American Outdoor Brands (AOBC) Misses Q1 EPS by 9c; Lowers Outlook
American Outdoor Brands (NASDAQ: AOBC) reported Q1 EPS of $0.02, $0.09 worse than the analyst estimate of $0.11. Revenue for the quarter came in at $129 million versus the consensus estimate of $147.38 million.
American Outdoor Brands sees Q2 2018 EPS of $0.07-$0.12, versus the consensus of $0.27. American Outdoor Brands sees Q2 2018 revenue of $140-150 million, versus the consensus of $171.4 million.
American Outdoor Brands sees FY2018 EPS of $1.04-$1.24, versus the consensus of $1.54. American Outdoor Brands sees FY2018 revenue of $700-740 million, versus the consensus of $777.4 million.
- Quarterly net sales were $129.0 million compared with $207.0 million for the first quarter last year, a decrease of 37.7%.
- Gross margin for the quarter was 31.5% compared with 42.3% for the first quarter last year.
- Quarterly GAAP net loss was $2.2 million, or $(0.04) per diluted share, compared with net income of $35.2 million, or $0.62 per diluted share, for the comparable quarter last year. First quarter 2018 and 2017 GAAP net (loss)/income per diluted share include expenses of $3.8 million and $1.7 million, respectively, for amortization, net of tax, related to acquisitions.
- Quarterly Non-GAAP net income was $1.2 million, or $0.02 per diluted share, compared with $37.7 million, or $0.66 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments to net income exclude a number of acquisition-related costs, including amortization, one-time transaction costs, and a change in contingent consideration liability, as well as discontinued operations. For a detailed reconciliation, see the schedules that follow in this release.
- Quarterly non-GAAP Adjusted EBITDAS was $12.9 million, or 10.0% of net sales, compared with $65.8 million, or 31.8% of net sales, for the comparable quarter last year.
- During the first quarter, the company announced the purchase of substantially all of the assets of Gemini Technologies, Incorporated (\"Gemtech\"), a provider of high quality suppressors and accessories for the consumer, law enforcement, and military markets, for $10.0 million. The company also announced the purchase of Bubba Blade™, a premium brand of knives and tools for fishing and hunting, for approximately $12.0 million. Both transactions closed early in the second quarter of fiscal 2018.
James Debney, American Outdoor Brands Corporation President and Chief Executive Officer, commented, "Our financial results for the first quarter reflected lower than anticipated shipments in our Firearms business, consistent with a softening in wholesaler and retailer orders, partially offset by increased revenue from our Outdoor Products & Accessories business, which grew organically at 11.4% and which more than doubled inorganically. Total revenue for the quarter also faced a challenging comparison to last year\'s heightened level of firearms demand, which we believe was driven by concerns for personal safety and the potential for increased firearm legislation.
"In Firearms, we believe units shipped in the first quarter were impacted by an extremely successful promotion on our M&P Shield pistols that we initiated in our prior fourth quarter. That promotion exceeded our expectations and we believe it pulled forward our shipments into the fourth quarter as wholesalers and retailers stocked up in preparation for the strong consumer demand for those products that they believed would occur – and that did in fact occur – over the ensuing 90 days. In addition, we believe that heightened channel inventory from multiple manufacturers at retail locations contributed to lower orders in the quarter. Despite those heightened channel inventories, we were pleased that our inventory at distributors actually declined during the quarter. For the remainder of the year, our focus in Firearms will be on bringing Gemtech suppressors into our product line and on introducing several significant new firearms in the second half of this fiscal year. We plan to further increase our internal inventory in preparation for new product launches, the upcoming fall hunting and holiday seasons, and the industry ordering shows that occur in January and February. In Outdoor Products & Accessories, we will focus on new product introductions, including offerings from our acquisition of Bubba Blade, a premium knife brand that is widely recognized among outdoor enthusiasts for some of the finest knives for fishing and hunting. Bubba Blade products deliver features and benefits that are very popular with consumers, and are protected by strong intellectual property. This acquisition also serves as our first step into the sizeable fishing market. Overall, we remain focused on the execution of our long-term strategic growth initiatives, which support our vision of being the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast," concluded Debney.
Jeff Buchanan, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, commented, "We ended the quarter with cash of $43.4 million and net debt of approximately $199 million. Although operating cash flow for our first quarter was negative, and we are forecasting neutral operating cash flow for our second quarter, we expect the current fiscal year to deliver positive operating cash flow of $70 million to $90 million. In addition, based on our guidance and current cash flow forecast, we do not expect our Net Debt-to-Adjusted EBITDAS trailing twelve month ratio to rise above 1.6, and we expect that ratio to be below 1.2 by the end of our current fiscal year."
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