Vista Outdoor Reports First Quarter FY24 Financial Results
- Separation Remains on Track, with Outdoor Products CEO in Place, Expect to Spin in Calendar 2023 Q4
- Total Sales Were $693.3 Million; Outdoor Products Sales $316.7 Million; Sporting Products Sales $376.6 Million, Consistent With Previous Guidance
- Net Income and Adj. EBITDA of $58.1 Million and $126.2 Million; Margins of 8.4% and 18.2%, Respectively
- Outdoor Products’ Cost Reduction and Earnings Improvement Program is Taking Hold as Operating Income Margins Increased 465 Basis Points and Adj. EBITDA Margins Increased 473 Basis Points Sequentially
- Reaffirming FY24 Guidance: Continue to Expect Sales of $2.85 Billion to $2.95 Billion and EBITDA Margins in the Range of 17.75% to 18.75%
ANOKA, Minn.–(BUSINESS WIRE)–$VSTO #bettertogether–Vista Outdoor Inc. (NYSE: VSTO), the parent company of 41 renowned brands that design, manufacture and market sporting and outdoor lifestyle products to consumers around the globe, today reported financial results for the first quarter of Fiscal Year 2024 (FY24), which ended on June 25, 2023.
“We began the fiscal year with momentum, and it continued to build through the first quarter of fiscal year 2024. With the hiring of Eric Nyman, the new CEO of Outdoor Products, we have two highly talented and accomplished leaders sitting atop Sporting and Outdoor Products, and we are ready to take each organization to the next level,” said Gary McArthur, interim CEO, Vista Outdoor. “I will continue in my role as Interim CEO with a keen focus on preparing the company to be ready for our planned separation in the fourth quarter of calendar year 2023.
“The future is bright, but I’m especially excited about three key themes that guide our outlook. One, we delivered results as expected and previously communicated, despite market challenges. Two, our restructuring and profit improvement initiatives for Outdoor Products are taking hold and having a meaningful impact. Three, our Sporting Products business is performing as expected in a normalizing market, remaining disciplined and focused on what we can control.
“Based on the necessary steps taken recently to progress towards completing the expected separation, our company is now on the verge of a transformative period. We have accomplished several key milestones including confidentially submitting the second amendment to our Form 10, and we expect to publicly file the Form 10 in September. Our company has a strong foundation built on passionate people, great brands and a focused strategy that best positions Outdoor Products and Sporting Products as independent companies post-separation.”
“It is a privilege to join Vista Outdoor during this transformational time,” said Eric Nyman, CEO of Outdoor Products. “The portfolio of preeminent brands present a truly incredible opportunity. I eagerly anticipate working with the team to prepare for the planned separation later this year, which I expect will unlock meaningful shareholder value and generate significant momentum for our people, brands, and shareholders, and propel us to new heights.”
“On the Sporting Products side, the fiscal year is off to a strong start as we met our first quarter financial goals, delivering over 30% EBITDA margins and a healthy, profitable mix of sales in a normalizing market,” said Jason Vanderbrink, CEO of Sporting Products. “Looking forward at our full fiscal year target, we expect we will be able to maintain EBITDA margins in the mid-twenties and support a healthy dividend post-Spin.”
For the three months ended June 25, 2023 versus the three months ended June 26, 2022:
- Sales decreased $109 million to $693 million, down 14 percent. Organic sales were $611 million, a decline of 24 percent, driven by lower shipments across nearly all categories in the Sporting Products segment and declines in the organic Outdoor Products businesses.
- Gross profit declined 23 percent to $227 million and gross profit margin decreased 390 basis to 32.7 percent primarily due to decreased volume and price in the Sporting Products segment, partially offset by acquisitions.
- Operating expenses were $135 million, up 11 percent, primarily driven by increased selling, general, and administrative expenses from acquired businesses, partially offset by decreased selling costs in both Sporting Products and the organic businesses in Outdoor Products.
- Operating income decreased 47 percent to $92 million. Adjusted operating income declined 45 percent to $101 million. Operating income margins decreased 819 basis points to 13.3 percent. Adjusted operating income margins decreased 823 basis points to 14.6 percent.
- Net income decreased to $58 million. Net income margin was 8.4 percent.
- Adjusted EBITDA decreased 38 percent to $126 million. Adjusted EBITDA margins decreased 704 basis points to 18.2 percent.
- Diluted Earnings per Share (EPS) was $0.99, down 54 percent, compared with $2.16. Adjusted EPS was $1.12, down 52 percent, compared with $2.31.
- Cash flow provided by operating activities was $74 million, compared with $108 million. Adjusted free cash flow generation was $75 million, compared with $110 million.
For the three months ended June 25, 2023 segment results versus the three months ended June 26, 2022:
Sporting Products
- Sales declined 26 percent to $377 million, in-line with our guidance, driven primarily by lower shipments across nearly all categories as channel inventory has normalized, and the previously announced termination of the Lake City contract at the beginning of the third fiscal quarter in the prior year.
- Gross profit decreased 34 percent to $132 million caused by decreased volume and price.
- Operating income decreased 38 percent to $108 million primarily driven by lower gross profit, partially offset by decreased selling costs. Operating income margin was 28.8 percent.
- Adjusted EBITDA decreased 37 percent to $115 million. Adjusted EBITDA margins decreased 523 basis points to 30.5 percent.
Outdoor Products
- Sales increased 8 percent to $317 million. Organic sales were $235 million, down 20 percent, primarily caused by lower volume due to high channel inventory.
- Gross profit increased 3 percent to $95 million, driven by acquisitions, partially offset by decreased volume from organic businesses.
- Operating income declined 76 percent to $7 million primarily caused by increased selling, general, and administrative costs related to acquired businesses, partially offset by increased total gross profit and lower selling costs related to organic businesses. Operating income margin was 1.9 percent.
- Adjusted EBITDA decreased 39 percent to $24 million. Adjusted EBITDA margins decreased 592 basis points to 7.6 percent.
“The first quarter of fiscal year 2024 was a testament to our continued financial discipline and focus on margin improvement and cash flow as we head toward spin,” said Andy Keegan, Vice President and Interim CFO of Vista Outdoor. “We generated $74 million of cash flow from operations and $75 million of adjusted free cash flow during the first quarter. Our net debt leverage ratio finished the quarter at 1.7x, within our target range of 1.0x to 2.0x. We will continue to prioritize debt paydown as our primary use of capital leading up to our planned separation, and we expect to spin in the fourth quarter of calendar year 2023.
“Our results in Sporting Products were in line with our expected and previously communicated range of high $300 million sales and an EBITDA margin in the low 30s. Our performance within the Outdoor Products segment was as expected and our previously announced cost reduction and earnings improvement program has begun to take hold. These impacts are translating to a positive impact on our bottom line as seen by the 473 basis point sequential improvement in our Adjusted EBITDA margins.”
Outlook for Fiscal Year 2024
The Company expects:
- Sales in the range of $2.85 billion to $2.95 billion
- Sporting Products sales expected to be approximately $1.475 billion to $1.525 billion
- Outdoor Products sales expected to be approximately $1.375 billion to $1.425 billion
- Adjusted EBITDA margin in the range of 17.75 percent to 18.75 percent
- Sporting Products EBITDA margin range of 26.75 percent to 27.75 percent
- Outdoor Products EBITDA margin range of 12.00 percent to 13.00 percent
- Earnings per share in the range of $4.38 to $4.88. Adjusted Earnings per share in the range of $4.50 to $5.00
- Cash from operating activities between $323 million to $375 million. Adjusted Free cash flow in the range of $290 million to $340 million
- Effective tax rate of approximately 23.5 percent
- Interest expense in the range of $65 million to $75 million
- Capital expenditures as a percent of sales of approximately 1.5 percent
Please see the tables in the press release for a reconciliation of non-GAAP measures; organic sales, adjusted income from operations, adjusted taxes, adjusted net income, adjusted earnings per share, adjusted free cash flow, adjusted EBITDA, and adjusted EBITDA margins to the comparable GAAP measures.
Earnings Conference Call Webcast Information
Vista Outdoor will hold an investor conference call to discuss its business operations, First Quarter Fiscal Year 2024 financial results, and provide an update on its business outlook on July 27, 2023, at 9 a.m. ET. The conference call will be accessible through a live webcast. Interested investors and other individuals can access the webcast and view and/or download the earnings press release, including a reconciliation of non-GAAP financial measures, and the related earnings release presentation slides, which will also include detailed segment information, via Vista Outdoor’s website (www.vistaoutdoor.com). Choose “Investors” then “Events and Presentations”. For those who cannot participate in the live webcast, a telephone recording of the conference call will be available until August 24, 2023. The telephone number is (866) 813-9403 and the access code is 291717.
Reconciliation of Non-GAAP and Supplemental Financial Measures
In addition to the results prepared in accordance with GAAP, we are providing the information below on a non-GAAP basis, including, adjusted operating expenses, adjusted operating income, adjusted taxes, adjusted net income and adjusted diluted earnings per share (EPS). Vista Outdoor defines these measures as, operating expenses, operating income, taxes, net income, and EPS, excluding, where applicable, the impact of costs incurred for transition costs, executive transition costs, planned separation costs, restructuring, contingent consideration and post-acquisition compensation. Vista Outdoor management is presenting these measures so a reader may compare operating expenses, income from operations, taxes, net income, and EPS excluding these items, as the measures provide investors with an important perspective on the operating results of the Company. Vista Outdoor management uses this measurement internally to assess business performance, and Vista Outdoor’s definition may differ from those used by other companies.
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| Three months ended June 25, 2023 |
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| ||||||||||||||||
| (in thousands except per share amounts) |
| Gross Profit |
| Operating Expenses |
| Operating income |
| Other Income / (Expense) |
| Interest Expense |
| Taxes |
| Net Income |
| EPS (1) | ||||||||||||||||
| As reported |
| $ | 226,757 |
| $ | 134,571 |
|
| $ | 92,186 |
|
| $ | (541 | ) |
| $ | (16,218 | ) |
| $ | (17,327 | ) |
| $ | 58,100 |
|
| $ | 0.99 | ||
| Transition costs |
|
| — |
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|
| (3,002 | ) |
|
| 3,002 |
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|
| — |
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|
| — |
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|
| (720 | ) |
|
| 2,282 |
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| ||
| Executive transition costs |
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| — |
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| (658 | ) |
|
| 658 |
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|
| — |
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| — |
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| (158 | ) |
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| 500 |
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| Planned separation costs |
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| — |
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| (3,224 | ) |
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| 3,224 |
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| — |
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| — |
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| (774 | ) |
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| 2,450 |
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| Restructuring |
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| — |
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| (834 | ) |
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| 834 |
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| — |
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| — |
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| (200 | ) |
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| 634 |
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| Post-acquisition compensation |
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| — |
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| (1,405 | ) |
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| 1,405 |
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| — |
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| — |
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| — |
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| 1,405 |
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| As adjusted |
| $ | 226,757 |
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| $ | 125,448 |
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| $ | 101,309 |
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| $ | (541 | ) |
| $ | (16,218 | ) |
| $ | (19,179 | ) |
| $ | 65,371 |
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| $ | 1.12 |
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| (1) As reported net income per share and adjusted net income per share are both calculated based on 58,541 diluted weighted average shares of common stock. | ||||||||||||||||||||||||||||||||
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| Three months ended June 26, 2022 |
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| (in thousands except per share amounts) |
| Gross Profit |
| Operating Expenses |
| Operating income |
| Other Income / (Expense) |
| Interest Expense |
| Taxes |
| Net Income |
| EPS (1) | ||||||||||||||||
| As reported |
| $ | 293,470 |
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| $ | 121,045 |
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| $ | 172,425 |
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| $ | — |
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| $ | (6,310 | ) |
| $ | (40,100 | ) |
| $ | 126,015 |
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| $ | 2.16 |
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| Transaction costs |
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| — |
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| (2,086 | ) |
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| 2,086 |
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| — |
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| — |
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| (515 | ) |
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| 1,571 |
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| Contingent consideration |
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| — |
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| 112 |
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| (112 | ) |
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| — |
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| — |
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| 28 |
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| (84 | ) |
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| Transition costs |
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| — |
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| (272 | ) |
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| 272 |
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|
| — |
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| — |
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| (68 | ) |
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| 204 |
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| Post-acquisition compensation |
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| — |
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| (4,332 | ) |
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| 4,332 |
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| — |
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| — |
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| (660 | ) |
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| 3,672 |
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| Planned separation costs |
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| — |
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| (4,300 | ) |
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| 4,300 |
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| — |
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| — |
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| (1,075 | ) |
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| 3,225 |
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| As adjusted |
| $ | 293,470 |
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| $ | 110,167 |
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| $ | 183,303 |
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| $ | — |
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| $ | (6,310 | ) |
| $ | (42,390 | ) |
| $ | 134,603 |
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| $ | 2.31 |
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| (1) As reported net income per share and adjusted net income per share are both calculated based on 58,381 diluted weighted average shares of common stock.. | ||||||||||||||||||||||||||||||||
The adjustments to “as reported” net income are items that are excluded from reported GAAP results to arrive at the “as adjusted” net income.
During the three months ended June 25, 2023, we incurred costs that we feel are not indicative of ongoing operations as follows:
- transition costs for prior acquisitions to integrate into the Company such as retention, professional fees and travel costs;
- executive transition costs for executive search fees and related costs for the transition of our CEO and General Counsel executives;
- costs associated with the planned separation of our Outdoor Products and Sporting Products reportable segments into two independent, publicly traded companies, including restructuring, severance, retention, advisory and legal fees;
- restructuring costs related to an over $50 million cost reduction and earnings improvement program, announced during our fourth fiscal quarter of 2023, which includes severance and asset impairments related to product line reassessments, office closures, and headcount reductions across our brands and corporate teams, and;
- post-acquisition compensation expense related to employee retention payments in connection with the Foresight, Stone Glacier, and QuietKat acquisitions.
As noted above, our reported tax expense of $(17,327) results in a tax rate of 23.0 percent and our adjusted tax expense of $(19,179) results in an adjusted tax rate of 22.7 percent.
During the three months ended June 26, 2022, we incurred costs that we feel are not indicative of ongoing operations as follows:
- transaction costs associated with possible and actual transactions, including advisory and legal fees;
- non-cash expenses for the change in the estimated fair value of the contingent consideration payable related to our HEVI-Shot acquisitions;
- transition costs for our Foresight, Fiber Energy, Stone Glacier, Remington, and QuietKat businesses to integrate into the Company such as retention, professional fees and travel costs;
- post-acquisition compensation expense related to employee retention payments in connection with the Foresight, Stone Glacier, and QuietKat acquisitions, and;
- costs associated with the planned separation of our Outdoor Products and Sporting Products reportable segments into two independent, publicly traded companies, including restructuring, severance, retention, advisory and legal fees.
As noted above, our reported tax expense of $(40,100) results in a tax rate of 24.1 percent and our adjusted tax expense of $(42,390) results in an adjusted tax rate of 24.0 percent.
Free Cash Flow
Free cash flow is defined as cash provided by operating activities less capital expenditures. Vista Outdoor management believes that free cash flow provides investors with an important indication of the cash generated by our business for debt repayment, share repurchases and acquisitions after making the capital investments required to support ongoing business operations. Vista Outdoor management uses free cash flow to assess overall liquidity.
Adjusted free cash flow is defined as free cash flow eliminating the cash impact of the following items that are adjusted in our presentation of reported income to adjusted net income: transaction costs, transition costs, planned separation costs, post-acquisition compensation, restructuring and executive transition costs. Vista Outdoor management believes that adjusted free cash flow enhances investors’ understanding of the liquidity of our ongoing operations. Adjusted free cash flow is also used by Vista Outdoor to assess employees’ performance and determine their annual incentive payments. Vista Outdoor’s definition of adjusted free cash flow may differ from those used by other companies. During the fourth quarter of fiscal year 2023, we modified our definition of adjusted free cash flow to no longer adjust for applicable tax amounts. All periods presented have been adjusted for this modification.
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| Three months ended |
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| (in thousands) |
| June 25, 2023 |
| June 26, 2022 |
| Projected year ending March 31, 2024 | ||||
| Cash provided by operating activities |
| $ | 73,701 |
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| $ | 107,577 |
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| $323,351–374,851 |
| Capital expenditures |
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| (7,616 | ) |
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| (4,910 | ) |
| ~(42,750-44,250) |
| Free cash flow |
| $ | 66,085 |
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| $ | 102,667 |
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| $280,601-330,601 |
| Transaction costs |
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| — |
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| 3,217 |
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| — |
| Transition costs |
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| 1,663 |
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| 116 |
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| 1,663 |
| Planned separation costs |
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| 2,629 |
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| 4,300 |
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| 2,629 |
| Post acquisition compensation |
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| 83 |
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| 83 |
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| 83 |
| Restructuring |
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| 2,241 |
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| — |
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| 2,241 |
| Executive transition |
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| 2,783 |
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| — |
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| 2,783 |
| Adjusted free cash flow |
| $ | 75,484 |
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| $ | 110,383 |
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| $290,000–340,000 |
Adjusted Earnings Per Share – Guidance Reconciliation Table
Adjusted EPS guidance, excluding the impact of costs incurred to date for transition costs, executive transition costs, planned separation costs, restructuring, and post-acquisition compensation, is a non-GAAP financial measure that Vista Outdoor defines as EPS excluding the impact of these items. Vista Outdoor management is presenting this measure so a reader may compare EPS, excluding these items, as this measure provides investors with an important perspective on the operating results of the Company. Vista Outdoor management uses this measurement internally to assess business performance, and Vista Outdoor’s definition may differ from those used by other companies.
| Current FY24 Full-Year Adjusted EPS Guidance |
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| Low |
| High | ||||
| EPS guidance including transition costs, executive transition costs, planned separation costs, restructuring, and post-acquisition compensation |
| $ | 4.38 |
| $ | 4.88 | ||
| Transition costs |
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| 0.04 |
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| 0.04 |
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| Executive transition costs |
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| 0.01 |
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| 0.01 |
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| Planned separation costs |
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| 0.04 |
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| 0.04 |
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| Restructuring |
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| 0.01 |
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| 0.01 |
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| Post-acquisition compensation |
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| 0.02 |
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| 0.02 |
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| Adjusted EPS guidance |
| $ | 4.50 |
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| $ | 5.00 |
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Organic Sales Reconciliation
Organic sales is a non-GAAP measure of sales growth excluding the impacts of acquisitions from year-over-year comparisons. Sales are considered inorganic for the twelve months after acquisition. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. This measure is used in assessing achievement of management goals for at-risk compensation.
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| Three months ended | ||||||
| (in thousands) |
| June 25, 2023 |
| June 26, 2022 | ||||
| Sporting Products |
| $ | 376,593 |
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| $ | 510,626 | |
| Outdoor Products |
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| 316,740 |
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| 291,986 |
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| Sales, net |
| $ | 693,333 |
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| $ | 802,612 |
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| Less Sporting Products acquisitions |
|
| — |
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| — |
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| Less Outdoor Products acquisitions |
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| (82,168 | ) |
|
| — |
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| Sporting Products organic sales, net |
| $ | 376,593 |
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| $ | 510,626 |
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| Outdoor Products organic sales, net |
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| 234,572 |
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| 291,986 |
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| Organic sales, net |
| $ | 611,165 |
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| $ | 802,612 |
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Adjusted EBITDA Margin
Adjusted EBITDA is defined as Net Income before other income/(expense), interest, taxes, and depreciation and amortization, excluding the non-recurring and non-cash items referenced above. We calculated “Adjusted EBITDA margins” as Adjusted EBITDA divided by net sales. Vista Outdoor management believes adjusted EBITDA margin provides investors with an important perspective on the Company’s core profitability and helps investors analyze underlying trends in the Company’s business and evaluate its performance on an absolute basis and relative to its peers. Adjusted EBITDA margin should be considered in addition to, and not as a substitute for, GAAP net income margin. Vista Outdoor’s definition may differ from that used by other companies.
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EBITDA NON-GAAP RECONCILIATION AND SUPPLEMENTAL FINANCIAL INFORMATION (In thousands) (Unaudited)
Segment Adjusted EBITDA
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| Three months ended June 25, 2023 | ||||||||||
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| Sporting Products |
| Outdoor Products |
| Total | ||||||
| Segment operating income (1) |
| $ | 108,464 |
|
| $ | 6,524 |
|
| $ | 114,988 | |
| Depreciation and amortization |
|
| 6,399 |
|
|
| 17,578 |
|
|
| 23,977 |
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| Adjusted segment EBITDA |
| $ | 114,863 |
|
| $ | 24,102 |
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| $ | 138,965 |
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| Adjusted segment EBITDA margin |
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| 30.5 | % |
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| 7.6 | % |
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| Three months ended June 26, 2022 | ||||||||||
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| Sporting Products |
| Outdoor Products |
| Total | ||||||
| Segment operating income (1) |
| $ | 176,086 |
|
| $ | 27,686 |
|
| $ | 203,772 |
|
| Depreciation and amortization |
|
| 6,382 |
|
|
| 11,807 |
|
|
| 18,189 |
|
| Adjusted segment EBITDA |
| $ | 182,468 |
|
| $ | 39,493 |
|
| $ | 221,961 |
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| Adjusted segment EBITDA margin |
|
| 35.7 | % |
|
| 13.5 | % |
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| (1) We do not calculate GAAP net income at the segment level, but have provided segment operating income and operating income margin as a relevant measurement of profitability. Segment operating income does not include interest expense and taxes as well as other non-cash and non-recurring items. Segment operating income is reconciled to our consolidated net income in the segment income to consolidated net income reconciliation table included in this release. | ||||||||||||
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Consolidated Adjusted EBITDA Reconciliation
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|
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| Three months ended | ||||||
| (in thousands) |
| June 25, 2023 |
| June 26, 2022 | ||||
| Net Income |
| $ | 58,100 |
|
| $ | 126,015 |
|
| Other expense, net |
|
| 541 |
|
|
| — |
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| Interest expense, net |
|
| 16,218 |
|
|
| 6,310 |
|
| Income tax provision |
|
| 17,327 |
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|
| 40,100 |
|
| Depreciation and amortization |
|
| 24,927 |
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|
| 19,316 |
|
| Transaction costs |
|
| — |
|
|
| 2,086 |
|
| Transition costs |
|
| 3,002 |
|
|
| 272 |
|
| Restructuring |
|
| 658 |
|
|
| — |
|
| Executive transition costs |
|
| 3,224 |
|
|
| — |
|
| Contingent consideration |
|
| — |
|
|
| (112 | ) |
| Planned separation costs |
|
| 834 |
|
|
| 4,300 |
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| Post-acquisition compensation |
|
| 1,405 |
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|
| 4,332 |
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| Adjusted EBITDA |
| $ | 126,236 |
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| $ | 202,619 |
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| Adjusted EBITDA Margin |
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| 18.2 | % |
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| 25.2 | % |
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SEGMENT INCOME TO CONSOLIDATED NET INCOME RECONCILIATION (In thousands) (Unaudited)
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| Three months ended | ||||||
|
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| June 25, 2023 |
| June 26, 2022 | ||||
| Segment income |
| $ | 114,988 |
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| $ | 203,772 |
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| Corporate costs and expenses (1) |
|
| (22,802 | ) |
|
| (31,347 | ) |
| Operating income |
| $ | 92,186 |
|
| $ | 172,425 |
|
| Other expense, net |
|
| (541 | ) |
|
| — |
|
| Interest expense, net |
|
| (16,218 | ) |
|
| (6,310 | ) |
| Income tax provision |
|
| (17,327 | ) |
|
| (40,100 | ) |
| Net Income |
| $ | 58,100 |
|
| $ | 126,015 |
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| (1) Includes corporate overhead and certain non-recurring items as described in the schedules to this release | ||||||||
EBITDA Margin Guidance
Vista Outdoor has not reconciled EBITDA margin guidance to GAAP net income margin guidance because Vista Outdoor does not provide guidance for net income, which is a reconciling item between GAAP net income margin and non-GAAP EBITDA margin. Accordingly, a reconciliation to net income is not available without unreasonable effort.
About Vista Outdoor Inc.
Vista Outdoor (NYSE: VSTO) is the parent company of more than three dozen renowned brands that design, manufacture and market sporting and outdoor products. Brands include Bushnell, CamelBak, Bushnell Golf, Foresight Sports, Fox Racing, Bell Helmets, Camp Chef, Giro, Simms Fishing, QuietKat, Stone Glacier, Federal Ammunition, Remington Ammunition and more.
Contacts
Investor Contact:
Tyler Lindwall
Phone: 612-704-0147
E-mail: [email protected]
Media Contact:
Eric Smith
Phone: 720-772-0877
E-mail: [email protected]
