American Outdoor Brands, Inc.

Good day, everyone, and welcome to American Outdoor Brands, Inc. First Quarter Fiscal 2023 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 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, shareholder cooperation agreement costs, technology implementation, acquisition costs, other costs, and income tax adjustments. The reconciliation 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. Given recent economic and industry conditions, I am pleased with our first quarter results, which reflect our ability to deliver net sales growth of over 31% above our pre-pandemic levels of fiscal 2020, while marking a number of achievements that support our long-term strategic priorities. Our results reflect our dedication to building authentic, lifestyle brands that help consumers make the most out of the moments that matter. During the quarter, our e-commerce net sales grew nearly 24% year-over-year, supported by strength in our direct-to-consumer-only business, particularly our Meet Your Maker and Gorilla Grills brands. Together, these two brands generated over 15% of our net sales in Q1, and helped our outdoor lifestyle category generate over 53% of total net sales in the quarter. We consider our direct-to-consumer sales to be one gauge of how well our brands are resonating with consumers, since those sales are not impacted by retailer issues, such as inventory levels or limited open-to-buy. Net sales in our traditional channel, on the other hand, decreased by about 48% compared with last year, although they were up slightly versus pre-COVID levels. The year-over-year decline was due to fewer orders from retailers as they responded to reduce foot traffic and continue to limit their open-to-buy in order to reduce inventory levels across all of their offerings. While this dynamic impacted retail sales across our brand portfolio, it was more pronounced in our shooting sports category, which includes personal protection products, such as laser sights, and sales of shooting accessories to firearm OEMs, dealers, and distributors. It's also important to note that strong net sales growth of over 70% in our traditional channel last year reflected that certain customers had accelerated their purchases to offset potential supply chain disruptions, creating a very tough calm for the current quarter. POS, which reflects consumer pull-through, is another gauge that we use to determine how well our brands are resonating with consumers. Selected data from the first quarter indicates that POS trends across our brand portfolio were generally favorable versus the prior year. We view this as an important positive since it not only reflects a strong consumer preference for our brands, it also indicates that sustained consumer pull-through should continue to draw down retailer inventories on a go-forward basis. We remain excited about growth opportunities within our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities. Outdoor lifestyle delivered growth of 26.5% over the first quarter of fiscal 2021 and growth of 54.2% over the pre-pandemic first quarter of fiscal 2020. We believe continued growth in this category as a percentage of our total net sales will help mitigate fluctuations in our shooting sports category which is more susceptible to short-term cyclicality. There is little doubt that consumer spending patterns are uncertain in the near term, given the current environment and the extremely high inflation rates we're seeing lately. Despite these factors, we remain excited by the fact that consumer participation in the outdoors is at its highest level in years. In fact, the Outdoor Industry Association published its newest State of the Outdoor Market report just two weeks ago, and in it they delivered some impressive numbers. Consider that since March of 2020, the outdoor participant base has grown nearly 7%. More than 10 million new participants enjoyed some sort of outdoor recreation, and there has been growth of 26% in new or returning outdoor participants. The new OIA report shows that roughly 54% of the US population participated in at least one outdoor activity in 2021, and that remote work opportunities are allowing many people to enjoy the outdoors for the first time, often during hours when they would have been in an office or commuting. Importantly, the report states something we believe for quite some time. Participation in outdoor recreation is sticky. Once someone begins to participate, they are likely to continue. We remain excited about the growth opportunities these trends present for our brands in the long term. 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 to become a $400 million company and beyond. We continue to leverage our dock and unlock strategy to deliver a steady flow of organically developed, exciting new products that generated nearly 26% of our first quarter revenue. We attended ICAST 2022, the fishing industry's premier trade show, where our Bubba Fishing Lifestyle brand received the award for best cutlery, hand pliers, and tools for our innovative proprietary multi-flex interchangeable knife sets. This marks the third consecutive year Bubba has taken home the award in this category. We also displayed the Bubba Voyager Gearbox, our first entry into waterproof storage. And we unveiled and previewed our proprietary Bubba electric fish scale, an exciting new product that truly energized and excited our core fishing retailers, distributors, and consumers ahead of the full launch and initial shipping next spring. We think this new product is a game changer for tournament and recreational fishing, allowing anglers around the world to compete and track their catches in real time. In fact, we heard several people refer to it as the Strava for fishing. Our other brands were busy as well. Our UST line of premium camping equipment and survival gear introduced a double-wide version of our popular self-inflating filmatic sleeping mat and an innovative, waterproof, durable camp blanket. Our Hui Man brand of land management tools prepared for the launch of some exciting new manual and lithium-powered material spreaders for easily spreading seed, salt, or fertilizer. These products are loaded with patent-pending features that I'll talk about next quarter. We have a number of very exciting new products in the hopper across our other brands as well, and I look forward to sharing more in the next couple of quarters. A key part of our long-term strategy includes growing the brands in our portfolio by plugging them into our dock and unlock process, and our new product launches demonstrate that approach. but our strategy also includes utilizing our leverageable business model as we grow. In keeping with that strategy, during the first quarter, we amended our Columbia, Missouri facility lease agreement to add 35,000 square feet of space that provides us the opportunity to increase our operational efficiency and leverage our Missouri facility while lowering our costs. Immediately following the lease amendment, we began plans to consolidate our crimson trace operations in Wilsonville, Oregon, as well as our guerrilla operations in Dallas, Texas and Holland, Michigan into the Missouri facility. We expect to complete these consolidations in the next three months and estimate they will yield a combined net cost savings of approximately $1.5 million per year beginning in our fourth fiscal quarter. These actions will bring our teams together and help us move closer to our long-term profitability objectives. As we look out across the balance of the year, we suspect that current inflationary pressure on consumers may be with us for a while. Therefore, our focus will remain on executing our long-term strategic plan while carefully managing the elements within our control. And there are several. First, we have a very strong portfolio of authentic brands that is capable of delivering healthy, organic growth. Second, our dock and unlock process yields results, providing a strong pipeline for innovative new products. And lastly, our direct-to-consumer business provides a direct link to the consumer, no noise or interference. And our recent success in D2C demonstrates that we know how to build brands that meet our consumers' expectations. Importantly, our dock and unlock process allows us the ability to edit and amplify our new product pipeline, managing velocity and focusing on products that are more likely to transcend short-term consumer spending trends. as well as products that better align with retailers' efforts to closely manage their inventories. While we manage these elements, we will seek further opportunities to lower costs while ensuring we remain well-positioned to capitalize on the growth opportunities that can help us achieve our long-term plan to reach $400 million in net sales and EBITDA's margins in the mid- to high-teens. Before I hand it over to Andy, I want to share with you that we recently published our first ESG report, which marks a significant step forward in our sustainability journey. The tenets of our sustainable long-term strategy include our commitment to the environment, our social impact, and our culture of governance. We believe that the nature of our brand portfolio positions us uniquely to capitalize on some of the challenges and opportunities our world presents. We are incredibly excited to build upon our momentum as we remain focused on driving recurring sustainable growth. We have about 300 employees across our company, and our commitment to build a diverse and inclusive culture has never been stronger. This is reflected in our management team, which features experienced and diverse members with expertise in a broad set of areas. Our inaugural ESG report formalizes our commitment to regularly communicate our ESG actions and performance. In the coming years, we will remain vigilant to maintain rigorous ESG standards, enhance our sustainability efforts, and continue to be keenly focused on implementing a best-in-class program. With that, I'll turn it over to Andy to discuss our financial results.