Vista Outdoor Inc. reported earnings in the second quarter ended September 26 jumped 75.2 percent on a 35 percent revenue gain, well above Wall Street’s targets. Sales grew 49 percent in the Shooting Sports segment and 9 percent in its Outdoor Products segment.

Vista Outdoor’s brands include Federal Premium, CamelBak, Bushnell, Camp Chef, Remington, Primos, Blackhawk, Bell, Giro, Bushnell Golf, Foresight Sports, Primos, Eagle, RCBS, CCI, Hevi-Shot, and Speer.

“When I joined Vista Outdoor four years ago, we embarked on a transformative journey that laid the foundation on which our top quartile performance in sales growth and profitability has been built. Our company is now stronger, more nimble and more efficient than ever before, providing a platform that enables us to leverage the strength of our brands and deliver profitable growth,” said Chris Metz, chief executive officer. “During the second quarter, each of our segments grew to create a new high-water mark for quarterly sales which rose 35 percent on top of a record second quarter last year and marked our fifth consecutive quarter of record financial performance. We’ve also completed a total of six acquisitions in 14 months, reflecting the strength of our acquisition pipeline and internal deal execution capabilities.”

“Across our business, we are demonstrating that brand power, innovative products and omnichannel distribution are the keys to driving growth and profitability. The marketplace knows that ‘Big Green is Back’, and we are ramping production ahead of schedule at our Remington facility to meet unprecedented demand. CamelBak delivered its most successful quarter yet, and with Foresight Sports and QuietKat added to our family of brands, we are uniquely positioned to capitalize on two high-growth markets at the early stages of widespread consumer adoption.”

“I am extremely proud of our team and thank our employees for their tireless work and dedication to achieving our mission. I am confident that their efforts and our sustained strategy execution will allow Vista Outdoor’s unique family of iconic brands and upstart innovators to continue to win and deliver value for our shareholders, now and into the future,” concluded Metz.

Foresight Sports Acquisition
On September 10, 2021, Vista Outdoor announced a definitive agreement to acquire San Diego-based Foresight Sports, a designer and manufacturer of golf performance analysis, entertainment and game technologies, for $474 million in cash and available credit from the company’s revolving credit facility. This facility was undrawn prior to the transaction, and Vista Outdoor’s net debt leverage ratio is 1.3 times as of the closing date on September 28, 2021. This ratio remains at the low-end of its target leverage ratio of 1 to 2 times. The results of this business will be reported within the Outdoor Products reportable segment. Foresight Sports will continue to operate in San Diego and be led by the company’s founders. The acquisition, which is operating at significantly higher EBITDA margin levels than its consolidated business and is expected to be immediately accretive to earnings, excluding transaction and transition costs.

Together, Bushnell Golf and Foresight Sports will elevate their brands’ strength and awareness to expand into new segments of the industry to drive growth. The Launch Pro, a personal launch monitor developed in partnership with Foresight Sports, as previously announced in July, has generated strong interest and sold out during its pre-sale event in September.

For the three months ended September 26, 2021 versus the three months ended September 27, 2020:

  • Sales increased 35 percent to $778 million driven by strong growth across both operating segments.
  • Gross profit rose 85 percent to $299 million and gross profit margin improved 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) increased 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.
  • Interest expense increased 4 percent to $6 million.
  • Fully Diluted Earnings per Share (EPS) was $2.36, compared with $1.34. Adjusted EPS was $2.41, up 119 percent compared with $1.10.
  • Cash flow provided by operating activities was $76 million, compared with $120 million. Free cash flow generation was $71 million, compared with $117 million, driven primarily by investments in higher inventory to meet heightened demand.

Sales of $778 million were well above Wall Street’s consensus estimate of $723.34 million. EPS of $2.41 easily topped Wall Street’s consensus estimate of $1.77.

For the three months ended September 26, 2021 operating segment results versus the three months ended September 27, 2020:

  • Shooting Sports – Sales rose 49 percent to $566 million, driven by 65 percent growth in ammunition which includes the acquisition of Remington and HEVI-Shot in the second half of last year; and 8 percent growth in our hunting and shooting category. Gross profit increased 128 percent to $239 million. Margin acceleration was the result of improved pricing and operating leverage driven by higher volume and operating efficiencies.EBIT increased 177 percent to $195 million. EBIT Margin improved by 1,583 basis points to 34 percent from 19 percent.
  • Outdoor Products – Sales were up 9 percent to $212 million, driven by double-digit growth in Outdoor Recreation led by CamelBak and growth in Action Sports. Gross profit increased 5 percent to $60 million, due to higher volume and operating efficiencies, partially offset by higher logistics costs and sales channel mix. Gross profit margin was 28 percent, down 96 basis points. 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.

Share Repurchases
During the quarter, the company repurchased 311,187 shares for a total of $12 million equates to an average share price of $38.58 as part of the $100 million share repurchase program approved by its Board of Directors and announced on May 6, 2021. Since the inception of the program, the company has repurchased a total of 1,523,683 shares for a total of $56 million.

Outlook For Fiscal Year 2022
“Our record quarterly results reflect our disciplined strategy which is driving shareholder value through sound acquisitions in outdoor brands, investments in organic growth and share repurchases while maintaining low leverage within our target of 1 to 2 times,” said Sudhanshu Priyadarshi, CFO, Vista Outdoor. “We are operating at levels well above our stated three-year targets and with the record demand for our highly sought-after brands across our portfolio, we continue to remain confident in our business model and the outlook going forward which is setting up to be another record year for Vista Outdoor since going public in 2015.”

“We are confident that our strategy, also known as the Value Creation Framework, will drive organic growth within our existing, leading brands as well as continued annual growth from our acquisitions. Remington is scaling quickly and expected to deliver over $300 million in sales this fiscal year, QuietKat is outperforming our expectations driven by strong demand in e-bikes and for the brand, and we expect Foresight Sports to provide meaningful growth and EBITDA margins well above our three-year target. Our acquisitions of Hevi-Shot, Venor and now Fiber Energy Products will also drive growth across new and adjacent categories. Fiber Energy Products is a leader in premium, all-natural wood heating and grilling pellet fuel which provides additional growth opportunities and another consumable offering for our Camp Chef customers. In all, we are very excited about our next chapter of growth fueled, in part, by the flexibility of our business model with a lean cost structure and the long-term affinity for our coveted portfolio of brands,” concluded Priyadarshi.

Based on a strong performance to date, demand for its brands, execution across the portfolio, and consideration for the current macroeconomic environment, Vista Outdoor is providing its outlook for fiscal year 2022 as follows, which includes the acquisitions of Fiber Energy Products, Foresight Sports, QuietKat, Venor, HEVI-Shot, and Remington:

  • Sales 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 of 24 percent to 24.5 percent, surpassing 3-year targets
  • GAAP earnings per share 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
  • Free cash flow in the range of $275 million to $325 million

Vista Outdoor is updating the following assumptions for Fiscal Year 2022 on a full-year basis:

  • Tax rate is expected to be in the mid-20 percent range;
  • Interest expense is expected to be in line with the prior-year adjusted interest expense;
  • Capital expenditures increased to be approximately 40 percent higher than FY21 (prior guidance was 30 percent);
  • R&D expenses are expected to be approximately 35 percent higher than FY21 (prior guidance was 25 percent); and
  • Additionally, the company confirmed its long-term targets issued at Investor Day in May with a performance at the high-end of these targets beyond FY22. The current fiscal year is forecasted to be its highest performance to date.

Photo courtesy Vista Outdoor