American Outdoor Brands(US:AOUT)2022-03-11 02:39Financial Data and Key Metrics Changes - Net sales for Q3 were $70.1 million, a decrease of 15.2% compared to $82.6 million in the prior year, following last year's record growth of 90% [19][30] - GAAP EPS for Q3 was $0.27, down from $0.56 last year, while non-GAAP EPS was $0.52 compared to $0.82 last year [23][30] - Adjusted EBITDAS for the quarter was $10.5 million, with a margin of 15%, compared to $15.8 million or a margin of 19.1% for the prior year [23] Business Line Data and Key Metrics Changes - Outdoor lifestyle category sales grew by 81% compared to two years ago, accounting for over 52% of total net sales in Q3, while shooting sports category sales were down 31% year-over-year [20][46] - The outdoor lifestyle category partially offset the decline in shooting sports, which saw a 45% increase compared to Q3 of fiscal 2020 [19][46] Market Data and Key Metrics Changes - The outdoor cooking market is valued at $7 billion, with the company entering this market through the acquisition of Grilla Grills for $27 million [6][16] - The shooting sports market has seen a long-term growth trend, with adjusted NICS checks up 32% in the trailing 12 months compared to two years ago [19] Company Strategy and Development Direction - The company aims for organic growth of 8% to 10% over the next four to five years, focusing on both organic growth and acquisitions [13][30] - The acquisition of Grilla Grills is expected to enhance the company's outdoor lifestyle category and expand its direct-to-consumer revenue base [16][17] Management's Comments on Operating Environment and Future Outlook - Management noted that the decline in shooting sports sales is primarily demand-driven, with a shift in consumer spending towards ammunition [39] - The company anticipates continued growth in the outdoor lifestyle category, while shooting sports sales are expected to be influenced by consumer firearm purchasing trends [30] Other Important Information - The company has maintained a strong balance sheet, ending Q3 with $22.8 million in cash and no borrowings on its line of credit [24] - The company plans to close the Grilla transaction with no impact on its cash reserves due to an increased borrowing capacity [27] Q&A Session Summary Question: Trends by outdoor activity - Management noted softness in shooting sports and personal protection, but strength in outdoor lifestyle activities such as hunting, fishing, and camping [33] Question: Material headwinds or drivers for Q4 - Management indicated that Q4 guidance is based on current trends in shooting sports and outdoor lifestyle, with too much uncertainty to provide a detailed outlook for next year [35] Question: Decline in shooting sports business - The decline is primarily due to demand-side issues, with inventory levels being adequate to meet future needs [39] Question: Margin difference between categories - Management did not provide specific margin breakdowns but indicated that overall margins are not significantly different between the two categories [41] Question: Guidance for fourth quarter profitability - Management expects a slight sequential margin decline, consistent with previous years, but with some savings in fixed and variable costs [43] Question: Year-over-year performance breakdown - Shooting sports were down 31% year-over-year, while outdoor lifestyle was up 7% [46] Question: Organic growth guidance and future outlook - Management emphasized the increasing share of outdoor lifestyle in the business and the long-term potential of shooting sports as new participants enter the market [50]