Vista Outdoor Inc.

Good morning and welcome to the first quarter fiscal year 2024 Vista outdoor earnings conference call. My name is Carla and I will be the operator of today's call. If you would like to register a question for the Q&A portion of the call please press star followed by one on your telephone keypad. When asking your question please ensure your telephone is unmuted locally. To revoke a question you can press star followed by two. I would now like to pass the conference over to our host, Tyler Lindvall, Vice President of Investor Relations, to begin. Please go ahead when you're ready.

Thank you, Operator, and good morning to everyone joining us for our first quarter fiscal year 2024 earnings call. With me this morning is Gary McArthur, Interim Chief Executive Officer. Eric Nyman, Incoming CEO, Outdoor Products. Jason Vanderbrink, CEO, Sporting Products. Vishak Shankaran, President, Outdoor Accessories and Golf. And Andy Keegan, Vice President and Interim Chief Financial Officer. 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 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. Gary, I'll turn it over to you.

Thank you, Tyler, and thank you for joining us this morning as we discuss our first quarter 2024 results. Let me begin by thanking our management team and all Vista Outdoor employees for their hard work during another challenging quarter. Though our top line continues to be tested, we delivered solid EBITDA and free cash flow again this quarter. Before discussing results, I thought it would be good to have Eric, our new CEO for Outdoor Products, introduce himself, and I will then provide an update on spend timing. Eric will be joining us in mid-August after spending 20 years at Hasbro, where he most recently served as Chief Operating Officer and President. He brings a wealth of talent and experience to our organization. I look forward to serving on the board with Eric as he guides outdoor products into the future.

Eric? Good morning, and thanks to the entire VISTA Outdoor family for the warm welcome. I am honored and excited to join VISTA Outdoor as the CEO of the outdoor product segment. It's an incredible opportunity to lead an iconic portfolio while also joining a purpose-driven company that connects people to the outdoors in deeper and more meaningful ways. I'm bringing to the job a passion for brands, growth, and the outdoors. I have 30 years of experience in multi-brand consumer products companies. As Gary mentioned, I most recently served as Chief Operating Officer and President of Hasbro, where I was responsible for leading Hasbro's business-driving innovation, e-commerce, operations, media and marketing, data analytics, strategic planning, and organization culture and leadership. I supported significant value creation driven by e-commerce and consumer direct transformation, integration of digital technology into traditional consumer products, media partnerships, and global brand building. I'm excited about Vista Outdoors' long-term strategy. The planned separation to unlock shareholder value will generate momentum for our people our brands, and shareholders. I look forward to partnering with our teams, the board, and outside stakeholders in the days and months ahead as we take Vista Outdoor, the outdoor product segment, and our brands to new heights.

Thanks, Eric. We're excited to have you on board in leading our outdoor products company through the spin and beyond. I will continue in my role as interim CEO and partner with Eric and Jason to prepare our company to be ready for the spin. With regards to the spin, earlier this month, we confidentially submitted a second amendment to our Form 10, which included our fiscal year 2023 financials, and we expect to publicly file the Form 10 in September. In early October, we expect to hold an Investor Day event, followed by roadshows wherein we will share the compelling standalone investment theses behind our outdoor products and sporting product segments as we proceed toward the expected spin in late October or early November. We continue to believe the spinoff of our outdoor product segment will unlock significant shareholder value. Upon completion of the spin, there will be two independent publicly traded companies, both of which will be two of the largest publicly traded companies in the outdoor space. Each company will have a dedicated strategic focus, tailored capital allocation approach, and its own set of competitive advantages. Shortly, Andy will provide an overview of sporting products expected dividend policy as well. Our company currently trades at a mid-single-digit enterprise value to fiscal year 2024 EBITDA, in line with ammunition and sporting company peers. While PurePlay outdoor products focus peers tend to trade at double-digit enterprise value to EBITDA. We believe this value is not being reflected in our current trading price. And after the spin, we expect our outdoor product segment will trade at a multiple that is more comparable to its outdoor peers. As mentioned last quarter, keys to completing the expected spin this calendar year will be establishing the outdoor product senior leadership team, a more stable macroeconomic environment, and improving outdoor products financial performance. We've made meaningful strides on all these criteria this quarter. We have now hired an outdoor product CEO Our outdoor product segment profitability has improved and we expect the positive trend to continue throughout the remainder of this year. We believe we are well positioned to complete the separation. In discussing our first quarter results, there are three core themes I will highlight. One, we delivered results as expected and previously communicated despite market challenges. Our restructuring and profit improvement initiatives for outdoor products are taking hold and having a meaningful impact. Three, our sporting products business is performing as expected in a normalizing market by focusing on what we can control and remaining disciplined in our strategy. Now let me talk to each of these points. Sales for the quarter were $693 million. Our adjusted EBITDA margins were 18.2% as we worked through a difficult market in both segments. Our leverage ratio is now 1.7 times, well within our long-term target of one to two times, and we will continue to prioritize a strong balance sheet. Organic sales for the quarter were $611 million, and organic adjusted EBITDA was $116 million. Sales for sporting products were $377 million, and adjusted EBITDA margins were 30.5%, both within our previously communicated range of high $300 million for sales and low 30s EBITDA margin for the quarter. We continue to expect sales in the high 300s per quarter and EBITDA margins in the mid-20s in the back half of this fiscal year. Outdoor products inventory at retail is improving. Depending on the channel or customer, as many retailers are still cautious on open-to-buy orders, outdoor product sales for the first quarter were up 8% to $317 million. Organic sales were $235 million, down 20%. Adjusted EBITDA and organic adjusted EBITDA margins were 7.6% and 6%, respectively. Andy will cover our quarterly financials in more detail shortly. Talking now about our restructuring and profit improvement, as mentioned last quarter, due to macroeconomic headwinds and organic declines experienced in our outdoor product segment, we launched a more than $50 million cost reduction and earnings improvement program in our fourth quarter of fiscal year 2023. These tactical and strategic actions positioned us to achieve meaningful margin improvement as we headed into fiscal year 2024. I am happy to report we are seeing the results in our financial results this quarter. Our outdoor product segment posted sequential adjusted EBITDA margin improvement of 473 basis points in line with expectations. And sequentially, corporate expense was $8 million lower. We expect the adjusted EBITDA margins in our outdoor product segment will continue to improve throughout fiscal year 2024. In our second quarter, we expect adjusted EBITDA margins to exceed 10% for this segment, and by the fourth quarter, be above our guidance range of 12 to 13%. Long-term, we believe adjusted EBITDA margins for this business should be in the mid-teens range, including corporate costs post-separation. and we will take the necessary actions to achieve this target. This will ensure a compelling financial profile exists as outdoor products transitions to a standalone publicly traded company. Let me now touch on sporting products. This quarter, our sporting products business faced a difficult comparison year over year due to shipments in the prior year reducing finished goods inventory. The market is normalizing as we expected and communicated, and we anticipate a more normalized purchasing cycle throughout fiscal year 2024 based on stable market pricing and demand. Each quarter, we expect increasing material costs that will pressure EBITDA margins from the 30.5% achieved in our first quarter of fiscal year 2024. Sporting products EBITDA margins profile is expected to bottom at or above the 25% target communicated at our investor day last year. As a result of more rational pricing, better structural dynamics in the market versus previous cycles. Next checks remain above 1 million per month through June, the 47th straight month of checks over 1 million. We see this as the new normal, and we like our position to provide high quality, consumable ammunition to this growing group of participants. Our sporting products business tends to directionally follow NICS checks, but with a lag of approximately six months, indicating that we can also expect demand to normalize well in excess of pre-pandemic levels. Jason will provide additional details on sporting products in a few minutes. Turning to the outdoor industry, the industry participation base continued to grow this year and is now at a record 168.1 million participants or over 50% of the US population over the age of six. The surge of participation brought on by the pandemic has stuck. as the new participants continue to be engaged despite the return of pre-pandemic activities and routines. We remain steadfast and hyper-focused on our goal of bringing the world outside and helping everyone enjoy outdoor activities, whether that's through the outdoor nonprofit groups we support or the new products our innovative brands create. Some big wins and new product launches in the quarter include Camp Chef released the new XXL Pro Vertical Smoker and placed its first store-in-store concept with Bass Pro Shops. In fishing, Sims continues to be a leader, having received nine awards at the 2023 Fly Fishing Consumer Choice Award Show, including Most Innovative Product for their G3 Pro Power Lock Boot. best eco-friendly product for their fall run insulated hoodie and best women's waders for their G3 guide stocking foot wader. We also announced Jordan Judd, former president and general manager of Salomon North America as the new president of Sims. We're excited to have Jordan on the leadership team and look forward to him guiding this iconic brand to even greater heights. Camelback launched new additions to its chill back cooler collection and all new insulated cocktail shaker and to its hiking hydration pack line. Quiet Cat electric bikes introduced the launch of its variable power output technology, giving riders the ability to customize power output parameters based on the trails or areas they choose to ride. And Fox Racing, the global leader in motocross and mountain bike safety equipment and apparel, announced the grand opening of its latest brick and mortar retail experience in Bentonville, Arkansas, one of the country's fastest growing mountain bike hotbeds. Vishak, president of our outdoor accessories and golf business unit, is here today. In a few minutes, we'll cover wins and updates from his brands. Looking ahead, we remain excited about the future. Our iconic brand, strong business unit leadership teams, talented employees, and solid financial foundation position us for success in fiscal year 2024 and post-spin.

With that, let me turn it over to Jason. Thank you, Gary, and good morning, everyone. The new fiscal year is off to a strong start despite persistent macroeconomic pressure on consumers. Sporting Products met its first quarter financial goals in a normalizing market and our industry leading team remains focused on lean operations. As expected, first quarter sales were down versus the record high of $511 million in quarter one of FY23. FY24 Q1 finished at $377 million in sales and EBITDA of $115 million. EBITDA margins remain very strong at 30.5% and in line with our previous expectations of a full-year target in the mid-20%. Sporting Products continues to generate positive results stemming from a multi-brand approach, factories working together to improve efficiencies, and controlling costs in production and SG&A. Despite the pressure of higher input costs, Sporting Products has demonstrated We are world-class manufacturers and much more profitable than just three years ago. With a normalizing market, we are expecting a return to seasonal buying patterns driving the consumer purchase cycle. We anticipate sustained demand for our profitable centerfire rifle ammunition and shotgun shells as we approach hunting season and see increased participation in the shooting sports. Indications are that the 18 million new users who entered the market during the past several years are regularly using their guns to practice, compete, and hunt. Despite events that drove spikes in June 2022 data, NICs for June of this year show continued strength with 47 straight months of firearms checks over 1 million per month. While the market is normalizing off pandemic highs, the industry is healthy, driven by this significant increase in baseline participation. We are optimistic about the hunting market and participation. There are more than 15 million licensed deer hunters in the United States. And last year, hunters and recreational shooters purchases of firearms and ammunition generated $1.5 billion for wildlife departments and conservation efforts throughout this country. This set a record in yearly contributions for the Pittman-Robertson Fund and keeps a tradition in place. Hunters and shooters are what keep wildlife thriving and we are proud to be part of this effort. We continue to see growth in the competitive shooting market. The largest youth clay target league reported a record 45,000 participants in 2022, a 13% increase in registered participants from 2021. The number of targets thrown by high school and college and homeschool teams increased from an estimated 16 million targets to more than 18.6 million during the same period. Other indicators of increased participation come from year-over-year data at regional and national competitions in skeet, sporting clays, and trap, showing increases from 2022 to 2023. In the centerfire rifle category, new product momentum is driving demand as Federal expands its caliber offerings for the innovative terminal ascent bullet. To build upon the historic success of Remington's core locked and further expand its leader position, the iconic line has added core lock tipped and core lock copper offerings for hunters who want modern bullet designs and a non-lead option. We continue to pivot our production schedule to build a broader assortment of centerfire rifle ammunition to meet demand and improve gross margin. Our innovation pipeline remains strong. The research and development teams are working on new products for launch at this fall sales shows and at next year's SHOT Show. We anticipate game-changing technologies to be released in coming quarters. Vendor consolidation at our customers continues and imports continue to lose ground. As we have seen historically, large domestic manufacturers will take share in a normalizing market, which again is what we are seeing. Efficiency gains continue as our leaders at the four factories collaborate on key learnings and process improvements. As these best practices are instituted, the way we build, sell, market, and introduce new products will be a key strength as we prepare for the split from Vista Outdoor. On the horizon for fiscal year 24. As we stated, we are aligned with previously communicated forecast and focused on reaching our financial goals for the year. The market for ammunition likes firearm sales by about six months, and from what we are currently experiencing, this could be the continuation of our normalizing market. Our business continues to bid on profitable long term contracts with established and new opportunities that serve a military. and law enforcement partners, both domestic and foreign. Recently, our law enforcement team secured a contract for spear and federal ammunition from a major law enforcement agency. Because of our diverse customer base and multi-brand strategy, we expect to continue to take market share, expand our presence into new markets, improve the financial performance of Remington, and continue to deliver mid-20s EBITDA margins. I have full confidence that with the best team in the ammunition business, we will continue to perform at the highest level and deliver on our shareholder expectations. Thank you. I will now pass to Vishak to discuss the outdoor accessories and golf business.

Vishak? Thank you, Jason. Good morning. I'm Vishak Shankaran, President of Outdoor Accessories and Golf. I joined the company in 2018. and have over 20 years of experience in consumer durables, healthcare, and industrial verticals. Prior to Vista Outdoor, I led the iconic Craftsman brand for Sears and held leadership roles at Stanley Black & Decker and GE. Since joining Vista Outdoor, I have been working closely with our teams to develop and execute on our vision of enhancing the experience of our hunting, shooting, general observation, and golfing enthusiasts. Before expanding on our strategy, I want to congratulate three brands for celebrating milestone anniversaries. Bushnell turned 75 and will celebrate by paying homage to the brand's rich heritage of innovation in optics. RCBS, which to this day is proudly manufactured in the U.S., in the same city it was founded, is turning 80. And Hoppy's, the number one name in gun care products, turned 120, a testament to creating the world's most effective gun cleaning products. Across both outdoor accessories and golf, we share common values that underpin our strategy. The first is to create powerhouse brands with strong loyalty and advocacy that generate over $100 million in annual revenue. In outdoor accessories, our Bushnell brand has a deep heritage and loyal consumer following as evidenced by numerous best of awards in multiple categories. In golf, we have two leading brands with over 98% of tour pros using our Bushnell golf laser range finders. and foresight rapidly becoming the launch monitor of choice on the PGA Tour. The second is owning the consumer journey by creating an end-to-end system to inform, educate, and enhance the entire consumer experience, both pre- and post-purchase. Our investments in technology and processes have improved customer satisfaction and online commerce as our NPS goals have gone from good to great. Third, be a nimble platform with the competency to innovate with speed and deliver leadership economics when leveraging a shared go-to-market and supply chain infrastructure. Fourth, be a best-in-class organization by leveraging talent, our ability to invest heavily in growth and innovation, and the VISTA outdoor engine. As Jason mentioned, we remain optimistic on the hunting and shooting market. Though short-term, we are seeing headwinds due to the current macroeconomic climate coupled with higher than usual promotional activity and challenged inventory levels. While inventory levels are improving in big box and retail, they remain challenged at wholesale distributors, dealers, and international channels. Until the back half of our fiscal year, we expect POS to exceed sell-in as excess inventory is cleared. As POS begins to align with sell-in, a strategy for growth in outdoor accessories has us well positioned for the future. We have the right talent, tools, and platform to deliver innovation, grow our business in core categories, and expand into adjacencies to diversify our business. Examples include our new Cellucor trail cameras with live stream and our Bushnell bone collector 1800 laser range finder with Bluetooth and applied ballistics. We are also well positioned to capture growth within our Eagle tactical and military businesses due to climate. Our Eagle Belt system was recently awarded a US Air Force contract. This is in addition to a contract win for the MOLLE 4K rucksack. Turning to golf, on-course participation grew for the fifth consecutive year to 25.6 million in 2022. Additionally, the number of off-course golfers reached 27.9 million in 2022, up 12% from 2021 levels, highlighting the importance of technology's increasing impact on golf. The combination of Bushnell Golf and Foresight Sports has created a technology ecosystem delivering meaningful performance enablement and entertainment solutions to all golfers. We remain confident in our ability to reach our 2022 Investor Day target of doubling the business in three years while delivering high EBITDA margins with an ambition to grow into a billion-dollar platform long-term through continued expansion of our ecosystem. Achievement of this target will be driven through three strategic pillars. First, expanding on our established leadership position in distance measurement devices. Innovation is at the core of Bushnell Golf, and we pride ourselves in translating this into new solutions for the golfer. We created the Golf Laser Rangefinder market and continue to maintain our leadership through innovation. This quarter, we expanded our lineup with the Wingman View and Wingman Mini, entrenching our leadership in the segment and the broader GPS device category. Second, capture and share in the fast-growing launch monitor category as we drive adoption. The market-leading accuracy of our club and ball data in four-side launch monitors has led us to a leadership position among PGA Tour players, coaches, and OEMs. With the successful launch of our Up Next player development program, we continue to drive penetration among young players, and their journey into our technology ecosystem. Third, continue the build-out of our ecosystem and leverage partnerships to enrich our user experiences. Our Bushnell mobile app and Foresight cloud platform have over half a million users who continuously engage with our products, tracking their on-course scores and performance metrics. We expanded our game improvement offering through partnerships with Sportsbox AI, an AI coaching app, and many others. In addition, we are onboarding Awesome Golf, a simulator app, and Pin Seeker, a closest to the pin tournament app, to enhance our entertainment options. I'm excited about the opportunity in front of us in both outdoor accessories and golf. Thanks to our passionate, talented team, we are committed to executing our vision of enhancing and improving experiences for the hunting, shooting, general observation, and golf enthusiasts. And with that, I'll hand it over to Andy.

Thank you, Vishak. And hello, everyone. My comments today will focus on adjusted results compared to the prior year period, unless otherwise noted. Both as reported and adjusted results are included in our earnings release and web slides and can be found on our website. Turning to slide 17, you will see we delivered results in line with expectations, despite market challenges. Our first quarter total sales decreased 13.6% to $693 million. Organic sales for the quarter were $611 million, down 23.9%. Gross profit was $227 million and gross margin decreased 386 basis points to 32.7%. The decrease was primarily due to decreased volume and price in our sporting product segment, partially offset by acquisitions. EBITDA in the quarter decreased 37.7% to $126 million and an EBITDA margin of 18.2%. down 704 basis points. Organic EBITDA for the quarter was $116 million, a decrease of 42.6%, and organic margins in Q1 was 19%. First quarter EPS decreased 51.6% to $1.12. Turning to slide 18, we remain sharply focused on our balance sheet. Our free cash flow continued to be solid, coming in at $75 million. Net debt decreased $42 million sequentially to $932 million. And our net debt leverage ratio is 1.7 times. Debt pay down and balance sheet health remain our top priority and primary use of capital leading up to our spend due to the current economic environment. Turning to our segment results on slide 19, within outdoor products, Sales increased 8.5% in Q1 to $317 million. Organic sales were down 19.7% to $235 million in Q1, primarily caused by lower volume due to high inventory in the channel. Growth profit increased 2.5% in Q1 to $95 million, driven primarily by acquisitions, partially offset by decreased volume from organic business. Q1 gross margin decreased to 29.9%. EBITDA was $24 million, down 39%, and EBITDA margin for the quarter was 7.6%. Organic EBITDA decreased to $14 million in Q1, and organic EBITDA margin for the quarter decreased to 6%. The decrease in the quarter was due to lower gross profit across all businesses. Though organic sales were down 20% year-over-year, the sequential decline is improving from a low of down 30%, as we expected. We expect the organic decline to continue to improve further next quarter and turn to growth in the back half of the fiscal year. EBITDA increased sequentially from $9 million in the previous quarter to $24 million, while EBITDA margins improved from 2.9% to 7.6%, as expected. largely due to the cost and earnings improvement actions taken in the previous quarter. EBITDA and EBITDA margins are expected to continue to improve throughout the year. For sporting products, sales decreased 26.2% in Q1 to $377 million, driven by lower shipments across nearly all categories. As prior year shipments reduced finished goods inventory, the market normalized and the termination of the Lake City contract in fiscal Q3 of the prior year. Gross profit decreased 34.4% in Q1 to $132 million, driven by decreased volume and price. Q1 gross margin decreased to 35%. Q1 EBITDA was $115 million, down 37.1%, primarily caused by decreased gross profit and partially offset by decreased selling costs. EBITDA margin was 30.5%, a decrease of 523 basis points. As I mentioned last quarter, we initiated a more than $50 million cost reduction and earning improvement program, which included closing facilities, workforce reduction, and other operating income improvements. The financial impacts of this program are taking hold and translating into improved performance, and a positive impact to our bottom line as our EBITDA margins in outdoor products improved 473 basis points sequentially. We remain on a path to achieving outdoor product margins above our guidance range by the end of fiscal 24 as channels clear through high inventory levels and we continue to see the benefits from the earnings improvement program. Inorganic contribution has improved significantly as the inorganic EBITDA margins have increased sequentially from about 3% to 12%. As we look to the future, post-spin, our sporting product business will be focused on debt pay down and providing a compelling dividend to shareholders. We currently expect to pay out approximately 20% to 30% of free cash flow in the form of dividends in the initial period post-spin. We will increase this percentage over time as our leverage declines and higher price debt is paid down. As you may recall from our investor day last year, our sporting products business will generate free cash flow as a percentage of EBITDA at a rate of approximately 50% to 60%. Our restructuring costs have significantly decreased our planned corporate costs for fiscal 2024. With this restructuring and expected dis-energies of approximately $15 million, we expect the total corporate costs between the two standalone companies to be approximately $70 to $75 million post-BID. We currently expect roughly 70% of these costs will be at the outdoor products due to the complexity to operate that segment compared to our supporting product segment. Our outdoor product segment will have no or minimal debt at the time of spend and one to two times leverage long term. Our outdoor products businesses primary capital allocation will be acquiring accretive businesses and opportunistically repurchasing shares. We look forward to sharing additional details behind the capital allocation frameworks for both businesses in October during our investor day and road shows. Moving on to page 20, for the full fiscal year 2024, we are reaffirming guidance and expect sales of $2.85 billion to $2.95 billion, sporting product sales of $1.475 billion to $1.525 billion, and outdoor product sales of $1.375 billion to $1.425 billion. EBITDA margins between 17.75% and 18.75%. Sporting products EBITDA margin range of 26.75% to 27.75%. And outdoor product EBITDA margin range of 12% to 13%. EPS between $450 and $5. and free cash flow between $290 million and $340 million. Similar to last quarter, we will not be providing specific quarterly guidance for the remainder of the year. What I can say is we expect total outdoor product sales to be approximately flat in Q2 due to the pressures across all businesses, including acquisitions, due to challenges previously outlined. We see slight growth in Q3 and strong growth in Q4. In addition, we see incremental improvement in outdoor products EBITDA margin each quarter from current levels, including around double digits in Q2 to margins above the guidance range by Q4. In sporting products, we expect sales to be roughly consistent each quarter and believe that profitability in terms of EBITDA margins will be mid-20% for the remainder of the fiscal year. We expect free cash flows to be weaker in the front half of the year and become stronger in the back half of the year. Interest expense will be front-end weighted as we pay down our term loan over the fiscal year. Thank you, everyone. At this time, we are going to excuse Eric from the call. You all will have a chance to meet him in the first few weeks after he starts. Operator, please open the line for questions.

Thank you. If you would like to ask a question, you may do so by pressing star followed by 1 on your telephone keypad. To revoke your question, Press Start, followed by 2. When preparing for your question, please ensure your phone is unmuted locally. Our first question is from Eric Wald from B. Reilly Securities. Your line is now open. Please go ahead.

Thank you. Good morning, everybody. Two quick questions, one on each of the two segments. On Elko products, obviously you talked about inventory levels expected to continue to decline and point of sale and continue to outpace sell-in until the back half of the year. Can you maybe dive into the inventory a little bit deeper in terms of the sub-sectors? Where do you maybe have the least amount of inventory, the most amount of inventory still out there, and then how could that impact the pace of recovery in the back half of the year? given kind of different margins between them?

Sure, maybe. Yeah, let me take that, Eric. So as we look at outdoor products and the different inventories where we're seeing, we'll say healthier inventory is still a little bit heavy, but not quite quite as heavy as in our motocross areas of our action sports business has reasonable inventories at this point in time. And our golf business also is in good shape on the inventory front overall. Really what we're seeing on kind of the rest in general is the wholesale channels in general are heavier than the retail channels and they've continued that they've been a little bit behind compared to our retail partners are our bigger box retail partners on being able to move through their inventory. So they're sitting at a little bit heavier, including our international distribution channels. All those are a little bit heavier than the retail, so besides kind of those categories were a little bit heavier on the rest of the categories at this point. Thank you.

And then just last question there for Jason. Can you talk about ammo pricing, give us an update on ammo pricing at retail? I know you took changes to kind of help with shelf space gains. Are those changes holding with the consumers recently? Do you see the need for further reductions? I think they could be relatively stable here. And then kind of on that, obviously with the cost input pressure you expect to increase in the back half of the year, Do you think you'll have any power to raise prices where needed or will that just need to be eased, so to speak, in margin?

Yeah. Good morning, Eric. As far as retail pricing, we do see some retail pricing compression, which is coming from the retail, the retailer's margin. Again, as we did in the first quarter, if there's a category or a strategic reason long term that we want to go grab shelf space, we'll do those pricing actions. But We're certainly open to the vendor consolidation, which is what we're starting to see, you know, as we've mentioned for the last two quarters, as the market generally normalizes, smaller manufacturers lose some shelf space because of vendor consolidation. So if it makes sense, we will go grab market share with price if we have to, but we're being very, very strategic because we know the input pressures that we are expecting in the back half is going to compress margins. case-by-case scenario, but so far in the market, we like what we see. Perfect. Thank you both.

Thanks, Eric. Our next question comes from Mark Smith from Lake Street Capital Markets. Your line is now open. Please go ahead.

Hi, guys. First one for me, just can you quantify any more of the savings here in Q1, you know, from this $50 million cost-cutting plant?

Yeah. From the quantification, you know, I don't think we get exact. I mean, what we can say is our corporate costs on a, for one, came down about $8 million, so that is a piece of it. And certainly, as we've talked about, the split of that $50 million was kind of 50-50 between the TAB, Mark McIntyre, The corporate and the non corporate businesses, so we did see that and we're seeing those actions come through very, very well on the outdoor products. TAB, Mark McIntyre, it's a part some of the 50 million and some of the other actions that the the businesses have executed on have increased that that old year over year improvement that that we're talking about in the. TAB, Mark McIntyre, sequential improvement going from the nine to the 24 million. And we'll continue to see that accelerate throughout the rest of the year as we see their margins grow to that north of 13% on the high end of our range. So it's all included in that, and we continue to see that improving as we go through the rest of the year, which is really exciting.

Okay. And second question, just, you know, any update as we think about acquisitions and kind of the inorganic growth? and maybe things that you guys have have have learned here as as maybe we've seen some of these acquisitions not quite uh hit targets that that may be expected um you know when when you made the acquisition any learnings and just an update on how these acquisitions are doing well i can take a shot and then i'll turn it over to andy for more of the detail but uh

You know, we did do these acquisitions at the early part of last year's fiscal year, and we definitely saw the back half of the year deteriorate quite a bit from what we had expected. But over the long term, we're very comfortable with the acquisitions and have full belief that they are going to return the value that is expected. The results, you know, will improve. And overall, we're just happy that we did make the acquisitions. Uh, lessons learned. I mean, obviously, uh, wish we had a crystal ball as to what the outlook would be at the time. And maybe there was more, you know, information available than, uh, we, we took into consideration, but I would just echo, I mean, yes, a little rough getting out of the gate, but over the longterm, we are very, very happy that we have both Fox and Sims in our portfolio. They're going to be longterm contributors of value and, uh, We are truly excited about the future.

That thing I would add maybe, Mark, just to that is I know everyone's focused on the most recent acquisitions, which is the Fox and Sims, but let's remember that we have more acquisitions than just those two that we've done over the last couple of years here. And we have very successful. I mean, Foresight acquisition has been a home run for the business. We've done very well in growing, and it's been a catalyst for our Bushnell golf brand to also grow. So we're seeing some very good successes. Remington Heavyshot on the ammo side have been great and the smaller acquisitions we've made also are doing well and have done well. They're facing the same economic pressures, but they've done well since we've acquired. So I would echo Gary's comments on Fox and Sins that long term we're very excited for those brands, but our other brands that we've acquired also we're very excited for overall. So I think our acquisition strategy will continue as we go forward. Perfect. Thank you.

Thanks, Mark. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Our next question is from Matt Caranda from Rothmans. Please go ahead when you're ready.

Hey, guys. Good morning. So just on the outdoor products segment, just wanted to maybe attack this from a different angle, but the outlook implies a pretty big benefit in the back half in terms of margins. Can you just walk us through where you're assuming that benefit comes from? Is that essentially operating leverage on higher revenue as you get better sell-in into the retail and wholesale channels? How much of it relies on the cost cuts that you've put in place and just the level of confidence in achieving the back half sort of margins that you need to hit the full year guidance?

Yeah, that's a great question, Matt. So I think it is a mix. I mean, certainly the leverage from having, you know, the implied growth in revenue first half to second half certainly will contribute to it, as we will see leverage coming off of those businesses as a whole. But I do also, the cost-cutting And not just the 50 million that we've talked about, but the other cost cutting that we're also doing, which is freight coming down, which is supplier negotiations that the teams have done, which is currency that is in our favor versus last year. All those things are coming through in those cost cuttings. And the reason it's taking time to get there is we still have inventory that we purchased at a higher level. Inventory did come down in the quarter for the outdoor product segment in particular. But it is still turning through those to be able to get to the newer cost that we're seeing. So the freight that we're seeing, the new contract that we've done, we're just now ordering that inventory that's going to start coming across the ocean. And that will start coming through the P&L as we sell through those products, which will be more in that second half of the year. We do see, have line of sight, that these are real. I mean, we've got the freight contract in place. We have the supplier negotiations that have happened. So it does have that, but there is certainly part of it is that we expect our sales to grow in the second half, and that will be part of the leverage as well.

Okay, got it. And then just for OP, curious how we should think about what you're factoring in from the acquired businesses in terms of margin. I know that It made some nice improvements this quarter. Looks like the combined EBITDA margin between Fox and Sims tracking at 12%. How much better can that get? Does it need to get a lot better in the second half to hit the targets, or is it more of a function of the core or organic outdoor products businesses need to show improvement to hit the target that you've set?

Both businesses, both sides will improve. I mean, the 12, we are very happy with how Fox and Sims have been able to execute. And a number of that jump is the integration that Fox and Bell are going through is creating some of that lift more accelerated than what had happened with the rest of the businesses, that integration that's happening. We do expect both to continue to show improvement as we go through the year, but it'll be in line with the rest of the businesses. So there isn't like a... that it needs to be that much heavier of a lift that they get to higher margins in order to meet these expectations.

Okay, got it. And then just maybe something for Jason, if I could, on the sporting product side. You mentioned commodity pressure. Maybe just highlight where you're seeing that come through the most. Can you price for that in this environment? And then how should we think about sort of, I think Gary mentioned we should assume that EBITDA margins sort of bottom in that 25% range. Do they bottom late in the year? Maybe just talk about seasonality and how we think about where EBITDA margins kind of find that trough this year or next.

Matt, we expect EBITDA margins in the back half to go possibly to normalize in that mid-20s. there's still a chance that we're above that. And that's obviously our goal. If you look at our 30.5 for Q1, when we did our plan, we thought there could be pricing pressures coming to the market in the back half. We certainly are not going to lead that. But again, if we have to go grab market share for long term, we planned for possibly some pricing coming down, but it would all be in the third and fourth quarters, our fiscal year, third and fourth quarters. But like I said earlier, we like what we see so far. You know, the mix that we are making right now is a much stronger mix, and we're doing that on purpose to, one, grab some self-space in a few categories, and then, two, to offset some of those input costs that we know are going to go up in the third and fourth quarter. So we're going to control what we can control, and if it makes sense, we're going to go grab market share, and we've planned that for the business, but I would look into it. If it happens, it's in the third and fourth quarters.

Okay, very helpful. I'll jump back into you guys. Thank you.

Thank you, Matt. So we have no further questions registered at this time. So with that, I will hand back to Gary for final remarks.

All right. Well, thanks, everybody, for joining our call. We're going to conclude with this, and we look forward to talking to some of you in our one-on-ones. Thanks so much.

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