Vista Outdoor’s Earnings Decline on 14 Percent Revenue Slide

Vista Outdoor, Inc. reported earnings declined 54 percent in the fiscal first quarter ended June 25. Sales dropped 14 percent with sales down 26 percent in the Sporting Products segment and 8 percent in the Outdoor Products segment. The company said results were in line with expectations and reiterated its guidance for the year.

“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 presents 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 percent 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.”

The Outdoor Products segment includes Bell, Bushnell, Bushnell Golf, CamelBak, Camp Chef, Foresight Sports, Fox Racing, Giro, QuietKat, Simms Fishing, and Stone Glacier. The Sporting Products segment includes CCI, Federal, HEVI-Shot, Remington, and Speer.

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, down 54 percent from $126 million. Net income margin was 8.4 percent.
  • Adjusted EBITDA decreased 38 percent to $126 million. Adjusted EBITDA margins decreased by 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.”

Company Outlook for Fiscal Year 2024

  • 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