Vista Outdoor Inc.

Hello and welcome to the first quarter fiscal year 2025 Vista Outdoor Earnings Conference Call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. And I'll hand it over to our host, Tyler Lindwall, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning to everyone joining us for our first quarter fiscal year 2025 earnings call. With me this morning are Eric Nyman, Co-CEO Vista Outdoor and CEO Revalyst, Jason Vanderbrink, Co-CEO Vista Outdoor and CEO The Kinetic Group, and Andy Keegan, Chief Financial Officer, Vista Outdoor. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements reflecting future events and their potential effect on our operating and financial performance. 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, and we are under no obligation to provide updates to these forward-looking statements. These forward-looking statements are subject to the risks and uncertainties that face VISTA Outdoor and the industries in which we operate, and actual results may differ materially from these forward-looking statements. We encourage you to review our quarterly earnings press release and VISTA Outdoor's SEC filings for more information on these risks, 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 reconciliations of non-GAAP financial measures. Eric, I'll turn it over to you.

Thank you, Tyler. Good morning, everyone. And thank you all for joining us this morning as we discuss our first quarter fiscal year 2025 results. Before I dive into the quarter, I wanted to first touch on the press release issued last week. Last week, the Board issued a release noting that we have commenced a review of strategic alternatives and have adjourned the special meeting for the CSG transaction to September 13, 2024. The Board is committed to acting in the best interests of the company and its stockholders. The strategic review will be comprehensive and include the following. One, an exploration of a full range of alternatives for Revelist. including a potential sale of Revelist. CSG is also considering an acquisition of Revelist with potential partners in addition to its proposed acquisition of the Kinetic Group. Two, an engagement with MNC Capital and its private equity partner with respect to its proposal to acquire Vista Outdoor to see if it can deliver superior value for the company's stockholders. This follows MNC's recent public statement on July 26, 2024, that if there were a reason or basis to increase our offer, including VISTA engaging with us in providing one, we would increase our offer price. In light of that recent statement, the Board has determined that MNC's proposal would reasonably be expected to lead to a superior proposal and meets the standard for engagement under the terms of the CSG merger agreement. Considering the extensive diligence conducted by MNC and its private equity partner to date, Vista Outdoor expects MNC to be able to confirm an increased proposal for the acquisition of Vista Outdoor in short order. Three, a continued consideration of the separation of Revelist and the Kinetic Group through a spinoff. Our advisors are looking at several strategic alternatives in order to maximize stockholder value. As an update on the strategic review, we have engaged with MNC to see if they can deliver superior value for the company's stockholders. Additionally, we have reached out to several parties regarding a potential acquisition of the Revelist business. Furthermore, CSG remains steadfast in their commitment to acquiring the Kinetic Group and is exploring the acquisition of Revelist with potential partners. The Board continues to recommend Vista Outdoor stockholders vote in favor of the proposal to adopt the merger agreement with CSG. We look forward to evaluating all strategic alternatives that would maximize value for stockholders, and we remain as focused as ever on delivering high-quality, innovative products for our consumers around the world. Moving on to Revolus results. Our teams across the organization executed against our plan in the first quarter of fiscal year 2025, and we are grateful for their hard work delivering in the face of continued market headwinds in certain segments and the continued uncertainty in the face of our planned separation. We did face some challenges in Q1 in both supply chain and new product launch timing introductions, which led to results that were not up to our expectations. That said, we understand the challenges and are already putting solutions in place to improve in the future. And the teams did find some tailwinds led by our gear up cost saving initiatives and great product innovation. Sales for the quarter were $274 million and adjusted EBITDA was $16 million with an adjusted EBITDA margin of 5.7%. We are confident in our fiscal year 2025 financial targets. and strongly believe in Revolus' potential to deliver on the long-term strategy that we are executing. Across the enterprise, we made progress implementing our actionable standalone strategy to drive value creation. Our strategy is built on our Dragonfly Wheel to generate momentum. The Revolus Dragonfly Wheel is our multi-pronged strategic flywheel, which plays upon our iconic Dragonfly logo. The Dragonfly Wheel contains our key strategies to unlock growth and propel margin expansion across our integrated international house of brands. The Dragonfly Wheel is brand focused and consumer informed to unlock value through innovative product and technology offerings, enhanced direct-to-consumer and international channel strategies, a robust digital gaming ecosystem, and world-class licensing partnerships. We continue to focus on innovation by leveraging our portfolio of category-defining power brands to win market share despite challenges related to market softness, order timing, and divestitures. We remain focused on driving growth and market share gains no matter the market conditions and are poised to revolutionize our future through innovative, brand-led, and consumer-obsessed product and technology offerings, as well as leading partnerships. Recent examples of these brand highlights, innovative offerings, and partnerships include in Revelist Adventure Sports, we are capturing market share across numerous categories, including helmets, mountain bike protection, and bike hydration in a declining market environment. Newness is gaining traction with our customers, and many of our newly introduced products and new styles, such as the V3 RS, Race Frame, and PureView are sold out. We intend to further capitalize on these trends with upcoming product launches. In Revelist outdoor performance, recent product launches across the platform have driven market share gains. We continue to grow market share at Sims, where we hold a dominant position in waders and in fishing sportswear, where we recently won best in category awards at ICAST for the women's latitude hoodie and the pro dry suit. The successful launch of the Camp Chef gridiron in the spring drove 8% growth in the flat top grill category, outpacing the market in a category that has been a bright spot within the broader outdoor cooking market. In Revelist precision sports technology, Foresight has had multiple consecutive quarters of growth as a result of the Quad Max and Falcon product launches. The delayed launch of the Phantom 3 GPS drove Bushnell golf sales lower than anticipated in the quarter, though we still expect this product to capture additional sales for the rest of fiscal year 2025. Foresight and Bushnell Golf continue to set the standard in golf technology. The power of these two brands living under the same leadership and platform will really be showcased this fall with a cooperative effort between Foresight Sports and Bushnell Golf that will change the way golfers capture and utilize information from launch monitors and laser range finders. In licensing, our platform teams have been hard at work leveraging our brands to ink new licensing partnerships to unlock additional revenue streams, further scale our brands, and reach new customers. We are excited to announce our biggest partnership ever, a collaboration with celebrity chef and restaurateur Guy Fieri. This collaboration between Revelist, Camp Chef, and Fieri unites the mayor of Flavortown himself with the leading innovator in outdoor cooking gear. Fieri is long served as an unofficial brand ambassador while using the brand's products on screen, on stage, and at home. This multi-year partnership will include several collaborations between Fieri and Camp Chef and will include a number of co-branded cooking equipment pieces. Be on the lookout for more news on this category-defining announcement on August 19th across Revellous social channels, and CampChef.com. We are extremely excited to welcome Guy to Team Revelist. Furthermore, at Foresight, we have an exciting licensing agreement and product collaboration coming very soon through our relationship with Volition America. This custom offering will bridge the tangible and the digital worlds and will benefit the Folds of Honor Foundation. Moving on. Our international expansion and transformation of our operating model is underway, and we believe that there is a significant opportunity to elevate and grow our brands through a unified and scalable approach. We have made substantial progress at Revelist by leveraging the operational backbone we acquired through our acquisition of Fox. This has allowed us to expand our presence across the globe for additional brands to reach new markets. We plan to continue the strategic expansion to regions where a unified operating model can be a growth catalyst for our brands. As we look at our direct-to-consumer and digital approach, our enhanced direct-to-consumer strategy places an emphasis on our own brand channels and other e-commerce sites, including Amazon. This strategy shift is in process and early results are promising, particularly with Amazon. where we grew low single digits year over year in Q1. We have also seen gains at certain direct brand sites, including Foresight, where the direct site revenue is up over 30% year over year and continues to be a leading growth contributor to the Revelist Precision Sports Technology platform. We also had a milestone achievement in the Revelist Adventure Sports platform with the iPhone-created campaign CamelHack that over-indexed and received over 1 million views on TikTok and 2 million views on Instagram, becoming the highest viewed post on Camelback's Instagram of all time. We aim to repeat this success with other products to drive brand engagement and sales in the future. Our digital gaming and esports initiatives are applying Revelist's digital-first thinking to create engaging content and gaming experiences that provide new consumer opportunities. Our acquisition of PinSeeker furthered our commitment to this strategy. PinSeeker has seen explosive year-over-year growth, and early results have exceeded our acquisition forecast model, further validating our digital gaming strategy and the decision to acquire that business. The PinSeeker team has also jump-started our broader Foresight Studios strategy, We had a strong quarter of successful course launches, including our recent digital course launch of Pinehurst No. 2, available on our foresight simulators that coincided with the U.S. Open Week played at the namesake course. We also entered into an exclusive partnership with Taraiti, the No. 2 ranked course in the world on the Golf Digest World's 100 Greatest Golf Courses list. These courses add to Foresight's list of premium course offerings that can be purchased for use in our simulators and demonstrate our commitment to providing a world-class user experience for all of our simulator owners. We are encouraged by these developments and the roadmap the team has set forth, and we expect to have more announcements to come soon. You will hear more about our excellent progress on our Gear Up transformation from Andy shortly. But I wanted to highlight the strong work our teams have done to optimize our portfolio to focus on our core assets with significant value and growth potential. In July, we announced the sale of fiber energy products. This strategic divestiture generated cash for Revelist that can be reinvested in our power brands and product innovation in support of our gear up transformation initiative. The new ownership provides resources and scale to the fiber energy brand. and we wish them the best of luck with this new endeavor. Alongside the RCBS sale announced in May, we have now completed two strategic divestitures to rebalance our portfolio. Our strategic review is ongoing and we see additional opportunities in the future. This review is a critical step in evaluating where further rebalancing will help to best position us for long-term success. In closing, I am energized by the roadmap we have in front of us at Revelist. Teams across our business are executing on our transformation through the Gear Up program and our value-creating Dragon Flywheel to unlock growth and margin expansion through game-changing innovations, exceptional licensing partnerships, an enhanced direct-to-consumer and international channel strategy, and digital-first thinking to create engaging content and gaming opportunities. We are relentless in our pursuit of excellence, and that drives my belief in our strategy and the future ahead of us. I am confident in our financial targets and ability to double our standalone adjusted EBITDA in fiscal year 2025. In that spirit, we'll be announcing the date of our upcoming Investor Day in the weeks ahead and look forward to sharing more details about the REVOIS story. I'll now hand it over to Jason to provide an update on the Kinetic Group. Jason, over to you.

Thank you, Eric, and good morning, everyone. The Kinetic Group delivered above expected earnings for the first quarter. Sales were $370 million with an adjusted EBITDA margin of 30% and adjusted EBITDA of $111 million, continuing the strong performance we demonstrated at the end of fiscal year 24. Our team has stayed focused while facing economic headwinds and inflationary pressures with rising commodity prices and successfully navigating a global powder shortage. As history has shown us several times, if the market starts to slow, we expect to gain market share due to vendor consolidation at our customers and consumers generally will purchase the brands they trust. As we are getting close to the important hunting seasons, our finished goods inventory in this key category is well positioned to fill consumer demand in all hunting loads in every category. We expect Heavy Shot to continue the momentum we have built since the acquisition and Remington Core Locked inventory and demand is in the best shape it has been in several years. Our seasonal build program has produced many calibers that the consumer has not been able to purchase in many years, which also brings higher margins with it. We continue to try to meet the demand we have seen with the CCI Uppercut product, which has exceeded our forecast when we introduced this game-changing product. At the industry's largest consumer trade show, the National Rifle Association annual meetings and exhibits Our brands were officially presented with Golden Bullseye Awards in every ammunition category. This is the first time we have swept these prestigious awards for excellence in new product technology. The products recognized were Spear Gold Dot Carbine, Federal Premium Forcex II Shorty, and the Remington 360 Buckhammer. Continuing our long standing support for the United States military federal announced a $3.6 million contract award for the 762 by 51 long range ammunition for the United States special operations command or so calm. This trusted product is currently being produced for the United States navy in a separate contract. demonstrating our American manufacturing expertise and proven history of supplying the United States warfighter with the best products to protect and defend. As part of our company DNA, we recently held a benefit auction at our annual sales meeting in Minnesota and were able to donate at least $20,000 to each of our beneficiary charities. The Anoka County Police Department, the Anoka County Sheriff's Office, the Anoka County Brotherhood Council Food Shelf, and the Vista Outdoor Employee Assistance Fund. This is a true testament to helping serve the communities that our factories are located in. For the 59th straight month in June, NICS data surpassed more than 1 million background checks. This continued high monthly volume supports a healthy and higher baseline of shooting and hunting participants. As we navigate the future and the United States presidential election, our American manufacturing facilities remain focused on building the best ammunition in America and delivering on all of our key financial metrics. The cross collaboration between our factories has resulted in cost savings, technology sharing, and allows us to best route production by cost and expertise. This serves as a tremendous competitive advantage for us. which is reflected in our profitability. Our mission has not and will not change. We will focus on what the end consumer wants and expects and work backwards from that. Our obsession with the consumer and customers we service will lead us through this volatile market and help us gain market share. With a diverse customer base and multi-brand strategy, the Kinetic Group is poised to continue to be the leader in ammunition technology and we are planning to release the most exciting product we have ever developed in our history in our third quarter. I have full confidence that with the best team in the ammunition business, we will continue to perform at the highest level. Our future is filled with great opportunity, and we look forward to growing our market share, building on world-class profitability, and delivering new and innovative products to our increasingly diverse customer and consumer base. I want to thank our 4,000 team members for their steadfast commitment to our vision and being part of the best team in the world. Together, we are winning and our financial metrics reflect just that. Thank you.

Andy? Thank you, Jason. And hello, everyone. My comments today will focus on adjusted results compared to the prior year period, unless otherwise noted, which are presented using non-GAAP financial measures. In the appendix to the slide presentation, we've included reconciliations of these non-GAAP financial measures to most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to page four of the slide presentation. I will reference the three REVLIS segments, REVLIS Adventure Sports, REVLIS Outdoor Performance, and REVLIS Precision Sports Technology in a combined manner as REVLIS in my remarks that follow. We've made progress on our long-term goals during the quarter. At the Kinetic Group, our sales met expectations and our adjusted EBITDA was strong despite persistent input cost headwinds. At RevList, we experienced challenges related to new product introduction and order fill timing, market softness in the specialty channel, and divestitures that impacted our results. These were partially offset by $5 million of realized cost savings attributable to the GEAR UP transformation program. The progress on the gear up initiative gives us momentum and confidence that we will double our standalone adjusted EBITDA in fiscal year 2025. Additionally, adjusted free cash flow significantly outperformed our expectations in the first quarter, delivering $70 million due to strong adjusted free cash flow from the Kinetic Group and a continued focus to reduce inventory at RevList, allowing us to reduce our net debt position by $81 million in the quarter. For the first quarter, total sales decreased 7.1% to $644.2 million due to lower volumes at the Kinetic Group and Revolus, partially offset by increased government sales at Revolus and increased price at the Kinetic Group. Gross profit in Q1 decreased 6.9% to $211.2 million due to decreased volume and increased input costs, including for copper and powder, at the Kinetic Group. and lower volume at Revlus, partially offset by increased price at the Kinetic Group. Q1 margin was relatively flat at 32.8%. EBITDA in Q1 decreased 11.3% to $110.1 million, equating to an EBITDA margin of 17.1%. Due to decreased growth profit at the Kinetic Group and Revlus, partially offset by decreased selling, general, and administrative costs related to gear-up initiatives. Q1 EPS declined 6.5% to $1.01. Turning to slide 19, our balance sheet is in a strong position. We continue to exercise sound financial discipline and drive incremental improvement at Revalis by placing a sharp focus on inventory levels. This outdoor inventory decreased 13% year over year in the quarter, primarily driven by Revalis inventory reduction of approximately $100 million, or 25% year over year. and $10 million, or 4%, sequentially. Our continued inventory reduction efforts at Revalis and strong profitability at the Kinetic Group drove adjusted free cash flow of $70 million in the quarter, providing the opportunity to reduce our net debt by $81 million sequentially. Our net debt ended the quarter at $579 million, equating to a net debt leverage ratio of 1.3 times. Turning to our business results on slide 20. Within Revelist, sales decreased 13.6% in Q1 to $273.7 million, driven by pre-order delivery timing and one-time royalty revenue in the prior year, as well as unfavorable product mix towards lower price point channels within Revelist Adventure Sports. Lower wholesale volume and order timing within Revelist Outdoor Performance. and lower volume as a result of strong new product introductions in the prior year for Bushnell Golf and order timing within Revellist Precision Sports Technology. The decline was partially offset by increased government sales at Revellist Outdoor Performance and growth at Foresight driven by new product introductions at Revellist Precision Sports Technology. Growth profit decreased 14.2% in Q1 to $81.4 million and Q1 gross margin decreased 21 basis points to 29.7% due to reduction in sales, partially offset by lower freight costs at Revellous Adventure Sports, lower discounting at Revellous Outdoor Performance, and favorable product mix at Revellous Precision Sports Technology. Q1 EBITDA was $15.6 million, down 35.2% and EBITDA margin for the quarter was 5.7%, down 190 basis points year over year, due to lower gross profit at all three REVO segments, partially offset by decreased selling general and administrative costs related to the GEAR UP initiatives. For the Kinetic Group, sales decreased 1.6% in Q1 to $370.4 million, due to lower shipments across nearly all categories, partially offset by increased price. Gross profit decreased 1.6% in Q1 to $129.8 million, and Q1 margin remained flat at 35% due to decreased volume and increased input costs, primarily for copper and powder. These decreases were partially offset by increased price. Q1 EBITDA was $111.2 million, down 3.2%, and EBITDA margin for the quarter was 30%. due to decreased gross profit and increased selling general and administrative costs. Moving on to page 22. As we look to the remainder of the fiscal year 2025, at the Kinetic Group, we continue to see headwinds from a global powder shortage limiting production and from increased input costs, including for copper and powder. These factors are expected to continue to put pressure on both the top and bottom lines. Turning to the sales guidance for our Revellous business. Within the channels we serve, we have seen softness in specialty, while seeing stronger performance in mass and direct to consumer relative to the specialty channel. We have seen channel inventory health continue to improve during the quarter relative to the prior year in both specialty and mass channels. When we saw softness in the specialty channel, we did see successes as well. Where we had new product introductions, We saw year-over-year growth in those categories. As we look to the remainder of the year, we have included in our guidance the list of exciting product launches, cross-collaborations, and key partnership launches that we plan to announce in the coming months. We do expect to recoup the $13 million of orders which shifted out of Q1 into Q2 due to challenges related to shipping filled orders at the end of the quarter and delayed new product introductions. Further, our fiscal year 2025 sales guidance excludes RCBS and fiber energy products, both of which have been divested. RCBS and fiber energy products contributed approximately $30 million of total combined sales in fiscal year 2024. As we look at REVOLUS EBITDA guidance, we are confident in our expectations for the fiscal year and expect to see sequential margin improvement each quarter due to a number of factors, including our gear up transformation program. As Eric mentioned, we are making tremendous progress with our gear up program, which contributed $5 million in realized cost savings in the first quarter. We see a clear path to reaching our goal of $25 to $30 million in cost savings in fiscal year 2025 across our key gear up focus areas that include organizational structure, real estate, supply chain and operations, indirect costs, and direct costs. Within our organizational structure, we expect cost savings of $20 million this year due to increased efficiency through the consolidation to three platform headquarters with an eye on refining our structure to promote growth and bring in new capabilities. Within real estate, we expect to save approximately $2 to $3 million in real estate cost savings this year by exiting leases and space, reducing our US real estate footprint by a third. We are targeting savings of more than $5 million this year related to our supply chain and operations. At the center of this is our distribution network warehouse strategy. We are reducing our distribution center footprint and rebalancing the inventory in our network to reduce costs. As of today, we have closed two distribution centers and are targeting the closure of a third by the end of the second quarter. Looking at indirect costs, we are finding savings of $2 to $3 million that we anticipate will flow through the P&L this year. One contributing example is a new contract that will reduce the credit card fees we pay when conducting card transactions. And as it relates to direct costs, longer term, we have a line of sight to significant cost savings in the key spend categories through cross-brand supply rationalization, consolidation, and simplification. Overall, we are pleased with the GEAR UP results to date. The positive momentum we have built provides confidence in achieving our long term goal of realizing $100 million of run rate cost savings by FY2027. Beyond the gear up initiatives outlined, we have also incorporated additional considerations into our guidance. These considerations are the contributions from our previously announced April 2023 cost restructuring program will contribute approximately $10 million to REVLIS in fiscal year 2025. improvements in supply chain and freight, as our inventory with higher price freight will have turned through our inventory balance, and lower expected promotions as compared to our fiscal year 2024, in which we had higher than usual promotional levels to drive inventory levels down. We are confident that Revell's operational and organizational improvements will continue to positively flow through to the bottom line in both the short and long term, regardless of near-term marketplace conditions. We reaffirm our expectation to double our standalone adjusted EBITDA at Revalis in fiscal year 2025 and over the long term believe that Revalis standalone adjusted EBITDA margins will be in the mid-teens. Based on the factors outlined, for the full fiscal year 2025, we expect sales of $2.665 to $2.775 billion, the kinetic group sales of $1.425 to $1.475 billion, And Revolis sales of $1.24 to $1.3 billion. Adjusted EBITDA between $410 and $490 million. The Kinetic Group adjusted EBITDA of $350 to $400 million. And Revolis adjusted EBITDA of $130 to $160 million. Adjusted EPS in the range of $3.60 to $4.50. and adjusted free cash flow between $240 and $320 million. As we look at phasing for both the Kinetic Group and Revelous businesses, within the Kinetic Group, both sales and EBITDA for the remaining three quarters of the fiscal year are expected to be evenly distributed each quarter. For Revelous, as we look at Q2, we expect sales to be down year over year, but improve sequentially, and we see continued sequential improvement throughout the remainder of the year. We expect EBITDA to more than double sequentially and be higher than the prior year as gear up savings take effect. We further expect EBITDA margin to improve sequentially through the remainder of the fiscal year 2025. Thank you, everyone. Operator, please open the line for questions.

Thank you. As a reminder, if you'd like to ask a question, you can press star plus by one on your telephone keypad. Our first question for today comes from Anna Glaston from B. Reilly. The line is now open. Please go ahead.

Hey, good morning. Thanks for taking my question. I guess to start off, you know, you've reaffirmed the standalone REBELIS EBITDA guidance to double this year, taking into account kind of the one huge shortfall. I understand that there's timing issues associated with that. And you were helpful on the call, but could you just give us a little bit more help in bridging, you know, getting there through the year to that, to reaffirming that doubling thing?

Yeah, I appreciate the question, Anna. So as we, there's probably two prongs that I look at as we look at the bridge. First is going to be the gear up, the savings have started coming through, the $5 million that we mentioned. We do see the path to the $25 to $30, which would imply it has to, continue to increase through the rest of the year, which we're seeing as the activities are happening throughout the year and our stage to be able to get to that number. And on the revenue side, we have explained and give a little bit more color on how we look at the difference from last year to this year and why we're confident as we head into the future. We talked about the $13 million that is going to ship out that we didn't see go out this past quarter for a variety of reasons. The divestitures from a year-over-year standpoint is a chunk of that as well. We talked about the $30 million of total for the year. So that was clearly in Q1 that it's a pretty even split between the quarters for that. And then there was some one-time items that we've mentioned. So between the royalty that we had mentioned on the call, the pre-orders that we had mentioned on the call, and some new product in the prior year. That accounts for about $20 million of the difference year over year. So we're down on what I call normal run rate type basis, not as significantly as it would imply. And we see that as we look forward, we didn't have those in the future quarters last year, plus the new products that we're introducing, the partnership we just announced with Gacchetti and the activities that we're looking to in the future. are going to be able to amplify our EBITDA because the sales are going to be stronger than they were in this quarter as we see sequential improvement each quarter going forward.

Got it. Thanks. And then taking a closer look at gross margin, would it be safe to assume that we should start to see that inflect based on the color you've provided in the fiscal third quarter?

You'll start to see it actually improve even in second quarter. As the sales start to improve, we do have pretty good flow through on our gross margin compared to what we call old COGS, so kind of the fixed cost structure of the sales line. That will start to, as we mentioned, we will see sequential improvement each quarter in our revenue numbers. which will help drive the margin up. Alongside that, we're implementing the Gear Up program, which does have some impact on our cost of sales as distribution for us goes through our cause line. So you will see that also helping to benefit the margin line as those activities continue through the rest of this year.

Got it. And just one more, you know, I think, It's encouraging to hear that you're seeing market share gains in some categories and good response to new product introductions. It seems like the specialty channel is getting a little bit better, but there are still some inventory overages. Can you speak to their capacity to take on or allocate space to some of these new product introductions? And if that's still been a hurdle in terms of your ability to go to market?

Sure. Good morning, Anna. You know, on the market share front, you know, we are encouraged by what we're seeing in terms of increases in share. You know, we've had, you know, according to Cercana, some good increases with bike helmets, with snow goggles, with bike hydration, and hard plastic bottles on the Camelback side. You know, all within our outdoor performance group, within Revelist, excuse me, our adventure sports group. Within Revelist outdoor performance, you know, we did highlight on the call, some increases in market share, again, according to Sarkana on fishing sportswear, flat top grills and our waders. And we're proud of that. And certainly at Precision Sports, you know, we're seeing, according to Golf Data Tech, some good share increases in launch monitors. So across the board, we are seeing, regardless of market conditions, some improving share. I think, you know, specific to your question about specialty, you know, that is something that we continue to see as a longer term turnaround. You know, it's a smaller portion of our business, but we do see that, you know, as we look at specialty, the bike market, for example, we're seeing some green shoots, but we see that as a kind of 12 to 18 month, you know, complete turnaround. And we think that by next spring, you know, we are already starting to see some green shoots with regards to things like pre-orders. You know, on the other hand, places like Mass, we've talked about, you know, we're seeing some good signs in terms of improvements. So, It is a bit of a changing environment with regards to different retail channels. Specialty is probably feeling across our base the most pressure still right now with a little bit of a longer term outlook for improvement.

Great, thanks. That was super helpful.

Thank you. Our next question comes from Matt Caranda from Roth Capital. Your line is now open. Please go ahead.

guys good morning um just on the rebelist side just wanted to hear a little bit more about why the why the delay in sales and the push out into the second quarter you just put a finer point on what the product shipment issues were what happened um and then maybe just how much did the bushnell launch uh delay or and hurt revenue was that in addition to the 13 million that you guys called out uh in the release um and and could you just be clear i guess did Matt Pinyan, sounds like that all benefits the second quarter so so potentially that it just fills in and we should see I guess we're not seeing growth, why aren't we seeing growth, yet in the second quarter.

Matt Pinyan, And matt yeah good question so on the on the delay so there's there's really two components, I would say, overall, one is the new product introduction, so we did have a product that. We pride ourselves on the introduction of products that are quality products and are going to meet the consumer's needs. What we ran into was an issue that it wasn't going to do what we wanted it to do. So in our Bushnell Golf platform, we had a product that as we did our final quality inspections, as the product arrived, we noticed an issue with software that we needed to correct. That required us a way. Instead of launching the product into the market and then subsequently being able to fix it, we chose to launch the product a little bit delayed. It is now being processed, so that is out there in the market. It is coming through. We expect that to deliver sales. Could some of those go into Q3? We'll see exactly when the timing of all those come back in, but we do expect to recoup them through the full year. The other piece of it was more order processing and getting them through the warehouses. This was a process that as we got to the end of the quarter, there was whether it was credit reviews, whether it was the order entry price, deviation type activities, getting them into the warehouse, being able to shift them out. There was some some noise in our system as we move to the platforms that we're moving to people are shifting and that caused a little bit of delay. Now, what I would say to that is. Joe Beck has joined our team as the Chief Supply Chain Officer and has already addressed these issues. We had a full work out of the issues right after they occurred. And we have the fixes in place already that as we ended the month of July, everything went out and actually went out better than we had expected. So I think that the team has smoothly been able to transition through those issues. So we do see that as improvement to your question on growing for Q2. I mean, we're still down a little bit, but we're going to be much better than we were in Q1 from the percentage decrease, which is closing that gap that we're talking about. The new products that we're launching through the rest of the year aren't all hitting in Q2. Those are going to come through over the next Uh, next few quarters, so I wouldn't expect we didn't expect even with the flow through of the 13 that you're going to see a, a larger role quarter. You'll start seeing that as we had through the remainder of the year.

Okay, all right. That's helpful. Um, and then just on the, um, even up aggression for rebelist and be able to take a crack at it this way. Uh, 5Million and realize savings in the 1st quarter. I think that implies. probably another 20 to 25 this year from gear up. Um, but I guess if I just baseline off of the segment EBITDA from last year, which was just under a hundred million, um, and we add the 25 to 30, we're still short of the one 45. What else are we relying on to get there? So maybe just address that and then talk about the cadence of realization of gear up for the rest of the year.

Sure. Matt, good morning. Why don't Andy and I tag team that one a little bit? I think, you know, with regards to our commentary on, you know, the 25 to 30 million in run rate cost savings for 25 and then the 100 million through fiscal year 27, we have made some great progress. And I think, you know, we'll give you a little, why don't we give you a little bit more color on where that's coming from. You know, on the operating model side, the team's done an excellent job already thus far. putting into place our new operational strategy with really an eye on refining our structure to move the move to platforms that we've talked about several times. And we've trimmed over $20 million of headcount costs already, along with bringing in new capabilities. So we feel like we've done a really good job in the early days on that part. And that gives us a lot more confidence on the balance of the year with regards to the EBITDA savings. As Andy mentioned, We did have some hiccups in Q1 on supply chain. We take full accountability for that. We're going to get better. And we brought in a new head of supply chain, Joe Beck, to do that. He's in that evaluative phase now. But we are targeting $5 million this year on the way to $10 to $15 million over the three years ahead. Through our distribution network and our warehouse strategy, we've talked about that. And so far this year, we've already consolidated our domestic warehouses or targeting to consolidate our domestic warehouses by over 40%. Going forward, we'll probably consolidate our domestic warehouses over the three-year period by over 80%. So again, that gives us a lot more confidence in terms of savings on the supply chain side while we improve performance. And that's going to be something that's very important for us. We also see some good EBITDA flow through happening, and we have good targets on indirect costs, on our real estate footprint. We're reducing our USA real estate footprint this year alone by over 30%, and that'll give us some EBITDA flow through. So I think you'll start to see that EBITDA goal continuing to come sharper into focus now that we're through Q1, and we can start seeing that flow through in the P&L, and we're targeting sequential improvements. I don't know, Andy, if you have any more to add on that element.

The only thing, Matt, to your question on closing the gap for the rest of the $20-ish million of contributions, there are three primary drivers I'd point to. The first is we have talked about the other restructuring program that we had done, which was the April 2023 restructuring program, which will contribute through this year about $10 million or so of additional Uh, savings for the overall revenue business, we are seeing improvements in our freight. Uh, so freight costs for our, our company as we head through this year is improving compared to the prior years as we are seeing the reduction in our, our container costs come down pretty substantially with our inventory level coming down. And then lastly is promotions. We were in the third quarter, you may recall, last year. We were very promotional and intentionally promotional, trying to drive our inventory and our retailers' inventory down, and that has been successful. This year, we don't expect to be as promotional, still promotional, the holiday season, but the actual promotions themselves will be less than last year. So those three are the primary drivers for the additional $20-ish million of EBITDA contributions.

Okay, that makes sense. And then maybe just last one for me, that the cash flow looks solid in the first quarter and seasonally, I think maybe a little bit ahead of where you guys expected to be. You reiterated the free cash flow guide, just looking for a little help on seasonality of free cash flow for the remainder of the year. Should we expect it to be pretty normal in terms of the year? Is there more opportunity? In terms of inventory flush, you guys did call out a lot of inventory flush from Revolis. So just looking for a little bit more around how to think about the seasonality of pre-cash flow for the remainder of the fiscal year.

Yeah, good question. I mean, we're very happy with how cash came through in Q1. We had a very successful reduction on both sides of the business, keep it up, being strong on the kinetic and being able to drive down some inventory of the Revolis business. As we look at the year, I'd expect Q2 to probably be the lightest of the quarters. We do see some inventory actual build as we go into the last season, the holiday season. You'll see inventory go up slightly, so I wouldn't expect as much of a drive-through on that. You'll also see some AR as we're trying to get our businesses to be able to sell through some products and have products on hand as they head into that season. that quarter probably be the lightest, and then the back two are pretty similar in size.

Got it. I'll take the rest of mine offline. Thanks, guys. Thank you.

Thank you. Our next question comes from Mark Smith of Lake Street Capital Markets. The line is now open. Please go ahead.

Hey, guys. I had just a couple questions on Kinetic first. Just gross profit margin looked a little better than expected. It looks like the guidance implies that coming down through the rest of the year. Can you just talk about some of the cost pressures and kind of your outlook on gross profit margin within Kinetic Group?

Yeah, Mark. Good morning. So for the first quarter, obviously, we had a good gross margin, gross profit quarter, mainly due to mix. Um, and price, so we did push a price increase on a category into the quarter, which obviously helped out and on the back half. We expect the commodities to continue to be elevated along with that as power, which you're going to be, you know, year over year increases. That's pretty substantial. So it'd be those, uh. Those categories are the biggest drivers for.

Okay, and then just similarly on kinetic, just, uh. Jason, if you want to talk about kind of channel inventory, what you're seeing in the industry out there, as well as pricing and availability, if needed, with commodity price increases to take additional price maybe later this year.

Yeah, I don't think we're going to be able to push price into the market, Mark. I think we're going to – I think there's always a balancing act of consumption that you've got to weigh into that versus commodity costs. So I don't think the market is favorable right now for price. Having said that, I think our history shows we're the first one to take price and the last one to discount it. And if we think that there's a way to push price increase in it, we will certainly try. But at the same time, we need to keep our factories flowing inefficiently like they are. Channel inventory is good. I think, you know, if you look at center fire rifle, for instance, you see core locked out there that hasn't been out there in five or six years, calibers. So the consumer has a lot better choices for calibers that he or she hasn't been able to purchase. So, you know, our customers need to get some sales data on that so their replenishment systems can pick up the sales because they haven't been there in many, many years. So I think it's going to be Our inventory is as good as it's been in five or six years for replenishment orders. And now, you know, I think our customers are sitting good and we're not really seeing anything that is what we would say overstocked in the channels right now. We're in good shape and to our customers.

Okay. And then for both Kinetic and Revelist, I think both at some point in press releases or presentation call that kind of government sales. I'm curious, just kind of the outlook, you know, what you're seeing in budgets, you know, and any opportunities coming forward, maybe to pick up any additional contract business or anything that maybe is coming off that you have to fight for to continue to keep in government businesses, again, on both Kinetic and RevList.

Yeah, for Kinetic, Mark, there's some big contracts coming. And again, I think our history shows that If you look at what we released on the SOCOM win, for instance, that's a big win for us. That's a pickup from a competitor. But again, I want to reiterate, we'll go chase the contracts if it's profitable. We're not going to go out on a limb and chase a contract that we don't view as profitable long-term, and that's first and foremost. Um, you know, generally we will go for contracts that are performance ammunition, where we can take a little more risk margins are a little better. Um, and we, we love what we see in that business right now. Um, there's opportunities coming. And at the same time, we, I think we are, our history shows if we go win contracts, we deliver and, and the government, uh, is the winner as well.

Yeah. I'll just add to that. Um, you know, on the revelry side, we're really proud of what the team's doing. We continue to believe it's a great opportunity for Revelist and overall for Vista to take the best technology being created for the outdoors and apply that to the opportunity to serve our military, our first responders, and our law enforcement. We have a great team in Virginia Beach that's working hard on that every day. We did have some good wins, particularly within Eagle, our PAC business, and our Blackhawk business. And we're going to continue to search for opportunity there. And we believe that over the three-year period, that's going to be an area of growth for Revelist.

Perfect. And last one for me, just Eric, you guys talked a little bit about mix within channel for Revelist and kind of some impact that that had. I'm curious, just as we look at price, kind of ASP, you know, maybe primarily in adventure sports, but we'd love to hear it across the board. kind of any mixed shift or you see consumers pull back, uh, maybe look at lower priced helmets or, or anything else that you're seeing? Just, just want kind of to hear your view on how the consumer is doing today.

Sure. You know, we've been very conservative with regards to the consumer outlook. You know, we called for the year, you know, a range that's essentially flat, um, you know, just slightly up or down, depending on, you know, some market conditions. And, you know, what we're seeing is that that's continued to be what we're, you know, what, what we, um, what, what, what we continue to see from the, from the outlook. Um, I, you know, I, I think across the businesses with regards to, I'll start with, you know, our Revell is precision sports. That's typically a direct business. You know, if you think about what we do every day at foresight sports and we're seeing continued strong response, both on. I'll call it our hardware, our launch monitors and things of that nature, but also, like I mentioned in the call, our software solutions. And that's an area that we're going to continue to lean into with regard to digital gaming. And I think you'll see continued strong response. I think that's going to continue to be our best area of growth, both short-term and medium-term. And we're really leaning into that as a team, and I'm proud of the work that the team continues to do. And there's going to be some more exciting announcements over the next several months With regards to adventure sports, you know, specifically on bike, I think you asked about, um, again, you know, we're seeing a little bit of mix shift. Um, you know, I think overall, when you look at the channel performance, we're seeing some better performance across, I'll call it mass and DTC, including Amazon. And we're seeing a little bit more continued pressure. Like I talked about in the first question, um, that specialty, we do see some green shoots at specialty over the longer term. You know, I think 12 to 18 months, we are seeing some pre-order action that we're feeling a little bit more optimistic about, but I'd say that is a little bit more mix shift, you know, specifically to your question. Perfect.

Thank you, guys.

Thank you. Our next question comes from Jim Chartier of Monash Crespi Heart. Your line is now open. Please go ahead.

Good morning. Thanks for taking my questions. You said a number of times for RevList you're confident in doubling standalone EBITDA this year. Can you get there at the low end of your revenue guidance?

I mean, our revenue and our EBITDA guidance kind of go hand in hand. So there's a little bit of pressure on being able to exactly double EBITDA at the bottom end of the range. But we'd be very close at that. I think if we are If we're seeing revenue at that point in time, we are looking at additional things on the gear up and then potential for savings on that side. So we could still accomplish it. It would just feel a little bit more of a challenge to be able to get there.

OK. Makes sense. And then for both businesses, can you give me a sense of what PLS looked like during the quarter?

Jim, good morning. For our first quarter, POS was down some. I mean, certainly goes different by categories. You can imagine ammunition, you know, we see hunting rifle and shot shell still really good and just still is hanging in there. There's some categories that we're seeing down. So I think all in all, it's flattish to down a little bit.

Yep. And on the Revolus side, Jim, I would say it's pretty much in line with, you know, a lot of the shipments. We had some pressure in the first quarter on POS, and we expect it to start improving sequentially going forward.

Great. Thanks, and best of luck.

Thank you. Thank you. At this time, we currently have no further questions for today. Therefore, that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.