camping portable grill Vista Outdoor Inc. (VSTO) CEO Chris Metz on Q4 2019 Results - Earnings Call Transcript

Vista Outdoor(NYSE: VSTO) 2019 earnings call for the fourth quarter 20199: zero o'clock A.M.Metz, Vice President of Investor Relations-CEOMick Lopez -CFOConference conference call participant Wold-B.RileyGautam kana-Dave King.Brett Andres, Rose Capital partnerCapital marketWelcome to Vista Outdoor 2019 earnings conference call for the fourth quarter.Today's call is being recorded.At this point in time, I want to hand over the meeting to Kelly resdorf.Please continue.Thank you, Brandon.Good morning, thank you for attending our fourth quarter of 2019 earnings call.This morning with me was Chris Metz, chief executive of Vista Outdoor;And Mick Lopez, our senior vice president and chief financial officer.Before we start, I would like to remind you that in today's conference call we will move forward several timesWe make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act.These forward-Based on our understanding of what is known today, forward-looking statements reflect our best estimates and assumptions.These forward-Forward-looking statements are influenced by the risks and uncertainties faced by Vista outdoors and the industry we operate in.We encourage you to review today's press release and Vista Outdoor's SEC documents for more information about these risk factors and uncertainties.Please note that we have published presentation material on vistaoutdoor's website.Com, which added our comments this morning and includedGAAP Financial indicators.That being said, Chris, I will transfer the phone to you.Thank you, Kelly. good morning.Thank you all for joining us as we discuss fourth quarter and full year results.We have now completed the first year of Vista Outdoor turnaround.I am proud of the many achievements we have made in fiscal 19 and, despite continuing challenges, I am optimistic about the future of this company and its great brands.The company's improvement is not achieved overnight, not even in four quarters.We understand this and we suspect you understand it.But in the past year, we have made great progress on the way forward.To that end, I want to take a few minutes from today to discuss what we have achieved in the past year and why it is so important for our future.Then tell you that we will start from here.From the point of view of achievement, perhaps most importantly, although the environment is very difficult, we have fulfilled many of our commitments for fiscal 19.As promised, it creates a solid foundation for Vista Outdoors to allow us to resume growth.As all the plans say, due to the changing situation throughout the year, the plan will continue to evolve, but we are on the same path and will eventually produce the same in our vision.I am pleased with some of the concrete achievements made in the past fiscal year and would like to talk about some of the foundations we have laid to create a solid foundation for growth.First of all, we spend a lot of cost inside the company, which has been dragging us down and killing potential growth.In order to become a more streamlined and focused company, we have greatly reduced the company's expenses.Excluding sales of our glasses business, this includes reducing SG & A by $44 million or 11% through various initiatives, including closing the corporate headquarters in Utah and consolidating the corporate leadership team.Second, we have made solid progress in our portfolio rebalancing plan.We reduce the 0.211 billion beauty yuan of debt reduce the 23% of 154 from we glasses business of sales we to 12 times EBITDA multiple sales the rest from we continue to focus on in Operation Capital of improvement.As a result, our improved balance sheet will free up funds to invest in our growing brands.We know that we still have more work to do in this regard, which remains the top priority for the fiscal year 2020.Third, we have completed the restructuring of the brand team.We bring several great new leaders to our brand, while also driving greater ownership and accountability of the brand and reshaping the true founder mindset in each of our businesses.By getting rid of the business operations model, we have now enabled our brands to control their own destiny and take initiatives that are more suited to their individual business plans, while also addressing their unique challenges.In the past, when companies ran brands from companies, many of the initiatives were one-size-fits-all.However, these brands are unique and diverse and cannot operate exactly according to the same plan.Over the past year, by pushing autonomy back to the brand, we have quickly seen improvements in performance, more innovation, and increased fuel for growth engines.Fourth, we re-Prioritize and restructure what we do in the company.For example, we have created a new center of excellence in e-commerce.Procurement and procurement.Our brand has benefited from our ability to focus on specialization in the field of e-commerceBusiness and digital marketing.As we mature in the digital world, we know it will continue to grow.The digital investments we make today will pay off in terms of increasing sales and profitability tomorrow.In fact, in fiscal 19, we have made good progress in e-commerce.There are several websites that are directly aimed at consumers.Our team of camp chefs continues to be a leader in the online shopping experience, and our CamelBak has achieved outstanding growth directly to consumers.We also bring online selection of spear ammunition and bullets offline.In addition, we have taken a different approach to the company support function this year, reorganizing many of these functions to focus on the tasks, activities that really bring value to our brand during the turnaround periodThese features are now more streamlined, focused and more disciplined for businesses.Finally, we have implemented a new rigorous monthly review process for all of our brands and business units, allowing us to monitor performance in real time and delve into key issues to focus further on achieving commitments.At the end of the day, all these achievements have helped us to reset the Foundation to create a more stable foundation.Now, with a safe foundation, we can start talking about growth.As I said when I first announced our transformation, we are committed to profitable growth, not just top-level revenue.So, let's talk about what's going to happen in the fiscal year 2020 and beyond, and why I'm optimistic about our health --We will succeed in continuing to turn losses into profits this fiscal year.First of all, let me admit that I know you haven't seen an announcement about the sale of Savage.We thought we could finish the sale in fiscal 19, but it's clear that the sale has entered this year.We are still in the process of negotiations, but no agreement has yet been signed.Of course I would like to announce it on this conference call, but there is more work to be done for our buyers.Of course, we need to submit the deal to our board for approval.We continue to believe in savage assets, and I am very proud of the process in which the savage management team continues to work hard while delivering solid results.Second, I discussed earlier that one of our achievements in fiscal 19 was to squeeze costs out of the company, which is undoubtedly the key to getting a more solid foundation.But the move will also last until the current fiscal year.We're not over yet.We know that in some areas we can continue to squeeze out unnecessary costs from companies and brands so that we can enter the market with more streamlined, focused companies.Third, we have finally seen signs of stability in the ammunition market, while 223,556 of POS data is still weak, and we have seen sales.in and sell-Overall, from the point of view of POS, the upgrade is finally started.We think it shows that we are close to the bottom of the low demand.Perhaps just as important, when the ammunition market comes back, the work we do in the field of shooting sports will also be positioned as gaining share.Despite the pricing pressure on our competitors, we have been taking a share in a competitive market, and we believe that when the market recovers, it is a good sign of our potential.Fourth, we expect our outdoor product segment to achieve organic growth throughout the year for the first time in business history.The work we have done to stabilize the outdoor product brand has begun to achieve results.While I certainly don't want to see the growth of outdoor product brands every quarter, it will continue to grow as the fiscal year goes on, I do see an overall growth model in the business unit, which is very encouraging and a long-term indicator of our success in turning the company around.Fifth, our focus on profitability has begun to generate dividends.In fiscal 19, we made it a priority not to chase after-sales at the expense of profit.In particular, brands like Bushnell give up deals that don't make money.While we all want to achieve top sales growth, I am happy with the team's commitment to maintaining pricing discipline.I believe we have begun to change the behavior of our customers through this discipline.While this may have eroded first-line revenue, it represents our commitment to continue to work to improve the profitability of our brands.Finally, perhaps the most important reason for optimism is that we still have incredible brands in this portfolio.Our brand is still one of the most representative brands in the outdoor industry.While some of these brands have lost a bit of momentum as Vista forms and matures, the work we have done this year has positioned all of these incredible brands as leading their respective categories.These brands now have more autonomy, creating a meaningful vision for their respective enthusiasts, and creating a very compelling future.What they have in common now is their commitment to building great teams, their passion for innovation, and the tools they need to create amazing and user experiences for their customers.All these brands have some great products this year.We have launched many new products at the are winter trade show and I have just finished releasing more new products at the NRA Show.Here are a few examples of products we are very excited about.We're already in the ammo business.We have launched more than 100 new ammunition products this year.I told you about some of the last quarter, but some of the other things I would like to mention are the new short shotgun and the high-fire gun sport shotgun, which are perfect for clay shooting.We now provide component bullets for Hydra.We know that our consumers are very excited about the Shok Deep and EDGE lr series, as well as our rimfire series, CCI Clean 22 and Quiet-22 Semi-We also offer Speers top gold point ammo to the commercial market.Our black eagle T.The series leather case is a new type of retained leather case, which has caused great sensation in law enforcement.In Bushnell, we recently launched the golf Pro xe v Rangefinder, a hot topic for the golf industry as a truly revolutionary technology.This is the first way to accurately measure the change of height and slope and the effect of humidity on the distance of golf balls.CamelBak has just launched a product made of 50% recyclable materials.In addition to their more than 80 and peak fitness bottles and their women's running series.Camp Chef continues to improve their portable grill and accessory products for backyard and courtyard consumers.Although I am optimistic about the 20 th fiscal year, we are not out of the woods yet, and I am very realistic.We continue to face adverse factors that put pressure on our business.Although the ammunition market seems to be bottoming out, we still don't see J-The curve we want to see.All the most intelligent people predict that the recovery will take 18 to 24 months.In the absence of a rebound in the market, we still have more than two years.We also continue to see retail pressures, consolidation and bankruptcy do affect our fiscal 19 and we will put pressure on us again in fiscal 20.We believe that we have received reliable guidance in fiscal 20.I certainly understand that it's hard to get excited about a print sales guide, but our guidance on doubling or better EPS is the beginning of the track we want to get on.However, as we said before, our goal is still to achieve profitable growth, and I believe we are on the right track to achieve our goal.With this, let's talk about the future.While I know we 've made solid progress, it's certainly not as fast and not a straight line as any of us want, but I can tell you that in fiscal 20, we will see --You will see that we continue to cut business costs, improve the supply chain, and accelerate the development of e-commerce.Our brand team.One of the biggest aspects of our transformation is what our portfolio will look like in the future.You know, we decided not to sell our clock immediately.Giro business.We discussed this at our last earnings call.But I want to spend a little more time on this decision and put it in the right angle.When we announced the plan to adjust the portfolio, we said, and went on to say that stripping makes sense to the company and shareholders only if we are able to get the right price on the right conditionsAs for the clock-After further internal and external analysis by Giro business, we conclude that these brands can resume growth and demonstrate our leadership economics expectations for brands in our portfolio.Today, however, with the current state of the business, we do not think we have received a quote for the business that we would like to see.So we're going to take some time to improve the performance of the brand and get them to where they should be.Since this decision, we have also had leadership changes in bell --Giro, we will take this opportunity to continue to rebuild these brands from a new perspective.As for Savage, we will continue the process with a view to completing the negotiations as soon as possible and, once feasible, we hope that the remainder of the process will be productive, and bring us the results that we need to be confident to complete the transaction.I hope it will give you a little bit more insight into where we are near the middle termTerm for portfolio.For those who have been with us all the timeWe 've been so far in this transition that we think you'll see you-Your belief in our company will be rewarded with long-term earnings growth.So I want to thank everyone who joined us today.As I said, I am still very optimistic about the future of Vista Outdoors.I know everyone wants to solve the problem immediately.But the truth is that our transformation is on track.As you know, turnover is always more than oneyear process.Our goal for the first year is to repair the foundation.We did it.We are stronger than a year ago and better able to meet the next stage of our plan.Our goal for the second year is to build on that.We will ensure strong growth strategies are identified for our brand and continue to improve efficiency in the business to help support our brand.We have made good progress in this regard.We have great talent in brands that are becoming smarter every day.We continue to cut costs, improve the efficiency of our business operations, and set positive goals for our brand team so that we can take or take a share in the leadership category.We continue to make progress every quarter and I still believe we are on the right path.I would like to thank our staff for their efforts to get us to where we are so far, and I know they will help us move towards the future.With this, I will hand over the rest of my time to Mick to discuss financial matters.Mick?Thank you, Chris.Good Morning, everyone.We disclose the report and the adjusted results in the press release.You can also find more detailed financial performance for fourth quarter of 2019 and year round on our website.In that speech Let's start on page 4 and look at the highlights of our fiscal year of 2019, with the final balance sheet showing a $0.211 billion reduction in debt due to improvements in asset sales and working capital, that is 23%.Most of these improvements in working capital come from the annual decrease in accounts receivable and capital expenditureto-year.To better reflect the value of goodwill and intangible assets, we have reset $0.5 billion.Also, please note our long term debt, we have successfully obtained a new credit agreement that is much less costly and less tightly contracted.Continue to slide five, you can see that we have been reducing our debt, so our net debt leverage ratio at the end of the year is about six times what we defined in the terms of the credit agreement at that time.Now talk about our profit performance.Today, I will discuss the overall adjustment results for Vista Outdoor first, and then provide more colors in our segment.Looking forward to the fourth quarter, our sales fell 0.514 billion from the same period last year, down $ 10%.The decline was mainly due to the loss of $34 million in revenue from our glasses business that we sold in the second quarter, which means organic revenue has fallen by 4%.Sales of ammunition were flat in the quarter compared to the same period last year, while sales of outdoor entertainment, guns and hunting and shooting accessories declined.The company's annual sales are $2.More than 6 million of our guidance.Compared to the previous year, this number fell by 11%, and in the absence of glasses, it fell by 7%.We experienced a drop in ammo, hydration and hunting shooting accessories, offset by an increase in guns and outdoor cooking.Gross profit in the fourth quarter was $0.103 billion, compared with $0.112 billion in the same period last year.Gross profit margin in the fourth quarter was 20%, a slight increase of 34 basis points over the same period last year.Gross profit for the year was $0.432 billion, compared to $0.524 billion in the previous year.The gross profit margin for the whole year was 21%, compared with 23% in the previous year, a decrease of 173 basis points, driven by a reduction of 302 basis points in the shooting movement.Operating expenses in the fourth quarter were $92 million, compared with $123 in the same period last year, a total decrease of 25%.On a comparable basis, the cost was reduced by $19 million or 17% based on the sales adjustment of our glasses business.This reduction reflects the lower cost of bad debts, the benefits of cost reduction actions taken, and the lower overall cost of sales.Operating expenses for the whole year are $0.371 billion, $0.444 billion .., 16%-over-Sales of glasses decreased.On a comparable basis, as Chris said, the cost was reduced by $44 million or 11% due to multiple cost reduction plans across the company.From the perspective of recognized accounting principles, please note that brutal gun assets classified as selling for the third quarter were additionally damaged by $36 million in the fourth quarter, the latest $0.17 billion valuation buyer to reflect potential value.Interest spending in the fourth quarter was $11 million, down 4% from a year earlier.The decrease was due to a reduction in the overall debt balance, partially offset by higher average interest rates.Interest expenditure for the full year was $51 million, compared to $49 million in the previous year.The four-year increase reflected an increase in the average interest rate, partially offset by a decrease in the average debt balance.The tax rate for the quarter was 170%, compared to 46% in the previous year.The tax rate benefits for the whole year were 14%, compared to 8% in the previous year.The tax rate for this year is mainly affected by the release of tax reserves and the real increase in tax revenue for the previous year, in part by non-Deductible expenses incurred throughout the year.Of course, any of these fixed amounts has changed the tax rate this year.7%, in line with our guidance of about 7%.Earnings per share for the fourth quarter were $0.01, up from negative $0.The previous quarter was 22.The company earned $0 a share.$14 a year, below $0.There were 50 last year.Insufficient earnings per share annual guidance is the result of several factors in the fourth quarter.First of all, we have experienced many problems related to production and supply that limit our ability to meet the needs of higher-margin products.Second, about $0.The impact of 04 is due to the increase in our bad debt reserves this quarter to deal with major bankruptcy risks for large customers.Finally, in the current quarter, we also increased the reserve for product liability to reflect an increase in risk in the field, resulting in a further $0.03 impact on earnings per share.We offer free cash flow for $79 million throughout the year, which is within our guidance of $70 million to $100 million.Now, we discuss our business unit in slide 7, where we report sales and adjusted gross profit by department.In the fourth quarter, sales in our outdoor products division were $0.22 billion, down 19% from the same period last year, without glasses, down by 8% [ph].We continue to see weakness in the hunting accessories market.Annual sales were $0.99 billion, down 14% from the previous year, and sales of organic glasses-free fell 7%.When we focus on profitable sales, we see a decline in revenue for most product lines offset by growth in outdoor cooking.Gross profit in the fourth quarter was $53 million, down 17% from the same period last year.The gross profit margin of 24% in this quarter increased by 70 basis points over the previous quarter. in our lower sales environment, the increase in gross profit margin is the result of our continued focus on improving pricing discipline and cost saving plans.Gross profit for the year was $0.248 billion, compared to $290 in the previous year.The decline of 15% reflects again the decline in glasses sales and product mix.The gross profit margin for the year was 25%, flat compared to the previous year.Now go to our shooting motion section on slide 8.Sales in the fourth quarter were $0.295 billion, down 1% from the previous quarter, reflecting the ongoing challenges in the gun category.Ammunition sales were flat with the same period last year.Sales continued to grow by 22%, reflecting an increase in the timing of international contract delivery and demand for key ammunition product lines.Shooting sports sold $1 for the whole year.69 billion, down 8%, mainly due to weak overall shooting market.Turning to gross profit.Gross profit in the fourth quarter was $50 million, up 3% from $49 million in the same period last year.Gross profit margin for the quarter was 17%, an increase of 63 basis points from 16% in the previous quarter.The increase in gross margin and the decline in sales are the result of a decrease in favorable goods and overall discounts, offset by continued weakness in the 223 and 556 markets.The shooting campaign's gross annual profit was $0.184 billion, down 22% from the previous year.The gross profit margin for the whole year was 17%, compared with 20% in the previous year, down 302 basis points.This decline reflects that overall commodity pricing is not very favorable, promotional activities have increased, and overall sales have declined, which is related to the continued weakness of the market throughout the year.Finally, on page 9.We have developed guidance for the financial year 2020.The guide includes the brutal firearms business throughout the year.As with the guidance we gave earlier, we reflect all the results of operations, including the amount that is normally adjusted during sales processes such as depreciation and amortization.Our intention remains to successfully sell this brutal gun asset, which will further achieve our debt repayment target.Given the uncertain timing of gun trading, we included guns for a full year in our guidance.From the perspective of the whole company, we expect sales to be within the range of $1.Between $94 billion and $2.03 billion.We expect the overall gross profit margin and R & D investment to be flat overall with fiscal 19.We expect the profit margin of the shooting campaign to be medium to high, and the profit margin for teenagers and outdoors will be low to medium to 20 years old.We also expect a profit margin of about 7% for EBITDA.We expect the annual interest expense to be between $45 million and $50 million.The effective tax rate is expected to be about 5% this year.We also expect the full year EPS to be delivered within $0.28 to $0.38. improvement in the second half of this year.We expect capital expenditure for the full year to be between $45 million and $50 million.Finally, we expect free cash flow of $55 million to $65 million.For modeling purposes, EPS will be affected by the $0 range at the beginning of the year.10 to $0.15.In the first quarter, we expect that the market will continue to face challenges, and the situation of excess inventory will be sold at a lower profit margin.Every quarter, the launch of new products, the improvement of goods and further cost reduction will gradually increase our gross profit.We do expect that our 20-year performance for this fiscal year will reflect normal seasonal changes between quarterly and quarterly revenues, particularly the reduction in international ammunition orders.With this Brandon, let's answer the question now.Question-and-Thank you.The first question comes from Eric Wold and B.Riley.Please continue with your question.Eric WoldThank you.Good morning.A few questions.I guess, what I want to know is if your comment on Bell goes a little deeperGiro, let me now understand what you think about these brands.Would you think this is to continue running it to increase the valuation of the final sale? Or can this actually be considered from a long-term perspective of the portfolio rather than a sale?Eric, we-Our board of directors and senior leadership team have been evaluating our assets and portfolios.When we sit down and look back at the BellGiro asset we came to a clear conclusion as a team and as a board that it would be better for us to hold this asset and continue to improve it for a period of time, which would be more than one-A year.We have seen a lot of growth in our business.So at this point in time, we are excited to hold it.We believe that this is the best thing to do in order to drive shareholder value, and that is our intended plan.Eric WoldPerfect.Then on the outdoor products that guide or comment on the organic overall growth in fiscal 20, can you give us a feeling? You see strengths and weaknesses from a variety of product lines or brands, andThese brands are expected to be weak, what is the main resistance of these brands?Chris metzye, I mean, starting with the shooting campaign, you know, in general, we haven't seen the bottom yet.We have seen signs of near bottom.Of course we see signs of stability.We plan to see these businesses decline slightly during the fiscal year under our guidance.Such a low single digit, if you want.In terms of outdoor products, overall, we expect the business to remain low single digits.If we look at all of our brands, almost every brand, in fact every brand, the main brand is predicted to grow more than other brands.As we said before, we have some brands like Camp Chef that continue to take advantage of the outdoor cooking space and we want them to grow a little bit more than our other brands.But we have some other brands, there are some very, very exciting new products that are on the market, and there are some, you know, e-commerce, direct to consumers, marketing plans, the personal marketing plan that we are doing is very exciting for us.So you know, we are very satisfied with the development of outdoor products business this year.Eric WoldOkay.This is my last question, if you can.This year of free cash flow for 55 million to 65 million beauty yuan last year for 79 million beauty yuan sales improve profit margin also has improve keep this a little of maximum factors is whatDriving free cash flow down?In addition to sales, where can you see higher opportunities?Mick LopezLook, thank you for your question and allow for more clarification.Over the years, we have been studying the conversion of EBITDA into cash, with revenues ranging from 3% to 8%, and EBITDA ranging from 12% to 170%.Just last year, the conversion rate and income were about 4%, respectively. we were a little conservative, saying that in the range of 3% and 4%, this is what we are guiding.As a result, there must be an opportunity in stock.I think we have made great progress in accounts receivable this year.You have also noticed that we are very sensible in using working capital, and we are already up to $80 million, with an actual operating speed of about $60 million, we are now in our 40 s with less than that level of working capital.40, so very proud of this, we will continue to focus on the high return on investment in working capital and start to reverse inventory more, which is the benefit we see.Eric Wald got it.Thank you both.Thank you for your question.The next question will come from Cohen and the company's Gautam Kana.Please continue with your question.KhannaYeah, sakyamoni.Thank you.I have a few questions.First of all, any update on the legacy [ph] supply agreement and the terms of the contract?Chris MetzYes, so you know, we're going deep into the process, and all we can comment on is public information.We mentioned last time that we worked with what we thought was the best contractor in the industry and we felt that we had to come together in the process to answer all the government's questions about the contract.So there will be one of the best finals soon.The government will then take the time to review the process throughout the summer and we expect an answer earlier in the fall.KhannaGot, sakyama.Is there any change in the basic pricing of [during this period?Chris MetzYes, so I commented-Yes, I commented on the previous earnings call that we would like the Lake City organization to be more accommodating in helping us with some sales and they have done it.They have been very cooperative for the last 90 days.But the market is still weak and you know we feel it is the right decision to opt out of our exclusive contract because, frankly, the market has been weak for a while and has been weak.But they are more accommodating and when we want to sell more of their products, of course we thank them for their cooperation.My Gautam hannaras, on the supply issue, you mentioned it in the shooting movement section.Could you please elaborate on what is specific for this quarter? Has it been resolved so far?Chris MetzYes, so we don't want to discuss in detail what it really is.But we can assure you that this is essentially one-off.This is an event that we firmly believe will not happen again, and we do not want it to have any impact on our plans for fiscal 20.Thank you, Gotham Hanna.Thank you, Chris Metz.Thank you for your question.The next question is from Dave King and Roth Capital Partners.Please continue with your question.Dave KingThanks.Morning, guys.Chris MetzMorning.Dave KingFirst for $010 to $0.Is the impact of the brutal sale based on contributions to operating income, or is it assumed that debt and interest have decreased?This is a good question, Dave.In order to compensate for the sale of assets, this will also be a decrease in interest.Dave KingOkay.Thanks, Mick.Then on the income guidance, how do you think each quarter is shaking compared to the 1 to 5 quarters you listed, it sounds like you are optimistic about the outdoors, should we expect some improvement in the next few quarters, or more load in the second half, and then you know, there's a similar problem with shooting.Thanks.Chris Metz is very similar to what we have seen in the past year, and we feel like we have a stronger half.From the point of view of the shooting movement, our stronger quarter has always been our second quarter, which has driven us to become stronger throughout the second quarter.But you know, the first quarter of last year was pretty weak.We expect this to continue as we have some seasonally strong products that do not sell in the first quarter.So we expect to start from a quarterly perspective, very similar to what we have experienced in the last four quarters, as the quarter goes on, we will definitely develop in the field of outdoor products as a new leadership our existing general management team starts to see what you know, their labor results come out, new products, what do you have.So this will definitely tend to the second half.In shooting sports.Again, this will be the weakness of the first quarter, the strength of the second quarter, and will reflect the point you have seen in the last two quarters of the second half.Dave KingOkay.Chris, the color is good.Thank you.Finally, I think in terms of production and supply chain issues.Can you talk, can you talk about what is driving these and to what extent are the people behind you now?Thank you.Chris MetzYeah.So we have some issues with some of our suppliers in terms of materials, you know, a bit-You know it's predictions, and frankly it's just that we have some opportunities that we're chasing, that they show up, that they can't supply and respond quickly to the material we want.So there's nothing we care about in the long run, but it's definitely going to have an impact on our fourth quarter and make us kind of back off.Dave KingOkay.No progress.Glad to hear this.Okay.Chris MetzNo.Dave KingThanks answered my question and good luck in the coming year.Chris MetzYeah.Thanks, Dave.Thank you for your question.The next question will come from Brett Andress in the capital markets of KeyBanc.Please continue with your question.Good morning, Brett Andrei.Brett, Chris metzmingBrett AndressCan you helped us to better understand the savage variables, and I think the brutal sales process is, it's a timeline about price discovery, and I think it might be something that impairment tells us.Or any other complexity that we don't appreciate with legal barriers.What color is there?Chris MetzYes, Brett, I think this brutal process is in the minds of a lot of people, so I think it might make sense to take a few minutes to explain where we are today.I think it makes the most sense from the beginning, and what we said at the beginning of the process is that we feel it makes sense to sell Savage because we think it is more valuable to others than us.We also stated that we would like to keep the seller disciplined and not disclose the assets.We don't want to be a part of fire sales and we also say there are a lot of interested buyers so we think it will be a strong process.In the last quarter of 90 days ago, we felt that we had gone far enough and we thought it would be very likely to sign the contract by the end of this quarter.Where are we sitting today?We still believe that it makes the most sense to release long-term value to Vista to sell Savage.We continue to receive strong interest from multiple buyers, and our due diligence with a fixed buyer goes very well.Unfortunately, as many of you know, this is-Guns are a very challenging industry, our buyers are doing their due diligence for much longer than we thought, we are our buyers and our consultants.So you know, we will continue due diligence and current processes as we look forward, and we will update-We know more and update you.The first line of hope is that Savage is a valuable asset in the gun industry.It has a good record.It has a great management team and we don't feel like it will weaken our guidance this year.Brett Andres understands.Thank you.I'm sorry if I missed this, but I believe the reserve for the customer credit risk and product liability action has increased.I guess where this effect is produced on the income statement, just more colors, I guess that's what you know, there's no real bankruptcy on my radar, but I don't pay attention now.So, if you can elaborate.Mick LopezSure.Sure.So, let's take a look at what we think is a product liability risk of $0.30 for that.There is a -At the end of the year, we conducted assessments with our legal team and we conducted general reserves.We have also looked at specific cases, so we will obviously take a cautious approach, the right approach is to reserve funds for future potential liabilities, as we have done in the pastThere is a special case that prompted us to make most of the reserves.So this is a specific case.With regard to bad debts, you may have heard that there has been no bankruptcy recently, but there is a great possibility of going bankrupt.We booked that particular customer for 50%, and given the latest developments we 've heard in the market, we believe that increasing our reserves to 90% is a prudent recovery in bankruptcy like 10%.I hope this will add enough color.Chris metzyer, just to illustrate this better.We felt it was a blow and we felt that all the evidence was in support of ensuring credit risk.Like Mick said, we feel like we are completely preserved now, we usually get 10% recovery, with 90 reserves, we feel it prudent to accept this in the fourth quarter and keep a total reserve of 2020.Thank you, Brett Anders.Thanks for the color here.Last one, Chris, any update you know about the ammo price environment, and with the cost of goods falling across the industry, have you seen any indication that you are aware of unreasonable pricing behavior, or any sport you know in the last 90 days?Chris metzso Brett, we are cautiously optimistic about this, but what we have seen in the last 90 days is that all of our major competitors have raised their prices and we are concerned about thisSo we see that the price market has stabilized the ammunition in general, so we are encouraged by what we have seen in the market, and we think this is a sign of something better this fiscal year than in the past.Brett Andres got it.No, this is encouraging.Great. thank you.Brett, Chris Metz. thank you.Thank you for your question.The next question will come from [please proceed.Good morning. unidentified.Thank you for answering my question.Regarding the prospect of outdoor products this year, can you give us a little more color? Perhaps in terms of the backlog you have or the POS trends you see, it gives you confidence that the business will not grow organically this year?So we-There is no doubt that we are facing a challenging environment.I mean, a lot of people call it the retail apocalypse.So there are a lot of unnecessary, but not unnecessary.There are many clients that go bankrupt and you have had a negative impact on many of our brands.What we see here is more about the strength of some of our brands and the sales we see.We had a great snow last winter.We use this with some of our zero helmets [ph] and goggles.We grow to this digital share and share positions on our glasses line with our new vivid technology and something like that, which clearly leads to stronger growth stock positions in the second year.We recently launched some new products and I mentioned Bushnell and frankly we can't make enough new products because the products are too hot now.So you know, we already have some product clicks, and we are encouraged that with the establishment of the product path, in some attractive aspects, we are working through our digital marketing online, we are very confident that we have some momentum of sustainable development.But again-You know, there are still downsides, and that's why the low single digit growth we are predicting, and we expect the outdoor product business to be built this year as we grow, we are beginning to see more of these products entering the market.Unknown analystThen you set up some new brand leaders and I think about a year ago you just wanted to know what changes they made you know and what --Do you know you're starting to see the impact of the new leadership?Of course we are.Whenever you bring new leaders to some brands, it takes a while for you to start getting traction, which is why we feel stronger and stronger about these brands-You know next year, as we move forward here, because the initiative you know takes time to achieve results.So you mentioned the schedule.So the first general manager we brought was probably about a year ago.Others may have been brought in over the past six to nine months.The general manager of our Bushnell business has been in office for about a year.Frankly, this is the place where we see the greatest impact and the longest sitting.We put in place plans like map pricing, which is the lowest ad pricing, we didn't do end-of-quarter deals, which hurt us at first, but our customers began to realize, they won't give it away when they order it.So we become more self-disciplined in pricing, which, by the way, also helps our customers because they don't want to lag behind products that don't map pricing because they don't make money either.So it's a win, victory, they appreciate it, but it takes some time to get through the system.It has a direct impact on the product path, as you can see in our laser range finder and some other products that are now starting to enter the market.So you know we're excited that we have new leaders, and you know we're really, really, really inspired at Blackhawk and camper.Obviously we don't want to disclose any competitive intelligence here, but trust me, they have an impact on their team and we are very excited about what we have seen.Mick Lopez would also like to add that they are very disciplined operational leaders and besides that I have a lot of strength in marketing and sales, we 've seen something about the skews inventory movement that is overstocked and out of date, which is obvious in some of their specific inventory numbers.So I think leadership is a great general manager.If I combine the contributions Chris mentioned, it will produce more and more results as they build a team.Some of them have just joined the team recently.Chris MetzYeah.So beyond that, I think it is important for everyone on the phone to understand that you see in our guidance that there is no real growth in the sales line, because you know that shooting has offset the growth we will see in outdoor products.But you will see that the profit increase comes from the efforts of the middle and senior levels.Mick talked about it, so you know we sit down and work with each of our general managers to really pursue complexity in the business, which means less distortion, less inventory, action, let's have a clear understanding of profitable products and you know where we can make the most money.Unknown analystThanks for all the colors.Best of luck.Thank you for your question.The next question will come from Scott Stember's collaboration with CL King and Associates.Please continue with your question.Good morning, thank you for answering my question.Can you guys give us an update on what you see in terms of personal reserves?I know it's hard to be sure.I know you guys did a study about a year and a half ago.Do you have any latest findings and you know when we can see it turn there.Is this in line with your expectations and I think the market will get a little flat.Or do you still think there will be some weakness in this regard?Chris MetzYes, so we see from the survey that the basic health of the shooting exercise is that it is still very healthy.We have seen from the group dealer's conversation with the dealer that, as we have experienced the whole winter programme, frankly, it is more optimistic than what we have seen in a very long and long time.They are all satisfied with their inventory levels.The conversations they have with customers, our range of customers, and people who are in business scope feel good about where they are.But no one really knows how fickle consumer demand becomes a reserve, and no one knows what you have.We feel very good about the stock location and the potential shooting movement.But we predict the environment will be more standardized this year.We don't expect much growth.We don't want to have any inventory, we just want it to be replenished normally, in fact, as we said, you know it could be a bit down.Scott StemberGot.Going back to the leverage situation, through the potential sales of brutal weapons they operate, you know six times now.I know it sounds like you still want the deal to be completed, but if it's not done at least, it could be talk or potential buyers.Remind us again if you know what other potential buyers need or are excited about this, and how comfortable a semester you are operating within these six-fold leverage ratios.Mick LopezSure.So we are now with a buyer.We operate exclusively.So we hope that we can complete the transaction according to the agreement.But there are multiple other buyers, and we are certainly willing to reopen it once it is closed.From a leverage point of view, I think we have solved this in the past, but I would like to reiterate that Savage is a very profitable brand that generates a lot of cash flow and EBITDA, we expect it to continue to do so.In fact, whether we remain brutal or not, the leverage of the results will be roughly the same.We do want to continue to improve our debt reduction through working capital management, as we did last year not only in terms of asset sales.Therefore, we believe that we are expected to be below six for the whole year.Chris MetzSo let me add that too.I think it is important to pay attention to what Mick mentioned in his script comments in the slides we provide.Slide 5 talks about an inflection point we encounter.So for the first time in the last seven or eight quarters, we 've seen our leverage ratio drop.Obviously, this does not include the impact of selling Savage.It points more to our efforts to generate better income.Working capital improved, frankly.So, as we move forward here, whether or not Savage is sold, no one will predict anything other than you know to complete our current process, that our leverage will come from the portfolio of asset sales, and continued improvement in the growth of working capital and earnings.Scott StemberGot.That's all I have.Thank you.Thank you.The next question will come from Gary Martinson [ph] and Jefferies.Please continue with your question.Analysis of unknown causesIn the past, you talked about wanting to focus on the brutal divestiture of weapons, keeping it aside, and then you know the review of the portfolio.With the delay in the process, I mean, did you do some extra thinking about other assets and maybe you would want to make money?Chris MetzWhat actually goes back to the previous question of how satisfied we are with the current leverage, and as we said before, we want to continue to reduce the leverage ratio.You know, in these two or three times of deleveraging, we will feel more comfortable and we will continue to work hard.We -As I mentioned earlier, continue an active dialogue with our board of directors to discuss the best way to release and drive shareholder value.If we feel that it would be helpful to have another asset sale, we would certainly be open to that.But at this time, we feel that the best way to drive shareholder value and continue to reduce leverage is to improve the business we are currently operating..Our new credit facility is perfect for us, added Mick Lopez.Our interest rate is quite low.As of March 31, the average interest rate was 4.8% and 6 on the revolver.Regular loans of 2%.Our interest rate on our second lean project north of 10% is definitely much higher, but that's just $40 million.So our overall interest rate is lower.This is reflected in our guidance on lower interest spending next year.Then, when we look at the contracts that are related to our debt, they are more tolerant.We do have a CCR fixed fee coverage and have enough capacity now.So this is not a concern from a liquidity perspective.Chris metzyer debt to the mixing point.We spent a lot of time last year working with our lenders, this is a big move for us, we know we are transforming the company, we lock in a long-term credit mechanism, this will enable us to accomplish what we are doing.So all of our debt has a four-year deadline.So when we try to reduce the leverage ratio, we are very confident about the current leverage ratio.Mick LopezYeah.We often talk to our financial partners in Wells, JPMorgan and [they] are very confident about our situation.As Chris mentioned, we had the next due date in 2023 and thought that our liquidity situation is now very good and we will continue to reduce leverage ratio profits as we increase EBITDA and contribution.Even though you see price pressures and ammunition, it seems that unidentified analysts are bottoming out the sport Gross margin for the shooting, is this the right way to consider this? You know we have lower margins in the first quarter, but we build each quarter in turn throughout the year?Chris MetzIt is a very good question, although you know that we are not here to predict the bottom of sales growth, although we have seen the market stability I said before, and we are encouraged by this.We do feel that we have reached the turning point of profit.The activities that are going on in our facility, we have withdrawn for various reasons, and the profit of ammunition is also increasing year by year, you will see the improvement of the goods this year, not just one year, we went through the dormitory in order.We feel good.Thank you for your question.This concludes the Q & A section.I now turn the phone back to Chris Metz's closing remarks.Chris Metz once again thank you all for your time today and for the conference call this morning.I am proud of what we have achieved in fiscal 19 and eager to prove what we can do in fiscal 20.I believe we have a solid plan, a strong team to achieve our goals for this fiscal year with the right mindset.We have built a solid foundation in our first year of transformation, which gives me confidence in our future achievements.I look forward to updating you on our progress in August.Thank you.Thank you to all the guests. this is the end of today's event.You can now disconnect the line.