American Outdoor Brands(AOUT) - 2024 Q2 - Quarterly Report

General Information American Outdoor Brands, Inc. filed a Form 10-Q, detailing company information, forward-looking statements, and trademarks Company Information and Filing Details 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] - Filing Type: Form 10-Q for the quarterly period ended October 31, 2023[1] - Exchange: Nasdaq Global Select Market, Trading Symbol: AOUT[2] - Filer Status: Accelerated filer and Emerging growth company[2] - Common Stock Outstanding (as of November 22, 2023): 12,936,665 shares[2] Statement Regarding Forward-Looking Information 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] - 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] - 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] 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] - 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] - Licensed trademarks from Smith & Wesson Brands, Inc. include M&P®, Performance Center®, Smith & Wesson®, and T/C®[5] PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) 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 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 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 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 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 Provides detailed explanations of accounting policies, asset/liability categories, and other financial disclosures (1) Organization 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] - 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] - 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] (2) Basis of Presentation 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] - Revenue is recognized when control of ownership transfers to the customer, typically on shipment or delivery, excluding sales tax[26] 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 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] 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] 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 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] 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 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] - 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] - The company has no Level 3 financial assets or liabilities as of October 31, 2023[52] (6) Inventories 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] (7) Debt 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] - No outstanding borrowings on the revolving line of credit as of October 31, 2023[57] - Interest rate (if borrowed): approximately 6.85% (SOFR plus applicable margin)[57] (8) Equity Discusses changes in stockholders' equity, including treasury stock repurchases, earnings per share calculations, and incentive stock and employee stock purchase plans Treasury Stock 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] 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] Earnings per Share 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] Incentive Stock and Employee Stock Purchase Plans 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][66] 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] - Unrecognized compensation expense: $3.4 million, to be recognized over a weighted average remaining contractual term of 1.5 years[70] - 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] (9) Accrued Expenses 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 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] (11) Commitments and Contingencies Discusses the company's litigation, the upcoming lease assumption for its Columbia, Missouri facility, and a gain contingency related to duty drawback mechanisms 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] - 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] Assignment and Assumption Agreement 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] - Estimated incremental annual expense of $1.3 million under the new lease, expected to be offset by facility consolidation savings and distribution efficiencies[79] - Expected increase of $12.8 million in right-of-use asset on the consolidated balance sheet[79] Gain Contingency 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] - Gains from reimbursements will be recorded when the contingency is resolved[80] (12) Segment Reporting 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] - Revenue streams are analyzed by customer group, brands, product categories, and channels, but lack full discrete financial information for separate reporting units[83] - Brand lanes (Adventurer, Harvester, Marksman, Defender) are focused on product development and marketing, not separate reporting units[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - Includes forward-looking statements subject to risks and uncertainties[87] - Product categories defined: Shooting sports (accessories, personal protection) and Outdoor lifestyle (hunting, fishing, camping, rugged outdoor, outdoor cooking)[87] Second Quarter Fiscal 2023 Highlights 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 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 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] - Gross margin decreased 200 basis points due to promotional product discounts[97] - Six months: Net sales increase driven by outdoor lifestyle products[102] - Gross margin remained relatively flat[104] - 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][104] Operating Expenses 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] - General and administrative decreased due to lower insurance, ERP expenses, and rent from facility consolidations[107] 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] - General and administrative decreased due to lower legal/advisory fees, ERP expenses, and rent from facility consolidations[108] Operating Loss 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] - Six months: Operating loss narrowed due to higher gross profit and lower operating expenses[112] Income Taxes 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][116] Net Income/(loss) 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] - Six months: Net loss narrowed primarily due to lower operating expenses and higher gross profit[120] Non-GAAP Financial Measure (Adjusted EBITDAS) 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] 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] Liquidity and Capital Resources Discusses the company's cash flows from operating, investing, and financing activities, and its overall liquidity and capital resource management Operating Activities 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] - Impacted by $13.6 million higher accounts receivable and $9.4 million higher inventory (planned build for seasons and new product launches)[127] - Partially offset by $6.3 million increased accounts payable and $3.5 million increased accrued expenses[127] - Expects overall inventory balance to decline by end of fiscal year ending April 30, 2024[127] Investing Activities 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] - Expected capital expenditures for fiscal 2024: $6.0 million to $7.0 million[129] Financing Activities 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] - Primarily from $5.0 million debt repayment on revolving line of credit and $3.8 million for common stock repurchases[130] Other Matters 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] - No recent accounting pronouncements are expected to have a material impact on condensed consolidated financial statements[133] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - No material changes to internal control over financial reporting during the most recent fiscal quarter[136] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, exhibits, and signatures for the quarterly report Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - As of October 31, 2023, $9.5 million of available funds to repurchase common stock under current authorization[140] Item 5. Other Information 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] Item 6. Exhibits 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][144] - 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][146] 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] - Signed by Brian D. Murphy (President and CEO) and H. Andrew Fulmer (EVP, CFO, and Treasurer)[148]