Q1 2021 Johnson Outdoors Inc Earnings Call

February 5, 2021

[music].

Hello, everyone and welcome to the Johnson outdoors first quarter 2021 earnings conference call.

Today's call will be led by Helen Johnson, Leipold, Johnson outdoors, Chairman and Chief Executive Officer also on the call is David Johnson, Vice President and Chief Financial Officer.

To the question and answer session. All participants will be placed in a listen only mode. After the prepared remarks. The question and answer session will begin if you would like to ask a question during that time. Please press Star then the number one on your telephone keypad.

This call is being recorded your participation implies consent to our recording this call. If you do not agree to these terms simply drop off the line I would now like to hand, the call over to Patricia Penman from Johnson outdoors. Please go ahead Ms Penman.

Thank you good morning, everyone. Thank you for joining us for our discussion of Johnson outdoors results for the 2021 fiscal first quarter. If you need a copy of today's news release. It is available on our website at Johnson outdoors Dot com under Investor Relations.

And also need to remind you that this conference call may contain forward looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance actual events may differ materially from those statements due to a number of factors. Many beyond Johnson outdoors control. These risks and uncertainties include those live.

<unk> and our press release and filings with the Securities and Exchange Commission. If you have additional questions. Following the call. Please contact Dave Johnson or me. It is now my pleasure to turn the call over to Helen Johnson Leipold. Thanks.

Thanks, Matt Good morning, and thank you for joining us I'll begin with comments on performance this quarter and outline priorities going forward.

David will review financial highlights and then we'll take your questions.

The first fiscal quarter sales reflect the continued impact of the COVID-19 pandemic driving high demand for outdoor recreation products have began and the second half of our 2020 fiscal year.

Consumer demand remains strong during the quarter and customers replenish their depleted inventory levels in anticipation of the upcoming warm weather recreation season.

First quarter sales rose, 29% to $165 $7 million versus the $128 1 million in the prior year period operating profit of $23 $6 million was up significantly versus $6 8 million in the prior year first quarter net.

Income was $19 $8 million or $1 96 per diluted share, which compared very favorably to the previous year's first quarter net income of $6 4 million or.

For 64 cents per diluted share day will provide more details on the quarter's results in his remarks.

And fishing, our largest business demand remains high across all brands and we continue to build on the powerful legacy of innovation that drives both seasoned anglers and new anchors. The Johnson outdoors for a great fishing experience Hummingbirds award, winning winning Mega 360 imaging the only.

And our option that provides the high resolution of 360 degree view with an unmatched with unmatched detail and coverage continues to do well and its second year on the market before Mega 360, anglers were limited to a sonar view either below or to the size of their boat, while moving now with Mega 360 <unk>.

And can make and accurate cash in any direction to EBIT side in front of and behind them. Even if the boat is anchored when Mega 360 imaging is used together with <unk> Kota spot lock technology. It provides anglers with and effort effortless command of the boat and and Uncompromised view of fish and the world below.

We are constantly looking for ways that our products can easily integrate and communicate and we continue to enhance our one boat network, enabling anglers to control their connected <unk>, Kota trolling motor talent and Raptor shallow water anchors and can and downrigger directly from their hummingbird unit.

Hummingbird also recently started shipping a new generation of helix fish finders, providing anglers with the latest and innovative imaging technology with Mega imaging, plus and a variety of screen sizes to ensure there is of helix to fit any of those needs. The big screen model of that offering the new helix.

15 model, both and giant and 15 four inch ultra bright and crystal clear display that enables visibility of the details provided by exclusive hummingbird sonar navigation and networking technologies.

<unk> 15, along with hummingbirds Ultra big screen solid series rounds out our product offering of the very best in large screen fish finders.

<unk>, we're continuing to see positive sales momentum with the award winning Raptor shallow water anchor raptors, the only shallow water anchor to feature two industry <unk> technologies active anchoring and auto bottom mode, which enable the shallow water anchors to automatically monitor the water and the bottom conditions.

Keep the boat anchored firmly in place no matter what the exchange situation is that they encounter.

Looking ahead, sustaining our innovation and technology leadership position and the fishing market remains a top priority and we have more exciting new products in the pipeline.

Flagship model of this innovative new line the award winning sportsman autopilot 120 utilizes of GPS enabled and <unk> Kota trolling motor to propel steer and anchored the kayak with its unique spot lock technology, providing kayak anglers with hands free fishing and we hope to continue the positive momentum of the sportsman.

Line and its second year on the market.

Camping is one of the most accessible outdoor activities that people have been able to do safely and both are Jeff Boyle and Eureka brands have benefited from the surge of participation in the activity and our hard work and understanding our target consumer is paying off demand for Eureka tents and stoves continues to be.

Expectations, and Jeff Boyle, the technology leader and portable outdoor cooking systems, just recently launched exciting new innovation called the stash. The stash is the lightest all in one backpack and stove system that Jeff Boyle has ever made and we're excited for our newest technology the hit online and retail share.

All of its very soon.

<unk> is the most trusted <unk> brand and the world and while the destination dining market continues to be impacted by travel restrictions, we're continuing our work to promote and support local diving, while we're taking steps to simplify our diving business. During this challenging time, our team continues to focus on investing and.

Innovation and enhancing our digital presence globally with new European website and E. Commerce. These efforts will ensure scuba pro is the strong position for the future.

It was and unprecedented and start to the year, while indications are strong and that it will be good a good season ahead and people will continue to be eager to get outdoors. The COVID-19 pandemic still brings uncertainty and challenges to work through.

Looking ahead, we will continue to focus on keeping pace with demand as well as leveraging our market, leading brands and driving innovation to maximize the heightened interest in outdoor recreation.

Our ongoing investment into understanding our consumers sustaining innovation leadership, identifying new sources and paths of growth and our market as well as optimizing our digital consumer experience as more and more consumers research and purchase online are all key to ensuring progress.

Towards our goal of delivering sustained profitable growth.

Now I will turn the call over to day for a review of the financial highlights.

Thank you Helen good morning, everyone.

As Helen mentioned, we came into our fiscal first quarter with the strong demand and our fishing camping and watercraft recreation businesses.

We've been working hard to produce as much as we can including adding more shifts and managing our supply chain to increase capacity where possible.

Operating profit was up significantly versus the prior year quarter, driven primarily by sales growth year over year.

Gross margin of 45, 3% is up three four points from last year's first quarter, primarily driven by a higher absorption of fixed cost due to increased sales volume.

And we had and improved product mix.

Operating expenses rose due to higher volume related expenses and the impact of favorable market conditions on the company's deferred compensation plan assets.

This resulted in approximately $1 4 million of higher deferred compensation expense and the current year quarter, which was completely offset by a gain and other income related to marketing the assets to market.

Net income for the year was $19 $8 million compared to $6 4 million of the prior fiscal first quarter the ifs.

<unk> tax rate was 23, 7% compared to last year's rate of 25, 1%.

We expect the for your tax rate to be in the mid twenties.

Net working capital is up versus last year's first quarter due to higher receivables and increased inventories.

While we're seeing strong demand like others and the industry. We continue to actively manage risks associated with our global supply chain.

Our balance sheet is strong and our healthy cash position and will continue to provide a competitive advantage as we make smart investments to strengthen the business and drive value for our shareholders.

Now I'll turn the call back over to the operator for Q&A session operator.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press, the pound or Husky and.

Please standby, while we compile the Q&A roster.

Your first question comes from Anthony <unk> Lib.

Little bit since ski.

From Sidoti and company.

Yes, good morning, and thanks for taking the question so yes.

Certainly yes.

The performance.

So looking at the top line could you give us a sense of the volume versus ASP.

And so could you start with that please.

Yes Anthony.

And that's actually more unit volume related and ASP for the quarter at least.

We're seeing kind of a broad based increase in volume both lower price mid price high price products. So at least for the quarter. It hasnt been a ton of Asps enhancement.

Got it okay. Thanks for that Dave.

Also.

Do you guys have a sense of to the growth and the participation rate from consumers looking to engage and outdoor recreation adjusted just wondering like how many new customers enter the.

The <unk> market.

For the upcoming season.

Well as far as participation rate.

<unk>.

We don't have a specific way of of.

Getting at debt that data and it's very different by business. So we can't give you that answer and it's our assumption that there are new consumers coming in as well as more active participation by existing consumers.

And I think we can say that across all.

All of the outdoors spaces that we've seen growth and so.

Until we get some.

Patient data from.

The syndicated sources, which have a lag time I think at this point.

Truly assumption, but we definitely feel that there are some new participants in the market across the board.

Okay got it good to hear so and as.

As far as the new product innovation and you mentioned some examples as far as the fish finders and some others.

So when you look at the upcoming season.

Would you say that youre going to be introducing more new products unusual or is this kind of the typical kind of pipeline of new products.

As of the one category other than the fish finders, where youre, particularly excited about for for new product introductions.

Well I think.

We've got new products for every business and and fishing.

And this is a solid year and we talked about a few of those so I don't think it's any different than the past is just part of doing business and we try to innovate and have something new every year.

And depending on the category.

Got it okay perfect. Okay, and then as far as the supply chain constraints can you just so a little bit more details as to what you are.

And obviously they didn't look like it impacted your first fiscal quarter, but can you give us.

Could you give us some more details about what your share.

Yes.

Like a lot of other companies, we're seeing a lot of.

Longer lead times.

And <unk>.

Difficult to getting some product out of Asia for electronic components in particular.

And then logistics constraints of everyone's heard about at the port and getting.

Shipping containers here on time, so right now I think.

And we seem to be okay shape is it hasnt necessarily affected is currently but we're looking into the season and this is something we're trying to actively manage.

Got it okay perfect all right well. Thank you best of luck.

Thank you.

Okay, and if you would like to ask a question. Please press star one.

There are no further questions at this time I would like to turn the conference back to MS. Helen Johnson Leipold.

Thank you everyone for joining us today hope you stay healthy stay safe and and hope you have a great day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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[music].

Hello, everyone and welcome to the Johnson outdoors first quarter 'twenty 'twenty One earnings conference call today's call will be led by Helen Johnson Leipold, Johnson outdoors, Chairman and Chief Executive Officer also on the call is David Johnson, Vice President and Chief.

Financial Officer.

Prior to the question and answer session. All participants will be placed in a listen only mode. After the prepared remarks. The question and answer session will begin if you would like to ask a question during that time. Please press Star then the number one on your telephone keypad.

I also need to remind you that this conference call may contain forward looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance.

Actual events may differ materially from those statements due to a number of factors. Many beyond Johnson outdoors control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have additional questions. Following the call. Please contact Dave Johnson or me. It is now my pleasure to turn the call.

Over to Helen Johnson Leipold.

Matt Good morning, and thank you for joining us I'll begin with comments and performance this quarter and outline priorities going forward, David will review financial highlights and then we'll take your questions.

First fiscal quarter sales reflect the continuing impact of the COVID-19 pandemic driving high demand for outdoor recreation products have began and the second half of our 2020 fiscal year.

Consumer demand remains strong during the quarter and customers replenish their depleted inventory levels in anticipation of the upcoming warm weather recreation of season.

First quarter sales rose, 29% two of $165 $7 million versus the $128 1 million in the prior year periods operating profit of $23 $6 million was up significantly versus $6 $8 million in the prior year first quarter net.

Income was $19 $8 million or $1.96 per diluted share, which compared very favorably to the previous year's first quarter net income of $6 4 million or <unk> 64 per diluted share day will provide more details on the quarters results in his remarks and.

And fishing, our largest business demand remains high across all brands and we continue to build on the powerful legacy of innovation that drives both seasoned anglers and new and wasting Johnson outdoors for a great fishing experience.

Hummingbirds award, winning winning Mega 360 imaging the only so and our option that provides the high resolution of 360 degree view with the unmatched with unmatched detail and coverage continues to do well and its second year on the market before Mega 360, anglers were limited to a sonar view either below.

The ore to the size of their boat, while moving now with Mega 360, anglers can make and accurate cash in any direction to EBIT side in front of and behind them. Even if the boat is anchored when Mega 360 imaging is used together with Mako the spot lock technology. It provides anglers with and effortless effort.

Let's command and the boat and then and compromise view of fish and the world below.

We are constantly looking for ways that our products can easily integrate and communicate and we continue to enhance our one boat network, enabling anglers to control their connected <unk>, Kota trolling motor Tallinn, and wrap the shallow water anchors and calling downrigger directly from their hummingbird unit.

<unk> also recently started shipping a new generation of helix fish finders, providing anglers with the latest and innovative imaging technology with Mega imaging, plus and a variety of screen sizes to ensure the areas of helix to fit any of always needs. The big screen model of that offering the new helix for.

<unk> model, both and giant and 15 four inch ultra bright and crystal clear display of it enables visibility of the details provided by exclusive hummingbird sonar navigation and networking technologies, the helix 15, and along with hummingbirds ultra being screened solid series.

Rounds out our product offering of the very best in large screen and fish finders.

You mean Kodak, we are continuing to see positive sales momentum with the award winning raptors shallow water anchor raptors, the only shallow water anchor to feature two industry first technologies active anchoring and auto bottom mode, which enabled the shallow water anchors to automatically monitor the water and the bottom conditions.

And keep the boat anchored firmly in place no matter what the exchange situation is that the encounter.

Looking ahead, and sustaining our innovation and technology leadership position and the fishing market remains a top priority and we have more exciting new products in the pipeline.

And watercraft recreation, we saw strong demand across all product lines and continued enthusiasm for our old town sportsman line of power pedal and paddles fishing kayaks that was the launch last fiscal year. The flagship model of this innovative new line The award winning sportsman autopilot 120 utilizes of GPS.

<unk> enabled and <unk> Kota trolling motor to propel steer and anchored the kayak with its unique spot lock technology, providing kayak anglers with hands free fishing and we hope to continue the positive momentum of the sportsman line and its second year on the market.

Expectations, and Jeff Boyle, the technology leader and portable outdoor cooking systems, just recently launched exciting new innovation called the stash. The stash is the lightest all in one backpack and stove system that Jeff Boyle has ever made and we are excited for our newest technology the hit online and retail share.

All of its very soon.

<unk> is the most trusted value brand and the world and while the destination dining market continues to be impacted by travel restrictions, we're continuing our work to promote and support local diving, while we are taking steps to simplify our diving business. During this challenging time, our team continues to focus on investing and.

Innovation and enhancing our digital presence globally with new European website and E. Commerce. These efforts will ensure scuba pro is and a strong position for the future.

Looking ahead, we will continue to focus on keeping pace with demand as well as leveraging our market, leading brands and driving innovation to maximize the heightened interest in outdoor recreation.

Towards our goal of delivering sustained profitable growth now.

Now I will turn the call over to day for a review of the financial highlights.

Thank you Helen good morning, everyone.

As Helen mentioned, we came into our fiscal first quarter with a strong demand and our fishing camping and watercraft recreation businesses.

We've been working hard to produce as much as we can including adding more shifts and managing our supply chain to increase capacity where possible.

Operating profit was up significantly versus the prior year quarter, driven primarily by sales growth year over year.

Gross margin of 45, 3% is up three four points from last year's first quarter, primarily driven by a higher absorption of fixed cost due to increased sales volume and.

And we had and improved product mix.

Operating expenses rose due to higher volume related expenses and the impact of favorable market conditions on the company's deferred compensation plan of assets.

Net income for the year was $19 $8 million compared to $6 4 million and the prior fiscal first quarter the.

The effective tax rate was 23, 7% compared to last year's rate of 25, 1% we.

We expect the for your tax rate to be in the mid twenties.

Net working capital is up versus last year's first quarter due to higher receivables and increased inventories.

While we're seeing strong demand like others and the industry. We continue to actively manage risks associated with our global supply chain.

Now I'll turn the call back over to the operator for the Q&A session operator.

As a reminder to ask a question you will need to press star one on your telephone.

To withdraw your question press, the pound or Husky and <unk>.

Please standby, while we compile the Q&A roster.

Your first question comes from Anthony lipids limits.

Little bit since Keith.

From Sidoti and company.

Yes, good morning, and thanks for taking the question so yes.

And so certainly impressive performance.

And so looking at the top line could you give us a sense of the volume versus ASP.

The two.

And we could just start with that please.

Yes Anthony.

And that's actually more unit volume related and Asps for the quarter at least.

We're seeing kind of a broad based increase in volume both lower price mid price high price products. So at least for the quarter. It hasnt been a ton of Asps enhancement.

Got it okay. Thanks for that Dave So.

And also.

Do you guys have a sense as to the growth and the participation rate from consumers that you are looking to engage and outdoor recreation adjusted.

Just wondering like how many new customers enter the.

The market.

For the upcoming season.

Well as far as participation rate.

And we don't have a specific way of of <unk>.

Getting at debt.

And data and it's very different by business. So we can't give you that answer it's our assumption that there are new consumers coming in as well as more active participation by existing and consumers.

And I think we can say that across.

All of the outdoors spaces that we've seen growth and so.

Until we get some participation data from.

The syndicated sources, which has a lag time I think at this point.

Truly assumption, but we definitely feel that there are some new participants in the market across the board.

Okay got it good to hear and so and as far as the new product innovation, Yes, you mentioned some examples of as far as the fish finders and some others.

So when you look at the upcoming season.

Would you say that youre going to be introducing more new products unusual or is this kind of the.

Typical kind of pipeline of new products.

The one category other than the fish finders, where youre, particularly excited about for for new product introductions.

Well I think.

We've got new products for every business and and fishing.

And this is a solid year and we talked about a few of those so I don't think its any different than in the past is just part of doing business and we try to innovate and the app something new every year.

And depending on the category.

Got it okay perfect. Okay, and then as far as the supply chain constraints can you just so a little bit more details as to what you are.

And obviously they didn't look like it impacted your first fiscal quarter, but can you give us.

Could you give us some more details about what your share.

Yes.

Like a lot of other companies, we're seeing a lot of.

Longer lead times.

And the.

Difficult to getting some product out of Asia for electronic components in particular.

And then logistics constraints of everyone's heard about at the port and getting.

Shipping containers here on time, so right now I think.

We seem to be in okay shape is it hasnt necessarily affected is currently but we're looking into the season and this is something we're trying to actively manage.

Got it okay perfect all right well. Thank you best of luck.

Thank you.

Okay, and if you would like to ask a question. Please press star one.

There are no further questions at this time I would like to turn the conference back to MS. Helen Johnson Leipold.

Thank you everyone for joining us today hope you stay healthy stay safe and and hope you have a great day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Q1 2021 Johnson Outdoors Inc Earnings Call

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