Good day, and welcome to the Vista Outdoor Inc. Second Quarter Fiscal Year 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelly Reisdorf..

Thank you. Good morning, and thank you for joining us today for our second quarter fiscal year 2021 earnings call. With me this morning are Chris Metz, Vista Outdoor, Chief Executive Officer; and Sudhanshu Priyadarshi, Senior Vice President and Chief Financial Officer.

Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements and we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act.

These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to the risks and uncertainties that face Vista Outdoor and the industries in which we operate.

We encourage you to review today's press release and Vista Outdoor's SEC filings for more information on these risks factors and uncertainties. Please also note that we have posted presentation materials on our website at vistaoutdoor.com, which supplements our comments this morning and include a reconciliation of non-GAAP financial measures.

With that said, I'll turn the call over to you, Chris..

Our drive to enhance our e-commerce capabilities; increasing our marketing efforts and meet consumers where they shop, which is increasingly online; the ongoing shift in consumer preferences toward outdoor activities that can be enjoyed in safe and socially distant ways; several new successful product introductions by Bushnell's Wingman GPS-enabled speaker, CamelBak's Horizon Drinkware line and the introduction of our Bushnell redesigned and repositioned line of optics.

The response in the channel with consumers our innovation has been strong and was well timed. Also increases in recreational shooting sports participation in part inspired by safety and personal protection and growth in the sale of hunting-related ammunition and accessories, driven by a strong fall hunting season.

Our team at Vista Outdoor was able to meet these demands under challenging circumstances. We have thrived as we watch the economy go up and down, politics permeate even further into everyday life, and we've adjusted our processes to account for enhanced safety for all of our employees.

Overall, Vista's second quarter is marked by excellence in strategy execution, well-timed new product introductions in the marketplace, a brand portfolio of market-leading brands focused on outdoor sports and recreation and a resilient business model now delivering significant profitability to fund the next leg of Vista's market leadership.

I'd like to thank our entire organization for the enthusiastic welcome of the Remington team and products to Vista Outdoor. Since day 1, there have been over and above levels of coordination and work taking place during these demanding and uncertain times.

Combined, our portfolio is stronger and is made better through our scale and our centers of excellence and the culture we've built. Turning to 4 execution highlights. First, I'll start with Remington. Remington furthers our strategy of building market-leading brands aligned to outdoor sports and recreation.

We were able to buy at an annual run rate of roughly $200 million in revenue with roughly $51 million in cash on hand and $30 million from our revolver. Importantly, this deal provides us with much needed manufacturing capacity to meet consumer demand without adding any additional capacity to the industry.

We also believe the iconic Remington brand provides us a valuable and uncapped future licensing business in key product categories. Because of these synergies we see, this is truly a once in a lifetime acquisition opportunity.

We couldn't be more excited about the potential and look forward to restoring the profitability of this business using our manufacturing strengths, distribution and marketing capabilities in our centers of excellence model.

We believe it will take us a couple of quarters to fully integrate the integration, and we've modeled our financial guidance accordingly. Our second execution highlight is navigating the COVID-19 climate. We're the first to recognize that we were aided by tailwinds resulting from consumers excited to get outdoors and recreate safely.

However, differently from others, we were able to leverage skills and assets we began building prior to COVID on e-commerce and direct-to-consumer sales to help build and fulfill demand for products across the portfolio. This included demand for both Outdoor Products and Shooting Sports.

The ability to serve consumers directly in today's climate has helped address shortages at retail and help drive consumers to Vista's outdoor e-commerce sites. Once consumers landed on our sites, we met them across promotions and engaging digital content.

The e-commerce center of excellence led by our Chief Digital Officer, Bob Steelhammer, in collaboration with our business unit leaders, delivered approximately 20% of our total company's revenue in Q2. We doubled this business in the quarter when compared to the prior year.

We're excited about the trajectory and growth potential for this channel as we look ahead. On the operations and finance side, we continue to manage our people and processes with the utmost care and attention given the ongoing spikes in surges in COVID-19. We're like all Americans who want to get back to normal.

But until conditions improve and government regulations loosen, we will manage our workforce and operations prudently and with safety as the #1 priority. We know that the last 6 months have been favorable to our business, and we acknowledge that changes in the pandemic or government regulations could change some of these advantages that we have seen.

Our third execution highlight is leveraging our infrastructure. The core anchor in the Vista Outdoor strategy is to help our portfolio of brands be better than they could be on their own. Internally, we call this Better Together.

The second quarter demonstrated the power of this model on the commercial side as our Shooting Sports segment was executing well in every aspect of the business. This success has been driven by consumer demand, but optimized by our decision to combine the sales forces and channel marketing for ammunition and hunt/shoot business units.

Each unit in most respects, serves the same customer and end consumers. Our Better Together approach has led to improved top and bottom line growth through efficiencies and scale, and our teams get better with each passing month.

With Remington ammunition and accessories now in the portfolio, we've added even more firepower for our talented team to deliver to the good of consumers and Visa Outdoor alike. We are rightfully known for our strong brands and commercial strength. However, our operations team also demonstrated the power of Better Together in Q2 as well.

With heightened consumer demand that no one could have accurately predicted, our operations team worked collaboratively and tirelessly to bring in more of the right materials and the right inventory.

Although we couldn't meet all of the demand in Outdoor Products and Shooting Sports, I feel confident that we not only grew our revenues but also took market share in the key categories we compete in. And the fourth execution highlight I'd like to mention is working capital.

Kudos and thanks to our team for the continued stellar work on the balance sheet this quarter. Working capital improved and contributed to free cash flow due to a combination of focus on accounts receivables and inventory management. We ended Q2 with a multiyear low in days sales outstanding, or DSO, and days inventory outstanding, or DIO performance.

Our cash conversion cycle has improved by roughly 24 days when compared with the prior year and by roughly 8 days compared to our first quarter.

With inventory in our retail partners also at multiyear lows across many of our categories, a key focus area for our team is making strategic investments in fast-moving inventory to support the growth we expect rest of the year. Now let's move to a review of the brand portfolio.

We experienced incredibly strong growth across our Outdoor Products and Shooting Sports segments as our highly relevant products address consumer demand for health, recreation and personal protection as people spend more time at home and outside.

In Shooting Sports, we anticipate this heightened level of demand, fueled by many factors, including civil unrest, a heightened desire for personal protection and increases in recreational shooting activities to continue into the future. One area of continued growth in demand is hunting.

We experienced a strong spring hunting season and fall hunting season is trending the same way. With continued COVID-19 restrictions and social distancing, more and more people are looking to spend time in nature and in the woods. For example, in the state of New York, hunting license sales tripled 2019 sales on opening day.

In Michigan, license sales are up 28%, with a large increase in the coveted 18- to 34-year-old demographic. These trends are in line with internal demand for hunting ammunition and bode well for the hunting-heavy Remington brand.

A second area of continued growth, our ammunition and hunt/shoot teams continue to secure domestic and international government contracts, which, as we all know, leads to a predictable multiyear revenue stream. These government contracts hedge against the volatility of the commercial market and create a halo effect for our brands.

Consumers realize that if the brands are good enough for national security and law enforcement officers, then they are certainly worthy of consumers' discretionary dollars. Recent wins with U.S.

Military and European countries for ammunition as well as optics and other accessories on victories here and abroad were among some of the highlights from the quarter. Our ammunition business, as you know, has been constrained in the current high demand environment.

I am frequently asked to describe what is different from this current time compared with a surge 4 years ago 2016. Although I'm not going to speculate on the sustainability of the surge in demand, I will simply share how we view the 5 key differences between then and now. Number one, significantly more new shooters.

According to data from the NSSF, there are 6.2 million new shooters in 2020. This rate is more than twice the number of new shooters in the former surge. Anecdotally, there is no shortage of reports of sold out shooting ranges and backlog firearm safety classes around the country.

Number two, much more diversity in new shooters than the industry has seen before. This has led to an increase in participation as they learn and enjoy their new purchases. Data from the NSSF indicates these shooters are more diverse, with large increases in both women and people of color entering the sport.

Number three, more accessories are being purchased to support participation. Categories such as gun cleaning kits, slings, spotting scopes, eyes and ear protection, all of which we sell are all comping in the low 40s to high 50s as year-over-year percentage increase over the prior year quarter.

Number four, we have cleaned inventory in all retail and wholesale locations. Despite us producing flat out for 6 months, there is no buildup of inventory at any of our customers. In fact, every one of them would like significantly more. Simply put, consumer demand continues to outpace our ability to supply. And number five, backlog.

We currently have over a year's worth of orders for ammunition in excess of $1 billion. This is unprecedented for our company. With demand far outstripping supply and inventory levels in the channel at all-time lows, we see strong demand continuing, and this metric informs our viewpoint of what a recovery or normalization could look like.

Now while I don't intend to provide updates on this metric every quarter or even every year, I did want to provide additional context in these extraordinary circumstances to convey an underlying strength and strong foundational element to our business.

We plan to leverage the consumer volume of interest and cash flow advantages of this period to further our competitive positioning across the portfolio. This includes investing and accelerating our new product innovation, further building out e-commerce and cross promotions and focusing on digital marketing within our brands.

Moving to Outdoor Products. COVID-19 and acceleration of remote work and migration away from cities continues to provide positive influence on outdoor recreation. In hydration, CamelBak continues its high customer brand affinity and its focus on personalized pursuits of staying healthy.

The brand is thriving despite continued COVID-related supply chain issues, primarily in Asia as well as Mexico. We're working on secondary suppliers and are targeting this brand for increases in R&D and centers of excellence resources. With Bell and Giro, we continue to benefit from the surge in people riding their bikes again.

Sales have been strong across the portfolio from specialty retail to mass. We have also seen more consumers getting back on their motorcycles with many of them buying a new helmet for themselves or for family members. Market research data indicates that the demand for bikes and related accessories will continue well into the future.

In Camp Chef, the surge in outdoor cooking continues as does our record level of brand awareness in this space. Sales during the quarter on the campchef.com platform were up significantly year-over-year, which is driving brand awareness and gross margin improvement.

Our new WiFi pellet grill launched ahead of the pandemic not only has hit a new MSRP price point at over $1,000, but is selling my crazy online and at retail. Camp Chef's history shows that the first purchase leads to a prolonged and productive relationship with the consumer.

So we believe the surge today will continue to pay dividends tomorrow and beyond. And in Bushnell Golf, the U.S. golf industry has rebounded from a punishing start to the golf season.

What began as record reductions in rounds this spring has turned into a significant increase as more Americans look to recreate outside in a safe and socially distant ways. This trend has driven top and bottom line growth for our Bushnell Golf brand, but the real story for golf has been innovation.

The category creating Wingman is the first of its kind golf audio GPS product. And the exciting story here is that in this category, we literally started from 0% market share in GPS devices and grew to 15% inside of the quarter. This market share gain is incredible and unprecedented.

Year-to-date, we have sold 5x more than we initially anticipated as the channel and consumer response have been much stronger than anticipated. Again, kudos to our ops team for chasing the demand, Wingman sound and GPS capabilities have expanded the market for Bushnell Golf and contributed to better-than-expected earnings.

Together, our two segments clearly highlight our business model strength and diversity. The growth rate in Shooting Sports was a tremendous 27% in the quarter. At the same time, our growth in Outdoor Products of 35% was even greater.

As cash flow continues to grow, we will invest in targeted brands as levers to further our growth in the outdoor industry. We will also explore other categories within Outdoor Products that are attractive and near adjacencies that we can but currently don't participate in.

In total, this outdoor will be seizing the opportunity across our portfolio in the industry, smartly deploying our cash flow to fund the next wave of our growth. During this period of growth, you can expect us to focus on 5 key strategic areas.

First, maintain and expand our industry-leading positions, including the prioritization of first or second place positions for our brands. Second, innovation. We are measuring the contributions of new products, and we like what we see in terms of both top and bottom line contributions.

We will continue to pragmatically increase our R&D and capital spend to invest in our new product pipeline and also looking harder at changes in demographics and user participation.

Third, grow our digital infrastructure for e-commerce to achieve our vision of connecting our portfolio of purpose-driven brands and products in ways to bring people together and drive revenue.

Fourth, we will continue to look for strategic, synergistic tuck-in acquisitions with a near-term accretive profile such as what we expect to see with a highly synergistic recent acquisition of Remington brand and ammunition assets. And finally, we look to build up our dry powder with cash on hand.

We know that the seasonality in our third and fourth quarter traditionally can be softer than the front half, and our planning activities have signaled that calendar year 2021 may have many of the uncertainties and pandemic-caused disruptions experienced in 2020.

Now I'd like to hand it over to Sudhanshu, who will provide more detail on our financial results and our outlook..

One, continued strength of demand for commercial animation; two, continued ordering in the channel for a strong fall hunting season; three, retail stores remain open, and we see continued trends in our e-commerce business; fourth, that our manufacturing and supply chain remain largely uninterrupted.

These factors are offset by the typical expected seasonality in each of our segments in the third quarter, most notably our outdoor cooking and golf product lines and reflects the impact of the distribution agreement with Lake City, which began October 1.

We anticipate each business unit being up year-on-year with our Shooting Sports segment showing a higher year-on-year growth rate than Outdoor Products. Within Shooting Sports, most of the strength will come from ammunition, although we do expect to continue to see positive growth in hunt/shoot.

While we expect Outdoor Products to be up year-on-year, we are factoring the growth rate to be influenced by risk of COVID outbreak as we are closely monitoring what is happening in Europe and here in the states.

In terms of normalized seasonal sales in this segment, the summer spike in sales we saw in the first and second quarter was due to people taking their summer vacations at home and taking sports and recreation products in record numbers. We feel this phenomenon is unlikely to be repeated in the winter months.

Consumers don't typically take as many vacation days in winter months, and our Outdoor Products portfolio is more weighted to warm weather product. And lastly, we anticipate increase in capital expenditure spending at the halfway point in fiscal '21. We feel capital spending will come in slightly above of that last fiscal year.

We are increasing our investments towards our organic growth initiatives, and we'll be investing in the Remington. R&D spend is expected to be flat from prior year. We expect annualized interest expense to be significantly less than the prior year. Our tax rate for the third quarter is expected to be in the mid-single digits.

We expect our leverage ratio to stay below 2x in the third quarter. We expect to see continued strength in our end market within our organic business, which will result in strong EBIT and free cash flows, offset by planned investments in marketing and working capital in Remington, as we ramp up bankruptcy [indiscernible] operations.

We expect free cash flow in the third quarter to be below the prior year third quarter. Therefore, our third quarter fiscal year 2021 guidance, which includes Remington is as follows. We expect revenue in the range of $510 million to $530 million, which represents 20% to 25% growth over the prior year quarter.

Earnings per share in the range of $0.55 to $0.65. Additionally, third quarter sales guidance includes approximately $10 million in sales from Remington. Revenue will be modest this quarter as we work to reestablish the relationships and processes and ordering cycles, which were severed when Remington entered bankruptcy.

While we have work to do to ramp up this business to our standards, we are proud to be able to revise one of the industry's oldest and most iconic sporting H/S brands to the greatest it once had. We anticipate the revenue run rate to normalize by mid next year.

As we continue to ramp up and optimize operations in the business, we expect this sales contribution to increase. And lastly, as I stated previously, we expect this acquisition post transition to be accretive to earnings in our fiscal year 2022. Thank you, everyone. And now we will open the line and take your questions..

[Operator Instructions]. We will go first to Dan Flick at Cowen & Company..

Congrats on a really great quarter. So I was under the impression that the $200 million sales figure for Remington was backward looking.

So curious what the capacity and pricing opportunity is on a go-forward basis given the demand environment has changed pretty substantially? And then also how the Remington portfolio -- that the product and margin mix might differ from Vista Outdoor's mix as well?.

Yes. Two very good questions, and let me take that. This is Chris. So the first question is the Remington sales projection. So what is publicly available is a couple of years ago, they hit a rate of $300 million to $400 million of sales.

And although we haven't measured their capacity, we believe that, that $300 million to $400 million on an annual run rate with the right demand is certainly achievable. In terms of the portfolio mix, one of the neat things about what Remington offers is really two things.

One, it provides us a little bit of buffer from our Lake City contract to the extent that we want to serve the small rifle ammunition demand.

But secondly and probably more importantly in this environment is they have got an absolute state-of-the-art 9-millimeter pistol factory, which gives us much needed capacity in a category that is not only super strong but is growing dramatically.

And this is the predominant caliber that is shot on ranges and gets consumed and not stockpiled, if you will, as much..

Awesome. That's very helpful. I was also curious how the acquisition could impact pricing power in terms of negotiations with customers. And then just a small question to kind of square away. The net debt, it looks like it increased on Slide 10, $69 million after the acquisition, but the price was $81 million. Just curious what the difference was there..

Okay.

Sudhanshu, do you want to address the net debt, and then I'll talk a little bit about pricing?.

Yes. So net debt, we paid $81 million for Remington, but we had to pay $12.5 million as a deposit that happened in last quarter. So that was part of restricted cash. If you add -- if you do $81 million and then pick $12.5 million out, you get to the number, pro forma number..

And as it relates to the pricing question, we don't see this changing pricing at all in the marketplace. It's a very, very competitive industry, as you all know.

And what we've been fortunate to be able to do is as our commodity input costs have increased, most notably copper, as well as our overtime rates with our factory workers to support the increased demand as well as some just general inefficiencies as we're producing flat out, we've been in a position where we've been able to pass that along to our customers, who, in turn, then have passed that along to consumer.

So it's a balanced marketplace, and we view the Remington acquisition as really the -- gives us the ability to dramatically increase our capacity while not increasing any capacity whatsoever in the industry.

So there should be no long-term hangover effect, if you will, from what happened in the past, which was added capacity to the entire industry in total..

We'll go next to Rommel Dionisio at Aegis..

Chris, you've obviously had a lot of experience turning around companies where you were from Arctic Cat as well. But as you look at Remington, this is a company that their former parent was -- has been -- had seen some financial challenges for a while.

So why would you say it's the lowest hanging fruit in terms of aspects of their business that maybe had not been underinvested in, in these last few years as obviously Freedom Group had some financial challenges.

Maybe could you just give us some granularity on what you plan to target sort of initially in terms of getting that business running as efficiently as your current -- as the rest of your ammunition portfolio?.

Yes. So Rommel, I mean, very insightful question because even prior to Arctic Cat I've had a lot of experience in looking at organizations that for one reason or another were dramatically underperforming and turned into a turnaround situation.

The really, really exciting thing about Remington is it wasn't that long ago that they demonstrated top quartile performance. So the brand is -- and the company is certainly capable of doing that. And there's, as you well know, it's one of the iconic sporting brands in the world.

Two factors that I see that I would suggest are low-hanging fruit that are very typical of a lot of turnarounds is, number one, just very undercapitalized. As companies start to deteriorate their performance, their balance sheet follows really quickly. They can't invest in inventory. They can't invest in raw materials.

They can't invest in the people to handle the surge capacity or what have you, and it really becomes just a self-fulfilling prophecy. And that's what's happened here as they went through bankruptcy.

So immediately, and that's what you're seeing some investments in our now quarter 3, we're spending a lot of time reinvesting in the supply chain in Remington.

All stuff that is normal course for us, very easy to do, harder to do if we didn't have a strong balance sheet like we do now, so everything in our projected guidance supports us heavily investing into the Remington brand. And that's why you see us putting a really small sales number, frankly, in Q3 because we're not focused on sales.

We're focused on rehiring literally 700 to 800 employees for that facility, retraining all those facilities, going through and working through their processes, bringing back online systems and then reintroducing the supply network to them.

So a lot of hard work there, but what I would call low-hanging fruit for a talented team, like I know we have in ammo. The second piece of low-hanging fruit is really the underinvestment that I think what we're seeing is in new products. So I think it's been a while since the Remington brand has introduced innovation into the industry, if you will.

And you've seen just a slew of innovation from our ammunition team over the past few years. And we're going to bring that same mentality and makeup to the Remington brand. So super, super exciting.

Now what's not necessarily low-hanging fruit, but a long-term opportunity for us is because of the iconic nature of the brand, we believe there's opportunities for licensing. We believe it's a brand that can extend itself into near adjacencies. And as we look over the mid to long term, it's an exciting potential revenue and royalty stream for us..

We move next to Jim Chartier at Monness, Crespi, Hardt..

On Remington, I'm just curious, are you forecasting the acquisition to be dilutive this year as you invest in the business in the second half of the year? And then any sense where kind of current EBITDA margins are for the business? And is there anything preventing you from getting that business in line with your current ammo segment, which is tracking, I think, close to 20% this year?.

Yes. So Jim, what we've guided is that we believe with a fair degree of confidence that it's going to be accretive in our first year. And we haven't guided beyond our third quarter for a number of reasons. And I've just alluded to the fact that we're going to invest in our Q3 here to support the ramp-up of Remington.

We believe that looking at both the top and the bottom line, that there's no reason why it shouldn't perform over the mid to long term, like our current ammunition business. Now certainly over the short term, next year or so, I would not model in 20% EBITDA margins for that business.

It's a business that we think we can move up into the double digits in terms of EBITDA as we start to stabilize the business, get it back and running and we start moving into our next fiscal year, but there are some things that I talk about low-hanging fruit that we'll be able to jump on, but there's some other things that are going to take some time to really implement.

All stuff that has taken us time to doing our business right now to demonstrate what I think is probably the best margin profile in the industry. And it will take a little bit of time to give Remington there as well..

Great.

And then can you just talk about the Lake City impact on third quarter sales and earnings?.

Yes. So as you know that Lake City, we ended that contract of old end of September. Now what we've done is, is we signed a contract with Lake City. So we'll continue to get supply from that Lake City facility, not as much as we had before.

But as I mentioned, with the Remington acquisition, we have the ability to produce not only in our own factories prior to the acquisition but now in factory in Lonoke to also support small rifle to the extent that we deem it necessary.

But what we really like about where we're going from the Lake City contract is that the Lake City product mix is a very volatile mix. And in good times, it performs very well and in bad times it performs very poorly. What we try to do is set our business up for a more stable and more predictable revenue and profit stream.

So we're excited that we're going to remix our portfolio into smaller handgun calibers like 9-millimeter. We've also put a concerted effort on contracts and increasing our work with the government, as evidenced by the very, very coveted win we just had with customs border patrol, which we've already begun to ship. So we're excited.

Like what we're doing with all of our Outdoor products businesses is, frankly, we're going in with a business mindset and looking to remix the portfolio to not only meet demand, but also to be smart about our margin profile so that we can fuel future growth..

We'll go next from Scott Stember at CL King..

Congratulations again on a great quarter. Obviously, e-com did great for you guys in the quarter.

Could you talk about how the traditional brick-and-mortar chain performed?.

Sure. So brick-and-mortar as we came out of the COVID environment and we kind of -- we've seen a lot of American consumers and really consumers across our strong European countries and what have you started to pull out of the work-from-home or shelter-in-place, if you will, we saw our brick-and-mortar retailers performing well.

And frankly, our brick-and-mortar retail partners' e-commerce business performed very well. And we've got some retail partners that are very, very good at e-commerce. And that's really our first priority as we start looking first at e-commerce is supporting our retail partners where we can.

Now the exciting thing is as we've ramped up and dramatically increased our sophistication in e-commerce, pockets of the country or in pockets of products where we're not as represented as we think we should be, we're underpenetrated, we can really dial up our own e-commerce efforts.

And so for the first time, we posted a number of 20% roughly of sales contributed in total by e-commerce. And we did that because we wanted folks to know that it's a material, meaningful part of our business. But the exciting thing is, we grew it over 100% the last 90 days. And I don't know too many companies that have grown at 100%.

But I think the more exciting part about it is we look at top quartile performers in e-commerce. And we feel like top quartile performance is 25% to 30% of revenues. And clearly, as the channel grows, that -- we're going to raise that bar.

But if you look at 25% to 30% versus where we're at 20%, we look at a $100 million to $200 million revenue stream as we go forward into the future from e-commerce. Now clearly, all of that's not going to be incremental. But we like the margin profile, and we like the potential for growth in that channel..

Got it. And on the supply chain side, you talked about CamelBak, some issues there. I just wanted to see if that was affecting other pieces of the Outdoor Products business. And if you could quantify potentially how much sales at the end of the day did it go out the door because of the supply issues..

Yes. So Scott, I mean, simply put, it's affected a number of our businesses. And it's frankly just a product of demand. We could have sold a heck of a lot more bike helmets and accessories if we had them in supply. We could have sold more hunt/shoot optics and all the accessories we have if we had them in supply.

We highlighted CamelBak because CamelBak just suffered more from some of the suppliers that were affected more so by the COVID environment. But the exciting thing about Outdoor Products is despite the shortages and supply-driven by demand, we grew that business by 35%. And it was a credit to our team to be able to continue to chase demand.

I mentioned Wingman, where we outsold our forecast by 5x. And our supply chain team was super nimble and agile and really went after chasing that demand. So we've already greenlighted a month or 2 ago for our Outdoor Products teams to strategically invest in inventory.

And that's what's supporting the guide that we're giving here in Q3 of up 20% in total. And hopefully, as we go forward, we'll -- we anticipate that these trends are going to continue and we'll see a continued growth in the top line..

And just a last question. Sudhanshu, you talked about some tariff exemptions helping out in the quarter. Could you talk about that a little bit? And then that's all for me..

Yes. So we did get some exemptions from the tariffs that was part of the Phase 1. So we got those benefits in Q2. Obviously, that will not -- that helps us in our Q2 earnings, and that will not help us in basically next year when we go. So we just talked about Q3 -- sorry, Q2..

And we'll go next to Ryan Sundby with William Blair..

Congrats on the quarter as well.

Look, I know you guys -- recognizing you just closed Remington but also your leverage ratio is still kind of down either the low end or below your target, can you maybe just talk about how the acquisition pipeline has changed as we move through the year? Because I would imagine with uncertainty around COVID-19, it was probably pretty hard to kind of get into conversations this summer.

But now with the impact of the pandemic starting to get better understood today and maybe past the election, how is that pipeline going to change and what [indiscernible] today?.

Sure. So let me touch on that just real quickly here. As you might imagine, given the strength of our balance sheet, which is fortunately, really taken a strong change for the good over the past couple of quarters. And frankly, it's been building over the past 3 years.

So -- but we've got it down to a point where over the last 60 days, our team has spent a lot more time internally, looking at potential targets that we think would be -- would meet our criteria. But I think the first thing that's important to note, Ryan, is our overwhelming focus will continue to be driving organic growth. We talked about e-commerce.

We talked about new product innovation. We talked about potential licensing opportunities. We've got to really bed down the Remington acquisition and prove that we can integrate and make that very accretive.

Our focus is going to be what we have in hand because we feel like there's so much value to be driven by the existing portfolio of products that we have. Now that being said, we've laid out some criteria because we will have the capital that where there's an opportunistic opportunity like Remington, we want to be able to take advantage of it.

But it's going to likely be smaller. It's going to be potentially nearly adjacent to or in the categories we compete in today. It will be accretive. And we certainly won't go beyond our stated leverage. And in fact, we anticipate -- we can't really see a scenario in the near future that we're going to go beyond 2x levered..

Got it. That makes a lot of sense. And then Sudhanshu, you mentioned margin in the outdoor side would have been higher in the quarter without some kind of touch up costs like airfreight and supply chain restructuring.

Is there any way you can help just kind of quantify what margins would have been if you could have taken those things away?.

So we won't go into detail about what was the airfreight charges and all. But as you're trying to meet the demand from the consumer that help us deliver 35% growth, we made investments in bringing product, air freight and other COVID-related costs. And that helped us in the margin in Q2. And then also because we grew 35% in Q2.

But we don't go into details about what the exact airfreight charges were..

We'll go next to Eric Wold at B. Riley Securities..

A couple of questions. I guess one, you noted that you currently have $1 billion of ammo backlog over the next year.

Was that inclusive of Remington or exclusive?.

That's exclusive..

Okay.

And then with Remington expected to generate about $10 million of revenues in the current quarter, I know you're still kind of working through that, is there a sense of right now kind of what level of revenues you need to get to on an annualized basis for that business to turn accretive?.

Yes. We haven't guided on Remington, but we've given you size of the bread box, if you will, in terms of what we think the businesses both historically done, what we think their most recent performance is.

And Eric, where the market demand is right now, I think it's safe to say that there's enough information out there without us fully guiding that the revenue in the short to medium-term shouldn't be an issue to make it accretive..

Got it. And then final question kind of talking about the [indiscernible] e-commerce doubling year-over-year.

Can you talk about how that's changed your engagement with those consumers in terms of the experience of kind of return purchases from their initial visited sites, the ability to kind of cross-promote and get in to add additional products from other brands into their baskets versus what they originally came to?.

Yes. Eric, one of the really exciting things that we have been talking about over the past couple of years is we've built what we call a center of excellence for e-commerce. And it always gets a bit more prudence and believability when you start to post good numbers like we have this past quarter.

But we've been investing in this in the last couple of years. And a lot of what we've been doing is laying the plumbing and the piping, really the infrastructure of all the systems so that we can cross-promote, we can start to share trends within businesses, we can start to look at potential loyalty programs with our retail customers.

We can start to do some things because in total, and this is how Vista becomes better together, we have millions and millions of followers. And we're marketing to these folks in an increasingly bigger way online, much of it in partnership with our customers.

So we're super-excited about the potential to start to perform in a, I guess, more of a world-class manner as we take advantage of some of the investments that we've made..

And that does conclude today's question-and-answer session. At this time, I would like to turn the conference back over to Chris Metz. Please go ahead..

Thank you, and thank you to everyone for taking the time to be on the call this morning. I know it's a very, very busy week with a lot going on in our country, and I know there's other calls that many of you attend as well.

But in closing, the quarter for us was marked by execution excellence on the strategy, a well-positioned brand portfolio focused on the great outdoors and a business model delivering significant free cash flow to fund the next leg of Vista Outdoor's market leadership. As we look ahead, 2020 has taught us to, frankly, expect the unexpected.

The world has been reshaped. It's turned upside down and forever altered through the many events that have played out this year. Continued impacts of COVID-19 and this week's election are other potential turning points that can alter or challenge the status quo as we know it today.

But if there's one message I hope you all take away from my remarks and Sudhanshu's and Kelly's remarks as well, it's this, that Vista Outdoor, our transformation is about our ability to control our own destiny. We've built a company that can adjust, respond and win amid uncertainty.

We've realized that external events impact what we do, but we have transformed the company so that we can drive and not be defined by external events that we cannot control.

We are focused solely on building a company that is more forward-thinking, strategic and impactful, and ultimately more prepared for the unexpected than, frankly, we believe anyone else in our immediate space.

We cannot predict the future and realize we must always be ready for further challenges or change, but the performance we've delivered amidst these extraneous events demonstrates our newfound strength, our nimbleness and our adaptability. So thank you again to our teams, to all of our employees. I'm excited for the future of this company.

Thank you all..

And that does conclude today's conference. Again, thank you for your participation..