American Outdoor Brands(AOUT) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited financial statements for Q3 and nine months ended January 31, 2024, report net losses, decreased assets, and reduced operating cash flow Condensed Consolidated Balance Sheets As of January 31, 2024, total assets slightly decreased to $239.1 million, while total liabilities increased to $56.7 million Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Items | Jan 31, 2024 (in thousands) | Apr 30, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $15,890 | $21,950 | | Inventories | $100,016 | $99,734 | | Total current assets | $149,936 | $157,620 | | Total assets | $239,079 | $243,587 | | Liabilities & Equity | | | | Total current liabilities | $23,011 | $23,002 | | Total liabilities | $56,653 | $51,723 | | Total equity | $182,426 | $191,864 | Condensed Consolidated Statements of Operations Q3 FY2024 net sales increased 5.0% to $53.4 million, but gross profit decreased, resulting in a net loss of $2.9 million Condensed Consolidated Statements of Operations (in thousands, except EPS) | Metric (in thousands, except EPS) | Q3 FY2024 | Q3 FY2023 | Nine Months FY2024 | Nine Months FY2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $53,425 | $50,894 | $154,801 | $149,006 | | Gross profit | $22,834 | $23,989 | $69,043 | $68,991 | | Operating loss | $(2,883) | $(3,001) | $(6,990) | $(8,697) | | Net loss | $(2,910) | $(2,863) | $(6,946) | $(8,188) | | Diluted EPS | $(0.23) | $(0.21) | $(0.53) | $(0.61) | Condensed Consolidated Statements of Stockholders' Equity Total equity decreased to $182.4 million due to a net loss and $5.6 million in treasury stock repurchases - For the nine months ended January 31, 2024, the company repurchased 635,075 shares of its common stock for $5.55 million[14] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased to $9.8 million for the nine months ended January 31, 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Jan 31, 2024 | Nine Months Ended Jan 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,823 | $24,263 | | Net cash used in investing activities | $(5,320) | $(4,231) | | Net cash used in financing activities | $(10,563) | $(17,843) | | Net (decrease)/increase in cash | $(6,060) | $2,189 | Notes to Condensed Consolidated Financial Statements Notes detail revenue recognition, disaggregation, lease accounting, and a new $10 million stock repurchase program Q3 FY2024 Net Sales Breakdown (YoY Change) | Q3 FY2024 Net Sales Breakdown (YoY Change) | Amount (in thousands) | % Change | | :--- | :--- | :--- | | e-commerce channels | $24,881 | 1.6% | | Traditional channels | $28,544 | 8.1% | | Domestic | $51,006 | 3.1% | | International | $2,419 | 72.2% | - Effective January 1, 2024, the company assumed a major facility lease, recording a right-of-use asset and lease liability of $10.6 million for the additional space[42] - On October 2, 2023, the Board authorized a new share repurchase program of up to $10.0 million, executable through September 30, 2024[62] Management's Discussion and Analysis (MD&A) Management reports a 5.0% Q3 net sales increase, but gross margin declined due to higher costs, while liquidity remains solid Third Quarter Fiscal 2024 Highlights Q3 FY2024 net sales grew 5.0% to $53.4 million, but gross margin fell to 42.7%, resulting in a net loss of $2.9 million Third Quarter Fiscal 2024 Highlights | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net Sales | $53.4 million | $50.9 million | | Gross Margin | 42.7% | 47.1% | | Net Loss | $2.9 million | $2.9 million | | Diluted EPS | ($0.23) | ($0.21) | | Non-GAAP Adjusted EBITDAS | $2.4 million | $3.3 million | Results of Operations Q3 net sales rose 5.0% to $53.4 million, driven by traditional and international channels, but gross margin declined due to higher costs - Q3 sales growth was driven by an increase in net sales of certain personal protection, rugged outdoor, hunting, and fishing products[94] - Gross margin for Q3 decreased by 440 basis points, primarily due to higher tariff, freight, and duty expenses, as well as increased promotional activity[97] - Q3 General and administrative expenses decreased by $1.4 million, primarily due to lower insurance premiums, reduced ERP system implementation costs, and lower rent expense[108] Non-GAAP Financial Measure Adjusted EBITDAS, a supplemental performance measure, decreased to $2.4 million for Q3 FY2024 and $8.7 million for the nine-month period Non-GAAP Adjusted EBITDAS (in thousands) | Metric (in thousands) | Q3 FY2024 | Q3 FY2023 | Nine Months FY2024 | Nine Months FY2023 | | :--- | :--- | :--- | :--- | :--- | | GAAP net loss | $(2,910) | $(2,863) | $(6,946) | $(8,188) | | Non-GAAP Adjusted EBITDAS | $2,375 | $3,275 | $8,741 | $11,019 | Liquidity and Capital Resources The company maintains a debt-free liquidity position with $15.9 million in cash, despite a decrease in operating cash flow - Cash generated by operating activities decreased to $9.8 million for the nine months ended Jan 31, 2024, compared to $24.3 million in the prior year period[128][129] - During the nine months ended Jan 31, 2024, the company used $5.0 million to pay off all borrowings on its revolving line of credit and $5.6 million to repurchase 635,075 shares of common stock[131] - The company expects to spend approximately $6.0 million to $6.5 million on capital expenditures in fiscal 2024[130] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported since the Annual Report on Form 10-K - There were no material changes from the information provided in Quantitative and Qualitative Disclosures about Market Risk in the Form 10-K[137] Controls and Procedures Disclosure controls and procedures were effective as of January 31, 2024, with no material changes in internal control over financial reporting - The CEO and CFO evaluated and concluded that the company's disclosure controls and procedures are effective as of January 31, 2024[138] - 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[139] PART II - OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 11, with no new material developments reported - The nature of legal proceedings is discussed in Note 11 — Commitments and Contingencies to the condensed consolidated financial statements and is incorporated by reference[141] Risk Factors No material changes to the previously disclosed risk factors were reported in the Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K[142] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 635,075 shares for $5.6 million and authorized a new $10.0 million share repurchase program Common Stock Repurchases | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Q1 FY2024 | 267,991 | $8.43 | | Q2 FY2024 | 157,536 | $9.46 | | Q3 FY2024 | 209,548 | $8.50 | | YTD FY2024 | 635,075 | $8.71 | - A new $10.0 million share repurchase plan was authorized on October 2, 2023, with approximately $7.8 million remaining available as of January 31, 2024[144] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter ended January 31, 2024 - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the quarter ended January 31, 2024[145] Exhibits This section lists filed exhibits, including lease agreements, officer certifications, and interactive data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by Rule 13a-14(a)/15d-14(a) and Section 1350[148]