began trading Thursday, jumping 22% out of the gate. Traeger priced at $18 per share at the top of the expected range of $16 and $18. That price values the company at $2.59 billion.
Traeger is listed on the New York Stock Exchange under the ticker “COOK.”
Traeger is an emerging growth company, which means it does not have to make the same disclosures required of bigger public companies. A business remains an emerging growth company until it reaches a number of milestones, including annual revenue of more than $1.07 billion.
Morgan Stanley, Jefferies, Baird and William Blair are the lead underwriters of the deal, which has a syndicate of 14 banks.
AEA Investors, Ontario Teachers’ Pension Plan Board and certain private-equity funds managed by Trilantic North America will hold approximately 29.7%, 21.9% and 16.0% of outstanding Traeger shares after the IPO. Each of these companies will be able to designate directors as long as they hold 5% of common stock shares.
Traeger plans to use the proceeds from the IPO to pay debt and cash bonuses to certain employees. The company does not intend to pay a dividend for the foreseeable future.
Traeger invented the wood pellet grill in 1987, which uses hardwood for grilling, smoking and other cooking techniques.
Traeger also has an app to help users, and offers a library of recipes. Traeger Kitchen TV, airs weekly, live-streaming cooking classes.
“While wood pellet grills have been sold commercially since the 1980s, the market for wood pellet grills remained relatively small and niche until recently,” the company said in its prospectus.
“The current broader market for wood pellet grills is relatively new and rapidly growing, and it is uncertain whether it will sustain high levels of demand and achieve wide market acceptance.”
Some environmental groups have targeted Traeger, suggesting customers opt for a more eco-friendly grill option, the company said.
Traeger merchandise is sold at a wide range of retailers, however, the company’s three largest retailers accounted for more than half of revenue last year.
Traeger had 1.6 million followers across Facebook, Instagram, and YouTube as of March 15, and talks about its social media community, which grew 40% in 2020, as an asset, with fans donning clothing, tattoos and even naming their children after Traeger.
“We believe that this community brings new people to Traeger, creates solidarity within the Traegerhood, and motivates owners to use their grills more often,” the prospectus said.
Data provided in the IPO documents show that the average Traeger owner cooked on their grill 56 times in 2020 with holidays like Thanksgiving and Christmas, along with the Super Bowl popular grilling days.
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Traeger is also profitable; it had net income of $31.6 million in 2020, after a loss of $29.6 million in 2019. Net income for the first three months of 2021 was $38.9 million, up from $7.9 million in the year-earlier period. Between 2017 and 2020, Traeger’s CAGR was 28%.
Revenue came to $545.8 million, in 2020, up from $363.3 million in 2019. For the three months ending March 31, 2021, revenue was $235.6 million.
On July 1, Traeger acquired Apption Labs Limited, a company that creates hardware and software for kitchen appliances, including the Meater smart thermometer, for $100 million.
On June 29, Traeger refinanced its existing credit facility to include a $560 million senior secured term loan facility and $125 million revolving credit facility. The company used $46.1 million from the new senior secured term loan facility to pay for the Apption acquisition.
The company warns that its “substantial indebtedness” could hurt its financial position. Long-term debt totaled $436.8 million for the three months ending March 31.
Traeger CEO Jeremy Andrus has served in that role since 2014 and will be board chair after the offering.
Dominic Blosil will be CFO, a role he’s held since January 2018. Prior to that, he was vice president of strategy and finance from February 2014 to December 2017.
The U.S. is “grilling and chilling” right now
Estimating that 60% of U.S. households own a grill, Traeger says its U.S. penetration is only 3%. The company sold 2 million grills between 2016 and 2020. The U.S. is its primary market, though the company has plans to expand internationally.
According to data from MetrixLab provided by Weber, the installed base of grills in the U.S. numbers nearly 70 million, or 56% of households. More than 30 million of those grills are Weber, and about 2 million are replaced each year.
Traeger estimates that 20 million grills were purchased in 2020, with nearly one-third of U.S. grill owners investing in more than one grill.
Both Weber and Traeger face a tough competitive landscape that also includes Napoleon, Char-Broil, a W.C. Bradley Co. brand, and Newell’s Coleman brand.
“[I]t’s notable that two specialty manufacturers would not only go public—but do so at the same time,” said RapidRatings’ Gellert.
The Renaissance IPO ETF IPO has slipped 1.7% for the year to date while the benchmark S&P 500 index SPX has gained 17.7%.