At its Investor Day held on May 23 at the New York Stock Exchange, Vista Outdoor officials conducted a deep dive into the growth potential of its Outdoor Products and Sporting Products segments and its plan to separate the businesses into two independent, publicly-traded companies.
The spinoff is not expected to occur until calendar 2023.
Providing an update on the Outdoor Products segment, Chris Metz, CEO, Vista Outdoor, said the segment’s set of brands is “the best stable of outdoor product brands in the industry. A third of our brands have number one share positions, and seven of our brands generate over $100 million in revenue annually.”
The Outdoor Products segment addresses an estimated $30 billion domestic market in its core and immediately adjacent end markets, with an estimated total global addressable market of over $100 billion.
Metz, who is expected to be appointed CEO of the Outdoor Products segment upon completion of the spinoffs, gave a brief overview of the segment’s five platforms and key brands.
He said CamelBak, the maker of water bottles, packs and hydration, struggled when Metz took over as CEO in 2017. “It’s one of the most iconic brands in outdoor recreation; however, we lost our way before I walked in. We weren’t focused on the consumer, and we didn’t innovate. The market moved to stainless steel, and we were slow to follow,” said Metz.
Greg Williamson was recruited to lead CamelBak, and the brand recovered showing growth of 30 percent this past fiscal year on top of a “very strong” fiscal 2021. Said Metz, “Its pipeline is chock-full with some incredible, incredibly innovative new products that you’ll see hit the market over the next 12-to-18 months. I’m very excited about the prospects of CamelBak going forward.”
Metz said Bell and Giro are two of the most well-known and respected brands in cycling, skiing and motocross and makeup Vista’s Action Sports platform. The business is led by Ric Kern and is coming off two record years. He added, “Action Sports is a platform that we are very bullish on. The TAM (total addressable market) is big. It’s $19 billion big. The business is global, with many of our sales coming from outside the U.S., and the participation rate is increasing year-over-year.”
Camp Chef was acquired about five and a half years ago and has since more than doubled in size. Said Metz, “Despite the headwinds of some of our near competitors, we love the long-term trends of outdoor cooking. And we believe this platform can grow substantially as we look out to the future.”
While Camp Chef has long been a leader in backcountry cooking, the brand is eying a big opportunity to grow share in the backyard cooking category that’s expected to be charged by the arrival later this year of the Apex grill, a dual fuel grill that can cook with pellets and propane. Said Metz, “It’s something we’ve been working on for years.”
Camp Chef’s growth is also supported by the recent acquisition of Fiber Energy, a supplier of wood chips. Said Metz, “Our market research had informed us that the attachment rate of branded pellets to branded grills is high and something we didn’t have before the acquisition we made recently.”
A fourth platform is Outdoor Accessories, which Metz said remains “highly fragmented” and is addressed by the Bushnell outdoor line.
Among recent acquisitions, Metz said Stone Glacier gives Vista a foothold into the growing technical gear and apparel market. He said Jeff Esposito, Stone Glacier’s president and his team “have done a remarkable job in creating what we call a cult-like following for the Stone Glacier brand. We believe we can use our scale and M&A team to continue to find gems like this in the outdoor space.”
QuietKat, which specializes in Overlanding electric bikes, saw business soar since being acquired in June 2021 as Vista invested in inventory and leveraged its supply chain capabilities to double the brand’s manufacturing capacity. Said Metz, ‘Within the first two years of our ownership, we will take the company from roughly $15 million in sales to $50 million in sales this year. And we think we can double the size again in the next fiscal year. Ebikes is an exploding category, and that’s a big part of it. But we feel that we have built the foundation to continue to be leaders in this space.”
Vishak Sankaran, president, outdoor accessories and golf, talked up the opportunity in golf, which is also in the Outdoor Products segment and supported by Bushnell Golf and Foresight Sports. Sankaran said that due to the resurgence in golf play over the pandemic, Vista has more than doubled its golf business, delivering well above fleet average margins. This year, Vista’s golf business will be in excess of $250 million, and continued healthy growth is expected going forward.
Sankaran said Golf, like many sports, is being transformed by technology, and Vista benefits from having two of the strongest technology leadership brands in the space to help drive that transformation. Foresight Sports, a supplier of golf analysis solutions, was acquired in September 2021.
“Putting together one of the leading consumer brands in Golf in Bushnell Golf with one of the leading technology brands in Foresight Sports allows us to rapidly drive penetration in the young but fast-growing launch monitor and simulator category, substantially expanding our addressable market. And the technology platform that we have in our Foresight business really positions us well to create a number of new innovative products and services for our golfing enthusiasts.”
Sankaran also said the acquisition of Foresight Sports gave Vista entry into the fast-growing, off-course segment and expanded its consumer base by over 50 percent. He said the growth over the last eight years in golf has primarily come from the off-core segment of golf, led by Topgolf and other companies offering a technology-driven golf experience.
Sankaran said, “These new venues offer a highly engaging, much more accessible and frankly a golfing experience in a non-intimidating setting that really have become fantastic off-ramps to bring non-golfers into our industry at a rapid pace. This off-course golf consumer base has grown to be over 12 million strong. One that is much younger at an average age of 30, substantially more diverse, and frankly way more technology savvy than we had before.”
Jason Vanderbrink, president, Sporting Products, said Vista is a major U.S. ammunition manufacturer and ranks among the major primer manufacturers globally with the “most iconic brands in this industry.” These include Remington, at 206 years old; Federal, which turned 100 last week and CCI, Speer, Estate Cartridge, and HEVI-Shot.
The Sporting Products segment totaled revenues of $1.7 billion in its just-completed fiscal year, and profits are at the strongest levels. Said Vanderbrink, “We have strong recurring revenue and very strong free cash flow no matter where we are in the economic cycle.”
He talked up the benefits of the sale of the Savage Firearms business that enabled Vista to work with “all gun companies” and cited innovation as key to Sporting Products’ success. Among the innovations, he cited Smith & Wesson 30 Super Carry as “a game-changer in personal protection pistols” and Federal’s Terminal Ascent as “simply the best bullet that’s ever been produced for long-range hunting.” He also cited the Core-Lokt Tipped’s success in helping revive Remington post-acquisition.
Vanderbrink also talked about the benefits the Sporting Products segment has seen from the exit of the Lake City Army Ammunition Plant, which manufactured primarily 5.56mm and .223 caliber rounds and is now operated by Winchester. Vanderbrink said, “We have replaced the Lake City Business with Remington and Hevi-Shot. We have replaced it for 4x and 30 percent more in margin. We are not reliant on a volatile, unprofitable category going forward. We have the category where the consumers are and where profitability is long term.”
The Sporting Product segment’s backlog is a healthy $3 billion, with 89 percent of orders less than 18 months old. The segment has announced six price increases in the last two years, and 87 percent of backorders took the price increase, with the remaining 13 percent reflecting long-term contracts.
Vanderbrink particularly talked about the improving health of the ammunition market coming out of the pandemic.
“What we love about this industry is the diversity that has come since COVID,” said Vanderbrink. “One-third of all new gun purchases are from females. We have seen a 50 percent increase in new gun purchases from people of color. The average age of a new gun owner in America is 36 years old, down from 49 years old. We have gained a generation in gun owners in America, which bodes well for future consumption.”
Other findings include that 75 percent of new gun owners are suburban or urban customers, and only 14 percent bought a firearm because they felt threatened by Second Amendment legislation. Only a quarter bought a gun because of the concerns of civil unrest. Said Vanderbrink, “So 75 percent of the new users bought it, whether it be for hunting, recreational shooting, first-time homebuyers, family heritage – it is a very, very sustainable base going forward. And the key is the new users are shooting two to three times more, and they are shooting the ammunition, thereby they are not hoarding the ammunition.”
Vista reiterated its guidance for the current fiscal year ended March 31, 2023.
For the full fiscal year, Vista’s sales are expected to reach $3.15 billion to $3.25 billion, up 5 percent year-over-year compared to the midpoint. Sporting Products sales growth is expected in the mid-single-digit range and Outdoor Products sales growth in the high-single-digit range.
In fiscal 2022, Sporting Products segment sales jumped 55 percent to $1.7 billion, driven by the acquisitions of Remington and HEVI-Shot, strong consumer demand and favorable pricing and mix. Outdoor Products sales rose 18 percent to $1.3 billion, driven primarily by strong consumer demand and acquisitions and reflecting double-digit growth across Outdoor Recreation, Action Sports and Outdoor Accessories.
Adjusted EBITDA is expected in the range of 20.5 percent to 21.5 percent. In fiscal 2020, the adjusted EBIT margin vaulted 933 basis points to nearly 22 percent.
Adjusted EPS in the current fiscal year is projected in the range of $7.00 to $7.75. In fiscal 2022, EPS surged 127 percent to $8.29 compared with $3.66 in the prior fiscal year.
