American Outdoor Brands, Inc.

Welcome to the fourth quarter and full fiscal year 2022 American Outdoor Brands Earnings Conference Call. My name is Vanessa and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, with your question, please enter the cue by pressing 0 then 1 on your touchtone phone. I will now turn the call over to Liz Sharp, Vice President of Investor Relations.

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 judgments 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 fair value inventory step-up, amortization of acquired intangible assets, goodwill impairment, stock compensation, transition costs, COVID-19 expenses, technology implementation, acquisition costs, 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'll turn the call over to Brian.

Thanks, Liz, and thanks, everyone, for joining us. The completion of fiscal 2022 marks our first full year as a standalone company dedicated to building authentic lifestyle brands that help consumers make the most out of the moments that matter. It also signals the approaching two-year anniversary of our spinoff in August 2020. Since that time, we have remained firmly focused on our long-term strategic priorities, which include introducing new, differentiated products, expanding our addressable markets, cultivating our direct-to-consumer relationships, diversifying and enhancing our supply chain, and pursuing complementary acquisitions. I believe we've made significant progress across these objectives, and today I look forward to sharing details of that progress and my thoughts on our outlook. First, let me highlight for you what we've achieved in our first two years as an independent public company. In that time, we've taken our revenue from $167 million in fiscal 2020 to over $247 million in fiscal 2022, representing net sales growth of nearly 48% over our pre-pandemic levels and a two-year CAGR of over 21%. Underpinning that growth are a number of important developments. We leveraged our dock and unlock strategy to deliver a steady flow of exciting new products that generated nearly 26% of our fiscal 2022 revenue. That dock and unlock strategy also enabled us to enter new markets in large categories, including land management, at-home meat processing, optics, and reloading equipment by creating a number of disruptive products that open up our potential for sizable future net sales growth. We created an entirely new brand, Meet Your Maker, which we conceived and developed internally, providing us with access to new markets and new customers, and helping fuel year-over-year growth of 73% in our direct-to-consumer business in fiscal 2022. Meet is an outstanding example of the organic growth opportunities made possible by Doc and Unlock, a process we expect will be a key driver for our future growth. We expanded our outdoor lifestyle category and entered the large outdoor cooking market with the acquisition of Grilla Grills, a token that met our strict criteria for strategic M&A targets and helped grow our direct-to-consumer business to more than 10% of our net sales in fiscal 2022 on a pro forma basis. We expanded internationally, delivering international net sales growth of more than 96% over fiscal 2020 and nearly 40% over fiscal 2021. While it's just over 5% of our total net sales today, we are still in the early innings of this exciting opportunity for our long-term growth. We successfully positioned our brands and products wherever the consumer sought them out, delivering two-year organic net sales growth of nearly 33% in our traditional brick-and-mortar channels and over 79% in our e-commerce channels. In summary, we successfully captured the growth opportunities that arose from an energized and expanded consumer base propelled by the pandemic. We capitalized on that growth by strengthening our balance sheet, investing in organic growth opportunities through innovation while identifying and pursuing accretive acquisitions. And we opportunistically returned cash to shareholders, demonstrating our board's confidence in the business and its commitment to a well-balanced capital allocation program that considers the perspectives of our shareholders. While these achievements are exciting in their own right, it's equally exciting to consider how the underlying market for our products has changed over the past two years. In that time, amidst an unprecedented pandemic, many consumers discovered for the first time, or rediscovered, a passion for the outdoors, shooting sports, and personal protections. This phenomenon delivered nearly 14 million new firearm entrants, over 9 million new first-time camper households, 3 million new fishing license issued, and up to 1 million new hunters. There's little doubt that some of the gains experienced by American Outdoor Brands and the broader industry over the past two years were propelled by the pandemic, resulting in outsized growth last year, and making year-over-year comparisons particularly challenging. That said, we are pleased with our performance in fiscal 2022, including our improved growth margins, and we are optimistic about our future growth opportunities, particularly in light of this larger installed base of new and returning outdoor and personal protection consumers. Investing capital in organic growth remains the top priority in our strategic plan, And our dock and unlock process continues to fuel the innovation pipeline that will support our long-term growth plans. Our new product pipeline is robust. Many of the products we launched in fiscal 2022 and plan to launch in fiscal 2023 reflect our intent to continue growing our outdoor lifestyle category while focusing on areas in shooting sports that represent large and more stable markets, such as shotgun sports, target shooting, and rifle scopes. New products in 2022 included the first electric fillet knife for our old-timer knife brand, double-wide sleeping mats and eco-friendly camp blankets from UST, meat processing accessories from Meet Your Maker, innovative designs and new hay bale blinds from BOG, rifle scopes and rapid-aiming red dots from Crimson Trace, an innovative clay target launcher from Caldwell, and a host of new products and category entries from Bubba, including culinary knives, expanded apparel, bags and packs, premium storage, award-winning cordless electric fillet knives, and our first fishing rods. In fact, it's hard to believe that just three years ago, we launched the first Bubba electric fillet knife at ICAST, the world's largest sport fishing trade show. ICAST is an important annual event, And that successful launch helped propel our entry into the very large market for freshwater fishing. I'm excited to announce that we'll be returning to ICAST in Orlando, Florida next week, where the team is excited to unveil our newest products for the fishing market. So stay tuned. Turning now to growth through acquisitions. We have long stated our desire to supplement organic growth with acquisitions that fit our strict criteria, which require a target to number one, Be dock and unlock friendly. Two, offer a runway for future growth. Three, serve large addressable markets. Four, have low complexity. And five, further diversify our supply chain. In fiscal 2022, we found that fit with Gorilla Grills, a direct-to-consumer provider of high-quality grills, smokers, modular outdoor kitchens, and accessories. that provided us with immediate access to the estimated $7 billion U.S. barbecue grill market. We are very pleased with Grilla, which is performing ahead of its model and continues to resonate with our outdoor cooking customers. We have plugged Grilla into our dock and unlock process and identified some exciting opportunities to leverage existing technology from other AOB products, demonstrating the power of our brand lane structure. The team has been busy preparing for a number of new product launches this fall, as well as our first major product launch scheduled for the springtime. We look forward to sharing more when that time comes. We believe there are additional opportunities on the horizon to identify and acquire other brands that fit our criteria. Andy and I have developed incredibly strong relationships in our industry over the past several years. And we believe those relationships will yield an increasing number of M&A opportunities in fiscal 2023, especially given the challenging consumer environment that has just begun to emerge. In fact, we have recently been approached by a number of companies with brands that are uniquely positioned to benefit from our dock and unlock process. And importantly, we have worked over the past two years to build a strong balance sheet that provides us with the flexibility to capture those opportunities when they arise. We intend to maintain our disciplined approach to capital allocation, applying our strict framework to any potential acquisition targets and opportunistically pursuing those that fit well within our portfolio and will drive future growth. Our achievements in fiscal 2022 have helped strengthen and diversify our company while building stronger, long-lasting relationships with our consumers. These will be important elements as we, our retail partners, And our consumers navigate fiscal 2023 amidst a number of macroeconomic factors that have recently developed, including rapidly rising inflation and interest rates, which have served to drive up inventory levels at retail. It remains to be seen how consumers may shift their buying patterns in response to these developments. The backdrop of this uncertainty, we are not providing full-year financial guidance for fiscal 2023 on today's call. although we look forward to doing so when our visibility into consumer buying patterns and their impact on our retail partners has improved. In the meantime, and despite the uncertainty in the near-term environment, we could not be more excited about our future. We set out last year with a goal to grow our business by 8% to 10% over the ensuing four to five years, implying a business capable of generating $400 million in net sales annually with EBITDA margins in the mid to high teens. And while macroeconomic factors may slightly impact the timeline, we are confident that we will achieve this growth objective. We believe our achievements over the past two years demonstrate that our strategy produces results, and we are on an exciting path to the future. With that, I'll turn it over to Andy to discuss our financial results.