Speaking at CL King’s 19th Annual Best Ideas Conference, Vista Outdoor’s management expounded on the rationale behind the acquisition of golf simulator Foresight Sports and provided a bullish outlook on the growth potential in ammunition despite current inventory challenges.
On September 10, Vista entered into a definitive agreement to acquire San Diego, CA-based Foresight Sports, a designer and manufacturer of golf performance analysis, entertainment and game enhancement technologies, for $474 million. The deal is expected to close early in the third quarter.
At CL King’s event, Sudhanshu Priyadarshi, SVP and CFO, said part of the reason for the acquisition was to diversify the businesses’ mix from ammunition aligned with the strategy announced at Vista’s Investor Day earlier this year. Priyadarshi said that beyond any reduction in risks tied to have more diverse revenue sources, he believes Vista’s stock valuation continues to be impacted in part by its exposure to ammunition despite its sale of Savage Arms.
Also helping the Foresight deal was Vista’s existing partnership with the company.
Earlier this year, Vista’s Bushnell Golf brand entered into an exclusive domestic partnership with Foresight to bring pro-level launch monitor technology to the amateur golfer. The Launch Pro, featuring Foresight technology, will launch this fall. Priyadarshi said the relationship helped Vista acquire Foresight “at a very good multiple is around nine times.”
However, Vista also seeks to be a bigger player in golf. “The golf category is growing,” said Priyadarshi. “We are very excited about the TAM (total addressable market). We have more than 36 million golf participants alone in the U.S.”
Foresight founders will join Vista as co-presidents, and the CTO (chief technology officer) will continue as an advisor. Priyadarshi noted that for the calendar year 2021, Foresight’s sales and adjusted EBITDA are expected to be approximately $100 million and $50 million, respectively. Priyadarshi said Vista believes the business could double or triple over the next two to three years.
“We believe that together we can grow this business and bring new products to market,” said Priyadarshi. “When we put the Bushnell brand and Foresight together, we get a great brand, and we get great technology.”
The Foresight acquisition is expected to be immediately accretive to earnings, excluding transaction and transition costs. Priyadarshi said Foresight’s margins “will compress a bit” as its technology is extended to consumer markets and internationally but would still be “much higher” than the overall 15 percent to 20 percent EBITDA target Vista set under its three-year plan detailed out on its Investor Day.
In the ammunition category, Priyadarshi said Vista continues to operate its manufacturing facility round the clock to catch up with the channel-wide inventory shortage. Last year’s acquisition of Remington is still ramping up to reach a 75 million to 100 million quarterly run rate.
Vista remains bullish on its outlook for ammunition, with 8 million new shooters in the U.S. last year and 4 million more forecasted in this calendar year. Said Priyadarshi, “When I look at it, this is a consumable model for us. You know, it’s a razor blade model.”
Andy Keegan, Vista’s VP corporate FP&A and treasury who formerly led finance for the ammunition unit, also said today’s inventory challenges are different from past run-ups that saw consumers hoarding inventory and retailers over-purchasing stock. Now, Keegan said that consumer-level stocks appear low “basically because most are being limited. You can’t buy very much at any given time.” Channel-wide inventories for purchase are likewise “very low.”
“It’s true that it’s hard to find ammo anywhere,” said Keegan. “It is a different dynamic. You’re not going to see that sudden drop-off that happened in previous times when inventory was plentiful.”
Vista’s ammunition growth is supported by its DTC push and the launch this fall of a subscription program that it claims will be a first for the industry. Said Keegan of the offering, “It will have a variety of different calibers that people will be able to get on a monthly subscription to be able to get their ammo delivered to them, and they won’t have to think about it. It is similar to how you think about Amazon subscriptions.”
Priyadarshi said Vista continues to explore acquisitions. Vista’s three-year plan calls for 10 percent annual growth with mid-single-digit growth organically, and the rest coming from M&A. Vista completed four deals in the last eight months, including Remington, Hevi-Shot, QuietKat,and Venor, in addition to its planned Foresight acquisition.
The CFO said Vista would not make another golf deal as the golf unit is absorbing Foresight, but overall it has five business units and six platforms to absorb and integrate companies. From a debt standpoint, Vista’s leverage ratio is expected to be below 1.5 times when the Foresight deal closes and below 1.0 times by the end of its current fiscal year ended March 31, 2022.
Said Priyadarshi, “While maintaining the strong balance sheet, we will keep looking for good deals, and we believe we can add a lot of value.”
Photos courtesy Foresight Sports, Remington
