Q1 2022 Johnson Outdoors Inc Earnings Call

Okay.

Hello, everyone and welcome to the Johnson outdoors first quarter 2022 earnings Conference call today's call will be led by Helen Johnson Leipold, Johnson outdoors, Chairman and Chief Executive Officer also on the call is David Johnson, Vice President and Chief Financial Officer.

To the question and answer session. All participants will be placed in a listen only mode.

The prepared remarks, the question and answer session will begin.

If he would like to ask a question during that time. Please press Star then the one number one on your telephone keypad.

This call is being recorded.

Your participation implies consent to our recording this call. If you do not agree to these terms simply drop off the call.

I will now turn the call over to Alex <unk> from Johnson outdoors. Please go ahead Ms kicked around.

Thank you operator, good morning, everyone. Thank you for joining us for our discussion of Johnson outdoors results for the 2022 fiscal first quarter.

A copy of today's news release it is available on our website at Www Dot Johnson outdoors dot com under Investor Relations.

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

Actual events may differ materially from those statements due to a number of factors many beyond Johnson outdoors control.

These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission.

If you have additional questions. Following the call. Please contact Dave Johnson or Pat Penman. It is now my pleasure to turn the call over to Helen Johnson Leipold.

Thanks, Alison good morning, and thank you for joining us.

I'll begin with an overview of the quarter and then I'll share our perspective on the performance and the outlook for our businesses, Dave will review financial highlights and then we'll take your questions.

Sales in that first fiscal quarter, ending December 2021 declined 7% to $153 $5 million compared to $165 $7 million.

Our year's unprecedented first quarter operating profit of $13 $8 million was down versus $23 6 million in the prior year first quarter as we continue to monitor the inflationary environment, we've been taking price increases for our products where appropriate.

Net income was $10 $9 million or $1.07 per diluted share versus $19 8 million or $1.96 per diluted share in.

I think it's valuable to note the compared to the pre pandemic December 2019 quarter.

Our net sales are 20% higher than our profit more than doubled.

Overall, we are seeing continued strong demand for our products as people continue to be eager to recreate outdoors by the ongoing global supply chain environment and uncertainties associated with the pandemic continue to be challenging and unpredictable. We remain laser focused on working hard to manage supply issues and fill orders.

While protecting the help me think about employees.

In fishing, our largest business demand across all product lines remained strong while managing supply chain issues in component delays continued to be of course.

Continue to be critical to helping us fill orders as English look to Johnson outdoors for the bass fishing experience as possible.

<unk> brand our most recent innovation award winning Mega light imaging deliveries, the clarity and detail Mega imaging in live action, allowing English to see patient structure in real time, even watching fish on screen as they move into strike in English more.

We have released a mega lie the English limit access to the most complete package of industry, leading technologies and products offered in our one boat network platform, which enables our hummingbirds dish binders and the coda motors to work together in unison getting anglers, an effortless command of their boat.

Also in the code of the award winning Raptor shallow water anchor continues to do well in the second year on the market. The Raptors two industry first technology auto Battler mode, which detects volume density to determine the right course, and active anchoring which continuously monitors anchoring sports and it just.

Automatically for stable bottom.

And the trolling motors with a strong heritage of innovation quality and durability mean, Colgate is the industry leader.

Both our watercraft recreation and camping businesses are experiencing continued strong sales growth and outperforming the market.

Craft recreation growth in our fishing kayak segment continues as we've outpaced the strong market with the ongoing enthusiasm for our innovative sportsmen alliance.

It's third year on the market.

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Simply looking for ways to integrate our product and the popular sports with autopilot one third it leverages the game changing.

<unk> <unk> technology from our sister brand COTA to hold position, while English fish.

The award winning autopilot motorized fishing kayak to reverse at all.

Sportsman salty higher sports and line offers a watercraft for anglers in every type of water and a champion both are Jeff Boyle and Eureka brands continue to benefit from the surge of participation in the activity demand for your retention stove continues to be strong and in jetblue consumers.

Can you be excited about the Super light stash. So that is entering its second year on the market.

Reducing weight and the trail is critical for backpacking stash is the lightest all in one backpacking stove system that Jeff Boyle, a technology leader in portable outdoor cooking systems has ever made.

Finally in our diving business as we thought guide markets, primarily in the U S and other regions in the world experienced some recovery our work to promote and support local diving and to enhance our global digital presence and ecommerce are all working to help with that.

We remain focused on these efforts along with sustained innovation to ensure scoop approach position as the most trusted brand in the world.

In summary, we are encouraged by the continued strong demand for outdoor recreation products and the team remains focused and working hard to meet demand.

Our company purpose, which is to inspire people to get out there to experience and value of the great outdoors for generations to come continues to guide everything we do and we remain committed to investing in our key strategic drivers, which are understanding our consumers.

<unk> innovation leadership, identifying new sources and paths of growth in our markets and continually optimizing our digital consumer experience.

Our ongoing hard work on these priorities ensures that our portfolio of market leading brands as well.

Is well positioned for success and that we continue to deliver sustained profitable long term growth for Johnson outdoors now I'll turn the call over to Dave for a review of the financial highlights.

Thank you al and good morning, everyone.

Wanted to highlight a few items from the quarter.

Helen mentioned demand remains strong, but like many companies we continue to face ongoing disruptions in our supply chain that must be managed on a daily basis, we continue to take action to mitigate our supply chain challenges for.

For example, we continue to maintain a higher than normal inventory levels and we're also working closely with all of our vendors and planning for ultimate source sources of supply for critical components, where feasible.

We've also invested in adding capacity and incremental resources where appropriate.

Capital expenses for the quarter were up $1 $9 million due to our additional capacity investments primarily in our fishing business.

Each business has implemented price increases in response to increased input costs.

And we will continue to monitor the inflationary environment, and we will take pricing adjustments as appropriate.

Operating profit was down five two points versus the prior year's record setting quarter gross margin of 39, 5% is down five eight points from last year's first quarter.

It continues to be pressured due to cost increases.

Operating expenses decreased $4 $6 million versus the prior year, primarily due to lower sales volume driven expenses.

Net income for the quarter was $10 9 million down 45% from the prior year quarter. The effective tax rate was 25, 6% compared to last year's rate of 23, 7%.

We expect the full year tax rate to be in the mid twenties.

Our strong balance sheet and healthy cash position continued to enable us to invest in strategic opportunities to strengthen the business, while consistently paying dividends to shareholders.

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

Thank you.

Again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchstone telephone against the ask a question. Please press Star then one.

One moment please.

Our first question comes from Anthony of Sidoti Your line is open.

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

So firstly in terms of the strong demand outlook and customer orders that you talked about the is there any way you can quantify that as to what you've seen so far is your answer.

The critical season here now of talking to them.

March and June quarters.

Yes.

It's an interesting phenomenon.

We're seeing a strong book of orders right now.

Compared to last year or so.

I hesitate to quantify it but it's still really strong right now so we'll have to see how things shake out in the season.

Got it and is that in all segments that youre seeing with a strong book of orders.

Yes.

Okay, that's great to hear.

Then.

As far as pricing and can you give us a sense as to how much pricing benefited the quarter and how should we think about price increases on a go forward basis.

Yes.

It didn't really benefit this first quarter a lot.

Some of the price increases were effective January one.

Some are effective even a little bit later than that.

So it wasn't a big driver for the first quarter, which is.

We're seeing the cost inputs.

Kind of being the story for the gross margin.

Yes, we'll continue to.

To look at that and adjust as necessary. So I would expect more benefit kind of the rest of the fiscal year from the increases we're putting in place.

Got it okay. Thanks for that and then just.

Overall in terms of the inventory increase.

So is that mostly for raw materials or finished goods as well.

Well.

The inventory increase is.

Just so that we are prepared to meet the demand. However, we still have.

A lot of inventory due to this.

<unk> that were waiting to get from a supply chain standpoint, and then.

We can.

Be ready to really.

Produce the product and get it in market.

So that's really the.

Yeah.

The challenge there is waiting for one component, but yet having everything else ready because.

We are prepared.

When when the supply those.

Specific pieces show up we're ready to go.

Got you, Okay and then.

A couple more questions if I may here so.

As far as the camping sales.

How much of the increase was driven by military times sales.

Yes.

It's a small piece of the increase most of it's in the consumer business that growth.

Yeah.

Got you, Okay and then.

Given our strong balance sheet and the current share price.

How should we think about potential share repurchases.

Other usages of cash I know in the past, we've always talked about acquisitions as well. So just overall, how should we think about capital allocation keeping in mind.

The current share price.

Our cash position in all of their needs for the business.

Well.

From an acquisition.

It's easily standpoint, we as we've always said we are always looking for acquisition opportunities and.

The key is that is it strategic.

Brings value to our focus.

We're out there looking.

Obviously, we're in good shape with the balance sheet.

To go after something.

When it does occur so we're very actively looking.

And always are but David you can talk to.

Yes, I mean that continues to be at the forefront and then obviously our dividend strategy is important.

Youre pointing Anthony.

Share repurchases and other alternate uses of cash has continued to be a discussion item.

But.

As you know they all have their pros and cons, so, but we continue to look at everything.

Okay great.

Good to hear and thank you all best of luck.

Thanks, Anthony Thank you.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchtone telephone.

One moment please.

I'm showing no further questions at this time I'd like to turn the call back over to Helen Johnson Leipold for any closing remarks.

Just wanted to say thanks to everybody for joining us today and I hope everyone has a great day. Thank you.

Ladies and gentlemen, this does conclude today's conference. Thank you for participation you may now disconnect have a great day.

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