Financial Data and Key Metrics - Net sales for Q3 2024 were $53.4 million, a 5% increase compared to Q3 2023, and a 23.3% increase compared to the pre-pandemic Q3 of fiscal 2020 [20] - Gross margin for Q3 was 42.7%, down from 47.1% in Q3 2023, due to higher tariff and freight cost amortization and increased promotional activity [22] - GAAP EPS was a loss of $0.23 for Q3, compared to a loss of $0.21 in Q3 2023, while non-GAAP EPS was $0.08, down from $0.13 in the prior year [24] - Adjusted EBITDAS for Q3 was $2.4 million, compared to $3.3 million in Q3 2023 [24] - The company ended Q3 with $15.9 million in cash, no debt, and total available capital of approximately $106 million [26] Business Line Performance - Outdoor Lifestyle category grew 2.8% year-over-year in Q3, driven by hunting and fishing-related products, and has grown 43.1% compared to the pre-pandemic Q3 of fiscal 2020 [7][21] - Shooting Sports category grew 7.6% year-over-year in Q3, driven by personal protection and shooting accessories, and has grown almost 6% compared to the pre-pandemic Q3 of fiscal 2020 [8][21] - E-commerce sales increased by 1.6% year-over-year, while traditional channel sales grew by 8.1% [21] - International sales grew by over 72% in Q3, driven by the introduction of lifestyle brands in the Canadian market [9] Market Performance - POS sales increased for both Outdoor Lifestyle and Shooting Sports categories, indicating strong consumer demand [9] - Retailers are focusing on careful inventory management and seeking innovative products, which aligns with the company's strategy to introduce new products and expand shelf space [19] Strategic Direction and Industry Competition - The company continues to focus on innovation, with a robust new product pipeline extending well into the next 5 years, positioning its brands to expand market share and enter new product categories [11] - The company's Dock and Unlock process has been successful in driving growth by entering new product categories and building brand loyalty [10] - The company is strategically expanding into international markets and leveraging its direct-to-consumer model to strengthen its connection with consumers [9][15] Management Commentary on Operating Environment and Future Outlook - Management highlighted the success of new product launches, such as the Caldwell Claymore and Grilla Mammoth smoker, which have been well-received by consumers and retailers [12][15] - The company expects full-year net sales growth of up to 3.5% for fiscal 2024, with gross margins expected to be around 44% [28] - Operating expenses are expected to decline slightly on a GAAP basis for fiscal 2024, while non-GAAP operating expenses are expected to increase slightly due to higher selling and distribution costs [29] Other Important Information - The company repurchased approximately 210,000 shares for $1.8 million in Q3, as part of its share repurchase program [27] - Capital expenditures for fiscal 2024 are expected to be between $6 million and $6.5 million, with $3 million to $3.5 million being recurring expenses [27] Q&A Session Summary Question: Inventory levels at retailers and confidence in future progress - Inventory levels in the channel were down, except for Outdoor Lifestyle due to the MEAT! load-in and work with Academy [32] - The company is focused on maintaining a tight link between sell-in and sell-through to avoid excess inventory in the channel [41] Question: Appetite for M&A given internal innovation efforts - The company evaluates acquisitions based on where its brands do not have "permission to play" or where it can augment existing innovation plans [35][36] - The company is actively looking for M&A opportunities, with a strong cash position and no debt [45] Question: Sales growth deceleration in Q4 - The expected deceleration in Q4 growth is attributed to the seasonal nature of the business, with Q2 and Q3 typically being stronger quarters [39] Question: Opportunities for higher load-in and new product launches - The company expects new product launches in late April to drive load-ins, along with new distribution opportunities and new retailers coming online [43] Question: Near-term appetite for acquisitions - The company is cautious about M&A in frothy markets but is actively looking for opportunities, with a strong pipeline and clear acquisition targets [45]
American Outdoor Brands(AOUT) - 2024 Q3 - Earnings Call Transcript