Recreational products manufacturer American Outdoor Brands (NASDAQ:AOUT) announced better-than-expected results in Q2 CY2024, with revenue down 4.1% year on year to $41.64 million. It made a GAAP loss of $0.18 per share, improving from its loss of $0.31 per share in the same quarter last year.
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American Outdoor Brands (AOUT) Q2 CY2024 Highlights:
- Revenue: $41.64 million vs analyst estimates of $41.08 million (1.4% beat)
- EPS: -$0.18 vs analyst estimates of -$0.32 (43.8% beat)
- Gross Margin (GAAP): 45.4%, in line with the same quarter last year
- EBITDA Margin: 4.8%, up from -5.5% in the same quarter last year
- Free Cash Flow was -$5.20 million, down from $4.60 million in the same quarter last year
- Market Capitalization: $118.3 million
Brian Murphy, President and Chief Executive Officer, said, "Net sales results for our first quarter came in as expected, declining slightly year-over-year, driven by a combination of order timing and recent trends in certain consumer markets. Nevertheless, I am pleased with our performance, which included a significant increase of more than 76% in Adjusted EBITDAS, and reflected a consumer preference for innovative products from our popular brands in Outdoor Lifestyle and Shooting Sports categories. New product innovation and expanded distribution opportunities are core to our long-term growth strategy, and both played a key role in our first quarter results."
Spun off from Smith and Wesson in 2020, American Outdoor Brands (NASDAQ:AOUT) is an outdoor and recreational products company that offers firearms and firearm accessories.
Leisure Products
Leisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.
Sales Growth
Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last four years, American Outdoor Brands grew its sales at a weak 1.9% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis. 
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. American Outdoor Brands’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7% annually.
This quarter, American Outdoor Brands’s revenue fell 4.1% year on year to $41.64 million but beat Wall Street’s estimates by 1.4%. We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
American Outdoor Brands has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 10% over the last two years, slightly better than the broader consumer discretionary sector.
American Outdoor Brands burned through $5.20 million of cash in Q2, equivalent to a negative 12.5% margin. The company’s quarterly cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Key Takeaways from American Outdoor Brands’s Q2 Results
We were impressed by how significantly American Outdoor Brands blew past analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed. Zooming out, we think this quarter featured some important positives. The stock traded up 4.7% to $9.61 immediately following the results.
American Outdoor Brands may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.