American Outdoor Brands(AOUT) - 2023 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended October 31, 2022, were $54.436 million, a decrease from $70.760 million in the same period of 2021, representing a decline of approximately 23%[16] - Gross profit for the three months ended October 31, 2022, was $25.962 million, down from $33.037 million in the prior year, reflecting a decrease of about 21%[16] - Operating loss for the three months ended October 31, 2022, was $(134) thousand, compared to an operating income of $5.301 million in the same period of 2021[16] - Net income for the three months ended October 31, 2022, was $370 thousand, a significant drop from $4.583 million in the same period of 2021[16] - Total net sales for the six months ended October 31, 2022, were $98.1 million, a decrease of $33.4 million, or 25.4%, from the prior year comparable period[100] - Net loss for the six months ended October 31, 2022, was $5.5 million, or $0.41 per diluted share, compared to net income of $8.0 million, or $0.56 per share, in the prior year[133] - GAAP net income for 2022 was $370,000 compared to a loss of $5.3 million in 2021, marking a significant improvement[137] Operating Expenses - Total operating expenses for the three months ended October 31, 2022, were $26.096 million, slightly lower than $27.736 million in the same period of 2021[16] - Total operating expenses for the six months ended October 31, 2022, were $50.7 million, a decrease of $1.8 million, or 3.4%, from the prior year[122] - Selling, marketing, and distribution expenses decreased by $3.2 million, or 10.9%, due to lower sales volume-related accruals and advertising expenses[122] Cash Flow and Capital Expenditures - Cash flows from operating activities for the six months ended October 31, 2022, provided $6,167,000, contrasting with a cash outflow of $25,274,000 in the same period of 2021[20] - The company expects to spend approximately $7.0 million to $7.5 million for capital expenditures in fiscal 2023[10] - Cash used in financing activities was $6.0 million for the six months ended October 31, 2022, primarily due to $5.2 million in payments on the revolving line of credit[145] Inventory and Assets - Total inventories decreased from $121,683,000 as of April 30, 2022, to $111,444,000 as of October 31, 2022, reflecting an 8.5% reduction[63] - Total intangible assets as of October 31, 2022, were valued at $191,209,000, with accumulated amortization of $133,142,000[56] Acquisitions and Integration - The Grilla Grills acquisition cost $27 million, financed through existing cash and a $25 million draw on a revolving line of credit[41] - The Grilla Grills acquisition generated $2.6 million and $7.8 million in net sales for the three and six months ended October 31, 2022, respectively[45] - The company acquired Grilla Grills for $27 million in March 2022 and is in the process of integrating it into its business[99] Shareholder Actions - The company repurchased 84,029 shares of common stock for $756,000 under a $10 million buyback authorization[68] - The company delivered common stock to employees with a total market value of $1.1 million in connection with the vesting of RSUs during the six months ended October 31, 2022[78] Future Outlook - The company believes it will meet future cash requirements through a combination of cash flows from operations, available cash balances, and borrowings from its existing $75 million credit facility[10] - The company anticipates a decline in inventory levels in the second half of fiscal 2023 due to reduced planned inventory purchases[143] - Future capital requirements will depend on various factors, including net sales and the timing of new product introductions[146] Product Development and Market Strategy - The company focuses on expanding its brand presence across four consumer verticals: Adventurer, Harvester, Marksman, and Defender, to capture a larger market share[24] - The company continues to develop and market outdoor lifestyle products and shooting sports accessories, with a strong emphasis on product innovation and consumer engagement[23] - New products represented 30.0% of net sales for the three months ended October 31, 2022[109] Stock-Based Compensation - The company incurred stock-based compensation expenses of $1,835,000 for the six months ended October 31, 2022, compared to $1,416,000 in the prior year[20] - The company granted an aggregate of 52,277 performance stock units (PSUs) and 263,898 restricted stock units (RSUs) during the six months ended October 31, 2022[78] - As of October 31, 2022, there was $3.4 million of unrecognized compensation expense related to unvested RSUs and PSUs, expected to be recognized over a weighted average remaining contractual term of 1.4 years[82]