Hello, everyone, and welcome to the Johnson Outdoors First Quarter 2023 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson's Outdoors Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President and Chief Financial Officer. [Operator Instructions] This call is being recorded. Your participation implies consent to our recording of this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman. Ms. Penman might be on mute. Ms. Penman your line is off mute.

Thank you. Good morning, everyone. Thank you for joining us for our discussion of Johnson Outdoors Results for the 2023 Fiscal First Quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under Investor Relations. I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have additional questions following the call, please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson-Leipold.

Thanks, Pat. Good morning, and thank you for joining us. I'll begin with an overview of the quarter, and then I'll share perspective on the performance and outlook for our businesses. Dave will review financial highlights, and then we'll take your questions. Sales in our first fiscal quarter ending December 2022 rose 16% to $178.3 million compared to $153.5 million in prior year first quarter. Net income for the quarter was $5.9 million or $0.57 per diluted share versus $10.9 million or $1.07 per diluted share in the previous year's first quarter. Operating profit decreased 60% to $5.5 million versus $13.8 million in the prior fiscal year first quarter, with increases in inventory costs significantly impacting profitability. We've been working hard to manage the challenging supply chain environment, while evaluating all avenues to mitigate cost pressures, including price strategies and cost reduction efforts. In our Fishing business, supply and component availability continued to ease, allowing us to fill more customer orders. We still have a solid pipeline of orders that we're working through and continuing to manage supply chain challenges remains our priority. In guiding, we continued to see momentum as the market rebounds from the depressed pandemic levels, and we continue to benefit from our SCUBAPRO equity as the most trusted dive brands in the world. In our Camping and Watercraft recreation businesses, we are seeing some softening in market demand and higher inventory levels at retail. The good news is that we continue to have strong brand positions, especially in Old Town and Jetboil. Innovation continues to be critically important to our growth and success of our brands. The last few years have brought new participants into outdoor recreation, which is a good thing for us. Our ongoing investment into understanding both new and existing consumers evolving needs and translating back into new product success remains our focus. In all of our businesses, we're working on exciting pipeline of new products. While it's still too early to tell how the season will end up, we're monitoring consumer buying behavior and focused on filling customer orders and supporting our brands as we head into our primary selling season. As always, our team takes a long-term view positioning our brands and business for long-term growth. Now I'll turn the call over to Dave for a review of the financial highlights.

Thank you, Helen. Good morning, everyone. I want to highlight a few items from the quarter. As Helen mentioned, we're seeing supply availability continue to improve, allowing us to fill more customer orders, especially in Fishing. The quarter's gross margin of 39.5% is down 4.3 points from last year's first quarter due primarily to the increased cost of sales due to high material and freight costs that are in inventory. We're starting to see our costs eased somewhat, but we expect margins to continue to be challenged in the coming months as we work through our higher cost inventory. Inflation remains a concern. And as Helen mentioned, we continue to evaluate all options to improve profitability. Operating expenses in the first quarter increased $10.4 million versus the prior year first quarter. Higher sales volume-driven expenses drove some of the increase. We also experienced higher compensation expense, an increase in health care costs and higher professional services costs between the quarters. Profit before income taxes was $8.2 million versus $14.6 million in the prior year quarter, driven by the lower gross margin and increased operating expenses. Net income for the first quarter was $5.9 million, down 46% from the prior fiscal first quarter. The effective tax rate was 28% compared to the prior year first quarter rate of 25.6%. It felt too early to tell how the season will shake out, but we're focused on monitoring demand and proactively managing our inventory levels. We continue to have no debt on the balance sheet and our cash position enables us to invest in opportunities to strengthen the business. We remain confident in our ability to deliver long-term value and consistently pay out cash dividends to our shareholders. Now I'll turn the call over to the operator for the Q&A session. Operator?

[Operator Instructions] Our first question will come from the line of Anthony Lebiedzinski from Sidoti.

So first, could you guys expand about the pipeline of unfulfilled orders. Maybe directionally, can you just talk about where it is now versus your fiscal year-end or versus a year ago? It sounds like it's mostly -- the backlog is mostly for Fishing, but maybe if you could just give us additional color that would be very helpful.

Yes, we've got a continuing pipeline in Fishing, as you know, we are working on our supply availability and as that supply comes in, we're able to continue to meet those orders. It's good momentum, but as far as the season goes going forward, we're still in the preseason mode, but there good solid orders in there that we feel are going to continue to be there as we move forward. So good shape on that end of it.

Okay. And as far as -- are you seeing any order cancellations or maybe some retailers may be postponing their orders? What are you seeing thus far? I know it's early still in the season. Obviously, you are tied to warm weather outdoor recreation. So I guess, on the consumer side, it's probably too early to tell, but just wondering as far as what you're hearing from your retailers?

Well, I think all retailers are being cautious right now and trying to predict the season is a tough one. So there's cautious. On their side, I think even Watercraft and Camping, the demand has slowed and they've got a pretty solid inventory at retail. So that's waiting for the season to come in then we can get a read. But I think there's caution out there.

Okay. Understood. So yes, so it sounds like Fishing and Diving are in better shape versus the 2 smaller segments. Okay. And then I think you talked about the price increases as well. Can you just talk about how much pricing contributed to reported revenue in the quarter and whether or not you have any plans for additional price increases?

Yes. I mean the price increase, we've taken a few tranches of price increases over the last 18 months or so. So I don't have the number for the total price increase effect on this quarter versus last quarter. But we did see unit volume up, obviously, significantly for the quarter, just to point that out. And as we said, I mean, we'll look at everything going forward to get our margins back to where we'd like it to be, and that would include pricing strategies as well as cost reductions.

Got it. Okay. And then in terms of your inventory, do you think we're now at the peak inventory position? And at what point would you be able to say when you're able to work through the high-cost inventory?

Yes. We expect inventory to start to go down -- starting with our the key selling season that may start in April with our inventory numbers. But we're working to get those down back to more balanced normal levels. We'll start to see -- unless we see costs start to increase even further, and they have moderated, we'll start to see our gross margin start to incrementally improve in the coming quarters. So that will be -- that will probably take the whole fiscal year to get through, but we'll start to see improvement going into the next quarter.

Okay. That's good to hear. And then on your operating expense side, you talked about higher health insurance and professional services fees and so on. Just wondering how much did that contribute to the overall increase in expenses in the quarter? And going forward, if you back out the sales-driven volume expenses, how should we think about your expense growth for the rest of the fiscal year?

Yes. I mean we'll see some moderate increases in the balance of the year in our expenses. I wouldn't expect anything significant. Yes, in this quarter, a good portion, almost half of that increase in operating expenses volume related. So we're not talking big numbers here for the quarter, but it's -- and the compensation expenses, they will probably be incrementally higher this year versus last year just due to headcount and merit and that kind of thing.

And I'm not showing any further questions in the queue. I'd like to turn the call back over to Helen Johnson-Leipold for any closing remarks.

Okay. Well, thank you all for joining us today, and I hope you have a great day.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.