American Outdoor Brands, Inc.

Good afternoon, and welcome to the American Outdoor Brand's fourth quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Liz Sharp, Vice President of Investor Relations. 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 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, goodwill impairment, stock compensation, shareholder cooperation agreement costs, facility consolidation 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, and Andy Fulmer, CFO. With that, I'll turn the call over to Brian.

Thanks, Liz, and thanks everyone for joining us. Over the past three years, our industry experienced a surge in consumer demand caused by the COVID pandemic, followed by challenges stemming from high inflation and rising interest rates, which reduced consumer spending and drove retailers to focus on destocking their inventories. All of this change occurred in parallel with our first few years as a new public company. And while the factors driving this change were largely out of our control, They presented us with a unique opportunity to reconfirm our strategy and fine-tune our focus towards areas we can control and where we can drive progress. The first of these is innovation. We are proud to have introduced several breakthrough products in fiscal 23, planting the seeds for future growth. We are reinventing the way people fish, manage their food plots, shoot clays, and reload. Our cutting-edge offerings have been developed to meet the evolving needs of our customers, ensuring we stay ahead of the competition and capture new market opportunities. Second, we have completed critical infrastructure projects that lay the foundation for future growth. These initiatives include implementing a new ERP system that links our strategy with operations, consolidating our Oregon and Michigan facilities, and securing additional distribution space in our Columbia, Missouri facility to accommodate future land growth. These strategic investments are now complete, and they demonstrate our commitment to enhancing operational efficiency, optimizing resources, and preparing for future expansion. In parallel, we effectively managed our cash flow, generating $30.7 million in operating cash in fiscal 23. By closely monitoring our financials and implementing stringent measures, we've been able to strengthen our financial position and ensure a solid foundation for future growth and profitability. This disciplined approach safeguards our ability to invest in key areas and sees promising opportunities as they arise. Lastly, despite being a larger, more stable, standalone business with greater growth potential, than at the time of our spinoff three years ago, market forces have created the conditions for a lower stock price, leading us to opportunistically repurchase our own stock. This approach not only demonstrates confidence in our company's potential, but we believe that it also helps enhance shareholder value, reinforcing our commitment to generating long-term returns. Fiscal 2023 marked our second full year as an independent public company dedicated to building authentic lifestyle brands that help consumers make the most out of the moments that matter. On a three-year basis, we delivered net sales growth of more than 14% over pre-pandemic levels, reflecting strength in our e-commerce channel and driven primarily by growth of nearly 34% in our outdoor lifestyle category. which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities. The markets we serve are large and growing. According to an Outdoor Industry Association report released just last week, the outdoor recreation base has grown in each of the last eight years, adding over 14 million participants since 2020 and now totaling over 168 million participants, or 55% of the US population over the age of six. In addition, consumer participation rates grew in 80% of the outdoor categories in 2022, including camping and fishing, large categories where our brands play. With our outdoor lifestyle category generating more than half of our net sales in fiscal 2023, we are truly ready for the future and excited to address this expanded outdoor market. Throughout the year, we continue to encounter choppy waters created by the shifting dynamics of retail supply and consumer demand in a post-pandemic environment. Despite those challenges, net sales for fiscal 2023 grew more than 14% of our pre-pandemic levels of fiscal 2020. And while those sales declined on a year-over-year basis, Our direct-to-consumer business, which largely consists of our outdoor lifestyle brands, delivered year-over-year growth of 76%, including our acquisition of Grilla Grills. Because our direct-to-consumer sales are not impacted by retail inventory levels, we consider those sales to be an indicator of how well our brands are resonating with consumers. Our direct-to-consumer sales also include sales of meet-your-maker meat processing equipment. Both meat and gorilla are sold exclusively direct to consumer, and together they generated nearly 13% of our total net sales in fiscal 2023. At our spinoff in 2020, our outdoor lifestyle category was less than half of our overall business. By the end of fiscal 2023, however, outdoor lifestyle made up 54% of our business and delivered growth of nearly 34% above pre-pandemic fiscal 2020. Given its large consumer markets and its favorable long-term participation trends, we believe this category will continue to grow as a percentage of our business over time. Point of sale data we received from our retailers indicates that sales of our products declined in the year in the high single digits. This is not a surprising result given the current environment. At the same time that our POS declined, however, Data indicates that channel inventory of our products declined by 26%. We view this as an important, positive dynamic, and we continue to believe this will drive replenishment orders in the second half of calendar 2023. Our international business remains an exciting growth opportunity for us. During the year, we expanded our international sales resources by signing a firm in Europe to represent our many cutlery brands and our Crimson Trace aiming solutions brands. International net sales for fiscal 2023 approached $9 million, representing just under 5% of our business and demonstrating growth of more than 37% over pre-pandemic levels. We're in the early innings here, and we believe that international net sales could eventually comprise roughly 10% of our total annual net sales. Innovation is our core strength. and therefore the key element in our long-term growth strategy. Our innovation engine, fueled by our dock and unlock process, is robust, and new products launched in the past two years generated over 25% of our fiscal 2023 net sales, a level consistent with prior years. Several new products we launched in 2023 have won industry awards, most incorporate proprietary features, and all of them taken together advance our strategy to enter new categories, and expand our distribution channels. Here are a few examples. Shooting clays has historically required owning a truck and lugging a large, bulky, electric clay thrower and a heavy car battery into the field. So we created the Caldwell Claymore, a lightweight, foot operated, durable, and portable clay target thrower that is entirely mechanical and allows for convenient storage, transport, and use in remote locations, no car battery needed. Those who carry a knife for daily tasks have always believed their everyday carry knife required frequent sharpening to remain useful. So we teamed up with Rage, a leader in replaceable blade technology for hunting, to create the Schrade and Rage knife series, a unique industry collaboration that introduces hunters to our Schrade brand and introduces the broader consumer market to the concept of never sharpening their knives again. Millions of firearm owners know that reloading ammo, while cost-effective, is a tedious and time-consuming process that often yields inaccurate powder measurements, spillage of materials, and damaged casings. So we created the Frankfurt X10 Progressive Reloading Press, an innovative 10-station, gear-driven workhorse that reloads ammo in one smooth pull of a handle, making reloading easy and efficient, even when switching calibers. Managing a plot of land has always involved spreading a variety of materials, from seeds to fertilizer, using spreaders that are heavy, uncomfortable, and deliver an inconsistent application of materials. So we created Hoeyman chest spreaders, designed for year-round use and with innovative features that eliminate issues with traditional spreaders, outperform the competition, and take our Huiman brand beyond hunting into farming, gardening, and broader land management markets. And lastly, we expanded our ever-growing Bubba portfolio, a lifestyle brand known for its high-quality angling equipment. By way of background, it may surprise you to learn that in the U.S., There are more anglers that target bass than there are golfers. Those 30 million anglers share a passion for the big catch, a quick weigh-in, and a humane release back into the water. Until now, that process has meant using a traditional fish scale that is awkward to hold, hard to see, and uses little, if any, technology. In short, this was a big, sleepy market that lacked innovation, and our team knew it was a space where Bubba had permission to play. So we entered the large, underserved catch and release market with our Bubba Tournament Grade Pro Series Smart Fish Scale, or the Bubba Pro SFS, a revolutionary product that we believe will change the way people fish. The Pro SFS redefines the fishing experience by seamlessly integrating traditional angling practices with advanced technology. Let me explain how. Beginning with the precision weight scale, the Pro SFS features a quick power-up and delivers a highly accurate and consistent fish weight measurement in a sleek and durable design that incorporates Bubba's signature non-slip grip and waterproof technology. But the Pro SFS is much more than a scale. It serves as a comprehensive fishing data hub that captures real-time information about the catch, such as the exact time of the catch, weather conditions at that time, and the exact location of the catch via GPS. This data is automatically logged into the accompanying Bubba app, creating a personal fishing log and empowering anglers with valuable insights that allow them to understand fish behavior and optimize their fishing strategy. The Bubba app also features integrated tournament functionality, allowing any angler to quickly and easily launch a tournament, invite fellow anglers in distant locations, and track the results in real time directly on the app. And it utilizes a proprietary smart calling system that maximizes fishing time by eliminating the guesswork of deciding which fish to keep. And lastly, While it's rich in functionality, the Pro SFS has a user-friendly interface that ensures both seasoned anglers and newcomers alike can effortlessly navigate its features. The Pro SFS is the first product of its kind that gamifies fishing. Over two years in the making, it incorporates a number of patents and patents pending, and has been designed entirely in-house, from the industrial design to the app development to the user interface. Not only is it a truly disruptive product, it also creates a new, potentially sizable revenue opportunity through an app subscription that currently sells for $49.99 per year and has a monthly option as well. With approximately 30 million anglers in the U.S. that target bass alone, capturing even a small percentage of this very large market could generate significant revenue. And the reception so far has been tremendous. The Bubba Pro SFS, had major league fishing professionals singing its praises on social media before we even launched the product. And the consumer response has been overwhelmingly positive as well, with a nearly perfect 4.9 star rating on the Apple App Store. We are extremely excited about the ProSFS, and you can count on hearing a lot more about it in the quarters to come. The products I've shared today, along with many of the other products in the pipeline, reflect our dedication to leveraging our culture of innovation to deliver solutions for consumers in the moments that matter. We believe that over time, our demonstrated ability to innovate will fuel our top line growth to 400 million and beyond, while our lean infrastructure will help deliver more of that growth to the bottom line. With that, I'll turn it over to Andy to discuss our financial results.

Thanks, Brian. In fiscal 2023, We strengthened our balance sheet, generated significant operating cash flow, controlled our costs, continued to invest for our long-term growth, and demonstrated effective capital deployment, all while navigating market challenges that included weakening consumer demand and cautious retailer inventory management. We ended the year with several significant achievements and highlights, so let me walk you through the details. Net sales for the year were $191.2 million, a decrease of 22.8% compared to fiscal 2022, and an increase of 14.2% over pre-pandemic fiscal 2020. Our shooting sports category was down 30.7%, and our outdoor lifestyle category declined 14.3% compared to fiscal 22. We believe these declines were mainly driven by reduced consumer spending as well as retailers' efforts to lower their overall inventory levels. Compared to pre-pandemic fiscal 2020, outdoor lifestyle increased 33.8% while shooting sports was down slightly by 2.2%. Outdoor lifestyle in fiscal 2023 represented nearly 54% of our total net sales compared to 48% of total net sales in fiscal 2022. Turning now to our traditional brick and mortar sales versus e-commerce. Net sales in our traditional channel decreased 30.7% compared to the year ago period and decreased 8% from fiscal 2020. Net sales in our e-commerce channel were down 10.5% compared to the prior year, but they were up almost 61% over fiscal 2020. E-commerce net sales of $87.2 million include our two direct-to-consumer-only brands, Meat and Grilla. These two brands performed very well in the year and helped us grow our direct-to-consumer sales by 76% over fiscal 2022. On a quarterly basis, net sales in Q4 came in above our expectations at $42.2 million, a decrease of 8% from the prior quarter, driven by declines of 7.5% in shooting sports and 8.6% in outdoor lifestyle. On a three-year basis, total net sales in Q4 declined just 2%. Turning to gross margin, we have built our operating model with a low level of fixed cost and complexity, an approach which helped us deliver strong gross margins in fiscal 23, despite the year-over-year decline in sales. Fiscal 23 gross margins were 46.1%, compared to 46.2% in the prior year. The slight decrease was driven by product mix and a full return to pre-pandemic normalized promotions, offset by lower freight costs. Turning to operating expenses. For the full year, GAAP operating expenses were $100.8 million compared to $170.8 million last year. It's important to note that fiscal 22 included a non-cash goodwill impairment charge of $67.8 million. Nevertheless, excluding that charge, GAAP OPEX still decreased by $2.1 million, mainly driven by lower variable selling and distribution costs from lower sales volumes, combined with reduced facility costs from the consolidation of Grilla and Crimson Trace into our Missouri headquarters. These decreases were partially offset by planned IT costs, and one-time legal and advisory fees from a shareholder cooperation agreement. Non-GAAP operating expenses for fiscal 23 were $80.5 million compared to $83.8 million last year. Non-GAAP operating expenses exclude goodwill impairment, intangible amortization, stock compensation, and certain non-recurring expenses as they occur. GAAP EPS for fiscal 23 was a loss of $0.90, as compared with a loss of $4.66 in the prior year. Excluding the impacts of the impairment and the related tax charges, fiscal 22 GAAP EPS would have been a positive $0.71 per share. Fiscal 2023 non-GAAP EPS was $0.48, as compared to $1.77 last year. Our fiscal 23 figures are based on our fully diluted share count of approximately 13.4 million shares. And for fiscal 2024, we expect our fully diluted share count will be about 13.5 million shares. Full year adjusted EBITDAs was $12.8 million compared to $35 million in fiscal 22. Turning to the balance sheet and cash flow. I'm extremely pleased with our efforts to further strengthen our balance sheet in fiscal 2023. We generated significant cash flow from operations, paid down debt, and returned capital to shareholders through our share repurchase program. We ended the year with cash of $22 million, an increase of $2.4 million over last year, despite paying down $20 million on our line of credit and repurchasing approximately $3.5 million of our common stock. We generated $30.7 million in cash from operations and invested $4.8 million in CapEx, resulting in free cash inflow of almost $26 million. This is a fantastic result and compares to a free cash outflow of $24.5 million in fiscal 22. In fact, it's worth noting that since our spinoff, we have generated $45.5 million in operating cash and nearly $31 million in free cash flow. Our team did an excellent job of decreasing our inventory levels during the year, and we hit our goal of taking inventory below $100 million by year end. While we expect inventory levels to decrease further by the end of fiscal 2024, we do expect some fluctuation quarter to quarter. In fact, Inventory levels in Q1 and Q2 of fiscal 2024 are likely to exceed $100 million due to our normal inventory build to support the hunting and holiday seasons and due to new products scheduled for launch later in the year. We plan to continue our focus on converting some of our slower moving inventory to cash in fiscal 2024, helping us move toward our long-term normalized working capital targets. We ended the year with just $5 million outstanding on our $75 million line of credit. As a result, we remain in a negative net debt position with up to $92 million in available capital. Turning to capital expenditures, we ended the year with capex of $4.8 million below our estimate last quarter due to lower spending on product tooling and maintenance as we push some projects into next year. In fiscal 2024, we expect to spend between $6 and $7 million in total capex, with product tooling and maintenance of between $3.5 and $4.5 million, and one-time spend of approximately $2.5 million from purchasing assets related to our assumption of the full lease of our Columbia, Missouri facility. We're excited to be operating effectively and efficiently on our new ERP system, Microsoft D365. CapEx spending on the project came in under budget in fiscal 2023 at $2 million. We also ended fiscal 2023 with a total of 1.3 million in one-time ERP costs and approximately $400,000 in redundancy costs to operate both D365 and our previous ERP in parallel. While the redundancy costs are now complete, we expect to spend roughly $300,000 in planned, final, one-time ERP costs in the first quarter of fiscal 2024 as we complete our final customizations. This amount will be treated as non-recurring implementation costs when calculating non-GAAP operating expense and adjusted EBITDAs. We view our ERP implementation as a complete success. Not only did we go live without disruption, but we completed the project below budget. Over the past three years, we have built a strong balance sheet and demonstrated our ability and willingness to employ all three of our capital allocation priorities, organic growth, M&A, and returning capital to shareholders, based on what is most opportunistic at the time. As we head into fiscal 2024, our balance sheet is even stronger, and we remain well-positioned to continue continue optimizing our capital allocation strategy to address the opportunities we identify. We have been very disciplined in our approach to M&A, and we plan to maintain that discipline as we seek opportunities in fiscal 2024 and beyond. In the meantime, we continue to return capital to shareholders through our stock repurchase program. As a reminder, the $10 million repurchase program is authorized through September 2023. In fiscal 2023, we repurchased 377,000 shares, which is roughly 3% of our outstanding stock, at an average price of $9.34 a share. Now turning to our outlook. We remain excited about the year ahead. Despite the challenges and opportunities of the last three years that Brian outlined earlier, we have grown our business, built a strong balance sheet, and created a leverageable business platform that is ready for growth. We believe that fiscal 2024 will deliver a return to growth, which will likely begin in Q3 and will yield full-year growth for fiscal 2024 of up to 3.5%, supported by market share gains, expanded distribution, and planned new product launches. We expect our net sales in fiscal 2024 to follow a seasonal pattern, with Q1 as the lowest net sales quarter, Q2 and Q3 as the highest net sales quarters, and Q4 coming in higher than Q1. As a starting point, we expect Q1 of fiscal 2024 to be slightly lower than Q1 of fiscal 2023, and we expect a return to growth in Q3 and Q4. Turning to gross margins, we believe that fiscal 2023 brought a return to a more normalized promotional environment, and we expect the same level of promotions in fiscal 2024. We also expect fiscal 2024 margins to improve from fiscal 2023 due to lower inbound freight costs and savings from the facility consolidations we completed in fiscal 2023. With regard to OPEX, We believe that overall OPEX for Fiscal 24 will increase slightly, mainly from higher selling and distribution costs netted by reductions from our facility consolidations, one-time legal and advisory fees, and IT implementation costs. Based on these factors, we believe our adjusted EBITDAs in Fiscal 2024 could increase by as much as 6.5% compared to Fiscal 2023. With that, operator, please open the call for questions from our analyst.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Our first question is from Mark Smith with Lake Street Capital.

Please go ahead.

Hi, guys. First off, can you just speak broadly about consumer trends a little bit during the quarter and maybe more importantly, any insights you can give us on what you're seeing since April with consumers?

Yeah. Hey, Mark. It's Brian. So in regards to consumer trends, we had alluded to previously about the convergence between POS sales at retail and the inventory at a retailer is being driven down. So we're seeing consistent trends, I would say, versus some of the more recent quarters, which is continued, I would say, continued strength with the consumer, especially at the higher price point items where we tend to play versus the kind of beginning to mid price point And then also the direct-to-consumer side of the business continues to do very well. So the consumer that's willing to spend more money in some of those higher-ticket items, we see continued strength.

Perfect. And then I think Andy talked a little bit about it at the end in the M&A outlook. Just curious kind of what you're seeing out there in M&A markets. I know you said that you're going to stay disciplined, but are you seeing valuations come down? Are you seeing... maybe some increased opportunities to make some acquisitions here?

Yeah, good questions, Brian, again. So on the M&A front, certainly if you do not have your own pipeline of prospects, you're not seeing a whole lot, is my guess. So we've seen fewer banker-led deals come to market. That's been pretty slow. But with that said, we are seeing quite a bit of activity on our own pipeline of targets that we've cultivated over the last few years. Some of those are, you know, situations where they might need to sell, and others are, you know, founder-led businesses that would be perfect size for us that just frankly are looking for an exit. So, yeah, we're seeing activity, but it's mostly through our own pipeline instead of, you know, M&A processes run by a banker. And then, sorry, you mentioned valuations too. I'll touch on that real quick. I would say that valuation, there seems to be some correction there with sellers. And so we are seeing valuation expectations come down, which is a good sign for us. And at this point, too, we're buyers. We'll be very cautious and disciplined, but we're in a good spot. It's a good place to be in when we're looking at deals.

Excellent.

Thank you, Gus.

Yeah, thanks, Mark.

The next question is from Eric Wold with B Riley Securities. Excuse me. Please go ahead.

Thanks. Good afternoon, guys. I guess two questions. I guess one, the 3.5% or as much as 3.5% net sales growth for the year, I know you talked about that turning positive in the back half. What are you assuming for retail, you know, point of sale, sell through and kind of in that assumption?

hey Eric this is Andy yeah you know when we take a look at the back half of the year you know we had a really good line review season last year which kind of translates towards the back half of our year and you know our discussions with retailers we do see open to buys kind of improving and especially going into that period and our inventory is in a great spot we said we're down 26% year-over-year So that's a great spot for us to go into the year.

Yeah, over the last two to three years, retailers were in a period of just get me everything you can. They were really starved for inventory with supply chain constraints. And the result of that is they really didn't have a chance or an opportunity to see who the winners and losers were, which brands and products were performing well and which ones weren't. And so then they had too much inventory, and obviously they're lowering that overall amount. But they now have a year or so under their belt where they've been able to analyze, you know, who's doing well and where do we need to make some changes. So the beginning of a, I'll call it a normalization in terms of their own process. And as Andy spoke to this last fall, we had our very successful line review season that will allow us to capture market share in the back half of this year and also some success with new product placement.

I guess you may ask it a different way. Do you expect point of sale for your products to grow this year, or is that sales growth more a catch-up from retailers being too cautious on the quote-unquote winners and taking your inventory down too much? You're just kind of recouping back to normal inventory, or do you actually expect point of sale to increase this year?

It's a great, it's a really good question. It's Brian again. I think that, like I said, the What we know today, right, is POS, we alluded to, is down in the single digits for our products. But I would say that's fared very well compared to the opening and mid-level price point options that are out there where we don't tend to play. And so I think within that higher price point item and the brands that we have, I would expect it to remain pretty stable. But with that said, I think the icing on the cake there is the market share gains from the line review process and the new products.

Got it. So this last question, this last question, I know you talked about your expectation for outdoor lifestyle to continue to gain share, market share, or gain share as a percentage of your sales going forward. Maybe it gives a sense to the other side, what is your current view on kind of fire of demand? the inventory landscape out there for your products. And when you expect outdoor lifestyle to gain share, do you expect shooting sport sales to grow as well, but just less than outdoor lifestyle, or do you actually don't expect growth in that side of the business?

Yeah, Eric, that's another great question. So over the long term, you know, outdoor lifestyle, we look at the total addressable market for outdoor lifestyle is just much bigger than With that said, you know, we're firmly entrenched in the shooting sports. We have great new products from Caldwell to Frankfurt Arsenal. So, you know, we expect that shooting sports will grow over time. It's just that the outdoor lifestyle has a bigger market to grow into.

Yeah, the thing that I'll add real quick, too, is, you know, we've really focused on some of the larger stable categories within shooting sports, which is why you're seeing products like the Claymore, Caldwell Claymore, performed very, very well for us, a new product, and the Frankfurt Arsenal X10. So they're in portions of that market that we feel are very stable and will continue to grow over time, along with that installed base. And that's really where we're focusing most of our efforts. Still, you know, obviously Crimson Trace brand and Aiming Solutions is an important brand, and it's a blue-chip brand within that space. But we like the diversification of getting into some of these other categories that

long-term. Got it. Thankful. Thank you guys. Helpful. Yep. Thanks, Eric.

Again, if you have a question, please press star then one. The next question is from Matt Karanda with Roth MKM. Please go ahead.

Hey, guys. Good afternoon. Just wanted to see if we could start by connecting the dots between sort of the near-term growth outlook that you have for fiscal 24 and which is in the low single digits. What do we need to do? What environment do we need in place to get back to sort of the longer-term growth algorithm that I think you guys have highlighted, which looked like it was more of a mid-teens sort of overall growth rate? Maybe you could just highlight some of the things that need to happen to kind of get back to that level.

Yeah. Hey, Matt. This is Brian. So in terms of connecting the dots between the two, the near-term outlook and the the capability we outlined in our investor day of getting to 400 over the next four to five years, really the backbone of that success and driving towards that larger number over that time period is based on new product launches. So you see at the end of this last fiscal with like the smart fish scale, which hopefully you enjoyed me going on and on about that product, and the Claymore, the X10. I mean, those are like the most recent ones But you can quickly, you start adding those up and layering them on top of each other. And when you already have an existing base of business that is going to grow and it's going to perform well and it's complimentary, but you have these wow products that we're introducing that have been in development for several years and they begin stacking, they individually can become very meaningful parts of the business. So We see, like we talked about, the successful line review season that we had this last fall, and us taking shares as a result of that in the back half of this next fiscal year. A big part of that is also new product placement, and those are those wild products that we talked about, and getting those on shelves, which is just the building blocks, continue to stack those over time, which is our plan. And then you look beyond that to buy geography, buy channel, and you've got a nice, I think, pathway to be able to reach that number we put out there. So we're still very bullish on that. I think you're probably looking at the full year and saying, you know, look, first half, you said that you could be down even in the first quarter, but second half is looking strong. And we have all indication that that's going to be the case, which will give us a nice tailwind heading into next year.

Okay. All right. That's helpful. I think it dovetails well with my other question, which was just any Any change in expectations around the percent of sales coming from new products this year? It sounds like we'd expect that to tick up, all things being equal, relative to kind of the 25% stat that I think you guys put in the release this last fiscal year.

Yeah, Brian again here. I think it's possible. I do, yeah. I think we've got, again, tremendous success planned for these new products, and so I think it is possible that that percentage takes up this next year.

Okay, and then just any other commentary on the Smartfish scale launch? Just curious if there's any early reads you might be able to share with us in terms of sort of the success of that product and the app signups and whatnot.

Yeah, we're smiling here on this side of the phone because the reception has been absolutely tremendous. And we're not gonna disclose how many users we have today on it, but it has exceeded our expectations. And so we've seen tremendous consumer demand for that product. We've also seen a lot of professionals come forward on their own, unsolicited, and support that product as it's not a fishing scale. I mean, it does that, but it's really a new way to approach fishing. And there are, look, 50 million anglers out there in the United States that fish on a don't fish on a regular basis, but have. And they're waiting for something interesting and new to come along before they jump back into it. So we're thinking about this much larger than just this base of, let's say, bass anglers. We could see this being a pretty big game changer for fishing overall. So consumers love it so far, and we're really excited about the prospects.

OK, great. And then just maybe one for Andy. I have a two-part modeling one if I could. So I think you mentioned in the prepared remarks, expect gross margins to be higher year over year this coming fiscal year. Just any way to quantify the benefit you're getting from lower inbound freight as you kind of burn off some of the higher cost inventory. Does that pick up more in the back half of the year? Maybe just speak to the seasonality of the gross margin profile. And then on OpEx, any stuff to take into account as we think about modeling the year, especially with the the Columbia lease takeover that you've got going? Just any color or help there on sort of the movement of distribution costs throughout the year?

That's two great questions. So, on the margin side, the way that I would think about it is the two pieces I talked about in the prepared remarks, you know, improvement in freight and then the facility consolidation. The way that I would look at that is improvement in freight, we did have a chunk of improvement in fiscal 23. So I would not expect a full year of improvement in fiscal 24, just because we had a little bit. And then on the facility consolidations, that piece in gross margin flows through inventory. So that inventory has to turn. So I would probably plan on that benefiting kind of more of the back half of the year, just as that inventory turns. And then on your OPEX, your spot on on OPEX, you know, the additional lease starts on January 1st. So I would, you know, definitely model those additional costs for the last four months of the year.

Got it. Okay. Appreciate it, guys. I'll jump back in queue.

Thanks, Matt.

This concludes our question and answer session. I would like to turn the conference back over to Brian Murphy for any closing remarks.

Thanks, Operator. In closing, I want to thank each of our employees across American Outdoor Brands for their loyalty, hard work, and dedication. Your contributions throughout fiscal 23 and every day have helped us move forward on the path for an exciting future. Thank you, everyone, for joining us. We look forward to speaking with you again next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.