Vista Outdoor (VSTO) Tops Q2 EPS by 46c, Revenues Beat; Offers 3Q EPS/Revenue Guidance Above Consensus

Vista Outdoor (NYSE: VSTO) reported Q2 EPS of $1.10, $0.46 better than the analyst estimate of $0.64. Revenue for the quarter came in at $575 million versus the consensus estimate of $506.39 million.

For the second quarter ended September 27, 2020:

• Sales increased 29 percent to $575 million, compared with the prior-year quarter.
• Gross profit rose 79 percent to $162 million, compared with the prior-year quarter. Gross profit margin improved by 786 bps compared with the prior-year quarter.
• Operating expenses were 15 percent of sales, and improved by 483 bps when compared with the prior-year quarter. Adjusted operating expenses were 15 percent of sales, and improved by 356 bps when compared with the prior-year quarter.
• Earnings before interest and taxes (EBIT) increased to $75 million, from $1 million in the prior year quarter. Adjusted EBIT increased to $78 million, from $10 million in the prior year quarter.
• Interest expense decreased 54 percent to $6 million, compared with the prior-year quarter. Adjusted interest expense decreased 37 percent.
• Fully Diluted Earnings per Share (EPS) was $1.34, compared with $(0.21) in the prior-year quarter. Adjusted EPS was $1.10, compared with $0.00 in the prior-year quarter.
• Cash flow provided by operating activities was positive $198 million, compared with a use of cash of $(8) million in the prior-year period. Free cash flow generation was positive $190 million, compared with a use of cash of $(23) million in the prior-year.

"We delivered outstanding results in the second quarter," said Vista Outdoor Chief Executive Officer, Chris Metz. "Our focus on the great outdoors, together with the strength of our business model, product offerings and execution drove positive results across the company. The difficult work we've done over the past three years to improve profitability and efficiency and expand our e-commerce capabilities turned our increased revenue into higher margins and a dramatically improved level of free cash flow. With our leverage ratio down to 1.4x in the quarter we could again look to acquisitions as a further lever of growth. Last month we completed an acquisition of the iconic Remington brand. We are thrilled with this highly synergistic acquisition, which adds Remington's Arkansas ammunition manufacturing facility and ownership of the legendary Remington brand in ammunition and accessories categories to our world-class portfolio."

"My sincere thanks and appreciation go out to our entire team of outstanding employees for their hard work and resilience. None of these results could have been possible without their extraordinary efforts to serve our customers with dedication and passion in the midst of the challenges presented by the COVID-19 pandemic," Metz added.

GUIDANCE:

Vista Outdoor sees Q3 2021 EPS of $0.55-$0.65, versus the consensus of $0.45. Vista Outdoor sees Q3 2021 revenue of $510-530 million, versus the consensus of $461.04 million.

"Our focus on e-commerce was well timed and well executed as this channel grew more than 100% during the quarter," said Sudhanshu Priyadarshi, Vista Outdoor Chief Financial Officer. "E-commerce at 22% of YTD sales contributed to the healthy upswing on the EBIT margin to 13.5% as well as superior growth in YTD free cash flow to $190 million. With the balance sheet now in excellent shape, we can move to deploying our capital to further fund our future growth including innovation and select tuck-in acquisitions, like Remington."

Based on results to date, the current market environment and typical seasonality, Vista Outdoor's outlook for third quarter Fiscal Year 2021, which includes Remington, is as follows:

• Sales in a range of $510 million to $530 million
• Earnings per Share in a range of $0.55 to $0.65

FY21 guidance does not include the impact of any additional future strategic acquisitions, divestitures, investments, business combinations or other significant transactions.

For earnings history and earnings-related data on Vista Outdoor (VSTO) click here.

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