American Outdoor Brands, Inc. (AOUT) Earnings

Management highlights

- **Overall Underlying Performance Assessment**: Management notes the reported net sales decline masks stronger underlying performance, with the accelerated fiscal 25 orders creating a difficult year-over-year comparison. Adjusted for this impact, the 5% full year decline is viewed as nominal, driven by two known factors: inventory reset at the largest e-commerce retailer and extended softness in the personal protection aiming solutions category. Consumer point-of-sale (POS) demand remained healthy, with 4% full year POS growth (the fourth consecutive quarter of positive growth).

Guidance

- Full year fiscal 27 net sales are expected to be in the range of $200 million to $210 million, representing 7.5% year-over-year growth at the midpoint versus fiscal 26's reported net sales. - The typical seasonal sales pattern is expected to hold: Q1 will be the lowest sales quarter, Q2 and Q3 the highest, and Q4 will be higher than Q1. Reported Q1 fiscal 27 net sales are expected to be 20% higher than Q1 fiscal 26; on a normalized basis (excluding the impact of the 2025 order acceleration), Q1 27 net sales are expected to be flat to slightly up year-over-year, with adjusted EBITDA expected to be slightly negative for Q1. - Fiscal 27 gross margins are expected to remain consistent with the company's long-term target range in the mid-40s. - Fiscal 27 operating expenses are expected to increase slightly, primarily due to higher variable costs tied to higher net sales, partially offset by lower intangible asset amortization. Management remains committed to disciplined expense management. - Full year fiscal 27 adjusted EBITDA is expected to be in the range of 6.5% to 7.5% of net sales, representing over 40% adjusted EBITDA growth versus fiscal 26 at the midpoint. - Capital expenditures for fiscal 27 are expected to be between $3.5 million and $4 million, consistent with the company's asset-light model of holding CapEx below 2% of net sales. - The company expects minimal GAAP income tax expense in fiscal 27 due to $21 million in net operating loss carryforwards.

Segment performance

American Outdoor Brands reported full year fiscal 26 net sales of $190.5 million, a 14.3% year-over-year decline from fiscal 25. After adjusting for $10 million in retailer orders accelerated into the final two weeks of fiscal 25, the adjusted net sales decline was 5.4%. - **Outdoor Lifestyle Segment**: This segment includes hunting, fishing, meat processing, outdoor cooking, and rugged outdoor activity products. It contributed 58% of fiscal 26 total net sales (up from 46% at the 2020 spin-off). Reported full year net sales decreased 13.1% year-over-year; adjusted for order acceleration, net sales decreased 1.6%. - **Shooting Sports Segment**: This segment includes target shooting, aiming, safe storage, cleaning/maintenance, and personal protection products. Reported full year net sales decreased 15.9% year-over-year, driven primarily by softness in the aiming solutions category. Adjusted for order acceleration, net sales decreased 10.4%. By distribution channel: - Traditional channel: Reported net sales decreased 13.5% year-over-year; adjusted for acceleration, net sales increased ~1%. - Ecommerce channel: Reported net sales decreased 15.6% year-over-year, due to ongoing inventory reset at the company's largest e-commerce retailer, with improvement seen as fiscal 26 progressed. - Domestic channel: Contributed 94% of fiscal 26 net sales, with a 13.4% year-over-year reported decline. - International channel: Contributed 6% of fiscal 26 net sales, with a 26.7% year-over-year reported decline, largely driven by U.S. trade policy uncertainty. Fourth quarter fiscal 26 reported net sales decreased 24% year-over-year; adjusted for order acceleration, net sales decreased 9.2%, with the decline almost entirely driven by weakness in aiming solutions.

Risks & headwinds

- Ongoing macroeconomic uncertainty, including fluctuations in inflation, interest rates, geopolitical developments, and evolving consumer spending patterns, creates uncertainty for sales and performance projections. - Continued trade policy and tariff uncertainty, with unclear future changes to Section 301 tariffs, creates ongoing input cost risk. - Sustained softness in the aiming solutions category of the shooting sports segment and residual inventory adjustment headwinds at the company's largest e-commerce retailer could pressure sales results.

Analyst Q&A

• Q: Does the fiscal 27 margin guidance include expected future benefits from additional IEPA tariff rebates, and how was the Q4 26 $4.4 million rebate benefit accounted for? /

  A: The full $4.4 million rebate benefit was recorded entirely in Q4 fiscal 26 COGS. No future contra-COGS items from additional tariff rebates are included in the fiscal 27 guidance, and all currently effective tariff costs are baked into the guidance. This matches management's approach of not factoring uncertain future rebate outcomes into forward projections.

• Q: How does positive current POS sell-through align with the expected high single-digit net sales growth for fiscal 27, and what is the core driver of the projected growth? /

  A: The growth projection already accounts for the normalization of sales after the $10 million fiscal 25 order pull-forward, so positive POS trends are fully consistent with the guidance. Most of the accelerated orders hit the first half of fiscal 26, creating a low comparison base for fiscal 27. Management notes ongoing improvement in both aiming solutions softness and the e-commerce inventory reset, and current trends support that the projected growth is realistic.

• Q: With a strong balance sheet and expected tariff refund receipts, what is the company's current capital allocation posture, especially for M&A versus existing priorities like share repurchases? /

  A: Management views the tariff refunds primarily as an offset to residual costs from replacement tariffs, not a discrete windfall. M&A activity is being actively pursued, with the recent addition of a new M&A lead accelerating pipeline development focused on strategic targets that fit the company's innovation-focused strategy, even for brands not actively for sale. Organic investment and the existing share repurchase program remain near-term priorities outside of M&A.

• Q: How does the company prioritize M&A growth versus organic innovation-based growth, given R&D spending has stayed relatively low? /

  A: Organic innovation remains the company's core priority, and low R&D spending reflects a higher return from internal development versus outsourcing, which has supported consistent strong new product performance (29% of 2026 sales from new products). Acquisitions are evaluated through an innovation lens: management targets strong brands with engaged consumer bases that can serve as vessels for the company's existing pipeline of new product ideas, rather than purely opportunistic multiple-arbitrage deals.