American Outdoor Brands, Inc.

Second 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 referenced 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 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. Our second quarter performance demonstrates our ability to successfully navigate ongoing challenges in the macro environment while executing on our long-term strategy. While it's too early to see what our economy will deliver as we move into the new calendar year, I believe our recent results reflect our ability to remain focused, identifying those elements we can control, executing accordingly, and best positioning our company for success over the long term. In the second quarter, we achieved net sales growth of 14% above our pre-pandemic levels of fiscal 2020, and we introduced several new innovative products while strengthening our balance sheet and marking achievements that support our strategic priorities and reflect our dedication to leveraging our culture of innovation to deliver solutions for consumers in the moments that matter. Our e-commerce platform is an important part of our brand growth strategy, and it represents an investment we made prior to the pandemic and our spinoff just over two years ago. While our e-commerce sales declined compared to the year-ago quarter, driven by our online retailers, our e-commerce channel grew over 171% compared to pre-pandemic levels. Within our e-commerce channel is our direct-to-consumer business, which is largely comprised of our outdoor lifestyle brands. Direct-to-consumer sales remain strong in the quarter, delivering year-over-year growth of over 119%. Consider our direct-to-consumer sales to be one gauge of how well our brands are resonating with consumers, since those sales are not typically impacted by issues that have hindered retailers, such as inventory levels or limited open-to-buy dollars. Our direct-to-consumer category also includes Meet Your Maker, Meet Processing Equipment, and Grilla Outdoor Cooking Products. Together, these two brands generated nearly 10% of our total net sales and helped our outdoor lifestyle category generate over 55% of our total net sales in the second quarter. We remain excited about growth opportunities in our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities, and which delivered growth of more than 22% over the pre-pandemic second quarter of fiscal 2020. We believe continued growth in this category is a percentage of our total net sales, will help mitigate fluctuations in our shooting sports category, which has been more susceptible to short-term cyclicality. Turning to our traditional sales channel, which consists of customers that operate out of physical brick-and-mortar stores, sales declined in the quarter, largely the result of a continuation of the factors we laid out last quarter. Namely, retailers placed fewer orders in response to lower consumer foot traffic while they worked to lower their inventories across all of their offerings, limiting their open-to-buy dollars. This activity had its biggest impact on our shooting sports category, which includes personal protection products, such as laser sights, and sales of shooting accessories to firearm OEMs, dealers, and distributors. By way of an update, initial national media reports on Black Friday shopping appear to be generally favorable for both online and brick-and-mortar retailers. with Bloomberg reporting year-over-year increases in the 2% to 3% range for both categories. This is good news, since increased foot traffic should help lower retailer inventories and improve their available open-to-buy. Innovation is a key element in our long-term strategy, and new products launched within the past two years generated 30% of our second quarter net sales. We continue to leverage our dock-and-unlock process to deliver a steady flow of organically developed exciting new products in the second quarter. Let me tell you about a few of those. Adding to our best-selling line of meat grinders, we launched a line of Meat Your Maker dual-grind grinders, which retail between $450 and $700 based on different size options. These dual-grind grinders help simplify and save time processing by passing meat through a separate course and fine plate simultaneously. We introduced our Meat Your Maker kitchen knife set, which is made with high-quality German steel blades, premium G10 handles, and includes a unique storage solution. We designed these knives specifically for our Meek customers, and we market them through our D2C channel. We also launched a Meet Your Maker butcher knife set with proprietary non-slip grips, as well as a premium leather knife carrier for safe and convenient transportation and storage of cutlery. And I just want to add here that we're very impressed with the continued brand loyalty that we've developed under the Mead brand as consumers continue to flock to our websites and provide us with great reviews and feedback. Lastly, we launched two new bog tripod lines, the Sherpa and the Infinite. These innovative tripods, which can be used for everything from hunting to photography, incorporate proprietary features, deliver enhanced versatility and functionality, and provide a compact and lightweight platform for hunters, for whom bog has become synonymous with premium hunting accessories. During the quarter, we attended the National Association of Sporting Goods Wholesalers Expo, where the Caldwell Claymore was recognized as Best New Accessory. The Claymore Clay Target Thrower is our first meaningful entry into the shotgun sports market. Some of you joined us at SHOT Show in January when we first unveiled this innovative foot-operated clay thrower to the public. The show gave us a great opportunity to demonstrate the innovation of the Claymore, which provides all the benefits of an electric clay thrower without requiring a battery. The buzz at the show was incredible, and people were lined up to give it a try. We are now shipping the Claymore to customers. We are excited about the opportunity addressed by each of these new offerings. As a company that thrives on innovation, intellectual property is one of our most valued assets, and you'll find it within several of the products I just outlined. and a great many more across our portfolio. 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. This power of innovation is apparent with our Meet Your Maker brand, which was developed internally, launched in late fiscal 2020, and delivered trailing 12-month revenue of $8.7 million at the end of Q2. Stay tuned for updates on several exciting new products we have planned for meat, Bubba, Grilla, and many of our other brands in the new year. Our strategy also includes a focus on utilizing our leverageable business model as we grow. On our last call, we announced that we would consolidate our Crimson Trace operations in Wilsonville, Oregon, as well as our Grilla operations in Holland, Michigan, and Dallas, Texas, into our Missouri facility. I'm happy to report that we recently completed both of those consolidations right on schedule. Andy will provide more detail, but savings from these consolidations will help us move closer to our long-term profitability objectives. The current environment of high inflation and rising interest rates makes it difficult to predict future consumer spending patterns as we head into the new year. Nevertheless, we are encouraged by the fact that consumer participation in the outdoors is at its highest level in years. We are also encouraged by recent reports in our industry, which indicate that once someone begins to participate in the outdoors, they're likely to continue. As a nimble, innovative, emerging growth company with a portfolio of strong brands that resonate with our core consumers, we are excited about the growth opportunities these trends present for our brands in the long term. As such, Our focus will remain on executing our long-term strategic plan while we carefully manage the elements within our control. While we do so, we will continue to invest in our infrastructure and our robust new product pipeline, seeking out opportunities to lower costs where we can, and ensuring we remain well-positioned to achieve our long-term plan, which is to reach $400 million and beyond in net sales and EBITDA margins in the mid-to-high teens. With that, I'll turn it over to Andy to discuss our financial results.