Vista Outdoor, Inc. reported sales declined 1.6 percent in the fiscal second quarter ended September 30 as sales declined 3.9 percent at its Revelyst outdoor products segment and inched up 0.5 percent at Kinetic Group. Results were in line with expectations with Revelyst exceeding plan. Vista’s board again unanimously recommended shareholders vote for a deal to sell Kinetic Group with Czechoslovak Group (CSG).
As reported, a special meeting of stockholders will be held on November 25 to vote and approve the $2.225-billion transaction with the Czechoslovak Group a.s. (CSG). Kinetic includes the Federal, Remington, CCI, Hevi-Shot, and Speer ammunition brands.
As previously announced on October 4, Vista Outdoor’s Board unanimously approved the acquisition of Revelyst by Strategic Value Partners, LLC (SVP) for for $1.125 billion . Vista Outdoor stockholders are not required to approve the SVP transaction separately. The SVP Transaction is subject to the closing of the CSG Transaction, as well as the receipt of necessary regulatory approvals and other customary closing conditions.
Revelyst has three segments: Adventure Sports (Fox Racing, Bell, Giro, CamelBak, QuietKat, and Blackburn), Outdoor Performance (Simms, Bushnell, Blackhawk, Stone Glacier, Camp Chef, and Primos) and Precision Sports Technology (Foresight Sports, Bushnell Golf, and Pinseeker).
“I am proud of the strong quarter the Vista Outdoor team delivered as we move towards separation. Regarding the separation, the Board underwent a thorough and competitive process, reviewing numerous strategic and other alternatives over nearly three years to maximize value to stockholders,” said Mike Callahan, chairman of the Board of Directors. “At the conclusion of our review, the Board determined that the transactions with CSG and SVP together maximize value for Vista Outdoor stockholders. Based on our management team’s current estimates, the CSG and SVP transactions will collectively deliver an estimated $45.00 1 per share of Vista Outdoor common stock. We are pleased to see ISS is recommending Vista Outdoor stockholders vote “FOR” the sale of The Kinetic Group to CSG and recognizes the significant value that the CSG and SVP transactions will deliver to stockholders. The Board continues to recommend Vista Outdoor stockholders vote in favor of the proposal to adopt the merger agreement with CSG at the special meeting of stockholders which will be held on November 25, 2024.”
“Our teams across Revelyst worked hard to deliver a terrific second quarter, keeping us on track with our commitment to double standalone adjusted EBITDA for the Fiscal Year,” said Eric Nyman, co-CEO of Vista Outdoor and CEO of Revelyst. “We saw Revelyst adjusted EBITDA more than double sequentially in the quarter driven largely by the demonstrable progress made in our GEAR Up transformation. GEAR Up initiatives have now delivered $11.6 million of realized cost savings through the first half of Fiscal Year 2025 across our key focus areas that include Organizational Structure, Real Estate, Supply Chain and Operations and Direct and Indirect Spend. Actioned initiatives include streamlining our corporate real estate footprint, further optimization of our distribution network and realizing efficiencies through the consolidation of external vendor spend. We expect further profitability improvements in the Fiscal Year primarily driven by the $25 to $30 million of estimated realized cost savings attributable to the GEAR Up transformation positioning us well for the future.”
“Looking ahead, we are excited to partner with SVP to capitalize on the momentum that we have built at Revelyst. The partnership positions us well to continue to leverage our integrated international house of brands and leadership in the outdoor industry. We see accelerating growth and an ability to deliver further innovation and top-tier products to outdoor enthusiasts bolstered by the access to SVP’s full operating resources and network. The future at Revelyst is bright, and I look forward to the next step in our journey alongside SVP.”
“The Kinetic Group continues to demonstrate best-in-class performance, while facing a tougher market than last year,” said Jason Vanderbrink, co-CEO of Vista Outdoor and CEO of The Kinetic Group. “Our Adjusted EBITDA margin outpaces the competition at 26.7 percent, showing disciplined product management and demand for our premium products. We were recently awarded key contracts from Veterans Affairs and the Federal Reserve Bank, adding balance to our customer portfolio. The team has also been celebrating the success of our sponsored Olympic shooters, who brought home four medals and a fourth-straight Men’s Skeet Gold from Paris. We look forward to building on a winning strategy and growing the presence of our ammunition brands as we move closer to closing the transaction with CSG.”
Consolidated results for the three months ended September 30, 2024, versus the three months ended September 24, 2023:
- Sales decreased 1.6 percent to $666 million driven primarily by lower volume at Revelyst Adventure Sports and divestitures within Revelyst Outdoor Performance, partially offset by increased price at The Kinetic Group and higher volume primarily driven by new product introductions at Revelyst Precision Sports Technology.
- Gross profit increased 1.2 percent to $211 million due to improved inventory health and increased price at Revelyst Adventure Sports, divestitures within Revelyst Outdoor Performance and increased price at The Kinetic Group, partially offset by increased input costs for copper and powder at The Kinetic Group and lower volume at Revelyst Adventure Sports.
- Operating expenses increased 9.5 percent driven primarily by increased incentive compensation and increased restructuring costs related to the GEAR Up initiative partially offset by lower selling, general and administrative costs at Revelyst primarily related to GEAR Up initiatives.
- Operating income declined 13.3 percent to $66 million and operating income margin decreased 133 basis points to 9.9 percent. Adjusted operating income was $88 million, down 3.6 percent. Adjusted operating income margin decreased 27 basis points to 13.2 percent.
- Net income decreased to $42 million. Net income margin decreased to 6.3 percent.
- Adjusted EBITDA declined 4.4 percent to $111 million. Adjusted EBITDA margin decreased 48 basis points to 16.7 percent.
- Diluted Earnings per Share (EPS) was $0.71, down 6.6 percent, compared with $0.76 in the prior fiscal year. Adjusted EPS increased to $1.03, or up 7.3 percent, compared with $0.96 in the prior fiscal year.
- Year to date cash provided by operating activities was $81 million, compared to $108 million in the prior fiscal year to date period. Year to date adjusted free cash flow was $111 million.
For the three months ended September 30, 2024, versus the three months ended September 24, 2023:
Revelyst
- Sales declined 3.9 percent to $315 million driven by lower volume at Revelyst Adventure Sports and divestitures within Revelyst Outdoor Performance. The decline was partially offset by increased volume within Revelyst Precision Sports Technology.
- Gross profit increased 5.0 percent to $98 million due to improved inventory health and increased price at Revelyst Adventure Sports and improved inventory health and divestitures at Revelyst Outdoor Performance, partially offset by lower volume at Revelyst Adventure Sports, manufacturing efficiency headwinds at Revelyst Outdoor Performance and increased discounting at Revelyst Precision Sports Technology.
- Operating income increased 67.1 percent to $21 million due to higher gross profit and lower selling, general and administrative costs related to GEAR Up initiatives across Revelyst Adventure Sports and Revelyst Outdoor Performance, partially offset by decreased gross profit and increased selling, general and administrative costs at Revelyst Precision Sports Technology. Operating income margin increased 270 basis points to 6.6 percent.
- Adjusted EBITDA increased 25.8 percent to $38 million. Adjusted EBITDA margin increased 286 basis points to 12.1 percent.
The Kinetic Group
- Sales increased 0.5 percent to $351 million, due to increased price.
- Gross profit declined 1.8 percent to $113 million driven primarily by increased input costs of copper and powder, partially offset by increased price.
- Operating income decreased 5.7 percent to $87 million due to lower gross profit and increased incentive compensation.
- Operating income margin decreased 163 basis points to 24.8 percent.
Adjusted EBITDA decreased 5.1 percent to $94 million. Adjusted EBITDA margin decreased 158 basis points to 26.7 percent.
Financial Update
“At Vista Outdoor, we delivered second quarter results in-line with our expectations and our fundamentals remained strong,” said Andrew Keegan, CFO of Vista Outdoor. “Our Revelyst business exceeded expectations during the quarter with segment Adjusted EBITDA more than doubling sequentially from the first quarter. The improved profitability was driven in part by our GEAR Up transformation program which has delivered $11.6 million in realized cost savings in the first half of Fiscal Year 2025. We are well-positioned and reaffirm our commitment to double Revelyst standalone adjusted EBITDA and realize $25 to $30 million of cost savings for the full Fiscal Year 2025 across our key focus areas.
“We continue to prioritize a strong balance sheet and a healthy inventory position. During the quarter we saw Revelyst inventory decrease $87 million year-over-year and $22 million sequentially from Q1. This reduction coupled with improved profitability drove Vista Outdoor’s year to date cash provided by operating activities of $81 million and adjusted free cash flow of $111 million, allowing us to decrease our net debt $26 million during the quarter. Our net debt ended the second quarter at $553 million and our net debt leverage ratio was 1.3x.
“Given the recently announced sale of both The Kinetic Group and Revelyst businesses we have elected to withdraw our full year Fiscal Year 2025 guidance. Upon the sale of The Kinetic Group, that is expected to close prior to year-end 2024, Revelyst will become a publicly traded company under the stock ticker GEAR. The Revelyst sale to SVP is contingent on the completion of the CSG transaction and is expected to close by the end of January 2025 at which point Revelyst will become a privately held company. We are excited for the future of both companies under new strategic ownership,” Keegan concluded.
In light of the company’s pending sale of The Kinetic Group to CSG, as well as its pending sale of Revelyst to Strategic Value Partners, the Company will not hold a conference call to discuss its second-quarter results.
Image courtesy Vista Outdoor/Stone Glacier