AOUT - NASDAQ

Good day, everyone, and welcome to the American Outdoors Brand, Inc. First Quarter Fiscal 2025 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Liz Sharp, Vice President of Investor Relations, for some information about today's call.

Thank you, and good afternoon. Our comments today may contain predictions, estimates, and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intent, should, could, indicate, suggest, believe, and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies, and vision, our strategic evolution, our market share and market demand for our products, market and inventory conditions related to our products and in our industry in general, and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings. You can find those documents, as well as a replay of this call, on our website at aob.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. I have a few important items to note about our comments on today's call. First, we referenced certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, technology implementation, non-recurring inventory reserve adjustments, other costs, and income tax adjustments. The reconciliation of GAAP financial measures to non-GAAP financial measures, whether they are discussed on today's call, can be found in our filings, as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. Joining us on today's call is Brian Murphy, President and CEO, and Andy Fulmer, CFO. And with that, I will turn the call over to Brian.

Thanks, Liz, and thanks, everyone, for joining us. I am pleased with our performance in the first quarter, which reflected solid execution in a dynamic consumer environment. Our results reflected a significant increase in profitability, as well as the consumer preference for innovative products from our popular brands in our outdoor lifestyle and shooting sports categories. This quarter, we demonstrated that product innovation and expanded distribution opportunities, both of which are core to our long-term growth strategy, are key to driving results. Our focus on that strategy and on controlling those things we can control is why we expect to deliver growth for fiscal 2025, despite some choppiness that may occur in the quarters along the way. Let's discuss that strategy before we dig into the quarterly results. As an innovation company in the outdoor enthusiast industry, we maintain a relentless focus on innovation, drilling down to understand the activities of the 175 million Americans who participate in outdoor recreation each year. Whether they're grilling or fishing, hunting or target shooting, or simply working the land under their feet, these are passionate consumers who tend to participate for a lifetime and they love their gear. As they pursue their passions, we work hard to find their pain points, and then we work even harder to create and deliver innovative solutions that take their experiences to the next level. Our innovation process has become our superpower. Our teams continually tap into the diverse products and technologies that exist across our portfolio, creating unique and usually proprietary solutions that fill our new product pipeline. And sometimes, instead of a product, they identify the opportunity to create an entirely new brand. At the end of the day, whether the solution is a new product or a new brand, or game for either. And we've done both successfully. We believe our ability to innovate is the key to unlocking growth potential with customer partners. The bottom line, innovation is exciting, it attracts consumers. Because of this, innovation forms the basis of our four-pillar growth strategy, which we've outlined before. Those pillars are, first, gaining market share, seeking to displace the competition by expanding our existing product lines. Second, entering new product categories, leveraging our experience in one category, like Grilla Grills, to help us enter new categories, like our new Mammoth Vertical Smokers. Third, entering new consumer markets, bringing in new consumers, such as property owners, who now buy Hooyman Land Management Tools that were originally created for hunters. And fourth, expanding distribution, opening doors to untapped customer channels, like moving MEAT! Your Maker, meat processing equipment, beyond D2C and into retail. Innovation lies at the core of all of these strategic initiatives. And the repeatable and scalable process we've developed to deliver that innovation has yielded tangible results. In fact, those results have been stacking up since our spinoff in 2020. Compared to four years ago, our new products have generated over $60 million of incremental organic revenue and 169 new patents, reflecting innovation vitality and the creation of a deep moat designed to protect our future revenue. And with that, let me turn to our results for the first quarter. Net sales for our first quarter came in as expected, declining slightly year-over-year by just over 4%. That said, new products performed well across several brands in both our shooting sports and outdoor lifestyle categories, helping to offset declines and deliver net sales in the quarter. In addition, we generated a significant increase in adjusted EBITDAs of more than 76%. We’ve replenished our inventory levels as planned in preparation for the fall hunting and holiday seasons, and we repurchased shares in the quarter. Andy will address all of these points in detail later in the call. In our shooting sports category, which includes solutions for target shooting, aiming, safe storage, cleaning and maintenance, and personal protection, net sales declined by about 7% compared to last year. In shooting sports, new products from our Caldwell Claymore family, including our Solo and Pullpup clay target throwers, drove strength in shooting accessories and helped partially offset the weakness in personal protection products that is reflective of recent trends in that market. It's worth noting that while we don't produce firearms, our shooting sports category tends to align with adjusted NICS [ph] background check results, which were down roughly 3% in the same period. New product innovation, like our expanded Caldwell Claymore family, plays an important role in not only growing our shooting sports category overall, but also in helping to cushion this part of our business from the dynamic nature of the personal protection market. In our outdoor lifestyle category, which consists of products related to hunting, fishing, camping, outdoor cooking, and rugged outdoor activities, net sales declined slightly by 1.7%. New products from our MEAT! BOG, and BUBBA brands delivered strong meat processing, hunting, and fishing performance and helped to nearly offset lower net sales in outdoor cooking and rugged outdoor-related products. Turning now to our distribution channels. As I pointed out, increased and expanded distribution channel opportunities are one of the four growth avenues that comprise our long-term strategic plan. During the quarter, we expanded distribution of our BOG and Caldwell brands by placing them into new retail locations, introducing these popular products to a broader consumer audience. Our efforts to expand our distribution network extend to the international market as well. Accordingly, our efforts to introduce more of our brands to Canadian consumers helped deliver international net sales of 4.4 million, comprising over 10% of our net sales in the quarter and representing growth of over 21%. While we're still in the early innings, these results demonstrate the tremendous potential the international market holds for our brands. With regard to sell-through, POS sales in our outdoor lifestyle category were positive in the quarter. On the shooting sports side, POS sales were weaker year-over-year, not a surprising result given the recent consumer market for firearms and related accessories. Lastly, new products generated about 23% of our net sales in the first quarter. During Q1, our team attended ICAS, the world's largest sport fishing trade show. Attendees at the show continued to rave about our new Bubba Pro Series Smart Fish Scale, which has now completed its first spring season as the official scale of Major League Fishing. The show provided us a great opportunity to give retailers a preview of an exciting new line of tools that will take our Bubba brand into new fishing markets and further extend its reach among the 54 million anglers in the U.S. who pursue their passion for sport fishing. You'll see these new Bubba products on retail shelves this coming spring. And that's not all. We have several new product launches on the calendar for a number of our brands, including Grilla, MEAT! Your Maker, Caldwell, and Wheeler, so stay tuned. Our new product pipeline is more robust than ever, extending well into the next five years, providing us with a significant long-term competitive advantage. With that, I'll turn it over to Andy to discuss our financial results.

Thanks, Brian. For the first quarter, we delivered solid net sales with profitability above our expectations, a strong balance sheet with over $23 million in cash, and no debt. And we continue to return capital to stockholders through our share repurchase program. We're pleased with our results for the quarter, so let me walk you through the details. Net sales in Q1 were $41.6 million compared to $43.4 million in Q1 last year, a decrease of 4.1%. During our last call, we discussed that we recognized $2 million to $3 million of shooting sports net sales in the fourth quarter that we had initially expected to take place in the first quarter. On a category basis, net sales in shooting sports decreased 7%, while net sales in outdoor lifestyle decreased 1.7% for the reasons Brian discussed. With regard to our traditional brick-and-mortar sales versus e-commerce sales, net sales in our traditional channel were roughly flat, while net sales in our e-commerce channel were down 10.2%, driven mainly by outdoor cooking products. You'll recall that all direct-to-consumer sales are included in our e-commerce net sales total. So it's important to note that last year's e-com results included our Grilla retail store in Michigan, which we closed as planned in July 2023. In addition, strong sales of Grilla in the fourth quarter left our inventory levels lower than we'd like. Those levels are now replenished. Turning to gross margin, GAAP gross margin for Q1 was 45.4%, which was flat to Q1 last year. This result was higher than the expectation we had heading into the quarter and was driven by lower amortization of tariff and freight variances related to our increased inventory levels. Turning to operating expenses, GAAP operating expenses for the quarter were $21.5 million compared to $23.8 million last year. The decrease was driven by lower intangible amortization, legal, and advertising expenses. On a non-GAAP basis, operating expenses in Q1 were $18.4 million compared to $19.6 million in Q1 last year. Non-GAAP operating expenses exclude intangible amortization, stock compensation, and certain non-recurring expenses as they occur. GAAP EPS for Q1 was a loss of $0.18, an improvement over the gap EPS loss of $0.31 last year. On a non-GAAP basis, EPS was $0.06 for the first quarter compared to $0.01 in Q1 last year. Our Q1 figures are based on a fully diluted share count of approximately 12.9 million shares. For full fiscal 2025, we expect our fully diluted share count will be about 13 million shares. Adjusted EBITDAs for the quarter increased roughly $900,000 to $2 million compared to Q1 last year. Bringing our adjusted EBITDAs for the trailing 12-month period to $10.6 million. Turning now to the balance sheet and cash flow, we maintained the strength of our balance sheet during the quarter, ending with a strong cash position, inventory on hand to fulfill orders we expect in the coming quarters, and no debt. Let me provide some of the details. We ended the quarter with cash of $23.5 million, down $6.2 million from year end despite investments we made in inventory during the quarter and a seasonal increase in accounts receivable. As a reminder, our business is seasonal in nature, with net sales typically increasing in Q2 and Q3 around the fall hunting and holiday seasons. As such, we typically use cash to build inventory and accounts receivable balances in the first half of our fiscal year and then generate cash in the second half of our fiscal year as we lower inventory levels and collect those receivables. We expect fiscal 2025 to be consistent with this trend. In Q1, we used $4.4 million of cash for operations due to a build in our inventory levels of $13.4 million netted by increases in accounts payable and accrued expenses. We expect inventory to remain above $100 million through our third quarter and then drop slightly below that level by year end. We ended the quarter with no outstanding balance on our $75 million expandable line of credit, bringing our total available capital to over $113 million. Turning to capital expenditures, our operating model was designed to be asset light, typically requiring annual CapEx of roughly 2% of net sales for patents, tooling, and maintenance investments, and our expectations for fiscal 2025 are right in line with our model. We spent $1.1 million on CapEx for the first quarter, mainly for product tooling and patent costs. For full year fiscal 2025, we expect to spend $3.5 million to $4.5 million, which includes a small amount to build out the new factory outlet store in our Missouri headquarters building. The strength of our balance sheet allows us to be very flexible with our capital allocation decisions and maintain focus on our three priorities, organic growth, M&A, and returning capital to shareholders based on what is most opportunistic at the time. We expect to fund organic growth in fiscal 2025 with cash from operations. With respect to M&A, we are beginning to see an increase in higher quality acquisition targets. Given the strength of our balance sheet and our reputation for building solid brands, we believe we are regarded as a buyer of choice in the M&A market. Lastly, we continue to return capital to stockholders through our share repurchase program. In Q1, we repurchased roughly 42,000 shares at an average price of $9.06 per share. We have $6.9 million remaining on our current repurchase authorization that expires at the end of September. Now turning to our outlook, we remain excited about the opportunities that lie ahead for fiscal 2025 and beyond. While we anticipate that headwinds in the shooting sports category may continue, we believe that our initiatives to drive channel expansion combined with our robust new product pipeline will help deliver growth in our outdoor lifestyle category. Therefore, we continue to believe that fiscal 2025 net sales could grow by as much as 2.5% compared to fiscal 2024. We expect our net sales in fiscal 2025 to follow the typical seasonal pattern that I described earlier, with Q1 as our lowest net sales quarter, Q2 and Q3 as our highest net sales quarters, and Q4 coming in higher than Q1. We expect Q2 net sales to decline year-over-year by between 8% and 9%, driven primarily by the shooting sports category, followed by growth in the second half of the year, driven largely by new product launches and distribution opportunities in our outdoor lifestyle category. And here, I'll point back to Brian's comments earlier in the call about some underlying choppiness on a quarterly basis this year as we make our way toward full-year growth. Turning to gross margins, we continue to expect gross margins for the full year to be approximately 45% versus 44% for the prior year. On a quarterly basis, we expect some fluctuation based on the timing of inventory purchases and the amortization of tariff and freight variances related to those purchases. As a result, we expect Q2 gross margins to be roughly 45%. Then, as inventory balances decrease during the second half of the year, we would expect gross margins to come in slightly lower for the second half. With regard to operating expense, assuming net sales growth of up to 2.5%, we expect overall op-eds to increase slightly due to higher variable selling and distribution costs. Based on all of these factors, we continue to believe our adjusted EBITDAs in fiscal 2025 will be in the range of 5.5% to 6% of net sales. The increase of between $1.5 million and $2.5 million in adjusted EBITDAs would align with our long-term model, which calls for an incremental EBITDAs contribution of roughly 30% on net sales over $200 million. One final note as a reminder on income tax expense. We've mentioned on previous calls that we have a full valuation allowance on our deferred tax assets. This removes any tax benefit we would have derived from our GAAP loss from operations. As such, we expect a small amount of income tax expense for GAAP purposes in each quarter for the remainder of fiscal 2025. With that, operator, please open the call for questions from our analysts.

[Operator Instructions] At this time, we will pause momentarily to assemble our roster. The first question is from Matt Koranda, ROTH Capital Partners. Please go ahead.

Hi, guys. Good afternoon. This is Joseph on for Matt. I just wanted to talk about new products growth. I know in the press release you mentioned new products makes up around 23% of your last two years net sales. On a high level, I just wanted to see if you guys could give some color on the performance of MEAT! and Grill in the quarter and where you see that going forward for fiscal 2025?

Hey, Joseph. This is Brian. So, yes, spot on. So new products generate a nice share of our revenue in the quarter. We did see quite a few of those new products going into Canada, so growth in international, which was nice to see. And then over the course of the year, again, we would still continue to see a nice percentage of our overall revenue come from new products. I don't know if you caught it, too. Within the prepared remarks, we talked about just the growth and innovation overall over the last four years since we spun out. Over that time, we've added over $60 million of pure innovation revenue, so new products that have been introduced over that period of time. So, yes, its innovation continues to hunt for us, and we expect a nice continued increase here for the rest of the year.

Thank you. That was helpful. Just another question. I know it's a more traditional question regarding past conferences. In regards to the current M&A market, I know last quarter you guys touched on the point seeing more opportunity in the outdoor lifestyle segment compared to shooting sports. I just want to know if that rhetoric still holds up, or is it even split, and how does the team feel navigating the current M&A market at the moment?

Yes, this is Brian again. Your question is about are we seeing more opportunities in the outdoor lifestyle side?

Yes, correct.

Did I get that right? Yes, that's true. We're really not seeing a whole lot in shooting sports. And so that's, I think, also indicative of just that market right now, especially on the personal protection side. The closer that some of those companies are to that piece of the business or those dynamics, I just think that there's a little bit more volatility. With that said, we haven't seen many other candidates step forward outside of that, but still in shooting sports. Outdoor lifestyle is actually getting pretty robust. We're not seeing very large companies or large brands come to market. I would say that most are sort of sub, call it sub 30 or 40 million in revenue, with quite a few that are kind of in that $10 million range. But certainly we're seeing more and more come to market, and they're much higher quality. I think that, as I said before, they have line of sight to some more stable run rates, but the biggest factor for a lot of them, at least the ones that we're looking at, is really what's going to happen with the consumer. So TBD on that, but the companies that are able to withstand that are certainly able to point to some nice runway performance.

Got it. Thank you. Just to circle back a little bit on more so Grilla, we also wanted to know if we can get an update on the rollout of Grilla to consumer. That would be helpful, and also where you guys are selling on your shelf spacing at other retailers?

Sure. This is Brian again. Yes, the rollout to retail, like we said, at the end of last year, was really preparing the market for a Grilla entry. And we have been sort of testing the market in certain ways. We do have Grilla, some of the products on Amazon, and they're doing well there. But we want to make sure, and it's very strategic, the products that we have on there. But of course, we want to make sure that it's complementary with what we're doing direct-to-consumer with that brand. And like I said in my prepared remarks, we have some very key innovative new products that are coming out later this year under Grilla. And so we want to make sure the partner that we have when we go into traditional retail is going to be able to represent those products. So we haven't disclosed who those partners are just yet, but we've got some really neat things planned for the rest of the year. I'm sorry. I missed the latter half of your question. I think you had something else related to Grilla.

Yes, just regarding Grilla and more so your new products, just regarding how you guys feel about shop spacing at other retailers such as Academy and where you guys feel your new products are doing and how they're doing at these other retailers.

Yes, I mean, the key is innovation. And I think if you've listened to some of the retailers that are publicly traded on some of their calls is when they're asked about how we are bringing consumers back into stores, it seems like the resounding answer is innovation and newness. And so for us, we're very well positioned when it comes to that. And so as we think about the rest of the year, we have a tremendous number of new products that are coming out to provide that newness that are incredibly disruptive across our portfolio. And so we're getting more and more requests there. We're getting new meetings. We're talking to customers that are approaching us and asking if they can be, bring in some of the AOB brands and products because they feel they're not getting that today. We also help provide stability, pricing stability. You saw it in the current quarter. We don't actively promote a whole lot. Our brands tend to play in that mid to high price point. And so the new products that we're coming out with, they reinforce that. And retailers can expect that we're going to maintain that pricing integrity and that helps protect them.

Got it. I appreciate the color. That's all for me. I'll go ahead and hop back in the queue. Thank you again for taking my questions.

[Operator Instructions] The next question is from Mark Smith with Lake Street Capital Markets. Please go ahead.

Yes, hey guys. You got Alex Sturnieks on the line for Mark Smith today. Thanks for taking my questions. The first one for me, kind of piggybacking on that retail partners question. As we move into the fall, what type of behavior are you guys seeing from retail partners as they prepare for the hunting and holiday seasons? And then, are you really seeing them become more promotional this year than historically? Where are you kind of reading that at?

Yes, so Alex, this is Brian again. I think there's a few things going on, right? I think if you look at last year, a lot of retailers were still destocking a lot of their excess inventory. And I think in order to do that, you saw a pretty high promotional environment last year as they're trying to get through a lot of that inventory. You'll also recall that we stated we were holding off on some of our new product launches last year around that time. Because we didn't feel that we could get through, I think, some of that noise with the consumer. And so we held off. I think going into this fall, I think you're going to see a mix with retailers where those that have been managing their inventories well and are through some of that destocking, which I think is most retailers, is I think you're going to see some stronger assortments. And that's going to benefit us as well. We had talked about previously just getting back into a normal cadence with line reviews. And so we're now seeing better line of sight into the products that are getting placed. We're seeing retailers get back into that cadence. And so I do think you're going to see some nice resets. With that said, there are some retailers that are still, I think, trying to unwind some of the wrong inventory and trying to get that right mix. And that also represents an opportunity for us. Some of the vendors and things that are supplying some of the products. I'll take Grills as an example. We're seeing opportunity there where some of those brands just aren't, they're just not moving. And so what will move? They're looking at what's new and innovation. And so I think, again, that represents a big opportunity for us. So kind of a mix of behavior, but overall, I do think they're also cautious, cautiously optimistic, just trying to better understand what the election holds for the consumer, what uncertainty that brings, what's going to happen with inflation. But overall, I think we're all seeing the consumer is still somewhat resilient.

Okay. Second one for me, the growth in international is really good to see this quarter. Maybe provide any additional opportunities. What do you really see there? And then maybe an update on taking on that extra space with the distribution facilities. What are the initial learnings that you've gotten from that so far?

Yes, just on the ladder, when you say extra space for distribution, are you talking about our distribution center here in Columbia or are you referring to something else?

Yes, the Columbia one.

Okay, yep. All right, so I'll address international first and just the opportunities we're seeing there. So like we said, Canada, we like to start in our own backyard. The Canadian consumer is obviously close to home. And the nice thing about that too is a lot of the influencers and ambassadors and things do cross over into that market. So we can leverage our teams and our social media platforms to reach that consumer pretty effectively. And so we're seeing that carry through with our success of many of our brands. But in particular, on the outdoor lifestyle side, if it's Grilla, we're seeing -- not Grilla, sorry, a little bit of Grilla. But really, MEAT! Your Maker and then some of our other outdoor lifestyle brands, Bubba is a big one as well, are doing very, very well in that market. And then beyond that, just as we think about international longer term, Canada still is untapped. We still have tremendous potential there. And if you look overseas in Europe and some other places, which is still a nice part of our business, has a lot to offer as well. Some nice diversity and some nice upsides. So we're very optimistic about that part of our business. And outdoor lifestyle is a much easier -- has products that are much more easily placed in places outside the United States. As you know, the United States has an affinity for the Second Amendment and firearms. And so there's more of that here, which does not exist much outside of this country. So big opportunity there. And then secondly, on the extra space. So we did take over the rest of this building here in Columbia, Missouri in January of this year. And it's going great. It's nice to have the extra space. Gives us a lot of flexibility as we're thinking about acquisitions. And it really allowed us to make our facility much more efficient. We were receiving and shipping out of the same site previously. And if any of you have ever come here and saw that, it looked like a big U-turn. And so we're able to be more efficient. We're seeing cost savings there. And we're much better positioned for growth going forward. So couldn't be happier. And then also we have the new store, right? We're building out a new store here, a factory store. We shut down the store that existed in Michigan for Grilla last year, which was part of a comp that we saw here in the current quarter. But we're very optimistic about that. We're in arguably the barbeque capital of the world on one of the most traveled interstates in the United States. And so we're optimistic that we'll see some nice traction from that store here at the later half of this year.

Okay, that's great. And then last one for me, just another update on the consumer behavior. You noted some softness expected for the shooting sports. Kind of curious, what are you seeing currently following a better month of mixed checks in August? What do you guys see out there in the competitive landscape as well? How's that impacting your pricing decisions?

Specifically, on shooting sports?

Yes, specifically shooting sports.

Yes, shooting sports is really interesting. We're obviously heading into an election, and there's a lot of uncertainty with this one, as I'm sure we say every four years. But I think the dynamic that's different is we had such a tremendous influx of new firearm owners, and that's a big change, right? 16 million-plus new firearm owners that weren't there before. Just when you throw that into the mix, there's a little bit of a different dynamic, right? I think previously, when you're looking at elections, you'll see people go out and buy more firearms traditionally. I'm not sure that's going to happen this year, but you would see that. But it would be somebody who already owned several firearms. And I think with this new consumer who's also one of the top participants at shooting ranges, et cetera, what are they going to do? How are they going to respond to this now that they've increased the size of that market? I'm not really sure. We're optimistic that the consumer, because they are still somewhat resilient, is going to be out there and we'll see some nice demand. But at the same time, I think that that market has just cooled relative to what it was a year or two ago. So still to be seen, but we're very confident. What are we doing in response? Just to put a bow on it, is we've been focusing very clearly on the more stable parts of our shooting sports business, which you saw in the quarter with the success of our Claymore line and target shooting. That's a nice stable part and we'll continue to see that grow. So hopefully that answers your question.

Yes, no, that makes perfect sense. Thanks for taking my questions, Brian.

Yes, thanks, Alex.

The next question is from the line of Matthew Koranda with a follow-up with Roth Capital Partners. Please go ahead.

Hi, guys. Again, Joseph on for Matt. I just wanted to circle back on some things here in terms of gross margins. You guys are starting off at 46%. We're looking at a little bit of deceleration with the forecast at 45%. Just wanting to see if that deceleration is coming from headwinds of tariffs or freight costs. Any color you guys could give on that?

Yes, Joseph, this is Andy. It's a great question. So if you look year-over-year, we're roughly guiding to roughly 45%. That's up from 44% last year and that's on a GAAP basis. We're about 50 basis points above non-GAAP. And I think you can attribute that savings year-over-year is from better freight rates. So, we're expecting that. We're expecting pretty much a normal promotional environment like we had last year. What I think you're going to see, though, is on a quarterly basis, we made a couple comments in the script on this, is you're going to see some fluctuations based on when we purchase inventory and when we have those freight and tariff variances and when those actually amortize into our P&L based on our inventory levels. I think you're going to see some fluctuation by quarter, but for the full year, that 45% is pretty well in line with our target.

Got you. Thank you for that clarification. Then just finally, my last one here in regards to shooting sports, again, piggybacking off of Alex's question earlier, I just wanted to see you guys mentioned in your press release that you kind of seen some headwinds in shooting sports segment. Just wanted to know if you're taking into account any election cycle at all and is that kind of offsetting at all or is it solely just in regards to the NICS checks and any data that you see from that point of view?

Yes, another great question. Our up to 2.5% does not contemplate any bump from the election. I mean, we really don't know what's going to happen at that point, so we didn't really want to bake that in.

Got you. That's all for me. Thank you again for taking my questions.

Yes, thanks, Joseph.

This concludes our question and answer session. I would like to turn the conference back over to Brian Murphy for any closing remarks.

Thank you, operator. Before closing, please note that we'll be attending the CL King Virtual Investor Conference on September 16th and hope to see some of you there. You'll also note that we've uploaded a new investor presentation to our website at aob.com. I'd encourage you to check it out. Finally, I want to thank our employees across American Outdoor Brands whose dedication every day helps our consumers make the most out of the moments that matter. Thank you, everyone, for joining us today. We look forward to speaking with you again next quarter.