Earnings Call Transcript - AOUT Q1 2022

Operator, Operator

Thank you for standing by, and welcome to the American Outdoor Brands First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Elizabeth Sharp, Vice President, Investor Relations. Please go ahead.

Elizabeth Sharp, Vice President, Investor Relations

Thank you, and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, should, indicate, suggest, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies and vision; our strategic evolution; our market share and market demand for our products; market and inventory conditions related to our products and in our industry in general; and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings. You can find those documents as well as a replay of this call on our website at aob.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, transition costs, COVID-19 expenses, technology implementation, related party interest income and the tax effect related to all of 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 today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. Joining us on today's call is Brian Murphy, President and CEO; and Andy Fulmer, CFO. And with that, I will turn the call over to Brian.

Brian Murphy, President and CEO

Thanks, Liz, and thanks, everyone, for joining us. I am extremely pleased with our strong start to the new fiscal year. We delivered first quarter growth in net sales and profitability, results that reflect our dedication to building authentic lifestyle brands that help consumers make the most out of the moments that matter. Our first quarter net sales grew more than 20% over Q1 of fiscal 2021 and 83% over Q1 of fiscal 2020. We believe our results demonstrate the alignment of our brands with strong consumer trends in personal protection and popular outdoor lifestyles as well as the ability of our Dock & Unlock process to fuel innovation and drive organic growth. The markets we serve, personal protection, shooting sports, camping, hunting and fishing, have all benefited from a new higher level of participation that began in our last fiscal year and continues to provide us with an expanded consumer base containing millions of new firearm owners, campers and fishing license holders. Not to mention our increased reach into adjacent markets with totally new consumers such as land management, meat processing, and home security. As a reminder, our brands are organized into four distinct brand lines; Defender, Marksman, Harvester, and Adventurer, each focused on a particular consumer type. In the first quarter, 16 of our 20 brands delivered growth over the same period in fiscal 2021 and 19 of our 20 brands delivered growth over the same period in fiscal 2020. Our top selling products this quarter came from each of our four brand lines demonstrating the diversity of our brand portfolio as well as our diversity across multiple consumer activity driven markets. We believe this diversity will serve us well as we continue to expand into larger addressable markets to have the ability to transcend near-term secular trends. Our growth reflects our ability to deliver consumers a steady stream of innovative new products driven by our Dock and Unlock process. Our sales and marketing teams were very busy in Q1 safely traveling and attending physical shows for the first time in over a year, unveiling a wide range of exciting new products and rolling out ramped-up advertising and social media campaigns to connect with our consumers. During the first quarter, we attended ICAST, the fishing industry's premier trade show, where we unveiled a wide variety of new products from BUBBA, our lifestyle brand, known for its high-quality fishing equipment designed for water-to-plate anglers. These included kitchen cutlery and expanded apparel line and premium storage packs and bags. While at the show, we also proudly received a best in category award for Best Cutlery, Hand Pliers and Tools for our new BUBBA Pro series cordless electric fillet knife, designed to meet the demands of the hardcore angler by delivering industry-leading power and performance technology for unparalleled cutting efficiency. Lastly and perhaps most exciting of all, at ICAST we announced BUBBA's entry into the $700 million retail market for saltwater fishing rods, reels and components and unveiled our first rods featuring the iconic BUBBA red with rod blanks designed entirely in-house which we anticipate will be available to consumers this coming February. Our entry into fishing rods is the direct result and just one example of employing our Dock and Unlock strategy to drive innovation and provide entry into new markets. Our other brands were busy in the quarter as well. Our Old Timer brand is a historic everyday carry brand known for its premium quality knives. During Q1, in time for Father's Day we launched the brand's first-ever electric fillet knives, which can be purchased in lithium-ion and 110-volt versions. This expansion of the Old Timer brand delivers the benefits of our award-winning Bubba fillet knives to freshwater fishermen and women under a brand they trusted for generations. And just after the close of Q1, we attended the outdoor retailer show, where we unveiled some exciting new products from UST, our survival camping and outdoor gear brand. New products included our double wide Fillmatic sleeping mats, an expansion of our popular Fillmatic mats at double the width and our UST 1 and 2 personal blankets made of eco-friendly materials and featuring our unique UST color and design. This was just a sampling. Our new product pipeline remains robust and we have a number of new products launching over the next few months from several of our brands, including Crimson Trace, MEAT! Your Maker and Hooyman. Some will expand our offerings and some will take us into completely new categories. Our teams are putting the finishing touches on their launch plans and working hard to ensure we have the inventory on hand to support these exciting new products and I look forward to sharing their successes with you on our next call. An important part of our strategy is to place our brands wherever consumers decide to shop for them, whether online or in the physical retail store. This approach is particularly important in our current environment, when the impacts of COVID are dynamic and consumers alternate between in-store shopping and online options. In our first quarter, our strategy delivered results. We believe strength in our traditional channel in Q1 was driven primarily by store reopenings. Net sales in the channel grew 70% over the prior year and 96% over the first quarter two years ago. We believe store re-openings positively impacted our international business as well, where recent investments to expand the size of our team and enhance our ability to source new customers are paying off. Our international sales grew from 4% of Q1 net sales last year to 7% of Q1 net sales this year. On a two-year basis, international net sales delivered remarkable growth of nearly 239%. As we have said before, we believe the international market holds tremendous growth potential for many of our brands and we continue to aggressively explore those opportunities. Sales into our e-commerce channel declined in Q1 versus the year-ago quarter, largely the result of an anomaly that occurred in the prior year. You'll recall that Q1 of last year included the strong replenishment of inventory for one of our largest customers, a major online retailer, who hadn’t placed orders for a full month in the preceding period, instead choosing to purchase only items they deemed essential during that time. So our e-commerce results for Q1 of last year reflected our ability to quickly replenish that retailer's inventory. We believe a more accurate comparison for our e-commerce growth in the current period is the two-year comparison which removes that anomaly and reflects growth of 55% over our first quarter of fiscal 2020. It's also important to note that our direct-to-consumer platform, which is included in our e-commerce numbers, exceeded our expectations in the quarter, delivering solid growth over the prior year and demonstrating that the investment we made long ago in our websites continues to drive results. Now turning to logistics, our teams here and in Asia again did a great job continuing to navigate supply chain constraints and port congestion issues. We incurred increased freight costs in Q1 which is nearly impossible to avoid in this environment, but the team effectively employed a variety of freight alternatives ensuring we invested appropriately to get the products we needed. Their work helped us to build up inventories, an initiative we've been working on for the past few quarters. That effort will continue in Q2 as we further invest in inventory of our highest volume products, support product launches I referenced, prepare for seasonality in our business and further mitigate supply chain risk. With an outdoor industry that has experienced unprecedented levels of consumer participation over the past year, our unique Dock and Unlock strategy in place, and a strong first quarter under our belts, we are excited about the opportunities that lie ahead. We look forward to sharing our progress as we take our brands from niche to norm. With that, I'll turn it over to Andy.

Andrew Fulmer, CFO

Thanks Brian. I'm happy to share the results from our first quarter which showed growth in net sales and adjusted EBITDA. Our performance for the quarter, combined with our outlook for the balance of fiscal '22 and beyond continued to support our long-term growth and profit expectations. Net sales for Q1 were $60.8 million compared to $50.5 million in the prior year. This represents an increase of 20% over last year and 83% over the first quarter of fiscal 2020. This increase was driven by higher demand in the outdoor products market combined with the consumer preference for the 20 brands across our portfolio. Turning to gross margins, Q1 gross margins were 47.7%, a 70 basis point increase over the prior year. This performance was driven by improved manufacturing efficiencies, favorable excessive stock and obsolete inventory adjustments and lower spending, offset by customer mix and increased freight costs. In addition, the absence of promotions we experienced throughout fiscal '21 continued in the first quarter of fiscal '22, helping drive higher gross margins. Looking ahead, we expect to return to more normal promotional levels in fiscal '22 and that expectation is incorporated into our guidance. Lastly, our gross margin you'll recall in the second half of fiscal '21 we worked to clear out some slow-moving inventory at little to no margin. We largely completed that effort in Q4 of fiscal '21 and you will see that impact reflected in the sequential increase in our gross margin from Q4 to Q1. GAAP operating expenses for the quarter were $24.8 million compared to $21.3 million last year. This increase was driven primarily by higher variable selling and distribution costs from the increase in net sales, new employees hired over the course of fiscal '21 to support our growth and increases in stock compensation and standalone G&A costs, offset by a reduction in intangible asset amortization. Non-GAAP operating expenses in Q1 were $20.3 million compared to $16.6 million in Q1 of last year. Non-GAAP operating expenses exclude intangible amortization, stock compensation, and certain nonrecurring expenses as they occur. GAAP EPS for Q1 was $0.24 as compared with $0.13 last year and non-GAAP EPS for Q1 was $0.48 compared to $0.36 last year. Our fiscal '22 figures are based on our fully diluted share count of approximately 14.3 million shares. Adjusted EBITDA for the quarter was $9.6 million at a margin of 15.7% and was consistent with our expectations. This compares to adjusted EBITDA of $8.7 million or a margin of 17.3% for the prior year. Please note prior to the August 2020 spinoff, the lease of our Columbia facility was treated as a finance lease, whereas now it is treated as an operating lease. Excluding this change, adjusted EBITDA margin would have been 15.8% last year or roughly flat year-over-year. Turning to the balance sheet and cash flow, we ended the quarter with $56.3 million of cash and no borrowings on our line of credit, compared to $60.8 million in cash at the end of fiscal '21. We're very pleased with this result considering that we were able to strategically invest in inventory of high volume products by $17.7 million in Q1. Recall last quarter, we discussed our plan to build inventory in fiscal '22 in support of new product launches and to mitigate the numerous risks in the supply chain from port congestion and container shortages. This is an important investment designed to protect our business as we foresee a likely continuation of these challenges in fiscal '22. Accordingly, in Q2 we will continue to work toward building up our inventory of high volume products along with our typical seasonal build. Our spending for CapEx and patent costs of $1 million in Q1 was in line with our expectations and we still expect total capital expenditures for the full fiscal year of between $7.5 million and $8.5 million. Now a brief update on our IT infrastructure and ERP buildup. You'll recall that our spin-off last year included an agreement with our former parent company that provides us with two years of IT support while we stand up our own independent platform by August 2022. I'm happy to report that our IT infrastructure and ERP implementation projects are both on time and on budget. As a reminder, we expect the total cost of this project to be about $8 million over the course of fiscal '22 and '23. In fiscal '22 we expect CapEx of about $3.5 million and one-time operating expenses of about $1.6 million. We also expect to record $1.2 million of duplicative expenses in fiscal '22 as we operate both our existing and our new platforms in parallel during the system changeover period. We will treat both the $1.6 million and the $1.2 million as technology implementation costs in G&A when calculating our non-GAAP operating expenses and adjusted EBITDA. We ended the quarter with no outstanding bank debt and the full capacity available on our $50 million line of credit. This facility provides an additional $15 million of availability under certain conditions. Our cash balance combined with our line of credit capacity provided us with over $120 million of available capital as of July 31. Our strong balance sheet positions us well for future opportunities. Brian and I continue to seek out acquisition targets that have the ability to supplement our organic growth with brands that operate in large addressable markets, have runway for growth and can benefit from being plugged into our Dock and Unlock process. While we continue to see a large number of targets coming to market, we remain disciplined in our approach as we assess those opportunities and we look forward to identifying opportunities that match our criteria. Now turning to our guidance, we believe that our strong balance sheet combined with the consumer preference for our brands positions us well for future growth. Today we are reaffirming our fiscal '22 guidance. We estimate that net sales for fiscal '22 will be in the range of $280 to $295 million, which at the midpoint would represent growth of roughly 4% over the prior year and growth of nearly 72% over our fiscal '20 results. With net sales in that range, we expect full-year GAAP EPS in the range of $1 to $1.24 and non-GAAP EPS in the range of $2.02 to $2.26. We also expect adjusted EBITDA of between 15% and 16% for the full year. Now just a few additional details on that outlook. Historically our quarterly net sales amounts reflect the seasonality in our business with Q2 typically delivering the highest net sales, and Q3 the second highest net sales. However, in fiscal '21 Q3 net sales were higher than Q2 by almost 5%. We expect to see net sales in fiscal '22 follow that same general path with Q3 net sales slightly higher than Q2. With regard to gross margin, as I mentioned before, our guidance also takes into consideration an expected resumption of more normalized promotional activity in the market during the remainder of our fiscal year. As we've discussed before, we plan to invest in sales and marketing initiatives in fiscal '22 including business travel and trade shows at more normalized levels than we did in fiscal '21 when pandemic-related restrictions eliminated those valuable opportunities to connect with our customers. We expect those investments to continue throughout fiscal '22. Accordingly, we expect Q2 and Q3 operating expenses to increase from Q1 levels due to increased travel, advertising and brand initiatives, and trade shows, including SHOT Show in January 2022. In conclusion, virtually all of our international sales are made in U.S. dollars. We expect our fiscal '22 effective tax rate will be approximately 25% and our fully diluted share count will be about 14.5 million shares. With that operator, please open the call for questions from our analysts.

Operator, Operator

Certainly. Our first question comes from the line of John Kernan from Cowen. Your question please?

John Kernan, Analyst

Yes, excellent. Thanks for taking my questions. Congrats on the nice top line results on an obviously difficult compare from Q1 last year, and congrats on the entry into saltwater fishing rods in relative terms like obviously a natural extension for BUBBA.

Brian Murphy, President and CEO

Thank you.

John Kernan, Analyst

Could you discuss the top line guidance for the remainder of the year? There are clearly challenging comparisons from last year, both in traditional channels and e-commerce, which are reflected in the guidance. You also mentioned a more normalized promotional environment in the industry. Are there any specific categories where you're noticing an increase in promotions?

Brian Murphy, President and CEO

Yes. Hey John, this is Brian. What I would say is that if you analyze the implied metrics for Q2 through Q4 over the two-year timeframe, that's essentially our perspective. You can probably infer this from our opening remarks, along with what other companies are indicating, suggesting nearly 70% growth over that two-year period, which is still impressive. We are noting that there is a mix between e-commerce and traditional retail. A significant aspect of this is international growth, which, as we mentioned in our Q1 remarks, is increasing significantly. Additionally, compared to previous periods, we have also observed enhanced distribution, leading to a mix of international sales. Most of this is classified as traditional retail, but e-commerce has been somewhat unstable. In the last quarter, we saw that an online retailer, which had ramped up after Q4 of FY '20, has been adjusting its priorities, particularly with the rise of the Delta variant which has caused them to focus more on PPE. It's a combination of various factors, but our direct-to-consumer business continues to excel and surpass our expectations, helping to balance some of these dynamics. Ultimately, our aim is to align with what the consumer expects to find.

John Kernan, Analyst

Understood. Then maybe Andy, just on gross margin. Obviously, supply chain costs are ticking up, and we’re hearing it from all the different consumer-facing companies. Tell us what the incremental headwind from supply chain is for the remainder of the year and how you think this is going to normalize as we exit '22 and enter ’23?

Andrew Fulmer, CFO

Yes, that's a great question, John. As we've discussed, we are certainly facing rising freight costs. We have a dedicated internal team that meets several times a week to analyze these costs and explore various options to optimize profitability. We consider airfreight when necessary to ensure we maintain good turnover with customers on certain products, all while trying to maximize our profitability. Regarding promotions, I'm not sure we'll disclose specific product promotions, but they will likely be in line with what we've done in the past, similar to fiscal 2020 and certain promotions during the holiday seasons.

John Kernan, Analyst

Okay, so maybe just to get maybe a little bit more detail on the gross margin adjusted SG&A. You did mention in the prepared remarks adjusted SG&A will rise as we go into Q2, Q3, Q4 which it seasonally always does. I guess, is there the flow of gross margin? Can you provide us any more color to gross margin comparisons pretty tough the next couple of quarters? Is there going to be some year over year pressure going into where you were in '21 that we should expect in the coming quarters?

Andrew Fulmer, CFO

Yes, another great question. So, when you look back at Q2 last year that was almost 47%. I would expect the year-over-year comp in Q2 will be lower than 47% and then Q3, Q4 was kind of 44% or 45%. I think you could probably model somewhere near that. And like you said, the OpEx we do expect in Q2 and Q3 to rise a little bit because of those trade shows, those types of things and then level off a little bit in Q4.

John Kernan, Analyst

All right great. Well, congrats on the progress and look forward to seeing what the rest of the year has in store. Thank you.

Brian Murphy, President and CEO

All right, thanks John.

Andrew Fulmer, CFO

Thanks John.

Operator, Operator

Thank you. Our next question comes from the line of Eric Wold from B. Riley Securities. Your question please?

Eric Wold, Analyst

Thank you. Good afternoon, guys. So, couple questions. I guess one on the entry into the $700 million market for fishing equipment rods and reels, what is your expectation for regional market share over the next three to five years in terms of your kind of decision to enter that market in the first place, where would you want to see that versus being disappointed?

Brian Murphy, President and CEO

Yes, Eric, this is Brian. We aim to capture as much of the market as possible. This is something we've been considering since acquiring the business. Andy can recall that I previously presented a slide discussing the potential market for our grip on a rod. We chose to pursue a gradual approach rather than releasing rods all at once, as we believed it could be too disruptive for consumers. We took our time to develop all the rod blanks internally, ensuring we did it correctly, culminating in the FK’s and the expansion of nuts and gas to logically advance for the consumer. I believe we are well positioned now compared to three years ago, and this is a substantial market for us. Our product stands out distinctly in comparison to others, and the red-handled rod is easily recognizable. We are very optimistic about our potential market share. While I won't specify a percentage target, we wouldn't enter this market if we didn't intend to make a significant impact. We have ambitious plans in place.

Eric Wold, Analyst

Makes sense. And then on past calls you talked about kind of an expectation for your share gains as kind of early participants in some of these activities over the past 12 to 18 months kind of, you know stick with it, become more avid and kind of maybe move up the chain. Can you talk about what evidence you may be seeing from your retail partners and on your own e-commerce sites in terms of that happening, ASPs getting larger, quite moving up in the price points within categories?

Brian Murphy, President and CEO

Yes, I can address that. This is Brian again. We are definitely observing an increase in our higher average selling price products, which has been part of our strategy, particularly with Dock and Unlock. We're transitioning to these higher price items as part of our long-term growth initiative. In our direct-to-consumer segment, we see that consumers are embracing the higher ASP products we are introducing, which is encouraging. Last year, while some competitors faced inventory challenges, we were in a strong position. Our inventory management and analytics team has helped us maintain a robust pipeline. Feedback from our brick-and-mortar customers indicates that some lower-priced products were not available on the shelves, allowing us to capture market share with the higher-priced products we have retained. Consequently, we have a broader selection available to customers now compared to 18 months ago, which is reflected in our sales data. We are collecting anecdotal evidence from our customers that supports this observation, and the numbers corroborate our findings.

Eric Wold, Analyst

Got it and then just final question from me. On international obviously is our big growth area, we are there over the two-year stack. Talk about how you are able to do that now efficiently given just the high level of demand you're seeing here in the U.S. being able to allocate products over there, that may be a demand here, are there meaningful differences in product category demand between the two markets? And can you get to similar if not better margins overseas and you can here to make that decision makes sense now versus possibly delaying a little bit?

Brian Murphy, President and CEO

Sure, that's a great question. It's Brian again. Our international strategy really started three to four years ago, and our aim was to build up that team and ensure we had sufficient resources. Operating internationally also presents additional challenges. For instance, distribution, whether we have local teams or rely on distributors, differs from country to country. Each has unique requirements, including variations in products like our BUBBA electric fillet knife, which will likely need a different configuration overseas. We've been working on these plans for several years. What we experienced in the first quarter was a result of efforts we initiated over the last couple of years. This wasn't simply about deciding how to allocate inventory internationally versus domestically; it was already in progress, and we’re meeting the anticipated growth internationally. Did that answer your question?

Eric Wold, Analyst

Yes, makes sense, thank you.

Operator, Operator

Thank you, our next question comes from a line of Scott Stember from CL King. Your question please?

Scott Stember, Analyst

Congrats on the quarter guys and thanks for taking my questions.

Brian Murphy, President and CEO

Thanks. Yes, Scott.

Scott Stember, Analyst

Can you discuss what you are observing in terms of demand for the four brand lines, and how inventory levels are looking? You mentioned that around four of those brands experienced a year-over-year decline. Does this indicate that some of them might be approaching the inventory levels they require?

Brian Murphy, President and CEO

Sure, this is Brain, I can start, may be feel free to chime in. So what I would tell you is that if you look at kind of Q1 versus last year, there was civil unrest that was apparent last year that has seemed to have died down a little bit. So we had 8 million to 10 million firearm owners that entered the market. On top of that, obviously, all of the great trends we saw in camping, fishing, and hiking and things like that. But I'll tell you that on the firearm side, we're seeing less of the spikes that we saw last year, but we're seeing a nice mix towards some of the hunting and fishing and camping categories. So I think this just speaks to the diversity of our brand portfolio, the brand lanes really hitting their stride. To be able to again, I kind of mentioned kind of alluded to in my prepared remarks around some of the near-term trends, that's kind of what I'm speaking to. So still solid demand when it comes to firearm accessories, things like that, from those new firearm owners. But we are seeing a pretty balanced mix across our entire portfolio.

Scott Stember, Analyst

Got it and regards to inventories, I know that we've been playing catch-up for quite some time. Are you seeing any pockets where things are starting to get closer to where folks want them or are we still way off?

Andrew Fulmer, CFO

Scott, this is Andy. I don't think we're way off. I think that the replenishment that we're seeing is very healthy. Like Brian said, kind of pretty balanced replenishment across the brand lanes. And again, I know we said in the prepared remarks, once again, the top sellers that we had in the quarter represented all of our four brand lanes, so we're very happy with that.

Brian Murphy, President and CEO

Yes, and we talked about kind of the ramp up in inventory. This was a strategy of ours because of all of the uncertainty in the supply chain. And so, that's what you're seeing in the quarter is that ramp up strategically to be able to prepare us for what might come next is anyone's guess, but we at least want to have the product to ship. So we are, but we're still seeing a pretty tight line between what we have and what our customers are selling through at POS.

Scott Stember, Analyst

Got it and last question on the international side, nice to see that starting to take a nice jump up, but which one, which of your product lanes are the biggest beneficiaries there? I imagine that shooting related stuff is probably the least, but just give us an indication of which brands are doing particularly well?

Brian Murphy, President and CEO

Yes, it's, so it might surprise you a little bit, this is Brian. Shooting is actually performing incredibly well internationally right now, in particular in places like Canada, which you probably expect. But we're also seeing some really good penetration on our hunting and camping and fishing brands. So, I'd say it's across the board, it mirrors pretty closely with what we're seeing domestically. But I think what would be a surprise to you is that shooting is performing incredibly well internationally.

Scott Stember, Analyst

Got it. That that's all I have. Thank you.

Brian Murphy, President and CEO

Thanks, Scott.

Andrew Fulmer, CFO

Thanks Scott.

Operator, Operator

Thank you. Our next question comes from the line of Mark Smith from Lake Street Capital. Your question please?

Mark Smith, Analyst

Hi guys. I wanted to just dig a little bit deeper into new customers. Can you talk about new customer trends? Are you still seeing new entrants into some of these markets or more so here in first quarter was a lot of this driven by strength from existing customers?

Brian Murphy, President and CEO

Yes, so hey, Mark, this is Brian. So I'll tell you that we, getting new distribution is one of the four pillars that we've outlined last call to really support that 8% to 10% growth over the next four to five years. And so we are seeing customers continued interest I would say from home and hardware, where the consumer that's going in there has an expectation that they are going to start to see more outdoor related products and brands, which is great for us. And then also there's an interesting crossover, so we have land management under like our Hooyman brand that we've talked about in the past. Well, that same person is there's a good overlap there with hunter. And so, we are being asked from certain customers to present and to offer them a solution essentially to help address that customers want and they go into some of those stores. And I think in large part too, because you had some folks that have exited the space a few years ago, that I think maybe are turning that a little bit, but exited the space. So home and hardware, farm and ranch stores, things like that, we're seeing great penetration and interest from and some nice customer wins. And but also, I mean, continued growth, yes you've asked about kind of the core base of customers, we're seeing on the traditional side, especially just across the board, I mean, we were looking at kind of our customer base and what grew in the quarter across our traditional channels. And it was, I mean, it was like a paintbrush, I mean it was across the board from a lot of our core customers. So it's strong there, and then we are getting some great new customer wins as well.

Mark Smith, Analyst

Okay, and as we look at, we've talked about within firearm and maybe within the Defender brand lane, these 8 million to 10 million new customers, are you seeing conversion from people who maybe just bought a firearm to people that are becoming kind of avid users, any idea kind of what that conversion looks like for these people and end up instead of just buying a firearm, but buying safety products, storage solutions, cleaning, targets, et cetera?

Brian Murphy, President and CEO

Yes, this is Brian, you hit it on the head. I mean, that's what we're seeing is folks moving up the chain, getting more interested in accessories, rewind a year ago, and they went into a store and bought whatever was available. And maybe it wasn't even, they weren't as loyal when it came to the brand of firearm. But now they get home, they've learned more about it, they want to shoot it safely, they want to secure it safely. We offer all of those products for that consumer. The other interesting thing that we're seeing is, they bought their first firearm again, sort of brand agnostic, they've done more research and now they may want to go back and get a specific brand. So they'll go in and now they're a little bit wiser too. They say, okay, well, I'm not just going to go buy a firearm, I want to get something that comes equipped with a Red Dot or a Laser, because I'm going to need it I went to the range and I shot terribly. So we are seeing higher attachment rates when it comes to things like that as well. So a little bit of a shift that same consumer but coming back a second or third time with more knowledge than they had the first time, which I think we're definitely seeing the benefit from.

Mark Smith, Analyst

Okay, and the last question from me is, and you've talked about it a little bit, but what gives you your confidence in your, as you guys say, permission to play in fishing rods and reels? And then as you look at this kind of evolution within BUBBA, in fishing, what are the other places and categories where you feel like you have permission to play in kind of a broader assortment of products?

Brian Murphy, President and CEO

Sure. I'll give you a brief overview regarding BUBBA and its permission to play. We've discussed its connection to the water to play lifestyle. When we make acquisitions, we ensure we understand this permission to play. For BUBBA, that revolves around the water to play concept, similar to the field to table movement. We feel that there hasn't been a brand truly addressing this water to play lifestyle, whether it involves freshwater or saltwater. When we acquired BUBBA a few years ago, we recognized this potential but felt we weren't ready to present it to consumers at that time. That's why we introduced nuts and gas, which align with the same grip preferences our consumers seem to like. It's distinctive and prominent on boats. The red handle of a BUBBA product is easily noticeable, much like having a YETI cooler, which adds a sense of legitimacy. We believe our new BUBBA rods, which have been developed over several years and designed in-house, will impress customers when they hit the shelves in February. They embody the quality associated with BUBBA products, and we're confident in this based on thorough consumer research and positive feedback from both our brick-and-mortar and e-commerce customers.

Mark Smith, Analyst

Excellent, thank you, guys.

Brian Murphy, President and CEO

Yep, thanks, Mark.

Andrew Fulmer, CFO

Thank you, Mark.

Operator, Operator

Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Brian Murphy for any further remarks.

Brian Murphy, President and CEO

All right, thank you, Operator. Before we close please note that we'll be attending two conferences next week, the CL King Best Ideas Conference, September 14, and the Lake Street Best Ideas Growth Conference on September 15, both virtual events where we hope to meet some of you. Thank you, everyone for joining us today. We look forward to speaking with you again next quarter.

Operator, Operator

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.