Overview
The following discussion and analysis of our financial condition and results of
operations for the three months ended
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.
In
First Quarter Fiscal 2023 Highlights
Our operating results for the three months ended
•
Net sales were$43.7 million , a decrease of$17.1 million , or 28.1%, from the comparable quarter last year. • Gross margin was 43.6%, an decrease of 410 basis points from the comparable quarter last year. • Net loss was$5.7 million , or$0.42 per diluted share, compared with net income of$3.5 million , or$0.24 per diluted share, for the comparable quarter last year. • Non-GAAP Adjusted EBITDAS was$1.4 million for the three months endedJuly 31, 2022 compared with$9.6 million for the three months endedJuly 31, 2021 . See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDAS. Results of OperationsNet Sales and Gross Profit The following table sets forth certain information regarding consolidated net sales and gross profit for the three months endedJuly 31, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change Net sales$ 43,676 $ 60,768 $ (17,092 ) -28.1 % Cost of sales 24,637 31,785 (7,148 ) -22.5 % Gross profit$ 19,039 $ 28,983 $ (9,944 ) -34.3 %
% of net sales (gross margin) 43.6 % 47.7 %
The following table sets forth certain information regarding trade channel net
sales for the three months ended
2022 2021 $ Change % Change e-commerce channels$ 20,545 $ 16,608 $ 3,937 23.7 % Traditional channels 23,131 44,160 (21,029 ) -47.6 % Total net sales$ 43,676 $ 60,768 $ (17,092 ) -28.1 %
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
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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
2022 2021 $ Change % Change Domestic net sales$ 40,276 $ 56,530 $ (16,254 ) -28.8 % International net sales 3,400 4,238 (838 ) -19.8 % Total net sales$ 43,676 $ 60,768 $ (17,092 ) -28.1 %
For the three months ended
Net sales in our e-commerce channel increased
Net sales in our traditional channels decreased
New products, which we define as any SKU introduced over the prior two fiscal
years, represented 25.9% of net sales for the three months ended
Gross margin for the three months ended
Operating Expenses
The following table sets forth certain information regarding operating expenses
for the three months ended
2022 2021 $ Change % Change Research and development$ 1,756 $ 1,521 $ 235 15.5 % Selling, marketing, and distribution 11,780 13,200 (1,420 ) -10.8 % General and administrative 11,064 10,039 1,025 10.2 % Total operating expenses$ 24,600 $ 24,760 $ (160 ) -0.6 % % of net sales 56.3 % 40.7 %
Research and development expenses increased
Operating Income
The following table sets forth certain information regarding operating income
for the three months ended
2022 2021 $ Change % Change Operating (loss)/income$ (5,561 ) $ 4,223 $ (9,784 ) -231.7 %
% of net sales (operating margin) -12.7 % 6.9 %
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Operating loss for the three months ended
Income Taxes
The following table sets forth certain information regarding income tax expense
for the three months ended
2022 2021 $ Change % Change Income tax expense$ 189 $ 849 $ (660 ) -77.7 % % of income from operations (effective tax rate) -3.4 % 19.7 % -23.1 %
We recorded income tax expense of
Net (Loss)/Income
The following table sets forth certain information regarding net (loss)/income
and the related per share data for the three months ended
2022 2021 $ Change % Change Net (loss)/income$ (5,695 ) $ 3,457 $ (9,152 ) -264.7 % Net (loss)/income per share Basic$ (0.42 ) $ 0.25 $ (0.67 ) -268.0 % Diluted$ (0.42 ) $ 0.24 $ (0.66 ) -275.0 %
Net loss was
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 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.
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The following table sets forth our calculation of non-GAAP Adjusted EBITDAS for the three months endedJuly 31, 2022 and 2021, respectively (dollars in thousands): For the Three Months Ended July 31, 2022 2021 (Unaudited) GAAP net (loss)/income $ (5,695 )$ 3,457 Interest expense 186 46 Income tax expense 189 849 Depreciation and amortization 4,162 4,179 Stock compensation 714 752 Technology implementation 769 272 Acquisition costs 47 - Shareholder cooperation agreement costs 1,010 - Non-GAAP Adjusted EBITDAS $ 1,382$ 9,555
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; hire additional
employees; fund growth strategies, including any potential acquisitions; to make
payments on our
The following table sets forth certain cash flow information for the three
months ended
2022 2021 $ Change % Change
Operating activities
Operating Activities
On an annual basis, operating activities generally represent the principal source of our cash flow.
Cash generated by operating activities was
Investing Activities
Cash used in investing activities was
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Financing Activities
Cash used in financing activities was
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, the capital needed to operate as an independent publicly traded company, including the establishment of our enterprise resource planning systems, any acquisitions or strategic investments that we may determine to make, our ability to navigate through the many negative business impacts from the COVID-19 pandemic and related aftermath, 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
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
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.
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