Q1 2023 Vista Outdoor Inc Earnings Call
We continue to see strong demand and participation rates remained steady.
Within outdoor recreation golf posted exceptional growth and sales of Camelback also increased primarily driven by new products. Our outdoor cooking platform was impacted by high comps from sell in last year as retailers were replenishing low inventory to keep up with elevated demand this year brick and mortar retailers.
Our in an overstock position, particularly at lower price and medium price point grills.
We are beginning to see a normalization within the domestic commercial ammunition market and we're seeing consumer demand and consumption settling to an elevated run rate that is higher than prior post peak levels. Our outlook for ammo remains positive the ranks of new shooters are increasing both in quantity and diversity.
Recent growth has not been politically driven but culturally driven by new entrants, who are participating more frequently and consuming more ammunition than legacy shooters. We expect demand to remain solid through mid term elections. As we are confident this event won't have a large impact on demand.
Overall, we expect to see lower price point categories continued to be affected more by inflation as reduced stimulus and higher prices have led to lower spend in areas such as hunting and shooting accessories bike helmets in the mass channel and grills at opening price points across several of our brands retail customers in.
Our categories bought heavily last year in both Q1, and Q2, creating extremely tough comps, particularly in outdoor accessories similar.
Similarly, certain large retailers have been reducing our halting new purchases across all categories, which is affecting our buyers open to buy even in categories, where sell through of our products remained strong.
I'll also note that last year in Q1, Amazon's Prime day was in June , whereas this year it shifted to Q2 in July .
Our latest acquisitions, including foresight Stone Glacier and quiet cat are all performing very well as planned despite the economic headwinds. We believe this reflects two dynamics first they are selling to higher and more affluent consumers less affected by inflation and second they are participating in higher.
Growth categories, which is a key reason we acquired these businesses as well as our planned acquisitions of Fox racing and Simms fishing.
We expect these acquisitions to partially offset the slowing of legacy products from historic highs demonstrating that having a diversified portfolio affords the flexibility to be strategic in the current operating environment.
Q1 was also a strong quarter on the bottom line adjusted EBITDA margin for the total company expanded 83 basis points to 25, 2%, our second highest margin rate ever and diluted EPS was a second best in company history at $2 31.
Moving to slide nine this quarter exemplifies the value creation strategy, we laid out at our Investor day in May as we delivered strong revenue growth profitability expansion traction from new product innovation and capital allocation excellence inclusive of M&A.
Looking at market traction on slide 10, our investments in new product innovations are driving growth. Examples. This quarter included camelback drink Ware, which was up more than 100% year on year. This quarter Camelback introduced the choke back cooler series, leading to strong media coverage and market uptake with.
<unk>, we have entered the soft cooler space with best in class installation in an integrated hydration reservoir only camelback can provide.
Additionally, we have launched our new fusion reservoir line with key features such as lightweight easy to feel easy to clean as well as the universal fit the fusion reservoir continues to cement our leadership position and hydration reservoirs.
For the sixth consecutive quarter Camelback posted sales growth led by D to C, which increased strong double digits from the prior year.
Camp chef stoves were up 30% year over year lifestyle shifts are embracing camping, there were 93 million active camping households in 2021 with 9 million first time camping households added during the year.
<unk> launched the new apex grille in July which exceeded expectations. The apex grill is sold out during the first week in fact, the apex grille was featured in our fourth of July profile in the Wall Street Journal covering the best grows on the market.
While the apex changes the grilling game there is yet another game changing launch planned for October one keeping eye on camp chef as they are leading the pack when innovation.
Sales at foresight with a lineup of launch monitors, including the all new GC three personal launch monitors surged in the quarter driven by strong consumer demand and the ability to procure a larger chip supply.
Alloy and topped off recently named foresight as their exclusive launch monitor partner, because our technology delivered delivery shot data with our highest level of quality accuracy and reliability.
<unk> was up more than 500% compared with the prior year driven by strong consumer demand new product innovation and favorable supply chain factors wished.
<unk> strong growth reflected in part the continued success of our <unk> 'twenty Trail cameras trail cameras drove more than 100% growth year over year. In addition, we're excited to be launching two new line extensions, one with dual Sim capability and the other with an adjustable integrated solar panel.
Bel power sports are up double digits in a category, where we are building on momentum with one of the most exciting brands in this space Fox racing.
This success was driven by supply chain efficiencies that led to stronger order fulfillment and consumer demand driven by new products, such as the <unk> 10, and strong performances by sponsored athletes showcasing our dear in traditional and social media outlets.
Now moving to slide 11, as lifestyles began to shift in early 2020, we committed to leverage our above trend cash flow and invest in the future to drive organic growth make strategic acquisitions and repurchase shares and to do so while maintaining a low leverage ratio. The innovations I've just described.
<unk> are the result of this commitment to excellence and capital allocation.
Now I'd like to turn your attention to the value creation framework on slide 12 that we first shared with you in calendar 2021, where several pillars to deploy in Q1, we leaned into acquisitions as the right opportunities became apparent.
With Fox racing this legendary brand will bring us into one of the most passionate sporting bases, we address with motocross and mountain biking.
With Simms fishing, we believe we can create efficient platform that delivers long term growth and value for all stakeholders.
With each of these planned acquisitions, we are continuing the successful implementation of our strategy to use accretive acquisitions to expand leadership positions across categories, while enhancing our ability to capitalize on long term growth opportunities in outdoor recreation.
While we reported a strong first quarter, we acknowledged that we are operating in a much more challenging environment with rising inflation and interest rates as well as eroding consumer sentiment. We recognize these dynamics and we are taking actions to mitigate risks, we're mindful of the potential impacts on our businesses and have incorporated.
Expectations into our guidance with the visibility known to us at this time.
We have several levers, we can pull including managing inventory controlling costs and optimizing our product offerings to name a few as shown on slide 13.
Managing a diversified portfolio is a competitive advantage and allows us to absorb fluctuations and brand performance across our portfolio.
We have the right teams in place with decades of experience in our industry to help us navigate the future and we have built a nimble organization with a lean cost structure, enabling us the flexibility to pivot quickly.
To summarize the first quarter the theme that's driven our performance for the past two years remains firmly in place our results continue to reflect the strength of our management team and our brands our talented workforce cash flow generation innovative new products strategic execution and strong.
<unk> outdoor sports and recreation markets.
Moving on to the separation that we announced nearly 90 days ago. Today, we're just as confident about unlocking value in our strategic rationale holds true despite the current environment.
We remain on track to spin off the outdoor product segment in calendar year 2023.
To do so there are three gating items to complete the spin shown on slide 14, including preparing the form 10 registration statement for a confidential filing with the SEC obtaining regulatory approval of the form 10 by the SEC along with other regulatory approvals and final approval by our board of.
Actors.
Both companies will offer a differentiated and compelling investment opportunity based on each company's respective business models.
Each will also have a tailored capital structure and capital allocation strategy to support their distinct business models and long term goals.
With both companies nearing $2 billion in pro forma annual sales each will be one of the largest businesses in their space outdoor products also offers a well diversified brand portfolio that is positioned to capture consumer demand across a variety of outdoor and lifestyle activities as I previously mentioned, we expect the separation.
To further unlock shareholder value.
Before I hand, it over to Jason Vanderbeek, who will discuss sporting products in more detail I'd like to reiterate a few important thoughts.
The start to fiscal 'twenty three was both successful and transformative with the separation announcement and planned acquisitions of Fox racing and Simms fishing.
We stayed the course on execution and financial performance.
We understand the negative macroeconomic pressures are real we're experiencing a slowing demand and lower price points across our brands. We are seeing pressures that key customers, including target and Walmart, we're seeing the secular downdraft in backyard grilling and ammo demand appears to be normalizing.
Despite macroeconomic headwinds that all companies are facing our fundamentals and competitive advantages are stronger than ever we continue to remain confident about our long term opportunities to grow as ammo demand is normalizing at new highs, our new product innovation machine is replacing opening price points and driving affinity for our brands.
Past acquisitions are growing the top and bottom line faster, while enhancing our talent diversifying our portfolio and increasing our Tam and we expect to Fox racing and Simms fishing to do the same our diversified portfolio of leading brands provides us with size and scale to thrive now and into the future.
And our execution is driving industry, leading financial performance is supported by our healthy balance sheet strong free cash flow generation and ample liquidity.
Today's environment is unprecedented and the impacts of inflation and supply chain constraints in a tight labor market are not unique to Vista outdoor we believe we can continue to weather these challenges unlock value and wind versus the competition with that I'll hand, it over to Jason Jason.
Thank you Chris good morning, everyone.
As Chris mentioned sporting product set a record in the fiscal first quarter delivering $511 million in revenue, which is a 40% increase from the prior year. Our sales growth. This quarter was driven by continued demand for our covenant brands.
It is also reflected higher volume due to the timing of shipments to fill a large commercial orders along with improved pricing.
Note that the higher than expected volume of shipments resulted in low finished goods inventory for the upcoming quarters labor shortages and higher turnover rates are also impacting the amount we are able to ship over the next few quarters that said, we continue to see low channel inventory in the categories that we are the clear market leader in.
And we still have a multibillion dollar backlog.
We've long been low cost manufacturing leaders and we've invested to improve the operations and drive efficiencies as well as implement cost savings projects across the business.
These improvements translated to strong performance on the bottom line. This quarter, we delivered EBITDA of 182 million up 39% year over year, driven primarily by higher gross profit.
EBITDA margin was 35, 7% compared to 36% in the prior year.
And improving our operations, we've also aligned and optimized our production for changes in consumer demand as a result, I feel confident that we have built a strong foundation for years to come.
Although we don't anticipate the high levels of demand that we experienced over the last couple of years to persist we have seen structural changes in the market that suggests the new post peak demand levels will be higher than in prior cycles.
We are better positioned today than we ever have been both internally and externally.
From our low point in fiscal year 2020, we have transformed our ammunition business in significant ways, which we believe will result to deliver sustained profitability in line with the mid Twenty's EBITDA rate, we presented at Investor day. The key changes we have made include.
Replacing over $185 million of ammunition sales from the Lake City Army ammunition plant that we had to sell at or below cost with close to $400 million in revenue from our acquisitions of Remington and heavy shop. The ammunition that these two brands produce are both higher and margin.
And and much more stable categories, which are much less price sensitive.
With Remington, we acquired the company, who led the industry in irrational pricing behaviors.
We have secured multi year primary agreements with OEM customers at much more favorable profit margins.
We are the clear leader in shotgun shell manufacturing with a large installed base of youth shooting with heavy shot we acquired the leader and non led animal for future expansion, we have modernized our largest factory and in OCA, Minnesota to take cost out and every aspect of manufacturing.
We have secured major law enforcement and government contracts at much more favorable pricing than in prior years.
We have not added any overhead in the past two and a half years.
And we arent done improving our factory efficiencies, our Remington facility in Lone Oak, Arkansas is running at roughly two thirds the efficiency levels of our federal and CCI plan.
However, we see a clear path to matching those efficiency levels by reducing cost per round significantly.
Externally the most important structural change is that our market has grown by 16 million new firearms owners over the past two plus years and they are a much more diverse and active group of users than before.
Animals stockpiling was much more prevalent three to five years ago today, it's all about consumption.
The drivers of that consumption are changing as well.
Politics have historically played a major role in purchasing behaviors by.
Contrast, recent data shows that the growing field of table movement increases in home ownership expanded interest in outdoor activities and desires to increase personal safety are driving higher participation rates well above historic levels.
With respect to innovation, our new products, which include Federal's high overall target load 30, Super Carrie and Remingtons core lock tip are driving consumer demand and external recognition.
A recent study from south with associates, one of the nations most reputable outdoor market and consumer research firms recognize federal has the most purchased rifle and shotgun shell ammunition, along with CCI blazer.
Blazer sub brand for rimfire in handgun ammunition, respectively.
Before I close I'd like to recognize the hard working and talented teams across our organization.
Their dedication to delivering high quality products is why our platform is recognized as the ammunition industry leader in terms of performance innovation and operational excellence.
I'd also like to recognize our culture of conservation and community.
We recently raised more than $300000 for causes supporting humanitarian relief in Ukraine, The Anoka, Minnesota Police Department and fluid services for families in need and we are actively working to a poll is misguided attempts to eliminate the Pittman Robertson Wildlife Trust fund our country's most significant.
And successful Wildlife Conservation program.
I'm honored to lead this business and represents a great hardworking people across each of our brands.
With that I'll hand, it over to <unk>.
Thank you, Jason and good morning, everyone. My comments today will focus on adjusted results compared to the prior year period, unless noted otherwise both as reported and adjusted results are included in our earnings release and deadlines and can be found when I looked at site.
Turning to slide eight.
We posted our second record quarter for sales EBITDA and EPS outlook.
Overall, we delivered more than 20% in sales and profit growth in the quarter and generated strong cash flow.
For the quarter sales increased 21% to $803 million, the second quarter inflow to exceed $800 million.
Gross profit increased 21% to $293 million and gross margin expanded nine basis points to 36, 6%.
Operating expense as a percentage of sales was 13, 7% down approximately 80 basis points due to prudent cost management.
EBITDA increased more than 25% to $203 million driven by higher gross profit and operating leverage.
Total company EBITDA margin increased 80 basis points to 22%.
Q1, EPS increased 33% to $2, 31% driven by strong sales growth profit Liberty expansion, a slightly lower tax rate and a roughly two 5% decline in outstanding shares, which was minimally offset by higher interest expenses.
Turning to slide 19.
Our balance sheet remains strong.
Net debt increased year over year to $553 million driven primarily by executions.
Our immediate liquidity increased.
$36 million as of quarter end.
Our net debt leverage ratio declined to <unk> seven times below our target ratio.
With the recently announced planned equity issues of Fox racing and Tim fishing post closing, we expect our leverage ratio of roughly one six times, which is within our target ratio of one to two times.
Slide 20 highlights our capital allocation strategy.
Over the past four quarter strong free cash flow generation has enabled us to meet our capital allocation priorities.
We are continually to invest organically these investments are driving profitable and sustainable growth as Chris mentioned.
Our new acquisition.
Further diversifying our portfolio generating a strong return and broadening our total addressable market and user base.
At the same time, we have repurchased approximately 5% apollo's stock.
Maintaining low leverage.
We evaluate investment that we expect will drive the highest return for our shareholders over the long term.
Our strong financial discipline over the past four years has resulted in a solid balance sheet and significant financial performance.
Turning to slide 21 acquisitions are a key growth driver, which has strengthened our portfolio in Edison spaces.
While our strong brand and complement our portfolio businesses, where we can add value to drive long term growth and improve profitability.
Before we move on to the segment results although.
How we are thinking about our capital allocation strategy before and after the anticipated separation.
We do not expect to pursue any further material execution prior to the separation and we have created scale in outdoor products with approximately $1 7 billion and a nice sales.
Our primary focus now will be on debt paydown and opportunistic share repurchases.
We expect to further reduce our leverage ratio to the low.
Low end of our target range of one to two times prior to the spin.
Post spin we expect the maximum leverage ratio to remain cool other sporting products business to be between two to three times.
Our plan is to use strong cash generation to reduce our leverage ratio to less than two times within 12 to 18 months, while paying a dividend.
We expect that our outdoor products business or sprinkle when have a leverage ratio of one to two times full spin.
Now, let's turn to our Q1 segment results on slide 22.
Within outdoor products.
<unk> added five execution since fiscal year, 'twenty announced definitive agreements to purchase two more power brands.
Sales declined 2% year over year.
In conclusion, all good products first quarter sales were up 35% compared to Q1 fiscal 'twenty, one and up 32% compared to Q1 fiscal 'twenty.
Outdoor recreation growth was driven by strength in golf and coming back.
<unk> benefited last year from a stimulus checks.
Low inflationary environment and higher than average selling to replenish lowered channel inventory and meet heightened demand.
Gross profit remained flat driven by lower sales in outdoor accessories, and higher transportation and freight costs offset by accretive acquisitions.
EBITDA declined to $39 million, reflecting 13, 5% margin, primarily driven by higher SG&A expense related to acquisitions higher supply chain costs and lower operating leverage in our legacy businesses due to lower sales.
Turning to supporting product sales increased 40% driven by higher volume and price.
Gross profit increased 35% gross margin declined to 39, 4%, primarily due to sales mix and higher commodity and freight costs.
EBITDA increased to $183 million EBITDA margin contracted slightly to 35, 7% from 36% a year ago.
Let's turn to slide 23 for our updated fiscal year 2023 outlook.
For the full fiscal year, we expect sales to increase to $3 2 billion to $3 $3 billion to $5 billion up 7% year over year at the midpoint.
The sporting product sales in the range of $1 75 billion to 1.7 dollars 75 billion.
And all of <unk> product sales in the range of $1 $4 75 billion to 155 billion.
Adjusted EBITDA margin between 21% to 21, 5%.
Adjusted EPS between $7 five.
And $7 65.
And free cash flow generation between $310 million to $360 million.
We expect interest expense to increase to 50 to 55 million upon closing Fox racing and fishing.
Furthermore, as we look to the last three quarters of fiscal year. Our guidance includes the following assumptions.
For sporting products record sales in Q1 have reduced finished goods inventory to very low levels as Jason mentioned.
We are also working through higher employee turnover rates labor shortages and reduce efficiency exiting as a result, we expect sales in Q2 through Q4 to be more closely aligned with the average quarterly sales and full fiscal year 2022.
For all of the product, we continue to see strength driven by our execution and strong performance in coming back and new product innovation.
We had hardware being prudent with our expectations for the fiscal year, given our reduced visibility into how long higher inflation back consumers at opening price points.
We expect sales for outdoor products in Q2 to be in line with first quarter sales decline with growth weighted towards the second half of fiscal year 'twenty, three reflecting the inventory loading in which benefited both Q1 and Q2 last year.
This also reflects the expected closing of Fox racing and Tim Phishing No later than by the end of Q2 as well as continued macroeconomic pressures.
We expect Q3 and Q4 sales to be closely aligned.
In addition, it is important to note that Fox nation, and similar fishing tend to experience highest seasonality in what would be our Q1 fiscal quarter.
Overall, we have maintained our lean cost structure over the past few years and.
And we will continue to evaluate opportunities to further optimize our cost.
We are taking proactive measures on factors within our control to further reduce risk we are confident about our future and the long term value we are creating.
Thank you everyone, let's now open it up for questions operator.
Thanks Kim.
I'd like to ask a question. Please press star followed by one on your telephone keypad.
Any reason you'd like to remove your question. Please press star followed by <unk>.
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Asking your question.
So our first question comes from Eric Wold of B Riley. Your line is now open. Please go ahead.
Thank you.
I appreciate it.
So don't you just a couple of quick questions to follow up on your on your latest comments.
Appreciating the.
Contributions from the two acquisitions in the guidance you made the comment that there.
Q1 seasonal so.
My question. There is obviously there is less contribution in the back half of the year that someone just took a straight average of your sales is there any way you can give us a sense of.
Some level of kind of pro forma sales change between fiscal 'twenty to fiscal 'twenty three kind of assuming.
Foresight Fox and kind of rolling those.
Both periods, just trying to get a sense of kind of the baseline business delta between the two.
So good morning, Eric This is a great question and it has a lot of moving pieces as you know we haven't closed off since then we expect to close sometime by end of Q2. So we have we would have second half benefit for <unk> 10, our number and that's going to be seeing auto product will.
B in hard dollars come in in Q3, and Q4 four side to be fluid last year.
And last year, it was roughly $100 million business, we're growing we're growing a lot in Q1, that's helping us offset the decline you're seeing in <unk> business do solving only declined 2%. So it helped it was helped by foresight.
But it's hard to perform on that until we close the Foxtons thing.
For this year.
Got it understood and then.
I'm not sure if a question for you or for Jason on the analyst side.
Is it the thought that the sale.
Sales will drop from the $500 million range too.
Matt something wrong kind of a 400 million a range for the remaining three quarters is that.
More your ability to supply demand you talked about labor shortages and whatnot into the market or are you seeing something on the.
The demand side and Pos sell through that would give you some pause in terms of where consumption is landing.
Eric Good morning. This is Jason Great question, when we when we delivered $510 million as we had pointed to in the script. Our finished goods inventory is very low right now so when we look at the rest of the year I think we should look at what we did on an average for fiscal year 'twenty to kind of be in the run rate.
Going forward due to due to labor shortages and frankly, just our finished goods inventory being relatively low right now from where we'd want to see them.
And Eric This is Chris add to Jason I would add adjacent comment too we had a healthy inventory position. So we were able to fill a bit more of the backlog. If you will in Q1 and Thats why you saw elevated numbers for the sporting products business and also to add onto that Eric as far as what we're seeing.
No not like unlike what we've seen for the last two quarters really the 505 six small rifle market is full and Thats why we are much much less reliant on that category. So the growth going forward is the growth and where we are the clear number one leader going forward in the categories, where the most demand remains.
Got it and just to confirm is it demand driven in any way or really just supply driven on your part in terms of where the sales will shake out.
And our categories, where we're the clear number one liter it's certainly supply.
Got it. Thank you guys very much appreciate it.
Thanks Kim.
Our next question comes from the line of Scott and.
<unk> K and partners. Your line is now open.
Please go ahead.
Good morning, everyone and thanks for taking my questions.
Good morning, Scott.
Our first question, Jason just talking about ammo.
Obviously things are normalizing things can't keep going through the roof forever, but it sounded like on a much higher plane could you talk about how you expect the pricing environment to be over the course of the next year, even if you take out the midterm elections.
Yes, good morning, Scott as far as the pricing, we're seeing some pressures on the 505 six small rifle arena, but we're relatively small player in that market again on the categories.
Where we're seeing the most demand with our biggest market share in vantages, we haven't seen any price degradation in the market.
Okay got it and then.
Comments some of the bigger.
Mass merchandisers.
Cut their overall.
Intake because of some of our ordering.
Could you talk about.
FF leveling out.
Obviously, you can hit this quarter and it's probably going to hit the second quarter, but could you talk about the timeline of when you would expect that process to run its course.
Yes, Scott as we alluded to Chris we alluded in the press.
<unk> remarks.
It's a bit of tale of two cities right. So you've got the lower price points skus that are selling through the mass merchants that.
That consumer demographic is more affected by inflation and so that affects our <unk>.
Our helmets.
<unk>.
In our action sports business it affected our outdoor accessories to a great deal and it affects our low to mid price point grilling platform and camp chef, but on the flip side you've got the.
The higher end demographic, where we sell a lot of our products and frankly, where all of our acquisition.
That much more inflation and recession resistant.
Given the inflation hasn't affected the consumer demographic as much but in terms of the timing of the map. So to your point some of our customers have just stopped ordering overall so you saw Walmart report.
Yes down earnings and more promotional to get rid of a heavy inventory position. So they pretty much stopped across the board in a lot of categories that affect us even though our demand was still pretty solid we have seen this before and it typically takes a couple of quarters to work its way out so the way we've guided for the rest of it.
The year is you should expect Q2 to look pretty similar to Q1, and then we start to pick back up in the second half and some of these categories, where we've been suffering.
Alright, and then last question just on the guidance I appreciate the last two deals have not closed yet.
But could you just give us a little bit of a framework of how much.
That's contributing to Europe dated guidance. So we can just.
Better measure the pre acquisition our core businesses.
Yes. So this is onshore.
If you assume that it closes by the end of Q2.
Roughly 200 million plus range, depending on when we prove so thats the math, we should do for our outdoor products business.
Guided one 475 to 1550.
Roughly 200 billion out on these M&A.
We will see our base business.
Is growing slightly.
And that reflects all of the macro challenges to be seeing that reflect what we're seeing in Q1 and Q2.
But all of these growth is much.
When you compare.
From fiscal 'twenty and 2021.
Okay got it that's all I have thank you.
Thank you.
Thank you.
Our next question comes from the line of Matt Koranda Roth Capital. Your line is now open. Please go ahead.
Hey, guys good morning.
Just curious if you could maybe do the same thing with the EBITDA outlook as well so that should be helpful. Just to kind of reconcile the 693 at the midpoint versus your prior EBITDA guide.
And what Fox in terms are expected to contribute.
So at least the similar math.
You see our base business, you will see contraction in gross margin from Q.
Q1 onwards, mainly in evolution business.
The higher labor costs, and then our auto product business. The continued higher supply chain cost product cost and also reduced operating leverage because the sales is not growing as much.
Okay.
Foxtons sales EBITDA, we haven't guided it you can do the math because it.
It's not that meaningful plastics for last six months of our year end plus six months on their watch.
Is there, but it's not that meaningful but you can do the math from.
From Falcon things and depending on when we close.
Okay got it.
And then on the sporting products segment I'm.
I'm wondering maybe Jason if you could put a finer point on it sounds like maybe not.
Maybe there is some supply constraints and you guys did allude to.
Maybe some some inefficiencies at Remington, but how much of the constraints on your supply side is Remington.
<unk>.
The core brands within Vista like federal.
Good morning, Matt.
We're not going to break it out by factory, but.
It's safe to say in the categories, where the most demand is.
None of our factories that demand.
So it's not so much on an efficiency side, it's just a throughput side.
On the categories, where we are number one clear leader.
Got it and then maybe last one for Chris you mentioned sort of potential for pick up in demand.
Load and with them the outdoor products segment in the back half of the fiscal year, just curious what visibility you have there.
In terms of open to buy.
Indications from some of your retail customers what gives you the confidence.
Saying that we should pick up in the back half of the fiscal year.
Yes.
That there's a number of factors first as quarter, one quarter, two are really difficult comps for our outdoor products business, particularly in outdoor accessories, where we.
We loaded in a bit more than I think our customers and us.
Thought last year in quarters, one and quarter two so that's going to it's already working its way through the system. Secondly, early indications on some of the Paul activity, particularly in hunting.
<unk> is highly encouraging and then three you just got general seasonality as we move into some of our seasonal periods and then lastly, you've got the contribution of some of the new products coming in.
Particularly in golf and in snow.
Okay I'll leave it there guys. Thank you.
Thank you.
Our next question comes from the line of Ryan Sundby of William Blair. Your line is now open. Please go ahead.
Yes, hi, good morning, Thanks for the question here.
Chris I was wondering if you could maybe compare and contrast, some of the growth opportunities and maybe at risk.
For an acquisition like Fox.
Seemingly close fit with other brands and biking luxuries.
First of all something Mike So that's more of a first entry and in new category here and deficiency.
Just any color there on how you think about the approach we create.
Sure. So Ryan both of them are have a lot of similarities and to your point has some differences as well. So let me first talk about the similarities.
When we look at acquisitions and there is a consistent theme across the other acquisitions, we've made to date.
Theyre all number one brands in their space their iconic and have a cult like following.
They participate in large Tam.
And then increasingly faster growing markets. If you will they've all bring a world class management team and the great cultural fits right. So they're complementary in their <unk>.
Synergistic and allow us to leverage the centers of excellence that we have developed now the differences between a Fox and assumes as Fox is highly synergistic as probably the most synergistic acquisition. We've made since Remington. So when you think about the opportunities with actions.
We really can't control our own destiny, there. It's a business that we believe will continue to grow the trends are great. Our preorder book looking into fall is terrific. So theres no reason to believe that we shouldnt continue to grow this business, but we're able to control our destiny on the.
Just the cost side as well so we'll be exploring that that's not a quick quick.
Quick one, but we'll be integrating it carefully as we look forward over the next couple of years.
Shins.
Shouldn't be more excited about the opportunity percentage with Casey Walsh has done and his team as he has built a terrific team and it is easily the most iconic brand in the exchange space and so we've been as I've commented previously on prepared remarks, and open comments, we've really been targeting the fishing space.
Over the last couple of years studying it understanding it better really really digging into it but we wanted to get into it with more of a platform player we could and so soon as just provided that perfect opportunity and they love us as a as a landing spot for them because they know that will continue.
<unk> them and use our strength to leverage them in places, where they just couldnt leverage as much as I hope they could so both of them are just terrific acquisitions that we think will add a lot of value to Vista outdoor.
Alright, great color.
And then just I guess quickly.
Quickly on offer products, that's only part of the claim there, which give you the stimulus checks from year to year.
Arrow is that isolated just to this quarter and I sort of way to maybe quantify how big of an impact that had versus maybe some of the broader softening demand.
Product and price point, you talked about earlier.
Yes, sure Brian I would view the.
The stimulus checks is affecting that more price sensitive category of consumers and what's really interesting and I think this kind of baffles a lot of people in our country is.
Unemployment is very low.
So people have jobs, they are earning good wages, but at the lower associated demographic entered the market.
Inflation has affected them more so and so without stimulus checks or what have you, we see it affecting us and affecting some of those categories.
As I mentioned before that are a bit more price sensitive.
Got it thanks guys.
Yes, Thanks, Brian .
Thank you.
Our next question comes from the line of Mark Smith from Lake Street Capital Markets. Your line is now open. Please go ahead.
Hi, guys.
First just wanted to dig in on the ammo business, just a little bit Jason It sounds like you've kind of confirmed backlog still multi billions.
Just trying to kind of reconcile with.
With that strong of a backlog why we would look at volume production down.
If pricing will be flat why production would be down maybe so much over the next three quarters versus Q1 levels.
Yes, Mark good morning, as we have mentioned.
Finished goods inventory is much lower than we had expected.
So our efficiencies at the factory and output that we had expected it didn't quite get where we want to get.
Throughput versus finished goods inventory equation nothing on the demand side.
Where we see healthy demand as you had mentioned.
Mark This is Christian let me add a bit to it as you guys start to dig into some more of the detail youre going to see the inventory position in our sporting its products business is relatively healthy.
But if you really dig into finished good versus raw materials and whip and what have you as Jason said, we've kind of drained upon it a little bit in Q1, just because we had the ability and the routes open up to be able to do that and so Jason.
<unk> has been hey, listen if we're able to ship our backlog, we're going to we're going to do that so we did that well in the first quarter now what Jason is talking about it with inefficiencies is really a tight tight labor market right. So when you got a tight labor market, particularly in some of these geographies, where we're manufacturing you are bringing in new Labour you got some labor that is turn it over.
Over and so theyre not as efficient as they will have a couple of quarters. So we plan Remington in particular, the higher output.
They're doing it creates a job versus our original expectations, but it's going to take them a little bit longer to get to the efficiency that we see in our other two plants and thats simply the reason for the lower orders. If you will is rebuilding some of that finished goods inventory.
To supply the demand.
Okay, and as we look at demand.
Demand trends, but also look at kind of retail shelves and retail inventory. That's out there are there some inefficiencies that come and changeover, perhaps from nine millimeter to more center fire rifle or shotgun are there any inefficiencies that come with kind of changeover in the plant.
Yes, Mark there is certainly some during the last five years, we have worked.
To minimize what changeovers or whether it be SKU rationalization.
What products, we make on what lines. So on a go forward basis.
We're much much better off than we were five years ago, just on changeovers getting OE.
Getting throughput out and get efficiencies up so we have we have certainly kept a steady eye on that during these past two and a half years.
Okay, and then kind of big picture as we think about consumer trends you guys have talked about kind of the entry price points being weaker than the higher end price points.
Wood Bell versus zero be perhaps an example of that within and if so can you talk about trends such as on demand for for Bel during the quarter maybe versus euro.
Yeah, So mark what's interesting about the the Bell brand is the Bell brand.
A lot of us think of it as selling mass helmets through mass channels of distribution, which is a big part of their business. So one of the leaders in the Moda Cross and.
Mountain biking category, which are a higher demographic, so belden itself really needs to be.
<unk> got another level or too.
So we've got pockets of bell that are that are really really growing nicely and then of course, we've got our mass channel that's a bit upside down right now.
All this stuff is built into our guidance now zero zero ourselves predominantly to a higher option associated demographics. So that has fared well. So the one thing I do want to say, though could you talk about consumer trends as we talked a lot about the slowing in the opening price points, but the participation rates are still very high.
We're highly encouraged by people that we see that are continuing to grill.
Yard or back country, and Thats, why we said our <unk> are up 30% for camp chef, we can see.
People visiting parks and campaign.
Participating with road biking, so we don't think that this is.
<unk> is going to be a long term issue with.
With the opening price point category categories, continuing to be soft some of it is as our retailers start to replenishing some of those key categories, we'll fix it but we think it will start to level as we go forward.
Perfect and the last one for me just can you guys talk about direct to consumer E comp trends during the quarter.
Yes, our direct to consumer business continues to.
The strong in total.
Obviously some of the categories that are affected in brick and mortar also get affected the same way and direct to consumer so our campus business where we've.
Sold a lot of.
Opening in mid price point grilling platforms in the past was a little bit slower.
But made up by some of the other categories that continue to grow in strength in DTC.
Perfect. Thank you.
Yeah.
Thank you.
Our final question comes from the line of Kim calcium.
Crispin.
Your line is now open. Please go ahead.
Good morning.
I was wondering if you could talk a little bit more about the <unk> partnership with top golf.
What does that mean for the business.
What does that do in terms of getting you towards I think the $500 million goal for the platform over time.
Yes, so Jim this is Chris.
Good good question, we don't typically size up partnerships like that.
But the way I would characterize it is it's not as much of a big dollar.
Increase it'll be not right. So we'll get our platform into top golfs will get into some of the other locations will get it into their fitting locations, but what's really exciting is the halo effect. This gives the foresight brand when you get to.
A top brand like Callaway that says Okay, you guys have the best technology and.
And it wasn't just callaway right, we've been working with tailor made for a long time now we've been increasingly working with the pushing at title group as well so calories a third big one to come onboard to say guys credit to you you've got terrific technology.
We want to use the best and so we're going to bring you guys on and that's why the partnership announcement was really exciting and so we're going to continue to build a relationship with them and support them in every way we can.
Great and then on <unk>.
<unk>.
I think you said.
<unk>.
It won't be accretive until FY 'twenty four.
Youre forecasting a mid teens EBITDA margin post integration so.
What do you need to do to.
Bring those margins up to the mid teens.
And then you mentioned kind of building a fishing platform.
What's the plan kind of acquisitions versus organic to do that thanks.
So this is <unk>.
As you know with the center of excellence.
E Commerce and supply chain adapt better we will add a lot more value and a lot more synergy to assume it's a new platform.
Dave will get most of the benefit of the client Boston to excellence.
Plus our relationship with retailers being part of a bigger 2 billion plus company produced those are the things that help us get to that.
Mid teen EBITDA margin and they made lots of investments the last couple of years to get to this level. So we will see.
More deleverage in the business.
<unk> continued to grow at this level.
And Jim just to add on to suit answers comments you had a question too about the fishing platform and so that's really a nod to the future that it opens up very large total addressable market for us, but as we have stated our capital allocation strategy at this point is.
Is to pay down debt, even though we've got a low leverage we'd like to continue to take that leverage down in a prudent manner and then secondly look at share repurchases, where we think we can offer to initially go in and purchased so not that we're ignoring M&A activities, but we don't have anything in our funnel.
Right now that's imminent and we're just going to continue down the path of building that business out and looking to the future.
Great. Thank you.
Thank you ladies and gentlemen at this time there are no additional questions I'd like to thank you for joining us today.
Yeah.
Okay.