Vista Outdoor Inc.

Good day and welcome to the VISTA Outdoor Second Quarter Fiscal Year 2022 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Shelley Hubbard. Please go ahead, ma'am.

Thank you, and good morning to everyone joining us for Second 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 Greg Williamson, President of Camelback. 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 also 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 the call over to you, Chris.

Thanks, Shelley. Good morning, everyone, and thank you for joining us today. Q2 was the first full quarter since we unveiled our value creation framework in May, and our strategy is driving record results. We reached a new high watermark for quarterly sales, which grew 35% from last year to $778 million, and set new records for EBIT and EBITDA margins, as well as EPS, marking our fifth straight quarter of record financial performance. Remarkably, our 35% growth rate this quarter was driven from a revenue base that grew 29% in Q2 last year. These results were fueled by organic growth, as a result of new innovation and high demand for key staples across our portfolio of brands, as well as growth from acquisitions such as Remington, HeavyShot, and Quiet Cat. In fact, Camelback and Quiet Cat both posted their highest quarterly sales ever in Q2, a testament to successfully executing against our strategy. In addition, we announced the acquisition of Foresight Sports in September, a top player in the golf technology sector. We are also excited to announce that we closed on our latest acquisition of Fiber Energy Products, a leader in all-natural wood grilling pellets. This latest strategic transaction secures a continuous supply of pellets for Camp Chef and expands our revenue in a consumable category. We now have 10 brands across our portfolio that are generating over $100 million in revenue annually. These highly sought-after power brands are key growth drivers with strong competitive advantages, resulting in rising market share within their respective categories. Delivering record results quarter after quarter requires strong execution and coordination across our teams, especially as we work to mitigate supply chain risks and integrate new brands into our portfolio. I'm extremely proud of our team and want to thank our employees for their tireless work and dedication. We are bringing more people outside, which is a core part of our mission, and it's so encouraging to see that outdoor activity continues to be an elevated part of the lives of so many. We are successfully leveraging the strength of our brands through lean business operations while building a resilient and balanced portfolio through disciplined M&A. As a result, we're well on our way to reaching and exceeding the three-year financial targets we announced in May. We've created a solid foundation for driving growth, profitability, and shareholder value. Our strategy to achieve the three-year targets that we unveiled in May is embodied in our value creation framework. This framework has five strategic pillars, including acquisitions, which I'll cover in more detail now. In just 14 months, we've reshaped our portfolio through six acquisitions. We've added Remington and HeavyShot in shooting sports, and QuietCat, Venore, Foresight Sports, and now Fiber Energy Products in our outdoor product segment. Our success in identifying, negotiating, closing, and integrating new businesses has positioned Vista Outdoor as an acquirer of choice in the outdoor industry. Remington and HeavyShot were key contributors to the 65% year-over-year growth our ammunition business delivered in Q2, and QuietCap posted its best quarter ever. Foresight Sports expands our presence and high growth less cyclical outdoor products markets with the potential to deliver higher margin recurring revenue. Combining Foresight Sports with Bushnell Golf under the same roof positions Vista Outdoors the industry leader in golf technology, including data collection and hardware development, as well as game improvement and entertainment year-round. Foresight is already delivering results. The team's recent launch of the GC3 Launch Monitor exceeded sales projections within days. The GC3 launch also sparked Already surging sales of our Sim-in-a-Box product line, a complete in-home golf simulator shipped directly to the consumer. Operating in two locations with a talented workforce, Fiber Energy Products' seven mills have state-of-the-art equipment and are designed for scalability as market demand increases. Adding Fiber Energy Products to our outdoor products portfolio positions us to drive growth across new and adjacent categories and adds to our consumable revenue base. Moving to our business units, I'll start with the ammunition business where we've transformed into a nimble, lean organization that can thrive at all points of the economic cycle. We're continuing to see strong consumer demand and retail orders across our ammunition brands. We expect the strength to continue as there are multiple key data points that show today's ammunition market is far different than it was five years ago. First, demand for our iconic ammunition brands is driven in part by approximately 12 million diverse new entrants into the market, including people of color and women who are contributing to high participation rates at shooting ranges, as well as increased sales of hunting licenses and shooting accessories. These new entrants, along with traditional consumers, have created a larger consumer base that is consuming more ammunition than ever before. Hunting participation, interest in personal protection, and the field-to-table movement continue to grow, not to mention the youth shooting leagues are one of the fastest-growing sports in America today. Second, the elevated demand we are currently seeing is more broad-based than previous surges, which was centered predominantly in .223, .556, and 9mm calibers. The demand today stretches across many other calibers, including rimfire, shot shells, and hunting calibers, and we anticipate continued demand for the foreseeable future. Third, inventory levels for ammunition continue to remain very low across all distribution channels. Much of the inventory on retail shelves today are multiple facings of the same calibers. Our team is continuing to work hard to fill the record demand that shows no signs of slowing. Fourth, our digital transformation allows us to meet the consumer wherever they prefer to shop. The next phase of our digital journey begins this month with the launch of our AMO subscription program. During this pilot phase, we will test and determine how we can successfully scale over time. And fifth, in response to the rising commodity costs we've experienced, our teams have implemented strategic pricing actions to mitigate rising costs and to better meet supply and demand economics. We anticipate that elevated demand will support current product pricing for the foreseeable future. With this continued demand in mind, we've decided to add more capacity with a strategic investment in equipment. While it's not a large investment, we will be adding a few pieces of equipment to give our plants more flexibility and capacity expansion. This is the first such investment since the Remington and HeavyShot acquisitions. We don't take such investments lightly, and I'm proud that our team has added little to no overhead since the beginning of the increases in demand 18 months ago. This is included in our capital expenditures and free cash flow guidance. Both Remington and HeavyShot added 30% more capacity to VISTA Outdoor without adding any marketplace capacity. While our second quarter growth in ammunition sales reached all-time highs, our production was hampered by raw material shortages and logistics challenges due to the broader global supply chain disruption that is affecting industries from all sectors. That said, Our team is working successfully with our suppliers to manage and mitigate those risks, and I feel confident that we will continue to leverage our strong relationships with our vendor partners to ensure we get more than our fair share. We believe that product innovation is key to creating a growing and resilient ammunition business. Remington launched its first new product since the acquisition, the CoreLock tip for big-game hunting. And American Rifleman Magazine awarded Federal Premiums Terminal Ascent with the Top Ammunition Award for 2021. Each of these products have been well-received in the market. Last but not least, we were also awarded the Secret Service Contract, a prestigious accomplishment and one that speaks to the premium performance of our products. Rounding out our shooting sports segment, our hunt-shoot business grew 8% during the quarter. powered by our Better Together model, strong brands, and new product offerings. Looking forward, we believe the future is bright for both our ammunition and hunt-shoot business units. The market continues to reorient itself as new entrance and activity trends evolve and Vista Outdoors' position to lead in all of these categories. Looking at the entire market, the number of firearm owners has roughly doubled over the last 10 years, which bodes well for our ammunition businesses, as well as our hot suit accessories as add-ons. We're also driving growth in our outdoor products brands with tremendous new product innovation. For example, during Q2, Bushnell Golf successfully launched the highly anticipated Launch Pro for just under $3,000, with inventory selling out in minutes on the Bushnell Golf website. These early hardware successes are supporting growth and translating nicely in subscription sign-ups and upgrades. Bushnell also introduced the new disc jockey, a portable speaker for the growing disc golf category that provides audible GPS distances to the next basket while streaming an audio playlist. Camp Chef unveiled their new Apex grill at the hardware show. The Apex expands Camp Chef's leadership position in the hybrid category, giving consumers the choice for wood pellet or propane-fueled cooking in a single platform. In our action sports business, the new Giro Contour RS goggle was named by Outside Magazine as 2022 Gear of the Year, which gives us added momentum heading into snow season. Bell's Moto 10 continues its success, moving into Phase 2 of the campaign with multiple athlete and partner collaborations hitting social media, and Camelback has been driving new innovation, which Greg will cover in a minute. I'm excited about the progress we continue to make in our licensing business. I expect that licensing will grow in time to be a considerable profit generator for Vista Outdoor. Recent wins include Bell Helmets, where we secured a 10-year license agreement with Racing Force to use the Bell brand on auto racing and karting products. And Bushnell and Remington have entered into a variety of licensing partnerships. Our value creation framework includes our Centers of Excellence. Our centers of excellence leverage our shared resources, expertise, and scale to achieve a level of excellence that would be out of the reach for our individual brands. Nowhere has this model been more evident than for QuietCat. In Q2, QuietCat delivered the best quarter ever in its history and is now well integrated within our sourcing and supply chain networks, getting more e-bikes into the marketplace. Our digital center of excellence continues to activate first-class D2C sites for our brands, with Blackburn and Copilot, the latest to come online. Another strategic pillar in our value creation framework strategy is talent and culture. From management to frontline employees, we've built a team that puts people first. I'm proud to share we've recently joined the Together Outdoors Coalition, which is an organization of outdoor companies committed to diversity, equity, and inclusion in the outdoors. At the same time, we're creating a culture that's focused on sustainability, and we're proud that Investors Business Daily recently recognized Vista Outdoor as a top three ES&G company in the consumer goods category. In summary, we're well positioned for the long term with a diverse portfolio of iconic as well as emerging disruptive brands that are changing the way we experience the outdoors. I'll now ask Greg Williamson, President of Camelback, to give an update on the record-breaking quarter. Greg? Thank you, Chris, and good morning, everyone. It's an exciting time to be at Camelback and be part of the Vista Outdoor family. There are two milestones I'd like to highlight before I get started. First, the Camelback brand recently celebrated its 30-year anniversary. I'm honored to be part of the brand that invented the hands-free hydration category and the BPA-free water bottle. And I'm equally excited for what the future holds as we extend this iconic brand to the next generation of outdoor consumer. Second, that in our entire 30-year-plus history, the second quarter was the largest revenue quarter on record. driven by year-over-year top-line growth of over 40%. Our focus on innovation has led to gains in many of our core categories. According to NPD's data, in the last 12 months, Camelback has gained 10 points of share in bike packs over $100, and over 5 points of share in the hydration pack space, where we have also claimed a leadership share position. Our growth is also being driven by entering new categories, as we did with the launch of our Horizon Drinkware collection last year. We continue to gain retail listings globally and are encouraged by the growth prospects for Camelbak in this large and growing market. We've continued our extension into new categories through an exciting new partnership with LifeStraw. This partnership brings together the leader in mobile hydration with the leader in outdoor water filtration to create tremendous consumer value in a fast-growing category. We've also improved product listings across all major retailers, including expanding vacuum stainless steel listings at Target and our pack and bottle listings at REI. Additionally, we've expanded our dropship program to include more websites, including Bass Pro, Target, and Dick's Sporting Goods. Lastly, the Vista Outdoor Digital Center of Excellence has supported the migration of Camelback.com to the Salesforce Commerce Cloud, giving us a more intelligent and capable e-commerce platform. As we look to the next 30 years, we have a solid foundation upon which we can grow. We've established a world-class management team. We've developed our deep-rooted and meaningful sustainability program, which we have branded Repurpose. This program reduces the environmental impacts of our products by creating a system that assists in generating environmentally safe product solutions. Recent research finds that 80% of Gen Z and millennial consumers base their purchasing decisions on social impact and sustainability. As you know, sustainability is part of our DNA at Camelback, and we're positioned to win with this demographic. We believe in diversifying the outdoors. We are engaging with partners such as Melanin Base Camp and Unlikely Hikers to promote diversity and access in outdoor recreation. We're expanding our content marketing and product lines. And to echo Chris's comments, we take seriously the obligation to lead by example in promoting diversity, equity, and inclusion in active lifestyle journeys. Our partnership with Peloton has extended our brand reach to their 2 million plus active subscribers as our podium sports bottles featured as part of the equipment packages offered for both the Peloton bike and tread. In closing, we are thriving because of our people. Our people are the difference makers. They are the key to our success. They embody our mission, which is to continuously reinvent outdoor hydration and carry solutions that empower an active lifestyle. I'm lucky to lead this team, and thank you again for the chance to represent Camelback here today. I'll now turn it over to Siddharth. Siddharth?