Smith & Wesson Brands, Inc. · NASDAQ:SWBI
Smith & Wesson Brands — Investor Presentation (June 2014)
46 slides from Smith & Wesson Brands's investor presentation, Jun 20, 2014
Slide 1: Investor Presentation Fiscal Year 2015
Exhibit 99.1 I N V E S T O R P R E S E N T A T I O N F i s c a l Y e a r 2 0 1 5 NASDAQ | SWHC 1 WWW.SMITH-WESSON.COM
Slide 2: Safe Harbor Statements
SAFE statements strategic Company’s are products, firearm-related qualified HARBOR corporate product the be focus by Company’s subject products, important development; Certain and objectives to strategies; the and growth statements factors safe-harbor other and the and opportunities, that rules dema
Slide 3: Our Vision and Mission
OUR VISIONprofessional FIREARMS “Our mission MANUFACTURER is employees to design, PROUDLY produce, MADEIS TOINBE THE andUSA market 3 high quality, innovative firearms that meet the needs and THE LEADING desires of our consumer and
Slide 4: A U.S. Market Leader
A U.S. MARKET +13.8% CONSUMER Concealed YOY) Carry MARKET • Gross Government LEADER Margin PROFESSIONAL INInternational =FIREARMS 41.3% • Net4MARKET SINCE Income1852 = 89% $88.6 Springfield, ofMFiscal +8.9% 2014 MA YOYFirearm / 1,700 Growing U.S. SalesMarket Employees 11% ofShare Fiscal Strong Withi
Slide 5: Strategic Corporate Objectives
STRATEGIC satisfaction and CORPORATE loyalty 5 Pursue OBJECTIVES strategic relationships 1 Protect and & acquisitions grow our core relating firearm to business our current 2 Focus business on profitable 5 growth 3 Streamline and standardize our business operations 4 Emphasize customer
Slide 6: Rules for Success
RULES FORFanatical Compliance: SUCCESSpursuit Concentrate of excellence on firearm • Brand/Product: industry – stay Invest focused, in ourkeep brands it simple • Channel: Protect U.S. andsporting sustain goods the iconic • Customer: Smith &Consumer Wesson brand • Assets: Be a High consumer-centric u
Slide 7: Business Roadmap
Business SUSTAIN Regulated Intervals Analysis ERP: Implementing Walther Debt FOCUS in Inorganic roadmap Create Re- GoMove GROW: is Establish of Plan Live Deeper $115M Growth Environment &assessed Strategic SCALE Supported Cellular Date SWSS Execute OPTIMIZE Create Profitability Vision Aug regularly
Slide 8: A Leading Firearm Brand Portfolio
A LEADING confident and toughest designed, accuracy. situations reliable special-featured FIREARM Smith and and &ergonomically Wesson® perform &firearms BRAND Wesson. knows under superior, PORTFOLIO demanding Only the Smith the passionate best For & standards. Wesson® will sport, about do.recreation
Slide 9: The #1 Firearm Brand in America
THE #1 Most Research—December owned FIREARM and considered BRAND 2011 &revolver IN Smith AMERICA & brand Wesson inSmith the Awareness market: & Wesson 1Tracking of92% everyLeads –2 Gen revolvers allPop firearm –owned Dec. manufacturers 2012 is a Smith 9 &inWesson total brand Endorser awareness brand
Slide 10: Adjusted NICS Background Checks
ADJUSTED 8,993,964 Foundation-1.0% (NSSF) NICS Y/Y UP 108,083,470 AVG. 9.4%+6.0% OVERY/Y 7 YEARS +11.3% Y/Y 2,500,000 +1.6%2,000,000 Y/Y 0 2007 1,500,000 2008 2009 1,000,000 2010 2011 14,796,872 2012 2013 13,780,285 2014 Actual +7.4% AdjY/Y NICS 10,791,275 Linear (Actual +27.7%Adj Y/Y NICS) 500,000
Slide 11: Adjusted NICS FYQ4
ADJUSTED FYQ4 provides Source: a more NDNSSF accurate NICS TheMAY picture NSSF2014adjusts of 2market HIGHEST FBIconditions. NICSMAYdataON 11 to eliminate RECORDbackground May ‘14 compared checks associated to May ‘13with shows permit a 9.9% applications decreaseand while checks May on ‘14active was
Slide 12: Opportunity to Increase Pistol Sales
OPPORTUNITY Wesson manufacture Handgun plus TO imports, UnitINCREASE Sales excludes FY 2010 PISTOL exports FY 2014 SALES 12 Pistols TO to FURTHER RevolversALIGN Ratio 1.4 WITH : 1 4.1 MARKET : 1 Note:U.S. Excludes Consumer formerHandgun Walther Market sales Source: CY 20102012 CYBATF 2012 and Pistol
Slide 13: Key Market Drivers
KEY (2) shooting first-time 2012 MARKET Source: in buyers 2012.DRIVERS bought NSSF—Handguns—2011 RepeatatCustomers least “Who’s one buying?” more • 90%firearm of Consumer New 10,511 within Shooters respondents Study the •first OnOf Ownership those year whoafter own whotheir ahave And handgun first U
Slide 14: Key Market Drivers (3)
KEY 2 carry centric: (3) •Home Source: MARKET permits. Users protection NSSF—An needs Sport DRIVERS and and drive Analysis personal Target new Whatproduct Shooters Of protection AreSport The features. 3 Shooting Top • are Over Reasons top (1) 17%drivers Participation Source: orFor 41M for Gun Gallup
Slide 15: New Target/Sport Shooters
NEWBuyers active, 37% Gun ofTARGET/SPORT 60% new shooting 2012 shooters 15 versus once SHOOTERS or22% moreofaestablished month2 Less than Increasingly shooters1 5 years experience Urban/Suburban (1) Source: Younger NSSF—An 1••18-34 47%Analysis of year new oldshooters Ofage Sport group are Shooting m
Slide 16: Robust Consumer Research
ROBUST industry products desires Result: brands Yield: RESEARCH Superior Proprietary and consumer NEW knowledge info DEFINED shifts and of deep • In-depth where CONSUMER understanding tomulti-city play in market PROFILES offocus our and targeted groups how EXPERIENCED toconsumer togain win deeper wi
Slide 17: Connecting with New Women Shooters
CONNECTING Ears Products designed WITH with NEWthe WOMEN needs ofSHOOTERS women shooters Leadinsponsor mind 17of NRA Women’s Television and digital marketing geared toward women Equipping NRA certified women instructors – Eyes &
Slide 18: Strategic Product Development
STRATEGIC prior concepts/sales PRODUCTLeading DEVELOPMENT concepts financially Market modeled research as key drives component product development of overall business Concepts casemarket-tested Further consumer with firearm studies owners conducted & purchase to finalizeintenders most desired Result
Slide 19: 2014 New Products
2014 NEW returns to the PRODUCTS product lineup Smith Governor® & Wesson – Multi-caliber Model 69 Combat revolver Magnum now offered – Smithin&popular first L-Frame matte silver revolver finish in SDVE powerful 9 and .44 40 Magnum – ValueModel driven66 pistols CombatnowMagnum available– in .357 Cali
Slide 20: 2014 New Products
2014inNEW now four PRODUCTS new camouflage Smith finishes & Wesson 20 M&P M&P BODYGUARD® 380 – A sub-compact .380 ACP pistol enhanced with M&P style features M&P15-22 (Multi-color) – Popular M&P15-22 rifle
Slide 21: 2014 New Products
2014Magnum .357 revolver NEW built PRODUCTS on enhanced the Smith with ®&Performance popular Wesson self-defense X-Frame CenterM986 &features ProSeries Pro Series M629 Products –– A A Pro purpose M929 Series –built A9mm 9mmhunting revolver competition package readyrevolver based for any oninspired c
Slide 22: Three Ways to U.S. Sporting Goods Market
THREE WAYS RETAILERS Footnote: Additional Cabela’s TO U.S. non Dick’s SPORTING big-box, Gander direct GOODS Mountain retail relationships MARKET Buying Groups: 10,000+ not included 600 15 DIRECT DISTRIBUTORS 22 2 BUYING independent GROUPS (Member Inventory Firearm ) firearm Retailers retailers Diver
Slide 23: Active Retail Engagement Program
ACTIVEgraphic Intuitive products strategy RETAIL interface, &ENGAGEMENT experiences, easy toincluding usePROGRAM & surveys, select Smith Retail and communicate & associate Wesson,incentive M&P, key register and rewards T/C® sales program firearms productTwo-way 23 initiativesdialogue elementopportun
Slide 24: Professional Market
PROFESSIONAL Fresno 2nd industry Countyday Sheriffs • Demands M&POffice, pistols Highest Texas strongly Standards DPSpositioned International MARKET to compete • Focus: for Performance 24Large agency Lawopportunities Enforcement• /Belgium, Federal Government Australia, Canada, • Focus: Puerto Top-ti
Slide 25: Smart Investments in Flexible Production
SMART INVESTMENTS flexibility precision machining Primary Manufacturing centerHoulton, Fiscal Year Selective ME2015 IN FLEXIBLE outsourcing CapEx Estimate: PRODUCTION of parts $40.0 production M Deep High toRiver, Volume betterCT meet CNC Plastic market Strategic Injection demand investment Molding
Slide 26: Vertical Integration
150,000 M fiscal 26 cash2015 on leased hand • Increases square delivers feet flexibility in-house VERTICAL •custom Positive INTEGRATION plastic impactinjection on gross Full molding, margin 45 injection •rapid Lowers prototyping, tool-building productionand molding costs tooling • Planned capabiliti
Slide 27: Financial Review
FINANCIAL REVIEW
Slide 28: Revenue Growth
REVENUE 2014 handgun GROWTH unit salesU.S.$ grew Millions 31.4% versus – Continuing prior year. Operations (1) Note: $627 Excludes $588prior $700year $600Walther $412 $500 sales1–+13.8% an agreement $400 +which 43.7%1 ended $621in$546 2013$300 28 Walther $380 $200 $100 $0 2012 2013 2014 Fiscal Year
Slide 29: Margin Expansion
MARGIN EXPANSION GROSS MARGIN OPERATING PROFIT MARGIN 41.3% 37.1% 31.0% 22.6% 24.1% 10.9% 2012 2013 2014 2012 2013 2014 29
Slide 30: Increased Profitability
INCREASED $26.4 $0.40 2012 PROFITABILITY 2013 2014 2012NET 2013INCOME 2014 30 EARNINGS PER DILUTED SHARE (Continuing Operations, U.S.$ Millions) (Continuing Operations) $1.47 $88.6 $81.4 $1.22 + 8.8% + 20.5%
Slide 31: Balance Sheet and Cash Flow
BALANCE Thousands) investing 43,770 machine 145,690 million Total credit Total deposits activities April SHEET current facility equity (62,551) 30, (62,616) & assets 166,823 2014 31CASH(41,421) April 239,171 (32,910) 181,299 FLOW 30,229,566 Free 2013 Inventory CONDENSED Total cash April liabilities
Slide 32: Stock Repurchases Returning Value to Shareholders
STOCK of shares nearly repurchased REPURCHASES 19.0% MAXIMUM as of June RETURNING 18, shares 2014 repurchased $14.94 TO OUR average under VALUE price loan SHAREHOLDERS Approximately covenants New $27M $30M $135M available repurchase in shares forplan repurchases repurchased approved32 Mar. Dec.2014
Slide 33: Return on Invested Capital
RETURN FY12 above FY13 is anON average FY14 INVESTED ROIC between WACC CAPITAL the beginning Efficient – ROIC allocation andWeighted end ofofthe capital Average respective generating Cost period. of Capital solid Please returns – WACC see The 33 appendix 70% ROIC60% presented for FYadditional 2014 a
Slide 34: Financial Guidance
FINANCIAL 0. information to 0. asFiscal of June Year FISCAL 19,Ending: 2014. YEAR The GUIDANCE Company 2015 Estimate April is notRevenue 30, updating 2015$585M –this From information tocontinuing $600M toGAAP operations the present Earnings FISCAL datePer norShare FIRST does $1.30 itsQUARTER inclusi
Slide 35: Investment Summary
INVESTMENT growing margins integration in market the Bestrange size in SUMMARY class & of market 20%—25% SAP ERP Leading share system, •Margins gains position Strong driving vary in the financial scalability among U.S. quarters firearm performance: & improved market due to Profitable absorption Icon
Slide 36: Investor Relations
INVESTOR RELATIONS WESSON.COM 36 Elizabeth Sharp Vice President Smith & Wesson 2100 Roosevelt Avenue Springfield, MA 01104 Phone: 413 747 3304 Email: lsharp@smith-wesson.com WWW.SMITH-
Slide 37: Appendices
@ Smith &Wesson’ 31
Slide 38: Experienced Officer Leadership
EXPERIENCED OFFICER for publicly20+ Presto years: LEADERSHIP Products 25+ years: Co., public aJAMES traded, multinational DEBNEY global $500 JEFFREY and million private business D.company BUCHANAN, manufacturing consumer PRESIDENT and unitexperience of Alcoa & EXECUTIVE company; in business-to-busin
Slide 39: Key Market Drivers
KEY MARKET DRIVERS “Who’s buying?” Rising percentage of U.S. households owning firearms 39
Slide 40: May 2014 Long Gun NICS Background Checks
MAY 2014800,000 1,000,000 LONG GUN 600,000 NICS 400,000 BACKGROUND 200,000 FYQ1 CHECKS FYQ2 FYQ3 1,400,000 FYQ4 1,200,000 0 Source:May FBI‘14 Total compared NICS Firearms to May ‘13 Background shows a 25.9% Checksdecrease 41 while May ‘14 was a 15.9% decrease over May ‘12.
Slide 41: Pistols vs. Revolvers
PISTOLS edge • Modern vs. REVOLVERS shape • Trigger Pistols pull •and Capacity revolvers • Safety havefeatures differentRevolver attributes, advantages: but pistols•are Simpler preferred to use by•both Easyprofessionals maintenanceand • Reliability consumers 42Pistol advantages: • Ergonomics/comfort
Slide 42: Market Participants
MARKET MSR Glock Springfield PISTOLS Sig Sauer PARTICIPANTS Winchester RIFLES Taurus43 DPMS/Bushmaster Smith Listed & Wesson Alphabetically Smith Mossberg &RIMFIRE Wesson Marlin Smith SEMI Traditions &BLACK Wesson H&KSEMI Smith Walther AUTOMATIC & Wesson Rock River SmithCENTERFIRE Ruger & Wesson Rem
Slide 43: Industry Indicators
INDUSTRY total firearm Exciseto Tax eliminate dealers collection INDICATORS who permit-related must, on manufacturing byNICS law, checks conduct WWW.FBI.GOV/ABOUT-US/CJIS/NICS and sales aother background values ADJUSTED • NSSF check translates NICS on every WWW.NSSF.ORG into firearm • Lagging • NICS
Slide 44: WACC Discrete Assumptions
WACC 1.74 38.38% discrete 1.25 ASSUMPTIONS 36.68% items 1.68Note: 1.67 34.67% 1.48 Smith*—Market Size Weighted & Wesson premiaAverage risk *research 3.74% premium Cost 3.99% 45 ofand Capital 4.07% size premia FY09 1.88%FY10 are 1.85% from FY11 1.87% Ibbotson® FY12 20-yr FY13 SBBI® risk FY14 freeMark
Slide 45: A Dynamic Regulatory Environment
A DYNAMIC REGULATORY microstamping requirement for pistols ENVIRONMENT • Flawed technology A solid history • Restricts of making rightsfirearms of law-abiding that meet citizens diverse Ourstate grandfathered requirements, M&P providing Shield pistols consumers remain withavailable a choicefor Wesal
Slide 46: Thank You
THANK YOU
Smith & Wesson Holding — Investor Presentation (June 2014) on 6ix