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Vista Outdoor Inc. (VSTO)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY24 was mixed: total sales were $682.3M, “in line with expectations,” with consolidated adjusted EBITDA at $93.5M (13.7%), but GAAP net loss of $148.2M due to a $219M non-cash goodwill/intangibles impairment; adjusted EPS was $0.80 while GAAP EPS was $(2.55) .
  • Management reaffirmed FY24 sales and adjusted EBITDA margin guidance; however, GAAP EPS guidance was cut sharply to $0.00–$0.40 (from $3.37–$3.77) reflecting impairment; cash from operations guidance was lowered to $256–$308M, adjusted EPS guidance held at $3.65–$4.05 .
  • Segment performance: The Kinetic Group delivered $365M sales and 27.9% adjusted EBITDA margin (above expectations), while Revelyst posted $317M sales and 4.6% adjusted EBITDA as promotional actions to clear high-priced inventory weighed on margins; Revelyst expects a return to growth in Q4 .
  • Balance sheet improved: total debt decreased sequentially to $835M, net debt to $778M, net leverage 1.7x; inventory down >15% YoY, with Revelyst inventory down ~25% YoY; capital allocation focused on debt paydown pre-stockholder vote on Kinetic sale to CSG .
  • Near-term stock catalysts: continued regulatory approvals and timeline clarity for the Kinetic Group sale, Q4 Revelyst growth from new golf tech (Falcon, QuadMax, ForeCaddy powered by AI), and early GEAR Up savings; watch propellant cost/supply constraints at Kinetic and promotional needs at Revelyst .

What Went Well and What Went Wrong

What Went Well

  • Kinetic Group execution: Q3 adjusted EBITDA margin at 27.9% and above expectations on operational efficiency; “Sales in the third quarter were $365 million with an adjusted EBITDA margin above expectations at 28%” (presentation rounded) .
  • Inventory and cash flow progress: total inventories down >15% YoY, net debt down $127M sequentially to $778M, YTD adjusted free cash flow $270.4M; CFO: “Our net debt leverage ratio is now at 1.7x” .
  • Product innovation momentum: Foresight Sports’ best quarter ever with Falcon and QuadMax launches; ForeCaddy “powered by AI” showcased at CES; D2C sales up 15% YoY in Q3, with Adventure Sports D2C up >40% .

What Went Wrong

  • GAAP earnings hit by impairment: Q3 recorded a $219M non-cash impairment due to a triggering event from lower enterprise value, driving GAAP EPS to $(2.55) and net income margin to (21.7)% .
  • Revelyst margin pressure: increased discounting and unfavorable mix led to gross margin decline to 26.7% and adjusted EBITDA margin to 4.6%; management noted headwinds from high interest rates and specialty channel softness .
  • Kinetic input cost headwinds: propellant price increases and supply constraints persist; price increases effective Jan 1 were “not enough to cover” all pressure, with some efficiency loss due to broader SKU mix .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$754.8 $693.3 $676.8 $682.3
GAAP EPS ($USD)$1.13 $0.99 $0.76 $(2.55)
Adjusted EPS ($USD)$1.27 $1.12 $0.96 $0.80
Gross Margin %n/a32.7% 30.9% 29.7%
Adjusted EBITDA ($USD Millions)$134.0 $126.2 $116.1 $93.5
Adjusted EBITDA Margin %17.8% 18.2% 17.2% 13.7%

Segment breakdown (note: “Sporting Products”/“Outdoor Products” were renamed to The Kinetic Group/Revelyst in Q3):

Segment MetricQ3 2023Q2 2024Q3 2024
Kinetic/Sporting Products Sales ($USD Millions)n/a$350.0 $365.0
Kinetic/Sporting Operating Income ($USD Millions)$117.9 $92.3 $95.3
Kinetic/Sporting Adjusted EBITDA ($USD Millions)$124.1 $98.8 $101.8
Kinetic/Sporting Adj. EBITDA Margin %30.9% 28.3% 27.9%
Revelyst/Outdoor Products Sales ($USD Millions)n/a$327.3 $317.0
Revelyst/Outdoor Operating Income ($USD Millions)$13.5 $12.9 $(2.9)
Revelyst/Outdoor Adjusted EBITDA ($USD Millions)$31.1 $30.3 $14.7
Revelyst/Outdoor Adj. EBITDA Margin %8.8% 9.3% 4.6%

KPIs and Balance Sheet

KPIQ2 2024Q3 2024
Total Debt Outstanding ($USD Millions)$945.0 $835.0
Net Debt ($USD Millions)$905.0 $778.0
Net Debt Leverage Ratio (x)1.8 1.7
Cash from Operations (YTD, $USD Millions)$107.5 $240.3
Adjusted Free Cash Flow (YTD, $USD Millions)$115.7 $270.4
Inventory Change YoY (Total)n/a>15% decrease
Revelyst Inventory Change YoY / Seqn/a~25% YoY ↓; just under 10% seq ↓

Guidance Changes

MetricPeriodPrevious Guidance (Q2 FY24)Current Guidance (Q3 FY24)Change
Company Sales ($USD Billions)FY24$2.725–$2.825 $2.725–$2.825 Maintained
Kinetic Group Sales ($USD Billions)FY24$1.450–$1.500 $1.450–$1.500 Maintained
Revelyst Sales ($USD Billions)FY24$1.275–$1.325 $1.275–$1.325 Maintained
Adjusted EBITDA Margin (%)FY2415.50–16.25 15.50–16.25 Maintained
Kinetic EBITDA Margin (%)FY2426.50–27.50 26.50–27.50 Maintained
Revelyst EBITDA Margin (%)FY247.75–8.25 7.75–8.25 Maintained
GAAP EPS ($USD)FY24$3.37–$3.77 $0.00–$0.40 Lowered (impairment)
Adjusted EPS ($USD)FY24$3.65–$4.05 $3.65–$4.05 Maintained
Cash from Operations ($USD Millions)FY24$284–$336 $256–$308 Lowered
Adjusted Free Cash Flow ($USD Millions)FY24$265–$315 $265–$315 Maintained
Effective Tax Rate (GAAP, %)FY24~19.5 ~(63.0) Lowered (GAAP)
Adjusted Effective Tax Rate (%)FY24~19.5 ~19.5 Maintained
Interest Expense ($USD Millions)FY24$55–$65 $55–$65 Maintained
Capex (% of Sales)FY24~1.50 ~1.50 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Separation & regulatory approvalsAnnounced sale of Sporting Products to CSG; transaction touted to return ≥$750M; separation to unlock value HSR waiting period expired; UK NSI approval received; CFIUS review ongoing; stockholder vote expected in Q2 CY24 Progressing
GEAR Up transformationLaunched; targeted $100M run-rate savings by FY27; +$25–$30M in FY25 incremental savings Actions underway to capture $25–$30M FY25 savings; segment streamlining and potential divestitures Executing
Inventory/destockingOutdoor Products organic volumes pressured by channel caution; high channel inventory Total inventories ↓ >15% YoY; Revelyst inventory ↓ ~25% YoY; healthier POS and order books Improving
D2C momentumLimited discussionD2C sales +15% YoY in Q3; Adventure Sports D2C +40%+; holiday D2C +9% YoY Improving
Product innovation & techForesight Falcon highlighted Falcon and QuadMax launches; ForeCaddy “powered by AI”; BLACKHAWK contract wins Strengthening
Propellant/supply chain (Kinetic)Limited prior commentaryPrice increases Jan 1 to offset propellant costs; propellant constraints likely to persist beyond CY24, but supply secured Headwind persists
Macro rates/consumer pressureOutdoor Products pressured by high interest rates Continued consumer pressure; mix shift hurting margins at Revelyst Persistent
Legal/regulatoryTransaction approvals framework cited CFIUS review; UK NSI approval; stockholder vote timing Ongoing
Weather (snow) exposuren/aSlow start to snow; small impact given replenishment timing and category size Modest risk

Management Commentary

  • “Q3 Total Sales of $682 Million In Line With Expectations…Adjusted EBITDA of $94 Million” with inventories down >15% YoY and net leverage at 1.7x; FY24 guidance reaffirmed .
  • Revelyst CEO: “GEAR Up…expected to drive $100 million of run-rate cost savings in FY27…clear path to doubling standalone Adjusted EBITDA in FY2025” .
  • Kinetic CEO: “For the 53rd straight month, NICS data surpassed more than 1 million firearms checks…industry has sustained its elevated base of users” .
  • CFO: “We had a triggering event…which resulted in recording an impairment of goodwill and intangible assets of $219 million” .
  • Product highlights: “Foresight recently launched the Falcon and QuadMax…ForeCaddy powered by AI…seamlessly following you around the golf course” .

Q&A Highlights

  • Revelyst shipment phasing: modest impact (“just a couple of million”) pushed into Q4 .
  • Channel health and Q4 drivers: strength in golf from Falcon/QuadMax and improving Action Sports order books; high single-digit EBITDA in Q4 as promotions recede and freight normalizes .
  • Kinetic inventory/pricing: channel inventory largely healthy post-October/November surge; price increases accepted, but propellant costs/supply remain a constraint into and beyond 2024 .
  • Corporate overhead/dis-synergies: ~70% weighting to Revelyst remains; timing shifts in comp and non-GAAP changes affected quarter-to-quarter optics .
  • Snow category: small exposure and replenishment timing mitigate Q4 impact .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable for VSTO in our tool due to missing CIQ mapping; as a result, we cannot provide vs-consensus comparisons for Q3 FY24 or prior quarters (consensus EPS/revenue) at this time. If needed, we can revisit upon data availability.

Key Takeaways for Investors

  • Consolidated performance was “in line” on sales and better-than-expected EBITDA, but GAAP earnings were hit by a non-cash impairment; adjusted EPS of $0.80 underscores underlying profitability amid normalization .
  • Kinetic remains the earnings engine with resilient margins despite input cost pressures; watch propellant supply/costs and the breadth of SKU mix’s impact on efficiency .
  • Revelyst is executing a deliberate reset: promotions cleared high-priced inventory, D2C grew double-digits, and Q4 is set up for growth and margin recovery; GEAR Up targeted savings and potential non-core divestitures are near-term levers .
  • Guidance stability (sales, adjusted EBITDA, adjusted EPS) combined with lowered GAAP EPS/cash-from-ops reflects non-cash impairment and working capital dynamics; monitor Q4 conversion and FY25 savings ramp .
  • Transaction progress (HSR, UK NSI, ongoing CFIUS) and expected stockholder vote timing are key catalysts; the sale’s cash infusion positions Revelyst for organic investment, opportunistic buybacks, and tuck-ins .
  • Trading lens: near-term upside from product cycle (golf tech) and D2C strength; risks include macro consumer pressure, specialty retail softness, and ammunition input cost volatility .
  • Medium-term thesis: separation unlocks value with a well-capitalized Revelyst, margin accretion from GEAR Up, and durable Kinetic profitability under strategic ownership; execution on savings, mix improvements, and innovation will drive valuation re-rating .