AOUT - NASDAQ

Good day, everyone, and welcome to the American Outdoor Brands, Inc. Second Quarter Fiscal 2026 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, intend, should, could, indicate, suggest, believe, and other similar expressions are 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. A few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, emerging growth transition costs, nonrecurring inventory adjustments, technology implementation costs, 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 today. Reflecting on the second quarter, I'm very proud of the way our teams continue to deliver in a dynamic environment. Efficiently managing tariffs, customer ordering dynamics, and cost reduction opportunities all while remaining committed to innovation and executing our term strategy. That commitment to innovation paired with disciplined execution of our strategy to enter new outdoor product categories is fueling the strength of our growth brands and the engagement we are seeing from consumers and retail partners. Together, these factors enabled us to deliver second-quarter results that surpassed our expectations even amid a dynamic retail backdrop. Pull-through of our products at several of our largest retailers was notably strong during the second quarter, with total POS up 4% year over year. This marks the second consecutive quarter of favorable POS performance, an encouraging indication that our products remain in demand and are helping to drive engagement at retail. This result is especially meaningful in light of recent reports from placer.ai indicating that foot traffic at most retailers trended down during the period. Before I turn to channel sell-in, I want to take a step back and talk about the evolution that is occurring in our traditional and e-commerce sales channels. In our traditional channel, a growing share of what has historically been classified as brick-and-mortar or in-store sales are now occurring through traditional retailers' online channels. Buy online, pick up in-store, ship to home, and same-day delivery, reflecting an evolutionary shift in how consumers shop. Many of our largest brick-and-mortar partners have invested heavily in omnichannel capabilities, and we are benefiting from that investment. For some of our retailers, online sales now represent up to 20% of their total revenue. Although these transactions reflect digital buying behavior, they are captured in a growing portion of our traditional sales channel results. In short, consumers are still buying online, but the where is shifting. Turning to our e-commerce channel, this channel has been evolving over time as well. Within this channel is our direct-to-consumer business on our own branded websites, as well as our sales to customers who only have an online presence, such as one of the world's largest online retailers. Over the past three and a half years, as our DTC business has grown, as our traditional retailers have expanded their online presence, our exposure to customers with an online-only presence has reduced. In fact, online-only customers represent just 20% to 25% of our total net sales today. So with that evolution in mind, let's turn to selling for the quarter. We benefited from higher demand in our traditional channel, which makes up roughly 65% of our overall business. Sales into the traditional channel were up 2.3%, aligned directionally with our POS results for the quarter, an indication that our brands are performing well across the broader omnichannel landscape. This compares to lower demand in our e-commerce channel, which makes up roughly 35% of our business, where sales declined by 15.9%. While the decline is due largely to lower sales to our largest online-only e-commerce partner, we believe a meaningful portion of the softness is being offset by digital sales flowing through traditional retailers' online platforms, as I discussed earlier. Our second-quarter results also reflected the continued expansion of our product and brand offerings within our existing retail partner network, consistent with our long-term growth strategy. During the quarter, we made meaningful progress with a major mass-market retailer that is now introducing our Caldwell and BOG brands into thousands of their stores for the first time. Given this retailer's significant scale and reach, this new placement, curated specifically for this retailer's audience, provides a substantial increase in visibility for both brands. It also represents a strong example of how our retail partners are increasingly turning to our innovative and popular products to strengthen their assortments and help drive consumer traffic. Turning to innovation, our innovation engine was firing on all cylinders this quarter. New products drove over 31% of net sales, demonstrating the power and consistency of our pipeline. We also locked in several launches for SHOT Show in January, including major expansions to our successful Caldwell Claycaptor and Claymore lines for shotgun enthusiasts. At SHOT, we will unveil the Caldwell Claycopter surface-to-air launcher, a complete reimagining of our handheld disc launcher into a compact, lightweight, wireless ground unit featuring a 50-disc hopper and seamless integration with our new Caldwell Plays app. Multiple units can be tethered together for greater challenge and fun, laying the groundwork for future gamification, much like we did with our Bubba brand. The Caldwell Plays app also makes Caldwell the only brand to bring disc and play shooting together for the first time. Users can pair surface-to-air units with our new wireless electronic clay thrower, the Claymore Connect, coordinating disc and clay launches simultaneously for the most dynamic shotgun training and recreational shooting experience ever. With these new additions to the Caldwell platform, our team has done an incredible job demonstrating that we do not just participate in categories; we reshape them. And we are not the only ones who feel this way. The Caldwell Claycopter was just named as the 2025 innovation of the year by Guns and Ammo Magazine and by the Industry Choice Awards. Over the past five years, our innovation pipeline has generated nearly $100 million in incremental annual new product revenue. Today, I believe that innovation pipeline is the strongest in our company's history, and this is only the beginning. I could not be more excited about SHOT Show in January, where we will introduce another wave of innovation that will fuel our brands into fiscal 2027 and beyond. Now just a quick update on Black Friday. We are very encouraged by our results on Black Friday and Saturday, as well as our overall performance in November. Initial POS results are in and show that each of our leading brands performed well, not just over the holiday weekend, but throughout the month. In our outdoor lifestyle category, POS for November grew approximately 13%, an exceptional result that reflects the continued strength of our growth brands, including BOG, Meat, and Bubba, with both consumers and retailers. As we head into the back half of the year, we are optimistic but remain cautious about the macro environment, particularly surrounding evolving consumer spending patterns and the resulting volatility in retail order patterns that is often the result. Feedback from our retailers indicates that consumer health is somewhat fractured, with higher-income cohorts remaining healthy and lower-income cohorts facing increasing pressure. We have all read this in recent media reports, and we see it reflected in our own sales analysis as well, with higher ASP products outperforming the pack. Accordingly, and not surprisingly, we continue to see demand patterns from our retailers that are highly variable as they seek to address their divergent consumer audience, try to assess the impact of their pricing decisions on demand elasticity, and then work to manage their inventory levels relative to those two factors. These dynamics underscore the importance of having a business model designed for agility and strength. Because we have deliberately built our company on a core foundation of innovation, our brands continue to deliver compelling new products, build consumer loyalty, expand our market presence, and strengthen our relationships with our retail partners. With innovation at the center of our strategy and a proven ability to stay focused on our priorities, we are confident that our agility will enable us to navigate what lies ahead and deliver durable long-term value for our shareholders. And with that, I will turn it over to Andy to walk through the financial results.

Thanks, Brian. As Brian mentioned, we are very pleased with our results for the second quarter, with net sales and profitability coming in well ahead of our expectations. Net sales for Q2 were $57.2 million compared to $60.2 million in Q2 last year, a decrease of 5%. In our outdoor lifestyle category, which consists of products relating to hunting, fishing, meat processing, outdoor cooking, and rugged outdoor activities, net sales were $34.6 million, down 5% compared to Q2 last year, mainly driven by a decrease in meat processing equipment, partially offset by increases in our BOG and Gorilla brands. In our shooting sports category, which includes solutions for target shooting, aiming, safe storage, cleaning and maintenance, and personal protection, net sales declined 5.1% compared to last year, driven by decreases in gun cleaning and personal protection products, partially offset by strong sales in our Caldwell brand. The outperformance by Caldwell was the result of expanded distribution of these innovative new products, particularly the Caldwell Claycopter, with an existing mass-market retailer that had not previously carried our Caldwell brand, as Brian mentioned. Turning to our distribution channels, our traditional channel net sales increased by 2.3% in Q2, while our e-commerce net sales decreased 15.9% compared to last year. Consistent with what we indicated in September, we believe our largest e-commerce retailer continued to adjust its purchasing pattern to realign with ongoing tariff impacts. Domestic net sales, which generated approximately 95% of our revenue in the quarter, decreased by $2.4 million or 4.3%, while international net sales decreased by roughly $600,000 compared to Q2 of last year. Gross margin remained strong in Q2, at 45.6%, compared to 48% in Q2 last year. This performance is noteworthy given the actions we took to clear some slow-moving inventory. In fact, without that action, gross margin would have come in approximately 150 basis points higher. Turning to operating expenses, GAAP operating expenses for the quarter were $24 million compared to $25.8 million last year. The decrease was driven by lower variable costs from the decrease in net sales as well as lower intangible amortization. On a non-GAAP basis, operating expenses in Q2 were $21.3 million compared to $22.7 million in Q2 of last year. Non-GAAP operating expenses exclude intangible amortization, stock compensation, and certain nonrecurring expenses as they occur. GAAP EPS for Q2 was $0.16 compared to $0.24 last year. On a non-GAAP basis, EPS was $0.29 for the second quarter, compared to $0.37 last year. Our Q2 figures are based on our fully diluted share count of approximately 12.9 million shares, a number that should remain consistent through year-end outside of any additional share buybacks that may occur. Adjusted EBITDA for the quarter was $6.5 million compared to $7.5 million in Q2 last year, down slightly from the prior year to 11.3% of net sales. Turning now to the balance sheet and cash flow, we continue to maintain a strong balance sheet, ending the quarter with $3.1 million in cash and no debt, after repurchasing $662,000 of our common stock. We have talked in the past about the seasonal nature of our business, where our highest quarterly net sales occur in Q2 and Q3. This pattern typically results in the first half of our fiscal year reflecting operating cash outflow from increases in accounts receivable and inventory, followed by a second half with cash inflow when we collect those receivables and lower our inventory levels. We expect the same seasonal pattern to occur in fiscal 2026. Operating cash outflow was $13 million in Q2, reflecting an increase in accounts receivable of $18.5 million. This increase in AR was driven by the sequential increase in net sales in Q2 versus Q1, as well as by the timing of shipments, which were higher toward the end of the second quarter. We ended the quarter with total inventory of $124 million, down $1.8 million compared to Q1, but up $12.4 million compared to Q2 last year. The year-over-year increase in Q2 was driven entirely by $14 million of incremental tariffs capitalized into inventory. Walking that math, you can see that our base inventory has actually declined by $1.6 million compared with last year. As I will discuss when I get to the outlook section, these higher tariff variances will start to amortize beginning in Q3 and will continue into next fiscal year. We remain committed to reducing our inventory levels over time to improve our working capital position. We have identified specific pockets of slower-moving inventory that we believe we can convert to cash on an opportunistic basis. As I mentioned earlier, we sold a small amount of this inventory in Q2, and we expect to sell more in Q3 and Q4. As a result, we are targeting inventory to be slightly lower in Q3 and then drop to roughly $115 million by the end of the fiscal year. Our balance sheet remains strong and debt-free. We ended the quarter with no balance on our $75 million line of credit, so as of Q2, we have total available capital of $93 million. Turning to capital expenditures, we spent $1 million on CapEx in Q2, mainly for product tooling and patent costs. For full-year fiscal 2026, we expect to spend $4 to $4.5 million, unchanged from last quarter and consistent with our asset-light operating model. Lastly, during the second quarter, our Board of Directors approved a new $10 million share repurchase program effective October 2025 through September 2026. In Q2, we repurchased roughly 74,000 shares of our common stock at an average price of $8.76 per share. Now turning to our outlook, you will recall that in our prior fiscal year, which ended April 30, 2025, we reported that retailers had accelerated approximately $10 million in orders originally slated for our current fiscal year as they sought to get ahead of impending tariffs. That action allowed us to deliver full fiscal 2025 net sales of $222 million, a fantastic result but one that created some challenging comps in the current fiscal year, particularly for the fourth quarter. That said, we are now more than seven months into our fiscal year, and we are pleased with our performance, especially given the macro challenges that have characterized the calendar year to date, including tariffs, cautious retailer buying, and the uncertain consumer environment. We have demonstrated that innovation continues to set us apart with both retailers and consumers and that our relentless focus on execution and agility positions us to capitalize on opportunities as they arise. We believe these strengths will continue to benefit us through the back half of fiscal 2026 and help mitigate the impact of ongoing external pressures. Based on what we know today, we believe the full fiscal year could deliver net sales that are down roughly 13% to 14% year over year from last year's $222 million. That percentage would include the $10 million of orders accelerated into the prior year. Adjusting for those orders, the underlying net sales decline would be roughly just 5%, a performance we would view as extremely positive given the current environment. So let me walk you through a few details on how we are thinking about the third quarter and balance of the year. With regard to net sales, in the third quarter, we expect net sales to decline approximately 8% year over year, reflecting the macro environment and retailer dynamics that Brian referenced earlier. Turning to tariffs, we have now been operating in the new tariff landscape for about nine months. Our teams have done an outstanding job navigating these challenges. We have taken pricing where appropriate, worked closely with our supplier partners to secure cost sharing and identify optimal sourcing locations, and continue to fuel our pipeline with innovative products designed to minimize tariffs on a go-forward basis. We believe these actions taken together will allow us to fully mitigate the financial impact of incremental tariffs starting in fiscal 2027, as we realize the full benefit of pricing actions and cost concessions as well as new product velocity. Turning to gross margin, let me start with a recap of how tariffs impact our P&L. We capitalize tariff costs when we purchase inventory and then amortize those costs over inventory turns. So, typically, as we build seasonal inventory for fall hunting and holiday seasons in the first half of our fiscal year, we then amortize those tariffs in the back half of the year, with the timing based on inventory turns. As we think about the current period, this year's situation is amplified because of the incremental tariffs that began in February. Accordingly, we will begin to see the impact of the amortization of those higher tariffs starting in December, ahead of our ability to realize the full benefit of our pricing actions and cost concessions. As a result, we expect gross margin for both the third quarter and likely for the full fiscal year in the range of 42% to 43%. Turning to operating expenses, we remain disciplined with the cost management we employ in the ordinary course of business, as we look for ways to avoid building in unnecessary costs. It's an approach that helps us maintain a lower level of expense over the long term, allowing us to be agile and asset-light when responding to changes in our environment. That said, we have identified certain potential cost-saving opportunities within the organization, for example, reducing travel expenses, consolidating remote offices, and allowing nonessential contracts to expire without renewal. We should begin to see the impact of these cost-saving initiatives and others in the second half of the year and into fiscal 2027. As such, we expect total OpEx to decline in Q3 and full fiscal 2026. Based on all the factors I discussed and what we know today, we expect adjusted EBITDA for the full fiscal 2026 in the range of 4% to 4.5% of net sales. While it's too early to provide a detailed outlook for fiscal 2027, we expect having the full-year benefit of tariff mitigation actions I mentioned earlier will give us a clear path to improve upon that range next fiscal year and get us back on track towards our long-term model. I believe the changes and progress I have outlined demonstrate our commitment to maintaining the level of profitability reflected in our long-term operating model, which targets an EBITDA contribution of 25% to 30% on net sales above $200 million. We have proven our ability to deliver this level of performance in the past. Therefore, as our brands continue to bring innovative, compelling new products to consumers, we are confident in our ability to translate that consumer loyalty into sustained profitability growth over time. With that, operator, please open the call for questions from our analysts.

We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Our first question is from Matt Koranda with ROTH Capital. Please go ahead.

Hey, good afternoon. So I guess I just wanted to start with the 4% sell-through metric that you shared. How much of your revenue in a given quarter do you have visibility into a POS, and maybe just which brands were tracking ahead of that 4% sell-through metric and which were maybe a little bit below?

Hey, Matt. It's Brian. So on the visibility question, we actually get to see quite a bit of our sales through POS. So it captures the majority of our largest retailers, and then, of course, we can also see our direct-to-consumer business. So I think we've sized it in the past, Andy, something close to 60% or so, roughly two-thirds of our revenue. And so we get a pretty good look at what's moving through. And then related to your second question, you know, which brands seem to perform better, you know, and were there others that performed not as well? I think it's pretty consistent with what we saw in November. Outdoor lifestyle, in particular, has been doing very, very well. And within shooting sports, I think as a category as a whole, it's been kind of aligning with NICS somewhat, so a little bit more pressure. There is softer demand for those types of products than there was last year, with the exception of Caldwell. Caldwell has just been off the charts, so with all the new products, including the Claycopter.

Okay. Alright. That's helpful, Brian. Thanks. And then yes, I was going to ask, you referenced the November performance in the prepared remarks and just now. Up 13%, I guess, in outdoor lifestyle, but then the guide for the quarter looks like it's down 8%. So maybe just help us kind of sketch the disconnect there. Is it shooting sports a little weaker in the quarter? Is there some inventory overhang that still needs to clear out among traditional retailers? Maybe just help us understand the gap there.

Yeah. Absolutely. So I mean, overall, you know, demand is choppy, but it's not collapsing by any means. And, you know, POS has been very strong, but retailers have been managing to much lower inventory levels. And also, we're seeing them, this is based on our conversations too, placing bets at different times based on their available capital depending on the seasonality, depending on if it's the, at this point, the holidays. And so we're having to react and work with them, plan with them, in regards to how that replenishment will work going forward. It's part of the reason we gave an outlook today is because we have a little bit more visibility after some of those conversations and following Black Friday. We'll learn even more in SHOT Show in January. But it's based on what we know today, yes, POS is incredibly strong. But this is really working through their ordering patterns and how they're choosing to allocate capital.

Got it. What can you do to, if anything, I guess, to mitigate the softness from the large customer in the e-commerce channel that seems to be causing some of the revenue headwinds for you guys in the near term? Do we just have to lap the adjustments that they've made to sort of the inventory that they carry? Or are there any levers you have to pull on your end to sort of stabilize that channel a little bit?

Yeah. I mean, we're again, just taking a step back, you know, we thought it was important this call to just call out this evolution that we see taking place. I think if you listen to some of the other publicly traded traditional retailers like Academy, etcetera, while they're experiencing, you know, lower foot traffic, you are seeing higher sales. And that's attributed to, in most cases, to just growing e-commerce and omnichannel. So I think following COVID, you really saw a hurry-up offense and begin to invest significantly in those on those sides of things. And so we've even internally begun to think, you know, how can we begin to parse this out? Because this really is an e-commerce sale. We just don't have a lot of visibility to it. And we're seeing them take share, frankly, from some of these other very large online-only retailers. So I think over time, to answer your question, you know, how do you begin to kind of reduce some of that volatility? I think that's just sort of a nature, I hate to say this, but nature of that one customer. But the fact that our direct-to-consumer business has grown as much as it has, coupled with our traditional retailers beginning to take a greater share of omnichannel, I think that by the nature of how those percentages will ultimately work out, will reduce that volatility inherently. Outside of that, I think it's, you know, whenever there's a big change in the economy, this one large e-commerce retailer tends to be up and down. It's just been our experience.

Sales in that Q4 period. So I think you're typically, if you look back historically, we're going to expect that same seasonality in Q3 and Q4 at a high level. I'll just make one comment too just on the tail end of that. I mean, tariffs have been a headwind for everybody. I think for us, you know, the difference is we have a clear path to how we're going to offset those tariffs by FY 2027 going into FY 2027. So when you start to see some of those timing changes flow through, from pricing, supplier negotiations, you know, we've got tariff-efficient product designs. And at the end of the day, you know, still keeping innovation at the center of our story. So new product velocity, it's also a big part of that, and we've demonstrated that in the past. So I don't want that to be lost because the team has done an incredible job getting out ahead of this. There may be some timing differences, like Andy alluded to, but at the end of the day, we feel confident that we're going to be able to offset the tariffs. Okay. Very helpful, guys. I'll leave it there. Thank you.

Yes. Thanks, Matt. The next question is from Doug with Water Tower Research. Please go ahead.

Yes, thank you. Good afternoon, everybody. Just staying on tariffs, that's very helpful in laying out the cadence there. But just in stepping back, the implementation of the tariff mitigation is complete. It's just a question of having it come around and working through the P&L. Is that right?

That is correct, Doug. So the tariffs started to get capitalized in the inventory way back in March. So the timing for our P&L for amortizing starts to hit in December. Right? Our mitigation efforts with pricing were after that, so there's a little delay on that. We've also gotten cost concessions. Cost concessions work like tariffs, but opposite. So if we get cost concessions in May, we're really not going to see the benefit of those until our fourth quarter and then into next year. So as Brian talked about, when all of this shakes out, all the timing differences shake out, in 2027, we believe that we fully offset all the, with mitigation, we've offset all the tariff impact. The tariffs that exist today. Yeah. Right. Oh, thank you. That's very helpful.

It looks like you, I mean, the numbers beat estimates. Sounds like they beat your internal forecast, and a lot of it came in the last couple of weeks of the quarter. Do you think there was maybe a little borrowing from Q3 here at the end of the quarter?

Yeah. This is Brian. No. The short answer is no. You know, I've worked at companies before that are trying to pull things into quarters. And you don't want to get on that treadmill. So, no, we just try to run the business the best we can. Not be promotional if we can avoid it. Obviously, that leads to higher margins. But, really, I think it's that new customer that we brought on, the expanded distribution, combined with the online retailer we have discussed, that we started to see a bounce back and begin to replenish some of those orders that we would have expected in prior quarters.

Got it. Okay. That makes sense. And just finally, as I try to understand this disconnect between sales and POS, it's such a wide gap. Is there, I mean, you would think they would track. Do you have any visibility or any guesses on when you think the two numbers will align a little bit more closely than where we are today?

That's a great question. That's a great question. I think, you know, we spend a lot of time talking about what's happening with the retailer and what are the decisions that they're making. Because, you know, as we said in the prepared remarks, they're trying to navigate, you know, one, a consumer that's under increasing pressure. Specifically within that, this divergence between two different cohorts, you've got the higher-end cohorts, high income, that continue to spend on premium products, which we benefit from, and we see that in our data. And then this lower-income cohort, which is certainly pulling back, and they're spending a lot less. So trying to allocate and make sure they've got the right mix and assortment to appeal to their sort of evolving consumer base. And at the same time, trying to play, you know, a little bit of a staring contest with some of the other retailers on pricing. What should their pricing be? Just because we pass along price doesn't mean they just immediately turn around and pass that on to the consumer. They have their own promotional cycles and seasonality. So it's different by retailer. I realize this is becoming a little bit of a complex answer, but to answer your question, it's really all of those things taken together combined with how they're allocating their capital on what they think is going to win, where they're seeing traction with certain cohorts, and certainly, they have a desire to bring on new products, which we're a key vendor for. So those are getting, they are beginning to converge more and more the longer we go on, especially as tariffs stay where they are. So I see that window narrowing. I don't have a magical date in mind, but I think we're getting closer to it. I really do.

Well, no question. It's been a challenging environment. That's helpful. Thank you.

Again, if you have a question, the next question is from Mark Smith with Lake Street Capital. Please go ahead.

Hi, guys. I wanted to first just talk a little bit about consumer trends, you know, primarily any other insights you can give us around, you know, Black Friday and kind of point of sale trends that you saw there. And also curious if you've seen any bump really from Florida and maybe how much of your products maybe fall under a tax holiday there.

Yeah. Mark, this is Andy. So, as we talked in the consumer written remarks, we were really happy with Black Friday. Not only with POS, Black Friday in November, not only with our POS results, but our direct-to-consumer. So, yeah, we're really happy with that. Yeah. And I think we haven't talked about direct-to-consumer much either, but we also saw, that's part of the POS, really, really strong direct-to-consumer business, in particular for Meet Your Maker and Gorilla. And then regarding your question on Florida, that's not something that we looked into. So that, we'll circle back and take a look at that.

Okay. And then the next question is just thinking about new products. You guys talked about, you know, SHOT Show, some new products coming, and you guys really proved you can enter new markets, you know, with Caldwell as we think about shotgun sports here. I'm curious as we think about these new products that you have in the pipeline, should we look at a lot of these coming in kind of backfilling markets where you currently play? Or are there new segments and markets that you expect to enter here over the next twelve months?

Yeah. Great question. As you're asking that, Andy and Liz were looking at me because I start to smile. As I said in the remarks, like, we truly have the best pipeline I've ever seen. Yeah. So it's, like, super exciting. And if you look in our investor deck, I think we started last this last quarter. We certainly have, we'll have the same slides this time. But we gave a tease to where we're taking some of our growth brands as it relates to innovation. So, a big part of that is really just building upon the ecosystems. And those ecosystems within Caldwell, within Bubba, etcetera, and what we found is as we've expanded some of those new families, like the Claycopter, the Claymore, the Bubba Smart Fish Scale, is they're becoming very sticky with the consumer. And so we want to try to build on that momentum. So what you'll see, especially at SHOT, and we mentioned it in the prepared remarks, is the Claycopter surface-to-air, which is unbelievable. I mean, like, when you see this product, Mark, like, unbelievable. Everything we, everybody we show this to, our retailers, just says this thing shouldn't exist. So to have that type of technology where we're building up the Claycopter line, we're now integrating it with a new app. Wait till you see what that app can do. But you can now tether and daisy chain several, whether it's disc or traditional clay throwers, without the headaches of what the industry's had to deal with. So I think we're truly trying to shape some of these activities, but it's really building on the momentum in this ecosystem and, frankly, gamification. You're going to see a lot more gamification from us spread across several of our brands. And I think that's really the focus in FY '27. As it relates to entirely new products, you know, like what the smart risk was for Bubba or what the Claycopter was for Caldwell last year. We've got several of those in our pipeline. But I think you'll see at least the first part of FY '27 really building out those families and those ecosystems I talked about.

Excellent. Looking forward to seeing it. The last one for me is just any update on M&A. I think last quarter, you talked about maybe fewer kind of high-quality targets out there. Have you seen any changes in kind of the M&A landscape?

We are. We are seeing a few changes. I would say the ice is beginning to break a little bit. I think if there, you know, why is that? I do think that because tariffs have kind of paused somewhat, you know, we're not seeing as many drastic changes. I think that companies are now able to demonstrate some level of run-rate performance where they can go to market. We're seeing a few instances where, you know, family-owned businesses are at a point where, look, the last five years has dealt the industry a lot of change. And it's been, if you're a family-run business, that can be a challenge if you don't have resources like we do. We're seeing opportunities like that come to market. We also believe that there will be some bigger assets that will be surfacing here in the next six months, possibly some divestitures. And so we're keeping an eye on those and, at the same time, continuing to cultivate our own pipeline. So, if you were to ask my excitement level now versus three months ago, I would say I'm much more excited about the opportunities that are coming up right now.

Excellent. Thank you, guys.

Yep. Thanks, Mark.

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

Thanks, operator. As we head into the holidays, I'd like to give a special thanks to our employees whose loyalty, hard work, and dedication continue to move our company forward on the path towards an exciting long-term future. To those employees and to everyone else who joined us today, we wish you a happy and healthy holiday season. And we look forward to speaking with you again next quarter.