Smith & Wesson Brands, Inc. Reports Third Quarter Fiscal 2025 Financial Results
- Q3 Net Sales of $115.9 Million
- Q3 Gross Margin of 24.1%; Non-GAAP Gross Margin of 25.1%
- Q3 EPS of $0.04/Share; Q3 Adjusted EPS of $0.02/Share
Maryville, Tennessee--(Newsfile Corp. - March 6, 2025) - Smith & Wesson Brands, Inc. (NASDAQ: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the third quarter of fiscal 2025, ended January 31, 2025.
Financial Highlights
Net sales were $115.9 million, a decrease of $21.6 million, or 15.7%, from the comparable quarter last year.
Gross margin was 24.1% compared with 28.7% in the comparable quarter last year.
GAAP net income was $1.7 million, or $0.04 per diluted share, compared with $7.9 million, or $0.17 per diluted share, for the comparable quarter last year.
Non-GAAP net income was $962 thousand, or $0.02 per diluted share, compared with $8.7 million, or $0.19 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the relocation and a gain on sale of certain real estate. For a detailed reconciliation, see the schedules that follow in this release.
Non-GAAP Adjusted EBITDAS was $13.3 million, or 11.5% of net sales, compared with $21.4 million, or 15.6% of net sales, for the comparable quarter last year.
Mark Smith, President and Chief Executive Officer, commented, "Our top line revenue for the third quarter came in slightly below our target range. However, lower operating expenses and leveraging of our flexible manufacturing model – which is designed to ensure solid profitability regardless of demand conditions – allowed us to deliver on EPS and EBITDAS expectations. Our new products continue to perform very well and we believe we gained share in those categories, with products introduced within the past year accounting for over 41% of sales in the quarter. We anticipate that the firearms market will remain steady at current demand levels, and we believe we are well-positioned for continued success given our industry leading innovation pipeline, disciplined cost control, state-of-the-art facilities, flexible manufacturing model, strong balance sheet, and capital allocation model of returning value to stockholders."
Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "While our new products continue to perform very well, we are seeing lower demand for our core product portfolio, which is negatively impacting both our top line and margins. We continue to expect full year revenue to be 5-10% lower than in fiscal 2024, which is consistent with what we said last quarter. Consistent with our capital allocation strategy, our board of directors has authorized a $0.13 per share quarterly dividend, which will be paid to stockholders of record on March 20, 2025 with payment to be made on April 3, 2025."
Conference Call and Webcast
The company will host a conference call and webcast on March 6, 2025 to discuss its third quarter fiscal 2025 financial and operational results. Speakers on the conference call will include Mark Smith, President and Chief Executive Officer, and Deana McPherson, Executive Vice President and Chief Financial Officer. The conference call may include forward-looking statements. The conference call and webcast will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties in North America are invited to participate by dialing 1-877-704-4453. Interested parties from outside North America are invited to participate by dialing 1-201-389-0920. Participants should dial in at least 10 minutes prior to the start of the call. A live and archived webcast of the event will be available on the company's website at www.smith-wesson.com under the Investor Relations section.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
In this press release, certain non-GAAP financial measures, including "non-GAAP net income," "Adjusted EBITDAS," and "free cash flow" are presented. From time-to-time, we consider and use these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends. We believe it is useful for us and the reader to review, as applicable, both (1) GAAP measures that include (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) spin related stock-based compensation, (vi) an accrued legal settlement, (vii) a gain on sale of certain real estate, (viii) Relocation expense, and (ix) the tax effect of non-GAAP adjustments; and (2) the non-GAAP measures that exclude such information. We present these non-GAAP measures because we consider them an important supplemental measure of our performance. Our definition of these adjusted financial measures may differ from similarly named measures used by others. We believe these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for our GAAP measures. The principal limitations of these measures are that they do not reflect our actual expenses and may thus have the effect of inflating its financial measures on a GAAP basis.
About Smith & Wesson Brands, Inc.
Smith & Wesson Brands, Inc. (NASDAQ: SWBI) is a U.S.-based leader in firearm manufacturing and design, delivering a broad portfolio of quality handgun, long gun, and suppressor products to the global consumer and professional markets under the iconic Smith & Wesson® and Gemtech® brands. The company also provides forging and machining services to third parties. For more information call (800) 331-0852 or visit www.smith-wesson.com.
Safe Harbor Statement
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and we intend that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, among others, that (i) we anticipate that the firearms market will remain steady at current demand levels, (ii) we believe we are well-positioned for continued success given our industry leading innovation pipeline, disciplined cost control, state-of-the-art facilities, flexible manufacturing model, strong balance sheet and capital allocation model of returning value to stockholders, and (iii) we continue to expect full year revenue to be 5-10% lower than in fiscal 2024. We caution that these statements are qualified by important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, economic, social, political, legislative, and regulatory factors; the results of the 2024 elections; the potential for increased regulation of firearms and firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability and costs of raw materials and components; our anticipated growth and growth opportunities; our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to effectively manage and execute the Relocation; our ability to introduce new products; the success of new products; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.
Contact:
investorrelations@smith-wesson.com
(413) 747-3448
SMITH &WESSON BRANDS, INC AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
As of: | ||||||
January 31, 2025 | April 30, 2024 | |||||
(In thousands, except par value and share data) | ||||||
ASSETS | ||||||
Current assets: |
|
| ||||
Cash and cash equivalents | $ | 26,704 | $ | 60,839 | ||
Accounts receivable, net of allowances for credit losses of $5 on | 57,442 | 59,071 | ||||
Inventories | 198,939 | 160,500 | ||||
Prepaid expenses and other current assets | 7,988 | 4,973 | ||||
Income tax receivable | 7,627 | 2,495 | ||||
Total current assets | 298,700 | 287,878 | ||||
Property, plant, and equipment, net of accumulated depreciation and amortization | 243,430 | 252,633 | ||||
Intangibles, net | 2,466 | 2,598 | ||||
Goodwill | 19,024 | 19,024 | ||||
Deferred income taxes | 7,312 | 7,249 | ||||
Other assets | 7,925 | 8,614 | ||||
Total assets | $ | 578,857 | $ | 577,996 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: |
|
| ||||
Accounts payable | $ | 25,183 | $ | 41,831 | ||
Accrued expenses and deferred revenue | 26,742 | 26,811 | ||||
Accrued payroll and incentives | 8,987 | 17,147 | ||||
Accrued profit sharing | 1,630 | 9,098 | ||||
Accrued warranty | 1,436 | 1,813 | ||||
Total current liabilities | 63,978 | 96,700 | ||||
Notes and loans payable (Note 3) | 109,045 | 39,880 | ||||
Finance lease payable, net of current portion | 34,143 | 35,404 | ||||
Other non-current liabilities | 7,620 | 7,852 | ||||
Total liabilities | 214,786 | 179,836 | ||||
Commitments and contingencies (Note 8) |
|
| ||||
Stockholders' equity: |
|
| ||||
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares | — | — | ||||
Common stock, $0.001 par value, 100,000,000 shares authorized, 75,680,697 | 76 | 75 | ||||
Additional paid-in capital | 295,348 | 289,994 | ||||
Retained earnings | 526,896 | 540,660 | ||||
Accumulated other comprehensive income | 73 | 73 | ||||
Treasury stock, at cost (31,677,994 shares on January 31, 2025 and | (458,322) | (432,642) | ||||
Total stockholders' equity | 364,071 | 398,160 | ||||
Total liabilities and stockholders' equity | $ | 578,857 | $ | 577,996 | ||
SMITH & WESSON BRANDS, INC AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
(Unaudited) | ||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||
| 2025 |
| 2024 | 2025 |
| 2024 | ||||||
| (In thousands, except per share data) | |||||||||||
Net sales |
| $ | 115,885 |
| $ | 137,484 | $ | 333,899 |
| $ | 376,686 | |
Cost of sales |
| 87,938 |
| 98,060 | 247,261 |
| 275,094 | |||||
Gross profit |
| 27,947 |
| 39,424 | 86,638 |
| 101,592 | |||||
Operating expenses: |
|
|
|
|
| |||||||
Research and development |
| 2,869 |
| 1,969 | 7,605 |
| 5,484 | |||||
Selling, marketing, and distribution |
| 10,336 |
| 10,080 | 29,839 |
| 31,138 | |||||
General and administrative |
| 12,999 |
| 16,063 | 42,480 |
| 45,571 | |||||
(Gain)/loss on sale/disposition of assets |
| (2,382) |
| 30 | (2,521) |
| (1) | |||||
Total operating expenses |
| 23,822 |
| 28,142 | 77,403 |
| 82,192 | |||||
Operating income |
| 4,125 |
| 11,282 | 9,235 |
| 19,400 | |||||
Other (expense)/income, net: |
|
|
|
|
| |||||||
Other (expense)/income, net |
| — |
| (11) | (11) |
| 176 | |||||
Interest expense, net |
| (1,723) |
| (955) | (3,875) |
| (1,448) | |||||
Total other expense, net |
| (1,723) |
| (966) | (3,886) |
| (1,272) | |||||
Income before income taxes |
| 2,402 |
| 10,316 | 5,349 |
| 18,128 | |||||
Income tax expense |
| 739 |
| 2,434 | 1,659 |
| 4,629 | |||||
Net income |
| $ | 1,663 |
| $ | 7,882 | $ | 3,690 |
| $ | 13,499 | |
Net income per share: |
|
|
|
|
| |||||||
Basic - net income |
| $ | 0.04 |
| $ | 0.17 | $ | 0.08 |
| $ | 0.29 | |
Diluted - net income |
| $ | 0.04 |
| $ | 0.17 | $ | 0.08 |
| $ | 0.29 | |
Weighted average number of common shares outstanding: |
|
|
|
|
| |||||||
Basic |
| 44,038 |
| 45,618 | 44,627 |
| 45,901 | |||||
Diluted |
| 44,398 |
| 46,028 | 45,069 |
| 46,315 | |||||
SMITH & WESSON BRANDS, INC AND SUBSIDIARIES | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
|
|
| For the Nine Months Ended January 31, | ||||||
|
|
| 2025 |
| 2024 | ||||
|
|
| (In thousands) | ||||||
Cash flows from operating activities: |
|
|
|
| |||||
Net income |
| $ |
| 3,690 | $ | 13,499 | |||
Adjustments to reconcile net income to net cash (used in)/provided by operating activities: |
|
|
|
| |||||
Depreciation and amortization |
|
|
| 23,860 |
| 24,291 | |||
(Gain)/loss on sale/disposition of assets |
|
|
| (2,521) |
| 785 | |||
Recoveries on notes and accounts receivable |
|
|
| — |
| (23) | |||
Deferred income taxes |
|
|
| (63) |
| — | |||
Stock-based compensation expense |
|
|
| 5,724 |
| 4,264 | |||
Non-cash sublease income |
|
|
| (1,287) |
| (139) | |||
Changes in operating assets and liabilities: |
|
|
|
| |||||
Accounts receivable |
|
|
| 1,629 |
| (5,471) | |||
Inventories |
|
|
| (38,439) |
| 23,589 | |||
Prepaid expenses and other current assets |
|
|
| (3,015) |
| (4,103) | |||
Income taxes |
|
|
| (5,132) |
| (6,079) | |||
Accounts payable |
|
|
| (16,750) |
| 11,230 | |||
Accrued payroll and incentives |
|
|
| (8,160) |
| 1,332 | |||
Accrued profit sharing |
|
|
| (7,468) |
| (4,730) | |||
Accrued expenses and deferred revenue |
|
|
| (456) |
| 3,907 | |||
Accrued warranty |
|
|
| (377) |
| 440 | |||
Other assets |
|
|
| 946 |
| 595 | |||
Other non-current liabilities |
|
|
| (232) |
| (384) | |||
Net cash (used in)/provided by operating activities |
|
|
| (48,051) |
| 63,003 | |||
Cash flows from investing activities: |
|
|
|
| |||||
Payments to acquire patents and software |
|
|
| (150) |
| (164) | |||
Proceeds from sale of property and equipment |
|
|
| 2,668 |
| 2,877 | |||
Payments to acquire property and equipment |
|
|
| (14,314) |
| (85,188) | |||
Net cash used in investing activities |
|
|
| (11,796) |
| (82,475) | |||
Cash flows from financing activities: |
|
|
|
| |||||
Proceeds from loans and notes payable |
|
|
| 70,000 |
| 50,000 | |||
Cash paid for debt issuance costs |
|
|
| (941) |
| — | |||
Payments on finance lease obligation |
|
|
| (134) |
| (929) | |||
Payments on notes and loans payable |
|
|
| — |
| (10,000) | |||
Payments to acquire treasury stock |
|
|
| (25,468) |
| (9,128) | |||
Dividend distribution |
|
|
| (17,375) |
| (16,557) | |||
Proceeds to acquire common stock from employee stock purchase plan |
|
|
| 749 |
| 722 | |||
Payment of employee withholding tax related to |
|
|
| (1,119) |
| (825) | |||
Net cash provided by financing activities |
|
|
| 25,712 |
| 13,283 | |||
Net decrease in cash and cash equivalents |
|
|
| (34,135) |
| (6,189) | |||
Cash and cash equivalents, beginning of period |
|
|
| 60,839 |
| 53,556 | |||
Cash and cash equivalents, end of period |
|
|
| 26,704 | $ | 47,367 | |||
Supplemental disclosure of cash flow information |
|
|
|
| |||||
Cash paid for: |
|
|
|
| |||||
Interest, net of amounts capitalized |
| $ |
| 4,219 | $ | 3,317 | |||
Income taxes |
| $ |
| 7,098 | $ | 10,687 | |||
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| For the Three Months Ended |
| For the Nine Months Ended | |||||||||||||||||||||
|
| January 31, 2025 |
| January 31, 2024 |
| January 31, 2025 |
| January 31, 2024 | |||||||||||||||||
|
| $ |
| % of Sales |
| $ |
| % of Sales |
| $ |
| % of Sales |
| $ |
| % of Sales | |||||||||
GAAP net sales |
| $ | 115,885 |
| $ | 137,484 |
|
| $ | 333,899 |
| $ | 376,686 |
| |||||||||||
Relocation |
|
| (203) |
|
| — |
|
| (4,416) |
|
| — |
| ||||||||||||
Non-GAAP net sales |
| $ | 115,682 |
| $ | 137,484 |
|
| $ | 329,483 |
| $ | 376,686 |
| |||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GAAP gross profit |
| $ | 27,947 |
| 24.1% | $ | 39,424 |
| 28.7% |
| $ | 86,638 |
| 25.9% | $ | 101,592 |
| 27.0% | |||||||
Relocation expenses |
|
| 1,096 |
|
| 642 |
|
| 2,830 |
|
| 1,954 |
| ||||||||||||
Settlement |
|
| — |
|
| — |
|
| 70 |
|
| 3,200 |
| ||||||||||||
Non-GAAP gross profit |
| $ | 29,043 |
| 25.1% | $ | 40,066 |
| 29.1% |
| $ | 89,538 |
| 27.2% | $ | 106,746 |
| 28.3% | |||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GAAP operating expenses |
| $ | 23,822 |
| 20.6% | $ | 28,142 |
| 20.5% |
| $ | 77,403 |
| 23.2% | $ | 82,192 |
| 21.8% | |||||||
Gain on sale of asset |
|
| 2,257 |
|
| — |
|
| 2,257 |
|
| — |
| ||||||||||||
Spin related stock-based compensation |
|
| — |
|
| (3) |
|
| — |
|
| (10) |
| ||||||||||||
Relocation expenses |
|
| (149) |
|
| (431) |
|
| (586) |
|
| (5,092) |
| ||||||||||||
Non-GAAP operating expenses |
| $ | 25,930 |
| 22.4% | $ | 27,708 |
| 20.2% |
| $ | 79,074 |
| 24.0% | $ | 77,090 |
| 20.5% | |||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GAAP operating income |
| $ | 4,125 |
| 3.6% | $ | 11,282 |
| 8.2% |
| $ | 9,235 |
| 2.8% | $ | 19,400 |
| 5.2% | |||||||
Gain on sale of asset |
|
| (2,257) |
|
| — |
|
| (2,257) |
|
| — |
| ||||||||||||
Settlement |
|
| — |
|
| — |
|
| 70 |
|
| 3,200 |
| ||||||||||||
Spin related stock-based compensation |
|
| — |
|
| 3 |
|
| — |
|
| 10 |
| ||||||||||||
Relocation expenses |
|
| 1,245 |
|
| 1,073 |
|
| 3,416 |
|
| 7,046 |
| ||||||||||||
Non-GAAP operating income |
| $ | 3,113 |
| 2.7% | $ | 12,358 |
| 9.0% |
| $ | 10,464 |
| 3.2% | $ | 29,656 |
| 7.9% | |||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GAAP net income |
| $ | 1,663 |
| 1.4% | $ | 7,882 |
| 5.7% |
| $ | 3,690 |
| 1.1% | $ | 13,499 |
| 3.6% | |||||||
Gain on sale of asset |
|
| (2,257) |
|
| — |
|
| (2,257) |
|
| — |
| ||||||||||||
Settlement |
|
| — |
|
| — |
|
| 70 |
|
| 3,200 |
| ||||||||||||
Spin related stock-based compensation |
|
| — |
|
| 3 |
|
| — |
|
| 10 |
| ||||||||||||
Relocation expenses |
|
| 1,245 |
|
| 1,073 |
|
| 3,416 |
|
| 7,046 |
| ||||||||||||
Tax effect of non-GAAP adjustments |
|
| 311 |
|
| (254) |
|
| (381) |
|
| (2,446) |
| ||||||||||||
Non-GAAP net income |
| $ | 962 |
| 0.8% | $ | 8,704 |
| 6.3% |
| $ | 4,538 |
| 1.4% | $ | 21,309 |
| 5.7% | |||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
GAAP net income per share - diluted |
| $ | 0.04 |
| $ | 0.17 |
|
| $ | 0.08 |
| $ | 0.29 |
| |||||||||||
Gain on sale of asset |
|
| (0.05) |
|
| — |
|
| (0.05) |
|
| — |
| ||||||||||||
Settlement |
|
| — |
|
| — |
|
| — |
|
| 0.07 |
| ||||||||||||
Spin related stock-based compensation |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||
Relocation expenses |
|
| 0.03 |
|
| 0.02 |
|
| 0.08 |
|
| 0.15 |
| ||||||||||||
Tax effect of non-GAAP adjustments |
|
| 0.01 |
|
| (0.01) |
|
| (0.01) |
|
| (0.05) |
| ||||||||||||
Non-GAAP net income per share - diluted |
| $ | 0.02 | (a) | $ | 0.19 | (a) |
| $ | 0.10 |
| $ | 0.46 |
| |||||||||||
(a) Non-GAAP net income per share does not foot due to rounding.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES | ||||||||||||
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDAS | ||||||||||||
(in thousands) | ||||||||||||
(Unaudited) | ||||||||||||
|
|
| ||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||
| January 31, 2025 |
| January 31, 2024 | January 31, 2025 |
| January 31, 2024 | ||||||
|
|
|
| |||||||||
GAAP net income |
| $ | 1,663 |
| $ | 7,882 | $ | 3,690 |
| $ | 13,499 | |
Interest expense |
| 2,355 |
| 1,615 | 5,881 |
| 3,404 | |||||
Income tax expense |
| 739 |
| 2,434 | 1,659 |
| 4,629 | |||||
Depreciation and amortization |
| 7,548 |
| 6,941 | 23,754 |
| 24,145 | |||||
Stock-based compensation expense |
| 2,002 |
| 1,504 | 5,724 |
| 4,264 | |||||
Settlement |
| — |
| — | 70 |
| 3,200 | |||||
Gain on sale of asset |
| (2,257) |
| — | (2,257) |
| — | |||||
Relocation expense |
| 1,230 |
| 1,073 | 3,143 |
| 5,186 | |||||
Non-GAAP Adjusted EBITDAS |
| $ | 13,280 |
| $ | 21,449 | $ | 41,664 |
| $ | 58,327 | |
|
|
|
| |||||||||
Non-GAAP Adjusted EBITDAS Margin |
| 11.5% |
| 15.6% | 12.6% |
| 15.5% | |||||
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES | ||||||||||||
RECONCILIATION OF NET CASH (USED IN) / PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | ||||||||||||
|
| |||||||||||
|
| For the Three Months Ended | For the Nine Months Ended | |||||||||
|
| January 31, 2025 | January 31, 2024 | January 31, 2025 | January 31, 2024 | |||||||
Net cash (used in)/provided by operating activities |
| $ | (9,839) | $ | 25,247 | $ | (48,051) | $ | 63,003 | |||
Payments to acquire property and equipment |
|
| (6,310) | (18,205) | (14,314) | (85,188) | ||||||
Free cash flow |
| $ | (16,149) | $ | 7,042 | $ | (62,365) | $ | (22,185) | |||
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