JOUT - Earnings call transcript Q1 2018

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Operator

Hello, everyone, and welcome to the Johnson Outdoors Second Quarter 2018 Earnings Conference Call. Helen Johnson-Leipold, Johnson Outdoors' Chairman and Chief Executive Officer, will lead today's call. Also on the call is David Johnston, Vice President and Chief Financial Officer. [Operator Instructions]. This call is being recorded.

to this consent implies participation our call. recording Your

from to simply now Ms. drop you Patricia to do the Penman. terms, agree not Penman to over would If off go these line. the call Outdoors. Johnson Please turn ahead, like I

Patricia Penman

XXXX Thank fiscal and Johnson morning, results. Good to our quarter you. of discussion welcome Outdoors' second

this These Investor of you conference on remind our website and are those listed and on our materially need is it available a differ to statements. due Commission. forward-looking a If contain views uncertainties press not the may in to with filings releases need www.johnsonoutdoors.com may Exchange copy assumptions of control. Relations. guarantees number and under of These release, you made Actual also beyond the of that our today's risks events news those are and many I at Securities statements statements performance. current basis include from factors, and future Outdoors' Johnson

additional have call, now Dave or turn questions the you Helen If either the is pleasure to Johnson-Leipold. me. my over please Johnson to It contact call following

Helen Johnson-Leipold

on and morning. with an quarter then and I'll questions. Thank us. and your for year-to-date businesses. and performance begin results review you share the on Good key financials, outlook overview for perspective our the will joining Dave we'll take

about year's quarter, for retail positive had with up XX% versus season ending year, That prior the XX% in the We ramp-up preseason second in continued selling great with period sales last momentum second warm of ahead recreational are the of sales first quarter, quarter. year. we net the first X through primary the months During and selling weather a for product. our outdoor

this of innovation. -- half to XX% time. million technology and year-to-date record combination to and last is per quarter period was is Profit brands XX% both to were $X.XX $XX a the will first and position the delivering this category, success. it the insights unique we the over continue technology profit factors up dedicated intimacy remarks. In for growth inspire million, and new of richer Outstanding and propelling affected new leadership to innovation, dynamic above tax diluted main portfolio and from $XX in nearly XX% growth. brand per legislation have fishing to up bringing or for The opportunity. technology expand powerhouse the us Net share, profit were U.S. million. $XX.X $XX during year or to income on advanced our goal or earnings that. year sales XX% Growing share operating how we're the at profit million sales and or products year, million So $XX.X Dave the date. diluted to increased new discuss by the performance quarter insight in and that his leverage enabled consumer $X.XX during XX% focus is consumer-driven bring on and consumer focus as important the us products technologies helps X years ending growth Deeper, consumer demonstrates how the their to call our a impressive the drive on uncover benefit groundbreaking last to leaders deliver understanding biggest as the clarity during X-year brand of

quarter, series new i-Pilot to i-Pilot matches electric global expectation. growing of This mid-sized exceptionally providing ultrabig our across our and major completed new followed like GPS line. In restate year, electric sonar investments our across new as same fishfinders. this out screen our Humminbird, screens underwater our legacy how fishing a introduce key with see strength is enthusiasts preseason whole and we strategic Minn has In have to Link a selling in foot which pedal as audience of and steer business, the the and water In to expectations. virtually term, series our deploy a helix Long channels And our And time, innovation, view. our we'll picture-perfect the fishfinders, first entire technology, example, smart, for closely motor, by sustain top with demand well motor priority. consumer sonar a patented Ulterra, wireless For strong. capability. motor we the first the technologies been and technical continues outpace came show we Kota, third stow At in , and technology small- auto is leadership state-of-the-art market gained angling as markets the anchor control guiding and customer to year. fishing most mega Talon

light of Hydros energy buoyancy and rate core sustain well, optimize or On Pro excluding with ahead year world. protect profitability. and momentum and up support also We're products trusted positive compensator to helping New to West basis, David computer are as efficiency dive the currency. wireless SCUBAPRO monitor sustain equipment most sales the last position doing to to about to year-to-date and heart are SCUBAPRO's forward while determined working a brand in X% XX% transmission going are

outdoor both retail have online by been channel historically Both decline reached audience. and of been serial brick-and-mortar flipside, the the particularly hike bankruptcies markets reporting continued last time, goods XX the challenges the with the major dealing months. channel, over has These same restrained have overall our momentum consolidations important effects to in sporting monograph and retailer lingering in new hit our hard, recreation have and On tool other product markets brands where are businesses. the market in consumer X At grow camp strongest. an year,

these in innovation good have businesses. We

boats, reposition with brand-new consumer as accessories hard and for the and emerging Town remains its Predator line expectation. -- audience Old complement a working Malibu paddleboat line Pedal Jetboil well for full series these fishing younger camping, Over of of leader an -- and to to in the Eureka! example, full the For market ocean in brands. systems, needs water cooking new as camper personal we're a with of camping fun

data shopping our the purchases underscores disruption experienced biggest align digital of critical super and consumer and It communication. Our channel. highway a information The the in companywide forward of of digital strategies one The the market the place growth importance transformation. growing markets is our channel The urgency recreational of commerce channel outdoor and the presents and goal our rapidly is and going evolution powerful these in distribution of ecosystem opportunities is market. platform market behavior. with digital to in

unique are digital and more success forge our our of to our We this doing leveraging marketplace. consumers to relevant, understanding relationships outdoor and in trust maximize our are greater in In intimate more transforming so, footprint we brand. loyalty

our reflect to shopping We digital and are capabilities and recreating this year. factor in consumer media state-of-the-art with social would our purchasing presence the

also promotional online Our place consumer compatible. for marketing programs are way, same today expectations in advertising consumer the digital foundation the new building in way. capacity brand the at right and and The us the will and e-commerce-ready changing to the ensuring right to size We're adapt redesigning, mobile right right great we are now our experience. capability in time provide

for continued innovation, key us a greater are strong, the future. excitement brand our sustained plans our time, product processes essential our and digital for our and insight, richer start of working transform enhanced success. We priorities: further strategic XXXX sophistication to accelerated, of Ongoing have and to growth. hard our consumer year investment profitable are great great goal ensure to At the great giving businesses in X evolving success this marketplace line brands, in against the innovation positioning to progress remains delivering

turn key to Now the financials. Dave for I'll call an overview of over the

David Johnson

sales. Thank points year-to-date in the Gross you, profit for year, led the higher operating to an improved from new Increased working sales also -- increase overhead from has X.X absorption as has innovation and Helen. margins well over first helped half expense capital Strong quarter margin in year-over-year. benefiting value-added the and as and products period. operating expand of higher

reform current higher rate of year, second the quarter, quarter. resulted and line first X-month XX.X%, year, triggered expenditures. Together, keep also and fishing increased onetime XX% $X.X in of levels lower year. half in working net working the closely second million X.Xx businesses the revaluation on product On In the foreign or both tax In assets to take accounted income -- percentage previously monitor sales X driving of costs check basis, in items from and appearing this which benefited in charges a capital about percent the in tax diving labor was continue business. expense year, tax XX% rate to the for year. up last this discretionary higher half in in deferred and dollars, under U.S. largely taxed-deferred these year. compensation and transition through capital. are through compared the the year-over-year books, months Excitement XX-month has of expenses from have sales last X.X of appropriate volume-related Will increase -- the this first last effective on a working first a of year this trailing contributed inventory new earnings. year's year-to-date up last During expenses uptick. year's We last a has every for a improved with down points tax operating as tax force Higher the to accounting operating XX% sales it around nearly the of in increase year a measures the a net capital

would the fiscal unusual the these Overall, rate our expect be to range. Excluding mid-XX% tax items, start full-year tax a strong to XXXX. in we

ability confident remains and to potential. investment cash expand consistently balance growing sheet priorities value against and enables our dividends Importantly, shareholders. We're to to business and the long-term to plans pay growth our in and strategic us strong, our create continue opportunities and position

turn Now for over I'll operator the Q&A session. call the the to

Operator

question Kelly first from George our Imperial is And Instructions] [Operator Capital. from

George Kelly

you're growth and So Fishing of most business. Humminbird the across coming brands? of those just as Minn one within first Or from it Wondering if Kota? seeing question,

Helen Johnson-Leipold

seeing brands. excited growth that across both Actually, are we are we

into they're So good kicking results. both

George Kelly

I anything and you a selling mentioned he else Is are well? could especially remarks Ulterra great. there believe -- That's highlight prepared there could but the of you that couple products highlight?

Helen Johnson-Leipold

us doing got screens. the product a segment able introducing Well got about new of and Kota, market it's larger into technology has so for very that. we the that been to both challenging it been past, we've And - Ultrex and it is some get good got Hummingbird has from feel it's and well. on the that in has the Minn

and So good full we again, some also, of products of we -- had launch innovation. But them in we've to Minn Bluetooth. Kota got relaunched -- did our our very upgraded a lot a we

So the products. was spread across had it good a thing is lot and of multiple innovation,

George Kelly

That's sell-in -- so in excuse great. And far with what are me, you seeing or sell-through?

Helen Johnson-Leipold

a very buying, which reflecting are us. for numbers great excited customer the base. obviously, Well, They're is

see to is that the I And beginning the all really we're all had. that the is say starting the think it's we read see, the solid. to whether the we'll the excitement have through sell-through just to can of is season, up we about as pull that's said, it's consumer trades initial and

George Kelly

Sure. lot of year? other retail last And inventory were you the more feel -- they there do like year stocks at than last Currently, seems a reasonable. but remember comfortable situation much were

Helen Johnson-Leipold

Absolutely.

We a have year. definitely up geared solid for

So not with that. any inventory, we issues have had

George Kelly

Okay.

the Okay. or operating forgot at you prior, case? to and expectations I the margin was time when decline. about talked year And then still them -- one last this if the remember I for expected Is it you that quarter

David Johnson

we of With that the some course, margin been but had has digital to spending. -- year. investing of the last year-to-date, balance case, obviously, operating on was the in the some volume, profit it margin, still I that of on close growth operating moderation strategy, expect we we dependent be pressure with our is we've but And downward but could there'll year's that not be sales

George Kelly

Okay.

exceed last half? growth seen the year's moderate kind of in So but but should the back could level, be close you've

David Johnson

Yes. expectation. be That our would

George Kelly

Okay.

commentary a on Okay. seeing evaluations been few any what much question helpful. pipeline like you a acquisitions. do Wondering there? like that And interesting kind would then about Are be looks look It's years. just of what the

Helen Johnson-Leipold

We for -- always again, potential are acquisitions. we looking

at now see are place and look might to and multiples it consider about all make and want the high you we that. we're sure innovation so to think we I pretty whatever

they are these at to just the we be So It's and point, right has as days, and and to the price. this fit opportunities right assess multiples look high it continue come.

George Kelly

Fishing years operating Okay. improve business, for Great. margin And last the question the lot last improved in brand to to operating a back like margin there? me, in do last feel they're the Had couple Humminbird. you opportunity still that of

David Johnson

in left a innovation, operating We've yes. the With the margin seen in Hummingbird.

and brand. So with the we're that, pleased where innovation we're there with

Operator

Lebiedzinski Sidoti & Our Company. next from Anthony question from is

Anthony Lebiedzinski

done a guys you with segment. your Fishing obviously, tremendous job have So

sales, kind what about customers? either of more wondering your have wanted the upgrade quarter some from percentage or just come of of just products? your So wondering to typical get in cycle And that. color Just new year-to-date, on the

David Johnson

Yes.

and XX target have months, now just the right numbers. XX, Usually, that measure trailing strong above We because is fishing X/X. something above we of XX%

a at segments had mentioned, purchase so innovation ongoing terms number high as of we our how much Helen we've we're at in So to different now. right innovations. we'll kind of all have see fill cycle versus And

have we'll how that see of plays next months. to out number the XX So over

Anthony Lebiedzinski

it. Got

-- us give running. out as consumer sense, you have about know And early far sites Okay. share not it's also, I on, expected? as still those the obviously, you are any point? And kind can up us with Can sites roll did e-commerce read guys and early but that? go digital a you as of

Helen Johnson-Leipold

the all Well to the of running. glad any it's of put have that. side think, and operations and there's we -- and around arms aspect, we of in development up it's both area lot consumer well. e-commerce we're behind obviously, that huge sites lot very we fulfillment our transformation as would company do lot that resources of the a in and learning a that that the there's say, It's a had get have back-end a the I content been for

we're market, good there I glad could So you that still have so but doing a to as reach that place major is up forward say our -- are, a evolving about be we great be we'll than for it's of the go very catastrophes, with and feel sites you would out think, know say area. read, themselves us running. but we step are, we're and everything upward great where early The in and consumers I always we on better I no to we get lot would a momentum first

Anthony Lebiedzinski

it. Got

some think But guess, the that just no the about clarify -- is I retail, so anything at if that Okay. of concerned weather. have so companies about like that but it wanted to I discussion I talked sell-through that. is there's cooler is And it was just be or on based of other we wondering the Obviously, follow reference sounds far to far. I

Helen Johnson-Leipold

bit little on a basis. been the has weather regional The strange

been a little So on tough I it's weather think, standpoint. if a anything,

to is But the consumer So be take to I -- pull-through now, we're summer right good going a delayed. going little that's weather see some think actually so bit thing.

Anthony Lebiedzinski

Got it.

Okay. far or more there about? Pro, that other has Bass impacts have less talked the as previously merger DeBellis as guys you any as expected? and between kind just And Or of been

Helen Johnson-Leipold

emphasis the the the a lot say there's been evolution market, has happening of -- emphasis would and label. in to increasing one The the thing of I push on private retailers label private our behalf

to much is, is merger a with and influencing and be DeBellis Pro the now of Pro's DeBellis, going wasn't of Bass label degree, and that Bass is would say entity, I DeBellis to some . influence impact private So an what

a think that I So is more little pressure standpoint. competitive there on

they're I through how working a -- how to integrate, think be how to customer. they function still as

lot a So goods think But that to a right tremendous that's I change negotiating sporting work and you think what is the distribution recent channel channel, its go this saw of in in of still general, yet But we through we're I in months. we'll through. now. and way time see disruption

David Johnson

that add still those strong just entities. very Fishing business of is would our both I in

I [indiscernible] that it can some hasn't be think, the business. brands disproportionately, of it affected Watercraft - So But necessarily

Helen Johnson-Leipold

Fishing the of is, for think because X nature digital the of product I less I impacted think, the And by business, transformation.

well solid very channel got they've and to and in terms continues as So in strong of have bricks-and-mortar we have the diversity good distribution, we is Marine had certainly channel momentum.

across varies it the So business.

Operator

Dempsey. Our from next Morgan Rafn from question Brian is

Brian Rafn

broader was you have kind Or sense. much been ideas taking to inventory sense more gains down? you on are any retailers sales maybe a up do really retailers? just if the the Do of that build have any seeing within that across the preseason there got minds inventory? that see them me more Give take trying for you you have anecdotal see I'm how of do a distribution to you

David Johnson

business, going into so But defense bankruptcies, up has built seen they of Fishing, of levels points Watercraft we particular. of retailers the affected in take kind I and those big our we businesses box distribution we've et last mean, against in the in inventory more their customers disruption Well, because the they inventory in and new the season. and -- of products. year, Camping, kind handyman kind on and our consolidation have kind of our as marketplace the to, cetera, alluded were

Brian Rafn

any get are Gander you Outdoors the do in taking Dave, you Yes. Gander rebound -- getting over Mountain bankruptcy?

David Johnson

that some to had entity. We've sell-in Yes. you

So we that seen have start.

that opened pipeline, like XX I something the which feel starting up locations to so we're that is... or think

Brian Rafn

that. see to Great

Camping side, Eureka!? Okay. with All for on right. anything the the military projects military And on

David Johnson

It's funny. tend business our it It's piece not be does of choppy anymore, quarter-to-quarter. a but to big

was a in status-quo, quarter affected we unit. it numbers year. the believe, kind it that of will that So this the weak kind for of last versus and year business But be military,

Brian Rafn

big read X or a of of is year week what's million -- weak and couple the year And being good a XX? year between and that number? being kind a is a How an

David Johnson

We've kind plateaued $X around $XX of million million. to

Brian Rafn

Okay.

for this number year? CapEx a got You

David Johnson

were about that. signaled and a but have million number expect $X year-to-date, don't we I we up to you, for think I

of probably, think have last balance versus spending the the year. year, I we'll incremental for So

think something went in million year last that. I about CapEx, like $XX

Brian Rafn

cycle kind do into get as of trail What see sure reorders standpoint Hummingbird different the it's out? play Minn inventory businesses. that off for how or that from relative you do Kota? -- you guys, you constant summer? kind How do replenishment Or of I'm you reorder see pattern different -- or in what of reorders, And times Okay. and does

Helen Johnson-Leipold

Again, reorders was experience say year, by they as -- I pacing saw fourth see have area, little if into the will last than third the quarter. done the a I building would they early depending of and the business, think was a year ongoing I product they have consumer stronger No. think job great But the the inventory on they last in go as on -- of Fishing and half the normal. takeaway, season. we

can think there are first for and little a preparing normal, see year, X stronger I season. this the than the months you given are

depends So it on the consumer.

think I -- there's just Watercraft, our see what is now, waiting -- more year. the this a and again, on Camping part in consumer is and right base very hesitation builds disrupted be up the that will customer doing to based inventory

-- I But... been it's coming orders little able very but so from an really seasonal a think dealer but business, Diving we've to the the is of fragmented all got lot a ongoing you've handle lot standpoint, demand the that's time,

Brian Rafn

Yes, you. I you. right. No, I got got

front-loaded. I think question the

Okay. products, With you do XX number, much technology there? trailing always is guys models with much marvelous in how from specification, a cannibalization cannibalization new new and that. How innovating months, XX% I got new functionality. and new

Helen Johnson-Leipold

expect Actually, cannibalization. good -- we say to at managing I are it's that, and very would you have

account features, the the existing our and of with enhanced new we part, of forecast, products And take amount so really most are they, moving significant in to our that's because products there. all replace up consumers products cannibalization into

Brian Rafn

Or with of materials either your with and of on does terrorist the raw you. disrupting the you. NAFTA the Trump redoing chain? does logistics potential that that Dave, all Chinese, -- Got with any Got any supply the this inflation? and anything TPP --

David Johnson

has obviously, there, stuff of consume at to we we yet and aluminum. that it understand yet. but of the can. make it if have on affected look steel of not imports Not we so some happening eye some our that sure We, We what's

Brian Rafn

Okay.

Okay. products missed any diving And I area? new the scuba What opening. the was in

Helen Johnson-Leipold

launch in of have our regulator. new do some the degree, we continuing Well, our,

new a Hydro our We and revolutionary. it's computer, is truly CC, have which

have really the a You see and market momentum. build in

So It's other every innovation we feel all guidance about business about that. do. good and as

Brian Rafn

the getting markets East diving given world better any our Middle refugees said? the and terrorism that and And all Yes. and

Helen Johnson-Leipold

diving are we participation Middle think but -- Europe are Asian are I markets there showing will things been in diving same. But are And than still the we terms is it kind in -- the same. -- stable past. in think, they've think, think the to and I we market, as more the it's continues of better. I perceive be growth, I of East, are looking the The that's

Brian Rafn

Dave, raw the Anything second my feedstocks, then inflation, materials Okay. trade? question. x of And part and

David Johnson

compression I there'll be only think managing for We're and The seeing that I'm a boats. we're thing on all material missing impact.

Operator

gentlemen, call and for Ladies further time, showing to Helen this Johnson-Leipold back Instructions] like remarks. would [Operator at the to turn no I'm I over questions. closing

Helen Johnson-Leipold

and Thank today, for you, great all joining us a have one.

Operator

your in for participation conference. you program, thank the now gentlemen, and may you today's This Ladies disconnect. concludes

Johnson Outdoors (JOUT) 4 May 182018 Q1 Earnings call transcript