Matt Koranda

Matt Koranda asked about the key factors driving Gentherm's momentum in winning strategic conquest business, specifically referencing the Mercedes-Benz award, and inquired about the breakdown of the $300 million adjacent market funnel and its expected conversion to revenue in 2026 and 2027.

Answer

President and CEO Bill Presley attributed the conquest wins to Gentherm's innovative edge, the value proposition for OEMs, and strong customer relationships, highlighting the adoption of Puls.A technology. He detailed the adjacent market funnel as roughly one-third furniture, one-third commercial vehicle, and one-third other mobility, noting rapid traction in furniture. CFO Jon Douyard added that the initial furniture award is a $3 million-$5 million opportunity for 2026, leveraging existing assets, with potential for significant growth in 2026-2027.

Matt Koranda asked about the factors driving Gentherm's momentum in securing conquest business, specifically with Mercedes-Benz, and sought clarity on the breakdown and conversion timeline of the $300 million adjacent market funnel.

Answer

Bill Presley, President and CEO, attributed conquest wins to Gentherm's innovative edge, value proposition for end-users, strong commercial relationships, and the rapid adoption of Pulse A technology. He detailed the adjacent market funnel as roughly one-third furniture, one-third commercial vehicle, and one-third other mobility, noting furniture's rapid traction and speed to market. Jon Douyard, CFO, added that the initial furniture award could generate $3-5 million in 2026, leveraging existing assets for incremental revenue.

Speaking on behalf of Matt Koranda, an analyst from ROTH Capital Partners asked about the dynamics behind the Q1 new business award figure, which appeared lower than in recent quarters. He also sought clarification on why the 2025 revenue guidance was maintained despite a weaker industry production forecast, particularly in North America.

Answer

President and CEO William Presley stated that Q1 new business awards were in line with historical Q1 trends and internal expectations, and he remains confident in a robust full year for bookings. CFO Jonathan Douyard added that while lower North American volume pressures the revenue forecast, this is partially offset by favorable foreign exchange rates and tariff pass-through revenue, allowing the company to maintain its full-year guidance range, albeit likely toward the lower end.

Matt Koranda asked about new CEO Bill Presley's top two priorities, the quantifiable savings from the planned 30% footprint reduction, and the underlying industry production assumptions built into the 2025 financial outlook.

Answer

CEO William Presley identified his top priorities as scaling core technology platforms beyond automotive seats and standardizing operating systems to improve asset utilization and margins. CFO Jon Douyard clarified that while the footprint reduction will create a 50-basis-point headwind in 2025, it is critical for achieving mid-to-high teens EBITDA margins long-term, declining to provide a specific savings figure at this time. Mr. Presley added that the 2025 outlook assumes a more pessimistic auto production environment than S&P forecasts, reflecting market uncertainty.

Matt Koranda inquired about the fourth-quarter bookings outlook, the specific factors driving the revenue guidance reduction, and the reasons for the anticipated sequential improvement in adjusted EBITDA margin despite lower revenue.

Answer

Phillip Eyler, President and CEO, explained that while Q4 bookings would be solid, they were unlikely to match the record $900 million from the prior year. He attributed the guidance cut primarily to steeper-than-expected light vehicle production declines, particularly in Asia and with customers like Stellantis, along with some EV program delays. Eyler stated that the expected Q4 margin improvement would be driven by the ramp-up of Fit-for-Growth cost savings initiatives, which would offset headwinds from new plant start-up costs in Mexico and Morocco.

Matt Koranda asked how Byrna's Q4 guidance aligns with the significant lift in web traffic, particularly concerning conversion rates. He also questioned the promotional strategy for the holiday season, the outlook for wholesale expansion, and the timeline for the commercial availability of the SOS alert technology and connected safety platform.

Answer

CEO Bryan Ganz explained that Q4 guidance reflects conservative conversion rate expectations, as web traffic continues to grow, and conversion takes time to catch up. He mentioned the 'Black and Orange' sale and 'Black Friday Cyber Monday' promotions, noting potential Q1 sales spillover due to timing. CFO Lauri Kearnes and CEO Bryan Ganz stated they are well-positioned with 1,000 stores, focusing on expanding existing relationships and selective new corporate stores rather than broad expansion. Ganz confirmed the SOS alert technology would be a phased, next-year (2026) event, leveraging existing technology.

Matt Koranda inquired about Q1 sales trends, the impact of the new administration, the loss of the Mike Huckabee endorsement, drivers of EBITDA leverage, and the expected P&L impact of the new Sportsman's Warehouse partnership.

Answer

Executive Bryan Ganz stated that Q1 2025 will see strong year-over-year growth, becoming a record quarter excluding the seasonally high Q4 2024. He noted the new administration has led to more platforms accepting Byrna's ads and downplayed the financial impact of losing the Huckabee endorsement. CFO Lauri Kearnes explained that while variable selling costs are stable, EBITDA leverage will be impacted by increased marketing spend and initial operating expenses from new retail stores, which she quantified at approximately $400,000 to $500,000 per quarter before they ramp up over six months. Bryan Ganz added that the Sportsman's partnership is crucial for rapid expansion, outlining the criteria for success and the faster rollout potential compared to company-owned stores.

Matt Koranda sought clarification on the implied full-year revenue growth of 100% and the Q4 run rate of $25 million, asking about key variables. He also asked about learnings from Q3 promotions, the strategy for the Black Friday period, and a potential timeline for advertising on mainstream cable news channels.

Answer

Executive Chairman Bryan Ganz confirmed the $25 million Q4 run rate based on September's performance, which would place full-year revenue over $80 million. He noted strong momentum from celebrity endorsers and retail expansion. CFO Laurilee Kearnes clarified that due to the November 30 fiscal year-end, the impact from Black Friday sales will largely be recognized in Q1 2025. Ganz added that the company's email list has grown to over 526,000 active subscribers, and email frequency will increase in Q4. Regarding new channels, he stated marketing spend is growing by about $200,000 per month and is expected to increase by 50% in the next year, while maintaining a 5x return on ad spend.

Matt Koranda asked for insights into Sportsman's Warehouse's back-half comparable store sales guidance, including demand trends observed through August and the overall setup for comps. He also sought a detailed breakdown of the average order value (AOV) trend, specifically regarding the potential for further improvement in attachment strategies and whether AOV growth is factored into the back-half guidance.

Answer

CEO Paul Stone noted positive August trends, including accelerating NICS performance, and expressed confidence in Q3 momentum. He emphasized significant untapped potential for attachment, especially with firearms and ammo, driven by working capital reinvestment and improved inventory alignment. He stated that UPT and AOV are at all-time highs, exceeding COVID-era marks.

Inquired about the reiterated guidance in light of tariff pressures, asking about mitigation strategies, the timing of the P&L impact from tariffs, and the specifics of the outperformance against NICS data (unit vs. dollar).

Answer

The company is managing tariff impacts through dynamic pricing and a strategic inventory pull-forward, which will delay the P&L impact until later in the year. They reiterated confidence in their guidance. The outperformance versus NICS is significant on a unit basis, driven by a value-oriented assortment that meets current consumer demand, and this trend continued into May.

Matt Koranda inquired about the monthly same-store sales cadence in Q3, the customer response to promotions, and the implied Q4 comp guidance considering the 53rd week calendar shift. He also asked for details on the new promotional strategy and the outlook for SG&A expenses.

Answer

CFO Jeff White explained that Q3 comps improved sequentially each month and clarified that the Q4 comp guidance is impacted by a calendar shift from last year's 53rd week. CEO Paul Stone detailed a new holiday promotional strategy focused on gifting and driven by a more effective digital marketing mix, which has boosted AOV through high attachment rates. Jeff White added that SG&A is expected to remain at a steady state, as any future cost savings will be reinvested into store labor and customer service.

Matt Koranda of ROTH Capital Partners sought clarification on a revenue reclassification between product and service segments. He also questioned the reasons for the guided Q2 revenue deceleration and asked what macroeconomic factors, like tariff pauses, were reflected in the outlook.

Answer

CFO Erica Wei confirmed a retrospective reclassification of delivery fees from product to service revenue to provide greater transparency, effective Q1 2025. She attributed the guided Q2 slowdown primarily to the Noble House integration, as the company is replacing seasonally strong outdoor SKUs from the prior year. She also noted that any impact from recent tariff pauses would likely be seen in Q3, not Q2, due to shipping and inventory cycles.

Matt Koranda requested a quantification of the headwind from the Noble House SKU rationalization on the Q1 revenue guide and asked about the potential impact of tariffs on both the 1P and 3P businesses.

Answer

CFO Erica Wei explained that the SKU retirement is a dynamic process without a fixed target, making it difficult to quantify precisely. She estimated that legacy Noble House revenue would be flat to slightly lower in Q1. On tariffs, Wei stated that the company does not expect a material impact, as the cost increase translates to a very low single-digit retail price change on bulky items. She added that GigaCloud's platform can help partners navigate supply chain shifts, such as sourcing from new regions.

Matt Koranda asked about FIGS's tariff mitigation strategy, questioning why the company has not factored price increases into its outlook and inquiring about the current state of demand normalization amid broader consumer volatility.

Answer

CFO Sarah Oughtred outlined cost mitigation efforts, including supply chain efficiencies and disciplined G&A spending. CEO Trina Spear explained the reluctance to raise prices, emphasizing the importance of affordability for their core customer base of healthcare professionals and noting that internal cost-saving measures are the priority. Spear also affirmed that underlying business fundamentals remain strong, with positive trends in repeat frequency, AOV, and active customers indicating a normalization of demand post-COVID.

Matt Koranda questioned the timing and rationale for shifting the promotional strategy and asked for an outlook on the overall scrubwear industry demand and replacement cycle in 2025.

Answer

CFO Sarah Oughtred explained the promotional shift is possible now due to a healthier inventory position. The goal is to solidify long-term brand health. She noted that while their guidance implies a scrubwear decline, it's due to their own promotional changes, as underlying customer trends like traffic and frequency are improving.

Matt Koranda asked about the specific drivers of the AOV headwind anticipated in the Q4 outlook and the requirements to return AOV to positive growth. He also inquired about the expected timeline for brand campaigns to translate into sales.

Answer

CFO Sarah Oughtred stated the cautious Q4 outlook reflects ongoing footwear trends and the inconsistent promotional response seen in Q3. Co-Founder and CEO Trina Spear explained that top-of-funnel campaigns can yield results over six months to several years, highlighting immediate positive indicators like increased web traffic and leads, which build long-term brand value.

Matt Koranda asked how lower consumer confidence is manifesting in customer behavior beyond lower AOV, such as in return rates or financing usage, and inquired about the quarter-to-date return rate trend.

Answer

Co-CEO Michael Karanikolas identified lower AOV and a modest growth deceleration as the primary behavioral shifts. He stated that they have not yet seen a meaningful impact on the product return rate, though it can be a lagging indicator. He noted that while some sentiment indicators improved late in April, the environment remains highly volatile.

Matt Koranda questioned the drivers of the G&A expense guide, particularly the impact of the store build-out, and asked for clarity on the potential for overall operating margin expansion in the coming year.

Answer

CFO Jesse Timmermans clarified that while the store build-out is a factor in higher G&A, it is not the most significant one, with investments in owned brand expansion also being key. On overall margins, he confirmed that operating margin expansion is a possible scenario but is largely dependent on achieving strong top-line growth.

Matt Koranda of Roth Capital Partners asked about any structural impediments preventing a return to pre-pandemic return rates and the potential timeline to achieve that goal.

Answer

Co-CEO Michael Karanikolas responded that while pre-pandemic levels are an aspiration, the primary focus is on making meaningful business and customer experience improvements, not just hitting a number. Co-CEO Michael Mente added that over the long term, physical retail presents a "tremendous opportunity" to reduce return rates through an omnichannel approach, though this would be a multi-year journey.

Matt Koranda asked for details on the end markets driving the Amran/Narayan acquisition's strong order book, its current capacity utilization, the timing of an organic growth inflection in the core Electronics segment, and the company's philosophy on balance sheet leverage for future M&A.

Answer

CEO David Dunbar confirmed that grid modernization, data centers, and AI are the primary growth drivers for Amran/Narayan, with capacity at 60-70% and expansions planned. CFO Ademir Sarcevic added that European margins for the new plant are expected to be consistent with the group average. Sarcevic also highlighted that core electronics orders were up 10% year-over-year, indicating an inflection point for organic growth is imminent. Regarding leverage, Sarcevic stated the priority is paying down debt from the current 2.8x level, with Dunbar adding this is as high as they are comfortable going.

Asked about the Q4 comp miss, the sensitivities in the Q1 sales guidance, trends seen in February, the timeline for the new merchandising team's impact, and details on the Q1 cash balance guide regarding inventory and potential use of the credit facility.

Answer

The Q4 comp miss was driven by a very weak November (-21%). The Q1 guidance range accounts for cautious optimism from positive trends during a brief warm weather period, balanced against the negative impact of a later Easter. The full results of the new merchandising team's efforts are expected to be visible by July. The company does not expect to access its credit facility unless comps consistently approach a -10% decline for the full year.

Asked for clarification on the time-shifted sales figures, the sales cadence in November, upcoming sales comparisons, the Q4 product margin guidance, promotional strategies for the holiday season, and the drivers of SG&A expenses.

Answer

The executive clarified that the shifted comp figure is for the quarter-to-date to normalize for the Thanksgiving timing shift. Sales cadence in November was volatile due to this shift. Last year's Q4 comps were consistently negative. The Q4 margin guidance of 200 bps improvement reflects strong November results offset by anticipated markdowns for the rest of the quarter. Promotional strategies are focused on margin dollar productivity, and SG&A is tracking as expected.

Matt Koranda of ROTH Capital Partners sought clarification on the quarter-to-date time-shifted sales comparison for Q4. He also inquired about the sales cadence in November, the drivers behind the Q4 product margin guidance, planned promotional strategies, and factors influencing the SG&A outlook.

Answer

Executive Michael Henry clarified the time-shifted sales figure provides a more accurate quarter-to-date comparison by aligning the Thanksgiving holiday periods. He described a volatile November sales cadence that has recently shown positive signs on a shifted basis. Henry explained that the strong November product margin improvement was due to lapping a major promotion, while the full Q4 guide of ~200 bps improvement anticipates future markdowns. He noted promotional strategies are focused on margin dollar productivity and that SG&A trends are in line with expectations.

Matt Koranda requested a breakdown of the 2025 growth guidance across the armor, duty gear, EOD, and nuclear franchises. He also asked for an explanation of the trends driving the Q1 guidance, the geographic source of potential tariff impacts, and the potential scale of mitigation efforts.

Answer

CFO Blaine Browers explained that core armor and duty gear are expected to grow around 3%, while the nuclear business growth is higher due to the full-year inclusion of the Alpha Safety acquisition. He attributed the soft Q1 outlook to a very strong comparison in U.S. Armor from Q1 2024 and lighter, back-end loaded project timing for the EOD business. Blaine Browers specified the tariff exposure is roughly 60% from Mexico and 40% from Canada, with minimal China impact. President Brad Williams reiterated that mitigation plans are in motion, covering pricing, production shifts, and productivity improvements, but the evolving nature of tariffs makes it difficult to quantify the offset.

Matt Koranda of ROTH Capital Partners asked for a breakdown of sales by month in Q3 to understand the cyber incidents' impact, the revenue contribution from the Alpha and ICOR acquisitions, and justification for the steep Q4 revenue and EBITDA margin ramp implied by the updated guidance.

Answer

CFO Blaine Browers detailed that July was most impacted, with a ramp in August and a strong September despite the second incident. He noted ICOR's contribution was consistent, while Alpha's ramped up sequentially. For Q4, he explained the significant EBITDA margin expansion is driven by SG&A leverage on higher sales, supported by inventory built in Q3 and detailed operational plans to increase production capacity.

Inquired about the drivers of the 2025 margin guidance, whether the potential tariff impact is included, the strategic role and financial contribution of the RockyMounts acquisition, and the reasons for the weak Q1 top-line guidance.

Answer

The company explained that 2025 margin expansion is driven by cost savings and significant gross margin improvement in Outdoor, and back-half weighted new product launches in Adventure. The potential tariff impact is not in the guidance. RockyMounts is a strategic acquisition for North American growth but its '25 contribution is conservatively planned. The weak Q1 guide is due to softness in the Australian auto market for Adventure and a delivery timing shift for Outdoor that moved revenue from Q1 to the prior Q4.

Matt Koranda of ROTH Capital Partners inquired about the key drivers for the 2025 guidance, specifically the balance between cost-cutting and product mix improvements. He also sought clarity on whether the potential $2.5 million tariff impact was included in the outlook and asked about the strategic contribution of the RockyMounts acquisition and near-term Q1 trends.

Answer

McNeil Fiske, President of Black Diamond, detailed that Outdoor's profit lift comes from both OpEx reduction and a 350-450 basis point gross margin expansion from improved mix. Mathew Hayward, Managing Director of Adventure, highlighted the importance of new products and international investments in the second half. CFO Michael J. Yates clarified the potential $2.5 million tariff impact is a headwind and is not included in the guidance. Yates and Hayward also explained that RockyMounts is critical for North American market penetration and doubles their distribution footprint. For Q1, Yates noted weakness in Adventure's Australian market offset by strength in Outdoor.

Joseph, on behalf of Matt Koranda, asked about the reasons for Lugano's strong EBITDA flow-through in Q4 and any updates on long-term margin goals. He also questioned the store growth strategy for the 5.11 brand under its new leadership.

Answer

Patrick Maciariello, an executive, attributed Lugano's strong performance to market strength and the growing acceptance of its disruptive business model, rather than a one-time event. He confirmed plans for new salon openings in 2025. For 5.11, he described the 2025 retail strategy as a 'test and learn' approach, with plans to launch a few stores with a different profile towards the end of the year.

Matt Koranda from ROTH Capital Partners asked for a breakdown of Lugano's growth drivers, questioning the contribution from existing versus new salons and average order values. He also probed the exceptionally high incremental margins at Lugano in Q3 and inquired about the current M&A landscape, deal flow, and how the company balances potential acquisitions with its new share buyback program given its balance sheet capacity.

Answer

Executive Patrick Maciariello described Lugano's growth as balanced across all salons, transaction values, and transaction volume, driven by its disruptive business model. He cautioned against extrapolating Q3's high margins but affirmed strong Q4 expectations. Executive Elias Sabo characterized the M&A market as muted but expressed optimism for 2025. He stated the company is comfortable with its leverage, given the portfolio's higher growth rate, strong cash generation, and available financing options, allowing flexibility for both M&A and buybacks.

Matt Koranda requested an analysis of Lugano's growth drivers, asking to differentiate between existing and new salon performance and average order values. He also questioned the unusually high incremental margins at Lugano in Q3 and inquired about the M&A landscape, deal flow, and how the company balances acquisitions with share buybacks given its current balance sheet.

Answer

Executive Patrick Maciariello described Lugano's growth as balanced across all salons, with increases in both transaction value and volume, but cautioned against extrapolating Q3's high margins. Executive Elias Sabo characterized the M&A market as muted but expressed optimism for a 2025 rebound, emphasizing a disciplined approach. He stated the company is comfortable with its current leverage due to higher portfolio growth and has access to additional capital via term loans and bonds if needed.

Matt Koranda asked if the softening economic outlook alters the company's appetite for large acquisitions, requested more detail on why deal flow isn't meeting standards, and questioned the balance sheet strategy regarding leverage reduction. He also sought insights on Lugano's London opening, its European expansion plans, and the sustainability of its high incremental margins.

Answer

Executive Elias Sabo explained that the economic outlook impacts forward earnings views, making them cautious on valuation, and clarified that the 'not meeting standards' comment refers to a lack of A+ quality businesses on the market, for which they would expect to pay premium multiples. CFO Ryan Faulkingham stated that leverage is already declining organically and they feel the balance sheet is in good shape. Executive Patrick Maciariello shared that Lugano's London success validates their model for Europe, with Elias Sabo adding that Lugano's accelerating growth requires significant, but high-return, inventory investment.

Matt Koranda asked if the softening economic outlook affects the company's appetite for large acquisitions, sought clarity on what 'deals not meeting standards' means, questioned the priority of leverage reduction, and inquired about learnings from Lugano's London opening and the sustainability of its high margins.

Answer

Executive Elias Sabo explained that while the weakening economy impacts their valuation of potential deals, they still seek premium, innovative companies and expect to pay premium multiples. Executive Ryan Faulkingham stated that leverage is declining organically due to strong performance and that they are confident in their balance sheet. Executive Patrick Maciariello noted the London salon's success validates their international expansion model. Sabo added that Lugano's inventory-to-sales model remains consistent, with accelerating growth requiring more upfront capital.

Questioned the rationale for divesting only Crosman from Velocity, sought clarification on M&A posture regarding leverage, and asked for details on the growth drivers for both Lugano and the newly acquired Honey Pot.

Answer

The Crosman sale to a natural buyer was a strategic move to maximize value, while the remaining Velocity business has exciting new technology coming. The company confirmed they are comfortable making acquisitions first and deleveraging later. Lugano's growth is driven by low market penetration, inventory investment, maturing salons, and geographic expansion. Honey Pot's growth comes from expanded shelf space in big-box, drug, and grocery channels, plus new products.

Matt Koranda asked for details on Q4 performance during the Black Friday/Cyber Monday period, the underlying omni-channel comparable sales assumption, initiatives to boost near-term conversion, and initial attach rates for the new recliner.

Answer

CFO Keith Siegner noted that while the quote pipeline shows double-digit growth, conversion on large configurations has been a challenge, and this is factored into the Q4 guidance. President & COO Mary Fox outlined conversion initiatives, including targeted outreach and special holiday events. She reported the recliner is off to a strong start, selling over 4,000 units in three weeks to both new and existing customers, significantly beating internal KPIs even without a major media campaign.

Matt Koranda inquired about the demand cadence through Q2 and early Q3, the drivers for the implied Q4 EBITDA margin ramp, and the specifics of recent changes to the customer financing program.

Answer

President and COO Mary Fox described underlying demand trends as stable from Q2 into Q3, noting that Lovesac remains competitive with 30%-level promotions even as competitors offer deeper discounts. CEO Shawn Nelson attributed the Q4 profit ramp to top-line leverage, outbound logistics savings, and lower anticipated SG&A. CFO Keith Siegner added that the company is testing new financing offers to counter the impact of new industry-wide fees on its credit card program.

Matt Koranda from ROTH Capital Partners sought confirmation on whether the Q1 guidance implies positive omnichannel comps, asked for color on sales trends through March and April, and inquired about any early consumer reaction to recent tariff announcements.

Answer

CFO Keith Siegner confirmed that flat to slightly positive omnichannel comps for Q1 are a possibility, noting that new/non-comp showrooms would contribute slightly less than the typical 5-6% due to a more balanced opening cadence this year. He also pointed to noise in year-over-year comparisons due to last year's promotional timing and the Easter shift. President and COO Mary Fox added that the prior week was quiet, making it too early to gauge any specific consumer reaction to tariff news.

Inquired about the specific drivers of the sales acceleration in the fiscal '25 outlook, the rationale for providing a fiscal '26 outlook, the expected gross margin headwinds in Q3 from tariff amortization, the company's overall tariff exposure, and the current state of the M&A funnel.

Answer

The company stated that the sales acceleration is broad-based across the entire product portfolio, driven by retailers seeking innovation. The fiscal '26 outlook was provided due to high visibility from strong line reviews and early commitments from a diverse set of retailers. Gross margins in H2 will be impacted by the amortization of H1 inventory costs and some delayed promotions, similar to the prior year. On tariffs, the company's strategy is to leverage its innovation advantage (pricing power, new products) and remain agile with a strong balance sheet and diverse supplier network. The M&A funnel is slow in Shooting Sports but has clearer opportunities in Outdoor Lifestyle and adjacent categories.

Matt Koranda asked for details on the drivers of sales acceleration in the fiscal '25 outlook, the rationale for providing fiscal '26 guidance, clarification on Q3 gross margin headwinds from tariff amortization, and the characteristics of the current M&A funnel.

Answer

CEO Brian Murphy stated that the sales acceleration is broad-based across the entire product portfolio, driven by retailers' demand for innovation, rather than being led by one or two specific brands. He explained that the early FY26 guidance was provided due to unprecedented visibility from strong, diverse retailer commitments. CFO H. Fulmer detailed that Q3 gross margin headwinds are from tariff variance amortization and promotional timing shifts. Murphy provided a detailed overview of the company's strategy to mitigate potential tariff impacts through innovation, pricing power, and supply chain agility, and described the M&A funnel as having more opportunities in Outdoor Lifestyle and adjacent categories.

Asked about the performance and outlook for the MEAT! and Grilla brands, the M&A market for Outdoor Lifestyle vs. Shooting Sports, the retail rollout and shelf space for Grilla, the reason for the slight gross margin deceleration in the forecast, and whether the election cycle is factored into the Shooting Sports outlook.

Answer

Executives stated new products are performing well, especially in Canada, and highlighted significant revenue growth from innovation. On M&A, opportunities are more robust and higher quality in the Outdoor Lifestyle segment. The Grilla retail rollout is strategic, with new products launching later in the year. The full-year gross margin forecast of 45% is an increase from the prior year due to better freight rates, with quarterly fluctuations expected. The company's guidance does not include any potential sales bump from the upcoming election.

On behalf of Matt Koranda, an analyst from ROTH Capital Partners inquired about the performance of new products, specifically the MEAT! and Grilla brands, and the outlook for the M&A market. He also asked for an update on Grilla's retail rollout, the drivers behind the gross margin forecast, and whether the guidance for the Shooting Sports segment accounts for a potential election-related sales increase.

Answer

President and CEO Brian Murphy highlighted that new products have generated over $60 million in incremental revenue since the 2020 spin-off and that the M&A pipeline is robust, particularly for higher-quality outdoor lifestyle brands with sub-$40 million in revenue. He noted Grilla is being strategically tested on Amazon ahead of a broader retail launch. CFO H. Fulmer explained that the full-year gross margin forecast of 45% is on track, with quarterly fluctuations due to inventory purchase timing. Fulmer also confirmed the company's sales forecast does not include any potential sales bump from the upcoming election cycle.

Asked about the company's confidence that the Google search issues are resolved, which diversified marketing channels are showing success, and the specific reasons for delaying the debt refinancing into Q1 2025.

Answer

The company is not certain the Google changes are done but feels better positioned by diversifying partners and channels, including Meta, TikTok, and Amazon ads. The debt refinancing is delayed to allow the Q4 business rebound to play out, to finalize the cash balance after potential asset sales, and to secure better terms on a new loan without being locked into unfavorable prepayment penalties.

Asked about the drivers for the expected Q4 sales pickup, the breakdown of restructuring savings between gross margin and OpEx, and the expected seasonality of profitability in 2025.

Answer

The Q4 sales pickup is expected due to strong holiday periods, increased ad spend compared to Q3, and historical consumer behavior. Restructuring savings are slightly more weighted to cost of sales but are significant in OpEx too. Profitability in 2025 is expected to follow historical patterns, being stronger in the second half of the year.

Inquired about the specific reasons for the Revelyst sales delay from Q1 to Q2, why Q2 isn't projected to show year-over-year growth despite the shift, the components bridging the gap to the full-year EBITDA target, and the expected seasonality of free cash flow.

Answer

The sales delay was attributed to a software quality issue with a new Bushnell Golf product and end-of-quarter order processing challenges, both of which have been resolved. Q2 will improve sequentially but not show year-over-year growth because new product launches are spread throughout the year. The full-year EBITDA target will be met through GEAR Up savings, ~$10M from a prior restructuring, improved freight costs, and lower promotions. Free cash flow is expected to be lightest in Q2 due to seasonal inventory builds, with the back half of the year being stronger.

Inquired about the Revelyst FY25 sales outlook, the realization timeline for cost savings initiatives, the implied corporate expense in guidance, and the pro forma balance sheet for Revelyst concerning free cash flow seasonality and potential future divestitures.

Answer

The Revelyst sales outlook is conservatively planned to be roughly flat year-over-year, excluding divestitures. The $25-30 million in GEAR Up savings is expected to be realized in FY25, with the full run-rate effect in FY26. Stand-alone Revelyst corporate costs are still projected to be around $55 million. Free cash flow seasonality is expected to be similar to the prior year, and the company is actively exploring further divestitures.

Matt Koranda of ROTH MKM inquired about the specifics of the operational consulting engagement, its expected impact on ammo production and gross margins, the recent sequential dip in casing sales, and the quantifiable impact of new payment and financing initiatives on the GunBroker platform.

Answer

Jared Smith, an executive, explained the consulting engagement is a comprehensive, 30-plus week review of the entire factory focused on rifle case production. CFO Robert Wiley added that Q4 ammo margins were impacted by clearing older inventory but should improve with increased production. Smith attributed the sequential dip in casing sales to equipment realignment and building inventory for future loaded ammunition orders, projecting a 30-40% increase in rifle casing manufacturing by year-end. Regarding GunBroker, Smith noted the new financing initiative will be developed in Q2/Q3, and the recent payment card launch showed positive early signs with a stable performance and a subsequent increase in take rate.

Matt Koranda of Roth MKM inquired about the specifics of the consulting firm's engagement to improve ammunition production, the resulting impact on gross margins, the dynamics of the casing business, and the quantifiable effects of new payment and financing features on the GunBroker marketplace.

Answer

Executive Jared Smith explained the consulting engagement is a comprehensive, 30-plus week review of the entire factory focused on rifle case production. CFO Robert Wiley noted a Q4 margin dip from clearing old inventory but expects improvement as production ramps up. Smith attributed a sequential dip in casing sales to equipment realignment and building inventory for future loaded ammo, projecting a 30-40% increase in rifle casing output by year-end. Regarding GunBroker, he stated the financing initiative is newly signed for future implementation and that the recent payments launch showed a stable, positive result in a short timeframe.