Q2 2022 Vista Outdoor Inc Earnings Call
Good day and welcome to the Vista outdoor second quarter fiscal year 2022 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Shelly Hubbard. Please go ahead ma'am.
Thank you and good morning to everyone joining us for our second quarter fiscal year 2022 earnings call with me. This morning is Chris Metz Vista Outdoor Chief Executive Officer Suite has euphoria, Darci senior Vice President and Chief Financial Officer.
And Greg Williamson President of Camelback.
Before we begin I'd 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 assumptions based on our understanding of information known to us today.
These forward looking statements are subject to the risks and uncertainties that face Vista outdoor and the industries in which we operate.
We encourage you to review today's press release and Vista outdoors SEC filings for more information on these risk factors and uncertainties.
Please also 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 the call over to you Chris.
Thanks Shelly.
Everyone and thank you for joining US today Q2 was the first full quarter since we unveiled our value creation framework in May and our strategy is driving record results. We reached a new high watermark for quarterly sales, which grew 35% from last year to $778 million and set new records for EBIT.
And EBITDA margins as well as EPS, marking our fifth straight quarter of record financial performance remarkably our 35% growth rate. This quarter was driven from a revenue base that grew 29% in Q2 last year.
These results were fueled by organic growth as a result of new innovation in high demand for key staples across our portfolio of brands as well as growth from acquisitions, such as Remington heavy shot and quiet cat.
In fact, camelback and Wildcat, both posted their highest quarterly sales ever in Q2, a testament to successfully executing against our strategy and.
In addition, we announced the acquisition of Foresight sports in September a top player in the golf technology sector.
We are also excited to announce that we closed on our latest acquisition of fiber energy products a leader in all natural wood grilling pellets.
This latest strategic transaction secures a continuous supply of pellets for camp chef and expands our revenue and our consumable category.
We now have 10 brands across our portfolio that are generating over $100 million in revenue annually.
These highly sought after power brands are key growth drivers with strong competitive advantages, resulting in rising market share within their respective categories.
Delivering record results quarter after quarter require strong execution and coordination across our teams, especially as we work to mitigate supply chain risks and integrate new brands into our portfolio.
I am extremely proud of our team and want to thank our employees for their tireless work and dedication we are bringing more people outside which is a core part of our mission and it's so encouraging to see that outdoor activity continues to be an elevated part of the lives of so many.
We are successfully leveraging the strength of our brands through lean business operations, while building, a resilient and balanced portfolio through disciplined M&A as a result, we're well on our way to reaching and exceeding the three year financial targets, we announced in May we've created a solid foundation for driving growth profitability.
And shareholder value.
Our strategy to achieve the three year targets that we unveiled in may is embodied in our value creation framework.
This framework has five strategic pillars, including acquisitions, which I'll cover in more detail now.
It just 14 months, we've reshaped our portfolio through six acquisitions, we've added Remington and heavy shot in shooting sports and quiet Cat Vanore foresight sports and now fiber energy products in our outdoor products segment.
Our success in identifying negotiating and closing and integrating new businesses has positioned Vista outdoor as an acquirer of choice in the outdoor industry.
Remington and heavy shot were key contributors to the 65% year over year growth our ammunition business delivered in Q2, and quiet cat posted its best quarter ever for site sports expands our presence in high growth less cyclical of outdoor products markets with the potential to deliver higher margin recurring revenue.
Combining foresight sports with Bushnell golf under the same roof positioned Vista outdoor as the industry leader in golf technology, including data collection and hardware development as well as game improvement in entertainment year round.
Foresight is already delivering results. The team's recent launch of the GC III launch monitor exceeded sales projections within days. The GC III launch also sparked already surging sales of our similar box product line are complete in home golf simulators shipped directly to the consumer.
Operating in two locations with a talented workforce fiber energy products seven mills have state of the art equipment and are designed for scalability as market demand increases, adding fiber energy products to our outdoor products portfolio positions us to drive growth across new and adjacent categories and adds to our consumable.
Revenue base.
Moving to our business units I'll start with ammunition business, where we've transformed into a nimble lean organization that can thrive at all points of the economic cycle.
We're continuing to see strong consumer demand and retail orders across our ammunition brands. We expect this strength to continue as they are multiple key data points that show today's ammunition market is far different than it was five years ago.
First demand for our iconic ammunition brands is driven in part by approximately $12 million diverse new entrants into the market, including people with color on women, who are contributing to high participation rates as shooting ranges as well as increased sales of hunting licenses and shooting accessories.
These new entrants along with traditional consumers have created a larger consumer base that is consuming more ammunition than ever before.
Let me participation interest in personal protection in the field to table movement continue to grow not to mentioned the youth shooting leagues are one of the fastest growing sports in America today.
Second the elevated demand. We're currently seeing is more broad based than previous searches, which was centered predominantly in two to three by five six and nine millimeter calibers.
The demand today stretches across many other calibers, including rimfire shot shells and hunting calibers and we anticipate continued demand for the foreseeable future.
Third inventory levels for ammunition continue to remain very low across all distribution channels much of the inventory on retail shelves today, our multiple facings of the same calibers. Our team is continuing to work hard to fill the record demand and shows no signs of slowing.
Fourth our digital transformation allows us to meet the consumer wherever they prefer to shop.
The next phase of our digital journey begins this month with the launch of our ammo subscription program. During this pilot phase, we will test and determine how we can successfully scale over time.
And fifth in response to the rising commodity costs, we've experienced our teams have implemented strategic pricing actions to mitigate rising costs and to better meet supply and demand economics, we anticipate that elevated demand will support current product pricing for the foreseeable future.
With this continued demand in mind, we have decided to add more capacity with a strategic investment in equipment, while it's not a large investment we will be adding a few pieces of equipment to give our plants more flexibility and capacity expansion.
This is the first such investment since the Remington and heavy shot acquisitions, we don't take such investments lightly and I'm proud that our team has added little to no overhead since the beginning of the increases in demand 18 months ago.
This is included in our capital expenditures and free cash flow guidance, both Remington and heavy shot added 30% more capacity to Vista outdoor without adding any marketplace capacity.
While our second quarter growth in ammunition sales reached all time highs our production was hampered by raw material shortages and logistics challenges due to the broader global supply chain disruption that is affecting industries from all sectors.
That said our team is working successfully with our suppliers to manage and mitigate those risks and I feel confident that we will continue to leverage our strong relationships with our vendor partners to ensure we get more than our fair share.
We believe that product innovation is key to creating a growing and resilient ammunition business Remington launched its first new product since the acquisition the core lock tip for big game hunting.
And American Rifleman magazine awarded Federal Premium's terminal at <unk> with a top ammunition award for 2021.
Each of these products have been well received in the market.
Last but not least we were also awarded the secret service contract a prestigious accomplishment and one that speaks to the premium performance of our products.
Rounding out our shooting sports segment, our onshore business grew 8% during the quarter powered by our better together model strong brands and new product offerings.
Looking forward, we believe the future is bright for both our ammunition and <unk> business units the.
The market continues to reorder reorient itself is new entrants and activity trends evolve at Vista outdoor is positioned to lead in all of these categories.
Looking at the entire market the number of firearm owners has roughly doubled over the last 10 years, which bodes well for our ammunition businesses as well as our hunt shoot accessories as add ons.
We're also driving growth in our outdoor products brands with tremendous new product innovation. For example, during Q2 Bushnell golf successfully launched the highly anticipated launch pro for just under $3000 with inventory selling out in minutes on the Bushnell golf website. These early hardware successes our support.
<unk> growth and translating nicely in subscription sign ups and upgrades.
Bush I'll also introduce the new discharge a portable speaker for the growing disc cost category that provides audible GPS distances to the next basket, while streaming and audio playlist.
Camp chef unveiled their new apex grille at the hardware show the apex expands Cas camp Chef's leadership position in the hybrid category, giving consumers the choice for wood pellet or propane fuel cooking in a single platform.
And our action sports business, the new zero contour RF goggle was named by outside magazine as 2022 gear of the year, which gives us added momentum heading into snow season.
Bell's Moto 10 continues as a success moving into phase two of the campaign with multiple athlete and partner collaborations hitting social media and Camelback has been driving new innovation, which Greg will cover in a minute.
I am excited about the progress we continue to make in our licensing business I expect that licensing will grow in time to be a considerable profit generator for Vista outdoor.
<unk> wins include Bell helmets, where we secured a 10 year license agreement with racing for us to use the bell brand on auto racing and <unk> products.
Bush Ellen Remington have entered into a variety of licensing partnerships.
Our value creation framework includes our centers of excellence.
Our centers of excellence leverage our shared resources expertise and scale to achieve a level of excellence that would be out of the reach of our individual brands.
Nowhere has this model been more evident than for quiet cat in Q2 quiet cat delivered the best quarter ever in its history and is now well integrated within our sourcing and supply chain networks getting more E bikes into the marketplace. Our digital digital center of excellence continues to activate first class DTC sites for our brands.
With Blackburn and co pilot the latest to come online.
Another strategic pillar and our value creation framework strategy is talent and culture for.
From management to frontline employees, we built a team that puts people first.
I am proud to share. We've recently joined that together outdoors coalition, which is an organization of outdoor companies committed to diversity equity and inclusion in the outdoors.
At the same time, we are creating a culture that's focused on sustainability and we're proud that investor's business Daily recently recognized Vista outdoor is a top three <unk> company in the consumer goods category.
In summary, we are well positioned for the long term with a diverse portfolio of iconic as well as emerging disruptive brands that are changing the way we experienced the outdoors.
Now ask Greg Williamson President of Camelback to give an update on the record breaking quarter Greg.
Thank you, Chris and good morning, everyone. It's an exciting time to be at camelback and be part of the Vista outdoor family.
There are two milestones I'd like to highlight before I get started.
First the Camelback brand recently celebrated its 30 year anniversary I'm honored to be part of the brand that had been at the hands free hydration category and the BPA free water bottle and I'm equally excited of what the future holds as we extend this iconic brand to the next generation of outdoor consumer.
Second that in our entire 30 year plus history. The second quarter was the largest revenue quarter on record driven by year over year top line growth of over 40%.
Our focus on innovation has led to gains in many of our core categories.
According to Npd's data in the last 12 months Camelback is 10 points of share in bypass over $100 and over five points of share in the high titration pack space, where we have also claimed a leadership share position.
Our growth is also being driven by entering new categories. As we did with the launch of our horizon drink wear collection last year.
We continue to gain retail listings globally and are encouraged by the growth prospects for camelback in this large and growing market.
We continue our extension into new categories through an exciting new partnership with Lifestraw. This partnership brings together the leader in mobile hydration with the leader in outdoor water filtration.
Tremendous consumer value and a fast growing category.
We've also improved product listings across all major retailers, including expanding vacuum stainless steel listening that target at our pack in bottle listings at Rei <unk>.
Additionally, we've expanded our drop ship program to include more websites, including bass pro target and Dick's Sporting goods.
Lastly, the Vista outdoor digital center of Excellence has supported the migration of Camelback Dot com to the Salesforce commerce cloud, giving us a more intelligent and capable e-commerce platform.
As we look at the next three years, we have a solid foundation upon which we can grow with.
To establish a world class management team.
We've developed our deep rooted in meaningful sustainability program, which we have branded repurpose. This program reduces the environmental impacts of our products by creating a system that assistant generating environmentally safe product solutions.
Recent research behind that 80% of Gen Z and millennial consumers base their purchasing decisions, our social impact and sustainability.
As you know sustainability is part of our DNA camelback.
Camelback and we're positioned to win with this demographic.
We believe in diversifying the outdoors, we are engaging with partners such as melanoma based camping unlikely hikers to promote diversity and access and outdoor recreation, we're expanding our content marketing and product lines and to Echo Chris's comments, we take seriously the obligation to lead by example, and promoting diversity equity and inclusion and active lifestyle journeys.
Our partnership with peloton has extended our brand reach to their 2 million plus active subscribers as our podium sports bottle is featured as part of the equipment packages offer for both the peloton bike and tread.
In closing we are thriving because of our people. Our people are the difference makers. They are the key to our success.
They embody our mission, which is to continuously reinvent outdoor hydration and carrier solutions that empower and active lifestyle.
I'm Lucky to lead this team and thank you again for the chance to represent camelback year to date.
I'll now turn it over to Sudhakar So notching.
Thanks, Greg and good morning, everyone.
Q2 was another record quarter as Chris noted.
Seeding our targets on the top and bottom line.
We are successfully on the strategy that Chris outlined driving shareholder value through strong execution in our go ranked <unk>.
<unk> growth investments and share repurchases, while maintaining low leverage within our target of one to two times.
Sales grew 35% in the second quarter, reaching a record of 778 million, while EBIT and EBITDA margins, both expanded to a record high of 25% and 27% respectively.
We also repurchased more than 300 positive share and ended the quarter with $265 million in cash.
Our net debt leverage ratio decline to 0.4 times well below our target ratio of one to two times.
In September we announced the acquisition of four five sports and subsequently closed this transaction ugly in our third quarter.
The 474 million purchase price.
<unk> paid for with cash on hand, and $250 million at level under our ABL.
As a result, our leverage ratio stood at one point in time upon closing on September 28, and.
And we may impact the lower end of our targeted range.
We expect this ratio to decline to one times by fiscal year end.
Today as Chris mentioned, we closed another acquisition pilot energy product.
Our disciplined acquisition strategy is proving that we can drive accretive growth and profitability across our portfolio of leading brands.
Now, let's discuss our Q2 results in more detail.
Earlier. This morning, we provided both as reported and adjusted results in our earnings release, including the slides accompanying our earnings conference call.
My comments today focus on adjusted results.
Looking at Slide 14, Q2 sales were up 35%, reflecting growth across both segments due to strong consumer preferences for our leading mass.
Gross profit increased 85% to $299 million from last year, driven predominantly by shooting sports.
Our strategic pricing actions higher sales volume and operating efficiencies driven by our lean cost structure increased shooting sports market, which were partially offset by higher commodity and supply chain costs.
Although product gross profit was driven by higher sales volume.
Fully offset by higher logistics costs and mix with new sales channels.
EBIT growth and add 50% to a record $194 million due to gross margin expansion and operating leverage.
EIT market reached a new record up 25%.
And EBITDA margin reached a new record high at 27%, increasing nearly 11 percentage points compared with the same period last year.
EPS also achieved a new record of $2 41.
Compared with $1 10 in the prior year quarter.
Lastly, higher inventory drove lower free cash flow in Q2 as compared to a year ago.
The majority of this growth is from acquired businesses and higher in transit inventory due impart by supply chain delays as the that increased inventory in advance of our holiday season demand.
Turning to page 15 of our presentation.
We are continuing to maintain a strong balance sheet through financial discipline with net leverage of <unk> four times and over 650 million of liquidity.
We had no outstanding borrowing on our ABL revolver at the end of Q2.
Moving on to page 16, you can see that our capital allocation priorities have remained unchanged.
We are focused on.
Investing in organic growth.
Making sound acquisitions.
Maintaining a strong balance sheet and.
And returning capital to shareholders via share repurchases, while maintaining a low leverage ratio.
Our strong results over the past several quarters, demonstrating that our capital investments are driving strong performance across our portfolio.
Now, let's shift to our segment highlights beginning on page 17.
Q2 was a strong quarter for shooting sports.
We are continuing to see high demand across all calibers of ammunition, and very low channel inventories and collect favorable price volume and mix in both ammunition and hunting and shooting accessories.
As a result second quarter sales rose, 49% year over year to a record.
<unk> hundred $66 million.
David our ammunition business, but up 65% and our onshore business was up 8%.
Remington is scanning quickly generating approximately $75 million in Q2 failed.
Yeah.
For the full fiscal year, we expect remington to generate over $300 million.
In total sale at an approximate 25% EBITDA margin.
With a purchase price of roughly <unk> 1 billion. This implies that we have paid a forward multiple of approximately one time.
And have created significant value for our shareholders.
This acquisition is a great example of our disciplined strategy to be a prudent acquirers.
Lastly, EBIT margin increase nearly 16 percentage points to 34% from the prior year quarter, driven by higher gross profit margin and operating leverage.
Turning to outdoor products on page 18.
Q2 sales grew 9% to $212 million on top of a strong comp last year driven by continued demand product strong brand led by the growth at Camelback and quiet cat, which is outperforming our expectations.
EBIT margin was 11% down two percentage points from the prior year, driven primarily by higher SG&A from acquisitions as well as higher logistics costs and sales channel mix.
Lastly, let's turn to our outlook on slide 19.
We expect continued strong demand for highly sought after brands.
<unk>.
We remain confident in our business model.
In our ability to continue executing successfully across our portfolio.
And in our potential to deliver record performance this fiscal year.
As a result.
Full fiscal year 2022 guidance Paul.
Revenue between $2 nine to $2 95 billion up over 30% from previous record in fiscal 'twenty one.
EBITDA margin of 24% to 24, 5% as compared to 15, 5% in fiscal 'twenty one.
Earnings per share of $7 70.
Two eight <unk> and.
An increase of over 110% from last year.
And free cash flow for the fiscal year 'twenty, two is anticipated to be between $275 million to $325 million.
We expect sales and EPS in Q3, and Q4 to be similar across both periods.
Our fiscal 'twenty two assumptions include expectations of higher commodity costs and higher logistics costs as we work through supply chain disruption.
And effective tax rate in the mid 20% range.
Interest expense in line with prior year at just as interest expense.
An increase in capex to approximately 14% higher than last year, which is up from 30% in previous guidance.
And our horizon R&D expense to roughly 35% higher than last year, which is up from 25% as previously guided.
Last but not least as important beyond fiscal 'twenty two.
We continue to see strong demand across our portfolio of leading brands, including recent acquisitions within our outdoor products segment.
We also see elevated long term demand trends for ammunition as evidenced by the increasing new firearm honored by the SEC.
Based on trends and our multibillion dollar backlog.
As a result, we have approved new capex investment for adding smart capacity within our existing evolution plan as Chris mentioned.
Coupled with a lean cost structure, and our legacy facilities and <unk> to drive growth and operating efficiencies at our Remington plans, we believe that our shooting sports segment can continue to operate at high EBITDA margins.
In addition, we are reiterating our long term targets provided at our Investor day.
We expect performance at the high end of each target driven by strong organic growth and that could use those as the Atlanta disciplined financial strategy.
We remained highly confident in our business model and a strong portfolio of brands.
We believe that this outdoor events solution to continue to drive long term value for all the shareholders.
Now I'll, then hand, it back to Chris for closing comments Chris.
Thanks, Sudan, but this truly is an exciting time to be at Vista outdoor we are delivering on our vision to build powerhouse brands that empower people to achieve their goals and live their best outdoor lives.
Before we take your questions I do want to note that we are mindful of the challenges we face as Covid has created an unprecedented environment for all of us from material container and labor shortages to increasing inflation.
We certainly are not immune to them and like others. We see these challenges continuing in the near term however.
However, we have clear competitive advantages that differentiate us, including a diverse portfolio of leading iconic and disruptive brands the size and scale of our multibillion dollar organizations are centers of excellence, our healthy balance sheet strong free cash flow and purpose and sustain.
Inability driven initiatives, we are uniquely positioned for our brands to excel and win in today's markets and to create long term value for our employees customers and shareholders now lets open it up to your questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Kindly ask that you please limit yourself to one question and rejoin the queue. If you wish to follow up on your question.
Once again press star one to ask a question we can pause for just a moment to allow everyone an opportunity to signal for questions.
Yeah.
We can now take the first question from James Hardiman from Wedbush Securities.
Hi, good morning, Thanks for taking my question so.
If I'm doing the math, right and which is entirely possible, but I'm not [laughter].
Putting the sort of on the fly.
But as I think about your guidance.
Second half revenue look pretty similar to first half.
Second half earnings.
Significantly short.
The first half.
Particularly the second quarter run rate I guess, I get that math right and B if so how.
Should we think about the drivers towards that Academy.
Yeah. So Jamie Thank you for the for the first question I wanted to address <unk> question. Thanks, Chris Yes, James So first half we saw a lot more benefit in commodities, we had some copper hedges from last year, which we talked during last year call last quarter call.
<unk> also had.
Better mix volume pricing there'll be continued to see the supply chain challenges raw material cost inflation and also SG&A will continue to go up a little bit because people are traveling going to trade shows. So all of those things are impacting our ability to match.
<unk> EBITDA margin.
Add to that to change in audience.
The SG&A as a percent of sales in the second quarter was roughly 13, 5%, which we don't believe is a sustainable level of cost.
Particularly for the reasons that <unk> mentioned, which.
Those costs, which suppressed because of COVID-19 related activities work from home and what have you. So we're going to continue to invest in innovative new products are powerhouse brands to deliver the outsized growth.
<unk> seen in the first half.
Got it that's helpful I'll hop back in queue. Thanks.
We can now take the next question from Jim <unk> from <unk> Crespi Hardt.
Good morning, Thanks for taking my question.
I was wondering if you could provide some more.
Quantify maybe the impact of the supply chain constraints on outdoor products.
What was the sales impact in second quarter due to some sales shift into third quarter.
And then also maybe what the margin impact was in second quarter, and then whats the expected impact in the back half of the year.
Yeah, So good question and something that.
Obviously, we've looked at it very hard and taken into account in our guidance.
At our supply chain conversations with our manufacturer partners. So when you start to look at.
What could have been it certainly is more of a demand story than it is a supply story and there is no question in each of our categories across outdoor products and shooting sports that our demand was was somewhat depressed.
However, when you look to what quarter will this fall into until the logistics container supply chain et cetera challenges.
Bet, which we don't anticipate they will for a while it continues to push out to the right. So we'll clear second and the third quarter here, our second quarter sales backlog, but unfortunately, we may see some of our third quarter slipped to fourth quarter fourth quarter slip to the first quarter. So on and so forth. We've built all of that into our guidance.
What I would suggest is that we're able to deliver outsized growth across really all of our categories because of the centers of excellence that we built we feel like we're managing.
Supply chain logistics at a level that.
Is higher than we've ever done in our company and we think better than than many of our peers and you see that in the growth.
I think you see that as evidenced when you look into the material that we're growing our inventory position at ace skus to be able to support the backlog and the continued growth.
Great. Thank you.
We can now take the next question from Scott.
C L King.
Good morning, and congrats and thanks for taking my questions.
Can we talk about Fortunately, yeah, a little bit obviously, you gave $100 million sales very high.
Associated EBITDA margins, but how should we look at this from a seasonality standpoint.
How this business works for you I imagine that's far less.
She's now, but it gives us a lot of these products are indoor based and maybe just talk about the timing of the accretion at least in the back half of the year.
Yeah, So Scott.
Like a lot of our acquisitions in fact, all of our acquisitions so far.
We're very very happy with what we're seeing in the early stages, and we would expect fore sight to perform.
Our other acquisitions have which are meeting or frankly, beating our expectations now in terms of.
Our guidance as we go forward, we've given the $100 million and $50 million of sales and EBITDA, respectively, and we know there is seasonality in bulk we see with our push now bulk business the seasonality won't be quite as pronounced in foresight sports because of the enduring nature of of some of the purchases. So we're not prepared to.
Give quarterly guidance, but.
We're certainly happy.
With the progress, we're making and committed to the yearly guidance that we unveiled and we're well on track to hit that.
Got it if I could just slip one last quick one just about Kate.
Cadence of earnings in the back half of the year I think you said that sales should be.
I guess with essentially the same in Q3 and Q4, how about earnings.
So yes. This is <unk>, yes, I think for your modeling purposes, Q3, and Q4 will be kind of half half. So you can just do the same math for the sales and EPS estimate headset.
Okay.
Alright, thank you.
Absolutely.
We can now.
Next question from Matt Koranda from Roth capital.
Hey, guys. Thanks, just.
Wondering if you could speak to the pricing environment in ammo.
I gathered from some of your prepared remarks, it sounded like you were or at least holding price during the quarter and potentially taking some but then on a go forward basis, maybe we're not going to say as many increases but.
Did I hear that right and maybe you could speak to the pricing dynamics within the quarter and then you know how do you see it playing out for the next several months and then also just on ammo backlog.
Could you just clarify.
Clarify is that still growing.
And maybe just a little more color on in terms of what Youre seeing in the channel you did mentioned some disparities by caliber but.
But maybe you could put some more color on what's calibers are lightest in your view and then are there.
In terms of availability.
Okay sure Matt So first of all on the pricing. So we continue.
We've taken.
Six price increases over the past 12 to 18 months, we just announce.
Our last price increase in November which should take effect in the beginning of this coming calendar year, we haven't signaled anything in terms of ongoing.
Price increases.
But we've been very consistent in.
Being able to take the inflation be it in labor and materials or what have you and pass that on and as long as the demand continues to persist in the way. It is and we anticipate that it will for the foreseeable future, we don't see price compression.
As an issue and as we've talked previously because of some of the consolidation we've done with Remington. Even if you look long term, we don't see the same type of price compression that the industry may have experienced in <unk>.
In previous times in terms of the ammo backlog, our ammo backlog continues to be at an all time level.
If you look at the consumption data and if you look at some of the other industries that are out there. It suggests that demand continues to.
Continues to be very very strong and thats evidenced in our backlog in terms of the channels.
<unk> is still minimal and I.
I will say that if you do a retail checks and you look at the inventory on the shelves whats remarkable is there.
Theyre carrying significantly less inventory and inventory carrying is honestly multiple facings and a lot of the same calibers and we know that the other calibers are in demand, but that just can't be produced yet that's the rationale behind some of the machinery and equipment were purchasing now to expand our capacity to really give R. R.
Ammunition factories, the flexibility to be able to meet.
A broad set of demand within the calipers and a lot of this is being driven by the increases in hunting, which is at its highest level since 1958 and a lot of it is being driven by the growth in youth sports and in a lot of the other shooting sports activities.
We can now take the next question from Rama <unk> from <unk> capital.
Okay.
Hi, good morning, Thanks for taking my question.
And as you think about them.
The ammunition segment, obviously, you're doing so well right now selling pretty much all of its human sanction, but how do you think about the brand segmentation between.
Oh, federal and Remington and over the long term I mean, there's probably some overlap but I didn't realize they have their little hill.
Customer base, but how do you think about how you segment those two brands in the marketplace.
Okay.
Yeah. So thank you Robert.
It's interesting about the brands is this the first time, we've kind of leaned out and talked about the powerhouse stable of brands. We have so we've got 10 brands that are over 100 million in annual sales, which really speaks to the power and the leverage that you can happen.
Markets, regardless of trends and conditions as it relates to ammo, we've got multiple brands and you've mentioned federal and rapid Tien and they've always had a core set of very loyal followers. So yes revenues over 200 year old brand in federal is a 100 year old brand, which we.
Next calendar year.
Iconic brands attract a super loyal following and we expect that to continue in fact by resurrecting Remington We've had a Grand Council that we've nominated to really dig into some of the users that were disenchanted over the last number of years because couldn't get their products. So those are the areas we're going into first.
And so we're innovating in our core work to bring whitetail deer hunters on the eastern seaboard the products that they've always wanted so yes, theres a lot of differentiation between the two brands and clearly we're going to market great.
Great great products to those loyalists and expect both of them to continue to drive their specific positions in the marketplace and grow simultaneously.
Great. Thanks very much.
Yes.
We can now take the next question from Mark Smith from Lake Street capital markets.
Hi, guys can you speak a little bit about digital growth recon growth with in ammunition, where that's moving to and if that had a significant impact on our margin during the quarter.
Yeah. So thank you Barak, so we don't break out our digital.
Revenue by brands, but.
And fair to start digital volume ammunition has not been a significant factor in the growth of the ammunition business and our first priority is really to service our loyal and.
And very committed dealer base. So the digital volume that we've done to date throughout the increases has really been kind of on the margins and it helps us it enable us to learn and.
And share those learnings with our dealers now that being said, we've built up a very good capability in our direct to consumer efforts in ammunition and it has grown and it will continue to grow.
And so when you see us.
Introduce the subscription program it will unveil and rollout this quarter, it's still limits testing an infancy stage stages, but it's one of those learning test and learn so we can take that learning and share that with our dealers in terms of what consumers are looking for how they want to shop, so on and so forth are overall.
The objective here and all of our DTC business is really to create a frictionless environment, we know consumers buying habits have changed and we want to make sure. We're there where they want to shop, how they want us.
To the extent that we need to increase or do you see efforts to do that we're committed to doing that in all of our brands.
Okay. Thank you.
We can now take our next question from coming from China from Cowen and company.
Hi, guys. Good morning. This is Jack <unk> on for for them today.
Good results.
I guess I guess, just a quick question.
Around ammo demand.
Backlog.
I think you alluded to it earlier, how it's growing.
I guess I guess, just a quick question.
In regards to that market catalyst here.
We're seeing.
Some some mixed data.
Turned negative here over the past couple of months.
How should we think about that sort of correlation.
You know between ammo sales.
Some of these.
Data checks.
And then I guess and then I guess just as a follow up.
Could talk about.
The administrations.
Plan.
So the Russian import ban.
On the ammo that'd be great. Thanks.
Sure Jack So as we mentioned in our prepared remarks, and some of the answers we've given so far we don't see the demand in ammunition abating.
We studied mix very very closely that we've said previously we don't think there is a super strong correlation between mix.
And ammunition purchases, but let me just address how we have absorbed that next leg of recent so I.
I think we all need.
Step back and understand that despite being down October mix was the second highest October ever on record.
Secondly, when we look at the mix data, we've seen with six straight months of over 1 million 2 million three net adjusted purchasers of the equipment of firearms that use ammunition and in fact, this flatness is actually kind of increased a little bit over.
The last few months, so certainly any surge we've seen has.
Subsided into what we call kind of a level that we find.
Very exciting.
Now I would say the correlation is not quite as strong just because when somebody goes out and purchase a piece of equipment our firearm.
That may or may not be a onetime purchase they may purchase more but what we do know is that you need to buy ammunition on a consistent basis to consume and put it in that product to use.
And so then we look at the underlying health I mentioned hunting instead of all time level. Since 1958, we look at the <unk>.
A variety of calibers now and previous searches as it used to be a two to 35569 millimeter type of increase.
Now, we're seeing calibers across the board because of all these activities. So the shot shells, we can't produce enough of them are hunting calibers, we can't produce Napa. That's the things that we start to see that are very very exciting for us now to the extent that the administration jumps in and helps us on up.
Russian import ban.
We're applauding that we think it's time that the plan.
Playing field is level.
However.
So we don't view the imports is a long term threat, we know that there's a lot of stickiness to the iconic brands that we have we've seen it over the history of our brands as we've studied it and we know that in times of increases like this where supply from domestic manufacturers such as ourselves cannot meet that demand imports.
And take that slack capacity that that won't go away, but as we continue to ramp up our.
Our production through increases in capacity increases and efficiencies Remington continuing to grow we're just going to continue to grow and feed that demand.
Perfect I appreciate it guys. Thank you so much.
Yeah welcome.
We can now take the next question from Ryan Sundby from William Blair.
Yes, hi, good morning.
Chris Great to hear quiet cat, it's off to such a strong start.
I guess given the demand out there for E bikes at the moment can you talk a little bit more about what your ability is.
All of that business and then quickly on point for energy just any additional detail there on size and growth and what that is.
It looks like the business.
Sure into Orion quiet Cat is one of those acquisitions that you know.
We might catch lightning in a bottle on this we know that the growth trends are tremendous and this is a great example, where we're able to take the center of excellence, we built in supply chain and procurement and just embedded that into the quiet cat business. So you've got two super innovative founders that know how to grow the business and we.
Broadening the scale and the leverage that we can provide on the supply chain side. So we've doubled their capacity or their ability to procure bicycles. So you know again we.
We expect this business off of a smaller base to double in the first 12 months and we don't see any reason why it can't continue to grow with that outpaced.
What type of rates given the trends in the industry, given frankly their position and innovative in this and so we're we continue to be very bullish on the quiet.
Acquisition, so fiber energy to really meet acquisition for us because it is something we haven't done to date, where we vertically integrated into a a manufacturer and its.
A strong vote of confidence and belief in our corporate standpoint to really back up our camp chef business, which has grown tremendously during our ownership and we think it's just at the nascent stages of this.
Pellet fiber type of.
Growth category outdoors, and so wood fiber energy brings to us and to the best plants with seven mills. So it gives the ability to grow our consumable category that we studied hard and see that there is a strong desire or attachment rate for folks.
<unk> branded grills that want those branded pellets and we Havent Franklin has the ability to supply that because of the shortage in the industry. So we strategically gone in purchases.
This manufacturing capability and really gives camp chef a different platform to be able to compete with some of the bigger competitors in the market.
That's great. Thanks, guys.
Sure.
We can now take the next question from Eric Wold from B Riley Securities.
Thanks, Good morning so.
With the additional equipment that you're bringing online.
Within the ammo segment can you give us a rough sense of the production boost.
This could provide and I know it will depend on calibers.
Another patch, maybe a broad sense of a boost to the kind of the current Max run rate for all ammo production right now, including Remington and heavy shot and then and the planning around.
The animals subscription program.
Function that subscription demand will be incremental to existing retail demand or somewhat acting as a substitute.
Sure Eric.
I know you'll appreciate the fact that we're very careful and cautious about what we share for competitive reasons getting kind of into competitive hand, so to speak and I've mentioned previously that we study as best we can industry capacity and making sure that we're not only managing our capacity, but very mindful.
All of whats being brought into the industry. So we don't get over our skis. If you will the additional equipment, we're not prepared to size up what the complete impact is going to be.
It certainly does give us capacity to expand on the margins, but importantly, it gives us more flexibility to be able to react quicker to some of the increases in other calibers that we're seeing right now that we werent as readily able to fulfill.
In terms of the subscription program.
Certainly we know because we've studied it that there is a subset of consumers out there that want a steady supply of their favorite caliber or their favorite brand their favorite build and we're excited that we've got the.
Plumbing and tightening setup to be able to supply to them, when where and how they need it so.
We'll see we're at the early stages of it but we're super excited about what the impact is going to be for us in our dealer network.
Got it thank you.
We can now take the final question from Jim Chartier from <unk> Crespi Hardt.
Hi, Thanks for putting me in again.
Right.
I was just wondering if you could kind of help size.
How much.
No.
Industry for ammo has grown since kind of 2019, you talked about adding 12 million new shooters.
Fleet of agendas, and what have you. So all of this stuff feeds and intrusive curiosity and the usage of the product. So the fact that is up 30, 40% on a consistent basis now we just we really strongly believe in everything we study demands going to continue to.
Hold very strong.
Great, So Jim and others. Thanks.
Thank you, Jim and and others for the questions and the continued support.
Well clothes here by reiterating effected demand that we're seeing in the marketplace, we see continuing across really all of our brands both of our segments and what's really neat is that we see the tailwinds as is very positive, but what excites me more is that were out.
Facing the Tailwinds because of the centres of excellence, we develop the talent, we've been able to attract and frankly the strength of our powerhouse brands. So we're working on supply to continue to drive it and we're excited about the fiscal year to come here. Thanks very much.
Which concludes today's call. Thank you for your parents dissipation you may know disconnect.
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