Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vista Outdoor Inc (VSTO, Financial) reported sales of $644.2 million for Q1, with The Kinetic Group contributing $370 million and Revelyst contributing $274 million.
- The Kinetic Group delivered an adjusted EBITDA margin of 30%, demonstrating strong performance despite economic headwinds.
- Revelyst achieved market share gains in several categories, including bike helmets, snow goggles, and fishing sportswear.
- The company made significant progress on its GEAR Up transformation program, realizing $5 million in cost savings in Q1 and targeting $25-$30 million for the fiscal year.
- Vista Outdoor Inc (VSTO) reduced its net debt by $81 million in the quarter, ending with a net debt leverage ratio of 1.3 times.
Negative Points
- Revelyst faced challenges related to new product introduction and order fill timing, impacting Q1 results.
- Gross profit for Q1 decreased by 6.9% to $211.2 million due to decreased volume and increased input costs.
- Revelyst's Q1 EBITDA was down 35.2% year-over-year, with an EBITDA margin of 5.7%, reflecting lower gross profit across all segments.
- The Kinetic Group experienced headwinds from a global powder shortage and increased input costs, which are expected to continue.
- Revelyst's sales guidance for the fiscal year excludes contributions from recently divested businesses, which contributed approximately $30 million in sales in fiscal year 2024.
Q & A Highlights
Q: You've reaffirmed the stand-alone Revelyst EBITDA guidance to double this year. Could you give us more help in getting there through the year?
A: Andrew Keegan, CFO: The GEAR Up savings have started coming through, with $5 million realized so far. We see a path to $25 million to $30 million in savings for the year. On the revenue side, we expect to recoup $13 million in orders that shifted out of Q1 and benefit from new product introductions and partnerships like the one with Guy Fieri.
Q: Can you speak to the capacity of the specialty channel to take on new product introductions?
A: Eric Nyman, Co-CEO: We are seeing market share gains in categories like bike helmets and fishing sportswear. However, the specialty channel is still under pressure and may take 12 to 18 months to fully recover. We are seeing some green shoots with preorders, but mass and direct-to-consumer channels are performing better.
Q: Why was there a delay in sales and a push out into the second quarter for Revelyst?
A: Andrew Keegan, CFO: The delay was due to a quality issue with a Bushnell Golf product that required a software fix, and order processing issues in our warehouses. These have been addressed, and we expect to recoup the delayed sales in the coming quarters.
Q: What else are you relying on to achieve the EBITDA target for Revelyst?
A: Eric Nyman, Co-CEO: In addition to GEAR Up savings, we expect contributions from an April 2023 restructuring program, improvements in freight costs, and reduced promotional activities compared to last year.
Q: Can you talk about the cost pressures and outlook on gross profit margin within the Kinetic Group?
A: Jason Vanderbrink, Co-CEO: We had a good quarter due to mix and price increases. However, we expect elevated commodity costs, particularly for powder, to put pressure on margins in the back half of the year.
Q: What is the outlook for government sales for both Kinetic and Revelyst?
A: Jason Vanderbrink, Co-CEO: We see opportunities for new contracts, particularly in performance ammunition. Eric Nyman, Co-CEO: On the Revelyst side, we had good wins in our Eagle and BLACKHAWK businesses and see this as a growth area over the next three years.
Q: How is the consumer doing today, particularly in the Adventure Sports segment?
A: Eric Nyman, Co-CEO: We are seeing some mix shift, with better performance in mass and direct-to-consumer channels. Specialty is still under pressure but showing some green shoots. We remain conservative in our consumer outlook.
Q: Can you get to the EBITDA target at the low end of your revenue guidance?
A: Andrew Keegan, CFO: There would be some pressure, but we are looking at additional GEAR Up savings to close the gap. It would be challenging but achievable.
Q: What did POS look like during the quarter for both businesses?
A: Jason Vanderbrink, Co-CEO: POS was flattish to down slightly, with some categories like hunting rifle and shotshell performing well. Eric Nyman, Co-CEO: On the Revelyst side, POS was in line with shipments and we expect improvement going forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
