Good day, ladies and gentlemen, and welcome to the American Outdoor Brands Corporation Fourth Quarter and Full Year Fiscal 2019 Financial Results Conference Call. [Operator Instructions] As a reminder, today's conference may be recorded. I'd now like to introduce your host for today's conference, Liz Sharp, Vice President, Investor Relations. Ma'am, please go ahead.

Thank you and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding revenue; earnings per share; non-GAAP earnings per share; fully diluted share count and tax rate for future periods; our product development, focus, objectives, strategies and vision; our strategic evolution; our market share and market demand for our product; 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, including our Forms 8-K, 10-K and 10-Q. You can find those documents as well as a replay of this call on our website at 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. I have a few important items to note with regard to our comments on today's call. First, we reference certain non-GAAP financial measures on this call. Our non-GAAP results and guidance exclude goodwill impairment charges, the effects of tax reform as well as acquisition-related costs, including amortization, debt extinguishment costs, recall-related expenses, onetime transition costs, a change in contingent consideration liability, fair value inventory step-up and the tax effect related to all those adjustments. The reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call, can be found in today's Form 8-K filing 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. For a detailed information on our results, please refer to our annual report on Form 10-K for the year ended April 30, 2019. I will now turn the call over to James Debney, President and CEO of American Outdoor Brands.

Thank you, Liz. Good afternoon, and thanks, everyone, for joining us. With me on today's call is Jeff Buchanan, our Chief Financial Officer. Later in the call, Jeff will provide a recap of our financial performance as well as our updated guidance. Fiscal 2019 was a year that presented several challenges for the firearms industry, including changes in the political environment and reduced consumer demand for both firearms and the accessories attached to them such as lights, lasers and scopes. Despite that backdrop, we delivered year-over-year growth in revenue and gross margin, and we believe we gained in market share. And importantly, we made significant and exciting progress toward our long-term strategy of being the leading provider of quality products for the shooting, hunting and rugged outdoor enthusiasts. Today, I'll recap our accomplishments for the year in the context of our strategic plan, then Jeff will provide detail on our financial results and our outlook for the coming fiscal year. You will find our strategic plan outlined in the investor presentation currently posted on our website. That plan consists of 5 main themes. The first of these is to remain focused on organic growth. Our objective is to harvest the growth potential of our 20 distinct brands by leveraging our deep understanding of the consumers' needs, wants and desires and using that information as a leading light for our new product development pipeline. This approach allows us to further expand our overall addressable market and to establish ourselves in new product categories where we believe our brands have permission to play. We made significant progress on this objective across our entire company in fiscal 2019. In firearms, we introduced 106 new SKUs, including 32 meaningful new products in numerous line extensions. This included Performance Center versions of our SW22 Victory,…

Thanks, James. Revenue for the year was $638.3 million, an increase of 5.2% over the prior year. Revenue in our Firearms segment was $481.3 million, an increase of 6.3%. And revenue in our OP&A segment was $177.3 million, an increase of 3.3% and representing more than 1/4 of our total revenue. Without considering Crimson Trace products' revenue, which was down for the year, the OP&A segment was up 6.8%. Within those total revenue numbers, intercompany sales eliminations were approximately $20.3 million. Revenue for the fourth quarter was $175.7 million, an increase of 2.2% over the prior year. Revenue in Firearms was $140.7 million, an increase of 4.8%. And revenue in OP&A was $42.2 million, a decrease of 3.4% from the prior year. Without considering Crimson Trace products' revenue, which was down for the quarter, the OP&A segment was up 3.3%. Within those total revenue numbers, intercompany sales eliminations were approximately $7.1 million. As James mentioned, we are proceeding with the restructuring of Crimson Trace into the OP&A division, including moving the Crimson Trace front offices in Oregon to Missouri, an action we believe will significantly improve operating efficiencies over time. For the year, the total company gross margin was 35.4% compared to 32.3% in the prior year. The Firearms gross margin was 31.9%, an increase over the prior year. And the OP&A gross margin was 45.9%, the same as the prior year. The total company gross margin increase was driven mainly by the Firearms segment, which had lower promotional product discounts and rebates and lower manufacturing spending. For the year, GAAP operating expenses were $188.2 million compared to $168.7 million in the prior year. Current year expenses included $10.4 million for a partial impairment of goodwill in Q3 related to Crimson Trace. On a non-GAAP basis, which excludes that impairment…

Thank you, Jeff. With that, operator, please open up the call for questions from our analysts.

[Operator Instructions] Our first question comes from the line of James Hardiman with Wedbush.

So a really good fourth quarter, certainly, versus your guidance. You beat it by $0.13, basically doubling that up. I don't think you really spoke to what was so much better than you initially anticipated 3 months ago.

Basically, what helped was the top line. Like the top line drove an extra about $0.05 in sales, and then that extra top line helped with absorption by about another $0.03. We did release some reserves at the end of the year because you true things up. That was another $0.04. That accounted for most of it. The -- we had a lot of promotional activity in Q4 that I think helped with the -- like the sales and the revenue, the top line. A lot of that came in at the very end as people were trying to get on -- get it in under the wire as the promotions were ending at the end of the -- our fiscal year.

That's helpful. And then the commentary on the Firearms business, continued softness moving forward. Maybe compare that outlook to how you've anticipated it looking 3 months ago. If I recall correctly, you would sort of look to June as a month that maybe things could bottom out and turn around. Your commentary on May didn't sound very constructive, although it was the first increase we've seen in a while and was better than, I think, a lot of people were looking for. So maybe walk us through the machinations there. Was May better or worse than you thought it would be? And I guess, has your outlook for the next 12 months gotten better or worse versus how you were thinking about it a few months back?

James, I think -- I don't think our outlook's particularly changed. I mean at the moment, it's fairly flattish, and we stick by that. Yes, May was up. But as you stack it up against prior years, it still ranks pretty low. That's what leads us to the conclusion that we believe the market is soft. And we are in that summer period as well, which we all know is the seasonal slow period. And it's always difficult to predict how things will go once we enter the cooler months, going to the fall and hunting kicks in and so on, back into the holidays and gift-giving season, which is always where we see the most sales at retail. So I think we'd just maintain that flattish outlook. Yes, you could take some encouragement away from the May result. Yes, it was certainly a positive year-on-year. But I don't think we know enough yet. We just don't have enough data points.

Perfectly fair. And then last question for me. Maybe just speak to inventory. It was down versus 3Q but up versus last year. Sounds like the distributors are pretty comfortable. What's the right amount of inventory? You talked about it being a buyers' market and them taking less inventory, so I'm just trying to put that inventory number in the proper context.

I think -- what's the right inventory? I think that's a million-dollar question. I don't think anybody knows. And distributors have obviously experienced competitors file for bankruptcy, as we know, one just happened recently. So I would say they're cautious, and I think that's a good thing. And they also know that the inventory that they need is readily available from manufacturers. So I think they're doing the smart thing by keeping their inventory as lean as possible but obviously not too lean so that they jeopardize their service levels to independent retailers. As you would expect, if business picks up, that inventory level is probably going to have to increase to support those service levels. That's the way it works. As we move through the summer period, there's no doubt that their inventory levels will start to creep back up again because they need to get ready for the busy period that's coming. And they need to take advantage also of just the regular normal cadence of promotions that, for example, we engage in. As you know, we'll have a late summer promotion. We'll do our spring promotions and so on. And they need to get ready for those. It is a buyers' market. That's our belief right now because the inventory is readily available, and we still have a soft market when it comes to the consumer.

And James, I just want to add that on our inventory, the Firearms finished goods inventory is actually down both over Q3 and Q4 of last year. The Outdoor Products, OP&A, inventory is significantly up over last year. And that's mainly because we did buy forward because of the tariffs that were going to be imposed and probably buying some now with respect to the possibility of additional tariffs. And as we said, we're moving a lot of inventory around now with the closing of UST and the upcoming move of BTI, so we do have excess inventory with regard to those moves. So most of the differences right now are really related to Outdoor Products. The finished goods inventory at the Firearms level is basically been -- it's been sort of on a downward -- a descent for the last 8 quarters, up and down a little bit but mostly down.

And just to add another point, where Jeff says we have excess inventory, that's inventory of very good product. This is not a product that is so...

Yes. It should be easily ordered.

I'll text you later. It's product that doesn't have a shelf life. It's fast-moving product as well, so we don't have any concerns there.

But just to clarify, the 127,000 number in terms of distributor inventory at the end of the quarter, I think it was 98,000 in the fourth quarter of last year. Was that number unnaturally low coming out of 4Q last year? Or what's driving that increase?

I would say that's a pretty low number when you think about it. If you take our average sell price and multiply it by the number of units, you can see how much revenue that would represent for us. And that's, call it, roughly 10% for the firearms business. That's pretty low when you still think about 60% of our revenue is generated by 2-step, the firearms business.

Yes. Historically, that was, I think, one of the lowest quarters we've had in many, many quarters.

Our next question comes from the line of Steve Dyer with Craig-Hallum.

Ryan Sigdahl on for Steve. Congratulations on a solid quarter given the challenging environment.

Thank you.

First question is drilling into Firearms. But with backlog down pretty meaningfully and a more cautious buyer the way it sounds, what gives you confidence in those new products driving growth in the back half of the year?

I think it's really our prior experience, to be honest. We have a very strong new product pipeline. We have a lot of experience with the revenue that's generated by new product introductions. And there are obviously different tiers. The lowest being just a simple line extension to -- all the way to the one that's going to generate the most revenue, which is our new platform. And I think that's a success we saw with the new EZ platform, the M&P 380 EZ being the first caliber that we introduced there. So there are several meaningful new product introductions across the whole of AOB that are staged for the balance of the year, and we're particularly excited about those. Those will, I have no doubt, generate a good amount of revenue. And that's what gives us confidence.

And just to clarify, you have both new product line extensions as well as new platforms coming?

What I would say is that January, we had the full spectrum going on, and that's just typical. As you heard in the prepared remarks, we launched 100-plus new products in firearms, 32 of those were meaningful. I'm not saying that's the mix you'll see this year, but I'm just indicating to you that you will see the full spectrum from what could be, could be, a new platform to a simple line extension. That's typically what we do.

Got it. Then James, you briefly mentioned that a large distributor recently filed Chapter 11. What impact has that had on your business? And then how would you assess the financial health of your other customers?

The one that just most recently filed for bankruptcy had lost relevance over the last 12 to 18 months. So as an impact on our business going forward right now, minimal. So no real concerns there. As for the balance of our customers when it comes to our 2-step distribution partners, I just see strong partners, so I have no concerns.

Great. Last one for me, and then I'll turn it over. Handgun average selling price was down last several quarters here, and it's the lowest in quite a while this quarter. What's the primary driver of that? Is it bundling, mix, incentives, et cetera? And then should we expect that to continue?

Right. It's mainly due to promotional activity, the -- from January to April, the types of promotions that are typically done in the industry are buy x, get y free, buy 8, get 9 free, so -- or get 1 free. The more that -- successful the promotional activity is or the lower that ratio is, then the lower the ASP is. So I think the change in ASP primarily relates to that. It also relates partially to success in, for example, the 380 EZ, which is a less expensive product versus a revolver, Performance Center revolver, which goes for $800 or $900. So product mix -- a successful product mix is probably impacting that also.

Our next question comes from the line Cai von Rumohr with Cowen and Company.

A good quarter, guys.

Thanks, Cai.

Jeff, could you -- I think I may have -- how much is the duplicative expense likely to be this year in OpEx? And sort of how does that pattern across the year?

Yes. Well, it's around $0.08, okay, $0.07 to $0.08. And it's relatively equal throughout the year. So pro rata each quarter, a couple cents a quarter roughly.

Then it's just 0, is it 0 in the next year? I would have thought it would have been [ spared ] early on.

Right. So there's a lot -- kind of there's a lot going on. So let me -- I'll try to explain this. So, for example, there's increased depreciation and costs associated with the new Missouri Campus, yet offsetting that is the reduced costs on the things like closing UST and now the front office of Crimson Trace moving, the other Columbia location, et cetera. So what I tried to do is by saying that the costs that are duplicate with next year, I'm trying to identify the costs that are, in essence, going away. And that's this $0.07 that I mentioned in the script, which is approximately $0.02 a quarter. And that is relatively a pro rata because we can't do this all at once. We're staging this in. And we just announced Crimson Trace, and all of those cost savings in Crimson Trace are really going to occur in 2021 and account for a large portion of that $0.07 that I'm talking about. So right now, we're going to be running -- we're still running a lot of, like I say, duplicate things that are going away. And I mean maybe it's $0.03 in 1 -- in quarter 1, and maybe it's down to $0.01 by quarter 4. But in general, there's not a big swing. It's just a very -- a slight downward glide path. But all of those are definitely gone by next year or 2021.

Got it. And then -- so you mentioned $8 million to $9 million of freight expense moves from COGS to OpEx. How should I think about how much of that is -- I would assume most of that's related to Firearms, but maybe not. Roughly how should I think about the allocation of that, the Firearms and OP&A?

It's about 75% on Firearms.

Got it. Okay. And then so $3 million per quarter if the tariff goes to 25%. But I assume that assumes no actions on your part in terms of raising prices to offset that?

Yes, exactly. So yes, let me explain the -- the $3 million. That's -- I think that's the worst possible amount in a quarter. So it's like assuming that the full quarter is impacted and that we don't have previously bought inventory, we haven't taken any mitigating steps, it's just the worst case. Obviously, if the full 25% on tariff is imposed on all Chinese goods, we will take mitigating actions. And those actions are -- you work with suppliers to get additional price concessions. You raise prices. You find other areas to offshore. And we think we can do all those things. I'm not sure whether we can mitigate a full impact of additional tariffs, but we're thinking about it right now. And as to when those are going to be imposed, it seems the story changes every day, so...

Just roughly, what percent of the OP&A sales are produced in China?

A very large percentage. I would say...

Mid-80s probably.

Yes, mid-80s. I mean we do a lot of assembly on Crimson Trace, for example, in Portland, although they buy product in Asia, but it is not -- the cost is lower, the assembly cost there. So yes, I think James is right, like 70s, 80s, something like that. And we buy -- I know we buy knife products in Taiwan. So that's probably a good estimate.

So DSOs were a little bit higher. How come they were where they were?

Like I said, a lot of sales at the end of a quarter as people were trying to get the deals that were ending at the end of April.

Got it. Okay. Okay. And then last one. Free cash flow, what's that look like for the year? I mean you're entering with a little extra inventory for buffer for China. What's the free cash flow look like now that the CapEx is down?

I would say the free cash flow next year looks better than this year. We typically don't give a forecast for free cash flow, but it definitely looks better. Just for the exact reason that you mentioned, you got -- right now, we have high DSOs and some inventory buildup on...

High inventory?

Yes, high inventory for the tariffs, so -- and less outgoing on cash, so...

And last one. M&A, you're still looking for tuck-ins. What's the pipeline look like in terms of are we looking at big things, small things? Give us some color on that if you could.

The company's focus is on smaller transactions. It's tough out there because the price is high, the interest rates are low. And so the result, the PE firms can pay a lot because they're willing to leverage a lot more than we are. So where we have had success the last 2, like BUBBA and LaserLyte, were ones that we were not in a process that we found on our own. Right now, we're finding -- I mean there's -- things are coming up, and we look at them. We're finding that in the process, it's hard at this point to be competitive because we're just more conservative. Our weighted average cost of capital has dropped. It's around 8% now. So our bogey for an acquisition has dropped maybe 10% or higher. But it's hard to find them, but we're still -- we're working on things that we find on our own. And it is the focus of the company on acquisitions. It's the biggest bang for the buck. You buy it on EBITDA. You don't hire any people. You don't take any buildings. You basically take some inventory and the supply chain and the IP. And you -- and we've already -- as we -- as James mentioned, we bought LaserLyte. We did the whole thing in just...

8 weeks.

Eight weeks. So we have the infrastructure now. As James mentioned, we're closing all these extra facilities. We have everything now in the Missouri Campus. But despite the fact that the square footage is about equal on trade, the cost is about unequal on trade, the Missouri Campus is only 60% to 70% utilized. So for basically even dollars and even square footage, we have the excess capacity. So we definitely would like to find these, what we call tuck-ins. And typically, they would be smaller.

Our next question comes from the line of Scott Stember with CL King.

You alluded to the fact that in the fourth quarter, there were, I guess, some consumers that were rushing to get in, I guess working to try to get their product with certain promotions. And I'm just trying to tie that into the first quarter where, I guess, even on the high end, you're looking for about 10% decline in sales year-over-year. Can you maybe just talk about the cadence of how some of those promotions are falling off? Or are you just stopping some of these bundling programs? Just give us an idea of how much of an impact that's having on your expectations for the first quarter.

Yes, just to clarify that. Promotional activity in Q4 is just the typical spring show specials, we refer to them as, where you may buy 6 of something and receive 1 is pretty good. And that was coming to end at April. That targets retailers, not consumers. So for those retailers who are waiting as long as possible, looking at their -- I suspect looking at their inventory, trying to optimize their inventory and then trying to capitalize on that promotion before it ended at the end of April, obviously, which was the end of our fiscal year. So when you look at our units shipped, we believe that we significantly overperformed. We definitely overperformed the market. You can see that in the numbers for sure when you compare to adjusted NICS. And so as we come into Q1, there's obviously going to be some correction. And we think that's what we're going to see in Q1, and that's built into our guidance. So as you just quite rightly said and compare versus last year, we are down. But we go back to what we said, it's a buyers' market. They're capitalizing on the opportunity without a doubt. I don't blame them. The products are readily available. They can afford to take some into inventory at a lower average cost and bleed it down until they believe that the next promotion will come along. We're not doing anything special, it's our normal cadence of promotional activity when it comes to working with our major retailers and our 2-step partners who serve all the independents that we don't serve direct and obviously the buy -- important 3 buy groups that we do work with. So it's our normal cadence there. We are doing the bundling promotions, and we'll continue. We do believe that we'll continue to do those this fiscal year as well. They've been very effective. So we've worked up a number of different bundle promotions that will activate throughout the year.

Got it. And maybe, James, just taking a step back, just looking at the market. I know that the last 1.5 years, I guess, a lot of the declines could be pinned on some of the pullback in the politically motivated buying that was taking place. But clearly, there are some underlying trends of organic growth, although we can't see them right now in the NICS numbers. But when do you think -- assuming that there's no change of political stance in the country here and we don't get any political-based buying, when do you think we could start to see what it will take for some of the underlying traits? Whether it's more people wanting personal security, whether it's women or just shooting sports, when do we see some signs that the industry could start to at least show some of the modest growth that we would expect it to see?

I think some of the trends that you referred to, obviously, are still there. People's primary reason to buy a handgun, for example, is for personal protection. Women are still very interested in owning firearms. So those trends are there. And as you quite rightly said, there's an absence of fear-based buying in that. To be absolutely clear to everybody, that's fear-based buying based on fear of regulation, okay? So we don't see any of that right now. The question you asked is a question that we try to answer internally all the time as we try and figure out our forecast going forward that obviously forms guidance that we give. And it's a difficult one, for sure. Certainly, the market appears to have somewhat reached its low point. Is it going to start growing from here? I just don't know. And that's why we hold on to what we call our flattish outlook. But what will drive excitement, what will drive revenue, all those new product introductions, that's absolutely key. And we have some -- a significant one for the balance of the year. Our promotions will always be strong. Our bundle promotions will be strong. That was -- those worked very well last year as you can see in our results. So the market, I don't know, we have what we have in control. Certainly, as you look outside of firearms, for us, we have our Outdoor Products & Accessories segment. We have a lot of excitement going on there. A tremendous number of new products were launched last year that we didn't get the full benefit in the year. We'll certainly see that benefit this year. Multiple rebranding initiatives; we have a very strong family of brands as we have discussed before. So we see plenty of growth opportunities there. There's some navigation to do. Some of the retailers aren't as strong as we'd like, but -- and it's a bit choppy out there. But I think that's starting to settle down. We certainly formed extremely strong and high-level strategic relationships with several key large retailers, which we're excited about, and we'll leverage that going forward as well. So there's a lot of good things. We are working hard to mitigate the softness in the market, and I hope you recognized that in the results. And that's all we can do, and we'll continue to do that. And if the market picks up, well, that will be a tailwind for us.

Got it. And just last question, Jeff, you talked about the $0.07 to $0.08 of duplicative costs for everything that's going on throughout the year and evenly distributed. But once we get past that into 2021, just trying to look back at my notes and to see if you guys will come out and say, all right, this is what the benefits will be starting in 2021 on an annualized basis from consolidating, from a -- just from a cost-saving standpoint or a synergy standpoint.

Yes. That's what that $0.07 to $0.08 is. That's just cost savings. Now obviously, a lot of what we're doing, especially with respect to the distribution and sales -- or the logistics and sales division is to try to enhance sales. Also, James talked about the new initiative in e-commerce. So a lot of those expenses in addition to are going away. We hope there will be more top line benefit in 2021 to everything we're doing.

Our next question comes from the line of Mark Smith with Lake Street.

Just real quick. I just wanted to look at the promotional activity a little bit more here in the quarter. Was this really led by you guys or more so by your peers? And was there anything that really surprised you in the promotional activity? Do you feel like it was at healthy levels throughout the quarter?

I guess the only real surprise is what we go back to, is that it got somewhat back-end loaded in the quarter. As I said, people were waiting. Retailers were waiting till the last minute looking at their inventory and then capitalizing on the last couple of weeks of that promotional period before it ended. Our math, no real surprises. I mean that's just a typical promotion for -- as I mentioned, it's the promotion for the show season when distributors invite independent retailers in to shows that they hold or they just do e-shows. And they're using those packages. They're not bundles, packages. And that's the typical buy 5, get 1 free; buy 6, get 1 free and so on with our 2-step distribution partners that were offering those to those independent retailers. So nothing unusual in that respect.

Okay. And pretty similar impact in handguns and long guns?

We're a handgun company. I mean that's where we're strongest. That's where our -- if you just look at the Firearms segment, that's where, by far, most of our revenue comes from.

Our next question comes from the line of Ronald Bookbinder with IFS Securities.

Yes, congratulations on a nice finish to the year.

Thanks, Ron.

You guys have done an excellent job of taking market share in a competitive market through product innovation and bundling. Is there an opportunity -- given, as you just expressed, the strong relationships that you have with key retailers, is there an opportunity for you guys to start producing private-label firearms for retailers and going after sort of a lower value end of the market?

I have private label in my background when I look back into the roots of my career, and I do my best to avoid it. I mean all it does is start to commoditize your product, compress your margins. You have less pricing power. There's lots of negatives to private label. The most valuable thing that we have are our 20 brands, and that's what sets us apart. We own those brands. There's nothing else out there really like them. We have the full spectrum as well from an iconic brand right the way down to brands that we're just nurturing and getting going now. And we can see a future that we'll just start new brands from scratch, and we'll get behind those and raise their awareness with the consumer by matching them with quality products. So I definitely don't see private label in our future. There are some very, very small parts of our business that are private label, but again, I mentioned what I think about private label.

Yes. Yes, it tends to be low margin, low revenue and -- but it would increase your throughput through your facilities. On the $0.07 to $0.08 that Jeff was just talking about that, that would be the cost savings going forward in fiscal '21 and beyond, is that $0.07 and $0.08 -- $0.07 to $0.08 already being backed out in the adjusted numbers?

No. No, because the only adjustments we're taking in the adjusted numbers are really amortization. We're not taking any -- at this point, we're not taking any onetime numbers associated with all these various moves. There might be a few dollars here and there if it's a true onetime. But really, what's going on right now is we're operating several things at once that are going to become just one thing. So it's kind of hard to identify what is "onetime". So instead of doing that, I thought it would be best to just say that we have $0.07 to $0.08 of costs in this year that will not be around next year.

And we have time for one more question. This question comes from the line of [ Max Mathoff ] with Two Way Media.

Hey, guys, congrats on a positive quarter. Just have a small bundle of questions, pun intended. So based on the success of the bundled promos that you guys had, can we expect to see this applied across more product SKUs, both firearms and accessories? So I mean like cleaning kits, optics, operated cases or even something like bundling your firearms with the Gemtech suppressors, especially since it's such a low-hanging fruit?

Yes. I think all of those are certainly on the table and make perfect sense. So we'll definitely see more of that. Some of them may even become standard SKUs. We just continue to see the value that we can create for the consumer. And if we see that demand can be sustained, then I do believe that we've made some of those just standard SKUs. And you can certainly see that with our M&P15 Sport II rifle as well where we could -- and the M&P15-22 as well where we just continue to bundle those with the Crimson Trace optic, make that a standard SKU.

Awesome. So one of the questions you kind of already answered, which was have you seen any evidence of any fear-based buying. But as we're approaching the next upcoming election cycle and obviously the upcoming rhetoric, speaking with the distribution channel, the retail channel, have you seen any signs of willingness for them to leverage up again much like they did in 2016? Or are they still hanging in with the lessons in the back of their minds from that?

Yes. I think lessons learned definitely are resonating strongly in people's minds right now. So there's certainly been nobody who's talking about building inventory and making it that they will see some fear-based buying manifest itself at some point. And again, it's fear-based buying just on fear of regulation. So nothing yet, but who knows?

Yes. And [ Max ], I'd like -- if you go back to '16, the build, in anticipation of the Clinton/Trump election, really occurred in '16. That is in the year of the election, probably 4 or 5 months before the election. We're still a year before that buildup period started in the equivalent time in the last election. So we got a long ways to go, and we'll see.

And I guess the final question. So in light of a few of your product competitors seemingly having success with ammunition, have you guys considered tucking in a small ammo manufacturer or perhaps having your own branded line of ammunition?

We've considered it. Obviously, we talk about the full spectrum of potential acquisitions, and that's still one that we do talk about. But nothing really appeals to us right now, I would say.

Yes, [ Max ], I would add to that. Two problems with -- one is the gross margins tend to be lower than firearms. And also, if we're going to be in -- with respect to the firearms business, we like to be in a leading position in terms of market share. So a tuck-in acquisition in ammo might -- you could do -- I suppose you could have some specialty ammo or something, but it's not -- I don't think it would be our focus right now.

And that concludes today's question-and-answer session. I'd like to turn the call back to Mr. Debney for closing remarks.

Thank you, operator. I want to thank everyone across the American Outdoor Brands team for their commitment and dedication to excellence. Thank you for joining us today, and we look forward to speaking with you next quarter. Take care, everyone.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.