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spk08: for standing by, and welcome to the American Outdoor Brands' fourth quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. And now I'd like to introduce your host for today's program, Liz Sharp, Vice President of Investor Relations. Please go ahead.
spk01: Thank you, and good afternoon. Our comments today may contain predictions, estimates, and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, should, indicate, suggest, believe, and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies, and vision, our strategic evolution, our market share and market demand for our products, market and inventory conditions related to our products and in our industry in general, and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings. You can find those documents as well as a replay of this call on our website at AOB.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, transition costs, COVID-19 expenses, related party interest income, and the tax effect related to all of those adjustments. The reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call, can be found in our filings as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. Joining us on today's call is is Brian Murphy, President and CEO, and Andy Fulmer, CFO. And with that, I will turn it over to Brian.
spk05: Thanks, Liz, and thanks, everyone, for joining us. Today, I'm excited to share the results of our first fiscal year as a public company, and I'm happy to report that those results exceeded our expectations for both net sales and net income. Fiscal 2021 was a historic year for our company. We completed our spinoff in August 2020 and became an independent public company dedicated to building authentic lifestyle brands that help consumers make the most out of the moments that matter. We believe that sharing our passion for building brands that allow people to pursue their outdoor adventures was especially timely as consumers increasingly looked to outdoor activities such as fishing, hunting, shooting sports, camping, and hiking in response to travel restrictions and social distancing. and as they continue to demonstrate an increased interest in self-protection. Some people turn to these activities for the very first time, and others for the first time in a long time. Regardless, we are pleased and proud that so many of them took our brands along with them on their journey. As a result, we delivered nearly $277 million in that sales, which represents 65% sales growth for the year and 50% sales growth for the fourth quarter. We are extremely proud of our employees whose loyalty, hard work, and dedication helped us establish our new company, service our customers with consistency, and deliver outstanding results despite a year of uncertainty driven by the pandemic. We believe the past year has ushered in an exciting new era for the outdoor industry, resulting in a new, higher foundational level of consumer participation. whether personal protection, shooting sports, camping, hunting, or fishing, each one of the markets in which our brands play has delivered meaningful growth. And importantly, each has welcomed many new participants who we believe will continue to explore the outdoors in the future. Calendar 2020 gave us 8 million new firearm owners, nearly 8 million new campers, and over 3 million new fishing license holders. During fiscal 21, our brands were uniquely positioned to address these strong U.S. consumer participation trends. That alignment, combined with our dock and unlock strategy, helped drive our strong performance in fiscal 21. As a reminder, our brands are organized into four distinct brand lanes, Defender, Marksman, Harvester, and Adventurer, each focused on a particular consumer type. Once a brand is docked into its respective brand lane, we begin to unlock its true potential by leveraging the lane's resources. including marketing, e-commerce, and new product development, allowing the brand to begin its transformation from niche to known. Our Dock & Unlock strategy drives growth, and in fiscal 21, it delivered results. First, Dock & Unlock helps us develop new products within existing markets, allowing us to take market share. In fiscal 21, we expanded our bubble line of fishing accessories to include shears, stainless steel pliers, hook extractors, and our Pro Series Lithium Ion Cordless Electric Filet Knife. These new products help drive Bubba revenue growth in fiscal 21 of over 73%. Second, Dock & Unlock provides some of our existing brands with access to entirely new product categories. In fiscal 21, we rebranded UST from its origins in lower ASP camping accessories to a camping lifestyle brand, and we introduced new, higher ASP products, including tents, air mattresses, and sleeping bags, which represent a larger category. Third, dock and unlock allows us to enter new and large consumer markets. In fiscal 21, we identified an unmet need in our harvester brand lane, so we developed and launched Meat Your Maker, a new brand developed internally that placed us in the $10 billion meat processing market and became a multi-million dollar revenue brand within its first nine months. Lastly, Dock and Unlock provides access to new distribution channels. In fiscal 21, we expanded Hooey Man from a single line of tree saws for hunters to a brand that offers a full range of land management tools popular with homeowners. These products are now available and beginning to gain traction at home and hardware stores. Dock and Unlock lies at the heart of our new product development pipeline. New products, which we define as any new SKU introduced over the prior two-year period, represented over 35% of our net sales for fiscal 21. Our new product pipeline remained robust throughout the year, and in the fourth quarter, we introduced new products across all four brand lanes. Let me hide a few of those for you. In our Defender lane, we launched the Crimson Trace CMR301, a universal laser and tactical light system. In our Marksman lane, we launched our new Tipton Knope Rope, pull-through bore cleaners. and the Caldwell AR500 target stand, which complements the full line of AR500 targets we launched last year. In our harvester lane, we launched two old-timer brand electric fillet knives, one corded and one lithium-ion cordless. We also launched a full assortment of Hueyman H-Grip work gloves, which complement our new expanded line of Hueyman land management tools. And in the adventurer lane, we launched the Bubba Pro Series electric fillet knife, which integrates our brushless motor technology and our advanced lithium-ion technology. We also introduced our Bubba Fishing Line Nipper, a product that spans freshwater, saltwater, and fly fishing markets. And during the quarter, we put the finishing touches on a number of new products, including two major products that will represent Bubba's entry into several new product categories in fiscal 22. Stay tuned. We'll be unveiling most of these exciting new products next week at ICAST, the fishing industry's premier trade show. We believe many of our brands have significant untapped potential for long-term growth, and our dock and unlock platform has been built to manifest that potential. Our brand certainly aligned well with the consumer trends we saw in fiscal 21, but at the same time, we believe our results were also driven by our ability to capitalize on that demand in several ways. First, We benefited from significant strategic investments we began making in our e-commerce capabilities long before the pandemic began. We established websites for each of our key brands, which positioned us to successfully meet the consumer wherever they shopped, whether online or in-store. This allowed us to establish new consumer relationships and increase existing consumer engagement. It also allowed us to respond effectively to increased demand across our brand portfolio. As a result, we grew net sales in our e-commerce channel by over 100% in fiscal 21, including sales by our e-commerce customers and our own direct-to-consumer sales as consumers shifted towards online purchases. At the same time, net sales in our traditional channels grew nearly 49%. Our strong e-commerce and traditional channels are both very important since they allow us to capture consumer demand no matter what channel it comes through. Second, We benefited from earlier investments in our supply chain and distribution capabilities. Our teams here and in Asia did a great job and continue to do a great job navigating supply chain constraints and port congestion. As a result, we heard from a number of customers that we did a better job than our competitors of keeping products on their shelves. Lastly, in terms of bottom line performance, our supply chain team did a great job here as well, managing material cost increases and freight expenses in a high-demand environment. It's also important to note that we benefited from the absence of costs related to multiple industry trade shows and travel cancellations in fiscal 21, important investments that are a necessary part of a more normalized selling and marketing environment. Fiscal 21 was an extraordinary year, one that delivered unprecedented challenges and unforeseen opportunities. During that time, we successfully prepared for and became a new public company and delivered tremendous growth and profits in a year that, we believe, established an outdoor renaissance for the consumer. Looking ahead to fiscal 22, we plan to build upon our new consumer relationships, supported by a strong brand portfolio, a robust lineup of exciting new products, and an established e-commerce platform that will allow us to deepen our insight into the behavior of our consumers. While we do that, We will work diligently to leverage our platform, monitoring and managing the risks that are likely to remain in our environment throughout the year, which includes supply chain constraints, increasing raw materials and freight costs, and ongoing tariffs. As we look to the longer term, we are excited about the large number of new consumers that have entered many of the markets where our brands play. In addition to that, we believe many of our brands have the authenticity, the potential, and the ambition to play in markets beyond the outdoors. So we have developed a pathway that will expand our total addressable market and take our brands from niche to known, fueling our growth in four ways. Number one, increasing our market share by launching new products within existing categories. Two, by entering new large product categories where our brands have permission to play. Three, by entering entirely new consumer markets that increase our total addressable market opportunity. And number four, by broadening our distribution, by onboarding new customers that reflect our brand's expanded permission to play. On a combined basis, we believe this strategy will support organic sales growth at a compound annual growth rate of between 8% and 10% over the next four to five years, exclusive of any acquisitions. That implies at the low end that we have a plan to more than double the size of our business organically since the separation in August 2020. and we believe that growth is just the beginning. As we work to achieve that growth, we will continue to focus on delivering long-term profitability. Our investments in product development and marketing and distribution infrastructure have resulted in a platform with largely fixed costs, helping us deliver record profitability in fiscal 21 as our net sales grew. As a result, we believe this platform has the ability to deliver EBITDA margins in the mid to high teens over the next four to five years as well. We could not be more excited about our future. We are proud of the foundation we have established in our first year as a public company, and we are poised to build on that foundation, setting our sights on future growth and taking our brands from niche to known. With that, I'll turn it over to Andy.
spk03: Thanks, Brian. I am happy to share our full year in Q4 results, which showed significant growth in net sales and adjusted EBITDAs, as well as strong free cash flow generations. Nut sales for the year were $276.7 million, compared to $167.4 million in the prior year, an increase of over 65%. This increase was driven by higher overall demand in the outdoor products market, combined with a consumer preference for the 20 brands across our portfolio. In fiscal 21, over half our brands grew nut sales more than 50% over the prior year. and six of those grew net sales in the triple digits. Net sales in Q4 were $64.5 million, an increase of approximately 50% over the prior year quarter. We saw growth in nearly all of our brands, and similar to the last two quarters, our four highest-selling products in Q4 represented each one of our four brand lanes. Our fiscal 21 gross margins were 45.8%, a 340 basis point increase over the prior year. The increase in gross margin percentage was driven by favorable product mix and lower promotional spending, offset by sales of discounted slower moving inventory that I've mentioned on earlier calls. For the full year, GAAP operating expenses were $103.3 million, compared to $183.8 million last year. Our fiscal 20 operating expenses included a goodwill impairment charge of approximately $99 million. If we exclude that impairment, then operating expenses increased on a year-over-year basis by $18.5 million, or 21.7%. The increase was driven by $11.2 million of variable selling and distribution costs and approximately $4.4 million of compensation-related expenses, both of which resulted from our higher net sales. These costs were netted by a decrease in intangible amortization of $2.6 million and approximately $1 million from facility consolidations that we completed in fiscal 20. Non-GAAP operating expenses for fiscal 21 were $83.6 million compared to $64.2 million last year. Non-GAAP operating expenses exclude intangible amortization, stock compensation, and certain non-recurring expenses as they occur. GAAP EPS for fiscal 21 was $1.29, as compared with an EPS loss of $6.88 last year. Again, fiscal 20 EPS was significantly impacted by the goodwill impairments. Our fiscal 21 non-GAAP EPS was $2.32 as compared to 23 cents last year. These figures are based on our fully diluted share count of approximately 14 million shares. Full-year adjusted EBITDAs was $47.3 million in fiscal 21, an increase of approximately 285% over the prior year. Fiscal 21 adjusted EBITDAs margin was 17.1%, compared to 7.3% in the prior year and was favorably impacted by three things. First, the significant increase in net sales and the resulting leverage of our fixed costs. Second, the absence of promotions in the market. And third, reduced travel and the absence of in-person trade shows driven by the pandemic-related restrictions. As we've mentioned on prior calls, The spinoff changed the accounting treatment of our Missouri headquarters from a finance lease to an operating lease. Had the full year been treated as an operating lease, adjusted EBITDAs would have been approximately $700,000 lower at $46.6 million, or 16.8% of net sales. Looking ahead to fiscal 22 and beyond, that annual cost will be treated entirely as rent expense. Turning to the balance sheet and cash flow, We ended the year with $60.8 million of cash and no borrowings on our LENV credit. Our full-year cash from operations was very strong at $33.3 million and was netted by cash outlays for CapEx and patent costs of $4.2 million in line with our expectations. As a result, free cash flows for the year was about $29 million. Our balance sheet is incredibly strong at this point and we believe it is adequate to support our investments in organic growth as well as any tuck-in acquisitions we may choose to pursue. Now let me turn to a discussion of our IT infrastructure. You'll recall that our spinoff last year included a two-year transition services agreement with our former parent company. That agreement provides for two years of full IT support while we stand up our own independent AOUT platform. As a result, our spinoff strategy has always included a goal to set up our IT infrastructure by August 24th, 2022. By way of an update, I'm pleased to report we have in place an extremely capable and experienced IT leader and team who have developed a tailored business-wide IT strategy based on a platform that has been chosen and designed to meet our company's specific needs now and into the future. This is an exciting investment for us as we look to enhance our analytical capabilities and prepare our company for future organic and inorganic growth. We estimate the implementation cost of this project will be approximately $8 million by the time we go live, a little over a year from now, in fiscal 23. We expect to capitalize $5.4 million of that cost and incur the balance of $2.6 million as one-time operating expense. Let me provide a bit of detail about the cost impact specific to fiscal 22. CAPEX spending in fiscal 22 for IT will be about $3.5 million, and one-time operating expense in fiscal 22 for IT will be about $1.6 million. In addition to the $1.6 million of one-time expense, We will also incur duplicative expenses of approximately $1.2 million as we run both the existing and new platforms side-by-side prior to the go-live date. We will treat both the $1.6 million and the $1.2 million as non-recurring transition costs when calculating non-GAAP operating expense and adjusted EBITDAs. Turning now to CAPEX outside of the IT project, We expect to spend approximately $4 to $5 million in capital expenditures in fiscal 22, mainly for product tooling and trade show booths for industry shows. To recap, our total capex for fiscal 22, including IT and all other capex, is expected to be $7.5 million to $8.5 million. Turning to inventory, we ended the year at $74.3 million of inventory up a bit sequentially from Q3, but somewhat below our expectations. You'll recall last quarter, we said we expected inventory to increase in support of new product launches and in order to mitigate supply chain risk, especially for high volume SKUs. Unfortunately, supply chain constraints and port congestion hampered our ability to build inventory to our preferred levels. That said, our team is focused on overcoming these hurdles. as we work to build up our inventories in fiscal 22 in support of new product launches and to increase safety stock levels to mitigate these risks. Finally, we ended the quarter with no outstanding bank debt and the full capacity available on our $50 million line of credit. This facility provides an additional $15 million of availability under certain conditions. Our cash balance combined with our line of credit capacity provided us with over $125 million of available capital at the end of fiscal 21. Brian and I continue to see a high number of acquisition targets coming to market. We also remain very disciplined in our approach when assessing these opportunities. Our strategy remains focused on finding brands that complement our current portfolio and have runway for growth, operate in large total addressable markets and allow us to apply our dock and unlock strategy to build value for our shareholders. Now turning to our guidance. We estimate that net sales for fiscal 22 will be in the range of $280 to $295 million. With net sales in that range, we would expect full year gap EPS in the range of $1 to $1.24 and non-GAAP EPS in the range of $2.02 to $2.26. We would also expect adjusted EBITDAs of between 15% and 16% for the full year. In fiscal 22, we expect to see a resumption of selling and marketing activities to more normalized levels, compared with the absence of those activities during the pandemic-related restrictions of fiscal 21. As a result, We plan to incur costs in support of increased business travel and costs related to trade show participation, including ICAST next week in Florida and SHOT Show next January in Las Vegas. In addition to this activity, we expect to see some level of promotional activity returning to the market as well. Finally, we expect our effective tax rate will be approximately 25% and our fully diluted share count will be about 14.5 million shares. With that, operator, we're ready to open the call for questions from our analysts.
spk08: Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Eric Walt from B. Reilly Security. Your question, please.
spk07: Thank you. Good afternoon. A couple questions, if I may. First off, looking at the fourth quarter specifically, the e-commerce mix versus retail dropped materially year over year versus the fourth quarter last year. Is that merely a timing of shipments, the impact of the retail economy picking back up, or is there something else there, and how should we think about that mix shaking out in fiscal 22 relative to the 40-60 split last year.
spk03: Hi, Eric. It's Andy. Great question. So when you look at Q4 over Q4, last year Q4 was when the pandemic was starting to affect sales. We had noted last year in the earnings call there were some anomalies with orders during that time frame and you kind of, you know, brick-and-mortar retail and e-com. I think if you look at the trends over the quarter, we started Q1 50-50, kind of an almost 50-50 split between e-com and traditional, went back to one-third, two-thirds in Q2, and that's what you saw in Q4 as well.
spk05: Yeah, I mean, this is Brian, Eric. Certainly we saw year-over-year there are just many more stores open at this point. I also think that retailers have been doing a lot of hurry-up offense to get their own retail storefronts up to speed online as well, and those would be captured as part of our traditional sales channel. So I think some of the customers that we have there have done a really good job getting up to speed. Obviously, more doors are open compared to, I think, last year we had said at one point that we were tracking over 1,000 retail doors that were closed. So I think it's just the economy opening back up in general.
spk07: Perfect. And then the second question, kind of a two-parter on the supply chain. You noted initially that a lot of your retailers or customers know that you did a better job than some of your competitors keeping products on shelves, which I assume translated into market share gains in the period. Any specific categories this would be reflected in, and how do you think that dynamic changes possibly as the supply chain possibly catches up? And then on the supply chain specifically, to you, was there any impact on your ability to get product out there, or is that merely a safety stock issue on inventory, and what have you assumed in guidance around supply chain? Thank you.
spk05: Yeah, I can start, Eric. This is Brian. So, first of all, our team did a fantastic job navigating some of the complexities that we were all introduced with here in our fiscal 21, and we We definitely relied more upon our insights into POS and strengthening that chain that I've talked about before between POS and our inventory planning. So we have our own analytic team in-house here, and we bought ahead. We started to see some of those trends, and we wanted to make sure that we had sufficient safety stock here. And I think we benefited from that. We certainly, like you said, we took share during that period. And like I said, our competitors – or not our competitors, but our customers – noted that we have done so. And then looking forward, Andy made a mention, and he can probably chime in too, about where we ended Q4, they were below our expectations when it comes to inventory levels. So part of that is strong sell-through. Demand has outstripped supply in some cases. But we haven't seen, you asked the question about product categories or by brand, we haven't necessarily seen pockets within our portfolio where we're missing the mark. I think it's just across the board with our portfolio, given the strong demand, it's just demand is very strong right now. Andy, anything you want to add to that?
spk03: Yeah, the only thing I would add is kind of going forward, we plan to invest to make sure, as Brian mentioned, to mitigate supply chain risk, invest in inventory, those safety stock levels, especially those high-turning SKUs.
spk08: Perfect. Thank you both. Thank you, Eric. Thank you. Our next question comes from the line. It was Scott Stemper from CL King. Your question, please. Good evening, and thanks for taking my questions.
spk04: Thanks, Scott. Going forward, could you just walk us through what you expect seasonality to be on a quarterly basis, just to help us model a little bit? you know, in fourth quarter versus a typical third quarter or, you know, first versus a second. Just maybe walk us through that, given this is the first time that we've been around the block, you know, from an earnings perspective with you guys.
spk05: Sure. Hey, Scott, this is Brian. It's All Start, and Andy can chime in. So if you look back historically, pre-FY21, typically our Q2 has been our highest quarter. This last year in FY21, we saw that shift a little bit. Obviously, there was a lot of pent-up demand as stores started to reopen in Q2 and Q3. And so actually, our Q3 was our peak in FY21. I'd say going forward, we're expecting that a similar hump between Q2 and Q3. Some of our retailers, too, we had talked about returning to a some level of promotional environment. We do have some promotional SKUs that we do utilize. And those can shift sometimes between Q2 and Q3. But overall, that's kind of the hump that we're talking about. So whether it's going to happen in Q2, Q3, too early to tell. But I would say between those two quarters, you're looking at the biggest hump for the year. Andy, anything you want to add? Nope. That's spot on.
spk04: So and then from Q3 to Q4, a similar cadence here. or something along those lines?
spk03: Yeah, so again, if you kind of go back historically, when you look at kind of between fiscal 2021, it is that hump, and it starts to drop from Q3 back into Q4.
spk04: Yeah, I guess I'm just trying to figure out, at least for this quarter also, lost sales opportunities because of the lower inventories that you talked about. Whether it happened this quarter or And if it happened in the third, let's get a sense, you know, it sounds like obviously it's going to be a headwind going forward. Nothing dramatic, but you have to work through it. But can you just compare Q3 versus Q4?
spk03: Yeah, I think one stat that you can pick up in the 10K is the increase year over year as of April in backlogs. So our backlog at the end of last April was $1.8 million, and that rose to $15.2 million at the end of fiscal 21. So I think that's a good indicator of, you know, that's kind of twofold. That's both future-dated orders, but it also has a decent chunk of orders we could have shipped if we had the inventory.
spk04: Got it. Just last question on the guidance. I appreciate, obviously, that it was a perfect storm of lack of expenses and travel and not flying anywhere, and then you were getting just incredible sales throughput. But going forward, is there any other items in there? I know that you had talked about, we're going back to a little bit more of a traditional, I guess, retail versus e-com. I know that e-com generates higher margins. Is that baked into your guidance as well?
spk03: Yeah, this is Andy again. Yeah, our guidance really contemplates all that. Obviously, our model kind of looks at both e-com, traditional. You are correct. We've said that in the past that e-com margins are generally higher because of the fact that direct-to-consumer is in there. And then, yeah, going in fiscal 22, we plan on investing in travel, trade shows, and other really brand investments. You know, we saw some really good investments that we made in fiscal 21, and we're going to continue to invest for our long-term growth.
spk05: Yeah, Scott, if I could add too, this is Brian, that, you know, we made the comment before, we want to be wherever the consumer expects to find us. And so certainly in FY21, they were increasingly going online. Like I had said, some of the traditional customers have done kind of hurry-up offense to put out their own sites make sure that they have that capability. So again, we want to continue to be where the consumer expects to find us. Direct-to-consumer is also a big part of e-comm. We continue to believe that we're in the early stages of seeing that growth, so I would expect that that would continue for us as well.
spk08: Got it. Thanks a lot. Thanks, Scott. Thanks, Scott. Thank you. Our next question comes from the line of Mark Smith from Lake Street Capital. Your question, please.
spk06: Hi, guys. First question for me is just clarifying. Andy, looking at the transition cost, that $0.19, that is fully the IT transition, the IT infrastructure, correct?
spk03: That is correct. If you do the math, Mark, the $0.19 is roughly that $2.8 million that I talked about. So it's about $1.6 of one time and then $1.2 million of duplicative costs.
spk06: Okay. All right. And then as we look at, you know, should we expect a little bit of that to continue to roll into fiscal 23 before the full transition in August?
spk03: Yes. Yeah, that's a great assumption. So I would expect the duplicative to start to ramp down. So those are the types of things where as we get closer to that go-live date, we're using less and less of the transition services agreement and more of our own IT infrastructure.
spk06: That's great. And then just looking at the, you know, you've talked a little bit about the promotional environment. You know, can you just kind of rate what you're seeing today in a promotional environment versus kind of what you're expecting to kind of ramp later in the year?
spk00: Sure.
spk05: This is Brian Mark. We're not seeing a whole lot, to be honest with you, at this point. What we're going off of is what we've heard from our customers. and what other public companies who happen to be our customers have talked about. And they have sort of alluded to their calendar year or calendar year, call it Q3 and Q4, maybe part of that in their Q2. But we're not seeing a whole lot of that right now. I think that the demand remains robust. But for us, we could see that later in the year. And, again, I'm just going off of what our customers are planning at this moment.
spk06: Okay. That's fair. And then looking at distribution channels, we've seen some UST stuff at Costco. Can you talk about increasing distribution and maybe any positive impact that that has had over the last year?
spk05: Sure. Yeah, I'm glad you asked, Brian. Yeah, we've seen a tremendous acceptance for our brands as they've continued to march down the path of niche to known using our dock-and-lock formula. So Yeah, we're showing up now. Hoeyman is showing up in home and hardware stores, which is great, as we address the broader land management tool category, which is very large. Obviously, you mentioned UST getting into some of those distribution channels like Costco and even places like REI, which is fantastic. And even some of our bubble products are making their way into other distribution channels as well. Some of the home and hardware, in some cases, even be pulled into the kitchen and So I think we'll see a continuation of that across our brand portfolio that we'll be excited to share with you going forward.
spk06: Perfect. And the last one for me, the guidance, I assume, does not include any acquisitions. But can you just talk about what you're seeing out there on the M&A front today?
spk05: Sure. Mark, this is Brian. We are seeing a lot of M&A. I kind of started in mergers and acquisitions, investment banking, was an advisor for a period of time, and I thought I saw a lot of M&A when I was an investment banker. Now on this side, we're just seeing a ton of volume right now, in particular founder sellers that are coming to market. And I think one of two reasons. Number one, they did see a nice pop last year. And we got a pretty good sense of who performed well before that and who maybe saw an uptick, a slight uptick due to COVID in their particular categories. And then the second is for tax reasons. I think that some of the founder sellers are expecting or maybe preparing for, if there is a change in tax code, that they are going to be hit with higher tax rate. So they're trying to beat that and getting to market sooner. With that said, there's also a lot of competition for these assets, which has created a higher valuation. I would say floor. It's not uncommon for us to see deals done in the double digits, low to even teens in some cases. So we're, like Andy had said in his prepared remarks, remaining very diligent, making sure that we're funding the right deal, it fits our criteria, and it's out there. But again, we're going to remain very, very diligent All right. That sounds great. Thank you, guys.
spk04: Yeah.
spk08: Thank you, Mark. Thank you. Once again, if you have a question, please press star then one. Our next question comes from the line of John from Cowan. Your question, please.
spk02: This is Krista Zuber on for John. Thank you for taking our questions. Could you provide us some sort of like puts and takes around the gross margin drivers for fiscal 22? I know that you touched on you know, some anticipated input and tariff costs as well as, you know, what you've commented on, on promotions and freight and inventory levels?
spk03: Hi, Krista. It's Andy. Great question. So margins going forward, you know, our guidance assumes really no change in tariffs. We don't, certainly don't know of any, anything come down the pipeline on that. With respect to kind of other pieces of the margin. Brian mentioned later in the year some additional promotional costs. Those are baked in. And when you look historically, kind of fiscal 20 into 21, you know, we've been kind of typically in the mid-40s with respect to margin percentage.
spk02: Okay, great. And then just touching on the CapEx with the big hike that's coming this year, Can you kind of talk to broadly how you sort of anticipate the run rate over the next several years for CapEx, maybe as a percent of sales or dollar amount? Thank you.
spk03: Yeah, another good question. So as we look, we guided kind of $7.5 to $8.5 million this year with a big chunk in IT. This year we'll also have more of a one-time cost for trade show booths. And really that's because under our former parent company, our trade show booths were under that parent company and now spun off after COVID. As we attend these trade shows, we're investing in those booths. So if you look back, kind of the rest of it, we look at our business as a relatively low CapEx company. It would be variable with respect to new products and also revenue. because most of the remainder of that capex is related to product tooling. Back in fiscal 19, we were roughly $2 million or so at $171 million or $177 million of net sales. And obviously, you can see that as the business is growing, we will invest more in product tooling.
spk02: Okay, great. And then just finally... I think you announced in May the promotion of Curtis Smith to your chief marketing officer. Just, you know, in relation to sort of OpEx, how do you kind of see your marketing initiatives evolving from here in fiscal 22 as it relates to, you know, customer acquisition costs and retention? Thank you very much.
spk05: Sure. Yeah, this is Brian. So, yeah, very excited. Curtis was promoted to our chief marketing officer. Curtis and I have been friends for a long time and worked in previous lives together. Curtis really helped with the senior team establish our dock and unlock process that we have. So he's been very, very involved along with me and the rest of the team to really unlock the power of these brands. He's got a lot of experience there. And so we'll continue to make investments in marketing going forward to unlock the potential for the 20 brands that we have. And also, as we look to acquisitions, how do we find these acquisitions and these companies that we believe are underserved, but could their potential be unlocked in our platform? And also with that, Annie mentioned some of the kind of customer acquisition, things like that. We spend a ton of time looking at that, and over the last year, if you look at our Q4, for example, we took some of the savings from our trade shows that we didn't spend on trade shows and reinvested that into marketing. We have an incredible new e-com platform, and we get some really good insights from that. So we plugged money into that to retain those new consumers that we've attracted over the last year, and we're going to continue to leverage Insights into that consumer base. It not only helps with us with our existing products, but as we've mentioned, we're going to come out with 300 new products this year. It really helps as we launch new products. So we're very excited about that.
spk02: Thank you, and best of luck.
spk08: Yeah, thank you. Thank you. Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Brian Murphy for any further remarks.
spk05: Yes, thank you. In closing, I want to especially thank our employees for helping to make our first year a tremendous success. We have a lot of people here who are actually listening to this call, so I want to thank you very much. Thanks, everyone, for joining us here today. We look forward to speaking with you again next quarter. Thank you, ladies and gentlemen, for your participation in today's conference.
spk08: This does conclude the program. You may now disconnect. Good day.
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