American Outdoor Brands (AOUT) Earnings Transcript

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DATE

March 12, 2026, at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Brian Daniel Murphy
• Chief Financial Officer — H. Andrew Fulmer
• Vice President, Investor Relations — Elizabeth A. Sharp

TAKEAWAYS

• Net Sales -- $56.6 million, a 3.3% decrease year over year, attributed to an ongoing inventory reset at the largest e-commerce retailer and softness in the aiming solutions category.
• Outdoor Lifestyle Category Sales -- $35.3 million with 5.4% growth year over year, driven by BOG and MEAT! Your Maker brands, and representing over 62% of total company net sales.
• Shooting Sports Category Sales -- Down 15% year over year, mainly due to decreased demand for aiming solutions; Caldwell brand registered "solid growth" on the new Claycopter platform.
• Point of Sale (POS) Growth -- 5% increase year over year, marking a third consecutive quarter of positive POS results, led by the outdoor lifestyle category.
• Traditional Channel Sales -- Down 2.1% year over year; E-Commerce Channel Sales -- Down 4.6% year over year, with inventory reset and tariff pressures impacting channel performance.
• Gross Margin -- 41%, down 370 basis points from prior year; the decrease driven by new tariffs and a $1.2 million inventory reserve related to aiming solutions. Without the reserve, gross margin would have been 43.1%.
• Tariff Impacts -- $1.7 million IEEPA tariff expense recognized, first material period of impact; U.S. Supreme Court ruling struck down IEEPA tariffs on February 20, though those paid are amortizing through cost of goods sold as inventory turns.
• Inventory -- Ended quarter at $110.2 million, down from $124.0 million sequentially, due to working capital management and $13.8 million inventory reduction that includes assets held for sale related to UST.
• GAAP Operating Expenses -- $27.1 million, up from $25.8 million, reflecting a $3.4 million non-cash impairment for the UST brand, partially offset by lower variable costs and intangible amortization.
• Non-GAAP Operating Expenses -- $21.0 million, compared to $22.7 million in the prior year, excluding impairment and certain nonrecurring items.
• GAAP EPS -- Loss of $0.32, versus $0.01 last year; Non-GAAP EPS -- $0.12, down from $0.21 last year on approximately 12.5 million fully diluted shares.
• Adjusted EBITDA -- $3.3 million, down from $4.7 million, largely due to the inventory reserve and tariff impact.
• Cash Flow and Balance Sheet -- $10.4 million in cash, no debt, $1.4 million share buyback executed during the quarter, and a renewed $75 million credit line extended to March 2031.
• Operating Cash Inflow -- $9.9 million for the quarter, driven by lower accounts receivable and inventory.
• CapEx Guidance -- Full-year capital expenditure expectations lowered by $500,000 to a range of $3.5 million-$4.0 million.
• Brand Portfolio Actions -- Decision to divest UST camping and survival brand due to limited returns on innovation; recorded a $3.4 million non-cash impairment and are fulfilling orders from existing inventory while seeking a buyer.
• New Product Contribution -- Over 26% of net sales attributable to new products in the quarter, reflecting successful innovation strategy.
• Annual Guidance (Fiscal 2026) -- Maintained for net sales ($191 million-$193 million), gross margin (42%-43%), and adjusted EBITDA (4%-4.5% of net sales).
• Order Pull-Forward Impact -- $10 million of sales accelerated into prior year Q4 due to tariff avoidance, creating a reported annual sales decline of 13%-14%, but underlying decline would be approximately 5% excluding this effect.

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RISKS

• H. Andrew Fulmer said, "lower gross margins in Q4, primarily due to increased amortization of tariff variances, including IEEPA tariffs," signaling continued near-term gross margin pressure as capitalized tariffs flow through cost of goods sold.
• H. Andrew Fulmer indicated, "should we just directionally see continued gross margin pressure in 2027 as these capitalized tariffs continue," and confirmed, "Yeah. I think that is a safe assumption. We cannot comment on what the margin percentage would be, but when you think back to when the IEEPA tariffs started back in March and April, they were accelerated all the way up to 125% in April, kind of down to roughly 30% for a while, and then November down to 20%. As we talked about, those are capitalized into inventory and then amortized in the future. You will see some spikes with those fluctuations rolling into fiscal 2027," highlighting risk of ongoing tariff-driven margin volatility next year.
• Company recorded a $3.4 million non-cash impairment for UST brand and is divesting the segment, acknowledging limited innovation potential and unfavorable market dynamics for traditional camping accessories.
• Management explicitly cites "uneven retailer ordering patterns," and "consumer uncertainty" as factors in current period operating performance, creating uncertain near-term demand visibility.

SUMMARY

American Outdoor Brands (NASDAQ:AOUT) delivered third-quarter results that reflected both disciplined working capital management and targeted brand portfolio actions, alongside headwinds from tariffs and category-specific softness. Management recorded a $3.4 million impairment charge to facilitate exit from the UST camping and survival brand, sharpening focus on higher-growth segments. The company is leveraging innovation, as new products accounted for over 26% of net sales and point of sale growth outpaced headline revenue, particularly in outdoor lifestyle categories. Looking forward, guidance for sales, gross margin, and adjusted EBITDA is unchanged as executives anticipate possible future margin volatility due to amortizing capitalized tariff costs, while highlighting available capital for both buybacks and opportunistic investment.

• Ongoing inventory reductions are proceeding more rapidly than previously planned, as H. Andrew Fulmer noted, "there is opportunity to end a little bit better than the $110,000,000 if we can move some of the slower-moving inventory."
• Recent U.S. Supreme Court action striking down IEEPA tariffs has created uncertainty about possible future tariff refund benefits, which management does not include in current guidance.
• Brian Daniel Murphy stated, "we are well positioned to navigate the current environment," but also pointed to "dynamic and evolving" tariff policy and persistent aiming solutions category weakness, indicating ongoing business agility will be required to meet long-term goals.

INDUSTRY GLOSSARY

• IEEPA Tariffs: U.S. government-imposed import duties under the International Emergency Economic Powers Act, affecting recognized inventory and gross margin as products are sold through.
• Section 232 Tariffs: Import tariffs levied by the U.S. government under Section 232 of the Trade Expansion Act, primarily targeting specific categories of goods such as steel and aluminum, now impacting company cost structure.
• POS (Point of Sale): Metric representing sales at the retail register, reflecting end-market consumer demand rather than wholesale shipments.
• Assets Held for Sale: Financial reporting classification for assets a company intends to divest, separated from operating assets on the balance sheet and often accompanied by impairment charges if expected sale proceeds are less than carrying value.

Full Conference Call Transcript

Elizabeth A. Sharp: Our use of words like anticipate, project, estimate, expect, intend, should, could, indicate, suggest, believe, and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies and vision, our strategic evolution, our market share and market demand for our products, market and inventory conditions related to our products and in our industry in general, and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings.

You can find those documents, as well as a replay of this call, on our website at https://aob.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. A few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired assets, stock compensation, emerging growth transition costs, nonrecurring inventory reserve adjustments, impairment of assets held for sale, technology implementation costs, other costs, and income tax adjustments.

The reconciliation of GAAP financial measures to non-GAAP financial measures, whether they are discussed on today's call, can be found in our filings, as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. Joining us on today's call is Brian Daniel Murphy, President and CEO, and H. Andrew Fulmer, CFO. With that, I will turn the call over to Brian.

Brian Daniel Murphy: Thanks, Liz, and thanks, everyone, for joining us today. I believe our third quarter performance demonstrates the disciplined execution of our strategy. In a period marked by shifting tariff policies, uneven retailer ordering patterns, and consumer uncertainty, our team remained focused on the fundamentals: delivering strong retail sell-through, advancing our innovation pipeline, and actively managing our portfolio to ensure our resources are concentrated behind the brands and product categories where we can create the most value. Despite the ongoing uncertainty that continues to characterize fiscal 2026, we believe our underlying operating model remains fully intact. Importantly, our results give us the confidence to reiterate our net sales and adjusted EBITDA guidance for fiscal 2026.

With that, let us dig into the details. Net sales for the quarter were $56,600,000, down 3.3% on a year-over-year basis but ahead of our expectations. To refresh everyone, there are a couple of elements creating tough sales comps in our current environment. One is an ongoing inventory reset taking place at our largest e-commerce retailer, and the other is the extended softness in the aiming solutions category. We believe these are near-term challenges and that our underlying business is performing very well. In fact, for the third quarter, when we adjust out for these elements, our net sales would have grown in the high single digits and our POS results would have grown in the mid-teens.

Even without that adjustment, our POS results were still strong, with growth of 5% for the quarter. This marks the third consecutive quarter of favorable POS results, which were led by strength in the outdoor lifestyle category. Ultimately, what matters most is what happens when consumers encounter our products at retail. The continued strength we are seeing in POS reinforces that our innovation is resonating. The outdoor lifestyle category generated over 62% of net sales in the quarter, delivered year-over-year growth of 5.4%, driven by strength in our BOG and MEAT! Your Maker brands. The shooting sports category declined 15% in the quarter, largely due to softness in aiming solutions products.

Notably, our Caldwell brand delivered solid growth, reflecting strong retailer and consumer response to the innovative Claycopter platform. That momentum was reinforced at SHOT Show in January, where engagement around our new Claycopter and Claymore connected products was exceptionally strong. Increasingly, retail partners are seeking differentiated innovation to drive traffic and strengthen consumer engagement, allowing us to take share following our entry into the shotgun sports category. Turning to innovation, investments we have made in our new product pipeline continue to bear fruit, with new products representing over 26% of our net sales in the quarter.

Looking ahead, as we enter peak fishing season, we are preparing an initial rollout in April of ScoreTracker Live, a platform that integrates Major League Fishing ScoreTracker technology into our Bubba app to deliver real-time tournament hosting and live scoring to anglers and organizers everywhere. ScoreTracker Live brings the intensity and excitement once reserved for professional MLF bass tournaments to events of any size, from neighborhood competitions and school teams to local clubs and regional circuits. It also supports the growing adoption of catch-and-release tournament formats that promote sustainable fisheries, aligning competitive excitement with responsible stewardship.

These new products from Caldwell and Bubba demonstrate that we are executing on a strategy that pairs two things in a novel way in our markets, that is, by combining innovative hardware with integrated digital capabilities, especially in categories where connectivity enhances the consumer experience. By building connected product ecosystems around select growth brands, we are deepening engagement, creating differentiated value for our retail partners, and supporting recurring revenue opportunities that increase customer lifetime value. The momentum we are seeing with brands like Caldwell and Bubba reflects the impact of directing our capital and innovation priorities toward areas where our capabilities can create meaningful differentiation and long-term value.

They are just two examples within what we consider to be our highest growth brands, which include BOG, Bubba, Caldwell, Grilla, and MEAT! Your Maker. We invest in them accordingly. That same discipline also guides how we evaluate the rest of our portfolio. We continually assess where our proven innovation engine can have the greatest impact and, just as importantly, where it cannot. During the quarter, we took two actions that reflect that disciplined approach to capital allocation and portfolio management. First, we made the decision to divest our camping and survival brand. UST was originally acquired by our former parent company in 2016 and was included in our brand portfolio when we spun off in 2020.

Since then, the camping accessories category has become increasingly price-driven and more brand-agnostic, with retailers deemphasizing traditional camping products and dedicating that shelf space to other product categories. While we evaluated opportunities to introduce differentiated innovation in the camping category, we ultimately concluded that the UST brand is unlikely to benefit from our innovation capabilities, and additional investment would be unlikely to generate returns consistent with our expectations. Therefore, we will continue fulfilling customer orders from existing inventory while we evaluate opportunities to transition the brand and its remaining inventory to an appropriate buyer. Second, and as I mentioned earlier, weak trends in aiming solutions stand out in contrast to the balance of our shooting sports category.

While we believe this market will rebound at some point, we also believe there is a greater near-term opportunity to redeploy capital into higher growth categories. As we prepare to accelerate the sell-through of a portion of this inventory, we took a reserve in the quarter that Andy will detail later. Together, these actions demonstrate our focus on investing in the brands and product categories where innovation and differentiation can drive stronger long-term growth, while reinforcing our commitment to disciplined working capital management. Lastly, I want to touch briefly on tariffs. They continue to represent a dynamic and evolving element of the operating environment for many companies, including ours.

As we have discussed in prior quarters, and as we all continue to experience, the policy landscape around tariffs can change quickly, requiring us to remain agile and thoughtful in how we proceed. Our teams have done a great job staying close to these developments, evaluating the potential impacts, and positioning the business so that we can respond appropriately as conditions evolve. It is clear that the current environment requires us to remain disciplined and agile. Accordingly, we remain focused on the priorities that continue to strengthen our business: investing in innovation, refining our brand portfolio, and allocating capital with discipline.

With a strong set of brands and a well-performing operating model, we believe we are well positioned to navigate the current environment, continuing to build enduring long-term value for our shareholders. I will now turn the call over to H. Andrew Fulmer to walk through the financial results.

H. Andrew Fulmer: Thanks, Brian. As Brian mentioned, we are pleased with our third quarter results, particularly given the ongoing macroeconomic and tariff-related dynamics impacting our business. Net sales for Q3 were $56,600,000 compared to $58,500,000 in Q3 last year, a decrease of 3.3%. In our outdoor lifestyle category, which consists of products relating to hunting, fishing, meat processing, outdoor cooking, and rugged outdoor activities, net sales for Q3 increased 5.4% over last year to $35,300,000, mainly driven by increases in our BOG and MEAT! Your Maker brands.

In our shooting sports category, which includes solutions for target shooting, aiming, safe storage, cleaning and maintenance, and personal protection, net sales declined 15% compared to last year, driven mainly by a decrease in aiming solutions. Turning to our distribution channels, our traditional channel net sales decreased by 2.1% in Q3, while our e-commerce net sales decreased 4.6% compared to last year. Consistent with previous quarters this year, our largest e-commerce retailer continued to reset its inventory, which we believe is in response to tariff pressures. Domestic net sales decreased 3.4%, while international net sales remained relatively flat to Q3 of last year.

Gross margin was 41% for Q3, down 370 basis points from Q3 last year, driven by the impact of new tariffs, including IEEPA tariffs, and an inventory reserve of $1,200,000 related to aiming solutions that Brian discussed. While the reserve impacted gross margin a bit in the quarter, it demonstrates our commitment to rationalize slower-moving inventory so we can reallocate capital toward higher-return opportunities, such as share repurchases and M&A opportunities. We expect to monetize a meaningful portion of this inventory over time, helping to drive improved working capital and enhancing financial flexibility. Without the reserve, gross margin would have been 43.1%, slightly ahead of our original expectations. It is important to note that on February 20, the U.S.

Supreme Court issued a ruling striking down tariffs previously imposed under IEEPA. The third quarter was the first period in which we began to see the impact of IEEPA tariffs flow through cost of goods sold, with approximately $1,700,000 recognized in the quarter. As a reminder, tariffs are capitalized into inventory and then recognized in the cost of goods sold as that inventory turns. As Brian explained, during the third quarter, we made the decision to divest our UST brand. Following this decision, we reclassified the related assets to assets held for sale and then performed an evaluation based on expected future cash flows.

As a result, we recorded a non-cash impairment charge of $3,400,000, which is reflected in operating expense in Q3. The UST contribution to the business has been minimal, and we do not anticipate any impact to our fiscal 2026 outlook. GAAP operating expenses for the quarter were $27,100,000 compared to $25,800,000 last year. The increase was driven by the non-cash impairment related to UST, partially offset by lower variable costs from reduced net sales as well as lower intangible amortization. On a non-GAAP basis, operating expenses in Q3 were $21,000,000 compared to $22,700,000 in Q3 of last year. Non-GAAP operating expenses exclude the non-cash impairment, intangible amortization, stock compensation, and certain nonrecurring expenses as they occur.

GAAP EPS for Q3 was a loss of $0.32 compared to GAAP EPS of $0.01 last year. On a non-GAAP basis, EPS was $0.12 for the third quarter, compared to $0.21 last year. Our Q3 figures are based on our fully diluted share count of approximately 12,500,000 shares, a number that should remain consistent through year-end outside of any additional share buybacks that may occur. Adjusted EBITDA for the quarter was $3,300,000 compared to $4,700,000 in the third quarter of last year, driven by the $1,200,000 inventory reserve and the $1,700,000 of IEEPA tariffs I referenced in my gross margin discussion.

Turning now to the balance sheet and cash flow, we continue to maintain a strong balance sheet, ending the quarter with $10,400,000 in cash and no debt after repurchasing $1,400,000 of our common stock. As we have discussed before, our business is seasonal, with the highest quarterly net sales typically occurring in Q2 and Q3. This pattern generally results in operating cash outflows in the first half of the fiscal year, followed by inflows in the second half as receivables are collected and inventory levels decline. This seasonal pattern played out as expected in Q3. Operating cash inflow was $9,900,000 in Q3, reflecting decreases in accounts receivable and inventory.

During the quarter, inventory levels declined by $13,800,000, which includes UST-related assets held for sale. We ended the quarter with total inventory of $110,200,000, down from $124,000,000 at the end of Q2. We expect our inventory at the end of the year to be approximately $110,000,000, which is lower than we originally planned. We will continue to explore opportunities to further lower that balance by monetizing slower-moving inventory. Our balance sheet remains strong and debt-free. We ended the quarter with no balance on our $75,000,000 line of credit, resulting in total available capital of over $100,000,000. We are also pleased to share that we recently amended our debt agreement with TD Bank to extend the maturity date to March 2031.

We believe this renewal provides us with favorable pricing and terms, reflecting the strength of our financial position. Turning to capital expenditures, we spent $1,200,000 in Q3, primarily related to product tooling and patent costs. For full fiscal 2026, we are lowering our expected CapEx range by $500,000 and now expect to spend between $3,500,000 and $4,000,000, consistent with our asset-light operating model. During Q3, we continued returning capital to shareholders through our share buyback program, repurchasing approximately 181,000 shares at an average price of $7.87 per share. Now turning to our outlook, we are in the final stretch of our fiscal year, and we are encouraged by our performance to date.

As such, we are maintaining our previously communicated full-year guidance for net sales, gross margin, and adjusted EBITDA. Let us begin with net sales. We continue to expect fiscal 2026 net sales in the range of approximately $191,000,000 to $193,000,000. Recall that at the end of fiscal 2025, retailers accelerated approximately $10,000,000 of orders originally planned for fiscal 2026 to get ahead of impending tariffs, creating a more challenging comparison for the current year. Including that impact, fiscal 2026 net sales would decline approximately 13% to 14% year over year. However, adjusting for that acceleration, the underlying decline in net sales for fiscal 2026 would be approximately 5%, which we would view as solid performance given the current environment.

Turning to gross margin, we continue to expect full-year gross margins in the range of 42% to 43%. This implies lower gross margins in Q4, primarily due to increased amortization of tariff variances, including IEEPA tariffs, associated with inventory purchases made earlier in the year. Turning to operating expenses, we have remained disciplined in managing our costs and avoiding structural expense growth, an approach that helps us maintain a lower level of expense over the long term, allowing us to be agile and asset-light when responding to changes in our environment. We have reduced spending in areas such as travel, remote office footprints, and nonessential contracts. As a result, we expect total operating expenses to decline for full fiscal 2026.

With regard to tariffs, our outlook reflects our current expectations based on what we know today and mitigation initiatives that we have taken, which include pricing actions, as well as benefiting from the flexibility of our asset-light business model. Our outlook does not reflect any potential tariff refunds, which remain subject to further guidance from U.S. Customs and Border Protection. Lastly, based on all the factors I have discussed, we continue to expect adjusted EBITDA for fiscal 2026 to be in the range of 4% to 4.5% of net sales. We remain committed to our long-term operating model, which targets EBITDA contribution of 25% to 30% on net sales above $200,000,000.

We have demonstrated this level of performance in the past, and as our brands continue to introduce innovative and compelling products, we remain confident in our ability to drive sustained profitability over time. With that, operator, please open the call for questions from our analysts.

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. The first question will come from Matthew Butler Koranda with Roth Capital. Please go ahead.

Matthew Butler Koranda: Hey, guys. Good afternoon. Maybe we will start out with the POS commentary, up 5% year over year, I think you mentioned in the press release. I guess we still have to lap the kind of wonky fourth quarter from last year where retailers preordered a fair bit. Can you just remind us what was pulled forward in the fourth quarter last year so we have a reasonable comparison to make for the implied fourth quarter sales run rate?

H. Andrew Fulmer: Yeah, Matt. This is Andy. Retailers pulled in roughly $10,000,000, and that was pretty much the last two weeks of Q4, so from May back into the last couple weeks of April.

Matthew Butler Koranda: Okay. Got it. It seems like fourth quarter, once we get through this period, perhaps there is a little bit more appetite from your retail customers to sort of load in a bit more. I mean, maybe just talk about their inventory levels and where they sit currently given POS has remained positive. It seems like they have been sort of flushing inventory for the better part of the last couple of quarters.

Brian Daniel Murphy: Yeah. Hey, Matt. It is Brian. I think what you are seeing here, we alluded to it at the beginning part of the script, where there are two things occurring right now: we have aiming solutions softness and then we have this large e-commerce customer that is, I would say, not destocking. I would consider it more underordering relative to demand. We do expect that both of those areas will normalize at some point. That said, excluding those two isolated items, the far majority of our business is performing quite well. We had mentioned high single digits in the quarter versus last year and being up mid-teens for POS.

That convergence between POS and replenishment certainly is more correlated for the majority of our business. Really, where we are seeing that disconnect is with those two items I just mentioned. Going forward, I would expect at some point there will be a normalization. We are seeing signs of that, but we are not quite ready to declare finality by any means. Certainly, things are moving, I think, in the right direction. It is just going to be a matter of when those normalize.

Matthew Butler Koranda: Okay. Got it. Then Andy mentioned we are performing better on inventory reductions and expect to be at $110,000,000 by the end of the year. Is that coming from sort of promotional activity and monetizing slow-moving inventory through promotions, or just finding new avenues of demand? Maybe just help us understand why the inventory reduction is happening a little faster than expected.

H. Andrew Fulmer: Yeah. It assumes just a regular amount of promotions, nothing crazy. In fact, I think there is opportunity to end a little bit better than the $110,000,000 if we can move some of the slower-moving inventory that I talked about.

Brian Daniel Murphy: Yeah. Just to add on what Andy said, it is really about efficiency. We talked about capital allocation, and we are constantly looking for areas where we can take advantage of, do we have a higher growth opportunity on one side of the business versus another? The aiming solutions product is great, and something could change tomorrow, and we would see demand spike for that type of product, but we just look at ourselves and say the opportunity cost is too high. Let us move through this.

I think that is part of it, the reduction, but it is also just increased efficiency from that higher growth inventory that is going to be churning through, which would lead to a lower inventory number.

Matthew Butler Koranda: Okay, guys. Appreciate it. I will leave it there.

Operator: The next question will come from Doug Lane with Water Tower Research. Please go ahead.

Doug Lane: Yes. Excuse me. Good evening, everybody. Just staying on inventories, if you get down to your level that you are expecting to end the year at, you are still up a little bit versus the prior year in a year where sales went down. So what was the reason for the increase in inventories to begin with? Do you think you will have to be a little bit more promotional going into 2027?

H. Andrew Fulmer: Yeah, Doug. This is Andy. The main driver there is the increase in tariffs. So the year-over-year, it is effectively all IEEPA and the Section 232 tariffs that we have now.

Brian Daniel Murphy: Yeah. But the core inventories are reducing really quite well. The tariffs are obfuscating the overall business, but it is still real inventory. It is a real inventory number.

Doug Lane: No. That makes sense. I get that. And then, sorry, I have a second part. I wanted to talk about tariffs. You talked about the third quarter being the first real impact as that capitalized tariffs start coming through the cost of goods sold. So fourth quarter gross margin is down. I know you are not giving 2027 guidance yet, but should we just directionally see continued gross margin pressure in 2027 as these capitalized tariffs continue to go through the P&L?

H. Andrew Fulmer: Yeah. I think that is a safe assumption. We cannot comment on what the margin percentage would be, but when you think back to when the IEEPA tariffs started back in March and April, they were accelerated all the way up to 125% in April, kind of down to roughly 30% for a while, and then November down to 20%. As we talked about, those are capitalized into inventory and then amortized in the future. You will see some spikes with those fluctuations rolling into fiscal 2027.

Brian Daniel Murphy: I want to jump in too, just to give some historical context. When we were hit with the first round of 301 tariffs the first time the administration implemented the 301 tariffs back in 2018 or so, you saw a very similar pattern where it hits immediately, you amortize that over time, but the pricing actions that you take, coupled with the fact that we are such prolific generators of new products—our new product velocity is off the charts—that is our main way for us to, over time, really reclaim that margin. I think you are seeing something very similar right now.

If you look back, it took us probably, I do not know, Andy, eighteen months, something like that, to be able to fully recover that margin pressure. Right now, it is a snapshot. It is a moment in time, but this is actually following a pretty similar path.

Doug Lane: Okay. And did the IEEPA tariffs—how much of your tariff pressure is from IEEPA, and will that help that it is at least going away? Then have you begun any efforts to try to recover the tariffs you already paid?

H. Andrew Fulmer: Yeah. The IEEPA tariffs are kind of that difference in pressure that you talked about before. TBD on what happens going forward, though. The Section 232 tariffs, as of today, are 10% until, I think, July or so, but who knows what that will be replaced with. We are obviously keeping a keen eye on it every day as the news comes out. As far as the refunds go, we are doing everything we can to preserve our rights, and we will see how that process shakes out.

Doug Lane: Okay. Fair enough. And just lastly, the third quarter sales came in better than you expected and better than the Street expected, and the full-year sales number is unchanged. So did the third quarter borrow from the fourth quarter, or are you just being conservative given the environment?

Brian Daniel Murphy: Yeah. I can jump in. No. There was no shifting of orders. Everything came through. That is what we try to do each quarter, not try to pull or push in any way. We really want to have a normal, recurring, more comparable business. From where I sit in this chair today, I did not see anything that caught my eye that is worth calling out.

Doug Lane: Okay. Fair enough. Thank you.

Brian Daniel Murphy: Yep. Thank you.

Operator: The next question will come from Mark Smith with Lake Street Capital. Please go ahead.

Mark Smith: Hi, guys. First, just a clarification question. Just looking at the impairment, I just want to confirm all of the impairment was on UST, or was there anything else that was impaired?

H. Andrew Fulmer: No. 100% of the impairment was UST.

Mark Smith: Perfect. And then second, you talked a lot about point of sale, talked about where the consumer is today. Curious if you can give us more thoughts on what you are hearing, what you are seeing out there from consumer spending. As we think about shooting sports, NICS improved a little bit following the end of the quarter. Have you seen any uptick since then? Any thoughts that you have on your consumer would be great.

Brian Daniel Murphy: Sure. Hey, Mark. I will touch on shooting sports first because I think there is an interesting contrast that is happening there. You have aiming solutions, which, based on some of the data that I have seen from third parties, has been one of the worst-performing product categories in the space, whereas the areas that we play in outside of that are doing pretty well. In others, especially like shotgun sports with Caldwell, we are seeing some really nice share gains there. A good portion of that new product revenue is coming from products like the new Claycopter platform.

Overall, I think we are seeing good trends there; just the aiming solutions is the one to keep an eye on, but it should normalize. Anything else related to the customer? I would say there is still that bifurcation that we had talked about before. I think it will be interesting to see going forward what happens with oil prices; do they sustain? Any uncertainty with the consumer is going to lead them to start changing their behavior, most likely. If unemployment begins to go up, if the consumer is under pressure, we will see what happens with rates. All that just adds to uncertainty.

In real time, it looks like store foot traffic growth does seem to be improving versus our last call when looking at different retailers, so that is a positive. Going forward, the consumer is still kind of touch and go. I think the more affluent consumers are continuing to spend, and then I think the lower-income, middle-income folks—the avid sportsmen and women—are certainly still spending. The more casual one is not; I think they are really pulling back. I think American Outdoor Brands, Inc. is really well situated, just given where our brands play, and the innovation piece is so important to these retailers to pull in consumers.

Mark Smith: Perfect. I think last question for me, just the topic this year of inventories and the guidance for year-end. It seems like a lot of the new product that you showed off at SHOT Show and have launched—is a lot of that going to be built up in that inventory number at the end of the fiscal year, or will you be shipping and have some of that cleared out before the end of the year? Then second, just a moving piece within that, will the UST—I imagine that is a small piece of inventory—do you expect that to be all gone or at least not in the book at year-end inventory?

H. Andrew Fulmer: Yeah. As far as the new products, it is a great question because the timing of two of the key products that you saw at SHOT Show is right near year-end. We are planning to ship those to our customers late April, early May. Yes, we will have some of that new product coming in because, obviously, we want to make sure our fill rates are good there. On the UST question, it is pretty minimal at this point after the impairment that was recorded. TBD on what that looks like going forward.

Mark Smith: Perfect.

H. Andrew Fulmer: Thank you, guys.

Mark Smith: Yep. Thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Brian Daniel Murphy for any closing remarks.

Brian Daniel Murphy: Thank you, operator. Before we close, I want to let everyone know that we will be participating in the ROTH Conference in California on March 23 and the Lake Street Virtual Conference on March 31, so we hope to see some of you there. I want to thank our employees, whose tireless commitment to innovation allows us to remain focused on executing our long-term vision. Thank you to everyone who joined us today. We look forward to speaking with you again next quarter.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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