Q1 2025 American Outdoor Brands Inc Earnings Call

September 5, 2024

Speaker Change: [inaudible]

Speaker Change: Music Music

Operator: Good day, everyone, and welcome to American Outdoor Brands Inc. 1st Quarter Fiscal 2025 Financial Results Conference Call. This call is being recorded.

Speaker Change: The New Year's Eve

Speaker Change: Good day everyone and welcome to American Outdoor Brands Inc. First Quarter Fiscal 2025, Financial Results Conference Call.

Liz Sharp: 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. 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, intent, 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.

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

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

Speaker Change: Board-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 Change: Market and inventory conditions related to our product and in our industry in general, and growth opportunities and trends.

Liz Sharp: 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 AOB.com. 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.

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

Speaker Change: Risk Factors and other considerations that could cause our actual results to be materially different or described in our security spyllies. You can find those documents as well as a replay of this call on our website at aob.com.

Speaker Change: 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.

Liz Sharp: I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, technology implementation, non-recurring inventory reserve adjustments, other costs, and income tax adjustments. The reconciliation of gap financial measures to non-gap 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.

Speaker Change: I have a few important items to note about our comments on today's call. First, we reference certain non-gap financial measures. Our non-gap results exclude amortization of acquired and tangible assets.

Speaker Change: Scott Compensation, Technology Implementation, Non-referring Inventory Reserve Adjustments, Other Costs, and Income Tax Adjustments.

Speaker Change: The Reconciliation of Gap Financial Measures, to non-Gap Financial Measures, whether they are discussed on today's call, can be found in our findings as well as today's earnings press release, which are posted on our website.

Speaker Change: Also, when we reference CPS, we are always referencing fully diluted EPS.

Liz Sharp: Joining us on today's call is Brian Murphy, President and CEO, and Andy Fullmer, CFO.

Speaker Change: Joining us on today's call is Brian Murphy, President in CEO and Andy Fomer, CFO. And with that, I will turn the call over to Brian.

Brian Murphy: And with that, I will turn the call over to Brian. Thanks, Liz, and thanks everyone for joining us. I am pleased with our performance in the first quarter, which reflected solid execution in a dynamic consumer environment. Our results reflected a significant increase in profitability, as well as a consumer preference for innovative products from our popular brands and our outdoor lifestyle and shooting sports categories. This quarter, we demonstrated that product innovation and expanded distribution opportunities, both of which are core to our long-term growth strategy, are key to driving results. Our focus on that strategy, and on controlling those things that we can control, is why we expect to deliver growth for fiscal 2025, despite some choppiness that may occur in the quarters along the way.

Brian Murphy: Thanks, Liz and thanks everyone for joining us. I am pleased with our performance in the first quarter which reflected solid execution in a dynamic consumer environment.

Brian Murphy: Our results reflected a significant increase in profitability, as well as a consumer preference for innovative products from our popular brands, in our outdoor lifestyle and shooting sports categories.

Brian Murphy: This quarter, we demonstrated that product innovation and expanded distribution opportunities, both of which are core to our long-term growth strategy, are key to driving results.

Brian Murphy: Our focus on that strategy and on controlling those things we can control is why we expect they deliver growth for fiscal 2025 despite some choppyness that may occur in the quarters along the way. Let's discuss that strategy before we dig into the quarterly results.

Brian Murphy: Let's discuss that strategy before we dig into the quarterly results. As an innovation company in the outdoor enthusiast industry, we maintain a relentless focus on innovation, drilling down to understand the activities of the 175 million Americans who participate in outdoor recreation each year. Whether they're grilling or fishing, hunting or target shooting, or simply working the land under their feet, these are passionate consumers who tend to participate for a lifetime, and they love their gear. As they pursue their passions, we were hard to find their pain points. And then we work even harder to create and deliver innovative solutions that take their experiences to the next level.

Brian Murphy: As an innovation company in the outdoor enthusiast industry, we maintain a relentless focus on innovation, drilling down to understand the activities of the 175 million Americans who participate in outdoor recreation each year.

Brian Murphy: Weather, they're grilling or fishing, hunting or target shooting, or simply working the land under their feet. These are passionate consumers who tend to participate for a lifetime and they love their gear.

Brian Murphy: at the Perseus and their passions, we were hard to find their pain points, and then we work even harder to create and deliver innovative solutions that take their experiences to the next level.

Brian Murphy: Our innovation process has become our superpower. Our teams continually tap into the diverse products and technologies that exist across our portfolio, creating unique and usually proprietary solutions that fill our new product pipeline. And sometimes, instead of a product, we identify the opportunity to create an entirely new brand. At the end of the day, whether the solution is a new product or a new brand, we're game for either. And we've done both successfully. We believe our ability to innovate is the key to unlocking growth potential with customer partners. The bottom line, innovation is exciting. It attracts consumers.

Brian Murphy: and sometimes a set of a product, they identify the opportunity to create an entirely new brand.

Brian Murphy: At the end of the day, whether the solution is a new product or a new brand, or game for either. And we dump both successfully.

Brian Murphy: We believe our ability to innovate is the key to unlocking growth potential with customer partners.

Brian Murphy: Because of this, innovation forms the basis of our four-pillar growth strategy, which we've outlined before. Those pillars are first, gaining market share, seeking to displace the competition by expanding our existing product lines. Second, entering new product categories, leveraging our experience in one category, like Gorilla Grills, to help us enter new categories, like our new Mammoth vertical smokers. Third, entering new consumer markets, bringing in new consumers, such as property owners, who now buy Kui Man Land Management tools that were originally created for hunters. And fourth, expanding distribution, opening doors to untapped customer channels, like moving meet your maker, meet processing equipment, beyond DTC, and into retail.

Brian Murphy: The bottom line, innovation is exciting in attracts consumers because of this innovation forms the basis of our four-pillar growth strategy which we've outlined before.

Brian Murphy: Both pillars are first gaining market share, seeking to display the competition by expanding our existing product lines.

Brian Murphy: Second, entering new product categories, leveraging our experience in one category, like Gorilla Grills, to help us enter new categories, like our new, mammoth, vertical smokers.

Brian Murphy: Third, entering new consumer markets, bringing in new consumers, such as property owners, who now buy who a man-land management tools that were originally created for hunters.

Brian Murphy: and Forest expanding distribution, opening doors to untapped customer channels, like moving meet your maker, meet processing equipment, beyond detail and into retail.

Brian Murphy: Innovation lies at the core of all of these strategic initiatives. And the repeatable and scalable process we've developed to deliver that innovation has yielded tangible results. In fact, those results have been stacking up since our spin-off in 2020.

Brian Murphy: Innovation lies at the core of all of these strategic initiatives. And the repeatable and scalable process we've developed to deliver that innovation has yielded tangible results.

Brian Murphy: In fact, those results have been stacking up since our spin-off in 2020.

Brian Murphy: Compared to four years ago, our new products have generated over $60 million of incremental organic revenue and 169 new patents, reflecting innovation vitality and the creation of a deep moat designed to protect our future revenue.

Brian Murphy: To prepare to four years ago, our new products have generated over $60 million of incremental organic revenue and 169 new patents reflecting innovation vitality and the creation of a deep mode designed to protect our future revenue.

Speaker Change: and with that, let me turn to our results for the first quarter.

Speaker Change: Netsails for our first quarter came in as expected to clenix slightly year-rear by just over 4%. That said, new products performed well across several brands in both our shooting sports and our lifestyle categories, helping to offset declines and deliver Netsails in the quarter.

Speaker Change: In addition, we generated a significant increase in adjusted EBITDAs of more than 76%.

Brian Murphy: We replenished our inventory levels as planned, in preparation for the fall hunting and holiday seasons, and we repurchased shares in the quarter, and we will address all of these points in detail later in the course.

Speaker Change: We replenished our inventory levels as planned.

Speaker Change: in preparation for the fall hunting in holiday seasons. And we repurchase shares in the quarter, and you will address all of these points in detail later in the call.

Brian Murphy: In our shooting sports category, which includes solutions for target shooting, aiming, safe storage, cleaning and maintenance, and personal protection, net sales decline by about 7% compared to last year. In shooting sports, new products from our called well claim or family, including our solo and pullpup, play target throwers, drove strength and shooting accessories and helped partially offset the weakness in personal protection products that is reflective of recent trends. It's worth noting that while we don't produce firearms, our shooting sports category tends to align with adjusted NICS background check results, which were down roughly 3% in the same period.

Speaker Change: Intershooting Sports category, which includes solutions for target shooting, aiming, safe storage, cleaning and maintenance, and personal protection. Net sales decline by about 7% compared to last year.

Speaker Change: and Shooting Sports, new products from our Caldwell Claymore family, including our solo and pull-up, play target throwers, drove strength and shooting accessories and help partially offset the weakness in personal protection products that is reflective of recent trends in that market.

Speaker Change: It's worth noting that while we don't produce firearms, our shooting sports category tends to align with adjusted nicks background check results, which were down roughly 3% in the same period.

Brian Murphy: New product innovation, like our expanded called well claim or family, plays an important role in not only growing our shooting sports category overall, but also in helping to cushion this part of our business from the dynamic nature of the personal protection market.

Speaker Change: New Product Innovation, like our expanded, called well, Claymore Family, plays an important role in not only growing our shooting sports category overall, but also in helping to cushion this part of our business from the dynamic nature of the person's protection market.

Operator: Good day, everyone, and welcome to American Outdoor Brands Inc. 1st quarter fiscal 2025 financial results conference call. This call is being recorded.

Brian Murphy: In our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities, net sales decline slightly by 1.7%. New products from our meat, bog, and bubble brands delivered strong meat processing, hunting, and fishing performance and helped to nearly offset lower net sales and outdoor cooking and rugged outdoor-related products.

Speaker Change: In our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities. Net sales declined slightly by 1.7%.

Elizabeth Sharp: 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. 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, intent, 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.

Speaker Change: New products from our meat, bog, and bubble brands delivered strong meat processing, hunting, and fishing performance, and helped to nearly offset lower net sales in outdoor cooking and rugged outdoor related products.

Elizabeth Sharp: 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 aob.com. 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.

Brian Murphy: Turning now to our distribution channels. As a pointer now, increased and expanded distribution channel opportunities are one of the four growth avenues that comprise our long-term strategic plan. During the quarter, we expanded distribution of our bog and called well brands by placing them into new retail locations, introducing these popular products to a broader consumer audience. Our efforts to expand our distribution network extend to the international market as well. Accordingly, our efforts to introduce more of our brands to Canadian consumers help deliver international net sales of 4.4 million, comprising over 10% of our net sales in the quarter and representing growth of over 21%.

Speaker Change: Turning not toward distribution channels.

Speaker Change: As a pointed out, increased and expanded distribution channel opportunities are one of the four growth avenues that comprise our long-term strategic plan.

Speaker Change: During the quarter, we expanded distribution of our bog and called well brands by placing them into new retail locations, introducing these popular products to a broader consumer audience.

Speaker Change: Our efforts to expand our distribution network extend to the international market as well.

Speaker Change: Accordingly, our efforts to introduce more of our brands to Canadian consumers help deliver international net sales of 4.4 million, comprising over 10% of our net sales in the quarter and representing growth of over 21%.

Brian Murphy: While we're still in the early innings, these results demonstrate the tremendous potential the international market holds for our brands. With regard to sell through, POS sales and our outdoor lifestyle category were positive in the quarter. On the shooting sports side, POS sales were weaker year over year, not a surprising result given the recent consumer market for firearms and related accessories.

Speaker Change: While we're still in the early innings, these results demonstrate the tremendous potential the international market holds for our brands.

Speaker Change: with regard to cell-through, PUS sales and our outdoor lifestyle category were positive in the quarter. On the shooting sport side, PUS sales were weaker, year over year. Not a surprising result given the recent consumer market for firearms and related accessories.

Brian Murphy: Lastly, new products generated about 23% of our net sales in the first quarter.

Elizabeth Sharp: I have a few important items to note about our comments on today's call. First, we referenced certain non-gap financial measures. Our non-gap results exclude amortization of acquired intangible assets, stock compensation, technology implementation, non-recurring inventory reserve adjustments, other costs, and income tax adjustments. The reconciliation of gap financial measures to non-gap 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 deluded EPS.

Speaker Change: Lastly, new products generated about 23% of our net sales in the first quarter.

Brian Murphy: During Q1, our team attended Eye Cast, the world's largest sport fishing trade show. Attendees at the show continue to rave about our new Bella Pro Series Smart Fish Scale, which has now completed its first spring season as the official scale of Major League Fishing. The show provided us a great opportunity to give retailers a preview of an exciting new line of tools that will take our bubble brand into new fishing markets and further extend its reach among the 54 million anglers in the US who pursue their passion for sport fishing. You'll see these new bubble products on retail shelves this coming spring.

Speaker Change: During Q1, our team attended ICAST, the world's largest sport fishing trade show.

Speaker Change: Attendees at the show continue to raise about our new Bubba Pro-Series Smart Fish Scale, which has now completed its first spring season as the official scale of Major League fishing.

Speaker Change: The show provided us a great opportunity to give retailers a preview of an exciting new line of tools that will take our Boba brand into new fishing markets. And further extend its reach among the 54 million anglers in the US who pursue their passion for sport fishing.

Brian Murphy: And that's not all. We have several new product launches on the calendar for a number of our brands, including Gorilla, Meet Your Maker, Called Well and Wheeler.

Speaker Change: We'll see these new bubble products on retail shelves this coming spring and that's not all We have several new product launches on the calendar for a number of our brands including Grilla, Meet your maker, called well and we'll learn, so stay tuned

Brian Murphy: Joining us on today's call is Brian Murphy, President and CEO, and Andy Fullmer, CFO. And with that, I will turn the call over to Brian. Thanks, Liz, and thanks everyone for joining us. I am pleased with our performance in the first quarter, which reflected solid execution in a dynamic consumer environment. Our results reflected a significant increase in profitability, as well as a consumer preference for innovative products from our popular brands and our outdoor lifestyle and shooting sports categories.

Brian Murphy: Institute. Our new product pipeline is more robust than ever, extending well into the next five years, providing us with a significant long-term competitive advantage.

Speaker Change: Our new product pipeline is more robust than ever, extending well into the next five years, providing us with a significant long-term competitive advantage.

Andy Fullmer: With that, I'll turn it over to Andy to discuss our financial results. Thanks, Brian. For the first quarter, we delivered solid net sales with profitability above our expectations, a strong balance sheet with over 23 million in cash and no debt. And we continue to return capital to stockholders through our share repurchase program. We're pleased with our results for the quarter, so let me walk you through the details. Net sales in Q1 were $41.6 million, compared to $43.4 million in Q1 last year. A decrease of 4.1%. During our last call, we discussed that we recognized two to $3 million of shooting sports net sales in the fourth quarter that we had initially expected to take place in the first quarter.

Speaker Change: with that I'll turn it over to Andy to discuss our financial results.

Andy Fomer: Thanks Brian. For the first quarter, we delivered solid net sales with profitability above our expectations. A strong balance sheet with over 23 million in cash and no debt. And we continue to return capital to stockholders who are share repurchased program.

Brian Murphy: This quarter, we demonstrated that product innovation and expanded distribution opportunities, both of which are core to our long-term growth strategy, our key to driving results. Our focus on that strategy and on controlling those things that we can control is why we expect to deliver growth for fiscal 2025, despite some choppiness that may occur in the quarters along the way.

Andy Fomer: We're pleased with our results for the corner, so let me walk you through the details.

Andy Fomer: That sales in Q1 were $41.6 million to pair to $43.4 million in Q1 last year, a decrease of 4.1%.

Brian Murphy: Let's discuss that strategy before we dig into the quarterly results. As an innovation company in the outdoor enthusiast industry, we maintain a relentless focus on innovation, drilling down to understand the activities of the 175 million Americans who participate in outdoor recreation each year. Whether they're grilling or fishing, hunting or target shooting or simply working the land under their feet, these are passionate consumers who tend to participate for a lifetime, and they love their gear.

Andy Fomer: During our last call, we discussed that we recognized $2 to $3 million of shooting sports net sales and the fourth quarter that we had initially expected to take place in the first quarter.

Andy Fullmer: On a category basis, net sales and shooting sports decreased 7%, while net sales and outdoor lifestyle decreased 1.7% for the reasons Brian discussed. With regard to our traditional brick-and-mortar sales versus e-commerce sales, net sales in our traditional channel were roughly flat, while net sales in our e-commerce channel were down 10.2%, driven mainly by outdoor cooking products. You'll recall that all direct-to-consumer sales are included in our e-commerce net sales total. So it's important to note that last year's e-commerce results included our Grilla retail store in Michigan, which we closed as planned in July 2023. In addition, strong sales of Grilla in the fourth quarter left our inventory levels lower than we'd like.

Brian Murphy: On a category basis, Net Sales and Shining Sports decrease 7% while Net Sales and Outdoor Lifestyle decrease 1.7% for the reasons Brian discussed.

Brian Murphy: As they pursue their passions, we were hard to find their pain points. And then we work even harder to create and deliver innovative solutions that take their experiences to the next level. Our innovation process has become our superpower. Our teams continually tap into the diverse products and technologies that exist across our portfolio, creating unique and usually proprietary solutions that fill our new product pipeline. And sometimes, instead of a product, we identify the opportunity to create an entirely new brand.

Brian Murphy: with regard to our traditional brick and mortar sales versus e-commerce sales.

Brian Murphy: That sales in our traditional channel were roughly flat, while that sales in our e-commerce channel were down 10.2% driven mainly by outdoor cooking products.

Brian Murphy: You'll recall that all direct-to-consumer sales are included in our e-commerce net sales total.

Brian Murphy: So it's important to note that last year's econ results included our Grilla Retail Store in Michigan, which we closed as planned in July 2023.

Brian Murphy: At the end of the day, whether the solution is a new product or a new brand, we're game for either. And we've done both successfully. We believe our ability to innovate is the key to unlocking growth potential with customer partners. The bottom line, innovation is exciting. It attracts consumers.

Brian Murphy: In addition, strong sales of Grilla in the fourth quarter left our inventory levels lower than we'd like. Those levels are now replenished.

Andy Fullmer: Those levels are now replenished.

Andy Fullmer: Turning to Gross Margin. Gap gross margin for Q1 was 45.4%, which was flat to Q1 last year. This result was higher than the expectation we had heading into the quarter and was driven by lower amortization of tariff and freight variances related to our increased inventory levels.

Speaker Change: Turning to Gross Margin, Gap Gross Margin for Q1 was 45.4% which was flat to Q1 last year.

Brian Murphy: Because of this, innovation forms the basis of our four pillar growth strategy, which we've outlined before. Those pillars are first, gaining market share, seeking to displace the competition by expanding our existing product lines. Second, entering new product categories, leveraging our experience in one category, like Gorilla Grills, to help us enter new categories, like our new mammoth vertical smokers. Third, entering new consumer markets, bringing in new consumers, such as property owners, who now buy Kui Man Land Management tools that were originally created for hunters.

Speaker Change: This result was higher than the expectation we had, heading into the quarter, and was driven by lower amortization of tariff and freight variances related to our increased inventory levels.

Andy Fullmer: Turning to operating expenses. Gap operating expenses for the quarter were $21.5 million compared to $23.8 million last year. The decrease was driven by lower intangible amortization, legal, and advertising expenses. On a non-GAAP basis, operating expenses in Q1 were $18.4 million compared to $19.6 million in Q1 last year. Non-GAAP operating expenses exclude intangible amortization, stock compensation, and certain non-recurring expenses as they occur. Gap EPS for Q1 was a loss of 18 cents and improvement over the Gap EPS loss of 31 cents last year. On a non-gap basis, EPS was 6 cents for the first quarter compared to 1 cent in Q1 last year.

Speaker Change: Turning to operating expenses, GAP operating expenses for the quarter were $21.5 million, compared to $23.8 million last year. The decrease was driven by lower and tangible amortization, legal and advertising expenses.

Speaker Change: On a non-gap basis, operating expenses in Q1 were $18.4 million, compared to $19.6 million in Q1 last year.

Brian Murphy: And fourth, expanding distribution, opening doors to untapped customer channels, like moving meet your maker, meet processing equipment, beyond DTC, and into retail. Innovation lies at the core of all of these strategic initiatives. And the repeatable and scalable process we've developed to deliver that innovation has yielded tangible results. In fact, those results have been stacking up since our spin-off in 2020. Compared to four years ago, our new products have generated over $60 million of incremental organic revenue and 169 new patents, reflecting innovation vitality, and the creation of a deep moat designed to protect our future revenue.

Speaker Change: Non-Gap operating expenses exclude intangible amortization, stock compensation, and certain non-referring expenses as they occur.

Speaker Change: Gap EPS for Q1 was a loss of 18 cents and improvement over the Gap EPS loss of 31 cents last year.

Speaker Change: On a non-gap basis, EPS was six cents for the first quarter compared to one cent in Q1 last year.

Andy Fullmer: Our Q1 figures are based on a fully diluted share count of approximately 12.9 million shares. For full fiscal 2025, we expect our fully diluted share count will be about 13 million shares.

Speaker Change: Our Q1 figures are based on a fully diluted share count of approximately 12.9 million shares.

Speaker Change: For Full Fiscal 2025, we expect our fully diluted share count will be about 13 million shares.

Andy Fullmer: Affairs. Adjust the EBITAS for the quarter increased roughly $900,000 to $2 million compared to Q1 last year, bringing our adjusted EBITAS for the trailing 12-month period to $10.6 million.

Brian Murphy: And with that, let me turn to our results for the first quarter. Net sales for our first quarter came in as expected, declining slightly year-to-year by just over 4%. That said, new products performed well across several brands in both our shooting sports and outdoor lifestyle categories, helping to offset the clients and deliver net sales in the quarter. In addition, we generated a significant increase in adjusted EBITDAs of more than 76%. We replenished our inventory levels as planned, in preparation for the fall hunting and holiday seasons, and we repurchased shares in the quarter, and we will address all of these points in detail later in the course.

Speaker Change: Adjust the e-bados for the quarter increased roughly $900,000 to $2,000, compared to Q1 last year. Bringing our adjusted e-bados for the trailing 12-month period to $10.6 million.

Andy Fullmer: Turning now to the balance sheet and cash flow, we maintain the strength of our balance sheet during the quarter, ending with a strong cash position, inventory on hand to fulfill orders we expect in the coming quarters, and no debt. Let me provide some of the details. We ended the quarter with cash of $23.5 million, down $6.2 million from year end, despite investments we made in inventory during the quarter and a seasonal increase in accounts receivable. As a reminder, our business is seasonal in nature, with net sales typically increasing in Q2 and Q3, around the fall hunting and holiday seasons.

Speaker Change: Turning now to the balance sheet and cash flow.

Speaker Change: We maintain the strength of our balance sheet during the quarter, ending with a strong cash position, inventory on hand to fulfill orders we expect in the coming quarters and no debt.

Speaker Change: Let me provide some of the details.

Speaker Change: We ended the quarter with cash of $23.5 million, down $6.2 million from year-end, despite investments we made in inventory during the quarter, and a seasonal increase in the winter season.

Brian Murphy: In our shooting sports category, which includes solutions for target shooting, aiming, safe storage, cleaning and maintenance, and personal protection, net sales declined by about 7% compared to last year. In shooting sports, new products from our Caldwell Claymore family, including our solo and pull-up, clay target throwers, drove strength and shooting accessories and helped partially offset the weakness and personal protection products that is reflective of recent trends in that market. It's worth noting that while we don't produce firearms, our shooting sports category tends to align with adjusted nicks background check results, which were down roughly 3% in the same period.

Speaker Change: As a reminder, our business is seasonal in nature, with net sales typically increasing in Q2 and Q3 around the fall hunting and holiday seasons.

Andy Fullmer: As such, we typically use cash to build inventory and accounts receivable balances in the first half of our fiscal year, and then generate cash in the second half of our fiscal year as we lower inventory levels and collect those receivables. We expect fiscal 2025 to be consistent with this trend. In Q1, we used $4.4 million of cash for operations due to a build in our inventory levels of $13.4 million, netted by increases in accounts payable and accrued expenses. We expect inventory to remain above $100 million through our third quarter, and then drop slightly below that level by year end.

Speaker Change: As such, we typically use cash to build inventory and accounts receivable balances in the first half of our fiscal year and then generate cash in the second half of our fiscal year as we lower inventory levels and collect those receivables.

Speaker Change: We expect fiscal 2025 to be consistent with this trend.

Speaker Change: and Q1, we used $4.4 million of cash for operations due to a build in our inventory levels of $13.4 million, netted by increases into accounts payable and a crude expense.

Brian Murphy: New product innovation, like our expanded Caldwell Claymore family, plays an important role in not only growing our shooting sports category overall, but also in helping to cushion this part of our business from the dynamic nature of the personal protection market. In our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities, net sales declined slightly by 1.7%. New products from our meat, bog, and bubble brands delivered strong meat processing, hunting, and fishing performance, and helped to nearly offset lower net sales and outdoor cooking and rugged outdoor related products.

Speaker Change: We expect inventory to remain above $100 million through our third quarter and then drop slightly below that level by year end.

Andy Fullmer: We ended the quarter with no outstanding balance on our $75 million expandable line of credit, bringing our total available capital to over $113 million.

Speaker Change: We ended the quarter with no outstanding balance on our 75 million dollar, expandable line of credit. Bring in our total available capital to over 113 million dollars.

Andy Fullmer: Turn it to capital expenditures. Our operating model was designed to be asset light, typically requiring annual catbacks of roughly 2% of net sales for patents, tooling, and maintenance investments, and our expectations for fiscal 2025 are right in line with our model. We spent $1.1 million on catbacks for the first quarter, mainly for product tooling and patent costs. For full year fiscal 2025, we expect to spend $3.5 to $4.5 million, which includes a small amount to build out the new factory outlet store in our Missouri headquarters building. The strength of our balance sheet allows us to be very flexible with our capital allocation decisions and maintain focus on our three priorities: organic growth, M&A, and returning capital to shareholders, based on what is most opportunistic at the time.

Speaker Change: Turning to Capitol expenditures.

Speaker Change: Our operating model was designed to be asset light, typically requiring annual capex of roughly 2% of net sales for patents, tooling, and maintenance investments. And our expectations for fiscal 2025 are right in line with our model.

Brian Murphy: Turning now to our distribution channels. As I pointed out, increased and expanded distribution channel opportunities are one of the four growth avenues that comprise our long-term strategic plan. During the quarter, we expanded distribution of our bog and Caldwell brands by placing them into new retail locations, introducing these popular products to a broader consumer audience. Our efforts to expand our distribution network extend to the international market as well. Accordingly, our efforts to introduce more of our brands to Canadian consumers help deliver international net sales of 4.4 million, comprising over 10% of our net sales in the quarter, and representing growth of over 21%.

Speaker Change: We spent $1.1 million on CapEx for the first quarter, mainly for product tooling and patent costs.

Speaker Change: For full year fiscal 2025, we expect to spend 3.5 to 4.5 million dollars, which includes a small amount to build out the new factory outlet store in our Missouri headquarters building.

Speaker Change: The strength of our balance sheet allows us to be very flexible with our capital allocation decisions and maintain focus on our three priorities, organic growth, M&A and returning capital to shareholders.

Andy Fullmer: We expect to fund organic growth in fiscal 2025 with cash from operations. With respect to M&A, we are beginning to see an increase in higher quality acquisition targets. Given the strength of our balance sheet and our reputation for building solid brands, we believe we are regarded as a buyer of choice in the M&A market. Lastly, we continue to return capital to stockholders through our share repurchase program. In Q1, we repurchase roughly 42,000 shares at an average price of $9.6 per share.

Speaker Change: Based on what is most opportunistic at the time.

Brian Murphy: While we're still in the early innings, these results demonstrate the tremendous potential the international market holds for our brands. With regard to sell-through, POS sales and our outdoor lifestyle category were positive in the quarter. On the shooting sports side, POS sales were weaker year-over-year, not a surprising result given the recent consumer market for firearms and related accessories. Lastly, new products generated about 23% of our net sales in the first quarter.

Speaker Change: We expect to fund organic growth in fiscal 2025 with cash from operations.

Speaker Change: With respect to M&A, we're beginning to see an increase in higher quality acquisition targets.

Speaker Change: Given the strength of our balance sheet and our reputation for building solid brands, we believe we are regarded as a buyer of choice in the M&A market.

Speaker Change: Lastly, we continue to return capital to stockholders through our Share Repurchase Program.

Speaker Change: and Q1, we repurchased roughly 42,000 shares at an average price of $9.6 per share.

Andy Fullmer: Air. We have $6.9 million remaining on our current repurchase authorization that expires at the end of September.

Brian Murphy: During Q1, our team attended EyeCast, the world's largest sport fishing trade show. Attendees at the show continue to rave about our new bella Pro Series Smart Fish Scale, which has now completed its first spring season as the official scale of Major League fishing. The show provided us a great opportunity to give retailers a preview of an exciting new line of tools that will take our bella brand into new fishing markets. It further extended its reach among the 54 million anglers in the US who pursue their passion for sport fishing.

Speaker Change: We have $6.9 million remaining on our current repurchase authorization that expires at the end of September

Andy Fullmer: Now turning to our outlook. We remain excited about the opportunities that lie ahead for fiscal 2025 and beyond. While we anticipate that headwinds in the shooting sports category may continue, we believe that our initiatives to drive channel expansion combined with our robust new product pipeline will help deliver growth in our outdoor lifestyle category. Therefore, we continue to believe that fiscal 2025 net sales could grow by as much as 2.5% compared to fiscal 2024. We expect our net sales in fiscal 25 to follow the typical seasonal pattern that I described earlier, with Q1 as our lowest net sales quarter, Q2 and Q3 as our highest net sales quarters, and Q4 coming in higher than Q1.

Speaker Change: Now turning to our outlook.

Speaker Change: We remain excited about the opportunities that lie ahead for fiscal 2025 and beyond.

Speaker Change: While we anticipate that headwinds in the shooting sports category may continue. We believe that our initiatives to drive channel expansion combined with our robust new product pipeline will help deliver growth in our outdoor lifestyle category.

Brian Murphy: You'll see these new bella products on retail shelves this coming spring. And that's not all. We have several new product launches on the calendar for a number of our brands, including Gorilla, Meet Your Maker, Caldwell and Wheeler.

Speaker Change: Therefore, we continue to believe that fiscal 2025 net sales could grow by as much as two and a half percent compared to fiscal 2024.

Speaker Change: We expect our net sales in fiscal 25 to follow the typical seasonal pattern that I described earlier. With Q1 as our lowest net sales quarter, Q2 and Q3 as our highest net sales quarters, and Q4 coming in higher than Q1.

Brian Murphy: Institute. Our new product pipeline is more robust than ever, extending well into the next five years, providing us with a significant long-term competitive advantage.

Andy Fullmer: We expect Q2 net sales to decline year over year by between 8% and 9%, driven primarily by the shooting sports category. Followed by growth in the second half of the year, driven largely by new product launches and distribution opportunities in our outdoor lifestyle category. And here, I'll point back to Brian's comments earlier in the call about some underlying choppiness on a quarterly basis this year as we make our way toward full-year growth. Turning to growth margins, we continue to expect growth margins for the full year to be approximately 45% versus 44% for the prior year.

Speaker Change: We expect Q2 net sales to decline year over year by between 8% and 9%. Driven primarily by the shooting sports categories.

Speaker Change: followed by growth in the second half of the year driven largely by new product launches and distribution opportunities in our outdoor lifestyle category.

Andy Fullmer: We're pleased with our results for the quarter, so let me walk you through the details. Net sales in Q1 were $41.6 million compared to $43.4 million in Q1 last year, a decrease of 4.1%. During our last call, we discussed that we recognized $2 to $3 million of shooting sports net sales in the fourth quarter that we had initially expected to take place in the first quarter. On a category basis, net sales and shooting sports decreased 7%, while net sales and outdoor lifestyle decreased 1.7% for the reasons Brian discussed.

Brian Murphy: and here I'll point back to Brian's comments earlier in the call about some underlying choppiness on a quarterly basis this year as we make our way toward full year growth.

Brian Murphy: Turning the gross margins.

Speaker Change: We continue to expect Rose margins for the full year to be approximately 45% versus 44% for the prior year.

Andy Fullmer: On a quarterly basis, we expect some fluctuation based on the timing of inventory purchases and the amortization of tariff and freight variances related to those purchases. As a result, we expect Q2 growth margins to be roughly 45%. Then, as inventory balances decrease during the second half of the year, we would expect growth margins to come in slightly lower for the second half. With regard to operating expense, assuming net sales growth of up to 2.5%, we expect overall up to increase slightly due to higher variable selling and distribution costs. Based on all of these factors, we continue to believe our adjusted EBITAS in fiscal 2025 will be in the range of 5.5% to 6% of net sales.

Speaker Change: On a quarterly basis, we expect some fluctuation based on the timing of inventory purchases.

Speaker Change: and the amortization of terror and freight variants is related to those purchases.

Speaker Change: As a result, we expect Q2 gross margins to be roughly 45%.

Andy Fullmer: With regard to our traditional brick and mortar sales versus e-commerce sales, net sales in our traditional channel were roughly flat, while net sales in our e-commerce channel were down 10.2% driven mainly by outdoor cooking products. You'll recall that all direct to consumer sales are included in our e-commerce net sales total. So it's important to note that last year's e-commerce results included our Grilla retail store in Michigan, which we closed as planned in July 2023. In addition, strong sales of Grilla in the fourth quarter left our inventory levels lower than we'd like. Those levels are now replenished.

Speaker Change: Then, as inventory balance is decreased during the second half of the year, we would expect gross margins to come in slightly lower for the second half.

Speaker Change: with regard to operating expense.

Speaker Change: Assuming that sales growth of up to 2 and a half percent, we expect overall op-as to increase slightly due to higher variable selling and distribution costs.

Speaker Change: Based on all of these factors, we continue to believe our adjusted EBITDAF's in fiscal 2025 will be in the range of 5 and 1.5% to 6% of NetSales.

Andy Fullmer: The increase of between $1.5 million and $2.5 million in adjusted EBITAS would align with our long-term model, which calls for an incremental EBITAS contribution of roughly 30% on net sales over $200 million.

Speaker Change: The increase of between $1.5 million and $2.5 million in adjusted EBITOS would align with our long-term model, which calls for an incremental EBITOS contribution, are roughly 30% on net sales over $200 million.

Andy Fullmer: Turning to Gross Margin. Gap Gross Margin for Q1 was 45.4%, which was flat to Q1 last year. This result was higher than the expectation we had heading into the quarter and was driven by lower amortization of tariff and freight variances related to our increased inventory levels.

Andy Fullmer: One final note as a reminder on income tax expense. We've mentioned on previous calls that we have a full valuation allowance on our deferred tax assets. This removes any tax benefit we would have derived from our gap loss from operations. As such, we expect a small amount of income tax expense for GAAP purposes in each quarter for the remainder of fiscal 2025.

Speaker Change: One final note as a reminder on income tax expense.

Speaker Change: We've mentioned on previous calls that we have a full valuation allowance on our deferred tax assets.

Speaker Change: This removes any tax benefit we would have derived from our gap loss from operations.

Andy Fullmer: Turning to operating expenses. Gap operating expenses for the quarter were $21.5 million compared to $23.8 million last year. The decrease was driven by lower intangible amortization, legal and advertising expenses. On a non-gap basis, operating expenses in Q1 were $18.4 million compared to $19.6 million in Q1 last year. Non-gap operating expenses exclude intangible amortization, stock compensation, and certain non-recurring expenses as they occur. Gap EPS for Q1 was a loss of 18 cents and improvement over the Gap EPS loss of 31 cents last year.

Speaker Change: As such, we expect a small amount of income tax expense for gap purposes in each quarter for the remainder of fiscal 2025.

Operator: With that, operator, please open the call for questions from our analyst. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you were using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

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

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then one on your telephone keypad.

Speaker Change: If you were using a speaker phone, please pick up your handset before pressing the keys.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: To withdraw your question, please press star then too.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Matt Koranda: The first question is from Matt Koranda, excuse me, Roth's Capital Partners. Please go ahead. Hi guys, good afternoon. This is Joseph on from Matt. I just wanted to talk about new products' growth. I know in the press release you mentioned, new products make up around 23% of your last two years in that sales.

Michael Brown: and Michael Brown.

Andy Fullmer: On a non-gap basis, EPS was 6 cents for the first quarter compared to 1 cents in Q1 last year. Our Q1 figures are based on a fully diluted share count of approximately 12.9 million shares. For full fiscal 2025, we expect our fully diluted share count will be about 13 million shares.

Speaker Change: The first question is from Matt Carranta, with Rob, excuse me, Rob Capital Partners, please go ahead.

Speaker Change: Hi guys, and afternoon, this is Joseph on For Matt. I just wanted to talk about new products growth. I know in the press release you mentioned, new products makes up around 23% of your last two years in that sales.

Joseph: On a high level, I just wanted to see if you guys could give some color on the performance of meat and grill in the quarter and where you see that going forward for fiscal 2025.

Speaker Change: and on a high level, just wanted to see if you guys could get some color on the performance of meat and grill in the quarter and where you see that going forward for fiscal 2025.

Andy Fullmer: Affairs. Adjust the EBITAS for the quarter increased roughly $900,000 to $2 million, compared to Q1 last year, bringing our adjusted EBITAS for the trailing 12-month period to $10.6 million.

Brian Murphy: Hey Joseph, this is Brian. So, yep, spot on some new products. Generated a nice share of our revenue in the quarter. We did see quite a few of those new products going into Canada, so growth in international, which was nice to see. And then, over the course of the year, again, we would still continue to see a nice percentage of our overall revenue come from new products. I don't know if you caught it, too. Within the prepared remarks, we talked about just the growth and innovation overall over the last four years since we spun out.

Speaker Change: Hey Joseph, this is Brian, so

Brian Murphy: Yep spot on some new products generated a nice share of our revenue in the quarter.

Andy Fullmer: Turning now to the balance sheet and cash flow, we maintain the strength of our balance sheet during the quarter, ending with a strong cash position, inventory on hand to fulfill orders we expect in the coming quarters and no debt. Let me provide some of the details. We ended the quarter with cash of $23.5 million, down $6.2 million from year end, despite investments we made in inventory during the quarter, and a seasonal increase in accounts receivable.

Brian Murphy: We did see quite a few of those new products going into Canada, so growth and international, which was nice to see, and then over the course of the year, again, we would still continue to see a nice percentage of our overall revenue come from new products.

Brian Murphy: I don't have you caught it too, within the prepare of remarks we talked about just the growth and innovation overall.

Brian Murphy: And over that time, we've added over $60 million of pure innovation revenue. So, new products that have been introduced over that period of time. So, yeah, it's an innovation continues to hump for us. And we expect a nice, you know, continued increase here for the rest of the year.

Brian Murphy: for the last four years since we spun out.

Brian Murphy: and over that time, we've added over $60 million of pure innovation revenue. So new products that have been introduced over that period of time. So yeah, it's innovation continues to home for us and we expect a nice, you know, continued increase here for the rest of the year.

Andy Fullmer: As a reminder, our business is seasonal in nature, with net sales typically increasing in Q2 and Q3 around the fall hunting and holiday seasons. As such, we typically use cash to build inventory and accounts receivable balances in the first half of our fiscal year, and then generate cash in the second half of our fiscal year as we lower inventory levels and collect those receivables. We expect fiscal 2025 to be consistent with this trend.

Joseph: Thank you. That was helpful. Just another question. I know there's a more traditional question regarding past conferences and regards to the current M&A market. I know last quarter you guys touched on the point, seeing more opportunity in the outdoor lifestyle segment compared to shooting sports. I just want to know if that rhetoric still holds up, or is the kind of even split in how does the team feel navigating during the current M&A market at the moment?

Speaker Change: Thank you, I'll help follow up just another question and I was more traditional question of regarding past.

Speaker Change: Conference is in regards to the current M&A market. I know last quarter you guys touched on the point, seen more opportunity in the outdoor lifestyle segment compared to shooting sports.

Andy Fullmer: In Q1, we used $4.4 million of cash for operations due to a build in our inventory levels of $13.4 million, netted by increases in accounts payable and accrued expenses. We expect inventory to remain above $100 million through our third quarter, and then drop slightly below that level by year end.

Speaker Change: Just want to know if that rhetoric still holds up or is it kind of even split and how does the team feel navigating during the current M&A market at the moment?

Brian Murphy: Yeah, this is Brian again. So, your question is about: are we seeing more opportunities in the outdoor lifestyle side? Yes. Can I get that right? Yeah, that's true. We're really not seeing a whole lot in shooting sports. And so, that's, you know, I think also indicative of just that market right now, especially on the personal protection side. The closer that some of those companies are to that piece of the business or those dynamics. I just think that there's a little bit more volatility. With that said, we haven't seen, you know, many other candidates step forward outside of that, but still in shooting sports.

Speaker Change: Yeah, this is Brian again. So your question is about are we seeing more opportunities in the outdoor lifestyle side?

Speaker Change: Yes, right

Speaker Change: Yeah, that's true. We're really not seeing a whole lot in shooting sports.

Andy Fullmer: We ended the quarter with no outstanding balance on our $75 million expandable line of credit, bringing our total available capital to over $113 million. Turned into capital expenditures, our operating model was designed to be asset light, typically requiring annual capex of roughly 2% of net sales for patents, tooling, and maintenance investments, and our expectations for fiscal 2025 are right in line with our model. We spent $1.1 million on capex for the first quarter, mainly for product tooling and patent costs. For full year fiscal 2025, we expect to spend $3.5 to $4.5 million, which includes a small amount to build out the new factory outlet store in our Missouri headquarters building.

Speaker Change: Um...

Speaker Change: and so that's, you know, I think also indicative of just that market right now, especially in the personal protection side, the closer.

Speaker Change: That's how those companies are to that piece of the business or those dynamics.

Speaker Change: I just think that there's a little bit more volatility. With that said we haven't seen many other candidates step forward outside of that but still shooting sports.

Brian Murphy: Outdoor lifestyle is actually getting pretty robust. We're not seeing, you know, very large companies or large brands come to market. I would say that most are sort of sub, call it sub 30 or 40 million in revenue, with quite a few that are kind of in that $10 million range. But certainly we're seeing more and more come to market. And so, in their much higher quality, I think that, as I said before, they have a line of sight to some, you know, more stable run rate. and the biggest factor for a lot of them, at least the ones that we're looking at, is really what's going to happen with the consumer.

Speaker Change: Outer Lifestyle is actually getting pretty robust. We're not seeing very large companies or large brands come to market.

Speaker Change: I would say that most are sort of sub, call it sub 30 or 40 million in revenue with quite a few that are kind of in that 10 million dollar range

Speaker Change: but certainly we're seeing more and more come to market and so in their much higher quality I think that as I said before they have line of sight to some more stable run rates.

Andy Fullmer: The strength of our balance sheet allows us to be very flexible with our capital allocation decisions and maintain focus on our three priorities, organic growth, M&A, and returning capital to shareholders based on what is most opportunistic at the time. We expect to fund organic growth in fiscal 2025 with cash from operations. With respect to M&A, we are beginning to see an increase in higher quality acquisition targets. Given the strength of our balance sheet and our reputation for building solid brands, we believe we are regarded as a buyer of choice in the M&A market.

Speaker Change: and the biggest factor for a lot of them, at least the ones that we're looking at, is really what's going to happen with the consumer. And so, TBD on that, but the companies that are able to withstand that are certainly able to point to some nice runway performance.

Brian Murphy: And so TBD on that, but the companies that are able to withstand that are certainly able to point to some nice runway performance.

Joseph: Got it, thank you.

Joseph: And then just to circle back a little bit on more so Grilla, we also wanted to know if we can get an update on the rollout of Grilla to consumer. That would be helpful, and also where you guys are filling on your shelf spacing at other retailers.

Speaker Change: Hi, thank you. And then just a circle back a little bit on Morso Grilla. We also wanted to know if we can get an update on the rollout of Grilla to consumer. That would be helpful and also where you guys are filling on your shelf facing at other retailers.

Andy Fullmer: Lastly, we continue to return capital to stockholders through our share repurchase program. In Q1, we repurchased roughly 42,000 shares at an average price of $9.6 per share.

Brian Murphy: Sure, this is Brian again. Yeah, the rollout to retail, like we said, at the end of last year was really preparing the market for Grilla entry. And we have been sort of testing the market in certain ways. We do have Grilla; some of the products on Amazon, and they're doing well there. But we want to make sure it's very strategic: the products that we have on there. But of course, we want to make sure that it's complimentary with what we're doing, direct to consumer with that brand. And like I said in my prepared remarks, we have some very key innovative new products that are coming out later this year under Grilla.

Speaker Change: Sure, this is Brian again

Brian Murphy: Yeah, the rollout to retail, like we said last at the end of last year, was really preparing the market for gorilla entry.

Andy Fullmer: Air. We have $6.9 million remaining on our current repurchase authorization that expires at the end of September.

Brian Murphy: and we have been sort of testing the market in certain ways. We do have Grilla, some of the products on Amazon and they're doing well there, but we want to make sure it's very strategic the products that we have on there.

Andy Fullmer: Now, turning to our outlook, we remain excited about the opportunities that lie ahead for fiscal 2025 and beyond. While we anticipate that headwinds in the shooting sports category may continue, we believe that our initiatives to drive channel expansion combined with our robust new product pipeline will help deliver growth in our outdoor lifestyle category. Therefore, we continue to believe that fiscal 2025 net sales could grow by as much as 2.5% compared to fiscal 2024.

Brian Murphy: But of course, we want to make sure that complementary with what we're doing, direct to consumer with that brand. And like I said in my prepared remarks, we have some very key innovative new products that are coming out later this year, under Grilla.

Brian Murphy: And so we want to make sure the partner that we have when we go into traditional retail is able to represent those products. So we have to disclose to those partners just yet, but we've got some really neat things planned for the rest of the year.

Brian Murphy: and so we want to make sure the partner that we have from the going to traditional retail is going to be able to represent those products.

Andy Fullmer: We expect our net sales in fiscal 25 to follow the typical seasonal pattern that I described earlier, with Q1 as our lowest net sales quarter, Q2 and Q3 as our highest net sales quarters, and Q4 coming in higher than Q1. We expect Q2 net sales to decline year over year by between 8% and 9%, driven primarily by the shooting sports category, followed by growth in the second half of the year, driven largely by new product launches and distribution opportunities in our outdoor lifestyle category. And here, I'll point back to Brian's comments earlier in the call about some underlying choppiness on a quarterly basis this year, as we make our way toward full-year growth.

Brian Murphy: So we haven't disclosed to those partners are just yet, but we've got some really neat things planned for the rest of the year. And then I'm sorry, I missed a latter half of your question.

Brian Murphy: And then I'm sorry, I missed the latter half of your question. Thank you. Something else related to Grilla. Yeah, just regarding Grilla and more so your new products, just regarding how you guys fill out our shelf spacing at other retailers such as Academy and where you guys fill your new products are doing and how they're doing at these other retailers. Yeah, yeah, I mean, the key is innovation. And I think if you've listened to some of the retailers that are publicly traded on some of their calls, is when they're asked about how are you bringing consumers back into stores.

Speaker Change: Thank you for something else related to Gorilla.

Speaker Change: Yeah, just regarding Berlin, more so your new product, just regarding how you guys feel about shelves facing at other retailers because of the academy and where you guys still your new products are doing and how they're doing at these other retailers.

Speaker Change: Yeah, I mean, the key is innovation and I think if you've listened to some of the retailers that are publicly traded on some of their calls.

Brian Murphy: It seems like the resounding answer is innovation and newness. And so for us that we're very well positioned when it comes to that. And so, as we think about the rest of the year, we have a tremendous number of new products that are coming out to provide that newness that are incredibly disruptive across our portfolio. And so we're getting more and more, more and more requests there; you know, we're getting new meetings. We're talking to customers that are approaching us and asking if they can be, you know, bring in some of the AB brands and products because they feel they're not getting that today.

Speaker Change: is, you know, when they're asked about how are you bringing consumers back into stores, it seems like the resounding answer is innovation and newness.

Andy Fullmer: Turning to growth margins, we continue to expect growth margins for the full year to be approximately 45% versus 44% for the prior year. On a quarterly basis, we expect some fluctuation based on the timing of inventory purchases, and the amortization of tariff and freight variances related to those purchases. As a result, we expect Q2 gross margins to be roughly 45%. Then, as inventory balances decrease during the second half of the year, we would expect gross margins to come in slightly lower for the second half.

Speaker Change: and so for us that we're very well positioned when it comes to that and so as we think about the rest of the year we have a tremendous number of new products that are coming out to provide that newness that are incredibly disruptive.

Speaker Change: Cross Airport, Fulio, and so we're getting more and more requests there. We're getting new meetings. We're talking to customers that are approaching us.

Speaker Change: and asking if they can bring in some of the A.O.B. brands and products.

Joseph: We also help provide stability, pricing stability. You know, we saw it in the current quarter. We don't actively promote, you know, a lot where our brands tend to play in that mid to high price point. And so the new products that we're coming out with, they reinforce that. And retailers can expect that we're going to maintain that pricing integrity, and that helps protect them. Got it. I appreciate the color. That's all for me. I'll go ahead and hop back in the queue. Thank you again for taking my question. Thank you again. If you have a question, please press star, then one.

Speaker Change: because they feel they're not getting that today. We also help provide stability, pricing stability. You know, we saw in the current quarter, we don't, we don't actively promote.

Andy Fullmer: With regard to operating expense, assuming net sales growth of up to 2.5%, we expect overall up to increase slightly due to higher variable selling and distribution costs. Based on all of these factors, we continue to believe our adjusted EBITAS and fiscal 2025 will be in the range of 5.5% to 6% of net sales. The increase of between 1.5 million and 2.5 million dollars in adjusted EBITAS would align with our long-term model, which calls for an incremental EBITAS contribution are roughly 30% on net sales over $200 million.

Speaker Change: You know, a lot, where our brands tend to play in that mid- to high price point, and so the new products that we're coming out with, they reinforce that, and retailers can expect that we're going to maintain that pricing integrity and that helps protect them.

Speaker Change: I appreciate the color, that's all for me. I'll go ahead and hop back in with you. Thank you again for taking my questions.

Speaker Change: Yep, thank you.

Speaker Change: Again, if you have a question, please press star then one. The next question is from Mark Smith with Lake Street Capital Markets. Please go ahead.

Mark Smith: The next question is from Mark Smith with Lake Street Capital Markets.

Alex Sternis: Please go ahead. Hey guys, you got Alex Sternis on the line for Mark Smith today. Thanks for taking my questions. So the first one for me, kind of piggybacking on that retail partners question. Now, as we move into the fall, what type of behavior are you guys seeing from retail partners as they prepare for the hunting and holiday seasons? And then, are you really seeing them become more promotional this year than historically? Or where are you kind of reading that at?

Andy Fullmer: One final note as a reminder on income tax expense. We've mentioned on previous calls that we have a full valuation allowance on our deferred tax assets. This removes any tax benefit we would have derived from our gap loss from operations. As such, we expect a small amount of income tax expense for gap purposes in each quarter for the remainder of fiscal 2025.

Alex Sterning: Hey guys, you got Alex Sterning from the Life Remark Smith today. Thanks for taking my questions

Speaker Change: So the first one for me, kind of piggybacking on that retail partner's question. Now as we move into the fall, what type of behavior are you guys seeing from retail partners as they prepare for the hunting and holiday seasons, and then...

Speaker Change: You know, are you really seeing them become more promotional this year than historically or where are you kind of reading that at?

Brian Murphy: Yeah, so Alex, this is Brian again.

Operator: With that, operator, please open the call for questions from our analysts. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.

Brian Murphy: I think I think there's a few things going on, right? I think if you look at last year, there was a lot of retailers were still destocking a lot of their excess inventory. And I think, in order to do that, you saw a pretty high promotional environment. Last year, as they're trying to get through live at inventory, you'll also recall that we stated, you know, we were holding off on some of our new product launches last year around that time because we didn't feel that we could have, you know, get through, I think some of that noise with the consumer.

Speaker Change: Yeah, so Alex, this is Brian again, I think there's a few things going on, right? I think if you look at last year there were a lot of retailers were still destocking, a lot of their excess inventory.

Speaker Change: and I think in order to do that, you saw a pretty high promotional environment last year and they're trying to get through live-a inventory. You'll also recall that we stayed at, you know, we were holding off on some of our new product launches last year around that time because...

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: We didn't feel that we could have.

Matt Koranda: The first question is from Matt Koranda, excuse me, Roth's capital partners. Please go ahead. Hi guys, good afternoon.

Brian Murphy: And so we held off. I think going into this fall, I think you're going to see a mix with retailers where, you know, those that have been managing their inventory. There's always well in our through some of that destocking, which I think is most most retailers. I think you're going to see some stronger assortments, and you know that's going to benefit us as well. We had talked about previously just getting back into a normal cadence with line reviews. And so we're now seeing, you know, better line of sight into the products that are getting placed. We're seeing retailers get back into that cadence.

Speaker Change: You know, get through, I think some of that noise with the consumer and so we held off.

Speaker Change: I think going into this fall, I think you're going to see a mix with retailers where you know, those that have been managing their inventories well and are through some of that destocking, which I think is most most retailers.

Joseph: This is Joseph on Format. I just wanted to talk about new products growth. I know in the press release you mentioned, new products make up around 23% of your last two years in that sales. On a performance of meat and grill in the quarter and where you see that going forward for fiscal 2025.

Speaker Change: is I think you're going to see some stronger assortments and that's going to benefit us as well. We had talked about previously.

Brian Murphy: Hey Joseph, this is Brian. So yep, spot on some new products generated a nice share of our revenue in the quarter. We did see quite a few of those new products going into Canada, so growth in international, which was nice to see. And then over the course of the year, again, we would still continue to see a nice percentage of our overall revenue come from new products. I don't know if you caught it, too, within the prepare remarks we talked about just the growth and innovation overall over the last four years since we spun out.

Speaker Change: Just kidding back into a normal cadence with line reviews and so we're now seeing, you know, better line of sight into the products that are getting placed, we're seeing retailers get back into that cadence.

Brian Murphy: And so I do think you're going to see some nice, you know, resets. With that said, there are some retailers that are still, I think, trying to unwind some of their wrong inventory and trying to get that right mix. And that also represents an opportunity for us, you know, some of the vendors and things that are supplying some of the products. I'll take grills as an example. We're seeing opportunity there where, you know, some of those brands just aren't just not moving, you know, and so what will move? They're looking at what's new and innovation.

Speaker Change: and so I do think you're going to see some nice, you know, resets. With that said, there are some retailers that are still, I think, trying to unwind some of their wrong inventory.

Speaker Change: and trying to get that right mix and that also represents an opportunity for us, you know, some of the vendors and things that are supplying some of the products.

Brian Murphy: And over that time, we've added over $60 million of pure innovation revenue. So new products that have been introduced over that period of time. So yeah, it's an innovation continues to home for us. And we expect a nice, you know, continued increase year for the rest of the year. Thank you. I was helpful.

Speaker Change: I'll take grills as an example. We're seeing our opportunity there, where some of those branches are just not moving. And so what we'll move, they're looking at what's new and innovation.

Brian Murphy: And so I think again, that represents a big opportunity for us. So kind of a mix of behavior, but overall, I do think they're all so cautious, you know, cautiously optimistic. Just trying to better understand what the election holds for the consumer, what uncertainty that brings, you know, what's going to happen with inflation. But overall, I think we're all seeing the consumer is still, you know, somewhat resilient. Okay.

Speaker Change: and so I think, again, that represents a big opportunity for us. So kind of a mix of behavior, but overall, I do think they're also cautious, you know, cautious, they optimistic.

Brian Murphy: Just another question. I know there's more traditional question regarding past conferences in regards to the current M&A market. I know last quarter you guys touched on the point seeing more opportunity in the outdoor lifestyle segment compared to shooting sports. I just want to know if that rhetoric still holds up or is it kind of even split and how does the team feel navigating during the current M&A market at the moment?

Speaker Change: Just trying to better understand what the election holds for the consumer, what uncertainty that brings, you know, what's what's going to happen with inflation. But overall, I think we're all saying the consumer is still somewhat resilient.

Brian Murphy: Yeah, this is Brian again. So your question is about are we seeing more opportunities in the outdoor lifestyle side? Yes. Can I get that right? Yeah, that's true. We're really not seeing a whole lot in shooting sports. And so that's, you know, I think also indicative of just that market right now, especially on the personal protection side, the closer that some of those companies are to that piece of the business or those dynamics.

Brian Murphy: Second one for me, the growth in international is really good to see this quarter. Maybe provide any additional opportunities. What do you really see there? And then maybe an update on taking on that extra space with the distribution facilities. Kind of what are the initial learnings that you've gotten from that so far? Yeah, just on the ladder, when you say extra space for distribution, are you talking about our distribution center here in Columbia? Are you referring to something else? Oh, yes, the Columbia one. Okay, yep. All right, I'll address international first and just the opportunities we're seeing there.

Speaker Change: Second one for me, the growth and international is really good to see this quarter. Maybe provide any additional opportunities. What do you really see there? And then maybe an update on taking on that extra space with the distribution facilities. What are the initial learnings that you've gotten from that so far?

Speaker Change: Yeah, just on the ladder, I think when you say extra space for distribution, are you talking about our distribution center here in Columbia or are you referring to something else?

Speaker Change: Yes, the Columbia one. All right. I'll address international first and just the opportunities we're seeing there. So, you know, like we said, Canada, you know, we like to start in our own backyard. You know, the Canadian consumers is obviously close to home.

Brian Murphy: So, you know, like we said, Canada, you know, we like to start in our own backyard. You know, the Canadian consumers is obviously close to home. And, and the nice thing about that too, is a lot of the influencers and ambassadors and things do cross over into that market. So, we can leverage our teams and our social media platforms to reach that consumer pretty effectively. And so, we're seeing that carry through with our success of many of our brands. But in particular, on the outdoor lifestyle side, you know, if it's gorilla, we're seeing, we're not gorilla, sorry, a little bit of gorilla.

Brian Murphy: I just think that there's a little bit more volatility. With that said, we haven't seen, you know, many other candidates step forward outside of that, but still in shooting sports. Outdoor lifestyle is actually getting pretty robust. We're not seeing, you know, very large companies or large brands come to market. I would say that most are sort of sub, call it sub 30 or 40 million in revenue, with quite a few that are kind of in that $10 million range.

Speaker Change: and the nice thing about that too is a lot of the influencers and ambassadors and things do cross over into that market. So we can leverage our teams and our social media platforms to reach that consumer pretty effectively.

Speaker Change: and so we're seeing that carried through with our success of many of our brands.

Brian Murphy: But certainly we're seeing more and more come to market. And so in their much higher quality, I think that as I said before, they have line of sight to some more stable run rate. And so we're seeing more and more come to market, and but the biggest factor for a lot of them, at least the ones that we're looking at, is really what's going to happen with the consumer. And so TBD on that, but you know the companies that are able to withstand that are certainly able to point to some nice runway performance. Got it.

Speaker Change: But in particular on the outdoor lifestyle side, you know, you know, if it's gorilla we're seeing or not gorilla, sorry, a little bit of gorilla, but really meet your maker and then some of our other outdoor lifestyle brands, Baba, is a big one as well.

Joseph: Thank you.

Brian Murphy: But really meet your maker, and then some of our other outdoor lifestyle brands, Boba is a big one as well, are doing very, very well in that market. And then beyond that, just as we think about international longer term, Canada still is untapped. We still have tremendous potential there. And if you look overseas in Europe and some other places, which is still a nice part of our business, has a lot to offer as well. You know, some nice diversity and some nice, nice outside. So, we're very optimistic about that part of our business and outdoor lifestyle.

Speaker Change: are doing very, very well in that market. And then beyond that, just as we think about international longer term, Canada still is on tap. We still have tremendous potential there. And if you look overseas in Europe and some other places, which is still a nice part of our business.

Speaker Change: is has a lot to offer as well. You know, some nice diversity and some nice, nice upside. So we're very optimistic about that part of our business and outdoor lifestyle is a much easier, um,

Brian Murphy: And then just to circle back a little bit on more so, Grilla, we also wanted to know if we can get an update on the rollout of grilla to consumer, that would be helpful and also where you guys are filling on your shelf spacing at other retailers. Sure, this is Brian again. Yeah, the rollout to retail, like we said, at the end of last year was really preparing the market for a grilla entry.

Brian Murphy: It's a much easier, you know, has products that are much more easily placed in places outside the United States. As you know, the United States has an affinity for the Second Amendment and firearms. And so, there's more of that here, which does not exist out much outside of those countries. So, big opportunity there. And then, secondly, on the extra space. So, you know, we did take over the rest of this building here in Columbia, Missouri, in January of this year. And it's going great. You know, it's nice to have the extra space. It gives us a lot of flexibility as we're thinking about acquisitions.

Speaker Change: has products that are much more easily placed in places outside of the United States.

Speaker Change: as you know the United States has an affinity for.

Speaker Change: You have the second amendment in firearms and so there's more of that here.

Brian Murphy: And we have been sort of testing the market in certain ways. We do have Grilla, some of the products on Amazon and they're doing well there. But we want to make sure it's very strategic, the products that we have on there. But of course, we want to make sure that it's complimentary with what we're doing, direct to consumer with that brand. And like I said in my prepared remarks, we have some very key innovative new products that are coming out later this year under Grilla.

Speaker Change: which does not exist outside of this country, so big opportunity there. And then secondly, on the extra space, so we did take over the rest of this building here in Columbia, Missouri in January of this year.

Speaker Change: and it's going great. It's nice to have the extra space, gives us a lot of flexibility as we're thinking about acquisitions.

Brian Murphy: And it really allowed us to make our facility much more efficient. We were receiving and shipping out of the same side previously. And if any of you have ever come here and saw that, it looked like a big U-turn. And so, you know, we're able to be more efficient. We're seeing cost savings there. And we're much better positioned for growth going forward. So, couldn't be happier. And then, also, we have the new store. Right? We're building out a new store here, a factory store. We shut down the store that existed in Michigan for Gorilla last year, which was part of the comp that we saw here in the current quarter.

Speaker Change: Um...

Speaker Change: and it really allowed us to make our facility much more efficient. We were receiving and...

Brian Murphy: And so we want to make sure the partner that we have when we go into traditional retail is able to represent those products. So we haven't disclosed two of those partners are just yet, but we've got some really neat things planned for the rest of the year. And then I'm sorry, I missed the latter half of your question. Thank you. Have something else related to Grilla? Yeah, just regarding Grilla and more so your new products, just regarding how you guys fill out shelf spacing at other retailers such as Academy and where you guys fill your new products are doing and how they're doing at these other retailers.

Speaker Change: and shipping out of the same side previously and if any of you have ever come here and saw that it looked like a big, a big U-turn.

Speaker Change: and so we're able to be more efficient, we're seeing cost savings there and we're much better position for growth going forward. So it couldn't be happier and then also we have the new store, right? We're building out in a store here, in fact, a store.

Speaker Change: We shut down the store that existed in Michigan for guerrilla last year, which was part of the comp that we saw here in the current quarter.

Brian Murphy: But, you know, we're very optimistic about that. We're in arguably the barbecue capital of the world on one of the most traveled interstates in the United States. And so, we're optimistic that we'll see some nice traction from that store here at the later half of this year. Okay, that's great.

Speaker Change: but we're very optimistic about that. We're in arguably the barbecue capital of the world on one of the most traveled interstates in the United States. And so we're optimistic that we'll see some nice traction from that store here at the later half of this year.

Brian Murphy: Yeah, I mean, the key is innovation. And I think if you've listened to some of the retailers that are publicly traded on some of their calls is when they're asked about how are you bringing consumers back into stores. It seems like the resounding answer is innovation and newness. And so for us that we're very well positioned when it comes to that. And so as we think about the rest of the year, we have a tremendous number of new products that are coming out to provide that newness that are incredibly disruptive across our portfolio.

Brian Murphy: And then, last one for me. Just another update on the consumer behavior. You know, you noted some softness expected for the shooting sport. Police. Kind of curious, what are you seeing currently following a better month of Nick's checks in August? What do you guys see out there in the competitive landscape as well? How is that impacting your pricing decisions? Specifically on shooting sports? Yes, specifically shooting sports. Yeah, shooting sports is really interesting. You know, we're obviously heading into an election, and there's a lot of uncertainty with this one. I'm sure we say every four years.

Speaker Change: Okay, that's great. And then last one for me, just another update on the consumer behavior. You know, you know, you know, notice some softness.

Speaker Change: Expected for the shooting sports.

Speaker Change: Kind of curious, what do you see currently following the better months of mixed checks and August? What do you guys see out there in the competitive landscape as well and how is that impacting your pricing decisions?

Brian Murphy: And so we're getting more and more, more and more requests there. You know, we're getting new meetings. We're talking to customers that are approaching us and asking if they can be, you know, bring in some of the AB brands and products because they feel they're not getting that today. We also help provide stability, pricing stability. You know, we you saw it in the current quarter. We don't we don't actively promote, you know, a lot where our brands tend to play in that mid to high price point.

Speaker Change: Specifically on Train Sports.

Speaker Change: Yes, specifically shooting sports.

Speaker Change: Yes, shooting sports is really interesting. We're obviously heading into an election.

Speaker Change: It's, uh, there's a lot of uncertainty with this one, as I'm sure we say every four years.

Brian Murphy: But I think the dynamic that's different is, you know, we had such a tremendous influx of new firearm owners, and that's a big change, right? 16 million plus new firearm owners that weren't there before. And you know, just when you throw that into the mix, there's a little bit of a different dynamic, right? I think previously when you're looking at elections, you'll see people go out and buy more firearms traditionally. I'm not sure it's going to happen this year, but you would see that. But it would be somebody who already owned, you know, several firearms. And I think with this new consumer, you know, who's also one of the obviously the top participants at shooting ranges, et cetera, what are they going to do?

Speaker Change: But I think the dynamic that's different is, you know, we had such tremendous influx of new firearm owners.

Brian Murphy: And so the new products that we're coming out with, they reinforce that. And retailers can expect that we're going to maintain that pricing integrity and that helps protect them. Got it. I appreciate the color. That's all for me. I'll go ahead and hop back in the queue. Thank you again for taking my question. Thank you again. If you have a question, please press star then one.

Speaker Change: and that's a big change, right? 16 million plus new firearm owners that weren't there before.

Speaker Change: and you know just when you throw that into the mix there's a little bit of a different dynamic right I think previously when you're looking at elections you'll see people go out and and buy more firearms traditionally I'm not sure it's gonna happen this year but you would see that

Mark Smith: The next question is from Mark Smith with Lake Street Capital Markets. Please go ahead. Hey guys, you got Alex Sturnieks on the line for Mark Smith today. Thanks for taking my questions. So the first one for me kind of piggybacking on that retail partners question. Now as we move into the fall, what type of behavior are you guys seeing from retail partners as they prepare for the hunting and holiday seasons? And then are you really seeing them become more promotional this year than historically?

Speaker Change: and it would be somebody who already owned several firearms.

Speaker Change: and I think with this new consumer, you know, who's also one of the top participants, like shooting ranges, etc. What are they going to do? You know, how are they going to respond to this? And now that they've increased the size of that market.

Brian Murphy: You know, how are they going to respond to this, and now that they've increased the size of that market? So I'm not, I'm not really sure, you know, we're optimistic that, you know, the consumer, because they are still somewhat resilient. It's going to be out there, and we'll see some nice demand. But at the same time, you know, I think that that market has just cooled relative to what it was, you know, a year or two ago. So still to be seen, but we're very confident. You know, what are we doing in response? Just to put our bow on it is we've we've been focusing very, very clearly on the more stable parts of our shooting sports business, which you saw in the quarter with the success of our Claymore line, you know, in target shooting.

Speaker Change: So I'm not really sure, you know, we're optimistic that, you know, the consumer because they are still somewhat resilient. It's going to be out there and we'll see some nice demand.

Mark Smith: Or where are you kind of reading that at? Yeah, so Alex, this is Brian again. I think there's a few things going on, right? I think if you look at last year, a lot of retailers were still destocking a lot of their access inventory. And I think in order to do that, you saw a pretty high promotional environment. Last year, as they're trying to get through live at inventory, you'll also recall that we we stated, you know, we were holding off on some of our new product launches last year around that time because we didn't feel that we could have, you know, get through.

Speaker Change: But at the same time, you know, I think that that market has just cooled relative to what it was, you know, a year or two ago.

Speaker Change: So I'm still still to be seen.

Speaker Change: But we're very confident, you know, what are we doing in response just to put our bill on it?

Speaker Change: is we've been focusing very, very clearly on the more stable parts of our shooting sports business, which you saw in the quarter with the success of our Claymore line, you know, and target shooting. We continue, you know, it's a nice, stable part and we'll continue to see that grow.

Alex Sternis: We continue, you know, it's a nice stable part, and we'll continue to see that grow. So hopefully that answers your question. Yeah, no, that makes perfect sense. Thanks for taking my questions, right? Yep, thanks, Alex.

Mark Smith: I think some of that noise with the consumer. And so we held off. I think going into this fall, I think you're going to see a mix with retailers where, you know, those that have been managing their inventory. There's always well and in our through some of that destocking, which I think is most most retailers is I think you're going to see some stronger assortments. And, you know, that's going to benefit us as well.

Speaker Change: So, I hope that answers your question.

Speaker Change: Yes, no, that makes perfect sense. Thanks for taking my questions, Brian.

Joseph: The next question is from the line of Matt Carando with follow-up for with Roth Capital Partners. Please go ahead. Hi guys, again, Joseph on from Matt. I just wanted to circle back on some things here in terms of gross margins. You get a starting off at 46%. We're looking at a little bit of deceleration with the forecast at 45. Just wanting to see if that deceleration is coming from headwinds of tariffs or freight costs. Any color that you guys could give on that?

Alex Sterning: Good, thanks, Alex.

Speaker Change: and next question is from the line of Matt Corrando with a follow-up for with the Roth Capital Partners. Please go ahead.

Matt Corrando: Hi guys, again Joseph on from that.

Matt Corrando: I just wanted to circle back on some things here in terms of gross margins, you get this.

Mark Smith: We had talked about previously just getting back into a normal cadence with line reviews. And so we're now seeing better line of sight into the products that are getting placed, we're seeing retailers get back into that cadence. And so I do think you're going to see some some nice, you know, resets. With that said, there are some retailers that that are still, I think, trying to unwind some of their the wrong inventory and trying to get that right mix.

Speaker Change: Starting off at 46% we're looking at a little bit of deceleration with the forecast F45.

Speaker Change: Just wanting to see if that...

Speaker Change: Descelerations coming from headwinds of tariffs or freight costs any color you guys could give on that.

Andy Fullmer: Yeah, Joseph, this is Andy. It's a great question. So if you look year over year, we're roughly, you know, guiding to roughly 50, 45%. That's up from 44% last year. So, and that's on a gap basis. We're about 50 basis points above non-gap. And I think you're going to attribute that savings year over year is from better freight rates. So we're expecting that. We're expecting pretty much a normal promotional environment like we had last year. What I think you're going to see, though, is on a quarterly basis. We made a couple comments in the script on this.

Speaker Change: Yeah, this is Andy, it's great question. So if you look year over year, we're roughly, you know, guiding to roughly 50, 45 percent. That's up from 44 percent last year. So, and that's on a gap basis. We're about 50 basis points above non-gap.

Mark Smith: And that also represents an opportunity for us, you know, some of some of the vendors and things that are supplying some of the products. I'll take grills as an example. We're seeing opportunity there where, you know, some of those brands just aren't just not moving, you know. And so what will move? They're looking at what's new and innovation. And so I think, again, that represents a big opportunity for us. So kind of a mix of behavior, but overall, I do think they're all so cautious, you know, cautiously optimistic.

Speaker Change: and I think you're going to tribute that savings year over years is from a better freight rates. So we're expecting that.

Speaker Change: We're expecting pretty much a normal promotional environment, like we had last year. What I think you're going to see though is on a quarterly basis, we made a couple of comments in the script on this. You're going to see some fluctuations based on when we purchase inventory and when we...

Andy Fullmer: Is you're going to see some fluctuations based on when we purchase inventory and when we have those freight and tariff variances and when those actually amortize into our P&L based on our inventory levels. So I think you're going to see some fluctuation by quarter. But for the full year, that 45% is pretty well in line with our target. All right, gotcha. Thank you for that clarification.

Speaker Change: when we have those freight and tariff variances and when those actually amortized into our PNL based on our inventory levels. So I think you're going to see some fluctuation by quarter but for the full year that 45% is pretty well in line with our target.

Mark Smith: Just trying to better understand what the election holds for the consumer, what uncertainty that brings, you know, what's what's going to happen with inflation. But overall, I think we're all saying the consumer is still, you know, somewhat resilient.

Joseph: And then just finally my last one here in regards to shooting sports. Again, piggybacking off of Alex's question earlier. I just wanted to see you guys mentioned in your press release that you kind of seen some headwinds in shooting sports segment. I just wanted to know if you're taking an account in any election election cycle at all and is that kind of offsetting at all or is it solely just in regards to the next checks and any data that you see from that point of view?

Speaker Change: Alright, God, thank you for that clarification and then just finally my last one here.

Brian Murphy: Okay. Second one for me, the growth in international is really good to see this quarter. Maybe provide any additional opportunities. What do you really see there? And then maybe an update on taking on that extra space with the distribution facilities. Kind of what are the initial learnings that you've gotten from that so far? Yeah, just on the ladder. When you say extra space for distribution, are you talking about our distribution center here in Columbia?

Speaker Change: and regards to the shooting sports, again piggybacking off of Alex's question earlier.

Speaker Change: I'm just wanting to see you guys mentioned in your press release that you kind of seen some headwinds including sports segment just wanting to know if you're...

Speaker Change: Taking an account and the election cycle at all and is that kind of offsetting at all or is it solely just regards in regards to the next checks and any data that you see from that point of view.

Brian Murphy: Are you referring to something else? Yes, the Columbia one. Okay. Yep. All right. I'll address international first and just the opportunities we're seeing there. So, you know, like we said, Canada, you know, we like to start in our own backyard. You know, the Canadian consumers is obviously close to home and and the nice thing about that too is a lot of the influencers and ambassadors and things do cross over into that market.

Andy Fullmer: Yeah, another great question. So are the up to two and a half percent, does not contemplate any bump from the election? I mean, we really don't know what's going to happen at that point, so we didn't really want to bake that in. Got you. That's all from me. Thank you again for taking my questions. Yeah, thanks, Joseph.

Speaker Change: Yeah, another great question, so are that the up to two and a half percent did not contemplate any, you know.

Speaker Change: and any bump from the election, I mean, we really don't know what's going to happen at that point, so we didn't really want to bake that in.

Speaker Change: Thank you again for taking my questions.

Brian Murphy: So, we can leverage our teams and our social media platforms to reach that consumer pretty effectively. And so, we're seeing that carry through with our success of many of our brands. But in particular on the outdoor lifestyle side, you know, you know, if it's gorilla, we're seeing or not gorilla, sorry, little bit of gorilla, but really meet your maker and then some of our other outdoor lifestyle brands. Bob is a big one as well.

Operator: This concludes our question and answer session.

Joseph: Yeah, thanks, Joseph.

Brian Murphy: I would like to turn the conference back over to Brian Murphy for any closing remarks. Thank you, operator. Before closing, please note that we'll be attending the CL King Virtual Investor Conference on September 16th and hope to see some of you there. You also note that we've uploaded a new investor presentation to our website at AOB.com. I'd encourage you to check it out.

Joseph: This concludes our question and answer session. I would like to turn the conference back over to Brian Murphy for any closing remarks.

Brian Murphy: Thank you, Operator. Before closing, please note that we'll be attending the CL King Virtual Investor Conference on September 16th and hope to see some of you there. You also note that we've uploaded a new Investor presentation to our website at alb.com. I'd encourage you to check it out.

Brian Murphy: Finally, I want to thank our employees across American Outdoor Brands whose dedication every day helps our consumers make the most out of the moments that matter. Thank you, everyone, for joining us today. We look forward to speaking with you again next quarter.

Brian Murphy: Are doing very, very well in that market. And then beyond that, just as we think about international longer term, Canada still is untapped. We still have tremendous potential there. And if you look overseas in Europe and some other places, which is still a nice part of our business is has a lot to offer as well, you know, some nice diversity and some nice nice outside. So, we're very optimistic about that part of our business and outdoor lifestyle.

Brian Murphy: Finally I want to thank our employees across American outdoor brands whose dedication every day helps our consumers make the most out of the moments that matter. Thank you everyone for joining us today. We look forward to speaking with you again next quarter.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

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

Brian Murphy: It's a much easier, you know, has products that are much more easily placed in places outside the United States. As you know, the United States has an affinity for, you know, the second amendment and firearms and so there's more of that here, which does not exist out much outside of those countries. So big opportunity there. And then secondly on the extra space. So, you know, we did take over the rest of this building here in Columbia, Missouri in January of this year.

Brian Murphy: And it's going great, you know, it's nice to have the extra space gives us a lot of flexibility as we're thinking about acquisitions. And it really allowed us to make our our facility much more efficient. We were receiving and and and shipping out of the same side previously. And if any of you have ever come here and saw that, it looked like a big a big U-turn. And so, you know, we're able to be more efficient.

Brian Murphy: We're seeing cost savings there and and we're much better position for growth going forward. So couldn't be happier. And then also we have the new store, right? We're building out a new store here, factory store. We shut down the that the store that existed in Michigan for gorilla last year, which was part of the comp that we saw here in the current quarter. But, you know, we're very optimistic about that. We're in arguably the barbecue capital of the world on one of the most traveled interstates in the United States. And so, we're optimistic that we'll see some nice traction from that store here at the later half of this year.

Brian Murphy: Okay, that's great. And then last one for me. Just another update on the consumer behavior. You know, you noted some softness expected for the shooting sport. Police. Kind of curious, what are you seeing currently following a better month of mixed checks in August? What do you guys see out there in the competitive landscape as well? How's that impacting your pricing decisions? Specifically on treating sports? Yes, specifically shooting sports. Yeah, shooting sports is is really interesting.

Brian Murphy: You know, we're obviously heading into an election and it's a there's a lot of uncertainty with this one as I'm sure we say every four years. But I think the dynamic that's different is, you know, we had such a tremendous influx of new firearm owners. And that's a big change, right? 16 million plus new firearm owners that that weren't there before. And, you know, just when you throw that into the mix, there's a little bit of a different dynamic, right?

Brian Murphy: I think previously when you're looking at elections, you'll see people go out and buy more firearms traditionally. I'm not sure it's going to happen this year, but you would see that. But it would be somebody who already owned, you know, several firearms. And I think with this new consumer, you know, who's also one of the top participants shooting ranges, etc. What are they going to do? You know, how are they going to respond to this?

Brian Murphy: And now that they've increased the size of that market. So I'm not I'm not really sure, you know, we're optimistic that, you know, the consumer because they are still somewhat resilient. It's going to be out there and we'll see some nice demand. But at the same time, you know, I think that that market has just cooled relative to what it was, you know, a year or two ago. So I'm still still to be seen, but we're very confident.

Brian Murphy: You know, what are we doing in response? Just to put our bow on it is we've thought we've been focusing very, very clearly on the on the more stable parts of our shooting sports business, which you saw in the quarter with the success of our claymore line, you know, in target shooting. We continue, you know, it's a nice stable part and we'll continue to see that grow. So hopefully that answers your question.

Andy Fullmer: Yeah, no, that makes perfect sense. Thanks for taking my questions, right? Yep. Thanks, Alex. The next question is from the line of Matt Carando with follow up for with Roth Capital Partners. Please go ahead. Hi guys. Again, Joseph on from that. I just wanted to circle back on some things here in terms of gross margins. You get a starting off at 46%. We're looking at a little bit of deceleration with the forecast at 45.

Andy Fullmer: Just wanting to see if that deceleration is coming from headwinds of tariffs or freight costs any color you guys could give on that. Yeah, Joseph, this is Andy. It's a great question. So if you look year over year, we're roughly guiding to roughly 50 to 45% that's up from 44% last year. And that's on a gap basis. We're about 50 basis points above non-gap. And I think you're going to tribute that savings year over years is from better freight rates.

Andy Fullmer: So we're expecting that. We're expecting pretty much a normal promotional environment like we had last year. What would I think you're going to see, though, is on a quarterly basis. We made a couple comments in the script on this. You're going to see some fluctuations based on when we purchase inventory and when we have those freight and tariff variances and when those actually amortize into our P&L based on our inventory levels.

Andy Fullmer: So I think you're going to see some fluctuation by quarter. But for the full year, that 45% is pretty well in line with our target. All right, gotcha. Thank you for that clarification. And then just finally, my last one here in regards to shooting sports. Again, piggybacking off of Alex's question earlier. I just wanted to see you guys mentioned in your press release that you kind of seen some headwinds in shooting sports segment.

Andy Fullmer: I just wanted to know if you're taking an account in any election cycle at all, and is that kind of offsetting at all, or is it solely just regard in regards to the next checks in any data that you see from that point of view? Yeah, that's another great question. So, are the up to two and a half percent, does not contemplate any, you know, any bump from the election? I mean, we really don't know what's going to happen at that point, so we didn't really want to bake that in.

Joseph: Got you. That's all from me. Thank you again for taking my questions. Yeah, thanks Joseph. This concludes our question and answer session. I would like to turn the conference back over to Brian Murphy for any closing remarks. Thank you operator. Before closing, please note that we'll be attending the CL King Virtual Investor Conference on September 16th, and hope to see some of you there. You also note that we've uploaded a new investor presentation to our website at aob.com.

Joseph: I'd encourage you to check it out. Finally, I want to thank our employees across American outdoor brands whose dedication every day helps our consumers make the most out of the moments that matter. 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 attending today's presentation.

Brian Murphy: You may

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