Smith & Wesson Brands, Inc. · NASDAQ:SWBI

Smith & Wesson Brands — Investor Presentation (September 2014)

52 slides from Smith & Wesson Brands's investor presentation, Sep 3, 2014

  1. Slide 1: Investor Presentation September 2014

    Exhibit 99.1 I N V E S T2014 September WWW.SMITH-WESSON.COM O R P R E S E N T ANASDAQ T I O N | SWHC

  2. Slide 2: Safe Harbor

    SAFE Certain harbor demand benefits markets future those 2the success reflected periods; HARBOR created statements forvertical of andof the opportunities new thereby. by and Company_s such contained products, integration scalability Such forward-looking forproducts the forward-looking in growth and

  3. Slide 3: Our Mission and Vision

    OUR mission “Our 3PROUDLY VISION MADE isIStoTO enable INBE THETHE ourUSA employees LEADINGtoFIREARMS design, produce, MANUFACTURER and market high quality, innovative firearms that meet the needs and desires of our consumer and professional customers.”

  4. Slide 4: A Growing Market Leader in Firearms

    ASport/Competition Springfield, Growing CONSUMER 4§85% U.S. ofMARKET Q1 Market FY15 MA MARKET /Share Firearm 1,700 LEADER § Personal Within U.S. PROFESSIONAL Sales IN Employees anProtection FIREARMS 15% Expanding of Q1§FY15 MARKET Law SINCE BaseEnforcement Firearm of 1852 Consumers Sales§ Military H

  5. Slide 5: Corporate Strategic Objectives

    1STRATEGIC OBJECTIVES CORPORATE 53 Protect and and Streamline Pursue grow strategic our core firearm standardize business our&business relationships 2 relating Focus 4on operations acquisitions profitable Emphasize to growth customer our current businesssatisfaction and loyalty

  6. Slide 6: Rules for Success

    6§“RULES Compliance: Concentrate Launch FOR newSUCCESS on products Fanatical firearmstrategically pursuit industry of_excellence stay focused, “ Brand/Product: keep it simple§ Invest Protect in our andbrands sustain“the Channel: iconic Smith U.S. sporting & Wessongoods brand “ Customer: § Be a consu

  7. Slide 7: Q1 Fiscal 2015 Highlights

    Q1 (July “Sales “Professional “Income 7““EPS Attended Vertical New On Completed Industry-wide Fiscal track 31, ofof products: $0.26 of 2014 $131.9M: integration 2015 to 2nd $14.6M $30M complete sales per _Industry Highlights inventory From M&P®22 diluted of stock -22.9% vs. through $20M: Continuing

  8. Slide 8: Business Model and Fiscal Year Focus

    Business FISCAL SUSTAIN Compliance Launch M&P Continuous Establish Deep Focus Process Planning Finalize Integration Precision Make Restructure LofC Pay Convert Debt Strategy Review (Consumer) Options Strategic SWSS Execute $20M Military Repurchase Repurchase, FOCUS SYSTEMS: Core with Profitability O

  9. Slide 9: Leading Firearm Brand Portfolio

    AFor §best 9Performance Designed LEADING will sport, hunting do.to recreation, Center® FIREARM and be the shooting most models protection, &accurate, enthusiasts BRAND offerand sophisticated reliable, PORTFOLIO professional passionate and ergonomically shooters about use, you firearms. limited cansu

  10. Slide 10: The #1 Firearm Brand in America

    THE §Leads Smith 92% revolvers Unaided Source: #1 &Smith FIREARM Aided Wesson owned all&firearm is Wesson aBRAND Smith manufacturers Handgun &IN Wesson AMERICA A&U §Endorser in Research—December total brand brand awareness to M&P59% 2011 §Leads & 10 Smith in critical & Wesson attribute Awareness rat

  11. Slide 11: Adjusted NICS Background Checks Annually

    ADJUSTED UP 13,780,285 14,796,872 1,000,000 1,500,000 2,000,000 2,500,000 500,000 9,534,131 8,993,964 8,083,470 +11.3% 02+1.6% Actual *CY07 Source: 11 007 AVG. 2008 Y/Y Adj _National Y/Y 9,436,182 CY14 9.6% +14.4% -1.0% +6.0% 2009 NICS +7.4% NICS ANNUALLY 2010 Y/Y Shooting Y/Y Linear Y/Y 10,791,275

  12. Slide 12: Adjusted NICS by Fiscal Quarter

    ADJUSTED 3RD 2,500,000 FYQ1 0Jul FY’10 FY’11 FY’12 FY’13 FY’14 FY’15 Smith&Wesson. more Source: picture MAY ‘14 HIGHEST accurate FYQ2 625,763 662,956 696,947 840,412 974,457 877,655 compared of June NSSF. market 2,000,000 July NICS FYQ3 picture The 602,908 602,191 679,810 846,437 872,025 805,571 JUL

  13. Slide 13: Opportunity to Increase Pistol Sales

    OPPORTUNITY U.S. Smith Pistols Note: Source: Consumer Excludes &to2012 Wesson Revolvers BATF former Handgun Handgun TOand Ratio INCREASE Walther U.S. Market 4.0 1.4 UnitInt_l. : 1sales Sales CY 5.7 4.1 PISTOL Trade :2010 FY 1 2010 Commission, CY SALES 2012 FY 2014 TO FURTHER includes manufacture ALI

  14. Slide 14: Key Market Drivers: Who's Buying?

    (1) KEY “§_Who_s within first (2)90% Of New Repeat year those MARKET of the Shooters Source: Source:buying? Customers after 10,511 past who their 5have DRIVERS NSSF—An respondents years1. first beenpurchase3 That NSSF—Handguns—2011sport Analysis who included shooting ownOf11% a handgun in Sport 2012

  15. Slide 15: Key Market Drivers: Customer-centric

    (1) KEY 1. 2. 3. “§4. “Customer-centric: (2)Over Home Concealed What Personal Sport Target Personal Hunting Recreation/ MARKET 17% Are and protection Source: Source:Shooting Protection 36% Safety/ The Target or carry Sport 41M Top DRIVERS Gallup and Shooters 8% and Protection Users_ adults 13% Reaso

  16. Slide 16: New Target/Sport Shooters

    NEW Less “§§Sport (1) Women 18-34 First-time 47% Younger Increasingly Source: than TARGET/SPORT of Shooting year new represent 5Increasingly NSSF—An years buyers old shooters Urban/Suburban age More experience are 37% group Often Represented active, are Analysis SHOOTERS ofurban makes new60% shooter

  17. Slide 17: Robust Research Defines Consumer Profiles

    ROBUST §“NEW Note: 17 Average Systematic In-depth In-field Income, Yield: Process: Result: Smith DEFINED Proprietary Superior research RESEARCH gender, number multi-city In-depth &&Wesson quantitative CONSUMER brand and with knowledge S&W info focus type Internal consumers perceptions, and attitude,

  18. Slide 18: Connecting with New Women Shooters

    §CONNECTING 18 Television Lead sponsor andofWITH digital NRA NEWmarketing Women_s WOMENgeared Network SHOOTERS toward and _Love womenat §First Equipping Shot_ NRA certified women instructors _ Eyes & Ears § Products designed with the needs of women shooters in mind

  19. Slide 19: Strategic Product Development

    STRATEGIC §Market Further 19Concepts research consumer market-tested PRODUCT drives studies product conducted with DEVELOPMENT firearm development to owners finalize& most purchase desiredintenders§ designs/features Results benchmarked against database of prior concepts/sales § Leading concepts fina

  20. Slide 20: 2014 New Smith & Wesson Products

    2014 NEW Smith Model K-Frame Governor® SDVE 20 & 69 66 9 and Wesson revolver Combat PRODUCTS _40 Multi-caliber _ Value returns Magnumdriven torevolver _the Smith .357 pistols product Magnum now &now Wesson_s lineup offered available in first popular inL-Frame California matte revolver silver complia

  21. Slide 21: 2014 New Smith & Wesson M&P Products

    2014 NEW Smith M&P M&P15-22 21 BODYGUARD & Wesson PRODUCTS (Multi-color) M&P380___SHOT Popular A sub-compact SHOW M&P15-22 .380rifle ACP now pistol in four enhanced new camouflage with M&P style finishes features

  22. Slide 22: 2014 New Performance Center Products

    2014 NEW Performance M929 M686 M629 M460XVR M986 ready 22 for _ Aany Pro 9mm classic, purpose Series _PRODUCTS® Center A course multi-caliber competition _time-tested A built &of ProProSeries fire hunting Series _ revolver SHOT and .357 9mm package Products multi-purpose Magnum SHOW inspired revolve

  23. Slide 23: Newest Products

    OUR first M&P22 delivers centerfire great shooting M&P BODYGUARD enhanced, Trace, systems 23 NEWEST BODYGUARD anthe and Compact sports. industry pistol firearm integrated popular tactical in handguns PRODUCTS for — leader a features lighting smaller lasers Anew —tactical in Our participants now from

  24. Slide 24: Three Ways to Market: Distributors, Buying Groups, Big Box

    THREE 14 independent 72% Academy Bass Dick_s Gander Buying DIRECT Diverse Retailers Note: 24 DISTRIBUTORS of Pro Additional Sporting Consumer Mountain Groups: path WAYS Shops 5Sports 2 BIG BUYING (toInventory market TO BOX 600 Goods non Channel U.S. 10,000+ big-box, GROUPS RETAILERS =)SPORTING Enhan

  25. Slide 25: Active Retail Engagement Program

    §ACTIVE “element Smith Intuitive Points Extensive Retail&associate in never Wesson, RETAIL graphic go-to-market catalog expire M&P, incentive interface, ENGAGEMENT ofand products and strategy arerewards T/C® easy transportable &to experiences, firearms program use PROGRAM & register § Two-way includ

  26. Slide 26: Professional Market

    PROFESSIONAL “§Demands 26 Attended Focus: M&P Law Army International U.S. Enforcement pistols Top-tier Large Highest 2nd Modular strongly agency industry agencies Standards MARKET / Federal Handgun opportunities positioned day in for high-volume Government (9mm) Performance to “compete Belgium, Repl

  27. Slide 27: Smart Investments in Flexible Production

    SMART Houlton, §IN optimize Deep Map 27Strategic FLEXIBLE source: River, INVESTMENTS internal MEinvestment CT Ecozones PRODUCTION Plastic capacity in Injection Springfield, § Conversion High Molding Volume MAofbasic Houlton, CNC capacity ME operation and in tooling into aCorporate dedicatedHQ precis

  28. Slide 28: Vertical Integration: Deep River Plastics

    150,000 VERTICAL Deep MAY Asset [Graphic Operational “Financial 28 Accretive Integrates Increases Lowers Reduces Enhances Positive Planned River 2014 purchase leased Appears production Benefits: payback: impact risk flexibility in new Plastics aBenefits: INTEGRATION key fiscal within square ofproduc

  29. Slide 29: Financial Review

    FINANCIAL REVIEW

  30. Slide 30: Revenue—Annual

    (1) U.S.$ REVENUE—ANNUAL $700 $627 $500 $600 $530-$540(E2) +43.7%1 $400 +13.8%1 $300 $200 FY12 $0 $100 Walther (2) $380 30 $588 $412 $546 Millions FY13 Smith Note: $621 FY14 Excludes & _ Continuing Wesson FY15(Est) FY2015 priorOperations yearprovided estimates Walther August sales _ 26, an agreement

  31. Slide 31: Revenue—Quarterly

    U.S.$$131.4 REVENUE—QUARTERLY $160 $180 $169.4 1Q12 $0 $20 $40 $60 $80 $100 $85.0 $120 $140 $124.2 Note: 31 Excludes 1Q13 Millions 1Q14 _Walther Continuing 1Q15 salesOperations _ an agreement which ended in Fiscal 2013

  32. Slide 32: Annual Gross Margin Expansion

    ANNUAL GROSS 37.1% 22.6% 24.1% 32 FY12 10.9% 31.0%FY13 41.3% MARGIN MARGIN FY14 FY12 OPERATING EXPANSION FY13 FY14 PROFIT MARGIN

  33. Slide 33: Gross Margins—Quarterly

    GROSS MARGINS—QUARTERLY 42.6% 28.1% 33 37.7% 1Q12 6.0% 28.9%1Q13 23.0% 37.2% MARGIN 1Q14 19.5% 1Q15 OPERATING 1Q12 1Q13 PROFIT 1Q14 MARGIN 1Q15

  34. Slide 34: Increased Net Earnings Profitability—Annual

    INCREASED NET EARNINGS (Continuing $88.6 + $1.22 $81.4 $26.4 2012 348.9% INCOME 2013 $1.47 $0.40 + 20.5% 2014 Operations, Operations) PER PROFITABILITY—ANNUAL 2012 DILUTED 2013 U.S.$ 2014 SHARE Millions)

  35. Slide 35: Net Profitability—Quarterly

    NET $0.04 PROFITABILITY—QUARTERLY (Continuing $0.40 $2.3 1Q12 [Graphic 35 INCOME 1Q13 $26.5 Appears 1Q14 $0.28 Operations, EARNINGS Here] 1Q15 $0.26 1Q12 U.S.$ $18.9 PER 1Q13 Millions) $14.6 DILUTED 1Q14(Continuing 1Q15 SHAREOperations)

  36. Slide 36: Condensed Balance Sheet and Cash Flow

    BALANCE CONDENSED For July Cash AR Inventory Long-term Free Current Other Notes §Total 36July the 53,411 31, cash $liabilities current assets equity current non-current payable 2014—Company 83,458 period liabilities 2014 flow 101,317 assets 55,890 $SHEET 152,959 assets assets April 435,755 ending: 1

  37. Slide 37: Stock Repurchases: Returning Value to Stockholders

    STOCK $165M §STOCKHOLDERS 3714.4MinREPURCHASES MAXIMUMshares sharesshares repurchased repurchased allowed RETURNING §Dec. $11.49 to be2012 repurchased average _TO JulyOUR price 2014 under VALUE § Share loan reduction covenantsof 21.7%

  38. Slide 38: Return on Invested Capital

    RETURN Weighted (Trailing Q1 70% 60% 50% 30% 40% 20% 2015 Q4 0% 10% 14.0% §ROIC The additional 38Efficient FY FY09 ROIC WACC 2015 34.1% Q1WACC FY Four Q4 Average assumptions ON presented allocation FY10 Quarters) INVESTED Cost Q4above ofused. FY11 of capital Capital CAPITAL excludes Q4generating FY1

  39. Slide 39: Financial Guidance: Fiscal Year and Second Quarter

    FINANCIAL FISCAL Revenue GAAP Tax Share Note: Company reiteration Rate All Count Earnings YEAR SECOND $100M $530M 37% financial isornot 55.5M modification Fiscal updating 2015 Per toinformation QUARTER $Year Share 110M 540M Estimate Ending: this of $0.04 $0.89 this information and 2015 to informatio

  40. Slide 40: Investment Summary

    §INVESTMENT “Profitable §Focus 40 Long-term Margins Short-term Leading Iconic Pure Strong play on brand financial Growth vary position operating strategy target headwinds with among SUMMARY performance: of incustomer on efficiencies the quarterly quarters growing for U.S. margins driven firearm gros

  41. Slide 41: Investor Relations

    INVESTOR Elizabeth Email: WWW.SMITH-WESSON.COM lsharp@smith-wesson.com Sharp RELATIONS Vice President Smith & Wesson 2100 Roosevelt Avenue Springfield, MA 01104 Phone: 413 747 3304

  42. Slide 42: Appendices

    (@) Smith &Wesson’ zs

  43. Slide 43: Experienced Leadership

    EXPERIENCED JAMES + 43years: DEBNEY multinational public ndLEADERSHIP private JEFFREY consumer company D. and BUCHANAN xperience business-to-business inPRESIDENT nancial anagement environments, & EXECUTIVE and w; cluding CFO VICE for President publicly PRESIDENT ofaded, Prestoglobal &Products CHIEF

  44. Slide 44: Key Market Drivers: Rising Household Firearm Ownership

    KEY MARKET _Who_s [Graphic Rising 44 percentage buying? AppearsDRIVERS Here] of U.S. households owning firearms

  45. Slide 45: July 2014 Handgun Background Checks

    JULY2014 July Jul’14 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 FYQ1 FY’10 May 282,826 275,406 Source: 508,468 533,674 416,260 629,802 683,266 535,661 633,688 770,872 568,133 439,383 881,038 402,183 565,419 876,673 511,902 458,889 533,201 359,660 422,005 410,26

  46. Slide 46: July 2014 Long Gun Background Checks

    JULYJune 1,400,000 Jul’14 FYQ1 FY10 May 314,167 288,478 286,545 362,310 405,883 479,436 515,135 614,226 349,597 387,244 421,264 349,370 4,773,677 Source: 46 FY11 2014 compared FYQ2 FBI 290,452 279,249 288,281 367,074 415,323 475,736 550,450 660,116 364,202 423,556 466,407 404,033 July 1,200,000 4,99

  47. Slide 47: Pistols vs. Revolvers

    PISTOLS ҤPistols 47 Trigger Ergonomics/comfort High Modern Capacity Safety Simpler Easy Reliability Pistolmaintenance Revolver and tech/cutting advantages: features pull shape to vs. revolvers advantages: use REVOLVERS edge have different attributes, but pistols are preferred by both professionals

  48. Slide 48: Market Participants

    MARKET Listed RIMFIRE SEMI AUTOMATIC PISTOLS Smith Beretta Glock H&K Kimber Ruger Sig Springfield 48 Sauer Walther AUTOMATIC & Sig Savage Alphabetically Ruger Sig Wesson Weatherby MSR RIFLES Sauer SEMI PARTICIPANTS Winchester Sauer Arms Ruger Rock REVOLVERS MSR Taurus BLACK Smith Sig River Colt CENT

  49. Slide 49: Industry Indicators

    INDUSTRY WWW.FBI.GOV eliminate ҤWWW.NSSF.ORG 49 Adjusted Applies Alcohol NICS Firearms NSSF Lagging ADJUSTED FET Data background translates permit-related to and data and NICS www.TTB.GOV retail INDICATORS Tobacco NICS Ammunition serves stores, into checks manufacturer_s Tax as checks gun aand are

  50. Slide 50: WACC Assumptions

    WACC Weighted Q4 FY09 Market Equity Size 20-yr Tax *—Market **—Tax Note: 50 Q4Rate premia risk Smith FY10 beta—end Q4 ASSUMPTIONS risk rate ** Average free Q4 risk premium *FY11 36.74% &for 3.74% Q4 rate—end Wesson premium trailing of Q4 FY12 Cost period 38.14% 3.99% *Q1 research 6.50% offour FY13 o

  51. Slide 51: Dynamic Regulatory Environment

    §“ARestricts 51 Flawed A We Our DYNAMIC solid will grandfathered history technology not rights comply REGULATORY of of making law-abiding M&P with Shield new firearms ENVIRONMENT California citizens andthat SDVE” meet microstamping pistols diverseremain staterequirement requirements, available for f

  52. Slide 52: Thank You

    HANK YOU

Smith & Wesson Holding — Investor Presentation (September 2014) on 6ix