Core Viewpoint - The article highlights the potential of Vista Outdoor (VSTO) as a strong value investment opportunity, supported by its favorable valuation metrics and earnings outlook [4][7]. Valuation Metrics - Vista Outdoor has a P/E ratio of 10.36, significantly lower than the industry average of 24.39, indicating it may be undervalued [4]. - The company has a P/S ratio of 0.96, compared to the industry average of 1.03, further suggesting undervaluation based on sales performance [5]. - VSTO's P/CF ratio stands at 8.28, which is attractive when compared to the industry's average of 31.06, indicating strong operating cash flow relative to its valuation [6]. Earnings Outlook - The stock's earnings outlook is strong, contributing to its classification as an impressive value stock at the moment [7].

PART I [Unaudited Financial Statements](index=2&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents Vista Outdoor's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and equity, along with detailed notes on significant accounting policies and events [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $2.35 billion, driven by reduced long-term debt, while stockholders' equity increased to $1.23 billion as of September 30, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $1,082,659 | $1,075,122 | | **Total Assets** | **$2,353,633** | **$2,402,380** | | **Total Current Liabilities** | $372,957 | $385,298 | | **Long-term Debt** | $587,519 | $717,238 | | **Total Liabilities** | $1,121,918 | $1,276,083 | | **Total Stockholders' Equity** | $1,231,715 | $1,126,297 | | **Total Liabilities and Stockholders' Equity** | **$2,353,633** | **$2,402,380** | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Net sales slightly decreased to $665.9 million, with net income at $41.8 million and diluted EPS at $0.71 for the three months ended September 30, 2024 Q2 FY2025 vs Q2 FY2024 Performance (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 24, 2023 | | :--- | :--- | :--- | | **Sales, net** | $665,915 | $676,808 | | **Gross Profit** | $211,429 | $208,870 | | **Operating Income** | $65,725 | $75,785 | | **Net Income** | $41,798 | $44,422 | | **Diluted EPS** | $0.71 | $0.76 | Six-Month Performance FY2025 vs FY2024 (in thousands, except per share data) | Metric | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 24, 2023 | | :--- | :--- | :--- | | **Sales, net** | $1,310,096 | $1,370,141 | | **Gross Profit** | $422,586 | $435,627 | | **Operating Income** | $146,753 | $167,971 | | **Net Income** | $98,918 | $102,522 | | **Diluted EPS** | $1.68 | $1.75 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated $80.5 million, investing activities provided $29.3 million, and financing activities used $134.0 million, resulting in a $23.3 million net decrease in cash for the six months ended September 30, 2024 Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 24, 2023 | | :--- | :--- | :--- | | **Cash provided by operating activities** | $80,543 | $107,540 | | **Cash provided by (used for) investing activities** | $29,252 | $(13,288) | | **Cash used for financing activities** | $(134,014) | $(139,806) | | **Decrease in cash and cash equivalents** | $(23,346) | $(46,254) | | **Cash and cash equivalents at end of period** | $36,925 | $39,954 | [Note 7: Divestitures and Acquisitions](index=13&type=section&id=Note%207.%20Divestitures%20and%20Acquisitions) The company completed two divestitures in the first half of fiscal 2025, selling the RCBS brand for a $19.7 million pre-tax gain and Fiber Energy Products for an $872 pre-tax loss - Completed the divestiture of the RCBS brand on May 1, 2024, recognizing a pre-tax gain of approximately **$19.7 million**[56](index=56&type=chunk) - Sold the wood pellet manufacturing company, Fiber Energy Products, on July 7, 2024, recording a pre-tax loss of about **$872**[56](index=56&type=chunk) [Note 13: Restructuring](index=16&type=section&id=Note%2013.%20Restructuring) The GEAR Up transformation program, targeting $40 million to $50 million in pre-tax restructuring charges by fiscal 2027, incurred $12.3 million in costs for the six months ended September 30, 2024 - The GEAR Up transformation program is expected to incur **$40 million to $50 million** in pre-tax restructuring charges through fiscal 2027[74](index=74&type=chunk) GEAR Up Restructuring Costs (in thousands) | Period | Costs Incurred | | :--- | :--- | | Three months ended Sep 30, 2024 | $7,093 | | Six months ended Sep 30, 2024 | $12,283 | | **Incurred since inception** | **$20,562** | [Note 18: Operating Segment Information](index=21&type=section&id=Note%2018.%20Operating%20Segment%20Information) The company operates four reportable segments, with The Kinetic Group being the largest contributor to sales and operating income for the three months ended September 30, 2024 - The company is organized into four reportable segments: The Kinetic Group (ammunition), Revelyst Outdoor Performance (outdoor cooking, fishing, accessories), Revelyst Adventure Sports (protective gear, e-mobility), and Revelyst Precision Sports Technology (golf tech)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) Segment Sales and Operating Income (Three Months Ended Sep 30, 2024, in thousands) | Segment | Sales, net | Operating Income | | :--- | :--- | :--- | | The Kinetic Group | $351,321 | $87,093 | | Revelyst Outdoor Performance | $100,218 | $2,605 | | Revelyst Adventure Sports | $159,471 | $11,053 | | Revelyst Precision Sports Technology | $54,905 | $7,827 | | **Total Reportable Segments** | **$665,915** | **$108,578** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, including a 1.6% net sales decrease, the planned sale of The Kinetic Group, the GEAR Up program, segment analysis, and liquidity, while addressing industry dynamics and risks [Executive Summary and Financial Highlights](index=25&type=section&id=Executive%20Summary%20and%20Financial%20Highlights) Net sales decreased 1.6% year-over-year, driven by Revelyst declines, while the company reduced total debt to $590 million and amended the Kinetic Group sale agreement to $2.225 billion - For the three months ended September 30, 2024, net sales decreased **1.6% YoY** The Kinetic Group sales increased **0.5%** due to price, while Revelyst segments' sales decreased **3.9%** due to lower volumes and divestitures[128](index=128&type=chunk) - The company reduced outstanding borrowings under its ABL Revolving Credit Facility by **$130 million** in the first six months of FY2025, lowering total debt to **$590 million**[129](index=129&type=chunk) - The agreement to sell The Kinetic Group to CSG was amended multiple times, with the Sixth Amendment on October 4, 2024, setting the base purchase price at **$2.225 billion** and cash consideration to stockholders at **$25.75 per share**[138](index=138&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Total net sales decreased 1.6% to $665.9 million, with varied segment performance and overall operating income declining 13.3% to $65.7 million for the three months ended September 30, 2024 Net Sales by Segment (Three Months Ended, in thousands) | Segment | Sep 30, 2024 | Sep 24, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | The Kinetic Group | $351,321 | $349,500 | 0.5% | | Revelyst Outdoor Performance | $100,218 | $107,281 | (6.6)% | | Revelyst Adventure Sports | $159,471 | $168,700 | (5.5)% | | Revelyst Precision Sports Technology | $54,905 | $51,327 | 7.0% | | **Total** | **$665,915** | **$676,808** | **(1.6)%** | Operating Income (Loss) by Segment (Three Months Ended, in thousands) | Segment | Sep 30, 2024 | Sep 24, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | The Kinetic Group | $87,093 | $92,348 | (5.7)% | | Revelyst Outdoor Performance | $2,605 | $(3,356) | 177.6% | | Revelyst Adventure Sports | $11,053 | $7,515 | 47.1% | | Revelyst Precision Sports Technology | $7,827 | $8,695 | (10.0)% | | **Total** | **$65,725** | **$75,785** | **(13.3)%** | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity with $336.1 million available under its ABL Revolving Credit Facility and a 32% total debt-to-capitalization ratio as of September 30, 2024 - As of September 30, 2024, the company had **$336,050** available to borrow under its 2022 ABL Revolving Credit Facility[183](index=183&type=chunk) - Total debt as a percentage of total capitalization was **32%** as of September 30, 2024[183](index=183&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risk exposure has not materially changed since March 31, 2024, with further details available in the FY2024 Form 10-K - The company's exposure to market risk has not changed materially since March 31, 2024[193](index=193&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during the quarter - The Co-CEOs and CFO concluded that disclosure controls and procedures were effective as of September 30, 2024[194](index=194&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[195](index=195&type=chunk) PART II - Other Information [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings, none of which are considered material to its business, operating results, or financial condition - Current legal proceedings are not considered individually or in aggregate to be material to the company's business or financial position[197](index=197&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) New risk factors related to the Revelyst Transaction include consummation conditions, uncertain merger consideration, potential termination, and the impact of termination fees on other acquisition offers - A new material risk factor has been added concerning the Revelyst Transaction, supplementing the risks in the FY2024 Form 10-K[199](index=199&type=chunk) - The Revelyst Transaction is subject to numerous conditions, including regulatory approvals and the consummation of the Sporting Products Sale, and failure to satisfy these could prevent or delay the merger[201](index=201&type=chunk) - Termination fees of **$47.75 million** (for the Merger Agreement) and **$28.125 million** (for the Revelyst Merger Agreement) may discourage competing acquisition proposals[211](index=211&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period - Not applicable[219](index=219&type=chunk) [Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated any Rule 10b5-1 trading plan or other trading arrangement during the last fiscal quarter - No director or officer of the company has adopted or terminated a Rule 10b5-1 trading plan or other trading arrangement in the last fiscal quarter[221](index=221&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including multiple amendments to the Agreement and Plan of Merger for The Kinetic Group sale and other key legal documents - Lists key legal documents filed with the report, including six amendments to the Agreement and Plan of Merger with CSG and the Agreement and Plan of Merger for the Revelyst Transaction[223](index=223&type=chunk)[224](index=224&type=chunk)

Core Viewpoint - Vista Outdoor reported quarterly earnings of $1.03 per share, exceeding the Zacks Consensus Estimate of $0.92 per share, and showing an increase from $0.96 per share a year ago, indicating a positive earnings surprise of 11.96% [1] Financial Performance - The company achieved revenues of $665.92 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.15%, although this represents a decline from $676.81 million in the same quarter last year [2] - Over the last four quarters, Vista Outdoor has exceeded consensus EPS estimates three times and topped revenue estimates only once [2] Stock Performance - Vista Outdoor shares have increased approximately 49.3% since the beginning of the year, significantly outperforming the S&P 500's gain of 21.2% [3] Future Outlook - The company's earnings outlook will be crucial for determining the sustainability of its stock price movement, with current consensus EPS estimates at $1 for the upcoming quarter and $3.98 for the current fiscal year, alongside projected revenues of $681.9 million and $2.69 billion respectively [7] - The estimate revisions trend for Vista Outdoor is currently mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Industry Context - The Leisure and Recreation Products industry, to which Vista Outdoor belongs, is currently ranked in the top 29% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% of ranked industries [8]

Financial Performance - Vista Outdoor reported Q2 FY2025 sales of $666 million, with operating income of $66 million and an operating margin of 9.9%[1] - Revelyst's Q2 FY2025 sales reached $315 million, with operating income increasing 67.1% to $21 million and an operating margin of 6.6%[10] - The Kinetic Group's Q2 FY2025 sales were $351 million, with operating income of $87 million and a margin of 24.8%[14] - Adjusted EBITDA for Vista Outdoor decreased 4.4% to $111 million, with a margin of 16.7%[7] - Diluted EPS was $0.71, down 6.6% year-over-year, while adjusted EPS increased 7.3% to $1.03[8] - Gross profit for the three months ended September 24, 2023, was $208,870, with an operating income of $75,785, resulting in an operating income margin of 11.2%[23] - Adjusted net income for the same period was $56,093, with an adjusted earnings per share (EPS) of $0.96, compared to an EPS of $0.76 as reported[23] - Free cash flow for the three months ended September 30, 2024, was $19,039, down from $70,520 in the previous year[29] - Adjusted EBITDA for the three months ended September 30, 2024, was $111,377, with an adjusted EBITDA margin of 16.7%[35] - Net sales for the three months ended September 30, 2024, were $665,915,000, a decrease of 1.3% from $676,808,000 in the same period last year[52] - Gross profit for the three months ended September 30, 2024, was $211,429,000, compared to $208,870,000 for the same period last year, indicating a slight increase of 0.7%[52] - Operating income for the three months ended September 30, 2024, was $65,725,000, down from $75,785,000 in the prior year, representing a decline of approximately 13.4%[52] - Net income for the three months ended September 30, 2024, was $41,798,000, compared to $44,422,000 in the same period last year, reflecting a decrease of approximately 5.9%[52] - Basic earnings per share for the three months ended September 30, 2024, were $0.72, down from $0.77 in the prior year, a decline of about 6.5%[52] - For the twelve months ended September 30, 2024, Vista Outdoor reported a net loss of $9,109,000 compared to a net loss of $5,505,000 for the previous twelve months[40] - Adjusted EBITDA for the twelve months ended September 30, 2024, was $424,987,000, down from $444,862,000 for the previous period, reflecting a decrease of approximately 4.3%[40] Debt and Cash Flow - Total debt decreased by $45 million sequentially to $590 million, with a net debt leverage ratio of 1.3 times[1] - The company reported a net debt of $553,075 as of September 30, 2024, down from $659,729 as of March 31, 2024[38] - Long-term debt decreased significantly to $587,519 thousand from $717,238 thousand, a reduction of approximately 18.1%[54] - Total liabilities decreased to $1,121,918 thousand as of September 30, 2024, down from $1,276,083 thousand, representing a decline of 12.1%[54] - Cash provided by operating activities was $80,543 thousand, down 25.1% from $107,540 thousand in the prior year[55] - Cash and cash equivalents at the end of the period were $36,925 thousand, down from $60,271 thousand, a decrease of 38.9%[55] - Cash used for financing activities was $134,014 thousand, a slight improvement compared to $139,806 thousand in the previous year[55] Cost Management and Restructuring - The GEAR Up transformation program delivered $11.6 million in realized cost savings in the first half of FY2025, with expected total savings of $25 to $30 million for the full fiscal year[3] - The company incurred restructuring costs related to a $50 million cost reduction program announced in the fourth fiscal quarter of 2023[25] - Planned separation costs associated with the Revelyst and The Kinetic Group businesses amounted to $14,358 for the three months ended September 30, 2024[35] Inventory and Assets - Revelyst inventory decreased by $87 million year-over-year, contributing to a year-to-date cash flow from operating activities of $81 million[17] - Total current assets increased to $1,082,659 thousand as of September 30, 2024, compared to $1,075,122 thousand as of March 31, 2024, reflecting a growth of 0.35%[54] - Net inventories increased slightly to $612,847 thousand from $609,999 thousand, reflecting a growth of 0.3%[54] Strategic Transactions and Future Outlook - The company plans to withdraw its full-year FY2025 guidance due to the pending sales of The Kinetic Group and Revelyst[18] - Institutional Shareholder Services recommended stockholders vote "FOR" the sale of The Kinetic Group to CSG, with an expected total cash consideration of approximately $45.00 per share[2] - The company is currently involved in significant transactions, including the CSG Transaction and the SVP Transaction, which may impact future operations and financial performance[43] - Vista Outdoor is focused on expanding its market presence and enhancing its product offerings through strategic acquisitions and partnerships[41] Other Financial Metrics - The tax expense for the three months ended September 24, 2023, was $13,546, resulting in a tax rate of 23.4%[26] - The company experienced a loss on the divestiture of its Fiber Energy business during the reporting period[24] - The company reported a gain on the sale of business amounting to $18,787 thousand during the six months ended September 30, 2024[55] - Total stockholders' equity increased to $1,231,715 thousand from $1,126,297 thousand, an increase of 9.3%[54]

Group 1 - Monteverde & Associates PC is investigating Vista Outdoor Inc. regarding its proposed merger with Czechoslovak Group a.s. [1] - The merger agreement includes the sale of Revelyst in an all-cash transaction, which is expected to deliver approximately $45 per share to Vista Outdoor stockholders [1] - A shareholder vote on the merger is scheduled for November 25, 2024 [1] Group 2 - Monteverde & Associates PC is recognized as a Top 50 Firm in the 2018-2022 ISS Securities Class Action Services Report [1] - The firm has a successful track record in recovering money for shareholders and litigating class actions [2]

Company Overview - Vista Outdoor (VSTO) shares increased by 10.5% to close at $44.01, supported by high trading volume, compared to a 4.1% gain over the past four weeks [1] - The company’s operating segment, Revelyst, has entered an agreement with Strategic Value Partners, LLC for an all-cash transaction valued at $1.125 billion [1] Earnings Expectations - Vista Outdoor is expected to report quarterly earnings of $0.92 per share, reflecting a year-over-year decline of 4.2% [2] - Revenue projections stand at $658.15 million, which is a decrease of 2.8% from the same quarter last year [2] Stock Performance and Trends - The consensus EPS estimate for Vista Outdoor has remained unchanged over the last 30 days, indicating a lack of upward momentum in earnings estimate revisions [3] - The stock currently holds a Zacks Rank of 3 (Hold), suggesting a neutral outlook [3] - In the same industry, Clarus Corporation (CLAR) has a Zacks Rank of 3 (Hold) and reported a 0.2% increase in its last trading session [3][4]

Core Viewpoint - Vista Outdoor Inc.'s operating segment, Revelyst, has entered into an agreement with Strategic Value Partners, LLC for an all-cash acquisition valued at $1.125 billion, which is expected to enhance growth opportunities for Revelyst through increased investment and expanded resources [1][2]. Group 1: Acquisition Details - The acquisition is anticipated to close by January 2025, contingent on the completion of Vista Outdoor's $2.225 billion transaction with Czechoslovak Group, which requires stockholders' approval [2]. - The acquisition positions Revelyst to effectively meet the growing demand for outdoor gear and activities, enhancing its market presence and supporting long-term growth and profitability [4]. Group 2: Company Operations - Revelyst is recognized for its exceptional craftsmanship and dedication to producing innovative products, operating three platforms: Revelyst Adventure Sports in Irvine, CA, Revelyst Outdoor Performance in Bozeman, Montana, and Revelyst Precision Sports Technology in San Diego [3]. - The consolidation of operations supports the GEAR Up transformation initiative aimed at enhancing resource allocation and strengthening supply-chain efficiency [3]. Group 3: Market Performance - Vista Outdoor has seen an 18.5% increase in stock price over the past six months, outperforming the Zacks Leisure and Recreation Products industry's growth of 11.5% [5]. - The company is focusing on both inorganic and organic growth strategies, including a capital allocation strategy and a cost-reduction program to drive value and synergies through mergers and acquisitions [6].

Core Insights - Vista Outdoor's shares increased by 10.14% following the announcement of two major business deals, including the sale of its Revelyst business for $1.125 billion and an amended acquisition agreement for The Kinetic Group at $2.225 billion [1] Financial Performance - Vista Outdoor currently trades at $43.88 with a market capitalization of $2.56 billion, showing a 12-week price change of 18.42% and a year-to-date increase of 48.29% [2] - The company has a Price-to-Book (P/B) ratio of 2.16 and a Price-to-Sales (P/S) ratio of 0.94, both near their two-year highs, indicating potential overvaluation as the GF Value estimate is $28.23 [2] - The Altman Z-score of 2.62 suggests potential financial stress, while the Return on Invested Capital (ROIC) is lower than the Weighted Average Cost of Capital (WACC), indicating less capital efficiency [3] Operational Strengths - Vista Outdoor benefits from a strong and expanding operating margin, which is a positive sign for its financial health [4] - The Beneish M-Score indicates that the company is unlikely to engage in financial manipulation, enhancing investor confidence [4] Strategic Outlook - The company is recalibrating its business strategy through significant transactions, necessitating close monitoring of its financial health and market performance in light of its ambitious valuation [5]

Core Viewpoint - Vista Outdoor is selling its two divisions, Revelyst and Kinetic Group, for a total of approximately $3.4 billion, with the sale of Revelyst valued at around $1.13 billion and Kinetic Group at about $2.23 billion [1][3][4]. Group 1: Transaction Details - The sale of Revelyst, the sporting goods business, is an all-cash transaction expected to be completed by January [3]. - The sale of Kinetic Group, Vista's ammunition business, has seen an increase in sale price from $2.15 billion to approximately $2.23 billion due to an amendment in the merger agreement [4]. - The combined enterprise value of both transactions is estimated at $3.35 billion, which will provide around $45 per share in cash to Vista Outdoor stockholders [4]. Group 2: Strategic Implications - The chairman of Vista Outdoor's board emphasized that these strategic sales are aimed at unlocking maximum value for shareholders and positioning both divisions for continued success under new ownership [5]. - Czechoslovak Group is advised by JPMorgan for the Kinetic Group deal, while Morgan Stanley is advising Vista Outdoor [5]. Group 3: Company Performance - Vista Outdoor's stock price has increased by approximately 35% since the beginning of the year [6]. - The company, which employs nearly 6,000 people globally, announced its plan to split into two divisions in 2022 [6].

Core Viewpoint - Gates Capital Management encourages Vista Outdoor to negotiate an all-cash transaction for the entire company, opposing the proposed sale of The Kinetic Group to CSG due to execution risks and the reduced scale of Revelyst [1][2][3] Group 1: Proposal Details - A private equity firm has offered $1.1 billion in cash for Revelyst, but the transaction must occur soon as the firm will not be interested post-CSG transaction [2] - The current CSG proposal is viewed as unfavorable for Vista shareholders, as it limits the potential sale of Revelyst and does not maximize cash returns [2][3] Group 2: Shareholder Recommendations - Institutional Shareholder Services (ISS) recommended that shareholders vote against the CSG proposal, aligning with Gates Capital's stance that a comprehensive sale is in the best interest of shareholders [1][3] - Gates Capital Management holds approximately 9.6% of Vista's common stock, indicating significant shareholder interest in the outcome of the negotiations [1]