Smith & Wesson Brands, Inc. · NASDAQ:SWBI
Smith & Wesson Brands — Investor Presentation (September 2015)
48 slides from Smith & Wesson Brands's investor presentation, Sep 10, 2015
Slide 1: Exhibit 99.1
Exhibit 99.1 WWW.SMITH-WESSON.COM
Slide 2: Safe Harbor
SAFE Certain harbor roadmap; financial strategies; by Such 2increased important factors HARBOR created statements benefits regulation the and include factors demand thereby. anticipated ofcontained vertical of that the for firearms Such demand could the revenue, integration; forward-looking Company’
Slide 3: Our Mission and Vision
“Our mission OUR consumers MANUFACTURER 3PROUDLY VISION and MADE isleading to continue IN professionals.” firearms THEto USA enhance manufacturers our position by ISas TOone BEofdesigning, the world’s producing, and marketing high-quality, innovative firearms and THE LEADING related products that me
Slide 4: A Growing U.S. Consumer Firearms Leader
A U.S. Massachusetts Growing Consumer Two FIREARMS 91% Sport/Competition 4Hunting Divisions: ofMARKET Q1 Concealed Market Sales FY16 DIVISION (HQ), Firearms =Share Total LEADER 88% Personal Carry Connecticut, Revenue Within of ACCESSORIES &Cleaning Q1FY16 Accessories Protection INanFIREARMS 9% Expan
Slide 5: Strategic Corporate Objectives
STRATEGIC Protect Focus Streamline Emphasize 5Pursueon strategic andprofitable and customer grow CORPORATE standardize relationships ourgrowth satisfaction core firearm our inOBJECTIVES & firearms business acquisitions and business loyalty and operations related that are products synergistic in the
Slide 6: Q1 FY16 Highlights
Q1See Sales Accessories Gross Firearms GAAP EPS to $0.32 Non-GAAP Cash 6*NICS anFY16 included insurance flow of Appendices per +10.1% margin EPS $147.8M: Sales: gross HIGHLIGHTS diluted from of Adjusted EPS Sales: 39.8% an Y/Y $0.26 margins: settlement, $134.4M operations expense (no share for +12.1
Slide 7: Strategic Roadmap
STRATEGIC 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
Slide 8: Operating Divisions
OPERATING FIREARMS The manufactured Connecticut handcuffs, chain federal Q1 $134.4 91.0% 38.7% 8*21.5% Excludes FISCAL firearms and of gross operating million governments. total directly, and the facilities, 2016 margin ACCESSORIES division and DIVISIONS sales related impact inmargin sales, Q1 sold
Slide 9: Firearms Division
9FIREARMS DIVISION
Slide 10: Leading Firearm Brand Portfolio
LEADING For professional standing and firearms Wesson. Performance 10 sport, accuracy. and Only behind recreation, FIREARM use, the Center® Smith the162 world you best & years protection, can models will knows Wesson® BRAND feel of do.reliability confident offer Smith handling PORTFOLIO and knows so
Slide 11: The Firearm Brand in America
THE 90% 100% 50% 60% 70% 30% General 0% aLeads Source: Smith 11 Smith 89% 49% 20% #1 all &Smith & Handgun FIREARM Wesson firearm 80% 40% 10% Wesson & Awareness Wesson manufacturers Buyers Endorser BRANDHandgun Population Tracking brand IN in AMERICA to total A&U18+ M&P – Gen brand Research—December
Slide 12: Adjusted NICS Background Checks, August
ADJUSTED August 2,500,000 0J1,500,000 1,184,246 718,971 1,189,152 1,308,100 918,707 Source: picture anuaryof ‘15 NSSF February 770,310 886,825 market 1,000,000 8,993,964 931,660 1,510,529 compared NICS The946,528 854,563 conditions. March NSSF 840,412 CY 500,000 CY’09 14,796,872 toAUGUST August Apri
Slide 13: Adjusted NICS, Fiscal Year
ADJUSTED August 2,500,000 FYQ1 500,000 1,000,000 1,500,000 2,000,000 0M 9,172,582 920,840 855,259 1,187,823 Source: on 13ay active June FYQ2 ‘15 NSSF 1,266,344 1,016,559 CCW July FY’11 987,698 compared NICS FYQ3 The August permit 625,763 NSSF 1,189,152 1,034,701 13,151,219 FY FYQ4 to September datab
Slide 14: Adjusted NICS Up Annually Over 8 Years
ADJUSTED UP 2,500,000 13,090,383 10,791,275 500,000 8,993,964 8,083,470 02+1.6% *CY07 Source: 007 AVG. 2008 Y/Y –National 9,436,182 CY15 7.0% 2,000,000 -1.0% +6.0% 2009 13,780,285 +7.4% NICS ANNUALLY 2010 Y/Y Shooting Y/Y Y/Y +27.7% 1,500,000 2011 +11.3% 14,796,872 Sports Y/Y 2012 OVER Y/Y 1,000,000
Slide 15: Industry Shipments, Handguns and Long Guns
INDUSTRY Total (in $5,500 Q4 $0 2008 Source: 15 $0 Millions) Q42009 Handguns $0 Q4 $3,000 Federal $3,000 2010 SHIPMENTS $3,000 Excise & 2011 Q3 Long $1,500 2012 $5,000 Tax Guns HANDGUNS collections 2013 Q3 $4,500 Total $1,500 2014 Handguns $2,500 2015 onQ3 AND manufacturing $2,500 2008 $2,500 Total
Slide 16: Firearm Unit Growth into Consumer Channel
FIREARM HAND 300 295 250 LONG 50 (Thousands) 35 40 25 0F 1Q 16iscal 48 33 20 2015 274 200 45 30 15 Fiscal GUN GUN 150 (CY) 10UNIT 5100 UNIT UNIT 1Q50 GROWTH 2016 GROWTH GROWTH (CY) INTO CONSUMER CHANNEL
Slide 17: Key Market Drivers
KEY The 1. 2. 3. 4. Who New year Sport Urban/Suburban—47% Women—37% Repeat (1) (2) (3)Target Personal Hunting— Recreation/ Source: Top after Shooters: is MARKET Shooting Customers: Buying? Reasons Shooting their Safety/ Gallup NSSF—An NSSF—First-Time 36% Sport—13% first Of of More DRIVERS For new th
Slide 18: Market Research Drives New Product Development
MARKET STRATEGIC NEW Concepts consumer 18 USERS market-tested studies RESEARCH PRODUCT DEFINED run to with finalize DRIVES CONSUMER DEVELOPMENT firearm mostowners desired PROFILES &designs/features purchase EXPERIENCED intenders The Results next generation benchmarked M&P against pistol isdatabase j
Slide 19: Three Ways to Market
THREE 14 (10,000+ 63% Buying DIRECT Diverse Retailers Note: Inventory DISTRIBUTORS ofAdditional Consumer Groups: path WAYS 6 BUYING 2 BIG ) firearm to market TO BOX 600 non Channel U.S. retailers independent big-box, GROUPS RETAILERS = SPORTING Enhanced Sales direct Member (TTM) insight retail GOODS
Slide 20: Professional Market Demands Highest Standards
PROFESSIONAL Demands Law Focus: Handgun market Enforcement Top-tier System Highestagencies (9mm) Standards /MARKET Federal in Replacement high-volume Government for Performance Partnered NICS states withLA General County Dynamics Sheriff, Final FresnoRFP County issued Sheriffs 8/28/15; Office Propos
Slide 21: Smart Investments in Flexible Production
SMART Strategic Selective Conversion Fiscal Houlton, Springfield, Primary Deep Map source: River, Year Manufacturing INVESTMENTS ME investment outsourcing 2016 of MA CT Ecozones High Houlton, Plastic Corporate CapEx Volume inof21 Injection basic ME Estimate: parts IN HQ CNC operation capacity FLEXIB
Slide 22: Vertical Integration: Deep River Plastics
VERTICAL Deep MAY 150,000 Strategic Integrates Increases Lowers Sophisticated Enhances 22 River 2014: production leased Benefits: flexibility new a Plastics key Asset INTEGRATION global product square manufacturing purchase Financial costs Positive infrastructure feet development Planned 45 ofHighli
Slide 23: Accessories Division
ACCESSORIES DIVISION 23
Slide 24: Accessories Division: December 2014 Acquisition
ACCESSORIES DECEMBER 144,500 Strategic Strong Robust Multiple Supplier Category 24 brand product square to accessory Benefits: leading leading portfolio 2014: foot innovation ACQUISITION market Financial product retailers facility Purchase $130.5M share process categories Accretive Highlights: ofcur
Slide 25: Accessories for Hunting, Shooting & Outdoor
ACCESSORIES HUNTING, SHOOTING FOR & OUTDOOR
Slide 26: Differentiated Platform, Competitive Advantage
DIFFERENTIATED Strong Portfolio product development process cutting Sophisticated products Infrastructure ~50 partners Focus: source, 26 distribute global Brand Design, edge market yields Nine share Product supply product recognized highly Market 800+ Global Leading in across & key over categories I
Slide 27: Expanding the Addressable Market
EXPANDING BTI Approximately Cumulative Retailers In The Note: 2013-2014 2012, BTI accessories Regarding males females portfolio estimate Industry amount THE spent 15 expand first spent that represents million ADDRESSABLE for Reference an time ~25% an 2000 average theaverage people purchases: market
Slide 28: Strong, Established Multi-Channel Distribution
STRONG Established Multi-Channel Dealers Specialty 28 Distributors Outdoor CHANNELS Relationships Internet Specialty International Only TOwith MARKET Outdoor Broad Retailers Sp Distribution oorRetailers Across Leading Channels
Slide 29: Financial Review
FINANCIAL REVIEW 29
Slide 30: Revenue—Annual
U.S.$$300 REVENUE—ANNUAL $610—$ $500 $400 FY12 $0 Note: $380 Excludes Millions FY13 $700 $200 FY14 $621 –Walther $100 Continuing FY15 (Estimate) sales FY16Operations – $546 an agreement $551 $600 which ended in Fiscal 2013 30
Slide 31: Revenue—Quarterly
U.S.$ REVENUE—QUARTERLY $169.4 $80 1Q13 $0 Accessories Note: $60 Excludes 1Q14 Millions $180 $401Q15 Firearms $131.4 $20–Walther Continuing 1Q16 $147.8 sales$160 Operations – an$13.3 agreement $124.2which $140ended $120 $134.4 in Fiscal $100 2013 31
Slide 32: Gross Margins—Quarterly
GROSS MARGINS—QUARTERLY 42.6% 37.7% ADJUSTED 26.6% 32.3% 1Q13 = Represents 1Q14 28.1% 19.9% 25.8% MARGIN 1Q15 EBITDAS non-GAAP: 39.9% 20.2% 26.3% 1Q16 OPERATING 23.0% 37.2% MARGIN 1Q13 See Appendices 1Q14 PROFIT 1Q15 for MARGIN 1Q16 GAAP to non-GAAP reconciliations. 32
Slide 33: Net Profitability—Quarterly
NET PROFITABILITY—QUARTERLY (U.S.$ $0.40 $0.28 $0.32 1Q13 = 33Represents INCOME 1Q14 $26.5 $0.27 Millions) 1Q15 $18.9 non-GAAP: EARNINGS SHARE 1Q16 $17.7 1Q13 $14.9 SeePER Appendices 1Q14 DILUTED 1Q15 for 1Q16GAAP to non-GAAP reconciliations.
Slide 34: Condensed Balance Sheet and Cash Flows
BALANCE CONDENSED For July Cash AR Inventory Long-term Current Other Notes Total 34 the 51,535 31, $liabilities current assets equity current non-current payable 55,417 period liabilities 2015 90,086 assets 55,280 $SHEET 209,998 assets assets April 514,095 ending: 170,747 $& 304,097 BALANCE 42,222 2
Slide 35: Key Finance Activities and Share Repurchase
KEY operations Optimizing JULY Issued 5.000% Notes company’s Expanded accessories facility $75M prior 5.875% utilizing 2017 from SHARE premium $165M 35 to with FINANCE 2014 due to $75M to in April Senior REPURCHASE cash $125M from cumulative credit 2018 2.9375% new division) capital DECEMBER of 2015
Slide 36: Financial Guidance
FINANCIAL (Fiscal FISCAL Revenue GAAP Non-GAAP Tax Share Note: present Rate Guidance Count Year Earnings date YEAR SECOND $135M $610M 37%Earnings Ending nor 55.8M GUIDANCE for 2016 does Per to QUARTER $revenue, April Share 140M 620M its Per Estimate inclusion Share* 30) $0.16 $0.99 GAAP 2016 to $0.1
Slide 37: Investment Summary
INVESTMENT Leading Iconic Margins Long-term from 37 operations brand position vary Adjusted target with among SUMMARY in of customer the quarterly EBITDAS quarters U.S.driven firearm gross due margin toproduct margins market absorption target portfolio inabove the impacts range 20% Focus of ofFocus
Slide 38: Investor Relations Contact
NASD: (413) 747-6284 SWHC www.smith-wesson.com 38 Liz Sharp, VP Investor Relations
Slide 39: Appendices
39 APPENDICES
Slide 40: Experienced Executive Leadership
EXPERIENCED JAMES PRESIDENT CHIEF OFFICER years: multinational onsumer siness-to-business vironments, ncluding esto 500 it Consumer company 40 member of million Alcoa Products years: EXECUTIVE DEBNEY and President board Products OFFICER ompany; business management public xperience vate Co., & EXECUT
Slide 41: Market Participants
MARKET Listed RIMFIRE SEMI AUTOMATIC PISTOLS Smith Beretta Glock H&K Kimber Ruger Sig Springfield 41 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
Slide 42: Industry Indicators
INDUSTRY WWW.FBI.GOV NICS ADJUSTED Adjusted WWW.NSSF.ORG Applies FET Firearms www.TTB.GOV Alcohol NSSF Lagging 42 Data background translates to and data and NICS retail Tobacco INDICATORS NICS Ammunition serves into stores, checks manufacturer’s Tax asgun aare and Excise proxy shows, conducted Trade
Slide 43: Non-GAAP Reconciliation
GAAP In per to acquired (xv) performance. period analytical effect 43 provide this share receipts of investor by toinflating non-GAAP intangible from NON-GAAP eliminating tool thefrom Our reader and continuing presentation, our definition note should assets, adjustments, with financial potential REC
Slide 44: Reconciliation of GAAP to Non-GAAP
SMITH RECONCILIATION For $July GAAP Bond Amortization Debt TCA Discontinued Insurance Acquisition-related Tax Non-GAAP % the effect of 31, extinguishment accessories premium Sales to gross operating net Three &2015 NON-GAAP recovery of WESSON income gross operating net $profit non-GAAP of operations
Slide 45: Reconciliation to Adjusted EBITDAS
SMITH RECONCILIATION (In For (Unaudited) July GAAP Interest Income Depreciation Stock-based TCA Discontinued Acquisition-related DOJ/SEC Non-GAAP 45 thousands) the 31, accessories to net Three expense tax &2015 NON-GAAP costs, WESSON income expense adjusted compensation and operations July Months in
Slide 46: Free Cash Flow Reconciliation
FREE SMITH RECONCILIATION (In For (Unaudited) July Net Payments Receipts Free 46 thousands) the cash 31, cash CASH Three & 2015 from provided used flow for WESSON the FLOW July Months in note $ investing 9,454 net by 31, receivable assets OF HOLDING operating Ended 2014 $ NET (3,842) activities of T
Slide 47: ormance
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Slide 48: Investor Relations Contact
NASD: SWHC www.smith-wesson.com Liz Sharp, VP Investor Relations (413) 747-6284 48
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