• Net Sales: $60.2 million, a 4% increase over last year's $57.9 million.
• International Net Sales: $3.4 million, representing 6% of total net sales and a 15% year-over-year growth.
• Gross Margin: 48%, a 230 basis point increase from 45.7% last year.
• GAAP Operating Expenses: $25.8 million, down from $26.5 million last year.
• Non-GAAP Operating Expenses: $22.7 million, slightly up from $22.3 million last year.
• GAAP EPS: $0.24, compared to $0.01 last year.
• Non-GAAP EPS: $0.37, compared to $0.25 last year.
• Adjusted EBITDAS: $7.5 million, up from $5.2 million last year.
• Cash: $14.2 million, with no debt.
• Share Repurchase: Approximately $1 million of common stock repurchased.
• Fiscal 2025 Net Sales Guidance: Increased to $205 million to $210 million.
• Fiscal 2026 Net Sales Outlook: Expected between $220 million and $230 million.

• Warning! GuruFocus has detected 3 Warning Sign with AOUT.

Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Outdoor Brands Inc (NASDAQ:AOUT) reported net sales of over $60 million, a 4% increase over the previous year, surpassing expectations.
• International net sales grew by nearly 15% year-over-year, indicating strong global demand.
• The company achieved its highest single shipping month ever in October, showcasing operational efficiency.
• Adjusted EBITDAS increased by 43% year-over-year, reflecting improved profitability.
• Growth was driven entirely by in-line products, with new product launches planned for the second half of the fiscal year, indicating potential for further growth.

Negative Points

• The shooting sports category saw a slight decline in personal protection products, indicating some market weakness.
• Operating cash outflow for the second quarter was $7.9 million, driven by an increase in accounts receivable.
• Inventory levels increased by $4.9 million in Q2, which could indicate potential overstocking risks.
• Gross margins are expected to be lower in the second half of fiscal 2025 due to increased amortization of tariff and freight variances.
• The M&A pipeline has slowed down, with fewer opportunities in the shooting sports category due to market softness.

Q & A Highlights

Q: Could you give us more insight into the purchasing timeline for retailers and any other drivers that give you confidence in the longer-term sales outlook? A: Brian Murphy, President and CEO, explained that the purchasing timeline typically occurs around the second quarter and can extend into early February. Retailers are making significant decisions about which products to add for the following year. The strong performance of in-line products has resonated with consumers, prompting retailers to seek more AOB products to increase foot traffic. This demand has led to earlier load-ins, providing strong visibility and confidence in future sales.

Q: Given some weakness in the shooting sports industry recently, how did products in that market perform in the quarter? A: Brian Murphy noted that while the company generally tracks with NICS background check results, they have focused on expanding into categories with more reliable growth, such as shotgun sports. The Claymore line has been particularly successful, helping to diversify revenue within the shooting sports category. Despite some softness in personal protection products, the diversification strategy has led to growth in more stable areas.

Q: Are there any new changes to your philosophy around the use of capital between investments in the business, buybacks, and M&A? A: H. Andrew Fulmer, CFO, stated that their capital allocation philosophy remains unchanged, prioritizing organic growth, M&A, and buybacks. They focus on organic growth through new product development and innovation. M&A is pursued for complementary and authentic brands, while buybacks are considered when the company is undervalued. Brian Murphy added that they maintain a strong balance sheet to remain flexible in response to potential changes in the market.

Q: With the fiscal '25 outlook suggesting an acceleration in sales, what are the key drivers for this growth? A: Brian Murphy highlighted that the acceleration is driven by innovation across the portfolio, with retailers seeking new products to replace the status quo. The willingness of retailers to adopt AOB products earlier than usual is a testament to the company's innovation advantage, which includes new products, compelling merchandising, and cross-category innovation.

Q: Could you provide more details on the gross margin outlook and any tariff exposure with the new administration? A: Andy Fulmer explained that gross margins are expected to be around 45% for Q3, slightly above last year's 43%, due to higher inventory purchases and delayed promotions. Brian Murphy discussed the company's approach to tariffs, emphasizing their focus on innovation and agility. They maintain strong supplier relationships and have options to move production outside China if necessary, ensuring they can adapt to changes in tariff policies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.