American Outdoor Brands, Inc.

Thank you for standing by, and welcome to the American Outdoor Brands first quarter 2022 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. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Elizabeth Sharp, Vice President, Investor Relations.

Please go ahead. 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 referenced certain non-GAAP financial measures, Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, transition costs, COVID-19 expenses, technology implementation, related party interest income, and the tax effect related to all 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 Brian Murphy, President and CEO, and Andy Fulmer, CFO. And with that, I will turn the call over to Brian.

Thanks, Liz, and thanks, everyone, for joining us. I am extremely pleased with our strong start to the new fiscal year. We delivered first quarter growth in net sales and profitability, results that reflect our dedication to building authentic lifestyle brands that help consumers make the most out of the moments that matter. Our first quarter net sales grew more than 20% over Q1 of fiscal 2021 and 83% over Q1 of fiscal 2020. We believe our results demonstrate the alignment of our brands with strong consumer trends and personal protection and popular outdoor lifestyles. as well as the ability of our dock and unlock process to fuel innovation and drive organic growth. The markets we serve, personal protection, shooting sports, camping, hunting, and fishing, have all benefited from a new, higher level of participation that began in our last fiscal year and continues to provide us with an expanded consumer base containing millions of new firearm owners, campers, and fishing license holders. not to mention our increased reach into adjacent markets with wholly new consumers, such as land management, meat processing, and home security. As a reminder, our brands are organized into four distinct brand lengths, Defender, Marksman, Harvester, and Adventurer, each focused on a particular consumer type. In the first quarter, 16 of our 20 brands delivered growth over the same period in fiscal 21. and 19 of our 20 brands delivered growth over the same period in fiscal 20. Our top-selling products this quarter came from each of our four brand lines, demonstrating the diversity of our brand portfolio as well as our diversity across multiple consumer activity-driven markets. We believe this diversity will serve us well as we continue to expand into larger, addressable markets that have the ability to transcend near-term secular trends. Our growth reflects our ability to deliver consumers a steady stream of innovative new products driven by our dock and unlock process. Our sales and marketing teams were very busy in Q1, safely traveling and attending physical shows for the first time in over a year, unveiling a wide range of exciting new products and rolling out ramped-up advertising and social media campaigns to connect with our consumers. During the first quarter, we attended ICAST, the fishing industry's premier trade show where we unveiled a wide variety of new products from Bubba, our lifestyle brand known for its high-quality fishing equipment designed for water-to-plate anglers. These included kitchen cutlery, an expanded apparel line, and premium storage packs and bags. While at the show, we also proudly received a Best in Category Award for Best Cutlery, Hand Pliers, and Tools for our new Bubba Pro Series Cordless Electric Filet Knife. Designed to meet the demands of the hardcore angler by delivering industry-leading power and performance technology for unparalleled cutting efficiency. Lastly, and perhaps most exciting of all, at ICAST, we announced Bubba's entry into the $700 million retail market for saltwater fishing rods, reels, and components, and unveiled our first rods featuring the iconic Bubba Red Grip, with rod blanks designed entirely in-house, which we anticipate will be available to consumers this coming February. Our entry into fishing rods is the direct result and just one example of employing our dock and unlock strategy to drive innovation and provide entry into new markets. Our other brands were busy in the quarter as well, Our Old Timer brand is a historic, everyday carry brand known for its premium quality knives. During Q1, in time for Father's Day, we launched the brand's first ever electric fillet knives, which can be purchased in lithium-ion and 110-volt versions. This expansion of the Old Timer brand delivers the benefits of our award-winning Bubba fillet knives to freshwater fishermen and women under a brand they've trusted for generations. Just after the close of Q1, we attended the outdoor retailer show, where we unveiled some exciting new products from UST, our survival camping and outdoor gear brand. New products included our double wide filmatic sleeping mats, an expansion of our popular filmatic mats at double the width, and our UST one and two person blankets, made of eco-friendly materials and featuring our unique UST color and design. This was just a sampling. Our new product pipeline remains robust, and we have a number of new products launching over the next few months from several of our brands, including Crimson Trace, Meet Your Maker, and Hooey Man. Some will expand our offerings, and some will take us into completely new categories. Our teams are putting the finishing touches on their launch plans and working hard to ensure we have the inventory on hand to support these exciting new products, and I look forward to sharing their successes with you on our next call. An important part of our strategy is to place our brands wherever consumers decide to shop for them, whether online or in a physical retail store. This approach is particularly important in our current environment when the impacts of COVID are dynamic and consumers alternate between in-store shopping and online options. In our first quarter, our strategy delivered results. We believe strength in our traditional channel in Q1 was driven primarily by store reopenings. Net sales in the channel grew 70% over the prior year and 96% over the first quarter two years ago. We believe store reopenings positively impacted our international business as well, where recent investments to expand the size of our team and enhance our ability to source new customers are paying off. Our international sales grew from 4% of Q1 net sales last year to 7% of Q1 net sales this year. On a two-year basis, International net sales delivered remarkable growth of nearly 239%. As we've said before, we believe the international market holds tremendous growth potential for many of our brands, and we continue to aggressively explore those opportunities. Sales into our e-com channel declined in Q1 versus the year-ago quarter, largely the result of an anomaly that occurred in the prior year. You'll recall that Q1 of last year included the strong replenishment of inventory for one of our largest customers, a major online retailer, who hadn't placed orders for a full month in the preceding period, instead choosing to purchase only items they deemed essential during that time. So our e-com results for Q1 of last year reflected our ability to quickly replenish that retailer's inventory. We believe a more accurate comparison for our e-com growth in the current period is the two-year comparison, which removed that anomaly and reflects growth of 55% over our first quarter of fiscal 2020. It's also important to note that our direct-to-consumer platform, which is included in our e-comm numbers, exceeded our expectations in the quarter, delivering solid growth over the prior year and demonstrating that the investment we made long ago in our websites continues to drive results. Now, turning to logistics. Our teams here and in Asia, again, did a great job continuing to navigate supply chain constraints and port congestion issues. We incurred increased freight costs in Q1, which is nearly impossible to avoid in this environment. But that said, the team effectively employed a variety of freight alternatives, ensuring we invested appropriately to get the products we needed. Their work helped us build up inventories, an initiative we've been working on for the past few quarters. That effort will continue in Q2 as we further invest in inventory of our highest volume products, support product launches I referenced, prepare for seasonality in our business, and further mitigate supply chain risk. With an outdoor industry that has experienced unprecedented levels of consumer participation over the past year, our unique dock and unlock strategy in place, and a strong first quarter under our belts, We are excited about the opportunities that lie ahead. We look forward to sharing our progress as we take our brands from niche to known. With that, I'll turn it over to Andy.