Q1 2022 Vista Outdoor Inc Earnings Call
Good day and welcome to the Vista Outdoor Inc. First quarter fiscal year 2022 earnings Conference call. Today's conference is being recorded and at this time I would like to turn the conference over to Vice President Investor Relations.
Hubbard. Please go ahead ma'am.
Good morning, and thank you for joining us for our first quarter fiscal year 'twenty 'twenty 2 earnings call with me. This morning, if Chris Metz Vista.
And outdoor Chief Executive Officer.
Hunter you free at Archie Senior Vice President and Chief Financial Officer, and Destock Shokran President of Hunt shoot tactical accessories.
And Bushnell golf.
Before we begin I would like to remind everyone that during today's call we will be making several forward looking statements and we make these statements under the safe Harbor provisions of the private Securities Litigation Reform Act.
These forward looking statements reflect our best estimates and.
And assumptions based on our understanding of information known to us today.
These forward looking statements are subject to the risks and uncertainties that face and Vista outdoor and the industries and which we operate.
We encourage you to review today's press release and Vista outdoors SEC filings for more information on these risk factor.
Saturate and uncertainties.
Please note that we have posted presentation materials on our website at investors that Vista outdoor dot com, which supplement our comments. This morning and include a reconciliation of non-GAAP financial measures.
With that said I'll turn it over to you Chris.
Thank you Shelly and.
Good morning, everyone and welcome to our fiscal year 2022 first quarter earnings call. We're excited to share details about our results and the growth potential of our brands. Our management team has spent a great deal of time together at the beginning of the quarter as part of our Investor day in May and we.
We hope he felt the energy and passion of our leadership team.
Like I did as part of the value creation framework, we introduced new 3 year financial targets and I can tell you that our teams are already well on their way to delivering results.
Again to those who joined the Investor Day now, let's get started with our first quarter results.
We began our fiscal year with another record quarter and strong.
Performance across the entire portfolio, including sales growth of nearly $184 million up 38% to $663 million compared with the prior year quarter.
Record gross profit of $241 million up 93% rent.
A record EBIT of $144 million up 200%.
<unk> and record adjusted EPS of $1.74, compared with 51.
And the prior year quarter.
And Q1, we delivered 38% sales growth, which translated to 24% EBITDA margins due to growth and operational changes we made over the past few years of our strategic transformation.
Stage.
As a result, our business is running more effectively and efficiently and ever generating tremendous leverage.
Taking a look at our segments growth in Q1 was evenly balanced with shooting sports up 39% and outdoor products up 38% driven by innovation and heightened demand for all of our pre.
<unk>.
E Commerce posted another quarter of double digit sales growth up 19% year over year on top of the previous years, 40% growth rate, despite physical doors reopening our DTC channel grew significantly higher.
We also maintained a strong balance sheet with over $200 million and cash.
Permission and and unchanged leverage ratio at 0.7 times, while adding 4 acquisitions in the past 9 months.
Outdoor recreational activity also continues to show highly favorable trends across camping, <unk> outdoor cooking hiking biking, fishing hunting and more.
1 area of high growth within Viking.
E bikes.
During the quarter, we added a premium electric bike brand to our portfolio quiet cat. We are very excited about the opportunities within this category and particularly with this brand.
We also added a female hunt inspired apparel brand and order.
We see great potential and both brands and look forward to seeing them.
And flourish and I am pleased to report that Vanore and quiet cat have been fully integrated and under 60 days and welcome to the Vista outdoor team.
The safety of our employees is Paramount as the pandemic continues we are providing resources for employees, including localized updates based on current conditions onsite.
Is easily protocol and vaccine information.
We have had minimal disruption within our facilities and we want to thank our employees for their diligence and keeping themselves and others healthy.
As you can see our people are the driving force behind our success. Our teams have continued to rise to the occasion and to find new ways.
As to make operations more efficient, which is paying off and new records.
Our throughput and absorption rates are at record levels and overhead has remained steady allowing strong leverage.
I'm proud to lead this organization as we empower people to achieve their goals and live their best outdoor lives.
Across our portfolio.
Polio consumer trends and participation reports demonstrate that outdoor resurgence of 2020 has not slowed.
According to the latest study by people for bikes. The total year to date 2021 market continues to accelerate outperforming even last year and growing by 12% compared to January through May 2000.
Yeah.
The RV industry posted another record month in June with RV sales up 25% compared with the prior year and nearly 39% versus 2019.
Southwick Associates released data and May 2021, showing that ammunition demand is not slowing the research found that <unk>.
And in 'twenty ammunition consumers had current inventory was lower than preferred and that over 80%, we'd like to add more.
Campgrounds of Americas June Research report predicted that 53 million Americans with camp and 2021. This figure's up over 480000 from its may projections.
<unk> of our national and state parks, while they are surging with national Parks, and Utah, seeing 15% increases and state parks, and Minnesota, which also happens to be in our backyard up 60% just to name a couple and just last weekend, the 32nd Olympic games kicked off and Tokyo. Many of our brands will be along for the ride and.
And we wish all the athletes the best of luck.
We also believe that demand and the ammunition market will have a longer run and this cycle and in past demand uncertainties the and.
Influx of over 10 million new gun owners into shooting sports has fundamentally changed demand dynamics.
<unk> is no longer a good leading indicator.
Demand for ammunition and forecasting our business, we have and instead shifted our focus to the unprecedented level of ammunition and consumption.
Retail and consumer inventories and our own multibillion dollar order backlog and all of which indicate that demand is very strong and will be for the foreseeable future regardless.
Yeah.
By now, we're all well versed and the supply chain disruption that continues to provide challenges and meeting demand.
Across the business our teams are stretching their supply chains and ramping production to source build and bring more product to the market.
Consumer demand for our product is not slow during the summer and fact, it's accelerate.
Elevated simply put we cannot meet the current level of consumer demand. We are fortunate to have a world class supply chain center of excellence supporting our businesses. It has been a collaborative all hands on deck moment for our company pooling resources and leveraging our scale to overcome many of the challenges.
And the headwinds we've got more than our fair share and delivered a strong quarter and our outlook is bright and we will continue to find ways to outperform and focus on what we can control.
Our strong underlying fundamentals combined with continued growth and outdoor trends new product innovation and meticulous execution.
Enabled us to navigate the headwinds and position our company for continued growth.
Our forward looking guidance contemplates the continued supply chain challenges and shortages that we and all others are currently experiencing.
Now for an update on our business units new products cement brand loyalty attract new.
Customers and drive organic sales growth, leading to higher profitability and returns to shareholders. This cycle is a fundamental part of our business model and it's why we continue to grow our R&D investment at a faster rate I am pleased to share with you our progress.
I'll begin with an update on our ammunition business if you.
Consumer media or trade publications, you likely saw the statement that big Green is back recently.
This campaign updated consumers about remingtons production progress and where they can find their favorite Remington loads.
This campaign has translated into ahead of schedule progress for the Remington brand.
Combined with strong.
He follows for our legacy ammunition brands I am pleased with the overall positioning of our ammunition platform and the round the clock production of our dedicated teams and has heightened demand market.
During the quarter, we successfully launched a category 1 loyalty program and have seen great response from members looking to get here.
And from their favorite ammunition brand loyalty membership has grown 400% since the first week and we've seen a strong percentage of members coming back to our site to make repeat purchases.
We also announced our ammunition subscription program our plan subscription service is on track for fall 2021 launch.
And we will further bolster our DTC capability, allowing us to better connect with our consumers.
And the loyalty and subscription programs are critical to allowing us to communicate directly with consumers, which in turn enables us to better share trends with our customers.
Federal and CCI brands continue.
With recent contract wins and retailer awards showing that the brands are in high demand across many categories.
Federal ammunition was awarded a 3 year contract to partner with the Defense Ordinance technology consortium to design develop and demonstrate technological superiority and small arms.
Ammunition.
Shooting sports retailer and tactical retailer magazine named our 2020 independent retailer Choice Awards CCI was honored with the Gold award and the rimfire category of both publications.
And lastly, federal ammunition has already reached the podium and Tokyo.
Throughout this week team USA, 1 gold and the men's and women's Olympic ski competition, using federal and gold metal paper shot shells congrats of team USA.
All in our ammunition team has delivered not only industry, leading growth, which gets more products onto our customer shelves, but also industry leading margins.
Earlier, now, let's turn to outdoor products, where each of our brands had a terrific quarter with all of them growing sales double digits year over year, let's start with Bell zero and Blackburn the Olympic games will give many action sports and international audience, where the best of the best compete for goal. This stage will drive interest.
Lying sport, while also featuring our products.
Zero will be represented by 33 athletes from 16 different countries at the Olympic Games, and Tokyo across Road Racing Mountain bike racing track racing time trial and triathlon.
Zero is also generating brand awareness.
And the interest and sales through its flash point MV MNT marketing program. This is a collection of riders and brands with 1 share goal breaking down barriers to change the image of cycling.
Our action sports brand and will also be represented and Dick's sporting goods, new line of retail stores and public lands.
We'll be sorting zero helmets choose gloves and bell helmets as part of this new endeavor.
Blackberry is launching several new products and the lighting category and we expect their updated ecommerce platform to be live next month.
Combined with positive momentum and Canada, and Europe, Bell zero, and Blackberry and are strong.
<unk> and heading into the remainder of the fiscal year.
Campbell had an outstanding quarter as well growing over 80% year over year, the sales tailwind and combined with their best in class marketing and customer loyalty positions camelback well for the future.
During the quarter Camelback.
<unk> light deal for Prime day was 1 of the top sports and outdoor deals the Triton renewal water bottle, which is made from 50% recycled materials drove strong retail sales, while the 80 plus kids bottle was the number 2 selling style for the Amazon water bottle category.
Outside magazine recognized multi.
Bev and their best women's travelled year of 2021, and the <unk> and their best men cycling gear of 2021, the podium bike and support model franchise continue to set records with sales up triple digits over the prior year quarter and.
And lastly, the horizon drink wear line, which was new in 2020.
And is up over 500% versus the prior year quarter, driven by an increase and key retail listings strong marketing focus and a new customization feature on Dick's Sporting goods website.
Camp chef is not only benefiting from strong outdoor trends, but also new innovative products.
The campus.
<unk> sidekick program added another attachment with the introduction introduction of the sidekick sear. The sidekicks here as part of the camp Chef 14 inch interchangeable Cook system, and will give new and existing pellet grill owners. Another reason to come back to camp chef.
The affordable Everest camp stove is a sought after product.
And retailers at all levels cannot keep it on the shelves.
And nobody desk camping better than camp chef and this has been and exciting trends supporting sales and brand affinity.
And <unk> line of fire pits is also part of the broader home improvement trend and.
<unk> fire pits have been a popular product as people seek to create a back country experience.
<unk> and their back patio.
For an update on our hunt shoot and golf business, <unk> soccer, and president of Huntsville, tactical accessories, and pushed out <unk> off to provide and update the shack.
Thanks, Craig and Hello, everyone.
Hunting and shooting accessories business continues to thrive.
Sales growth of 37% year over year, driven by triple digit sales growth for our CBS reloading and Golden Arrow's business.
New product innovation and increased participation across the hunting and recreational shooting market were primary drivers of growth.
We were especially pleased with the performance of our range finder category.
The category was up triple digits year over year supported by strong market demand for the prime <unk> hundred and the newly introduced Prime 1800 with active things technology.
The new active thing technology is.
As a game changer and the market and allows the display to Fluidly change based on the lighting condition.
We also integrated the same active and technology into our new fusion ex range, finding binoculars, which has seen strong market demand as we head into the fall hunting season.
<unk> fusion ex is loaded with features and gives users the best of both worlds optimal viewing clarity and ranging accuracy all in 1 unit.
It is immensely rewarding to watch our continued success and the range Finder category Bushnell created 25 years ago.
Bushnell has also made.
Tremendous advancements and the trail camera market, especially with a new line of cellular models, the cello core 20 and 30.
These new models offer proven and cellular performance improved connectivity best in class battery life, and a user friendly app for starting.
Putting images.
We have also made advancements to our entire digital ecosystem, focusing on and improve brand experience across all websites.
We are now more agile with product updates and are consistently putting our best foot forward with enhanced content and improved.
Improved navigation and supporting the customer experience and our retail partners.
Before I turn the call. Many of you have seen the launch of the new Outdoorsman Bluetooth speaker.
Which is a rugged down solution that was designed for outdoor adventures.
From the woods to the back.
And start the vote to the beach and from the ATV to the Tailgate Party.
We are really excited about the outdoorsman and Howard can expand the Bushnell brand.
Now, let's turn to golf, the golf industry set records and participation and equipment sales in the second half.
<unk> and the trend has only continued in 2021.
Rounds played through May are up over 33% and our golf team is well positioned to capitalize on the growth with a variety of new products.
And new fans and to handheld GPS started shipping in June and.
Our 20th reception has been incredible.
First deliveries sold out on <unk> dot com and a few hours.
In addition to defend them to the new ion edge watch will be introduced to the market in August.
And touch screen feature rich watch with Green view and a long.
Long battery life will deliver strong results.
Each of our golf products operate independently, but are fully integrated with our new mobile app. The revamped Bushnell golf mobile App earned a 4 star plus rating and over 20000 downloads and his first few weeks.
We also announced our entry into the domestic large monitor market low.
Last week, we announced our partnership with Technology leader Force bites boats and.
And our intent to bring our consumer solution to the market under the Bushnell golf brand.
The large pro will offer our core consumers.
Access to the best technology, and measurement and analysis to support our game.
Launched flow also expands our offerings and the off course inspired golf segment through access to multiple co simulations to enhance that and home or off course, playing experience.
We will begin taking orders in September and will ship the launch growth in October.
We are also constantly seeking new markets to leverage our technology and IP portfolio, which has led us to the rapidly growing sport of difficult.
Our disc golf laser range.
And their product the edge laser range finder, and has been well received and the marketplace.
We're also activating partnerships and the advocacy sectors to expand access and infrastructure for desktops.
And last but not least I would like to extend my tanks.
Range by and appreciation to our entire business and the people that drive our success.
We have a strong culture, driven by passionate enthusiasts, who not only made great products, but also use them and their own outdoor adventures.
As part of our secret sauce.
And I am truly honored.
<unk> represent our people and this call today Chris.
Chris.
Thanks, Felicia I'm very excited about the future of Vista outdoor we have great leaders passionate employees and plans in place to drive growth and profitability across the entire organization.
And now I'll turn it over to Sudan to dive deeper into our Q1 financial performance and.
And provide our outlook. So you don't you.
Thanks, Chris and good morning, everyone.
As Chris mentioned earlier, we delivered another quarter of record results and growth profit EBIT and EPS in Q1, following a record year and fiscal 2021.
We grew sales by 38%.
Percent and Q1.
And with balanced growth across both segments exceeding our expectations.
There is no question that industry trends remain highly favorable as consumers continue to look to the outdoor 40 creation.
To capitalize on this opportunity.
We further invested in innovation e-commerce, and our supply chain to position Vista outdoor for continued growth and profitability.
During the quarter, we purchased 1.2 million shares and maintained a low leverage ratio of <unk> 7 times well.
Below our target leverage ratio of 1 to 2 times.
We also ended the quarter with $209 million and cash and integrated 2 recent acquisitions into our business.
Remington is also ramping up faster than we had anticipated.
Enabling us to better meet higher demand for our products.
We have had great success and integrating acquisitions.
And our smart serial acquirer and illustrating that we can do this and an accretive manner.
In May we hosted our investor.
Yesterday and outlined our 3 year performance goals.
To recap we are targeting the following growth and profitability ranges.
Sales growth of 10% plus on average annually, which includes mid single digit organic growth plus acquisitions.
EBITDA margin in the range of 15% to 20%.
Free cash flow of $600 million or more over the next 3 years.
E Commerce as a percentage of total sales of approximately 25% to 30%.
Leverage ratio.
At approximately 1 to 2 times and capital expenditures of roughly 1% to 2% of sales.
These targets are supported by our long term financial strategy to drive continued organic growth through investments and increased market.
Yeah.
Maintained a strong balance sheet and cash flow generation.
And acquire complementary businesses that we can take to the next level of sales and profitability by leveraging our centers of excellence relationships and expertise.
Okay.
Sure. We are very excited about the solid financial and operational foundation, we have built.
Supported by the strong underlying fundamentals and a growing addressable market.
Thank you to those who are able to join us at our Investor Day <unk>.
And we received great feedback about day event.
We are happy to could join us.
And for those who may have missed it the event replay and transcripts.
And at level on our website at investors Dr Tester outdoor dot com.
Now, let's move on to Q1 results and more detail.
Overall this morning, we provided both as reported and adjusted results and our earning release, including the slides accompanying our earnings conference call.
My comments today focus on adjusted results.
Looking at Slide 11, Q1 sales growth.
Earlier D, 8% that included net identical growth across our shooting sports and outdoor products segments.
We have delivered double digit growth across all major product categories.
Outdoor recreation ammunition, hunting and shooting and acts and sports.
Gross profit rose, 93% to $242 million from a year ago, driven primarily by shooting sports with strong contribution from outdoor products.
These increases were primarily driven by volume and.
Price increases due to higher input cost.
And a strong growth across our DTC channel.
EBIT growth, 203% to a record $146 million driven by gross margin expansion and operating leverage.
And EBITDA margin reached a record high at $24.4.
<unk> and.
Increasing nearly 11 percentage points compared with the same period a year ago.
Interest expense for the first quarter was $6 million down 12% from the prior year due to a more favorable rate following our refinancing announced in March of this year.
4% slightly offset by a higher average debt balance.
First quarter adjusted tax expense was $35 million compared with $12 million in the prior year.
The adjusted tax rate was 25%.
Adjusted net income by 105 million.
Resulting in a record adjusted EPS of $1.74, compared with 51 and the prior year quarter.
Key drivers behind EPS of strength, where volume improved gross margin in both segments.
Growth of our E Commerce channel and continued benefit.
And from new products and cost saving initiatives.
Turning to page 12 of our presentation.
We have maintained a solid balance sheet with net leverage of <unk> 7 times, and our strong liquidity of nearly $600 million.
We have no.
No outstanding borrowings on our ABL revolver.
Our working capital increased year over year.
Similarly, driven by an increase in inventory.
The majority of this growth is from acquired businesses and.
And and increasing in transit inventory due to higher demand.
And and logistics delays.
Overall, we are and our strong financial position to fund future growth.
Moving on to page 13, you can see that our capital allocation priorities are to invest in organic growth net.
<unk> food and acquisition and maintain.
And our strong balance sheet, while maintaining a low leverage ratio.
We are investing in organic growth and acquisitions and we have also implemented a 2 year $100 million.
Share buyback program announced in early May.
As we.
<unk> acquisition opportunities we.
We will remain diligent to ensure we are not overpaying and that data a strong strategic fit within our portfolio to grow sales and profitability beyond what these companies could do on their own.
Non less safe to our segment.
We review beginning on page 14.
Shooting sports recorded first quarter sales of $463 million up 39% from the prior year quarter.
Of this our ammunition business was up 39% and our hunt shoot business was up.
Up 37%.
We continue to see strong demand for ammunition, as well as hunting and shooting accessories with the strongest ammunition categories being pistol and rimfire and soft shell ammunition.
And we continue to see strong growth across.
And all distribution channels, especially for ammunition and store inventories remain low.
First quarter gross profit dollar with Huntington and $81 million up hunting and 15% from the prior year quarter.
Gross margin for the quarter was 39%.
Which is roughly 14 percentage point improvement when compared with the prior year quarter.
Margin exploration were driven by strong consumer demand.
Actual pricing improvement mix and operating efficiencies.
EBIT dollars also incur.
Creased at accelerated rates up 160% with a rate increase of 15 percentage points from the prior year quarter.
Turning to outdoor products on page 15.
First quarter sales were $200 million up 38% over the prior year.
Continued demand for our product drove double digit sales growth across all business units.
Gross profit was $61 million up 48% from the prior year.
Gross profit margin improved by approximately 200 basis points.
EBIT.
More than doubled to $26 million up hunting and 25% from the prior year period, driven by gross margin expansion with fixed cost leverage and mix of higher margin product, which was somewhat offset by increased distribution and freight costs and higher product costs.
Turning to our outlook today, we are providing guidance per our second fiscal quarter.
Following a strong first quarter of fiscal 2022 and continued heightened demand across our portfolio we expect.
Revenue in the range of 710.
And then the $730 million compared with $575 million and the prior year quarter.
And earnings per share in the range of $1.72.18, compared with $1.10 in the same period last year.
For the full fiscal year.
We have updated our injunctions too and effective tax rate in the mid 20% range interest.
Interest expense in line with prior year adjusted interest expense R&D.
R&D expense of roughly 25% higher than last year.
And we are in.
Increasing our capex from approximately 15% growth to 30% growth over the prior year, primarily driven by investments and ammunition to reduce bottlenecks and maximized our production.
We continue to expect strong demand for all of our brands.
So the remainder of this fiscal year.
This was driven by continued increase in year over year outdoor participation rate trends and also by our order backlog for shooting sports and outdoor products.
We are controlling what we can control and work.
So tirelessly to get finished product through the constrained supply chain to our consumers.
In the second half, we anticipate elevated ocean freight costs as container prices rise.
And we expect greater use of air freight where it makes sense.
Working to reduce the lead time to our consumers and alleviate some pressure and the supply chain bottlenecks.
Yes.
We also expect higher commodity costs year over year in our U S manufacturing businesses as well as higher labor costs.
That's.
That said, while we achieved a record EBITDA margin of 24%, which includes the increase in demand, but also a reflection of the heavy lifting with day to transform our businesses.
<unk> EBITDA and the second half and the upper end of our key and target.
Range of 15% to 20% that we provided at our Investor day.
And we expect sales growth and the second half of 15% to 20%.
This sales growth assumes Remington achieved annualized run rate of 300 to 4.
$400 million.
And sales starting Q2 of this fiscal year.
We are excited about the growth and future opportunities for both segments, which continue to outperform last year.
We are in a solid position to continue investing and our brands with our financial flexibility.
We maintain low leverage ratios and remain opportunistic and M&A.
Thank you for your attention.
Let's open the line and take your questions.
Thank you to our speakers, ladies and gentlemen, if you would like to ask a question over the phone at this time.
And you signaled by pressing star 1 on your telephone keypad. Please note that we are using a speakerphone and just to make sure. Your mute function is turned off to low your signal reach our equipment. Once again that is star 1 to ask a question and we'll pause for just a brief moments to give everyone an opportunity to signal for questions.
And she will now move to our first question over the phone which comes from James Hardiman from Wedbush Securities. Please go ahead. Your line is now open.
Hey, good morning.
Congrats on another.
Pretty impressive quarter here.
So.
Obviously, you blew away our expectation.
<unk> got I don't know if you blew away your own expectation by my quite the same magnitude, but I guess, if I look specifically.
To shooting sports.
And I guess within that ammunition and $364 million of sales.
I wouldn't have thought that was possible given that that is.
Obviously capacity constrained maybe walk us through how you were able to accomplish that I'm, assuming that a big part of the answer as Remington being up to speed.
And maybe maybe quicker than expected.
And if that.
The entirety of it.
But maybe speak to and how youre able to accomplish that.
264, the new baseline and then how do I think about ammunition in the context of a second quarter guide that is.
That is also.
Up there so to speak.
Weak.
So hey, James Thanks for the.
The kind words at the beginning I mean to answer I guess.
And Thats part of your question.
We were.
We are pleasantly surprised with the way things came in the first quarter.
Remington because of the execution of our team.
Came on speed, even faster than we had anticipated and I should say the same.
The first per heavy shot and unrelated ammunition. We're proud of the fact that we fully integrated our 2 other acquisitions quiet cat and <unk>, but we were pleasantly surprised with the trends we saw in the ammunition business.
I would not look at the.
Margins or.
The sales level as something that is a.
Continuing at those levels. It will continue to be high it'll continue to be beyond any historic.
Hi is that we've seen and will continue to ramp up Remington, but the margins were.
Jordan Aerie and.
We were benefited by some strong hedge positions that will begin to roll off.
We continued to see the extraordinary demand and the marketplace help us from a from a pricing standpoint, and so there were a number of factors that contribute to it.
But as I said in my opening script remarks.
Yes, we've taken Knicks, and said Thats no longer a strong indicator or correlating factor.
In the way we look at continued ammunition.
Performance I mean, obviously it is a factor, but not the biggest I mean, the underlying backlog we have the inventory levels that are low.
The participation that is at all time highs the new people that we've entered into the industry all.
Our good harbinger for free.
Forward looking forecast and demand.
That's helpful and.
And to the question of sort of the forward guidance I don't know is there a.
A way to think about.
<unk>.
Maximum ammunition sales rate or output once Remington is up to full speed.
Yes, James we've given some pretty good color and the past in terms of running 24.7.
And we think we've.
Well, we believe we have.
Achieved more capacity expansion and anybody and the industry by the.
Pier, a fact that we bought Remington and heavy shots, we've added 2 more factories into.
Our lineup if you will and.
And we've been running 20.
4.7 as I mentioned, but we continue to smartly find ways to increase our capacity.
A little bit here, and a little bit there and that certainly contributed to it but.
But were being super mindful of not adding a lot of fixed costs and a lot of fixed overhead.
Knowing that at some point.
Point and time, the hyper demand, we're seeing we don't see it going backwards, but we see it is certainly slowing down to a more reasonable level at some point in time, we don't know when that point and time is.
So we're going to continue to run the factories as we're running them and we're going to continue to scratch and claw for little bits of capacity.
Capacity expansion here and there, but nothing material.
Very helpful. Mark I appreciate it.
Yep Thanks, Jamie.
And then move onto our next question over the phone which comes from Gautam Khanna from Cowen and company. Please go ahead. Your line is now open.
Yeah, Hey, guys. This is Dan on for Gautam good morning.
So listen it appears from our channel checks that in store animal availability has been improving.
And at least marginally and it sounds from your comments earlier that.
And it's not on the demand side, it's not like day.
Demand is slowing so is there anything that you see on the supply side that explains this.
And also did backlog increased again this quarter.
Yes, so Dan.
Let me take the latter of the 2 yes, our backlog did increase and as I mentioned and the scripted remarks.
And the.
Multibillion dollar level, it's at a high level and the inventory and our customers' channel, although improving I think the word you use is is the right word which is marginal improvements I don't think we have 1 customer that I can think of that as real happy with their inventory per.
Physician and we worked tirelessly day and night trying to allocate inventory and the most appropriate fair and equitable way so.
And we would however continue to see the inventory levels marginally improve as we go forward and the ensuing quarters and a lot of that has to do with us.
<unk> shouldn't becoming more efficient increasing a little bit of capacity here and there as I mentioned as well as our competitors. So.
Demand continues to be there and.
And.
I mean people have.
And certainly enjoyed the product coming available.
We expect that to continue as we as.
Forward.
Okay, great. Thank you.
Could you also just comment on pricing trends and the industry.
Well I mean pricing is certainly remained stable and in fact in some respects it's started to come down a little.
As we go which we think is a good thing and when I say come down I mean the.
Pricing that is MSRP pricing, what have you that hasnt changed but I think the retail pricing to customers driven predominantly by the E. Tailers has come down to what we believe is a more reasonable level and not much.
A little bit, but it has come down a bit I mean, it still follows supply and demand dynamics.
But I.
I think the pricing has.
It has come down a little bit now what we would say is.
And last year with last year's acquisition of Remington and it certainly.
Helped us from a capacity.
But these standpoint and it certainly helped us from a.
A variety and a price I would say disciplined standpoint, because we.
We bought 1 of the companies that we felt like we could help from a.
Our market commercial standpoint, and and we certainly have <unk>.
Creating even more discipline from us.
Passe standpoint.
Why would look going forward to see more discipline in the industry than in previous surges that is or are certain belief.
That's very helpful. Thank you.
Our supply and now move onto our next question over the phone which comes from Matt Koranda from Roth Capital. Please go ahead. Your line is open.
Hey, guys, just specifically and the ammo side of the shooting sports segment I'm. Just wondering if you could comment on sort of volume versus price contribution of growth from the quarter.
And then just on a go forward basis, how do we think about that.
Yes, so Matt why don't I, let Sudan, and you've talked a little bit about the volume price.
Question you've asked.
Thanks, Chris Thanks, Matt Good morning, So we don't disclose the mix between price and volume.
But as you can see the improvement you saw and ammunition growth margin and EBIT, it's driven by all of those factors volume price. Obviously Remington is helping US we are much ahead of integration.
Doing great bolt in adding sales and profitability and also DTC channel.
You saw our e-commerce grew 19%, but DTC grew significantly higher than that.
So thats, what I will leave at that we don't breakdown with food and volume pricing and mix, but we believe.
And the kind of margin and we have done all of those things helped obviously commodity as Chris mentioned.
And we had.
Good hedges and that's also helped.
I will leave it at that Hey, Matt I would add 1 thing because.
<unk> out to our manufacturing and operations teams, so to add to <unk> point on pricing and and mix a big part of our margin lift as well as the.
Is the efficiencies that we're driving and our facilities. So we continue to take our.
And our efficiencies up we figure out smarter ways to run longer to produce the calibers that people are looking for and we're doing this with with really not adding people not.
And machinery PP&E things of that nature, which have really helped us leverage.
And our entire operation So think of the last surge, where we were kind of and the low twenty's EBITDA margin and this surge where and the low thirty's from an EBITDA margin standpoint and.
Pricing.
Adding mix is I would say maybe we haven't studied that if there is much of a difference but I can tell you. We've got a completely different team in place and in terms of the way they manage.
The operations, which I think points to.
Longer term stability and a gross margin line for us.
Okay helpful and then.
And just on the Remington ramp.
Just wanted to maybe if you could put a finer point on it sounds like you guys are ramping a little bit faster than we had anticipated and maybe a little bit faster and then you guys had spoken to and prior quarters.
What are the gating items that keep you from ramping now and to that $400 million.
And run rates.
Kind of talked about on the upper bound of what's feasible is it more labor related or is it component related what are the gating items there.
Yes, so Matt.
Again, when we bought Remington we felt like it was going to be a really good fit for our organization, but we knew we had a number.
Number of challenges and I think why it's even exceeded our expectations is because we were able to really leverage some of the supply chain and materials and what have you and and we really had a collaborative effort between the Remington team and our federal CCI Speer.
And so just a wonderful team effort.
We are quickly getting to.
That run rate and is Sudan to pointed by as we move through the year, we'll be at that $3 to $400 million run rate and really the limiting factors are the 2.
<unk>, you mentioned, which is 1 labor and the labor.
And your team everywhere, although we've got a workforce down to little rock, Arkansas area, which is terrific and super excited to be a part of for.
For the first time ever and ammunition company, that's really focused on Ami.
Munition and too.
Input materials right whether it's.
Tight edition outdoor products or any consumer products category for that matter everybody is facing input material shortages. So we factored all of this into our guidance going forward and that would be probably the limiting factor if you will.
Okay helpful. I'll jump back and do you think you guys.
Well now move to our next question over the phone which comes from Scott timber from C. L. King. Please go ahead. Your line is open.
Good morning, guys and congratulations on a great quarter.
Thanks Scott.
What was the actual dollar contribution from Remington and heavy shot and the quarter.
And.
So Scott and does this with Hangzhou and I said last call, we don't disclose it anymore, because we run it.
And 1 ammunition business be making trade off decisions between raw material from Remington factory or heavy truck factory, but what I told you before we were expecting a $200 million.
Run rate from Remington and heavy shot is $20 million of business.
But now we guided that Remington will achieve $300 million to $400 million run rate starting in Q2. So you can do your math.
But you can see from sequential improvement from Q4 to Q1 and our <unk>.
Ammunition business.
Remington is a big part of it.
Okay.
Okay got it and last question on the DTC.
And definitely got some really nice growth there and obviously the margin opportunities are huge but could you talk about how far along you are.
And growing that and.
How much low hanging fruit is.
It's still there for you guys.
Yeah, Scott and I would characterize it as we're still in the early innings on DTC and the exciting thing is we started 3 years ago laying the plumbing and the piping and what have you. So the infrastructure, which we spent a lot of money and we've added a lot of people too.
As is.
And is largely there we continue to add to it and fairness, but.
So it's been built it's highly scalable and it's going to help us not only with our organic businesses, but it is going to help us increasingly as we acquire companies and and.
And we've certainly with our our debt.
It shouldn't have really ramped that up but I would again characterized it and the early innings. It's something that we are super excited to collaborate with our brands, but also with our customers I mean, we think a big part of what we're doing on D to C will help grow the pie and total I mean, if you sit back and you.
Is it all the new products, we've just launched I mean gosh it's.
Every quarter, we launch more and more and you heard <unk> talk about hunting and shooting accessories and all the laser rangefinders and we've just we've introduced dozens and dozens of new products. There is and any number of customers that can really say grace over all of the content that.
Look it on and provide online so we're doing that not only for ourselves, but for them and we're taking insights and we're taking learnings and we're driving more.
Much more viewership online with all the content that we're creating and we think it's going to grow the pie and total we thank all of our customers are going to grow their business.
And wherever we can we'd like to feed our business to them. So <unk> along for the ride. We certainly understand there is hyper growth opportunities for us and.
We don't want to be beholden to.
People not showing our consumers' experience that we frankly believe they deserve so we're controller.
We want our own destiny and feeding the business, where it wants to be.
Got it that's all I have thanks.
Okay. Thanks, guys.
And now move onto our next question over the phone which comes from Mark Smith from Lake Street Capital markets. Please go ahead. Your line is open.
Yes.
Control and guys I just wanted to follow up a little bit on that direct to consumer business.
Can you talk at all about mix and how that is between shooting sports and outdoor products in particular and ammunition. How early are you and and really building out that direct to consumer business.
Well Mark I got to tell you I mean, the exciting part is it's so broad based and it's across the board.
Across all of our business units and I think thats whats contributing.
And in many respects to why our business is all of our businesses are growing double digits now when you think of D to C. It really.
What's the opportunity to bring new products to life faster, so where we have exciting new products.
And we need to get them to market fast it really enables us to overnight launched this to the consumer now we're we're excited to tie ammunition to hunt shoot accessories to even brands.
Like quiet cash or to camp chef is is really behind the scenes right. We're running on a singular platform that allows us to leverage technology, where we can cross promote so things like loyalty programs or things like.
Subscription and really help not just our ammunition business, but youll.
It gives them all and across all of our outdoor products businesses, and where we have like consumers and we have lots of white consumers across our brands and Thats, where we can really tie it together and Thats why I really reinforce the fact that hey, we're at the.
And the early innings I mean.
We said before we said at our Investor day that listen and best in class.
CFA is kind of 30% to 35% overall online business and a large part of the <unk>.
Great companies are moving towards D to C.
We're a fraction of that and despite being hundreds of millions of dollars and and our E. Com online business. There is a lot more to come.
Cash to Dan and then can you just talk about what youre seeing on the M&A front as far as deals coming out valuations and then maybe if you can discuss.
If you feel like you've got cash burn and a hole in your pocket or how patient do you want to be on the M&A from.
Well Mark he lives and we certainly from a cash burning a hole in our pocket I mean, we've been very mindful of our capital allocation right. So we went and Opportunistically and bought back shares and.
And thank our board for the authorization, we had and I think that's going to turn out to be 1 of our better investments.
We have quietly.
Built a small.
We're not yet calling a center of excellence, but we built a small team internally here that has worked over the last year to really evaluate targets and so you think about 3 of the first 4 acquisitions, we did I wouldn't call and proprietary deals, but they didn't go to auction and so we're able to smartly by.
Denise and not pay huge multiples because theres a lot of cash chase and deals right now and I can assure you that we're not going to go chase deals and pay huge premiums, but we are not going to be afraid to lean into something where we feel like it's great for shareholders. We feel like we can get really good returns on it and youre going to see us increasingly.
And compound more active.
We've heard investors say and we certainly talked about defense versus offense, we were doing a lot of defense and the first couple of years of.
And my tenure here and the last 12 months to 18 months or so we kind of had a balance of offense and defense and we're always going to play some defense, but we're much more.
<unk> now right, we find and we think theres some great great outdoor products companies out there that really view this step.
As a as a great landing spot rate, where they don't necessarily want to sell to and financial sponsor.
I want to be part of a long term outdoor products company.
Did they can carry their legacy on for years and years to come. So we're excited about the deal flow, we're seeing to be honest.
Perfect. Thank you.
And now move onto our next question over the phone, which comes from Ryan Sundby from William Blair.
Your line is open.
Yes, hi, good morning, I'll add my congrats on another great quarter too.
Thanks for asking about it.
I wanted to ask about your plans to enter the golf monitor and simulation market.
It seems like pushing out has plenty of brand equity in that space. So can you talk about why now is the right time to enter white.
Please go site as the right partner and then maybe what the economics look like with something like this is this and licensing deal or I guess will you be making the product and then I guess finally, what kind of price point should we expect to see for something like this because it seems like theres, a pretty big range out there for for some of these offerings.
Hey, Ryan, it's such an exciting opportunity.
Opportunity and we have so much going on and our golf business and that's a big reason why we have <unk> with US. This morning to talk about it. So if you want to take that question. Yes. Thank you Craig Good morning, Ryan and a great question and really appreciate it obviously, we are as excited as you to enter this space I mean, just to give a little context right you saw NGF and.
And golf data pick it out.
This was probably the third months consecutively that'd be had about $4 million plus the strength and golf equipment. That's occurred 3 highest months and a long long time.
And great market to be and when.
When you look at it from a golf enthusiast perspective, what we've been seeing is really 2 key trends.
Emerging in the space.
1 trend is really around technology, becoming relevant which is around hitting dynamics understanding vault flight and analytics and how that can be translated into performance enablement for.
Golf golfers and.
The screen.
And what I really already well adopted and the pro space Youll see that and all.
A major golfing event, but we see that as now is the time, where those technologies can be brought to our consumer and the golfing enthusiasts and the space.
Second big opportunity that and train and B C and the golfing space there's really.
The growth of off course box space.
I mean, I know all of us have seen top golf, we have all gone to those.
Arena, but increasingly more than just top golf and home simulators are starting to gain traction and we see that both of those.
And the right point.
And evolution and technology, where they can be meaningfully bought at the right value right value proposition and the right way to a consumer.
From a partnership perspective, I think it's important to note that <unk> been actively researching this space for quite some time.
All of the players in this space we have spoken.
Extensively tested we have a great and tunnel facility and a team that I'm really proud of that spend a lot of time evaluating different technologies and what we have come to the conclusion that force side is among the top leaders and their technology that camera based has increasingly become.
And we are very very popular and successful and.
And the pro arena, primarily because it accomplishes 2 tank it delivers on accuracy.
And at Delaware and consistency and those are the 2 most important things that golf will seek when they try and Delaware. So those are the phase I hope that helps you give some context Bolivia.
Yes, <unk> I think that's a great great answer for it I think as a closing comment on the golf segment.
<unk> team really studied the market and 1 of the things we found out is.
<unk> was 1 of the most popular brand names and launch monitors. Despite the fact that we werent even in launch monitors we were the second most recognized brands. So we have permission to play.
And this category and will be shack and team are going to do is take a product offer kind of 80% of the features if you will and bring in at a price point, that's a fraction of what the pros painful and launch monitors so exciting growth opportunity for us and golf.
So we appreciate everybody's.
Attendance. This morning, we know this is a busy earnings.
Earnings release week and.
And a lot of your are busy on other calls so certainly wanted to thank you for your attendance this morning and and <unk>.
I'd like to highlight.
The recent release of our second ESG impact report, we're excited to have this be released and our ESG focus is rooted.
Belief that common ground can be found outside we know through experience and outdoor experiences can bring people together regardless of their differences are report details our efforts and bringing people together and leading by example, I encourage every 1 of you to view our website and review the report and more detail from <unk>.
Out of our continued.
Drive to do well so that we can do good and thank you all for joining us here today.
Ladies and gentlemen, this does conclude today's call. Thank you very much for your participation you may now disconnect.
Rooted in the.
And.
Okay.