Vista Outdoor Inc.

Gentlemen, welcome to the full year 2022 fourth quarter VISTA Outdoor Earnings Conference Call. Towards the end of the presentation, you will have the opportunity to ask questions. Please press star 1 on your telephone keypad to register for the same. I shall now hand over to the management team to begin.

Thank you, Operator, and good morning to everyone joining us for our fourth 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 Jason Vanderbrink, President of Sporting Products. 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 Outdoors 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 which supplement our comments this morning and include a reconciliation of non-GAAP financial measures. Before I turn it over to Chris, I would like to invite you to join us on May 23rd for Investor Day, which will feature Chris Metz, CEO, Sudhanshu Priyadarshi, CFO, and other key business leaders. This event will be webcast live on our website at investors.vistaoutdoor.com under Events. More details will follow. Chris, I'll turn it over to you.

Thank you, Shelly, and good morning, everyone. We appreciate you joining us this morning. Before I discuss our FY22 financial results, I want to provide some additional comments on our other press release. Today we announced a very important strategic step for the company that we believe will unlock significant value for our shareholders and other stakeholders. After a very thorough assessment of our business and value creation opportunities, With the help of outside advisors, VISTA Outdoors Board has approved a plan to separate our outdoor products and sporting product segments into two separate and independent publicly traded companies. Today's announcement is just the first step in the separation process, which we expect to complete in calendar year 2023. I'll spend a few minutes discussing the details of the separation, along with the many compelling benefits that motivated our decisions. Our outdoor product segment, to be renamed at a later date, will be an industry-leading, diversified platform of iconic outdoor brands, including Camelback, Bell, Xero, Camp Chef, Bushnell, Bushnell Golf, Foresight Sports, Stone Glacier, and Quiet Cat. Sales for our outdoor product segment were $1.3 billion in FY22. I will lead the outdoor products business as Chief Executive Officer and Sudhanshu Pridharshi will serve as Chief Financial Officer. Other members of the Outdoor Products leadership team will be announced at a later date. Sporting Products, to also be renamed at a later date, will continue to be the world's leading manufacturer of ammunition. Its iconic brands include Federal, Remington, CCI, Sphere, and Heavy Shot. Sales for our Sporting Products segment were 1.7 billion in FY22. Jason Vanderbrink, President of Sporting Products, will be appointed Chief Executive Officer and other members of their leadership team will be announced at a later date. So why are we doing this? Over the past few years, we've made significant progress executing on our value creation strategy to grow our leading portfolio of brands and become a nimbler and more profitable business. In the past few fiscal years, we have grown sales from 1.8 billion to over 3 billion. net income from a loss in FY20 to a net income of $473 million in FY22, adjusted EBITDA from $114 million to $739 million, adjusted EPS from $0.24 to $8.29, while our share price has appreciated from approximately $10 to $36. This strategy has delivered incredible results. and has built a strong foundation for outdoor products and sporting products to unlock further tremendous value and succeed on their own as separate and distinct independent companies. Each company will have a singular strategic focus with resources to support its specific operational needs and growth drivers. Additionally, each company will have tailored and discrete capital allocation priorities that are better suited to support its distinctive business model and long-term goals. Outdoor products will be a high-growth platform, continuing its proven track record of strategic acquisitions of complementary outdoor businesses, furthering its reputation as the acquirer of choice in the outdoor recreation products marketplace, and reinvesting in organic growth through new product development, marketing, and expanded e-commerce and international sales. Our centers of excellence will remain with the outdoor products business, enabling the platform to continue to leverage its scale and better together concept that has been so effective for us. Meanwhile, sporting products will prioritize using its strong cash flow to return capital to shareholders through a consistent dividend policy and opportunistic share repurchases. Separating the businesses will provide shareholders the opportunity to invest in two attractive businesses with differentiated capital allocation priorities. We expect that the enhanced strategic focus for each will allow both businesses to trade at more appropriate valuations in the marketplace. We look forward to working through this transformative process to ensure that each company is optimized with the right teams and resources so they can continue to create value for shareholders. We will share more details with you regarding the structure of each company as we work towards completing the transaction. Now let's turn to our financial results. We completed another record year at Vista with sales topping $3 billion, coupled with record fourth quarter sales of over 800 million, rising 36% year over year and marking the seventh consecutive quarter of record results. In FY22, both reportable segments grew strong double digits. EBITDA margins continued to expand, reaching 23.6 with adjusted margins of 24.3. And we posted record EPS of $8 and adjusted EPS of $8.29. We also invested in organic growth, completed five acquisitions, repurchased 5% of our outstanding shares, and maintained a debt leverage ratio of 0.9 times. lower than our stated straighted target of one to two times. Furthermore, these metrics exceeded the long-term targets we discussed and committed to in our last year's Investor Day. These outstanding results are a testament to the tremendous efforts of our teams. When I walked in the door over four years ago, there was a lot to be done to return this company to growth and profitability. Fast forward to today, and we have just completed our second record year of performance. Our team has put in the time and effort and made tough decisions to best position VISTA Outdoor to capture the lifestyle shifts we are seeing in outdoor recreation. We now have a diversified portfolio of 39 highly coveted brands, 10 of which are power brands, with revenues exceeding $100 million each, with seven in outdoor products and three in sporting products. In FY22, we added five new brands with strong growth potential and leaders in their respective spaces. Leading brands like this do not get created overnight. We're well positioned to deliver another year of profitable growth in fiscal 23 and beyond as consumer demand remains strong and participation levels remain high. The results delivered by our portfolio of businesses, both legacy and new, demonstrate that our operating model enhances the performance of outdoor brands regardless of where they fall on the growth and maturity curve. We intend to translate this underlying momentum into greater value for shareholders going forward. As many of you know, many times past performance serves as the best indicator for future performance. As such, I would like to reflect a bit on what we've accomplished over the past 12 months to give you a glimpse of what's in store for this coming fiscal year. Our value creation strategy has built a foundation for the future success of both companies that will allow them to deliver long-term value for their shareholders for years to come. Our first strategic pillar at Vista Outdoor was to build the right team as well as the right culture. And again, the results speak for themselves. Each of our business units is now led by a team of experienced operators who know how to win in all market conditions. Those leaders will continue to deliver for outdoor products and sporting products post-separation. Our second strategic pillar has been organic growth. We've been successful over the years in growing our brands by focusing on three areas. One, product innovation. Two, marketing. And three, e-commerce. I am pleased to share with you that over the past 12 months, we've organically grown our entire business by over 20%. The investments we've made in these areas will continue to pay dividends for outdoor products and sporting products for years to come. The third pillar of our value creation strategy has been building our centers of excellence, focusing on e-commerce, supply chain, and M&A. The returns on these investments have been substantial. A few notable achievements over the past 12 months Our Ecom Center of Excellence helped our direct-to-consumer business grow by 23% year over year, and our social followers grew to over 8 million followers. Our Supply Chain Center of Excellence rallied to help our businesses through the headwinds created by COVID and the general logistics challenges faced by all companies. Here are a few examples. We increased container shipments 35% despite bottlenecks at ports around the world by leveraging total VISTA volume to secure both capacity and competitive costs. We added two new multi-brand distribution centers in the West Coast and South Central regions to expand capacity and reduce lead times to customers. And we've tripled the number of e-bikes imported since our Quiet Cat acquisition less than 12 months ago. Our M&A Center of Excellence enabled us to identify complete due diligence, close, and fully integrate five new businesses in the past 12 months. And all of them have exceeded our base projections. In fact, mergers and acquisitions, the oldest trade brand for the dealmaker community, recognized our acquisition of Foresight Sports as the gold standard in the middle market category, finding this transaction to be the top deal in the consumer goods category. Given the focus of these investments, we believe that the Centers of Excellence will be better positioned to support the success of our outdoor products business post-separation. As we have previously stated and have shown each year, our Centers of Excellence create a real competitive advantage and will continue to enable our outdoor products brands to achieve levels of greatness that would be unattainable to them as stand-alone businesses. Lastly, our value creation strategy has been balanced capital deployment, maintaining our balance sheet strength, and generating the cash flow necessary to provide financial flexibility for value creation. Our efforts to date have resulted in a dramatically improved balance sheet. In FY22 alone, our acquisitions contributed over $400 million in revenue and $100 million of EBITDA. and we've bought back 3 million shares, reducing our outstanding shares by 5%, all while creating a balance sheet with 0.9 times leverage, and we have ample dry powder to continue to grow. Post-separation, our outdoor products and sporting products businesses will each begin their time as independent companies, larger, more profitable, and with stronger balance sheets because of our successful balance capital allocation strategy. We believe that allowing each of our segments to pursue a tailored capital allocation philosophy going forward will be critical to their success as independent companies and their value proposition for shareholders. Outdoor products will focus its capital deployment on growth to drive long-term shareholder value, while sporting products will prioritize returning capital to shareholders. We expect that the separation process will cause minimal disruption to our business units and create only modest dis-synergies in corporate overhead. Now, let's move on to some of the FY22 accomplishments of our outdoor products and sporting product segments. Looking first at the outdoor product segment, sales rose in outdoor products 15% to a record $345 million in Q4, and fiscal year sales for outdoor products increased 18% to a record $1.3 billion year over year, driven by double-digit growth in outdoor recreation, action sports, and outdoor accessories. Our hydration pack and drinkware brand, Camelback, saw Q4 sales climb double digits, marking the brand's fifth straight quarter of double-digit sales growth and a record fourth quarter. Camelback ended the year up over 30% while posting its best marks in company history, driven by strong demand across its product lines. Camelback's international sales were also up over 30% last year and now represent over 30% of Camelback's overall revenue. Our action sports brands, Bell and Giro, likewise, finished the year strong with FY22 sales growth year over year. Giro's show business delivered record sales in Q4. In bikes, Zero rolled out three new major helmet releases and expanded its flat pedal shoe line to tap into growing mountain bike and urban riding trends, including e-bikes. We're expanding Bell Zero's manufacturing footprint in the U.S. and Portugal. We expect these new facilities to help ease supply chain issues and get products to customers faster around the globe. Like Camelback, Bell Zero has launched a major sustainability initiative in the quarter, which will substantially reduce its carbon footprint, fueling brand awareness and affinity. In the first year of ownership of our e-bike brand, Quiet Cat, we doubled sales. Additionally, Quiet Cat achieved a major channel win just recently in Q4 by gaining entry into Lowe's, where customers will be able to purchase e-bikes online and in stores starting in our fiscal Q1. For Camp Chef, our outdoor cooking brand, March marked its second best month in its 31-year history. Helping drive its performance, Camp Chef became a TikTok sensation, growing its followers to nearly 125,000 in its first year. Our golf businesses continued to thrive in the fourth quarter, driven by strong new product introductions and surging golf trends. Over the past few years, there have been over 6 million golfers who played on a course for the first time. This growth is 30% stronger than the last major surge, which was sparked by Tiger's dominant run in 1999 and 2000. Foresight Sports again exceeded our expectations in Q4 in terms of revenue and bottom line growth, despite the fact that sales were somewhat impacted by supply chain constraints in the global chip market. We anticipate continued chip challenges, but remain confident that our supply chain team will procure what we need to meet our plans. For Bushnell Golf, the LaunchPro, which is Bushnell's branded launch monitor powered by Foresight Sports, is now available at major golf retailers. The LaunchPro enables consumer entry into the personal launch monitor category at a lower price point coupled with an exclusive subscription service which drives penetration and market expansion while also creating recurring revenue. The product has been so popular that we can't keep it in stock. Our outdoor accessories business unit, which includes Stone Glacier and our hunting brands, grew in the low single digits in Q4, marking its eighth consecutive quarter of year-over-year growth. In March, Bushnell wrapped up a 12-month, 25th anniversary marketing campaign for its hunting laser range finder, a category that Bushnell created. Now let's move on to sporting product segments. Sales for the segment were up 56% to a record $464 million and up 55% to $1.7 billion for Q4 and fiscal 22, respectively, year over year. This sustained success in sporting products is another data point that demonstrates how the new ammo consumer is different today compared with prior surges. We have seen continued and steady demand for ammunition, even as firearm indicators have slowed. For example, As of the fiscal year end, we had a backlog of over $3 billion. As we said before, traditional firearms-related indicators are not necessarily correlated with ammo, which is a consumable. For example, we are seeing more sustained participation from legacy users as well as the 14 million new first-time firearms owners in the current surge in ammo demand. Channel inventories remain low for most calibers, apart from small rifle ammunition products like those produced at the Lake City Army Ammunition Plant. Purposely, we are less reliant on Lake City small rifle ammunition sales due to the Remington acquisition and our strategic shift into product mixes that are more stable and more profitable, such as hunting, personal defense, and shot shell ammunition. Primers, a critical ingredient to all ammunition, has always been a strength of ours. However, with industry-leading technology and much-needed capacity, we have leveraged this strength. Our team has done a terrific job in partnering with several OEM companies on long-term contracts that lock in reliable orders at competitive pricing for many years to come. Lastly, as Federal celebrates its 100th anniversary, the team's culture of innovation and impact is as strong as ever. Our connection with consumers is equally strong. In a recent national study by Southwick Associates, one of the nation's most reputable outdoor market and consumer research firms, Vista Outdoors brands were named the top brands in every single ammunition category for the first time ever. Abroad, I commend our team for stepping up to support the resistance in Ukraine. Our team made a $50,000 contribution to the humanitarian effort and donated one million rounds of needed ammunition for the Ukrainian troops. Additionally, our Ukraine t-shirt promotion, which can be found on our website, has sold over 14,000 t-shirts so far, generating over $100,000 in profits, of which 100% will be donated to help the refugees. I encourage each of you to go online to www.federalpremium.com and purchase one for yourself. Across VISTA, we've always had a strong culture of leading from the front, and I'm proud of the entire team for doing their part. Now we'll turn it over to Sudhanshu to discuss our financials in more detail. Sudhanshu?