Q1 2025 Johnson Outdoors Inc Earnings Call
Speaker Change: Hello everyone and welcome to the Johnson Outdoors first quarter 2025 earnings conference call.
Speaker Change: Today's call will be led by Helen Johnson-Leopold, Johnson Outdoors Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President and Chief Financial Officer.
Speaker Change: Prior to the question and answer session, all participants will be placed in a listen-only mode.
Speaker Change: After the prepared remarks, the question and answer session will begin.
Speaker Change: If you would like to ask a question during that time, please press star 11 on your telephone keypad.
Speaker Change: This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line.
Speaker Change: I would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman.
Pat Penman: Thank you. Good morning and thank you for joining us for our discussion of Johnson Outdoors results for the 2025 fiscal first quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under investor relations.
Pat Penman: I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance.
Pat Penman: Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission.
Speaker Change: If you have additional questions following the call, please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leopold.
Speaker Change: Thanks, Pat. Good morning, everyone. Thank you for joining us. I'll begin by sharing perspective on our first quarter performance, as well as an update on the strategic priorities for our businesses.
Speaker Change: Dave will review the financial highlights and then we'll take your questions.
Speaker Change: We continue to face ongoing marketplace challenges with a cautious retail and trade channel environment and competitive pressures.
Speaker Change: As we said during our last quarterly call, we are not seeing indicators these conditions are going away anytime soon, and our first quarter results reflect that.
Speaker Change: We remain focused on aggressively leaning into our strategic priorities, innovation, operational efficiencies, and e-commerce, and making the necessary changes for the future growth.
Speaker Change: We're making inroads on these key drivers and I'd like to share some of our progress on each of them.
Speaker Change: In this highly competitive outdoor recreation marketplace, we are strengthening our innovation capability as it is one of the most critical elements to driving growth.
Speaker Change: For example, in our fishing business, we recently launched new technology in our Hummingbird brand, and we've seen positive reception from our retail partners so far, with consumer enthusiasm beginning to build as well.
Speaker Change: These products start shipping in January and are not reflected in our first quarter results.
Speaker Change: We're excited about the momentum as we continue to work hard to give anglers the best fishing experiences possible.
Speaker Change: In diving, we recently purchased a company that has been a long-time supplier for our ScubaPro brand and has been an integral part of a number of our past successful innovations in that business.
Speaker Change: In addition to being a catalyst for future scuba pro innovation, this acquisition is a vertical integration that allows us to accelerate our efforts in simplifying our diving business and enabling more efficient operational footprint.
Speaker Change: Improving profitability and strengthening our business operations continue to be a strategic priority and we've been working hard to drive operational and product cost savings across all of our businesses.
Speaker Change: In addition, we are focused on managing our inventory levels. Dave will give more details on this.
Speaker Change: We also have heard the news around the new tariffs. As you know, we are an American company. We pride ourselves on our U.S.-based manufacturing and operations, which we have expanded in the past few years.
Speaker Change: For example, we have operations or manufacturing in multiple states, including Maine, Georgia, Alabama, California, Minnesota, and Wisconsin.
Speaker Change: Regarding tariffs, we continue to discuss the implications and have already started on our mitigation plans. Leveraging our American footprint will be an important part of this plan.
Speaker Change: Another key strategic priority is enhancing our ability to drive growth through e-commerce. We are investing in digital commerce center in a digital commerce center of excellence which adds expertise and capabilities that will allow us to accelerate sales and profitability.
Speaker Change: As we navigate this tough environment, we will continue to invest and execute on our strategic priorities. We are confident these are the right things to position us for future healthy, profitable growth. Now I'll turn the call over to Dave for more details on financials.
Thank you, Helen.
Speaker Change: To start, I want to point out that the first quarter sales results also reflect a challenging comparison between quarters due to load-in of the Minn Kota Quest trolley motor line in the previous first quarter.
Speaker Change: Gross margin in the first quarter was negatively impacted by increased promotional pricing, unfavorable overhead absorption, and an unfavorable product mix.
Speaker Change: As Helen mentioned, we continue to expand our cost savings program with the addition of product cost savings initiatives that include investing in resources to drive down costs with improved product design.
Speaker Change: Operating expenses decreased $400,000 versus the prior year first quarter due primarily to lower sales volumes between quarters and decreased expense on the company's deferred compensation plan.
nearly offset by increases in consulting expenses and warranty expenses.
Speaker Change: We've been working hard to manage our higher-than-normal inventory levels. Our inventory balance as of December was $201.6 million, down about $66 million from last year's first quarter.
Speaker Change: I want to continue to highlight that in the midst of our challenging results, our balance sheet remains debt-free, which is a strong competitive advantage in today's marketplace. And we continue to pay a meaningful dividend to shareholders.
Speaker Change: with the board approving our most recent dividend announced in December.
Speaker Change: We remain confident in our ability and plans to create long-term value for shareholders.
Speaker Change: Now, I'll turn the call over to the operator for the Q&A session.
Thank you.
Speaker Change: Thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 11 again.
Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Anthony Libidzinski from Sudoti and Company, LLC.
Good morning everyone and thank you for taking the questions.
Speaker Change: So first, as far as your revenue, it came in above our estimate, which is certainly good to see. So I guess just a broad kind of housekeeping question first. So in terms of the quarterly revenue, can you just give us a sense about pricing versus
Speaker Change: unit volumes. I know you have engaged in more promotional pricing. So, again, just wanted to get a sense of the pricing versus unit volume dynamics that happen in a quarter.
Yeah, I mean,
Speaker Change: We were affected by, you know, discounting, obviously, in the quarter, so I can't give you an exact breakdown of it, but certainly both units are down, but exacerbated by the discounting that we did in the first quarter.
Speaker Change: Okay, thanks Dave. And then I heard there was a diving acquisition made, so can you give us some more details about this? When was this completed and purchase price or anything like that that we can, you know,
Speaker Change: Anything that you could add to what you said before would be very helpful.
Speaker Change: Well, I'll just start with, you know, how excited we are about making the acquisition and it
Speaker Change: was a partner that we have had for a long time. It was SCUBA Pro and...
Speaker Change: They've been making our product and contributing to our innovation and Offered the opportunity for a lot more manufacturing efficiency and Consolidation of some of our
products that we source.
Speaker Change: So, we're very excited, and the integration went very smoothly because we've worked with them before and know them, so in general, it was, I think, a very positive and added value. And Dave, you can go into details.
Dave: Yeah, the operation is located in South Africa, and as Helen alluded, it will increase our efficiency for the diving operation, which we're very happy about.
Speaker Change: There's also some strong innovation that we'll be able to leverage out of that that plant as well The purchase price is around 14 million dollars. All the details will be in the queue, but that's that's the approximate price
Speaker Change: Okay, well thank you very much for that information. It's certainly very helpful and congrats on that. It certainly sounds like a value-added acquisition here and accretive. So I guess, you know,
Speaker Change: As you enter the busy season now, I know you talked about innovation. It looks like the Humminbird product is off to a good start. Can you give us any other sense of the early indications for incoming orders?
Speaker Change: for the rest of the business, and just broadly speaking as far as inventory levels at the retail level, what is your sense of that?
Well, I-
Speaker Change: Let's talk inventory level, you know, it's really it's it's a mixed bag and Depends on which partner and you know, some are are in a healthy position and some may have a little bit of
Speaker Change: I don't have too much inventory, but it depends on which...
Speaker Change: business and what class of trade we're talking about. But, you know, there's cautious ordering and that's understandable given all, you know, given all the things that are going on, very hard to predict.
Speaker Change: what things will be like. You know it is good that our new products are getting
Speaker Change: good reception by the trade it's still in the Helen time frame and we've
Speaker Change: got some in our watercraft business as well as some in JetBoil but you know they haven't hit our numbers yet but you know we don't
Speaker Change: expect the market to bounce back in Q2. We're just, you know, glad that the innovation and our new products are getting good reception, but it's still very
Speaker Change: You know, unpredictable and very cautious environment as far as we can tell.
Speaker Change: Mm-hmm, understood. Okay, and then I know you also combined camping and watercraft recreation segments together now, but can you just parse out the two and give us some additional information about them? I'm just curious as you know as to what you saw in the quarter.
Speaker Change: Yeah, you know, the camping business is doing better relative to the watercraft business for the quarter. The market and, you know, the paddling market is still really challenged.
we're seeing a little bit of, you know...
Speaker Change: I hate to say growth in the camping business, but a little bit more positivity in that side of the business. So the first quarter is kind of a tale of two different markets really.
Mm-hmm.
Okay, all right.
Speaker Change: Thanks for that, and then as far as your cost savings initiatives, can you talk about the impact of that? And then you also talked about expanding these cost...
Speaker Change: savings measures. So how should we think about the impact of what could come going forward here as you look to continue on that path?
Speaker Change: Yeah, I mean, we're happy with the progress we've made in cost savings. I think we've talked before about, we were really focused last year on factory efficiency, reducing scrap rates.
Speaker Change: Just getting our act together on the factory floor, which has borne some fruit.
Speaker Change: We're expanding that. We're looking at, you know, sourcing initiatives. And like we alluded to, you know, looking at our product design and trying to just take costs physically out of the product. That's a little bit of a midterm to longer term type of payout, but that should bear fruit for us.
Speaker Change: You know, the cost savings has definitely impacted the first quarter, but it was just masked by the discounting we had to do.
Speaker Change: Okay, understood. Okay. All right. And then, you know, lastly, in terms of the tariffs, so I know you touched on this a little bit, and even
Speaker Change: It was just announced, actually, about half an hour ago. But just overall, obviously, as an American company, manufacturer here in the U.S., you guys do use a lot of imported components. So I guess...
Speaker Change: to just maybe broadly, maybe talk to us in terms of like what's your
Speaker Change: you know exposure is as far as China or any other sources as far as you know just broadly speaking about tariffs so we know how should we think about that what are the mitigation strategies you're looking at here kind of going forward
Speaker Change: Yeah, I mean, as you alluded to, it's a dynamic situation. Things change pretty quickly.
Speaker Change: We do business with China, we do business with Mexico, we do business with Canada. Mexico and China we have exposure to. I hesitate to give you a number on that because we are working on mitigation strategies right now. I mean, you know, and we alluded to our, you know, our American footprint and what we want to do in the US.
Speaker Change: I think there are things that we can do to help mitigate some of this stuff. So I think more to come as we learn more and as we know where the dust is going to settle here, but just rest assured we're working on mitigation strategies.
Speaker Change: That sounds very good. Okay. Well, thank you very much and best of luck going forward.
Thank you.
Thank you. Thank you. Thank you.
Speaker Change: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 11 again.
Speaker Change: At this time, I would now like to turn the conference back over to Helen Johnson Leopold for closing remarks.
Speaker Change: Thank you for joining us today and I hope everyone has a great day. Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
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Speaker Change: There are so many of us in this story. I could tell you about the specificity of this story. Jesus says put your people first, work hard, live long. Patricia Penman University A Special One Special One
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