Welcome to the Fourth Quarter and Full Fiscal Year 2022 American Outdoor Brands Earnings Conference Call. My name is Vanessa and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I will now turn the call over to Liz Sharp, Vice President of Investor Relations.

Thank you, and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, should, indicate, suggest, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies and vision; our strategic evolution; our market share and market demand for our products; market and inventory conditions related to our products and in our industry in general; and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings. You can find those documents as well as a replay of this call on our website at aob.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude fair value inventory step-up, amortization of acquired intangible assets, goodwill impairment, stock compensation, transition costs, COVID-19 expenses, technology implementation, acquisition costs, related party interest income, other costs and the tax effect related to all of those adjustments. The reconciliations of GAAP financial measures to non-GAAP financial measures whether or not they are discussed on today's call can be found in our filings as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. Joining us on today's call is Brian Murphy, President and CEO; and Andy Fulmer, CFO. And with that, I will turn the call over to Brian.

Thanks, Liz, and thanks everyone for joining us. The completion of fiscal 2022 marks our first full year as a standalone company dedicated to building authentic lifestyle brands to help consumers make the most out of the moments that matter. It also signals the approaching two-year anniversary of our spin-off in August 2020. Since that time, we have remained firmly focused on our long-term strategic priorities, which include, introducing new differentiated products, expanding our addressable markets, cultivating our direct-to-consumer relationships, diversifying and enhancing our supply chain, and pursuing complementary acquisitions. I believe we've made significant progress across these objectives and today I look forward to sharing details of that progress and my thoughts on our outlook. First, let me highlight for you, what we've achieved in our first two years as an independent public company. In that time, we've taken our revenue from $167 million in fiscal 2020 to over $247 million in fiscal 2022, representing net sales growth of nearly 48% over our pre-pandemic levels, and a two year CAGR of over 21%. Underpinning that growth are a number of important developments. We leveraged our Dock and Unlock strategy to deliver a steady flow of exciting new products that generated nearly 26% of our fiscal 2022 revenue. That Dock and Unlock strategy also enabled us to enter new markets in large categories, including land management, at home meat processing, optics, and reloading equipment by creating a number of disruptive products that open up our potential for sizable future net sales growth. We created an entirely new brand Meet Your Maker, which we conceived and developed internally, providing us with access to new markets and new customers, and helping fuel year-over-year growth of 73% in our direct-to-consumer business in fiscal 2022. Meat is an outstanding example of the organic growth…

Thanks, Brian. Net sales for the year were $247.5 million, a decrease of 10.5% compared to our record prior year and an increase of roughly 48% over fiscal 2020. The year-over-year decrease was driven by a decline in shooting sports of 22.5%, partially offset by an increase in outdoor lifestyle of 7.2%. In fiscal ‘22, our net sales were almost evenly split between our two primary product categories, with shooting sports representing about 52% of our net sales and outdoor lifestyle representing 48% of our net sales. This result reflects significant progress and growing our outdoor lifestyle category, which represented only 40% of our net sales in fiscal ‘21. Turning now to our traditional brick-and-mortar sales versus e-commerce. Net sales in our traditional channel decreased 10.6% compared to the year ago period, but increased roughly 33% over fiscal ‘20. Net sales in our e-commerce channel were down 10.4% compared to our record fiscal 2021, but up nearly 80% over fiscal 2020. Our e-commerce net sales number includes our direct-to-consumer net sales of $16.6 million. This represents an increase of 73% in D2C net sales over fiscal '21 and an increase of nearly 273% over fiscal '20. These results demonstrate that the investments we made in our e-commerce platform in fiscal 2020 continue to yield meaningful returns and we believe they will continue to do so as we grow. On a quarterly basis, net sales in Q4 were $45.9 million, a decrease of approximately 29% from the prior year quarter, driven mostly by the decline in our shooting sports category. On a two year basis, we grew our net sales in Q4 by 6.5% over Q4 of fiscal 2020. Fiscal ’22 gross margins were 46.2%, a 40 basis point increase over the prior year. The increase in gross margin percentage was…

Thank you. We will now begin our question-and-answer session. [Operator Instructions] And we have our first question from Mark Smith with Lake Street Capital Partners.

Hey, guys. Thanks for the update here at the end on kind of your outlook. I'm curious, if you can talk at all, last quarter you did a little bit about kind of point of sale trends and data kind of what you're seeing out there today as far as at retail?

Sure. Hey, Mark. This is Brian. So we continue to see, I would say, strong demand for our products at retail. So POS remains strong. However, we are seeing that retailers are taking a step back right now and closely managing their inventory levels as they anticipate or try to anticipate what the consumer is going to do. It’s kind of funny before this call, we were talking about the dynamic right now between the consumer and the retailer. It feels like they're in a little bit of a staring contest. But for our products, we are seeing products move through nicely. We're just seeing that inventory levels are coming down with retailers.

And that brings up my next point, you guys talked about your inventory and kind of the puts and takes there. What's your comfort level with retail inventory right now?

Our comfort with retail inventory of our products, whether it's -- you're saying overall, you're staying with our products specifically.

I guess, your products specifically, but also if there's competitive products, if we're seeing any bloat in inventory that maybe would cause more competitive pricing or promotions down the road that would be insightful if there's any of that happening?

Yeah. So what we're seeing is generally the “open to buy” has been reduced from where it was in our Q3 and into Q4. So the open to buy from retailers has shrunk, as they're trying to lower their own inventory levels. With that said, there are pockets that they are focused on that are tend to be higher moving or higher volume of which we do benefit from some of them. But overall, there are other areas like shooting accessories, which we began to know back in -- it started in January, just a slowdown in shooting accessories and that's moving along, but overall, we're not seeing retailers begin to double down on that space. But they're just being more cautious. So that’s probably the best insight I can give you.

No, that's helpful. My next question was really around kind of brand lanes, if there's any that are holding better than others. And when you just talk about shooting sports, anything we've seen mix seemed to hold up pretty well and would you say that accessory business in shooting sports is following trends with mix or with inflationary pressure on consumers or they may be pulling back a little bit from some of their accessory spend within shooting sports?

Yeah. Good question. So I'll kind of reframe it into the two different worlds. You've got direct-to-consumer for us, which we noted with the combination of Grilla. Just those two brands alone represents about 10% of our total net sales. And where we have that conversation directly with the consumer through direct-to-consumer sales, we still are seeing some very, very good traction and very much positive trends. So that's moving along very nicely and obviously, Grilla and Meat fall into our harvester in our adventurer lanes. And then, what I also want to mention is looking kind of where we're at today, looking forward to be seen if we are in the early stages of a recession or what that might look like, but the saying goes history never repeats itself, but it sometimes rhymes. And historically, during times of lower consumer spend, fishing, hunting, camping and I would say outdoor cooking, specific -- any off-premise, cooking and consumption of drinks, meaning away from restaurants tends to see a benefit as people are more cautious about getting in their cars and driving to restaurants and when there's inflation and things like that. So I think that bodes well for companies like ours, specifically the brand lanes that we have and where we play. So I do think that that will -- if that were to be the case. I think that bodes well for all of our brand lanes. You asked specifically about shooting sports. We continue to see good attachment rates with our accessories. We are not seeing the same height obviously that we saw last year when there was civil unrest and some other dynamics that play that drove up demand, but certainly we are seeing consumers come back around with additional purchases, so we are seeing a stickiness there.

Excellent. The last one from me, remind me and I apologize if I missed this. You guys completed your buyback, but you've not seen re-up by the Board yet for new buybacks. Is that correct?

That's correct.

And are you guys limited in any way from doing a re-up until the two year anniversary from spin-off or is it available if the board wanted to do a buyback now and authorize one?

Yeah, Mark. This is Andy. It's a great question. So there are some limitations. I don't think that -- I think the dollar amount would be pretty big. So we work with our Board to make sure we're maximizing shareholder value and capital allocation. So yes, nothing of note.

Okay, perfect. Thank you guys.

And thank you. [Operator Instructions] I see no further questions in queue at this time.

All right. Well, operator and everyone listening, in closing, I want to acknowledge the loyalty, hard work and dedication of our employees, our suppliers and our customers who continue to move American Outdoor Brands forward on a path to an exciting long term future. Thank you everyone for joining us today. We look forward to speaking with you again next quarter.

And thank you. Ladies and gentlemen, this concludes today's conference. We thank you for participating. You may now disconnect.