American Outdoor Brands, Inc.: Form 10-Q for the period ended Jul 31, 2026

Overview

The following discussion and analysis of our financial condition and results of operations for the three months ended July 31, 2026 and 2025 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, 2026. 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 for hunting, fishing, rugged outdoor activities, meat processing, and outdoor cooking.

U.S. Tariff Developments

The current political and economic environment is dynamic and uncertain, as the current U.S. Administration has imposed tariffs such as Section 301 and Section 232 of the Trade Act, modified and paused tariffs, and granted exemptions from tariffs, on different countries and products multiple times recently.

In 2025, the U.S. Administration imposed a series of tariffs on nearly all U.S. trading partners pursuant to the International Emergency Economic Powers Act of 1977 (“IEEPA”). On February 20, 2026, the United States Supreme Court issued a ruling striking down tariffs previously imposed under IEEPA. Immediately following the Supreme Court ruling, the U.S. government initiated new tariffs under Section 122 of the Trade Act ("Section 122 tariffs") which have been in effect since February 24, 2026. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.

In March 2026, the U.S. Court of International Trade ("CIT") issued an order directing U.S. Customs and Border Protection ("CBP") to process refunds of certain IEEPA tariffs. In April 2026, CBP released a new system to process IEEPA tariff refunds, allowing importers to submit refund claims. We believe it is probable that we will recover the IEEPA tariffs previously paid and have recognized IEEPA tariff refund receivables under the loss recovery accounting model. Accordingly, we recorded a receivable of $15.2 million as of April 30, 2026 and an additional receivable of $693,000 for new claims submitted during the three months ended July 31, 2026. As of July 31, 2026, we have received $14.2 million in cash related to these receivables and have a remaining receivable of $1.7 million, which was recorded in other current assets.

In addition, during the three months ended July 31, 2026, we recognized a net benefit of approximately $200,000 related to expected recoveries of previously paid IEEPA tariffs, which was recorded as a reduction of cost of goods sold, representing the expense for IEEPA tariffs on inventory sold to customers prior to April 30, 2026.

The ultimate timing and amount of recoveries for our outstanding receivables and potential future claims remain subject to review and processing by governmental authorities and could be affected by future legal, regulatory, or administrative developments. In addition, there continues to be uncertainty regarding existing and proposed tariff regimes, including the potential imposition, modification, suspension, or invalidation of tariffs under various statutory authorities. We continue to monitor tariff-related developments and assess their potential impact on its business, financial condition, and results of operations.

First Quarter Fiscal 2027 Highlights

Our operating results for the three months ended July 31, 2026 included the following:

• Net sales were $37.3 million, an increase of $7.6 million or 25.4%, from the comparable quarter last year.
• Gross margin was 53.0%, an increase of 630 basis points, over the comparable quarter last year.
• Net loss was $1.5 million, or $(0.12) per diluted share, compared with a net loss of $6.8 million, or $(0.54) per diluted share, for the comparable quarter last year.
• Non-GAAP Adjusted EBITDA was $1.2 million for the three months ended July 31, 2026 compared with a loss of $3.1 million for the three months ended July 31, 2025. 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 July 31, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding net sales categories for the three months ended July 31, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding trade channel net sales for the three months ended July 31, 2026 and 2025 (dollars in thousands):

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 July 31, 2026 and 2025 (dollars in thousands):

For the three months ended July 31, 2026, total net sales increased $7.6 million, or 25.4%, from the comparable quarter last year. We believe the increase in net sales was primarily attributable to the timing of orders from certain customers in our traditional channel. In the prior year, we believe these customers accelerated orders that otherwise would have occurred in the first fiscal quarter of 2026 into the fourth fiscal quarter of 2025 in anticipation of increased costs associated with tariffs imposed by the U.S. administration in March and April 2025. As a result, net sales in the first fiscal quarter of 2026 were reduced by these accelerated orders, while the first fiscal quarter of 2027 did not experience a comparable shift in order timing. In addition to the impact of order timing on the year-over-year comparison, net sales increased as a result of pricing actions taken on our products to mitigate additional tariff costs associated with tariffs imposed by the U.S. Administration starting in March and April of 2025; higher sales to two of our largest retailers, including our largest e-commerce retailer and our largest mass retailer; as well as higher direct-to-consumer sales of products sold through our own websites. Our international net sales increased $606,000, or 32.7%, over the comparable quarter last year as a result of increased sales to our European and Canadian customers.

Net sales in our shooting sports channel increased $2.1 million, or 15.3%, over the comparable quarter last year, primarily because of higher net sales of shotgun sports products within our shooting accessories category, which benefited from new product sales, partially offset by lower net sales of aiming solutions products within our personal protection category as a result of lower demand.

Net sales in our outdoor lifestyle channel increased $5.4 million, or 34.4%, over the comparable quarter last year, which reflected higher net sales of our hunting, fishing, rugged outdoor, and outdoor cooking categories, which also benefited from new product sales.

New products, which we define as any SKU introduced over the trailing 24 months, represented 36.1% of net sales for the three months ended July 31, 2026. New products represented 28.8% of net sales for the three months ended July 31, 2025.

Gross margin for the three months ended July 31, 2026 increased 630 basis points over the comparable quarter last year, primarily because of new product sales that typically have higher gross margins, pricing actions mentioned above, favorable channel mix, and lower tariff expenses.

Operating Expenses

The following table sets forth certain information regarding operating expenses for the three months ended July 31, 2026 and 2025 (dollars in thousands):

Research and development expenses decreased $403,000 from the comparable quarter last year, primarily from lower depreciation expense. Selling, marketing, and distribution expenses increased $1.8 million over the comparable quarter last year mainly because of higher sales-volume related expenses. General and administrative expenses decreased $181,000 from the comparable quarter last year, primarily because of lower bad debt expense and acquired intangible asset amortization, partially offset by higher professional fees.

Operating Loss

The following table sets forth certain information regarding operating loss for the three months ended July 31, 2026 and 2025 (dollars in thousands):

Operating loss for the three months ended July 31, 2026 was $4.7 million lower as compared to the comparable quarter last year primarily from higher net sales volume and higher gross profit.

Income Taxes

The following table sets forth certain information regarding income tax benefit for the three months ended July 31, 2026 and 2025 (dollars in thousands):

We recorded income tax expense of $1,000 for the three months ended July 31, 2026 compared with income tax expense of $52,000 for the prior year comparable period. The income tax expense recorded for the three months ended July 31, 2026 and 2025 was primarily due to a full valuation allowance recorded against our deferred tax assets.

Net Loss

The following table sets forth certain information regarding net loss and the related per share data for the three months ended July 31, 2026 and 2025 (dollars in thousands, except per share data):

Net loss was $1.5 million, or $0.12 loss per diluted share, for the three months ended July 31, 2026 compared with a net loss of $6.8 million, or $0.54 loss per diluted share, for the comparable quarter last year. The lower net loss was primarily related to higher net sales volume and higher gross profit during the three months ended July 31, 2026 as compared to the three months ended July 31, 2025.

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 months ended July 31, 2026 and 2025, 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 three months ended July 31, 2026 and 2025 (dollars in thousands):

Operating Activities

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

Cash provided by operating activities was $13.0 million for the three months ended July 31, 2026 compared with cash used in operating activities of $1.7 million for the three months ended July 31, 2025. Cash provided by operating activities for the three months ended July 31, 2026 was primarily impacted by $12.6 million of lower other current assets as a result of receiving $14.2 million of IEEPA refunds during the quarter for claims filed at the end of our prior fiscal year, $3.7 million of reduced accounts receivable due to timing of customer shipments, $2.1 million of increased accrued expenses for higher tariff and professional fees accruals, and $1.8 million of higher accounts payable due to timing of inventory purchases. The increase in cash from operations was partially offset by $8.4 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.

Investing Activities

Cash used in investing activities was $494,000 during the three months ended July 31, 2026 for payments on capital expenditures, an increase of $124,000 as compared to the prior year comparable period. We expect to spend approximately $3.5 million to $4.0 million of capital expenditures in fiscal 2027, an increase of $1.0 million to $1.5 million from the $2.5 million we spent in fiscal 2026.

Financing Activities

Cash used in financing activities was $706,000 for the three months ended July 31, 2026 which consisted of payments of employee withholding tax related to vested restricted stock units.

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 $33.3 million of cash equivalents on hand as of July 31, 2026 and had $21.4 million in cash and cash equivalents on hand as of April 30, 2026.

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, 2026. 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, 2026, 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 July 31, 2026, 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 July 31, 2026 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 25, 2026, 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.