American Outdoor Brands, Inc. Reports First Quarter Fiscal 2023 Financial Results

About this update from American Outdoor Brands, Inc.

Net Sales $43.7 Million Gross Margin 43.6% e-commerce Sales $20.5 Million -- Traditional Sales $23.1 Million Facility Consolidation Underway COLUMBIA, Mo. , Sept. 8, 2022 /PRNewswire/ -- American Outdoor Brands, Inc. (NASDAQ Global Select: AOUT) , an industry leading provider of products and accessories for rugged outdoor enthusiasts, today announced financial results for the first quarter fiscal 2023 ended July 31, 2022 . First Quarter Fiscal 2023 Financial Highlights Quarterly net sales were $43.7 million , a decrease of $17.1 million , or 28.1%, compared with net sales of $60.8 million for the comparable quarter last year. E-commerce net sales of $20.5 million , which were driven by increased direct-to-consumer net sales, grew by 23.7%, while traditional net sales of $23.1 million , which were impacted by lower foot traffic at retail and lower shooting sports sales to OEM customers, declined by 47.6%. Compared with pre-COVID levels in the first quarter of fiscal 2020, total net sales grew 31.5%, while e-commerce net sales grew by 92.2% and traditional net sales grew by 2.7%. Quarterly gross margin was 43.6%, compared with quarterly gross margin of 47.7% for the comparable quarter last year, a decrease driven primarily by lower sales volumes and increased freight expenses. Quarterly GAAP net loss was $5.7 million , or ( $0.42 ) per diluted share, compared with net income of $3.5 million , or $0.24 per diluted share, for the comparable quarter last year. Quarterly non-GAAP net income was $84,000 , or $0.01 per diluted share, compared with non-GAAP net income of $6.8 million , or $0.48 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for net income exclude acquired intangible amortization, stock compensation, technology implementation, stockholder cooperation agreement costs, and acquisition costs. For a detailed reconciliation, see the schedules that follow in this release. Quarterly Adjusted EBITDAS was $1.4 million , or 3.2% of net sales, compared with $9.6 million , or 15.7% of net sales, for the comparable quarter last year. For a detailed reconciliation, see the schedules that follow in this release. Brian Murphy , President and Chief Executive Officer, said, "Given recent industry and economic conditions, I am pleased with our first quarter results, which reflect our ability to deliver net sales growth of over 31% above our pre-pandemic levels of fiscal 2020 while marking a number of achievements that support our strategic priorities and which reflect our dedication to building authentic, lifestyle brands that help consumers make the most out of the moments that matter." "During the quarter, our e-commerce net sales grew nearly 24% year over year, supported by strength in our direct-to-consumer business, which includes MEAT! Your Maker meat processing equipment and Grilla grills. Together, these two brands generated over 15% of our net sales in Q1 and helped our Outdoor Lifestyle category generate over 53% of our total net sales in the quarter. We consider our direct-to-consumer sales to be one gauge of how well our brands are resonating with consumers since those sales are not impacted by retailer issues, such as inventory levels or limited open-to-buy. We remain excited about growth opportunities within our Outdoor Lifestyle category, which consists of products related to hunting, fishing, camping, and rugged outdoor activities, and which delivered two-year growth of 26.5% over the first quarter of fiscal 2021 and three-year growth of 54.2% over the pre-pandemic first quarter of fiscal 2020." "We continued to leverage our Dock & Unlock™ strategy to deliver a steady flow of organically developed, exciting new products that generated nearly 26% of our first quarter revenue. We also attended ICAST 2022, the fishing industry's premier tradeshow, where our BUBBA fishing lifestyle brand received the award for 'Best Cutlery, Hand Pliers and Tools" for our innovative Multi-Flex Interchangeable Knife Sets. This marks the third consecutive year that BUBBA has taken home the award in this category. While at ICAST, we launched the BUBBA Voyager Gear Box, our first entry into waterproof storage, and we unveiled and previewed our proprietary BUBBA Electric Fish Scale, an exciting new product that truly energized and excited our core fishing retailers, distributors, and consumers, ahead of the full launch and shipping of initial inventory in Spring of 2023." "A key part of our long-term strategy includes growing the brands in our portfolio by plugging them into our Dock & Unlock process and utilizing our leverageable business model. During the first quarter, we amended our Columbia, Missouri facility lease agreement to add 35,000 square feet of space that provides us the opportunity to increase our operational efficiency and leverage our Missouri facility. We then commenced plans to consolidate our Crimson Trace operations in Wilsonville, Oregon , as well as our Grilla operations in Holland, Michigan and Dallas, Texas , into the Missouri facility. We estimate that these consolidations will yield a net cost savings of approximately $1.5 million per year, beginning in our fiscal fourth quarter. We look forward to completing the consolidations in the next three months, bringing our teams together and moving us closer to our long-term profitability objectives." concluded Murphy. Andrew Fulmer , Chief Financial Officer, said, "Our strong balance sheet has provided us with both the resources and the flexibility to pursue important growth opportunities, and we continued to fortify that balance sheet in the first quarter, demonstrating effective capital deployment. Cash from operations exceeded $5.0 million , allowing us to reduce the outstanding balance on our line of credit. Our cash balance of $17.5 million , combined with the capacity on our line of credit, provided us with up to $72.0 million of available capital at the end of the first quarter, and a net debt leverage ratio of less than 0.1 times our trailing 12-month Adjusted EBITDAS. "While we are not giving specific guidance today, we are providing a framework for our revenue outlook for fiscal 2023. Consumer spending patterns over the balance of our fiscal year have yet to be determined, and we believe that retailers and distributors continue to be extremely cautious with regard to their inventory levels. That said, we also believe our brands are performing well and in alignment with recent consumer outdoor participation trends. As a result, we believe our revenue for fiscal 2023 could exceed pre-pandemic fiscal 2020 revenue by as much as 25%. We believe our solid financial position enables us to continue executing on our long-term strategic plan, investing in our business, and addressing the exciting growth opportunities we have identified for fiscal 2023 and beyond." Conference Call and Webcast The Company will host a conference call and webcast today, September 8, 2022 , to discuss its first quarter fiscal 2023 financial and operational results. Speakers on the conference call will include Brian Murphy , President and Chief Executive Officer, and Andrew Fulmer , Chief Financial Officer. The conference call may include forward-looking statements and a discussion of non-GAAP financial measures. The conference call and webcast will begin at 5:00 p.m. Eastern Time ( 2:00 p.m. Pacific Time ). Those interested in listening to the conference call via telephone may call directly at (833) 630-1956 and ask to join the American Outdoor Brands call. No RSVP is necessary. The conference call audio webcast can also be accessed live on the Company's website at www.aob.com , under the Investor Relations section. Reconciliation of U.S. GAAP to Non-GAAP Financial Measures In this press release, certain non-GAAP financial measures, including "non-GAAP net income," "non-GAAP income per share diluted," and "Adjusted EBITDAS" are presented. A reconciliation of these and other non-GAAP financial measures are contained at the end of this press release. From time-to-time, the Company considers and uses these non-GAAP financial measures as supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends. The Company believes it is useful for itself and the reader to review, as applicable, both (1) GAAP measures that include (i) amortization of acquired intangible assets, (ii) stock compensation, (iii) technology implementation, (iv) acquisition costs, (v) stockholder cooperation agreement costs, (vi) income tax adjustments, (vii) interest expense, (viii) income tax expense, and (x) depreciation and amortization; and (2) the non-GAAP measures that exclude such information. The Company presents these non-GAAP measures because it considers them an important supplemental measure of its performance and believes the disclosure of such measures provides useful information to investors regarding the Company's financial condition and results of operations. The Company's definition of these adjusted financial measures may differ from similarly named measures used by others. The Company believes these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company's GAAP measures. The principal limitations of these measures are that they do not reflect the Company's actual expenses and may thus have the effect of inflating its financial measures on a GAAP basis. About American Outdoor Brands, Inc. American Outdoor Brands, Inc. (NASDAQ Global Select: AOUT) is an industry leading provider of outdoor products and accessories, including hunting, fishing, camping, shooting, and personal security and defense products, for rugged outdoor enthusiasts. The company produces innovative, top quality products under its brands BOG®; BUBBA®; Caldwell®; Crimson Trace®; Frankford Arsenal®; Grilla Grills®; Hooyman®; Imperial®; LaserLyte®; Lockdown®; MEAT!; Old Timer®; Schrade®; Tipton®; Uncle Henry®; ust®; and Wheeler®. For more information about all the brands and products from American Outdoor Brands, Inc. , visit www.aob.com . Safe Harbor Statement Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby. All statements other than statements of historical facts contained or incorporated herein by reference in this press release, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "estimates," "expects," "intends," "targets," "contemplates," "projects," "predicts," "may," "might," "plan," "would," "should," "could," "may," "can," "potential," "continue," "objective," or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this press release include our belief that our direct-to-consumer sales is one gauge of how well our brands are resonating with consumers; our excitement about growth opportunities within our Outdoor Lifestyle category; our long-term strategy to grow the brands in our portfolio by plugging them into our Dock & Unlock process and utilizing our leverageable business model; our estimate that the consolidations of our operations in Wilsonville, Oregon and Holland, Michigan , and Dallas, Texas into our Missouri facility will yield a significant cost savings of approximately $1.7 million per year, beginning in our fiscal fourth quarter and that these consolidations will occur within the next three months; and our belief that our solid financial position enables us to continue executing on our long-term strategic plan, investing in our business, and addressing the exciting growth opportunities we have identified for fiscal 2023 and beyond; our belief that retailers and distributors continue to be extremely cautious with regard to their inventory levels; our belief that our brands are performing well and in alignment with the recent consumer outdoor participation trends; and our outlook for fiscal 2023. We caution that these statements are qualified by important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, the effects of the COVID-19, pandemic, including potential disruptions in our ability to source the materials necessary for the production of our products, disruptions and delays in the manufacture of our products, and difficulties encountered by retailers and other components of the distribution channel for our products; economic, social, political, legislative, and regulatory factors; lawsuits and their effect on us; inventory levels, both internally and in the distribution channel, in excess of demand; natural disasters, pandemics, seasonality, news events, political events, and consumer tastes; future investments for capital expenditures; future products and product development; the features, quality, and performance of our products; the success of our strategies and marketing programs; our market share and factors that affect our market share; liquidity and anticipated cash needs and availability; the supply, availability, and costs of materials and components and related tariffs; our ability to maintain and enhance brand recognition and reputation; risks associated with the distribution of our products and overall availability of labor; and, other factors detailed from time to time in our reports filed with the Securities and Exchange Commission , including our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 . Contact: Liz Sharp , VP, Investor Relations [email protected] (573) 303-4620 AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of: July 31, 2022 April 30, 2022 (Unaudited) (In thousands, except par value and share data) ASSETS Current assets: Cash and cash equivalents $ 17,469 $ 19,521 Accounts receivable, net of allowance for credit losses of $137 on July 31, 2022 and $129 on April 30, 2022 23,920 28,879 Inventories 120,638 121,683 Prepaid expenses and other current assets 10,754 8,491 Income tax receivable 1,072 1,231 Total current assets 173,853 179,805 Property, plant, and equipment, net 10,357 10,621 Intangible assets, net 60,673 63,194 Right-of-use assets 25,417 23,884 Other assets 369 336 Total assets $ 270,669 $ 277,840 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 13,495 $ 13,563 Accrued expenses 9,634 7,853 Accrued payroll and incentives 2,983 2,788 Lease liabilities, current 1,618 1,803 Accrued profit sharing 820 998 Total current liabilities 28,550 27,005 Notes and loans payable, net of current portion 19,551 24,697 Lease liabilities, net of current portion 24,739 23,076 Other non-current liabilities 31 31 Total liabilities 72,871 74,809 Equity: Preferred stock, $0 .001 par value, 20,000,000 shares authorized, no shares issued or outstanding — — Common stock, $0 .001 par value, 100,000,000 shares authorized, 14,291,791 shares issued and 13,454,827 shares outstanding on July 31, 2022 and 14,240,290 shares issued and 13,403,326 outstanding on April 30, 2022 14 14 Additional paid in capital 268,855 268,393 Retained (deficit)/earnings (56,046) (50,351) Treasury stock, at cost (836,964 shares on July 31, 2022 and April 30, 2022 ) (15,025) (15,025) Total equity 197,798 203,031 Total liabilities and equity $ 270,669 $ 277,840 AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) For the Three Months Ended July 31 , 2022 2021 (Unaudited) Net sales $ 43,676 $ 60,768 Cost of sales 24,637 31,785 Gross profit 19,039 28,983 Operating expenses: Research and development 1,756 1,521 Selling, marketing, and distribution 11,780 13,200 General and administrative 11,064 10,039 Total operating expenses 24,600 24,760 Operating (loss)/income (5,561) 4,223 Other income/(expense), net: Other income, net 241 129 Interest expense, net (186) (46) Total other income, net 55 83 (Loss)/income from operations before income taxes (5,506) 4,306 Income tax expense 189 849 Net (loss)/income $ (5,695) $ 3,457 Net (loss)/income per share: Basic $ (0.42) $ 0.25 Diluted $ (0.42) $ 0.24 Weighted average number of common shares outstanding: Basic 13,443 14,083 Diluted 13,443 14,301 AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended July 31 , 2022 2021 (In thousands) Cash flows from operating activities: Net (loss)/income $ (5,695) $ 3,457 Adjustments to reconcile net income to net cash (used in)/provided by operating activities: Depreciation and amortization 4,162 4,179 Loss on sale/disposition of assets — 127 Provision for credit losses on accounts receivable 7 23 Deferred income taxes — (110) Stock-based compensation expense 714 752 Changes in operating assets and liabilities: Accounts receivable 4,952 3,939 Inventories 1,045 (17,746) Accounts payable 277 4,226 Accrued liabilities 1,798 (805) Other (2,192) (1,207) Net cash provided by/(used in) operating activities 5,068 (3,165) Cash flows from investing activities: Payments to acquire patents and software (1,392) (449) Payments to acquire property and equipment (218) (537) Net cash used in investing activities (1,610) (986) Cash flows from financing activities: Payments on notes and loans payable (5,170) — Cash paid for debt issuance costs (88) — Proceeds from exercise of options to acquire common stock, including employee stock purchase plan — 5 Payment of employee withholding tax related to restricted stock units (252) (312) Net cash used in financing activities (5,510) (307) Net decrease in cash and cash equivalents (2,052) (4,458) Cash and cash equivalents, beginning of period 19,521 60,801 Cash and cash equivalents, end of period $ 17,469 $ 56,343 Supplemental disclosure of cash flow information Cash paid for: Interest $ 161 $ 38 Income taxes $ 32 $ 85 AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (In thousands, except per share data)(Unaudited) For the Three Months Ended July 31 , 2022 2021 GAAP gross profit $ 19,039 $ 28,983 Non-GAAP gross profit $ 19,039 $ 28,983 GAAP operating expenses $ 24,600 $ 24,760 Amortization of acquired intangible assets (3,075) (3,428) Stock compensation (714) (752) Technology implementation (769) (272) Acquisition costs (47) — Shareholder cooperation agreement costs (1,010) — Non-GAAP operating expenses $ 18,985 $ 20,308 GAAP operating (loss)/income $ (5,561) $ 4,223 Amortization of acquired intangible assets 3,075 3,428 Stock compensation 714 752 Technology implementation 769 272 Acquisition costs 47 — Shareholder cooperation agreement costs 1,010 — Non-GAAP operating income $ 54 $ 8,675 GAAP net (loss)/income $ (5,695) $ 3,457 Amortization of acquired intangible assets 3,075 3,428 Stock compensation 714 752 Technology implementation 769 272 Acquisition costs 47 — Shareholder cooperation agreement costs 1,010 — Income tax adjustments 164 (1,113) Non-GAAP net income $ 84 $ 6,796 GAAP net (loss)/income per share - diluted $ (0.42) $ 0.24 Amortization of acquired intangible assets 0.23 0.24 Stock compensation 0.05 0.05 Technology implementation 0.06 0.02 Acquisition costs — — Shareholder cooperation agreement costs 0.07 — Income tax adjustments 0.01 (0.08) Non-GAAP net income per share - diluted (a) $ 0.01 $ 0.48 (a) Non-GAAP net income per share does not foot due to rounding. AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET (LOSS)/INCOME TO NON-GAAP ADJUSTED EBITDAS (In thousands)(Unaudited) For the Three Months Ended July 31 , 2022 2021 GAAP net (loss)/income $ (5,695) $ 3,457 Interest expense 186 46 Income tax expense 189 849 Depreciation and amortization 4,162 4,179 Stock compensation 714 752 Technology implementation 769 272 Acquisition costs 47 — Shareholder cooperation agreement costs 1,010 — Non-GAAP Adjusted EBITDAS $ 1,382 $ 9,555 View original content to download multimedia: https://www.prnewswire.com/news-releases/american-outdoor-brands-inc-reports-first-quarter-fiscal-2023-financial-results-301620781.html SOURCE American Outdoor Brands, Inc.

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