Vista Outdoor reported earnings on an adjusted basis rose 33 percent in the first quarter ended June 26 on a 21 percent revenue gain. Strong double-digit growth in the Sporting Products segment offset a 2 percent decline in Outdoor Products, primarily driven by Outdoor Accessories. Both sales and earnings topped company guidance and Vista’s full-year guidance was raised.
Highlights of the quarter include:
- Sales increased 21 percent to $803 million, gaap eps rose 26 percent to $2.16 and adjusted eps rose 33 percent to $2.31
- Ebit and ebitda margins of 21 percent and 24 percent, respectively; net debt leverage ratio of 0.7x
- Enters definitive agreements to purchase simms fishing and fox racing expanding iconic brand portfolio
- Updates fy23 guidance to reflect continued growth and profitability expansion
- Expects fy23 sales of $3.3 billion, up 7 percent at midpoint, 20 percent ebit margin, and 21 percent ebitda margin
- Capital allocation strategy shifts to using strong free cash flow for debt repayment
“There is no doubt that companies are operating in a tough environment with rising inflation and supply chain challenges,” said Chris Metz, Chief Executive Officer. “Despite that, we posted a great first quarter and we’ve taken these impacts into account in our fiscal year guidance. We have built a nimble culture and have empowered our brands to make the best decisions for their businesses and consumers. We have also maintained an optimized and lean cost structure to allow us to succeed in a variety of economic and operational environments and have action plans to further control costs if necessary. Our strong first quarter results reflect these collective efforts, continued strength in outdoor participation levels, and our financial discipline in making the most optimal investments to drive long-term growth and unlock shareholder value.
“I am very proud of the work our teams have accomplished in the first quarter and equally excited to welcome Simms Fishing and Fox Racing, both strategic acquisitions and iconic brands that are highly complementary to our Outdoor Products portfolio. I am also confident in our future as we prepare to separate our Sporting Products and Outdoor Products segments into two independent, publicly-traded companies. Following the separation, each company will have size, scale, leading brands and a capital structure that will allow it to be successful and further unlock shareholder value. Upon the successful close of the Fox and Simms acquisitions, our Outdoor Products business will be one of the largest companies in the outdoor products space in terms of annual sales, housing nine power brands with more than $100 million in annual sales each. Equally as exciting is our Sporting Products business, which just posted another record sales quarter. Sporting Products’ continued success is demonstrating that new participants in shooting sports have created a new, elevated base of demand that will allow that business to generate solid cash flow and returns for its shareholders for years to come. Our future is bright, our business fundamentals remain strong, and we have highly talented teams to effectively navigate through the current environment,” concluded Metz.
For the three months ended June 26, 2022 versus the three months ended June 27, 2021:
- Sales increased 21 percent to $803 million driven by strong double-digit growth in Sporting Products, partially offset by a 2 percent decline in Outdoor Products primarily driven by Outdoor Accessories.
- Gross profit rose 22 percent to $293 million and gross profit margin improved by 15 basis points to 37 percent.
- Operating expenses were $121 million, up nearly 24 percent, primarily driven by acquisitions.
- Earnings before interest and taxes (EBIT) increased 20 percent to $172 million. Adjusted EBIT rose 26 percent to $183 million. Adjusted EBIT margins increased 87 basis points to 23 percent.
- Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 20 percent to $192 million. Adjusted EBITDA rose 25 percent to $203 million. Adjusted EBITDA margins increased 83 basis points to 25 percent.
- Fully Diluted Earnings per Share (EPS) was $2.16, up 26 percent, compared with $1.71. Adjusted EPS was $2.31, up 33 percent, compared with $1.74.
- Cash flow provided by operating activities was $108 million, compared with $29 million. Free cash flow generation was $108 million, compared with $36 million, driven primarily by higher net income and improved working capital.
Sales of $803 million topped Vista’s guidance in the range of $770 million that $790 million, or up 17.7 percent at the midpoint. Adjusted EBITDA margins of 25 percent exceeded Vista’s guidance in the range of 22 percent to 22.5 percent. Adjusted EPS was $2.31 topped Vista’s guidance in the range between $1.85 that $1.95.
For the three months ended June 26, 2022 segment results versus the three months ended June 27, 2021:
- Sales rose 40 percent to $511 million, driven by strong growth across all calibers. Volume was the largest contributor to growth and pricing to a much lesser extent.
- Gross profit increased 35 percent to $201 million. Margin expansion was driven by higher volume, improved mix and higher pricing, partially offset by higher commodity and freight costs.
- EBIT increased 41 percent to $176 million driven by higher gross profit and selling, general and administrative expense leverage.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 39 percent to $182 million. EBITDA margins decreased 28 basis points to 36 percent.
- Sales decreased 2 percent to $292 million primarily driven by Outdoor Accessories which was partially offset by growth in Outdoor Recreation. The prior year period reflected benefits from stimulus checks, a lower inflationary environment and higher-than-average sell-in to replenish low channel inventory and meet elevated demand.
- Gross profit remained flat at $93 million, primarily due to lower Outdoor Accessories sales and higher transportation and freight costs, offset by the addition of accretive acquisitions.
- EBIT decreased 36 percent to $28 million primarily driven by lower sales and higher selling, general and administrative expenses from the addition of acquisitions.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by 24 percent to $39 million. EBITDA margins decreased 381 basis points to 14 percent.
As of June 26, 2022, the company had repurchased 362,203 shares for a total of approximately $14 million as part of the $200 million share repurchase program approved by the Board of Directors and announced on January 31, 2022. The former $100 million share repurchase program was completed in fiscal year 2022.
Outlook for Fiscal Year 2023
“We posted a strong first quarter with total and organic sales growth and expanding profitability. We also saw stronger operating leverage during our first quarter as compared to the prior year period and sequentially from fourth quarter fiscal year 2022. However, we are mindful of the current macroeconomic landscape and being prudent about our cost structure and capital allocation strategy,” said Sudhanshu Priyadarshi, Chief Financial Officer of Vista Outdoor. “Our net debt leverage ratio at the end of the first quarter was well below our targeted ratio of one to two times. Following our recent acquisitions, we expect to be well within that targeted range at approximately 1.6 times. With strong free cash flow, our capital allocation strategy now shifts to focus on debt repayment and opportunistic share repurchases before we spin-off the Outdoor Products segment. We are tracking ahead of pace to complete the spin-off in calendar year 2023 and excited about the future of both segments as we seek to further unlock shareholder value.”
Vista Outdoor is updating its outlook for Fiscal Year 2023 to reflect current visibility into the global macroeconomic environment. This guidance, which also assumes Fox Racing and Simms Fishing close by the end of the second quarter, is as follows:
- Sales in the range of $3.200 billion to $3.325 billion, up 7 percent at the midpoint
- Adjusted EBITDA margin in the range of 21.0 percent to 21.5 percent
- Earnings per share (EPS) in the range of $6.90 to $7.50 and adjusted earnings per share (EPS) in the range of $7.05 to $7.65
- Free cash flow in the range of $310 million to $360 million
- Effective and adjusted tax rate of approximately 24 percent
- Interest expense in the range of $50 million to $55 million
- Capital expenditures as a percentage of sales to be approximately one percent to two percent
- R&D expenditure growth in the range of 35 percent to 40 percent
Previously, Vista guided for sales to arrive in a range of $3,150 million that $3,250 millionup 5 percent at the midpoint (excludes future acquisitions), adjusted EBITDA in the range of 20.5 percent to 21.5 percent, and adjusted earnings per Share (EPS) in a range of $7.00 that $7.75.