Earnings Call Transcript - AOUT Q1 2021

Liz Sharp, Vice President of Investor Relations

Thank you, and good morning. On behalf of all of us at American Outdoor Brands, we hope you are healthy and safe. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development; focus; objectives; strategies and vision; our strategic evolution; our market share and market demand for our products; market and inventory conditions related to our products and in our industry in general; and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings. You can find those documents as well as a replay of this call on our website at aob.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures on this call. Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, transition costs, COVID-19 expenses, related party interest income and the tax effect related to all those adjustments. The reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call, can be found in our filings as well as yesterday's earnings press release, which are posted to our website. Also, when we reference EPS, we are always referencing fully diluted EPS. As many of you know, on August 24, we completed our spin-off from Smith & Wesson Brands, and today marks our first earnings call as American Outdoor Brands. I would like to note that we expect our 10-Q to file by the end of next week. Going forward, our goal will be to file our 10-Q concurrent with our earnings release each quarter. Joining us on today's call is Brian Murphy, President and CEO; and Andy Fulmer, Chief Financial Officer. And with that, I will turn it over to Brian.

Brian Murphy, President and CEO

Thanks, Liz. I'm happy to join you today for our first earnings call, and I know that I speak for all of us at American Outdoor Brands when I say we could not be more excited about our future. We believe our passion for products that allow people to pursue their outdoor adventures is especially timely as consumers increasingly look to outdoor activities such as fishing, hunting, shooting sports, camping and hiking in response to travel restrictions and social distancing. We are excited to continue developing and delivering innovative products that make it possible for people to rethink their connection with the outdoors. Before I cover our performance, I want to extend a sincere thank you to all of our employees, who hopefully are listening to this call, across the company for their incredible accomplishments. In the past several months, this team has successfully organized and executed the complicated spin-off of our business into an independent company and delivered extraordinary quarterly results, all while maintaining protocols to ensure the health and safety of our workforce and our business. So with that, let me turn to the quarter. I am very pleased with our first quarter results, which featured significant growth in both net sales and profitability. We believe our net sales growth of nearly 52% reflected the strong alignment between our diverse brand portfolio and consumer trends, including participation in outdoor activities, driven in part by pandemic-related travel restrictions and social distancing and increased interest in self-protection. We believe our performance is a result of having built a business platform and a strategy that are resilient and that have positioned our company to be agile in a variety of operating environments. Now let me cover the highlights from the quarter. First, we benefited from pent-up demand that began during our fourth quarter when over 1,000 of our brick-and-mortar retail outlets were shut down due to COVID. That pent-up demand was released in Q1 when those stores began to reopen. Second, during Q4, one of our largest customers, a major online retailer, did not place orders with us for a full month as they chose to purchase only items they deemed essential during that time. That customer resumed purchasing of our products at the end of Q4, and therefore, our Q1 results reflect our ability to adequately replenish that retailer's inventory. And third, our strong net sales growth in the quarter reflected our success at working with certain retailers over the previous 3 quarters to take a more balanced approach to their ongoing replenishment orders, which Andy will detail later. Beyond these elements, our first quarter results also demonstrated the benefit of investments we have made over time in our logistics capabilities in our e-commerce platform. Our e-com platform is an important element within our growth strategy, and it is favorably impacting our results in the current environment. In the first quarter, sales in our e-com channels grew 130% compared to the prior year and included a significant increase in direct-to-consumer sales. At the same time, our traditional brick-and-mortar channel sales grew as well by 15% year-over-year. Each of these channels contributed an equal share of our overall net sales. And the fact that each delivered growth in the quarter demonstrates that we have successfully achieved our objective to situate our brands where the consumer expects to find us. During the quarter, we experienced growth across nearly every one of our 20 brands and within each of the major categories and activities that we serve, including shooting, camping, hunting, fishing and personal protection. We believe that growth was driven, in part, by an underlying core base of consumers who loyally support our brands regardless of current trends. That said, we also believe those current trends have provided us an opportunity to capitalize on that brand equity. At the core of that brand equity is our brand lane structure and our unique dock-and-unlock strategy. We believe our brand lanes provide us with an ideal competitive advantage for developing exciting, on-trend and highly innovative new products year after year that turn new consumers into strong long-term advocates as we take our brands from niche to known. And while that strategy is well-timed as consumers increasingly head into the outdoors, we believe it will also serve us well in the long run. So let me share with you how this works. Once a brand is docked into one of four brand lanes, we can then begin to unlock a brand's true potential by leveraging the respective lanes' resources. These include brand marketing, product development, sourcing and e-commerce. As we have discussed previously, several of our brands are benefiting from our dock-and-unlock formula, including BUBBA, BOG, and our newest brand, MEAT! Your Maker. Based on our research and consumer studies, we believe that the majority of our brands remain in infancy and have yet to be fully explored, representing significant runway for long-term growth. The dock-and-unlock platform has been built to manifest that potential. It has also been designed to be a truly leverageable platform that positions us well for future growth. Later on, Andy will address the financial benefits of this platform. Turning now to a brief discussion of our supply chain. As I outlined last quarter, a vast majority of our products are sourced from China or rely upon components coming from China. So we are keenly tuned into the impacts of China-related tariffs and the COVID-19 pandemic. The long-term strategy to diversify our supply chain remains well underway. At the same time, I am pleased to report that our suppliers in China are all operational, and we had no disruptions during the quarter. While our Q1 results clearly benefited from tailwinds in the current environment and no one knows what portion of those trends will be sustainable over time, our focus is on building the business for the long term. We are seeing a number of developments that bode well for long-term trends; namely, an increased interest in personal protection and first-time entrants into camping, fishing and shooting sports. In fact, the National Shooting Sports Foundation estimates that nearly 5 million Americans purchased their first firearm during the first 7 months of 2020. That number reflects a very sizable and recent expansion of the installed base of responsible firearm owners, all of whom are potential customers for our accessories and related items. And the fall hunting season, which has yet to begin, will be interesting to watch as folks continue to reconnect with the outdoors. As a company dedicated to developing and delivering innovative outdoor products and accessories for rugged outdoor enthusiasts, we believe that our spin-off could not have been better timed, and we are excited about the future. And with that, I'll ask Andy to cover the financial results.

Andy Fulmer, Chief Financial Officer

Thanks, Brian. Net sales for the quarter were $50.5 million compared to $33.2 million in the prior year, an increase of approximately 52% and was due to the factors that Brian outlined. Increased net sales in the quarter benefited in part from an initiative we began in fiscal '20 to migrate certain retail customers away from lumpy, bulk buy ordering. We successfully worked with those customers to achieve a more balanced approach to their replenishment orders, which gives us a more direct relationship with changes in consumer demand. As a result, and based on feedback from those retailers, we believe our inventory replenishment is better aligned with consumer demand. Net sales in our e-commerce channels were $24.5 million, an increase of 129.7% over the prior year. These net sales include our direct-to-consumer sales as well as our sales to customers that do not traditionally operate a physical brick-and-mortar store, but generate the majority of their sales from consumer purchases from their retail websites. Sales in our traditional brick-and-mortar channels increased as well by 15.1% to $25.9 million. These increases reflect the benefit of investments we've made in our e-commerce and marketing platforms, as Brian explained, ensuring that our brands are available where the consumer decides to shop. In Q1, gross margin was 47% compared to 41.1% in the prior year. This substantial increase was driven by the combination of a favorable product mix and a decrease in promotional activity. Although the majority of our cost of goods sold is from variable costs, our margins also improved slightly from leveraging fixed costs over the increased sales. As shown in our previous filings under our former parent company, our gross margin percentage tends to vary by quarter, especially with certain annual promotions that typically take place in Q2 and Q3. Our margins are also significantly impacted by tariffs as we source approximately 80% of our products from China. A large number of our products are on Lists 1 through 3, currently subject to tariffs at 25%. A smaller number are on List 4A, subject to 7.5%, and the remaining portion are on List 4B, currently with no tariffs. During Q1, the decrease in promotional activity allowed us to offset tariff costs, yielding a blended gross margin of 47%, a level which is more in line with our historical gross margin before tariffs were implemented. Last quarter, we mentioned our plans to discount certain slower-moving inventory in order to convert that to cash. This effort, combined with our planned annual Q2 and Q3 promotions and the ongoing impact of tariffs, will result in a more normalized gross margin for the rest of the fiscal year. In the quarter, GAAP operating expenses were $21.3 million compared to $20.9 million in Q1 of last year. Variable selling and distribution costs increased by $2.3 million due to higher sales volumes, and marketing costs increased by approximately $200,000 due to increased brand and e-com initiatives. These increases were netted by declines in intangible amortization of $649,000, savings from facility consolidations of approximately $800,000 and bad debt expense due to customer bankruptcies in the prior year of approximately $550,000. Please note that due to COVID-19-related restrictions, our operating expenses were lower this quarter in travel, trade shows and other expenses. We plan to reinvest those savings in Q2 to Q4 for targeted marketing initiatives. As shown in the reconciliation in our press release, we intend to report results on a non-GAAP basis as well. Non-GAAP operating expenses exclude intangible amortization, stock compensation and certain nonrecurring expenses as they occur. In Q1, non-GAAP operating expenses were $16.6 million compared to $15.4 million in the prior year quarter. Our first quarter operating expense also includes certain expenses that were allocated to us when we were a division of our larger parent company. Because our spin-off was effective on August 24, the last of that expense allocation will occur in our second quarter, which ends on October 31. For the first quarter, GAAP EPS was $0.13 as compared with an EPS loss of $0.36 last year. Our non-GAAP EPS was $0.36 as compared with a loss of $0.09 in the year-ago quarter. These EPS figures are based on our share count at the spin-off of approximately 14 million shares. Turning to adjusted EBITDAS. Our investments in e-commerce, marketing and distribution infrastructures helped us facilitate net sales and earnings growth in Q1. The costs associated with these platforms are mostly fixed in nature, and they proved to be highly leverageable in the quarter as our net sales increased, providing a significant contribution to adjusted EBITDAS, which was $8.7 million in Q1. This equates to a 17.3% EBITDAS margin as compared with a 0% margin in Q1 of last year. Please note that our Q1 operating expenses included $758,000 of allocated depreciation that has been added back in the adjusted EBITDAS reported. This depreciation was related to the distribution center where our headquarters is located, as that facility is leased by our former parent company. At the spin date, we entered into a sublease with our former parent for office and warehouse space. Therefore, going forward, this depreciation cost will be recorded as operating lease expense and will not be added back to adjusted EBITDAS. Our Q1 adjusted EBITDAS percentage would have been 15.8% without this allocated depreciation. Turning to the balance sheet and cash flow. In Q1, cash generated from operating activities was $564,000 compared to a cash use of $1.3 million in the prior year. Accounts receivable increased by $7 million, driven by our sales increase and the timing of shipments later in the quarter. Our inventory level increased by $9.6 million, a portion of which was a planned investment to help mitigate potential COVID-19 supply chain risks as well as our seasonal Q1 build to prepare for the hunting and holiday seasons in Q2 and Q3. The increase also reflects additional tariff costs that were capitalized into inventory. You will note that our cash balance was 0 at the end of Q1. This is due to the nature of our carve-out financial statements under our former parent company as cash was typically swept to the parent company each month and offset through intercompany accounts. At the August 24 spin-off date, we were capitalized with $25 million from our former parent company. And we entered into a new $50 million asset-based line of credit with TD Bank. The credit facility also provides an additional $15 million of availability under certain conditions, which gives us initial available capital of between $75 million and $90 million. We believe that our strong opening balance sheet positions us well as we begin operations as a stand-alone company. Capital expenditures for the quarter were approximately $900,000, and we expect to spend $4 million in CapEx for the full fiscal year, with a portion of that being onetime in nature related to the spin-off. Now turning to our guidance. As we focus on our long-term financial objectives, we intend to issue guidance only on a full-year basis. We presented our initial guidance in our investor presentation in July. We are now increasing those estimates as we expect sales in the range of $195 million to $205 million. At that net sales range, we expect GAAP EPS to be in the range of a $0.22 loss to a $0.11 loss; non-GAAP EPS to be in the range of $0.78 to $0.89; and adjusted EBITDAS to be in the range of $19 million to $21 million. Our Q1 tax rate of 38% includes discrete items relating to the allocation of expenses from our former parent, which caused our effective tax rate to be higher, but we expect this will only occur in Q1. Going forward, our estimates assume a tax rate for the remainder of the year of approximately 27%. Lastly, all of our estimates are based on our current fully diluted share count of approximately 14 million shares.

John Kernan, Analyst

Excellent. And Brian and Andy, congrats on all the work to get through the spin and certainly the operational momentum inside the business as well. I wanted to go into the sales guidance for the remainder of the year. Obviously, tremendous momentum in the first quarter, both from a growth perspective year-over-year, the amount of dollar growth impressive as well. How should we think about the rest of the year? What are your assumptions with your retail partners? It seems like you've done some work around the replenishment side of the business. I'm wondering, given the strong sell-through that we're seeing in a lot of your key brands, how are you planning the business from a wholesale perspective as we go into the back half of the year? Because it does look like your guidance assumes a pretty meaningful deceleration in the momentum you're seeing right now.

Brian Murphy, President and CEO

Yes. Thanks, John. This is Brian. So the full year guidance that we put forth and we've updated still assumes a 16% to 22% year-over-year growth, which we think is pretty meaningful. And there's still a lot of uncertainty that remains for Qs 2 through 4. And while we're still through a portion through Q2, really, we've only completed 4 months. And so there's still quite a bit of runway ahead of us. And based on what we're seeing today, that guidance reflects what we're seeing.

John Kernan, Analyst

Got it. Maybe any commentary from a specific brand level perspective for BUBBA, Crimson Trace, to MEAT! Your Maker, BOG. You did call them out in your prepared remarks, and it does seem like all of them have building momentum at the retail level right now.

Brian Murphy, President and CEO

Yes. So big question. And I would say, like we said in our prepared remarks, most of our brands, really, there were only 2 that did not show growth and for reasons that we expected, one of which was a major retailer's decision to go to private label, so we expected that. Excluding that factor, we actually saw growth. And then one additional brand outside of a customer load in from last year, we also saw growth. So essentially, outside of those 2 unique factors, all of our brands grew year-over-year. And so we would expect the increased levels of participation that we're seeing in the market. Our brands are, in particular, are well positioned to take advantage of this environment.

John Kernan, Analyst

Got it. And then maybe one more for me. Just on the guidance from a margin perspective. A lot of gross margin expansion in Q1 and meaningful adjusted SG&A leverage as well. Just how should we think about the balance between gross margin and SG&A rate that's embedded in the EBITDAS guidance that you provided?

Andy Fulmer, Chief Financial Officer

Yes, thanks, John. This is Andy. Regarding the margins in Q1, the reduction in promotions certainly contributed positively, as mentioned in our prepared remarks. As we move forward, with our annual promotions and the strategy we’ve implemented to convert some slower-moving inventory back to cash, we anticipate some margin declines from Q1. On the operating expenses front, when we assess OpEx on a run rate basis, we plan to reinvest savings achieved from reduced travel and trade shows during COVID-19 into the latter half of the year, specifically from Q2 through Q4. Additionally, regarding General and Administrative expenses, our Q1 figures included allocated costs from the carve-out financial statement. Moving ahead, we will incur the full cost of our building and sublease and bear the complete burden of corporate expenses. It’s important to note that our selling and distribution costs are highly variable based on revenue.

John Kernan, Analyst

That's helpful. Best of luck. And again, congrats on the spin and the momentum.

James Hardiman, Analyst

Obviously, a really strong quarter. I think a lot of us sort of understand how the supply chain expands and contracts with the legacy firearm business. But maybe help us understand the inventory situation, not only on your own balance sheet but at retail, given that we don't have a long history with this. Are we playing catch up at this point? And sort of if so, how long does that take to sort of normalize?

Brian Murphy, President and CEO

Yes, James, this is Brian. The best way to approach this topic is to consider the alignment between consumer demand and our replenishment processes with retailers meeting that demand. Last year, prior to COVID, we made some difficult decisions to prepare our business for long-term growth by better aligning these two aspects. We worked to transition our customers away from irregular bulk buys toward more consistent replenishments each month and quarter. This change has allowed us to streamline our forecasting and inventory planning. The team has done an amazing job with this, making it easier for us to identify the inventory needs of our customers as we can see real-time sales of our products. This positions us uniquely compared to some competitors, enabling us to quickly adjust to meet consumer needs and align our marketing strategies. As Andy mentioned, we are reinvesting some savings into marketing. Every early spring, we launch several new products, and now we can sync these marketing efforts with the inventory requirements of our customers, ensuring there is no disconnect. Consequently, we have managed to keep pace with many of our retailers based on their observed demand.

James Hardiman, Analyst

Okay. So I should take that to mean that you're not significantly behind in terms of where channel inventories right now such that you would need to ramp up to meet the current demand?

Brian Murphy, President and CEO

There is definitely a strong demand in the market. I believe we are in a unique position to serve our customers, and I have received feedback from many of them confirming that we have some of the highest fulfillment rates compared to their other vendors.

James Hardiman, Analyst

Okay, I think you've addressed some of this with your margin commentary. Looking at your guidance, you achieved $9 million in EBITDAS in the first quarter, and the annual guidance is just over double that amount. As an outsider, I would have expected the second quarter to be larger than the first. However, it seems there are margin issues related to accounting allocations. You mentioned promotions affecting gross margins. Can you clarify if there's anything from a top-line perspective that suggests the rest of the year will differ significantly from what we experienced in the first quarter? Additionally, regarding the major shift in customer orders from Q4 to Q1, is there any way to quantify that?

Andy Fulmer, Chief Financial Officer

James, this is Andy. From a top line perspective, I don’t think there’s anything particularly noteworthy when looking at the quarter-by-quarter performance. You made a valid point. Regarding the margins, as we discussed, the expected promotions and the conversion to cash will play a role. In terms of operating expenses, the first quarter is somewhat of an exception due to the allocation under the carve-out. Moving forward, could you remind me what the second part of the question was? I seem to have missed it.

James Hardiman, Analyst

The sort of one-time benefit that you got in Q1 from the customer shifting out of Q4.

Andy Fulmer, Chief Financial Officer

Oh, yes. As we mentioned, I don't think we can put a number on that. However, as indicated in the prepared remarks, a major online retailer ceased ordering in Q4, and we believe this happened specifically in that quarter. In Q1, we successfully assisted them in replenishing their inventory levels.

Brian Murphy, President and CEO

And then I would add this is Brian. James, it's just that this is a highly unprecedented uncertain time. Things seem to keep arising that no one could really predict. I want to emphasize that we have taken the time to build a platform that is very agile. While we don't know what will happen in the next 12 months, we have made our best estimates and shared that in our outlook. We have created an agile platform that we believe will help us navigate a variety of different operating conditions. What we understand today is reflected in our guidance, and we are confident that we have a strong platform to respond as needed and to anticipate when necessary.

James Hardiman, Analyst

That's really helpful. If I could clarify one point, Andy. These carve-out financials will clearly change as we progress through the year with the actual expenses your team is incurring. That won't be retroactive, correct? These figures are for the first quarter, and we won't be adjusting them retroactively in any way. Is that right?

Andy Fulmer, Chief Financial Officer

That is absolutely correct. Yes. That's absolutely correct.

Scott Stember, Analyst

Congratulations on a really good start to AOUT.

Brian Murphy, President and CEO

Thank you, Scott. Maybe talking about on the e-commerce side. You talked about the direct-to-consumer, how that's really taken off. Could you maybe just frame out for us what inning you guys are in, in that process? And maybe how big of the e-com growth that really is and how much more we can expect? Yes, this is Brian, and that's a great question. We continue to emphasize direct-to-consumer sales, especially over the last few quarters. As I mentioned earlier, our goal is to be accessible to consumers wherever they expect to find us. Despite the unfortunate store closures, consumers continue to purchase our products, which remain in high demand. Our investment in the e-commerce platform allows us to sell directly to consumers who want to buy our products, ensuring they have a positive experience. In terms of where we stand, it's really up to the consumer. We are ready to adapt to various market conditions. If consumers choose to buy from us online, we're fully equipped with our e-commerce websites and distribution capabilities. If physical stores reopen and people return to shopping in person, we will be ready for that as well. It's difficult to determine a specific stage in this process, but we have the necessary infrastructure already established to serve consumers moving forward.

Scott Stember, Analyst

Okay. Got it. And just going back to your flexible business model. You talked about how it helps you, obviously, to keep up with demand. But if we were to keep at the same pace of retail pull-through, what is your ability to continue to keep up with that? Basically, is there a breaking point or a limit where even with your flexible structure where it becomes problematic?

Brian Murphy, President and CEO

That's a great question. And we talk a lot about that internally because, again, we've built this platform to serve a variety of environments. We've also built this platform to facilitate long-term growth. So as we take our brands from niche to known, what's really that known piece is a mature brand portfolio, which we believe we don't have today. We've got significant runway for growth. But with that said, we just stood up a 632,000-square foot facility. We share that facility with a company that we just recently spun out from, Smith & Wesson. But we have adequate, I believe, based on the demand that we're seeing today, to be able to service that demand going forward.

Scott Stember, Analyst

Okay. And just one last question, if I can. Just for modeling purposes, I know things are coming out in time as far as historical quarterlies and from an adjusted basis. But when the Q comes out, will there be more disclosure about past years on an adjusted basis and on a quarterly basis? And if not, when would we see that?

Andy Fulmer, Chief Financial Officer

Yes. Scott, this is Andy. So as the quarters come out, we will have comparable quarters on a carve-out basis from prior year as well. So when the first Q comes out, you'll see Q1 over Q1. And then as the quarters go, the Q2 versus Q2 and so forth.

Mark Smith, Analyst

First question for me. Can you give us a breakdown or any insight into sales growth of shooting-related products versus nonshooting products? So for instance, if we looked at Harvester and Adventurer versus Marksman and Defender.

Brian Murphy, President and CEO

Mark, this is Brian. In this environment, we're experiencing unprecedented demand across all of our brand categories. The Marksman, Harvester, Adventurer, and Defender are all seeing significant interest. Factors like social distancing have particularly impacted the Harvester and Adventurer brands, as well as Marksman. Additionally, personal protection concerns are influencing demand for the Defender brand, which indirectly affects Marksman as well, as customers seek to maintain their firearms and responsibly practice shooting. Unfortunately, I can't pinpoint a specific answer as the demand is widespread; we're seeing remarkable demand across all four of our brand categories.

Mark Smith, Analyst

Okay. And then as we look at kind of the channel of sales, can you give us more insight or breakdown on gross profit margin differences between e-com and traditional sales?

Andy Fulmer, Chief Financial Officer

Mark, it's Andy. So we can't get too much detail. I will say that with increased direct-to-consumer sales, those are obviously at higher margin than some of our traditional sales. But we really can't get into too much detail on the kind of channel-by-channel margin.

Mark Smith, Analyst

Okay. You touched on this earlier, but could you provide any quantifiable insights regarding your backlog, particularly any issues related to specific brands or brand lanes?

Andy Fulmer, Chief Financial Officer

Yes, we can't disclose the backlog. Regarding specific product levels, I can't really provide further details.

Brian Murphy, President and CEO

Brian here. I want to emphasize the importance of being more in tune with consumer demand, which influences everything, including traditional and e-commerce aspects. We are observing real-time sales, although there is a lag in the traditional segment. However, by aligning better with this demand, we can achieve a relationship that is closer to a one-to-one correlation and forecast our needs more accurately.

Mark Smith, Analyst

Sure. And then just looking within brick-and-mortar, are there any issues that you still have today within closures and just maybe even looking at international markets? Anything that you're still seeing closed today that's not fully reopened?

Brian Murphy, President and CEO

On the traditional side, we experienced impressive growth in the last quarter, achieving 15% in our traditional channels. Compared to reports from other companies, I think this is quite notable. Retailers with a strong e-commerce platform are currently doing better, and we support that business strategy. Those with a solid structure in place will likely continue to find success, and we are definitely positioned to support that approach. Internationally, this area represents a relatively small segment of our overall business, and while it offers significant growth potential, we were not greatly affected by international store closures. Our objective is to be available where consumers expect to find us, whether that's online or in stores. We are prepared to meet them wherever they choose, and we have strong partnerships across both channels to ensure they can do the same.

Andy Fulmer, Chief Financial Officer

Yes. And Mark, I'll just point out, too, historically, over the last 2 to 3 years, I think our international percent of revenue is roughly 4%. So it represents a pretty decent growth engine in the future.

Mark Smith, Analyst

Okay. And then the last one for me. You guys gave us a lot of insight into gross profit margin and some of the moving parts there as we move from first quarter into second and third quarter. But is there anything to call out as far as pressures as we go forward that's built into the guidance that you haven't talked to outside of kind of promotions and tariffs? Are you seeing any increases in steel? Or any raw products that maybe put pressure on gross profit margin going forward?

Andy Fulmer, Chief Financial Officer

Yes, I would say there is nothing unusual. We collaborate effectively with our supply chain partners on costing to ensure everything is in order. The current tariff situation is already accounted for in our margin profile that we use for guidance. Therefore, there are no changes in that aspect, and if there are any changes, we would update our guidance accordingly.

Brian Murphy, President and CEO

Yes. And I would say, Mark, this is Brian, the other thing that we've, I think, discussed in the past is we have a strategy in place to diversify our supply chain, which helps to offset some of that tariff risk. And the best way to do that is through new product introductions. And so by coming out with between 200 and 300 new products each year, we have the ability to raise the average ASP of some of those products. So if you look at brands like UST, we have sleeping bags, we have tents, we have all these new products that come at a higher ASP, and we're able to look at different supply chains to help deliver those products. And for us, that's been a major strategic initiative to help us offset some of those pressures. And so when it comes to commodity price, commodity input costs and things like that, we stay on top of that, and we look across our supply chain to make sure that we're as competitive as possible.

Operator, Operator

I'm not showing any further questions at this time. I would now like to turn the call back over to Brian Murphy for closing remarks.

Brian Murphy, President and CEO

Thank you, operator, and thank you, everyone, for joining us today. We are looking forward to participating in 2 virtual conferences this month, the C.L. King Best Ideas Conference on September 16 and the Lake Street BIG4 Conference on September 17. We hope to speak with some of you there. In the meantime, please stay safe. We look forward to speaking with you again next quarter. Thanks.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.