Earnings Call Transcript - JOUT Q4 2021

Operator, Operator

Hello everyone and welcome to the Johnson Outdoors' Fourth Quarter 2021 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson Outdoors' Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President and Chief Financial Officer. Prior to the question-and-answer session, all participants will be in a listen-only mode. After the prepared remarks, the question-and-answer session will begin. This call is being recorded. Your participation implies consent to our recording the call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Patricia Penman, Johnson Outdoors. Please go ahead, Ms. Penman.

Patricia Penman, Corporate Secretary

Thank you. Good morning everyone. Thank you for joining us for our discussion of Johnson Outdoors results for the 2021 fiscal fourth quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under Investor Relations. I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have additional questions following the call, please contact Dave Johnson or me. It is now my pleasure to turn the call over to Helen Johnson-Leipold.

Helen Johnson-Leipold, CEO

Thanks Pat. Good morning, and thank you for joining us. I'll begin with an overview on the quarter and year-to-date results and then I'll share perspective on the performance and outlook for our businesses. Dave will review financial highlights and then we'll take your questions. In fiscal 2021, total company revenue grew 26% to $752 million, profit surged 57% to $111 million, and net income was $83 million or $8.21 per diluted share, a 51% improvement from the prior fiscal year. We had an exceptional year. Our Fishing, Camping, and Watercraft recreation businesses saw strong sales throughout the year and our Diving business began to recover in the third and fourth quarters. During our fiscal fourth quarter, total company net sales were $166 million, which was an increase versus last year's strong quarter. Overall, as people desire to spend time outdoors continued to fuel demand, our performance this year reflects the value of our sustained focus and investment in translating deep rich consumer insight into the innovative products that deliver the best outdoor experience possible. In Fishing, our largest business, robust demand across all product lines continued throughout the year as anglers look to Johnson Outdoors for the best fishing experiences possible. In our Humminbird brand, our most recent innovation, the award-winning MEGA Live Imaging delivers the clarity and detail of MEGA Imaging in live-action, allowing anglers to see fish and structure in real-time, even watching fish on screen as they move into bite. With the release of MEGA Live, anglers have access to the most complete package of industry-leading technologies and products offered in our One Boat Network platform, which enables our Humminbird and Minn Kota products to work together in unison, giving anglers effortless command of their boat. And for some anglers, fishing is an all-weather sport and Humminbird is also a leader in ice fishing technology. The award-winning MEGA Live Imaging also launched in the ice HELIX 9 this year, joining our popular MEGA 360 Imaging technology. MEGA Live Imaging gives ice anglers the ability to see fish moving below the ice in real-time and reacting to the lure, and MEGA 360 allows ice anglers to quickly understand what structure is under the ice, so they can more easily locate productive fishing holes. In Minn Kota, the award-winning Raptor Shallow Water Anchor continues to do well in its first full year on the market. The Raptor has two industry-leading first technologies, Auto Bottom Mode, which detects bottom density to determine the right anchoring force, and Active Anchoring, which continuously monitors anchoring force and adjusts automatically for stable bottom pinning. In trolling motors, with strong innovation, quality, and durability, Minn Kota is the industry leader. In Watercraft Recreation, our Fishing Kayak segment continues to grow and we've outpaced the strong market with the ongoing enthusiasm for our innovative sports line that we launched last year. Both retailers and consumers are enthusiastic about the innovation and our Sportsman Autopilot 136 motorized fishing kayak was recently awarded Paddling Magazine's Best Fishing Boat for 2022. Old Town Sportsman Autopilot 136 leverages the game-changing Spot Lock technology from its sister brand Minn Kota to hold position while anglers fish. From the award-winning autopilot motorized fishing kayak to the versatile pedal-powered Sportsman Salty kayak, the Sportsman line offers a watercraft for anglers in any type of water. In Camping, cooking continues to be an integral part of the camping experience; demand for our Eureka camp cooking technology continues to exceed expectations. And in Jetboil, consumers continue to be excited about our superlight Stash stove that we launched earlier this year, reducing weight on the trails, which is critical for backpackers. The Stash is the lightest all-in-one backpacking stove system that Jetboil, the technology leader in portable outdoor cooking systems, has ever made. Finally, in our Diving business, we start to see margins begin to recover from pandemic-related restrictions in the latter half of the fiscal year. Diving had a strong fiscal fourth quarter. Our work to promote and support local diving, as well as enhance our global digital presence and strengthen e-commerce, are all contributing to this positive growth. We remain focused on these efforts, along with sustained innovation, to ensure SCUBAPRO's position as the most trusted dive brand in the world. While the ongoing global supply chain environment remains challenging and unpredictable, we have taken the time to understand opportunities and have invested in capacity, in addition to helping us manage our supply chain. We remain focused on continuing to work hard to manage supply chain issues and fill orders. In summary, we had an exceptional year, which wouldn't have been possible without the hard work and dedication of our employees who worked tirelessly to meet the incredible demand for our product. As we continue to navigate the challenges ahead, our company's purpose, which is to inspire people to get out there to experience and value the great outdoors for generations to come, continues to guide everything we do. We remain committed to investing in our key strategic drivers, understanding our consumer, sustaining innovation leadership, identifying new sources and paths of growth in our markets, and continually optimizing our digital consumer experience. Our ongoing hard work on these priorities ensures that our portfolio of market-leading brands is well positioned for success, and that we can continue to deliver sustained, profitable long-term growth for Johnson Outdoors. Now, I'll turn the call over to Dave for a review of the financial highlights.

David Johnson, CFO

Thank you, Helen. Good morning everyone. I want to highlight a few items from the quarter and the year. As Helen mentioned, we had continued strong demand in three of our four businesses through fiscal 2021. Like the challenging supply environment that many companies are operating in, we're facing ongoing disruptions in our supply chain that must be managed on a daily basis. We've taken actions to mitigate our supply chain challenges, including finding alternative sources and doing everything possible to secure inventory and raw components to fill demand. Total inventory levels are higher than last year by 71% and raw material inventory is up by 100%. In addition, we've invested in adding capacity and incremental resources where appropriate. Despite higher raw material and freight costs, gross margins only dipped slightly due to volume efficiencies and favorable product mix. Now, in the near term, we expect gross margins to be pressured due to the supply chain issues and we're taking appropriate mitigation actions. Operating expenses were $28.9 million higher versus the prior year due to largely volume-related expenses, as well as increased headcount and people costs, but it declined as a percentage of sales versus fiscal 2020. Net income for the year was $83.4 million, up 51% from the prior fiscal quarter. The effective tax rate is 26.2% compared to last year's rate of 25.1%. Next year, we expect the tax rate to be in the mid-20s. Looking ahead, demand remains healthy and we're focused on managing ongoing supply chain pressures, including maintaining higher than normal inventory levels to meet demand. Our strong balance sheet and healthy cash position continues to enable us to invest in strategic opportunities to strengthen the business, while consistently paying dividends to our shareholders. Now, I'll turn the call back over to the operator for the Q&A session.

Operator, Operator

Thank you. Our first question comes from Anthony from Sidoti. Your line is open.