Johnson Outdoors (JOUT) Earnings Call Transcript

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Date

Friday, December 12, 2025 at 11 a.m. ET

Call participants

• Chairman and Chief Executive Officer — Helen Johnson-Leipold
• Vice President and Chief Financial Officer — David W. Johnson

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Takeaways

• Total Company Sales -- Flat for the full fiscal year compared to the prior year, indicating neither overall contraction nor growth across the business portfolio.
• Operating Loss -- $16.2 million, an improvement relative to fiscal 2024's operating performance.
• Pretax Loss -- $9.3 million, a significant reduction from the $29.9 million pretax loss in fiscal 2024, primarily due to prior-year goodwill write-offs and better gross margin and operating cost control.
• Tax Expense -- $25 million, which included a $25.9 million noncash reserve on U.S. deferred tax assets reflecting a reassessment of asset realizability after recurring losses.
• Gross Margin -- 35.1%, up 1.2 percentage points from the prior year, driven by cost savings, increased volume, and reduced inventory reserves.
• Operating Expenses -- Decreased 8%, or $20.2 million, compared to the prior year, with reductions stemming from previous goodwill write-off, lower promotional spending, and lower deferred compensation costs.
• Inventory Balance -- $170.7 million at year-end, down approximately $39 million from fiscal 2024, linked to focused inventory management initiatives.
• Cash Flow from Operations -- Positive for the third consecutive year, with inventory reduction cited as a driver.
• Debt Status -- Debt-free balance sheet, with the company maintaining a healthy cash position.
• Fishing Segment Product Performance -- Demand for Humminbird's XPLORE Series and MEGA Live 2 fishfinders notably exceeded expectations, with the XPLORE Series receiving the Anglers' Choice Award and best in category honors at ICAST.
• Camping and Watercraft Performance -- Sales declined overall due to the 2024 Eureka! exit, but excluding Eureka! prior-year sales, the segment grew 2%.
• Jetboil and Old Town Brands -- Jetboil's new fast boil cooking systems outpaced demand expectations, and Old Town's fishing kayak line performed positively despite ongoing challenges in the overall watercraft market.
• Diving Segment Sales -- Increased modestly, attributed to improvements in select regional markets and the launch of the new Hydros Pro 2 buoyancy control device, with initial shipment slated shortly after the call.
• Digital and E-Commerce Initiatives -- Stated as "fueling growth," with a commitment to continued digital expansion.
• Cost Savings Initiatives -- Management confirmed these remain a company-wide focus, supporting margin improvement and offsetting higher material costs.
• Tariff Mitigation -- Progress reported on mitigation strategies, with ongoing adjustments to tariff changes and selective price increases accepted by retail partners thus far.
• Gross margin improved by over 1 percentage point in fiscal 2025 due to a portfolio of cost savings initiatives, including operational efficiencies.
• Tax Rate Outlook -- Management expects an effective tax rate in the "mid- to high-20s" percent range for fiscal 2026, assuming the deferred tax asset reserve remains in place.
• Product Innovation Pipeline -- Management cited innovation as a "key priority" with momentum from recent launches continuing across business segments, but withheld specifics for competitive reasons.

Summary

Johnson Outdoors (NASDAQ:JOUT) reported unchanged annual sales and achieved a large reduction in operating and pretax losses, driven by improved cost controls and gross margin expansion. The company implemented a substantial noncash reserve on deferred tax assets, contributing significantly to the reported tax expense. The Fishing segment experienced robust demand for newly launched products, especially within the Humminbird brand. Digital commerce initiatives and operational enhancements were identified by management as ongoing strategic drivers for the business. Brands exiting the portfolio had a material impact, but select segments returned to growth after adjusting for these changes.

• The Hydros Pro 2 launch in the Diving segment was highlighted by management as a recent innovation with favorable early reception at a major trade show.
• Inventory was reduced by $39 million, continuing a multi-year trend of operational improvement and positive operating cash flow.
• Tariff-related cost pressures led management to adopt strategic price increases, which have so far met with acceptance from retail partners.
• Going forward, management expects the tax rate to normalize in the "mid- to high-20s" percent range if current reserves are maintained.
• Operational efficiency and cost control initiatives are set to continue into fiscal 2026 as a primary strategic focus.

Industry glossary

• ICAST: The International Convention of Allied Sportfishing Trades, widely regarded as the world’s largest sportfishing trade show.
• DEMA: The Diving Equipment & Marketing Association trade show, the largest event in the scuba diving industry.
• Buoyancy Control Device: Equipment used by divers to establish, maintain, or adjust buoyancy underwater.
• Deferred Tax Asset Reserve: An accounting provision reducing recognized value of deferred tax assets based on anticipated realizability, often in response to recent operating losses.

Full Conference Call Transcript

Helen Johnson-Leipold: Thanks, Pat. Good morning, everyone. Thank you for joining us. I'll begin by sharing perspective on our fiscal 2025 performance as well as an update on the strategic priorities for our businesses. Dave will review the financial highlights, and then we'll take your questions. After a slow start to the beginning of the year, new product successes drove double-digit growth in the second half of the year, resulting in a solid finish to fiscal 2025. Total company sales for the full fiscal year were flat compared to the prior year. Although we still have a lot of work to do to get our profitability where it needs to be, our operating loss of $16.2 million improved compared to fiscal 2024.

While the marketplace is still uncertain, we feel good about the momentum we're seeing and the execution of our plans to accelerate the growth of our business and brands. In fishing, demand exceeded expectations for Humminbird's new XPLORE Series and MEGA Live 2 fishfinders. In addition to XPLORE winning best in category marine electronics honors at ICAST this summer, we were also honored to recently receive the Anglers' Choice Award. This is a meaningful award because consumers themselves directly vote for their favorite new fishing product. As always, we're focused on finding out what anglers want and need and then turning those insights into cutting-edge technologies to give them the best fishing experiences possible.

We will continue to invest in being an innovation leader to drive future growth. In our Camping and Watercraft business, sales declined for fiscal 2025, driven primarily by the closeout of Eureka! inventory in 2024 after we exited that brand. Excluding the impact of Eureka! sales in the prior year, this segment grew by 2%. Demand for JetBoil's new fast boil cooking systems continued to outpace expectations. And Old Town's fishing kayak line is doing well in a watercraft marketplace that overall is still struggling. Both Old Town and Jetboil remain strong leaders in their markets, and we are committed to the long-term opportunity in these 2 brands.

In Diving, sales were up for the fiscal year due to modest improvements in certain regional markets. While we continue to work on integrating the acquisition of a long-time supplier during the fiscal year, we also focused our efforts on innovation. Recently, SCUBAPRO launched the new Hydros Pro 2, a buoyancy control device built for ultimate performance in all dive conditions. Hydros Pro 2 builds on the award-winning legacy of our original Hydros Pro, and we've seen great reception so far with lots of enthusiasm at DEMA, the world's largest scuba diving trade show. We look forward to shipping Hydros Pro 2 beginning this month.

Along with diving innovation in all business segments, we focused on strengthening our digital and e-commerce capabilities. Our goal is simple: make our products easy to find wherever consumers choose to shop. The landscape keeps changing, but our efforts to expand our digital footprint are already fueling growth, and we're excited about the progress. Digital and e-commerce continue to be an area of opportunity, and we're committed to building on that momentum. Finally, our cost savings program remains a priority company-wide, and we continue to work on driving optimal product costs and enhancing operating efficiencies. Cost savings will continue to be a key priority in fiscal 2026. Overall, we're pleased with the solid finish to our fiscal year.

While it's still too early to tell if the outdoor recreation marketplace has turned the corner, we do expect global macroeconomic challenges to continue to drive uncertainties and our strategic priorities remain more important than ever. Heading into fiscal 2026, we feel confident that our ongoing investment in the consumer-driven innovation and digital and e-commerce excellence, along with our continued hard work on operational efficiencies are the right drivers to position Johnson Outdoors for future success. Now I'll turn the call over to Dave for more details on financials.

David Johnson: Thank you, Helen, and good morning, everyone. Loss before income taxes for 2025 was $9.3 million compared to a pretax loss of $29.9 million in fiscal 2024, with the improvement mainly due to the $11.2 million write-off of goodwill in the prior year as well as an increase in gross margin and decrease in operating expenses versus the prior year. In fiscal 2025, we saw a tax expense of $25 million compared to a tax benefit of $3.3 million in the prior year. The current year expense was driven by a $25.9 million noncash reserve on U.S. deferred tax assets.

This reserve reflects the company's assessment of the realizability of those assets in light of recent operating losses and may be released in future periods when profitability improves. Gross margin for the fiscal '25 improved to 35.1%, up 1.2 points from the prior year. We're pleased with our progress on cost savings initiatives, which offset increases in material costs. Overhead absorption from higher volumes and reduced inventory reserves added to the improvement in gross margin. Operating expenses decreased by 8% or $20.2 million from the prior fiscal year.

Key drivers of the expense change were the write-off of the goodwill in the prior year, a decrease in promotional spending versus the prior year period and lower deferred compensation costs between years. For the third year in a row, we were able to drive positive cash flow from operations. We continue to make progress on our inventory levels in fiscal 2025, which was one of the drivers of positive cash flow. Our inventory balance was at the end of the year was $170.7 million, down about $39 million from fiscal '24. Regarding tariffs, we've made progress on our mitigation strategies, and we'll continue to make adjustments as the tariff situation evolves. Our balance sheet remains debt-free.

We have a healthy cash position, and we remain confident in our ability and plans to create long-term value for shareholders. Now I'll turn the call over to the operator for the Q&A session.

Operator: [Operator Instructions] Our first question comes from the line of Anthony Lebiedzinski from Sidoti.

Anthony Lebiedzinski: Certainly great to see the strong year-over-year sales gain in the fourth quarter along with the gross margin improvements. So as we think about the fourth quarter revenue gain, correct me if I'm wrong, but I think it was mostly volume driven. Just wondering if you have seen this momentum continue into early fiscal '26.

Helen Johnson-Leipold: We were really excited about what happened in the third and fourth quarter. And we just -- every month, things grew and the markets looked better than they have. And we don't give too much forward-looking statements. But I would say, so far, at least it's just very early in the year, but there's -- the market momentum is continuing as far as we can see. But there's no -- we're not ready to say the market has turned the corner. This is our sell-in period, and time will tell, but the season -- hopefully, it will be a very good season. So right now, knock on wood, things look pretty good.

Anthony Lebiedzinski: That's great to hear. Okay. So it sounds like you are seeing some green shoots, I guess. I know you've put in a lot of focus on product innovation, and I know you highlighted a few products that did very well for you. Just wondering about the pipeline coming up for '26. I know you don't want to share specifics given competitive reasons, but anything you can just talk at a high level as far as new product pipeline for next year?

Helen Johnson-Leipold: Well, we did -- yes, in diving, we talked about our new buoyancy compensator. And we've still got momentum in fishing from the launches that we had this past year. And launches are over more than 1 year. So we feel good about the momentum. We're focused on building the pipeline across every business. And again, Jetboil had positive results for their innovation, and that will continue into this season. So innovation is our key priority, and we will always focus on that. And it's critical during the time when it's so competitive out there and consumers are a little bit price sensitive. It's all about innovation. So that is a key focus.

And we feel good about that -- it's one of our key priorities.

Anthony Lebiedzinski: Got you. Okay. And then as it relates to the tariffs, I know, Dave, you touched on this a little bit, but I think you guys did take some pricing actions a little bit in July, I think more so in October. If you could just comment on the extent of that and what's been the reception from the retail partners that you work with?

David Johnson: Yes. We did take pricing where it made sense. We were very strategic about what we wanted to do there. And so far, it's been okay. I mean the retailers understand our trade partners understand it. It hasn't affected the business right now. And as Helen alluded to, we're preseason right now. So it will be up to the consumer when those [indiscernible] to the shelves and make their decisions. But so far, so good.

Anthony Lebiedzinski: Okay. That's good to hear. And then with the work that you've done on improving your operational efficiencies and enhancing your manufacturing processes, is there a way you can perhaps put a number on that in terms of how much it helps your gross margin? And do you think there are more opportunities to further expand on that?

David Johnson: Yes. I mean we felt really good about the progress we made this year, and it was over 1 point of gross margin that we drove to the bottom line through the efforts. And we've got a full portfolio of cost savings initiatives going into fiscal '26. So we're going to continue the efforts, it's across the board. And that will be critical, again, to help manage the tariff situation and help manage the competitive environment.

Anthony Lebiedzinski: Got you. Got it. All right. And then I guess lastly for me, I know the tax rate was impacted by the deferred tax valuation. But just kind of going forward here, how do we think about the effective tax rate for fiscal '26?

David Johnson: Yes. I mean with the reserve in place, we would expect the tax rate going forward to be normal in a more normal range. So mid- to high 20s, something like that. So yes, going forward, we would expect that.

Operator: At this time, I would now like to turn the conference back over to Helen Johnson-Leipold for closing remarks.

Helen Johnson-Leipold: Thank you for joining us today, and I hope everybody has a happy holiday season. Have a good day.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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