Vista Outdoor Inc.

Good day and welcome to the Vista Outdoor Inc. first quarter fiscal year 2022 earnings conference call. Today's conference is being recorded and at this time I would like to turn the conference over to Vice President, Investor Relations, Shelley Hubbard. Please go ahead, ma'am.

Good morning and thank you for joining us for our first quarter fiscal year 2022 earnings call. With me this morning is Chris Metz, VISTA Outdoor Chief Executive Officer, Sudhanshu Priyadarshi, Senior Vice President and Chief Financial Officer, and Vishak Shankaran, President of Hunt, Shoot Tactical Accessories and Bushnell Golf. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements, and we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to the risks and uncertainties that face VISTA Outdoor and the industries in which we operate. We encourage you to review today's press release and VISTA Outdoors SEC filings for more information on these risk factors and uncertainties. Please note that we have posted presentation materials on our website at investors.vistaoutdoor.com, which supplement our comments this morning and include a reconciliation of non-GAAP financial measures. With that said, I'll turn it over to you, Chris.

Thank you, Shelly. Good morning, everyone, and welcome to our fiscal year 2022 first quarter earnings call. We're excited to share details about our results and the growth potential of our brands. Our management team spent a great deal of time together at the beginning of the quarter as part of our investor day in May. We hope you felt the energy and passion of our leadership team like I did. As part of the value creation framework, we introduced new three-year financial targets, and I can tell you that our teams are already well on their way to delivering results. Thank you again to those who joined the investor day. Now, let's get started with our first quarter results. We began our fiscal year with another record quarter and strong performance across the entire portfolio, including sales growth of nearly 184 million, up 38% to $663 million compared with the prior year quarter. Record gross profit of $241 million, up 93%. Record EBIT of $144 million, up 200%. And record adjusted EPS of $1.74 compared with 51 cents in the prior year quarter. In Q1, we delivered 38% sales growth, which translated to 24% EBITDA margins due to growth and operational changes we made over the past few years of our strategic transformation stage. As a result, our business is running more effectively and efficiently than ever, generating tremendous leverage. Taking a look at our segment's tremendous leverage. Taking a look at our segment's growth in Q1 was evenly balanced, with shooting sports up 39% and outdoor products up 38%. E-commerce posted another quarter of double-digit sales growth up 19% year-over-year, on top of the previous year's 40% growth rate, despite physical doors reopening. Our D2C channel grew significantly higher. We also maintained a strong balance sheet with over $200 million in cash in an unchanged leverage ratio at 0.7 times, while adding four acquisitions in the past nine months. Outdoor recreational activity also continues to show highly favorable trends across camping, outdoor cooking, hiking, biking, fishing, hunting, and more. One area of high growth within biking is e-bikes. During the quarter, we added a premium electric bike brand to our portfolio, Quiet Cat. We are very excited about the opportunities within this category and particularly with this brand. We also added a female hunt-inspired apparel brand, Menor. We see great potential in both brands and look forward to seeing them flourish. I am pleased to report that Venor and QuietCat have been fully integrated in under 60 days. Welcome to the VISTA outdoor team. The safety of our employees is paramount. As the pandemic continues, we are providing resources for employees, including localized updates based on current conditions, onsite safety protocol, and vaccine information. We've had minimal disruption within our facilities, and we want to thank our employees for their diligence in keeping themselves and others healthy. As you can see, our people are the driving force behind our success. Our teams have continued to rise to the occasion and to find new ways to make operations more efficient, which is paying off in new records. Our throughput and absorption rates are at record levels, and overhead has remained steady, allowing strong leverage. I'm proud to lead this organization as we empower people to achieve their goals and live their best outdoor lives. Across our portfolio, consumer trends and participation reports demonstrate that outdoor resurgence of 2020 has not slowed. According to the latest study by People for Bikes, the total year-to-date 2021 market continues to accelerate, outperforming even last year and growing by 12% compared to January through May 2020. The RV industry posted another record month in June, with RV sales up 25% compared with the prior year and nearly 39% versus 2019. Southwick Associates released data in May 2021 showing that ammunition demand is not slowing. The research found that two-thirds of ammunition consumers said current inventory was lower than preferred and that over 80% would like to add more. Campgrounds of America's June research report predicted that 53% million Americans would camp in 2021. This figure is up over 480,000 from its May projections. Our national and state parks, well, they're surging, with national parks in Utah seeing 15% increases and state parks in Minnesota, which also happens to be in our backyard, up 60%, just to name a couple. And just last weekend, the 32nd Olympic Games kicked off in Tokyo. Many of our brands will be along for the ride, and we wish all the athletes the best of luck. We also believe that demand in the ammunition market will have a longer run in this cycle than in past demand surges. The influx of over 10 million new gun owners into shooting sports has fundamentally changed demand dynamics. NICS is no longer a good leading indicator of demand for ammunition. In forecasting our business, we have instead shifted our focus to the unprecedented level of ammunition consumption, low retail and consumer inventories, and our own multibillion-dollar order backlog, all of which indicate that demand is very strong and will be for the foreseeable future, regardless of next checks. By now, we are all well-versed in the supply chain disruption that continues to provide challenges in meeting demand. Across the business, our teams are stretching their supply chains and ramping production to source, build, and bring more product to the market. Consumer demand for our product is not slow during the summer. It's accelerated. Simply put, we cannot meet the current level of consumer demand. We're fortunate to have a world-class supply chain center of excellence supporting our businesses. It has been a collaborative, all-hands-on-deck moment for our company, pooling resources and leveraging our scale to overcome many of the challenges. And despite the headwinds, we got more than our fair share and delivered a strong quarter, and our outlook is bright. we will continue to find ways to outperform and focus on what we can control. Our strong underlying fundamentals, combined with continued growth in outdoor trends, new product innovation, and meticulous execution, enabled us to navigate the headwinds and position our company for continued growth. Our forward-looking guidance contemplates the continued supply chain challenges and shortages that we and all others are currently experiencing. Now for an update on our business units. New products cement brand loyalty, attract new customers, and drive organic sales growth, leading to higher profitability and returns to shareholders. This cycle is a fundamental part of our business model, and it's why we continue to grow our R&D investment at a faster rate. I'm pleased to share with you our progress. I'll begin with an update on our ammunition business. If you follow consumer media or trade publications, you likely saw the statement that Big Green is back recently. This campaign updated consumers about Remington's production progress and where they can find their favorite Remington loads. This campaign has translated into ahead-of-schedule progress for the Remington brand. Combined with strong sales for our legacy ammunition brands, I am pleased with the overall positioning of our ammunition platform and the round-the-clock production of our dedicated teams in this heightened demand market. During the quarter, we successfully launched a category-first loyalty program and have seen great response from members looking to get gear from their favorite ammunition brand. Loyalty membership has grown 400% since the first week, and we've seen a strong percentage of members coming back to our site to make repeat purchases. We also announced our ammunition subscription program. Our planned subscription service is on track for a fall 2021 launch, and will further bolster our D2C capability, allowing us to better connect with our consumers. Both the loyalty and subscription programs are critical to allowing us to communicate directly with consumers, which in turn enables us to better share trends with our customers. Federal and CCI brands continue to thrive, with recent contract wins and retailer awards showing that the brands are in high demand across many categories. Federal Ammunition was awarded a three-year contract to partner with the Defense Ordnance Technology Consortium to design, develop, and demonstrate technological superiority in small arms ammunition. Shooting Sports Retailer and Tactical Retailer magazines named their 2020 Independent Retailer Choice Awards. CCI was honored with a Gold Award in the Rimfire category of both publications. And lastly, Federal ammunition has already reached the podium in Tokyo. Earlier this week, Team USA won gold in the men's and women's Olympic ski competition using Federal's gold medal paper shot shells. Congrats to Team USA. All in, our ammunition team has delivered not only industry-leading growth, which gets more product onto our customer shells, but also industry-leading margins. Now, let's turn to outdoor products, where each of our brands had a terrific quarter with all of them growing sales double digits year over year. Let's start with Bell, Xero, and Blackburn. The Olympic Games will give many action sports an international audience, where the best of the best compete for gold. This stage will drive interest in the underlying sport while also featuring our products. Jiro will be represented by 33 athletes from 16 different countries at the Olympic Games in Tokyo across road racing, mountain bike racing, track racing, time trial, and triathlon. Jiro is also generating brand awareness and sales through its Flashpoint MVMNT marketing program. This is a collection of riders and brands with one shared goal, breaking down barriers to change the image of cycling. Our action sports brand will also be represented in Dick's Sporting Goods' new line of retail stores, Public Lands. We'll be assorting Xero helmets, shoes, gloves, and bell helmets as part of this new endeavor. Blackburn is launching several new products in the lighting category, and we expect their updated e-commerce platform to be live next month. Combined with positive momentum in Canada and Europe, Bell, Xero, and Blackburn are a strong position heading into the remainder of the fiscal year. Camelback had an outstanding quarter as well, growing over 80% year over year. The sales tailwind combined with their best-in-class marketing and customer loyalty positions Camelback well for the future. During the quarter, Camelback's spotlight deal for Prime Day was one of the top sports and outdoor deals. The Triton Renewal Water Bottle, which is made from 50% recycled materials, drove strong retail sales, while the Eddie Plus Kids Bottle was the number two selling style for the Amazon water bottle category. Outside Magazine recognized Multibeth in their Best Women's Travel Gear of 2021 and the Mule Pack in their Best Men's Cycling Gear of 2021. The Podium Bike and Sport Bottle franchise continue to set records with sales up triple digits, over the prior year quarter. And lastly, the Horizon Drinkware line, which was new in 2020, is up over 500% versus the prior year quarter, driven by an increase in key retail listings, strong marketing focus, and a new customization feature on Dick's sporting goods website. Camp Chef is not only benefiting from strong outdoor trends, but also new innovative products. The Camp Chef Sidekick Program added another attachment with the introduction of the Sidekick Sear. The Sidekick Sear is part of the Camp Chef 14-inch interchangeable cook system and will give new and existing pellet grill owners another reason to come back to Camp Chef. The Portable Everest Camp Stove is a sought-after product, and retailers at all levels cannot keep it on their shelves. Nobody does camping better than Camp Chef, and this has been an exciting trend supporting sales and brand affinity. Camp Chef's line of fire pits is also part of the broader home improvement trend. Camp Chef's fire pits have been a popular product as people seek to create a backcountry experience in their back patio. For an update on our hunt, shoot, and golf business, I've asked Vishak Sankaran, President of Hunt, Shoot Tactical Accessories and Bushnow Golf, to provide an update.