Vista Outdoor Inc. reported sales jumped 35 percent in the second quarter ended September 26 due to stellar growth by its ammunition business and a record quarter by Camelbak. With contributions from the acquisitions of Fiber Energy Products, Foresight Sports, QuietKat, Venor, HEVI-Shot, and Remington, sales for the fiscal year ended March 2022 are projected to expand over 30 percent.
In the quarter, sales increased 35 percent to $778 million, driven by strong growth across both operating segments. Sales were well above Wall Street’s consensus estimate of $723.34 million.
Net earnings rose 75.2 percent to $139.5 million, or $2.36 a share, also easily topping Wall Street’s consensus estimate of $1.77.
On a conference call with analysts, Chris Metz, CEO, said the results reflected the early payback of the company’s Value Creation Framework it spoke of in May. Vista reached new records for quarterly sales, EBITDA and EBITDA margins, as well as its EPS, marking its fifth straight quarter of record financial performance. The 35 percent revenue gain came on top of last year’s 29 percent quarterly increase.
Metz stated, “These results were fueled by organic growth as a result of innovation and high demand for key staples across our portfolio of brands, as well as growth from acquisitions such as Remington, Hevi-Shot and Quietkat. Camelbak and Quietkat both posted their highest quarterly sales ever in Q2, a testament to successfully executing against our strategy.”
Metz also noted that Vista, in September, announced the acquisition of Foresight Sports, a top player in the golf technology sector, for $474 million. Metz said Foresight Sports, combined with Bushnell Golf, further positions Vista Outdoor “as the industry leader in golf technology,” and its recent introduction of the GC3 Launch Monitor exceeded sales projections in days. Metz added, The GC3 Launch also sparked already surging sales of our Sim-In-A-Box product line, a complete in-home golf simulator shipped directly to the consumer.”
Vista further announced Thursday that it closed the acquisition of Fiber Energy Products, a leading provider of all-natural wood grilling pellets. The Fiber Energy Products acquisition is expected to secure a continuous supply of pellets for Vista’s Camp Chef brand and expand its revenue opportunity in a consumable category.
“We now have ten brands across our portfolio that are generating over $100 million in revenue annually,” said Metz. “These highly sought-after power brands are key growth drivers with strong competitive advantages, resulting in rising market share within their respective categories.”
The ten brands include Federal Premium, Camelbak, Giro, Bell, Camp Chef, Foresight Sports, CCI, Remington, Bushnell, and Bushnell Golf.
By business segment in the quarter, Shooting Sports’ sales rose 49 percent to $566 million. Ammunition sales grew 65 percent to $450.2 million, including about $80 million in sales from the acquisition of Remington and HEVI-Shot in the second half of last year. Sales in its Hunting and Shooting Accessories category brands advanced 8 percent to $116.2 million.
The gains were driven by continued demand, price, volume, and mix in Ammunition and Hunting and Shooting Accessories.
Gross profit in the Shooting Sports segment increased 128 percent to $239 million, with gross margin improving to 42 percent from 28 percent. The margin acceleration was the result of improved pricing and operating leverage driven by higher volume and operating efficiencies.
EBIT in the Shooting Sports segment increased 177 percent to $195 million. EBIT Margin improved by 1,583 basis points to 34 percent from 19 percent. The Shooting Sports segment includes Federal Premium, Remington, Primos, Blackhawk, Primos, Eagle, RCBS, CCI, HEVI-Shot, Speer, and other brands.
Metz said Vista continues to see strong consumer demand and retail orders across its ammunition brands and expects the strength to continue due to “multiple key data points that show today’s ammunition market is far different than it was five years ago.”
First, Metz noted that demand for ammunition brands is driven in part by approximately 12 million new, diverse entrants into the market, including people of color and women who are contributing to high participation rates at shooting ranges as well as increased sales of hunting licenses and shooting accessories.
“New entrants along with traditional consumers have created a larger consumer base that is consuming more ammunition than ever before,” said Metz. “New participation, interest in personal protection and the field to table movement continue to grow, not to mention that youth shooting leagues are one of the fastest-growing sports in America today.”
Second, the elevated demand currently being seen is more broad-based than previous surges, which was centered predominantly in 223, 556 and nine-millimeter calibers. Third, inventory levels for ammunition “continue to remain very low” across all distribution channels.
Fourth, Vista’s ammunition growth is expected to gain a boost from the launch of its ammo subscription program this month to mark a major push online for the business. Metz said, “During this pilot phase, we will test and determine how we can successfully scale over time.”
Finally, Metz said Vista is adding “a few pieces of equipment to give our plants more flexibility and capacity expansion” to support elevated demand expeced in the foreseeable future. This will mark the first such investment since the Remington and HEVI-Shot acquisitions. Both Remington and HEVI-Shot added 30 percent more capacity to Vista Outdoor without adding any marketplace capacity.
Said Metz, “We don’t take such investments lightly and I’m proud that our team has added little to no overhead since the beginning of the increases in demand 18 months ago.”
Metz said the ammunition team has implemented strategic pricing actions to mitigate rising costs and to better meet supply and demand economics.
Innovation is also expected to drive Vista’s ammunition growth. Metz called out Remington’s Core-Lokt Tipped and Federal Premium’s Terminal Ascent as recent launches receiving strong market responses.
Metz added that the Hunting and Shooting Accessories business is also expected to benefit from similar tailwinds, including research indicating the number of firearm owners has roughly doubled over the last 10 years.
Metz said, “We believe the future is bright for both our ammunition and hunt shoot business units. The market continues to reorient itself as new entrants and activity trends evolve and Vista Outdoor is positioned to lead in all of these categories.”
In Outdoor Products, sales were up 9 percent to $212 million, driven by double-digit growth in Outdoor Recreation, led by strong growth at Camelbak and gains in golf.
Outdoor Recreation sales grew 10 percent to $107.5 million from $98 million last year. The segment includes Camelbak, Camp Chef, Bushnell Golf, and Venor. Action Sports’ sales reached $104.6 million, up from $98.0 million. The segment includes Bell, Giro, Krash, Raskullz, Blackburn, and Quite Kat.
Gross profit in the Outdoor Products segment increased 5 percent to $60 million. Gross profit margin eroded 96 basis points to 28 percent due to higher logistics costs and sales channel mix, partially offset by sales volume and operating efficiencies. EBIT decreased 10 percent to $24 million, primarily driven by higher selling, general and administrative expenses from the current year acquisitions and higher selling and marketing expenses to support an increase in sales. EBIT margin was reduced by 234 basis points to 11 percent from 13 percent.
Outdoor Products’ 9 percent growth came on top of 35 percent growth in the 2020 second quarter.
Metz cited innovation as the primary growth driver across the segment’s brands, including Bushnell Golf’s introduction of Launch Pro, priced just under $3,000 and selling out in minutes on the Bushnell Golf website. Bushnell also introduced the Bushnell Disc Jockey, the first Bluetooth speaker designed specifically for disc golfers.
Camp Chef unveiled a new Apex Grill that gives outdoor cooks a choice of wood palette or propane fuel cooking in a single platform and solidifies Camp Chef’s leadership in the hybrid category.
In the Action Sports business, Giro’s Contour RS Goggles for snow sports was named by Outside Magazine as 2022 Gear of the Year and Bell’s Moto-10 spherical helmet keeps building on its buzz.
The star of the Outdoor Products’ segment was Camelbak, which grew over 40 percet year-over-year and marked its largest revenue quarter in its 30-year history.
Greg Williamson, president of Camelbak, on the call noted that according to NPD’s data, Camelbak gained 10 points of share in bike packs over $100 in the last 12 months, and over five points a share in hydration packs to claim a leadership share position. Camelbak’s launch of it Horizon drinkware collection last year continued to gain traction and another line extension will come from a partnership with LifeStraw that merges the benefits of mobile hydration and outdoor water filtration.
“We’ve also improved product listings across all major retailers, including expanding vacuum stainless steel listings at target, and our pack and bottle listings at REI,” said Williamson. “Additionally, we’ve expanded our Drop Ship Program to include more websites, including Bass Pro, Target and Dick’s Sporting Goods.”
Companywide, earnings benefited from an improvement in gross margins by 1,025 basis points to 38.4 percent. Operating expenses were 14 percent of sales, gaining leverage of 117 basis points. Adjusted operating expenses were 13 percent of sales, gaining leverage of 121 basis points.
Earnings before interest and taxes (EBIT) leaped 155 percent to $191 million, from $75 million. Adjusted EBIT increased to $194 million, up 150 percent from $78 million. Adjusted EBIT margins increased 1,147 basis points to 25 percent.
Metz said Vista Outdoor is “well on our way to reaching and exceeding” the three year financial targets announced in May and also cited the firm’s success in acquiring six acquisitions over the last 18 months. They include Remington and HEVI-Shot in Shooting Sports, and QuietKat, Venor, Foresight Sports and Fiber Energy Products in the Outdoor Product segment.
Metz said, “Our success in identifying, negotiating, closing and integrating new businesses has positioned Vista Outdoor as an acquirer of choice in the outdoor industry.”
Looking ahead, Vista updated its guidance for the current year, which includes the acquisitions of Fiber Energy Products, Foresight Sports, QuietKat, Venor, HEVI-Shot, and Remington.
- Sales are projected in a range of $2.9 billion to $2.95 billion, over 30 percent, compared with $2.2 billion in FY21, exceeding 3-year targets;
- Adjusted EBITDA margin is expected to range between 24 percent to 24.5 percent, surpassing 3-year targets;
- GAAP earnings per share are expected in the range of $7.62 to $7.92. Adjusted earnings per share in a range of $7.70 to $8.00, over 110 percent compared with $3.66 in FY21;
- Fiscal Q3 and Q4 sales and earnings per share are expected to be roughly the same across each quarter; and
- Free cash flow in the range of $275 million to $325 million.
“This truly is an exciting time to be a Vista Outdoor. We’re delivering on our vision to build powerhouse brands that empower people to achieve their goals and live their best outdoor lives,” said Metz in his concluding remarks., “I do want to note that we’re mindful of the challenges we face as COVID has created an unprecedented environment for all of us, from material, container and labor shortages to increasing inflation. We certainly are not immune to them, and like others, we see these challenges continuing in the near term. However, we have clear competitive advantages that differentiate us, including a diverse portfolio of leading iconic and disruptive brands, the size and scale of our multibillion-dollar organization, our centers of excellence, a healthy balance sheet, strong free cash flow, and purpose and sustainability-driven initiatives. We’re uniquely positioned for our brands to excel and win in today’s markets and to create long-term value for our employees, customers and shareholders.”
Photos courtesy Remington, Camelbak