Financial Data and Key Metrics Changes - Q1 net sales reached $60.4 million, exceeding expectations despite a challenging consumer backdrop, reflecting a decline from $69.3 million in the prior year [5][32] - Adjusted EBITDA for Q1 was a loss of $800,000, compared to breakeven guidance, indicating a significant decline in profitability [37][41] - Gross margin decreased to 34.4% from 35.9% year-over-year, impacted by lower volumes and unfavorable product mix [36] Business Line Data and Key Metrics Changes - Adventure segment revenue fell 28% to $16.1 million, primarily due to significant declines from three specific accounts [33][34] - Outdoor segment revenue was $44.3 million, down 6% year-over-year, driven by planned declines in ski business and product simplification efforts [34][35] - The company sold $2.7 million of discontinued merchandise in the Outdoor segment, which negatively impacted gross margin by 80 to 90 basis points [72][76] Market Data and Key Metrics Changes - North America wholesale for Outdoor was down 7.3%, with a 38% decline in the ski category [17] - Europe digital D2C sales increased by 10.7%, while international distributor markets saw a decline of 21.4% [18] - Apparel bookings for the fall/winter season increased by 30% in Europe and 50% in North America, indicating strong demand [20][67] Company Strategy and Development Direction - The company is focused on executing its strategic roadmap for profitable growth, emphasizing product simplification and SKU rationalization [5][6] - A new leadership appointment in the Adventure segment aims to drive growth and improve market positioning [10][11] - The company is accelerating efforts to reduce reliance on China for manufacturing, with plans to complete the transition by the end of 2026 [23][43] Management's Comments on Operating Environment and Future Outlook - Management has withdrawn full-year guidance due to macroeconomic uncertainties and the impact of U.S. trade policies [13][41] - The company is taking decisive actions to maintain competitive positioning and financial strength, with zero third-party bank debt [13][39] - Management remains confident in the strategic direction and is actively working to mitigate the impact of tariffs on operations [42][43] Other Important Information - The company announced the divestiture of its PEEP Snow Safety brand for EUR 7.8 million, aligning with its strategy to simplify the business [40] - Cash and cash equivalents at the end of Q1 were $41.3 million, down from $45.4 million at the end of the previous year [38] Q&A Session Summary Question: Are there any cancellations in products brought into the U.S. due to tariff impacts? - Management confirmed there have been no cancellations and emphasized efforts to maintain supply while managing margin impacts [49][50] Question: Can you quantify the headwinds to gross margin in each segment? - Management indicated that discontinued merchandise accounted for a significant portion of the gross margin decline, with specific percentages provided for each segment [55][61] Question: What is the expected annualized contribution from the PEEP business? - The PEEP business historically generates about $5 million in revenue annually, with EBITDA around breakeven [64] Question: How is the company addressing distribution in the U.S.? - The company is focusing on specialty distribution channels rather than mass discount retailers, expanding its reach significantly in the bike rack segment [87] Question: What is the status of price increases in relation to competitors? - The company has been proactive in implementing price increases to offset tariffs, positioning itself ahead of competitors in this regard [89][91]

Financial Data and Key Metrics Changes - Q1 2025 net sales were $60.4 million, exceeding expectations despite a challenging consumer backdrop, compared to $69.3 million in Q1 2024, reflecting a 13% decline year-over-year [5][33] - Adjusted EBITDA for Q1 was a loss of $800,000, down from breakeven guidance, with adjusted EBITDA margin at negative 1.3% [37][41] - Gross margin for Q1 was 34.4%, down from 35.9% in the prior year, impacted by lower volumes and unfavorable product mix [35][36] Business Line Data and Key Metrics Changes - Adventure segment revenue was $16.1 million, down 28% year-over-year, primarily due to significant declines from three specific accounts [34] - Outdoor segment revenue was $44.3 million, down 6% year-over-year, driven by a planned decline in the ski business and the shift of IGD revenue to Q4 2024 [34][35] - The company sold $2.7 million of discontinued merchandise in the Outdoor segment during Q1, which contributed to the revenue but negatively impacted gross margins [69] Market Data and Key Metrics Changes - North America wholesale sales in the Outdoor segment were down 7.3%, with a 38% decline in the ski category [17] - North America digital D2C sales were down 7%, while Europe digital D2C sales increased by 10.7% [18] - International distributor markets saw a decline of 21.4% due to optimal timing shifts of deliveries [18] Company Strategy and Development Direction - The company is focused on executing its strategic roadmap for long-term profitable growth, emphasizing product simplification and SKU rationalization [5][6] - A new leadership appointment in the Adventure segment aims to drive growth and improve organizational structure [10][11] - The company is accelerating efforts to reduce exposure to China sourced products, with plans to complete the transition by Q4 2025 [24][42] Management's Comments on Operating Environment and Future Outlook - Management has withdrawn full-year guidance due to macroeconomic uncertainties and the impact of U.S. trade policies on consumer demand [12][41] - The company is committed to maintaining competitive positioning and financial strength, supported by a balance sheet with zero third-party bank debt [13][41] - Management remains optimistic about the potential for long-term growth despite current challenges, citing a strong order book for fall/winter apparel [21][46] Other Important Information - The company announced the divestiture of its PEEP Snow Safety brand for EUR 7.8 million, aligning with its strategy to simplify the business [40] - Cash and cash equivalents at the end of Q1 were $41.3 million, down from $45.4 million at the end of 2024 [38] - The company is actively pursuing legal matters related to Section 16B securities litigation and cooperating with ongoing investigations by the DOJ and CPSC [44][45] Q&A Session Summary Question: Are there any cancellations in products brought into the U.S. due to tariff impacts? - Management confirmed there have been no cancellations and emphasized efforts to maintain supply while managing margin impacts [48][50] Question: Can you quantify the headwinds to gross margin in each segment? - Management indicated that the unfavorable product mix and promotional sales efforts negatively impacted gross margins, with specific percentages provided for each segment [56][58] Question: What is the expected annualized contribution from the PEEP business before divestiture? - The PEEP business historically generates about $5 million in annual revenue, with Q1 revenue reported at $1.8 million [61] Question: How is the company navigating distribution in the U.S.? - The company is focusing on specialty distribution channels rather than mass discount retailers, expanding its reach with new partnerships [84] Question: What is the strategy regarding price increases in light of tariffs? - The company has proactively communicated price increases to offset tariffs and is among the first in the industry to do so [86][88]

Financial Data and Key Metrics Changes - Net sales for the second quarter were $834 million, a decrease of 7% compared to the prior year [16] - Gross profit was $273 million, down 2%, but gross margin expanded by 180 basis points to 32.8% [16] - Non-GAAP net income totaled $68 million, an increase of 3%, with non-GAAP EPS of $1.04, up $0.05 [19] - GAAP earnings per share rose by $0.05 to $0.98 [19] - Adjusted EBITDA was $123 million, $1 million below the prior year quarter [19] Business Line Data and Key Metrics Changes Pet Segment - Pet net sales totaled $454 million, a decrease of 6% [20] - E-commerce sales represented 27% of Pet sales, up from the prior year [21] - Non-GAAP operating income for Pet reached $66 million, up 5%, with a non-GAAP operating margin of 14.5%, an increase of 150 basis points [21] Garden Segment - Garden net sales totaled $380 million, a 10% decrease [22] - E-commerce sales in the Garden segment delivered double-digit growth, particularly in Wild Bird and Grass Seed categories [23] - GAAP operating income for Garden was $59 million, up $2 million, with a GAAP operating margin of 15.5%, an increase of 190 basis points [23] Market Data and Key Metrics Changes - The earlier timing of customer orders and promotional events shifted sales into the first quarter, impacting both segments [6][22] - POS trends in the Garden segment were down low single digits, reflecting the delayed start to the garden selling season [22] - The Wild Bird business achieved record sales, benefiting from extended cold weather [8][50] Company Strategy and Development Direction - The company is focused on streamlining operations through footprint consolidation, portfolio refinement, and cost structure improvements [5][12] - The M&A strategy aims to identify high-growth consumable companies with accretive margins [26] - Continued investment in e-commerce, digital technology, and innovation is prioritized [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for the year despite navigating a challenging environment in the second half [5][14] - Anticipated increased consumer caution and a more promotional retail environment due to macroeconomic uncertainties [14] - The company reaffirmed its fiscal 2025 guidance for non-GAAP EPS of $2.2 or higher [26] Other Important Information - The company has completed significant inventory reductions of $90 million across both segments [24] - Cash and cash equivalents at the end of the second quarter were $517 million, an increase of $215 million [25] - The company repurchased approximately 1.2 million shares for $41 million during the quarter [24] Q&A Session Summary Question: Can you talk about Pet trends, particularly durables versus consumables? - Management noted a 6% decline in net sales due to earlier customer orders and SKU rationalization efforts [29][30] - Consumables were up low to mid-single digits, while durables were down double digits [31] Question: How are tariffs impacting your business? - Management indicated that tariffs affect about 13% of total import costs, primarily from China [34] - Plans are in place for vendor concessions and pricing adjustments to mitigate tariff impacts [35] Question: What are you seeing in the Garden segment regarding the spring selling season? - Management acknowledged a delayed season but noted improved consumption as weather conditions became favorable [46][64] Question: Are you seeing trade down to private label products? - Management confirmed some trade down to private label, particularly in the Wild Bird business [68][71] Question: How is the M&A environment being impacted by tariffs? - Management noted that M&A activity is low, with a disconnect between bid-ask spreads due to current market conditions [79][80]