Smith & Wesson Brands, Inc. Reports Third Quarter Fiscal 2024 Financial Results

About this update from Smith & Wesson Brands, Inc.

Q3 Net Sales of $137.5 Million Q3 Gross Margin of 28.7%; Non-GAAP Gross Margin of 29.1% Q3 EPS of $0.17 /Share; Q3 Adjusted EPS of $0.19 /Share Q3 Adjusted EBITDAS Margin of 15.6% Maryville, Tennessee --( Newsfile Corp. - March 7, 2024 ) - Smith & Wesson Brands, Inc. (NASDAQ: SWBI) , a U.S. -based leader in firearm manufacturing and design, today announced financial results for the third quarter of fiscal 2024, ended January 31, 2024 . Financial Highlights Net sales were $137.5 million , an increase of $8.4 million , or 6.5%, over the comparable quarter last year. Gross margin was 28.7% compared with 32.4% in the comparable quarter last year. GAAP net income was $7.9 million , or $0.17 per diluted share, compared with $11.1 million , or $0.24 per diluted share, for the comparable quarter last year. Non-GAAP net income was $8.7 million , or $0.19 per diluted share, compared with $11.6 million , or $0.25 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the move of our headquarters and significant elements of our operations to a new facility in Maryville, Tennessee , or the Relocation, and other costs. For a detailed reconciliation, see the schedules that follow in this release. Non-GAAP Adjusted EBITDAS was $21.4 million , or 15.6% of net sales, compared with $25.1 million , or 19.5% of net sales, for the comparable quarter last year. Mark Smith , President and Chief Executive Officer, commented, "Our team delivered another strong quarter on both the top and bottom line. We believe we gained market share as our shipments outpaced the overall firearm market, reflecting the continuing robust demand for our best-in-class, innovative new products and sustained momentum in our core product portfolio. We continue to expect the firearm market to experience healthy demand through the 2024 election cycle. With our deep pipeline of new products, leading brand, new state-of-the-art facility in Tennessee , strong balance sheet, and most importantly, world-class dedicated employees, we are well positioned to continue delivering value for our stockholders." Deana McPherson , Executive Vice President and Chief Financial Officer, commented, "Net sales for our third quarter were 6.5% above the prior year comparable quarter. During the quarter, inventory in the distribution channel declined from October levels, in terms of actual units and weeks of inventory, indicating strong sell through of our products at retail. Cash generated by operations was $25.4 million , $18.5 million better than last year, primarily due to receivables remaining relatively flat to last quarter while inventory declined by $9.8 million . We repurchased nearly 71,000 shares during the third quarter, utilizing $916,000 of our $50 million authorization, and paid $5.5 million in dividends. Consistent with our capital allocation strategy, our board of directors has authorized a $0.12 per share quarterly dividend, which will be paid to stockholders of record on March 21, 2024 with payment to be made on April 4, 2024 ." Conference Call and Webcast The company will host a conference call and webcast on March 7, 2024 to discuss its third quarter fiscal 2024 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 continue to expect the firearm market to experience healthy demand through the 2024 election cycle and (ii) with our deep pipeline of new products, leading brand, new state-of-the-art facility in Tennessee , strong balance sheet, and most importantly, world-class dedicated employees, we are well positioned to continue delivering value for our stockholders. 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 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, 2023 . Contact: [email protected] (413) 747-3448 SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS As of: January 31, 2024 April 30, 2023 (In thousands, except par value and share data) ASSETS Current assets: Cash and cash equivalents $ 47,367 $ 53,556 Accounts receivable, net of allowances for credit losses of $0 on January 31, 2024 and $23 on April 30, 2023 60,647 55,153 Inventories 153,529 177,118 Prepaid expenses and other current assets 9,020 4,917 Income tax receivable 5,613 1,176 Total current assets 276,176 291,920 Property, plant, and equipment, net 256,830 210,330 Intangibles, net 2,670 3,588 Goodwill 19,024 19,024 Deferred income taxes 8,085 8,085 Other assets 7,781 8,347 Total assets $ 570,566 $ 541,294 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,141 $ 36,795 Accrued expenses and deferred revenue 24,333 20,149 Accrued payroll and incentives 19,897 18,565 Accrued income taxes 190 1,831 Accrued profit sharing 3,473 8,203 Accrued warranty 2,110 1,670 Total current liabilities 86,144 87,213 Notes and loans payable, net of current portion 64,858 24,790 Finance lease payable, net of current portion 35,809 36,961 Other non-current liabilities 7,324 7,707 Total liabilities 194,135 156,671 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, 75,325,789 shares issued and 45,568,550 shares outstanding on January 31, 2024 and 75,029,300 shares issued and 45,988,930 shares outstanding on April 30, 2023 75 75 Additional paid-in capital 287,827 283,666 Retained earnings 520,050 523,184 Accumulated other comprehensive income 73 73 Treasury stock, at cost (29,757,239 shares on January 31, 2024 and 29,040,370 shares on April 30, 2023 ) (431,594 ) (422,375 ) Total stockholders' equity 376,431 384,623 Total liabilities and stockholders' equity $ 570,566 $ 541,294 SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended January 31 , For the Nine Months Ended January 31 , 2024 2023 2024 2023 (In thousands, except per share data) Net sales $ 137,484 $ 129,036 $ 376,686 $ 334,465 Cost of sales 98,060 87,195 275,094 221,890 Gross profit 39,424 41,841 101,592 112,575 Operating expenses: Research and development 1,969 2,133 5,492 5,675 Selling, marketing, and distribution 10,108 9,996 31,101 27,454 General and administrative 16,065 15,576 45,599 48,867 Total operating expenses 28,142 27,705 82,192 81,996 Operating income 11,282 14,136 19,400 30,579 Other income/(expense), net: Other income(expense), net (11 ) 840 176 2,304 Interest (expense)/income, net (955 ) (508 ) (1,448 ) (1,361 ) Total other (expense)/income, net (966 ) 332 (1,272 ) 943 Income from operations before income taxes 10,316 14,468 18,128 31,522 Income tax expense 2,434 3,389 4,629 7,483 Net income $ 7,882 $ 11,079 $ 13,499 $ 24,039 Net income per share: Basic - net income $ 0.17 $ 0.24 $ 0.29 $ 0.52 Diluted - net income $ 0.17 $ 0.24 $ 0.29 $ 0.52 Weighted average number of common shares outstanding: Basic 45,618 45,897 45,901 45,817 Diluted 46,028 46,166 46,315 46,133 SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended January 31 , 2024 2023 (In thousands) Cash flows from operating activities: Net income $ 13,499 $ 24,039 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Depreciation and amortization 24,291 21,795 Loss/(gain) on sale/disposition of assets 785 (43 ) Provision for recoveries on notes and accounts receivable (23 ) (1 ) Stock-based compensation expense 4,264 3,859 Changes in operating assets and liabilities: Accounts receivable (5,471 ) 4,444 Inventories 23,589 (56,767 ) Prepaid expenses and other current assets (4,103 ) (384 ) Income taxes (6,079 ) (8,220 ) Accounts payable 11,230 134 Accrued payroll and incentives 1,332 1,073 Accrued profit sharing (4,730 ) (5,737 ) Accrued expenses and deferred revenue 3,917 (4,078 ) Accrued warranty 440 (156 ) Other assets 565 1,158 Other non-current liabilities (383 ) (2,364 ) Net cash provided by/(used in) operating activities 63,123 (21,248 ) Cash flows from investing activities: Payments to acquire patents and software (164 ) (251 ) Proceeds from sale of property and equipment 2,877 85 Payments to acquire property and equipment (85,188 ) (64,586 ) Net cash used in investing activities (82,475 ) (64,752 ) Cash flows from financing activities: Proceeds from loans and notes payable 50,000 25,000 Payments on notes and loans payable (10,000 ) (231 ) Payments on finance lease obligation (1,049 ) (856 ) Payments to acquire treasury stock (9,128 ) - Dividend distribution (16,557 ) (13,744 ) Proceeds to acquire common stock from employee stock purchase plan 722 753 Payment of employee withholding tax related to restricted stock units (825 ) (1,054 ) Net cash provided by financing activities 13,163 9,868 Net decrease in cash and cash equivalents (6,189 ) (76,132 ) Cash and cash equivalents, beginning of period 53,556 120,728 Cash and cash equivalents, end of period $ 47,367 $ 44,596 Supplemental disclosure of cash flow information Cash paid for: Interest, net of amounts capitalized $ 3,317 $ 1,743 Income taxes $ 10,687 $ 15,775 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 Nine Months Ended January 31, 2024 January 31, 2023 January 31, 2024 January 31, 2023 $ % of Sales $ % of Sales $ % of Sales $ % of Sales GAAP gross profit $ 39,424 28.7% $ 41,841 32.4% $ 101,592 27.0% $ 112,575 33.7% Relocation expenses 642 0.5% 305 0.2% 1,954 0.5% 3,285 1.0% Settlement - 0.0% - 0.0% 3,200 1% - 0.0% Non-GAAP gross profit $ 40,066 29.1% $ 42,146 32.7% $ 106,746 28.3% $ 115,860 34.6% GAAP operating expenses $ 28,142 20.5% $ 27,705 21.5% $ 82,192 21.8% $ 81,996 24.5% Spin related stock-based compensation (3 ) 0.0% (26 ) 0.0% (10 ) 0.0% (79 ) 0.0% Relocation expenses (431 ) -0.3% (321 ) -0.2% (5,092 ) -1.4% (2,649 ) -0.8% Non-GAAP operating expenses $ 27,708 20.2% $ 27,358 21.2% $ 77,090 20.5% $ 79,268 23.7% GAAP operating income $ 11,282 8.2% $ 14,136 11.0% $ 19,400 5.2% $ 30,579 9.1% Settlement - 0.0% - 0.0% 3,200 - - 0.0% Spin related stock-based compensation 3 0.0% 26 0.0% 10 0.0% 79 0.0% Relocation expenses 1,073 0.8% 626 0.5% 7,046 1.9% 5,934 1.8% Non-GAAP operating income $ 12,358 9.0% $ 14,788 11.5% $ 29,656 7.9% $ 36,592 10.9% GAAP net income $ 7,882 5.7% $ 11,079 8.6% $ 13,499 3.6% $ 24,039 7.2% Settlement - 0.0% - 0.0% 3,200 0.8% - 0.0% Spin related stock-based compensation 3 0.0% 26 0.0% 10 0.0% 79 0.0% Relocation expenses 1,073 0.8% 626 0.5% 7,046 1.9% 5,934 1.8% Tax effect of non-GAAP adjustments (254 ) -0.2% (153 ) -0.1% (2,446 ) -0.6% (1,425 ) -0.4% Non-GAAP net income $ 8,704 6.3% $ 11,578 9.0% $ 21,309 5.7% $ 28,627 8.6% GAAP net income per share - diluted $ 0.17 $ 0.24 $ 0.29 $ 0.52 Settlement - - 0.07 - Relocation expenses 0.02 0.01 0.15 0.13 Tax effect of non-GAAP adjustments (0.01 ) - (0.05 ) (0.03 ) Non-GAAP net income per share - diluted $ 0.19 (a) $ 0.25 $ 0.46 $ 0.62 (a) Non-GAAP net income per share does not foot due to rounding. SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP INCOME FROM OPERATIONS TO NON-GAAP ADJUSTED EBITDAS (In thousands) (Unaudited) For the Three Months Ended For the Nine Months Ended January 31, 2024 January 31, 2023 January 31, 2024 January 31, 2023 GAAP net income $ 7,882 $ 11,079 $ 13,499 $ 24,039 Interest expense 1,615 671 3,404 1,806 Income tax expense 2,434 3,389 4,629 7,483 Depreciation and amortization 6,941 6,669 24,145 21,795 Stock-based compensation expense 1,504 1,253 4,264 3,859 Settlement - - 3,200 - Relocation expense 1,073 2,082 5,186 7,390 Non-GAAP Adjusted EBITDAS $ 21,449 $ 25,143 $ 58,327 $ 66,372 15.6% 19.5% 15.5% 19.8% SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF OPERATING CASH FLOW FROM OPERATIONS TO FREE CASH FLOW (In thousands) (Unaudited) For the Three Months Ended For the Nine Months Ended January 31, 2024 January 31, 2023 January 31, 2024 January 31, 2023 Net cash provided by/(used in) operating activities $ 25,367 $ 6,917 $ 63,123 $ (21,248 ) Net cash used in investing activities (18,205 ) (25,162 ) (85,188 ) (64,752 ) Free cash flow $ 7,162 $ (18,245 ) $ (22,065 ) $ (86,000 ) To view the source version of this press release, please visit https://www.newsfilecorp.com/release/200737 SOURCE Smith & Wesson Brands, Inc

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