American Outdoor Brands, Inc. Q2 FY2025 earnings call

• Innovation Advantage: Comprises three forms - consistent new product pipeline, distinctive merchandizing solutions (rebranded key brands with updated logos, packaging, displays), and cross-category innovation partner.
• Second Quarter Performance: Exceeded expectations with net sales over $60 million (+4% YOY), adjusted EBITDAS up 43%, growth in all channels, and highest shipping month in October.
• Upcoming Products: Key new products to be showcased at SHOT Show, including a revolutionary product from Caldwell for shotgun sports, with positive reception from retailers.

Outdoor Lifestyle: Net sales grew by 5.4%, with products from MEAT!, BOG, and Grilla brands driving strong performance in hunting, meat processing, and outdoor cooking. Shooting Sports: Net sales grew by nearly 2%, with products from Caldwell Claymore family and Tipton brand driving strength in shooting accessories, offsetting a slight decline in personal protection products. Distribution Channels: Traditional channel net sales increased by 4.3%, e-commerce net sales by 3.5%, and international net sales reached $3.4 million (6% of total net sales, +15% year-over-year).

• Increased FY'25 net sales guidance to $205 million to $210 million (midpoint +3.2% YOY), with Q3 net sales growth expected at ~5%.
• Gross margin expected to be approximately 45.5% for FY'25, with Q3 gross margin ~45%.
• Adjusted EBITDAS for FY'25 revised to $13.5 million to $15 million (6.6%-7.1% of net sales).
• Initial net sales outlook for FY'26: $220 million to $230 million.

• Dependence on continuous innovation to stay competitive in a dynamic market.
• Exposure to tariffs and potential impact on costs and margins.
• Uncertainty in the M&A market and challenges in finding suitable acquisition targets that align with the company's strategy.

Q: Could you give more insight into the purchasing timeline for retailers and drivers of the longer-term sales outlook?

A: Retailers make big decisions during line reviews, wanting innovation to drive foot traffic. Inline products are performing well, and retailers are excited about new products, leading to earlier load-ins.

Q: Given weakness in the shooting sports industry, how did products in that market perform?

A: Diversification into shotgun sports with the Claymore line has driven growth, offsetting softness in personal protection products.

Q: Are there new changes to the balance sheet philosophy around capital use, especially regarding M&A?

A: Capital allocation prioritizes organic growth, then M&A, then buybacks. M&A pipeline has seen a slowdown but continues to look for complementary brands.

Q: What's driving the acceleration in sales for fiscal '25?

A: Retailers seeking innovation are willing to take in more AOB product across the portfolio due to the company's innovation advantage in new products, merchandising, and cross-category solutions.

Q: Thoughts on the fiscal '26 outlook and gross margin headwinds?

A: Early order indications from retailers give visibility into FY'26, with net sales expected $220M-$230M. Gross margin headwinds include tariff amortization and delayed Q2 promotions impacting the second half.

Q: Details on the M&A funnel?

A: Less activity in shooting sports; more opportunities in outdoor lifestyle, exploring outdoor adjacent brands, and seeking brands to plug in existing innovation ideas.