Q1 2022 American Outdoor Brands Inc Earnings Call
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Okay.
Thank you for standing by and welcome to the American outdoor brands first quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as well.
Today's program, maybe recorded I would now like to introduce your host for today's program. Although it is a.
This sharp Vice President Investor Relations. Please go ahead.
Thank you and good afternoon all.
Our comments today may contain predictions estimates and other forward looking statements.
Use of words like anticipate project estimate expect intend should indicate suggest believe and other similar expressions is intended to identify those forward looking statements.
Forward looking statements also include statements regarding our product development focus objectives strategies and vision.
Our strategic evolution.
Our market share and market demand for our products.
Market and inventory conditions related to our products and in our industry in general.
And growth opportunities and trends.
Our forward looking statements represent our current judgment about the future and they are subject to various risks and uncertainties.
Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings.
You can find those documents as well as a replay of this call on our website at <unk> Dot com.
Today's call contains time sensitive information that is accurate only as of this time and we assume no obligation to update any forward looking statements. Our actual results could differ materially from our statements today.
I have a few important items to note about our comments on today's call first we referenced certain non-GAAP financial measures are non-GAAP results exclude amortization of acquired intangible assets stock compensation transition costs, COVID-19 expenses technology implementation.
Related party interest income and the tax effect related to all those adjustments.
The reconciliations of GAAP financial measures to non-GAAP financial measures, whether they are whether or not they are discussed on today's call can be found in our filings as well as today's earnings press release, which are posted on our website.
Also when we reference E. P. S. We are always referencing fully diluted EPS.
Joining us on today's call is Brian Murphy, President and CEO and Andy former CFO.
With that I will turn the call over to Brian.
Thanks, Liz and thanks, everyone for joining us.
I am extremely pleased with our strong start to the new fiscal year, we delivered first quarter growth in net sales and profitability results that reflect our dedication to building authentic lifestyle brands that help consumers make the most out of the moments that matter. Our first quarter net sales grew more than 20% over Q1 of fiscal 2021.
And 83% over Q1 of fiscal 2020.
We believe our results demonstrate the alignment of our brands with strong consumer trends and personal protection and popular outdoor lifestyles.
As well as the ability of our dock and unlock process to fuel innovation and drive organic growth.
The markets, we serve personal protection shooting sports camping hunting and fishing have all benefited from a new higher level of participation that began in our last fiscal year and continues to provide us with an expanded consumer base containing millions of new firearm owners campers and fishing license holders.
Not to mention our increased reach into adjacent markets with holding new consumers, such as land management meat processing and home security.
As a reminder, our brands are organized into four distinct brand lines defender marksman Harvester and adventurer each focused on a particular consumer type in.
In the first quarter 16 of our 20 brands delivered growth over the same period in fiscal 'twenty one.
In 19 of our 20 brands delivered growth over the same period in fiscal 'twenty.
Our top selling products. This quarter came from each of our four brand lanes, demonstrating the diversity of our brand portfolio as well as our diversity across multiple consumer activity driven markets.
We believe this diversity will serve us well as we continued to expand into larger addressable markets that have the ability to transcend near term secular trends.
Our growth reflects our ability to deliver consumers a steady stream of innovative new products driven by our dock and unlock process, our sales and marketing teams were very busy in Q1 safely traveling and attending physical shows for the first time in over a year unveiling a wide range of exciting new products and rolling out ramped up advertising.
Rising and social media campaigns to connect with our consumers.
During the first quarter, we attended I cast the fishing industry Premier trade show, where we unveiled a wide variety of new products from Bubba our lifestyle brand known for its high quality fishing equipment designed for water to plate anglers.
These included kitchen, cutlery, and expanded apparel line and premium storage packs and bags.
Well at the show we also proudly received a best in category Award for Best Cutlery hand, pliers and tools for our new Bubba Pro series Cordless electric fillet knife.
Designed to meet the demands of the hardcore angler by delivering industry, leading power and performance technology for unparalleled cutting efficiency.
Lastly, and perhaps most exciting of all at <unk>, we announced the Bubbas entry into the $700 million retail market for saltwater fishing rods reels and components.
And unveiled our first rods, featuring the iconic Bubba red grip with Rod blanks designed entirely in house, which we anticipate will be available to consumers. This coming February.
Our entry into fishing route is the direct result, and just one example of employing our docket unlock strategy to drive innovation and provide entry into new markets.
Our other brands were busy in the quarter as well our old timer brand is a historic everyday carry brand known for its premium quality knives.
During Q1 in time for Fathers day, we launched the brand's first ever electric fillet knife, which can be purchased in lithium ion and 110 volt versions. This.
This expansion of the old timer brand delivers the benefits of our award winning Bubba fillet knives to freshwater fisherman and womens under our brand they've trusted for generations.
And just after the close of Q1, we attended the outdoor retailer show, where we unveiled some exciting new products from U S. T R survival camping and outdoor gear brand.
New products included our double wide film attic sleeping mats and expansion of our popular film attic math at double the width.
And our U S T. One and two person blankets made up eco friendly materials and featuring our unique U S T color and design.
This was just a sampling.
Our new product pipeline remains robust and we have a number of new products launching over the next few months from several of our brands, including Crimson trace.
Meet your maker and Jujuy man.
Some will expand our offerings and some will take us into completely new categories. Our teams are putting the finishing touches on their launch plans.
I'm working hard to ensure we have the inventory on hand to support these exciting new products and I look forward to sharing their successes with you on our next call.
An important part of our strategy is to place our brands wherever consumers decide to shop for them, whether online or in a physical retail store.
<unk> approach is particularly important in our current environment when the impacts of Covid are dynamic and consumers alternate between in store shopping and online options.
And our first quarter our strategy delivered results.
We believe strengthen our traditional channel in Q1 was driven primarily by store reopening.
Net sales in the channel grew 70% over the prior year and 96% over the first quarter two years ago. We.
We believe store reopening has positively impacted our international business as well, where our recent investments to expand the size of our team and enhance our ability to source new customers are paying off.
Our international sales grew from 4% of Q1 net sales last year to 7% of Q1 net sales this year.
On a two year basis international net sales delivered remarkable growth of nearly 239%.
As we've said before we believe the international market holds tremendous growth potential for many of our brands and we continue to aggressively explore those opportunities.
Sales into our E Comm channel declined in Q1 versus the year ago quarter, largely the result of an anomaly that occurred in the prior year.
Youll recall that Q1 of last year included the strong replenishment of inventory for one of our largest customers a major online retailer who haven't placed orders for a full month in the preceding period instead choosing to purchase only items they deemed essential during that time.
So our E com results for Q1 of last year reflected our ability to quickly replenish that retailers inventory.
We believe a more accurate comparison for our E comm growth in the current period is the three year comparison, which removes that anomaly and reflects growth of 55% over our first quarter of fiscal 2020.
It's also important to note that our direct to consumer platform, which is included in our E com numbers exceeded our expectations in the quarter delivering solid growth over the prior year and demonstrating that the investment we made long ago and our websites continues to drive results.
Now turning to logistics.
Our teams here and in Asia, again did a great job continuing to navigate supply chain constraints and port congestion issues.
We incurred increased freight cost in Q1, which is nearly impossible to avoid in this environment.
But that said the team effectively employed a variety of freight alternatives, ensuring we invested appropriately to get the products we need it.
Their work helped us build up inventories an initiative, we've been working on for the past few quarters.
That effort will continue in Q2 as we further invest in inventory of our highest volume products support product launches I meant I referenced.
Prepare for seasonality in our business and further mitigate supply chain risks.
Within outdoor industry that has experienced unprecedented levels of consumer participation over the past year, our unique Doc can unlock strategy in place.
And our strong first quarter under our belts. We are excited about the opportunities that lie ahead.
We look forward to sharing our progress as we take our brands from niche to known.
With that I'll turn it over to Andy.
Thanks, Brian.
I'm happy to share the results from our first quarter, which showed growth in net sales and adjusted EBITDA.
Our performance for the quarter combined with our outlook for the balance of fiscal 'twenty, two and beyond continue to support our long term growth and profit expectations.
Net sales for Q1 were $68.0 million compared to $55 million in the prior year.
This represents an increase of 20% over last year and 83% over the first quarter of fiscal 2020.
This increase was driven by higher demand in the outdoor products market combined with a consumer preference for the 20 brands across our portfolio.
Turning to gross margins Q.
Q1, gross margins were 47, 7%, a 70 basis point increase over the prior year.
This performance was driven by improved manufacturing efficiencies favorable access and obsolete inventory adjustments and lower spending.
Offset by customer mix and increased freight costs.
In addition, the absence of promotions, we experienced throughout fiscal 'twenty. One continued in the first quarter of fiscal 'twenty, two helping drive higher gross margins.
Looking ahead, we expect a return to more normal promotional levels in fiscal 'twenty, two and that expectation is incorporated into our guidance.
Lastly on gross margin, you'll recall in the second half of fiscal 'twenty, one we work to clear out some slow moving inventory at little to no margin.
We largely completed that effort in Q4 of fiscal 'twenty, one and you will see that impact reflected in the sequential increase in our gross margin from Q4 to Q1.
GAAP operating expenses for the quarter were $32.0 million compared to $24.0 million last year.
This increase was driven primarily by higher variable selling and distribution costs from the increase in net sales.
New employees hired over the course of fiscal 'twenty, one to support our growth.
And increases in stock compensation and Standalone G&A costs.
Offset by a reduction in intangible asset amortization.
Non-GAAP operating expenses in Q1 were $23.0 million compared.
Compared to $22.0 million in Q1 of last year.
Non-GAAP operating expenses exclude intangible amortization stock compensation and certain nonrecurring expenses as they occur.
GAAP EPS for Q1 was 24 cents as compared with 13 last year and non-GAAP EPS for Q1 was <unk> 48.
Compared to 36 last year.
Our fiscal 'twenty two figures are based on our fully diluted share count of approximately $17.0 million shares.
Adjusted EBITDA for the quarter was $15.0 million at a margin of 15, 7% and was consistent with our expectations.
This compares to adjusted EBITDA of $15.0 million or a margin of 17, 3% for the prior year.
Please note.
Higher to the August 2020 spinoff the lease of our Columbia facility was treated as a finance lease, whereas now it is treated as an operating lease.
Excluding this change adjusted EBITDA margin would have been 15, 8% last year, a roughly flat year over year.
Turning to the balance sheet and cash flow.
We ended the quarter with $59.0 million of cash and no borrowings on our line of credit.
Compared to $68.0 million in cash at the end of fiscal 'twenty one.
We're very pleased with this result, considering that we are able to strategically invest in inventory of high volume products by $24.0 million in Q1.
Recall last quarter, we discussed our plan to build inventory in fiscal 'twenty two in support of new product launches.
And to mitigate the numerous risks in the supply chain from port congestion and container shortages.
This is an important investment designed to protect our business as we foresee a likely continuation of these challenges in fiscal 'twenty two.
Accordingly in Q2, we will continue to work towards building up our inventory of high volume products.
Along with our typical seasonal build.
Our spending for Capex and patent costs of $1 million in Q1 was in line with our expectations and we still expect total capital expenditures for the full fiscal year.
Of between $12.0 million and $13.0 million.
Now a brief update on our it infrastructure and ERP build out.
Youll recall that our spinoff last year included an agreement with our former parent company that provides us with two years of support while we stand up our own independent platform by August of 2022.
I am happy to report that our it infrastructure and ERP implementation projects are both on time and on budget.
As a reminder, we expect the total cost of this project to be about $8 million over the course of fiscal 'twenty, two and 'twenty three.
In fiscal 'twenty, two we expect capex of about $8.0 million.
And one time operating expenses of about $7.0 million.
We also expect to record $3.0 million of duplicative expenses in fiscal 'twenty, two as we operate both our existing and our new platforms in parallel during the system changeover period.
We will treat both the $7.0 million and the $3.0 million.
As technology implementation costs and G&A, when calculating our non-GAAP operating expenses and adjusted EBITDA.
We ended the quarter with no outstanding bank debt and the full capacity available on our $50 million line of credit.
This facility provides an additional $15 million of availability under certain conditions.
Our cash balance combined with our line of credit capacity provided us with over $120 million of available capital as of July 31.
Our strong balance sheet positions us well for future opportunities.
Brian and I continue to seek out acquisition targets that have the ability to supplement our organic growth with brands that operate in large addressable markets have runway for growth and can benefit from being plugged in to our dock and unlocking process.
While we continue to see a large number of targets coming to market. We remain disciplined in our approach as we assess those opportunities and we look forward to identifying opportunities that match our criteria.
Now turning to our guidance.
We believe that our strong balance sheet combined with the consumer preference for our brands positions us well for future growth.
Today, we are reaffirming our fiscal 'twenty two guidance.
We estimate that net sales for fiscal 'twenty, two will be in the range of $280 million to $295 million, which at the midpoint would represent growth of roughly 4% over the prior year and growth of nearly 72% over our fiscal 'twenty results.
With net sales in that range, we expect full year GAAP EPS in the range of $1 to $25.0
And non-GAAP EPS in the range of $2 <unk> to.
To $28.0
We also expect adjusted EBITDA of between 15% and 16% for the full year.
Now just a few additional details on that outlook.
Historically, our quarterly net sales amounts reflect the seasonality in our business with Q2 typically delivering the highest net sales in Q3, the second highest net sales.
However in fiscal 'twenty, one Q3, net sales was higher than Q2 by almost 5%.
We expect to see net sales in fiscal 'twenty, two followed that same general path with Q3 net sales slightly higher than Q2.
With regard to gross margin as I mentioned before our guidance also takes into consideration an expected resumption of more normalized promotional activity in the market during the remainder of our fiscal year.
As we've discussed before we plan to invest in sales and marketing initiatives in fiscal 'twenty, two including business travel and trade shows at more normalized levels and we did in fiscal 'twenty, one when pandemic related restrictions eliminated those valuable opportunities to connect with our customers.
We expect those investments to continue throughout fiscal 'twenty two.
Accordingly, we expect Q2 and Q3 operating expenses to increase from Q1 levels due to increased travel advertising and brand initiatives and Tradeshows.
Including shot show in January 2022.
In conclusion virtually all of our international sales are made in U S dollars we.
We expect our fiscal 'twenty, two effective tax rate will be approximately 25%.
And our fully diluted share count will be about $19.0 million shares.
With that operator, please open the call for questions from our analysts.
Certainly ladies and gentlemen, if you have any questions. At this time. Please press Star then one on your Touchtone telephone. If your question has been answered and he'd like to remove yourself from the queue. Please press the pound key.
Our first question comes the line of John Kernan from Cowen Your question. Please.
Excellent. Thanks for taking my question Congrats on the nice top line results on a obviously a difficult compare from from Q1 last year.
Yes.
GAAP.
<unk>.
Entry into saltwater fishing rods or else it sounds like obviously a natural.
And for Bubba.
So thank you.
Maybe can you talk to the <unk>.
Top line guidance embedded for the rest of the year, obviously very difficult comparisons.
From last year, maybe both for.
Traditional channels and.
E Commerce, that's embedded in the guidance.
And any.
Talked about a more normalized promotional environment in the industry are there any specific categories, where you.
Youre seeing promotion has picked up a bit now.
Yeah, Hey, John This is Brian So what I would tell you is if you do the implied math for Q2 through four.
Over the two year period, that's really how we're looking at it you could probably pick up on that just based on how we are.
For opening remarks, and a lot of other companies are doing something very similar implies nearly 70% growth for that period of time over the two year period, which is still remarkable.
We're seeing you asked about mix kind of E com versus traditional.
Big part of that too is international so international like we said in our Q1 remarks is opening up pretty dramatically.
And then if you look at the two year compared two we've also seen increased distribution. So we're seeing a mix of international take place. There. Obviously, that's mostly traditional how we classify that plus E. Com E. Comm has been in a little bit of a flux right. We have this last quarter a little bit of.
Online retailer that last year kind of bulked up coming out of our Q4 of FY 'twenty and then also that online retailer has also been with the Delta Berrien rising.
<unk> has been prioritizing of re prioritizing some of that some of that PPE. So.
It's kind of a mix of things, but our direct to consumer business continues to thrive and do incredibly well exceeding our expectations.
Offsetting some of that but it's going to be a quarter to quarter at the end of the day. Our goal is to be where the consumer expects to find us.
Understood maybe Andy just on gross margin, obviously supply chain costs are ticking up we're hearing it from all the different.
Consumer facing companies.
What the incremental headwind from the supply chain is for the remainder of the year.
And how you think this is going to normalize as we exit.
2002 and into 'twenty three.
Yes, that's a great question John.
As we talked about we're definitely experiencing increased freight costs.
We have an internal team dedicated they meet numerous times a week really looking at freight freight costs, what the different options are to maximize the profitability.
We look at airfreight, when we need to and we may need to make sure.
We're getting good turns on customer with customers on certain products.
Obviously again trying to maximize our profitability there.
With respect to <unk>.
You talked before about promotions.
I'm not sure we would really breakout what what specific product promotions, but it wouldnt really be anything out of the ordinary than what we've done in the past when you go back to fiscal 'twenty certain promotions during.
Holiday season, those types of things.
Okay.
Maybe just to get.
Maybe a little bit more detail on the gross margin adjusted SG&A.
You did mention in the prepared remarks.
Adjusted SG&A right.
We go into Q2, Q3, Q4, which seasonally it always does.
Yes.
The flow of gross margin.
Can you provide us any more color that gross margin comparisons are pretty tough for the next couple of quarters.
Or is there going to be some year over year pressure relative to where you were in 'twenty, one that we should expect in the coming quarters.
Yes. Another great question. So when you look back at Q2 last year that was almost 47% I would expect the year over year comp in Q2 will be lower than 47.
And then Q Q3, four was kind of $89.0, I think you can probably model somewhere somewhere near that.
Like you said the Opex, we do expect in Q2 and three to rise a little bit because of those.
Trade shows those types of things and then level off a little bit in Q4.
Alright, great well congrats on the progress.
And look forward to seeing what the rest of your house. So thank you.
Alright, Thanks John.
Thank you. Our next question comes from the line of Eric Wold from B Riley Your question. Please.
Thank you good afternoon guys.
So a couple of questions I guess.
One on the the entry into the $70 million market for fishing equipment rods and reels.
What is your expectation for reasonable market share.
Over the next three to five years in terms of Europe kind of decision to.
Enter that market in the first place where would you where would you want to see that and where would you be disappointed.
Yes, Eric this is Brian as much as possible, we want to take as much.
Market share. So this is this is actually something that we've had on the list since we acquired the business.
Andy actually can you remember as I had a slide in there that had the bubble grip on our rod and we had talked about the market potential for that business, but we wanted to follow that kind of niche to known progression. We felt it was going to be too disruptive to the consumer if we just came out with Rob. So we took our time we worked on it we developed all the rod lengths in house did it.
Right way came out with the <unk> expansion and gas to create that logical next step for the consumer so I think whereas well positioned as we can be right now versus if we had done this three years ago.
But for US it is a big market.
Think that we have a very distinctive looking product versus others in the market I think people will automatically recognize that red handled rod. So we're very optimistic when it comes to how much market share we can take.
It'd be I think I'd be reaching too far if I gave you a percentage of what we're going after but we wouldn't enter a market like this unless we plan to disruptive. So we've got some big plans.
Makes sense and then yeah.
On past calls you've talked about kind of the expectation for.
Share gains as kind of early participant in some of these activities over the past 12 to 18 months kind of.
No.
Stick with it.
Become more avid and kind of maybe move up the chain.
Can you talk about what evidence you may be seeing from your retail partners.
On your own e-commerce sites in terms of.
That happening ASP getting larger moving up and the price points within categories.
Yeah, Yeah, I can speak to that so this is Brian again, so we are absolutely seeing some of the higher ASP products. That's been part of our plan to as we as we.
Obviously talking to Mark but.
As part of that moving up into these higher ASP items, which is part of our longer term growth plan and so we are seeing that consumers are leased and our direct to consumer business.
Or taking on those higher ASP products that were introducing which is great.
And then also we are in a good spot last year I think some of our competitors were struggling with inventory.
We have we have talked about very tight lined with our inventory management and analytics team to have that inventory.
Well some of the lower priced products and this is feedback from our customers from our primarily our brick and mortar customers.
Is some of the lower price point products, just werent on shelves and so we were able to take some share with some higher price point products that we've been able to retain.
I think there's also just we have more share when it comes to the customer options when they're walking into that store.
One of our products versus if you rewind 18 months ago, it might look a little bit different. So we are hearing that anecdotally from our customers we're seeing it in our numbers so.
So.
A few data points to give you there, but we are seeing them.
Got it and then just final question if I may.
On international obviously.
So a big growth there year over year over the two year stack.
Yes.
Talk about how you're able to do that now efficiently given just the sense of a high level of demand youre seeing here in the U S being able to allocate product over there that may be a demand here or are there meaningful differences in product category demand between the two markets.
Can you can you get to similar if not better margins overseas and you can here to to make that decision makes sense now versus possibly.
Delaying a little bit.
Sure Yes, great question. This is Brian again, so our international strategy really began three years to four years ago and our goal was to ramp up that team make sure that we have adequate resources.
Working internationally also comes with some additional challenges right distribution, whether you have boots on the ground or youre going through distributors.
Each country has different requirements, even when it comes to things like voltage. So if we saw a bubba electric fillet knife here, it's going to be a different configuration overseas most likely so.
Those plans have been in place for several years, so to be able to get what we saw in the first quarter that was really in motion over the last couple of years that wasn't day, hey, let's figure out and allocate inventory international versus domestic it was that was already in the pipeline and we're servicing the growth that we expected internationally.
Does that answer your question.
Yes, it makes sense. Thank you okay.
Thank you. Our next question comes from the line of Scott Stanford from C. L. King Your question. Please.
Congrats on the quarter guys and thanks for taking my questions.
Thanks, Kevin.
Maybe when you're looking at the at the four brand lanes can you maybe just talk about what youre seeing on the demand side and maybe also.
From.
And inventory perspective, you did say that about four of those brands into 'twenty brands.
Went down year over year, so would that suggest that maybe some of them.
Or getting closer to having the inventory that they need.
Yes.
Sure Brian It can start to feel free to chime in.
So what I would what I would tell you is that if you look at kind.
Q1 versus last year, there was civil unrest that was apparent last year that has seemed to have died down a little bit. So we had eight to 10 million firearm owners that entered the market on top of that obviously all of the.
The great trends, we saw in camping fishing, and hiking and things like that but I will tell you that on the firearms side, we're seeing less of the spikes that we saw last year, but we're seeing a nice mix towards some of the hunting and fishing and camping categories. So I think just speaks to the diversity of our brand portfolio the brand Lance really hit.
Their stride to be able to again I kind of mentioned kind of alluded to it in my prepared remarks around some of the near term.
<unk>, that's kind of what I'm speaking to so still solid demand when it comes to firearm accessories and things like that from those new firearm owners.
But we are seeing a pretty balanced mix across our entire portfolio.
Got it in regards to inventories I know that we've been.
Playing catch up for quite some time are you seeing any pockets where things are starting to get.
Closer to where folks want them or are we still way off.
Scott. This is Andy I don't think were way off I think that the replenishment that we're seeing is very healthy.
Like Brian said kind of pretty balanced replenishment across the brand lanes and again I know, we said in the prepared remarks once again.
The top sellers that we had in the quarter represented all of our four brand late so we're very happy with that.
We talked about kind of the ramp up in inventory. This was a strategy of ours because of all of the uncertainty in the supply chain.
And so that what youre seeing in the quarter is that ramp up strategically to be able to prepare us for what Mike might come next to anyone's guess, but we at least want to have the product to ship. So we but we're still seeing a pretty tight line between what.
We have been and what our customers are selling through at Pos.
Yes.
Got it and last question on the international side nice to see that starting to take advantage.
Jump off.
Which of your product lines are.
The biggest beneficiaries there I mentioned that shooting related stuff is probably the least but just give us an indication of which brands are doing.
Certainly well.
Yes.
So it might surprise you a little bit this is Brian shooting is actually performing incredibly well.
Internationally right now.
In particular in places like Canada, which you probably expect.
But we're also seeing some really good penetration on our hunting and camping.
Camping and fishing brands, so I'd say, it's across the board mirrors pretty closely with what we're seeing domestically.
But I think what would be a surprise to us that shooting is performing.
Incredibly well internationally.
Got it that's all I have thank you.
Thanks, Scott Q.
As a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then one our next question comes from the line of Mark Smith from Lake Street Capital. Your question. Please.
Hi, guys wanted to just dig a little bit deeper into new customers can you just talk about new customer trends or are you still seeing new entrants into some of these markets or more so here in first quarter was a lot of it's driven by strength from existing customers.
Yes.
Yeah, Hey, Mark this is Brian So I'll tell you that.
Getting to your distribution is one of the four pillars that we outlined last call too.
To really support that 8% to 10% growth over the next four to five years.
And so we are seeing customers continued.
Interest I would say from home and hardware, where the consumer that's going in there is has an expectation that they are going to start to see more outdoor related products and brands.
Which is great for US and then also there is an interesting crossover. So we have land management under like our <unk> brand and we've talked about in the past well that.
That same person is.
There's good overlap there with the Hunter and so we are being asked from certain customers to present and to offer them.
Our solution essentially to help address that customers want as they go into the some of those stores and I think in large part to because you had some folks that that exited the space.
A few years ago, but I think maybe are turning down a little bit, but exited the space, So home and hardware farm and farm and ranch stores.
Things like that we're seeing great penetration in interest from.
Some nice customer wins.
And.
But also I mean continued growth, yes, you asked about kind of the core base of customers.
We are seeing on the traditional side, especially just.
Across the board I mean, we were looking at.
Kind of our customer base and what grew in the quarter across our traditional channels and it was I mean, it was like a paintbrush.
It's across the board from a lot of other our core customers.
So it's strong there and then we are getting some great new customer wins as well.
Okay, and then as we look at we've talked about.
Within fire arm and maybe within the defender brand Lane.
Eight to 10 million new customers or are you seeing conversion from people, who maybe just bought a firearm to people that are becoming kind of avid users.
Any idea of kind of what that conversion looks like for these people and instead of just buying a firearm but buying.
Safety products storage solutions cleaning targets et cetera.
Yes. This is Brian you hit it you hit it on the head I mean, that's what we're seeing is folks moving up the chain getting more interested in accessories rewind a year ago and they went into a store and bought whatever was available maybe it wasn't even they weren't as loyal when it came to the brand of firearm, but now they get home they have learned more about it they want to shoot at.
They want to secure it safely we offer all of those the products for that consumer the other interesting thing that we're seeing is.
They bought their first firearm again sort of brand agnostic they've done more research and now they may want to go back and get a specific brand.
So they'll go in and now they are a little bit wiser to say, okay, well I'm not just going to go buy a firm I want to get something that comes equipped with a red dot or a laser because I'm going to need it I went to the range and I shot terribly.
So we are seeing a higher attachment rate when it comes to things like that as well.
So little bit of a little bit of a shift that same consumer but coming back a second or third time with with more knowledge than they had the first time, which I think we're definitely seeing the benefit from.
Okay. The last question for me is and you've talked about it a little bit but what gives you your confidence in your as you guys say permission to play and fishing rods and reels and then as you look at this kind of evolution within.
And fishing what are the other places in categories, where you feel like you have permission to play in kind of a broader assortment of products.
Sure so.
I'll give you a ts and say we prefer to Bubba when we established it permission to play we've talked about we talk about this water to plate lifestyle. So whenever we do an acquisition or when we went through kind of this full doc in a mug process a few years ago, and we're now kind of marching down that road, but it's a good insight into how we look at acquisitions too.
Two is we establish what that permission to players for Bubba, it's water to place this water to plate lifestyle, just like there is a field to table movement.
Really there is no brainer housing has not been a brand that is addressed we feel this water to play at lifestyle, which is very much a real lifestyle.
Whether its freshwater saltwater and when we had this in mind like I said, a few years ago. When we first acquired Bubba then Bubba blade is we felt that we didn't have permission at that time to introduce that to the consumer.
That's why we came out with nets and gaps which is basically the same grip our consumers can have a preference for that it seems like they do.
Very distinctive you see it on the boat and Thats really become a hallmark of above our product is seeing that red handle on about you can't Miss It when you walk by a boat and for a lot of people. It is it is like having a yeti cooler on your boat. It gives you some legitimacy and so we think that the Bubba rods, which came from.
Several years of development doing it all in house and these grips.
Once they hit shelves in February is what we're expecting youll see the difference you will feel the difference it as it comes with quality you'd expect from any Bubba product. So that's why we feel confident obviously, we do a lot of consumer research as well and so we're very confident that this one at the Mark and we've gotten good reception from our customers too.
Our brick and mortar customers on income customers.
Excellent. Thank you guys.
Yep. Thanks Martin.
Thank you.
And this does conclude the question and answer session of today's program I'd like to hand, the program back to Brian Murphy for any further remarks.
Alright. Thank you operator before we close please note that we'll be attending two conferences next week. The CL King Best ideas Conference September 14th and the Lake Street Best ideas growth Conference on September 15th both virtual events, where we hope to meet some of you. Thank.
Thank you everyone for joining us today, we look forward to speaking with you again next quarter.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
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Thank you for standing by and welcome to the American outdoor brands first quarter 2022 earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program may be recorded.
I would now like to introduce your host for today's program, although it's been sharp Vice President Investor Relations. Please go ahead.
Thank you and good afternoon.
Our comments today may contain predictions estimates and other forward looking statements.
Our use of words like anticipate project estimate expect intend should indicate suggest believe and other similar expressions is intended to identify those forward looking statements.
Forward looking statements also include statements regarding our product development focus objectives strategies and vision.
Our strategic evolution.
Market share and market demand for our products.
And inventory conditions related to our products and in our industry in general and growth opportunities and trends.
All forward looking statements represent our current judgment about the future and they are subject to various risks and uncertainties.
Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings.
You can find those documents as well as a replay of this call on our website at <unk> Dot com.
Today's call contains time sensitive information that is accurate only as of this time and we assume no obligation to update any forward looking statements. Our actual results could differ materially from our statements today.
I have a few important items to note about our comments on today's call first we referenced certain non-GAAP financial measures are non-GAAP results exclude amortization of acquired intangible assets stock compensation transition costs, COVID-19 expenses technology implementation.
Related party interest income and the tax effect related to all those adjustments.
The reconciliations of GAAP financial measures to non-GAAP financial measures, whether they are whether or not they are discussed on today's call can be found in our filings as well as today's earnings press release, which are posted on our website.
Also when we reference EPS, we are always referencing fully diluted EPS.
Joining us on today's call is Brian Murphy, President and CEO and Andy former CFO.
With that I will turn the call over to Brian.
Thanks, Liz and thanks, everyone for joining us I am extremely pleased with our strong start to the new fiscal year, we delivered first quarter growth in net sales and profitability results that reflect our dedication to building authentic lifestyle brands that help consumers make the most out of the moments that matter.
Our first quarter net sales grew more than 20% over Q1 of fiscal 2021, and 83% over Q1 of fiscal 2020.
We believe our results demonstrate the alignment of our brands with strong consumer trends and personal protection and popular outdoor lifestyles.
As well as the ability of our dock and unlock process to fuel innovation and drive organic growth.
The markets, we serve personal protection shooting sports camping hunting and fishing have all benefited from a new higher level of participation that began in our last fiscal year and continues to provide us with an expanded consumer base containing millions of new firearm owners campers and fishing license holders.
Not to mention our increased reach into adjacent markets with holding new consumers, such as land management meat processing and home security.
As a reminder, our brands are organized into four distinct brand lens defender marksman harvester and adventurer each focused on a particular consumer type and.
In the first quarter 16 of our 20 brands delivered growth over the same period in fiscal 'twenty one.
In 19 of our 20 brands delivered growth over the same period in fiscal 'twenty.
Our top selling products. This quarter came from each of our four brand lanes, demonstrating the diversity of our brand portfolio as well as our diversity across multiple consumer activity driven markets.
We believe this diversity will serve us well as we continue to expand into larger addressable markets that have the ability to transcend near term secular trends.
Our growth reflects our ability to deliver consumers a steady stream of innovative new products, driven by our dock and unlock process.
Our sales and marketing teams were very busy in Q1 safely traveling and attending physical shows for the first time in over a year unveiling a wide range of exciting new products and rolling out ramped up advertising and social media campaigns to connect with our consumers.
During the first quarter, we attended <unk>, the fishing industry Premier trade show, where we unveiled a wide variety of new products from Bubba our lifestyle brand known for its high quality fishing equipment designed for water to plate anglers.
These included kitchen, cutlery, and expanded apparel line and premium storage packs and bags.
While at the show we also proudly received a best in category Award for Best Cutlery hand, pliers and tools for our new Bubba Pro series Cordless electric fillet knife.
Designed to meet the demands of the hardcore angler by delivering industry, leading power and performance technology for unparalleled cutting efficiency.
Lastly, and perhaps most exciting of all at <unk>, We announced Bubbas entry into the $700 million retail market for saltwater fishing rods reels and components and unveiled our first rods featuring the iconic Bubba red grip with Rod blanks designed entirely in house, which we anticipate will be available to <unk>.
Consumers this coming February.
Our entry into fishing route is the direct result, and just one example of employing our dock and unlock strategy to drive innovation and provide entry into new markets.
Our other brands were busy in the quarter as well our old timer brand as a historic everyday carry brand known for its premium quality knives.
During Q1 in time for Fathers day, we launched the brand's first ever electric fillet knives, which can be purchased in lithium ion and 110 volt versions. This.
This expansion of the old timer brand delivers the benefits of our award winning Bubba fillet knives to freshwater fisherman and women under our brand they've trusted for generations.
And just after the close of Q1, we attended the outdoor retailer show, where we unveiled some exciting new products from U S. T R survival camping and outdoor gear brand.
New products included our double wide film attic sleeping mats and expansion of our popular film attic, Matt at double the width.
And our U S T. One and two person blankets made up eco friendly materials and featuring our unique U S T color and design.
This was just a sampling.
Our new product pipeline remains robust and we have a number of new products launching over the next few months from several of our brands, including Crimson trace.
Meet your maker and Jujuy man.
Some will expand our offerings and some will take us into completely new categories. Our teams are putting the finishing touches on their launch plans.
Working hard to ensure we have the inventory on hand to support these exciting new products and I look forward to sharing their successes with you on our next call.
An important part of our strategy is to place our brands wherever consumers decided to shop for them, whether online or in a physical retail store. This approach is particularly important in our current environment. When the impact of Covid are dynamic and consumers alternate between in store shopping and online options.
And our first quarter our strategy delivered results.
We believe strengthen our traditional channel in Q1 was driven primarily by store reopening.
Net sales in the channel grew 70% over the prior year and 96% over the first quarter two years ago.
We believe store reopening has positively impacted our international business as well, where recent investments to expand the size of our team and enhance our ability to source new customers are paying off.
Our international sales grew from 4% of Q1 net sales last year to 7% of Q1 net sales this year on.
On a two year basis international net sales delivered remarkable growth of nearly 239%.
As we've said before we believe the international market holds tremendous growth potential for many of our brands and we continue to aggressively explore those opportunities.
Sales into our E Comm channel declined in Q1 versus the year ago quarter, largely the result of an anomaly that occurred in the prior year.
Youll recall that Q1 of last year included the strong replenishment of inventory for one of our largest customers a major online retailer who hadn't placed orders for a full month in the preceding period instead choosing to purchase on the items they deemed essential during that time.
So our E com results for Q1 of last year reflected our ability to quickly replenish that retailers inventory.
We believe a more accurate comparison for our E comm growth in the current period is the three year comparison, which removes that anomaly and reflects growth of 55% over our first quarter of fiscal 2020.
It's also important to note that our direct to consumer platform, which is included in our E com numbers exceeded our expectations in the quarter delivering solid growth over the prior year and demonstrating that the investment we made long ago and our websites continues to drive results.
Now turning to logistics.
Our teams here and in Asia, again did a great job continuing to navigate supply chain constraints and port congestion issues.
We incurred increased freight cost in Q1, which is nearly impossible to avoid in this environment.
But that said the team effectively employed a variety of freight alternatives, ensuring we invested appropriately to get the products we need it.
Their work helped us build up inventories an initiative, we've been working on for the past few quarters.
That effort will continue in Q2 as we further invest in inventory of our highest volume products support product launches I meant I referenced.
Prepare for seasonality in our business and further mitigate supply chain risk.
With an outdoor industry that has experienced unprecedented levels of consumer participation over the past year, our unique Doc can unlock strategy in place.
And our strong first quarter under our belts. We are excited about the opportunities that lie ahead.
We look forward to sharing our progress as we take our brands from niche to known.
With that I'll turn it over to Andy.
Thanks, Brian I'm.
Im happy to share the results from our first quarter, which showed growth in net sales and adjusted EBITDA.
Our performance for the quarter combined with our outlook for the balance of fiscal 'twenty, two and beyond continue to support our long term growth and profit expectations.
Net sales for Q1 were $68.0 million compared to $55 million in the prior year.
This represents an increase of 20% over last year and 83% over the first quarter of fiscal 2020.
This increase was driven by higher demand in the outdoor products market combined with a consumer preference for the 20 brands across our portfolio.
Turning to gross margins.
Q1, gross margins were 47, 7%, a 70 basis point increase over the prior year.
This performance was driven by improved manufacturing efficiencies favorable access and obsolete inventory adjustments and lower spending.
Offset by customer mix and increased freight costs.
In addition, the absence of promotions, we experienced throughout fiscal 'twenty. One continued in the first quarter of fiscal 'twenty, two helping drive higher gross margins.
Looking ahead, we expect a return to more normal promotional levels in fiscal 'twenty, two and that expectation is incorporated into our guidance.
Lastly on gross margin Youll recall in the second half of fiscal 'twenty. One we worked to clear out some slow moving inventory at little to no margin.
<unk> largely completed that effort in Q4 of fiscal 'twenty, one and you will see that impact reflected in the sequential increase in our gross margin from Q4 to Q1.
GAAP operating expenses for the quarter were $32.0 million compared to $24.0 million last year.
This increase was driven primarily by higher variable selling and distribution costs from the increase in net sales.
New employees hired over the course of fiscal 'twenty, one to support our growth.
And increases in stock compensation, and Standalone G&A costs offset by a reduction in intangible asset amortization.
Non-GAAP operating expenses in Q1 were $23.0 million.
Compared to $22.0 million in Q1 of last year.
Non-GAAP operating expenses exclude intangible amortization stock compensation and certain nonrecurring expenses as they occur.
GAAP EPS for Q1 was 24 as compared with 13 last year and non-GAAP EPS for Q1 was <unk> 48.
Compared to 36 last year.
Our fiscal 'twenty two figures are based on our fully diluted share count of approximately $17.0 million shares.
Adjusted EBITDA for the quarter was $15.0 million at a margin of 15, 7% and was consistent with our expectations.
This compares to adjusted EBITDA of $15.0 million or a margin of 17, 3% for the prior year.
Please note.
Higher to the August 2020 spinoff the lease of our Columbia facility was treated as a finance lease, whereas now it is treated as an operating lease.
Excluding this change adjusted EBITDA margin would have been 15, 8% last year, a roughly flat year over year.
Turning to the balance sheet and cash flow.
We ended the quarter with $59.0 million of cash and no borrowings on our line of credit.
Compared to $68 million in cash at the end of fiscal 'twenty one.
We're very pleased with this result, considering that we are able to strategically invest in inventory of high value products by $24.0 million in Q1.
Recall last quarter, we discussed our plan to build inventory in fiscal 'twenty two in support of new product launches.
And to mitigate the numerous risks in the supply chain from port congestion and container shortages.
This is an important investment designed to protect our business as we foresee a likely continuation of these challenges in fiscal 'twenty two.
Accordingly in Q2, we will continue to work towards building up our inventory of high volume products.
Along with our typical seasonal build.
Our spending for Capex and patent costs of $1 million in Q1 was in line with our expectations and we still expect total capital expenditures for the full fiscal year.
Of between $12.0 million and $13.0 million.
Now a brief update on our it infrastructure and ERP build out.
Youll recall that our spinoff last year included an agreement with our former parent company that provides us with two years of support while we stand up our own independent platform by August of 2022.
I am happy to report that our it infrastructure and ERP implementation projects are both on time and on budget.
As a reminder, we expect the total cost of this project to be about $8 million over the course of fiscal 'twenty, two and 'twenty three.
In fiscal 'twenty, two we expect capex of about $8.0 million and onetime operating expenses of about $7.0 million.
We also expect to record $3.0 million of duplicative expenses in fiscal 'twenty, two as we operate both our existing and our new platforms in parallel during the system changeover period.
We will treat both the $7.0 million and the $3.0 million as technology implementation costs and G&A when calculating our non-GAAP operating expenses and adjusted EBITDA.
We ended the quarter with no outstanding bank debt and the full capacity available on our $50 million line of credit.
This facility provides an additional $15 million of availability under certain conditions.
Our cash balance combined with our line of credit capacity provided us with over $120 million of available capital as of July 31.
Our strong balance sheet positions us well for future opportunities.
Brian and I continue to seek out acquisition targets that have the ability to supplement our organic growth with brands that operate in large addressable markets have runway for growth and can benefit from being plugged in to our dock and unlocking process.
While we continue to see a large number of targets coming to market. We remain disciplined in our approach as we assess those opportunities and we look forward to identifying opportunities that match our criteria.
Now turning to our guidance.
We believe that our strong balance sheet combined with the consumer preference for our brands positions us well for future growth.
Today, we are reaffirming our fiscal 'twenty two guidance.
We estimate that net sales for fiscal 'twenty, two will be in the range of $280 million to $295 million, which at the midpoint would represent growth of roughly 4% over the prior year and growth of nearly 72% over our fiscal 'twenty results.
With net sales in that range, we expect full year GAAP EPS in the range of $1 to $25.0
And non-GAAP EPS in the range of $2 <unk> to.
To $28.0
We also expect adjusted EBITDA of between 15% and 16% for the full year.
Now just a few additional details on that outlook.
Historically, our quarterly net sales amounts reflect the seasonality in our business with Q2 typically delivering the highest net sales in Q3, the second highest net sales.
However in fiscal 'twenty, one Q3, net sales was higher than Q2 by almost 5%.
We expect to see net sales in fiscal 'twenty, two followed that same general path with Q3 net sales slightly higher than Q2.
With regard to gross margin as I mentioned before our guidance also takes into consideration an expected resumption of more normalized promotional activity in the market during the remainder of our fiscal year.
As we've discussed before we plan to invest in sales and marketing initiatives in fiscal 'twenty, two including business travel and trade shows at more normalized levels than we did in fiscal 'twenty, one when pandemic related restrictions eliminated those valuable opportunities to connect with our customers.
We expect those investments to continue throughout fiscal 'twenty two.
Accordingly, we expect Q2 and Q3 operating expenses to increase from Q1 levels due to increased travel advertising and brand initiatives and Tradeshows, including shot show in January 2022.
In conclusion virtually all of our international sales are made in U S dollars we.
We expect our fiscal 'twenty, two effective tax rate will be approximately 25%.
And our fully diluted share count will be about $19.0 million shares.
With that operator, please open the call for questions from our analysts.
Certainly ladies and gentlemen, if you have any questions. At this time. Please press Star then one on your Touchtone telephone. If your question has been answered and he'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of John Kernan from Cowen Your question. Please.
Yeah. Thanks for taking my question Congrats on the nice top line results on a obviously a difficult compare from from Q1 last year.
Yes exactly.
Congrats on the.
Entry into saltwater fishing rods or else it sounds like obviously a natural.
Extension for Bubba.
So thank you.
Maybe can you talk to the.
Topline guidance embedded for the rest of the year, obviously very difficult comparisons.
From last year, maybe both for.
Traditional channels and.
E Commerce, how that's embedded in the guidance and talked.
<unk> talked about a more normalized promotional environment in the industry are there any specific categories.
Are you seeing promotions pick up a bit now.
Yeah, Hey, John This is Brian So what I would tell you is if you do the implied math for Q2 through four.
Over the two year period, that's really how we're looking at it you could probably pick up on that just based on how we.
With our opening remarks, and a lot of other companies are doing something very similar implies nearly 70% growth for that period of time over the two year period, which is still remarkable.
We're we're seeing you asked about mix kind of E com versus traditional a big part of that too is international So international like we said in our Q1 remarks is opening up pretty dramatically.
And then if you look at the two year compared two we've also seen increased distribution. So we're seeing a mix of international take place. There. Obviously, that's mostly traditional how we classify that plus E. Com E. Comm has been in a little bit of a flux right. We had this last quarter.
A little bit of.
An online retailer that last year kind of bulked up coming out of our Q4 of FY 'twenty and then also that online retailer has also been with the Delta Varian rising.
Has it been prioritizing of re prioritizing some of that some of that PPA. So.
It's kind of a mix of things, but our direct to consumer business continues to thrive and do incredibly well exceeding our expectations.
Offsetting some of that but it's going to be a quarter to quarter at the end of the day. Our goal is to be where the consumer expects to find us.
Understood and then maybe Andy just on gross margin, obviously supply chain costs are ticking up we're hearing it from all the different.
Consumer facing companies.
Curious what the incremental headwind from the supply chain is for the remainder of the year.
You think this is going to normalize.
A J.
22, <unk> into 'twenty three.
Yes, that's a great question John.
As we talked about we're definitely experiencing increased freight costs.
We have an internal team dedicated to it.
Meet numerous times a week really looking at freight freight costs, what the different options are to maximize the profitability.
We look at airfreight, when we need to when we may need to make sure.
We're getting good turns on customer with customers on certain products.
Obviously again trying to maximize our profitability there.
With respect to.
You talked before about promotions.
I'm not sure we would really breakout what what specific product promotions, but there wouldn't really be anything out of the ordinary than what we've done in the past when you go back to fiscal 'twenty certain promotions during.
Holiday season, those types of things.
Okay.
Maybe just to get.
Maybe a little bit more detail on the gross margin adjusted SG&A.
<unk> mentioned in the prepared remarks.
Adjusted SG&A right.
We go into Q2, Q3, Q4, which seasonally it always does.
Yes.
The flow of gross margin.
Can you provide us any more color of the gross margin comparisons are pretty tough for the next several quarters.
Is there going to be from year over year pressure relative to where you were in 'twenty, one that we should expect in the coming quarters.
Yes. Another great question. So when you look back at Q2 last year that was almost 47% I would expect the year over year comp in Q2 will be lower than 47%.
And then Q Q3, four was kind of $89.0, I think you could probably model somewhere somewhere near that.
Like you said the Opex, we do expect in Q2 and three to rise a little bit because of those.
Trade shows those types of things and then level off a little bit in Q4.
Alright, great well congrats on the progress.
And I look forward to seeing what the rest of your house. So thank you.
Great. Thanks, Joe.
Thank you. Our next question comes from the line of Eric Wold from B Riley Your question. Please.
Thank you good afternoon guys.
Just a couple of questions I guess.
One on the the entry into the $70 million market for fishing equipment rods and reels.
What is your expectation for reasonable market share.
Over the next three to five years in terms of Europe kind of decision do you enter that market in the first place where would you where would you want to see that and where would you be disappointed.
Yes, Eric this is Brian as much as possible, we want to take as much.
So this is this is actually something that we've had on the list since we acquired the business.
Andy actually can you remember as I had a slide in there that had the bubble grip on our rod and we had talked about the market potential for that business, but we wanted to follow that kind of niche to known progression. We felt it was going to be too disruptive to the consumer if we just came out with Rob. So we took our time we worked on it we developed all the rod lengths in house did it.
The right way came out with the <unk> expansion and gas to create that logical next step for the consumer so I think whereas well positioned as we can be right now versus if we had done this three years ago.
But for US it is a big market.
I think that we have a very distinctive looking product versus others in the market.
Like people will automatically recognize that red handled.
Rod So we're very optimistic when it comes to how much market share we can take.
I would be I think I'd be reaching too far if I gave you a percentage of what we're going after but we wouldn't enter a market like this unless we plan to disruptive. So we've got some big plans.
Makes sense and then yeah.
On past calls you've talked about kind of an expectation for.
Share gains as kind of early participant in some of these activities over the past 12 to 18 months kind of.
Stick with it.
More avid and kind of maybe move up the chain.
Talk about what evidence you may be seeing from your retail partners.
On your own e-commerce sites in terms of.
Is that happening ASP is getting larger moving up and the price points within categories.
Yeah, Yeah, I can speak to that so this is Brian again, so we are absolutely seeing some of the higher ASP products. That's been part of our plan to as big as we.
Obviously dock and lock, but as.
As part of that moving up into these higher ASP items, which is part of our longer term growth plan and so we are seeing that consumers are leased and our direct to consumer business or taking on those higher ASP products that were introducing which is great.
And then also we are in a good spot last year I think some of our competitors were struggling with inventory.
We have we have Andy talked about very tight lined with our inventory management and analytics team to have that inventory.
Some of the lower priced products and this is feedback from our customers from our primarily our brick and mortar customers.
Is some of the lower price point products, just werent on shelves and so we were able to take some share with some higher price point products that we've been able to retain so.
So I think there's also just we have more share when it comes to the customer options when they're walking into that store.
One of our products versus if you rewind 18 months ago, it might look a little bit different. So we are hearing that anecdotally from our customers we're seeing it in our numbers.
<unk>.
A few data points to give you there, but we are seeing them.
Got it and then just final question if I may.
On international obviously.
So a big growth there year over year, though over the two year stack.
Yes.
Can you talk about how you're able to do that now efficiently given just the since the high level of demand Youre seeing here in the U S being able to allocate products over there that will be in demand here or are there meaningful differences in product category demand between the two markets and can you can you get to similar if not better margins overseas in U K.
Here to to make that decision makes sense now versus possibly.
Delaying a little bit.
Sure Yes, great question. This is Brian again, so our international strategy really began three years to four years ago and our goal was to ramp up that team make sure that we have adequate resources.
Working internationally also comes with some additional challenges right distribution, whether you have boots on the ground or youre going through distributors.
Each country has different requirements, even when it comes to things like voltage. So if we saw a bubba electric fillet knife here, it's going to be a different configuration overseas most likely so.
Those plans have been in place for several years, so to be able to get what we saw in the first quarter that was really in motion over the last couple of years that wasn't day, hey, let's figure out and allocate inventory international versus domestic it.
That was already in the pipeline and we're servicing the growth that we expected internationally does that answer your question.
Yes makes sense. Thank you okay.
Thank you. Our next question comes from the line of Scott Stanford from C. L. King Your question. Please.
Congrats on the quarter guidance and thanks for taking my questions.
Thanks, Jeff.
Maybe when you're looking at the at the <unk> brand lanes can you maybe just talk about what youre seeing.
On the demand side and maybe also.
From.
And inventory perspective, you did say that about four of those brands into 'twenty brands went down year over year. So would that suggest that maybe some of them.
Or getting closer to having the inventory that they need.
Yes.
Sure. This is Brian <unk> and starting to feel free to chime in.
So what I would what I would tell you is that if you look at kind.
Q1 versus last year, there was civil unrest that was apparent last year that has seemed to have died down a little bit. So we had eight to 10 million firearm owners that entered the market on top of that obviously all of the.
The great trends, we saw in camping fishing, and hiking and things like that but I will tell you that on the on the firearms side, we're seeing less of the spikes that we saw last year, but we're seeing a nice mix towards some of the hunting and fishing and camping categories. So I think just speaks to the diversity of our brand portfolio the brand Lance really hit.
Their stride to be able to again I kind of mentioned kind of alluded to it in my prepared remarks around some of the near term.
<unk>, that's kind of what I'm speaking to so still solid demand when it comes to firearm accessories and things like that from those new firearm owners.
But we are seeing a pretty balanced mix across our entire portfolio.
Got it in regards to inventories I know that we have been.
Playing catch up for quite some time are you seeing any pockets where things are starting to get.
Closer to where folks want them or are we still way off.
Scott. This is Andy I don't think were way off I think the replenishment that we're seeing is very healthy.
Like Brian said kind of pretty balanced replenishment across the brand lanes and again I know, we said in our prepared remarks once again.
The top sellers that we had in the quarter represented all of our four brand lanes. So we're very happy with that.
We talked about kind of the ramp up in inventory. This was a strategy of ours because of all of the uncertainty in the supply chain.
And so that what youre seeing in the quarter is that ramp up strategically to be able to prepare us for what might that might come next to anyone's guess, but we at least want to have the product to ship. So we but we're still seeing a pretty tight line between what.
We have been and what our customers are selling through at Pos.
Yes.
Got it and last question on the international side nice to see that starting to take advantage.
Jump off, but which ones which of your product lines are.
The biggest beneficiaries there I mentioned that shooting related stuff is probably the least but just give us an indication of which brands are.
Certainly well.
Yes.
So it might surprise you a little bit this is Brian shooting is actually performing incredibly well.
Internationally right now in.
In particular in places like Canada, which you probably expect.
But we're also seeing some really good penetration on our hunting and.
Camping and fishing brands, so I'd say, it's across the board mirrors pretty closely with what we're seeing domestically.
But I think what would be a surprise to you is that shooting is performing.
Incredibly well internationally.
Got it that's all I have thank you.
Thanks, Scott Q.
As a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then one our next question comes from the line of Mark Smith from Lake Street Capital. Your question. Please.
Hi, guys.
Just dig a little bit deeper into new customers can you just talk about new customer trends are you still seeing new entrants into some of these markets or more so here in first quarter was a lot of this driven by strength from existing customers.
Yes.
Yes, So hey, Mark this is Brian So I'll tell you that.
Getting to your distribution is one of the four pillars that we outlined last call.
To really support that 8% to 10% growth over the next four to five years.
And so we are seeing customers continue.
Interest I would say from home and hardware, where the consumer that's going in there is has an expectation that they are going to start to see more outdoor related products and brands.
Which is great for US and then also there is an interesting crossover. So we have land management under like our <unk> brand and we've talked about in the past while at the same person is.
There's good overlap there with the Hunter and so we are being asked from certain customers to present and to offer them.
Our solution essentially to help address that customers want as they go into the some of those stores and I think in large part to because you had some folks that exited the space.
A few years ago, but I think maybe are turning that a little bit but exited the space, So home and hardware farm and farm and ranch stores.
Things like that we're seeing great penetration in interest from.
Some nice customer wins.
And.
But also I mean continued growth, yes, you asked about kind of the core base of customers.
We are seeing on the traditional side, especially just.
Across the board I mean, we were looking at.
Kind of our customer base and what grew in the quarter across our traditional channels and it was I mean, it was like a paintbrush.
It's across the board from a lot of other our core customers.
So it's strong there and then we are getting some great new customer wins as well.
Okay, and then as we look at we've talked about.
Within fire arm and maybe within the defender brand Lane.
Eight to 10 million new customers or are you seeing conversion from people, who maybe just bought a firearm to people that are becoming kind of avid users.
Any idea of kind of what that conversion looks like for these people and to instead of just buying a firearm but buying.
Safety products storage solutions cleaning targets et cetera.
Yes. This is Brian you hit it you hit it on the head I mean, Thats what were seeing is folks moving up the chain getting more interested in accessories rewind a year ago and they went into a store and bought whatever was available maybe it wasn't even they werent as loyal when it came to the brand of firearm, but now they get home they have learned more about it they want to shoot it say.
They want to secure it safely we offer all of those the product for that consumer the other interesting thing that we're seeing is.
They bought their first firearm again sort of brand agnostic they've done more research and now they may want to go back and get a specific brand.
So they'll go in and now they are a little bit wiser to say, okay, well I'm not just going to go buy a firm I want to get something that comes equipped with a red dot or a laser because I'm going to need it I went to the range and I shot terribly.
So we are seeing a higher attachment rate when it comes to things like that as well.
So little bit of a little bit of a shift that same consumer but coming back a second or third time with with more knowledge than they had the first time, which I think we're definitely seeing the benefit from.
Okay. The last question for me is and you've talked about it a little bit but what gives you confidence in your as you guys say permission to play and fishing rods and reels and then as you look at this kind of evolution within.
Bob and fishing.
What are the other places in categories, where you feel like you have permission to play in kind of a broader assortment of products.
Sure so.
I'll give you a ts and say we prefer to Bubba when we established its permission to play we talked about we talked about this water to plate lifestyle. So whenever we do an acquisition or when we went through kind of this full doc in a mug process a few years ago, and we're now kind of marching down that road, but it's a good insight into how we look at acquisitions too.
Two is we establish what that permission to players for Bubba, it's water to place this water to plate lifestyle, just like there is a field to table movement.
Really there is no brainer housing has not been a brand that is addressed we feel this water to play at lifestyle, which is very much a real lifestyle.
Whether it's fresh water or saltwater and when we had this in mind like I said, a few years ago. When we first acquired Bubba then Bubba blade is we felt that we didn't have permission at that time to introduce that to the consumer.
That's why we came out with nets and gaps which is basically same grip our consumers can have a preference for that it seems like they do.
Distinctive you see it on the boat and Thats really become a hallmark of above our product is seeing that red handle on about you can't Miss It when you walk by a boat and for a lot of people. It is it is like having a yeti cooler on your boat. It gives you some legitimacy and so we think that the Bubba rods, which came from.
Several years of development doing it all in house and these grips if you.
Once they hit shelves in February is what we're expecting youll see the difference you will feel the difference it as it comes with quality you'd expect from any bubba product. So.
That's why we feel confident obviously, we do a lot of consumer research as well and so we're very confident that this one at the Mark and we've gotten good reception from our customers to our brick and mortar customers on income customers.
Excellent. Thank you guys.
Yeah. Thanks Martin.
Thank you and this does conclude the question and answer session of today's program I'd like to hand, the program back to Brian Murphy for any further remarks.
Alright. Thank you operator before we close please note that we'll be attending two conferences next week. The CL King Best ideas Conference September 14th and the Lake Street Best ideas growth Conference on September 15th both virtual events, where we hope to meet some of you.
Thank you everyone for joining us today, we look forward to speaking with you again next quarter.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.