American Outdoor Brands, Inc.

Good afternoon, and welcome to the American Outdoor Brand's first quarter fiscal 2024 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, could, 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, 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. And with that, I will turn the call over to Brian.

Thanks, Liz, and thanks, everyone, for joining us. I'm pleased with our first quarter fiscal 2024 results, which reflected solid execution in sales, profitability, and capital management, combined with ongoing progress against our long-term strategic objectives. Net sales were generally flat compared to the prior year, a result that met our expectations and that we view favorably, given the fact that retailers continue to remain cautious about their inventories and available open-to-buy dollars in the quarter. We are especially pleased with the longer-term growth we delivered. Our first quarter reflected net sales growth of nearly 31% over our pre-pandemic first quarter of fiscal 2020, with growth over 10% in shooting sports and over 54% in outdoor lifestyle, including our acquisition of Grilla Grills. On a year-over-year basis, our shooting sports category saw a slight decline in net sales compared to the prior year. a result that is consistent with reports from firearm manufacturers citing ongoing heightened channel inventory and reduced consumer demand. And just a reminder, we don't produce firearms, only shooting sports-related accessories. The decline in shooting sports was offset by a slight increase in our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities. This is a solid result, which we believe reflects the strength of our brands in the category and the success of our strategy to invest in this growing part of our business. We continue to benefit from our strategy to intentionally place our brands where consumers expect to find them, whether online or in-store. In our traditional channel, net sales growth was strong, supported by new product introductions in hunting and fishing under our BOG and Bubba brands. We are encouraged by this result as we believe it reflects the ongoing convergence of inventory destocking activities by retailers with their need to replenish inventories. It also bodes well for many of our brands since we believe retailers are seeking out innovative products to help drive foot traffic and attract today's more discerning consumer. Net sales in our e-commerce channel declined year over year, driven primarily by our largest online retailer, but we're partially offset by increased sales of certain hunting and shooting sports products to other online retailers. Online net sales of Meat Your Maker and Grilla, our two direct-to-consumer-only brands, were up slightly over year. Meat and Grilla generated over 35% of our total e-commerce sales, and together they delivered strong trailing 12-month net sales of over $24 million. That said, due to the planned closures of our Michigan and Texas retail Grilla stores, Total net sales for these two brands were down slightly in the quarter. For several quarters now, we have provided certain sales data on Grilla and Meat for three reasons. First, to demonstrate the performance of Grilla for its first year under our ownership since the acquisition. Second, to highlight the success we can achieve by organically creating and launching a brand, Meat, using our brand lean architecture. And third, to provide a proxy for how well our brands are resonating directly with consumers, since both of these brands have thus far been sold exclusively D2C. This is especially the case recently, as the retail channel has been experiencing inventory challenges. Now, and as we've outlined in our strategic plan, we have the opportunity to expand the reach of these brands by moving them into retail distribution in the near future. This is an exciting and important step in our strategic plan, that will allow our brands to access bigger markets and make it easier for consumers to find our products wherever they shop. It's important to note, however, that our goal is not to make it easier for competitors to target us. Therefore, in order to maintain our competitive advantage, we don't plan to provide detailed quarterly sales data on meat and grilla going forward. Instead, we intend to begin reporting on an annual basis our direct-to-consumer sales totals as a subset of our total e-commerce sales. Turning back to the quarter, point of sale data we received from our retailers indicates that sales of our products declined slightly in the first quarter, driven almost entirely by products in the shooting sports category. This is not a surprising result given the current environment. At the same time, POS data also indicates that channel inventory of our products improved in the quarter, lower on a sequential basis from Q4 and down in the mid-teens on a percentage basis year-over-year. We view this as a positive dynamic which supports our belief that we will begin to see an increase in replenishment orders in the second half of the year. Innovation is our core strength and a 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 last two years generated over 21% of our first quarter net sales, a result that met our expectations. In the first quarter, we officially launched our new Bubba Tournament Grade Pro Series Smart Fish Scale, or the Bubba Pro SFS, our first entry into the large, underserved catch-and-release market. Since its launch in May, the Bubba Pro SFS was awarded Best Cutlery, Hand Pliers and Tools, at ICAST 2023, the world's largest sport fishing trade show, and was named the official scale of Major League Fishing, or MLF, beginning with the 2024 Bass Pro Tour season. Consumer response has been very strong, and the MLF has just commenced filming competitions that will start to air in early 2024. It's early in the game, but we're very excited about what this partnership can do for the Bubba brand long term. With that, I'll turn it over to Andy to discuss our financial results.