American Outdoor Brands, Inc. (AOUT)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following discussion and analysis of our financial condition and results of operations for the three and nine months ended January 31, 2026 and 2025 should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year ended April 30, 2025. This discussion and analysis should also be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.

The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include those discussed above in “Statement Regarding Forward-Looking Information” in this Form 10-Q. In addition, this section sets forth key objectives and performance indicators used by us, as well as key industry data tracked by us.

In 2025, the U.S. Administration imposed a series of tariffs on nearly all U.S. trading partners pursuant to the International Emergency Economic Powers Act of 1977 (“IEEPA”). On February 20, 2026, the United States Supreme Court issued a ruling striking down tariffs previously imposed under IEEPA. The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and could be subject to further legal, regulatory, and administrative developments. Following the Supreme Court’s decision, the U.S. Administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from nearly all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.

The following discussion and analysis includes references to net sales of our products in shooting sports and outdoor lifestyle categories. Our shooting sports category includes net sales of shooting accessories and our products used for personal protection. Our outdoor lifestyle category includes net sales of our products used in hunting, fishing, camping, rugged outdoor activities, and outdoor cooking.

On December 12, 2025, our Board of Directors approved a plan to divest our ust branded product line (the “Disposal Group”). The Disposal Group consists primarily of inventory and long-lived intangible assets associated with the brand. We expect to complete the divestiture within twelve months. The Disposal Group does not represent a strategic shift that will have a major effect on our operations or financial results.

We concluded that the Disposal Group met the criteria for classification as held for sale under ASC 360-10 – Property, Plant, and Equipment during the three months ended January 31, 2026 and does not qualify as discontinued operations under ASC 205-20 – Presentation of Financial Statements. The results of the Disposal Group will continue to be reported within continuing operations.

Third Quarter Fiscal 2026 Highlights

Our operating results for the three months ended January 31, 2026 included the following:

•Net sales were $56.6 million, a decrease of $1.9 million or 3.3%, from the comparable quarter last year.

•Gross margin was 41.0%, a decrease of 370 basis points, from the comparable quarter last year.

•Net loss was $4.1 million, or ($0.33) per diluted share, compared with net income of $169,000, or $0.01 per diluted share, for the comparable quarter last year.

•Non-GAAP Adjusted EBITDA was $3.3 million for the three months ended January 31, 2026 compared with $4.7 million for the three months ended January 31, 2025. See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDA.

Our operating results for the nine months ended January 31, 2026 included the following:

•Net sales were $143 million, a decrease of $16.9 million or 10.5%, from the prior year comparable period.

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•Gross margin was 44.0%, a decrease of 210 basis points, from the prior year comparable period.

•Net loss was $8.9 million, or $(0.70) per diluted share, compared with net income of $915,000, or $0.07 per diluted share, for the prior year comparable period.

•Non-GAAP Adjusted EBITDA was $6.7 million for the nine months ended January 31, 2026 compared with $14.2 million for the nine months ended January 31, 2025. See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDA.

Results of Operations

Net Sales and Gross Profit

The following table sets forth certain information regarding consolidated net sales and gross profit for the three months ended January 31, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding trade channel net sales for the three months ended January 31, 2026 and 2025 (dollars in thousands):

Our e-commerce channel include net sales from customers that do not traditionally operate physical brick-and-mortar stores, but generate the majority of their revenue from consumer purchases from their retail websites. Our e-commerce channel also include our direct-to-consumer sales. Our traditional channel include customers that primarily operate out of physical brick-and-mortar stores and generate the large majority of revenue from consumer purchases in their brick-and-mortar locations. We sell our products worldwide.

The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the three months ended January 31, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding net sales categories for the three months ended January 31, 2026 and 2025 (dollars in thousands):

For the three months ended January 31, 2026, total net sales decreased $1.9 million, or 3.3%, from the comparable quarter last year primarily from lower aiming solutions product net sales in our shooting sports category, partially offset by increased hunting and meat processing net sales in our outdoor lifestyle category. The decrease in total

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net sales was partially offset by pricing actions taken on our products to mitigate additional tariff costs associated with tariffs imposed by the U.S. Administration starting in March and April of 2025.

Net sales in our e-commerce channel decreased $1.3 million, or 4.6%, from the comparable quarter last year, primarily because of lower net sales to the world's largest online retailer. We believe this decline reflects their inventory management actions, which reduced net sales across most of our products.

Net sales in our traditional channel decreased by $671,000, or 2.1%, compared to the same quarter last year, driven primarily by lower aiming solutions net sales in our shooting sports category, partially offset by increased hunting, fishing, and meat processing product net sales within our outdoor lifestyle category.

New products, which we define as any SKU introduced over the past 24 months, represented 26.6% of net sales for the three months ended January 31, 2026.

Gross margin for the three months ended January 31, 2026 decreased 370 basis points from the comparable quarter last year, primarily because of recording additional reserves on slow-moving inventory, to record at net realizable value and to reallocate capital towards higher-return opportunities; increased depreciation expense; and higher inbound freight and tariff costs.

The following table sets forth certain information regarding consolidated net sales and gross profit for the nine months ended January 31, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding trade channel net sales for the nine months ended January 31, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the nine months ended January 31, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding net sales categories for the nine months ended January 31, 2026 and 2025 (dollars in thousands):

For the nine months ended January 31, 2026, total net sales decreased $16.9 million, or 10.5%, from

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth under Item 1A, “Risk Factors” and elsewhere in this report.

Set forth below is a comparison of the results of operations and changes in financial condition for the fiscal years ended April 30, 2026 and 2025. The comparison of, and changes between, the fiscal years ended April 30, 2025 and 2024 can be found within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K for the fiscal year ended April 30, 2025 filed with the SEC on June 26, 2025.

Background

We operate as one reporting segment. We analyze revenue streams in various ways, including customer group, brands, categories, and customer channels. However, this information does not include a full set of discrete financial information.

The following discussion and analysis includes references to net sales of our products in shooting sports and outdoor lifestyle categories. Our shooting sports category includes net sales of shooting accessories and our products used for personal protection. Our outdoor lifestyle category includes net sales of our products used in hunting, fishing, rugged outdoor activities, and outdoor cooking.

U.S. Tariff Developments

The current political and economic environment is dynamic and uncertain, as the current U.S. Administration has imposed tariffs such as Section 301 and Section 232 of the Trade Act, modified and paused tariffs, and granted exemptions from tariffs, on different countries and products multiple times recently.

In 2025, the U.S. Administration imposed a series of tariffs on nearly all U.S. trading partners pursuant to the International Emergency Economic Powers Act of 1977 (“IEEPA”). On February 20, 2026, the United States Supreme Court issued a ruling striking down tariffs previously imposed under IEEPA. Immediately following the Supreme Court ruling, the U.S. government initiated new tariffs under Section 122 of the Trade Act ("Section 122 tariffs") which have been in effect since February 24, 2026. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.

In March 2026, the U.S. Court of International Trade ("CIT") issued an order directing U.S. Customs and Border Protection ("CBP") to process refunds of certain IEEPA tariffs. In April 2026, the CBP released a new system to process IEEPA tariff refunds, allowing importers to submit refund claims. We believe it is probable that we will recover the IEEPA tariffs previously paid and have recognized an IEEPA tariff refund receivable under the loss recovery accounting model of $15.2 million as of April 30, 2026, which was recorded in other current assets. During the year ended April 30, 2026, we recognized a benefit of $4.4 million related to expected recoveries of previously paid IEEPA tariffs, which was recorded as a reduction of cost of goods sold, representing the expense for IEEPA tariffs on inventory sold to customers since the tariffs were enacted in February 2025. Additionally, we reduced the carrying value of inventory on hand as of April 30, 2026 by $10.7 million for tariffs previously capitalized as cost of inventory.

The ultimate timing and amount of recoveries remain subject to review and processing by governmental authorities and could be affected by future legal, regulatory, or administrative developments. In addition, there continues to be uncertainty regarding existing and proposed tariff regimes, including the potential imposition, modification, suspension, or invalidation of tariffs under various statutory authorities. The Company continues to monitor tariff-related developments and assess their potential impact on its business, financial condition, and results of operations.

Brand Divestiture

On December 12, 2025, our Board of Directors approved a plan to divest our ust branded product line (the “Disposal Group”). The Disposal Group consists primarily of inventory and long-lived intangible assets associated with the brand. We expect to complete the divestiture within twelve months. The Disposal Group does not represent a strategic shift that will have a major effect on our operations or financial results.

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We concluded that the Disposal Group met the criteria for classification as held for sale under ASC 360-10 – Property, Plant, and Equipment during the year ended April 30, 2026 and does not qualify as discontinued operations under ASC 205-20 – Presentation of Financial Statements. The results of the Disposal Group will continue to be reported within continuing operations.

Fiscal 2026 Highlights

Our operating results for fiscal 2026 included the following:

•Net sales were $190.5 million, a decrease of $31.8 million, or 14.3%, from the prior fiscal year.

•Gross margin was 44.7%, an increase of 10 basis points over the prior fiscal year.

•Net loss was $9.2 million, or $(0.73) per diluted share, compared with a net loss of $77,000, or $(0.01) per diluted share, for the prior fiscal year.

•Non-GAAP Adjusted EBITDA was $10.2 million, compared with $17.7 million for the prior fiscal year. See non-GAAP financial measure disclosures below for our reconciliation of Non-GAAP Adjusted EBITDA.

•We repurchased a total of 551,283 shares of our common stock, in the open market, for $5.1M during fiscal 2026.

Results of Operations

Net Sales and Gross Profit

The following table sets forth certain information regarding consolidated net sales for the fiscal years ended April 30, 2026 and 2025 (dollars in thousands):

The following table sets forth certain information regarding trade channel net sales for the fiscal years ended April 30, 2026 and 2025 (dollars in thousands):

Our e-commerce channels include net sales from customers that do not traditionally operate physical brick-and-mortar stores, but generate the majority of their revenue from consumer purchases from their retail websites. Our e-commerce channels also include our direct-to-consumer sales. Our traditional channels include customers that primarily operate out of physical brick-and-mortar stores and generate the large majority of revenue from consumer purchases in their brick-and-mortar locations.

We sell our products worldwide. The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the fiscal years ended April 30, 2026 and 2025 (dollars in thousands):

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The following table sets forth certain information regarding net sales categories for the fiscal years ended April 30, 2026 and 2025 (dollars in thousands):

Fiscal 2026 Net Sales Compared with Fiscal 2025

Total net sales decreased $31.8 million, or 14.3%, from the prior fiscal year because of a decrease in all our channel and category sales primarily from reduced orders from the world's largest online retailer and our belief that a large portion of traditional channel sales were accelerated from our first fiscal quarter of 2026 into the fourth fiscal quarter of 2025, as mentioned below. The decrease in total net sales were partially offset by pricing actions taken on our products to mitigate additional tariff costs associated with tariffs imposed by the U.S. Administration starting in March and April of 2025.

E-commerce channel net sales decreased $13.2 million, or 15.6%, from the prior fiscal year primarily because of lower net sales to the world's largest online retailer in most of our product categories. We believe this decline reflects their inventory management actions, which reduced net sales across most of our products. In addition, we had lower direct-to-consumer net sales for products sold on our websites due to reduced consumer demand.

Net sales in our traditional channels decreased $18.6 million, or 13.5%, from the prior fiscal year. This decrease was driven by the majority of our product categories, partially offset by increased net sales of outdoor cooking equipment. We believe a large portion of the traditional channel decrease was a result of certain customers accelerating orders from our first fiscal quarter of 2026 into the fourth fiscal quarter of 2025. We believe this was due to the anticipated increased costs associated with tariffs imposed by the U.S. Administration in March 2025 and April 2025.

New products represented 29.1% of net sales for fiscal 2026 compared to 21.5% of net sales for fiscal 2025. We have a history of introducing over 200 new products each year.

Our order backlog as of April 30, 2026 was $1.6 million, or $1.0 million lower than at the end of fiscal 2025. Although we generally fulfill the majority of our order backlog, we allow orders received that have not yet shipped to be cancelled, and therefore, our backlog may not be indicative of future sales.

Fiscal 2026 Cost of Sales and Gross Profit Compared with Fiscal 2025

Gross margin for fiscal 2026 increased 10 basis points over the prior fiscal year, primarily from our pricing actions mentioned above as well as a higher percentage of new product sales that typically have higher gross margins, offset by sales of slow-moving inventory at lower margins, increased depreciation expense, and higher inbound freight and tariff costs.

Operating Expenses

The following table sets forth certain information regarding operating expenses for the fiscal years ended April 30, 2026 and 2025 (dollars in thousands):

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