Johnson Outdoors Inc 2026 Q3 Earnings Call

Good morning. Thank you for joining us for our discussion of Johnson Outdoors' results for the 2026 fiscal third quarter. If you need a copy of today's new 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 any additional questions following the call, please contact Asad Rahman or myself. It is now my pleasure to turn the call over to Helen Johnson-Leipold.

Good morning, everyone. First of all, I would like to share that Asad Rahman, our new chief financial officer, joined Johnson Outdoors on June 30th. This follows the planned retirement later this year of our longtime CFO, Dave Johnson. We thank Dave for his many years of service and contributions to the company. I'm excited to have Asad on the call with us today. I'll begin by sharing perspective on the third quarter and year-to-date results, as well as give an update on each business. Asad will review the financial highlights. We will take your questions. The strength of our market-leading brands helped us deliver solid third-quarter results, with total company sales increasing 5% versus the prior year quarter. Operating income was $18.3 million, $11 million higher than the prior year quarter, with approximately $15 million in tariff refunds received contributing to the improvement.

Year-to-date, our net sales are 15% higher than last year's nine-month period, with operating income and gross margin also up for the fiscal year-to-date period. We are pleased with the results we delivered this quarter and the continued progress on our strategic priorities of innovation leadership, digital and e-commerce excellence, and operational efficiencies. In our fishing business, Minn Kota continues to be the leader in trolling motors. The quarter's results were driven by continued healthy demand for Minn Kota's full lineup of trolling motors. We are pleased with the momentum of our fishing portfolio. As always, we remain focused on investing in innovation and delivering differentiated technology that enhances the experience of the anglers worldwide. In our diving business, strong sales in regulators and buoyancy compensators helped drive a solid increase in third-quarter sales.

Digital engagement continues to play an increasingly important role enhancing connectivity between our SCUBAPRO brand, retail partners, and consumers. Our focus remains on enhancing brand visibility, improving consumer engagement, and supporting our retail partners around the world. Together, these initiatives strengthen the foundation of the business and underscore the enduring value of the SCUBAPRO brand. Finally, our camping and watercraft business faced a challenging quarter, primarily due to weakness in marketplace conditions. Jetboil remains a leader in camp cooking, and we're focused on capturing the many opportunities we see to further strengthen and expand the brand. With our Old Town brand, our portfolio of innovative, high-quality watercraft continues to resonate with consumers, and we remain committed to building on those strengths to drive sustainable growth over time. Overall, our results reflect the strength of our portfolio and the progress we are making against our strategic priorities.

By remaining focused on innovation, expanding our digital and e-commerce presence, and driving operational efficiencies, we are positioning the business to perform through a range of market conditions and create long-term value. Now, I will turn the call over to Asad for more details on the financials.

Thanks, Helen. Good morning, everyone. Gross margin for the third quarter improved to 45.3%, an increase of 7.7 points compared to the prior year quarter. The tariff refund of approximately $15 million contributed to this improvement. Excluding this benefit, gross margin would have been modestly lower than the prior year due to higher raw material costs. Looking ahead, we do not anticipate additional meaningful tariff refunds, and as the tariff landscape continues to evolve, we remain vigilant in managing potential cost impacts and are closely monitoring developments. Operating expenses increased $7 million from the prior year third quarter, due primarily to increased sales volume-related costs as well as increased variable compensation costs. Profit before income taxes for the third quarter was $23.3 million, compared to $10.5 million in the previous year quarter. Driven mostly by the factors I just mentioned.

During the quarter, we increased inventory levels to support sales demand. Our inventory balance at the end of the third quarter was $188.3 million, up about $24.5 million from the previous year third quarter. Year-to-date, gross margin is 40.6%, up 5.8 points from the prior year-to-date period. Tariff refunds, pricing actions, improved overhead absorption, and cost-saving initiatives more than offset higher material costs to drive margin improvement in the current year-to-date period. Our ongoing strategic cost savings program remains critical and continues to deliver meaningful benefits to our bottom line.

Profit before income taxes on a year-to-date basis was $32.2 million, compared to a loss of $4.3 million during the previous year period, which resulted in an increase of approximately $36.5 million as a result of the strong gross margin improvement mentioned earlier. Looking ahead, we remain focused on actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth. Our balance sheet remains debt-free, and we continue to pay a meaningful dividend to shareholders with the board approving our most recent dividend announced in May. I'll turn the call over to the operator for the Q&A session.

We had varied results across the business, but we feel good that our plans for innovation have kicked in, but the market is very complex. We're not going to give any forward-looking statements, but the momentum is good, and we're keeping focused on strategic priorities, so hopefully things continue.

Pricing was a factor this quarter, and we did strategic pricing where it made sense for our products, keeping in mind the consumer and demand dynamics.