UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from         to

Commission File Number 001-40694

Traeger, Inc.

(Exact name of registrant as specified in its charter)

Delaware	82-2739741
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

    

1215 E Wilmington Ave, Suite 200
Salt Lake City, Utah	84106
(Address of principal executive offices)	(Zip code)

(801) 701-7180

(Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	COOK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of November 3, 2023, there were 125,809,285 shares of the registrant's common stock, par value $0.0001 per share, outstanding.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)	1
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations and Comprehensive Loss	2
Condensed Consolidated Statements of Changes in Stockholders' Equity	3
Condensed Consolidated Statements of Cash Flows	5
Notes to Unaudited Condensed Consolidated Financial Statements	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4. CONTROLS AND PROCEDURES	35
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	35
ITEM 1A. RISK FACTORS	35
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES	36
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	36
ITEM 4. MINE SAFETY DISCLOSURES	36
ITEM 5. OTHER INFORMATION	36
ITEM 6. EXHIBITS	37
SIGNATURES	38

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates," “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, general macroeconomic trends, industry and business trends, equity compensation, business strategy, plans, market growth and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, our history of operating losses, our ability to manage our future growth effectively, our ability to expand into additional markets, our ability to maintain and strengthen our brand to generate and maintain ongoing demand for our products, our ability to cost-effectively attract new customers and retain our existing customers, our failure to maintain product quality and product performance at an acceptable cost, the impact of product liability and warranty claims and product recalls, the highly competitive market in which we operate, the use of social media and community ambassadors, a decline in sales of our grills, our dependence on three major retailers, risks associated with our international operations, our reliance on a limited number of third-party manufacturers and problems with (or loss of) our suppliers or an inability to obtain raw materials, the ability of our stockholders to influence corporate matters, our ability to successfully remediate the material weakness in our internal control over financial reporting in an appropriate and timely manner or at all, and the other important factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 16, 2023, as updated by Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRAEGER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	September 30, 2023		December 31, 2022
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	11,280	$	39,055
Restricted cash	—		12,500
Accounts receivable, net	50,996		42,050
Inventories	101,891		153,471
Prepaid expenses and other current assets	35,051		27,162
Total current assets	199,218		274,238
Property, plant, and equipment, net	55,232		55,510
Operating lease right-of-use assets	11,922		13,854
Goodwill	74,725		74,725
Intangible assets, net	481,155		512,858
Other non-current assets	14,468		15,530
Total assets	$	836,720	$	946,715
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	26,028	$	29,841
Accrued expenses	40,682		52,295
Line of credit	25,000		11,709
Current portion of notes payable	250		250
Current portion of operating lease liabilities	3,772		5,185
Current portion of contingent consideration	10,810		12,157
Other current liabilities	1,726		1,470
Total current liabilities	108,268		112,907
Notes payable, net of current portion	397,009		468,108
Operating leases liabilities, net of current portion	8,418		9,001
Contingent consideration, net of current portion	—		10,590
Deferred tax liability	10,373		10,370
Other non-current liabilities	879		870
Total liabilities	524,947		611,846
Commitments and contingencies—See Note 10
Stockholders' equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized and no shares issued or outstanding as of September 30, 2023 and December 31, 2022	—		—
Common stock, $0.0001 par value; 1,000,000,000 shares authorized
Issued and outstanding shares - 125,658,970 and 122,624,414 as of September 30, 2023 and December 31, 2022	13		12
Additional paid-in capital	929,249		882,069
Accumulated deficit	(630,832)		(570,475)
Accumulated other comprehensive income	13,343		23,263
Total stockholders' equity	311,773		334,869
Total liabilities and stockholders' equity	$	836,720	$	946,715

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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TRAEGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	117,730	$	93,788	$	442,403	$	517,768
Cost of revenue	73,064		68,710		278,983		336,605
Gross profit	44,666		25,078		163,420		181,163
Operating expenses:
Sales and marketing	25,913		25,496		75,903		102,401
General and administrative	24,823		70,485		103,873		142,637
Amortization of intangible assets	8,889		8,889		26,666		26,666
Change in fair value of contingent consideration	(2,300)		1,820		508		3,775
Restructuring costs	225		8,036		225		8,036
Goodwill impairment	—		110,837		—		222,322
Total operating expense	57,550		225,563		207,175		505,837
Loss from operations	(12,884)		(200,485)		(43,755)		(324,674)
Other income (expense):
Interest expense	(7,517)		(7,337)		(23,408)		(20,238)
Other income (expense), net	1,992		(3,545)		8,020		(8,351)
Total other expense	(5,525)		(10,882)		(15,388)		(28,589)
Loss before provision (benefit) for income taxes	(18,409)		(211,367)		(59,143)		(353,263)
Provision (benefit) for income taxes	852		(225)		1,214		(27)
Net loss	$	(19,261)	$	(211,142)	$	(60,357)	$	(353,236)
Net loss per share, basic and diluted	$	(0.16)	$	(1.76)	$	(0.49)	$	(2.98)
Weighted average common shares outstanding, basic and diluted	124,053,643		119,924,371		123,265,134		118,682,379
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(27)	$	(67)	$	(24)	$	(58)
Change in cash flow hedge	—		12,285		(2,088)		24,609
Amortization of dedesignated cash flow hedge	(2,666)		—		(7,808)		—
Total other comprehensive income (loss)	(2,693)		12,218		(9,920)		24,551
Comprehensive loss	$	(21,954)	$	(198,924)	$	(70,277)	$	(328,685)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

2

TRAEGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited)

(in thousands, except share amounts)

	Three Months Ended September 30, 2023 and 2022
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders'  Equity
	Shares	Amount
Balance at June 30, 2023	123,960,782	$	12	$	923,048	$	(611,571)	$	16,036	$	327,525
Issuance of common stock under stock plan	1,698,188	1		—		—		—		1
Stock-based compensation	—	—		6,201		—		—		6,201
Net loss	—	—		—		(19,261)		—		(19,261)
Foreign currency translation adjustments	—	—		—		—		(27)		(27)
Amortization of dedesignated cash flow hedge	—	—		—		—		(2,666)		(2,666)
Balance at September 30, 2023	125,658,970	$	13	$	929,249	$	(630,832)	$	13,343	$	311,773
Balance at June 30, 2022	118,211,775	$	12	$	821,806	$	(330,411)	$	12,247	$	503,654
Issuance of common stock under stock plan	4,375,618	—		—		—		—		—
Stock-based compensation	—	—		53,253		—		—		53,253
Net loss	—	—		—		(211,142)		—		(211,142)
Foreign currency translation adjustments	—	—		—		—		(67)		(67)
Change in cash flow hedge	—	—		—		—		12,285		12,285
Balance at September 30, 2022	122,587,393	$	12	$	875,059	$	(541,553)	$	24,465	$	357,983
	Nine Months Ended September 30, 2023 and 2022
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Member's and Stockholders'  Equity
	Shares	Amount
Balance at December 31, 2022	122,624,414	$	12	$	882,069	$	(570,475)	$	23,263	$	334,869
Issuance of common stock under stock plan	3,034,556	1		—		—		—		1
Stock-based compensation	—	—		47,180		—		—		47,180
Net loss	—	—		—		(60,357)		—		(60,357)
Foreign currency translation adjustments	—	—		—		—		(24)		(24)
Change in cash flow hedge	—	—		—		—		(2,088)		(2,088)
Amortization of dedesignated cash flow hedge	—	—		—		—		(7,808)		(7,808)
Balance at September 30, 2023	125,658,970	$	13	$	929,249	$	(630,832)	$	13,343	$	311,773

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Balance at December 31, 2021	117,547,916	$	12	$	794,413	$	(188,317)	$	(86)	$	606,022
Issuance of common stock under stock plan	5,045,003	—		—		—		—		—
Shares withheld related to net share settlement	(5,526)	—		(41)		—		—		(41)
Stock-based compensation	—	—		80,687		—		—		80,687
Net loss	—	—		—		(353,236)		—		(353,236)
Foreign currency translation adjustments	—	—		—		—		(58)		(58)
Change in cash flow hedge	—	—		—		—		24,609		24,609
Balance at September 30, 2022	122,587,393	$	12	$	875,059	$	(541,553)	$	24,465	$	357,983

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

TRAEGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(60,357)	$	(353,236)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property, plant and equipment	11,204		9,703
Amortization of intangible assets	32,074		32,025
Amortization of deferred financing costs	1,519		1,468
Loss on disposal of property, plant and equipment	2,262		707
Stock-based compensation expense	47,180		80,687
Bad debt expense	153		(317)
Unrealized loss (gain) on derivative contracts	(2,689)		4,567
Amortization of dedesignated cash flow hedge	(7,808)		—
Change in fair value of contingent consideration	288		495
Goodwill impairment	—		222,322
Restructuring costs	—		1,419
Other non-cash adjustments	(15)		—
Change in operating assets and liabilities:
Accounts receivable, net	(9,099)		58,874
Inventories	51,580		(14,845)
Prepaid expenses and other current assets	(6,077)		(7,118)
Other non-current assets	(393)		64
Accounts payable and accrued expenses	(15,467)		(42,838)
Other non-current liabilities	4		22
Net cash provided by (used in) operating activities	44,359		(6,001)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment	(15,678)		(15,128)
Capitalization of patent costs	(373)		(403)
Proceeds from sale of property, plant, and equipment	2,925		—
Net cash used in investing activities	(13,126)		(15,531)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit	103,100		166,978
Repayments on line of credit	(161,809)		(156,666)
Proceeds from long-term debt	—		12,500
Repayments of long-term debt	(188)		—
Principal payments on finance lease obligations	(386)		(355)
Payments of acquisition related contingent consideration	(12,225)		(9,275)
Taxes paid related to net share settlement of equity awards	—		(41)
Net cash provided by (used in) financing activities	(71,508)		13,141
Net decrease in cash, cash equivalents and restricted cash	(40,275)		(8,391)
Cash, cash equivalents and restricted cash at beginning of period	51,555		16,740
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	11,280	$	8,349

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

TRAEGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

(Continued)	Nine Months Ended September 30,
	2023		2022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	30,243	$	18,403
Cash paid for income taxes	$	2,449	$	2,250
NON-CASH FINANCING AND INVESTING ACTIVITIES
Equipment purchased under finance leases	$	451	$	952
Property, plant, and equipment included in accounts payable and accrued expenses	$	2,152	$	15,512

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

6

TRAEGER, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Nature of Operations – Traeger, Inc. and its wholly owned Subsidiaries (collectively "Traeger" or the "Company") design, source, sell, and support wood pellet fueled barbecue grills sold to retailers, distributors, and direct to consumers. The Company produces and sells the pellets used to fire the grills and also sells Traeger-branded rubs, spices and sauces, as well as grill accessories (including covers, barbecue tools, trays, liners, MEATER smart thermometers and merchandise). A significant portion of the Company’s sales are generated from customers throughout the United States ("U.S."), and the Company continues to develop distribution in Canada and Europe. The Company’s headquarters are in Salt Lake City, Utah.

Traeger, Inc. was incorporated in July 2021 in connection with the conversion of TGPX Holdings I LLC from a Delaware limited liability company into a Delaware corporation at the time of the Company's initial public offering ("IPO") and has no material assets and liabilities or standalone operations other than its ownership in its consolidated subsidiaries. TGPX Holdings II LLC is the only direct subsidiary of Traeger, Inc. TGPX Holdings II LLC is a holding company with no other operations, cash flows, material assets or liabilities other than the equity interest in TGP Holdings III LLC. Pursuant to the statutory corporate conversion (the "Corporate Conversion"), all of the outstanding limited liability company interests of TGPX Holdings I LLC were converted into shares of common stock of Traeger, Inc., and TGP Holdings LP (the "Partnership") became the holder of such shares of common stock of Traeger, Inc. In connection with the Corporate Conversion, the Partnership liquidated and distributed these shares of common stock to the holders of partnership interests in the Partnership in direct proportion to their respective interests in the Partnership based upon the value of Traeger, Inc. at the time of the IPO, with a value implied by the initial public offering price of the shares of common stock sold in the IPO.

Basis of Presentation and Principles of Consolidation – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 16, 2023 (the "Annual Report on Form 10-K").

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to fairly present the consolidated financial position, results of operations and cash flows for the interim periods presented. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of results that may be expected for any other interim period or for the year ended December 31, 2023.

Emerging Growth Company Status – The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 ("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. The Company has elected to use the extended transition period for complying with the adoption of new or revised accounting standards and as a result of this election, its financial statements may not be comparable to companies that comply with public company effective dates. The Company will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of its common stock that is held by non-affiliates is at least $700 million as of the last business day of its most recently completed second fiscal quarter, (ii) the end of the fiscal year in which the Company has total annual gross revenues of $1.24 billion or more during such fiscal year, (iii) the date on which the Company issues more than $1.0 billion in non-convertible debt in a three-year period, or (iv) December 31, 2026.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates – The preparation of these financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates and the assumptions made by management that present the greatest amount of estimation uncertainty include the fair value of contingent consideration obligations, customer credits and returns, obsolete inventory

7

reserves, valuation and impairment of intangible assets including goodwill, unrealized positions on foreign currency derivatives and reserves for warranty. Actual results could differ from these estimates.

Restricted Cash – The Company considers cash to be restricted when withdrawal or general use is legally restricted. The restricted cash balance is associated with borrowings from the delayed draw term loan facility that are restricted in use and were drawn down to fund payments of contingent consideration associated with the acquisition of Apption Labs.

Concentrations – Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash in banks, trade accounts receivable, foreign currency contracts, and business activity with certain third-party contract manufacturers of our products. Credit is extended to customers based on an evaluation of the customer’s financial condition and collateral is not generally required in the Company’s sales transactions. Three customers (each large U.S. retailers) that accounted for a significant portion of net sales are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Customer A	14	%	14	%	18	%	15	%
Customer B	20	%	5	%	18	%	18	%
Customer C	8	%	17	%	12	%	17	%

As of September 30, 2023, customers A, B, C, and D accounted for a significant portion of trade accounts receivable of 18%, 28%, 5%, and 13% compared to 31%, 20%, 8%, and 4% as of December 31, 2022. Concentrations of credit risk exist to the extent credit terms are extended with these four large customers. A business failure on the part of any one of the four customers could result in a material amount of exposure to the Company. No other single customer accounted for greater than 10% of the Company’s net sales for the three and nine months ended September 30, 2023 and 2022, respectively. Additionally, no other single customer accounted for greater than 10% of trade accounts receivable as of September 30, 2023 or December 31, 2022.

The Company’s sales to dealers and distributors located outside the United States are generally denominated in U.S. dollars. The Company does have sales to certain dealers located in the European Union, the United Kingdom and Canada which are denominated in Euros, British Pounds and Canadian Dollars, respectively.

The Company relies on a limited number of suppliers for its contract manufacturing of grills and accessories. A significant disruption in the operations of certain of these manufacturers, or in the transportation of parts and accessories would impact the production of the Company’s products for a substantial period of time, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Revenue Recognition and Sales Returns and Allowances – The Company recognizes revenue at the amount to which it expects to be entitled when a contract exists with a customer that specifies the goods and services to be provided at an agreed upon sales price and when the performance obligation is satisfied. The performance obligation for most of the Company’s sales transactions is considered complete when control transfers, which is determined when products are shipped or delivered to the customer depending on the terms of the contract. Sales are made on normal and customary short-term credit terms or upon delivery of point-of-sale transactions.

Shipping charges billed to customers are included in net sales and related shipping costs are included in cost of sales. The company has elected to account for shipping and handling activities performed after control has been transferred to the customer as a fulfillment cost.

The Company enters into contractual arrangements with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company does not have long-term contracts that are satisfied over time. Due to the nature of the contracts, no significant judgment exists in relation to the identification of the customer contract or satisfaction of the performance obligation. The Company expenses incremental costs of obtaining a contract due to the short-term nature of the contracts.

The Company has certain contractual programs and practices with customers that can give rise to elements of variable consideration such as customer cooperative advertising and volume incentive rebates. The Company estimates the variable consideration using the most likely amount method based on sales and contractual rates with each customer and records the estimated amount of credits for these programs as a reduction to net sales.

8

The Company has entered into contracts with some customers that allow for credits to be claimed for certain matters of operational compliance or for returns to the retail customer from end consumers. Credits that will be issued associated with these items are estimated using the expected value method and are based on actual historical experience and are recorded as a reduction of revenue at the time of recognition or when circumstances change resulting in a change in estimated returns. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

New Accounting Pronouncements Recently Adopted – In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial instruments measured at amortized cost and also applies to some off-balance sheet credit exposures. The Company has adopted this guidance effective January 1, 2023. The adoption of this guidance did not have a material impact on the Company’s accompanying condensed consolidated financial statements.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to ease the potential accounting and financial reporting burden of reference rate reform, including the expected market transition from the London Interbank Offering Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance provides optional expedients and scope exceptions for transactions if certain criteria are met. These transactions include contract modifications, hedge accounting, and the sale or transfer of debt securities classified as held-to-maturity. The Company adopted this ASU in the second quarter of 2023. Adoption of this new standard did not have a material impact on the Company's consolidated financial statements and related disclosures.

3 – REVENUE

The following tables disaggregates revenue by product category, geography, and sales channel for the periods indicated (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue by product category	2023		2022		2023		2022
Grills	$	56,573	$	38,994	$	239,444	$	307,105
Consumables	25,385		25,151		90,330		106,899
Accessories	35,772		29,643		112,629		103,764
Total revenue	$	117,730	$	93,788	$	442,403	$	517,768

	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue by geography	2023		2022		2023		2022
North America	$	102,125	$	82,638	$	399,280	$	477,338
Rest of world	15,605		11,150		43,123		40,430
Total revenue	$	117,730	$	93,788	$	442,403	$	517,768

	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue by sales channel	2023		2022		2023		2022
Retail	$	91,764	$	68,060	$	359,726	$	433,001
Direct to consumer	25,966		25,728		82,677		84,767
Total revenue	$	117,730	$	93,788	$	442,403	$	517,768

4 – ACCOUNTS RECEIVABLES, NET

Accounts receivable consists of the following (in thousands):

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	September 30, 2023		December 31, 2022
Trade accounts receivable	$	63,509	$	56,822
Allowance for expected credit losses	(899)		(867)
Reserve for returns, discounts and allowances	(11,614)		(13,905)
Total accounts receivable, net	$	50,996	$	42,050

5 – INVENTORIES

Inventories consisted of the following (in thousands):

	September 30, 2023		December 31, 2022
Raw materials	$	6,655	$	7,110
Work in process	9,078		12,155
Finished goods	86,158		134,206
Inventories	$	101,891	$	153,471

Included within inventories are adjustments of $1.5 million and $1.3 million at September 30, 2023 and December 31, 2022, respectively, to record inventory to net realizable value.

6 – ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

	September 30, 2023		December 31, 2022
Accrual for inventories in-transit	$	5,441	$	7,987
Warranty accrual	7,171		7,368
Accrued compensation and bonus	5,730		4,499
Other	22,340		32,441
Accrued expenses	$	40,682	$	52,295

The changes in the Company’s warranty accrual, included in accrued expenses on the accompanying condensed consolidated balance sheets, were as follows for the fiscal periods indicated (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Warranty accrual, beginning of period	$	7,486	$	8,647	$	7,368	$	8,326
Warranty claims	(2,435)		(2,239)		(6,015)		(6,327)
Warranty costs accrued	2,120		877		5,818		5,286
Warranty accrual, end of period	$	7,171	$	7,285	$	7,171	$	7,285

7 – DERIVATIVES

Interest Rate Swap

On February 25, 2022, the Company entered into a floating-to-fixed interest rate swap agreement to hedge or otherwise protect against fluctuations on a portion of the Company's variable rate debt. The agreement provides for a notional amount of $379.2 million, fixed rate of 2.08% and a maturity date of February 28, 2026. This agreement was designated as a cash flow hedge on the exposure of the variability of future cash flows subject to the variable monthly interest rates on $379.2 million of the term loan portion under the First Lien Term Loan Facility (as defined below). The Company assessed hedge effectiveness at the time of entering into the agreement, utilizing a regression analysis, and determined the hedge is expected to be highly effective.

As a cash flow hedge, the interest rate swap is revalued at current market rates, with the changes in valuation being recorded in other comprehensive income within the accompanying condensed consolidated statements of operations and comprehensive

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loss, to the extent that the hedge is effective. The gains or losses on the interest rate swaps are recorded in accumulated other comprehensive income within the accompanying condensed consolidated balance sheets and are reclassified into interest expense in the periods in which the interest rate swap affects earnings. The cash flows related to interest settlements and changes in valuation are classified consistent with the treatment of the hedged monthly interest payments generally as operating activities on the accompanying condensed consolidated statement of cash flows.

In January 2023, the Company changed the interest reset period from one month to three months on the term loan portion under the First Lien Term Loan Facility (as defined below). As a result, the Company dedesignated its hedging relationship. At the time of dedesignation total amount recorded in accumulated other comprehensive income ("AOCI") was $21.3 million and will be amortized into earnings as a reduction of interest expense over the term of the previously hedged interest payments.

The gross and net balances from the interest rate swap contract position were as follows (in thousands):

	September 30, 2023		December 31, 2022
Gross Asset Fair Value	$	24,246	$	23,410
Gross Liability Fair Value	—		—
Net Asset Fair Value	$	24,246	$	23,410

For the three and nine months ended September 30, 2023, as a result of the discontinued cash flow hedge accounting treatment, realized and unrealized gains from the interest rate swap were recorded in other income (expense), net within the accompanying condensed consolidated statements of operations and comprehensive loss and the amortization of the amounts recorded within AOCI were recorded within interest expense. For the three and nine months ended September 30, 2022, realized losses and unrealized gains from the interest rate swap were recorded in interest expense and other comprehensive loss, respectively, within the accompanying condensed consolidated statements of operations and comprehensive loss.

Foreign Currency Contracts

The Company is exposed to foreign currency exchange rate risk related to its purchases and international operations. The Company utilizes foreign currency contracts to manage foreign currency risk in purchasing inventory and capital equipment, and future settlement of foreign denominated assets and liabilities. The volume of the Company’s foreign currency contract activity is limited by the amount of transaction exposure in each foreign currency and the Company’s election as to whether to hedge the transactions. There are no derivative instruments entered into for speculative purposes.

The Company had outstanding foreign currency contracts as of September 30, 2023 and December 31, 2022. The Company did not elect hedge accounting for any of these contracts. The fair market value of the contracts in an asset position are offset by the fair market value of the contracts in a liability position to reach a net position. For periods where the net position is an asset balance, the balance is recorded within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets and for periods where the net position is a liability balance, the balance is recorded within other current liabilities on the accompanying condensed consolidated balance sheets. Changes in the net fair value of contracts are recorded in other income (expense), net within the accompanying condensed consolidated statements of operations and comprehensive loss.

The gross and net balances from foreign currency contract positions were as follows (in thousands):

	September 30, 2023		December 31, 2022
Gross Asset Fair Value	$	—	$	—
Gross Liability Fair Value	1,236		1,001
Net Fair Value	$	1,236	$	1,001

Gains (losses) from foreign currency contracts were recorded in other income (expense), net within the accompanying condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Realized losses	$	(804)	$	(964)	$	(2,484)	$	(250)
Unrealized gains (losses)	410		(1,703)		(279)		(4,567)
Total losses	$	(394)	$	(2,667)	$	(2,763)	$	(4,817)

8 – FAIR VALUE MEASUREMENTS

For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price the Company would receive to sell an asset, or pay to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction. In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. These two types of inputs create the following fair value hierarchy:

•Level 1: Quoted prices for identical instruments in active markets.

•Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3: Significant inputs to the valuation model are unobservable.

The following table presents information about the fair value measurement of the Company’s financial instruments (in thousands):

Financial Instruments Recorded at Fair Value on a Recurring Basis:	Fair Value Measurement Level	As of September 30, 2023		As of December 31, 2022
Assets:
Derivative assets—interest rate swap contract (1)	2	$	24,246	$	23,410
Total assets		$	24,246	$	23,410
Liabilities:
Derivative liabilities—foreign currency contracts (2)	2	$	1,236	$	1,001
Contingent consideration—earn out (3)	3	10,810		22,747
Total liabilities		$	12,046	$	23,748

(1)Included in prepaid expenses and other current assets and other non-current assets in the accompanying condensed consolidated balance sheets.

(2)Included in other current liabilities in the accompanying condensed consolidated balance sheets.

(3)Included in current and non-current contingent consideration in the accompanying condensed consolidated balance sheets.

Transfers of assets and liabilities among Level 1, Level 2 and Level 3 are recorded as of the actual date of the events or change in circumstances that caused the transfer. As of September 30, 2023 and December 31, 2022, there were no transfers between levels of the fair value hierarchy of the Company’s assets or liabilities measured at fair value.

The fair value of the Company’s derivative assets through its foreign currency contracts is based upon observable market-based inputs that reflect the present values of the differences between estimated future foreign currency rates versus fixed future settlement prices per the contracts, and therefore, are classified within Level 2. The fair value of the Company's interest rate swap contract held with a financial institution is classified as a Level 2 financial instrument, which is valued using observable underlying interest rates and market-determined risk premiums at the reporting date.

On November 10, 2022, the Company entered into the second amendment to the share purchase agreement associated with the Apption Labs business combination to extend the earn out period through the end of fiscal year 2023. This amendment also modified the contingent consideration calculation associated with the achievement of certain revenue, earnings, and successful product launch thresholds for fiscal years 2022 and 2023. In April 2023, the Company used the restricted cash balance to pay $12.4 million associated with the contingent cash consideration to the sellers based on the achievement of certain thresholds for fiscal year 2022. The remaining undiscounted amounts the Company may be required to pay under the contingent consideration arrangement is $15.0 million, becoming due during the first half of fiscal year 2024.

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The fair values of the Company's contingent consideration earn out obligation is estimated using a Black Scholes model. Key assumptions used in these estimates include the weighted average cost of capital and the probability assessments with respect to the likelihood of achieving the forecasted performance targets consistent with the level of risk of achievement. As these are significant unobservable inputs, the contingent consideration earn out obligation is included in Level 3 inputs.

At each reporting date, the Company revalues the contingent consideration obligation to its fair value and records increases and decreases in fair value in the revaluation of contingent consideration in our accompanying condensed consolidated statements of operations and comprehensive loss. Changes in the fair value of the contingent consideration obligation results from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets.

The following table presents the fair value contingent consideration (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Contingent consideration, beginning of period	$	13,110	$	14,700	$	22,747	$	25,300
Payments of contingent consideration	—		—		(12,445)		(12,555)
Change in fair value of contingent consideration	(2,300)		1,820		508		3,775
Contingent consideration, end of period	$	10,810	$	16,520	$	10,810	$	16,520

The following table reconciles the changes in fair value of contingent consideration and payments of contingent consideration to the accompanying condensed consolidated statement of cash flows and condensed consolidated statements of operations and comprehensive loss (in thousands):

	Nine Months Ended September 30,
	2023		2022
Total payment of contingent consideration	$	12,445	$	12,555
Less: amounts paid in excess of the acquisition date fair value of the contingent consideration (1)	(220)		(3,280)
Acquisition date fair value of contingent consideration (2)	$	12,225	$	9,275
Change in fair value of contingent consideration (3)	$	508	$	3,775
Less: amounts paid in excess of the acquisition date fair value of the contingent consideration (1)	(220)		(3,280)
Net change in fair value of contingent consideration (4)	$	288	$	495

(1)Included in the change in fair value of contingent consideration as an operating activity in the accompanying condensed consolidated statement of cash flows.

(2)Agrees to the payments of acquisition related contingent consideration as a financing activity within the accompanying condensed consolidated statement of cash flows.

(3)Agrees to the change in fair value of contingent consideration in the accompanying condensed consolidated statement of operations and comprehensive loss.

(4)Agrees to the change in fair value of contingent consideration as an operating activity in the accompanying condensed consolidated statement of cash flows.

The following financial instruments are recorded at their carrying amount (in thousands):

	As of September 30, 2023				As of December 31, 2022
Financial Instruments Recorded at Carrying Amount:	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Liabilities:
Debt—Credit Facilities (1)	$	403,883	$	367,937	$	476,070	$	393,236
Total liabilities	$	403,883	$	367,937	$	476,070	$	393,236

(1)Included in current portion of notes payable and notes payable, net of current portion within the accompanying condensed consolidated balance sheets. Due to the unobservable nature of the inputs these financial instruments are considered to be Level 3 instruments in the fair value hierarchy.

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9 – DEBT AND FINANCING ARRANGEMENTS

Notes Payable

On June 29, 2021, the Company refinanced its existing credit facilities and entered into a new first lien credit agreement, as borrower, with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and other lenders party thereto as joint lead arrangers and joint bookrunners (the "First Lien Credit Agreement"). The First Lien Credit Agreement provides for a $560.0 million senior secured term loan facility (the "First Lien Term Loan Facility"), including a $50.0 million delayed draw term loan, and a $125.0 million revolving credit facility (the "Revolving Credit Facility" and, together with the First Lien Term Loan Facility, the "Credit Facilities").

The First Lien Term Loan Facility accrues interest at a rate per annum that considers both fixed and floating components. Following the completion of the Company's IPO in July 2021, the fixed component ranges from 3.00% to 3.25% per annum based on the Company's Public Debt Rating (as defined in the First Lien Credit Agreement). Until June 2023, as described further below, the floating component was based on the Eurocurrency Base Rate (as defined in the First Lien Credit Agreement) for the relevant interest period. The First Lien Term Loan Facility requires periodic principal payments from December 2021 through June 2028, with any remaining unpaid principal and any accrued and unpaid interest due on the maturity date of June 29, 2028. The delayed draw term loan includes a variable commitment fee, which is based on the fixed interest rate and ranges from 0% to the Applicable Rate (as defined in the First Lien Credit Agreement). During 2022, the Company borrowed $25.0 million under the delayed draw term loan, for purposes of financing the Company's earn out obligation. The borrowing took place prior to the expiration of the delayed draw term commitment date of December 29, 2022. As of September 30, 2023, the total principal amount outstanding on the First Lien Term Loan Facility was $403.9 million.

Loans under the Revolving Credit Facility accrue interest at a rate per annum that considers both fixed and floating components. Following completion of the Company's IPO in July 2021, the fixed component ranges from 2.75% to 3.25% per annum based on the Company's most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement). Until June 2023, as described further below, the floating component was based on the Eurocurrency Base Rate for the relevant interest period. The Revolving Credit Facility also has a variable commitment fee, which is based on the Company's most recently determined First Lien Net Leverage Ratio and ranges from 0.25% to 0.50% per annum on undrawn amounts. Letters of credit may be issued under the Revolving Credit Facility in an amount not to exceed $15.0 million which, when issued, lower the overall borrowing capacity of the facility. The Revolving Credit Facility expires on June 29, 2026 and no principal payments are due before such date. As of September 30, 2023, the Company had no outstanding loan amounts under the Revolving Credit Facility.

The First Lien Credit Agreement contains certain affirmative and negative covenants that limit the Company's ability to, among other things, incur additional indebtedness or liens (with certain exceptions), make certain investments, engage in fundamental changes or transactions including changes of control, transfer or dispose of certain assets, make restricted payments (including dividends), engage in new lines of business, make certain prepayments and engage in certain affiliate transactions. In addition, the Company is subject to a financial covenant and is required to maintain a First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement) not to exceed 6.20 to 1.00. As of September 30, 2023, the Company was in compliance with the covenants under the Credit Facilities.

On August 9, 2022, the Company entered into a second amendment (the “Amendment”) to the First Lien Credit Agreement to provide for a “Covenant Amendment Period” (as defined therein) through and including the earlier of June 30, 2023 and the date on which the Company, in its sole discretion, delivers written notice to the Administrative Agent of the Company's election to end the Covenant Amendment Period. During that period, the Company's springing First Lien Net Leverage Ratio covenant will be increased from 6.20 : 1.00 to 8.50 : 1.00 and a minimum liquidity covenant of $35.0 million will be in effect. Liquidity will be calculated as the sum of cash on the Company's balance sheet, availability under the Revolving Credit Facility and availability under the Receivables Financing Agreement (as defined below), and the minimum liquidity covenant will be tested only if and when the Company requests borrowings under the Revolving Credit Facility. During the Covenant Amendment Period, the fixed dollar portion of the “Fixed Dollar Amount” definition shall decrease from $127.0 million to $102.0 million, and the use of certain restricted payments baskets will be reduced or eliminated entirely. The Covenant Amendment Period ended on June 30, 2023.

In June 2023, the Company entered into a third amendment to the First Lien Credit Agreement which, amongst other things, implements certain changes in the reference rate from the Eurocurrency Base Rate to the Secured Overnight Financing Rate (as defined in the First Lien Credit Agreement).

Accounts Receivable Credit Facility

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On November 2, 2020, the Company entered into a receivables financing agreement (as amended, the "Receivables Financing Agreement"). Through the Receivables Financing Agreement, the Company participates in a trade receivables securitization program, administered on its behalf by MUFG Bank Ltd. ("MUFG"), using outstanding accounts receivable balances as collateral, which have been contributed by the Company to its wholly owned subsidiary and special purpose entity, Traeger SPE LLC (the "SPE"). While the Company provides operational services to the SPE, the receivables are owned by the SPE once contributed to it by the Company. The Company is the primary beneficiary and holds all equity interests of the SPE, thus the Company consolidates the SPE without any significant judgments.

On June 29, 2021, the Company entered into Amendment No. 1 to the Receivables Financing Agreement and increased the net borrowing capacity from the prior range of $30.0 million to $45.0 million up to $100.0 million. The borrowing capacity fluctuates at each month end based upon the amount of eligible outstanding domestic accounts receivables to be used as collateral. As of September 30, 2023, the Company had drawn down $25.0 million under this facility for general corporate and working capital purposes. The Company is required to pay an annual upfront fee for the facility, along with fixed interest on outstanding cash advances of 1.7%, a floating component based on the CP Rate (as defined in the Receivables Financing Agreement), and an unused capacity charge that ranges from 0.25% to 0.5%. The facility is set to terminate on June 29, 2024. As of September 30, 2023, the Company was in compliance with the covenants under the Receivables Financing Agreement.

On November 8, 2023, the Company entered into Amendment No. 9 to the Receivables Financing Agreement in order to extend the expiration of the facility by one year to June 27, 2025. As part of the amendment, the maximum borrowing capacity was decreased from $100.0 million to $75.0 million and allows for seasonal adjustments, at the discretion of the Company, to change the capacity anywhere between $30.0 million and $75.0 million. The Company is required to pay fixed interest on outstanding cash advances of 2.5%, a floating interest based on the CP Rate (as defined in the Receivables Financing Agreement), and an unused capacity charge that ranges from 0.25% to 0.5%.

10 – COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is subject to various claims, complaints and legal actions in the normal course of business. The Company does not believe it has any currently pending litigation of which the outcome will have a material adverse effect on its operations or financial position.

11 – STOCK-BASED COMPENSATION

The Traeger, Inc. 2021 Incentive Award Plan (the "2021 Plan") provides for the grant of stock options, including incentive stock options, and nonqualified stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash awards to the Company’s employees and consultants and directors of the Company and its subsidiaries. Subject to the adjustment described in the following sentence, the initial number of shares of the Company's common stock available for issuance under awards granted pursuant to the 2021 Plan is equal to 19,983,145 shares, which shares may be authorized but unissued shares, treasury shares, or shares purchased in the open market. On January 1, 2023, an additional 6,131,220 shares of common stock became available for issuance under awards granted pursuant to the 2021 Plan, as a result of the operation of an automatic annual increase provision in the 2021 Plan. Notwithstanding anything to the contrary in the 2021 Plan, no more than 100,000,000 shares of our common stock may be issued pursuant to the exercise of incentive stock options under the 2021 Plan.

The Company's stock-based compensation was classified as follows in the accompanying condensed consolidated statements of operations and comprehensive loss (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of revenue	$	20	$	34	$	55	$	185
Sales and marketing	1,386		603		3,068		3,012
General and administrative	4,795		52,616		44,057		77,490
Total stock-based compensation	$	6,201	$	53,253	$	47,180	$	80,687

On July 20, 2021, the board of directors of the Company (the "Board") approved grants of restricted stock units ("RSUs") covering 12,163,242 shares of common stock that became effective in connection with the completion of the Company’s IPO,

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which include RSUs covering 7,782,957 shares granted to the Company's Chief Executive Officer ("CEO") and RSUs covering 4,380,285 shares granted to other employees, directors, and certain non-employees.

CEO Awards

The awards include a combination of time-based and performance-based awards. Specifically, time-based RSUs covering 2,594,319 shares ("RSU CEO Award") and performance-based RSUs ("PSUs") covering 5,188,638 shares ("PSU CEO Award") were granted to the CEO.

Other IPO Awards

The RSUs granted to other employees, directors, and certain non-employees, included 3,635,287 time-based RSUs ("IPO RSUs") and 744,998 performance-based RSUs ("IPO PSUs") granted to certain senior level executives of the Company.

IPO RSUs

The IPO RSUs vest based on certain time-based conditions set forth in the applicable award agreement. IPO RSUs granted to certain senior executives of the Company vest as to 50% of the underlying shares on each of the third and fourth anniversaries of the closing of the IPO, subject to continued employment with the Company or one of its subsidiaries.

Letter Agreement

On August 31, 2022, the Board approved a letter agreement between the Company and the Company’s CEO (the “Letter Agreement”) intended to facilitate a personal tax planning initiative.

The Letter Agreement provided for the accelerated vesting of 2,075,455 unvested shares subject to the RSUs CEO Award and 518,864 earned but unvested shared subject to the PSU CEO Award, and required the CEO to pay the withholding tax associated with the acceleration of the awards by cash or check, rather than by selling vested shares to cover the tax obligation with respect to such accelerated vesting.

In addition, the Letter Agreement imposes certain clawback rights intended to maintain the retention incentives of the RSU CEO Award and the PSU CEO Award by mirroring their former vesting schedule. If the CEO experiences a termination of service, other than due to a qualifying termination (as defined in the applicable award agreements), prior to an original vesting date of an RSU or PSU, the CEO will forfeit and return to the Company that number of shares of the Company’s common stock that would not otherwise have vested pursuant to the terms of the original award agreements or, if he has disposed of or transferred such shares, he will deliver to the Company the corresponding value of those shares plus any gain realized in connection with such sale or other transfer.

The approval for the acceleration of vesting was determined to be a modification and therefore, the Company evaluated each of the modified awards to determine the necessary accounting treatment. Vesting of the awards was assessed as probable immediately prior to and after the modification resulting in an acceleration of the remaining expense based on the original grant date fair value. As a result of the modification, the Company recorded approximately $39.4 million of accelerated stock-based compensation for the year ended December 31, 2022.

CEO and IPO PSU Cancellations; Performance Shares

On April 13, 2023, following mutual agreement between the Company and each named executive officer, the Board approved the cancellation and termination of the unearned CEO PSUs and IPO PSUs originally granted to the executives on August 2, 2021. As a result, the Company recognized $27.5 million of stock-based compensation expense during the nine months ended September 30, 2023 related to the cancellations.

On the same day, the Board approved a grant to the CEO of an award of 1,037,728 performance-based restricted shares (the “Performance Shares”). The Performance Shares were issued under the 2021 Plan and are intended to retain and incentivize the CEO to lead the Company to sustained, long-term superior financial performance.

The Performance Shares are eligible to be earned upon the achievement of an Adjusted EBITDA goal during the fiscal year ending on December 31, 2023. If the Adjusted EBITDA goal is achieved, the earned Performance Shares will vest on March 31, 2024.

If the Adjusted EBITDA goal is not achieved, then the Performance Shares instead will become eligible to be earned based on the achievement of a stock price goal of $18.00 per share (the "Stock Price Goal") for the period beginning on January 1, 2024

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and ending on August 2, 2031. If the Stock Price Goal is achieved, the earned Performance Shares will vest on the later of March 31, 2024 or the date on which the Stock Price Goal is achieved.

The vesting of the Performance Shares is in all cases subject to the CEO’s continued service as the Company's Chief Executive Officer or Executive Chairman of our Board.

Upon a termination of the CEO’s service to the Company without cause, by the CEO for good reason, or due to the CEO’s death or disability (each as defined in his award agreement), any previously earned Performance Shares will vest, and any remaining Performance Shares will be forfeited and terminated without consideration as of the date of termination. The vesting of any Performance Shares upon a qualifying termination will be subject to the CEO’s timely execution and non-revocation of a general release of claims, and continued compliance with customary restrictive covenants.

In the event the Company incurs a change in control (as defined in the 2021 Plan), then any previously-earned Performance Shares will vest, and any remaining Performance Shares will vest if the Stock Price Goal is achieved based on the price per share received by or payable to our holders of our common stock in connection with the transaction. Any remaining Performance Shares will be forfeited and terminated without consideration as of immediately prior to the change in control. The CEO is required to make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to the Performance Shares, and to pay the withholding tax associated with the issuance of the Performance Shares. To the extent the Performance Shares vest, the CEO must hold such shares for two years following the applicable vesting date, subject to certain exceptions set forth in the award agreement.

For RSUs, PSUs, and Performance Shares, the compensation expense is recognized on a straight-line basis over the vesting schedule and on an accelerated basis over the tranche's requisite service period, respectively. In addition, when an award is forfeited prior to the vesting date, the Company will recognize an adjustment for the previously recognized expense in the period of the forfeiture, with the exception of performance-based awards for which the requisite service period has been provided.

The Company uses the Monte Carlo pricing model to estimate the fair value of its PSUs and Performance Shares as of the grant date, and uses various simulations of future stock prices through the Stochastic model to estimate the fair value over the remaining term of the performance period as of the grant date.

A summary of the time-based restricted stock unit activity during the nine months ended September 30, 2023 was as follows:

	Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022	5,923,835	$	6.73
Granted	4,587,718	4.05
Vested	(1,988,337)	7.78
Forfeited	(247,091)	7.75
Outstanding at September 30, 2023	8,276,125	$	4.95

As of September 30, 2023, the Company had $33.5 million of unrecognized stock-based compensation expense related to unvested time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.99 years.

A summary of the performance-based restricted stock unit activity during the nine months ended September 30, 2023 was as follows:

	Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022	4,714,242	$	12.59
Modified	(1,037,728)	15.13
Granted	—	—
Vested	—	—
Forfeited or cancelled	(3,676,514)	11.87
Outstanding at September 30, 2023	—	$	—

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As of September 30, 2023, the Company had no unrecognized stock-based compensation expense related to unvested performance-based units.

A summary of the performance-based restricted share activity during the nine months ended September 30, 2023 was as follows:

	Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022	—	$	—
Granted	1,037,728	15.58
Vested	—	—
Forfeited	—	—
Outstanding at September 30, 2023	1,037,728	$	15.58

As of September 30, 2023, the Company had $5.1 million of unrecognized stock-based compensation expense related to unvested performance-based restricted shares that is expected to be recognized over a weighted-average period of 2.83 years.

12 – INCOME TAXES

For the three months ended September 30, 2023 and 2022, the Company recorded income tax provision and benefit of $852,000 and $225,000, respectively. For the nine months ended September 30, 2023 and 2022, the Company recorded income tax provision and benefit of $1,214,000 and $27,000, respectively.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. As of September 30, 2023, the Company's U.S. operations have resulted in losses, and as such, the Company maintains a valuation allowance against substantially all its U.S. deferred tax assets.

13 – RELATED PARTY TRANSACTIONS

The Company outsources a portion of its customer service and support through a third party who is an affiliate of the Company through common ownership. For the three months ended September 30, 2023 and 2022, the Company recorded expenses associated with such services of $1.7 million and $1.4 million, respectively. For the nine months ended September 30, 2023 and 2022, the Company recorded expenses associated with such services of $4.4 million and $5.0 million, respectively. Amounts payable to the third party as of September 30, 2023 and December 31, 2022 was $1.1 million and $0.4 million, respectively.

14 – EARNINGS (LOSS) PER SHARE

The Company computes basic earnings (loss) per share ("EPS") attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares, determined using the treasury-stock method. For purposes of the diluted EPS calculation, restricted stock units and performance shares are considered to be potential common shares.

The following table sets forth the computation of the Company’s basic and diluted EPS attributable to common stockholders for the fiscal periods indicated (in thousands, except share and per share amounts):

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net loss	$	(19,261)	$	(211,142)	$	(60,357)	$	(353,236)
Weighted-average common shares outstanding—basic	124,053,643		119,924,371		123,265,134		118,682,379
Effect of dilutive securities:
Restricted stock units and performance shares	—		—		—		—
Weighted-average common shares outstanding—diluted	124,053,643		119,924,371		123,265,134		118,682,379
Earnings (loss) per share
Basic and diluted	$	(0.16)	$	(1.76)	$	(0.49)	$	(2.98)

The following table includes the number of units and shares that may be dilutive common shares in the future, and were not included in the computation of diluted earnings (loss) per share because the effect was anti-dilutive for the fiscal periods indicated:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Restricted stock units and performance shares	9,313,853	10,486,780	9,313,853	10,486,780

15 – RESTRUCTURING PLAN

In July 2022, the Board approved a restructuring plan (the "2022 restructuring plan") as part of its efforts to reduce the Company’s costs and drive long-term operational efficiencies due to challenging macroeconomic pressures. As part of the 2022 restructuring plan, the Company eliminated approximately 14% of its global headcount, suspended operations of Traeger Provisions (the Company's premium frozen meal kit business), and postponed nearshoring efforts to manufacture product in Mexico. These actions were substantially completed in the third quarter of fiscal 2022.

A summary of the activity in the restructuring reserve in connection with the Company's 2022 restructuring plan recorded in accrued expenses within the accompanying condensed consolidated balance sheets as follows (in thousands):

	Employee Related Costs		Contract Exit Costs
Balance at December 31, 2022	$	135	$	2,953
Net additions charged to expense	—		225
Cash payments against reserve	(135)		(3,178)
Balance at September 30, 2023	$	—	$	—

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Annual Report on Form 10-K"), filed with the Securities and Exchange Commission (the “SEC”), on March 16, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. As a result of many important factors, such as those set forth in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements. For convenience of presentation, some of the numbers have been rounded in the text below.

Overview

Traeger is the creator and category leader of the wood pellet grill, an outdoor cooking system that ignites all-natural hardwoods to grill, smoke, bake, roast, braise, and barbecue. Our grills are versatile and easy to use, empowering cooks of all skill sets to create delicious meals with a wood-fired flavor that cannot be replicated with gas, charcoal, or electric grills. Grills are at the core of our platform and are complemented by Traeger wood pellets, rubs, sauces and accessories.

Our marketing strategy has been instrumental in building our brand and driving customer advocacy and revenue. We have disrupted the outdoor cooking market and created a passionate community, the Traegerhood, which includes foodies, pitmasters, backyard heroes, moms and dads, professional athletes, outdoorsmen and outdoorswomen, and world-class chefs. This community, together with our various marketing initiatives, has helped to promote our brand and products to the wider consumer population and supported our efforts to redefine outdoor cooking as an experience accessible to everyone. We have an active online and social media presence and a content-rich website that drives significant customer engagement and brings our Traegerhood together. We also directly engage with our current and target customers by sponsoring and participating in a variety of events, including live shows, outdoor festivals, rodeos, music and film festivals, barbecue competitions, fishing tournaments, and retailer events. We believe the style and authenticity of our customer engagement reinforces our brand and drives new and existing customer interest in our products and community.

Our revenue is primarily generated through the sale of our wood pellet grills, consumables and accessories. We currently offer six series of grills – Pro (with and without WiFIRE), Ironwood and Timberline – as well as a selection of smaller, portable grills within our Town and Travel Series and a special Club Lineup through targeted channels. Our grills are available in a number of different sizes and can be upgraded through a variety of accessories. A growing number of our grills feature WiFIRE technology, which allows users to monitor and adjust their grills remotely using our Traeger app. Our consumables include our wood pellets, which are made from natural, virgin hardwood and are available in a variety of flavors, as well as rubs and sauces. Our accessories include grill covers, liners, tools, MEATER smart thermometers, apparel and other ancillary items.

We sell our grills using an omnichannel distribution strategy that consists primarily of retail and direct to consumer ("DTC") channels. Our retail channel covers brick-and-mortar retailers, e-commerce platforms, and multichannel retailers, who, in turn, sell our grills to their end customers. Our retailers include Ace Hardware, Amazon, Costco, The Home Depot, and Best Buy, among others, as well as a significant number of independent retailers that cater to local communities and specific categories, such as hardware, camping, outdoor, farm, ranch, barbecue and other categories. Our DTC channel covers sales directly to customers through our website and Traeger app, as well as certain country- and region-specific Traeger or distributor websites. Our consumables and accessories are available through the same channels as our grills.

Over the last several years, we have made significant investments in our supply chain and manufacturing operations. Our supply chain includes third party manufacturers for our grills and accessories and pellet production facilities for our wood pellets that we own or lease. We work closely with our manufacturers to evolve on design, manufacturing process and product quality. Our grills are currently manufactured in China and Vietnam, our wood pellets are produced at facilities located in New York, Oregon, Georgia, Virginia, and Texas, and our MEATER smart thermometer accessories are currently manufactured in Hong Kong. We have entered into manufacturing agreements covering the supply of substantially all of our grills and accessories, pursuant to which we make purchases on a purchase order basis. We rely on several third-party suppliers for the components used in our grills, including integrated circuits, processors, and system on chips.

Our revenue increased by 25.5% and decreased by 14.6% for the three and nine months ended September 30, 2023, respectively, as compared to the three and nine months ended September 30, 2022, respectively, and was $117.7 million and $442.4 million for the three and nine months ended September 30, 2023, respectively, up from $93.8 million and down from

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$517.8 million for the three and nine months ended September 30, 2022, respectively. We recorded a net loss of $19.3 million and $60.4 million for the three and nine months ended September 30, 2023, respectively, compared to net loss of $211.1 million and $353.2 million for the three and nine months ended September 30, 2022, respectively.

Key Factors Affecting Our Financial Condition and Results of Operations

We believe that our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including those below and in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K.

Macroeconomic Conditions

Continuing global economic uncertainty, terrorism and conflicts, political conditions and fiscal challenges in the United States and abroad could result in adverse macroeconomic conditions, including inflation, slower growth or recession. While our revenue increased in the three months ended September 30, 2023, as compared to the prior year period, we believe these challenging macroeconomic pressures and uncertainties have resulted in decreased discretionary consumer spending, particularly for durable goods, and therefore contributed to an overall decline in our revenue for the nine months ended September 30, 2023, compared to the prior year period. For example, we experienced a mid double digit percentage decline in demand for grills and a low double digit percentage decline in demand for consumables, as measured by unit volume, in the nine months ended September 30, 2023, compared to the prior year period. We expect these macroeconomic trends to continue through the remainder of fiscal year end 2023, which could result in continued pressure on our revenue and results of operations.

Supply chain constraints have led to higher product component and freight costs, which have increased our cost of revenues relative to historical rates. While we experienced a decline in excess of 60% in our inbound freight container rates for the three months ended September 30, 2023, as compared to the prior year period, we believe if supply chain challenges worsen in the future, we will observe increases in our cost of revenues which could continue to impact our operating results.

In response to these macroeconomic conditions we have taken actions to identify and execute on cost savings initiatives, while simultaneously seeking to maintain product quality and reliability across the supply chain. For example, we took actions to reduce overhead expenses, execute long-term transportation contracts, enact freight surcharges, and implement operational efficiencies across our pellet mill operations. As a result of these actions, the Company expects cost savings to improve operating results in the long-term, but given the uncertainty of the current macroeconomic environment, there can be no assurance regarding the outcome of our continuing efforts to help mitigate the effects of these conditions on our business.

Components of Results of Operations

Revenue

We derive substantially all of our revenue from the sale of grills, consumables and accessories in North America, which includes the United States and Canada. We recognize revenue, net of product returns, for our grills, consumables and accessories generally at the time of delivery to retailers through our retail channel and to customers through our DTC channel. Estimated product returns are recorded as a reduction of revenue at the time of recognition and are calculated based on product returns history, observable changes in return behavior, and expected returns based on sales volume and mix. We also have certain contractual programs that can give rise to elements of variable consideration, such as volume incentive rebates, with estimated amounts of credits recorded as a reduction to revenue.

Although we experience demand for our products throughout the year, we believe there can be certain seasonal fluctuations in our revenue. We have typically experienced moderately higher levels of sales of our grills in the first and second quarters of the year as our retailers purchase inventory in advance of warmer weather, when demand for outdoor cooking products is the highest across our key markets. Higher sales also coincide with social events and national holidays, which occur during the same warm weather timeframe.

Gross Profit

Gross profit reflects revenue less cost of revenue. Cost of revenue consists of product costs, including the costs of components, costs of products from our third-party manufacturers, direct and indirect manufacturing costs across all products, packaging, inbound freight and duties, warehousing and fulfillment, warranty costs, product quality testing and inspection costs, excess and obsolete inventory write-downs, cloud-hosting costs for our WiFIRE connected grills, depreciation of tooling and

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manufacturing equipment, amortization of internal use software and patented technology, and certain employee-related expenses.

We calculate gross margin as gross profit divided by revenue. Gross margin can be impacted by several factors, including, in particular, product mix and sales channel mix. For example, gross margin on sales through our DTC channel is generally higher than gross margin on sales through our retail channel. If our DTC sales grow faster than sales from our retail channel, and if we are able to realize greater economies of scale or product cost improvements through engineering and sourcing, we would expect a favorable impact to overall gross margin over time. Additionally, gross margin on sales of certain of our products is higher than for others. If revenue from sales of wood pellets increased as a percentage of total revenue, we would expect to see an increase in overall gross margin. These favorable anticipated gross margin impacts 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. External factors beyond our control, such as duties and tariffs and costs of doing business in certain geographies can also impact gross margin.

Sales and Marketing

Sales and marketing expense consists primarily of the costs associated with advertising and marketing of our products and employee-related expenses, including salaries, benefits, and stock-based compensation expense, as well as sales incentives and professional services. These costs can include print, internet and television advertising, travel-related expenses, direct customer acquisition costs, costs related to conferences and events, and broker commissions. We expect our sales and marketing expense to decrease in the short-term and increase on an absolute dollar basis in the long-term as we continue to reduce our costs to drive operational efficiencies while continuing to increase the scope of outreach to potential new customers to drive long-term revenue growth. We also anticipate that sales and marketing expense as a percentage of revenue will fluctuate from period to period based on revenue for such period and the timing of the expansion of our sales and marketing functions, as these activities may vary in scope and scale over future periods.

General and Administrative

General and administrative expense consists primarily of employee-related expenses and facilities for our executive, finance, accounting, legal, human resources, information technology and other administrative functions. General and administrative expense also includes fees for professional services, such as external legal, accounting, and information and technology services, and insurance.

In addition, general and administrative expense includes research and development expenses incurred to develop and improve our future products and processes, which primarily consist of employee and facilities-related expenses, including salaries, benefits and stock-based compensation expense, as well as fees for professional services, costs related to prototype tooling and materials, and software platform costs. Research and development expense was $2.8 million and $1.9 million for the three months ended September 30, 2023, and 2022, respectively, and $8.0 million and $8.6 million for the nine months ended September 30, 2023 and 2022, respectively.

As a result of the 2022 restructuring plan, we expect general and administrative expense, including our research and development expenses and external legal and accounting expenses, to normalize as we continue to manage our investments to support our growth and develop new and enhance existing products. We anticipate that general and administrative expense as a percentage of revenue will vary from period to period, but we expect to leverage these expenses over time as we grow our revenue.

Amortization of Intangible Assets

Amortization of intangible assets primarily consists of amortization of identified finite-lived customer relationships, distributor relationships, non-compete arrangements and trademark assets that were allocated a considerable portion of the purchase price from the corporate reorganization and acquisition of our Company in 2017, as well as the July 2021 acquisition of Apption Labs Limited and its subsidiaries (collectively, "Apption Labs") pursuant to a share purchase agreement (the "Share Purchase Agreement"). These costs are amortized on a straight-line basis over 2.5 to 25 year useful lives and, as a result, amortization expense on these assets is expected to remain stable over the coming years. Future business acquisitions may result in incremental amortization of intangible assets acquired in any such transactions.

Change in Fair Value of Contingent Consideration

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The fair values of our contingent consideration earn out obligation associated with the Apption Labs business combination is estimated based on probability adjusted present values of the consideration expected to be transferred using significant inputs. At each reporting date, we revalue the contingent consideration obligation to its fair value and records increases and decreases in fair value in the general and administrative expenses in our accompanying condensed consolidated statements of operations and comprehensive loss. Changes in the fair value of the contingent consideration obligation results from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets in the Share Purchase Agreement.

Restructuring Costs

The Board approved the 2022 restructuring plan as part of its efforts to reduce our costs and drive long-term operational efficiencies due to challenging macroeconomic pressures. As part of the 2022 restructuring plan, we eliminated approximately 14% of our global headcount, suspended operations of Traeger Provisions, our premium frozen meal kit business, and postponed nearshoring efforts to manufacture product in Mexico. These actions and the associated costs were substantially completed and recognized in the third quarter of 2022 and the final costs were recognized during the third quarter of 2023.

Goodwill Impairment

Goodwill represents the excess of consideration transferred over the fair value of tangible and identifiable intangible net assets acquired and the liabilities assumed in a business combination. Substantially all of our goodwill was recognized in the purchase price allocation when our Company was acquired in 2017 and when Apption Labs was acquired in July 2021, with smaller incremental amounts recognized in subsequent business combinations. Goodwill is not amortized, but is tested for impairment at the reporting unit level annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. In conducting the impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. We currently operate as a single reporting unit under the guidance in Topic 350, Intangibles - Goodwill and Other.

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference.

Total Other Expense

Total other expense consists of interest expense and other income (expense), net. Interest expense includes interest and other fees associated with our Credit Facilities, Receivables Financing Agreement (each as defined below) as well as the amortization of amounts recorded within accumulated comprehensive income (loss) prior to the dedesignation of the interest rate swap derivative contracts as a cash flow hedge. Other income (expense), net also consists of any realized and unrealized gains (losses) from our interest rate swap derivative contract subsequent to the dedesignation of the swap contract from a cash flow hedge, foreign currency realized and unrealized gains and losses resulting from exchange rate fluctuations on transactions denominated in a currency other than the U.S. Dollar and from the foreign currency contracts that we use to manage our exposure to foreign currency exchange rate risk related to our purchases and international operations.

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Results of Operations

The following tables summarize key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

	Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
	2023		2022		Amount		%		2023		2022		Amount		%
	(unaudited)
	(dollars in thousands)
Revenue	$	117,730	$	93,788	$	23,942	25.5	%	$	442,403	$	517,768	$	(75,365)	(14.6)	%
Cost of revenue	73,064		68,710		4,354		6.3	%	278,983		336,605		(57,622)		(17.1)	%
Gross profit	44,666		25,078		19,588		78.1	%	163,420		181,163		(17,743)		(9.8)	%
Operating expenses:
Sales and marketing	25,913		25,496		417		1.6	%	75,903		102,401		(26,498)		(25.9)	%
General and administrative	24,823		70,485		(45,662)		(64.8)	%	103,873		142,637		(38,764)		(27.2)	%
Amortization of intangible assets	8,889		8,889		—		—	%	26,666		26,666		—		—	%
Change in fair value of contingent consideration	(2,300)		1,820		(4,120)		(226.4)	%	508		3,775		(3,267)		(86.5)	%
Restructuring costs	225		8,036		(7,811)		(97.2)	%	225		8,036		(7,811)		(97.2)	%
Goodwill impairment	—		110,837		(110,837)		(100.0)	%	—		222,322		(222,322)		(100.0)	%
Total operating expense	57,550		225,563		(168,013)		(74.5)	%	207,175		505,837		(298,662)		(59.0)	%
Loss from operations	(12,884)		(200,485)		187,601		(93.6)	%	(43,755)		(324,674)		280,919		(86.5)	%
Other income (expense):
Interest expense	(7,517)		(7,337)		(180)		(2.5)	%	(23,408)		(20,238)		(3,170)		(15.7)	%
Other income (expense), net	1,992		(3,545)		5,537		156.2	%	8,020		(8,351)		16,371		196.0	%
Total other expense	(5,525)		(10,882)		5,357		49.2	%	(15,388)		(28,589)		13,201		46.2	%
Loss before provision (benefit) for income taxes	(18,409)		(211,367)		192,958		(91.3)	%	(59,143)		(353,263)		294,120		(83.3)	%
Provision (benefit) for income taxes	852		(225)		1,077		(478.7)	%	1,214		(27)		1,241		(4,596.3)	%
Net loss	$	(19,261)	$	(211,142)	$	191,881	(90.9)	%	$	(60,357)	$	(353,236)	$	292,879	(82.9)	%

Comparison of the Three Months Ended September 30, 2023 and 2022

Revenue

	Three Months Ended September 30,				Change
	2023		2022		Amount		%
	(dollars in thousands)
Revenue:
Grills	$	56,573	$	38,994	$	17,579	45.1	%
Consumables	25,385		25,151		234		0.9	%
Accessories	35,772		29,643		6,129		20.7	%
Total Revenue	$	117,730	$	93,788	$	23,942	25.5	%

Revenue increased by $23.9 million, or 25.5%, to $117.7 million for the three months ended September 30, 2023 compared to $93.8 million for the three months ended September 30, 2022. The increase was driven primarily by higher sales from grills and MEATER smart thermometers.

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Revenue from our grills increased by $17.6 million, or 45.1%, to $56.6 million for the three months ended September 30, 2023 compared to $39.0 million for the three months ended September 30, 2022. The increase was primarily driven by an growth in excess of 60% in unit volumes, due to lower volumes in 2022 as a result of retailer destocking combined with the introduction of new product and strategic pricing actions on certain grills in 2023. The impact as a result of growth in unit volumes was partially offset by a low double digit percentage decrease in the average selling price due to a pricing change with certain retailers as part of our direct import program and strategic pricing actions on certain grills.

Revenue from our consumables increased by $0.2 million, or 0.9%, to $25.4 million for the three months ended September 30, 2023 compared to $25.2 million for the three months ended September 30, 2022. The increase was primarily driven by higher unit volume, partially offset by a mid single digit percentage reduction in average selling price. Higher unit volume was primarily driven by an increase in excess of 20% in sauces & rubs, partially offset by low single digit percentage reduction in pellet volumes. Lower average selling price was driven by launch of new lower priced sauce offering and mix shift to lower average selling price pellet offerings.

Revenue from our accessories increased by $6.1 million, or 20.7%, to $35.8 million for the three months ended September 30, 2023 compared to $29.6 million for the three months ended September 30, 2022. The increase was driven primarily by higher sales of MEATER smart thermometers as well as a low single digit percentage increase of Traeger branded accessories.

Gross Profit

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Gross profit	$	44,666		$	25,078		$	19,588	78.1	%
Gross margin (Gross profit as a percentage of revenue)	37.9		%	26.7		%

Gross profit increased by $19.6 million, or 78.1%, to $44.7 million for the three months ended September 30, 2023 compared to $25.1 million for the three months ended September 30, 2022. Gross margin increased to 37.9% for the three months ended September 30, 2023 from 26.7% for the three months ended September 30, 2022. The increase in gross margin was driven primarily by favorability from freight and logistics, certain portions of restructuring costs incurred in 2022, favorability in the MEATER smart thermometers business, and foreign exchange rates.

Sales and Marketing

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Sales and marketing	$	25,913		$	25,496		$	417	1.6	%
As a percentage of revenue	22.0		%	27.2		%

Sales and marketing expense increased by $0.4 million, or 1.6%, to $25.9 million for the three months ended September 30, 2023 compared to $25.5 million for the three months ended September 30, 2022. As a percentage of revenue, sales and marketing expense decreased to 22.0% for the three months ended September 30, 2023 from 27.2% for the three months ended September 30, 2022. The decrease in sales and marketing as a percentage of revenue was primarily driven by a reduction in revenue from sales channels with associated variable costs.

General and Administrative

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
General and administrative	$	24,823		$	70,485		$	(45,662)	(64.8)	%
As a percentage of revenue	21.1		%	75.2		%

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General and administrative expense decreased by $45.7 million, or 64.8%, to $24.8 million for the three months ended September 30, 2023 compared to $70.5 million for the three months ended September 30, 2022. As a percentage of revenue, general and administrative expense decreased to 21.1% for the three months ended September 30, 2023 from 75.2% for the three months ended September 30, 2022. The decrease in general and administrative expense was driven by a decrease in stock-based compensation expense of $47.8 million primarily due to the accelerated vesting in the comparable period of $40.5 million of modified awards held by the CEO and certain directors.

Amortization of Intangible Assets

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Amortization of intangible assets	$	8,889		$	8,889		$	—	—	%
As a percentage of revenue	7.6		%	9.5		%

Amortization of intangible assets, substantially attributable to the 2017 corporate reorganization and acquisition of the Company and the July 2021 acquisition of Apption Labs, remained flat at $8.9 million for the three months ended September 30, 2023 compared to $8.9 million for the three months ended September 30, 2022.

Change in Fair Value of Contingent Consideration

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Change in fair value of contingent consideration	$	(2,300)		$	1,820		$	(4,120)	(226.4)	%
As a percentage of revenue	(2.0)		%	1.9		%

Change in fair value of contingent consideration, attributable to the revalued earn out obligation associated with the Apption Labs business combination, decreased $4.1 million, or 226.4%, to $2.3 million for the three months ended September 30, 2023 compared to $1.8 million for the three months ended September 30, 2022. The change in fair value was primarily driven by a change in the likelihood of achieving certain performance thresholds.

Restructuring Costs

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Restructuring costs	$	225		$	8,036		$	(7,811)	(97.2)	%
As a percentage of revenue	0.2		%	8.6		%

Restructuring costs decreased by $7.8 million, or 97.2%, to $0.2 million for the three months ended September 30, 2023 compared to $8.0 million for the three months ended September 30, 2022. The decrease in restructuring costs was primarily due to the substantial completion of the 2022 restructuring plan and recognition of the related costs in the third quarter of 2022 compared to the recognition of the final costs related to the 2022 restructuring plan in the third quarter of 2023.

Goodwill Impairment

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Goodwill impairment	$	—		$	110,837		$	(110,837)	(100.0)	%
As a percentage of revenue	—		%	118.2		%

The Company recorded no goodwill impairment for the three months ended September 30, 2023 compared to $110.8 million non-cash goodwill impairment for the three months ended September 30, 2022, which was primarily attributable to the

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adverse impacts from macroeconomic conditions such as inflationary pressures and supply chain disruption, unfavorable demand, and the sustained decreases in the Company’s publicly quoted share price and market capitalization.

Total Other Expense

	Three Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Interest expense	$	(7,517)		$	(7,337)		$	(180)	(2.5)	%
Other income (expense), net	1,992			(3,545)			5,537		156.2	%
Total other expense	$	(5,525)		$	(10,882)		$	5,357	49.2	%
As a percentage of revenue	(4.7)		%	(11.6)		%

Total other expense decreased by $5.4 million, or 49.2%, to $5.5 million for the three months ended September 30, 2023 compared to $10.9 million for the three months ended September 30, 2022. This decrease was primarily due to the realized and unrealized gains from our interest rate swap, partially offset by increased interest expense on our First Lien Term Loan Facility.

Comparison of the Nine Months Ended September 30, 2023 and 2022

Revenue

	Nine Months Ended September 30,				Change
	2023		2022		Amount		%
	(dollars in thousands)
Revenue:
Grills	$	239,444	$	307,105	$	(67,661)	(22.0)	%
Consumables	90,330		106,899		(16,569)		(15.5)	%
Accessories	112,629		103,764		8,865		8.5	%
Total Revenue	$	442,403	$	517,768	$	(75,365)	(14.6)	%

Revenue decreased by $75.4 million, or 14.6%, to $442.4 million for the nine months ended September 30, 2023 compared to $517.8 million for the nine months ended September 30, 2022. The decrease was driven primarily by lower sales from our grills and consumables, partially offset by higher sales of MEATER smart thermometers.

Revenue from our grills decreased by $67.7 million, or 22.0%, to $239.4 million for the nine months ended September 30, 2023 compared to $307.1 million for the nine months ended September 30, 2022. The decrease was primarily driven by a mid double digit percentage reduction in unit volume and high single digit percentage decrease in average selling price.

Revenue from our consumables decreased by $16.6 million, or 15.5%, to $90.3 million for the nine months ended September 30, 2023 compared to $106.9 million for the nine months ended September 30, 2022. The decrease was driven by a low double digit percentage reduction in unit volume and a low single digit percentage reduction in average selling price. Lower unit volume was driven by a low double digit percentage reduction in pellets and a high double digit percentage reduction in sauces and rubs. Lower average selling price was driven by a mid double digit percentage reduction in sauces and rubs and low single digit percentage in pellets.

Revenue from our accessories increased by $8.9 million, or 8.5%, to $112.6 million for the nine months ended September 30, 2023 compared to $103.8 million for the nine months ended September 30, 2022. The increase was driven primarily by higher sales of MEATER smart thermometers as well as a mid single digit percentage increase of Traeger branded accessories.

Gross Profit

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	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Gross profit	$	163,420		$	181,163		$	(17,743)	(9.8)	%
Gross margin (Gross profit as a percentage of revenue)	36.9		%	35.0		%

Gross profit decreased by $17.7 million, or 9.8%, to $163.4 million for the nine months ended September 30, 2023 compared to $181.2 million for the nine months ended September 30, 2022. Gross margin increased to 36.9% for the nine months ended September 30, 2023 from 35.0% for the nine months ended September 30, 2022. The increase in gross margin was driven primarily by favorability from freight and MEATER smart thermometers business, foreign exchange rates, and certain portions of restructuring costs incurred in 2022, partially offset by grill price changes and increased dilution as a result of sales channel mix.

Sales and Marketing

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Sales and marketing	$	75,903		$	102,401		$	(26,498)	(25.9)	%
As a percentage of revenue	17.2		%	19.8		%

Sales and marketing expense decreased by $26.5 million, or 25.9%, to $75.9 million for the nine months ended September 30, 2023 compared to $102.4 million for the nine months ended September 30, 2022. As a percentage of revenue, sales and marketing expense decreased to 17.2% for the nine months ended September 30, 2023 from 19.8% for the nine months ended September 30, 2022. The decrease in sales and marketing expense was driven by a decrease in advertising costs, commissions and other employee expenses, travel related expenses, and professional fees.

General and Administrative

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
General and administrative	$	103,873		$	142,637		$	(38,764)	(27.2)	%
As a percentage of revenue	23.5		%	27.5		%

General and administrative expense decreased by $38.8 million, or 27.2%, to $103.9 million for the nine months ended September 30, 2023 compared to $142.6 million for the nine months ended September 30, 2022. As a percentage of revenue, general and administrative expense decreased to 23.5% for the nine months ended September 30, 2023 from 27.5% for the nine months ended September 30, 2022. The decrease in general and administrative expense was driven by a decrease in stock-based compensation expense of $33.4 million primarily due to the accelerated vesting in the comparable period of $40.5 million of modified awards held by the CEO and certain directors partially offset by the $27.5 million of current period cancellation of the unearned CEO PSUs and IPO PSUs.

Amortization of Intangible Assets

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Amortization of intangible assets	$	26,666		$	26,666		$	—	—	%
As a percentage of revenue	6.0		%	5.2		%

Amortization of intangible assets, substantially attributable to the 2017 corporate reorganization and acquisition of the Company and the July 2021 acquisition of Apption Labs, remained flat at $26.7 million for the nine months ended September 30, 2023 compared to $26.7 million for the nine months ended September 30, 2022.

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Change in Fair Value of Contingent Consideration

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Change in fair value of contingent consideration	$	508		$	3,775		$	(3,267)	(86.5)	%
As a percentage of revenue	0.1		%	0.7		%

Change in fair value of contingent consideration, attributable to the revalued earn out obligation associated with the Apption Labs business combination, decreased $3.3 million, or 86.5%, to $0.5 million for the nine months ended September 30, 2023 compared to $3.8 million for the nine months ended September 30, 2022. The change in fair value was primarily driven by a change in the likelihood of achieving certain performance thresholds.

Restructuring Costs

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Restructuring costs	$	225		$	8,036		$	(7,811)	(97.2)	%
As a percentage of revenue	0.1		%	1.6		%

Restructuring costs decreased by $7.8 million, or 97.2%, to $0.2 million for the nine months ended September 30, 2023 compared to $8.0 million for the nine months ended September 30, 2022. The decrease in restructuring costs was primarily due to the substantial completion of the 2022 restructuring plan and recognition of the related costs in the third quarter of 2022 compared to the recognition of the final costs related to the 2022 restructuring plan in the third quarter of 2023.

Goodwill Impairment

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Goodwill impairment	$	—		$	222,322		$	(222,322)	(100.0)	%
As a percentage of revenue	—		%	42.9		%

The Company recorded no goodwill impairment for the nine months ended September 30, 2023 compared to $222.3 million non-cash goodwill impairment for the nine months ended September 30, 2022 which was primarily attributable to the adverse impacts from the macroeconomic conditions such as inflationary pressures and supply chain disruption, unfavorable demand, and the sustained decreases in the Company’s publicly quoted share price and market capitalization.

Total Other Expense

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
	(dollars in thousands)
Interest expense	$	(23,408)		$	(20,238)		$	(3,170)	(15.7)	%
Other income (expense), net	8,020			(8,351)			16,371		196.0	%
Total other expense	$	(15,388)		$	(28,589)		$	13,201	46.2	%
As a percentage of revenue	(3.5)		%	(5.5)		%

Total other expense decreased by $13.2 million, or 46.2%, to $15.4 million for the nine months ended September 30, 2023 compared to $28.6 million for the nine months ended September 30, 2022. This decrease was primarily due to the realized and unrealized gains from our interest rate swap, partially offset by increased interest expense on our First Lien Term Loan Facility.

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Liquidity and Capital Resources

Historically, our cash requirements have principally been for working capital purposes, capital expenditures, and debt service payments. We have funded our operations through cash flows from operating activities, cash on hand, and borrowings under our credit facilities and receivables financing agreement. The Company maintains the majority of its cash and cash equivalents in accounts with major U.S. and multi-national financial institutions including JPMorgan Chase Bank, HSBC, World First Bank, Handelsbanken, and Stadtsparkasse München, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

As of September 30, 2023, we had cash and cash equivalents of $11.3 million, $125.0 million borrowing capacity under our Revolving Credit Facility (as defined below) and $5.9 million borrowing capacity under our Receivables Financing Agreement (as defined below). As of September 30, 2023, we had no outstanding loan amounts under the Revolving Credit Facility and had drawn down $25.0 million on the Receivables Financing Agreement. As of September 30, 2023, the total principal amount outstanding under our First Lien Term Loan Facility was $403.9 million. Based on our current business plan and revenue prospects, we continue to believe that our existing cash and cash equivalents, availability under our Revolving Credit Facility and Receivables Financing Agreement, and our anticipated cash flows from operating activities will be sufficient to meet our working capital and operating resource expenditure requirements for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. However, our future working capital requirements will depend on many factors, including our rate of revenue growth and profitability, the timing and size of future acquisitions, and the timing of introductions of new products and investments in our supply chain and implementation of technologies.

We may from time to time seek to raise additional equity or debt financing to support our growth or in connection with the acquisition of complementary businesses. Any equity financing we may undertake could be dilutive to our existing stockholders, and any additional debt financing we may undertake could require debt service and financial and operational requirements that could adversely affect our business. There is no assurance we would be able to obtain future financing on acceptable terms or at all. See Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K and Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q.

Cash Flows

The following table sets forth cash flow data for the periods indicated therein (in thousands):

	Nine Months Ended September 30,
	2023		2022
Net cash provided by (used in) operating activities	$	44,359	$	(6,001)
Net cash used in investing activities	(13,126)		(15,531)
Net cash provided by (used in) financing activities	(71,508)		13,141
Net decrease in cash, cash equivalents and restricted cash	$	(40,275)	$	(8,391)

Cash Flow from Operating Activities

During the nine months ended September 30, 2023, net cash provided by operating activities consisted of a net loss of $60.4 million and non-cash adjustments to net loss of $84.2 million, and net changes in operating assets and liabilities of $20.5 million. Non-cash adjustments primarily consisted of depreciation of property, plant, and equipment of $11.2 million, amortization of intangible assets of $32.1 million, stock-based compensation of $47.2 million, amortization of the dedesignated cash flow hedge of $7.8 million, and unrealized gains on derivative contracts of $2.7 million. The increase in net cash from net changes in operating assets and liabilities during the nine months ended September 30, 2023 was primarily due to a decrease in inventories of $51.6 million as a result of strategic inventory management to rightsize inventory levels along with seasonality decreases, partially offset by a decrease in accounts payable and accrued expenses of $15.5 million due to the seasonality and timing of our payments and an increase in accounts receivable of $9.1 million as a result of increases in revenue.

During the nine months ended September 30, 2022, net cash used in operating activities consisted of net loss of $353.2 million and non-cash adjustments to net loss of $353.1 million, partially offset by net changes in operating assets and liabilities of $5.8 million. Non-cash adjustments consisted of depreciation of property, plant, and equipment of $9.7 million, amortization of intangible assets of $32.0 million, stock-based compensation of $80.7 million, goodwill impairment of $222 million, and unrealized losses on derivative contracts of $4.6 million. The decrease in net cash from net changes in operating assets and

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liabilities during the nine months ended September 30, 2022 was primarily due to a decrease in accounts receivable of $58.9 million as a result of increased cash collection from seasonal revenue during the first half of the fiscal year, partially offset by an increase in inventories of $14.8 million from increased inventory spending and a decrease in accounts payable and accrued expenses of $42.8 million due to the seasonality and timing of our payments.

Cash Flow from Investing Activities

During the nine months ended September 30, 2023, net cash used in investing activities was $13.1 million. The cash flow used was driven primarily by the purchase of property, plant, and equipment of $15.7 million primarily related to the construction in progress for our new corporate headquarters, purchase of tooling equipment, pellet mill machinery and equipment, and internal-use software and website development costs, partially offset from the sale of property, plant, and equipment of $2.9 million.

During the nine months ended September 30, 2022, net cash used in investing activities was $15.5 million. The cash flow used was driven primarily by the purchase of property, plant, and equipment of $15.1 million primarily related to the purchase of tooling equipment, the purchase of wood pellet production equipment, and internal-use software and website development costs.

Cash Flow from Financing Activities

During the nine months ended September 30, 2023, net cash used in financing activities was $71.5 million. The cash flow used was driven primarily by net repayments on our lines of credit under the Revolving Credit Facility and Receivables Financing Agreement of $58.7 million, as well as the payment of the acquisition date fair value related to the contingent consideration of $12.2 million.

During the nine months ended September 30, 2022, net cash provided by financing activities was $13.1 million. The cash flow provided was driven primarily by net borrowings on our lines of credit under the Revolving Credit Facility and Receivables Financing Agreement of $10.3 million for general corporate and working capital purposes, as well as the borrowings under the delayed draw term loan of $12.5 million for the purpose of financing the earn out obligation associated with the acquisition of Apption Labs.

Credit Facilities

On June 29, 2021, we refinanced our existing credit facilities and entered into a new first lien credit agreement, as borrower, with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and other lenders party thereto as joint lead arrangers and joint bookrunners (the "First Lien Credit Agreement"). The First Lien Credit Agreement provides for a senior secured term loan facility (the "First Lien Term Loan Facility") and a revolving credit facility (the "Revolving Credit Facility" and, together with the First Lien Term Loan Facility, the "Credit Facilities").

First Lien Credit Agreement

The First Lien Credit Agreement provides for a $560.0 million First Lien Term Loan Facility (including a $50.0 million delayed draw term loan) and a $125.0 million Revolving Credit Facility.

The First Lien Term Loan Facility accrues interest at a rate per annum that considers both fixed and floating components. Following the completion of our IPO in July 2021, the fixed component ranges from 3.00% to 3.25% per annum based on our Public Debt Rating (as defined in the First Lien Credit Agreement). Until June 2023, as described further below, the floating component is based on the Eurocurrency Base Rate (as defined in the First Lien Credit Agreement) for the relevant interest period. The First Lien Term Loan Facility requires periodic principal payments from December 2021 through June 2028, with any remaining unpaid principal and any accrued and unpaid interest due on the maturity date of June 29, 2028. The delayed draw term loan includes a variable commitment fee, which is based on the fixed interest rate and ranges from 0% to the Applicable Rate (as defined in the First Lien Credit Agreement). During 2022, we borrowed $25.0 million under the delayed draw term loan, for purposes of financing our earn out obligation. The borrowing took place prior to the expiration of the delayed draw term commitment date of December 29, 2022. As of September 30, 2023, the total principal amount outstanding on the First Lien Term Loan Facility was $403.9 million.

Loans under the Revolving Credit Facility accrue interest at a rate per annum that considers both fixed and floating components. Following completion of our IPO in July 2021, the fixed component ranges from 2.75% to 3.25% per annum based on our most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement). Until

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June 2023, as described further below, the floating component is based on the Eurocurrency Base Rate for the relevant interest period. The Revolving Credit Facility also has a variable commitment fee, which is based on our most recently determined First Lien Net Leverage Ratio and ranges from 0.25% to 0.50% per annum on undrawn amounts. Letters of credit may be issued under the Revolving Credit Facility in an amount not to exceed $15.0 million which, when issued, lower the overall borrowing capacity of the facility. The Revolving Credit Facility expires on June 29, 2026 and no principal payments are due before such date. As of September 30, 2023, we had no outstanding loan amounts under the Revolving Credit Facility.

Except as noted below, the Credit Facilities are collateralized by substantially all of the assets of TGP Holdings III LLC, TGPX Holdings II LLC, Traeger Pellet Grills Holdings LLC and certain subsidiaries of Traeger Pellet Grills Holdings LLC, including intellectual property, mortgages and the equity interest of each of these respective entities. The assets of Traeger SPE LLC, substantively consisting of our accounts receivable, collateralize the receivables financing agreement discussed below and do not collateralize the Credit Facilities. There are no guarantees from parent entities above Traeger, Inc.

The First Lien Credit Agreement contains certain affirmative and negative covenants that limit our ability to, among other things, incur additional indebtedness or liens (with certain exceptions), make certain investments, engage in fundamental changes or transactions including changes of control, transfer or dispose of certain assets, make restricted payments (including dividends), engage in new lines of business, make certain prepayments and engage in certain affiliate transactions. In addition, we are subject to a financial covenant whereby we are required to maintain a First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement) not to exceed 6.20 to 1.00. As of September 30, 2023, we were in compliance with the covenants under the Credit Facilities.

On August 9, 2022, we entered into a second amendment (the “Amendment”) to the First Lien Credit Agreement to provide for a “Covenant Amendment Period” (as defined therein) through and including the earlier of June 30, 2023 and the date on which we, in our sole discretion, deliver written notice to the Administrative Agent of our election to end the Covenant Amendment Period. During that period, our springing First Lien Net Leverage Ratio covenant will be increased from 6.20 : 1.00 to 8.50 : 1.00 and a minimum liquidity covenant of $35.0 million will be in effect. Liquidity will be calculated as the sum of cash on our balance sheet, availability under our Revolving Credit Facility and availability under our Receivables Financing Agreement (as defined below), and the minimum liquidity covenant will be tested only if and when we request borrowings under our Revolving Credit Facility. During the Covenant Amendment Period, the fixed dollar portion of the “Fixed Dollar Amount” definition shall decrease from $127.0 million to $102.0 million, and the use of certain restricted payments baskets will be reduced or eliminated entirely. The Covenant Amendment Period ended on June 30, 2023.

In June 2023, we entered into a third amendment to the First Lien Credit Agreement which, amongst other things, implements certain changes in the reference rate from the Eurocurrency Base Rate to the Secured Overnight Financing Rate (as defined in the First Lien Credit Agreement).

Accounts Receivable Credit Facility

On November 2, 2020, we entered into a receivables financing agreement (as amended, the “Receivables Financing Agreement”). Through the Receivables Financing Agreement, we participate in a trade receivables securitization program, administered on our behalf by MUFG Bank Ltd. ("MUFG"), using outstanding accounts receivables balances as collateral, which have been contributed by us to our wholly owned subsidiary, Traeger SPE LLC (the "SPE"). While we provide operational services to the SPE, the receivables are owned by the SPE once contributed to it by us. We are the primary beneficiary and hold all equity interests of the SPE, thus we consolidate the SPE without any significant judgments.

On June 29, 2021, we entered into Amendment No. 1 to the Receivables Financing Agreement and increased the net borrowing capacity from the prior range of $30.0 million to $45.0 million up to $100.0 million. The borrowing capacity fluctuates at each month end based upon the amount of eligible outstanding domestic accounts receivables to be used as collateral. As of September 30, 2023, we had drawn down $25.0 million under this facility for general corporate and working capital purposes. Absent any cash advances that exceed the SPE’s available cash, the SPE collects proceeds from the receivables and transfers available cash to us on a regular basis. We are required to pay an annual upfront fee for the facility, along with fixed interest on outstanding cash advances of 1.7%, a floating component based on the CP Rate (as defined in the Receivables Financing Agreement), and an unused capacity charge that ranges from 0.25% to 0.50%. The facility is set to terminate on June 29, 2024. As of September 30, 2023, we were in compliance with the covenants under the Receivables Financing Agreement.

On November 8, 2023, the Company entered into Amendment No. 9 to the Receivables Financing Agreement in order to extend the expiration of the facility by one year to June 27, 2025. As part of the amendment, the maximum borrowing capacity was decreased from $100.0 million to $75.0 million and allows for seasonal adjustments, at the discretion of the Company, to

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change the capacity anywhere between $30.0 million and $75.0. million. The Company is required to pay fixed interest on outstanding cash advances of 2.5%, a floating interest based on the CP Rate (as defined in the Receivables Financing Agreement), and an unused capacity charge that ranges from 0.25% to 0.5%.

Contractual Obligations

There have been no material changes to our contractual obligations as of September 30, 2023 from those disclosed in our Annual Report on Form 10-K. Refer to the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" included in our Annual Report on Form 10-K for a discussion of our debt and operating lease obligations, respectively.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Our critical accounting policies and estimates are described under the heading "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K, the notes to the consolidated financial statements included therein and Note 2 – Summary of Significant Accounting Policies to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. During the nine months ended September 30, 2023, except as indicated below, there were no material changes to our critical accounting policies and estimates from those discussed in our Annual Report on Form 10-K.

Valuation of Goodwill and Acquired Intangible Assets

Intangible Assets

Finite-lived intangible assets are initially recorded at fair value and presented net of accumulated amortization. Intangible assets are amortized on a straight-line basis over their estimated useful lives. We are currently amortizing acquired intangible assets, including customer relationships, distributor relationships, non-compete arrangements, business trademarks, technology and other intangible assets over periods ranging between 2.5 years and 25 years. These assets were recognized in the purchase price allocation when we underwent a corporate restructuring and acquisition in 2017, as well as when we acquired Apption Labs in July 2021. We assess the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss on intangible 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. If the carrying amount exceeds the sum of the undiscounted cash flows, an impairment charge is recognized based on the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.

Goodwill

Goodwill represents the excess of consideration transferred over the fair value of tangible and identifiable intangible net assets acquired and the liabilities assumed in a business combination. Substantially all of the Company’s goodwill was recognized in the purchase price allocations when the Company was acquired in 2017 and when Apption Labs was acquired in July 2021, with smaller incremental amounts recognized in other business combinations. Goodwill is not amortized, but is tested for impairment at the reporting unit level annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. In conducting the impairment test, the Company first reviews qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. We currently operate as a single reporting unit under the guidance in Topic 350, Intangibles - Goodwill and Other.

When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value

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exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference.

To determine reporting unit fair value as part of the quantitative test, we use a weighting of fair values derived from the income approach and the market approach. Under the income approach, the Company projects the future cash flows and discount these cash flows to reflect their relative risk. The cash flows used are consistent with those the Company uses in its internal planning, which reflects actual business trends experienced and our long-term business strategy. Under the market approach, we use the guideline company method to develop valuation multiples and compare our reporting unit to similar publicly traded companies.

In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill could result in significantly different estimates of fair value.

The Company conducts annual goodwill impairment tests in the fourth quarter of each fiscal year or whenever an indicator of impairment exist. For the annual impairment tests conducted in the fourth quarters of 2022 and 2021, the Company performed qualitative assessments of goodwill and determined that it was more likely than not that the fair value of goodwill was greater than its carrying value, therefore the quantitative impairment test was not performed and no impairment of goodwill was recorded in connection with the annual impairment tests.

As a result of sustained decreases in the Company’s publicly quoted share price, market capitalization and lower than expected operating results, the Company conducted an interim impairment analysis of its goodwill and long-lived assets. As a result of this analysis, the Company concluded there were no events or changes in circumstances which indicated that the carrying value of its long-lived assets may not be recoverable. However, the Company did identify indicators of goodwill impairment for the single reporting unit and concluded that a triggering event had occurred which required an interim goodwill impairment assessment during the second and third quarters of fiscal year 2022. The primary indicators of impairment were attributable to the adverse impacts from the macroeconomic conditions such as inflationary pressures and supply chain disruption, unfavorable demand, and the sustained decreases in the Company’s publicly quoted share price and market capitalization. As a result of these factors, the Company's operating results were lower than expected.

The Company estimated the reporting unit's fair value under the income approach, which utilizes a discounted cash flow model, and the market approach, which utilizes the guideline company model. The income approach used the reporting unit's projections of estimated operating results and cash flows that were discounted using a market participant discount rate based on the weighted-average cost of capital. The main assumptions supporting the cash flow projections include, but are not limited to, revenue growth, margins, discount rate, and terminal growth rate. The financial projections reflect management's best estimate of economic and market conditions over the projected period, including forecasted revenue growth, margins, capital expenditures, depreciation, and amortization. Under the market approach, the Company uses the guideline company method to develop valuation multiples and compare the single reporting unit to similar publicly traded companies.

Due to impairment indicators identified during the second and third quarters of 2022, the Company performed interim quantitative goodwill impairment tests and concluded that the carrying value of the single reporting unit exceeded its fair value and recorded $222.3 million of non-cash goodwill impairment charges for the fiscal year ended December 31, 2022. Significant negative industry or economic trends, disruptions to our businesses, significant unexpected or planned changes in use of the assets, divestitures and market capitalization declines may result in impairments to goodwill and other long-lived assets.

As of September 30, 2023, the Company performed a qualitative assessment of goodwill and determined that it was more likely than not that the fair value of goodwill was greater than its carrying value, and therefore a quantitative impairment test was not performed. As a result, no impairment of goodwill was recorded for the period ended September 30, 2023.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 – Summary of Significant Accounting Policies to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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There have been no material changes to our disclosures regarding our exposure to market risk as described in Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2023, due to the existence of a material weakness in our internal controls over financial reporting described below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act as recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As previously disclosed in our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2023, we identified a material weakness in our internal controls over financial reporting related to the Company’s controls related to the accurate accounting and reporting of transactions subject to ASC 815 Derivatives and Hedging, which did not operate effectively to identify a misstatement within the condensed consolidated financial statements.

Remediation Plan of Previously Disclosed Material Weakness

In order to remediate the material weakness, the Company’s management has begun to implement steps to enhance the design of its control activity over the preparation of other comprehensive income (loss) within the consolidated statement of operations and other comprehensive income (loss). The material weakness cannot be considered remediated until the newly designed control activity operates for a sufficient period of time and management has concluded, through testing, that the control is operating effectively.

Changes in Internal Control over Financial Reporting

Other than the remediation plan discussed above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are from time to time subject to various legal proceedings, claims, and governmental inspections, audits, or investigations that arise in the ordinary course of our business. We believe that the ultimate resolution of these matters would not be expected to have a material adverse effect on our business, financial condition, or operating results.

ITEM 1A. RISK FACTORS

Other than the risk factors disclosed in our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2023 and Quarterly Report on Form 10-Q for the quarter ended, June 30, 2023, which risk factors are incorporated herein by reference,

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there have been no material changes with respect to the risk factors disclosed in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Recent Sales of Unregistered Securities; Purchases of Equity Securities by the Issuer or Affiliated Purchaser

None.

Use of Proceeds

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) On November 8, 2023, Traeger SPE LLC (“SPE”), Traeger Pellet Grills LLC and Traeger Pellet Grills HoldingsLLC, each a wholly owned subsidiary of Traeger, Inc. (the “Company”), entered into a ninth amendment (the “Amendment”) to that certain receivables financing agreement with MUFG Bank Ltd., as committed lender, group agent and administrative agent (“MUFG”), and the other lenders party thereto, which provides the Company with secured short-term capital financing using outstanding accounts receivable balances as collateral and is dated as of November 2, 2020, as further amended on June 29, 2021, February 18, 2022, July 20, 2022, August 19, 2022, September 21, 2022, September 30, 2022, November 8, 20222 and June 23, 2023 (the “RFA”). The Amendment makes a number of changes to the terms of the RFA. Key changes include an extension of the termination date of the RFA by twelve months (from June 27, 2024 to June 27, 2025, a reduction of the maximum commitment from $100,000,000 to $75,000,000, and the ability for commitment levels to be set on a monthly basis (between a minimum commitment level of $30,000,000 and the facility limit of $75,000,000) to better align commitment levels to the Company’s varying seasonal levels of receivables. The monthly commitment levels are set in advance for each month, but can be adjusted at the request of SPE (subject to consent of MUFG) up to two times per calendar year. The reduction of the maximum commitment and the varying monthly liquidity levels will enable the Company to avoid paying commitment fees for facility capacity it is unable to use due to its available account receivables balances throughout the year. Among other changes, the Amendment also changes the applicable benchmark interest rate from Adjusted LIBOR to Adjusted Term SOFR and increases the liquidity level that must be maintained to avoid a “Liquidity Shortfall” (as defined in the RFA) to $75.0 million.

The foregoing description of the Amendment is qualified in its entirety by reference to the full and complete terms contained in the Amendment, a copy of which will be filed as an exhibit to this Quarterly Report.

(b) None.

(c) Not applicable.

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ITEM 6. EXHIBITS

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	Date	Number	Filed/Furnished Herewith
3.1	Certificate of Incorporation of Traeger, Inc.	8-K	08/03/21	3.1
3.2	Bylaws of Traeger, Inc.	8-K	08/03/21	3.2
10.1	Amendment No. 8 to the Receivables Financing Agreement, by and among Traeger SPE LLC, MUFG Bank, Ltd., Traeger Pellet Grills LLC and the lenders party thereto, dated June 23, 2023.	10-Q	08/08/23	10.2
10.2	Amendment No. 3 to First Lien Credit Agreement by and among TGP Holdings III LLC, Traeger Pellet Grills Holdings LLC, TGPX Holdings II LLC, Credit Suisse AG, as administrative agent, and the lenders party thereto, dated June 2, 2023.	10-Q	08/08/23	10.3
10.3	Amendment No. 9 to the Receivables Financing Agreement, by and among Traeger SPE LLC, MUFG Bank, Ltd., Traeger Pellet Grills LLC and the lenders party thereto, dated November 8, 2023.				*
31.1	Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)				*
31.2	Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)				*
32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350				**
32.2	Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350				**
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.				*
101.SCH	Inline XBRL Taxonomy Extension Schema Document				*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				*
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)				*

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TRAEGER, INC.
Date: November 8, 2023
	By:	/s/ Jeremy Andrus
	Name:	Jeremy Andrus
	Title:	Chief Executive Officer
		(Principal Executive Officer)
Date: November 8, 2023
	By:	/s/ Dominic Blosil
	Name:	Dominic Blosil
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

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