Q2 2024 American Outdoor Brands Inc Earnings Call

Yes.

Speaker 1: Good day everyone and welcome to American Outdoor Brands Inc. 2nd quarter fiscal 2020 for Financial Results Conference Call. This call is being recorded.

Good day, everyone and welcome to the American Outdoor brands, Inc. Second quarter fiscal 'twenty 'twenty four financial results Conference call. This call is being recorded.

Speaker 1: At this time, I would like to turn the call over to Liz Sharp, Vice President of Investor Relations for some information about today's call.

At this time I would like to turn the call over to Liz Sharp Vice President of Investor Relations for some information about today's call.

Speaker 2: Thank you in good afternoon. Our comments today may contain predictions, estimates, and other forward-looking statements.

Thank you and good afternoon, our comments today may contain predictions estimates and other forward looking statements.

Speaker 2: Our use of words like anticipate, project, estimate, expect, intent, should, could, indicate, to just, believe, and other similar expressions is intended to identify those forward-looking

How are your words like anticipate project estimate.

Sure. It could indicate suggest believe and other similar expressions are intended to identify those forward looking statements.

Speaker 2: forward-looking statements also include statements regarding our product development, focus, objectives, strategies and vision, our strategic evolution, our market share and market demand.

Forward looking statements also include statements regarding our product development focus objectives strategies and vision.

Our strategic evolution.

Our market share and market demand for our products.

Speaker 2: market and inventory conditions related to our products and in our industry in general and growth opportunities and trends.

Market and inventory conditions related to our products and in our industry in general.

Of course opportunities and trends.

Speaker 2: Our forward-looking statements represent our current judgment about the future and they are subject to various risks and uncertainties.

Our forward looking statements represent our current judgment about the future and they are subject to various risks and uncertainties risk factors and other considerations that could cause our actual results to be materially different are described in our securities Securities filings.

Speaker 2: risk factors and other considerations that could cause our actual results to be materially different are described in our Securities File.

Speaker 2: You can find those documents as well as a replay of this call on our website at AOB.com.

You can find those documents as well as a replay of this call on our website at <unk> Dot com.

Speaker 2: Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking...

Today's call contains time sensitive information that is accurate only as a first time and we assume no obligation to update any forward looking statements. Our actual results could differ materially from our statements today.

Speaker 2: Our actual results could differ materially from our statements today. I have a few important items to-

I have a few important items to note about our comments on today's call.

Speaker 2: First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets, dot compensation, shareholder cooperation agreement costs, facility consolidation costs, technology implementation, acquisition costs, other costs, and income tax adjustments.

First we reference certain non-GAAP financial measures are non-GAAP results exclude amortization of acquired intangible assets stock compensation shareholder cooperation agreement cost facility consolidation costs technology implementation acquisition costs or other costs and income tax adjustments.

Speaker 2: The reconciliations of GAAP financial measures to non- GAAP financial measures, whether they are discussed on today's call, can be found in our filings, as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS.

The reconciliations of GAAP financial measures to non-GAAP financial measures, whether they are discussed on today's call can be found in our filings as well as today's earnings press release, which are posted on our website.

So when we reference EPS, we're always referencing fully diluted EPS.

Speaker 2: Joining us on today's call is Brian Murphy, President and CEO and Andy Fulmer CFO . And with that, I'll turn the call over to Brian . Thanks, Liz.

Joining us on today's call is Brian Murphy, President and CEO, and Andy former CFO and with that I'll turn the call over to Brian.

Thanks, Liz and thanks, everyone for joining us.

Speaker 3: I'm pleased with our second quarter results, which demonstrated solid performance in sales and capital management, as well as ongoing progress in support of our long-term strategic objectives.

I'm pleased with our second quarter results, which demonstrated solid performance in sales and capital management as well as the ongoing progress in support of our long term strategic objectives.

Speaker 3: We deliver net sales growth of 6.4%, a result that came in ahead of our expectations, and that we view favorably, given that retailers continue to remain cautious about their inventories and available open-to-buy dollars in the quarter.

We delivered net sales growth of six 4%. A result that came in ahead of our expectations and that we view favorably given that retailers continue to remain cautious about their inventories and available open to buy dollars in the quarter.

Speaker 3: Our second quarter sales also reflected long-term growth of more than 21 percent over our pre-pandemic second quarter of fiscal 2020, including our acquisition of Grela Grills in fiscal 2022.

Our second quarter sales also reflected long term growth, but more than 21% over our pre pandemic second quarter of fiscal 2020, including our acquisition of Gorilla Grilles in fiscal 2020 two.

Speaker 3: We delivered year-over-year growth of more than 14% in our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities.

We delivered year over year growth of more than 14% and our outdoor lifestyle category, which consists of products related to hunting fishing camping, <unk> outdoor cooking and rugged outdoor activities.

Speaker 3: On a long-term basis, our outdoor category has grown nearly 40% compared to the pre-pandemic second quarter of fiscal 2020, including the gorilla acquisition.

On a long term basis, our outdoor category has grown nearly 40% compared to the pre pandemic second quarter of fiscal 2020, including the Gorilla acquisition.

Speaker 3: I believe this result reflects the success of our strategy to grow this part of our business. In fact, our outdoor lifestyle category comprise nearly 60% of our total sales in the second quarter.

I believe this result reflects the success of our strategy to grow this part of our business in fact, our outdoor lifestyle category comprised nearly 60% of our total sales in the second quarter.

Speaker 3: Growth in our outdoor lifestyle category also reflects our strategy to seek out and place our brands where consumers expect to find them, whether online or in store. As well as our strategy to drive sales to retail expansion opportunities.

Growth in our outdoor lifestyle category also reflects our strategy to seek out and place our brands, where consumers expect to find them whether online or in store as well as our strategy to drive sales to retail expansion opportunities.

Speaker 3: Accordingly, we were proud to join forces with Academy Sports and Outdoors in the second quarter to bring Academy customers a select lineup of our meatier maker, meat processing equipment.

Accordingly, we were proud to join forces with Academy sports and outdoors in the second quarter to bring academy customers, a select lineup of our meet your maker meat processing equipment.

Speaker 3: Beginning in October , select meat products became available at all 270 Academy of Retail locations in our mind.

Beginning in October select meat products became available at all 270 Academy of retail locations and online.

Speaker 3: We originally launched Meet in 2019 as a new, exclusively direct-to-consumer brand. Leveraging our Harvester brand lane team's existing infrastructure and consumer insights, Meet quickly developed a loyal following of consumers who appreciate its premium, professional-grade equipment quality, its commitment to user education, its industry-leading lifetime warranty, and its authentic personality.

We originally launched meet in 2019, as a new exclusively direct to consumer brand.

Leveraging our Harvester brand lane teams existing infrastructure and consumer insights meet quickly developed a loyal following of consumers who appreciate its premium professional grade equipment quality its commitment to use our education its industry, leading lifetime warranty.

It's authentic personality.

Speaker 3: Academy is an ideal partner for our initial entry of meat into brick and mortar stores, providing us with a great opportunity to introduce this exciting product lineup to a large number of new potential customers.

Academy is an ideal partner for our initial entry of meat into brick and mortar stores, providing us with a great opportunity to introduce this exciting product lineup to a large number of new potential customers.

Speaker 3: Our shooting sports category saw slight decline in second quarter net sales compared to the prior year. A result that is consistent with reports from firearm manufacturers citing ongoing heightened channel inventory and reduced consumer demand.

Our shooting sports category saw a slight decline in second quarter net sales compared to the prior year. A result that is consistent with reports from firearm manufacturers, citing ongoing heightened channel inventory and reduced consumer demand.

Speaker 3: Although we don't produce firearms or ammunition, related products in our shooting sports category include solutions for target shooting, aiming, face storage, cleaning and maintenance, and self-defense.

Although we don't produce firearms or ammunition related products in our shooting sports category.

<unk> solutions for target shooting, aiming safe storage cleaning and maintenance and self defense.

Speaker 3: Turning now to channel sales in the second quarter, sales growth in our traditional channel was strong, led by the initial shipments related to the meat launch I just discussed, and supported by strength in the hunting and fishing categories under our BOG and BOBBA brand.

Turning now to channel sales in the second quarter sales growth in our traditional channel was strong led by the initial shipments related to the meat launch I just discussed.

It's supported by strength in the hunting and fishing categories under a bog and Bubba brands.

Speaker 3: Net sales in our e-commerce channel also increased year over year, driven primarily by sales for our largest online retailer.

Net sales in our ecommerce channel also increased year over year, driven primarily by sales to our largest online retailer.

Speaker 3: While promotions without retailer in the shooting sports category came in higher than we originally anticipated.

Well promotions with that retailer in the shooting sports category came in higher than we originally anticipated.

Speaker 3: They were beneficial for two reasons. First, they helped deliver several of our brands into the hands of consumers in this otherwise uncertain consumer environment. And second, they helped the lower channel inventories of our shooting sports products as well.

They were beneficial for two reasons first they helped deliver several of our brands into the hands of consumers in this otherwise uncertain consumer environment and second they helped to lower channel inventories of our shooting sports products as well.

Speaker 3: With regard to cell-through, we gather point-of-sail and channel inventory data from retailers that represent about half of our sales. This quarter's POS data was...

With regard to sell through we gather point of sale and channel inventory data from retailers that represent about half of our sales.

This quarter's P O S data was slightly down overall.

Speaker 3: Outdoor lifestyle was relatively flat, a result we were pleased with given the current environment. Our shooting sports category posted a year-over-year decline that was driven almost entirely by drop-in aiming solutions, which are primarily the sights and optics that attach to firearms.

Outdoor lifestyle was relatively flat are resolved we were pleased with given the current environment.

Our shooting sports category posted a year over year decline that was driven almost entirely by a drop in aiming solutions, which are primarily the sites and optics that attached to firearms.

Speaker 3: Sales of those products tend to follow adjusted Nix data more closely.

Sales of those products tend to follow adjusted next data more closely.

Speaker 3: The balance of sales in the shooting sports category performed well relative to the underlying channel trends for the category.

The balance of sales in the shooting sports category performed well relative to the underlying channel trends for the category.

C O S data also indicate that channel inventory of our products declined slightly in the quarter on a year over year basis with the decline in the shooting sports category, partially offset by an increase in the outdoor lifestyle category consistent with my earlier comments.

Speaker 3: Before I close out the sales discussion, I want to turn quickly to preliminary Black Friday weekend sales results.

Before I close out the sales discussion I want to turn quickly to preliminary Black Friday weekend sales results.

Speaker 3: And these are directed consumer sales for a gorilla and meat product.

And these are a direct to consumer sales for a gorilla in meat products.

Speaker 3: For the 4-day period from Black Friday through Cyber Monday, on a combined basis, Grilla and Mead delivered nearly 40% year-rear growth.

For the four day period from Black Friday through cyber Monday on a combined basis gorilla and meet delivered nearly 40% year over year growth.

Speaker 3: Grilla had its largest single sales day ever on Black Friday, and Meat had its largest single sales day ever on Cyber Monday. Again, preliminary, but pretty exciting result.

Gorilla had its largest single sales day ever on Black Friday, and meet had its largest single sales day ever on cyber Monday.

Preliminary but pretty exciting results.

Speaker 3: Now, turning to innovation. Innovation is core to who we are, and a key element that our long-term growth strategy.

Now turning to innovation innovation is core to who we are and a key element of our long term growth strategy.

Speaker 3: We are reshaping enthusiasts' expectations of what it means to deliver in the moments that matter, whether it's gamifying fishing with Bubba's new Smart Fish Scale, defining hunting rest stability with Bog's death grip line, or re-invisioning Clay Thrower's that operate battery-free with Caldwell's Claymore line.

We are reshaping enthusiastic expectations of what it means to deliver in the moments that matter, whether it's a game of filing fishing with Bubba as new smart their scale.

Defining hunting rough stability with bogs death grip line.

Or re envisioning clay throwers that operate battery free with Caldwell's Claymore line.

Speaker 3: As we court consumers who are increasingly discerning, we believe that by introducing a consistent stream of innovative solutions, backed by enthusiast brands, we're able to capture market share and gain new place.

As we court consumers, who are increasingly discerning, we believe that by introducing a consistent stream of innovative solutions backed by enthusiast brands, we're able to capture market share and gained new placement.

Speaker 3: This innovation engine fueled by our docking the lock process generated over 25% of our second quarter net sale.

Innovation engine fueled by our dock into log process generated over 25% of our second quarter net sales.

Yeah.

Speaker 3: Well, this time of year is typically quite for us with regard to new product introductions. Our teams are hard at work on a number of new products and extensions that will begin unveiling across several of our shooting sports brands at the upcoming SHOT Show in January .

Well this time of year is typically quiet for us with regard to new product introductions. Our teams are hard at work on a number of new products extensions that will begin unveiling across several of our shooting sports brands at the upcoming shot show in January.

Speaker 3: In addition, we're putting the finishing touches on launch plans for a very exciting new product from Grilla you'll hear about soon.

In addition, we're putting the finishing touches on launch plans for a very exciting new product from gorilla, you'll hear about soon.

Speaker 3: Well, we've introduced several gorilla products and accessories since the acquisition. This upcoming launch represents the first, and a lineup of significant, new gorilla innovations generated by our Dawkins and LogPros.

Well, we've introduced several gorilla products and accessories since the acquisition. This upcoming launch represents the first in a lineup of significant new gorilla innovations generated by our dock into log process.

Speaker 3: We've also ported Grilla Overtooth our Salesforce e-commerce platform and launched a brand new website.

Yeah.

We are also imported gorilla over two <unk>, our sales force E Commerce platform and launched a brand new website.

Speaker 3: Visit us at GrillaGrills.com. Check out our new Evolver Backyard Campaign.

Is there a set gorilla grills dotcom checkout, our new evolve your backyard campaign.

Speaker 3: and then stay tuned for a number of new Grilla products that will launch under this campaign in the coming quarter.

And then stay tuned for a number of new gorilla products will launch under this campaign in the coming quarters.

Speaker 3: Lastly, we were honored to receive recognition for our innovative achievements when we were recently named Accessory Manufacturer of the Year by the National Association of Sporting Goods Wholesaler.

Lastly, we were honored to receive recognition for our innovative achievements. When we were recently named accessory manufacturer of the year by the National Association of Sporting goods wholesalers.

Speaker 3: Our Caldwell brand took home honors as well for best new accessories.

Our Caldwell brand took homeowners as well for best New accessory.

Speaker 3: These awards are a testament to our creative teams under Caldwell and throughout AOB whose teamwork and talent are at the very core of our success.

These awards are a testament to our creative teams under Caldwell and throw a O b, whose teamwork and talent are at the very core of our success with.

Speaker 3: With that, I'll turn it over to Andy to discuss our financial result.

With that I'll turn it over to Andy to discuss our financial results.

Speaker 4: Thanks Brian . As Brian mentioned, we are pleased with our results for the second quarter.

Thanks, Brian as Brian mentioned, we are pleased with our results for the second quarter. We delivered net sales growth, we maintain a strong balance sheet and we continue to return cash to shareholders through our share repurchase program.

Speaker 4: We delivered net sales growth, we maintained a strong balance sheet, and we continued to return cash to shareholders through our share repurchase program, all while continuing to navigate market challenges stemming from cautious inventory management by retailers and reduce consumer demand. concise.

All while continuing to navigate market challenges stemming from cautious inventory management by retailers and reduced consumer demand.

Let me walk you through the details.

Speaker 4: Netsvails for Q2 came in above our expectations at $57.9 million compared to $54.4 million in Q2 last year, an increase of 6.4%.

Net sales for Q2 came in above our expectations at $57 $9 million compared to $54.4 million in Q2 last year, an increase of six 4%.

Speaker 4: compared to pre-pendemic Q2 of fiscal 2020, net sales increased by 21.3% including the acquisition of grilla.

Compared to pre pandemic Q2 of fiscal 'twenty 'twenty net sales increased by 21, 3%, including the acquisition of Gorilla.

Speaker 4: On a category basis, net sales and outdoor lifestyle increased by 14.3% over Q2 last year, and included continued strengths in our hunting and rugged outdoor products.

On a category basis net sales in outdoor lifestyle increased by 14, 3% over Q2 last year and included continued strength in our hunting and rugged outdoor products.

Speaker 4: Conversely, net sales and shooting sports decreased by 3.4% compared to Q2 last year, a result that was entirely driven by a decline in aiming solution products, which are sold to both firearm OEMs and consumers, and the sales of which tend to align more closely with adjusted.

Conversely, net sales in shooting sports decreased by three 4% compared to Q2 last year. A result that was entirely driven by a decline in aiming solution products, which are sold to both firearm Oems and consumers and the sales of which tend to align more closely with adjusted mix.

Speaker 4: On a channel basis, traditional sales, which included our retail launch of Meet Your Maker products increased by 8.7% while ecommerce net sales increased by 3.3% over Q2 last week.

On a channel basis traditional sales, which included our retail launch of meet your maker products increased by eight 7% while E. Commerce net sales increased by three 3% over Q2 last year.

Speaker 4: As a reminder, our e-commerce channel includes direct to consumer sales from our own websites, as well as sales by online retailers that do not have brick and mortar stores.

As a reminder, our E Commerce channel includes direct to consumer sales from our own websites as well as sales by online retailers that do not have brick and mortar stores.

Turning to gross margin.

Speaker 4: Gross margins for Q2 decreased to 45.7% compared to 47.7% in Q2 last year.

Gross margin for Q2 decreased to 45, 7% compared to 47, 7% in Q2 last year.

Speaker 4: The decrease was mainly due to increased promotional activity in the current year that Brian mentioned.

The decrease was mainly due to increased promotional activity in the current year that Brian mentioned.

Speaker 4: Although this promotional level was higher than we anticipated, we believe the programs were effective in driving net sales in this uncertain market.

Although this promotional level was higher than we anticipated. We believe the programs were effective in driving net sales in this uncertain market.

Turning to operating expenses.

Speaker 4: Gap operating expenses for the quarter were $26.5 million compared to $26.1 million last year.

GAAP operating expenses for the quarter were $26 $5 million compared to $26 $1 million last year.

Speaker 4: The increase was driven mainly by higher variable selling at distribution cost relating to the net sale link.

The increase was driven mainly by higher variable selling and distribution costs relating to the net sales increase.

Speaker 4: netted by decreases in IT, insurance, and lower rent due to facility consolidations we completed last year.

Netted by decreases in high tea insurance and lower rent due to facility consolidations, we completed last year.

Speaker 4: An in non-gap basis, operating expenses in Q2 were up to flightly to $22.3 million compared to $21.3 million in Q2 of last year for the reasons that I just

On a non-GAAP basis operating expenses in Q2 were up slightly to $22 $3 million compared to $21.3 million in Q2 of last year for the reasons that I just listed.

Speaker 4: non-GAAP operating expenses exclude intangible amortization, stock compensation, and certain non-recurring expenses as they occur.

non-GAAP operating expenses exclude intangible amortization stock compensation and certain nonrecurring expenses as they occur.

Speaker 4: Gap EPS was one cent for the second quarter compared to three cents for the second quarter last year.

GAAP EPS was one cent for the second quarter compared to three for the second quarter last year.

Speaker 4: On a non-gap basis, EPS was 25 cents in Q2 this year compared to 29 cents in the prior year.

On a non-GAAP basis EPS was <unk> 25 in Q2 this year compared to 29 in the prior year.

Speaker 4: Our Q2 figures are based on our fully diluted share count of approximately 13.3 million shares.

Our Q2 figures are based on a fully diluted share count of approximately $13 3 million shares for full fiscal 'twenty 'twenty four we expect our fully diluted share count will be about $13 5 million shares.

Speaker 4: For full fiscal 2024, we expect our fully deleted share count will be about 13.5 million shares.

Speaker 4: Just a debauch for the quarter was $5.2 million compared to $6.4 million last year.

Adjusted EBITDAX for the quarter was $5 $2 million compared to $6 $4 million last year.

Speaker 4: Turning now to the balance sheet in Cashflow. We continue to maintain a strong balance sheet.

Turning now to the balance sheet and cash flow, we continue to maintain a strong balance sheet.

Speaker 4: We ended the second quarter with cash of $8.4 million and no debt. After repurchasing approximately $1.5 million of our comments doc.

We ended the second quarter with cash of $8 $4 million and no debt after repurchasing approximately $1.5 million of our common stock.

Due to the seasonal nature of our business our second quarter typically reflects operating cash outflow, which is the result of seasonal increases in both accounts receivable and inventory and that was the case this quarter.

Speaker 4: Our second quarter typically reflects operating cash outflow, which is the result of seasonal increases in both the consumable and inventory. And that was the case this quarter.

Then in the second half of the year.

Speaker 4: We typically generate cash from operations as we collect those receivables and lower our inventory levels.

We typically generate cash from operations as we collect those receivables and lower our inventory levels.

Speaker 4: We expect this pattern to hold true for our second half of fiscal 2024.

We expect this pattern to hold true for our second half of fiscal 2024 as well.

Speaker 4: Operating cash outflow for the second quarter was $8.4 million, driven mainly by an increase in accounts receivable over approximately $17 million.

Operating cash outflow for the second quarter was $8 $4 million driven mainly by an increase in accounts receivable of approximately $17 million.

Speaker 4: The higher level of AR resulted from the sequential net sales increase over Q1, as well as the timing of shipments, which were higher toward the end of the quarter.

The higher level of Ey are resulted from the sequential net sales increase over Q1 as well as the timing of shipments which were higher towards the end of the quarter.

Speaker 4: Our inventories grew by $4.2 million in the second quarter. The majority of that increase was driven by our decision to accelerate certain product purchases into Q2 in order to provide safety stock for a vendor change that will yield cost savings beginning at fiscal 2025.

Our inventories grew by $4 $2 million in the second quarter.

The majority of that increase was driven by our decision to accelerate certain product purchases into Q2 in order to provide safety stock for a vendor change that will yield cost savings beginning in fiscal 2025.

Speaker 4: Balance of the increase resulted from the need to capitalize a higher level of tariff related variances in the quarter driven by product

The balance of the increase resulted from the need to capitalize a higher level of tariff related variances in the quarter driven by product mix.

Speaker 4: We expect inventory to decline sequentially from our current level in Q3 and again in Q4, resulting in inventories just below $100 million by the end of fiscal 2021.

We expect inventory to decline sequentially from our current level in Q3 and again in Q4, resulting in inventories just below $100 million by the end of fiscal 2024.

Speaker 4: We remain debt-free, ending the quarter with no outstanding balance on our $75 million expandable line of credit and total available capital of roughly $100 million.

We remain debt free ending the quarter with no outstanding balance on our $75 million expandable line of credit.

And total available capital of roughly $100 million.

With regard to capital expenditures.

Speaker 4: We spent a net $745,000 on CapEx for the second quarter, mainly for product tooling and patent costs as expected.

We spent a net $745000 on capex for the second quarter, mainly for product tooling and patent costs as expected.

Speaker 4: Our expectations for total capex spend for fiscal 2024 remain unchanged at between $6 million and $7 million.

Our expectations for total Capex spend for fiscal 'twenty 'twenty four remain unchanged at between 6 million and $7 million.

Speaker 4: Included in this range is spending of between $3 million and $4 million for product tooling and maintenance.

Included in this range is spending of between 3 million and $4 million for product tooling and maintenance.

Speaker 4: and at one time spend of approximately $3 million to purchase assets, including warehouse racking, office furniture, and other fixtures. When we assume the full lease at our Columbia Missouri facility on January 1st.

And a one time spend of approximately $3 million to purchase assets, including warehouse racking office furniture and other fixtures when we assume the full lease at our Columbia, Missouri facility on January one.

Speaker 4: Returning capital to shareholders remains a key capital allocation priority. And the strength of our balance sheet has allowed us to return capital to shareholders opportunistically through our share repurchase program.

Returning capital to shareholders remains a key capital allocation priority and the strength of our balance sheet has allowed us to return capital to shareholders Opportunistically through our share repurchase program.

Speaker 4: Our prior share repurchase program expired in September , and in Q2, our Board of Directors approved a new share repurchase program of up to $10 million effective October 2023 through September 2024.

Our prior share repurchase program expired in September and in Q2, our board of directors approved a new share repurchase program of up to $10 million effective October 2023 through September 2024.

Speaker 4: In the second quarter, we repurchased roughly 158,000 shares for $1.5 million at an average price of $9.46 per share.

And the second quarter, we repurchased roughly 158000 shares for $1 $5 million at an average price of $9 46 per share.

Now turning to our outlook.

Speaker 4: Our brands remain strong with consumers, and we continue to believe that fiscal 2024 could deliver full-year net sales growth of up to 3.5%.

Our brands remain strong with consumers and we continue to believe that fiscal 2024 could deliver full year net sales growth of up to 3.5%.

Speaker 4: As I noted earlier, Q2 net sales came in ahead of our expectations. A result that benefited from retailers placing orders earlier in the season than last

As I noted earlier Q2 net sales came in ahead of our expectations. A result that benefited from retailers, placing orders earlier in the season than last year.

Speaker 4: As such, we now expect Q3 to be relatively flat compared to Q3 last year.

As such we now expect Q3 to be relatively flat compared to Q3 last year.

Speaker 4: And we continue to believe Q4 will follow our typical seasonal pattern, delivering net sales that are higher than Q1 of fiscal 2024.

And we continue to believe Q4 will follow our typical seasonal pattern delivering net sales that are higher than Q1 of fiscal 2024.

Turning to gross margins.

Speaker 4: We expect to see gross margins come in at between 44% and 45% on a full fiscal 2024 basis.

We expect to see gross margins come in at between 44% and 45% on a full fiscal 2024 basis, which would imply a slight decline in second half gross margins as well as a decline in our full year adjusted EBITDA expectations.

Speaker 4: which would imply a slight decline in second half gross margins as well as a decline in our full year adjusted EBITAS expectations. I'll walk you through those details now.

I'll walk you through those details now.

With regard to margins further.

Speaker 4: First, while second quarter sales came in ahead of our expectations and we are maintaining our full year sales outlook, we are opting to invest more in promotions than we had originally planned as we continue to pursue our share of wallet in the current uncertain consumer spending environment.

First while second quarter sales came in ahead of our expectations and we are maintaining our full year sales outlook, we are opting to invest more in promotions than we had originally planned as we continued to pursue our share of wallet in the current uncertain consumer spending environment.

Speaker 4: Second, we are selectively discounting and converting to cash some of our slower moving inventory, primarily in shooting sports categories.

Second we are selectively discounting and converting to cash some of our slower moving inventory primarily in shooting sports category.

Speaker 4: We believe the combination of these two initiatives will help us gain and protect market share while further building and strengthening our balance sheet.

We believe the combination of these two initiatives will help us gain and protect market share, while further building and strengthening our balance sheet.

Speaker 4: Third, inventory purchases in the first half of the year and predominantly in the second quarter represent both a higher dollar spend as well as a mix of products that skewed towards higher tariffs as I discussed earlier.

Third inventory purchases in the first half of the year and predominantly in the second quarter represent both a higher dollar spend as well as a mix of products stick skewed towards higher tariffs as I discussed earlier.

Speaker 4: Counting treatment requires that the variances created by the difference between our standard costs and actual costs of purchase inventory, mostly tariff.

Accounting treatment requires that the variances created by the difference between our standard costs and actual cost of purchased inventory mostly tariffs b.

Speaker 4: be amortized across the third and fourth quarters, and that will impact margins to a degree.

Be amortized across the third and fourth quarters and that will impact margins to a degree.

Speaker 4: And lastly, freight savings that we secured earlier this year are only recognized as the underlying inventory turns over, generally six months down the road.

And lastly, freight savings that we secured earlier this year are only recognized as the underlying inventory turns over generally six months down the road.

Speaker 4: So the benefit of those cost reductions won't be fully recognized until our new fiscal year, which begins May 1.

So the benefit of those cost reductions won't be fully recognized until our new fiscal year, which begins may 1st.

Speaker 4: With regard to OPEX, we believe that overall operating expenses will decline slightly on a gap basis for fiscal 2024 as a result of reductions from facility consolidations, one time legal and advisory fees, and IT implementation costs offset by higher selling and distribution costs.

With regard to Opex, we believe that overall operating expenses will decline slightly on a GAAP basis for fiscal 2024 as a result of reductions from facility consolidations, one time legal and advisory fees and implementation costs offset by higher selling and distribution.

Cost.

Speaker 4: On a non-gap basis, OpEx will increase slightly, mainly due to the higher selling and distribution costs.

On a non-GAAP basis, Opex will increase slightly mainly due to the higher selling and distribution costs.

Speaker 4: And recall here that we have shot show in our third quarter, which adds selling and marketing costs in Q3 that don't occur in Q3.

And recall here that we have shot show in our third quarter, which adds selling and marketing cost in Q3 that don't occur in Q4.

Speaker 4: Based on these factors, we expect our adjusted EVADAS margin for fiscal 2024 to be between 4% and 5.5%.

Based on these factors, we expect our adjusted EBITDA margin for fiscal 2024 to be between 4% and five 5%.

Speaker 4: As we enter fiscal 2025 in May, we expect to see the positive impacts on our adjusted EBITAS of the savings initiatives I've outlined in today's call. With that, I'll hand it back to Brian .

As we enter fiscal 2025 in May we expect to see the positive impacts on our adjusted Ebitdas of the savings initiatives I've outlined in today's call.

With that I'll hand, it back to Brian.

Thank you Andy.

Speaker 3: In closing, we're pleased with our second quarter performance. I believe our results demonstrate our ability to manage those elements within our control, delivering growth, innovation, and a loyal customer base for our popular brands, while prudently managing our capital to allow us to invest in our long-term growth.

In closing, we're pleased with our second quarter performance.

I believe our results demonstrate our ability to manage those elements within our control delivering growth innovation and a loyal customer base for our popular brands, while prudently managing our capital to allow us to invest in our long term growth.

Speaker 3: We have a number of reasons to be excited about the future. For instance.

We have a number of reasons to be excited about the future for instance.

Speaker 3: We're on track to deliver total net sales growth of up to 3.5% this fiscal year, in alignment with our initial expectations.

We're on track to deliver total net sales growth of up to three 5% this fiscal year in alignment with our initial expectations.

Speaker 3: POS sales at retail for outdoor lifestyle brands remain relatively favorable and channel inventories for shooting sports brands are significantly lower.

Pass sales at retail for our outdoor lifestyle brands remained relatively favorable and channel inventories for our shooting sports brands are significantly lower.

Speaker 3: We have many innovative, exciting new products and development across multiple brands and shooting sports and outdoor lifestyle that will begin launching in January . And we'll continue launching through calendar 2024 and beyond.

We have many innovative exciting new products in development across multiple brands and shooting sports and outdoor lifestyle that will begin launching in January and we'll continue launching through calendar 2024 and beyond.

Speaker 3: We are extending the reach of our legacy D2C brands, such as Meet Your Maker, with strategic retail partners.

We are extending the reach of our legacy D to C brands, such as meet your maker with strategic retail partners.

Speaker 3: Our Bubba brand was named the official scale of Major League Fishing earlier this year, and the new MLF season, which we believe will drive tremendous visibility for Bubba, is set to kick off in January 2024.

Our Bubba brand was named the official scale of major league fishing earlier, this year and the new MLR season, which we believe will drive tremendous visibility for Bubba.

Is set to kick off in January 2024.

Speaker 3: We have taken aggressive preemptive actions with regard to facility consolidation and space optimization, break-cost reduction, and a vendor change, all of which are designed to generate notable savings in fiscal 25.

We have taken aggressive preemptive actions with regard to facility consolidation and space optimization.

Cost reduction and a vendor change all of which are designed to generate notable savings in fiscal 'twenty five.

Speaker 3: Business consolidations are now complete and we have the capacity and resources to grow organically and through acquisition without adding incremental costs.

Business consolidations are now complete and we have the capacity and resources to grow organically and through acquisition without adding incremental cost.

Speaker 3: And lastly, the MNA landscape appears to be hitting up a bit. At the same time, our balance sheet remains extremely strong and we have no depth.

Lastly, the M&A landscape appears to be heating up a bit at the same time, our balance sheet remains extremely strong and we have no debt.

Speaker 3: affording us the ability to freely explore the growing number of acquisition opportunities we see on the horizon.

Affording us the ability to freely explore the growing number of acquisition opportunities we see on the horizon.

Speaker 3: Gap it off, we have a broad portfolio of authentic lifestyle brands, including Caldwell, Grilla, Baba, and others.

Cap it off we have a broad portfolio of authentic lifestyle brands, including Caldwell Gorilla, Bubba and others.

That continues to resonate with enthusiasts, who are passionate about their outdoor activities.

We couldnt be more excited about what lies ahead.

Speaker 3: With that, operator, please open the call for questions for more analysts.

With that operator, please open the call for questions from our analysts.

Speaker 1: Certainly, to ask a question you may press star then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, you may press star then two.

Certainly so ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw. Your question you May Press Star then two.

Speaker 1: Today's first question comes from Mark Smith with Lake Street Capital Markets. Please go ahead.

Today's first question comes from Mark Smith with Lake Street Capital markets. Please go ahead.

Speaker 5: Hi, guys. First question for me just wanted to dig in on adding meat into a kind of traditional channel. Any additional insight you can give us on kind of the scale of that was maybe a way of asking this would you still had growth in the traditional channel without adding in those meat sales into academy?

Hi, guys.

First question for me just wanted to dig in on <unk>.

Adding meat into kind of traditional channel.

Any additional insight you can give us on Canada the scale of that maybe a way of asking this would you still had growth in the traditional channel without adding.

Adding in those meat sales into our Academy.

Speaker 3: Hey, Mark, it's Brian . The short answer is yes. We still have an increase.

Yeah.

Hey, Mark it's Brian.

The answer is yes, we still have an increased despite the loaded with to meet your maker.

Speaker 3: despite the load-in with Meet Your Maker. And all signs to this point are very positive. We're working with Academy to make sure that's a successful launch. Also great to see that our e-commerce sales for the four days we mentioned in our prepared remarks from Black Friday to Cyber Monday saw tremendous traction. So all signs are positive at this time, but yes, the underlying trends within traditional were also very positive.

And in all science to this point, a very positive we're working with academy to make sure that's a successful launch.

Also great to see that our e-commerce sales for the four days, we mentioned in our prepared remarks from Black Friday, cyber Monday saw tremendous tremendous traction.

So all signs are positive at this at this time, but yes, the underlying trends within traditional we're also very positive.

Speaker 5: Then, you know, shooting sports is obviously still a little bit tough. I'm curious if we can just look at October , at all. Any call out as we saw Nick get better. Did you see increased demand, as you look at point of sale, data for some of your shooting sports products, or did that not really apply with that purely more so just buy around?

Okay. Then you know shooting sports is obviously still a little bit tough I'm curious if we can just look at October at all any call out is we saw mix get better did you see.

<unk> demand as you look at point of sale data for some of your shooting sports products or.

Did that not really apply was that purely more so just firearms.

Speaker 3: Yeah, this is Brian again. So I would say that we alluded to aiming solutions dragging down, go overall sales and shooting sport.

Yeah. This is Brian again, so I would say that we alluded to adding solutions.

Dragging down the overall sales in shooting sports.

Speaker 3: And that is definitely true. Our brand-like called Well, Tipped in Wheeler, Frankfurt Arsenal actually did very well, just given the other trends going on in the industry. So very pleased to see that in particular, within categories that we've emphasized are good long-term, steady categories.

And that is that is definitely true.

Our brands like Caldwell, and Tipton Wheeler Frankford Arsenal.

I actually did very well.

Just given the other trends going on in the industry. So very pleased to see that in particular within categories that we've emphasized are good long term steady categories.

Speaker 3: So really the difference there, the delta, came on the ending solution side.

So really the difference there the delta came on the Ami solution side.

Speaker 5: And then I just want to clarify, Andy, that either does margin guidance that you gave. Can you just give that to us again?

Okay.

And then I just want to clarify that.

The EBITDA margin guide.

Guidance.

Can you just give that to us again.

Speaker 4: Yeah, so the range that we're expecting is between 4 and 5.5%.

Yeah. So the the range that we're expecting is between four and five 5%.

And it sounds like.

Yeah go ahead.

Speaker 5: I was just going to say, and it seems like a lot of that is the big driver of that is gross profit margin, looking for that to be down in the second half and you walk through some of those reasons.

Oh, I was just going to say and it seems like a lot of that is.

The big driver of that is gross profit margin and looking for that to be down in the second half and you walked through some of those reasons.

Speaker 4: Yes, great question. So as I talked about in the prepared remarks, it's really kind of, we kind of look at it in three pieces. So the majority is related to the investments that we've done in additional promotions and promotions we expect. So you saw a chunk of that in Q2. And really, like Brian talked about in his remarks, it's, you know, protecting market share, we believe those are great investments to be relevant with our consumers.

Yeah, Yeah, great question so.

As I talked about in the prepared remarks, it's really kind of we kind of look at it in three pieces. So the majority is related to the investments that we've done and additional promotions and promotions. We expect so you saw a chunk of that in Q2.

And really like Brian talked about in his remarks, it's protecting market share. We believe those are great investments to be relevant with our consumers.

Speaker 4: Second piece is kind of the higher tariff products that I talked about a little bit above our expectations in Q2. And as I talked about actually on the Q1 call, those variances, the way that our accounting works is, when those variances are recorded, they amortize off in roughly six months because we have about six months worth of inventory. So as those...

The second piece is kind of the higher tariffs products that I talked about a little bit above our expectations in Q2.

And as I talked about actually on our Q1 call. Those variance is the way that our accounting works is when those variances are recorded they amortize off in roughly six months, because we have about six months worth of inventory so as those <unk>.

Speaker 4: variances came in in Q2. We're expecting those to amortize off in Q4. The final piece is really inbound freight variances. So like tariffs, those are also capitalized in the first half and will amortize off in the second half.

Variances came in in Q2, we're expecting those two to amortize off in Q4.

The final piece is really inbound freight variances so like tariffs those are also capitalized.

In the first half and we'll amortize off in the second half.

Speaker 4: One thing I did want to kind of clarify though, we have seen significant savings inbound free since kind of the craziness of a couple of years ago.

One thing I did want to kind of clarify, though we have seen significant savings and inbound freight since you know kind of the I'll call. It the craziness a couple of years ago.

Speaker 4: what the delta relates to is more of a delay in timing of getting down to the expected rates, which we're seeing today, which is great.

What the Delta relates to is as more of a delay in timing of getting down to the.

The expected rates, which we're seeing today, which is great.

Speaker 4: So it's really just a timing issue of when those get amortized off in the second half of the year. And we expect that'll provide a tailwind going into fiscal 25.

Really just a timing issue of when those get amortized off in the second half of the year and we expect that that will provide a tailwind going into fiscal 'twenty five.

Speaker 4: And in fact, if you look at like a, almost like a pro forma, fiscal 24 pro forma basis on EBITAS, between those are current inbound freight rates and also those vendor savings that both Brian and I talked about, that would add almost $3 million to the framework, that four to five and a half percent that I talked about.

And in fact, if you look at like a almost like a pro forma fiscal 'twenty for a pro forma basis on ebitdas.

Between those are current inbound freight rates and also those vendor savings at both Brian and I talked about that would add almost $3 million to defer to mark that four to five 5% that I talked about them.

Speaker 5: That's helpful. Thank you.

Okay.

That's helpful. Thank you.

Yeah.

Thanks Mark.

Speaker 1: Thank you. The next question is from Eric Wold with B Riley Securities. Please go ahead.

The next question is from Eric Wold with B Riley Securities. Please go ahead.

Speaker 3: Thank you, Graffney everybody. First of all, a couple of questions around the launch of meat into a academy. Is this exclusive to a academy for some point of time to kind of reference partners, you know, for Barry Romarch. Well, the product makes broad and over time. Well, anything ever be exclusive to retail and then how should we think about pricing at retail versus your DPC? Is it always going to be the same or?

Thank you good afternoon everybody.

First of all a couple of questions around the largest meat into an academy.

Is this exclusive to academy for some point in time, you kind of referenced partners.

In your prepared remarks.

Well the product mix rod and overtime.

If you've ever been exclusive to retail and then how should we think about pricing.

At retail versus your DTC is it is it always give you the same or.

Kind of what drives the delta there.

Speaker 6: Yo

Yeah.

Speaker 3: Eric is Brian , so I love the interest around me and it was a really good first expansion of the brand and we have plans for their expanded.

Eric It's Brian so.

Loved the interest around me and it was a really good first expansion of the brand and we have plans to further expand that.

Speaker 3: And we tease that this for a few quarters, just around wanting to make sure that we had the right partner before we introduced the brand. We thought tremendous growth, direct to consumer before beginning to introduce it. There were lots of things we wanted to do before that took place. Obviously the right partner for us merchandising is critical, making sure that we can, the brand can show up in the way that consumers will expect it to show up.

And we've teased at this for a few quarters just around wanting to make sure that we have the right partner before we introduced the brand we saw tremendous growth in direct to consumer before beginning to introduce there were lots of things we wanted to do before that took place.

We see the right partner for US merchandising is critical making sure that we can the brand can show up in the way that consumers will expect it to show up.

Speaker 3: And then also there are some differences between, you know, let's say, the consumers that are shopping on our website and some of the consumers that are walking into Academy stores.

And then also there are some differences between let's say the consumers that are shopping on our website and some of the consumers that are walking into academy stores.

Speaker 3: And so we have a slightly, there are some shared products between the two, but we do have some that are positioned more for account of these customers and for that retail place.

And so we have a slightly you know there are some shared products between the two but.

But we do have some that are <unk>.

Positioned more for academy's customers and for that retail placement, so theyre not one for one and that's intentional.

Speaker 3: So they're not one for one, and that's intentional, really, because we want this to be a win-win. And so far, that's what we're seeing.

Really because we want it we want this to be a win win.

So far that's what we're seeing.

Speaker 3: Over time, I think we want to be careful with the assortment. We have ambitious plans to increase the assortment of meat as we expand that product line over time. And I would expect you to continue to see some version of that showing up at retail, but ultimately complementing what we have online and really being that good partner for retailers. And then your question.

Over time, I think we've got we want to be careful with the assortment we have ambitious plans to increase the assortment of meat.

As we expand that product line over time and I would expect you would continue to see some version of that showing up at retail, but ultimately complementing what we have on line and really being that good partner for retailers.

And then your question about pricing.

Speaker 3: Pricing in general is, I would say, pretty similar when it comes to EBITDA contribution, is the way that we look at it, because while gross margins might be higher direct to consumer, you obviously have more support costs that go into selling and marketing that product to consumers, and you're also shipping each of.

Pricing in general is I would say pretty similar when it comes to EBITDA contribution.

Is the way that we look at it because while gross margins might be higher direct to consumer you, obviously have more support costs that go into.

Selling and marketing that product to consumers and you're also shifting he chose <unk>.

Speaker 3: Whereas with this, we're getting some scale when you sell to the retailer as you know. Slightly lower gross margins, but overall pretty similar EBITDA contribution. So no, no major delta between the two.

Whereas with this we're getting some scale when you sell to the retailer as you know.

Slightly lower gross margins, but overall pretty similar EBITDA contribution so.

No no major delta between the two.

Speaker 7: Thank you, Alpforment. Last question, you mentioned that.

Thank you helpful. And then last question you mentioned that.

Speaker 7: Some of the, the net sales website in the quarter was driven by retailers ordering earlier in the season than they saw last year. I guess what do you think drove that? And is does that indicate anything around kind of more?

Some of the deals outside of the quarter was driven by retailers ordering earlier in the season that you saw last year I guess, what do you think drove that and does that indicate anything around kind.

Kind of more.

Speaker 8: opportunity to unlock, open to buy dollars, and I guess as you talk to the partners.

Opportunity, you're going to unlock open to buy dollars.

Could you talk to the partners.

Speaker 8: Are you getting any symptom optimism about return to more normalized orin patterns? Is that just something seasonally this year that should be ready to?

Are you getting any sense of optimism about a return to kind of more normalized ordering patterns or is that just some.

Something seasonally this year that it shouldn't be read it too.

Speaker 3: Yeah, it's a really good question. So, I'll put it right again here. I think it's a few things. One is you probably saw yourself that you were getting pinged earlier than usual.

Yes, it's a really good question, so Brian again here.

I think it's a few things one is.

You probably saw yourself that you were getting pinged.

Earlier than usual.

Speaker 3: with different promotions that retailers are running to try to draw on consumers and brands are doing the same thing.

With with different promotions that retailers are running to try to draw consumers and brands are doing the same thing.

Speaker 3: And I think the retailers looking around at each other really felt they had to get out ahead of that in anticipation. So we saw more interest from retailers earlier than we typically do.

I think the retailers looking around at each other.

Really felt they had to get out ahead of that in anticipation. So we saw more interest from retailers earlier than we typically do.

Speaker 3: to bring on product. That in combination with the fact we've got a stellar analytics team, sales ops team that is constantly looking at our inventories in the channel.

Two to bring on product that in combination with the fact, we've got a a stellar analytics team sales ops team that is constantly looking at our REIT or our inventories in the channel.

Speaker 3: And while these retailers have undergone a lot of change, sometimes you need to prompt them and say, look, here's where your inventory is or add. And it would make sense if you want to hit the timing and based on what everybody else is doing.

And while these retailers have undergone a lot of change.

Sometimes you need a prompt them and say look here's where your inventories are at and it would make sense. If you won't hit the timing and based on what everybody else is doing.

Speaker 3: you know for you to to make this buy you know a little bit of FOMO but it's real you know they don't want to miss the mark and they want to make sure You want to make sure they have every opportunity to get the most out of the consumers wallet and

For you to to make this by you know a little bit of fomo, but it's real.

They don't want to Miss the Mark and they want to make sure we want to make sure. They have every opportunity to get the most out of the consumer's wallet.

Speaker 3: And so it's really those two things, you know, I think just observing what their peers were doing, promotions going out earlier than planned, some retailers having more inventory and wanting to get through that more quickly and seeing this as an opportunity to do that.

And so it's really those two things you know I think just observing what their peers were doing.

Promotions going out earlier than planned some retailers, having more inventory and wanting to get through that more quickly and seeing this as an opportune time to do that.

Speaker 3: and everybody kind of playing catch up from the retailer standpoint. So it really ramped up very, very quickly in terms of that interest, which we were pleased to see. But as a result, it led to, you know, I guess heading out of October , we had more sales than we expected because of those orders. So we were pleased to see that interest, which we were pleased to see.

And in every kind of playing catch up from the retailer standpoint so.

It really ramped up very very quickly in terms of that interest, which we were pleased to see but as a result, it led to.

Heading out of October we had more sales than we.

<unk> because of those orders.

Perfect. Thank you.

Thanks, Eric.

Speaker 1: Thank you. The next question is from Matt Caronda with Ross Capital. Please go ahead.

Thank you. The next question is from Matt Koranda with Roth Capital. Please go ahead.

Speaker 8: Hey guys, sounds like maybe we're starting to get a little bit of restocking activity in the traditional channel just based on the POS comments that you made and some of the comments you made in the Q&A here. Just wanted to see if maybe you could unpack for us where we're seeing the best lift in terms of brands for you guys or categories more broadly.

Hey, guys.

It sounds like maybe we're starting to get a little bit of restocking activity in the traditional channel just based on the P. O S comments that you made in some of that come to bid in the Q&A here.

Wanted to see if maybe you could unpack for us where we're seeing the best lift in terms of brands.

For you guys or categories more broadly.

Speaker 3: Yeah, I'm gonna have a Brian here. So, really, if you look at outdoor lifestyle category versus shooting sports, outdoor lifestyle is outperforming. You know, 60% of our sales in the corner came from outdoor lifestyle.

Yeah.

Hey, Matt Ryan here.

So really if you look at outdoor lifestyle category versus shooting sports outdoor lifestyle is is outperforming you know 60% of our sales in the quarter came from outdoor lifestyle.

Speaker 3: In particular, the brands and products that have what's new. We alluded to it last quarter. It was our strong belief that as retailers were coming out of this trough and beginning to right size inventory.

Particular, the brands and products that have what's new we alluded to last quarter. It was our strong belief that.

As retailers were coming out of this trough and beginning to rightsize inventory.

Speaker 3: Seeing potential foot traffic decline, really emphasizing what's new. In fact, Academy had their call earlier today.

Seeing potential foot traffic decline really emphasizing what's new in fact academy had their call earlier earlier today.

Speaker 3: which we obviously listened to, and that was one of the takeaways that I heard was, look, we need to be showing these consumers what's new, getting them into our stores and really separating ourselves from the pack. You're hearing that pretty consistently across the board, and so, our outdoor lifestyle brands have, we've done a really good job of introducing, keeping that continuous pipeline of innovation.

We obviously listened to and that was that was one of the takeaways that I that I heard was look we need to be showing these consumers, what's new getting them into our stores and really separating ourselves from the pack youre hearing that pretty consistently across the board and so.

Our outdoor lifestyle brands have we've done a really good job of introducing keeping that continuous pipeline of innovation. So we have seen as part of that is evidenced.

Speaker 3: So we have seen this part of that as evidence. And I didn't say this in the prepare remarks, but when we look at our POS data, it's the higher price products, and most of those higher price products have come from recent product introduction.

And I did say this in the prepared remarks, but when we look at our Pos data is.

The higher priced products and most of those higher priced products have come from recent product introductions and.

Speaker 3: And that's where we're seeing some really good traction. So new products at higher ASPs, and I think that helps the retailer obviously make up for some of the lower traffic numbers.

And that's where we're seeing some really good traction so new products at higher Asps.

I think that helps the retailer obviously to make up for some of the lower lower traffic numbers.

Speaker 3: And then within shooting sports, pretty solid of their results from our marksman brands, you know, Tipton Wheeler-Frafer called well. And it's a very similar story there. It's new products really, really shine bright in the quarter.

And then within shooting sports.

Pretty pretty solid results from our our marksman brands Tipton Wheeler Frankfurt.

Caldwell and but a very similar story there, it's new products really really shine bright in the quarter.

Speaker 3: And, and then aiming solutions, that just seems like a category right now that, you know, consumers and therefore dealers and retailers are just a little bit shy and

And and then aiming solutions that just seems like a category right now.

Consumers and therefore dealers and retailers are just a little bit shy in and kind of investing in a big way there. So it will come back it always does.

Speaker 3: and kind of inventing in a big way there. So it will come back and always does.

Speaker 3: But right now, those are some of the pick-aways that we have.

But right now those are some of the.

Takeaways that we have.

Speaker 8: Okay, that's really helpful, Brian . Thank you. And then I guess help us square that with the forward look that says

Okay. That's really helpful. Brian Thank you and then.

I guess help us square that with the forward look that says hey, we're likely to get a little bit more promotional over the next couple of quarters.

Speaker 8: Hey, we're likely to get a little bit more promotional over the next couple of quarters. I guess with the newness and the innovation you bring, I would have seen that would bring less discounting. So maybe just talk a little bit about sort of the plan promotional strategy that you have. It did sound like I guess to be fair a little bit of it was more shooting sports related, but maybe just unpack it for us so we can understand what the puts and takes are there.

Yes, with the newness and the innovation you bring I would assume that would bring less discounting. So maybe just talk a little bit about sort of the planned promotional strategy that you have it did sound like I guess to be fair a little bit of it was more shooting sports related but maybe just unpack it for us. So we can understand what the puts and takes are there.

Speaker 3: Yeah, Matt, this is Brian , I can start and then Andy, Andy, feel free to chime in. So, I think.

Yeah, Matt This is Brian I can start and then Andy any feel free to chime in so.

I think the.

Speaker 3: The promotions that occurred in Q2, the way that everything kind of came together in a way, I think retailers were experiencing a little bit of FOMO and making sure that they had.

Promotions that occurred in Q2.

The way that everything kind of came together in a way I think retailers were experiencing a little bit of fomo in and making sure that they had.

Speaker 3: They're incentives out earlier, and therefore placing those orders.

They're.

There are incentives out earlier, and therefore, placing those orders.

Does.

It's really really important, especially in the online channel with our e-commerce retailers to capture that moment because.

If you capture that moment correctly, you see a lot of consumer pull through in this current period of time.

It gives you this nice sort of.

Visibility for the rest of the year for the most part.

So this is a really critical time of the year to make sure that you are front and center in front of the consumer as they come back they post reviews and honestly you said relevancy, it's a great Billboard for that so.

Speaker 3: One, one, wanted to make sure that we were capturing that. So as we look in the second half of the year, will there be promotions, you know, certainly, you're going to be smart promotions. But I think it's going to be a slightly different flavor than what we did here in the second quarter, which was very strategic and really taking advantage of that trail that we're really going after to stay in front of the consumer. So anything you want to add on the second half.

One one wanted to make sure that we're capturing that so as we look in the second half of the year will the will there be.

Our motions.

Certainly they're going to be smart promotions, but I think it's going to be a slightly different flavor than what we did here in the second quarter, which was very strategic and really taking advantage of of.

Of that trail that were really going after to stay in front of the consumer so anything you want to add on the second half.

Speaker 3: Yeah, so we don't, I don't see anything else there. I think we'll continue to be vigilant on the shooting sports side, you know, where there are opportunities, but at the same time we've got great product, great brands, and we all know that will come back. So we just want to be jujitsu jud, jud, jud, jud.

Yeah. So we don't I don't see anything else. There I think will continue to be vigilant on the shooting sports side, where there are opportunities, but at the same time, we've got great product great brands and we all know that will come back. So we just want to be judicious Jude dishes there.

Speaker 8: Okay, fair enough. And then just, I know you addressed the meat, sell in a little bit in the Q&A here, but maybe could you guys talk about the status of Grilla? Because I know that was also something that you guys had planned to bring into the Omni Channel this year, potentially, and just wanted to see what the latest update is there on Grilla, entering sort of retail partners.

Okay fair enough.

And then just a I know you addressed the meat sell out a little bit and in the Q&A here, but maybe it could could you guys talk about the status of grill out because I know that was also something that you guys had planned to bring into the Omnichannel. This year potentially and just wanted to see what the latest update is there on gorilla entering.

Sort of retail partners.

Speaker 3: Yeah, Brian again. So that is still our plan. You know, we wanted to lead with me. That was further along in the process.

Yes.

Brian again, so that is still our plan.

We wanted to to lead with meat that was further along in the process.

Speaker 3: The other thing with gorilla is, as I alluded to in the prepare remarks, we do have a major new product launch coming in the next few months here and then in the following quarters, we have some additional ones that are truly innovative and fit with this evolved, evolved your backyard where people have made significant investments in their backyard and we believe that gorilla has every reason to be there.

The other thing with Gorilla is as I alluded to in the prepared remarks, we do have a major new product launch coming in the next few months here and then in the following quarters, we have some additional ones that.

That are truly innovative and fit with this evolve evolve your backyard, where people have made significant investments in their backyard and and we believe that gorilla has every reason to be there. So.

Speaker 3: We want to make sure that those product launches are done in a timely manner and if possible are done well with the cadence along with retail. We are really finding if we launch a new product direct to consumer.

We want to make sure that those product launches are done.

In a timely manner and and if possible are done well with the cadence along with retail.

We are really finding if we launch a new product direct to consumer.

Speaker 3: It depends on the product, but if it's a higher priced product and it's a little bit more innovative.

It depends on the product, but if if it's a higher priced product in its own way more innovative and we do a test run we did it with like the Frankford Arsenal X 10 related that I think we may have you also done it with the Caldwell Clay Moore.

Speaker 3: and we do it cast-run, we did it with like the Frankfurt Arsenal X-10 when we did that.

Speaker 3: I think that maybe we'll also tell you what the call to out Claymore is we got tremendous feedback. We're able to get complete ownership with our communities. In this case we've got 25,000, 30,000 gorilla users on Facebook, for example.

We got tremendous feedback, we're able to get complete ownership with our communities. In this case, we've got 25000 30000 gorilla users on Facebook for example.

Speaker 3: and getting their support and buy-in is critical. So running these ahead of time just sets the groundwork.

And getting their support and buy in is critical so running these ahead of time just sets the groundwork.

Speaker 3: So once those pieces are all put together, you're talking about a really powerful retail expansion strategy.

Once those pieces are all put together you're talking about a really powerful retail expansion strategy and so we need to make sure those things line up instead of just trying to solve grills into into retail I don't think thats going to be successful.

Speaker 3: And so we need to make sure those things line up instead of just trying to solve grills into retail. I don't think that's gonna be a success.

Speaker 8: Okay, fair enough, just to clarify though that we should expect some form of retail sales for Grilla this year or we're not ready to commit to that yet.

Okay fair enough just to clarify, though that we should expect some form of a retail sales for gorilla this year or we're not ready to commit to that yet.

Speaker 3: I think it's fair to assume some retail placement, but it's going to be more cat thing than anything else. It's not anything that's going to change the model.

I think I think it's fair to assume some retail placement but.

You know, it's going to be more testing than anything else it's not.

It's not anything that's going to change the model.

For this year.

Speaker 8: Maybe just last one you mentioned, the MNA environment may be.

Okay, Alright got it maybe.

Maybe just last one the match and <unk>.

In a environment may be kind of unfreezing a bit here as we move into the end of the year and into next year.

Speaker 8: kind of unfreezing a bit here as we move into the end of the year and into next year, counterwise. Maybe just wanted to hear your thoughts, Brian , in terms of what's interesting.

Calendar wise, maybe just wanted to hear your thoughts Brian in terms of what's interesting.

Speaker 8: Where are valuation expectations resetting to have they come down out of the stratosphere? How should we be thinking about sort of categories that you're interested in?

Where our valuation expectations resetting to have they come down out of the stratosphere.

How should we be thinking about sort of categories that you're interested in.

Speaker 8: And then he just kind of early thoughts on sort of timing of any potential acquisitions that could happen over the next year or so.

And then they just kind of early thoughts on sort of timing of any potential acquisitions that could happen over the next year or so.

Yeah.

Speaker 3: Yeah, things seem to be unifying. And based on what we're hearing from investment bankers.

Yeah things seem to be on fine.

And based on what we're hearing from investment bankers.

Speaker 3: is that the first half of next year, first half of 24, we're gonna see more activity. There's already more pitch activity going on right now.

Is that the first half of next year first half of 'twenty four we're going to see more activity. There is already more pitch activity going on right now.

Speaker 3: along with that because of just a function of the investment banking fees, you tend to attract larger companies.

Along with that because of just.

Or just a function of the investment banking fees you tend to attract larger companies. They can pay those fees. So some sizable brands should be coming to market. That's at least what we expected.

Speaker 3: I can pay those fees so some sizable brand should be coming to market, at least what we expect.

Speaker 3: We're certainly aware of several of them that we expect to come to market.

We're certainly aware of several of them that we expect to come to market and then we also have our own proprietary pipeline in place and and Thats very strong so we're seeing fewer.

Speaker 3: And then we also have our own proprietary pipeline in place, and that's very strong. So we're seeing fewer, you know, last time we spoke, we were seeing more distressed type deals. Certainly they're out there.

Last time, we spoke we were seeing more distressed type deals certainly they are out there, but we are beginning to see a return of companies that are able to establish some level of run rate.

Speaker 3: but we're beginning to see a return of companies that are able to establish some level of run rate that then they can take and defend as they go out into markets.

That then they can take and defend as they go out in the market with regard to valuation I think it's it's still a little too soon because there hasnt been enough.

Speaker 3: with regards to valuation. I think it's still a little too soon because there hasn't been enough.

Speaker 3: just like real estate in a lower market, you don't see as many, you can have as many data points, right? So it's hard to say exactly where things are shaking out. But I think that debt, the amount of debt a company can put on is a driving factor. I think you have financial buyers versus strategics. Financials are probably a little bit less ambitious when it comes to over-equitizing.

Just like real estate and a lower market you don't see as many data points right. So it's hard to say exactly where things are shaking out, but I think that that the amount of that a company can put on as a driving factor I think you have financial buyers versus strategics financials are probably a little.

Less.

Ambitious when it comes to over <unk> in a deal.

Speaker 3: And so that's where I think the debt piece is going to be critical, especially for financial buyers and those that are raising funds.

So that's where I think the debt piece is going to be critical, especially for financial buyers and those that are raising funds.

Speaker 3: So my expectation is that valuations are coming down, and in the first half of next year, I think we'll see a closer alignment to seller and buyer expectations. I think three months ago there was a – and six months ago there was a much bigger delta, but I think those are beginning to converge.

So my expectation is that valuations are coming down and in the first half of next year I think we'll see a closer alignment to seller and buyer expectations I think three months ago there was a.

Six months ago, there was a much bigger delta, but I think those are beginning to converge.

Okay very helpful. I'll take the restaurant up on guys. Thank you.

Speaker 1: Thank you. The next question is a follow up from Mark Smith with Lake Street. Please go ahead.

Thank you.

The next question is a follow up from Mark Smith with Lake Street. Please go ahead.

Speaker 8: Hey guys, I just wanted to follow up on Black Friday a little bit more in depth and kind of two part here. First of all, we just look at traditional. Did you guys participate a little bit more in Black Friday promotions around traditional retail this year versus last year and maybe if you break up any impact from that on sales and large and how that would impact Q2 versus Q3?

Hey, guys I just wanted to follow up on Black Friday, and a little bit more in depth in kind of two part here first if we just look at traditional.

Did you guys participate a little bit more.

Black Friday promotions around traditional retail.

This year versus last year.

Maybe if you can break up any impact from that on sales and margin and how that would impact Q2 versus Q3.

Speaker 4: Yeah, Mark, this is Andy. I think overall the promotional level of traditional was pretty consistent year over year. We worked with a number of retailers to, in those types of promotions, usually our front end where we'll discount product, sell that product to the retailer, and then that retailer will run it in like a Black Friday ad or a mail or those types of...

Yeah, Mark this is Andy.

I think overall the promotional level of traditional it was pretty consistent year over year.

We worked with a number of retailers too.

And those types of promotions you usually are front end, where we will discount product sell it sell that product to the retailer and then that retailer well run in like a black Friday ad or a mailer or those types of things.

Speaker 4: But overall I think the level was it might be a little bit above last year, but nothing real notable

But overall I think the level was it might be a little bit above last year, but nothing really notable.

Speaker 8: And the other part is, you know, as we look at gorilla and meet that you guys called out, some of the positive results there. You know, can we quantify or call out maybe how much of that was driven by being fairly promotional or heavy discount versus just kind of natural growth in those brands.

Okay.

And the other part is as we look at railroad and meet that you guys called out some of the positive results there.

Can you quantify or call out maybe how much of that was driven by being fairly promotional or heavy discount.

Versus just kind of natural growth in those brands.

Yes, Mark you sound like me when I first heard the news like that's great but was it profitable.

And so I asked you know what.

Speaker 3: You know, I knew some of the promotions that were planning to run, but just generally, did we see anything unexpected there? The good news is that, no, we didn't see anything unexpected. We didn't have to, we didn't do anything above and beyond what would be, I guess, called, typical for us in prior years. So, it wasn't like, you know, buy a grill, get a trampoline or something like that. Very reasonable, Black Friday, Cyber Monday deals, and overall pleased with the EpoDoc contribution we got from those.

I knew sort of promotions that we're planning to run but just generally.

Can we see anything unexpected there.

The good news is that no we didn't see anything unexpected we didn't have we didn't do anything.

And beyond what would be I guess call. It typical for us in prior years.

It wasn't like you know by a grille get a trampoline or something like that.

Very reasonable Black Friday, cyber Monday deals and overall pleased with the EBITDA contribution we got from those.

Excellent. Thank you.

Speaker 9: Thanks, Mark.

Thanks Mark.

Speaker 1: Thank you. This concludes our question and answer session. I would now like to hand the call back to Brian Murphy for closing remarks.

Thank you. This concludes our question and answer session I would now like to hand, the call back to Brian Murphy for closing remarks.

Speaker 3: Thank you, operator. Before we close, I want to let everyone know that we'll be participating in the Roth Conference in Dear Valley on December 14th and 15th. And in January , we'll be attending Shot Show and Las Vegas. We hope to connect with some of you at the...

Thank you operator before we close I want to let everyone know that we'll be participating in the Roth conference in Deer Valley on December 14th and 15th and in January we'll be attending shot show in Las Vegas, We hope to connect with some of your Ftes coming events.

Speaker 3: We had end of the holidays. I'd like to give a special thanks to our employees whose loyalty, hard work, and dedication, continue to move our company forward on the path towards an exciting long-term future.

As we head into the holidays I'd like to give a special thanks to our employees, whose loyalty hard work and dedication continues to move our company forward on the path towards an exciting long term future.

Speaker 3: For those employees and to everyone else who joined us today, we wish you a happy and healthy holiday season. And we look forward to speaking with you.

Those employees and to everyone else, who joined US today, we wish you a happy and healthy holiday season.

And we look forward to speaking with you again next quarter.

Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker 10: The.

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