Smith & Wesson Brands, Inc. · NASDAQ:SWBI
Smith & Wesson Brands — American Outdoor Brands — Investor Presentation (September 2018)
42 slides from Smith & Wesson Brands's investor presentation, Sep 17, 2018
Slide 1: Investor Presentation September 2018
Investor Presentation September 2018
Slide 2: Legal Safe Harbor
Legal SAFE HARBOR Certain statements contained in this presentation 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. Forward-looking statements include statements regarding
Slide 3: Our Vision
Our Vision is to be the Leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast Firearms Outdoor Products & Accessories Electro-Optics Manufacturing Services © 2017 AMERICAN OUTDOOR BRANDS CORP. ALL RIGHTS RESERVED. 3
Slide 4: Establishing Centers of Excellence to Leverage Opex as We Grow
ESTABLISHING CENTERS OF EXCELLENCE TO LEVERAGE OPEX AS WE GROW AMERICAN OUTDOOR BRANDS LEADERSHIP FIREARMS SEGMENT OUTDOOR PRODUCTS & ACCESSORIES SEGMENT Firearms Division Manufacturing Services —NEW— Manufacturing Expertise LOGISTICS & CUSTOMER Outdoor Products & Electro-Optics NPD Expertise SERVIC
Slide 5: Multiple Paths to Market
Multiple Paths to Market GOAL: BE THE PREFERRED VENDOR Two Step via Distributors 12,000+ Independent Retailers Logistics & Customer Direct to Strategic Retailers Large Strategic Retailers (e.g. Cabela’s) Services Facility in Missouri Direct to Buying Groups Buying Groups: 700 Member Retailers Direct
Slide 6: Organic and Inorganic Growth
ORGANIC AND INORGANIC GROWTH Organically: Building our business around Hunting the consumer we already know via product innovation, brand expansion, and new Shooting Fishing “Outdoor product introduction Recreation” Core Firearm Market Size Consumer ~$30-35 Billion* Archery Activities Camping Shooti
Slide 7: Firearms Division
FIREARMS DIVISION
Slide 8: Adjusted NICS by AOB Fiscal Quarter
Adjusted NICS by AOB Fiscal Quarter 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 FY Q1 FY Q2 FY Q3 FY Q4 FY’10 1,867,500 2,255,455 2,608,228 2,441,399 FY’11 1,856,796 2,343,844 2,863,690 2,798,070 FY’12 2,057,045 2,639,291 3,432,853 3,387,156 FY’13 2,540,204 3,169,177 5,553,062 4,32
Slide 9: Firearms Division: Elements in Current Environment Q1FY19
Firearms Division ELEMENTS IN CURRENT ENVIRONMENT – Q1FY19 • We are pleased with Q1 results which featured consumer adoption of new products and fewer promotions • New products represented 28.5% of our firearms revenue: • Strong sales of M&P Shield 380EZ – launched in February 2018. • Consumer deman
Slide 10: Firearms Division 2018 New Products
Firearms Division 2018 NEW PRODUCTS M&P380 Shield EZ Built for personal protection and every-day carry, the M&P380 Shield EZ is designed to be easy to use, featuring an easy-to-rack slide, easy-to-load magazine, and easy-to-clean design. M&P M2.0 Compact 3.6” The M&P M2.0 Compact series has expanded
Slide 11: Protection Is the Key Purchase Motivator
PROTECTION Firearms Division IS THE KEY PURCHASE MOTIVATOR Number of respondents who reported these reasons were important Handgun Respondents: Home Protection 94% Personal Protection 91% Vehicle Protection 60% Long Gun Respondents: Home Protection 75% Personal Protection 71% Hunting 56% © 2017 AMER
Slide 12: Outdoor Products & Accessories Division
OUTDOOR PRODUCTS & ACCESSORIES DIVISION
Slide 13: Outdoor Products & Accessories Division Overview
Outdoor Products & Accessories Division OVERVIEW We are solely focused on the rugged outdoor enthusiast. Whether it’s the Marksman, Hunter, Defender, or Adventurer, we offer a selection of products across shooting accessories, cutlery & tools, and survival categories. Our 15+ gear & accessory brands
Slide 14: History of Strategic Acquisitions
Outdoor Products & Accessories Division HISTORY OF STRATEGIC ACQUISITIONS A disciplined strategy focused on leveraging our existing competencies, while targeting a familiar consumer, have led us to seek acquisitions that have: 1) provided successful entry into previously targeted categories (camping
Slide 15: Repeatable Innovation Drives Organic Growth
Outdoor Products & Accessories Division REPEATABLE INNOVATION DRIVES ORGANIC GROWTH Our brands provide inspiration for product innovation. Each of our brands stands for something with consumers – each has a unique character that establishes its “permission to play” in defined product categories. Thi
Slide 16: Future Expansion Opportunities for Division
Outdoor Products & Accessories Division FUTURE EXPANSION OPPORTUNITIES FOR DIVISION Example Market Product Categories & Items Camping • Backpacks & Bags Backpacking packs, day packs Opportunity to & Hiking • Camp Cooking Stoves, cookware, utensils, coolers • Tents Backpacking tents, camping tents, s
Slide 17: Electro-Optics Division
ELECTRO-OPTICS DIVISION
Slide 18: Electro-Optics Division Business Strategy
Electro-Optics Division BUSINESS STRATEGY • Organic: • Expand Electro-Optics product categories to address market opportunity • Variable Cost reduction • Leverage intra-division sourcing model: • Introduce new product categories quickly and efficiently • Harvest cost reductions within core product o
Slide 19: 2018 Innovation: Expansion of Product Line
Electro-Optics Division 2018 INNOVATION: EXPANSION OF PRODUCT LINE New Dual-Purpose Flashlight Line • CTC’s initial entry into large and diverse flashlight market • Focused on tactical products for consumers already familiar with Crimson Trace brand • Four SKUS, all feature M-LOK® / KEYMOD and Picat
Slide 20: Manufacturing Services Division
MANUFACTURING SERVICES DIVISION
Slide 21: Manufacturing Services Division: Accessing New Markets
Manufacturing Services Division – Accessing New Markets NEW BRAND LAUNCH: JANUARY 2018 • New brand, logo, and website (www.swpc.com) • Provides industrial B2B umbrella brand for existing services • Simplifies go-to-market messaging for sales team, enabling cross-selling of services • Leverages stren
Slide 22: Logistics & Customer Services Division
LOGISTICS & CUSTOMER SERVICES DIVISION
Slide 23: New Building – Boone County, MO
Logistics & Customer Services Division NEW BUILDING – BOONE COUNTY, MO Capital Investment of $75 million Facilities Overview • $47M construction, site prep, etc. • Approx. 600,000 sq. ft. distribution facility • $3.1M land (Included in above) • Expandable to 1,200,000+ sq. ft. • No cash outlay: Sale
Slide 24: Significant Benefits of Logistics Facility
Logistics & Customer Services Division SIGNIFICANT BENEFITS OF LOGISTICS FACILITY Better Service to Improved Acquisition Operational & Customers Integration Financial Efficiencies • Centralized distribution • Timely harvesting of • Centralized location allows for consolidation of synergies adds sign
Slide 25: Logistics Facility – Financial Impact
Logistics & Customer Services Division LOGISTICS FACILITY – FINANCIAL IMPACT Project Costs • Non-cash capital lease of land & building (20 years) • FY19 capital expenditures for equipment and IT • Additional freight from Firearms Division to L&CS Estimated Rate • Other costs (utilities, maintenance,
Slide 26: Financial Review
American Outdoor Brands Corporation FINANCIAL REVIEW
Slide 27: Q1 Condensed Income Statement – Non-GAAP
Q1 CONDENSED INCOME STATEMENT – NON-GAAP (U.S.$ Thousands, except per share data) FOR THREE MONTHS ENDED Q1 FY19 Q1 FY18 Net sales $138,833 $129,021 Cost of sales 86,261 88,389 Gross profit 52,572 40,632 % of net sales (gross margin) 37.9% 31.5% Total operating expenses 33,500 37,418 % of net sales
Slide 28: Balance Sheet and Cash Flow Information
Financial Review BALANCE SHEET AND CASH FLOW INFORMATION (UNAUDITED) CONDENSED BALANCE SHEET CONDENSED CASH FLOWS As of: (U.S.$ Thousands) For the three months ending: (U.S.$ Thousands) July 31, 2018 April 30, 2018 July 31, 2018 July 31, 2017 Net cash provided by/(used in) Cash and cash equivalents
Slide 29: Reconciliation of Net Operating Free Cash Flow
Reconciliation of Net Operating FREE CASH FLOW (Unaudited) FREE CASH FLOW For the three months ending: (U.S. $ Thousands) July 31, 2018 July 31, 2017 Net cash provided by/(used in) $10,639 ($34,492) operating activities Net cash used in Capex and patent (7,108) (4,788) spending Free cash flow $3,531
Slide 30: Annual Revenue
Financial Review ANNUAL REVENUE ($ In Millions) $1,000 $900 Notes $800 Estimate $620-$630 Note: Guidance for revenue, GAAP $700 earnings per share, non-GAAP earnings per share, tax rate, and $600 share count reflects information as of August 30, 2018. The Company is not updating any of $500 this gui
Slide 31: Diluted Earnings Per Share
Financial Review DILUTED EARNINGS PER SHARE U.S. $ Represents non-GAAP Note: Represents GAAP Guidance for revenue, GAAP earnings per share, non-GAAP earnings per share, tax rate and FY19-Estimate share count reflects information as of August 30, 2018. The Company is not updating any of this guidance
Slide 32: Financial Guidance
Financial Review FINANCIAL GUIDANCE (Fiscal Year Ending April 30) Fiscal Second Quarter Estimate Note: Guidance for revenue, GAAP earnings per share, non-GAAP earnings Revenue $150M to $160M per share, tax rate, and share count GAAP Earnings Per Share $0.04 to $0.08 reflects information as of August
Slide 33: Adjusting to Industry Conditions
Adjusting to Industry Conditions FOCUS ON PROFITABILITY, CONTINUE TO INVEST • Focus on profitability, reducing costs, and generating cash across the entire business to facilitate further investment in: • Startup and ramp of new Logistics & Customer Services facility in Missouri • Increased incentive
Slide 34: Positioning Our Company for Future Growth
Positioning Our Company For FUTURE GROWTH With strong leadership teams operating each division, we can unlock further value, while we explore acquisitions that have the potential to add value and expand our addressable market: Our objective is to leverage our focused, • Focus on tuck-in opportunitie
Slide 35: Proxy Access: Responding to Stockholder Activists
Proxy Access RESPONDING TO STOCKHOLDER ACTIVISTS • Activists have called on us to issue a report related to gun safety measures and mitigation of harm associated with gun products, including: • Evidence of monitoring of violent events associated with our products. • Efforts we are undertaking to res
Slide 36: Appendices
American Outdoor Brands Corporation APPENDICES
Slide 37: Q1 Condensed Income Statement—GAAP
Q1 CONDENSED INCOME STATEMENT—GAAP (U.S.$ Thousands, except per share data) FOR THREE MONTHS ENDED Q1 FY19 Q1 FY18 Net sales $138,833 $129,021 Cost of sales 86,411 88,389 Gross profit 52,422 40,632 Total operating expenses 38,946 43,832 Operating income/(loss) 13,476 (3,200) Total other (expense)/in
Slide 38: Condensed Consolidated Statements of Income/(Loss)
American Outdoor Brands Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) For the Three Months Ended July 31, 2018 July 31, 2017 (Unaudited) (Unaudited) (In thousands, except per share data) Net sales $ 138,833 $ 129,021 Cost of sales 86,411 88,389 Gross profit 52,422 4
Slide 39: GAAP to Non-GAAP Reconciliation
American Outdoor Brands Corporation GAAP TO NON-GAAP RECONCILIATION (Unaudited) (U.S. $ thousands, except per share data) For the Three Months Ended July 31, 2018 July 31, 2017 $ % of Sales $ % of Sales GAAP gross profit $ 52,422 37.8% $ 40,632 31.5% Fair value inventory step-up 150 0.1% — Non-GAAP
Slide 40: Net Sales and EPS Guidance – GAAP to Non-GAAP Reconciliation
American Outdoor Brands Corporation Net Sales and Earnings Per Share Guidance – GAAP to Non-GAAP Reconciliation (EPS) (Unaudited) Range for the Three Months Ending October 31, 2018 Range for the Year Ending April 30, 2019 Net sales (in thousands) $ 150,000 $ 160,000 $ 620,000 $ 630,000 GAAP income p
Slide 41: GAAP to Non-GAAP Reconciliation
GAAP to NON-GAAP RECONCILIATION In this presentation, certain non-GAAP financial measures, including “non-GAAP net income,” “Adjusted EBITDAS,” and “free cash flow” are presented. From time-to-time, the company considers and uses these supplemental measures of operating performance in order to provi
Slide 42: Investor Relations Contact
Elizabeth Sharp Vice President – Investor Relations 2100 Roosevelt Avenue Springfield, MA 01104 Phone: 413 747 6284 Email: lsharp@aob.com www.aob.com
American Outdoor Brands — Investor Presentation (September 2018) on 6ix