Smith & Wesson Brands, Inc. Reports Second Quarter Fiscal 2025 Financial Results

About this update from Smith & Wesson Brands, Inc.

Q2 Net Sales of $129.7 Million ; Sequential Increase of 46.8% Q2 Gross Margin of 26.6%; Non-GAAP Gross Margin of 27.1% Q2 EPS of $0.09 /Share; Q2 Adjusted EPS of $0.11 /Share Q2 Adjusted EBITDAS Margin of 14.3% Maryville, Tennessee --( Newsfile Corp. - December 5, 2024 ) - Smith & Wesson Brands, Inc. (NASDAQ: SWBI) , a U.S. -based leader in firearm manufacturing and design, today announced financial results for the second quarter of fiscal 2025, ended October 31, 2024 . Second Quarter Fiscal 2025 Financial Highlights Net sales were $129.7 million , an increase of $4.7 million , or 3.8%, over the comparable quarter last year and $41.3 million , or 46.8%, over the prior quarter. Gross margin was 26.6% compared with 25.4% in the comparable quarter last year. GAAP net income was $4.1 million , or $0.09 per diluted share, compared with $2.5 million , or $0.05 per diluted share, for the comparable quarter last year. Non-GAAP net income was $4.8 million , or $0.11 per diluted share, compared with $6.5 million , or $0.14 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the relocation and an accrued legal settlement. For a detailed reconciliation, see the schedules that follow in this release. Non-GAAP Adjusted EBITDAS was $18.5 million , or 14.3% of net sales, compared with $19.3 million , or 15.5% of net sales, for the comparable quarter last year. Mark Smith , President and Chief Executive Officer, commented, "Second quarter results came in below our expectations as overall demand for firearms normalized late in the quarter. We believe that the primary driver of the demand pressure continued to be inflation. The consumer cautiousness with discretionary spend that we observed in recent quarters was more pronounced during the second quarter than we anticipated. Despite these headwinds, we continued to outperform the market and believe we gained share, led by our best-in-class innovation - with new products representing 44% of our sales in the period. We are well positioned to navigate this challenging demand environment, as we have many times before. By remaining focused on executing against our flexible manufacturing model, we expect to preserve profitability and a strong balance sheet. Additionally, we expect to maintain and gain share through innovation." Deana McPherson , Executive Vice President and Chief Financial Officer, commented, "Net sales for our second quarter were nearly 4% above the prior year comparable quarter on the strength of our new Bodyguard 380 pistol and lever action rifles. Based on the softer demand trends we have seen across the industry in recent months, we have reduced our expectations for the second half of fiscal 2025, and for our third quarter, we expect our top line to be approximately 10-15% lower than fiscal 2024. During the quarter, our Board authorized a new $50 million share repurchase authorization and we signed a new unsecured $175 million line of credit, which increased our total available borrowings by $75 million and extended the maturity to October 2029 . 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 December 19, 2024 with payment to be made on January 2, 2025 ." Conference Call and Webcast The company will host a conference call and webcast on December 5, 2024 to discuss its second 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. The conference call audio webcast can also be accessed live 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) relocation expense, and (viii) 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 manufacturing services including forging, machining, and precision plastic injection molding services. 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 are well positioned to navigate a challenging demand environment; (ii) by remaining focused on executing against our flexible manufacturing model, we expect to preserve profitability and a strong balance sheet; (iii) we expect to maintain and gain share through innovation; and (iv) based on the softer demand trends we have seen across the industry in recent months, we have reduced our expectations for the second half of fiscal 2025, and for our third quarter, we expect our top line to be approximately 10-15% lower than 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: [email protected] (413) 747-3448 SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS As of: October 31, 2024 April 30, 2024 (In thousands, except par value and share data) ASSETS Current assets: Cash and cash equivalents $ 39,093 $ 60,839 Accounts receivable, net of allowances for credit losses of $5 on October 31, 2024 and $0 on April 30, 2024 52,707 59,071 Inventories 196,035 160,500 Prepaid expenses and other current assets 10,112 4,973 Income tax receivable 8,120 2,495 Total current assets 306,067 287,878 Property, plant, and equipment, net 244,452 252,633 Intangibles, net 2,523 2,598 Goodwill 19,024 19,024 Deferred income taxes 7,249 7,249 Other assets 8,128 8,614 Total assets $ 587,443 $ 577,996 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 31,627 $ 41,831 Accrued expenses and deferred revenue 29,979 26,811 Accrued payroll and incentives 13,198 17,147 Accrued profit sharing 892 9,098 Accrued warranty 1,485 1,813 Total current liabilities 77,181 96,700 Notes and loans payable 98,994 39,880 Finance lease payable, net of current portion 34,578 35,404 Other non-current liabilities 7,625 7,852 Total liabilities 218,378 179,836 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued or outstanding - - Common stock, $0.001 par value, 100,000,000 shares authorized, 75,677,848 issued and 44,219,627 shares outstanding on October 31, 2024 and 75,395,490 shares issued and 45,561,569 shares outstanding on April 30, 2024 76 75 Additional paid-in capital 293,362 289,994 Retained earnings 531,000 540,660 Accumulated other comprehensive income 73 73 Treasury stock, at cost (31,458,221 shares on October 31, 2024 and 29,833,921 shares on April 30, 2024 ) (455,446 ) (432,642 ) Total stockholders' equity 369,065 398,160 Total liabilities and stockholders' equity $ 587,443 $ 577,996 SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended October 31 , For the Six Months Ended October 31 , 2024 2023 2024 2023 (In thousands, except per share data) Net sales $ 129,679 $ 124,958 $ 218,013 $ 239,201 Cost of sales 95,133 93,192 159,276 177,034 Gross profit 34,546 31,766 58,737 62,167 Operating expenses: Research and development 2,221 1,724 4,736 3,522 Selling, marketing, and distribution 9,574 10,952 19,411 20,993 General and administrative 15,779 15,322 29,480 29,536 Total operating expenses 27,574 27,998 53,627 54,051 Operating income 6,972 3,768 5,110 8,116 Other (expense)/income, net: Other (expense)/income, net (5 ) 141 (11 ) 188 Interest expense, net (1,419 ) (646 ) (2,152 ) (492 ) Total other expense, net (1,424 ) (505 ) (2,163 ) (304 ) Income from operations before income taxes 5,548 3,263 2,947 7,812 Income tax expense 1,414 765 921 2,196 Net income $ 4,134 $ 2,498 $ 2,026 $ 5,616 Net income per share: Basic - net income $ 0.09 $ 0.05 $ 0.05 $ 0.12 Diluted - net income $ 0.09 $ 0.05 $ 0.04 $ 0.12 Weighted average number of common shares outstanding: Basic 44,523 45,977 44,922 46,042 Diluted 44,935 46,361 45,404 46,458 SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended October 31 , 2024 2023 (In thousands) Cash flows from operating activities: Net income $ 2,026 $ 5,616 Adjustments to reconcile net income to net cash (used in)/provided by operating activities: Depreciation and amortization 16,261 17,327 (Gain)/loss on sale/disposition of assets (139 ) 682 Provision for losses/(recoveries) on notes and accounts receivable - (1 ) Stock-based compensation expense 3,722 2,759 Changes in operating assets and liabilities: Accounts receivable 6,364 (4,619 ) Inventories (35,535 ) 13,827 Prepaid expenses and other current assets (5,139 ) (4,953 ) Income taxes (5,625 ) (5,178 ) Accounts payable (10,135 ) 14,682 Accrued payroll and incentives (3,949 ) 1,324 Accrued profit sharing (8,206 ) (6,699 ) Accrued expenses and deferred revenue 2,212 2,859 Accrued warranty (328 ) (92 ) Other assets 486 397 Other non-current liabilities (227 ) (175 ) Net cash (used in)/provided by operating activities (38,212 ) 37,756 Cash flows from investing activities: Payments to acquire patents and software (112 ) (125 ) Proceeds from sale of property and equipment 237 45 Payments to acquire property and equipment (8,004 ) (66,983 ) Net cash used in investing activities (7,879 ) (67,063 ) Cash flows from financing activities: Proceeds from loans and notes payable 60,000 50,000 Cash paid for debt issuance costs (941 ) - Payments on finance lease obligation (89 ) (681 ) Payments on notes and loans payable - (10,000 ) Payments to acquire treasury stock (22,620 ) (8,212 ) Dividend distribution (11,652 ) (11,080 ) Proceeds to acquire common stock from employee stock purchase plan 749 722 Payment of employee withholding tax related to restricted stock units (1,102 ) (806 ) Net cash provided by financing activities 24,345 19,943 Net decrease in cash and cash equivalents (21,746 ) (9,364 ) Cash and cash equivalents, beginning of period 60,839 53,556 Cash and cash equivalents, end of period $ 39,093 $ 44,192 Supplemental disclosure of cash flow information Cash paid for: Interest, net of amounts capitalized $ 2,353 $ 1,725 Income taxes $ 6,785 $ 7,353 SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (Dollars in thousands, except per share data) (Unaudited) For the Three Months Ended For the Six Months Ended October 31, 2024 October 31, 2023 October 31, 2024 October 31, 2023 $ % of Sales $ % of Sales $ % of Sales $ % of Sales GAAP net sales $ 129,679 100.0% $ 124,958 100.0% $ 218,013 100.0% $ 239,201 100.0% Relocation (2,554) -2.0% - 0.0% (4,213 ) -1.9% - 0.0% Settlement - 0.0% - 0.0% 70 0.0% - 0.0% Non-GAAP net sales $ 127,125 98.0% $ 124,958 100.0% $ 213,870 98.1% $ 239,201 100.0% GAAP gross profit $ 34,546 26.6% $ 31,766 25.4% $ 58,737 26.9% $ 62,167 26.0% Relocation expenses 552 0.4% 409 0.3% 1,734 0.8% 1,312 0.5% Settlement 70 0.0% 3,200 2.6% 70 0.0% 3,200 1.3% Non-GAAP gross profit $ 35,168 27.1% $ 35,375 28.3% $ 60,541 27.8% $ 66,679 27.9% GAAP operating expenses $ 27,574 21.3% $ 27,998 22.4% $ 53,627 24.6% $ 54,051 22.6% Spin related stock-based compensation - 0.0% (3 ) 0.0% - 0.0% (7 ) 0.0% Relocation expenses (312) -0.2% (1,652 ) -1.3% (437 ) -0.2% (4,661 ) -1.9% Non-GAAP operating expenses $ 27,262 21.0% $ 26,343 21.1% $ 53,190 24.4% $ 49,383 20.6% GAAP operating income $ 6,972 5.4% $ 3,768 3.0% $ 5,110 2.3% $ 8,116 3.4% Settlement 70 0.0% 3,200 2.6% 70 0.0% 3,200 1.3% Spin related stock-based compensation - 0.0% 3 0.0% - 0.0% 7 0.0% Relocation expenses 864 0.7% 2,061 1.6% 2,171 1.0% 5,973 2.5% Non-GAAP operating income $ 7,906 6.1% $ 9,032 7.2% $ 7,351 3.4% $ 17,296 7.2% GAAP net income $ 4,134 3.2% $ 2,498 2.0% $ 2,026 0.9% $ 5,616 2.3% Settlement 70 0.0% 3,200 2.6% 70 0.0% 3,200 1.3% Spin related stock-based compensation - 0.0% 3 0.0% - 0.0% 7 0.0% Relocation expenses 864 0.7% 2,061 1.6% 2,171 1.0% 5,973 2.5% Tax effect of non-GAAP adjustments (238) -0.2% (1,234 ) -1.0% (700 ) -0.3% (2,580 ) -1.1% Non-GAAP net income $ 4,830 3.7% $ 6,528 5.2% $ 3,567 1.6% $ 12,216 5.1% GAAP net income per share - diluted $ 0.09 $ 0.05 $ 0.04 $ 0.12 Settlement - 0.07 - 0.07 Spin related stock-based compensation - - - - Relocation expenses 0.02 0.04 0.05 0.13 Tax effect of non-GAAP adjustments (0.01) (0.03 ) (0.02 ) (0.06 ) Non-GAAP net income per share - diluted $ 0.11 (a) $ 0.14 (a) $ 0.08 (a) $ 0.26 (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 Six Months Ended October 31 , 2024 October 31 , 2023 October 31 , 2024 October 31 , 2023 GAAP net income $ 4,134 $ 2,498 $ 2,026 $ 5,616 Interest expense 2,081 1,233 3,527 1,788 Income tax expense 1,414 765 921 2,196 Depreciation and amortization 8,181 7,972 16,206 17,203 Stock-based compensation expense 1,869 1,484 3,722 2,759 Settlement 70 3,200 70 3,200 Relocation expense 738 2,195 1,913 4,113 Non-GAAP Adjusted EBITDAS $ 18,487 $ 19,347 $ 28,385 $ 36,875 Non-GAAP Adjusted EBITDAS Margin 14.3% 15.5% 13.0% 15.4% SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (In thousands) (Unaudited) For the Three Months Ended For the Six Months Ended October 31 , 2024 October 31 , 2023 October 31 , 2024 October 31 , 2023 Net cash (used in)/provided by operating activities $ (7,397 ) $ (2,874 ) $ (38,212 ) $ 37,756 Payments to acquire property and equipment (3,302 ) (34,926 ) (8,004 ) (66,983 ) Free cash flow $ (10,699 ) $ (37,800 ) $ (46,216 ) $ (29,227 ) To view the source version of this press release, please visit https://www.newsfilecorp.com/release/232540 SOURCE Smith & Wesson Brands, Inc

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