American Outdoor Brands, Inc.

Good day, everyone, and welcome to American Outdoor Brands, Inc. second quarter fiscal 2022 financial results conference call. This call is being recorded. At this time, I would like to turn the call over to Liz Sharp, Vice President of Investor Relations, for some information about today's call.

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 product, 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 amortization of acquired intangible assets, stock compensation, transition costs, COVID-19 expenses, technology implementation, related party interest income, other costs, 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 it over to Brian.

Thanks, Liz, and thanks, everyone, for joining us. I'm very pleased with our performance for the first half of fiscal 2022. We are in the midst of a growing outdoor market that has welcomed new participants to the outdoors. We have a collection of authentic brands that continue to resonate with our core consumers. We own a unique dock and unlock process that has organically created innovative brands and products. And we have built an operations team that has successfully navigated recent supply challenges to keep our products moving. In addition, we have achieved key milestones in establishing our post-spinoff standalone infrastructure. Together, these elements form a strong operation that will allow us to continue servicing our customers and delivering growth for the balance of fiscal 22 and for the long term. With that, let me share some details of our recent performance. During our second fiscal quarter, our e-commerce net sales grew nearly 5% year-over-year and over 228% on a two-year basis, including a meaningful increase in our direct-to-consumer business. While our total net sales declined in the quarter, we believe this primarily reflects the timing of orders from our traditional channel customers. In our second quarter last year, certain customers increased their orders to address depleted inventories as they reopened from COVID-related closures. This year, many of our largest customers indicated that they accelerated their orders into our first quarter to mitigate supply chain concerns. These fluctuations in timing are the reason we view our six-month performance as a more meaningful comparison than the shorter-term quarterly comparisons. For the first half of fiscal 2022, we delivered net sales growth of 1.5% versus the year-ago period, and net sales growth of over 62% versus the first half of fiscal 2020. These results reflect our dedication to building authentic lifestyle brands that help consumers make the most out of the moments that matter. The markets we serve, fishing, camping, hunting, shooting sports, and the rugged outdoor lifestyles 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 participants. Not to mention our increased reach into adjacent markets with wholly new consumers, such as land management, meat processing, and home security. We continue to identify opportunities within this expanded consumer base, utilizing our brand-lane structure and our dock-and-unlock strategy. Our brand lanes, Defender, Marksman, Harvester, and Adventurer, organize our brands by consumer activity and provide us with an ideal competitive advantage for developing innovative new products year after year that turn consumers into long-term advocates as we take our brands from niche to known. Once a brand is docked into its appropriate brand lane, we begin to unlock its potential by leveraging the lane's resources, which include brand marketing, creative, product development, sourcing, and e-commerce. Dock and Unlock continues to fuel innovation, drive future growth, and support our objective to deliver a compound annual organic growth rate of 8% to 10% over the next four to five years. During the second quarter, we benefited from a strong consumer preference for our brands across our portfolio, especially the hunting-related brands in our harvester brand lane in anticipation of the fall hunting season. This includes Meet Your Maker, our internally developed direct-to-consumer brand of meat processing equipment. Meat provides an outstanding case study of our dock and unlock process in action. Launched in March of 2020 and sold exclusively in the direct-to-consumer channel, meat products are winning over consumers at a very exciting pace. In October, meat achieved its first million-dollar month, a record it surpassed again in the month of November. And by the end of November, including orders through Black Friday and Cyber Monday, Meet achieved trailing 12-month net sales of just over $6 million, from a starting point of zero less than two years ago. To sum it up, we identified a consumer opportunity in the growing field-to-table movement, a gap in our offering, and a lack of appealing acquisition targets. From there, Dock and Unlock led us to design, build, launch, and take market share with an organically developed brand that has delivered growth of 414% in the past year alone. In addition, we have identified additional new products under the meat brand that we're launching as we speak. More on that next quarter. Meat is an outstanding example of the strength that lies in investing our capital into organic growth opportunities made possible by Dock & Unlock. This ability to invest in ourselves is a key driver for our future growth. I see no reason that our meat brand cannot become a meaningful percentage of our revenue in the future, and I see every reason for us to create exciting new brands in the future that have the same potential. We had other new product developments in the quarter as well, resulting from our dock and unlock strategy. Bubba, our fishing lifestyle brand known for its high-quality angling equipment and apparel, which is situated in the Adventurer brand lane, entered an entirely new product category by launching its newest product line, the Kitchen Series, a collection of high-end culinary knives designed to complement the water-to-plate lifestyle. BOG, our very popular line of hunting gear engineered for the unknown, resides in our harvester brand lane. BOG products often incorporate our proprietary technology, and in September, BOG expanded its tripod family to include two new camo design patterns. BOG also announced an expansion of its family of ground blinds to include a hay bale blind designed for open-field hunting and a larger hub line designed for rifle, crossbow, or compound bow hunters, and spacious enough to accommodate multiple hunters at the same time. Two exciting developments in our Defender brand lane included our Crimson Trace brand, which introduced the CT RAD series, a comprehensive family of 10 new rapid aiming sights in both red and green illuminated options, as well as micro, compact, and full-size platforms. And lastly, our Lockdown brand, which offers connected solutions designed to protect high consequence valuables, rolled out the new Lockdown Logic app, developed by our in-house R&D team, which includes app development resources. The new app enhances the consumer experience, unlocks new functionality and features, and lays the foundation for future product launches in the Lockdown brand family. Our customers tell us regularly that we are, without a doubt, the innovation leader within our product categories. And in the second quarter, new products comprised over 25% of our revenue. This innovation is the direct result of our Dock and Unlock strategy, and new products resulting from this process drive our long-term organic growth and generate healthy, accretive, and sustainable margins. In fact, the strong margins we demonstrated in the second quarter are a direct reflection of this power in action. In fiscal 2022, we will launch over 350 new products, surpassing our annual average. New product launches will occur across all four of our brand lanes, with the highest new product growth rate coming from the hunting-related brands in our harvester brand lane and the camping and fishing-related brands in our adventurer brand lane. Turning to brand performance, We believe that brand growth in the quarter reflects the same timing fluctuations we discussed earlier. For that reason, we believe that here as well, the six-month comparison is a more accurate assessment of performance. For the six months of fiscal 22, over half our brands delivered growth over the same period in fiscal 21. Our top-selling products within the six-month period came from each of our four brand lanes, demonstrating the range of our brand portfolio and 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. In addition to providing diversity, a number of our brands are highly complementary to one another. Our brand-lead structure, combined with our e-commerce platform, allows us to identify and implement a number of cross-marketing opportunities among those brands to drive growth. For example, the consumers that purchase our bog products are typically hunters. It stands to reason that they will likely be interested in processing the meat they harvest on their hunts. So we saw a cross-marketing opportunity, and during the second quarter, we utilized our e-commerce platform to reach out to our bog audience, introducing them, perhaps for the first time, to meet your maker, meet processing equipment, enabling us to complete that field-to-table concept for our consumer while we expand our customer base. We see a number of opportunities across our portfolio where our highly complementary brands can work together in this fashion. As you know, our e-commerce platform is a key element in our strategy 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. Our second quarter e-commerce growth demonstrates the positive impact of this strategy. Clearly, the investment we made long ago in our websites continues to pay off. Now turning to logistics, our teams here and in Asia, again, continue to successfully navigate supply chain constraints and poor congestion issues. Their work helped us achieve the strategic inventory build we have discussed on prior calls, inventory that is important to ensuring that our retailers and our own online storefronts are stocked for the hunting and holiday shopping seasons, particularly with our most popular products. That inventory also supports the new product launches I mentioned earlier. With a robust new product pipeline in place, a portfolio of authentic brands in hand, and an energized outdoor consumer market. We are excited about the future, and 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 to discuss our financial results.