Johnson Outdoors (JOUT) Earnings Transcript

Image source: The Motley Fool.

DATE

Aug. 1, 2025, 11 a.m. ET

CALL PARTICIPANTS

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

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Revenue -- $180.7 million in the third fiscal quarter ending June 2025, an increase of 5% from the prior year third fiscal quarter.
• Operating Profit -- $7.3 million in the third fiscal quarter ending June 2025, compared to an operating loss in the prior year third fiscal quarter.
• Gross Margin -- 37.6% in the third fiscal quarter ending June 2025, a rise of 1.8 percentage points year-over-year.
• Operating Expenses -- Decreased by $1.7 million in the third fiscal quarter ending June 2025, and excluding a $2 million deferred compensation increase, dropped $3.7 million versus prior year third fiscal quarter.
• Inventory -- Ended the quarter at $163.7 million, down $59.4 million from the prior year third quarter.
• Fishing Segment (Electronics) -- The Humminbird MEGA Live 2 Sonar and XPLORE fish finder unit saw demand exceed expectations and the XPLORE series won "Best in Electronics" at ICAST.
• Camping Segment (Jetboil) -- Orders for Jetboil Fast Boil cooking systems with improved boil times and fuel efficiency outpaced expectations.
• Watercraft Segment -- "Old Town remains resilient" according to Johnson-Leipold, despite persistent weakness in the overall watercraft marketplace.
• Diving Segment -- Saw slight improvement in results during the quarter amid "challenged" global market conditions.
• Tariffs -- Modest negative impact in the quarter, with further cost expected to be expensed in the fourth quarter, according to David W. Johnson.
• Cost Savings -- Operating expense reductions were attributed to lower promotional and professional services spending, and ongoing factory and product cost initiatives.
• Balance Sheet -- Remained debt-free and maintained a "solid cash position" as described by management.
• Sales Trend -- Management stated, "every month, we saw improvement in our sales" throughout the quarter.
• Pricing -- David W. Johnson noted that pricing increases were implemented "on certain product lines," with ongoing evaluations across the portfolio.

SUMMARY

Johnson Outdoors (NASDAQ:JOUT) delivered higher revenue and returned to operating profitability in the third quarter as market demand for new fishing and camping products exceeded expectations. Management highlighted inventory reductions and improved gross margins as contributors to the better financial results. Leadership confirmed that multiple industry awards for product innovation enhanced momentum within the Fishing business segment. The company is proactively managing tariff-related headwinds, cost structure, and pricing strategies while benefiting from a debt-free balance sheet.

• Management confirmed steady month-over-month sales gains during the quarter but described the broader environment as "dynamic" and subject to ongoing uncertainty.
• Integration work continues with a long-term supplier acquired earlier in the fiscal year, which management expects to deliver planned benefits.
• Leadership stated they "will always have to consider promotions" as a tactic based on market conditions, signaling flexibility in commercial strategy.

INDUSTRY GLOSSARY

• ICAST: International Convention of Allied Sportfishing Trades, the largest annual global fishing trade show, considered a leading venue for product awards.
• Deferred Compensation Plan Valuation: An accounting adjustment related to the change in value of deferred employee compensation liabilities, impacting reported operating expenses.
• Overhead Absorption: The allocation of indirect manufacturing costs—such as factory overhead—across produced units, impacting gross margin based on production volume.

Full Conference Call Transcript

Helen P. Johnson-Leipold: Good morning, everyone. Thank you for joining us. I'll begin by sharing perspective on our third quarter 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. Sales in our third fiscal quarter ending June 2025 increased 5% to $180.7 million compared to $172.5 million in the prior year third quarter. Operating profit was up significantly to $7.3 million versus an operating loss in the previous third quarter. While the marketplace continued to fluctuate, our positive results this quarter reinforce the critical importance of our focus and investment in market-leading innovation to continued growth and success of our brands.

In our Fishing business, demand for Hummingbird's new fish finder technology, MEGA Live 2 Sonar and our new XPLORE fish finder unit has been exceeding expectations. I'm excited to announce that a few weeks ago, our XPLORE series captured Best in Electronics honors at ICAST, the world's most prestigious fishing show. Also, Boating Magazine recently awarded our Minn Kota brand, the Marine Power Innovation Award for our Riptide Instinct brushless trolling motor. We're excited by the response to our innovation in this business, and we will continue to invest in being an innovation leader to drive future growth. In our Camping and Watercraft business, both our Old Town and Jetboil brands remain strong leaders in their markets.

Orders for Jetboil's newest Fast Boil cooking systems with features building on lightened fast boil times and fuel efficiency continue to outpace expectations. And while the watercraft marketplace is still weak and the industry struggles, Old Town remains resilient and continues to build on its industry-leading innovation. Results in our Diving business were slightly improved amidst stronger market conditions during the third quarter. However, the diving marketplace remains challenged with uncertainties in the global economy and consumer travel, and we continue to work well -- to be well positioned in diving for the future.

We continue our integration work with the long-term supplier we purchased at the beginning of this fiscal year, and we are confident it will deliver the benefits we plan for. We are also focused on finding ways to drive more operational efficiencies across the business. Overall, we are pleased with our positive third quarter results and the success of our innovation. At the same time, global macroeconomic challenges continue to drive uncertainties in the marketplace. We continue to invest and execute on our strategic priorities, innovation, operational efficiencies and e-commerce and our resiliency as a company is further bolstered by our debt-free balance sheet and cash position.

We are confident these are the right things to position us for future healthy profitable growth. Now I'll turn the call over to Dave for more details on the financials.

David W. Johnson: Thank you, Helen, and good morning, everyone. Profit before income taxes in the third quarter was up significantly due to an increase in sales, gross margin improvements and a reduction in operating expenses versus the prior year. Gross margin in the third quarter was 37.6%, up 1.8 points from last year's quarter. Overhead absorption from higher volumes, improved pricing and cost savings efforts drove the improvements, offset by a modest impact from tariffs. Operating expenses decreased $1.7 million versus the prior year third quarter. And excluding the $2 million increase from the deferred compensation plan valuation, expenses are down $3.7 million. Lower promotion and professional services expenses contributed to the decline. We continue to make progress on our inventory levels.

Our inventory balance as of June was $163.7 million, down about $59.4 million from last year's third quarter and down from our fiscal year-end. Regarding tariffs, while the current environment remains dynamic, we've made progress on our mitigation strategies. We'll continue to adjust as the tariff situation evolves and we gain more clarity. Our cost savings program remains critical in this environment, and we're committed to driving optimal product costs and enhanced operating efficiency across the company. Again, I'll reiterate that our balance sheet remains debt-free, and we have a solid cash position. We remain confident in our ability and plans to create long-term value for our shareholders.

Now I'll turn the call over to the operator for the Q&A session.

Operator: [Operator Instructions] And we have a question from Anthony Lebiedzinski of Sidoti.

Anthony Chester Lebiedzinski: Certainly nice to see the improved sales and much better profitability in the quarter. So as you alluded to, it's been certainly a dynamic environment to say the least. Can you comment on the cadence of sales that you saw throughout the quarter as you went from April through June? And can you give us maybe some early read or color as to how the month of July was?

Helen P. Johnson-Leipold: Well, certainly, as we look at the quarter, every month, we saw improvement in our sales. So it was a positive trend. It's a little early to talk about the final quarter, but it is towards the end of the season, and we are hoping to end in a good spot looking forward to more stability certainly for next season, but it is good to see some positive results.

Anthony Chester Lebiedzinski: Absolutely. Okay. All right. And then I know, Dave, you touched on the impact of tariffs. It sounds like it was a modest impact in the quarter. So as we look to update our models, how should we think about the impact of tariffs going forward? Just curious to get your thoughts on that.

David W. Johnson: Yes. I mean I do expect more cost coming in, in the fourth quarter. So we're forecasting that to see the tariffs kind of flow through our inventories and get out to be expensed. Beyond that, I mean, as you know -- as everybody knows, it's -- things are changing on a daily, weekly basis. So we're ready to mitigate these tariffs as we head into next season. And we've made -- and like I said, we've made really good progress on the supply chain side of things, and we'll continue to look at other alternatives to mitigate that.

Anthony Chester Lebiedzinski: Right. So I guess one of the ways you can mitigate that is through pricing actions. Can you comment on that, what you've done and any potential things that you may want to do?

David W. Johnson: Yes. We have taken pricing on certain product lines in our portfolio. We'll continue to look at that going forward kind of across the portfolio, keeping in mind the consumer dynamics that we're looking at, competitive situation, et cetera. But that will definitely be something we'll look at.

Anthony Chester Lebiedzinski: Got it. Okay. And then you guys have been certainly working on your cost savings program for a while to be more efficient in terms of how you operate the business. Can you give us an update on that, like what was done in the quarter and kind of what's more to come as you look to get into your fiscal '26 year in a couple of months?

David W. Johnson: Yes. I mean the cost savings program is robust. We last year had a ton of factory efficiencies that we recognized. We continue that work this year, and we are focused on product cost improvements. And that will take a little bit of time to manifest, but we're very excited about the portfolio of initiatives that we've got in the pipeline.

Anthony Chester Lebiedzinski: Got it. Okay. And then -- so here, in this quarter, you benefited also from lower discounting promotions. Do you think you can sustain this type of a trend here? I certainly realize that you're kind of getting towards the end of the season, but just broadly thinking about that, whether you think you can sustain this type of reduced promotional activity going forward?

Helen P. Johnson-Leipold: Well, I think we obviously are in very competitive markets. And we put programs together to reflect what we need to do. I think the fourth quarter is normally not a high quarter for us from a seasonal standpoint. But if you're referring to -- as we move forward, we will always have to consider promotions as a tactic depending on what's going on in the market.

Anthony Chester Lebiedzinski: Right. Okay. And then as far as the recent awards that you've received, I know at the ICAST show, we did get a Best in Electronics award. So thinking about that, I mean, have you seen -- because of that, have you seen an uptick -- a further uptick in demand because of that? Just wondering how to think about that and how that could translate into sales for you guys?

Helen P. Johnson-Leipold: Well, it certainly is our target audience that pays attention to the ICAST and getting recognition for the XPLORE fish finder unit was -- it just adds to the momentum. So we were very happy about that. But it definitely got off to a very good start.

Anthony Chester Lebiedzinski: That's good to hear. All right. And then I guess my last question here is you've done a nice job reducing inventory. Do you think you can further reduce inventory in the next couple of quarters here?

David W. Johnson: We're working on that for sure. I think there's more improvement to be had. We've made really good progress. We feel good about kind of our ability to put process in place to really manage that. The caveat is just the macroeconomic environment, the tariffs that, of course, will add cost or inventory, et cetera. But we feel good about where we are right now, but we know we got more progress to make.

Operator: I'm showing no further questions at this time. I'd like to turn it back to Helen Johnson-Leipold for closing remarks.

Helen P. Johnson-Leipold: I just want to thank all of you for joining us today, and everybody, have a nice day. Thank you.

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

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.