Good day everyone and welcome to the American Outdoor Brands, Inc. Fourth Quarter and Full Year Fiscal 2024 Financial Results Conference call. This call is being recorded. And at this time, I would like to turn the call over to Liz Sharp, Vice President of Investor Relations, for some information about today's call.

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, could, 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 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 amortization of acquired and tangible assets, stock compensation, shareholder cooperation agreement costs, facility consolidation costs, technology implementation, tariff drawback adjustments, acquisition costs, other costs, and income tax adjustments. The reconciliation of GAAP financial measures to non-GAAP financial measures, whether 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'll turn the call over to Brian.

Thanks, Liz, and thanks everyone for joining us. I'm very pleased with our performance for fiscal 2024, a year in which we delivered year-over-year net sales growth that exceeded our expectations and achieved several strategic milestones, which position our company and our brands well for the future. At the core of our company is our relentless focus on innovation, which is driven by the activities of our consumer. This is a commitment that we maintain no matter what the environment, and it drives not only brand loyalty with our consumers, but also long-lasting and trusting relationships with our retailers. Those retailers have learned that while other suppliers are reeling from changes and uncertainty in the environment, often halting their innovation efforts and slashing prices, they can rely on us to remain steadfast in our promise to maintain the value of our brands, invest in innovation, strengthen our supply chain, and most of all, support their customers with a steady stream of exciting products from leading brands that bring shoppers through the door. That reliability helped drive growth in fiscal 2024 by allowing us to forge stronger relationships with our consumers and retailers, despite the consumer uncertainty that characterized the year. It also allowed us to deliver on a number of commitments we made to our stockholders heading into fiscal 2024. When we entered the year, we shared our intent to control those elements, we could control, in order to best position us for those elements we could not control. We set out a number of objectives for fiscal 2024, and we believe the results we are sharing today demonstrate that we have delivered on those commitments. For instance, we said we would invest in international expansion to drive growth in the channel. We made that investment and delivered solid growth.…

Thanks, Brian. In fiscal 2024, we strengthened our balance sheet, generated significant operating cash flow, controlled our costs, and demonstrated effective capital deployment, all while growing year-over-year net sales by more than 5%. We ended the year with several achievements and highlights, so let me walk you through the details. Net sales for the year were $201.1 million, an increase of 5.2% compared to fiscal 2023, and an increase of 20.1% over pre-pandemic fiscal 2020. On a category basis, outdoor lifestyle sales increased by 6.9% and shooting sports sales increased by 3.2% compared to fiscal 2023, driven mainly by increased net sales in the hunting, fishing, and shooting accessories categories. Compared to pre-pandemic fiscal 2020, outdoor lifestyle sales increased 43%, which includes the acquisition of Grilla, and shooting sports sales growth was generally flat at about 1%. Outdoor lifestyle represented roughly 54% of total net sales in both fiscal 2024 and fiscal 2023. Turning now to our traditional brick and mortar sales versus e-commerce. Net sales in our traditional channel increased 12.3% compared to the year ago period and 3.3% compared to fiscal 2020. Net sales in our e-commerce channel were down slightly at 3.3% compared to the prior year, but they were up more than 55% over fiscal 2020. Our e-commerce channel sales include our sales to online retailers and our own direct-to-consumer or D2C sales. On a standalone basis, D2C net sales for fiscal 2024 were $29.1 million, roughly flat to last year, and represented approximately 15% of our total net sales. It's worth noting that our D2C sales also reflect the closure last year of a legacy Grilla retail location in Michigan, which largely serviced local sales in that area. Excluding sales from that store, fiscal 2024 D2C sales would have been up 3.3% over fiscal 2023.…

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Mark Smith with Lake Street Capital. Please go ahead.

Hi, guys. First question for me, just wanted to dig in a little bit more on new product mix. You know, Brian, you talked a lot about your innovation and some of the products. I'm curious if, you know, here in Q4, if there was any standout new products or even segments that seem to be maybe doing better than others.

Yeah, hey Mark, it's Brian. So, yeah, great question, and thanks for keying in on the innovation piece. I mean, new products was a big part of the year at 23% of our net sales. And then specific to Q4, Q4 is when we start getting into the fishing season. So, BUBBA did extraordinarily well in Q4 and heading into Q1 of this next fiscal. We've also seen some nice pick up in brands like BOG, which has become a little bit more of a year round hunting brand, just given some of the new product introductions there. Meat obviously doing pretty well, you know, saw the entry into retail in November and that's carried through the end of the fiscal. And then just Grilla. Grilla continues to do very well for us. It -- Andy had said in his prepared remarks that we shut down the Holland location up in Michigan last year, took the new space here to bring that product down here. That business just continues to do extremely well. We launched the Mammoth Vertical Smoker that I mentioned in my prepare remarks. We can't keep that product in stock. So really trying to get as much as we can over here right now, but a lot of those products are in high demand and we need to try to capture that as best we can.

Okay, I did want to ask about Meat in the retail. I don't know if you can quantify anything or talk about kind of how that process has gone, any increase or lift that you've seen because of that, and then any sneak peek you can give us at Grilla and kind of the plan and rolling that out to retail, if that will follow kind of a similar pattern.

Yeah, with meat, I mean, just taking a step back, the strategy has always been, how can we maintain the brand standards? And we've got such a robust product pipeline in place for both Meat and Grilla, which retailers are going to be able to accentuate that and really represent the brand the way it needs to be a retailer. And so, you know, Academy was the first retailer that we worked with on the Meat brand. They've done an absolutely incredible job, have been a great partner for us. And what's interesting is in turn has also given us more eyeballs on our website. So we've seen a nice pickup in some of the accessory items and things or maybe some products that are not sold at Academy. And so it's actually been a win-win for us in that situation. And then for Meat, we're also beginning to explore some other retail avenues. We have Meat beginning to show up in some of the tractor supply stores. So if you are on that email list for MEAT! Your Maker, you probably received that email. That's also a very exciting partnership and very complimentary with Academy. And then we'll continue to look for additional opportunities. You know, we've turned some folks down. We just didn't think it was the right fit, but ultimately we want to do what's best for the brand and make sure this is a win-win for the retailers and for us and the consumer. And then as it relates to Grilla, this last year was really, we got to make sure that we're set to go with Grilla to go into retail. The packaging, you know, this is kind of the boring stuff, but you can't really take a blank cardboard box that says Grilla on it and put it on a shelf. It probably wouldn't sell too many. So you know, we had to take a fresh look at it and make sure that we were buttoned up and ready to go out retail. We did the same exercise with Meat before we took it into retail. And -- but there it's going to be a similar strategy, similar playbook. And I think, you know, products like the vertical smoker, the mammoth vertical smoker, are really going to be, I'll call them halo products, as we begin to bring that brand into retail. There's just a tremendous amount of consumer excitement with that brand and with that product especially. And the retailers are really excited about the modularity of the kitchen. It's something that's for most of them entirely new and that's really what they're looking for.

Okay. And then, you know, for all of your brands throughout kind of traditional retail, I'm curious just the growth that we saw there, you know, if you can give any more breakdown of kind of where that came from? Maybe how much of a lift you got from further launches into Canada. How much of that maybe came from just being better stocked and having better inventory? And maybe how do you feel about your shelf space and your retail partners and how that relationships are?

Yeah, great question. I think it's a lot of things, and you alluded to that. It's the simple blocking and tackling, having high fill rates with our customers. It's ultimately supporting them with the right merchandising and pull through activity, making sure that our marketing is as targeted as possible. I mean, we really want to be a close partner with our retailers. And that's what's allowed us to go into Canada in a very big way. In a 10-K, this time, you'll see we break out Canada versus Europe and rest of world. Canada's becoming a much bigger part of our business, and I think we're just getting started there. So being able to give them the right product at the right time is a huge deal. And then just across traditional and general, I think a lot of the retailers, especially the good ones, the ones that operate very well, have caught up to Amazon, to some respect, being able to ship out same day, being able to utilize services like DoorDash to get those products to consumers the same day. And ultimately for us too, since we play at the higher end in the premium side of the market, premium price points, is our ability to maintain that high pricing, with minimum advertised price, with [MAP] (ph), and then if people aren't following that, we were pretty strict, you know, we'll take people off. So the traditional retailers have a lot of trust in us that we're not going to go blow out products, we're not going to go drop the retail, we're not going to devalue their inventory, and as a result they want to continue to jump on the AOB train and let's get some new products, let's get all that. So just a tremendous amount of trust that's been built up at across different avenues.

Okay, and I think the last one for me, kind of two part here, you know, any updates on your thoughts on M&A market, what you're seeing out there, and kind of how maybe hungry you guys are currently for M&A deals. And then any additional thoughts on use of capital. I know Andy, you talked a little bit about the factory outlet and some things that you'll spend on, but just kind of your use of capital this year and kind of how you see that playing out?

Yeah. So as we alluded to the last few quarters, the deal market had dropped off pretty considerably. And I think one of the main reasons there is companies just didn't have run rate level performance to be able to sell off of, and so we expected it would take a few quarters for them to begin to see a trend that would at least give buyers some trust and credibility in those numbers. So during that period of time, we were very proactive in going after companies that we were targeting. And so we've cultivated quite a bit of a pipeline there that we're still talking to. With that said, I would say especially in the last, I would say last 30 days, 45 days, we've seen a nice pickup in deal flow. And for us, especially at sizes that make great tuck-ins for us. And in categories that make a lot of sense, they're complementary to our existing portfolio, they don't step on the toes of anything else. We can leverage our new product innovation engine and also give us some more diversification. I will tell you, just to give you this insight, most of the deals that we're looking at, and perhaps not surprisingly, are on the outdoor lifestyle side of the business. It's not because we're trying to not pursue anything on the shooting sports side, but certainly there are more opportunities on the outdoor lifestyle side and I think as a company we have more permission to play there. So that's where most of our focus lies today. And we're hopeful that in terms of our cash position and where we stand, our liquidity, I think we're a buyer of choice. That's the feedback we've been hearing from some of the bankers and even sellers directly for us to just be a good buyer in this environment. So I think this should be an interesting year for us when it comes to M&A.

Okay. You know, maybe I'll sneak in one more just to confirm kind of on your guidance and kind of your outlook here in fiscal 2025. It sounds like within shooting sports that you guys aren't expecting or have anything built in for kind of a ramp here as we get closer to the election. And obviously you don't sell firearms or ammunition, but is that a fair statement that you guys are not expecting, any significant ramp in demand for those products as we enter and get closer to the election.

Yeah, this is Brian I’ll start and Andy, feel free to chime in here, but you're spot on. So we've taken a conservative view, you know, to that category heading into the election. I don't think anybody knows what's really going to happen. But if something were to happen for whatever reason, that would be incremental to what we have modeled this year in the numbers. So, Andy, do you want to add anything to that?

Yeah, just overall, I know you had, Mark, you had a couple of questions on guidance. I was going to walk you through a couple of things really quick. So, we guided to roughly the 45% gross margin. As we've talked about in previous calls about elevated freight costs that have been kind of stuck in inventory, needed to be amortized to the P&L, that happened, as you know, in the back half of fiscal 2024, and we talked about that turning into a headwind in fiscal 2025. We're seeing a continuation of the amortization into Q1, and then those tailwinds will start in Q2. So I think if you were to look kind of quarter-by-quarter on gross margin, the full year is roughly at 45%. I think Q1 will be a little bit lower, maybe like 43%. And then you'll see some improvement starting in Q2.

Okay. Perfect. Very helpful, guys. Thank you.

Thanks, Mark.

And this will conclude our question and answer session. I'd like to turn the conference back over to Brian Murphy for any closing remarks.

Thanks, operator. Before closing, I want to thank our employees across AOB, whose dedication helped us deliver a solid year of growth and progress towards achieving our strategic plan. Thank you, everyone, for joining us today. Have a great summer and we look forward to speaking with you again next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.