SEC Filing | American Outdoor Brands Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2023

Commission File No. 001-39366

American Outdoor Brands, Inc.

(Exact name of registrant as specified in its charter)

Delaware

84-4630928

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1800 North Route Z, Suite A
Columbia, Missouri

65202

(Address of principal executive offices)

(Zip Code)

(800) 338-9585

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each Class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $0.001 per share	AOUT	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 13,243,292 shares of common stock, par value $0.001, outstanding as of March 2, 2023.

AMERICAN OUTDOOR BRANDS, INC.

Quarterly Report on Form 10-Q

For the Three and Nine Months Ended January 31, 2023 and 2022

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
	Item 1. Financial Statements (Unaudited)	5
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4. Controls and Procedures	29

PART II - OTHER INFORMATION
	Item 1. Legal Proceedings	30
	Item 1A. Risk Factors	30
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 6. Exhibits	31
Signatures		32

Accumax®, Adrenaline®, BOG®, Bubba®, Caldwell®, Deadshot®, Deathgrip®, Delta Series®, Dominion®, E-MAX®, F.A.T. Wrench®, Fieldpod®, Frankford Arsenal®, Golden Rod®, Hooyman®, Hydrosled®, Imperial®, Intellidropper®, Lead Sled®, Lockdown®, Mag Charger®, MEAT Your Maker! ®, Old Timer®, Schrade®, Sharpfinger®, Tipton®, Grilla®, Grilla Grills®, Uncle Henry®, ust®, Wheeler®, XLA Bipod®, Crimson Trace®, Lasergrips®, Laserguard®, LaserLyte®, Lasersaddle®, Lead Sled®, Lightguard®, Rail Master®, Tack Driver®, Your Land. Your Legacy®, are some of the registered U.S. trademarks of our company or one of our subsidiaries. AOB Products Company™, Dock and Unlock ™, Don’t Be Outdoorsy – Be Outdoors™, Engineered for the Unknown™, From Niche to Known™, Lockdown Puck™, MEAT!™, Secure Your Lifestyle™, The Ultimate Lifestyle™, Unmatched Accuracy at the Bench and in the Field™, and Water to Plate™, are some of the unregistered trademarks of our company or one of our subsidiaries. Trademarks licensed to us by Smith & Wesson Brands, Inc. in connection with the manufacture, distribution, marketing, advertising, promotion, merchandising, shipping, and sale of certain licensed accessory product categories include M&P®, Performance Center®, Smith & Wesson®, and T/C®, among others. This report also may contain trademarks and trade names of other companies.

Statement Regarding Forward-Looking Information

The statements contained in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained or incorporated herein by reference in this Quarterly Report on Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “suggests,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “would,” “should,” “could,” “may,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Quarterly Report on Form 10-Q include statements regarding:

•

the impact of recently adopted accounting standards on our financial statements and related disclosures;

•

our future lease payments;

•

our future expected amortization expense;

•

our expectation that the unrecognized compensation expense related to unvested RSUs and PSUs will be recognized over a weighted average remaining contractual term of 1.2 years;

•

our estimate of annual expense under our lease after the assignement of such lease to us, which increase in expense we expect will be entirely offset by savings from recent facility consolidations and efficencies gained in our distribution processes;

•

our expectation for increase of right-of-use asset on our consolidated balance sheet when the lease assignment to us is effective and our expectation to receive tax and other incentives from federal, state, and local governmental authorities previously received by our former parent following the assignment of the lease to us;

•

the results reported in our condensed consolidated financial statements may not be indicative of results that may be expected for the entire fiscal year;

•

our belief that Adjusted EBITDAS is useful to understanding our operating results and the ongoing performance of our underlying business, as Adjusted EBITDAS provides information on our ability to meet our capital expenditure and working capital requirements, and isalso an indicator of profitability;

•

our belief that reporting Adjusted EBITDAS provides additional transparency and comparability to our operating results;

•

our belief that the presentation of Adjusted EBITDAS is useful to investors because it is frequently used by analysts, investors, and other interested parties to evaluate companies in our industry;

•

the availability of equity or debt financing to us on acceptable terms or at all;

•

our expectation of spending approximately $6.0 million to $6.5 million for capital expenditures in fiscal 2023;

•

our expectation for new product introductions that will launch later in the year;

•

our future capital requirements' dependency on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the capital needed to operate as an independent publicly traded company, including the establishment of our enterprise resource planning systems, any acquisitions or strategic investments that we may determine to make, our ability to navigate through the business impacts from the coronavirus, or COVID-19 pandemic, and related aftermath, and changes in consumer spending, which is sensitive to economic conditions and other factors;

•

the possibility that our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained if sufficient funds are not available or are not available on acceptable terms;

•

our expectation to continue to utilize our cash flows to invest in our business, including research and development for new product initiatives; hire additional employees; fund growth strategies, including any potential acquisitions; to make payments on our $10.0 million of borrowings under our revolving line of credit and any indebtedness we may incur over time; implement our enterprise resource planning systems; and to repurchase shares of our common stock where we have authorization to do so;

•

our estimation that our information technology infrastructure will cost a total of approximately $8.8 million over a period that spans fiscal 2022 and fiscal 2023;

•

our expectation for capital expenditures of approximately $2.2 million and one-time operating expenses of approximately $1.7 million in fiscal 2023;

•

our expectation to spend approximately $500,000 of duplicative expenses in fiscal 2023 related to our information technology infrastructure and enterprise resource planning platforms in parallel during the system changeover period; and

•

our expectation for inventory levels to decline in the fourth quarter of fiscal 2023 as we reduce our planned inventory pruchases, other than purchases for new product introductions, and a return to typical seasonality trends for our business.

A number of factors could cause our actual results to differ materially from those indicated by the forward-looking statements. Such factors include, among others, the following:

•

potential disruptions in our suppliers’ ability to source the raw materials necessary for the production of our products, disruptions and delays in the manufacture of our products, and difficulties encountered by retailers and other components of the distribution channel for our products including delivery of product stemming from port congestion and related transportation challenges, which may continue to be adversely impacted by the multitude of the effects of COVID-19 and the hostilities in the Ukraine;

•

lower levels of consumer spending in general and specific to our products or product categories;

•

our ability to introduce new products that are successful in the marketplace;

•

interruptions of our arrangements with third-party contract manufacturers and freight carriers that disrupt our ability to fill our customers’ orders;

•

increases in costs or decreases in availability of finished products, product components, and raw materials;

•

our ability to maintain or strengthen our brand recognition and reputation;

•

the ability to forecast demand for our products accurately;

•

our ability to continue to expand our e-commerce business;

•

our ability to compete in a highly competitive market;

•

our dependence on large customers;

•

our ability to attract and retain talent;

•

an increase of emphasis on private label products by our customers;

•

pricing pressures by our customers;

•

our ability to collect our accounts receivable;

•

the potential for product recalls, product liability, and other claims or lawsuits against us;

•

our ability to protect our intellectual property;

•

inventory levels, both internally and in the distribution channel, in excess of demand;

•

our ability to identify acquisition candidates, to complete acquisitions of potential acquisition candidates, to integrate acquired businesses with our business, to achieve success with acquired companies, and to realize the benefits of acquisitions in a manner consistent with our expectations;

•

the performance and security of our information systems;

•

our ability to comply with any applicable foreign laws or regulations and the effect of increased protective tariffs;

•

economic, social, political, legislative, and regulatory factors;

•

the potential for increased regulation of firearms and firearms- related products;

•

the effect of political pressures on firearm laws and regulations;

•

the potential impact on our business and operations from the results of federal, state, and local elections and the policies that may be implemented as a result thereof;

•

our ability to realize the anticipated benefits of being a separate, public company;

•

future investments for capital expenditures, liquidity and anticipated cash needs and availability;

•

the potential for impairment charges;

•

estimated amortization expense of intangible assets for future periods;

•

actions of social or economic activists that could, directly or indirectly, have an adverse effect on our business;

•

disruptions caused by social unrest, including related protests or disturbances;

•

our assessment of factors relating to the valuation of assets acquired and liabilities assumed in acquisitions, the timing for such evaluations, and the potential adjustment in such evaluations; and

•

other factors detailed from time to time in our reports filed with the Securities and Exchange Commission, or the SEC, including information contained herein.

All forward-looking statements included herein, or in our Annual Report on Form 10-K, are based on information available to us as of their respective dates and speak only as of such dates. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q, or in our Annual Report on Form 10-K, reflect our views as of the date of these reports about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements.

We are subject to the informational requirements of the Exchange Act, and we file or furnish reports, proxy statements, and other information with the SEC. Such reports and other information we file with the SEC are available free of charge at https://ir.aob.com/financial-information/sec-filings as soon as practicable after such reports are available on the SEC’s website at www.sec.gov. The SEC’s website contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	As of:
	January 31, 2023 (Unaudited)			April 30, 2022
	(In thousands, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents	$	21,710		$	19,521
Accounts receivable, net of allowance for credit losses of $142 on January 31, 2023 and $129 on April 30, 2022		25,142			28,879
Inventories		105,512			121,683
Prepaid expenses and other current assets		9,663			8,491
Income tax receivable		1,414			1,231
Total current assets		163,441			179,805
Property, plant, and equipment, net		9,791			10,621
Intangible assets, net		55,044			63,194
Right-of-use assets		24,593			23,884
Other assets		293			336
Total assets	$	253,162		$	277,840
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	10,075		$	13,563
Accrued expenses		10,095			7,853
Accrued payroll, incentives, and profit sharing		2,780			3,786
Lease liabilities, current		1,126			1,803
Total current liabilities		24,076			27,005
Notes and loans payable		9,599			24,697
Lease liabilities, net of current portion		24,298			23,076
Other non-current liabilities		31			31
Total liabilities		58,004			74,809
Commitments and contingencies (Note 12)
Equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 14,369,455 shares issued and 13,256,830 shares outstanding on January 31, 2023 and 14,240,290 shares issued and 13,403,326 shares outstanding on April 30, 2022		14			14
Additional paid in capital		271,276			268,393
Retained deficit		(58,539	)		(50,351	)
Treasury stock, at cost (1,112,625 shares on January 31, 2023 and 836,964 shares on April 30, 2022)		(17,593	)		(15,025	)
Total equity		195,158			203,031
Total liabilities and equity	$	253,162		$	277,840

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months ended January 31,						For the Nine Months ended January 31,
	2023			2022			2023			2022
	(In thousands, except per share data)
Net sales	$	50,894		$	70,105		$	149,006		$	201,633
Cost of sales		26,905			38,010			80,015			107,518
Gross profit		23,989			32,095			68,991			94,115
Operating expenses:
Research and development		1,575			1,377			4,887			4,354
Selling, marketing, and distribution		14,522			15,627			40,226			44,490
General and administrative		10,893			10,366			32,575			31,020
Total operating expenses		26,990			27,370			77,688			79,864
Operating (loss)/income		(3,001	)		4,725			(8,697	)		14,251
Other income, net:
Other income, net		226			258			1,052			1,004
Interest expense, net		(213	)		(68	)		(641	)		(167	)
Total other income, net		13			190			411			837
(Loss)/income from operations before income taxes		(2,988	)		4,915			(8,286	)		15,088
Income tax (benefit)/expense		(125	)		1,149			(98	)		3,282
Net (loss)/income	$	(2,863	)	$	3,766		$	(8,188	)	$	11,806
Net (loss)/income per share:
Basic	$	(0.21	)	$	0.27		$	(0.61	)	$	0.84
Diluted	$	(0.21	)	$	0.27		$	(0.61	)	$	0.82
Weighted average number of common shares outstanding:
Basic		13,331			14,054			13,413			14,091
Diluted		13,331			14,205			13,413			14,332

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands)


	Common Stock				Additional						Treasury Stock
For the three months ended January 31, 2023 and 2022	Shares		Amount		Paid-In Capital			Retained Earnings			Shares		Amount			Total Equity
Balance at October 31, 2021		14,183	$	14	$	266,686		$	22,569			—	$	—		$	289,269
Net income		—		—		—			3,766			—		—			3,766
Stock-based compensation		—		—		920			—			—		—			920
Issuance of common stock under restricted stock unit awards, net of tax		5		—		(23	)		—			—		—			(23	)
Repurchase of treasury stock		—		—		—			—			364		(7,011	)		(7,011	)
Balance at January 31, 2022		14,188	$	14	$	267,583		$	26,335			364	$	(7,011	)	$	286,921

Balance at October 31, 2022		14,353	$	14	$	270,220		$	(55,676	)		921	$	(15,781	)	$	198,777
Net income		—		—		—			(2,863	)		—		—			(2,863	)
Stock-based compensation		—		—		1,065			—			—		—			1,065
Issuance of common stock under restricted stock unit awards, net of tax		16		—		(9	)		—			—		—			(9	)
Repurchase of treasury stock		—		—		—			—			192		(1,812	)		(1,812	)
Balance at January 31, 2023		14,369	$	14	$	271,276		$	(58,539	)		1,113	$	(17,593	)	$	195,158

	Common Stock				Additional						Treasury Stock
For the nine months ended January 31, 2023 and 2022	Shares		Amount		Paid-In Capital			Retained Earnings			Shares		Amount			Total Equity
Balance at April 30, 2021		14,059	$	14	$	265,362		$	14,529			—	$	—		$	279,905
Net income		—		—		—			11,806			—		—			11,806
Stock-based compensation		—		—		2,336			—			—		—			2,336
Shares issued under employee stock purchase plan		35		—		408			—			—		—			408
Proceeds from exercise of stock options		3		—		5			—			—		—			5
Issuance of common stock under restricted stock unit awards, net of tax		91		—		(528	)		—			—		—			(528	)
Repurchase of treasury stock		—		—		—			—			364		(7,011	)		(7,011	)
Balance at January 31, 2022		14,188	$	14	$	267,583		$	26,335			364	$	(7,011	)	$	286,921

Balance at April 30, 2022		14,240	$	14	$	268,393		$	(50,351	)		837	$	(15,025	)	$	203,031
Net loss		—		—		—			(8,188	)		—		—			(8,188	)
Stock-based compensation		—		—		2,900			—			—		—			2,900
Shares issued under employee stock purchase plan		39		—		287			—			—		—			287
Issuance of common stock under restricted stock unit awards, net of tax		90		—		(304	)		—			—		—			(304	)
Repurchase of treasury stock		—		—		—			—			276		(2,568	)		(2,568	)
Balance at January 31, 2023		14,369	$	14	$	271,276		$	(58,539	)		1,113	$	(17,593	)	$	195,158

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		For the Nine Months Ended January 31,
		2023				2022