Q3 2024 American Outdoor Brands Inc Earnings Call

Operator: Good day, everyone, and welcome to American Outdoor Brands, Inc.'s third quarter fiscal 2020 financial results conference call. This call is being recorded. 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. Liz?

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

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.

Elizabeth A. Sharp: Thank you and good afternoon. Our comments today may contain predictions, estimates, and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, should, could, indicate, suggest, believe, and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies, and vision, our strategic evolution, our market share and market demand for our products, market and inventory conditions related to our products and in our industry in general, and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filing. You can find those documents, as well as a replay of this call, on our website at AOB.com.

Thank you and good afternoon.

Today may contain predictions estimates and other forward looking statements.

Our use of words like anticipate project estimate expect intend should could indicate suggest believe and other similar expressions is intended to identify those forward looking statements.

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

Our market share and market demand for our products market and inventory conditions related to our products and in our industry in general.

Growth opportunities and trends.

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

Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings you can find those documents as well as a replay of this call on our website at <unk> Dot com.

Elizabeth A. Sharp: Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. First, we referenced certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets.

Today's call contains time sensitive information that is accurate only as of this time.

And we assume no obligation to update any forward looking statements.

Our actual results could differ materially from our statements today.

I have a few important items to note about our comments on today's call first we reference certain non-GAAP financial measures are non-GAAP results exclude amortization of acquired intangible assets stock compensation shareholder cooperation agreement cost.

Elizabeth A. Sharp: Stock Compensation, Shareholder Cooperation Agreement Costs, Facility Consolidation Costs, Technology Implementation, Acquisition Costs, Other Costs, and Income Tax Adjustments. 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. Joining us on today's call is Brian Murphy, President and CEO, and Andy Fulmer, CFO. And with that, I will turn the call over to Brian. Thanks Liz and thanks everyone for joining us.

Facility consolidation costs technology implementation.

Acquisition costs other cost and income tax adjustments 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're always referencing fully dilute.

EPS joining.

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

Thanks, Liz and thanks, everyone for joining us we delivered a solid third quarter and I'm very pleased with our results which include a topline sales growth disciplined capital management and the unveiling of several strategically important product introductions, we believe expand our brands runway for growth.

Brian Daniel Murphy: We delivered a solid third quarter, and I'm very pleased with our results, which included top-line sales growth, disciplined capital management, and the unveiling of several strategically important product introductions that we believe expanded our brand's runway for growth. I believe our results demonstrate our ability to remain focused on our long-term strategy while successfully navigating the near-term environment. Our third quarter sales reflected growth of more than 23% over our pre-pandemic third quarter of fiscal 2020, including our acquisition of Grilla Grills in fiscal 2022. For the third quarter, we delivered net sales growth of 5%, a result that came in ahead of our expectations and was supported by our diverse portfolio, evidenced by stronger sales across a number of brands within our shooting sports and outdoor lifestyle categories, which both delivered net sales growth.

Believe our results demonstrate our ability to remain focused on our long term strategy, while successfully navigating the near term environment.

Our third quarter sales reflect the growth of more than 23% over our pre pandemic third quarter of fiscal 2020, including our acquisition of Gorilla grills in fiscal 2022.

For the third quarter, we delivered net sales growth of 5%. A result came in ahead of our expectations and was supported by our diverse portfolio.

Evidenced by stronger sales across a number of brands within our shooting sports and outdoor lifestyle categories, which both delivered net sales growth.

Brian Daniel Murphy: In addition, our e-commerce and traditional channels experienced net sales growth in the quarter. In our Outdoor Lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities, we delivered third quarter year-over-year growth of 2.8%. That growth was led by strength in our hunting and fishing-related products and reflected the success of our strategy to identify incremental retail opportunities, including the expansion of our Meet Your Maker meat processing equipment into the retail channel last quarter. On a long-term basis, our outdoor lifestyle category has grown more than 43% compared to the pre-pandemic third quarter of fiscal 2020, including the gorilla acquisition. I believe this result reflects the success of our strategy to grow this part of our business. In fact, our outdoor lifestyle category comprised over 54% of our total net sales in the third quarter. Now we turn to our shooting sports category, which includes solutions for target shooting, aiming, safe storage, cleaning and maintenance, and personal protection.

In addition, our e-commerce and traditional channels experienced net sales growth in the quarter.

In our outdoor lifestyle category, which consists of products related to hunting fishing camping <unk> outdoor cooking and rugged outdoor activities, we delivered third quarter year over year growth of two 8%.

That growth was led by strength in our hunting and fishing related products and reflected the success of our strategy to identify incremental retail opportunities, including the expansion of our meet your maker meat processing equipment into the retail channel last quarter.

On a long term basis, our outdoor lifestyle category has grown more than 43% compared to the pre pandemic third quarter of fiscal 2020, including the gorilla acquisition.

I believe this result reflects the success of our strategy to grow this part of our business.

In fact, our outdoor lifestyle category comprised over 54% of our total net sales in the third quarter.

Turning now to our shooting sports category, which includes solutions for target shooting, Amy safe storage cleaning and maintenance and personal protection.

Brian Daniel Murphy: We delivered growth of 7.6% compared to the prior year. This result was led by our ability to clear some slower moving inventory in the personal protection category combined with stronger sales in shooting accessories. We are especially pleased with this result, given reports from firearm manufacturers in the quarter that continue to cite reduced consumer demand. With regard to channel sales, in the third quarter, we delivered sales growth in both our traditional and e-commerce channels, reflecting our strategy to ensure that our brands meet the consumer wherever they shop. We also deliver sales growth in our domestic and international channels, reflecting our strategy to expand into international markets. In fact, our international sales grew by over 72% in the quarter, the result of introducing more of our lifestyle brands to the Canadian market. With regard to sell-through, we gather point-of-sale and channel inventory data from retailers that represent about half of our sales.

We delivered growth of seven 6% compared to the prior year. This result was led by our ability to clear some slower moving inventory in the personal protection category.

And with stronger sales in shooting accessories.

We are especially pleased with this result, given reports from firearm manufacturers in the quarter that continued to site reduced consumer demand.

With regard to channel sales in the third quarter, we delivered sales growth in both our traditional and e-commerce channels, reflecting our strategy to ensure that our brands meet the consumer wherever they shop.

We also delivered sales growth in our domestic and international channels, reflecting our strategy to expand into international markets.

In fact, our international sales grew by over 72% in the quarter. The result of introducing more of our lifestyle brands to the Canadian market.

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

Brian Daniel Murphy: We were pleased with our POS results this quarter. POS sales increased for both our outdoor lifestyle and shooting sports categories. Now turning to innovation, which is core to our long-term growth strategy. Our ability to innovate allows us to drive growth by entering new product categories, and it's driven by our dock and unlock process. Our approach often consists of creating a new product with proprietary IP, then using that product to establish a beachhead for a given brand. From there, we branch out, developing incremental products that allow us to enter new product categories and move from that single point of entry to a full family of products that build upon the brand's familiarity and its loyal following. We've proven the success of this approach in the past with our Bubba brand, moving from a single manual fillet knife to a full family of fishing products that now includes our Bubba Pro Series Smart Fish Scale, which was rapidly adopted and is now the official scale for Major League Fishing.

We were pleased with our POS results this quarter <unk> sales increased for both our outdoor lifestyle and shooting sports categories.

Now turning to innovation, which is core to our long term growth strategy.

Our ability to innovate allows us to drive growth by entering new product categories, and it's driven by our dock and a long process.

Our approach often consists of creating a new product with proprietary IP and using that product to establish a beachhead for a given brand.

From there we found out developing incremental products that allow us to enter new product categories and moved from that single point of entry to a full family of products that build upon the brand familiarity and its loyal following.

We've proven the success of this approach in the past with our Bubba brand moving from a single manual fillet knife to a full family of fishing products. Now includes our Bubba Pro series Smart Fishkill, which was rapidly adopted and is now the official scale for major like fishing.

Brian Daniel Murphy: In the third quarter, we again demonstrated the success of this approach by unveiling a number of innovative and internally developed new products under our Caldwell, Gorilla, and Hui Man brands. I believe these products represent the tip of the iceberg as we execute against a robust new product pipeline that extends well into the next five years, providing us with a long-term competitive advantage and uniquely positioning our brands to expand market share, enter new product categories and markets, and broaden our distribution channel. Now, let me share some of the exciting product details. In a sea of electric clay throwers, most powered by wires connected to a 40-pound car battery, Caldwell caught the attention of clay shooters last year when it introduced the world's first battery-free, foot-operated clay thrower with a stackable clay hopper, called the Claymore.

In the third quarter, we again demonstrated the success of this approach by unveiling a number of innovative and internally developed new products under our Caldwell Gorilla and Jujuy.

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I believe these products represent the tip of the iceberg as we execute against a robust new product pipeline that extends well into the next five years, providing us with a long term competitive advantage and uniquely positioning our brands to expand market share enter new product categories and markets and broadened our distribution channels.

Now, let me share some of the exciting product details.

And if you have electric play for hours most powered by wires connected to a 40 pound car battery.

<unk> copy attention of clay shooters last year, when we introduced the world's first battery free foot operated clay for with a stackable clay hopper called the claymore.

Brian Daniel Murphy: It has been very successful, to say the least. However, when developing the Claymore, we also stumbled upon a gap in the marketplace. There were a few product offerings available between the two main types of clay throwers: hand-held, which are generally entry-level and lower priced, and stationary clay throwers, which tend to be much more expensive. Our solution, the Caldwell Claymore Solo, which leverages the same battery-free mechanics of the original Claymore, but loads and throws one clay at a time instead of being stack-set.

It's been very successful to say the least when developing the clay Moore, we also stumbled upon a gap in the marketplace. There were a few product offerings available between the two main types of play throwers handheld, which are generally entry level and lower priced and stationary play throwers, which tend to be much more expensive.

Our solution, the Caldwell claim or solo which leverages. The same battery free mechanics of the original claymore, but loads and froze one play at a time instead of being stacks up.

Brian Daniel Murphy: Because of this, it's remarkably light at just 15 pounds, half the weight of the original Claymore, and competitively priced, filling a gap with innovation and extreme value. But we didn't stop there; we looked at the clay thrower market and wondered why consumers had to compromise throwing distance when choosing between a handheld thrower and a stationary one. We also recognize the benefit of being able to change the angle of the target with a handheld thrower. However, most lack the ability to securely hold a clay in place when tilting the thrower before releasing it.

Because of this it's remarkably light at just 15 pounds half the weight of the original claymore and competitively priced filling a gap with innovation and extreme value.

But we didn't stop there we looked at the <unk> market and wondered why consumers had a compromise throwing distance when choosing between the handheld thrower in a stationary one.

We also recognize the benefit of being able to change the angle of the target with a handheld thrower. However, most like the ability to securely hold a claim place when tilting the floor before release.

Brian Daniel Murphy: We solved both of these problems with the Caldwell Claymore Pull Pup. Our new handheld thrower can easily launch clay targets over 55 yards, while our dual-grip design, combined with a unique holding clip, enables users to easily launch targets off camber at a variety of angles. Next, we saw an opportunity for our new Grilla brand to fulfill its promise to help consumers evolve their backyard. One of the benefits of owning a brand that's entirely direct-to-consumer is the closer connection it brings to the actual user, including product ideas. Gorilla consumers expressed frustration with the vertical smoker offerings from competitors. Feedback included lack of space. Limited Meat Rack and Hanging Options. Poor smoke generation, and few options to control and monitor cooking.

We saw both of these problems with the Caldwell Clay Moore pull up.

Our new handheld dror can easily launch clay targets over 55 yards, while our dual grip design combined with a unique holding clip enables users to easily launch targets off camber and a variety of angles.

Next we saw an opportunity for our new gorilla brand to fulfill its promise to help consumers evolve their backyard.

One of the benefits of owning a brand thats entirely direct to consumer is a closer connection it brings to the actual user including product ideas.

Gorilla consumers express frustration with the vertical smoker offerings from our competitors.

Feedback included lack of space limited meet rack and hanging options poor smoked generation.

And few options to control and monitor cooking.

Brian Daniel Murphy: We've solved all of those problems with the new Mammoth Vertical Smoker, which features over 1,600 square inches of smoking space, accommodates up to 10 racks and 24 hangers, puts out a generous amount of smoke using a proprietary lift heat deflector, and utilizes our new Alpha Connect 2.0 controller to control and monitor cooking. The mammoth absolutely hits the mark, and we continue to sell out each new container of mammoth vertical smokers as they arrive, demonstrating the powerful nature of Gorilla's connection with the consumer. Lastly, As our Hooyman brand has expanded into land management products, we've identified several categories riddled with consumer pain points ripe for innovation. One touch area, it sees brighter.

We've sold all of those problems with the new Mammoth vertical smoker, which features over 1600 square inches of smoking space accommodates up to 10 racks in 'twenty four hangers.

Puts out a generous amount of smoke using our proprietary lipid he'd deflector.

And utilizes our new Elfa connect to point, a controller to control and monitor cooking.

The mammoth absolutely hit the Mark and we continue to sell out each new container of mammoth vertical smokers as they arrive demonstrating the powerful nature of Grillos connection with the consumer.

Lastly.

As our Hooey man brand has expanded into land management products, we've identified several categories riddled with consumer pain points ripe for innovation.

One such area is the Spreaders C. It can be very expensive and if you need to cover a large area to consideration standout speed and precision.

Brian Daniel Murphy: It can be very expensive. And if you need to cover a large area, two considerations stand out: speed and precision. After releasing our first seed spreader last year, the Huiman Chest Mounted Spreader, we turned our attention to high-capacity spreaders. These are commonly mounted on vehicles, including ATVs. We discovered that, in addition to speed and precision, users had to overcome two additional pain points with vehicle-mounted spreaders. An overly cumbersome attachment process.

After releasing our first seed spreader last year, the Jujuy man's chest monitored spreader, we turned our attention to high capacity Spreaders.

These are commonly mounted vehicles, including Atvs.

We discovered that in addition to speed and precision users had to overcome to additional pinpoints with vehicle mounted spreaders.

One an overly cumbersome attachment process.

Brian Daniel Murphy: And two, frustration from seed spilling from the hopper any time precision and distance adjustments are made. Our new 125-pound capacity Hueyman vehicle spreaders solve all of these problems. Enabling the user to attach or spreader in under 60 seconds and adjust the spreader's accuracy without compromising valuable seats. With these products in hand, we attended SHOT Show in January, an annual industry event that is generally focused on new shooting-related products. Our Caldwell brand is always popular at SHOT, and the new Claymore products were extremely well received. And while attendees weren't surprised to see Caldwell at the show, they were surprised and very interested.

To the frustration from seed spilling from the Hopper anytime precision distance adjustments were made.

Our new 125 pound capacity Hooey mountain vehicle spreader solve all of these problems, enabling the user to attach a spreader in under 60 seconds and adjust the spreaders accuracy without compromising valuable seat.

With these products in hand, we attended shot show in January and annual industry event that is generally focused on new shooting related products.

R. Caldwell brand is always popular a shot in the new claim our products were extremely well received.

And while attendees weren't surprised to see Caldwell at the show they were surprised and very interested to see a full grill outdoor kitchen set up the new mammoth smoker or meet your maker meat processing equipment, and our Hooey man product lineup.

Brian Daniel Murphy: You'll see a full Gorilla Outdoor Kitchen setup, the new Mammoth Smoker, our Meet Your Maker Meat Processing Equipment, and our Hui Man product lineup. All of which were brand new to the shop, and the reception was tremendous. But most importantly, we were able to expose these brands to an entirely new audience, retailers, and adjacent distribution channels. Increased and expanded distribution channel opportunities are one of our four growth avenues that comprise our long-term strategic plan, and they are particularly strategic given the current retail environment. As we've said on prior calls, the surge in consumer buying during the pandemic allowed retailers in our industry to become less selective when stocking their shelves. But today's consumer is more discerning, and retailers have shifted towards careful inventory management, seeking out compelling products that consumers truly want. At AOB, we believe that by introducing a steady stream of innovative solutions backed by enthusiast brands.

All of which were brand new to shop and the reception was tremendous.

But most importantly, we were able to expose these brands to an entirely new audience retailers in adjacent distribution channels.

Increased an expanded distribution channel opportunities are one of our four growth avenues that comprise our long term strategic plan.

And there are particularly strategic given the current retail environment.

As we've said on prior calls the surge in consumer buying during the pandemic a lot of retailers in our industry to become less selected when stocking their shelves, but.

But today's consumers more discerning and retailers have shifted towards careful inventory management seeking out compelling products that consumers truly one.

And it'll be we believe that by introducing a steady stream of innovative solutions backed by enthusiast brands, we can capture market share gain new placement and expand shelf space with retailers looking to drawing the consumer.

Andy Fulmer: We can capture market share, gain new placement, and expand shelf space with retailers looking to draw in the consumer. With that, I'll turn it over to Andy to discuss our financial results. Thanks, Brian.

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

Thanks, Brian.

Andy Fulmer: Our third quarter results included growing our net sales over last year, strengthening our balance sheet, and returning capital to shareholders. All while navigating the environment of consumer uncertainty and cautious retailer behavior that have marked the last few quarters. Let me walk you through the details.

Our third quarter results included growing our net sales over last year.

<unk>, our balance sheet and returning capital to shareholders, all while navigating the environment of consumer uncertainty and cautious retailer behavior that have mark the last few quarters, Let me walk you through the details.

Andy Fulmer: Net sales for Q3 of $53.4 million increased 5% over Q3 last year. These results were slightly ahead of our expectations by about $2.5 million, as certain orders we had originally expected in Q4 occurred in Q3. Compared to pre-pandemic Q3 of fiscal 2020, net sales increased by 23.3%, including the acquisition of grill. On a category basis, we saw growth in both outdoor lifestyle and shooting sports nutsales. Compared to Q3 last year, the outdoor lifestyle category grew by almost 3%, driven by fishing and hunting products, and Shooting Sports grew by almost 8%, driven by increases in both personal protection and shooting accessories. Compared to pre-pandemic Q3 of fiscal 2020, the outdoor lifestyle category grew by 43.1%, as Brian mentioned, and shooting sports grew by almost 6%. On a channel basis, traditional net sales increased by 8.1% and e-commerce increased by 1.6% compared to Q3 last year. 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.

Net sales for Q3 of $53 $4 million increased 5% over Q3 last year. These.

These results were slightly ahead of our expectations by about two and a half million dollars as certain orders. We had originally expected in Q4 occurred in Q3.

Compared to pre pandemic Q3 of fiscal 2020, net sales increased by 23, 3%, including the acquisition of Gorilla.

On a category basis, we saw growth in both outdoor lifestyle and shooting sports net sales.

Compared to Q3 last year outdoor lifestyle grew almost 3% driven by fishing and hunting products and shooting sports grew by almost 8% driven by increases in both personal protection and shooting accessories.

Compared to pre pandemic Q3 of fiscal 2020, the outdoor lifestyle category grew by 43, 1% as Brian mentioned and shooting sports grew by almost 6%.

On a channel basis traditional net sales increased by eight 1% and e-commerce increased by one 6% compared to Q3 last year.

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.

Andy Fulmer: Direct-to-consumer sales and Q3 were up over the prior year, led by very strong Black Friday weekend sales of Meat and Grilla, as we outlined on our last call. However, that strength was somewhat offset by lower sales to online retail. Turning now to Gross Margin. As we discussed on our last call, inventory purchases in the first half of fiscal 2024 were higher than purchases in the first half of fiscal 2023, a period when we were actively driving down inventory levels in order to strengthen our balance sheet. The higher level of purchasing in Q1 and Q2 this year drove higher tariff and freight variance, which then must be amortized over inventory turns roughly six months later. That increased amortization, combined with a slightly higher level of promotional activity, yielded a gross margin for the third quarter of 42.7% compared to 47.1% in the third quarter last year. Turning to Operating Equipment, Gap operating expenses for the quarter decreased $1.3 million to $25.7 million.

Direct to consumer sales in Q3 were up over the prior year led by very strong Black Friday weekend sales of meat and gorilla as we outlook outlined on our last call.

That strength was somewhat offset by lower sales to online retailers.

Turning now to gross margin.

As we discussed on our last call inventory purchases in the first half of fiscal 2024 were higher than purchases in the first half of fiscal 2023.

A period, when we were actively driving down inventory levels in order to strengthen our balance sheet.

The higher level of purchasing in Q1 and Q2 this year drove higher tariff and freight variances, which then must be amortized over inventory turns roughly six months later.

That increased amortization combined with a slightly higher level of promotional activity yielded gross margin for the third quarter, a 42, 7% compared to 47, 1% in the third quarter last year.

Turning to operating expenses GAAP.

GAAP operating expenses for the quarter decreased $1 $3 million to $25 $7 million.

Andy Fulmer: The decrease was driven mainly by lower G&A resulting from lower insurance and IT costs and lower rent expense due to facility consolidations we completed last year. On a non-GAAP basis, operating expenses decreased in Q3 to $21.5 million compared to $22 million in Q3 of last year for the reasons I just outlined. Non-GAAP operating expenses exclude intangible amortization, stop compensation, and certain non-recurring expenses as they occur.

The decrease was driven mainly by reduced G&A, resulting from lower insurance costs and lower rent expense due to facility consolidations, we completed last year.

On a non-GAAP basis operating expenses decreased in Q3 to $21 $5 million compared to $22 million in Q3 of last year for the reasons I just outlined.

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

Andy Fulmer: Gap EPS was a loss of $0.23 for the third quarter compared to a loss of $0.21 in Q3 last year. On a non-gap basis, EPS was $0.08 in Q3 this year compared to $0.13 in the prior year. Our Q3 figures are based on our fully diluted share count of approximately 12.9 million shares. For full fiscal 2024, we expect our fully diluted share count to be about 13.3 million shares. Adjusted EBITDA for the quarter was $2.4 million compared to $3.3 million last year.

GAAP EPS was a loss of 23.

For the third quarter compared to a loss of 21 in Q3 last year.

On a non-GAAP basis EPS was <unk> <unk> in Q3, this year compared to 13 in the prior year.

Our Q3 figures are based on a fully diluted share count of approximately $12 9 million shares.

For full fiscal 'twenty 'twenty four we expect our fully diluted share count will be about $13 3 million shares.

Adjusted EBITDA for the quarter was $2 $4 million compared to $3 $3 million last year.

Andy Fulmer: Turning to the balance sheet and cast. Positive cash flow in the third quarter helped us continue to strengthen our balance sheet. We ended the third quarter with cash of $15.9 million and no debt after repurchasing approximately $1.8 million of our common stock.

Turning to the balance sheet and cash flow.

Positive cash flow in the third quarter helped us continue to strengthen our balance sheet.

We ended the third quarter with cash of $15 $9 million and no debt after repurchasing approximately $1.8 million of our common stock.

Andy Fulmer: On prior calls, we've outlined that the seasonal nature of our business typically results in operating cash outflow in the first half of the year when we experience increases in accounts receivable and inventory. This is typically followed by positive cash inflow in the second half, as we collect those receivables and lower our inventory. This pattern is playing out as expected in fiscal 2024. We generated $13 million of operating cash in Q3, and we expect to generate cash in Q4. Operating cash inflow in Q3 was mainly driven by a decrease in accounts receivable of $13.2 million and a decrease in inventory of $9.1 million.

On prior calls we've outlined that the seasonal nature of our business typically results in operating cash outflow in the first half of the year when we experienced increases in accounts receivable and inventory.

This is typically followed by positive cash inflow in the second half of the year as we collect those receivables and lower our inventory levels.

This pattern is playing out as expected in fiscal 2024.

We generated $13 million of operating cash in Q3, and we expect to generate cash in Q4.

Operating cash inflow in Q3 was mainly driven by a decrease in accounts receivable of $13 $2 million and a decrease of inventory of $9 $1 million netted by a decrease in accounts payable of $8 $4 million.

Andy Fulmer: The net result was a decrease in accounts payable of $8.4 million. The team did an excellent job lowering our inventory levels more quickly than expected. Therefore, we expect inventories to be roughly flat from Q3 to Q4. Our balance sheet remains debt-free. We ended the quarter with no outstanding balance on our $75 million expandable line of credit.

The team did an excellent job lowering our inventory levels more quickly than expected and therefore, we expect inventories to be roughly flat from Q3 to Q4.

Our balance sheet remains debt free we ended the quarter with no outstanding balance on our 75 million dollar expandable line of credit.

Andy Fulmer: And we now have total available capital of roughly $106 million with regard to capital expenditures. We spent $3.7 million on CapEx in the third quarter. Roughly $2.9 million of this spending was from a planned, one-time purchase of assets relating to the full lease assumption of our Columbia, Missouri headquarters. We have lowered our planned CapEx spending for the full year by $500,000, and we now expect total CapEx spend for fiscal 2024 to be between $6 million and $6.5 million, of which approximately three to three and a half million dollars is recurring. Finally, a key capital allocation priority for our company is returning capital to shareholders through our share repurchase program. In Q3, we repurchased roughly 210,000 shares for $1.8 million at an average price of $8.50 per share.

We now have total available capital of roughly $106 million.

With regard to capital expenditures, we spent $3 $7 million on Capex in the third quarter.

Roughly $2 9 million of this spending was from a planned one time purchase of assets relating to the full lease assumption of our Columbia, Missouri headquarters.

We have lowered our planned capex spending for the full year by $500000 and we now expect total capex spend for fiscal 2024 to be between 6 million and $6 5 million of which approximately three to $3 $5 million is recurring.

Finally, a key capital allocation priority for our company is returning capital to shareholders through our share repurchase program.

In Q3, we repurchased roughly 210000 shares for $1 $8 million at an average price of $8 50 per share.

Andy Fulmer: At the end of Q3, we had $7.8 million of availability remaining on our $10 million share repurchase program through September 2024. Now turning to our net sales outlook, we continue to believe that fiscal 2024 could deliver full year net sales growth of up to three and a half percent. Journey to Gross Margin. We expect to see gross margins come in at approximately 44% on a full fiscal 2024 basis, which would imply a decline in Q4 gross margins from last year. This expected decline is due to the higher tariff and freight cost amortization that I discussed earlier with regard to OPEC.

At the end of Q3, we had $7 $8 million of availability remaining on our $10 million share repurchase program through September 2024.

Now turning to our outlook.

Our net sales outlook remains unchanged and we continue to believe that fiscal 2024 could deliver full year net sales growth of up to three 5%.

Turning to gross margins, we expect to see gross margins come in at approximately 44% on a full fiscal 2024 basis.

It would imply a decline in Q4 gross margins from last year.

This expected decline is due to the higher tariff and freight cost amortization that I discussed earlier.

With regard to Opex we.

Andy Fulmer: We continue to believe that overall operating expenses will decline slightly on a gap basis for fiscal 2024 as a result of reductions from facility consolidations, lower one-time legal and advisory fees, and lower IT implementation costs offset by higher selling and distribution. On a non-gap basis, we expect that OPEX will increase slightly, mainly due to higher selling and distribution. 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 Q4. Based on these factors, we expect our adjusted EBITDA margin for the full fiscal 2024 to be between 4.5% and 5%. Brian said:

We continue to believe that overall operating expenses will decline slightly on a GAAP basis for fiscal 2024, as a result of reductions from facility consolidations, lower onetime legal and advisory fees and lower implementation costs offset by higher selling and distribution costs.

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

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 Q4.

Based on these factors, we expect our adjusted EBITDA margin for the full fiscal 2024 to be between four and a half and 5%.

Ryan.

Brian Daniel Murphy: Thank you, Andy. I believe our third-quarter results demonstrate our ability to manage the 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. We have a great portfolio of authentic lifestyle brands and a growing lineup of exciting and innovative products that continue to resonate with enthusiasts who are passionate about their outdoor activities. With that, Operator, please open the call to questions from our analysts. Thank you very much. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

Thank you Andy I believe our third quarter results demonstrate our ability to manage the 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.

We have a great portfolio of authentic lifestyle brands and a growing lineup of exciting and innovative products that continue to resonate with enthusiasts who are passionate about their outdoor activities.

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

Thank you very much we will now begin the question and answer session to 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.

Operator: To withdraw your question, please press star, then 2. Today's first question comes from Mark Smith with Lake Street Capital Market. Please go ahead. Hey, good afternoon guys. This is Aaron on the line for Mark.

To withdraw your question. Please press Star then tail.

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

Hey, Good afternoon, guys. This is Aaron on the line from Mark Congrats on the quarter. So.

Mark Eric Smith: Congratulations on the quarter. So I guess to start, I'm kind of just wondering if you could kind of unpack the inventory levels at retailers a little bit. You know, I know you had some commentary in your prepared remarks there, but have you seen any improvement since the last quarter? And I'm also just kind of curious. Just on your general level of confidence that you guys are going to see some progress there moving forward here. Yeah, was it Aaron?

So I guess just start on kind of just wondering if you can kind of unpack the.

The inventory levels at retail is a little bit.

You had some commentary in the <unk>.

The prepared remarks, there, but have you seen the improvement since last quarter and then also just kind of curious.

Just on your on your general level of confidence that you guys are going to see some progress there moving forward here.

Yes, it was it darrin.

Brian Daniel Murphy: Correct, yep. Okay, Aaron, this is Brian. So yeah, so we didn't, you know, we said, look, POS was up in the quarter. We didn't, we didn't give any insight into inventory. Inventory was down in the channel, which is a positive. You know, it was up a little bit in outdoor lifestyle because of meat, part of the meat load-in and the work with Academy.

Correct Yep.

Okay. Aaron this is Brian so.

Yes, we did we said look Pos was up in the quarter.

We didn't we didn't give any insight into inventory inventory was down in the channel which is up.

It was up a little bit in outdoor lifestyle because of meat part of the meat load in and the work with academy, but excluding that on both sides of the fence outdoor lifestyle and shooting sports inventory was down so that's positive.

Brian Daniel Murphy: But excluding that on both sides of the fence, outdoor lifestyle and shooting sports, inventory was down, so that's positive. And then I'd say just some context or color, you know. We just, like we said, we were at SHOT Show in Vegas, and we met with a lot of our big retailers. Inventory destocking just was not a top priority there, so, you know, we're mostly focused on getting it to a normal cadence, looking forward to the next year. You know, the big theme that we took away was innovation, which obviously is where we play. You know, that's one of our strengths. So lots of factors, and I think we're seeing great pull through at retail right now. Great, that's very helpful.

And then I'd say, just just some context or color.

Likewise, that'd be rough shot show in Vegas, and we meet with a lot of our big retailers.

Inventory Destocking just was not a top priority. There. So you know, we're mostly focused on getting into a normal cadence looking forward to the next year you know the big theme that we took away was innovation, which obviously is where we play you know lots of one of our strengths.

So lots of a factor and I think we're seeing great great pull through at retail right now.

Great. That's very helpful. Thanks for that color and then so you know in previous quarters, you know you sort of.

Mark Eric Smith: Thanks for that, Keller. And then, you know, in previous quarters, you've sort of remained focused on growing organically through your innovation efforts, and I guess R&D has been sort of at a comfortable level for you guys. So, does your confidence in internal innovation efforts affect your appetite for the M&A markets to any degree? Yeah, this is Brian. It's a really good question.

We remain focused on growing organically through your innovation efforts and I guess R&D has been sort of at a comfortable level for you guys. So.

Does your confidence with internal innovation efforts I'm, just curious does it affect your appetite on the on the M&A markets to any degree.

Yes. This is Bryan I think it's a really good question you know I think one of the things that you had.

Brian Daniel Murphy: You know, I think one of the things that you, Outdoors, and we don't have as much insight into it as you do, is we talked about where we have permission to play, where our brands have permission to play, and that permission to play for our brands is what ultimately informs our three to five-year, we have a five-year growth plan of new products going forward, that's based on that permission to play. So when we look at acquisitions, we say, where do our brands not have permission to play, or where can we augment maybe some of those plans? A good example of that would be Gorilla, right? One of the reasons we went after Gorilla, in addition to being a great direct-to-consumer brand and it has this differentiation with modular kitchens, is that we were actually wanting to go into outdoor cooking with Meet Your Maker.

So we don't have as much insight into is yes.

As we talked about where we have permission to play where our brands have permission to play and that permission to play for our brands is what ultimately informs our three to five years.

We have five year growth plan of new products going forward, that's based on that permission to play. So when we look at acquisitions, we say, where we're at don't our brands have permission to play or where can we augment maybe some of those plans is a good example of that would be with grill right. One of the reasons, we went up to gorilla.

In addition to being a great direct to consumer branded has this differentiation with modular kitchens.

As we were actually wanting to go into outdoor cooking with meet your maker.

Brian Daniel Murphy: And the more we went down that road and talked with consumers, we just felt like it wasn't the right fit. And so that's what helped give us the conviction to go after Gorilla was that we could take some of those innovations that we had developed, and we called putting them in the vault; we could take them out of the vault and then use them for some of those brands that we go acquire. So it's really, where don't we have, where do our brands not have permission to do what we do as a company?

And the more we went down that road and talking with consumers. We just felt like it wasn't the right fit and so that's what helps to give us the conviction to go after gorilla.

Was that we could take some of those innovations that we have developed and we call it putting it in the bulk we could take them out of the vault and then use them for some of those brands that we go acquire so it's really we're doing we have we're going to our brands have permission to play, but we do as a company.

Brian Daniel Murphy: And then, in some cases, where can we actually augment, you know, some of the innovation that we've already developed but may not have the right brand for? So, that's really how we look at it and really helps inform our acquisitions. Great. Yeah, totally understandable. Thanks for all that color.

And then in some cases, where can we actually augment you know some of the innovation that we've already developed but may not have the right brand for so that's really how we look at it.

And really helps inform our acquisitions.

Great Yeah, I totally understandable, thanks for all that color and again congrats on the quarter.

Mark Eric Smith: And again, congratulations on the quarter. Yeah, thank you. Thank you. The next question comes from Matt Koranda with Roth MKM. Please go ahead. Hey guys, it's Mike Zabrinon from that.

Yes. Thank you.

Thank you. The next question comes from Matt Koranda with Roth M. P. M. Please go ahead.

Hey, guys, it's Mike <unk>.

Matthew Butler Koranda: Maybe I just started on the sales guide, which implies a low single-digit growth rate in the fourth quarter, somewhere a bit below the third quarter growth. Just any reason to expect the deceleration and growth in the fourth quarter? Or are we more so just being conservative given the continued caution from retailers? Hey, Mike, this is and it's a great question. I would attribute it more to just the cyclical, like quarter by quarter, seasonal nature of our business. So typically, q2 and q3 are higher, and q4 is a little bit lower.

Maybe just start on the sales guide.

Implies a low single digit growth rate in the fourth quarter somewhere a bit below the third quarter growth.

Any reason to expect the deceleration in growth in fourth quarter or are we more so just being conservative given the continued caution from retailers.

Hey, Mike This is Dan it's a great question.

Would attribute it more to just the.

Cyclical like quarter by quarter seasonal nature of our business. So typically Q T Q2, Q3 are higher.

Q4 is it a little bit lower so I wouldn't I wouldn't really.

Andy Fulmer: So I wouldn't really put any more emphasis on that. Got it. Okay. And maybe on channel inventory. We talked about it earlier, but maybe just speak to what we're seeing in regards to sell in versus sell through at retail. And then are there any areas where we see opportunity for higher load in benefits? Looking ahead? Sure, this is Brian.

But any more emphasis on that.

Got it okay.

Maybe on the channel inventory kind of talked about it earlier, but maybe just speak to what we're seeing in regards to sell in versus sell through at retail and then.

Are there any areas, where we see opportunity for higher load in benefit looking.

Looking ahead.

Sure. This is Brian so, yes, I mean I think.

Brian Daniel Murphy: So yeah, I mean, I think, Going back, gosh, two plus years. You know, we talked about how ultimately what we want to have is the closest link possible between sell-in and sell-through. You know, we don't want to have too much of our product in the channel. We want there to be as much of a tight link as possible so that way, when we see our POS data, it allows all of our internal teams, in inventory management teams, and in our SNOP process to be able to order the right product and not have too much of it and get it here at the right time.

Going back gosh, two plus years.

We talked about ultimately what we want to have is.

Gnosis like possible between sell in and sell through you know, we don't want to be have too much of our product in the channel we want there to be as much of a tight link as possible. So that we wouldn't be CRM Pos data. It allows all of our internal teams inventory management teams, our ethanol process to be able to order the right product and not have to.

Much of it and get it here at the right time.

Brian Daniel Murphy: So we feel like that link is pretty strong right now. We're not seeing a whole lot of slack in the system, at least with our company. And then, I'm sorry, what was the second part of your question?

So we feel like that that link is pretty strong right now we're not seeing a whole lot of slack in the system at least with our company.

And then I'm sorry, what was the second part of your question.

Bob.

Matthew Butler Koranda: Just any areas where we see opportunity for higher load, and we talked about it happening a little bit in this quarter. Yeah, I mean, so replenishments are, you know, we're seeing great replenishment right now. You know, and then we've got new products that are always coming out. We've got some new products that are going to be hitting at the end of April and shipping to stores. So we'll see some benefit there. That should include some load-ins.

Just any areas, where we see opportunity for higher loading.

You talked about it happening.

Happening a little bit in this quarter.

Yeah, I mean, so re plans are we're seeing great replenishment right now.

You know and then we've got new products that are always coming out we've got some new products are going to be hitting at the end of April and shipping to stores. So we will see some benefit there that should include some load ins.

Brian Daniel Murphy: And then, you know, we haven't talked about next year yet, but certainly, you know, our conversations with retailers, the line reviews that we had last fall that went very, very well should go well for us and see some load-ins for those new products next year. In addition to new distribution, you know, we've got some new retailers coming online that we're very excited about. Got it. It's great to hear. Last one for

We haven't talked about next year, yet, but certainly you know our conversations with retailers line reviews that we had last fall that one very very well should go well for us and see some load ins for those new products.

Next year. In addition to new distribution, we've got some new retailers coming online that were very excited about.

Got it that's great to hear.

Last one for me we've talked about balancing.

Matthew Butler Koranda: We talked about balancing internal innovation versus M&A earlier in the Q&A, but maybe just speak to, I guess your appetite to be acquisitive in the near term, maybe. The balance sheet looks great, but just any changes on this front, have we seen anything interesting? Yeah, any developments there? Yeah, it's Brian again.

Internal internal innovation, Bruce M&A earlier in the Q&A, but maybe just speak to that.

The app your appetite to be acquisitive in the near term maybe the balance sheet looks great, but just any changes on this front have we seen anything interesting.

Any developments there.

Yes, it's Brian again, and any feel free to chime in.

Brian Daniel Murphy: And Andy, feel free to chime in. So generally, we tend to be, in terms of our philosophy, a little bit more cautious when we see multiples go way up, and the market becomes more frothy. We did gorilla over the last few years, but it was very selective and very targeted.

So generally we tend to be just in terms of our philosophy, we tend to be a little bit more cautious when we see multiples go way up and the market becomes more frothy, we did gorilla over the last few years, but it was very selective and very targeted so and now we're seeing sort of the M&A market has come down slow down a little bit we're seeing signs of it.

Brian Daniel Murphy: So and then now we're seeing sort of the M&A market slow down a little bit, but we're seeing signs of it beginning to pick back up. We're seeing a few more decks from banks with sell-side deals, and more. We couldn't be in a better position. You know, like you alluded to, we're in a great cash position. We have dry powder. We have no debt.

Getting to pick back up we're seeing a few more decks from banks with sell side deals.

And we're we couldn't be in a better position like you alluded to we're in a great cash position, we have dry powder, we have no debt.

Brian Daniel Murphy: And so we're on the hunt. We are actively looking, meeting with companies directly or through advisors. But we've got a great pipeline that we're executing against, and you never know when one's going to hit.

And so we're on the hot we are actively looking meeting with companies.

Directionally or through advisors, but we've got a great pipeline that we're executing against and you never know and one's going to hit but we've got a very clear perspective on who it is that we need to go after and we're executing on that.

Brian Daniel Murphy: But we've got a very clear perspective on who it is that we need to go after, and we're executing on that. Got it. That's all from me, guys. Congratulations on the quarter. Thank you. Thank you. This concludes our question and answer session. I'd like to turn the call back over to Brian Murphy for closing remarks. Thank you, Operator. Before we close, I want to let everyone know that we'll be participating in the Roth Conference in California on March 18th and 19th and hope to see some of you there. I also want to thank our employees for their dedication and our shareholders for their support. Thank you everyone for joining us today. We look forward to speaking with you again next quarter. The conference is now concluded. Thank you for your participation. You may now disconnect your line. Narrated by Stan Lee. Show theme

Got it that's all for me guys congrats on the quarter.

Thank you. Thank you.

Thank you. This concludes our question and answer session I'd like to turn the call back over to Brian Murphy for closing remarks.

Thank you operator before we close I want to let everyone know that we'll be participating in the Roth conference in California on March 18th and 19th and hope to see some of you there.

I also thank our employees for their dedication and our shareholders for their support thanks, everyone for joining US today, we look forward to speaking with you again next quarter.

The conference has now concluded. Thank you for your participation you may now disconnect your lines.

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Okay.

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