American Outdoor Brands, Inc. (NASDAQ:AOUT) is an innovation company that provides product solutions for outdoor enthusiasts, including hunting, fishing, camping, shooting, outdoor cooking, and personal security and personal defense products. The company has carved out a unique position in the outdoor industry by consistently delivering innovative and high-quality products that cater to a wide range of outdoor activities.
Company History and Evolution
Founded in 1852 as the American Knife Company, American Outdoor Brands has a rich history spanning over 170 years. The company has undergone several transformations and name changes throughout its existence, reflecting its evolving focus and product offerings. For much of the 20th century, the company operated as Smith & Wesson Brands, Inc., becoming a well-known name in the firearms industry. In 2020, the outdoor products and accessories division was spun off from Smith & Wesson Brands to form the independent entity now known as American Outdoor Brands, Inc.
This strategic spin-off allowed American Outdoor Brands to concentrate on its core competencies in the outdoor lifestyle and shooting sports markets. Since becoming an independent company, American Outdoor Brands has pursued a growth strategy that includes both organic innovation and strategic acquisitions. Notable additions to its brand portfolio include Bubba, Grilla Grills, and MEAT! Your Maker, which have strengthened the company's position in fishing, outdoor cooking, and meat processing equipment categories.
Market Challenges and Diversification
Despite facing challenges related to volatility in the firearms and shooting sports market, including a significant impairment charge in 2022 for its firearms-adjacent businesses, American Outdoor Brands has actively worked to diversify its product offerings. This diversification strategy has helped reduce the company's reliance on the shooting sports segment and positioned it to capitalize on growing consumer demand for a wide range of outdoor lifestyle products.
Strategic Growth Plan
Under the leadership of CEO Brian Murphy, American Outdoor Brands has implemented a strategic four-pillar growth plan centered on gaining market share, entering new product categories, tapping into new consumer markets, and expanding distribution. This multifaceted approach has helped the company navigate the dynamic outdoor industry landscape and deliver solid financial results, even in the face of broader macroeconomic headwinds.
Financials
For the fiscal year ended April 30, 2024, American Outdoor Brands reported total revenue of $201.10 million, down slightly from $191.21 million in the prior year. The company's net loss for the year was $12.25 million, or $0.94 per diluted share, compared to a net loss of $12.02 million, or $0.90 per diluted share, in the previous fiscal year. Operating cash flow for fiscal 2024 was $24.49 million, with free cash flow of $18.38 million.
In the first quarter of fiscal 2025, the company reported revenue of $41.64 million, a decrease of 4.1% from the same period last year. The net loss for the quarter improved to $2.37 million, or $0.18 per diluted share, compared to a net loss of $4.11 million, or $0.31 per diluted share, in the prior year quarter. Operating cash flow for Q1 2025 was negative $4.35 million, with free cash flow of negative $5.46 million. The decreases in revenue and cash flows were primarily due to a build-up in inventory levels to prepare for the upcoming fall hunting and holiday seasons.
Liquidity
Despite the challenging year, American Outdoor Brands maintained a healthy balance sheet, ending fiscal 2024 with $29.70 million in cash and cash equivalents and no outstanding debt. As of the end of Q1 2025, the company had $23.46 million in cash and cash equivalents. The company's current ratio stood at 4.494, and its quick ratio was 1.540, indicating a strong liquidity position. American Outdoor Brands also has access to a $75 million expandable credit facility, which had no outstanding balance as of the end of Q1 2025.
Innovation and Product Development
One of the key drivers of American Outdoor Brands' performance has been its focus on innovation. The company has introduced a steady stream of new products across its portfolio of 21 distinct brands, which are organized into four brand lanes: Adventurer, Harvester, Marksman, and Defender. These new product introductions have accounted for a significant portion of the company's revenue in recent years, with new products representing 23.4% of net sales in the first quarter of fiscal 2025.
For example, the company's Bubba brand, which offers a range of fishing and marine accessories, introduced the Bubba Pro Series Smart Fish Scale, which has become the official scale of Major League Fishing. Similarly, the Caldwell Claymore family of shooting accessories, including the Solo and Pullpup clay target throwers, have been well-received by consumers. These new product launches have helped the company offset declines in other areas, such as the personal protection segment within its shooting sports category.
Over the past four years since its spinoff, American Outdoor Brands has introduced over $60 million in incremental organic revenue from new products and has been awarded 169 new patents, reflecting its strong innovation capabilities.
International Expansion
American Outdoor Brands' international expansion efforts have also been a bright spot, with international net sales growing 21.2% year-over-year in the first quarter of fiscal 2025. The company has found particular success in the Canadian market, where its outdoor lifestyle brands like MEAT! Your Maker and Bubba have resonated with consumers. In the most recent quarter, 89.4% of net sales came from the domestic US market, while 10.6% came from international markets.
Product Segments
American Outdoor Brands operates in two main product segments: Shooting Sports and Outdoor Lifestyle. The Shooting Sports segment includes shooting accessories and products used for personal protection. In Q1 2025, this segment saw net sales of $18.68 million, a decrease of $1.40 million or 7.00% from the prior year period. The decrease was primarily due to lower direct-to-consumer sales of personal protection products on the company's e-commerce platform.
The Outdoor Lifestyle segment includes products used in hunting, fishing, camping, rugged outdoor activities, and outdoor cooking. This segment generated net sales of $22.96 million in Q1 2025, a decrease of $405,000 or 1.70% from the prior year period. The decline was driven by lower sales of rugged outdoor products on the e-commerce channel, partially offset by increases in international sales, particularly in Canada.
Future Outlook
Looking ahead, American Outdoor Brands expects fiscal 2025 net sales to grow by up to 2.5% compared to the prior year, driven by new product introductions and expanded distribution opportunities, particularly in its outdoor lifestyle category. The company sees gross margins for the full year hovering around 45%, compared to 44% in the prior year, with adjusted EBITDA expected to be in the range of 5.5% to 6% of net sales. This represents an anticipated increase of $1.5 million to $2.5 million in adjusted EBITDA.
For the second quarter of fiscal 2025, the company expects net sales to decline year-over-year by between 8% and 9%, driven primarily by the shooting sports category. However, growth is anticipated in the second half of the year. Q2 gross margins are expected to be approximately 45%, with slightly lower gross margins in the second half of the year as inventory balances decrease.
The company expects overall operating expenses to increase slightly in fiscal 2025 due to higher variable selling and distribution costs, assuming the projected net sales growth of up to 2.5% is achieved.
However, the company is not immune to the broader industry challenges, including headwinds in the shooting sports category, which it expects to continue. The company has noted that it is closely monitoring the impact of macroeconomic factors, such as the upcoming U.S. presidential election, on consumer demand.
Despite these uncertainties, American Outdoor Brands remains focused on its strategic initiatives and its ability to innovate and adapt to changing market conditions. The company's diverse portfolio of outdoor lifestyle and shooting sports brands, combined with its strong balance sheet and liquidity, position it well to navigate the evolving outdoor industry landscape.
Conclusion
In conclusion, American Outdoor Brands is a compelling investment opportunity for those seeking exposure to the dynamic and growing outdoor recreation market. The company's unwavering commitment to innovation, its diversified brand portfolio, and its prudent financial management make it a standout player in the industry. As the company continues to execute on its strategic plan, investors will be closely watching its ability to capitalize on new opportunities and weather any potential market disruptions. With its focus on new product development, international expansion, and strategic growth initiatives, American Outdoor Brands is well-positioned to navigate the challenges and opportunities in the outdoor products market.