American Outdoor Brands, Inc.

Good day, everyone, and welcome to American Outdoor Brands, Inc., third 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. 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 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 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 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 of and Andy Fulmer, CFO. And with that, I will turn the call over to Brian.

Thanks, Liz, and thanks, everyone, for joining us. In the third quarter, we addressed ongoing uncertainty in the macroeconomic environment while remaining focused on the future, investing in our long-term growth, managing the elements within our control, and delivering several important operational and financial achievements. For our company and many others in our space, we continue to encounter choppy waters created by the shifting dynamics of retail supply and consumer demand in a post-pandemic environment. POS data we receive from our retailers indicates that sales of our products declined in the third quarter in the high single digits. We believe this is a reasonable result given the current environment. The POS data also indicates that consumers continue to choose our brands, which is great news. In fact, several of our major retailers have told us we are outperforming other brands in our categories. At the same time, however, many retailers continue to focus on destocking initiatives, a legacy from supply chain issues and inventory builds that emerged during the pandemic. This process takes time to work out, and as a result, we believe a return to normalized replenishment orders from retailers is unlikely to occur until later in 2023. While we can't control the choppy waters around us, we can and we have continued to invest in our business and manage the elements within our control. I believe our third quarter performance reflects solid execution on that front. We demonstrated the strength of our new product pipeline with several innovative new products that excited our retailers and consumers. We expanded our domestic and international sales teams. We amended our facility lease agreement to optimize recent consolidations and add capacity for future growth. we strengthen our balance sheet, and we return capital to our shareholders. As a result, I believe we are well positioned for the time when retailers pivot from managing supply chain issues and inventory destocking initiatives to focusing on replenishing their inventories and preparing to deliver the innovative products consumers truly want. With that, let me share some details from the third quarter. While net sales in our third quarter declined year over year, figures 17.4% above pre-pandemic levels. Our direct-to-consumer business, which largely consists of our outdoor lifestyle brands, delivered year-over-year growth of over 37%, which includes our acquisition of Grilla Grills. 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 typically impacted by retailers' inventory levels or limited open-to-buy dollars. Our direct-to-consumer sales also include sales of meet-your-maker, meat processing equipment, and Grilla outdoor cooking products, which are sold exclusively direct to consumer. Together, these brands generated over 14% of our total net sales. Our outdoor lifestyle category made up 55.6% of our business and delivered growth of more than 39% over the pre-pandemic third quarter of fiscal 2020. Growth in our outdoor lifestyle category, including international growth, remains an exciting opportunity for us. During the quarter, we expanded our sales resources, adding a dedicated manager for fishing sales in the southeastern United States. We also named a sales rep firm that is well known in the fishing industry to cover the northeastern U.S. territory. And more recently, we named a firm in Europe to represent our many cutlery brands, as well as our Crimson Trace optics brand. Innovation is our core strength, and therefore the key element in our long-term growth strategy. Our innovation machine is robust and new products launched within the past two years generated nearly 24% of our third quarter net sales. Our dock and unlock process fuels that innovation and during the quarter we unveiled a host of new products, most of which incorporate proprietary features and that taken together advance our strategy to enter new product categories and expand our product lines and distribution channels. Let me share more information on some of those now. First, We recently refreshed our Frankfurt Arsenal brand, enhancing its appeal to the younger demographic now entering the ammunition reloading space, while maintaining the brand's strong reputation among the established, mature demographic that historically participates in reloading. In Q3, we launched new products that appeal to both demographics. First, we introduced a full line of entry-level kits that make reloading easy and less intimidating for first-timers. We also launched the X10 Progressive Press, which is now shipping. The X10 is getting rave reviews from avid reloading consumers who typically have a greater appetite for higher performing, higher ASP reloading equipment. The X10 is a state-of-the-art press that incorporates smart technology developed by the same internal electrical engineering team that designed the smart technology in our Lockdown Puck, our Bubba Smart Fish Scale, and our Caldwell Chronographs. In fact, based upon its internal technology, the X10 will serve as a platform for additional reloading products that are now in our pipeline. Next, our Crimson Trace, or CT brand, built its reputation as the market leader in laser solutions and optics for firearms. But our dock and unlock process indicated CT has permission to play in the broader, more stable outdoor market. So we went to work exploring ways to combine CT's capabilities into advanced laser range-finding optics. The result is our newly launched HorizonLine Pro Laser Range-Finding Binos, which incorporate our laser and instinctive activation technology, allowing the user to rapidly determine the distance of any object to 2,000 yards. Suitable for a variety of applications and very competitively priced, the Horizon Line range-finding binos will ship this summer. Our Wheeler brand is a line of precision tools that is highly regarded by gunsmithing consumers and professionals who demand performance. We discovered that over time, the brand had naturally migrated into new markets, including automotive and industrial applications. So we refreshed the brand with new aesthetics and packaging, and recently launched new screwdriver sets designed for these markets, which represent new distribution opportunities for the Wheeler brand. For years, consumers have relied on our LockDown brand to protect, store, and organize their firearms and accessories. Recently, our dock and unlock process led us to think beyond the gun vault, The result is our new LockDown SecureWall, a proprietary panel system that works with our hangers, shelves, and baskets, as well as standard peg hooks to create a custom storage space for everything from firearms to tools to just about anything. This versatility makes it appealing not only to consumers, but to retailers as well. This spring, we'll launch the SecureWall Builder, our proprietary drag-and-drop software app that lets buyers easily plan and visualize their unique solutions. The new LockDown SecureWall products expand the brand's reach beyond the legacy firearm owner into the broader consumer, DIY, and retail markets, all new markets for LockDown. Lastly, over the past year, we have energized our large and loyal Schrade consumer base with the rebranding and a variety of new cutlery products. And we've even caught the attention of hunters who represent a new market for Schrade. Now, we have partnered with Rage, a brand renowned among bow hunters for its award-winning hunting broadhead blade technology. Our teams collaborated to create the Schrade Enrage series, a trio of razor-sharp, replaceable blade knives that allow the consumer to never have to sharpen their knife. The Schrade Enrage series also creates a recurring revenue stream for us by introducing consumables. These features make it a great option for not only hunters in the field, but also for everyday carry consumers most of whom are unfamiliar with the replaceable blade option. This collaboration, which is unique in our industry, gives each of our companies the opportunity to market our brands to a completely new user audience. The EnRage series will be available at select retailers beginning this month. These and many other products in the pipeline reflect our dedication to leveraging our culture of innovation to deliver solutions for consumers in the moments that matter. Based on feedback from our retailers, we believe they're as excited as we are about bringing these products to their consumers when their shelves are ready. While we address the dynamics of the current environment, we continue to invest in our long-term strategy, which includes leveraging our business model. During the third quarter, we expanded the lease agreement at our Missouri headquarters and distribution center, providing us full use of the building, creating opportunities to optimize past business consolidations, and providing us with additional capacity a benefit that aligns with our long-term plan to grow organically and throw strategic acquisitions. In addition, we've also successfully completed our ERP implementation, a platform we expect will yield enhanced capabilities and improve analytics as we grow. Andy will provide more detail on these investments. For now, I want to express my appreciation to our implementation team and our employees across the organization for bringing our new ERP system successfully across the finish line. Our achievements in Q3 helped strengthen our foundation and prepare us for future growth. Long-term outdoor participation trends remain positive, and 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. With that, I'll turn it over to Andy to discuss our financial results.