Johnson Outdoors Inc. Class A Stock

Thank you. Hello everyone and welcome to Johnson Outdoors third quarter 2026 earnings conference call. Today's call will be held by Helen Johnson-Leopold, Johnson Outdoors chairman and chief executive officer. Also on the call is Asad Rahman, chief financial officer. 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. If you would like to ask a question during that time, please press star, then the number 11 on your telephone keypad. This call has been recorded. Your participation implies consent to our recording of this call. If you do not agree with these terms, simply drop off the line.

I'll now turn the call over to Andres Batista from Johnson Outdoors. Please go ahead, Mr. Batista.

Good morning and 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 Investors 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. Natural 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 like Asad, Raman, or myself.

It is now my pleasure to turn the call over to Helen Johnson-Leopold.

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 a planned retirement later this year of our longtime CFO, Dave Johnson, and 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, and then 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 were 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 and 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. enhances the experience of the anglers worldwide in our diving business strong sales and regulators and buoyancy compensators help drive a solid increase in third quarter sales to 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.

Currently our camping and watercraft business faced a challenging quarter, primarily due to weakness in marketplace conditions. Jeff Boyle 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. 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. A direct 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 materials 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. 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.

Now, I'll turn the call over to the operator for the Q&A session. Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Stand by while we compile the Q&A roster. And our first question comes from the line of Anthony Liborinsky, a Sudoti. Your line is now open.

Good morning and thanks for taking the questions. It's really nice to see the results, especially in fishing and diving. So maybe first we could just talk about how the quarter progressed from April to June and any early reads so far how July was?.

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

Understood. Okay, got it. Okay. And then can you just talk about the pricing actions, um,.

and the impact they had on the fishing revenue? 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.

Understood. Right. And then, so as you mentioned, you know, the gross margin excluding the tariff refund came in, you know, just slightly below, relatively in line with a year ago. How do we think about gross margins here kind of going forward? Maybe if you could just go over the various puts and takes that we should be mindful of.

Yes, gross margin, as you mentioned, was flattish, excluding refunds. Pricing and cost savings continue to be a good factor for us. Increasing raw material costs is the headwind. We, like many companies, electronic industry component costs are dynamic for us, and that's something we are monitoring. But it is a good thing that our cost savings efforts in place are there to help offset that.

Got it understood. Okay. And then just switching gears to the operating expenses, so they did come in higher than what we had expected and we're up 11.5% from last year. I know you touched on this a little bit as far as the increased sales and marketing costs, as well as variable compensation expenses. If we were to separate those two, well, was the larger factor driving the higher operating expenses? And then just broadly speaking, how should we think about operating expenses going forward?.

Yes, roughly half of that was related to the variable compensation cost. The rest was related to volume-related costs and other expenses. We continue to manage our expenses prudently while investing in key priorities that are the right things to set us up for long-term success.

Mm-hmm. Got it. All right. And then lastly for me here, so the tax rate has jumped. quarter the quarter so far this year. Any kind of. estimate how to think about the tax rates for the fourth quarter and any perhaps early read for fiscal 27 as to how to think about the tax rate.

Yes, because of the valuation allowance on the U.S. income right now, we knew that the tax rate would be up and down each quarter. To think of it practically, for the full year, it's going to be about $5 to $6 billion of tax expense for the year.

Okay, that's very helpful. All right, well, thank you very much and best of luck.

Thank you. Thank you. I'm showing no further questions at this time. I'll now turn it back to Helen Johnson-Leopold for closing remarks.

thank you all for joining us and have a good day thank you.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, everyone, and welcome to the Johnson Outdoors Second Quarter 2026 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, Chief Financial Officer.

[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 line.

I would now like to turn the call over to Allison Kitzerow from Johnson Outdoors. Please go ahead, Ms. Kitzerow.

Good morning, and thank you for joining us for our discussion of Johnson Outdoors' results for the 2026 fiscal second quarter. If you need a copy of today's news release, it is available on our website at www.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 Dave Johnson or Pat Penman.

It is now my pleasure to turn the call over to Helen Johnson-Leipold.

Thanks, Allison. Good morning, everyone. I'll begin by sharing perspective on our second quarter and year-to-date results as well as give an update on each business. Dave will review the financial highlights, and then we'll take your questions.

Improved retail conditions and ongoing success of our product innovation helped drive a 15.5% revenue growth in the second quarter with all business segments contributing to the improvement. Operating income for the second quarter was much improved versus the prior year second quarter due to the increased sales volume and our cost savings initiatives continuing to boost profitability as well.

Year-to-date, our net sales are 21.5% higher than last year's fiscal 6-month period with operating income and gross margin also up for the fiscal year-to-date period. We are pleased with our second quarter and year-to-date results and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership positions across our portfolio.

Our Fishing business delivered strong results in the second quarter, driven by improved trade conditions, continued robust demand for Humminbird's XPLORE Series and MEGA Live 2 fish finders and Minn Kota's full lineup of trolling motors as well as pricing actions. These factors combine to reinforce our momentum and position in the marketplace.

We remain focused on investing in innovation to deliver fishing technology that sets the standard for anglers worldwide. In Camping & Watercraft, growth during the quarter was supported by our expanding digital and e-commerce capabilities with Old Town and Jetboil maintaining their leadership position in competitive categories. During the quarter, Jetboil also launched TrailCook, a new innovation designed to expand the brand beyond boiling water into broader back country cooking. In both brands, we will continue to build on our strength to drive sustained growth through innovation and deeper engagement with outdoor enthusiasts.

Lastly, in our Diving business, improved conditions across the global markets and continued growth in e-commerce helped drive a solid increase in second quarter sales. Digital engagement continues to play an increasingly important role, enhancing connectivity between our SCUBAPRO brand, retail partners and consumers. As we continue to lean into digital channels and strengthen our global footprint, we are optimistic about SCUBAPRO's ability to grow and further reinforce its position in the market.

Overall, we are pleased with the quarter and year-to-date results. By investing in and executing our strategic priorities, consumer-driven innovation, digital and e-commerce excellence and operational efficiencies, we are strengthening our market position and taking the right steps to navigate macroeconomic uncertainty while building long-term resilience.

Now I'll turn the call over to Dave for more details on the financials.

Thank you, Helen. Good morning, everyone. Our strategic cost savings program remains critical and continues to deliver meaningful benefits to our bottom line.

Gross margin for the second quarter improved to 38.8%, up 3.8 points from the prior year quarter. Overhead absorption from higher volumes and cost savings were the main drivers of the improvement in gross margin. Year-to-date, gross margin is 37.9%, up 4.9 points from the prior year-to-date period.

Operating expenses increased $11.2 million from the prior year second quarter, due primarily to increased sales volume-related costs as well as increased variable compensation costs. Profit before income taxes for the second quarter was $10.2 million compared to $4.2 million in the previous year quarter, driven mostly by the improvement in operating income.

As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of the second quarter was $186.9 million, up about $6.8 million from the previous year second quarter.

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 February.

Looking ahead, despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth.

Now I'll turn the call over to the operator for the Q&A session.

[Operator Instructions] Our first question comes from Anthony Lebiedzinski with Sidoti.

Certainly nice to see the really strong revenue growth, especially in Fishing. So as it relates to Fishing, how much was revenue helped by pricing versus better market conditions and a stronger competitive position?

Yes. I mean we saw strong unit volume growth in our business. So that was a big driver for the quarter. Pricing certainly helped. But -- and we're also seeing just really strong demand for our -- with the broad line of trolling orders that we have. That's very helpful.

Got you. So do you think this is perhaps the sort of a replacement cycle after the bump from COVID? Or is there something else you think going on?

The market is very hard to predict. But I think we have innovation that is really driving -- continues to drive purchase. And I do think there will be -- I think consumers are a little cautious with all the things going on, but innovation still is the catalyst to get things moving. We're hoping that this is the beginning of an upward trend, but I think it's going to be challenging and innovation will be the key going forward.

Got you. Okay. So as far as the other 2 segments, you highlighted the increased sales through e-commerce. So can you expand on that a little bit? And then maybe give us, if possible, some numbers as it relates to the growth that you saw in the quarter? And how are you thinking about the rest of F '26 as it relates to Diving and Watercraft & Camping?

Well, there's a few questions in there. But e-commerce is one of our growth initiatives. And we put a hard court press on that, and it does reach a much broader consumer base. So we are really excited about it. And not to mean that our bricks and mortar aren't important. I think it's -- they both complement each other.

We are just -- we've been up and running on a true digital mode for only about -- actually, it was a year. And so it's early on, and we're -- we've got a lot to learn, but it's a good opportunity to reach a broader audience. I think it will continue to grow. It's a smaller piece of the pie than our other sales. But I think from a growth standpoint, it is helping us.

I think, again, the -- as you -- we don't do a lot of forward-looking, but as we look at the third quarter, the signs in the second are good, and they're better than they've been in the past. But again, there's -- the world is complicated and the consumers have a lot going on.

So -- but we -- again, it's back to the product line, the brand, the positioning in the market, and we feel really good about where we are as a brand and as a company. And we're hoping that the markets also cooperate as well. So it's good to have a quarter that is -- feels very strong. So hopefully I've answered your question.

Yes. That's definitely very helpful context. So as far as the world out there, just wondering, as you talk to your retail customers. Since the Iran conflict started in late February, gas prices have gone up quite a bit. So as it relates to that, I mean, from the point-of-sale data that you can get your hands on, I mean, have you seen any notable impact for your brands? Anything you can talk about that?

I mean I would say not yet, Anthony. We haven't seen a direct impact. But like a lot of companies, we're looking at inflationary pressure, higher input costs.

Worried consumers.

Consumers that their confidence levels are down. So I think so far, it's okay. We haven't seen a direct impact, but we're looking at things kind of in a neutral fashion over the next couple of quarters.

Okay. Understood. Okay. And then -- so yes, so I guess as far as the gross margin, so I guess a 2-part question here. So first, in the quarter itself, you did have a strong improvement versus last year. You talked about fixed cost absorption, but also some cost savings. So was that kind of a 50-50 split between that?

And then my second part to that question is as it relates to cost pressures, how should we be thinking about the gross margins for the rest of the fiscal year?

Yes. So most of the improvement was operating leverage, so fixed cost absorption, but our cost savings program is critical to that -- helping that as well. We're seeing cost pressure going forward. I think like a lot of companies in the electronic industry, component costs are dynamic for us. And so that's something we've got our eye on and we're monitoring. So I just think going forward, that will be something that will be a little bit of a headwind for us maybe over the next coming quarters, if you will. So it's a good thing we have our cost savings efforts in place now to help try to offset that.

Got it. Okay. And then in terms of the operating expenses, they did come in higher than what we had expected. Just roughly speaking, how much of the year-over-year increase came from your sales volume-related costs versus the incentive compensation piece. And then again, just kind of maybe help us understand like how should we be thinking about operating expenses going forward for the rest of the fiscal year?

Yes. I mean a decent portion was volume related and probably -- I can't give you the numbers, but let's say maybe 1/3 was volume related, and then we had some variable compensation accruals adjustments in there that made up about 1/3. And then there's some other cats and dogs in there, too, that we didn't call out, but there's other costs that were -- that we have in that operating expense, like some health care costs and some other consulting expense. So -- but the 2 big ones were the volume related and then the variable compensation.

Okay. And you expect that to continue, you think, here at least near term or just any general comment there?

Well, I think the expense structure will settle down probably a little bit. I mean, obviously, the volume drives some of that. But in terms of kind of where we are, in terms of our spending and our ability to manage that, I think it will kind of settle down probably going forward over the next couple of quarters.

But Anthony, we are investing, and we're putting foundational systems. And so -- and we're investing against our key priorities. So I would say it's good spend and it may not be long term, but as Dave said, it will settle down. But I feel we're investing in the right things to set us up for success long term. And that will eventually -- it will get more efficient on the other side of this.

Okay. And then lastly for me, the tax rate came in lower than what we had expected. Maybe, Dave, you can address that. And again, any sort of commentary as to how we should be thinking about the tax rate for the balance of the fiscal year?

Yes. I mean because we have the valuation allowance on the U.S. income right now, it's -- the tax rate is going to kind of be up and down. So it just depends on the mix of profits that we're seeing in the quarter and what we're forecasting for the full year.

So I mean, I think the way to think about that is probably a $4 million to $5 million tax expense for the year and how we divide that up over the quarters just kind of depends on the mix of profit. So it's just hard for me to give you a rate quarter-by-quarter just because of that mix.

And I'm not showing any further questions at this time. I turn the call back over to Helen.

Okay. Well, thank you, everybody, for joining us today and questions, you can call Dave or Pat, but have a good day. Thank you.

Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Hello, everyone, and welcome to the Johnson Outdoors First Quarter 2026 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 and Chief Financial Officer. [Operator Instructions] The call is being recorded your participant implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman.

Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2026 fiscal first 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.

Good morning, everyone. I'll be given by sharing perspective on our start to fiscal 2026 as well as an update on the strategic priorities for our businesses. Dave will review the financial highlights, and then we'll be happy to take your questions. In the first quarter of fiscal 2026, we saw markets stabilize and solid reception to our new products.

That combination helped drive double-digit growth in the quarter, which is encouraging given that this quarter is typically a slower period as we ramp up for the primary selling season. Additionally, the ongoing hard work we've been doing to improve our profitability has been showing results.

Our operating loss for this first quarter was much improved versus the prior year quarter. While there are still uncertainties in the broader environment, we're encouraged by how the fiscal year has started and feel good about the execution of our plans to accelerate the growth of our business in brands.

Starting with Fishing, both our Minn Kota and Hummingbird brands delivered solid performance in the quarter, with the category benefiting from improved trade dynamics. Demand remains strong for Hummingbird's Explorer series and MEGA Live 2 fish binders, which launched last fiscal year, and we saw healthy demand across encodes full lineup of trolling motors.

Turning next to Camping and Watercraft. This is an area where our investments in digital and e-commerce are really paying off across Jetboil and Old Town, we've been focused on meeting consumers where they are, which is online and making it easier for them to discover and purchase our products.

These efforts helped drive growth in the quarter. Both Oldtown and Jetboil remain strong leaders in their respective markets. Jetboil continues to see strong demand for its fast oil cooking systems, which has exceeded our expectations.

Finally, in diving, improved conditions across the global markets and our innovation helped drive an increase in sales for the quarter, we continue to see positive momentum for SCUBAPRO's new HydrosPro product that we began shipping in December, HydrosPro 2 builds on the award winning legacy of our original Hydros Pro incorporating meaningful innovation of comfort, fit and performance needed in the buoyancy control device.

Digital engagement is becoming increasingly important in diving as well from educating drivers on new technologies to supporting dealers with better digital tools and active. We see this as another opportunity to strengthen the connection between our products, our retail partners and consumers.

Overall, we are pleased with the start of fiscal 2026, while it's too still too early to predict how the rest of the fiscal year will unfold. Our priorities remain clear across all our businesses, maintaining a strong and robust innovation pipeline building a growing momentum in digital and e-commerce and continuing to improve product cost and operating efficiency with our cost savings initiatives.

These are the right drivers to position Johnson Outdoors for sustainable growth and long-term success. Now I'll turn the call over to Dave for more details on financials.

Thank you, Helen, and good morning, everyone. Loss before income taxes for the first quarter was $1.3 million compared to a pretax loss of $18.9 million in the previous year quarter. The improvement is driven mostly by revenue growth and improving margins. Gross margin for the first quarter improved to 36.6%, up 6.7 points from the prior year. Overhead absorption from higher volumes was the main driver of the improvement in gross margin. .

Additionally, price increases and our ongoing progress on cost savings initiatives helped to offset increases in material costs. Operating expenses increased $2.1 million from the prior year first quarter due primarily to increased sales volume-related expense, partially offset by decreased warranty expense.

Tax expense for the quarter was about $2 million, driven mainly by an adjustment related to our U.S. valuation allowance on deferred tax assets. We continue to make good progress on our inventory levels. Our inventory balance at the end of the first quarter was $183.9 million, down about $17.7 million from the previous year quarter.

I want to highlight that 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 December. We remain confident in our ability and plans to create long-term value for shareholders.

Now I'll turn the call over to the operator for the Q&A session.

[Operator Instructions] And our first question comes from the line of Anthony Lebiedzinski of Sidoti.

Certainly a great start to the fiscal year, so first, just a general kind of question in terms of pricing versus unit volumes. I don't need specific numbers, but just kind of maybe if you could just talk about what you saw as far as pricing versus unit volumes, that would be a good start.

Well, yes, most of the increase in the quarter was unit volume driven, but we did take pricing across the businesses to react to the cost increases we had. But I would say most of the increase we're seeing is unit volume related.

That's encouraging here -- so you guys have for years focused strongly on innovation. Can you share broadly as far as your sales are concerned, what's coming from new products versus a few years ago? Has there been a meaningful change in terms of the new product component of your sales?

I mean innovation has always been critical for us and we have been focusing on improving our success rate. So competition is strong and our main way of maintaining leadership is innovation.

So I would say we continue to make it stronger. And I don't know about the -- Dave, you can comment on the percept volume, but it truly is the driver of growth.

Absolutely. And we've seen improvement in our new product success over the last couple of years. I think during the COVID cycle, that may have come down a little bit, but we're seeing improvement in that area.

Got you. And then you also talked about the growth in the e-commerce channel. Can you share with us what percentage of your revenue is now related to e-commerce? And do you guys have a goal in mind as far as what you want to get to in the next few years?

What we can say is that it's the fastest growing channel we have, and it's definitely expansive growth for us. our goal is to continue to grow that at a faster pace than our -- across our businesses. It's a key contributor to growth year-on-year.

Got you. All right. And then -- so you had a great start here to the fiscal year, strong sell-in to retailers in the December quarter. What is your sense now about the current trade inventory levels?

Well, we were glad that the -- what we said, stabilized is more that the trade was in a good position from an into standpoint to react to good sell-in. We had a good cylinder in the first quarter, and so they are in a good position. Hopefully, we get the consumer takeaway as the season begins. So I think that the trade is in a healthy position right now.

Okay. That's good to hear. You've done a lot with your cost savings efforts, and it's clearly evident in the gross margin improvement.

I know there was some fixed cost absorption component to that as well. But as it relates to the cost savings initiatives, should we expect to come on that program as we look forward to the rest of the fiscal year?

Yes. It's a key strategy for us going forward, especially in these volatile times with the supply chain. So it will be critical for us to continue to work on optimizing product costs, being as efficient as possible. We've got a whole slew of initiatives that we're working on to make that happen.

Okay. And then in terms of the warranty expense, how significant was that as far as the adjustment to the OpEx.

Yes. I mean it was probably less than 1 point of the operating expense percentage going down. So -- but it did come down in the quarter. So we wanted to point that out.

Got you. Okay. That makes sense. Okay. And lastly for me. I mean, so Dave, you did touch on the tax expense, which we were not expecting for the quarter. going forward, what's the -- where should we expect the tax rate to fall for the balance of the fiscal year?

Yes. I mean, the challenge for us is just the profits in the geographies in which we serve. So we've got the valuation allowance in the U.S. And as we make money in the U.S., that won't -- we won't have tax -- or expense on that because it's all reserved for. So the tax rate will be kind of wacky going forward until we can kind of stabilize our profits.

Okay. Got you. All right. Well, thank you very much, and best of luck.

I'm showing no further questions at this time. I'll now turn it back to Helen Johnson-Leipold for closing remarks.

I just want to thank everybody for joining us is have a great day.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Hello, everyone, and welcome to the Johnson Outdoors' Fourth Quarter 2025 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, Chief Financial Officer. [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.

Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2025 fiscal fourth 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 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.

Thanks, Pat. Good morning, everyone. Thank you for joining us. I'll begin by sharing perspective on our fiscal 2025 performance as well as an update on the strategic priorities for our businesses. Dave will review the financial highlights, and then we'll take your questions.

After a slow start to the beginning of the year, new product successes drove double-digit growth in the second half of the year, resulting in a solid finish to fiscal 2025. Total company sales for the full fiscal year were flat compared to the prior year. Although we still have a lot of work to do to get our profitability where it needs to be, our operating loss of $16.2 million improved compared to fiscal 2024. While the marketplace is still uncertain, we feel good about the momentum we're seeing and the execution of our plans to accelerate the growth of our business and brands.

In fishing, demand exceeded expectations for Humminbird's new XPLORE Series and MEGA Live 2 fishfinders. In addition to XPLORE winning best in category marine electronics honors at ICAST this summer, we were also honored to recently receive the Anglers' Choice Award. This is a meaningful award because consumers themselves directly vote for their favorite new fishing product. As always, we're focused on finding out what anglers want and need and then turning those insights into cutting-edge technologies to give them the best fishing experiences possible. We will continue to invest in being an innovation leader to drive future growth.

In our Camping and Watercraft business, sales declined for fiscal 2025, driven primarily by the closeout of Eureka! inventory in 2024 after we exited that brand. Excluding the impact of Eureka! sales in the prior year, this segment grew by 2%. Demand for JetBoil's new fast boil cooking systems continued to outpace expectations. And Old Town's fishing kayak line is doing well in a watercraft marketplace that overall is still struggling. Both Old Town and Jetboil remain strong leaders in their markets, and we are committed to the long-term opportunity in these 2 brands.

In Diving, sales were up for the fiscal year due to modest improvements in certain regional markets. While we continue to work on integrating the acquisition of a long-time supplier during the fiscal year, we also focused our efforts on innovation. Recently, SCUBAPRO launched the new Hydros Pro 2, a buoyancy control device built for ultimate performance in all dive conditions. Hydros Pro 2 builds on the award-winning legacy of our original Hydros Pro, and we've seen great reception so far with lots of enthusiasm at DEMA, the world's largest scuba diving trade show. We look forward to shipping Hydros Pro 2 beginning this month.

Along with diving innovation in all business segments, we focused on strengthening our digital and e-commerce capabilities. Our goal is simple: make our products easy to find wherever consumers choose to shop. The landscape keeps changing, but our efforts to expand our digital footprint are already fueling growth, and we're excited about the progress. Digital and e-commerce continue to be an area of opportunity, and we're committed to building on that momentum.

Finally, our cost savings program remains a priority company-wide, and we continue to work on driving optimal product costs and enhancing operating efficiencies. Cost savings will continue to be a key priority in fiscal 2026. Overall, we're pleased with the solid finish to our fiscal year. While it's still too early to tell if the outdoor recreation marketplace has turned the corner, we do expect global macroeconomic challenges to continue to drive uncertainties and our strategic priorities remain more important than ever.

Heading into fiscal 2026, we feel confident that our ongoing investment in the consumer-driven innovation and digital and e-commerce excellence, along with our continued hard work on operational efficiencies are the right drivers to position Johnson Outdoors for future success.

Now I'll turn the call over to Dave for more details on financials.

Thank you, Helen, and good morning, everyone. Loss before income taxes for 2025 was $9.3 million compared to a pretax loss of $29.9 million in fiscal 2024, with the improvement mainly due to the $11.2 million write-off of goodwill in the prior year as well as an increase in gross margin and decrease in operating expenses versus the prior year.

In fiscal 2025, we saw a tax expense of $25 million compared to a tax benefit of $3.3 million in the prior year. The current year expense was driven by a $25.9 million noncash reserve on U.S. deferred tax assets. This reserve reflects the company's assessment of the realizability of those assets in light of recent operating losses and may be released in future periods when profitability improves.

Gross margin for the fiscal '25 improved to 35.1%, up 1.2 points from the prior year. We're pleased with our progress on cost savings initiatives, which offset increases in material costs. Overhead absorption from higher volumes and reduced inventory reserves added to the improvement in gross margin.

Operating expenses decreased by 8% or $20.2 million from the prior fiscal year. Key drivers of the expense change were the write-off of the goodwill in the prior year, a decrease in promotional spending versus the prior year period and lower deferred compensation costs between years.

For the third year in a row, we were able to drive positive cash flow from operations. We continue to make progress on our inventory levels in fiscal 2025, which was one of the drivers of positive cash flow. Our inventory balance was at the end of the year was $170.7 million, down about $39 million from fiscal '24.

Regarding tariffs, we've made progress on our mitigation strategies, and we'll continue to make adjustments as the tariff situation evolves. Our balance sheet remains debt-free. We have a healthy cash position, and we remain confident in our ability and plans to create long-term value for shareholders.

Now I'll turn the call over to the operator for the Q&A session.

[Operator Instructions] Our first question comes from the line of Anthony Lebiedzinski from Sidoti.

Certainly great to see the strong year-over-year sales gain in the fourth quarter along with the gross margin improvements. So as we think about the fourth quarter revenue gain, correct me if I'm wrong, but I think it was mostly volume driven. Just wondering if you have seen this momentum continue into early fiscal '26.

We were really excited about what happened in the third and fourth quarter. And we just -- every month, things grew and the markets looked better than they have. And we don't give too much forward-looking statements. But I would say, so far, at least it's just very early in the year, but there's -- the market momentum is continuing as far as we can see. But there's no -- we're not ready to say the market has turned the corner. This is our sell-in period, and time will tell, but the season -- hopefully, it will be a very good season. So right now, knock on wood, things look pretty good.

That's great to hear. Okay. So it sounds like you are seeing some green shoots, I guess. I know you've put in a lot of focus on product innovation, and I know you highlighted a few products that did very well for you. Just wondering about the pipeline coming up for '26. I know you don't want to share specifics given competitive reasons, but anything you can just talk at a high level as far as new product pipeline for next year?

Well, we did -- yes, in diving, we talked about our new buoyancy compensator. And we've still got momentum in fishing from the launches that we had this past year. And launches are over more than 1 year. So we feel good about the momentum. We're focused on building the pipeline across every business. And again, Jetboil had positive results for their innovation, and that will continue into this season. So innovation is our key priority, and we will always focus on that. And it's critical during the time when it's so competitive out there and consumers are a little bit price sensitive. It's all about innovation. So that is a key focus. And we feel good about that -- it's one of our key priorities.

Got you. Okay. And then as it relates to the tariffs, I know, Dave, you touched on this a little bit, but I think you guys did take some pricing actions a little bit in July, I think more so in October. If you could just comment on the extent of that and what's been the reception from the retail partners that you work with?

Yes. We did take pricing where it made sense. We were very strategic about what we wanted to do there. And so far, it's been okay. I mean the retailers understand our trade partners understand it. It hasn't affected the business right now. And as Helen alluded to, we're preseason right now. So it will be up to the consumer when those [indiscernible] to the shelves and make their decisions. But so far, so good.

Okay. That's good to hear. And then with the work that you've done on improving your operational efficiencies and enhancing your manufacturing processes, is there a way you can perhaps put a number on that in terms of how much it helps your gross margin? And do you think there are more opportunities to further expand on that?

Yes. I mean we felt really good about the progress we made this year, and it was over 1 point of gross margin that we drove to the bottom line through the efforts. And we've got a full portfolio of cost savings initiatives going into fiscal '26. So we're going to continue the efforts, it's across the board. And that will be critical, again, to help manage the tariff situation and help manage the competitive environment.

Got you. Got it. All right. And then I guess lastly for me, I know the tax rate was impacted by the deferred tax valuation. But just kind of going forward here, how do we think about the effective tax rate for fiscal '26?

Yes. I mean with the reserve in place, we would expect the tax rate going forward to be normal in a more normal range. So mid- to high 20s, something like that. So yes, going forward, we would expect that.

At this time, I would now like to turn the conference back over to Helen Johnson-Leipold for closing remarks.

Thank you for joining us today, and I hope everybody has a happy holiday season. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.