Vista Outdoor Reports Second Quarter Fy23 Financial Results

ANOKA, Minn. – 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 second quarter of Fiscal Year 2023 (FY23), which ended on September 25, 2022.

“We continue to operate in a challenging global macroeconomic and geopolitical environment that has negatively impacted demand for our products and driven significantly higher costs over the last year. However, despite these headwinds, we posted another strong quarter with an increase in sales and continued strong profitability. Our free cash flow also increased over 80% to nearly $200 million in the first half of this fiscal year,” said Chris Metz, Chief Executive Officer. “At Vista Outdoor, we have a great team that knows how to win. We are managing our inventory, controlling costs and optimizing our product offerings across our brand portfolio. We have strong brands that are market share leaders in their respective categories. We also have a strong balance sheet and a solid financial foundation that allows us to continue to invest in our brands throughout the economic cycle. Our business is healthier and more profitable than it has ever been, thanks to our continued focus on executing our long-term strategy. I am confident that we will be able to successfully navigate through this challenging economic period and continue to thrive in the future.”

For the three months ended September 25, 2022 versus the three months ended September 26, 2021:

  • Sales increased $3 million to $782 million driven by acquisitions and direct-to-consumer sales which increased approximately 65 percent. This was partially offset by a low double-digit decline in organic sales.
  • Gross profit declined 12 percent to $263 million and gross profit margin decreased 477 basis points to 34 percent primarily due to higher supply chain and other input costs including freight.
  • Operating expenses were $132 million, up nearly 22 percent, primarily driven by acquisitions.
  • Earnings before interest and taxes (EBIT) decreased 31 percent to $132 million. Adjusted EBIT declined 28 percent to $141 million. Adjusted EBIT margins decreased 694 basis points to 18 percent.
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased 25 percent to $155 million. Adjusted EBITDA declined 22 percent to $164 million. Adjusted EBITDA margins decreased 611 basis points to 21 percent.
  • Fully Diluted Earnings per Share (EPS) was $1.62, down 31 percent, compared with $2.36. Adjusted EPS was $1.71, down 29 percent, compared with $2.41.
  • Cash flow provided by operating activities was $86 million, compared with $76 million. Free cash flow generation was $87 million, compared with $71 million.

For the three months ended September 25, 2022 segment results versus the three months ended September 26, 2021:

Sporting Products

  • Sales declined 4 percent to $432 million, in-line with our guidance, driven primarily by low finished goods inventory entering the quarter and labor shortages in certain regions.
  • Gross profit decreased 21 percent to $159 million due largely to lower sales and higher commodity and freight costs.
  • EBIT decreased 24 percent to $134 million.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 23 percent to $140 million. EBITDA margins decreased 804 basis points to 32.4 percent. In the prior year period, EBITDA margins hit a record at 40.4 percent reflecting expansion of nearly 19 percentage points as compared to the second quarter fiscal 2021, which included favorable hedges. Sporting Products profitability remains much stronger than prior to the pandemic due to a broader and more profitable product mix as a result of the acquisition of Remington and a strategic decision to shift away from less profitable and more volatile ammunition product categories purchased from the Lake City Army Ammunition Plant.

Outdoor Products

  • Sales increased 6 percent to $349 million driven by the acquisitions of Foresight Sports, Fox Racing, Simms Fishing, Stone Glacier, and Fiber Energy, which were largely offset by lower organic sales, particularly in Outdoor Accessories, as demand remained consistent with the prior quarter. Last year, in the first half of fiscal 2022, consumers benefited from stimulus checks and a lower inflationary environment which drove higher-than-average sell-in to replenish low channel inventory and meet elevated demand.
  • Gross profit increased 11 percent to $107 million, primarily due to the addition of accretive acquisitions which were partially offset primarily by lower Outdoor Accessories sales and higher transportation and freight costs.
  • EBIT decreased 29 percent to $30 million primarily due to higher selling, general and administrative expenses from the addition of acquisitions.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 11 percent to $46 million. EBITDA margins decreased 261 basis points to 13.2 percent.

Please see the tables in the press release for a reconciliation of non-GAAP operating expense, EBIT, EBITDA, taxes, net income, earnings per share, free cash flow and EBITDA margins to the comparable GAAP measures.

Outlook for Fiscal Year 2023

“Our second quarter results illustrate the strength of our brands and our continued disciplined execution in a challenging external environment which has impacted demand and input costs across our business units,” said Sudhanshu Priyadarshi, Chief Financial Officer of Vista Outdoor. “That said, we continue to operate with prudent financial discipline. We are generating strong free cash flow and have a net debt leverage ratio within our targeted range of one to two times. Our sales and profitability are driven by a diverse portfolio and a nimble operational structure that we expect will enable us to perform at higher levels than prior to the pandemic. In addition, we are making good progress on our separation, which we announced in May, and are currently on track to spin-off our Outdoor Products segment in calendar 2023.”

Vista Outdoor is updating its outlook for Fiscal Year 2023 to reflect year-to-date performance and continued challenges in the current global macroeconomic environment. The updated fiscal outlook is as follows:

  • Sales in the range of $3.05 billion to $3.15 billion, up 2 percent at the midpoint
    • Sporting Products sales expected to be approximately $1.725 billion to $1.775 billion
    • Outdoor Products sales expected to be approximately $1.325 billion to $1.375 billion
  • Adjusted EBITDA margin in the range of 19.75 percent to 20.25 percent
  • Earnings per share (EPS) in the range of $5.76 to $6.26 and adjusted earnings per share (EPS) in the range of $6.00 to $6.50
  • Free cash flow in the range of $310 million to $360 million
  • Interest expense in the range of $55 million to $60 million
  • Effective and adjusted tax rate of approximately 23 percent
  • Capital expenditures as a percent of sales to be approximately 1 percent to 2 percent
  • R&D expenditure growth in the range of 35 percent to 40 percent

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