Financial Data and Key Metrics Changes - The company reported net sales of $57.9 million for Q2 2024, an increase of 6.4% compared to $54.4 million in Q2 2023, and a 21.3% increase compared to the pre-pandemic Q2 of fiscal 2020 [14][5][21] - Gross margin decreased to 45.7% from 47.7% in the prior year, primarily due to increased promotional activity [15][16] - GAAP EPS was $0.01 for Q2 2024, down from $0.03 in Q2 2023, while non-GAAP EPS was $0.25 compared to $0.29 in the prior year [17] Business Line Data and Key Metrics Changes - The outdoor lifestyle category saw a year-over-year growth of 14.3%, contributing nearly 60% of total sales in Q2 2024 [14][6] - The shooting sports category experienced a decline of 3.4% in net sales compared to the previous year, primarily due to a drop in aiming solution products [15][8] Market Data and Key Metrics Changes - Sales growth in the traditional channel increased by 8.7%, while e-commerce net sales rose by 3.3% year-over-year [15] - Point-of-sale data indicated a slight overall decline, with outdoor lifestyle remaining relatively flat and shooting sports showing a decline driven by aiming solutions [10][9] Company Strategy and Development Direction - The company aims to grow its outdoor lifestyle segment through retail expansion and strategic partnerships, such as the collaboration with Academy Sports and Outdoors [6][7] - Innovation is a core element of the company's long-term growth strategy, with over 25% of Q2 net sales generated from new product introductions [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving full-year net sales growth of up to 3.5% for fiscal 2024, with expectations for Q3 to be relatively flat compared to the previous year [21][25] - The company anticipates gross margins to be between 44% and 45% for the full fiscal year, indicating a slight decline in the second half [22] Other Important Information - The company ended Q2 2024 with cash of $8.4 million and no debt, having repurchased approximately $1.5 million of common stock [18][20] - A new share repurchase program of up to $10 million was approved, effective from October 2023 through September 2024 [20] Q&A Session Summary Question: Insights on MEAT's addition to traditional channels - Management confirmed that traditional channel growth occurred even without MEAT's sales, indicating positive underlying trends [30] Question: Demand for shooting sports products in October - Management noted that while aiming solutions declined, other brands performed well, indicating a mixed demand landscape [32] Question: Clarification on EBITDAS margin guidance - The expected EBITDAS margin range is between 4% and 5.5% [33] Question: Launch exclusivity and pricing for MEAT - Management clarified that while there are shared products between DTC and retail, there are also products tailored for retail customers [39] Question: Retail ordering patterns and opportunities - Management observed that retailers ordered earlier due to competitive promotions and inventory management strategies [42] Question: Performance of outdoor lifestyle versus shooting sports - Outdoor lifestyle outperformed shooting sports, with new product introductions driving sales [47] Question: Planned promotional strategy for the second half - Management indicated that promotions will continue but will be more strategic compared to Q2 [50] Question: Status of Grilla's retail expansion - Management confirmed plans for Grilla's retail placement but emphasized a testing approach rather than a full rollout [57] Question: M&A environment outlook - Management noted an increase in M&A activity expected in the first half of 2024, with valuations beginning to align more closely with buyer expectations [59][60]

[General Information](index=1&type=section&id=General%20Information) American Outdoor Brands, Inc. filed a Form 10-Q, detailing company information, forward-looking statements, and trademarks [Company Information and Filing Details](index=1&type=section&id=Company%20Information%20and%20Filing%20Details) American Outdoor Brands, Inc. filed a Form 10-Q for the quarter ended October 31, 2023, as an accelerated filer and emerging growth company listed on Nasdaq under AOUT - Registrant: **American Outdoor Brands, Inc.**[2](index=2&type=chunk) - Filing Type: Form 10-Q for the quarterly period ended **October 31, 2023**[1](index=1&type=chunk) - Exchange: Nasdaq Global Select Market, Trading Symbol: **AOUT**[2](index=2&type=chunk) - Filer Status: Accelerated filer and Emerging growth company[2](index=2&type=chunk) - Common Stock Outstanding (as of November 22, 2023): **12,936,665 shares**[2](index=2&type=chunk) [Statement Regarding Forward-Looking Information](index=3&type=section&id=Statement%20Regarding%20Forward-Looking%20Information) This section outlines the company's forward-looking statements and various risk factors that could materially affect actual results - Forward-looking statements cover future operating results, financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations[6](index=6&type=chunk) - Key risk factors include potential disruptions in supplier ability, lower consumer spending, ability to introduce successful new products, interruptions with third-party manufacturers, increased costs of materials, and ability to maintain brand recognition[7](index=7&type=chunk) - Other risks include dependence on large customers, ability to attract talent, pricing pressures, product recalls, intellectual property protection, inventory levels, acquisition integration, information system security, compliance with foreign laws, economic/social/political factors, and potential for increased regulation of firearms[8](index=8&type=chunk) [Trademarks](index=2&type=section&id=Trademarks) The company lists its registered and unregistered U.S. trademarks, along with licensed trademarks, used across its outdoor lifestyle and shooting sports accessory products - Company owns registered U.S. trademarks including Accumax®, BOG®, BUBBA®, Caldwell®, Crimson Trace®, Frankford Arsenal®, Grilla Grills®, Hooyman®, Imperial®, Lockdown®, MEAT! Your Maker, Old Timer®, Schrade®, Tipton®, Uncle Henry®, ust®, and Wheeler®[5](index=5&type=chunk) - Unregistered trademarks include AOB Products Company™, Dock and Unlock ™, Don't Be Outdoorsy – Be Outdoors™, Engineered for the Unknown™, From Niche to Known™, Lockdown Puck™, MEAT!™, Secure Your Lifestyle™, The Ultimate Lifestyle™, Unmatched Accuracy at the Bench and in the Field™, Water to Plate™, and Your Land. Your Legacy™[5](index=5&type=chunk) - Licensed trademarks from Smith & Wesson Brands, Inc. include M&P®, Performance Center®, Smith & Wesson®, and T/C®[5](index=5&type=chunk) [PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, as of October 31, 2023, and April 30, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Oct 31, 2023 | Apr 30, 2023 | Change | | :----- | :----------- | :----------- | :----- | | Cash and cash equivalents | $8,379 | $21,950 | $(13,571) | | Accounts receivable, net | $40,447 | $26,846 | $13,601 | | Inventories | $109,123 | $99,734 | $9,389 | | Total current assets | $164,266 | $157,620 | $6,646 | | Total assets | $243,650 | $243,587 | $63 | | Accounts payable | $17,805 | $11,544 | $6,261 | | Accrued expenses | $12,271 | $8,741 | $3,530 | | Total current liabilities | $33,993 | $23,002 | $10,991 | | Total liabilities | $57,659 | $51,723 | $5,936 | | Total equity | $185,991 | $191,864 | $(5,873) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income or loss for the three and six months ended October 31, 2023 and 2022 Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Net sales | $57,931 | $54,436 | $3,495 | 6.4% | | Gross profit | $26,490 | $25,962 | $528 | 2.0% | | Operating loss | $(22) | $(134) | $112 | -83.6% | | Net income/(loss) | $77 | $370 | $(293) | -79.2% | | Basic EPS | $0.01 | $0.03 | $(0.02) | -66.7% | | Diluted EPS | $0.01 | $0.03 | $(0.02) | -66.7% | | **6 Months Ended Oct 31, 2023** | | | | | | Net sales | $101,376 | $98,112 | $3,264 | 3.3% | | Gross profit | $46,209 | $45,001 | $1,208 | 2.7% | | Operating loss | $(4,106) | $(5,695) | $1,589 | -27.9% | | Net income/(loss) | $(4,036) | $(5,325) | $1,289 | -24.2% | | Basic EPS | $(0.31) | $(0.40) | $0.09 | -22.5% | | Diluted EPS | $(0.31) | $(0.40) | $0.09 | -22.5% | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in the company's equity, including net income, stock-based compensation, and treasury stock repurchases Stockholders' Equity Highlights (in thousands) | Metric | Oct 31, 2023 | Apr 30, 2023 | Change | | :---------------------------------------- | :----------- | :----------- | :----- | | Total Equity | $185,991 | $191,864 | $(5,873) | | Net income/(loss) (6 months) | $(4,036) | N/A | N/A | | Stock-based compensation (6 months) | $1,938 | N/A | N/A | | Repurchase of treasury stock (6 months) | $(3,762) | N/A | N/A | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Provides a summary of cash inflows and outflows from operating, investing, and financing activities for the six months ended October 31, 2023 and 2022 Cash Flow Highlights (Six Months Ended October 31, in thousands) | Activity | 2023 | 2022 | Change | | :-------------------------------------- | :--------- | :--------- | :------- | | Net cash (used in)/provided by operating activities | $(3,215) | $6,167 | $(9,382) | | Net cash used in investing activities | $(1,581) | $(3,311) | $1,730 | | Net cash used in financing activities | $(8,775) | $(6,022) | $(2,753) | | Net decrease in cash and cash equivalents | $(13,571) | $(3,166) | $(10,405) | | Cash and cash equivalents, end of period | $8,379 | $16,355 | $(7,976) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies, asset/liability categories, and other financial disclosures [(1) Organization](index=9&type=section&id=%281%29%20Organization) Describes the company as a leading provider of outdoor lifestyle products and shooting sports accessories, organized into four consumer verticals - Company is a leading provider of outdoor lifestyle products and shooting sports accessories[21](index=21&type=chunk) - Brands are organized into four consumer verticals: Adventurer (fishing, outdoor cooking, camping), Harvester (hunting preparedness and post-hunt activities), Marksman (shooting range, firearm maintenance), and Defender (self-defense, personal security)[21](index=21&type=chunk) - Products are conceived, designed, sourced, and sold, with some electro-optics manufactured in Columbia, Missouri, and most products manufactured/assembled by third parties in Asia[21](index=21&type=chunk) [(2) Basis of Presentation](index=9&type=section&id=%282%29%20Basis%20of%20Presentation) Explains that interim financial statements are unaudited and prepared in accordance with SEC requirements, detailing revenue recognition and sales breakdowns - Interim financial statements are unaudited and prepared in accordance with SEC requirements, with condensed GAAP disclosures[22](index=22&type=chunk) - Revenue is recognized when control of ownership transfers to the customer, typically on shipment or delivery, excluding sales tax[26](index=26&type=chunk) Net Sales by Channel (Three Months Ended Oct 31, in thousands) | Channel | 2023 | 2022 | Change | % Change | | :--------------------- | :----- | :----- | :----- | :------- | | e-commerce channels | $23,462 | $22,713 | $749 | 3.3% | | Traditional channels | $34,469 | $31,723 | $2,746 | 8.7% | | Total net sales | $57,931 | $54,436 | $3,495 | 6.4% | Net Sales by Geography (Three Months Ended Oct 31, in thousands) | Geography | 2023 | 2022 | Change | % Change | | :-------------------- | :----- | :----- | :----- | :------- | | Domestic net sales | $54,982 | $52,106 | $2,876 | 5.5% | | International net sales | $2,949 | $2,330 | $619 | 26.6% | | Total net sales | $57,931 | $54,436 | $3,495 | 6.4% | Net Sales by Product Category (Three Months Ended Oct 31, in thousands) | Category | 2023 | 2022 | Change | % Change | | :------------------ | :----- | :----- | :----- | :------- | | Shooting sports | $23,371 | $24,191 | $(820) | -3.4% | | Outdoor lifestyle | $34,560 | $30,245 | $4,315 | 14.3% | | Total net sales | $57,931 | $54,436 | $3,495 | 6.4% | Net Sales by Channel (Six Months Ended Oct 31, in thousands) | Channel | 2023 | 2022 | Change | % Change | | :--------------------- | :----- | :----- | :----- | :------- | | e-commerce channels | $41,838 | $43,257 | $(1,419) | -3.3% | | Traditional channels | $59,538 | $54,855 | $4,683 | 8.5% | | Total net sales | $101,376 | $98,112 | $3,264 | 3.3% | Net Sales by Geography (Six Months Ended Oct 31, in thousands) | Geography | 2023 | 2022 | Change | % Change | | :-------------------- | :----- | :----- | :----- | :------- | | Domestic net sales | $94,771 | $92,382 | $2,389 | 2.6% | | International net sales | $6,605 | $5,730 | $875 | 15.3% | | Total net sales | $101,376 | $98,112 | $3,264 | 3.3% | Net Sales by Product Category (Six Months Ended Oct 31, in thousands) | Category | 2023 | 2022 | Change | % Change | | :------------------ | :----- | :----- | :----- | :------- | | Shooting sports | $43,446 | $44,579 | $(1,133) | -2.5% | | Outdoor lifestyle | $57,930 | $53,533 | $4,397 | 8.2% | | Total net sales | $101,376 | $98,112 | $3,264 | 3.3% | [(3) Leases](index=11&type=section&id=%283%29%20Leases) Details the company's operating lease assets and liabilities, including recognition principles, weighted average terms, and future payment schedules - Operating lease assets and liabilities are recognized at commencement based on the present value of lease payments[38](index=38&type=chunk) Operating Lease Assets and Liabilities (in thousands) | Metric | Oct 31, 2023 | Apr 30, 2023 | | :-------------------------------- | :----------- | :----------- | | Right-of-use assets, net | $23,736 | $24,198 | | Lease liabilities, current portion | $985 | $904 | | Lease liabilities, net of current portion | $23,648 | $24,064 | | Total operating lease liabilities | $24,633 | $24,968 | - Weighted average lease term: **15.1 years**; Weighted average discount rate: **5.4%** (as of Oct 31, 2023)[40](index=40&type=chunk) Future Operating Lease Payments (in thousands) | Fiscal Year | Amount | | :---------- | :----- | | 2024 | $1,150 | | 2025 | $2,300 | | 2026 | $2,197 | | 2027 | $2,207 | | 2028 | $2,238 | | Thereafter | $26,426 | | Total future lease payments | $36,518 | [(4) Intangible Assets, net](index=13&type=section&id=%284%29%20Intangible%20Assets%2C%20net) Presents the net book value of intangible assets, including customer relationships, developed software, patents, and trademarks, along with amortization details Intangible Assets, Net (in thousands) | Asset Class | Oct 31, 2023 (Net) | Apr 30, 2023 (Net) | | :-------------------------------- | :----------------- | :----------------- | | Customer relationships | $13,524 | $15,945 | | Developed software and technology | $8,151 | $9,044 | | Patents, trademarks, and trade names | $22,207 | $24,901 | | Patents and software in development | $2,039 | $1,701 | | Indefinite-lived intangible assets | $430 | $430 | | Total intangible assets, net | $46,351 | $52,021 | - Weighted-average amortization period for definite-lived intangible assets is approximately **five years**[46](index=46&type=chunk) Amortization Expense (in thousands) | Period | 2023 | 2022 | | :-------------------------------- | :----- | :----- | | Three months ended October 31 | $3,200 | $3,300 | | Six months ended October 31 | $6,500 | $6,800 | Future Expected Amortization Expense (in thousands) | Fiscal Year | Amount | | :---------- | :----- | | 2024 | $6,462 | | 2025 | $9,500 | | 2026 | $8,152 | | 2027 | $5,798 | | 2028 | $4,479 | | Thereafter | $9,491 | | Total | $43,882 | [(5) Fair Value Measurement](index=13&type=section&id=%285%29%20Fair%20Value%20Measurement) Describes the company's fair value measurements, categorized into a three-level hierarchy based on input observability, with cash and cash equivalents classified as Level 1 - Fair value measurements are categorized into a three-level hierarchy based on input observability[49](index=49&type=chunk) - Cash and cash equivalents (**$8.4 million** as of Oct 31, 2023) are classified as Level 1, valued using unadjusted quoted prices in active markets[50](index=50&type=chunk) - The company has no Level 3 financial assets or liabilities as of October 31, 2023[52](index=52&type=chunk) [(6) Inventories](index=14&type=section&id=%286%29%20Inventories) Provides a breakdown of inventories by category, including finished goods, finished parts, work in process, and raw materials, as of October 31, 2023, and April 30, 2023 Inventories (in thousands) | Category | Oct 31, 2023 | Apr 30, 2023 | | :---------------- | :----------- | :----------- | | Finished goods | $98,445 | $90,906 | | Finished parts | $2,860 | $2,818 | | Work in process | $132 | $66 | | Raw material | $7,686 | $5,944 | | Total inventories | $109,123 | $99,734 | - Inventory on deposit with suppliers in Asia amounted to **$3.6 million** as of October 31, 2023[54](index=54&type=chunk) [(7) Debt](index=14&type=section&id=%287%29%20Debt) Details the company's revolving line of credit, including its maturity, outstanding borrowings, and applicable interest rate - Revolving line of credit: **$75 million**, maturing March 2027[56](index=56&type=chunk) - No outstanding borrowings on the revolving line of credit as of October 31, 2023[57](index=57&type=chunk) - Interest rate (if borrowed): approximately **6.85%** (SOFR plus applicable margin)[57](index=57&type=chunk) [(8) Equity](index=15&type=section&id=%288%29%20Equity) Discusses changes in stockholders' equity, including treasury stock repurchases, earnings per share calculations, and incentive stock and employee stock purchase plans [Treasury Stock](index=15&type=section&id=Treasury%20Stock) Details the company's common stock repurchase authorization and shares repurchased during the six months ended October 31, 2023 - New **$10.0 million** common stock repurchase authorization approved on October 2, 2023, expiring September 30, 2024[59](index=59&type=chunk) Common Stock Repurchases (Six Months Ended Oct 31, 2023, in thousands, except per share data) | Period | Shares Purchased | Average Price Per Share | Total Value | | :-------------------------------- | :--------------- | :---------------------- | :---------- | | Total year-to-date fiscal year 2024 | 425,527 | $8.81 | $3,762 | - As of October 31, 2023, **$9.5 million** remains available for repurchases under the current authorization[140](index=140&type=chunk) [Earnings per Share](index=15&type=section&id=Earnings%20per%20Share) Presents basic and diluted earnings per share for the three and six months ended October 31, 2023 and 2022, noting anti-dilutive effects Earnings Per Share (in thousands, except per share data) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | | :---------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.01 | $0.03 | | Diluted EPS | $0.01 | $0.03 | | **6 Months Ended Oct 31, 2023** | | | | Basic EPS | $(0.31) | $(0.40) | | Diluted EPS | $(0.31) | $(0.40) | - No common shares added to calculate dilutive EPS for the six months ended October 31, 2023 and 2022, due to operating loss (anti-dilutive effect)[61](index=61&type=chunk) [Incentive Stock and Employee Stock Purchase Plans](index=15&type=section&id=Incentive%20Stock%20and%20Employee%20Stock%20Purchase%20Plans) Describes the company's RSU, PSU, and ESPP programs, including vesting schedules, stock-based compensation expense, and unrecognized compensation - Grants RSUs (vest over 3-4 years) and PSUs (vest over 3-year performance period based on TSR vs. Russell 2000 Index)[62](index=62&type=chunk)[66](index=66&type=chunk) Stock-Based Compensation Activity (Six Months Ended Oct 31, 2023, in thousands) | Metric | RSUs and PSUs Outstanding (2023) | Weighted Average Grant Date Value (2023) | | :--------------------------------- | :------------------------------- | :--------------------------------------- | | Beginning of period | 560,579 | $13.36 | | Awarded | 394,332 | $8.69 | | Vested | (161,149) | $11.86 | | Forfeited | (51,742) | $9.62 | | End of period | 742,020 | $11.46 | - Stock-based compensation expense: **$1.9 million** (six months ended Oct 31, 2023)[69](index=69&type=chunk) - Unrecognized compensation expense: **$3.4 million**, to be recognized over a weighted average remaining contractual term of **1.5 years**[70](index=70&type=chunk) - ESPP allows employees to purchase common stock at **85%** of the lower of the fair market value on the first day of the offering period or the exercise date[71](index=71&type=chunk) [(9) Accrued Expenses](index=17&type=section&id=%289%29%20Accrued%20Expenses) Provides a detailed breakdown of accrued expenses, including freight, sales allowances, professional fees, and commissions, as of October 31, 2023, and April 30, 2023 Accrued Expenses (in thousands) | Category | Oct 31, 2023 | Apr 30, 2023 | | :-------------------------------- | :----------- | :----------- | | Accrued freight | $3,984 | $1,962 | | Accrued sales allowances | $3,579 | $2,453 | | Accrued professional fees | $1,255 | $1,106 | | Accrued commissions | $1,291 | $1,072 | | Accrued warranty | $948 | $966 | | Accrued employee benefits | $518 | $568 | | Accrued taxes other than income | $358 | $346 | | Accrued other | $338 | $268 | | Total accrued expenses | $12,271 | $8,741 | [(10) Income Taxes](index=17&type=section&id=%2810%29%20Income%20Taxes) Presents the income tax benefit or expense and effective tax rates for the three and six months ended October 31, 2023 and 2022, primarily impacted by valuation allowance Income Tax (Benefit)/Expense (in thousands) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Income tax benefit | $(40) | $(161) | | Effective tax rate | -108.1% | -77.0% | | **6 Months Ended Oct 31, 2023** | | | | Income tax expense | $15 | $28 | | Effective tax rate | -0.4% | -0.5% | - Income tax expense/benefit primarily due to a full valuation allowance recorded against deferred tax assets[77](index=77&type=chunk) [(11) Commitments and Contingencies](index=18&type=section&id=%2811%29%20Commitments%20and%20Contingencies) Discusses the company's litigation, the upcoming lease assumption for its Columbia, Missouri facility, and a gain contingency related to duty drawback mechanisms [Litigation](index=18&type=section&id=Litigation) The company is involved in ordinary course litigation, with no material expenses for product liability defense or settlements during the reported periods - Involved in lawsuits, claims, investigations, and proceedings in the ordinary course of business[78](index=78&type=chunk) - No material expenses for product liability litigation defense, administrative costs, or settlement fees for the three and six months ended October 31, 2023 and 2022[78](index=78&type=chunk) [Assignment and Assumption Agreement](index=18&type=section&id=Assignment%20and%20Assumption%20Agreement) Effective January 1, 2024, the company will assume full lease for its Columbia, Missouri facility, expecting incremental annual expenses offset by consolidation savings - Effective January 1, 2024, company will assume full lease for **632,000 sq ft** Columbia, Missouri facility[79](index=79&type=chunk) - Estimated incremental annual expense of **$1.3 million** under the new lease, expected to be offset by facility consolidation savings and distribution efficiencies[79](index=79&type=chunk) - Expected increase of **$12.8 million** in right-of-use asset on the consolidated balance sheet[79](index=79&type=chunk) [Gain Contingency](index=18&type=section&id=Gain%20Contingency) The company is utilizing a duty drawback mechanism to offset Section 301 tariffs on Chinese imports for internationally sold products, with gains recorded upon resolution - Utilizing duty drawback mechanism to offset Section 301 tariffs on Chinese imports for internationally sold products[80](index=80&type=chunk) - Gains from reimbursements will be recorded when the contingency is resolved[80](index=80&type=chunk) [(12) Segment Reporting](index=19&type=section&id=%2812%29%20Segment%20Reporting) The company operates as one segment, with the CEO reviewing only consolidated financial information for resource allocation, despite analyzing revenue by various categories - Company operates as one segment; CEO reviews only consolidated financial information for resource allocation[83](index=83&type=chunk) - Revenue streams are analyzed by customer group, brands, product categories, and channels, but lack full discrete financial information for separate reporting units[83](index=83&type=chunk) - Brand lanes (Adventurer, Harvester, Marksman, Defender) are focused on product development and marketing, not separate reporting units[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed discussion and analysis of the company's financial condition and results of operations, including key highlights, performance metrics, and liquidity [Overview](index=20&type=section&id=Overview) Provides an overview of the financial discussion and analysis for the three and six months ended October 31, 2023 and 2022, including product category definitions - Discussion and analysis covers financial condition and results of operations for three and six months ended October 31, 2023 and 2022[87](index=87&type=chunk) - Includes forward-looking statements subject to risks and uncertainties[87](index=87&type=chunk) - Product categories defined: Shooting sports (accessories, personal protection) and Outdoor lifestyle (hunting, fishing, camping, rugged outdoor, outdoor cooking)[87](index=87&type=chunk) [Second Quarter Fiscal 2023 Highlights](index=20&type=section&id=Second%20Quarter%20Fiscal%202023%20Highlights) Summarizes key financial metrics for the second quarter and six months ended October 31, 2023, including net sales, gross margin, net income, and Adjusted EBITDAS Second Quarter Fiscal 2023 Highlights (in thousands, except per share data) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $57,900 | $54,400 | | Gross margin | 45.7% | 47.7% | | Net income | $77 | $370 | | Diluted EPS | $0.01 | $0.03 | | Non-GAAP Adjusted EBITDAS | $5,200 | $6,400 | | **6 Months Ended Oct 31, 2023** | | | | Net sales | $101,400 | $98,100 | | Gross margin | 45.6% | 45.9% | | Net loss | $(3,900) | $(5,300) | | Diluted EPS | $(0.29) | $(0.40) | | Non-GAAP Adjusted EBITDAS | $6,400 | $7,800 | [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including net sales, gross profit, operating expenses, operating loss, income taxes, and net income or loss for the reported periods [Net Sales and Gross Profit](index=20&type=section&id=Net%20Sales%20and%20Gross%20Profit) Details the company's net sales and gross profit performance, highlighting drivers of change and gross margin fluctuations for the three and six months ended October 31, 2023 Consolidated Net Sales and Gross Profit (Three Months Ended Oct 31, in thousands) | Metric | 2023 | 2022 | Change | % Change | | :---------------- | :----- | :----- | :----- | :------- | | Net sales | $57,931 | $54,436 | $3,495 | 6.4% | | Cost of sales | $31,441 | $28,474 | $2,967 | 10.4% | | Gross profit | $26,490 | $25,962 | $528 | 2.0% | - Three months: Net sales increase driven by outdoor lifestyle products[95](index=95&type=chunk) - Gross margin decreased **200 basis points** due to promotional product discounts[97](index=97&type=chunk) - Six months: Net sales increase driven by outdoor lifestyle products[102](index=102&type=chunk) - Gross margin remained relatively flat[104](index=104&type=chunk) - New products (SKUs introduced over prior two fiscal years) represented **25.3%** of net sales for the three months and **23.5%** for the six months ended October 31, 2023[97](index=97&type=chunk)[104](index=104&type=chunk) [Operating Expenses](index=22&type=section&id=Operating%20Expenses) Provides a breakdown and analysis of research and development, selling, marketing, distribution, and general and administrative expenses for the reported periods Operating Expenses (Three Months Ended Oct 31, in thousands) | Expense Category | 2023 | 2022 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Research and development | $1,675 | $1,557 | $118 | 7.6% | | Selling, marketing, and distribution | $15,414 | $13,924 | $1,490 | 10.7% | | General and administrative | $9,423 | $10,615 | $(1,192) | -11.2% | | Total operating expenses | $26,512 | $26,096 | $416 | 1.6% | - Three months: Selling, marketing, and distribution increased due to outbound freight and sales volume[107](index=107&type=chunk) - General and administrative decreased due to lower insurance, ERP expenses, and rent from facility consolidations[107](index=107&type=chunk) Operating Expenses (Six Months Ended Oct 31, in thousands) | Expense Category | 2023 | 2022 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Research and development | $3,274 | $3,313 | $(39) | -1.2% | | Selling, marketing, and distribution | $27,468 | $25,704 | $1,764 | 6.9% | | General and administrative | $19,573 | $21,679 | $(2,106) | -9.7% | | Total operating expenses | $50,315 | $50,696 | $(381) | -0.8% | - Six months: Selling, marketing, and distribution increased due to outbound freight and sales volume[108](index=108&type=chunk) - General and administrative decreased due to lower legal/advisory fees, ERP expenses, and rent from facility consolidations[108](index=108&type=chunk) [Operating Loss](index=23&type=section&id=Operating%20Loss) Discusses the company's operating loss for the three and six months ended October 31, 2023 and 2022, and the factors contributing to its change Operating Loss (in thousands) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | Change | % Change | | :--------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Operating loss | $(22) | $(134) | $112 | -83.6% | | **6 Months Ended Oct 31, 2023** | | | | | | Operating loss | $(4,106) | $(5,695) | $1,589 | -27.9% | - Three months: Operating loss improved due to lower operating expenses[110](index=110&type=chunk) - Six months: Operating loss narrowed due to higher gross profit and lower operating expenses[112](index=112&type=chunk) [Income Taxes](index=23&type=section&id=Income%20Taxes) Presents the income tax benefit or expense and effective tax rates, noting the primary impact of a full valuation allowance against deferred tax assets Income Tax (Benefit)/Expense (in thousands) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Income tax benefit | $(40) | $(161) | $121 | -75.2% | | Effective tax rate | -108.1% | -77.0% | -31.1% | | | **6 Months Ended Oct 31, 2023** | | | | | | Income tax expense | $15 | $28 | $(13) | -46.4% | | Effective tax rate | -0.4% | -0.5% | 0.1% | | - Income tax expense/benefit primarily due to a full valuation allowance recorded against deferred tax assets[115](index=115&type=chunk)[116](index=116&type=chunk) [Net Income/(loss)](index=24&type=section&id=Net%20Income%2F%28loss%29) Details the company's net income or loss and diluted EPS for the three and six months ended October 31, 2023 and 2022, and the factors influencing these results Net Income/(Loss) (in thousands, except per share data) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | Change | % Change | | :---------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Net income | $77 | $370 | $(293) | -79.2% | | Diluted EPS | $0.01 | $0.03 | $(0.02) | -66.7% | | **6 Months Ended Oct 31, 2023** | | | | | | Net loss | $(4,036) | $(5,325) | $1,289 | -24.2% | | Diluted EPS | $(0.31) | $(0.40) | $0.09 | -22.5% | - Three months: Net income decreased primarily due to lower gross profit[118](index=118&type=chunk) - Six months: Net loss narrowed primarily due to lower operating expenses and higher gross profit[120](index=120&type=chunk) [Non-GAAP Financial Measure (Adjusted EBITDAS)](index=24&type=section&id=Non-GAAP%20Financial%20Measure%20%28Adjusted%20EBITDAS%29) Defines Adjusted EBITDAS as a non-GAAP measure used to assess underlying performance trends, evaluate strategies, and compare against peers - Adjusted EBITDAS is a non-GAAP measure defined as GAAP net income/(loss) before interest, taxes, depreciation, amortization, stock compensation expense, and certain non-routine items[121](index=121&type=chunk) Non-GAAP Adjusted EBITDAS (in thousands) | Metric | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | | Non-GAAP Adjusted EBITDAS | $5,241 | $6,414 | | **6 Months Ended Oct 31, 2023** | | | | Non-GAAP Adjusted EBITDAS | $6,367 | $7,796 | - Adjusted EBITDAS is used to understand underlying performance trends, evaluate business strategies, make budgeting decisions, and compare performance against peers[121](index=121&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's cash flows from operating, investing, and financing activities, and its overall liquidity and capital resource management [Operating Activities](index=25&type=section&id=Operating%20Activities) Analyzes cash flows from operating activities, highlighting the impact of changes in accounts receivable, inventory, accounts payable, and accrued expenses - Cash used in operating activities: **$3.2 million** (six months ended Oct 31, 2023) vs. **$6.2 million** provided (prior year)[127](index=127&type=chunk) - Impacted by **$13.6 million** higher accounts receivable and **$9.4 million** higher inventory (planned build for seasons and new product launches)[127](index=127&type=chunk) - Partially offset by **$6.3 million** increased accounts payable and **$3.5 million** increased accrued expenses[127](index=127&type=chunk) - Expects overall inventory balance to decline by end of fiscal year ending April 30, 2024[127](index=127&type=chunk) [Investing Activities](index=26&type=section&id=Investing%20Activities) Details cash used in investing activities, primarily for capital expenditures, and expected future capital expenditure levels - Cash used in investing activities: **$1.6 million** lower (six months ended Oct 31, 2023) due to reduced IT infrastructure and ERP system spending[129](index=129&type=chunk) - Expected capital expenditures for fiscal 2024: **$6.0 million to $7.0 million**[129](index=129&type=chunk) [Financing Activities](index=26&type=section&id=Financing%20Activities) Explains cash used in financing activities, primarily from debt repayment on the revolving line of credit and common stock repurchases - Cash used in financing activities: **$8.8 million** (six months ended Oct 31, 2023)[130](index=130&type=chunk) - Primarily from **$5.0 million** debt repayment on revolving line of credit and **$3.8 million** for common stock repurchases[130](index=130&type=chunk) [Other Matters](index=26&type=section&id=Other%20Matters) States that there are no material changes to critical accounting policies or expected material impacts from recent accounting pronouncements - No material changes to critical accounting policies from those disclosed in the Annual Report on Form 10-K[132](index=132&type=chunk) - No recent accounting pronouncements are expected to have a material impact on condensed consolidated financial statements[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no material changes to the company's quantitative and qualitative disclosures about market risk from the information provided in its previous Form 10-K - No material changes from market risk disclosures in the Form 10-K[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) As of October 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Disclosure controls and procedures were effective as of October 31, 2023, as evaluated by CEO and CFO[135](index=135&type=chunk) - No material changes to internal control over financial reporting during the most recent fiscal quarter[136](index=136&type=chunk) [PART II - OTHER INFORMATION](index=27&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, other information, exhibits, and signatures for the quarterly report [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company's legal proceedings are discussed in Note 11 (Commitments and Contingencies) to the financial statements, which is incorporated by reference - Legal proceedings information is incorporated by reference from Note 11 – Commitments and Contingencies[137](index=137&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed on June 28, 2023 - No material changes to risk factors previously disclosed in the Annual Report on Form 10-K[138](index=138&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the six months ended October 31, 2023, totaling 425,527 shares for $3.8 million Common Stock Repurchases (Six Months Ended Oct 31, 2023, in thousands, except per share data) | Period | Total of Shares Purchased | Average Price Paid Per Share | Maximum Value May Yet Be Purchased | | :-------------------------------- | :-------------------------- | :--------------------------- | :--------------------------------- | | Total year-to-date fiscal year 2024 | 425,527 | $8.81 | $9,537 | - New **$10.0 million** common stock repurchase authorization approved on October 2, 2023, expiring September 30, 2024[140](index=140&type=chunk) - As of October 31, 2023, **$9.5 million** of available funds to repurchase common stock under current authorization[140](index=140&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) During the quarter ended October 31, 2023, none of the company's directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended October 31, 2023[141](index=141&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer - Includes Rule 13a-14(a)/15d-14(a) Certifications (31.1, 31.2) and Section 1350 Certifications (32.1, 32.2) from Principal Executive Officer and Principal Financial Officer[143](index=143&type=chunk)[144](index=144&type=chunk) - Includes Inline XBRL Taxonomy Extension Schema, Instance, Calculation, Definition, Label, and Presentation Linkbase Documents (101.SCH, 101.INS, 101.CAL, 101.DEF, 101.LAB, 101.PRE) and Cover Page Interactive Data File (104)[145](index=145&type=chunk)[146](index=146&type=chunk) [Signatures](index=29&type=section&id=Signatures) The report is duly signed on November 30, 2023, by the President and CEO, and the EVP, CFO, and Treasurer - Report signed on **November 30, 2023**[148](index=148&type=chunk) - Signed by Brian D. Murphy (President and CEO) and H. Andrew Fulmer (EVP, CFO, and Treasurer)[148](index=148&type=chunk)

American Outdoor Brands, Inc. (NASDAQ:AOUT) Q1 2024 Earnings Conference Call September 7, 2023 5:00 PM ET Company Participants Liz Sharp - VP, IR Brian Murphy - President & CEO Andrew Fulmer - EVP, CEO & Treasurer Conference Call Participants Eric Wold - B. Riley Securities Alex Sturnieks - Lake Street Capital Markets Matthew Koranda - ROTH Capital Markets Operator Good afternoon and welcome to the American Outdoor Brands First Quarter Fiscal 2024 Earnings Conference Call. All participants will be in listen ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2023 Commission File No. 001-39366 | --- | --- | |------------------------------------------------------------------------------------------------------------------|------------------------------------------| ...

American Outdoor Brands, Inc. (NASDAQ:AOUT) Q4 2023 Earnings Conference Call June 28, 2023 5:00 PM ET Company Participants Liz Sharp - Vice President, Investor Relations Brian Murphy - President and Chief Executive Officer Andrew Fulmer - Executive Vice President, Chief Financial Officer and Treasurer Conference Call Participants Mark Smith - Lake Street Capital Markets Eric Wold - B. Riley Securities Matthew Koranda - ROTH MKM Operator Good afternoon and welcome to the American Outdoor Brands Fourth Quarte ...

PART I [ITEM 1. BUSINESS](index=6&type=section&id=ITEM%201.%20BUSINESS) American Outdoor Brands, Inc, a leading provider of outdoor lifestyle and shooting sports accessories, operates through four brand lanes and focuses on innovation, direct-to-consumer growth, and strategic acquisitions - The company designs, sources, and sells outdoor lifestyle products (knives, tools, cooking, camping) and shooting sports accessories (rests, optics, reloading supplies)[18](index=18&type=chunk) - Manufacturing of some electro-optics occurs in Columbia, Missouri, with most products manufactured/assembled by third parties in Asia[18](index=18&type=chunk) - The company organizes its brands into four consumer verticals: Adventurer (fishing, outdoor cooking, camping), Harvester (hunting, meat processing), Marksman (shooting range, firearm maintenance), and Defender (self-defense, security/storage)[19](index=19&type=chunk) - Key strategies include introducing innovative new products, expanding addressable markets, cultivating direct-to-consumer relationships, enhancing the supply chain, and pursuing strategic acquisitions[21](index=21&type=chunk) **Financial Performance (FY2021-2023)** | Metric | FY2023 ($M) | FY2022 ($M) | FY2021 ($M) | | :--- | :--- | :--- | :--- | | Net Sales | 191.2 | 247.5 | 276.7 | | Gross Profit | 88.1 | 114.2 | 126.8 | | Total Assets | 243.6 | 277.8 | N/A | - Outdoor recreation participation grew by **2.3%** in calendar 2022 to **168.1 million participants** (55% of US population aged 6+)[27](index=27&type=chunk) - The acquisition of Grilla Grills in March 2022 provided entry into the estimated **$7 billion outdoor cooking industry**[27](index=27&type=chunk) - The company has approximately 30 product designers, engineers, and software developers, delivering over 200 new products annually and holding over 380 patents and patents pending[30](index=30&type=chunk) - Direct-to-consumer sales **increased 76.0%** over fiscal 2022, with DTC-exclusive brands representing **$24.4 million (28.0%)** of total e-commerce channel net sales in fiscal 2023[37](index=37&type=chunk)[60](index=60&type=chunk) **R&D Spending** | Year | Gross Spending on R&D ($M) | | :--- | :--- | | FY2023 | 6.4 | | FY2022 | 5.5 | | FY2021 | 5.4 | **Advertising & Promotion Expenses** | Year | Expenses ($M) | | :--- | :--- | | FY2023 | 11.9 | | FY2022 | 13.3 | | FY2021 | 14.4 | - The world's largest e-commerce retailer accounted for **25.4% of net sales** in FY2023 and **27.8% in FY2022**[60](index=60&type=chunk) - Order backlog was **$7.0 million** as of April 30, 2023, up from **$3.7 million** in FY2022[92](index=92&type=chunk) [ITEM 1A. RISK FACTORS](index=22&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces risks from supply chain dependence, product innovation needs, outsourcing, cost volatility, brand maintenance, demand forecasting, e-commerce challenges, competition, and customer concentration - The company is vulnerable to disruptions in supplier capabilities, raw material availability, and distribution networks, especially from Asia, with most operations concentrated in one Missouri facility[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - Success hinges on the timely introduction of innovative products that achieve market acceptance[113](index=113&type=chunk) - A significant portion of production is outsourced to third-party manufacturers, primarily in Asia, posing risks of disruption from financial, natural, or political instability[114](index=114&type=chunk) - Costs and availability of finished products, components, and raw materials are volatile due to economic conditions, labor costs, tariffs, and exchange rates, impacting margins[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Inaccurate forecasting of customer demand can lead to excess inventory or product shortages, resulting in financial losses and reputational damage[131](index=131&type=chunk)[132](index=132&type=chunk) - Challenges in e-commerce include intense promotional pressure, potential impact on gross margins, and risks associated with technology, data security, and competition with retailers[134](index=134&type=chunk)[136](index=136&type=chunk) - A substantial portion of revenue depends on a small number of large customers, with the largest e-commerce retailer accounting for **25.4% of FY2023 net sales**[140](index=140&type=chunk)[142](index=142&type=chunk) - Performance is influenced by general economic conditions, consumer spending patterns, and political factors, including potential increased regulation of firearms and related products[153](index=153&type=chunk)[155](index=155&type=chunk)[157](index=157&type=chunk) - Future acquisitions involve significant risks, including integration difficulties, unforeseen expenses, and failure to achieve expected synergies[164](index=164&type=chunk)[166](index=166&type=chunk)[171](index=171&type=chunk) - Inability to protect intellectual property or claims of infringement by third parties could impair competitive advantage and increase costs[187](index=187&type=chunk)[191](index=191&type=chunk) - The company is subject to **Section 301 tariffs** on goods from China, which can increase costs and reduce margins[199](index=199&type=chunk)[200](index=200&type=chunk) - Reliance on IT systems creates vulnerability to interruptions, failures, or cyber security breaches that could disrupt operations and damage reputation[202](index=202&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) - Exposure to product recalls, product liability claims, and class-action lawsuits could lead to substantial monetary judgments and reputational damage[210](index=210&type=chunk)[213](index=213&type=chunk) - The market price and trading volume of common stock may be volatile due to earnings fluctuations, analyst estimates, and economic conditions[220](index=220&type=chunk) - Provisions in corporate documents and Delaware law may discourage or delay acquisitions, potentially decreasing stock price[224](index=224&type=chunk)[225](index=225&type=chunk) - Future equity issuances could dilute current investors' ownership and negatively impact EPS[228](index=228&type=chunk)[229](index=229&type=chunk) - Failure to maintain effective internal controls could lead to inaccurate financial reporting and adverse effects on business and stock price[237](index=237&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=45&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company has no unresolved staff comments from the SEC - The company has no unresolved staff comments from the SEC[238](index=238&type=chunk) [ITEM 2. PROPERTIES](index=45&type=section&id=ITEM%202.%20PROPERTIES) The company's principal operating properties are leased and include facilities in Missouri, Michigan, Massachusetts, and China **Principal Properties (as of April 30, 2023)** | Location | Facility Type | | :--- | :--- | | Columbia, Missouri | Corporate Office and Warehouse | | Holland, Michigan | Storefront | | Chicopee, Massachusetts | Administrative Office | | Shenzhen, Peoples Republic of China | Office | - The company will assume the lease for the entire 632,000 sq ft Columbia, Missouri facility effective January 1, 2024, with an option to expand by up to 491,000 additional sq ft[69](index=69&type=chunk)[70](index=70&type=chunk)[512](index=512&type=chunk)[514](index=514&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=45&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is occasionally involved in various lawsuits and claims, which it actively monitors and vigorously defends - The company is subject to lawsuits, claims, investigations, and proceedings related to product liability, intellectual property, commercial relationships, employment, and governmental matters[75](index=75&type=chunk) - The company actively monitors litigation and intends to vigorously defend claims and assert all appropriate defenses[75](index=75&type=chunk) - **No material expenses** were incurred for product liability litigation defense or settlements in FY2021-2023[508](index=508&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=45&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - The company has no mine safety disclosures[240](index=240&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=46&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq under "AOUT," with an active share repurchase program and no history of paying cash dividends - Common stock trades on the Nasdaq Global Select Market under the symbol **"AOUT"**[242](index=242&type=chunk) - As of June 21, 2023, there were **228 record holders** of common stock[243](index=243&type=chunk) - The company has **never declared or paid cash dividends** and plans to retain all available funds and future earnings to fund business development and expansion[244](index=244&type=chunk) **Share Repurchase Program (FY2023)** | Metric | Value | | :--- | :--- | | Total Shares Purchased | 377,034 | | Average Price Paid Per Share | $9.34 | | Total Value of Shares Purchased | $3.5 million | | Maximum Dollar Value Remaining | $6.5 million | - On September 30, 2022, the Board authorized repurchases of up to **$10.0 million** of common stock through September 29, 2023[250](index=250&type=chunk) [ITEM 6. RESERVED](index=48&type=section&id=ITEM%206.%20RESERVED) This item is reserved and not applicable - This item is intentionally left blank[251](index=251&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=49&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Fiscal 2023 saw a 22.8% net sales decrease to $191.2 million, a net loss of $12.0 million, and significantly improved operating cash flow of $30.7 million driven by inventory reduction **Fiscal 2023 Highlights** | Metric | FY2023 | FY2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $191.2M | $247.5M | ($56.3M) | -22.8% | | Gross Margin | 46.1% | 46.2% | -0.1% | | | Net Loss | ($12.0M) | ($64.9M) | $52.9M | -81.5% | | Diluted EPS | ($0.90) | ($4.66) | $3.76 | -80.7% | | Non-GAAP Adjusted EBITDAS | $12.8M | $35.0M | ($22.2M) | -63.4% | | Shares Repurchased | 377,034 | N/A | N/A | N/A | | Value Repurchased | $3.5M | N/A | N/A | N/A | **Net Sales Breakdown (FY2023 vs. FY2022)** | Channel/Category | FY2023 ($M) | FY2022 ($M) | Change ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | E-commerce Channels | 87.2 | 97.4 | (10.2) | -10.5% | | Traditional Channels | 104.0 | 150.1 | (46.1) | -30.7% | | Domestic Net Sales | 182.3 | 234.8 | (52.5) | -22.4% | | International Net Sales | 8.9 | 12.7 | (3.8) | -30.0% | | Shooting Sports | 88.9 | 128.2 | (39.3) | -30.7% | | Outdoor Lifestyle | 102.3 | 119.3 | (17.0) | -14.3% | - E-commerce decline was due to reduced demand in shooting sports and retailer inventory reduction, partially offset by a **76.0% increase in direct-to-consumer sales**[265](index=265&type=chunk)[266](index=266&type=chunk) - Gross margin decreased by 10 basis points due to lower sales volumes, product/customer mix, increased promotional discounts, and higher inventory provisions[269](index=269&type=chunk) **Operating Expenses (FY2023 vs. FY2022)** | Expense Category | FY2023 ($M) | FY2022 ($M) | Change ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and Development | 6.4 | 5.5 | 0.9 | 15.6% | | Selling, Marketing, & Distribution | 51.8 | 56.2 | (4.4) | -7.8% | | General and Administrative | 42.6 | 41.2 | 1.4 | 3.3% | | Impairment of Long-Lived Assets | 0.0 | 67.8 | (67.8) | -100.0% | | Total Operating Expenses | 100.8 | 170.8 | (70.0) | -41.0% | - Operating loss was **($12.7 million)** in FY2023, an improvement from **($56.5 million)** in FY2022, primarily due to the absence of the **$67.8 million goodwill impairment charge** from the prior year[274](index=274&type=chunk)[275](index=275&type=chunk) - Cash generated in operating activities was **$30.7 million** for fiscal 2023 compared with cash usage of **$18.0 million** for the prior fiscal year, primarily impacted by **$21.9 million of reduced inventory**[294](index=294&type=chunk) - Cash used in investing activities was **$4.8 million** for fiscal 2023 compared with cash usage of **$33.6 million** for the prior fiscal year, primarily because of the **$27.0 million used to acquire Grilla Grills** during fiscal 2022[296](index=296&type=chunk) - Cash used in financing activities was **$23.5 million** in fiscal 2023, due to **$20.2 million of payments on the revolving line of credit** and **$3.5 million of payments to repurchase common stock**[297](index=297&type=chunk) **Contractual Obligations (as of April 30, 2023, in thousands)** | Obligation Type | Total ($K) | Less Than 1 Year ($K) | 1-3 Years ($K) | 3-5 Years ($K) | More Than 5 Years ($K) | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | 5,000 | 0 | 0 | 5,000 | 0 | | Interest on debt | 1,563 | 399 | 798 | 366 | 0 | | Operating lease | 37,541 | 2,251 | 4,419 | 4,445 | 26,426 | | Purchase obligations | 35,691 | 35,691 | 0 | 0 | 0 | | **Total Obligations** | **79,795** | **38,341** | **5,217** | **9,811** | **26,426** | [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=57&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk relates to the variable interest rate on its $75.0 million revolving line of credit - The company's primary market risk is the variable interest rate associated with its **$75.0 million revolving line of credit**[316](index=316&type=chunk) - As of April 30, 2023, **$5.0 million was outstanding** on the revolving line of credit, bearing interest at **6.05%** (SOFR plus applicable margin)[300](index=300&type=chunk)[316](index=316&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=57&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This item incorporates the consolidated and combined financial statements and related notes by reference from page F-1 - Financial statements, notes, and audit report are incorporated by reference from page F-1[317](index=317&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=57&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) This item is not applicable to the company - No changes in or disagreements with accountants on accounting and financial disclosure[317](index=317&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=57&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of April 30, 2023, following the implementation of a new ERP system during the fiscal year - Management concluded that disclosure controls and procedures were **effective** as of April 30, 2023[319](index=319&type=chunk) - Management believes internal control over financial reporting was **effective** as of April 30, 2023, based on the COSO Framework[320](index=320&type=chunk) - A new ERP system, **Microsoft D365**, was implemented for all subsidiaries during fiscal 2023, which is expected to enhance transactional processing, management tools, and internal controls[322](index=322&type=chunk) - As an "emerging growth company," the independent registered public accounting firm is **not required to formally attest** to the effectiveness of internal controls over financial reporting[320](index=320&type=chunk) [ITEM 9B. OTHER INFORMATION](index=59&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) This item is not applicable to the company - No other information to disclose[324](index=324&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=59&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to the company - No disclosure regarding foreign jurisdictions that prevent inspections[324](index=324&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=60&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement and Item 1 of this report - Information regarding directors and corporate governance is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[326](index=326&type=chunk) - Information relating to executive officers is included in Item 1, "Business"[326](index=326&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=60&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement - Executive compensation information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[327](index=327&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=60&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding security ownership is incorporated by reference from the 2023 Proxy Statement - Security ownership information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[328](index=328&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=60&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding related transactions and director independence is incorporated by reference from the 2023 Proxy Statement - Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[329](index=329&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=60&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information regarding principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[330](index=330&type=chunk) PART IV [ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=61&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This item lists the financial statements and various exhibits filed with the Form 10-K - Consolidated and Combined Financial Statements are listed in the Index to Consolidated and Combined Financial Statements on page F-1[332](index=332&type=chunk) - Exhibits include agreements related to the spin-off, corporate governance, compensation plans, loan agreements, and various XBRL documents[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=62&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item states that there is no Form 10-K summary - No Form 10-K Summary is provided[335](index=335&type=chunk) SIGNATURES [Signatures Detail](index=63&type=section&id=SIGNATURES_DETAIL) The report is signed by the CEO, CFO, and Board of Directors on June 28, 2023 - The report is signed by Brian D Murphy (President and CEO), H Andrew Fulmer (EVP, CFO, Treasurer), and members of the Board of Directors[337](index=337&type=chunk)[338](index=338&type=chunk) - The signing date is June 28, 2023[337](index=337&type=chunk) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA [INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS](index=64&type=section&id=INDEX%20TO%20CONSOLIDATED%20AND%20COMBINED%20FINANCIAL%20STATEMENTS) This section provides an index to the detailed financial statements and accompanying notes - The index includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Statements of Equity, Statements of Cash Flows, and Notes[340](index=340&type=chunk) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM](index=65&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) Grant Thornton LLP issued an unqualified opinion on the company's consolidated financial statements for fiscal years 2021-2023 - The auditor is **Grant Thornton LLP** (PCAOB ID Number 248)[341](index=341&type=chunk)[345](index=345&type=chunk) - An **unqualified opinion** was issued on the consolidated financial statements for the fiscal years ended April 30, 2023, 2022, and 2021, confirming fair presentation in conformity with GAAP[342](index=342&type=chunk) - Audits were conducted in accordance with PCAOB standards, providing reasonable assurance that financial statements are free of material misstatement[344](index=344&type=chunk)[345](index=345&type=chunk) - As an emerging growth company, the auditor was not engaged to perform an audit of internal control over financial reporting and expresses **no opinion on its effectiveness**[344](index=344&type=chunk) [CONSOLIDATED BALANCE SHEETS](index=66&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to $243.6 million in FY2023 from $277.8 million in FY2022, driven by a reduction in inventories **Consolidated Balance Sheet Data (as of April 30, in thousands)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $21,950 | $19,521 | | Accounts receivable, net | 26,846 | 28,879 | | Inventories | 99,734 | 121,683 | | Prepaid expenses and other current assets | 7,839 | 8,491 | | Income tax receivable | 1,251 | 1,231 | | Total current assets | 157,620 | 179,805 | | Property, plant, and equipment, net | 9,488 | 10,621 | | Intangible assets, net | 52,021 | 63,194 | | Right-of-use assets | 24,198 | 23,884 | | Other assets | 260 | 336 | | Total assets | **$243,587** | **$277,840** | | **LIABILITIES AND EQUITY** | | | | Accounts payable | $11,544 | $13,563 | | Accrued expenses | 8,741 | 7,853 | | Accrued payroll, incentives, and profit sharing | 1,813 | 3,786 | | Lease liabilities, current | 904 | 1,803 | | Total current liabilities | 23,002 | 27,005 | | Notes and loans payable | 4,623 | 24,697 | | Lease liabilities, net of current portion | 24,064 | 23,076 | | Other non-current liabilities | 34 | 31 | | Total liabilities | **51,723** | **74,809** | | Total equity | **191,864** | **203,031** | [CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME](index=67&type=section&id=CONSOLIDATED%20AND%20COMBINED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20(LOSS)%2FINCOME) The company reported a net loss of $12.0 million in FY2023, a significant improvement from a $64.9 million net loss in FY2022, which included a large goodwill impairment **Consolidated and Combined Statements of Operations (for the years ended April 30, in thousands, except per share data)** | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net sales | $191,209 | $247,526 | $276,687 | | Cost of sales | 103,145 | 133,287 | 149,859 | | Gross profit | 88,064 | 114,239 | 126,828 | | Research and development | 6,361 | 5,501 | 5,378 | | Selling, marketing, and distribution | 51,791 | 56,168 | 56,773 | | General and administrative | 42,612 | 41,244 | 41,182 | | Goodwill impairment | — | 67,849 | — | | Total operating expenses | 100,764 | 170,762 | 103,333 | | Operating (loss)/income | (12,700) | (56,523) | 23,495 | | Other income, net | 1,188 | 1,311 | 497 | | Interest (expense)/income, net | (761) | (324) | 300 | | Total other income, net | 427 | 987 | 797 | | (Loss)/income from operations before income taxes | (12,273) | (55,536) | 24,292 | | Income tax (benefit)/expense | (249) | 9,344 | 5,887 | | Net (loss)/income/comprehensive (loss)/income | **($12,024)** | **($64,880)** | **$18,405** | | Net (loss)/income per share: | | | | | Basic | ($0.90) | ($4.66) | $1.31 | | Diluted | ($0.90) | ($4.66) | $1.29 | | Weighted average number of common shares outstanding: | | | | | Basic | 13,372 | 13,930 | 13,997 | | Diluted | 13,372 | 13,930 | 14,225 | [CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY](index=68&type=section&id=CONSOLIDATED%20AND%20COMBINED%20STATEMENTS%20OF%20EQUITY) Total equity decreased to $191.9 million in FY2023 from $203.0 million in FY2022, driven by the net loss and treasury stock repurchases **Consolidated and Combined Statements of Equity (as of April 30, in thousands)** | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Common Stock | $14 | $14 | $14 | | Additional Paid-In Capital | 272,784 | 268,393 | 265,362 | | Retained Deficit/(Earnings) | (62,375) | (50,351) | 14,529 | | Treasury Stock | (18,559) | (15,025) | 0 | | **Total Equity** | **$191,864** | **$203,031** | **$279,905** | - Key changes in FY2023 include a **net loss of ($12,024) thousand**, stock-based compensation of **$4,050 thousand**, and repurchase of treasury stock of **($3,534) thousand**[354](index=354&type=chunk) [CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS](index=69&type=section&id=CONSOLIDATED%20AND%20COMBINED%20STATEMENTS%20OF%20CASH%20FLOWS) The company generated $30.7 million in cash from operations in FY2023, a significant improvement driven by reduced inventory **Consolidated and Combined Statements of Cash Flows (for the years ended April 30, in thousands)** | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $30,706 | ($17,953) | $33,320 | | Net cash used in investing activities | (4,826) | (33,588) | (4,181) | | Net cash (used in)/provided by financing activities | (23,451) | 10,261 | 31,428 | | Net increase/(decrease) in cash and cash equivalents | 2,429 | (41,280) | 60,567 | | Cash and cash equivalents, end of period | $21,950 | $19,521 | $60,801 | - Cash generated in operating activities for fiscal 2023 was primarily impacted by **$21.9 million of reduced inventory** and a decrease in accounts receivable of **$2.0 million**[294](index=294&type=chunk) - Cash used in investing activities decreased primarily because of the **$27.0 million used to acquire Grilla Grills** during fiscal 2022[296](index=296&type=chunk) - Cash used in financing activities in fiscal 2023 was because of **$20.2 million of payments on the revolving line of credit** and **$3.5 million of payments to repurchase common stock**[297](index=297&type=chunk) **Supplemental Disclosure of Cash Flow Information (Cash Paid For, in thousands)** | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Interest | $761 | $125 | $111 | | Income taxes (net of refunds) | ($73) | $3,819 | $7,951 | NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS [Note 1. Background, Description of Business, and Basis of Presentation](index=72&type=section&id=Note%201.%20Background,%20Description%20of%20Business,%20and%20Basis%20of%20Presentation) This note details the company's spin-off from Smith & Wesson Brands, Inc and the "carve-out" basis of presentation for financial statements prior to the Separation - The company completed its spin-off from Smith & Wesson Brands, Inc on **August 24, 2020**[362](index=362&type=chunk) - The business is a leading provider of outdoor lifestyle products and shooting sports accessories, organized into Adventurer, Harvester, Marksman, and Defender brand lanes[363](index=363&type=chunk) - Financial statements for periods prior to the Separation were prepared on a **"carve-out" basis**, including allocated corporate expenses[364](index=364&type=chunk)[365](index=365&type=chunk)[367](index=367&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=73&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines significant accounting policies, including the use of estimates, revenue recognition, goodwill valuation, and inventory costing - Significant estimates include provisions for excess/obsolete inventory, freight/duty/tariff accruals, goodwill/intangible asset valuation, and deferred tax asset realization[368](index=368&type=chunk) - Inventories are valued at the **lower of cost (FIFO method) or net realizable value**[376](index=376&type=chunk) - Goodwill is tested annually for impairment, with a **full impairment of $67.8 million** recorded in FY2022[379](index=379&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - Revenue is recognized when control of ownership transfers to the customer, reflecting estimates for sales adjustments[390](index=390&type=chunk) **Disaggregation of Revenue (FY2023, 2022, 2021 in thousands)** | Channel/Category | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | E-commerce channels | $87,219 | $97,418 | $108,726 | | Traditional channels | 103,990 | 150,108 | 167,961 | | Domestic net sales | 182,299 | 234,803 | 267,573 | | International net sales | 8,910 | 12,723 | 9,114 | | Shooting sports | 88,885 | 128,180 | 165,341 | | Outdoor lifestyle | 102,324 | 119,346 | 111,346 | **Advertising Expense** | Year | Expense ($M) | | :--- | :--- | | FY2023 | 11.9 | | FY2022 | 13.3 | | FY2021 | 14.4 | - A **full valuation allowance of $17.0 million** was maintained against net deferred tax assets as of April 30, 2023, due to uncertainty of realization[416](index=416&type=chunk)[417](index=417&type=chunk)[503](index=503&type=chunk) - One customer accounted for **25.4% of net sales** in FY2023 and **39.2% of accounts receivable** in FY2023[424](index=424&type=chunk)[425](index=425&type=chunk) [Note 3. Acquisitions](index=81&type=section&id=Note%203.%20Acquisitions) In fiscal 2022, the company acquired Grilla Grills for $27 million, which generated $15.0 million in net sales in FY2023 - The company acquired substantially all assets of **Grilla Grills** in fiscal 2022 for **$27 million**, financed by existing cash and a $25 million credit line draw[430](index=430&type=chunk) **Grilla Grills Acquisition Purchase Price Allocation (in thousands)** | Item | Amount | | :--- | :--- | | Inventories | $5,956 | | Property, plant, and equipment | 105 | | Intangibles | 18,495 | | Goodwill | 3,534 | | Total assets acquired | 28,090 | | Accounts payable | 894 | | Accrued expenses | 46 | | Accrued warranty | 150 | | Total liabilities assumed | 1,090 | | **Net Purchase Price** | **$27,000** | - The **$3.5 million goodwill** from Grilla Grills was subsequently written off as part of the full goodwill impairment on April 30, 2022[431](index=431&type=chunk) - Grilla Grills generated **$15.0 million in net sales** in FY2023 and **$2.6 million in FY2022**[434](index=434&type=chunk) [Note 4. Leases](index=82&type=section&id=Note%204.%20Leases) The company's operating lease liabilities totaled $25.0 million as of April 30, 2023, primarily related to its Columbia, Missouri facility **Operating Lease Assets & Liabilities (as of April 30, in thousands)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | Right-of-use assets, net | $24,198 | $23,884 | | Lease liabilities, current portion | 904 | 1,803 | | Lease liabilities, net of current portion | 24,064 | 23,076 | | **Total operating lease liabilities** | **$24,968** | **$24,879** | - Operating lease costs were **$4.0 million** in FY2023 and **$3.9 million** in FY2022[440](index=440&type=chunk) - As of April 30, 2023, the weighted average lease term was **15.6 years** and the weighted average discount rate was **5.4%**[440](index=440&type=chunk) - Effective January 1, 2024, the company will assume the direct lease for the entire 632,000 sq ft Columbia, Missouri facility, expecting an incremental annual expense of **$1.3 million**[441](index=441&type=chunk)[512](index=512&type=chunk)[514](index=514&type=chunk) **Future Lease Payments (as of April 30, 2023, in thousands)** | Fiscal Year | Amount | | :--- | :--- | | 2024 | $2,251 | | 2025 | 2,241 | | 2026 | 2,178 | | 2027 | 2,207 | | 2028 | 2,238 | | Thereafter | 26,426 | | **Total future lease payments** | **$37,541** | [Note 5. Inventory](index=84&type=section&id=Note%205.%20Inventory) Total inventories decreased to $99.7 million as of April 30, 2023, from $121.7 million in 2022 **Inventory Summary (as of April 30, in thousands)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | Finished goods | $90,906 | $110,650 | | Finished parts | 2,818 | 4,353 | | Work in process | 66 | 194 | | Raw material | 5,944 | 6,486 | | **Total inventories** | **$99,734** | **$121,683** | - The company recorded **$4.3 million** in FY2023 and **$3.9 million** in FY2022 for deposits on inventory from Asian suppliers[446](index=446&type=chunk) [Note 6. Property, Plant, and Equipment](index=84&type=section&id=Note%206.%20Property,%20Plant,%20and%20Equipment) Net property, plant, and equipment totaled $9.5 million as of April 30, 2023, with depreciation expense of $2.7 million for the fiscal year **Property, Plant, and Equipment Summary (as of April 30, in thousands)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | Machinery and equipment | $17,678 | $17,664 | | Computer and other equipment | 1,865 | 2,095 | | Leasehold improvements | 316 | 2,364 | | Less: Accumulated depreciation and amortization | (11,229) | (12,635) | | Construction in progress | 858 | 1,133 | | **Total property, plant, and equipment, net** | **$9,488** | **$10,621** | - Depreciation expense was **$2.7 million** for FY2023, **$2.3 million** for FY2022, and **$3.0 million** for FY2021[448](index=448&type=chunk) **Total Depreciation and Amortization Expense (by line item, in thousands)** | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Cost of sales | $1,429 | $1,299 | $1,016 | | Research and development | 415 | 203 | 43 | | Selling, marketing, and distribution | 362 | 510 | 114 | | General and administrative | 14,305 | 14,955 | 18,653 | | **Total depreciation and amortization** | **$16,511** | **$16,967** | **$19,826** | [Note 7. Intangible Assets](index=85&type=section&id=Note%207.%20Intangible%20Assets) Net intangible assets were $52.0 million as of April 30, 2023, with an amortization expense of $13.7 million for the fiscal year **Intangible Assets Summary (as of April 30, in thousands)** | Item | 2023 Net Carrying Amount | 2022 Net Carrying Amount | | :--- | :--- | :--- | | Customer relationships | $15,945 | $22,025 | | Developed software and technology | 9,044 | 6,417 | | Patents, trademarks, and trade names | 24,901 | 29,633 | | Patents and software in development | 1,701 | 4,689 | | Indefinite-lived intangible assets | 430 | 430 | | **Total intangible assets** | **$52,021** | **$63,194** | - Amortization expense amounted to **$13.7 million** for FY2023, **$14.5 million** for FY2022, and **$16.8 million** for FY2021[454](index=454&type=chunk) **Future Expected Amortization Expense (as of April 30, 2023, in thousands)** | Fiscal Year | Amount | | :--- | :--- | | 2024 | $13,614 | | 2025 | 9,312 | | 2026 | 8,097 | | 2027 | 5,753 | | 2028 | 4,463 | | Thereafter | 8,651 | | **Total** | **$49,890** | [Note 8. Goodwill](index=85&type=section&id=Note%208.%20Goodwill) The company had no goodwill on its balance sheet as of April 30, 2023, following a full impairment charge of $67.8 million in FY2022 - The goodwill balance was **$0** as of April 30, 2023 and 2022[457](index=457&type=chunk) - A non-cash impairment charge of **$67.8 million** was recorded in FY2022, reducing the goodwill balance to zero, triggered by a decline in stock price and market capitalization[382](index=382&type=chunk)[457](index=457&type=chunk) - Total accumulated goodwill impairment charges since fiscal 2015 amount to **$177.2 million**[457](index=457&type=chunk) [Note 9. Accrued Expenses](index=86&type=section&id=Note%209.%20Accrued%20Expenses) Total accrued expenses increased to $8.7 million as of April 30, 2023, with accrued sales allowances and freight being the largest components **Accrued Expenses Summary (as of April 30, in thousands)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | Accrued sales allowances | $2,453 | $2,392 | | Accrued freight | 1,962 | 1,253 | | Accrued professional fees | 1,106 | 951 | | Accrued commissions | 1,072 | 1,175 | | Accrued warranty | 966 | 786 | | Accrued employee benefits | 568 | 312 | | Accrued taxes other than income | 346 | 718 | | Accrued other | 268 | 266 | | **Total accrued expenses** | **$8,741** | **$7,853** | [Note 10. Debt](index=86&type=section&id=Note%2010.%20Debt) The company has a $75.0 million revolving line of credit maturing in March 2027, with $5.0 million outstanding as of April 30, 2023 - The company has a **$75.0 million revolving line of credit**, amended in March 2022 and maturing in March 2027[463](index=463&type=chunk) - As of April 30, 2023, **$5.0 million was outstanding** on the revolving line of credit, bearing interest at **6.05%** (SOFR plus applicable margin)[464](index=464&type=chunk) - Proceeds from borrowings on the revolving line of credit were used to purchase the Grilla Grills branded products in fiscal 2022[464](index=464&type=chunk) - In fiscal 2023, an irrevocable standby letter of credit for **$1.7 million** was executed to collateralize duty drawback bonds, with no amounts drawn[464](index=464&type=chunk) [Note 11. Fair Value Measurement](index=86&type=section&id=Note%2011.%20Fair%20Value%20Measurement) The company's cash and cash equivalents of $22.0 million are classified as Level 1 fair value measurements, with no Level 3 assets or liabilities - Financial assets and liabilities are categorized into a three-level fair value hierarchy: Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[465](index=465&type=chunk)[466](index=466&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk) - Cash and cash equivalents (**$22.0 million** as of April 30, 2023) are classified as **Level 1**[466](index=466&type=chunk) - The carrying value of the revolving line of credit approximated fair value using **Level 2** inputs[468](index=468&type=chunk) - The company currently has **no Level 3** financial assets or liabilities[468](index=468&type=chunk) [Note 12. Self-Insurance Reserves](index=87&type=section&id=Note%2012.%20Self-Insurance%20Reserves) In FY2023, the company transitioned to a self-insured group health insurance program, with an ending reserve balance of $396,000 - The company transitioned to a **self-insured group health insurance program** in FY2023, with stop-loss insurance for medical claims exceeding certain limits[469](index=469&type=chunk) **Self-Insurance Reserves Activity (in thousands)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | Beginning balance | $29 | $33 | | Additional provisions charged to expense | 2,094 | — | | Payments | (1,727) | (4) | | **Ending balance** | **$396** | **$29** | [Note 13. Equity](index=87&type=section&id=Note%2013.%20Equity) The company repurchased $3.5 million of common stock in FY2023 and recorded $4.1 million in stock-based compensation expense - In FY2023, the company repurchased **377,034 shares** of common stock for **$3.5 million** under a $10.0 million authorization[471](index=471&type=chunk) - In FY2022, the company completed a **$15.0 million stock repurchase program**, purchasing 836,964 shares[471](index=471&type=chunk) - Stock-based compensation expense was **$4.1 million** in FY2023, **$2.8 million** in FY2022, and **$2.9 million** in FY2021[478](index=478&type=chunk) - As of April 30, 2023, there was **$2.3 million of unrecognized compensation expense** related to unvested RSUs and PSUs[489](index=489&type=chunk) **RSUs and PSUs Outstanding Activity (in thousands of units)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | Beginning of period | 349.8 | 427.5 | | Awarded | 371.2 | 114.9 | | Vested | (146.0) | (127.1) | | Forfeited | (14.4) | (65.5) | | **End of period** | **560.6** | **349.8** | - Under the Employee Stock Purchase Plan (ESPP), employees purchased **89,860 shares** in FY2023 and **76,098 shares** in FY2022[490](index=490&type=chunk) [Note 14. Employer Sponsored Benefit Plans](index=91&type=section&id=Note%2014.%20Employer%20Sponsored%20Benefit%20Plans) The company offers a 401k plan and a profit-sharing plan, contributing $500,000 to the 401k in FY2023 **Contributory Defined Investment Plan (401k) Contributions (in thousands)** | Year | Company Contributions | | :--- | :--- | | FY2023 | $500 | | FY2022 | $592 | | FY2021 | $461 | **Non-Contributory Profit-Sharing Plan Contributions (in thousands)** | Year | Company Contributions | | :--- | :--- | | FY2023 | $0 | | FY2022 | $984 | | FY2021 | $1,900 | [Note 15. Income Taxes](index=91&type=section&id=Note%2015.%20Income%20Taxes) The company recorded an income tax benefit of $249,000 in FY2023 and maintained a full valuation allowance of $17.0 million against net deferred tax assets **Income Tax (Benefit)/Expense (in thousands)** | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total current | ($249) | $2,661 | $9,445 | | Total deferred | — | 6,683 | (3,558) | | **Total income tax expense/(benefit)** | **($249)** | **$9,344** | **$5,887** | - Effective tax rates were **2.0%** (FY2023), **(16.8%)** (FY2022), and **24.2%** (FY2021)[504](index=504&type=chunk) **Deferred Tax Assets (Liabilities) (as of April 30, in thousands)** | Item | 2023 | 2022 | | :--- | :--- | :--- | | Inventories | $1,574 | $1,594 | | Accrued expenses, including compensation | 1,446 | 1,805 | | Stock-based compensation | 1,172 | 801 | | Intangible assets | 11,877 | 11,817 | | Property, plant, and equipment | (2,577) | (1,949) | | Right-of Use assets | (5,640) | (5,570) | | Right-of Use lease liabilities | 5,820 | 5,803 | | Capitalized R&D | 1,340 | — | | Loss and credit carryforwards | 1,636 | — | | Less valuation allowance | (17,041) | (14,441) | | **Net deferred tax asset/(liability)** | **$—** | **$—** | - A **full valuation allowance of $17.0 million** (FY2023) and **$14.4 million** (FY2022) was maintained against net deferred tax assets due to uncertainty of realization[503](index=503&type=chunk) - The IRS initiated an examination of the FY2021 federal income tax return on March 7, 2023[507](index=507&type=chunk) [Note 16. Commitments and Contingencies](index=93&type=section&id=Note%2016.%20Commitments%20and%20Contingencies) This note covers legal proceedings, lease commitments, and the use of duty drawback mechanisms to offset tariffs - The company is involved in various lawsuits but did not incur any material expenses in defense and administrative costs relative to product liability litigation for FY2021-2023[508](index=508&type=chunk) **Operating Lease Expiration Dates** | Location | Expiration Date | | :--- | :--- | | Holland, Michigan | July 31, 2023 | | Shenzhen, China | August 31, 2023 | | Phoenix, Arizona | April 30, 2024 | | Chicopee, Massachusetts | May 31, 2025 | | Columbia, Missouri | December 31, 2038 | - Effective January 1, 2024, the company will assume the direct lease for the entire 632,000 sq ft Columbia, Missouri facility, expecting an incremental annual expense of **$1.3 million**[512](index=512&type=chunk)[514](index=514&type=chunk) - The company is utilizing the **duty drawback mechanism** to offset Section 301 tariffs on certain goods imported from China and sold internationally[515](index=515&type=chunk) [Note 17. Segment Reporting](index=94&type=section&id=Note%2017.%20Segment%20Reporting) The company operates as one reporting segment as the CEO reviews only consolidated financial information for resource allocation - The company operates as **one reporting segment** because the Chief Executive Officer reviews only consolidated financial information and allocates resources based on those statements[516](index=516&type=chunk) - The four brand lanes do not qualify as separate reporting units due to integrated operating and administrative activities[516](index=516&type=chunk) [Note 18. Related Party Transactions](index=94&type=section&id=Note%2018.%20Related%20Party%20Transactions) This note summarizes transactions with the former parent company, Smith & Wesson Brands, Inc, prior to the Separation in August 2020 - Prior to the Separation, the combined financial statements included allocated general corporate expenses and sales to the former parent company[519](index=519&type=chunk) - For the period prior to the Separation in fiscal year 2021, sales to the former parent totaled **$2.4 million**[522](index=522&type=chunk) - All notes to and from the former parent were settled in connection with the Separation[523](index=523&type=chunk) - Interest income on activity with the former parent was **$424,000** during the first four months of fiscal year 2021, prior to the Separation[523](index=523&type=chunk)

American Outdoor Brands, Inc. (NASDAQ:AOUT) Q3 Fiscal 2023 Earnings Call March 9, 2023 5:00 PM ET Company Participants Liz Sharp - Vice President, Investor Relations Brian D. Murphy - President and Chief Executive Officer Andrew Fulmer - Executive Vice President, Chief Financial Officer, and Treasurer Conference Call Participants Ryan Meyers - Lake Street Eric Wold - B. Riley Securities Matt Koranda - ROTH MKM Operator Good day, everyone, and welcome to American Outdoor Brands, Inc. Third Quarter Fiscal 202 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2023 Commission File No. 001-39366 American Outdoor Brands, Inc. (Exact name of registrant as specified in its charter) Delaware 84-4630928 (State or other jurisdiction of incorporation or organization) (I. ...

American Outdoor Brands, Inc. (NASDAQ:AOUT) Q1 2023 Results Conference Call September 8, 2022 5:00 PM ET Company Participants Liz Sharp - VP, IR Brian Murphy - President & CEO Andy Fulmer - CFO Conference Call Participants Matt Koranda - ROTH Capital Eric Wold - B. Riley Securities Connor Jensen - Lake Street Capital John Kernan - Cowan Operator Good day everyone and welcome to American Outdoor Brands Inc. First Quarter Fiscal 2023 Financial Results Conference Call. This call is being recorded. At this time ...