Core Viewpoint - AXIL Brands, Inc. experienced a decline in revenue and net income for fiscal 2025, but management highlighted improvements in cash flow and strategic initiatives aimed at long-term growth [12]. Financial Performance - AXIL reported net sales of $26.3 million for fiscal 2025, down 4.5% from $27.5 million a year earlier [1] - Net income decreased significantly to $0.9 million in fiscal 2024 from $2 million a year earlier, resulting in basic earnings per share (EPS) of 13 cents compared to 57 cents in the previous year [2] - Adjusted EBITDA rose 21.3% to $2.4 million, representing 9.3% of sales versus 7.3% a year earlier [2] - Operating cash flow improved markedly, generating $1.9 million versus only $3 thousand in fiscal 2024 [2] Key Business Metrics - Cash on hand rose to $4.8 million at the end of May 2025 from $3.3 million in the prior year [3] - Inventory declined to $2.5 million from $3.4 million, reflecting improved working capital management [3] - Accounts receivable nearly doubled to just more than $1 million, indicating stronger sales momentum or extended collection cycles [3] Operating Efficiency - Operating expenses represented 66.6% of sales in fiscal 2025, improving from 67.9% a year earlier [4] - Reduced sales and marketing expenses fell to $11.7 million from $13.4 million, contributing to efficiency gains [4] - Higher professional and consulting costs rose to $3.3 million from $2.7 million, partially offsetting the efficiency improvements [4] Management Insights - CEO Jeff Toghraie described fiscal 2025 as "a pivotal year" for AXIL, marking its third consecutive year of profitability despite global trade challenges [5] - Management emphasized the robust gross margin of 71% and significant improvements in operating cash flow as evidence of financial discipline [6] - The company is reshaping its supply chain by relocating manufacturing to the U.S. to mitigate tariff exposure [6] Factors Influencing Results - Revenue decline was partly due to global trade challenges, including tariffs and supply-chain disruptions [7] - Improved cost structure with lower marketing outlays and tighter expense controls helped sustain profitability [7] - The decision to advance U.S.-based manufacturing played a role in offsetting tariff-related cost pressures [7] Brand Diversification - AXIL continued to diversify its brand portfolio, with early momentum in its Reviv3 hair and skin care division supported by new leadership hires [8] Future Guidance - For fiscal 2026, management projected strong momentum driven by a major wholesale agreement with a large membership-based retailer, expected to enhance revenues and brand visibility [9] - This partnership is anticipated to expand AXIL's national reach and support long-term growth [9] Strategic Developments - AXIL launched Sharper Vision Marketing, a subsidiary aimed at monetizing internal digital marketing expertise and reducing customer acquisition costs [11] - The company advanced its operational realignment efforts, emphasizing the transition of its supply chain to the U.S. [11] - A key leadership appointment was made to bolster the Reviv3 segment, signaling intent to accelerate growth in the hair and skin care market [11]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China's Trade Activities - **Period**: July 2025 Core Insights and Arguments 1. **Trade Performance**: China's trade activities exceeded expectations in July, with exports growing by 7.2% year-over-year (YoY) and imports increasing by 4.1% YoY, marking the strongest gain in a year [3][4][7] 2. **Trade Surplus**: The trade surplus narrowed to a three-month low of US$98.2 billion, lower than market expectations [3] 3. **Export Dynamics**: - Exports to the US declined by 21.7% YoY, while exports to the rest of the world (RoW) rebounded to 12.2% YoY [5] - Notable growth in exports to Africa (42.4% YoY) and the EU (9.2% YoY) [5] - Integrated circuits (ICs) and autos were the primary contributors to export strength, with IC exports rising by 29.2% YoY [5][20] 4. **Import Trends**: - Imports from Japan increased by 17.1% YoY, and from Africa by 19.4% YoY [5] - IC imports led the growth, while auto imports saw a significant decline of 42.1% YoY [5] 5. **Tariff Implications**: The narrowing tariff gap with RoW could benefit China's exports if the US-China tariff truce is extended, potentially leading manufacturers to reconsider supply chain relocations [6][15] 6. **Domestic Economic Context**: The mid-year Politburo meeting reaffirmed a commitment to a 5% GDP target, suggesting that ongoing export strength may reduce the urgency for economic stimulus [6] Additional Important Insights 1. **Sector Performance**: - Machinery & electrical exports remained stable at 8.0% YoY, while labor-intensive exports were flat at 0.0% YoY [5] - Ship sales contracted for the first time in five months, down by 1.5% YoY [5] 2. **Regional Trade Dynamics**: - Exports to ASEAN countries remained strong at 16.6% YoY, with Thailand and Vietnam exceeding 25% [5] - Imports from ASEAN declined by 5.8% YoY, indicating regional economic challenges [5] 3. **Future Monitoring**: Continuous monitoring of US-China negotiations and the potential impact of upcoming chip tariffs is essential for assessing future trade dynamics [6]

Investment Rating - The industry investment rating is In-Line for both HK and ASEAN financials, with a preference for high total shareholder return (TSR) stocks in Singapore and Hong Kong [6][4]. Core Insights - The macroeconomic environment is expected to dominate discussions in the second half of the year, particularly regarding the impact of interest rates and potential tariffs on China and Hong Kong, as well as supply chain relocations into ASEAN [2][3]. - Singapore banks are anticipated to perform well, potentially benefiting from a lower cost of equity if revitalization measures for Singapore's equity market are implemented [2]. - Defensive stocks are favored in the current climate, with UOB being the most preferred bank in Singapore, while HSBC and Standard Chartered are expected to perform well due to dividends, share buybacks, and high return on equity (RoE) [2][4]. Summary by Sections Singapore and Hong Kong Financials - Preferred stocks include SGX, UOB, HSBC, and Standard Chartered, while Hang Seng and BoCHK are least preferred [4]. - Target prices for preferred stocks are set at 15.90 for SGX, 90.00 HKD for UOB, and 121.50 HKD for HSBC, with current prices showing slight upside potential for SGX and UOB, but downside for HSBC [8]. - The average daily traded value for UOB is 199 million USD, indicating strong liquidity [8]. Emerging Markets (EM) ASEAN - The report indicates a less favorable outlook for EM in the near term, particularly for Indonesia, where economic risks and lower commodity prices are expected to limit loan growth [3]. - The Philippines is highlighted as a preferred EM, benefiting from resilient RoE and increased retail lending penetration, with BDO and BPI being the preferred banks [3][9]. - Target prices for preferred EM banks include 10,017.00 for BCA and 8,625.00 for BRI, with current prices showing significant upside potential [9]. Financial Metrics - The report estimates a 2025 RoE of 33.3% for Singapore banks, with a target price-to-earnings ratio (PER) of 33.1 for SGX [8]. - Malaysian banks are expected to show defensive characteristics, but with stretched valuations compared to Singapore banks [2][3]. - The estimated dividend yield on target prices for preferred banks ranges from 2.3% for SGX to 6.0% for UOB in 2026 [9].

Financial Data and Key Metrics Changes - The net loss for the first quarter of 2025 was $4.2 million or $0.19 per diluted share, compared to a loss of $6.3 million or $0.29 per diluted share in the first quarter of 2024 [21] - Adjusted net loss was $5.3 million for Q1 2025 or $0.25 per diluted share, compared to $3.2 million or $0.15 per diluted share in 2024 [21] - Consolidated sales declined by 1.5% to $140.1 million, with US segment sales also decreasing by 1.5% to $128.5 million [22] - Gross margin decreased to 36.1% from 40.5%, driven by customer and product mix [23] Business Line Data and Key Metrics Changes - The major product line decreases were in kitchenware, largely offset by increases in tableware and home solution products, particularly in warehouse clubs, e-commerce, and the dollar channel [22] - In food service, revenue growth was noted despite delays in product launches and capital projects [14] - International segment sales were approximately flat year over year, with operating results improving due to implemented actions [15] Market Data and Key Metrics Changes - The mass retail channel experienced a pronounced decline, while e-commerce, the dollar channel, and club sales showed strong gains [6] - The Asia Pacific region saw an increase, offset by a small decrease from UK national accounts [22] Company Strategy and Development Direction - The company is transitioning to a geographically distributed sourcing and manufacturing model to mitigate risks from US trade policy changes, aiming to relocate 80% of manufacturing out of China by the end of 2025 [10][11] - Cost management measures have been tightened, with over $10 million in annual costs identified for elimination [17] - The company is actively pursuing M&A opportunities but is being conservative in its approach due to the current environment [18] Management's Comments on Operating Environment and Future Outlook - The management highlighted ongoing economic headwinds and a volatile tariff policy impacting pricing, promotions, and product planning [7] - The company is well-positioned to absorb near-term pressures and aims to emerge stronger when economic trends stabilize [19] - No formal guidance for the full year 2025 was issued due to a lack of visibility in the current environment [20] Other Important Information - The company has a strong balance sheet with liquidity of approximately $90 million at quarter-end [28] - Adjusted EBITDA for the trailing twelve months ended March 31, 2025, was $51 million [22] Q&A Session Summary Question: Can you provide additional numbers regarding the sales decline at mass retail and the sales increase in e-commerce and other channels? - The swing was approximately $15 million [32] Question: Can you give an update on the Dolly Parton program? - Shipments occurred as expected, and the program remains strong with anticipated year-over-year growth [34] Question: What is the magnitude of the planned price increases? - The bulk of the increases is between 6-16%, with the impact on volume currently unknown [36] Question: Why was the decision made not to provide guidance? - The main reason is the lack of visibility in the current environment, making it difficult to provide accurate guidance [44] Question: Why hasn't the transition out of China been completed already? - The company has been ramping up production in other geographies and is actively shipping from multiple locations [48] Question: How does the company expect demand to react to significant price increases? - Historically, the company has seen relatively little impact on demand from price increases, particularly in essential product categories [49] Question: What message would the company convey to shareholders regarding stock performance? - The company believes there is a significant intrinsic value gap and is focused on realizing this value in the stock price [52]

Financial Data and Key Metrics Changes - The company reported first-quarter sales of $1 billion, a decrease of 7% compared to Q1 2024, or down 5% organically when excluding the impact of China and foreign exchange [20][36] - Operating income was $135.8 million, down 19%, with an operating margin of 13.1% [37] - Earnings per share (EPS) for the quarter were $0.66 [21][37] Business Line Data and Key Metrics Changes - **Water Innovations**: Sales decreased by 10% or 7% organically, with operating income of $113.2 million, down 20%, and an operating margin of 20% [27][37] - **Outdoors**: Sales decreased by 3%, with operating income of $31.7 million, down 16%, and an operating margin of 10.4% [29][38] - **Security**: Sales decreased by 4%, with operating income of $23.2 million, down 13%, and an operating margin of 14.2% [32][39] Market Data and Key Metrics Changes - The company noted a soft demand environment, with point of sale (POS) excluding China down low single digits and reductions in wholesale inventories [20][21] - The spring selling season was slower due to cautious consumer behavior, particularly in the repair and remodel sector [19][20] Company Strategy and Development Direction - The company is focused on mitigating the impact of tariffs through supply chain opportunities, cost reduction activities, and strategic pricing actions [10][11] - A significant portion of the company's cost of goods sold (COGS) is sourced from the U.S. (60%) and North America (70%), providing a competitive advantage [14][42] - The company is consolidating its U.S. office associates into a new campus in Deerfield, Illinois, to enhance collaboration and innovation [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current uncertain environment and emphasized the importance of strategic priorities [10][47] - The company will not provide detailed full-year financial guidance due to uncertainty around consumer demand but will outline a framework for potential EPS scenarios [12][43] - Management expects to fully offset the anticipated $200 million tariff impact in 2025 through various mitigation strategies [12][44] Other Important Information - The company has made significant progress in reducing its reliance on China, with expectations that COGS from China will be around 10% by the end of the year [14][86] - The digital business is expected to generate around $300 million in sales in 2025, with strong momentum in the Flow business [23][24] Q&A Session Summary Question: How does the transformation effort and headquarters move progress? - Management described the transformation as being in its third phase, focusing on co-location to drive innovation and performance acceleration, with positive talent relocation outcomes [50][56] Question: How is the company planning to mitigate the tariff impacts? - Management expects to fully offset the $200 million in-year tariff impact through supply chain moves and pricing actions, with a significant portion of the annualized $525 million impact related to China [59][63] Question: How confident is the company in achieving $300 million in digital sales? - Management expressed confidence in the digital business's performance, highlighting strong growth in the Flow segment and new partnerships [68][70] Question: What is the strategy regarding e-commerce pricing and market share? - Management acknowledged a transition to a firmer pricing strategy in e-commerce, which may have temporarily impacted share but is aimed at long-term brand health [80][81]

Financial Data and Key Metrics Changes - The company reported first quarter sales of $1 billion, a decrease of 7% compared to Q1 2024, or down 5% organically when excluding the impact of China and foreign exchange [20][38] - Operating income was $136 million, with an operating margin of 13.1%, and earnings per share (EPS) were $0.66 [21][38] - The company expects to fully offset the anticipated $200 million tariff impact in 2025 through supply chain opportunities, cost reduction activities, and strategic pricing actions [12][44] Business Line Data and Key Metrics Changes - **Water Innovations**: Sales decreased by 10% or 7% organically, reflecting lower point of sale and inventory destocking [28][38] - **Outdoors**: Sales decreased by 3%, driven by low single-digit point of sale declines, but double-digit growth was noted in decking [30][39] - **Security**: Sales decreased by 4%, primarily due to soft point of sale and inventory reductions [31][40] Market Data and Key Metrics Changes - The company noted a softer market environment, with cautious consumer behavior impacting demand, particularly in the repair and remodel sector [19][20] - Inventory reductions were observed across channels, particularly in wholesale, as partners prepared for a softening environment [20][81] Company Strategy and Development Direction - The company is focused on mitigating the impact of tariffs, controlling costs, and driving strong brands and digital initiatives [33][34] - A significant consolidation of headquarters is underway to enhance collaboration and innovation, expected to be completed by the end of summer [8][58] - The company aims to leverage its North American manufacturing footprint to gain a competitive advantage, particularly against competitors sourcing from China [14][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current uncertain environment and emphasized the importance of strategic priorities [34][47] - The company is not providing detailed full-year financial guidance due to uncertainty around consumer demand but has outlined a framework for potential EPS scenarios [12][44] - Management highlighted the potential for market outperformance despite external challenges, driven by strong brand positioning and supply chain advantages [34][47] Other Important Information - The company has reduced its spend from China by over 60% since 2017 and expects to have only 10% of its cost of goods sold (COGS) from China by the end of the year [14][85] - The digital business is expected to generate around $300 million in sales in 2025, with significant momentum in the Flow product line [23][70] Q&A Session Summary Question: How does the transformation effort and headquarters move progress? - Management indicated that the transformation is in its third phase, focusing on co-location to drive innovation and performance acceleration, with positive talent relocation outcomes [51][56] Question: How is the company planning to offset the tariff impacts? - The company expects to fully offset the $200 million impact in 2025 through supply chain moves and pricing actions, with a significant portion of the annualized $525 million impact related to China [59][63] Question: What is the confidence level in achieving $300 million in digital sales? - Management expressed strong confidence in achieving the digital sales target, highlighting significant activations and new partnerships that drive value [68][72] Question: Can you provide more details on the e-commerce pricing strategy and share shifts? - The company is transitioning to a firmer pricing strategy in e-commerce to maintain competitiveness, acknowledging some short-term share loss for long-term brand health [79][80]