UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
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
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(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 |
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.
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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
AMERICAN OUTDOOR BRANDS, INC.
Quarterly Report on Form 10-Q
For the Three and Six Months Ended October 31, 2023 and 2022
TABLE OF CONTENTS
Accumax®, BOG®, BUBBA®, Caldwell®, Deadshot®, Deathgrip®, Delta Series®, E-MAX®, F.A.T. Wrench®, Fieldpod®, Frankford Arsenal®, Golden Rod®, Hooyman®, Imperial®, Intellidropper®, Lead Sled®, Lockdown®, Mag Charger®, Old Timer®, Schrade®, Sharpfinger®, Tipton®, Grilla®, Grilla Grills®, Uncle Henry®, ust®, Wheeler®, XLA Bipod®, Crimson Trace®, Lasergrips®, Laserguard®, LaserLyte®, Lasersaddle®, Lightguard®, and Rail Master® 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!™, MEAT Your Maker!™, Secure Your Lifestyle™, The Ultimate Lifestyle™, Unmatched Accuracy at the Bench and in the Field™, Water to Plate™, and Your Land. Your Legacy™ 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 following:
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:
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
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As of: |
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October 31, 2023 |
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April 30, 2023 |
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(In thousands, except par value and share data) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Income tax receivable |
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Total current assets |
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Property, plant, and equipment, net |
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Intangible assets, net |
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Right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Accrued payroll, incentives, and profit sharing |
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Lease liabilities, current |
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Total current liabilities |
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Notes and loans payable |
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— |
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Lease liabilities, net of current portion |
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Other non-current liabilities |
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Total liabilities |
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(Note 11) |
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Equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Retained deficit |
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Treasury stock, at cost ( |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
5
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months ended October 31, |
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For the Six Months ended October 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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(In thousands, except per share data) |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, marketing, and distribution |
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General and administrative |
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Total operating expenses |
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Operating loss |
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Other income, net: |
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Other income, net |
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Interest income/(expense), net |
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( |
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Total other income, net |
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Income/(loss) from operations before income taxes |
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( |
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Income tax (benefit)/expense |
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( |
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( |
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Net income/(loss) |
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$ |
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$ |
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$ |
( |
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$ |
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Net income/(loss) per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of common shares |
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Basic |
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Diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
6
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
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Common Stock |
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Additional |
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Treasury Stock |
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For the three months ended October 31, 2023 and 2022 |
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Shares |
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Amount |
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Paid-In |
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Retained |
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Shares |
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Amount |
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Total |
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Balance at July 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Shares issued under employee stock |
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— |
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— |
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— |
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Issuance of common stock under |
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— |
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( |
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— |
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— |
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— |
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( |
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Repurchase of treasury stock |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at October 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Balance at July 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Shares issued under employee stock |
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— |
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— |
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— |
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— |
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Issuance of common stock under |
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— |
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( |
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— |
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— |
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— |
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( |
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Repurchase of treasury stock |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at October 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Additional |
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Treasury Stock |
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For the six months ended October 31, 2023 and 2022 |
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Shares |
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Amount |
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Paid-In |
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Retained |
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Shares |
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Amount |
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Total |
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Balance at April 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Shares issued under employee stock |
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— |
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— |
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— |
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— |
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Proceeds from exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock under |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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Repurchase of treasury stock |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at October 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Balance at April 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Shares issued under employee stock |
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— |
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— |
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— |
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— |
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Issuance of common stock under |
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( |
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— |
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— |
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— |
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( |
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Repurchase of treasury stock |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at October 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
7
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Six Months Ended October 31, |
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2023 |
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2022 |
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(In thousands) |
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Cash flows from operating activities: |
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Net loss |
$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash (used in)/provided by |
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Depreciation and amortization |
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Loss/(gain) on sale/disposition of assets |
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( |
) |
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Provision for credit losses on accounts receivable |
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Stock-based compensation expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
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( |
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Inventories |
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( |
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Prepaid expenses and other current assets |
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( |
) |
|
Income taxes |
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
( |
) |
|
Accrued payroll, incentives, and profit sharing |
|
|
|
|
( |
) |
|
Right of use assets |
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
||
Other assets |
|
|
|
|
|
||
Lease liabilities |
|
( |
) |
|
|
( |
) |
Other non-current liabilities |
|
( |
) |
|
|
— |
|
Net cash (used in)/provided by operating activities |
|
( |
) |
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
||
Payments to acquire patents and software |
|
( |
) |
|
|
( |
) |
Proceeds from sale of property and equipment |
|
|
|
|
— |
|
|
Payments to acquire property and equipment |
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
||
Payments on notes and loans payable |
|
( |
) |
|
|
( |
) |
Payments to acquire treasury stock |
|
( |
) |
|
|
( |
) |
Cash paid for debt issuance costs |
|
— |
|
|
|
( |
) |
Proceeds from exercise of options to acquire common stock, |
|
|
|
|
|
||
Payment of employee withholding tax related to restricted |
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
( |
) |
|
|
( |
) |
Net decrease in cash and cash equivalents |
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
||
Cash and cash equivalents, end of period |
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
||
Cash paid for: |
|
|
|
|
|
||
Interest |
$ |
|
|
$ |
|
||
Income taxes (net of refunds) |
$ |
( |
) |
|
$ |
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
8
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
(1) Organization:
American Outdoor Brands, Inc. (our “company,” “we,” “us,” or “our”) are a leading provider of outdoor lifestyle products and shooting sports accessories encompassing hunting, fishing, outdoor cooking, camping, shooting, and personal security and defense products for rugged outdoor enthusiasts. We conceive, design, source, and sell our outdoor lifestyle products, including premium sportsman knives and tools for fishing and hunting; land management tools for hunting preparedness; harvesting products for post-hunt or post-fishing activities; outdoor cooking products; and camping, survival, and emergency preparedness products. We conceive, design, produce or source, and sell our shooting sports accessories, such as rests, vaults, and other related accessories; electro-optical devices, including hunting optics, firearm aiming devices, flashlights, and laser grips; and reloading, gunsmithing, and firearm cleaning supplies. We develop and market all our products as well as manufacture some of our electro-optics products at our facility in Columbia, Missouri. We also contract for the manufacture and assembly of most of our products with third parties located in Asia.
We focus on our brands and the establishment of product categories in which we believe our brands will resonate strongly with the activities and passions of consumers and enable us to capture an increasing share of our overall addressable markets. Our owned brands include BOG, BUBBA, Caldwell, Crimson Trace, Frankford Arsenal, Grilla Grills, or Grilla, Hooyman, Imperial, LaserLyte, Lockdown, MEAT! Your Maker, Old Timer, Schrade, Tipton, Uncle Henry, ust, and Wheeler, and we license additional brands for use in association with certain products we sell, including M&P, Smith & Wesson, Performance Center by Smith & Wesson, and Thompson/Center. In focusing on the growth of our brands, we organize our creative, product development, sourcing, and e-commerce teams into
(2) Basis of Presentation:
Interim Financial Information
Our unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the Securities and Exchange Commission, or SEC, for interim reporting. As permitted under those rules, certain disclosures and other financial information that normally are required by accounting principles generally accepted in the United States have been condensed or omitted. Our accounting policies are described in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for our fiscal year ended April 30, 2023. We are responsible for the condensed consolidated financial statements included in this report, which are unaudited but, in our opinion, include all adjustments necessary for a fair presentation of our condensed consolidated balance sheet as of October 31, 2023, our condensed consolidated statement of operations for the three and six months ended October 31, 2023 and 2022, and our condensed consolidated statement of cash flows for the six months ended October 31, 2023 and 2022. The consolidated balance sheet as of April 30, 2023 was derived from audited financial statements.
The results reported in these condensed consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire fiscal year.
9
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
Revenue Recognition
We recognize revenue for the sale of our products at the point in time when the control of ownership has transferred to the customer. The transfer of control typically occurs at a point in time based on consideration of when the customer has (i) a payment obligation, (ii) physical possession of goods has been received, (iii) legal title to goods has passed, (iv) risks and rewards of ownership of goods has passed to the customer, and (v) the customer has accepted the goods. The timing of revenue recognition occurs either on shipment or delivery of goods based on contractual terms with the customer. Revenue recorded excludes sales tax charged to retail customers as we are considered a pass-through conduit for collecting and remitting sales taxes.
The duration of contractual arrangements with customers in our wholesale channels is typically less than one year. Payment terms with customers are typically between
We have elected to treat all shipping and handling activities as fulfillment costs and recognize the costs as distribution expenses at the time we recognize the related revenue. Shipping and handling costs billed to customers are included in net sales.
The amount of revenue we recognize reflects the expected consideration to be received for providing the goods or services to customers, which includes estimates for variable consideration. Variable consideration includes allowances for trade term discounts, chargebacks, and product returns. Estimates of variable consideration are determined at contract inception and reassessed at each reporting date, at a minimum, to reflect any changes in facts and circumstances. We apply the portfolio approach as a practical expedient and utilize the expected value method in determining estimates of variable consideration, based on evaluations of specific product and customer circumstances, historical and anticipated trends, and current economic conditions. We have co-op advertising program expense, which we record within advertising expense, in recognition of a distinct service that we receive from our customers at the retail level.
Disaggregation of Revenue
The following table sets forth certain information regarding trade channel net sales for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
e-commerce channels |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
Traditional channels |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
Our e-commerce channels include net sales from customers that do not traditionally operate a physical brick-and-mortar store, but generate the majority of their revenue from consumer purchases at their retail websites. Our e-commerce channels also include our direct-to-consumer sales. Our traditional channels include customers that operate primarily out of physical brick and mortar stores and generate the large majority of their revenue from consumer purchases at their brick-and-mortar locations.
We sell our products worldwide.
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Domestic net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
International net sales |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
10
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
The following table sets forth certain information regarding net sales in our shooting sports and outdoor lifestyle categories for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Shooting sports |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
- |
% |
||
Outdoor lifestyle |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
The following table sets forth certain information regarding trade channel net sales for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
e-commerce channels |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
- |
% |
||
Traditional channels |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
We sell our products worldwide.
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Domestic net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
International net sales |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
The following table sets forth certain information regarding net sales in our shooting sports and outdoor lifestyle categories for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Shooting sports |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
- |
% |
||
Outdoor lifestyle |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
Recently Adopted Accounting Standards
No recent accounting pronouncements are expected to have a material impact on our condensed consolidated financial statements.
(3) Leases:
We lease real estate, as well as other equipment, under non-cancelable operating lease agreements. We recognize expenses under our operating lease assets and liabilities at the commencement date based on the present value of lease payments over the lease terms. Our leases do not provide an implicit interest rate. We use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Our lease agreements do not require material variable lease payments, residual value guarantees, or restrictive covenants. For operating leases, we recognize expense on a straight-line basis over the lease term. We record tenant improvement allowances as an offsetting adjustment included in our calculation of the respective right-of-use asset.
Many of our leases include renewal options that can extend the lease term. These renewal options are at our sole discretion and are reflected in the lease term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
11
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
The amounts of assets and liabilities related to our operating leases as of October 31, 2023 and April 30, 2023 are as follows (in thousands):
|
|
October 31, 2023 |
|
|
April 30, 2023 |
|
||
Operating Leases |
|
|
|
|
|
|
||
Right-of-use assets |
|
$ |
|
|
$ |
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Right-of-use assets, net |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Lease liabilities, current portion |
|
$ |
|
|
$ |
|
||
Lease liabilities, net of current portion |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
For the three and six months ended October 31, 2023, we recorded $
Future lease payments for all our operating leases for the remainder of fiscal 2024 and for succeeding fiscal years, as of October 31, 2023, are as follows (in thousands):
|
|
|
|
Operating |
|
|
2024 |
|
|
|
$ |
|
|
2025 |
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
2027 |
|
|
|
|
|
|
2028 |
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
Total future lease payments |
|
|
|
|
|
|
Less amounts representing interest |
|
|
|
|
( |
) |
Present value of lease payments |
|
|
|
|
|
|
Less current maturities of lease liabilities |
|
|
|
|
( |
) |
Long-term maturities of lease liabilities |
|
|
|
$ |
|
|
The cash paid for amounts included in the measurement of the liabilities and the operating cash flows was $
12
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
(4) Intangible Assets, net:
The following table summarizes intangible assets as of October 31, 2023 and April 30, 2023 (in thousands):
|
|
October 31, 2023 |
|
|
April 30, 2023 |
|
||||||||||||||||||
|
|
Gross |
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
||||||
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
||||||
Customer relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Developed software and technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Patents, trademarks, and trade names |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Patents and software in development |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total definite-lived intangible assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Indefinite-lived intangible assets |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
We amortize intangible assets with determinable lives over a weighted-average period of approximately
Future expected amortization expense for the remainder of fiscal 2024 and for succeeding fiscal years, as of October 31, 2023, are as follows (in thousands):
Fiscal |
|
Amount |
|
|
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
(5) Fair Value Measurement:
We follow the provisions of ASC 820-10, Fair Value Measurements and Disclosures Topic, or ASC 820-10, for our financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value under GAAP and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
Financial assets and liabilities recorded on the accompanying condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives, and most U.S. Government and agency securities).
Our cash and cash equivalents, which are measured at fair value on a recurring basis, totaled $
13
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets in which trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 2 inputs include the following:
Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect our assumptions about the assumptions a market participant would use in pricing the asset or liability.
We currently do
(6) Inventories:
The following table sets forth a summary of inventories, stated at lower of cost or net realizable value, as of October 31, 2023 and April 30, 2023 (in thousands):
|
|
October 31, 2023 |
|
|
April 30, 2023 |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Finished parts |
|
|
|
|
|
|
||
Work in process |
|
|
|
|
|
|
||
Raw material |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
Certain of our suppliers in Asia require deposits to procure our inventory prior to beginning the manufacturing process. These deposits on our inventory varies by supplier and range from
(7) Debt:
On August 24, 2020, we entered into a financing arrangement consisting of a $
On March 25, 2022, we amended our secured loan and security agreement, or the Amended Loan and Security Agreement, increasing the revolving line of credit to $
As of October 31, 2023, we had
In the fiscal year ended April 30, 2023, we executed an irrevocable standby letter of credit for $
14
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
(8) Equity:
Treasury Stock
On September 30, 2022, our Board of Directors authorized the repurchase of up to $
Earnings per Share
We compute diluted earnings per share by giving effect to all potentially dilutive stock awards that are outstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive. All of our outstanding restricted stock units, or RSUs, were included in the computation of diluted earnings per share for the three and six months ended October 31, 2023 and 2022.
The following table provides a reconciliation of the net income amounts and weighted average number of common and common equivalent shares used to determine basic and diluted earnings per share for the three months ended October 31, 2023 and 2022 (in thousands, except per share data):
|
For the Three Months Ended October 31, |
|
|||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
||||||||||||||||||||||
|
Net |
|
|
|
|
|
Per Share |
|
|
Net |
|
|
|
|
|
Per Share |
|
||||||||||
|
Income |
|
|
Shares |
|
|
Amount |
|
|
Income |
|
|
Shares |
|
|
Amount |
|
||||||||||
Basic earnings |
$ |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||||
Effect of dilutive stock awards |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
||
Diluted earnings |
$ |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||||
Due to the loss from operations for the six months ended October 31, 2023 and 2022, respectively, there are
Incentive Stock and Employee Stock Purchase Plans
We have a stock incentive plan, or 2020 Incentive Compensation Plan, under which we can grant new awards to our employees and directors.
We grant performance stock units, or PSUs, to our executive officers and certain other employees from time to time. At the time of grant, we calculate the fair value of our PSUs using the Monte-Carlo simulation.
|
|
For the Six Months ended October 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Grant date fair market value |
|
|
|
|
|
|
||
American Outdoor Brands, Inc. |
|
$ |
|
|
$ |
|
||
Russell 2000 Index |
|
$ |
|
|
$ |
|
||
Volatility (a) |
|
|
|
|
|
|
||
American Outdoor Brands, Inc. |
|
|
% |
|
|
% |
||
Russell 2000 Index |
|
|
% |
|
|
% |
||
Correlation coefficient (b) |
|
|
|
|
|
|
||
Risk-free interest rate (c) |
|
|
% |
|
|
% |
||
Dividend yield (d) |
|
|
% |
|
|
% |
||
15
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
The PSUs vest, and the fair value of such PSUs will be recognized, over the corresponding
During the six months ended October 31, 2023, we granted an aggregate of
During the six months ended October 31, 2022, we granted an aggregate of
We recognized $
We include stock-based compensation expense in the cost of sales, sales and marketing, research and development, and general and administrative expenses.
A summary of activity for unvested RSUs and PSUs under our 2020 Incentive Compensation Plan for the six months ended October 31, 2023 and 2022 is as follows:
|
|
For the Six Months Ended October 31, |
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
||||
|
|
Total # of |
|
|
Average |
|
|
Total # of |
|
|
Average |
|
||||
|
|
Restricted |
|
|
Grant Date |
|
|
Restricted |
|
|
Grant Date |
|
||||
|
|
Stock Units |
|
|
Fair Value |
|
|
Stock Units |
|
|
Fair Value |
|
||||
RSUs and PSUs outstanding, beginning of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Awarded |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
RSUs and PSUs outstanding, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of October 31, 2023, there was $
16
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
We have an employee stock purchase plan, or ESPP, which authorizes the sale of up to
We measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. We amortize the fair value of the award over the vesting period of the option. Under ESPP, fair value is determined at the beginning of the purchase period and amortized over the term of each exercise period.
The following assumptions were used in valuing ESPP purchases under our ESPP during the six months ended October 31, 2023 and 2022:
|
|
For the Six Months ended October 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Risk-free interest rate |
|
|
|
|
||||
Expected term |
|
|
|
|
||||
Expected volatility |
|
|
|
|
||||
Dividend yield |
|
|
% |
|
|
% |
||
(9) Accrued Expenses:
The following table sets forth other accrued expenses as of October 31, 2023 and April 30, 2023 (in thousands):
|
October 31, 2023 |
|
|
April 30, 2023 |
|
||
Accrued freight |
$ |
|
|
$ |
|
||
Accrued sales allowances |
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
||
Accrued commissions |
|
|
|
|
|
||
Accrued warranty |
|
|
|
|
|
||
Accrued employee benefits |
|
|
|
|
|
||
Accrued taxes other than income |
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
||
Total accrued expenses |
$ |
|
|
$ |
|
||
(10) Income Taxes:
The income tax expense included in the condensed consolidated statements of operations is based upon the estimated effective tax rate for the year, adjusted for the impact of discrete items which are accounted for in the period in which they occur. We recorded income tax benefit of $
17
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
income tax expense of $
(11) Commitments and Contingencies:
Litigation
From time to time, we are involved in lawsuits, claims, investigations, and proceedings, including those relating to product liability, intellectual property, commercial relationships, employment issues, and governmental matters, which arise in the ordinary course of business.
For the three months and six months ended October 31, 2023 and 2022, we did not incur any material expenses in defense and administrative costs relative to product liability litigation. In addition, we did not incur any settlement fees related to product liability cases in those fiscal years.
Assignment and Assumption Agreement
The Lease covers approximately
Gain Contingency
In 2018, the United States imposed additional section 301 tariffs of up to
18
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Three and Six Months Ended October 31, 2023 and 2022
(12) Segment Reporting:
We have evaluated our operations under ASC 280-10-50-1 – Segment Reporting and have concluded that we are operating as
Our business includes our outdoor products and accessories products as well as our electro-optics products, which we develop, source, market, assemble, and distribute from our facility in Columbia, Missouri. We report operating costs based on the activities performed.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following discussion and analysis of our financial condition and results of operations for the three and six months ended October 31, 2023 and 2022 should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year ended April 30, 2023. This discussion and analysis should also be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.
The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include those discussed above in “Statement Regarding Forward-Looking Information” in this Form 10-Q. In addition, this section sets forth key objectives and performance indicators used by us, as well as key industry data tracked by us.
The following discussion and analysis includes references to net sales of our products in shooting sports and outdoor lifestyle categories. Our shooting sports category includes net sales of shooting accessories and our products used for personal protection. Our outdoor lifestyle category includes net sales of our products used in hunting, fishing, camping, rugged outdoor activities, and outdoor cooking.
Second Quarter Fiscal 2023 Highlights
Our operating results for the three months ended October 31, 2023 included the following:
Our operating results for the six months ended October 31, 2023 included the following:
Results of Operations
Net Sales and Gross Profit
The following table sets forth certain information regarding consolidated net sales and gross profit for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
57,931 |
|
|
$ |
54,436 |
|
|
$ |
3,495 |
|
|
|
6.4 |
% |
Cost of sales |
|
|
31,441 |
|
|
|
28,474 |
|
|
|
2,967 |
|
|
|
10.4 |
% |
Gross profit |
|
$ |
26,490 |
|
|
$ |
25,962 |
|
|
$ |
528 |
|
|
|
2.0 |
% |
% of net sales (gross margin) |
|
|
45.7 |
% |
|
|
47.7 |
% |
|
|
|
|
|
|
||
The following table sets forth certain information regarding trade channel net sales for the three months ended October 31, 2023 and 2022 (dollars in thousands):
20
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
e-commerce channels |
|
$ |
23,462 |
|
|
$ |
22,713 |
|
|
$ |
749 |
|
|
|
3.3 |
% |
Traditional channels |
|
|
34,469 |
|
|
|
31,723 |
|
|
|
2,746 |
|
|
|
8.7 |
% |
Total net sales |
|
$ |
57,931 |
|
|
$ |
54,436 |
|
|
$ |
3,495 |
|
|
|
6.4 |
% |
Our e-commerce channels include net sales from customers that do not traditionally operate physical brick-and-mortar stores, but generate the majority of their revenue from consumer purchases from their retail websites. Our e-commerce channels also include our direct-to-consumer sales. Our traditional channels include customers that primarily operate out of physical brick-and-mortar stores and generate the large majority of revenue from consumer purchases in their brick-and-mortar locations. We sell our products worldwide.
The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Domestic net sales |
|
$ |
54,982 |
|
|
$ |
52,106 |
|
|
$ |
2,876 |
|
|
|
5.5 |
% |
International net sales |
|
|
2,949 |
|
|
|
2,330 |
|
|
|
619 |
|
|
|
26.6 |
% |
Total net sales |
|
$ |
57,931 |
|
|
$ |
54,436 |
|
|
$ |
3,495 |
|
|
|
6.4 |
% |
The following table sets forth certain information regarding net sales categories for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Shooting sports |
|
$ |
23,371 |
|
|
$ |
24,191 |
|
|
$ |
(820 |
) |
|
|
-3.4 |
% |
Outdoor lifestyle |
|
|
34,560 |
|
|
|
30,245 |
|
|
|
4,315 |
|
|
|
14.3 |
% |
Total net sales |
|
$ |
57,931 |
|
|
$ |
54,436 |
|
|
$ |
3,495 |
|
|
|
6.4 |
% |
For the three months ended October 31, 2023, total net sales increased $3.5 million, or 6.4%, from the comparable quarter last year because of an increase in net sales of our outdoor lifestyle products.
Net sales in our e-commerce channel increased $749,000, or 3.3%, from the comparable quarter last year, primarily because of an increase in net sales to the world's largest e-commerce retailer as a result of promotional activity, which primarily related to our hunting and shooting sports products. Our increase in net sales in our e-commerce channel was partially offset by lower net sales of personal protection products in our shooting sports product category and outdoor cooking products in our outdoor lifestyle product category.
Net sales in our traditional channels increased $2.7 million, or 8.7%, from the comparable quarter last year, primarily because of increased net sales in our outdoor lifestyle category for our hunting and rugged outdoor products from additional demand and because we began selling one of our direct-to-consumer only brands at retail during the three months ended October 31, 2023.
New products, which we define as any SKU introduced over the prior two fiscal years, represented 25.3% of net sales for the three months ended October 31, 2023.
Gross margin for the three months ended October 31, 2023 decreased 200 basis points from the comparable quarter last year, primarily because of promotional product discounts.
The following table sets forth certain information regarding consolidated net sales and gross profit for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
101,376 |
|
|
$ |
98,112 |
|
|
$ |
3,264 |
|
|
|
3.3 |
% |
Cost of sales |
|
|
55,167 |
|
|
|
53,111 |
|
|
|
2,056 |
|
|
|
3.9 |
% |
Gross profit |
|
$ |
46,209 |
|
|
$ |
45,001 |
|
|
$ |
1,208 |
|
|
|
2.7 |
% |
% of net sales (gross margin) |
|
|
45.6 |
% |
|
|
45.9 |
% |
|
|
|
|
|
|
||
21
The following table sets forth certain information regarding trade channel net sales for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
e-commerce channels |
|
$ |
41,838 |
|
|
$ |
43,257 |
|
|
$ |
(1,419 |
) |
|
|
-3.3 |
% |
Traditional channels |
|
|
59,538 |
|
|
|
54,855 |
|
|
|
4,683 |
|
|
|
8.5 |
% |
Total net sales |
|
$ |
101,376 |
|
|
$ |
98,112 |
|
|
$ |
3,264 |
|
|
|
3.3 |
% |
The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Domestic net sales |
|
$ |
94,771 |
|
|
$ |
92,382 |
|
|
$ |
2,389 |
|
|
|
2.6 |
% |
International net sales |
|
|
6,605 |
|
|
|
5,730 |
|
|
|
875 |
|
|
|
15.3 |
% |
Total net sales |
|
$ |
101,376 |
|
|
$ |
98,112 |
|
|
$ |
3,264 |
|
|
|
3.3 |
% |
The following table sets forth certain information regarding net sales categories for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Shooting sports |
|
$ |
43,446 |
|
|
$ |
44,579 |
|
|
$ |
(1,133 |
) |
|
|
-2.5 |
% |
Outdoor lifestyle |
|
|
57,930 |
|
|
|
53,533 |
|
|
|
4,397 |
|
|
|
8.2 |
% |
Total net sales |
|
$ |
101,376 |
|
|
$ |
98,112 |
|
|
$ |
3,264 |
|
|
|
3.3 |
% |
For the six months ended October 31, 2023, total net sales increased $3.3 million, or 3.3%, from the prior year comparable period because of an increase in net sales of our outdoor lifestyle products.
Net sales in our e-commerce channel decreased $1.4 million, or 3.3%, from the prior year comparable period, primarily because of lower net sales to the world's largest e-commerce retailer as a result of reduced demand. In addition, our e-commerce channel decreased because of lower net sales for certain personal protection products in our shooting sports product category and certain outdoor cooking products in our outdoor lifestyle product category. Our decline in net sales in our e-commerce channel was partially offset by higher net sales for certain hunting and shooting products in our outdoor lifestyle product category as a result of additional promotional activity mentioned above.
Net sales in our traditional channels increased $4.7 million, or 8.5%, from the prior year comparable period, primarily because of increased net sales in our outdoor lifestyle category as a result of new hunting and rugged outdoor product introductions. In addition, our traditional channel net sales increased because we began selling one of our direct-to-consumer only brands at retail as mentioned above.
New products, which we define as any SKU introduced over the prior two fiscal years, represented 23.5% of net sales for the six months ended October 31, 2023.
Gross margin for the six months ended October 31, 2023 remained relatively flat from the prior year comparable period.
Operating Expenses
The following table sets forth certain information regarding operating expenses for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Research and development |
|
$ |
1,675 |
|
|
$ |
1,557 |
|
|
$ |
118 |
|
|
|
7.6 |
% |
Selling, marketing, and distribution |
|
|
15,414 |
|
|
|
13,924 |
|
|
|
1,490 |
|
|
|
10.7 |
% |
General and administrative |
|
|
9,423 |
|
|
|
10,615 |
|
|
|
(1,192 |
) |
|
|
-11.2 |
% |
Total operating expenses |
|
$ |
26,512 |
|
|
$ |
26,096 |
|
|
$ |
416 |
|
|
|
1.6 |
% |
% of net sales |
|
|
45.8 |
% |
|
|
47.9 |
% |
|
|
|
|
|
|
||
22
Research and development expenses increased $118,000 over the comparable quarter last year, primarily from increased depreciation. Selling, marketing, and distribution expenses increased $1.5 million over the comparable quarter last year, primarily because of increased outbound freight costs and higher sales volume related expenses. General and administrative expenses decreased $1.2 million from the comparable quarter last year, primarily because of lower insurance premiums, reduced enterprise resource planning system implementation-related expenses, and lower rent expense as result of the facility consolidations we completed in the prior fiscal year.
The following table sets forth certain information regarding operating expenses for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Research and development |
|
$ |
3,274 |
|
|
$ |
3,313 |
|
|
$ |
(39 |
) |
|
|
-1.2 |
% |
Selling, marketing, and distribution |
|
|
27,468 |
|
|
|
25,704 |
|
|
|
1,764 |
|
|
|
6.9 |
% |
General and administrative |
|
|
19,573 |
|
|
|
21,679 |
|
|
|
(2,106 |
) |
|
|
-9.7 |
% |
Total operating expenses |
|
$ |
50,315 |
|
|
$ |
50,696 |
|
|
$ |
(381 |
) |
|
|
-0.8 |
% |
% of net sales |
|
|
49.6 |
% |
|
|
51.7 |
% |
|
|
|
|
|
|
||
Research and development expenses were relatively flat with the prior year comparable period. Selling, marketing, and distribution expenses increased $1.8 million over the prior year comparable period, primarily because of increased outbound freight costs and higher sales volume related expenses. General and administrative expenses decreased $2.1 from the prior year comparable period, primarily because of lower legal and advisory fees associated with the completed cooperation agreement with a stockholder that was completed in the prior fiscal year, reduced enterprise resource planning system implementation-related expenses, and lower rent expense as result of the facility consolidations we completed in the prior fiscal year.
Operating Loss
The following table sets forth certain information regarding operating income/(loss) for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Operating loss |
|
$ |
(22 |
) |
|
$ |
(134 |
) |
|
$ |
112 |
|
|
|
-83.6 |
% |
% of net sales (operating margin) |
|
|
0.0 |
% |
|
|
-0.2 |
% |
|
|
|
|
|
|
||
Operating loss for the three months ended October 31, 2023 was $22,000, a $112,000 increase from an operating loss of $134,000 for the three months ended October 31, 2022, primarily because of lower operating expenses.
The following table sets forth certain information regarding operating loss for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Operating loss |
|
$ |
(4,106 |
) |
|
$ |
(5,695 |
) |
|
$ |
1,589 |
|
|
|
-27.9 |
% |
% of net sales (operating margin) |
|
|
-4.1 |
% |
|
|
-5.8 |
% |
|
|
|
|
|
|
||
Operating loss for the six months ended October 31, 2023 was $4.1 million, a $1.6 million decrease from an operating loss of $5.7 million for the six months ended October 31, 2022, primarily because of higher gross profit and lower operating expenses.
Income Taxes
The following table sets forth certain information regarding income tax benefit for the three months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Income tax benefit |
|
$ |
(40 |
) |
|
$ |
(161 |
) |
|
$ |
121 |
|
|
|
-75.2 |
% |
% of income from operations (effective tax rate) |
|
|
-108.1 |
% |
|
|
-77.0 |
% |
|
|
|
|
|
-31.1 |
% |
|
23
We recorded income tax benefit of $40,000 for the three months ended October 31, 2023 compared with income tax benefit of $161,000 for the prior year comparable period because of a higher estimated effective tax rate. The income tax expense recorded for the three months ended October 31, 2023 and 2022 was primarily due to a full valuation allowance recorded against our deferred tax assets.
The following table sets forth certain information regarding income tax expense for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Income tax expense |
|
$ |
15 |
|
|
$ |
28 |
|
|
$ |
(13 |
) |
|
|
-46.4 |
% |
% of income from operations (effective tax rate) |
|
|
-0.4 |
% |
|
|
-0.5 |
% |
|
|
|
|
|
0.1 |
% |
|
We recorded income tax expense of $15,000 for the six months ended October 31, 2023, compared with income tax expense of $28,000 for the prior year comparable period. The income tax expense recorded during the six months ended October 31, 2023 and 2022 was primarily due to a full valuation allowance recorded against our deferred tax assets.
Net Income/(loss)
The following table sets forth certain information regarding net income and the related per share data for the three months ended October 31, 2023 and 2022 (dollars in thousands, except per share data):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net income |
|
$ |
77 |
|
|
$ |
370 |
|
|
$ |
(293 |
) |
|
|
-79.2 |
% |
Net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.01 |
|
|
$ |
0.03 |
|
|
$ |
(0.02 |
) |
|
|
-66.7 |
% |
Diluted |
|
$ |
0.01 |
|
|
$ |
0.03 |
|
|
$ |
(0.02 |
) |
|
|
-66.7 |
% |
Net income was $77,000, or $0.01 per diluted share, for the three months ended October 31, 2023 compared with net income of $370,000, or $0.03 per share, for the comparable quarter last year, primarily because of higher gross profit.
The following table sets forth certain information regarding net loss and the related per share data for the six months ended October 31, 2023 and 2022 (dollars in thousands, except per share data):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net loss |
|
$ |
(4,036 |
) |
|
$ |
(5,325 |
) |
|
$ |
1,289 |
|
|
|
-24.2 |
% |
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.31 |
) |
|
$ |
(0.40 |
) |
|
$ |
0.09 |
|
|
|
-22.5 |
% |
Diluted |
|
$ |
(0.31 |
) |
|
$ |
(0.40 |
) |
|
$ |
0.09 |
|
|
|
-22.5 |
% |
Net loss was $4.0 million, or $0.31 per diluted share, for the six months ended October 31, 2023 compared with net loss of $5.3 million, or $0.40 per share, for the prior year comparable period, primarily because of lower operating expenses and higher gross profit.
Non-GAAP Financial Measure
We use GAAP net income as our primary financial measure. We use Adjusted EBITDAS, which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends, and it should be considered in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Adjusted EBITDAS is defined as GAAP net income/(loss) before interest, taxes, depreciation, amortization, and stock compensation expense. Our Adjusted EBITDAS calculation also excludes certain items we consider non-routine. We believe 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 is also an indicator of profitability. We believe this reporting provides additional transparency and comparability to our operating results. We believe 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. We use Adjusted EBITDAS to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to neutralize our capitalization structure to compare our performance against that of other peer companies using similar measures, especially companies that are private. We also use Adjusted EBITDAS to supplement GAAP measures of performance to evaluate our performance in connection with compensation
24
decisions. We believe it is useful to investors and analysts to evaluate this non-GAAP measure on the same basis as we use to evaluate our operating results.
Adjusted EBITDAS is a non-GAAP measure and may not be comparable to similar measures reported by other companies. In addition, non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. We address the limitations of non-GAAP measures through the use of various GAAP measures. In the future, we may incur expenses or charges such as those added back to calculate Adjusted EBITDAS. Our presentation of Adjusted EBITDAS should not be construed as an inference that our future results will be unaffected by these items.
The following table sets forth our calculation of non-GAAP Adjusted EBITDAS for the three and six months ended October 31, 2023 and 2022, respectively (dollars in thousands):
|
For the Three Months Ended October 31, |
|
|
For the Six Months Ended October 31, |
|
||||||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||
|
(Unaudited) |
|
|||||||||||||||||
GAAP net income/(loss) |
$ |
|
77 |
|
|
$ |
|
370 |
|
|
$ |
|
(4,036 |
) |
|
$ |
|
(5,325 |
) |
Interest expense |
|
|
(6 |
) |
|
|
|
242 |
|
|
|
|
7 |
|
|
|
|
428 |
|
Income tax expense/(benefit) |
|
|
(40 |
) |
|
|
|
(161 |
) |
|
|
|
15 |
|
|
|
|
28 |
|
Depreciation and amortization |
|
|
3,935 |
|
|
|
|
4,110 |
|
|
|
|
7,880 |
|
|
|
|
8,272 |
|
Stock compensation |
|
|
1,005 |
|
|
|
|
1,121 |
|
|
|
|
1,938 |
|
|
|
|
1,835 |
|
Technology implementation |
|
|
66 |
|
|
|
|
273 |
|
|
|
|
359 |
|
|
|
|
1,042 |
|
Acquisition costs |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
47 |
|
Facility consolidation costs |
|
|
— |
|
|
|
|
292 |
|
|
|
|
— |
|
|
|
|
292 |
|
Stockholder cooperation agreement costs |
|
|
— |
|
|
|
|
167 |
|
|
|
|
— |
|
|
|
|
1,177 |
|
Other |
|
|
204 |
|
|
|
|
— |
|
|
|
|
204 |
|
|
|
|
— |
|
Non-GAAP Adjusted EBITDAS |
$ |
|
5,241 |
|
|
$ |
|
6,414 |
|
|
$ |
|
6,367 |
|
|
$ |
|
7,796 |
|
Liquidity and Capital Resources
We expect to continue to utilize our cash flows to invest in our business, including research and development for new product initiatives; to hire additional employees; to fund growth strategies, including any potential acquisitions; to make payments on any indebtedness we may incur over time; and to repurchase shares of our common stock if we are authorized to do so.
The following table sets forth certain cash flow information for the six months ended October 31, 2023 and 2022 (dollars in thousands):
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Operating activities |
|
$ |
(3,215 |
) |
|
$ |
6,167 |
|
|
$ |
(9,382 |
) |
|
|
-152.1 |
% |
Investing activities |
|
|
(1,581 |
) |
|
|
(3,311 |
) |
|
|
1,730 |
|
|
|
-52.3 |
% |
Financing activities |
|
|
(8,775 |
) |
|
|
(6,022 |
) |
|
|
(2,753 |
) |
|
|
45.7 |
% |
Total cash flow |
|
$ |
(13,571 |
) |
|
$ |
(3,166 |
) |
|
$ |
(10,405 |
) |
|
|
328.6 |
% |
Operating Activities
On an annual basis, operating activities generally represent the principal source of our cash flow.
Cash used in operating activities was $3.2 million for the six months ended October 31, 2023 compared with cash generated by operating activities of $6.2 million for the six months ended October 31, 2022. Cash used in operating activities for the six months ended October 31, 2023 was primarily impacted by $13.6 million of higher accounts receivable due to timing of customer shipments and $9.4 million of higher inventory as a result of a planned inventory build during the period to prepare for the fall hunting and winter holiday seasons as well as additional purchases for new product introductions that will launch later in the year. We expect that our overall inventory balance will decline by the end of our fiscal year ending April 30, 2024, as compared to our overall inventory balance as of October 31, 2023. Cash used in operations was partially offset by $6.3 million of increased accounts payable due to timing of supplier payments from increased inventory purchases; $3.5 million of increased accrued expenses from higher freight, tariff, and duty expenses for the import of inventory products; and $1.8 million of lower prepaid expenses from lower deposits on inventory and insurance premium costs.
25
Investing Activities
Cash used in investing activities was $1.6 million lower during the six months ended October 31, 2023 compared with the prior year comparable period, primarily from reduced spending on the development and implementation of our independent information technology infrastructure and enterprise resource planning system that was completed in the prior fiscal year. We expect to spend approximately $6.0 million to $7.0 million of capital expenditures in fiscal 2024, an increase of $1.1 million to $2.1 million over fiscal 2023.
Financing Activities
Cash used in financing activities was $8.8 million for the six months ended October 31, 2023, primarily from $5.0 million to payoff all our borrowings on our revolving line of credit and $3.8 million used to repurchase 425,527 shares of our common stock.
Our future capital requirements will depend 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, any acquisitions or strategic investments that we may determine to make, and changes in consumer spending, which is sensitive to economic conditions and other factors. Further equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained.
We had $8.4 million of cash equivalents on hand as of October 31, 2023 and had $22.0 million in cash and cash equivalents on hand as of April 30, 2023.
Other Matters
Critical Accounting Policies
The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Significant accounting policies are summarized in Note 2 of the Notes to the consolidated and combined financial statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023. The most significant areas involving our judgments and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023, to which there have been no material changes. Actual results could differ from our estimates.
Recent Accounting Pronouncements
The nature and impact of recent accounting pronouncements, if any, is discussed in Note 2—Basis of Presentation to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes from the information provided in Quantitative and Qualitative Disclosures about Market Risk in the Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of October 31, 2023, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) and have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting during our most recent fiscal quarter ended October 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
The nature of legal proceedings against us is discussed in Note 11 — Commitments and Contingencies to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors
We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on June 28, 2023, risk factors that materially affect our business, financial condition, or results of operations. There have been no material changes from the risk factors previously disclosed.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchases within the meaning of Rule 10b5-1 of the Exchange Act during the six months ended October 31, 2023 (dollars in thousands, except per share data):
|
|
Total # of |
|
|
Average |
|
|
Total # of Shares Purchased as Part of Publicly Announced |
|
|
Maximum Dollar Value of Shares that May Yet Be Purchased |
|
||||||
|
|
Shares |
|
|
Price Paid |
|
|
Plan or |
|
|
Under the Plan |
|
||||||
Period |
|
Purchased |
|
|
Per Share (2) |
|
|
Program (1) |
|
|
or Program |
|
||||||
Total first quarter fiscal year 2024 |
|
|
267,991 |
|
|
$ |
|
8.43 |
|
|
|
267,991 |
|
|
$ |
|
4,217 |
|
August 1, 2023 to August 31, 2023 |
|
|
59,221 |
|
|
|
|
9.49 |
|
|
|
327,212 |
|
|
|
|
3,655 |
|
September 1, 2023 to September 30, 2023 |
|
|
48,344 |
|
|
|
|
9.61 |
|
|
|
375,556 |
|
|
|
|
— |
|
October 1, 2023 to October 31, 2023 |
|
|
49,971 |
|
|
|
|
9.27 |
|
|
|
425,527 |
|
|
|
|
9,537 |
|
Total second quarter fiscal year 2024 |
|
|
157,536 |
|
|
|
|
9.46 |
|
|
|
425,527 |
|
|
|
|
9,537 |
|
Total year-to-date fiscal year 2024 |
|
|
425,527 |
|
|
$ |
|
8.81 |
|
|
|
425,527 |
|
|
$ |
|
9,537 |
|
(1) On September 30, 2022, our Board of Directors authorized the repurchase of up to $10.0 million of our common stock, subject to certain conditions, in the open market, in block purchases, or in privately negotiated transactions. This authorization expired on September 29, 2023. We purchased $375,556 shares during the six months ended October 31, 2023 under this expired plan for a total of $3.3 million, utilizing cash on hand. On October 2, 2023, our Board of Directors authorized the repurchase of up to $10.0 million of our common stock, subject to certain conditions, in the open market, in block purchases, or in privately negotiated transactions, executable through September 30, 2024. We purchased 49,971 shares during the six months ended October 31, 2023 under the new authorization for a total of $464,000, utilizing cash on hand. During the three and six months ended October 31, 2023, under these authorizations, we repurchased a total of 157,536 and 425,527 shares, respectively, of our common stock for $1.5 million and $3.8 million, respectively, utilizing cash on hand. As of October 31, 2023, we have $9.5 million of available funds to repurchase our common stock under the current authorization.
(2) The average price per share excludes fees paid to acquire the shares.
Item 5. Other Information
During the quarter ended October 31, 2023, none of our directors or officers
27
Item 6. Exhibits
The exhibits listed on the Index to Exhibits (immediately preceding the signatures section of this Quarterly Report on Form 10-Q) are included herewith or incorporated herein by reference.
INDEX TO EXHIBITS
|
|
|
|
|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
|
|
|
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
|
|
|
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
AMERICAN OUTDOOR BRANDS, INC., a Delaware corporation |
||
|
|
|
||
Date: November 30, 2023 |
|
By: |
|
/s/ Brian D. Murphy |
|
|
|
|
Brian D. Murphy |
|
|
|
|
President and Chief Executive Officer |
|
|
|
||
Date: November 30, 2023 |
|
By: |
|
/s/ H. Andrew Fulmer |
|
|
|
|
H. Andrew Fulmer |
|
|
|
|
Executive Vice President, Chief Financial Officer, and Treasurer |
29
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian D. Murphy, certify that:
Date: November 30, 2023 |
|
By: |
/s/ Brian D. Murphy |
|
|
|
Brian D. Murphy |
|
|
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, H. Andrew Fulmer, certify that:
Date: November 30, 2023 |
|
By: |
/s/ H. Andrew Fulmer |
|
|
|
H. Andrew Fulmer |
|
|
|
Executive Vice President, Chief Financial Officer, and Treasurer |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Outdoor Brands, Inc. (the “Company”) on Form 10-Q for the period ended October 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian D. Murphy, the President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 30, 2023 |
|
By: |
/s/ Brian D. Murphy |
|
|
|
Brian D. Murphy |
|
|
|
President and Chief Executive Officer |
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission, and is not to be incorporated by reference into any filing of American Outdoor Brands, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Outdoor Brands, Inc. (the “Company”) on Form 10-Q for the period ended October 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. Andrew Fulmer, the Executive Vice President, Chief Financial Officer, and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 30, 2023 |
|
By: |
/s/ H. Andrew Fulmer |
|
|
|
H. Andrew Fulmer |
|
|
|
Executive Vice President, Chief Financial Officer, and Treasurer |
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission, and is not to be incorporated by reference into any filing of American Outdoor Brands, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.