# American Outdoor Brands, Inc.: Form 10-Q for the period ended Jan 31, 2024

- Company: [American Outdoor Brands, Inc.](/companies/aout.md) (CIK 1808997)
- Form: 10-Q
- Filed: 2024-03-07
- Accepted by EDGAR: Mar 7, 2024, 21:15 ET
- Period: 2024-01-31
- Accession: 0000950170-24-027969
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1808997/000095017024027969/aout-20240131.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1808997/000095017024027969/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-01-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-11-01 to 2024-01-31 | $53.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-05-01 to 2024-01-31 | $154.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-11-01 to 2024-01-31 | $30.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-05-01 to 2024-01-31 | $85.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-11-01 to 2024-01-31 | $22.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-05-01 to 2024-01-31 | $69.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-11-01 to 2024-01-31 | $1.8m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-05-01 to 2024-01-31 | $5.1m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-11-01 to 2024-01-31 | −$2.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-05-01 to 2024-01-31 | −$7.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-11-01 to 2024-01-31 | $13.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-05-01 to 2024-01-31 | $28.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-11-01 to 2024-01-31 | −$2.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-05-01 to 2024-01-31 | −$6.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-11-01 to 2024-01-31 | $0.23 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-05-01 to 2024-01-31 | −$0.53 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-11-01 to 2024-01-31 | $0.23 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-05-01 to 2024-01-31 | −$0.53 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-11-01 to 2024-01-31 | 12,883,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-05-01 to 2024-01-31 | 13,030,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-05-01 to 2024-01-31 | $9.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-05-01 to 2024-01-31 | $4.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-05-01 to 2024-01-31 | $5.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-01-31 | $15.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-01-31 | $149.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-01-31 | $239.1m | us-gaap:Assets |
| Current liabilities | at 2024-01-31 | $23.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-01-31 | $56.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-01-31 | $182.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,258 characters.

### Overview

The following discussion and analysis of our financial condition and results of operations for the three and nine months ended January 31, 2024 and 2023 should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year ended April 30, 2023. This discussion and analysis should also be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.

The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include those discussed above in “Statement Regarding Forward-Looking Information” in this Form 10-Q. In addition, this section sets forth key objectives and performance indicators used by us, as well as key industry data tracked by us.

The following discussion and analysis includes references to net sales of our products in shooting sports and outdoor lifestyle categories. Our shooting sports category includes net sales of shooting accessories and our products used for personal protection. Our outdoor lifestyle category includes net sales of our products used in hunting, fishing, camping, rugged outdoor activities, and outdoor cooking.

### Third Quarter Fiscal 2024 Highlights

Our operating results for the three months ended January 31, 2024 included the following:

- Net sales were $53.4 million, an increase of $2.5 million or 5.0%, over the comparable quarter last year.
- Gross margin was 42.7%, a decrease of 440 basis points from the comparable quarter last year.
- Net loss was $2.9 million, or $0.23 per diluted share, compared with a net loss of $2.9 million, or $0.21 per diluted share, for the comparable quarter last year.
- Non-GAAP Adjusted EBITDAS was $2.4 million for the three months ended January 31, 2024 compared with $3.3 million for the three months ended January 31, 2023. See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDAS.

Our operating results for the nine months ended January 31, 2024 included the following:

- Net sales were $154.8 million, an increase of $5.8 million, or 3.9%, over the prior year comparable period.
- Gross margin was 44.6%, a decrease of 170 basis points from the prior year comparable period.
- Net loss was $6.9 million, or $0.53 per diluted share, compared with a net loss of $8.2 million, or $0.61 per diluted share, for the prior year comparable period.
- Non-GAAP Adjusted EBITDAS was $8.7 million for the nine months ended January 31, 2024 compared with $11.0 million for the nine months ended January 31, 2023. See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDAS.

### Results of Operations

### Net Sales and Gross Profit

The following table sets forth certain information regarding consolidated net sales and gross profit for the three months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $53,425 | $50,894 | $2,531 | 5.0% |
| Cost of sales | 30,591 | 26,905 | 3,686 | 13.7% |
| Gross profit | $22,834 | $23,989 | $(1,155) | -4.8% |
| % of net sales (gross margin) | 42.7% | 47.1% |  |  |

The following table sets forth certain information regarding trade channel net sales for the three months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| e-commerce channels net sales | $24,881 | $24,493 | $388 | 1.6% |
| Traditional channels net sales | 28,544 | 26,401 | 2,143 | 8.1% |
| Total net sales | $53,425 | $50,894 | $2,531 | 5.0% |

Our e-commerce channels include net sales from customers that do not traditionally operate physical brick-and-mortar stores, but generate the majority of their revenue from consumer purchases from their retail websites. Our e-commerce channels also include our direct-to-consumer sales. Our traditional channels include customers that primarily operate out of physical brick-and-mortar stores and generate the large majority of revenue from consumer purchases in their brick-and-mortar locations. We sell our products worldwide.

The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the three months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Domestic net sales | $51,006 | $49,489 | $1,517 | 3.1% |
| International net sales | 2,419 | 1,405 | 1,014 | 72.2% |
| Total net sales | $53,425 | $50,894 | $2,531 | 5.0% |

The following table sets forth certain information regarding net sales categories for the three months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Shooting sports net sales | $24,306 | $22,581 | $1,725 | 7.6% |
| Outdoor lifestyle net sales | 29,119 | 28,313 | 806 | 2.8% |
| Total net sales | $53,425 | $50,894 | $2,531 | 5.0% |

For the three months ended January 31, 2024, total net sales increased $2.5 million, or 5.0%, over the comparable quarter last year because of an increase in net sales of certain personal protection and rugged outdoor products as well as our hunting and fishing products.

Net sales in our e-commerce channel increased $388,000, or 1.6%, over the comparable quarter last year, primarily because of an increase in direct-to-consumer net sales for products sold on our e-commerce platform. E-commerce channel net sales for our outdoor lifestyle category increased primarily from higher rugged outdoor product net sales as a result of higher holiday shopping trends and increased promotional product discounts.

Net sales in our traditional channels increased $2.1 million, or 8.1%, over the comparable quarter last year. Traditional channel net sales for our shooting sports category increased primarily because of selling slow moving personal protection products at a discount and higher net sales of certain shooting accessories. Traditional channel net sales for our outdoor lifestyle category increased primarily from higher fishing and hunting product net sales as a result of higher holiday shopping trends, partially offset by lower orders of certain rugged outdoor products. In addition, our international net sales increased $1.0 million, or 72.2%, over the comparable quarter last year as a result of increased sales in Canada because of increased orders in the region as we continued to focus on introducing more outdoor lifestyle brands in Canada.

New products, which we define as any SKU introduced over the prior two fiscal years, represented 22.1% of net sales for the three months ended January 31, 2024.

Gross margin for the three months ended January 31, 2024 decreased 440 basis points from the comparable quarter last year, primarily because of higher tariff, freight, and duty expenses driven by increased inventory purchases earlier in fiscal 2024, as well as an increase in promotional activity.

The following table sets forth certain information regarding consolidated net sales and gross profit for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $154,801 | $149,006 | $5,795 | 3.9% |
| Cost of sales | 85,758 | 80,015 | 5,743 | 7.2% |
| Gross profit | $69,043 | $68,991 | $52 | 0.1% |
| % of net sales (gross margin) | 44.6% | 46.3% |  |  |

The following table sets forth certain information regarding trade channel net sales for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| e-commerce channels net sales | $66,720 | $67,750 | $(1,030) | -1.5% |
| Traditional channels net sales | 88,081 | 81,256 | 6,825 | 8.4% |
| Total net sales | $154,801 | $149,006 | $5,795 | 3.9% |

The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Domestic net sales | $145,777 | $141,871 | $3,906 | 2.8% |
| International net sales | 9,024 | 7,135 | 1,889 | 26.5% |
| Total net sales | $154,801 | $149,006 | $5,795 | 3.9% |

The following table sets forth certain information regarding net sales categories for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Shooting sports net sales | $67,752 | $67,161 | $591 | 0.9% |
| Outdoor lifestyle net sales | 87,049 | 81,845 | 5,204 | 6.4% |
| Total net sales | $154,801 | $149,006 | $5,795 | 3.9% |

For the nine months ended January 31, 2024, total net sales increased $5.8 million, or 3.9%, over the prior year comparable period because of an increase in net sales of our outdoor lifestyle products.

Net sales in our e-commerce channel decreased $1.0 million, or 1.5%, over the prior year comparable period, primarily because of lower net sales to the world's largest e-commerce retailer as a result of reduced orders. E-commerce channel net sales for our shooting sports category decreased because of lower net sales for certain personal protection products. E-commerce channel net sales for our outdoor lifestyle category increased primarily from higher net sales for certain hunting and rugged outdoor products as a result of additional promotional activity, partially offset by lower net sales for our outdoor cooking products.

Net sales in our traditional channels increased $6.8 million, or 8.4%, over the prior year comparable period. Traditional channel net sales for our shooting sports category increased primarily because of selling slow moving personal protection products at a discount and higher net sales of certain shooting accessories mentioned above. Traditional channel net sales for our outdoor lifestyle category increased primarily as a result of higher net sales for hunting, fishing, and certain rugged outdoor products, which include new product introductions during fiscal 2024. In addition, our traditional channel net sales increased because we began selling one of our outdoor lifestyle direct-to-consumer only brands at retail. Our international net sales increased $1.9 million, or 26.5%, over the prior year comparable period as a result of increased sales in Canada because of increased orders in the region as we focus on introducing more outdoor lifestyle products in Canada.

New products, which we define as any SKU introduced over the prior two fiscal years, represented 23.0% of net sales for the nine months ended January 31, 2024.

Gross margin for the nine months ended January 31, 2024 decreased 170 basis points from the prior year comparable period primarily from higher tariff, freight, and duty expenses from increased inventory purchases earlier in fiscal 2024 and increased promotional product discounts.

### Operating Expenses

The following table sets forth certain information regarding operating expenses for the three months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $1,792 | $1,575 | $217 | 13.8% |
| Selling, marketing, and distribution | 14,464 | 14,522 | (58) | -0.4% |
| General and administrative | 9,461 | 10,893 | (1,432) | -13.1% |
| Total operating expenses | $25,717 | $26,990 | $(1,273) | -4.7% |
| % of net sales | 48.1% | 53.0% |  |  |

Research and development expenses increased $217,000 over the comparable quarter last year, primarily from increased depreciation for new product tooling. Selling, marketing, and distribution expenses remained flat as compared to the comparable quarter last year. General and administrative expenses decreased $1.4 million from the comparable quarter last year, primarily because of lower insurance premiums, reduced enterprise resource planning system implementation-related expenses, and lower rent expense as result of the facility consolidations we completed in the prior fiscal year.

The following table sets forth certain information regarding operating expenses for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $5,065 | $4,887 | $178 | 3.6% |
| Selling, marketing, and distribution | 41,933 | 40,226 | 1,707 | 4.2% |
| General and administrative | 29,035 | 32,575 | (3,540) | -10.9% |
| Total operating expenses | $76,033 | $77,688 | $(1,655) | -2.1% |
| % of net sales | 49.1% | 52.1% |  |  |

Research and development expenses increased $178,000 over the prior year comparable period from increased depreciation for new product tooling. Selling, marketing, and distribution expenses increased $1.7 million over the prior year comparable period, primarily because of increased outbound freight costs and other sales volume-related expenses. General and administrative expenses decreased $3.5 million from the prior year comparable period, primarily because of $1.2 million lower legal and advisory fees associated with the completed cooperation agreement with a stockholder that was completed in the prior fiscal year, $1.1 million of reduced enterprise resource planning system implementation-related expenses, and $500,000 of lower rent expense as result of the facility consolidations we completed in the prior fiscal year.

### Operating Loss

The following table sets forth certain information regarding operating loss for the three months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Operating loss | $(2,883) | $(3,001) | $118 | -3.9% |
| % of net sales (operating margin) | -5.4% | -5.9% |  |  |

Operating loss for the three months ended January 31, 2024 was relatively flat as compared to the comparable quarter last year.

The following table sets forth certain information regarding operating loss for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Operating loss | $(6,990) | $(8,697) | $1,707 | -19.6% |
| % of net sales (operating margin) | -4.5% | -5.8% |  |  |

Operating loss for the nine months ended January 31, 2024 was $7.0 million, a $1.7 million increase from an operating loss of $8.7 million for the nine months ended January 31, 2023, primarily because of lower operating expenses as mentioned above.

### Income Taxes

The following table sets forth certain information regarding income tax benefit for the three months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Income tax expense/(benefit) | $13 | $(125) | $138 | -110.4% |
| % of income from operations (effective tax rate) | -0.4% | 4.2% |  | -4.6% |

We recorded income tax expense of $13,000 for the three months ended January 31, 2024 compared with income tax benefit of $125,000 for the prior year comparable period because of differences in the timing of recording return to provision adjustments relating to our Federal tax returns. The income tax expense recorded for the three months ended January 31, 2024 was primarily due to a full valuation allowance recorded against our deferred tax assets. The income tax benefit recorded during the three months ended January 31, 2023 was primarily due to recording return to provision adjustments relating to the Federal tax return filed for the prior fiscal year.

The following table sets forth certain information regarding income tax expense for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Income tax expense/(benefit) | $28 | $(98) | $126 | -128.6% |
| % of income from operations (effective tax rate) | -0.4% | 1.2% |  | -1.6% |

We recorded income tax expense of $28,000 for the nine months ended January 31, 2024 compared with income tax benefit of $98,000 for the prior year comparable period. The income tax expense recorded during the nine months ended January 31, 2024 was primarily due to a full valuation allowance recorded against our deferred tax assets. The income tax benefit recorded during the nine months ended January 31, 2023 was primarily due to recording return to provision adjustments relating to the Federal tax return filed for the prior fiscal year.

On March 7, 2023, the Internal Revenue Service (“IRS”) initiated an examination of our Federal income tax return filed for the tax period ended April 30, 2021. During the three months ended January 31, 2024, we were notified by the IRS that they had concluded their examination. As a result of their examination procedures, there was no impact to our condensed consolidated financial statements.

### Net loss

The following table sets forth certain information regarding net income and the related per share data for the three months ended January 31, 2024 and 2023 (dollars in thousands, except per share data):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net loss | $(2,910) | $(2,863) | $(47) | 1.6% |
| Net loss per share |  |  |  |  |
| Basic | $(0.23) | $(0.21) | $(0.02) | 9.5% |
| Diluted | $(0.23) | $(0.21) | $(0.02) | 9.5% |

25

Net loss was $2.9 million, or $0.23 per diluted share, for the three months ended January 31, 2024 compared with net loss of $2.9 million, or $0.21 per share, for the comparable quarter last year.

The following table sets forth certain information regarding net loss and the related per share data for the nine months ended January 31, 2024 and 2023 (dollars in thousands, except per share data):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net loss | $(6,946) | $(8,188) | $1,242 | -15.2% |
| Net loss per share |  |  |  |  |
| Basic | $(0.53) | $(0.61) | $0.08 | -13.1% |
| Diluted | $(0.53) | $(0.61) | $0.08 | -13.1% |

Net loss was $6.9 million, or $0.53 per diluted share, for the nine months ended January 31, 2024 compared with net loss of $8.2 million, or $0.61 per share, for the prior year comparable period, primarily because of lower operating expenses.

### Non-GAAP Financial Measure

We use GAAP net income as our primary financial measure. We use Adjusted EBITDAS, which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends, and it should be considered in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Adjusted EBITDAS is defined as GAAP net income/(loss) before interest, taxes, depreciation, amortization, and stock compensation expense. Our Adjusted EBITDAS calculation also excludes certain items we consider non-routine. We believe that Adjusted EBITDAS is useful to understanding our operating results and the ongoing performance of our underlying business, as Adjusted EBITDAS provides information on our ability to meet our capital expenditure and working capital requirements, and is also an indicator of profitability. We believe this reporting provides additional transparency and comparability to our operating results. We believe that the presentation of Adjusted EBITDAS is useful to investors because it is frequently used by analysts, investors, and other interested parties to evaluate companies in our industry. We use Adjusted EBITDAS to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to neutralize our capitalization structure to compare our performance against that of other peer companies using similar measures, especially companies that are private. We also use Adjusted EBITDAS to supplement GAAP measures of performance to evaluate our performance in connection with compensation decisions. We believe it is useful to investors and analysts to evaluate this non-GAAP measure on the same basis as we use to evaluate our operating results.

Adjusted EBITDAS is a non-GAAP measure and may not be comparable to similar measures reported by other companies. In addition, non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. We address the limitations of non-GAAP measures through the use of various GAAP measures. In the future, we may incur expenses or charges such as those added back to calculate Adjusted EBITDAS. Our presentation of Adjusted EBITDAS should not be construed as an inference that our future results will be unaffected by these items.

The following table sets forth our calculation of non-GAAP Adjusted EBITDAS for the three and nine months ended January 31, 2024 and 2023, respectively (dollars in thousands):

*(Unaudited)*

|  | For the Three Months Ended January 31, 2024 | 2023 | For the Nine Months Ended January 31, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| GAAP net loss | $(2,910) | $(2,863) | $(6,946) | $(8,188) |
| Interest expense | 65 | 213 | 71 | 641 |
| Income tax expense/(benefit) | 13 | (125) | 28 | (98) |
| Depreciation and amortization | 3,968 | 3,894 | 11,848 | 12,115 |
| Stock compensation | 1,133 | 1,065 | 3,071 | 2,900 |
| Technology implementation | 106 | 543 | 465 | 1,585 |
| Acquisition costs | — | — | — | 47 |
| Facility consolidation costs | — | 548 | — | 840 |
| Stockholder cooperation agreement costs | — | — | — | 1,177 |
| Other | — | — | 204 | — |
| Non-GAAP Adjusted EBITDAS | $2,375 | $3,275 | $8,741 | $11,019 |

26

### Liquidity and Capital Resources

We expect to continue to utilize our cash flows to invest in our business, including research and development for new product initiatives; to hire additional employees; to fund growth strategies, including any potential acquisitions; to make payments on any indebtedness we may incur over time; and to repurchase shares of our common stock if we are authorized to do so.

The following table sets forth certain cash flow information for the nine months ended January 31, 2024 and 2023 (dollars in thousands):

|  | 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Operating activities | $9,823 | $24,263 | $(14,440) | -59.5% |
| Investing activities | (5,320) | (4,231) | (1,089) | 25.7% |
| Financing activities | (10,563) | (17,843) | 7,280 | -40.8% |
| Total cash flow | $(6,060) | $2,189 | $(8,249) | -376.8% |

### Operating Activities

On an annual basis, operating activities generally represent the principal source of our cash flow.

Cash generated by operating activities was $9.8 million for the nine months ended January 31, 2024 compared with cash generated by operating activities of $24.3 million for the nine months ended January 31, 2023. Cash generated by operating activities for the nine months ended January 31, 2024 was primarily impacted by $1.3 million of lower prepaid expenses and other current assets because of reduced deposits on inventory and increased accrued payroll and incentives because of higher management incentive accruals, offset by lower accounts payable due to timing.

### Investing Activities

Cash used in investing activities was $1.1 million higher during the nine months ended January 31, 2024 compared with the prior year comparable period, primarily from higher spending on warehouse equipment in conjunction with the Lease assignment, noted below. We expect to spend approximately $6.0 million to $6.5 million of capital expenditures in fiscal 2024, an increase of $1.1 million to $1.6 million over fiscal 2023.

### Financing Activities

Cash used in financing activities was $10.6 million for the nine months ended January 31, 2024, primarily from $5.0 million to payoff all our borrowings on our revolving line of credit and $5.6 million used to repurchase 635,075 shares of our common stock.

On January 31, 2023, we entered an Assignment Agreement with our former parent company and RCS – S&W Facility, LLC to assign to us the rights of the tenant under the Lease Agreement, dated October 26, 2017, as amended by the First Amendment of Lease Agreement, dated October 25, 2018, and as further amended by the Second Amendment to Lease Agreement, dated January 31, 2019 (collectively, the “Lease”), which assignment was effective on January 1, 2024.

The Lease covers approximately 632,000 square feet of building and surrounding property located at 1800 North Route Z, Columbia, Boone County, Missouri, or the Building, where we formerly subleased approximately 361,000 of the Building from our former parent company. We now lease the entire building and the Lease provides us with an option to expand the Building by up to 491,000 additional square feet. The terms of the Lease are consistent with the sublease agreement that we formerly had with our former parent company. The Lease term ends on November 26, 2038 and, pursuant to the Assignment Agreement, does not provide for an extension of the term of the Lease. We will receive tax and other incentives from federal, state, and local governmental authorities previously received by our former parent. Our former parent will guarantee the Lease through the end of the term. During the three months ended January 31, 2024, we recorded a right-of-use asset and lease liability of $10.6 million for the additional space provided under the Assignment Agreement.

Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, any acquisitions or strategic investments that we may determine to make, and changes in consumer spending, which is sensitive to economic conditions and other factors. Further equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained.

We had $15.9 million of cash equivalents on hand as of January 31, 2024 and had $22.0 million in cash and cash equivalents on hand as of April 30, 2023.

### Other Matters

### Critical Accounting Policies

The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Significant accounting policies are summarized in Note 2 of the Notes to the consolidated and combined financial statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023. The most significant areas involving our judgments and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023, to which there have been no material changes. Actual results could differ from our estimates.

### Recent Accounting Pronouncements

The nature and impact of recent accounting pronouncements, if any, is discussed in Note *2—Basis of Presentation* to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

## Market risk

As filed, 140 characters.

There were no material changes from the information provided in Quantitative and Qualitative Disclosures about Market Risk in the Form 10-K.

## Controls and procedures

As filed, 1,211 characters.

### Disclosure Controls and Procedures

As of January 31, 2024, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) and have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter ended January 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 299 characters.

We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on June 28, 2023, risk factors that materially affect our business, financial condition, or results of operations. There have been no material changes from the risk factors previously disclosed.

Filed Mar 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-027969. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.