Earnings Call Transcript - JOUT Q2 FY2026

Operator

Hello, everyone, and welcome to the Johnson Outdoors second quarter 2026 earnings conference call. Today's call will be led by Helen Johnson-Leopold, Johnson Outdoors chairman and chief executive officer. Also on the call is David Johnson, chief financial officer. Prior to the question and answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question and answer session will begin. If you would like to ask a question during that time, please press star, then the number 11 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Allison Kitzerow from Johnson Outdoors. Please go ahead, Ms. Kitzerow.

Allison Gitzaro, Head of Investor Relations

Good morning, and thank you for joining us for our discussion of Johnson Outdoors' results for the 2026 fiscal second quarter. If you need a copy of today's news release, it is available on our website at www.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 any additional questions following the call, please contact Dave Johnson or Pat Penman. It is now my pleasure to turn the call over to Helen Johnson-Leopold.

Helen Johnson-Leipold, Chairman

Thanks, Allison. Good morning, everyone. I'll begin by sharing perspective on our second quarter and year-to-date results, as well as give an update on each business. Dave will review the financial highlights, and then we'll take your questions. Improved retail conditions and ongoing success of our product innovation helped drive a 15.5% revenue growth in the second quarter, with all business segments contributing to the improvement. Operating income for the second quarter was much improved versus the prior year second quarter due to the increased sales volume and our cost savings initiatives continuing to boost profitability as well. Year-to-date, our net sales are 21.5% higher than last year's fiscal six-month period, with operating income and gross margin also up for the fiscal year-to-date period. We are pleased with our second quarter and year-to-date results and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership positions across our portfolio. Our fishing business delivered strong results in the second quarter, driven by improved trade conditions, continued robust demand for Hummingbird's Explore Series and Megalive 2 Fish Finders, and Minn Kota's full lineup of trolling motors, as well as pricing actions. These factors combine to reinforce our momentum and position in the marketplace. We remain focused on investing in innovation to deliver fishing technology that sets the standard for anglers worldwide. In camping and watercraft, growth during the quarter was supported by our expanding digital and e-commerce capabilities, with Old Town and Jetboil maintaining their leadership positions in competitive categories. During the quarter, Jeff Boyle also launched TrailCook, a new innovation designed to expand the brand beyond boiling water into broader backcountry cooking. In both brands, we will continue to build on our strengths to drive sustained growth through innovation and deeper engagement with outdoor enthusiasts. Lastly, in our diving business, improved conditions across the global markets and continued growth in e-commerce helped drive a solid increase in second quarter sales. Digital engagement continues to play an increasingly important role, enhancing connectivity between our SCUBA Pro brand, retail partners, and consumers. As we continue to lean into digital channels and strengthen our global footprint, we are optimistic about SCUBA Pro's ability to grow and further reinforce its position in the market. Overall, we are pleased with the quarter and year-to-date results by investing in and executing our strategic priorities, consumer-driven innovation, digital and e-commerce excellence, and operational efficiencies. We are strengthening our market position and taking the right steps to navigate macroeconomic uncertainty while building long-term resistance. Now I'll turn the call over to Dave for more details on the financial.

David Johnson, CFO

Thank you, Hal. Good morning, everyone. Our strategic cost savings program remains critical and continues to deliver meaningful benefits to our bottom line. Gross margin for the second quarter improved to 38.8 percent, up 3.8 points from the prior year quarter. Overhead absorption from higher volumes and cost savings were the main drivers of the improvement in gross margin. Year-to-date gross margin is 37.9%, up 4.9 points from the prior year-to-date period. Operating expenses increased $11.2 million from the prior year second quarter, due primarily to increased sales volume-related costs as well as increased variable compensation costs. Profit before income taxes for the second quarter was $10.2 million compared to $4.2 million dollars in the previous year quarter, driven mostly by the improvement in operating income. As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of the second quarter was 186.9 million dollars, up about 6.8 million dollars from the previous year second quarter. Our balance sheet remains debt-free and we continue to pay a meaningful dividend to shareholders, with the board approving our most recent dividend, announced in February. Looking ahead, despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth. Now I'll turn the call over to the operator for the Q&A session. Thank you, ladies and gentlemen.

Operator

If you have a question or comment at this time, please press star 11 on your telephone. If your portion has been answered. Do you wish to move yourself from the queue? Please press star one one again. One moment for our first question. Our first question comes from Anthony Liebczynski

Speaker 3

with Sidoti. Your line is open. Thank you, and good morning, everyone. You know, certainly nice to see the really strong revenue growth, especially in phishing. So as it relates to phishing, how much was revenue helped by pricing versus better market conditions in a stronger competitive

David Johnson, CFO

position. Yeah. I mean, we saw strong unit volume growth in our business. So that was a big driver for the quarter. Pricing certainly helped. And we're also seeing just really strong demand for the broad line of trolling motors that we have. That's very helpful.

Speaker 3

Gotcha. Thanks, Dave. So do you think this is perhaps the start of a replacement cycle after the bump from COVID or is there something else you think going on?

Helen Johnson-Leipold, Chairman

You know, I, the market is, is very hard to predict, but I think, you know, we have innovation that is really driving, continues to drive purchase. And I do think there will be, I think consumers are a little cautious with all the things going on, but innovation still is the catalyst to get things moving. We're hoping that this is the beginning of an upward trend, but I think it's going to be challenging and innovation will be the key going forward.

Speaker 3

Gotcha. Okay. Thanks for that. So, as far as the other two segments, you highlighted the increased sales through e-commerce. So, can you expand on that a little bit and then maybe give us, if possible, some numbers as it relates to the growth that you saw in the quarter and how Or are you thinking about the rest of F-26 as it relates to diving and watercraft and camping? Well, there's a few questions in there.

Helen Johnson-Leipold, Chairman

But, you know, e-commerce is one of our, you know, growth initiatives. And we put a hardcore press on that. And it does reach a much broader consumer base. So we're really excited about it. And not to mean that our bricks and mortar aren't important. I think they both complement each other. You know, we are just, we've been up and running on a true, you know, digital mode for only about, actually, it was a year. And so it's early on, and we've got a lot to learn, but it's a good opportunity to reach a broader audience. You know, I think it will continue to grow. It's a smaller piece of the pie than our other sales, but I think from a growth standpoint, it is helping us. I think, again, we don't do a lot of forward looking, but as we looked at the third quarter, the signs in the second are good, and they're better than they've been in the past. But again, the world is complicated, and the consumers have a lot going on. But again, it's back to the product line, the brand, the positioning in the market, And we feel really good about where we are as a brand and as a company. And, you know, we're hoping that the markets also, you know, cooperate as well. So it's good to have a quarter that feels very strong.

Speaker 3

So hopefully I answered your question. Yes, that's definitely a very helpful context. So as far as the world out there, just wondering, as you talk to your retail customers, since the Iran conflict started in late February, gas prices have gone up quite a bit. And so as it relates to that, I mean, from the point of sale data that you can get your hands on, I mean, have you seen any notable impact for your brands? Anything you can talk about that?

David Johnson, CFO

I mean, I would say not yet. Anthony, we haven't seen a direct impact, but, you know, like a lot of companies, we're looking at, you know, inflationary pressure, higher input costs, you know, consumers that, you know, their confidence levels are down. So I think so far it's okay. We haven't seen a direct impact, but we're looking at things kind of in a neutral fashion over the next couple of quarters.

Speaker 3

Mm-hmm. Okay. Understood. Okay. And then, so, yeah, so I guess as far as the gross margin, so I guess a two-part question here. So, you know, first, in the quarter itself, you did have a strong improvement versus last year. You talk about fixed cost absorption, but also some cost savings. So, was that kind of a 50-50 split between that? And then And then my second part to that question is, as it relates to cost pressures, how should we be thinking about the gross margins for the rest of the fiscal year?

David Johnson, CFO

Yeah, so, you know, most of the improvement was operating leverage, so fixed cost absorption. But our cost savings program is critical to that, you know, helping that as well. So, you know, we're seeing cost pressure going forward. I think, you know, like a lot of companies, the electronic industry component costs are dynamic for us. And so that's something we've got our eye on and we're monitoring. So I just think going forward, that'll be something that'll be a little bit of a headwind for us maybe over the next coming quarters, if you will. So it's a good thing we have our cost savings efforts in place now to help try to offset that.

Speaker 3

And then in terms of the operating expenses, they did come in higher than what we had expected. Just roughly speaking, you know, how much of the year-over-year increase came from your sales volume-related costs versus the incentive compensation piece? And then, again, you know, just kind of maybe help us understand, like, how should we be thinking about operating expenses going forward for the rest of the fiscal year?

David Johnson, CFO

Yeah, I mean, a decent portion was volume-related and probably – I can't give you the numbers, but, you know, let's say maybe a third was volume-related, and then we had some variable compensation accruals adjustments in there that made up about a third. And then there's some other cats and dogs in there, too, that we didn't call out. But there's other costs that we have in that operating expense, like some health care costs and some other consulting expense. But the two big ones were the volume-related and then the variable compensation.

Speaker 3

And you expect that to continue, do you think, here at least near term or, you know, just any general comment there?

David Johnson, CFO

Well, I think, you know, the expense structure will settle down probably a little bit. I mean, obviously the volume drives some of that. But, you know, in terms of kind of where we are in terms of our spending and our ability to manage, I think it will kind of settle down probably going forward over the next couple of quarters.

Helen Johnson-Leipold, Chairman

But, you know, Andy and me, we are investing and we're putting foundational systems in. And we're investing against our key priorities. So I would say it's good spend, and it may not be long-term, but as Dave said, it will settle down. But I feel we're investing in the right things to set us up for success long-term, and that will eventually get more efficient on the other side of this.

Speaker 3

okay and then lastly for me um the tax rate that came in lower than what we had expected kind of maybe you can maybe dave you can address that and and again any sort of commentary as to how we should be thinking about the tax rate the for the balance of the fiscal year yeah i mean

David Johnson, CFO

because we have the uh the valuation allowance on uh the u.s income right now it's the tax rate going to kind of be up and down. So it just depends on the mix of profits that we're seeing in the quarter in what we're forecasting for the full year. So, I mean, I think, you know, the way to think about that is probably, you know, a $4 to $5 million tax expense for the year and how we divvy that up over the quarters just kind of depends on the mix of profits. So it's just hard for me to give you a rate quarter by quarter just because of that mix. Understood. This is

Speaker 3

definitely helpful. Okay. Well, thank you very much and best of luck. Thanks, Anthony. And I'm not

Operator

showing any further questions at this time. I turn the call back over to Helen. Okay. Well,

Helen Johnson-Leipold, Chairman

thank you, everybody, for joining us today. And questions, you can call Dave or Pat,

Operator

but have a good day. Thank you. Thank you, ladies and gentlemen. That's going to conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.