American Outdoor Brands, Inc.: Form 10-Q for the period ended Oct 31, 2025

Overview

The following discussion and analysis of our financial condition and results of operations for the three and six months ended October 31, 2025 and 2024 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, 2025. 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.

Second Quarter Fiscal 2026 Highlights

Our operating results for the three months ended October 31, 2025 included the following:

• Net sales were $57.2 million, a decrease of $3.0 million or 5.0%, from the comparable quarter last year.
• Gross margin was 45.6%, a decrease of 240 basis points, from the comparable quarter last year.
• Net income was $2.1 million, or $0.16 per diluted share, compared with net income of $3.1 million, or $0.24 per diluted share, for the comparable quarter last year.
• Non-GAAP Adjusted EBITDA was $6.5 million for the three months ended October 31, 2025 compared with $7.5 million for the three months ended October 31, 2024. See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDA.

Our operating results for the six months ended October 31, 2025 included the following:

• Net sales were $86.9 million, a decrease of $15.0 million or 14.7%, from the prior year comparable period.
• Gross margin was 46.0%, a decrease of 100 basis points, from the prior year comparable period.
• Net loss was $4.8 million, or $(0.37) per diluted share, compared with net income of $746,000, or $0.06 per diluted share, for the prior year comparable period.
• Non-GAAP Adjusted EBITDA was $3.4 million for the six months ended October 31, 2025 compared with $9.5 million for the six months ended October 31, 2024. See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDA.

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 October 31, 2025 and 2024 (dollars in thousands):

22

The following table sets forth certain information regarding trade channel net sales for the three months ended October 31, 2025 and 2024 (dollars in thousands):

Our e-commerce channel 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 channel also include our direct-to-consumer sales. Our traditional channel 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 October 31, 2025 and 2024 (dollars in thousands):

The following table sets forth certain information regarding net sales categories for the three months ended October 31, 2025 and 2024 (dollars in thousands):

For the three months ended October 31, 2025, total net sales decreased $3.0 million, or 5.0%, from the comparable quarter last year with lower net sales in both our shooting sports and outdoor lifestyle categories, primarily from lower e-commerce channel net sales. The decrease in net sales was partially offset by price increases on our products to mitigate additional tariff costs associated with tariffs imposed by the U.S. Administration in March and April of 2025.

Net sales in our e-commerce channel decreased $3.9 million, or 15.9%, from the comparable quarter last year, primarily because of lower net sales to the world's largest online retailer. We believe this decline reflects their inventory management actions, which reduced net sales across most of our products. In addition, we had lower direct-to-consumer net sales for products sold on our websites due to reduced consumer demand.

Net sales in our traditional channel increased by $828,000, or 2.3%, compared to the same quarter last year, driven primarily by stronger hunting and outdoor cooking product sales within our outdoor lifestyle category. This growth was partially offset by lower sales of our meat processing equipment.

New products, which we define as any SKU introduced over the prior two fiscal years, represented 31.4% of net sales for the three months ended October 31, 2025.

Gross margin for the three months ended October 31, 2025 decreased 240 basis points over the comparable quarter last year, primarily because of higher promotional activity, including sales of slow-moving inventory at low margins; increased depreciation expense; and higher inbound freight and tariff costs.

The following table sets forth certain information regarding consolidated net sales and gross profit for the six months ended October 31, 2025 and 2024 (dollars in thousands):

The following table sets forth certain information regarding trade channel net sales for the six months ended October 31, 2025 and 2024 (dollars in thousands):

The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the six months ended October 31, 2025 and 2024 (dollars in thousands):

The following table sets forth certain information regarding net sales categories for the six months ended October 31, 2025 and 2024 (dollars in thousands):

For the six months ended October 31, 2025, total net sales decreased $15.0 million, or 14.7%, from the prior year comparable period. We believe the decrease in net sales was primarily a result of certain customers in our traditional channel accelerating into our fourth fiscal quarter of 2025 orders that we had originally planned to receive in our first fiscal quarter of 2026, which we believe was due to the anticipated increased costs associated with tariffs imposed by the U.S. Administration in March and April of 2025. The decrease in net sales was partially offset by price increases on our products to mitigate the additional tariff costs.

Net sales in our e-commerce channel decreased $9.7 million, or 23.7%, from the prior year comparable period, primarily because of lower net sales to the world's largest online retailer that resulted in lower net sales for the majority of our product categories.

Net sales in our traditional channel decreased $5.3 million, or 8.7%, from the prior year comparable period, which we believe is from acceleration of orders into our fourth fiscal quarter of 2025, as mentioned above. Traditional channel net sales decreased primarily because of lower net sales of the majority of our product categories, partially offset by higher personal protection product sales in our shooting sports category and outdoor cooking product sales in our outdoor lifestyle category.

New products, which we define as any SKU introduced over the prior two fiscal years, represented 30.5% of net sales for the six months ended October 31, 2025.

Gross margin for the six months ended October 31, 2025 decreased 100 basis points from the prior year comparable period, primarily because of higher promotional activity as well as higher depreciation, freight, and tariff costs.

Operating Expenses

The following table sets forth certain information regarding operating expenses for the three months ended October 31, 2025 and 2024 (dollars in thousands):

Research and development expenses decreased $644,000 from the comparable quarter last year, primarily from lower depreciation expense. Selling, marketing, and distribution expenses decreased $642,000 from the comparable quarter last year mainly because of lower sales-volume related expenses, including compensation-related expenses. General and administrative expenses decreased $545,000 from the comparable quarter last year, primarily because of lower variable compensation-related expenses and acquired intangible amortization expense, partially offset by higher public company costs.

The following table sets forth certain information regarding operating expenses for the six months ended October 31, 2025 and 2024 (dollars in thousands):

Research and development expenses decreased $363,000 from the prior year comparable period, primarily from lower depreciation expense. Selling, marketing, and distribution expenses decreased $1.5 million from the prior year comparable period mainly because of lower sales-volume related expenses, including compensation-related expenses. General and administrative expenses decreased $784,000 from the prior year comparable period, primarily because of lower variable compensation-related expenses and acquired intangible amortization expense, partially offset by higher public company costs.

Operating Income/(Loss)

The following table sets forth certain information regarding operating income for the three months ended October 31, 2025 and 2024 (dollars in thousands):

Operating income for the three months ended October 31, 2025 was $979,000 lower as compared to the comparable quarter last year primarily from lower net sales volume that resulted in $2.8 million of lower gross profit, partially offset by $1.8 million of lower operating expenses.

The following table sets forth certain information regarding operating (loss)/income for the six months ended October 31, 2025 and 2024 (dollars in thousands):

We recorded an operating loss of $4.7 million for the six months ended October 31, 2025 as compared to operating income of $497,000 in the prior year comparable period. The decrease in operating income is primarily because of lower net sales volume that resulted in $7.9 million of lower gross profit, partially offset by $2.7 million of lower operating expenses.

Income Taxes

The following table sets forth certain information regarding income tax benefit for the three months ended October 31, 2025 and 2024 (dollars in thousands):

We recorded no income tax expense for the three months ended October 31, 2025 compared with income tax expense of $12,000 for the comparable quarter last year. The income tax expense recorded for the three months ended October 31, 2025 and 2024 was primarily due to a full valuation allowance recorded against our deferred tax assets.

The following table sets forth certain information regarding income tax benefit for the six months ended October 31, 2025 and 2024 (dollars in thousands):

We recorded income tax expense of $53,000 for the six months ended October 31, 2025 compared with income tax expense of $34,000 for the prior year comparable period. The income tax expense recorded for the six months ended October 31, 2025 and 2024 was primarily due to a full valuation allowance recorded against our deferred tax assets.

Net Income/(Loss)

The following table sets forth certain information regarding net income and the related per share data for the three months ended October 31, 2025 and 2024 (dollars in thousands, except per share data):

Net income was $2.1 million, or $0.16 per diluted share, for the three months ended October 31, 2025 compared with net income of $3.1 million, or $0.24 per diluted share, for the comparable quarter last year. The lower net income was primarily related to lower net sales volume and lower gross profit during the three months ended October 31, 2025 as compared to the three months ended October 31, 2024.

The following table sets forth certain information regarding net (loss)/income and the related per share data for the six months ended October 31, 2025 and 2024 (dollars in thousands, except per share data):

Net loss was $4.8 million, or $0.37 loss per diluted share, for the six months ended October 31, 2025 compared with net income of $746,000, or $0.06 per diluted share, for the prior year comparable period. The net loss was primarily related to lower net sales volume and lower gross profit during the six months ended October 31, 2025 as compared to the six months ended October 31, 2024.

Non-GAAP Financial Measure

We use GAAP net income as our primary financial measure. We use Adjusted EBITDA, 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 EBITDA is defined as GAAP net income/(loss) before interest, taxes, depreciation, amortization, and stock compensation expense. Our Adjusted EBITDA calculation also excludes certain items we consider non-routine. We believe that Adjusted EBITDA is useful to understanding our operating results and the ongoing performance of our underlying business, as Adjusted EBITDA 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 EBITDA 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 EBITDA 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 EBITDA 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 EBITDA 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 EBITDA. Our presentation of Adjusted EBITDA 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 EBITDA for the three and six months ended October 31, 2025 and 2024, respectively (dollars in thousands):

(Unaudited)

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 six months ended October 31, 2025 and 2024 (dollars in thousands):

Operating Activities

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

Cash used in operating activities was $15.0 million for the six months ended October 31, 2025 compared with cash used in operating activities of $12.3 million for the six months ended October 31, 2024. Cash used by operating activities for the six months ended October 31, 2025 was primarily impacted by $4.1 million of lower accrued payroll and incentives because of timing of payroll accruals and the annual payment of management incentives and $19.3 million of increased inventory. The increase in inventory was a result of planned increase in purchases to prepare for the fall and winter hunting and holiday seasons as well as new product launches later in the fiscal year. In addition, we capitalized higher tariff costs into inventory for tariffs imposed on inventory purchases for product manufactured in China. The cash usage for the six months ended October 31, 2025 was partially offset by a $3.4 million increase in accounts payable due to the timing of inventory purchases as we built our inventory balances higher during our first fiscal quarter, and $2.4 million of increase accrued expenses primarily related to the higher tariff expense imposed on inventory purchases for product manufactured in China.

Investing Activities

Cash used in investing activities was $1.4 million during the six months ended October 31, 2025, a decrease of $217,000 as compared to the prior year comparable period. We expect to spend approximately $4.0 million to $4.5 million of capital expenditures in fiscal 2026, compared to the $3.9 million we spent in fiscal 2025.

Financing Activities

Cash used in financing activities was $4.0 million for the six months ended October 31, 2025, primarily from $3.2 million used to repurchase 314,376 shares of our common stock.

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 $3.1 million of cash equivalents on hand as of October 31, 2025 and had $23.4 million in cash and cash equivalents on hand as of April 30, 2025.

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, 2025. Our critical accounting policies 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, 2025, 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.

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

Disclosure Controls and Procedures

As of October 31, 2025, 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 October 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on June 26, 2025, 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.