Q2 2026 Johnson Outdoors Inc Earnings Call

May 8, 2026

Speaker #1: Hello everyone and welcome to the Johnson Outdoors second quarter 2026 earnings conference call. Today's call will be led by Helen Johnson-Leopold, Johnson Outdoors chairman and chief executive officer, also on the call is David Johnson, chief financial officer.

Operator: Hello, everyone, welcome to the Johnson Outdoors Q2 2026 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson Outdoors Chairman and Chief Executive Officer. Also on the call is David Johnson, Chief Financial Officer. Prior to the question and answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question and answer session will begin. If you would like to ask a question during that time, please press star, then the number 11 on your telephone keypad.

Operator: Hello, everyone, welcome to the Johnson Outdoors Q2 2026 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson Outdoors Chairman and Chief Executive Officer. Also on the call is David Johnson, Chief Financial Officer. Prior to the question-and-answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question-and-answer session will begin. If you would like to ask a question during that time, please press the star, then the number one one on your telephone keypad.

Speaker #1: Prior to the question and answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question and answer session will begin.

Speaker #1: If you would like to ask a question during that time, please first start, then the number 11 on your telephone keypad. This call is being recorded.

Operator: 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. I would now like to turn the call over to Allison Kitzerow from Johnson Outdoors. Please go ahead, Ms. Kitzerow.

Speaker #1: Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Alison Kitzurow from Johnson Outdoors.

Speaker #1: Please go ahead, Ms.

Speaker #2: Good morning, and thank you for joining us for our discussion of Johnson Outdoors' results for the 2026 fiscal second quarter. If you need a copy of today's news release, it is available on our website at www.johnsonoutdoors.com under Investor Relations.

Allison Kitzerow: Good morning, thank you for joining us for our discussion of Johnson Outdoors results for the 2026 fiscal Q2. If you need a copy of today's news release, it is available on our website at www.johnsonoutdoors.com under Investor Relations. 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. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control.

Allison Kitzerow: Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2026 fiscal Q2. If you need a copy of today's news release, it is available on our website at www.johnsonoutdoors.com under Investor Relations. 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. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control.

Speaker #2: 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.

Speaker #2: 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.

Allison Kitzerow: These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any additional questions following the call, please contact Dave Johnson or Pat Penman. It is now my pleasure to turn the call over to Helen Johnson-Leipold.

Speaker #2: If you have any additional questions following the call, please contact Dave Johnson or Pat Penman. It is now my pleasure to turn the call over to Helen Johnson, Leopold.

Speaker #3: Thanks, Alison. Good morning, everyone. I'll begin by sharing perspective on our second quarter and year-to-date results. As well as giving an update on each business day we'll review the financial highlights and then we'll take your questions.

Helen Johnson-Leipold: Thanks, Allison. Good morning, everyone. I'll begin by sharing perspective on our Q2 and year-to-date results, as well as give an update on each business. Dave will review the financial highlights. Then we'll take your questions. Improved retail conditions and ongoing success of our product innovation helped drive a 15.5% revenue growth in Q2, with all business segments contributing to the improvement. Operating income for Q2 was much improved versus the prior year Q2 due to the increased sales volume and our cost savings initiatives continuing to boost profitability as well.

Helen Johnson-Leipold: Thanks, Allison. Good morning, everyone. I'll begin by sharing perspective on our Q2 and year-to-date results as well as give an update on each business. Dave will review the financial highlights. Then we'll take your questions. Improved retail conditions and the ongoing success of our product innovation helped drive a 15.5% revenue growth in Q2, with all business segments contributing to the improvement. Operating income for Q2 was much improved versus the prior year's Q2 due to the increased sales volume and our cost savings initiatives continuing to boost profitability as well.

Speaker #3: Improved retail conditions and ongoing success of our product innovation help drive a 15.5% revenue growth in the second quarter, with all business segments contributing to the improvement.

Speaker #3: Operating income for the second quarter was much improved versus the prior year second quarter due to the increased sales volume and our cost savings initiatives continuing to boost profitability as well.

Speaker #3: Year-to-date, our net sales are 21.5% higher than last year's fiscal six-month period, with operating income and gross margin also up for the fiscal year-to-date period.

Helen Johnson-Leipold: Year-to-date, our net sales are 21.5% higher than last year's fiscal H1 period, with operating income and gross margin also up for the fiscal year-to-date period. We are pleased with our Q2 and year-to-date results, and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership positions across our portfolio. Our fishing business delivered strong results in Q2, driven by improved trade conditions, continued robust demand for Humminbird's APEX Series and MEGA Live Imaging fish finders, and Minn Kota's full lineup of trolling motors, as well as pricing actions.

Helen Johnson-Leipold: Year-to-date, our net sales are 21.5% higher than last year's fiscal H1 period, with operating income and gross margin also up for the fiscal year-to-date period. We are pleased with our Q2 and year-to-date results and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership positions across our portfolio. Our fishing business delivered strong results in Q2, driven by improved trade conditions, continued robust demand for Humminbird's APEX Series and MEGA Live Imaging fish finders, and Minn Kota's full lineup of trolling motors, as well as pricing actions.

Speaker #3: We are pleased with our second quarter and year-to-date results and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership positions across our portfolio.

Speaker #3: Our fishing business delivered strong results in the second quarter, driven by improved trade conditions, continued robust demand for hummingbirds explore series, and megalide two fish finders, and Minn Kota's full lineup of trolling motors as well as pricing actions.

Speaker #3: These factors combined to reinforce our momentum and position in the marketplace. We remain focused on investing in innovation to deliver fishing technology that sets the standard for anglers worldwide.

Helen Johnson-Leipold: These factors combined to reinforce our momentum and position in the marketplace. We remain focused on investing in innovation to deliver fishing technology that sets the standard for anglers worldwide. In camping and watercraft, growth during the quarter was supported by our expanding digital and e-commerce capabilities, with Eureka! and Jetboil maintaining their leadership positions in competitive categories.

Speaker #3: In camping and watercraft, growth during the quarter was supported by our expanding digital and e-commerce capabilities, with old town and jet boil maintaining their leadership positions in competitive categories.

Speaker #3: During the quarter, jet boil also launched trail cook, a new innovation designed to expand the brand beyond boiling water into broader backcountry cooking. In both brands, we will continue to build on our strengths to drive sustained growth through innovation and deeper engagement with outdoor enthusiasts.

Helen Johnson-Leipold: During the quarter, Jetboil also launched TrailCook, a new innovation designed to expand the brand beyond boiling water into broader backcountry cooking. In both brands, we will continue to build on our strengths to drive sustained growth through innovation and deeper engagement with outdoor enthusiasts. Lastly, in our diving business, improved conditions across the global markets and continued growth in e-commerce helped drive a solid increase in Q2 sales.

Speaker #3: Lastly, in our Diving business, improved conditions across the global markets and continued growth in e-commerce helped drive a solid increase in second quarter sales.

Speaker #3: Digital engagement continues to play an increasingly important role in enhancing connectivity between our scuba pro brand, retail partners, and consumers. As we continue to lean into digital channels and strengthen our global footprint, we are optimistic about scuba pro's ability to grow and further reinforce its position in the market.

Helen Johnson-Leipold: Digital engagement continues to play an increasingly important role, enhancing connectivity between our SCUBAPRO brands, retail partners, and consumers. As we continue to lean into digital channels and strengthen our global footprint, we are optimistic about SCUBAPRO's ability to grow and further reinforce its position in the market. Overall, we are pleased with the quarter and year-to-date results by investing in and executing our strategic priorities, consumer-driven innovation, digital and e-commerce excellence, and operational efficiencies.

Speaker #3: Overall, we are pleased with the quarter and year-to-date results by investing in and executing our strategic priorities: consumer-driven innovation, digital and e-commerce excellence, and operational efficiencies, we are strengthening our market position and taking the right steps to navigate macroeconomic uncertainty while building long-term resilience.

Helen Johnson-Leipold: We are strengthening our market position and taking the right steps to navigate macroeconomic uncertainty while building long-term resilience. Now I'll turn the call over to Dave for more details on the financials.

Speaker #3: Now I'll turn the call over to Dave for more details on the financials.

Speaker #1: Thank you, Helen. Good morning, everyone. Our strategic cost savings program remains critical and continues to deliver meaningful benefits to our bottom line. Gross margin for the second quarter improved to 38.8% of 3.8 points from the prior year quarter.

David Johnson: Thank you, Hel. Good morning, everyone. Our strategic cost savings program remains critical and continues to deliver meaningful benefits to our bottom line. Gross margin for Q2 improved to 38.8%, up 3.8 points from the prior year Q2. Overhead absorption from higher volumes and cost savings were the main drivers of the improvement in gross margin. Year to date, gross margin is 37.9%, up 4.9 points from the prior year to date period. Operating expenses increased $11.2 million from the prior year Q2, due primarily to increased sales volume-related costs as well as increased variable compensation costs. Profit before income taxes for Q2 was $10.2 million compared to $4.2 million in the previous year Q2, driven mostly by the improvement in operating income.

Speaker #1: Overhead absorption from higher volumes and cost savings were the main drivers of the improvement in gross margin. Year-to-date, gross margin is 37.9% of 4.9 points from the prior year-to-date period.

Speaker #1: Operating expenses increased 11.2 million from the prior year second quarter. Through primarily to increase sales volume-related costs as well as increased variable compensation costs.

David Johnson: Operating expenses increased $11.2 million from the prior year's Q2, due primarily to increased sales volume-related costs as well as increased variable compensation costs. Profit before income taxes for Q2 was $10.2 million compared to $4.2 million in the previous year's Q2, driven mostly by the improvement in operating income. As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of Q2 was $186.9 million, up about $6.8 million from Q2 of the previous year.

Speaker #1: Profit before income taxes for the second quarter was $10.2 million, compared to $4.2 million in the prior-year quarter, driven mostly by the improvement in operating income.

Speaker #1: As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of the second quarter was $186.9 million, up about $6.8 million from the previous year's second quarter.

David Johnson: As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of Q2 was $186.9 million, up about $6.8 million from the previous year Q2. Our balance sheet remains debt-free, we continue to pay a meaningful dividend to shareholders, with the board approving our most recent dividend announced in February. Looking ahead, despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth. Now I'll turn the call over to the operator for the Q&A session.

Speaker #1: Our balance sheet remains debt-free and we continue to pay a meaningful dividend to shareholders. With the board approving our most recent dividend announced in February.

David Johnson: Our balance sheet remains debt-free; we continue to pay a meaningful dividend to shareholders, with the board approving our most recent dividend announced in February. Looking ahead, despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth. Now I'll turn the call over to the operator for the Q&A session.

Speaker #1: Looking ahead despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth.

Speaker #1: Now I'll turn the call over to the operator for the Q&A session.

Speaker #4: Thank you, ladies and gentlemen. If you have a question or comment at this time, please first star one-to-one on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star one-to-one again.

David Johnson: Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star 11 again. One moment for our first question. Our first question comes from Anthony Lebiedzinski with Sidoti. Your line is open.

Operator: Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star 11 again. One moment for our first question. Our first question comes from Anthony Lebiedzinski with Sidoti. Your line is open.

Speaker #4: One moment before our first question. Our first question comes from Anthony Lebedinski with Sedota. Your line is open.

Speaker #5: Thank you, and good morning, everyone. It's certainly nice to see the really strong revenue growth, especially in fishing. So as it relates to fishing, how much was revenue helped by pricing versus better market conditions and a stronger competitive position?

Anthony Lebiedzinski: Thank you, and good morning, everyone. You know, certainly nice to see the really strong revenue growth, especially in fishing. As it relates to fishing, how much was revenue helped by pricing versus better market conditions and a stronger competitive position?

Speaker #1: Yeah, I mean, we saw strong unit volume growth in our business. So that was a big driver for the quarter. Pricing certainly helped. But we're also seeing just really strong demand for our broad line of trolling motors that we have.

David Johnson: Yeah, I mean, we saw strong unit volume growth in our business, that was a big driver for the quarter. Pricing certainly helped. We're also seeing, you know, just really strong demand for the broad line of trolling motors that we have. That's very helpful.

David Johnson: Yeah, I mean, we saw strong unit volume growth in our business; that was a big driver for the quarter. Pricing certainly helped. We're also seeing, you know, just really strong demand for the broad line of trolling motors that we have. That's very helpful.

Speaker #1: That's very helpful.

Speaker #5: Gotcha. Yeah, thanks, Dave. So do you think this is perhaps the sort of a replacement cycle after the bump from COVID, or is there something else you think going on?

Anthony Lebiedzinski: Got you. Thanks, Dave. So do you think this is perhaps the sort of a replacement cycle after the bump from COVID, or is there something else you think going on?

Anthony Lebiedzinski: Got you. Thanks, Dave. So do you think this is perhaps the sort of replacement cycle after the bump from COVID, or is there something else you think is going on?

Helen Johnson-Leipold: You know, the market is very hard to predict, but I think, you know, we have innovation that continues to drive purchase. I do think I think consumers are a little cautious with all the things going on, but innovation still is the catalyst to get things moving. We're hoping that this is the beginning of a upward trend, but I think it's gonna be challenging, and innovation will be the key going forward.

Helen Johnson-Leipold: You know, the market is very hard to predict, but I think, you know, we have innovation that continues to drive purchase. I do think consumers are a little cautious with all the things going on, but innovation still is the catalyst to get things moving. We're hoping that this is the beginning of an upward trend, but I think it's going to be challenging, and innovation will be the key going forward.

Speaker #3: The market is very hard to predict, but I think we have innovation that is really driving continues to drive purchase and I do think there will be I think consumers are a little cautious with all the things going on, but innovation still is the catalyst to get things moving.

Speaker #3: We're hoping that this is the beginning of an upward trend, but I think it's going to be challenging and innovation will be the key going forward.

Speaker #5: Gotcha. Okay. Thanks for that. So as far as the other two segments, you highlighted the increased sales through e-commerce. So can you expand on that a little bit and then maybe give us, if possible, some numbers as it relates to the growth that you saw in the quarter and how are you thinking about the rest of F26 as it relates to diving and watercraft and camping?

Anthony Lebiedzinski: Got you. Okay, thanks for that. As far as the other two segments, you highlighted the increased sales through e-commerce. Can you expand on that a little bit and then, you know, maybe give us, if possible, some numbers as it relates to the growth that you saw in the quarter? How are you thinking about the rest of 2026 as it relates to diving, watercraft, and camping?

Speaker #3: Well, there's a few questions. In there, but e-commerce is one of our growth initiatives and we put a hardcore press on that and it does reach a much broader consumer base.

Helen Johnson-Leipold: Well, there's a few questions in there.

Helen Johnson-Leipold: Well, there are a few questions in there.

Anthony Lebiedzinski: Yes.

Helen Johnson-Leipold: You know, e-commerce is one of our, you know, growth initiatives, and we put a hardcore press on that, and it does reach a much broader consumer base. We're really excited about it. Not to mean that our bricks and mortar aren't important, I think they both complement each other. You know, we've been up and running on a true, you know, digital mode for only about, actually it was 1 year. It's early on, and we've got a lot to learn, but it's a good opportunity to reach a broader audience. You know, I think it will continue to grow. It's a smaller piece of the pie than our other sales, but I think from a growth standpoint, it is helping us.

Helen Johnson-Leipold: You know, e-commerce is one of our, you know, growth initiatives, and we put a hardcore press on that, and it does reach a much broader consumer base. We're really excited about it. Not to mean that our bricks and mortar aren't important; I think they both complement each other. You know, we've been up and running in a true, you know, digital mode for only about, actually, 1 year. It's early on, and we've got a lot to learn, but it's a good opportunity to reach a broader audience. You know, I think it will continue to grow. It's a smaller piece of the pie than our other sales, but I think from a growth standpoint, it is helping us.

Speaker #3: So we're really excited about it. And not to mean that our bricks and mortar aren't important. I think they both complement each other. We've just been up and running on a true digital mode for only about—actually, it was a year.

Speaker #3: And so it's early on and we're we've got a lot to learn, but it's a good opportunity to reach a broader audience. I think it will continue to grow.

Speaker #3: It's a smaller piece of the pie than our other sales, but I think from a growth standpoint, it is helping us. I think, again, as you do a lot of forward-looking, but as we looked at the third quarter, the signs in the second are good, and they're better than they've been in the past.

Helen Johnson-Leipold: I think, again, we don't do a lot of forward-looking, but as we look to Q3, the signs in Q2 are good, and they're better than they've been in the past. Again, the world is complicated, and the consumers have a lot going on. Again, it's back to the product line, the brand, the positioning in the market, and we feel really good about where we are as a brand and as a company. You know, we're hoping that the markets also, you know, cooperate as well. It's good to have a quarter that feels very strong. Hopefully I answered your question.

Helen Johnson-Leipold: I think, again, we don't do a lot of forward-looking, but as we look to Q3, the signs in Q2 are good, and they're better than they've been in the past. Again, the world is complicated, and the consumers have a lot going on. Again, it's back to the product line, the brand, and the positioning in the market, and we feel really good about where we are as a brand and as a company. You know, we're hoping that the markets also, you know, cooperate as well. It's good to have a quarter that feels very strong. Hopefully I answered your question.

Speaker #3: But again, there's a the world is complicated and the consumers have a lot going on. So but we, again, it's back to the product line, the brand, the positioning in the market, and we feel really good about where we are as a brand and as a company.

Speaker #3: And we're hoping that the markets also cooperate as well. So it's good to have a quarter that feels very strong. So hopefully, I—

Speaker #5: Gotcha. Yeah. Yes, that definitely very helpful context. So as far as the world out there, just wondering, as you talk to your retail customers, since the Iran conflict started in late February, gas prices have gone up.

Anthony Lebiedzinski: Got you. Yes. Yes, that definitely very helpful context. As far as the world out there, just wondering, as you talk to your retail customers, you know, since the Iran conflict started in late February, you know, gas prices have gone up quite a bit. As it relates to that, I mean, from the point of sale data that you can get your hands on, I mean, have you seen any notable impact for your brands? Anything you can talk about that?

Anthony Lebiedzinski: Got you. Yes. Yes, that's definitely very helpful context. As far as the world out there is concerned, I'm just wondering, as you talk to your retail customers, you know, since the Iran conflict started in late February, you know, gas prices have gone up quite a bit. As it relates to that, I mean, from the point of sale data that you can get your hands on, I mean, have you seen any notable impact for your brands? Anything you can talk about that?

Speaker #5: Quite a bit. So as it relates to that, I mean, from the point of sale data that you can get your hands on, I mean, have you seen any notable impact for your brands?

Speaker #5: Is there anything you can talk about regarding that?

Speaker #1: I mean, I would say not yet. Anthony, we haven't seen a direct impact, but like a lot of companies, we're looking at inflationary pressure, higher input costs, consumers that their confidence levels are down.

David Johnson: I mean, I would say not yet, Anthony. We haven't seen a direct impact, but, you know, like a lot of companies, we're looking at, you know, inflationary pressure, higher input costs.

David Johnson: I mean, I would say not yet, Anthony. We haven't seen a direct impact, but, you know, like a lot of companies, we're looking at, you know, inflationary pressure and higher input costs.

Helen Johnson-Leipold: a worried consumer

David Johnson: consumers that, you know, their confidence levels are down. I think so far it's okay. We haven't seen a direct impact, but we're looking at things kind of, in a neutral fashion over the next couple of quarters.

David Johnson: consumers that, you know, their confidence levels are down. I think so far it's okay. We haven't seen a direct impact, but we're looking at things kind of in a neutral fashion over the next couple of quarters.

Speaker #1: So I think so far it's okay. We haven't seen a direct impact, but we're looking at things kind of in a neutral fashion over the next couple of quarters.

Speaker #5: Okay. Understood. Okay. And then so yeah, so I guess as far as the gross margin, so I guess two-part question here. So first, in the quarter itself, you did have a strong improvement versus last year.

Anthony Lebiedzinski: Okay. Understood. Okay. Then, yeah. I guess as far as the gross margin, I guess, you know, 2-part question here. You know, first, in the quarter itself, you did have a strong improvement versus last year. You talked about fixed cost absorption, but also some cost savings. I don't, was that, like, a kind of a 50-50 split between that? Then my second part, to that question is as it relates to cost pressures, how should we be thinking about the gross margins for the rest of the fiscal year?

Anthony Lebiedzinski: Okay. Understood. Okay. Then, yeah. I guess as far as the gross margin, I guess you know, 2-part question here. You know, first, in the quarter itself, you did have a strong improvement versus last year. You talked about fixed cost absorption and also some cost savings. I don't, was that, like, kind of a 50-50 split between that? Then my second part to that question is as it relates to cost pressures, how should we be thinking about the gross margins for the rest of the fiscal year?

Speaker #5: You talk about fixed cost absorption, but also some cost savings. So was that kind of a 50-50 split between that? And then my second part, to that question is, as it relates to cost pressures, how should we be thinking about the gross margins for the rest of the fiscal year?

Speaker #1: Yeah. So most of the improvement was operating leverage. So fixed cost absorption, but our cost savings program is critical to that helping that as well.

David Johnson: Yeah. You know, most of the improvement was operating leverage, so fixed cost absorption. Our cost savings program is critical to that, you know, helping that as well. You know, we're seeing cost pressure. Going forward, I think, you know, like a lot of companies in electronic industry, component costs are dynamic for us, that's something we've got our eye on and we're monitoring. I just think going forward, that'll be something that'll be a little bit of a headwind for us, maybe over the next coming quarters, if you will. It's a good thing we have our cost savings efforts in place now to help try to offset that.

David Johnson: Yeah. You know, most of the improvement was operating leverage, so fixed cost absorption. Our cost savings program is critical to that, you know, helping that as well. You know, we're seeing cost pressure. Going forward, I think, you know, like a lot of companies in the electronics industry, component costs are dynamic for us; that's something we've got our eye on and we're monitoring. I just think going forward, that'll be something that'll be a little bit of a headwind for us, maybe over the next coming quarters, if you will. It's a good thing we have our cost savings efforts in place now to help try to offset that.

Speaker #1: We're seeing cost pressure going forward. I think like a lot of companies, the electronic industry component costs are dynamic for us. And so that's something we've got our eye on and we're monitoring.

Speaker #1: So I just think going forward, that'll be something that'll be a little bit of a headwind for us, maybe over the next coming quarters, if you will.

Speaker #1: So it's a good thing we have our cost savings efforts in place now to help try to offset that.

Speaker #5: Got it. Okay. And then in terms of the operating expenses, they did come in higher than what we had expected. Just roughly speaking, how much of the year-over-year increase came from your sales volume-related costs versus the incentive compensation piece?

Anthony Lebiedzinski: Got it. Okay. In terms of the operating expenses, they did come in higher than what we had expected. Just roughly speaking, you know, how much of the year-over-year increase came from your sales volume related costs versus the incentive compensation piece? Again, you know, just kind of, you know, maybe help us understand like how should we be thinking about operating expenses going forward for the rest of the fiscal year?

Anthony Lebiedzinski: Got it. Okay. In terms of the operating expenses, they did come in higher than what we had expected. Just roughly speaking, you know, how much of the year-over-year increase came from your sales volume-related costs versus the incentive compensation piece? Again, you know, just kind of, you know, maybe help us understand like how should we be thinking about operating expenses going forward for the rest of the fiscal year?

Speaker #5: And then again, just kind of maybe help us understand how should we be thinking about operating expenses going forward for the rest of the fiscal year?

Speaker #1: Yeah. I mean, a decent portion was volume-related and probably I can't give you the numbers, but let's say maybe a third was volume-related, and then we had some variable compensation accruals adjustments in there that made up about a third.

David Johnson: Yeah, I mean, a decent portion was volume related and probably I can't give you the numbers, but, you know, let's say maybe a third was volume related, and then we had some variable compensation accruals adjustments in there that made up about a third. Then there's some other cats and dogs in there too that we didn't call out. There's other costs that we have in that operating expense, like some healthcare costs and some other consulting expense. The two big ones were the volume related and then the variable compensation.

David Johnson: Yeah, I mean, a decent portion was volume-related, and probably I can't give you the numbers, but, you know, let's say maybe a third was volume-related, and then we had some variable compensation accrual adjustments in there that made up about a third. Then there's some other cats and dogs in there too that we didn't call out. There are other costs that we have in that operating expense, like some healthcare costs and some other consulting expenses. The two big ones were the volume-related and then the variable compensation.

Speaker #1: And then there's some other cats and dogs in there too that we didn't call out, but there's other costs that we have in that operating expense, like some healthcare costs and some other consulting expense.

Speaker #1: So, but the two big ones were the volume-related, and then the variable compensation.

Speaker #5: Okay. And you expect that to continue you think here at least near term or just any general comment there?

Anthony Lebiedzinski: Okay. You expect that to continue, you think here, at least near term or, you know, just any general comment there?

Anthony Lebiedzinski: Okay. You expect that to continue, you think here, at least in the near term or, you know, just any general comment there?

Speaker #1: Well, I think the expense structure will settle down probably a little bit. I mean, obviously, the volume drives some of that, but in terms of where we are in terms of our spending and our ability to manage it, I think it'll kind of settle down probably going forward over the next couple of quarters.

David Johnson: Well, I think, you know, the expense structure will settle down probably a little bit. I mean, obviously the volume drives some of that. You know, in terms of kind of where we are in terms of our spending and our ability to manage that, I think it'll kind of settle down probably going forward over the next couple of quarters.

Speaker #3: But Anthony, we are investing. And we're putting foundational systems in. And so we're investing against our key priorities. So I would say it's good spend and it may not be long-term, but as Dave said, it will settle down.

Helen Johnson-Leipold: You know, Anthony, we are investing and we're putting foundational systems in. We're investing against our key priorities. I would say it's good spend, and it may not be long-term, but there, you know, as Dave said, it will settle down. I feel we're investing in the right things to set us up for success long term. It will get more efficient on the other side of this.

Helen Johnson-Leipold: You know, Anthony, we are investing and we're putting foundational systems in. We're investing against our key priorities. I would say it's a good spend, and it may not be long-term, but there, you know, as Dave said, it will settle down. I feel we're investing in the right things to set us up for success long-term. It will get more efficient on the other side of this.

Speaker #3: But I feel we're investing in the right things to set us up for success long term. And eventually, it will get more efficient on the other side of this.

Speaker #5: Okay. And then lastly from me, the tax rate, the Cayman lower than what we had expected, kind of maybe you can maybe Dave, you can address that.

Anthony Lebiedzinski: Okay. Then lastly from me, the tax rate came in lower than what we had expected. Kind of maybe you can, maybe Dave, you can address that and again, any sort of commentary as to how we should be thinking about the tax rate for the balance of the fiscal year?

Anthony Lebiedzinski: Okay. Then lastly, from me, the tax rate came in lower than what we had expected. Kind of maybe you can, maybe Dave, you can address that, and again, any sort of commentary as to how we should be thinking about the tax rate for the balance of the fiscal year?

Speaker #5: And again, any sort of commentary as to how we should be thinking about the tax rate for the balance of the fiscal year?

Speaker #1: Yeah. I mean, because we have the valuation allowance on the US income right now, the tax rate is going to kind of be up and down.

David Johnson: Yeah, I mean, because we have the valuation allowance on the US income right now, it's the tax rate is going to kind of be up and down. It just depends on the mix of profits that we're seeing in the quarter and what we're forecasting for the full year. I mean, I think, you know, the way to think about that is probably, you know, a $4 to 5 million tax expense for the year. How we divvy that up over the quarters just kind of depends on the mix of profits. It's just hard for me to give you a rate quarter by quarter just because of that mix.

David Johnson: Yeah, I mean, because we have the valuation allowance on the US income right now, the tax rate is going to kind of be up and down. It just depends on the mix of profits that we're seeing in the quarter and what we're forecasting for the full year. I mean, I think, you know, the way to think about that is probably, you know, a $4 to 5 million tax expense for the year. How we divvy that up over the quarters just kind of depends on the mix of profits. It's just hard for me to give you a rate quarter by quarter just because of that mix.

Speaker #1: So it just depends on the mix of profits that we're seeing in the quarter and what we're forecasting for the full year. So I mean, I think the way to think about that is probably a four to five million dollar tax expense for the year and how we divvy that up over the quarters just kind of depends on the mix of profits.

Speaker #1: So it's just hard for me to give you a rate quarter by quarter, just because of that mix.

Anthony Lebiedzinski: Understood. Yeah, this is definitely helpful. Okay, well, thank you very much and best of luck.

Speaker #5: Understood. But yeah, this is definitely helpful. Okay. Well, thank you very much, and best of luck.

Speaker #1: Thanks, Anthony.

David Johnson: Thanks, Anthony.

Helen Johnson-Leipold: Thanks, Anthony.

Anthony Lebiedzinski: Okay.

Speaker #5: Bye.

Speaker #6: And I'm not showing any further questions at this time. I'm going to turn the call back over to Helen.

Anthony Lebiedzinski: I'm not showing any further questions this time. I turn the call back over to Helen.

Operator: I'm not showing any further questions this time. I turn the call back over to Helen.

Speaker #3: Okay. Well, thank you, everybody, for joining us today. And questions, you can call Dave or Pat, but have a good day. Thank you.

Helen Johnson-Leipold: Okay. Well, thank you everybody for joining us today. Questions, you can call Dave or Pat, have a good day. Thank you.

Helen Johnson-Leipold: Okay. Well, thank you, everybody, for joining us today. Questions, you can call Dave or Pat, have a good day. Thank you.

Helen Johnson-Leipold: Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.