Vista Outdoor’s Quarterly Sales Slide as Ammunition Declines Offsets Outdoor Gains

Vista Outdoor reported adjusted EBITDA decreased 7.5 percent in the fiscal fourth quarter ended March 31 as sales declined 6.4 percent. The Revelyst outdoor segment returned to organic growth for the first time in nine quarters but the Kinetic ammunition business saw a double-digit drop.

“I am proud of the work our teams at Revelyst and The Kinetic Group have accomplished and our results demonstrate that the strategic direction of Vista Outdoor is the right one,” said Eric Nyman, Co-CEO of Vista Outdoor and CEO of Revelyst. “Across Revelyst, we have undertaken a journey to transform our organization into the leading, global integrated house of brands in the Outdoor industry. Our collective efforts during the fiscal year have enabled us to work through economic uncertainties and challenges, and we have emerged stronger at each step along the way as we transform our business to unlock its full potential. Our Gear Up transformation strategy has made tremendous progress, providing confidence that our actions will realize $25 to $30 million of run-rate cost savings in Fiscal Year 2025 supporting the potential to double standalone Adjusted EBITDA year-over-year. We are on track for our long-term goal of realizing $100 million of run-rate cost savings in Fiscal Year 2027 from the GEAR Up program.”

“We continue to be confident in our ability to receive CFIUS clearance with respect to the CSG transaction, and the Board continues to recommend Vista stockholders vote in favor of the proposal to adopt the merger agreement with CSG,” concluded Nyman.

“The Kinetic Group finished the year strong, achieving our financial guidance and delivering quality EBITDA margins in the high-twenties,” said Jason Vanderbrink Co-CEO of Vista Outdoor and CEO of The Kinetic Group. “We have a strong order position going into the new fiscal year and there are backlogs in several product categories that strengthen our confidence in delivering on financial expectations. Some challenges remain related to higher commodity input costs, including for powder and copper, but pricing actions taken to offset the increased production costs have not impacted open orders.”

Revelyst’s portfolio of brands included Fox, Bell, Giro, CamelBak, Camp Chef, Bushnell, Simms Fishing, Foresight Sports and Bushnell Golf.  Kinetic’s brands include Federal, Remington, CCI, Hevi-Shot and Speer.

Consolidated Results for the Three Months Ended March 31, 2024
(versus the three months ended March 31, 2023)

• Sales decreased $47 million to $694 million, down 6.4 percent driven by The Kinetic Group, partially offset by an increase in the Revelyst business.
• Gross profit decreased 6.5 percent to $221 million and gross profit margin was relatively flat at 31.8 percent.
• Operating expenses were $158 million. The lower operating expense is primarily due to lower impairment, restructuring, and selling, general, and administrative expenses related to Revelyst, partially offset by increased contingent consideration and GEAR Up restructuring costs.
• Operating income increased to $63 million. Operating income margin was 9.0 percent. Adjusted operating income was $85 million, down 9.0 percent. Adjusted operating income margin was relatively flat at 12.2 percent.
• Net income increased to $40 million. Net income margin increased to 5.8 percent.
• Adjusted EBITDA decreased 7.5 percent to $109 million. Adjusted EBITDA margin decreased 20 basis points to 15.7 percent.
• Diluted Earnings per Share (EPS) was $0.69 compared with $(5.18) in the prior year period. Adjusted EPS decreased to $1.02, or down 2.9 percent compared with $1.05 in the prior fiscal year period.

For the Three Months ended March 31, 2024
(versus the three months ended March 31, 2023)

Revelyst

• Sales increased 1.4 percent to $332 million driven by increased volume as a result of new product introductions in Revelyst Precision Sports Technology, partially offset by lower volume in Revelyst Outdoor Performance.
• Gross profit increased to $100 million, up 17.3 percent, driven primarily by increased efficiencies, volume, and price, partially offset by increased discounting.
• Operating income (loss) increased 242.7 percent to $12 million driven by increased gross profit and lower selling, general, and administrative costs. Operating income (loss) margin increased 622 basis points to 3.6 percent.
• Adjusted EBITDA increased 209.5 percent to $29 million. Adjusted EBITDA margin increased 590 basis points to 8.8 percent.

 The Kinetic Group

• Sales decreased to $362 million, down 12.5 percent, due to lower volume across nearly all categories and lower pricing.
• Gross profit decreased to $121 million, down 20.7 percent driven by decreased volume and price, unfavorable mix, and increased input costs due to inflation.
• Operating income (loss) decreased 24.8 percent to $94 million due to lower gross profit, partially offset by lower selling, general, and administrative costs. Operating income (loss) margin decreased 422 basis points to 25.9 percent.
• Adjusted EBITDA decreased 23.3 percent to $100 million. Adjusted EBITDA margin decreased 392 basis points to 27.7 percent.

Consolidated Results for the Twelve Months Ended March 31, 2024
(versus the twelve months ended March 31, 2023)

• Sales decreased 10.8 percent to $2.7 billion and organic sales were $2.6 billion, down 14.5 percent, driven primarily by lower volume at The Kinetic Group and Revelyst.
• Gross profit decreased 16.7 percent to $859 million due to lower volume and price at The Kinetic Group and lower organic volume at Revelyst. These decreases were partially offset by lower discounting at The Kinetic Group and increased volume from inorganic business and efficiencies at Revelyst.
• Operating expenses decreased 12.4 percent driven primarily by lower impairment, selling, general, and administrative expenses related to organic business, restructuring, and transaction costs, partially offset by increased selling, general, and administrative expenses related to inorganic business, contingent consideration, planned separation, and GEAR Up restructuring costs.
• Operating income (loss) declined 53.2 percent to $50 million and operating income (loss) margin decreased 166 basis points to 1.8 percent. Adjusted operating income (loss) was $343 million, down 34.1 percent. Adjusted operating income (loss) margin decreased 441 basis points to 12.5 percent.
• Net income (loss) improved to $(6) million. Net income (loss) margin increased to (0.2) percent
• Adjusted EBITDA declined 27.8 percent to $442 million. Adjusted EBITDA margin decreased 378 basis points to 16.1 percent.
• Diluted EPS was $(0.10), up 41.2 percent, compared with $(0.17) in the prior fiscal year. Adjusted EPS declined to $3.86, or down 38.3 percent, compared with $6.26 in the prior fiscal year.
• Cash provided by operating activities was $401 million, compared to $486 million in the prior fiscal year. Adjusted free cash flow was $432 million.

For the Twelve Months Ended March 31, 2024
(versus the twelve months ended March 31, 2023)

Revelyst

• Sales declined 2.2 percent to $1.3 billion and organic sales were $1.2 billion, down 10.7 percent, driven by lower volume, increased discounting, and unfavorable mix in Revelyst Adventure Sports and Revelyst Outdoor Performance.
• Gross profit decreased 3.5 percent to $373 million due largely to lower organic volume, increased discounting, and unfavorable mix, partially offset by volume from inorganic business and increased efficiencies.
• Operating income (loss) declined 54.2 percent to $29 million primarily caused by increased selling, general and administrative costs related to prior year acquisitions and lower gross profit, partially offset by lower selling, general, and administrative costs related to organic business. Operating income (loss) margin decreased 251 basis points to 2.2 percent.
• Adjusted EBITDA decreased 21.5 percent to $98 million. Adjusted EBITDA margin decreased 188 basis points to 7.6 percent.

The Kinetic Group

• Sales decreased 17.4 percent to $1.5 billion, driven by lower volume across nearly all categories as channel inventory has normalized, the termination of the Lake City contract at the beginning of the third fiscal quarter in the prior fiscal year, and lower pricing. These decreases were partially offset by increased shipments and lower discounting.
• Gross profit declined 25.7 percent to $486 million driven primarily by decreased volume and price, unfavorable mix, and increased input costs due to inflation. These decreases were partially offset by lower discounting.
• Operating income (loss) decreased 29.4 percent to $390 million, due to lower gross profit, partially offset by decreased selling costs. Operating income (loss) margin decreased 457 basis points to 26.8 percent.
• Adjusted EBITDA decreased 28.0 percent to $416 million. Adjusted EBITDA margin decreased 422 basis points to 28.6 percent.

Fiscal Year 2025 Outlook
“Fiscal Year 2024 was a transformative year for our company with the signing of a definitive agreement with CSG to sell the Kinetic Group for $1.91 Billion, the hiring of key management at Revelyst and the kick-off of the GEAR Up transformation program all while navigating an uncertain macroeconomic backdrop. Sales for Fiscal Year 2024 were $2.7 billion with Adjusted EBITDA of $442 million,” said Andrew Keegan, CFO of Vista Outdoor.

“We remained disciplined during the year and prioritized the health of our balance sheet, driving a $100 million reduction in inventory. Additionally, our robust fourth quarter cash provided by operating activities of $161 million and adjusted free cash flow of $161 million allowed us to pay down $115 million of debt during the quarter and improve our net debt leverage ratio to 1.5x.

“Our Fiscal Year 2025 guidance reflects headwinds that include a global powder shortage, increasing input costs, including for copper and powder, and competitive market pricing at The Kinetic Group pressuring the bottom line during the year. At Revelyst, our guidance takes into consideration our expectation that consumers do not meaningfully change their purchasing patterns due to ongoing economic uncertainties and challenges. Sales guidance also excludes a combined approximately $30 million from the divested RCBS brand and the Fiber Energy brand, which suffered a fire at its main production facility. We expect to double our Revelyst standalone adjusted EBITDA during the year primarily driven by the GEAR Up transformation program, contributions from our previously announced April 2023 cost restructuring program, improvements in supply and freight cost and lower expected promotions as compared to Fiscal Year 2024,” concluded Keegan.

Vista Outdoor Fiscal Year 2025 Financial Guidance

• Sales in the range of $2.665 billion to $2.775 billion
  • The Kinetic Group Sales expected to be approximately $1.425 billion to $1.475 billion
  • Revelyst Sales expected to be approximately $1.240 billion to $1.300 billion
• Adjusted EBITDA in the range of $410 million to $490 million
  •  The Kinetic Group adjusted EBITDA expected to be approximately $350 million to $400 million
  • Revelyst adjusted EBITDA expected to be approximately $130 million to $160 million
• Earnings Per Share (EPS) in the range of $3.60 to $4.50
• Cash provided by operating activities in the range of $280 million to $362 million; adjusted Free Cash Flow in the range of $240 million to $320 million
• Effective tax rate of approximately 25.0 percent
• Interest expense in the range of $30 million to $40 million
• Capital expenditures as a percent of sales of approximately 1.5 percent

Image courtesy Simms Fishing