Johnson Outdoors Inc. (NASDAQ:JOUT) Q3 2023 Earnings Call Transcript
Johnson Outdoors Inc. (NASDAQ:JOUT) Q3 2023 Earnings Call Transcript August 4, 2023
Operator: Hello, everyone, and welcome to the Johnson Outdoors Third Quarter 2023 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson Outdoors Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President Chief Financial Officer. Prior to the question-and-answer session all participants will be placed in a listen-only mode. After the prepared remarks, the question-and-answer session will begin. [Operator Instructions] This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms simply drop off the call. I would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman.
Pat Penman: Thank you. Good morning,, everyone. Thank you for joining us for our discussion of Johnson Outdoors results for the 2023 fiscal third quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under Investor Relations. I also need to remind you that, this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors many beyond Johnson Outdoors' control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have additional questions following the call please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson-Leipold.
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Helen Johnson-Leipold: Thanks, Pat. Good morning, everyone, and thank you for joining us. I just want to excuse my voice. I've got a little bit of a hoarse voice today, but I'll do my best. I'll begin with an overview on the quarter and the year, and then I'll share perspective on performance and outlook for our businesses. Dave will review financial highlights, and then we'll take your questions. Sales in our third fiscal quarter ending June 30, 2023 declined 8% to $187 million compared to $203.8 million in the prior year third quarter. Total company year-to-date sales were up 4% over last year's fiscal nine-month period. Profit before income taxes for the third quarter slightly increased to $19.8 million versus $19.2 million in the prior year quarter.
For the year-to-date period profit before income taxes was $47.9 million versus $47 million in the prior year-to-date period. We're seeing consumer demand continue to moderate from the strong pandemic-fueled levels of the past few years. At the same time, the marketplace continues to be competitive reinforcing the critical importance of innovation for the continued growth and success of our brand. In Fishing, we remain committed to being innovative leaders. We recently announced a broad line of exciting new products at this year's ICAST and largest supporting trade show in the world Minn Kota announced the QUEST series the all-new brushless trolling motor technology giving anglers ultimate control in tough fishing environment. Minn Kota also launched the restage of all of its bow-mount trolling motors with an updated technology suite angler enhancement and more seamless integration in the Humminbird products.
We're always looking for ways to unify our products to enhance the fishing experience. Also launched at ICAST, was the One-Boat Network App bring together both Humminbird and Minn Kota devices into one dashboard to give anglers unprecedented command of their fishing boat. Sustaining our innovation leadership position and a competitive fishing market remains a top priority. We are excited about the breadth of new innovation we've just announced and we will continue to work on a pipeline of new products to give anglers the best fishing experience as possible. In our Diving business, sales were flat this quarter. However, year-to-date period showed positive growth especially from our European and Asian markets. We will continue to leverage our innovation and brand-building efforts to ensure SCUBAPRO remains the world's most trusted dive brands.
Our Camping and Watercraft Recreation business is continuing to face softening markets due to the post-pandemic slowdown. Retailers still have product on shelf to work through and at the same time consumer spending has slowed. We're committed to the long-term opportunity in these two businesses and our consumer-focused innovation plays a critical role in that. I'm excited to announce that Old Town received the Best of Boats and Watercraft honor at this year's ICAST or to a revolutionary Old Town ePDL+ drive. This is cutting its technology and contains power-assisted pedal drive that combines pedal and power to propel the fishing experience to the next level. This technology is new to the world and the word to shipping Old Town ePDL+ early next year.
While the near-term continues to be challenged across all of our brands, we're working hard to position them for continued success in the evolving marketplace, ongoing investments to understand our consumers, sustained innovation leadership and identify new sources and paths of growth in our markets. Our key to ensuring progress toward our goal of delivering sustained profitable long-term growth. Now I'll turn the call over to Dave for more details on the financial.
David Johnson: Thank you, Helen. Good morning, everyone. I want to highlight a few items from the quarter and the year. The quarter's gross margin of 41.5% improved from 36.1% in last year's third quarter, due primarily to price increases and lower freight and materials costs. We're pleased that our gross margins have started to recover and we'll continue to look for ways to improve efficiencies to maintain strong gross margins going. Operating expenses in the third quarter increased $10.4 million versus the prior year third quarter, due primarily to a $5.1 million increase in deferred compensation expense related to marketing plan assets to market, which is entirely offset in other income. Additionally higher warranty expense and advertising and promotion costs also contributed to the increase between quarters.
Resulting operating profit for the quarter decreased to $17.4 million versus $23.8 million in the prior fiscal year third quarter. Earnings before taxes up slightly versus the prior quarter. Net income for the third quarter was $14.8 million versus the prior fiscal year third quarter of $14.1 million. The quarter's effective tax rate was 25.3% and was 25.9% for the nine-month period. While we have generated strong cash flow from operations through June, we're still working through high inventory levels as we wind down the season. We'll continue to proactively manage our inventory position and working capital levels appropriately. Looking ahead, we remain focused on continuing to improve operational efficiency and strengthen our operating margins.
Our balance sheet continues to have no debt and our cash position enables us to invest in opportunities to strengthen the business. We remain confident in our ability to deliver long-term value and consistently pay out cash dividends to our shareholders. Now I'll turn the call over to the operator for the Q&A session. Operator?
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