Q2 2021 Johnson Outdoors Inc Earnings Call

May 7, 2021

[music].

Hello, everyone and welcome to the Johnson outdoors second 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.

Back to the question and answer session. I'll question, all participants will be placed in a listen only mode. After the prepared remarks. The question and answer session will begin if you'd like to ask a question during that time. Please press Star then you're over one on your telephone keypad.

This call is being recorded repurchase ship your participation implies consent to our recording this call for Ya and I agreed system simply drop off the line I would now like turn the call over to Patricia Penman from Johnson outdoors. Please go ahead and spin.

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

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.

<unk> 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, Pat Good morning, and thank you for joining us I'll.

Beginning with an overview of the quarter and year to date results and then I'll share perspective, and the performance and outlook for our businesses Dave.

Dave will review key financials, and then we'll take your questions.

Historically, the first six months of the fiscal year is our preseason ramp up and selling period for the primary retail selling season.

But the ongoing impact of the COVID-19, pandemic and the increased interest and outdoor activities have resulted in unprecedented high demand for outdoor recreation products that has continued through our fiscal second quarter.

And both customer and consumer demand remained strong sales surged to $206 $2 million during the second quarter, 26% ahead of last year.

Strong operational efforts allowed the company to deliver these results at the halfway Mark in fiscal year total company year to date sales stand at $371 $8 million or 28% increase.

Over same period year ago.

Total company fiscal six months operating profit increased 54, 4% to $59 $6 million compared with same period year ago for the second fiscal quarter total operating profit was $36 million versus $31 8 million.

Previous year's quarter.

Net income for the quarter was $27 8 million or two seven and $6 per diluted share gain will discuss the key financial drivers and detailed later in this call.

The pandemic has been a catalyst for people to get outdoors and his participation and outdoor activities has grown we've been able to take advantage of the heightened interest by leveraging our portfolio of market, leading brands and innovation in fishing, our largest and most profitable business participation has always been high but it's.

And even higher during the pandemic robust demand for me and coda and Hummingbird technology continued through the second quarter as both new and season anguish and looked at Johnson outdoors for the best fishing experience as possible.

For the strong year did your innovation quality and durability mean code and continues to be the industry leader and trolling motors.

<unk> continued to impress across all product lines as anguished look to <unk> as the trusted brand to help them catch more fish.

We're also seeing continued success with Hummingbirds award winning Mega 360 imaging. The only sonar option that provides a high resolution 360 degree view with unmatched detail and coverage as well as success with Mega imaging plus.

Extending the depth range and expanding the site.

Coverage areas and Mega imaging plus can be found and hummingbird, the new generation of helix fish finders, providing English for the latest and innovative imaging technology and a variety of screen sizes, ensuring there is a helix to fit any anglers needs.

We will continue to invest and building upon our strength, our knowledge of fishing and fishing consumers coupled with our technical knowhow to maintained our pipeline of exciting new products and to the sustained <unk> Kota and hummingbird leadership position in the fishing market and watercraft recreation and our pedal drive.

System technology has been expanding to a broader audience as more people are eager to get out and the water and the fishing kayak segment, especially continues to grow.

Enthusiasm hasnt slowed down for the innovative line of sports News and Chi X that was launched last year.

From the versatile pedal powered sports and salty kayak to the award winning auto pilot 120, motorized fishing kayak and sports and online offers a watercraft for everyone looking to enjoy the great day outdoors.

Innovation is key to taking the camping experience from good to great and we're seeing our hard work pay off and understanding consumers' evolving needs and expectations and translating those insights into bigger better new product success.

And it's.

Since its launch earlier this year, we have seen consumer excitement for all new Super lightweight, Jeff Boyle Stash stove.

We all know reducing weighted Amit trail is critical for backpackers stash is the lightest all of them and backpacking stove system that Jeff Boyle with technology leader and portable outdoor cooking systems has ever made.

And as more people continue to look for ways to spend time outdoors. This year demand for our Eureka brand of tense and camp cooking technology.

Can use to beat expectations and.

Meanwhile, ongoing travel restrictions and lockdowns in certain countries continue to impact the diving market. We're continuing our work to promote and support local diving, taking steps to simplify and simplify our diving business. During this challenging time and enhancing our digital presence globally with new European websites.

And ecommerce these efforts along with sustained innovation will strength strengthened <unk> position as the most trusted dive brand in the world.

Looking ahead, our near term focus is to keep pace with the strong demand and fishing watercraft recreation and camping longer term, we remain committed to investing in our key strategic strategic.

<unk> drivers understanding our consumer sustaining innovation leadership, identifying new sources and paths of growth and our markets and optimizing our digital consumer experience as more consumers research and purchase online.

And our ongoing hard work on these priorities ensures that our portfolio of market, leading brands is well positioned for success in 2021 and that we continue to deliver sustained profitable long term growth for Johnson outdoors now I will turn the call over the day for a review of the financial highlights.

Thank you Helen and good morning, everyone.

And as Helen mentioned and the second quarter was another unprecedented period with strong sales and free of our core businesses.

With market dynamics strong and retail inventories and Wayne.

Our excellent sales performance was the key driver and increasing profits during the quarter.

For the quarter gross margin of 45, 2% was down slightly versus the prior year quarter.

A $1 $1 million increase and tariffs and higher freight costs for raw materials offset overhead absorption benefits from higher volumes.

Operating expenses for the quarter increased $13 $9 million, driven primarily by higher sales driven expenses as well as higher variable and deferred compensation expenses between quarters.

Deferred compensation expenses were up $4 $7 million due to favorable valuations and we're 100% offset and other income.

Net income for the quarter was $27 8 million compared to $24 million and the prior fiscal year second quarter and.

And year to date effective tax rate is 24, 7% compared to last year's rate of 27, 5%. We expect for for your tax rate to be in the mid <unk>.

Looking ahead, we anticipate a strong season, and we'll continue to monitor the many marketplace dynamics.

While our cost of goods will be pressured at this time, we don't expect a material impact on our margins from cost increases.

Our balance sheet remains strong and our cash position is healthy providing us the financial capacity and flexibility to strategically invest and strengthening the business, while continuing to pay out a cash dividend to our shareholders.

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

Yes at this time, if and when does having a question for you can press star one on your telephone keypad, Frank questions for going to Starwood and our first question comes from the line of Anthony <unk> from Sidoti.

Yeah.

Yes, good morning, and thank you for taking the questions. So first.

Dave you said that the inventory levels at retail or lean is that across the board or just wondering if when you look at Europe.

12 months.

One particular area, where you think the.

Retail inventories are leaner than others.

Yes, I would characterize the three businesses that are growing and that's the retailers are still seeing very lean inventory across the board. So I don't think theres and a distinction among those three businesses.

Got it okay. Thanks for that color Dave.

And then.

You mentioned that so obviously our demand is working.

And working to increase capacity. So can you give us a sense as to where you are with us and.

But what should we look for them.

Youll book.

<unk>.

And from here.

Yes.

We're kind of set for the season and a way and we added shifts early.

And to our factories.

We're we're building product.

And that's been very helpful. We're of course, adding a lot of seasonal labor, which has its challenges, but we've done that as well. So we're working as fast as we can to meet the demand right now and those are kind of the two short term levers that we've pulled and just to keep in mind that we still are at.

And like 80% in terms of being able to have our workforce in the plan because of the COVID-19 and all the safety rules.

The rules and they're going out and so.

And if we can cross our fingers hope things change we will.

We have the ability to staff.

More during a shift.

Got it okay. Thank you both for color.

So in terms of any supply chain constraints.

So I think it's been well publicized can you give us a sense as to.

As you look now on.

And may 7th versus March 31 quarter, and that thing has gotten better or worse for the same and in terms of the supply chain constraints.

I would say, it's pretty dynamic Anthony right now.

Electric and parts coming in.

And we're working very hard to make sure we have adequate supply.

I think we've done a good job, so far and maintaining that.

But as you heard I'm sure out there and the industry. There are shortages here and there and longer lead times. So we're working very hard to make sure. We can maintain that supply and I would say it's still.

A pretty delicate balance right now.

Mhm got it Okay, and then lastly, I guess for me here so.

How should we think about your ability to offset the higher costs.

Price increases.

How are you thinking about those or anything else.

For the cost mitigation strategies.

Sure Yes.

Thank you.

And we'll definitely consider all options to out and mitigate cost increases.

Cost savings programs are important and how we price our product the innovation, we bring out into the marketplace. That's all part of the equation. So we will look at all options for that.

Got it okay, well, thank you and best of luck.

Thank you.

And then and no further questions in queue at this time I would now and turn it back over to Helen.

And therefore.

Thanks, everyone for joining us and we.

Hope you have a great day.

Thank you.

And this does conclude today's conference you may disconnect.

[music].

Hello, everyone and welcome to the Johnson outdoors and second 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.

And these term simply drop off the line.

Now I'll turn the call over to Patricia Penman from Johnson outdoors. Please go ahead and experiment.

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.

During the call. Please contact Dave Johnson or me. It is now my pleasure to turn the call over to Helen Johnson Leipold.

Thanks, Pat Good morning, and thank you for joining us and I'll.

I'll begin with an overview of the quarter and year to date results and then I'll share perspective, and the performance and outlook for our businesses Dave.

Dave will review key financials, and then we'll take your questions.

Historically, the first six months and the fiscal year is our preseason ramp up and selling period for the primary retail selling season.

But the ongoing impact of the COVID-19 pandemic and the increased interest in outdoor activities has resulted in unprecedented high demand for outdoor recreation products that has continued through our fiscal second quarter.

As both customer and consumer demand remained strong sales surge to $206 $2 million during the second quarter, 26% ahead of last year.

Strong operational efforts allowed the company to deliver these results at the halfway Mark fiscal year total company year to date sales stand at 371 $8 million or 28% increase.

Over same period year ago.

Total company fiscal six months operating profit increased 54, 4% to $59 $6 million compared with same period, a year ago for the second fiscal quarter total operating profit was $36 million versus $31 8 million.

Previous year's quarter.

Net income for the quarter was $27 $8 million or $2 $76 per diluted share gain will discuss the key financial drivers and detailed later in this call.

And even higher and during the pandemic robust demand for me and coda and Hummingbird technology continued through the second quarter as both new and season and looked at Johnson outdoors for the best fishing experience as possible.

For the strong heritage of innovation quality, and durability mean code and continues to be the industry leader and trolling motors.

<unk> continued to impress across all product lines as the anguish and look to mean quota and been trusted brand to help them catch more fish.

Extending the depth range and expanding the side.

Coverage areas and Mega imaging, plus can be found and hummingbird and new generation of helix fish finders, providing English for the latest and innovative imaging technology and the variety of screen sizes, ensuring there is a helix to fit any English needs.

We will continue to invest and building upon our strength, our knowledge of fishing and fishing consumers coupled with our technical know how.

To maintain our pipeline of exciting new products and to the sustained with current and hummingbird leadership position in the fishing market and.

Watercraft recreation pedal drive system technology has been expanding to a broader audience as more people are eager to get out and the water and the fishing kayak segment, especially continues to grow and.

Enthusiasm hasnt slowed down for the innovative line of sports News and Chi X that was launched last year.

From the versatile pedal powered sports and salty kayak to the award winning autopilot 120, motorized fishing kayak and sports and line offers a watercraft for everyone looking to enjoy the great day outdoors.

Since its launch earlier this year, we have seen consumer excitement for all new Super lightweight, Jeff Boyle staff stove.

And we all know reducing weighted Amit trail is critical for backpackers stash is the lightest all in one backpack and stove system that Jeff Boyle with technology leader and portable outdoor cooking systems has ever made.

And as more people continue to look for ways to spend time outdoors. This year demand for our Eureka brand attempts and camp cooking technology continues to be expectations.

And I mean, while ongoing travel restrictions and lockdowns in certain countries continue to impact the dining market. We're continuing our work to promote and support local diving, taking steps to simplify and simplify our diving business. During this challenging time and enhancing our digital presence globally with new European websites.

And E Commerce. These efforts along with sustained innovation will strength strengthened <unk> position as the most trusted dive brand in the world.

Looking ahead, our near term focus is to keep pace with the strong demand and fishing watercraft recreation and camping longer term, we remain committed to investing in our key strategic tryst strategic.

Strategic drivers understanding our consumer sustaining innovation leadership, identifying new sources and paths of growth and our markets and optimizing our digital consumer experience as more consumers research and purchase online.

Ongoing hard work on these priorities ensures that our portfolio of market, leading brands is well positioned for success in 2021 and that we continue to deliver sustained profitable long term growth for Johnson outdoors now I will turn the call over the day for a review of the financial highlights.

Thank you Helen and good morning, everyone.

Helen mentioned and the second quarter was another unprecedented period with strong sales and three of our for businesses.

With market dynamic strong and retail inventories lean.

Our excellent sales performance was the key driver and increasing profits during the quarter.

For the quarter gross margin of 45, 2% was down slightly versus the prior year quarter, as a $1 $1 million increase and tariffs and higher freight costs for raw materials offset overhead absorption benefits from higher volumes.

Operating expenses for the quarter increased $13 $9 million, driven primarily by higher sales driven expenses as well as higher variable and deferred compensation expenses between quarters.

Deferred compensation expenses were up $4 $7 million due to favorable valuations and we're 100% offset and other income.

Net income for the quarter was $27 $8 million compared to $24 million and the prior fiscal year second quarter and.

And year to date effective tax rate is 24, 7% compared to last year's rate of 27, 5%. We expect for your tax rate to be in the mid twenties.

Looking ahead, we anticipate a strong season, and we'll continue to monitor the many marketplace dynamics.

While our cost of goods will be pressured at this time, we don't expect a material impact on our margins from cost increases.

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

Yes at this time and if anyone does have any questions. You can press star one on your telephone keypad, Frank questions for going to Starwood and our first question comes from the line of Anthony <unk> from Sidoti.

Yes, good morning, and thank you for taking the questions. So first.

Dave you said that the inventory.

And Tory levels of retail or lean is that across the board or just wondering if when you look at Europe.

Yes.

Particularly for where you think the <unk>.

Retail inventories are leaner than others.

Got it okay. Thanks for that color, Dave and then.

You mentioned that.

Obviously, our demand and supply work.

And working to increase capacity. So can you give us a sense as to where you are with us.

And what should we look for them.

Youll book.

Greece.

And from here.

Yes, I mean.

And.

And we're kind of set for the season and a way and we added shifts early.

Through our factories.

And where we're building product.

Like 80% in terms of being able to have our workforce in the plan because of the COVID-19 and all of the safety rules and they're going out and so.

If we can cross our fingers, how things change we will.

And the ability to staff.

And more during a shift.

Got it okay. Thank you both for color.

So in terms of any supply constraints.

So I think it's been well publicized can you give us a sense as to.

As you look now on May 7th versus March 31 quarter, and as thing and it's gotten better or worse for the same and in terms of the supply chain constraints.

Yes.

I would say, it's pretty dynamic Anthony right now.

Electric and parts coming in.

And we're working very hard to make sure we have adequate supply.

I think we've done a good job, so far and maintaining that.

Pretty delicate balance right now.

Got it Okay, and then lastly, I guess for me here so.

How should we think about your ability to offset the higher costs.

For price increases.

Are you thinking about those or anything else.

Other cost mitigation strategies.

Sure Yes.

<unk>.

We will definitely consider all options to help mitigate cost increases.

Cost savings programs are important and how we price our product the innovation, we bring out into the marketplace. That's all part of the equation and we will look at all options for that.

Got it okay, well, thank you and best of luck.

Thank you.

And there are no further questions in queue at this time I would now and turn it back over to Helen Johnson CFO.

Thanks, everyone for joining us and we.

Hope you have a great day.

Thank you.

And.

This does conclude today's conference you may all disconnect.

Q2 2021 Johnson Outdoors Inc Earnings Call

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