Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) Q1 2022 Earnings Conference Call May 31, 2022 5:00 PM ET Company Participants Riley Timmer - Vice President, Investor Relations Jon Barker - Chief Executive Officer Jeff White - Chief Financial Officer Conference Call Participants Mark Smith - Lake Street Capital Markets Ryan Sigdahl - Craig-Hallum Scott Mushkin - R5 Capital Eric Wold - B. Riley Securities Justin Kleber - Robert W. Baird Operator Greetings. Welcome to the Sportsman’s Warehouse First Quarter ...

PART I [Business Overview](index=6&type=section&id=Item%201.%20Business) Sportsman's Warehouse operates 122 outdoor sporting goods stores, focusing on tailored merchandise, competitive pricing, and omni-channel growth [Overview](index=6&type=section&id=Overview) Sportsman's Warehouse operates 122 stores across 29 states, providing outdoor gear and services, and received a **$55.0 million** merger termination fee - Sportsman's Warehouse operates **122 stores** across **29 states**, with the largest outdoor specialty store base in the Western United States and Alaska[19](index=19&type=chunk) - The company received a **$55.0 million** termination fee on December 2, 2021, following the termination of its merger agreement with Great Outdoors Group due to anticipated FTC clearance issues[20](index=20&type=chunk) [Our Competitive Strengths](index=6&type=section&id=Our%20Competitive%20Strengths) The company's strengths include a differentiated shopping experience, comprehensive local merchandise, flexible real estate, low operating costs, and growth opportunities - The company offers a differentiated shopping experience through knowledgeable staff, in-store events, and a top-tier e-commerce platform with buy-online-pickup-in-store options[22](index=22&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - Merchandise strategy includes over **24,000 SKUs** per store, tailored to local conditions, with consumables accounting for **39% of unit sales** and **19% of dollar sales** in fiscal year 2021, driving repeat traffic[28](index=28&type=chunk)[67](index=67&type=chunk) - The flexible store model (**7,500 to 65,000 sq ft**) allows for profitable expansion into diverse markets, targeting over **50% pre-tax return on invested capital** after 18-24 months[27](index=27&type=chunk)[31](index=31&type=chunk) [Our Growth Strategy](index=10&type=section&id=Our%20Growth%20Strategy) Sportsman's Warehouse aims to grow by leveraging its omni-channel presence, enhancing operating margins, strengthening its brand, expanding loyalty programs, and opening new stores - Growth strategies include improving the website user experience, expanding online product assortment, refining buy-online-pickup-in-store capabilities, and growing private label programs[35](index=35&type=chunk)[36](index=36&type=chunk) - The company plans to open **10 new stores** in fiscal year 2022, targeting an annual square footage growth rate of **5% to 10%**[41](index=41&type=chunk) - Strategic acquisitions are considered an additional source of growth, targeting accretive margins, content, private label expansion, or operational efficiencies[42](index=42&type=chunk) [Our Stores](index=12&type=section&id=Our%20Stores) As of January 29, 2022, Sportsman's Warehouse operates 122 stores totaling approximately **4.7 million gross square feet**, with ongoing refurbishments and new 'spike camp' concept stores - As of January 29, 2022, the company operates **122 stores** across **29 states**, with a total of approximately **4.7 million gross square feet**[44](index=44&type=chunk)[251](index=251&type=chunk) - Store design features a 'no frills' warehouse format with wide aisles, high ceilings, visible signage, central checkouts, and 'store-within-a-store' concepts for popular brands[48](index=48&type=chunk) - The company completed refurbishments for **19 stores** in 2021 and plans **7 more** in 2022, alongside testing new **10,000 sq ft** 'spike camp' concept stores for smaller markets[50](index=50&type=chunk)[51](index=51&type=chunk) [Expansion Opportunities and Site Selection](index=16&type=section&id=Expansion%20Opportunities%20and%20Site%20Selection) Sportsman's Warehouse uses a rigorous site selection process, adapting its store model to various markets, and plans to open **10 new stores** in fiscal year 2022 - Site selection criteria include local demographics, traffic patterns, density of hunting and fishing license holders, outdoor recreation activities, store visibility, and attractive lease terms[54](index=54&type=chunk) - New stores require an average net investment of approximately **$2.4 million** (excluding initial inventory) and target a pre-tax return on invested capital of over **50%** after 18-24 months[58](index=58&type=chunk) [Omni-Channel Strategy](index=16&type=section&id=Omni-Channel%20Strategy) The company's omni-channel strategy integrates sportsmans.com as a sales, marketing, and educational platform, leveraging stores for fulfillment and attracting over **100.8 million visits** in fiscal year 2021 - The website, sportsmans.com, serves as a sales channel, marketing platform, and product education resource, offering a substantial amount of additional merchandise assortment beyond physical stores[60](index=60&type=chunk) - Omni-channel services include in-store kiosks for online orders, buy-online-pickup-in-store, and ship-from-store capabilities, which turn all retail stores into distribution centers to decrease fulfillment time and leverage inventory[61](index=61&type=chunk)[63](index=63&type=chunk) - The website received over **100.8 million visits** in fiscal year 2021, demonstrating its position as a leading resource for outdoor products and education[64](index=64&type=chunk) [Our Products and Services](index=18&type=section&id=Our%20Products%20and%20Services) Sportsman's Warehouse offers a broad range of branded and private label products across six departments, with Hunting and Shooting as the largest, and provides value-added technical support services - The company offers a wide selection of branded products from manufacturers like Browning, Carhartt, and Smith & Wesson, alongside private label brands such as Rustic Ridge™, Killik™, and Vital Impact™[66](index=66&type=chunk)[68](index=68&type=chunk) - Consumable goods (e.g., ammunition, bait) accounted for approximately **39.0% of unit sales** and **19.0% of dollar sales** in fiscal year 2021, driving repeat customer visits[67](index=67&type=chunk) - Sales by Department (Fiscal Years 2020-2022) | Department | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Camping | 13.1% | 12.7% | 14.4% | | Apparel | 8.4% | 7.5% | 9.3% | | Fishing | 10.0% | 9.9% | 11.1% | | Footwear | 6.8% | 5.6% | 7.5% | | Hunting and Shooting | 54.2% | 57.6% | 49.1% | | Optics, Electronics, Accessories, and Other | 7.5% | 6.7% | 8.6% | | **Total** | **100.0%** | **100.0%** | **100.0%** | [Loyalty and Co-Branded Credit Card Programs](index=23&type=section&id=Loyalty%20and%20Co-Branded%20Credit%20Card%20Programs) The company's loyalty program has approximately **3.2 million participants**, generating about **45% of revenue**, complemented by co-branded credit cards for customer acquisition and retention - As of January 29, 2022, the loyalty program had approximately **3.2 million participants**, generating about **45% of the company's revenue**[84](index=84&type=chunk) - Customers earn one point for each dollar spent, redeemable for **$1.00 credit** for every **100 points**, with points expiring after **12 months** of dormancy[85](index=85&type=chunk) - The co-branded Explorewards VISA and Credit Cards allow customers to earn points on all daily purchases (VISA) or in-store/online purchases (Credit Card), with Comenity Bank managing credit and bearing losses[86](index=86&type=chunk) [Sourcing and Distribution](index=24&type=section&id=Sourcing%20and%20Distribution) The company sources merchandise from approximately **1,200 vendors** and distributes from a single **507,000 square foot** center in Salt Lake City, leveraging a WMS for omni-channel fulfillment - The company sources merchandise from approximately **1,200 vendors**, with no single vendor accounting for more than **10%** of total merchandise purchased in fiscal year 2021[88](index=88&type=chunk) - All merchandise is distributed from a single **507,000 square foot** distribution center in Salt Lake City, Utah, which also supports direct-to-consumer e-commerce orders[90](index=90&type=chunk) - The HighJump Warehouse Management System (WMS) enables full omni-channel distribution, allowing inventory commingling and efficient case/item picking to optimize space and labor[91](index=91&type=chunk) [Marketing and Advertising](index=26&type=section&id=Marketing%20and%20Advertising) Sportsman's Warehouse targets male customers aged 35-65 with a dual marketing approach combining regional advertising and local grassroots efforts, with total marketing expense at approximately **$20.5 million** in fiscal year 2021 - The primary marketing efforts focus on driving consumers to stores and increasing visit frequency and profitability, targeting a demographic of males aged **35-65** with annual household incomes of **$40,000-$100,000**[94](index=94&type=chunk)[95](index=95&type=chunk) - Marketing employs a two-pronged approach: regional advertising (newspaper inserts, digital, email, radio, national TV) and local grassroots efforts (in-store events, seminars, community outreach, conservation group sponsorships)[95](index=95&type=chunk)[96](index=96&type=chunk)[100](index=100&type=chunk) - Total marketing expense for fiscal year 2021 was approximately **$20.5 million**[95](index=95&type=chunk) [Information Technology](index=26&type=section&id=Information%20Technology) The company relies on robust and scalable IT systems for supply chain, merchandising, POS, WMS, and e-commerce, with enhanced reporting tools providing real-time KPIs for comprehensive business monitoring - Business-critical IT systems include supply chain, merchandise, point-of-sale (POS), Warehouse Management System (WMS), e-commerce, loss prevention, and financial/payroll[98](index=98&type=chunk) - The IT infrastructure is robust and scalable, built on a private WAN with redundant wireless backup, ensuring system availability and quick integration of new stores[98](index=98&type=chunk)[99](index=99&type=chunk) - Enhanced reporting tools provide management with real-time Key Performance Indicators (KPIs) at company, store, department, and category levels, facilitating comprehensive business performance monitoring[101](index=101&type=chunk)[102](index=102&type=chunk) [Intellectual Property](index=28&type=section&id=Intellectual%20Property) The company owns valuable registered and unregistered trademarks and service marks, including 'Sportsman's Warehouse®' and private label brands, which it intends to maintain - Key registered trademarks and service marks include Sportsman's Warehouse®, Sportsman's Warehouse America's Premier Outfitter®, Lost Creek®, Rustic Ridge™, Killik™, and Vital Impact™[104](index=104&type=chunk) - The company also owns numerous domain names, including www.sportsmans.com, and believes its trademarks are valid and valuable[104](index=104&type=chunk) [Our Market and Competition](index=28&type=section&id=Our%20Market%20and%20Competition) Sportsman's Warehouse operates in the large, growing, and fragmented U.S. outdoor activities market, estimated at over **$70 billion** annually, competing on product selection, value, and service - The U.S. outdoor activities and sporting goods market is estimated at over **$70 billion** annually, driven by new product introductions and resilient consumer demand[106](index=106&type=chunk)[107](index=107&type=chunk) - Growth in the outdoor industry accelerated in 2020 and 2021 due to COVID-19, with increased participation in fishing and wildlife recreation, and a rise in first-time firearm buyers[108](index=108&type=chunk) - The market is highly fragmented, with small independent retailers comprising approximately **65%** of the outdoor specialty retail product market, presenting an opportunity for market share expansion[119](index=119&type=chunk)[120](index=120&type=chunk) [Seasonality](index=32&type=section&id=Seasonality) The company experiences moderate seasonal fluctuations, with higher net sales in the third and fourth fiscal quarters due to holiday spending and hunting seasons, leading to increased expenses - Net sales are moderately higher in the third and fourth fiscal quarters, averaging **26.8%** and **28.9%** of annual net sales, respectively, over the last three fiscal years[122](index=122&type=chunk) - Increased expenses are incurred in the third and fourth quarters due to higher purchase volumes and increased staffing[122](index=122&type=chunk) [Regulation and Compliance](index=32&type=section&id=Regulation%20and%20Compliance) Sportsman's Warehouse operates in a highly regulated industry, subject to federal, state, and local laws concerning firearms and ammunition sales, dedicating significant resources to compliance - The company is subject to extensive federal, state, and local regulations, particularly concerning the sale of firearms and ammunition, requiring Federal Firearms Licenses (FFLs) for all locations[124](index=124&type=chunk)[125](index=125&type=chunk) - Compliance includes performing pre-transfer background checks using NICS or comparable state systems, recording transactions on ATF Form 4473, and adhering to age, residency, and waiting period restrictions[126](index=126&type=chunk)[127](index=127&type=chunk) - The company dedicates significant resources to compliance, employing internal inspections and software tools to prevent the sale of jurisdictionally-restricted items, and has never had a license revoked since 1986[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [Human Capital](index=36&type=section&id=Human%20Capital) As of January 29, 2022, Sportsman's Warehouse had approximately **7,700 employees**, none unionized, prioritizing retention, growth, and development through competitive compensation and extensive training - As of January 29, 2022, the company had approximately **7,700 employees** (**3,300 full-time**, **4,400 part-time**), with no employees represented by a labor union[143](index=143&type=chunk) - The company offers competitive compensation, benefits, and an industry-best employee discount program, fostering a culture where employees are often outdoor enthusiasts themselves[144](index=144&type=chunk) - Extensive training programs, including **20 hours of initial sales training** and **16 hours annually**, focus on product knowledge, sales techniques, and compliance, supported by a dedicated training room for live and recorded sessions[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Available Information](index=38&type=section&id=Available%20Information) The company's Annual, Quarterly, and Current Reports (10-K, 10-Q, 8-K) are available free of charge on its website and the SEC's website - Annual, Quarterly, and Current Reports (10-K, 10-Q, 8-K) are available on the company's website (www.sportsmans.com) and the SEC's website (www.sec.gov)[150](index=150&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.Risk%20Factors) The company faces significant risks from government regulations on firearms, economic downturns, intense competition, supply chain disruptions, and challenges in business strategy and IT systems [Risks Related to the Firearms Business](index=38&type=section&id=Risks%20Related%20to%20the%20Firearms%20Business) The firearms business faces significant risks from evolving government regulations, potential litigation, and reputational damage, which could decrease demand and increase operating expenses - Current and future government regulations on firearms and ammunition, such as increased minimum age requirements (e.g., Washington, Florida), waiting periods, and restrictions on certain products, could negatively impact demand and increase compliance costs[153](index=153&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - The company is exposed to litigation risks, including product liability lawsuits for firearms/ammunition and claims related to background check performance, which could lead to significant financial losses and reputational harm[158](index=158&type=chunk) - The sale of firearm-related products also presents reputational risks and potential negative publicity that could affect consumer perception and willingness to shop with the company[161](index=161&type=chunk) [Risks Related to Our Retail Operations](index=42&type=section&id=Risks%20Related%20to%20Our%20Retail%20Operations) Retail operations are vulnerable to COVID-19 impacts, economic downturns, regional factors, intense competition, supply chain disruptions, and increased freight costs, affecting sales and profitability - The COVID-19 pandemic has caused supply chain interruptions and shifts in consumer behavior, with future impacts remaining uncertain, potentially leading to decreased sales if demand subsides[163](index=163&type=chunk)[164](index=164&type=chunk)[258](index=258&type=chunk) - The company's retail-based model is highly sensitive to general economic conditions, with potential declines in consumer spending due to factors like inflation, job losses, and reduced access to credit, impacting sales and profitability[165](index=165&type=chunk) - Reliance on a single distribution center in Salt Lake City, Utah, makes the company vulnerable to natural disasters or disruptions, which could impair merchandise delivery to stores and customers[175](index=175&type=chunk) - Increased freight costs and ongoing supply chain disruptions from vendors are expected to continue into fiscal year 2022 and beyond, putting pressure on gross profit and margins[176](index=176&type=chunk)[177](index=177&type=chunk) [Risks Related to Our Business Strategy](index=50&type=section&id=Risks%20Related%20to%20Our%20Business%20Strategy) Business strategy risks include challenges in new market expansion, omni-channel development, private label growth (product recalls, IP protection), and strategic acquisitions, all potentially impacting financial results - Expansion into new markets, particularly smaller ones, presents risks including unfamiliarity with local preferences, challenges in site identification, and potential delays in store openings due to various factors[191](index=191&type=chunk)[194](index=194&type=chunk) - Failure to successfully develop and maintain the omni-channel platform, especially given larger competitors and regulatory restrictions on online firearm/ammunition sales, could adversely affect sales and profitability[196](index=196&type=chunk)[197](index=197&type=chunk) - Growing private label brand offerings expose the company to risks such as product recalls, intellectual property protection challenges, and potential adverse effects on vendor relationships[203](index=203&type=chunk)[204](index=204&type=chunk)[206](index=206&type=chunk) [Risks Related to Liquidity and Capital Resources](index=56&type=section&id=Risks%20Related%20to%20Liquidity%20and%20Capital%20Resources) Liquidity risks include dependence on operating cash flows and a **$250.0 million** credit facility, restrictive debt covenants, and rising interest rates (including LIBOR transition), which could impact financial flexibility - The company's operations and expansion depend on adequate capital, with liquidity primarily from operating cash flows and a **$250.0 million** revolving credit facility, which is subject to borrowing base calculations[209](index=209&type=chunk)[210](index=210&type=chunk) - Restrictive covenants in the revolving credit facility limit the company's ability to incur debt, create liens, make investments, and declare dividends, potentially impairing operational flexibility[212](index=212&type=chunk) - An increase in market interest rates or the discontinuation of LIBOR (which affects existing variable-rate debt) could increase interest costs, making financing more expensive and lowering earnings[214](index=214&type=chunk)[216](index=216&type=chunk) [Risks Related to Our Common Stock](index=58&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Provisions in the company's governing documents and Delaware law could deter acquisitions and make management changes difficult, while stock price volatility may lead to investor losses and litigation - Provisions in the company's governing documents and Delaware law, such as a classified board and supermajority voting requirements, could discourage acquisitions and make it harder for stockholders to change management[219](index=219&type=chunk)[220](index=220&type=chunk)[223](index=223&type=chunk) - The price of the common stock is volatile, with fluctuations driven by operating performance, demand for products, regulatory changes (especially firearms), and broader economic conditions, potentially leading to investor losses and litigation[224](index=224&type=chunk)[225](index=225&type=chunk) [General Risks](index=60&type=section&id=General%20Risks) General risks include potential disruptions or breaches of IT systems, failure to protect intellectual property, and increasing ESG expectations, which could lead to reputational damage and additional costs - Material disruptions or breaches of IT systems, including cyber-attacks and data loss, could damage customer relationships, lead to litigation, and negatively impact operations and financial condition[227](index=227&type=chunk)[229](index=229&type=chunk) - Failure to protect intellectual property (trademarks, service marks, copyrights) could diminish brand value, lead to costly litigation, and adversely affect operating results[230](index=230&type=chunk) - Increasing focus on corporate responsibility and ESG matters by investors and stakeholders may impose additional costs and expose the company to reputational damage if it fails to meet evolving standards[233](index=233&type=chunk) [Unresolved Staff Comments](index=63&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC [Properties](index=64&type=section&id=Item%202.%20Properties) Sportsman's Warehouse leases all **122 retail stores** (approximately **4.7 million gross square feet**), its corporate headquarters, and a **507,000 square foot** distribution center - The company leases all **122 retail store locations** across **29 states**, totaling approximately **4.7 million gross square feet**, with lease terms typically ranging from five to fifteen years[237](index=237&type=chunk) - The corporate headquarters (**70,000 sq ft**) is leased until March 31, 2035, and the distribution center (**507,000 sq ft**) is leased until December 31, 2023, with options to extend[235](index=235&type=chunk)[236](index=236&type=chunk) - The distribution center is considered sufficient to support a network of **135 or more stores**[236](index=236&type=chunk) [Legal Proceedings](index=64&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding material legal proceedings is incorporated by reference from Note 16, 'Commitments and Contingencies,' to the Consolidated Financial Statements - Material legal proceedings are detailed in Note 16, 'Commitments and Contingencies,' of the Consolidated Financial Statements[238](index=238&type=chunk) [Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company PART II [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&type=section&id=Item%205.%20Market%20For%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is listed on Nasdaq under 'SPWH,' with **165 holders of record** as of March 8, 2022, and no dividends paid in fiscal years 2021 or 2020 - The company's common stock is listed on the Nasdaq under the symbol **'SPWH'**[4](index=4&type=chunk) - As of March 8, 2022, there were **165 holders of record** of the common stock[241](index=241&type=chunk) - The company did not pay any dividends in fiscal year 2021 or fiscal year 2020 and does not anticipate paying cash dividends in the foreseeable future[242](index=242&type=chunk) - Cumulative Total Stockholder Return ($100 Investment) | Fiscal Years Ended | Jan 28, 2017 | Feb 3, 2018 | Feb 2, 2019 | Feb 1, 2020 | Jan 30, 2021 | Jan 29, 2022 | | :----------------- | :----------- | :---------- | :---------- | :---------- | :----------- | :----------- | | SPWH | $100.00 | $62.23 | $64.89 | $82.13 | $222.05 | $134.85 | | S&P Retail | $100.00 | $139.89 | $150.18 | $179.48 | $252.16 | $265.45 | | Russell 2000 | $100.00 | $112.88 | $109.58 | $117.75 | $151.28 | $143.61 | [Reserved](index=66&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=66&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and results for fiscal years 2021-2019, covering COVID-19 impacts, KPIs, sales, gross profit, expenses, net income, liquidity, and non-GAAP measures [Overview](index=66&type=section&id=Overview) Sportsman's Warehouse operates **122 stores** (approximately **4.7 million gross square feet**), increased square footage by **6.5%** in FY2021, and received a **$55.0 million** merger termination payment - The company operates **122 stores** in **29 states**, with approximately **4.7 million gross square feet**, increasing gross square footage by **6.5%** in fiscal year 2021 through **10 new store openings**[251](index=251&type=chunk) - The merger agreement with Great Outdoors Group was terminated on December 2, 2021, due to anticipated FTC clearance issues, and Sportsman's Warehouse received a **$55.0 million** termination fee[253](index=253&type=chunk) [COVID-19 Pandemic](index=68&type=section&id=COVID-19%20Pandemic) The COVID-19 pandemic significantly increased sales in fiscal years 2020-2021, particularly in firearms and ammunition, but also caused supply chain interruptions and negatively impacted gross margin due to product mix - The company experienced a significant increase in sales during fiscal years 2020 and 2021, particularly in firearms and ammunition, which negatively impacted gross margin due to a shift in product mix[255](index=255&type=chunk)[256](index=256&type=chunk) - Net Sales Growth (FY2019-FY2021) | Period | Net Sales (Millions USD) | Growth Rate | | :----- | :------------------- | :---------- | | FY2019 | $886.4 | - | | FY2020 | $1,451.8 | +63.8% | | FY2021 | $1,506.1 | +3.7% | | FY2019 to FY2021 | - | +69.9% | - Supply chain interruptions and a short supply of qualified employees continue to be challenges, with ammunition demand outpacing supply expected to continue into the first half of fiscal 2022[257](index=257&type=chunk) [Fiscal Year](index=70&type=section&id=Fiscal%20Year) The company operates on a 52/53-week fiscal year, ending on the Saturday closest to January 31, with fiscal years 2021, 2020, and 2019 each comprising 52 weeks - The company uses a 52/53-week fiscal year, ending on the Saturday closest to January 31[260](index=260&type=chunk) - Fiscal years 2021, 2020, and 2019 each comprised **52 weeks**[260](index=260&type=chunk) [How We Assess the Performance of Our Business](index=70&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) The company assesses performance using net sales, same store sales, gross margin, SG&A, income from operations, and Adjusted EBITDA, focusing on growth drivers and margin improvement - Key performance measures include net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations, and Adjusted EBITDA[262](index=262&type=chunk) - Net sales growth is driven by increasing gross square footage (new stores/acquisitions), improving same store sales, increasing customer visits, growing loyalty/credit card programs, and expanding omni-channel capabilities[272](index=272&type=chunk) - Gross margin improvement focuses on shifting product mix to higher-margin items (apparel, footwear), increasing traffic, improving vendor terms, and coordinating pricing strategies[268](index=268&type=chunk) - Adjusted EBITDA is a non-GAAP measure used for business decision-making, evaluating store performance, budgeting, and managing expenditures, excluding items not indicative of ongoing expenses[274](index=274&type=chunk)[335](index=335&type=chunk) [Results of Operations](index=75&type=section&id=Results%20of%20Operations) In FY2021, net sales increased **3.7%** to **$1,506.1 million**, net income grew to **$108.5 million** (boosted by a **$55.0 million** merger termination payment), while FY2020 saw net sales surge **63.8%** to **$1,451.8 million** - Key Financial Performance Metrics (Percentage of Net Sales) | Metric | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | FY2020 (Feb 1, 2020) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Net sales | 100.0% | 100.0% | 100.0% | | Cost of goods sold | 67.4% | 67.2% | 66.5% | | Gross profit | 32.6% | 32.8% | 33.5% | | Selling, general, and administrative expenses | 26.6% | 24.3% | 29.7% | | Income from operations | 6.0% | 8.5% | 3.8% | | Merger termination payment | (3.7)% | - | - | | Interest expense | 0.1% | 0.3% | 0.9% | | Income before income taxes | 9.6% | 8.4% | 2.9% | | Income tax expense | 2.4% | 2.1% | 0.6% | | Net income | 7.2% | 6.3% | 2.3% | | Adjusted EBITDA | 9.1% | 11.3% | 6.7% | - Net Sales and Same Store Sales (FY2021 vs FY2020) | Metric | FY2021 (Jan 29, 2022) | FY2020 (Jan 30, 2021) | Change (YoY) | | :-------------------------------- | :-------------------- | :-------------------- | :----------- | | Net Sales | $1,506.1 million | $1,451.8 million | +3.7% | | Same Store Sales | -2.2% | - | - | | New Store Contribution to Net Sales | $92.6 million | - | - | | Hunting and Shooting Net Sales | -$19.0 million | - | -2.3% | | Firearms Same Store Sales | -12.5% | - | - | | Ammunition Same Store Sales | -13.7% | - | - | - Net Sales and Same Store Sales (FY2020 vs FY2019) | Metric | FY2020 (Jan 30, 2021) | FY2019 (Feb 1, 2020) | Change (YoY) | | :-------------------------------- | :-------------------- | :------------------- | :----------- | | Net Sales | $1,451.8 million | $886.4 million | +63.8% | | Same Store Sales | +48.3% | - | - | | New/Acquired Store Contribution to Net Sales | $155.3 million | - | - | | Hunting and Shooting Net Sales | +$397.1 million | - | +91.1% | | Firearms Net Sales | +$194.8 million | - | +115.5% | | Ammunition Net Sales | +$122.6 million | - | +93.7% | [Seasonality](index=80&type=section&id=Seasonality) The company's net sales and operating results are moderately seasonal, with higher sales in the third and fourth fiscal quarters due to hunting seasons and holiday spending - Net sales are typically higher in the third and fourth fiscal quarters due to hunting season openings and consumer holiday buying patterns[293](index=293&type=chunk) - New retail store openings can lead to a temporary decline in operating profit due to non-recurring pre-opening expenses and higher fixed costs as a percentage of sales[294](index=294&type=chunk) [Liquidity and Capital Resources](index=81&type=section&id=Liquidity%20and%20Capital%20Resources) Primary cash needs are for working capital and capital expenditures, funded by operating cash flows, a **$250.0 million** credit facility, and a **$55.0 million** merger termination payment - Primary cash requirements are for seasonal working capital and capital expenditures for new store openings and acquisitions[298](index=298&type=chunk)[299](index=299&type=chunk) - Capital expenditures are projected between **$48 million** and **$55 million** for fiscal year 2022, primarily for **10 new stores** and existing store refurbishments[300](index=300&type=chunk) - Cash Flows Summary (Thousands USD) | Activity | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | | :------------------------------------ | :-------------------- | :-------------------- | | Cash flows (used in) provided by operating activities | $(21,626) | $238,816 | | Cash flows used in investing activities | $(53,452) | $(26,227) | | Cash provided by (used in) financing activities | $66,571 | $(148,749) | | Cash and cash equivalents at end of period | $57,018 | $65,525 | - As of January 29, 2022, **$77.0 million** was outstanding under the **$250.0 million** revolving credit facility, with **$146.1 million** available for borrowing[308](index=308&type=chunk) - The board authorized a **$75.0 million** share repurchase program from March 31, 2022, to March 31, 2023[303](index=303&type=chunk) [Critical Accounting Policies and Estimates](index=85&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies include revenue recognition (gift cards, loyalty programs), sales returns, inventory valuation (lower of cost or net realizable value), and impairment review of long-lived assets - Revenue is recognized when control of goods is transferred to customers, with gift card and loyalty reward program sales recorded as contract liabilities and recognized upon redemption[318](index=318&type=chunk)[323](index=323&type=chunk) - Sales returns are estimated based on historical experience, with a provision recorded as a reduction in sales and a right-to-return asset for expected resold merchandise[327](index=327&type=chunk) - Inventory is valued at the lower of cost (weighted average method) or net realizable value, with provisions for shrinkage, damaged, obsolete, or slow-moving inventory[328](index=328&type=chunk)[381](index=381&type=chunk) - Long-lived assets are reviewed for impairment when events indicate carrying value may not be recoverable, using estimated future undiscounted net cash flows[329](index=329&type=chunk) [Leases](index=89&type=section&id=Leases) The company adopted ASC 842 on February 3, 2019, recognizing operating lease ROU assets and liabilities, with a **$9.3 million** net adjustment to retained earnings and lease expense recognized straight-line - The company adopted ASC 842 on February 3, 2019, recognizing operating lease ROU assets and liabilities for leases exceeding **12 months**[389](index=389&type=chunk)[390](index=390&type=chunk) - Initial recognition resulted in **$183.0 million** in ROU assets and **$214.0 million** in operating lease liabilities, with a **$9.3 million** net adjustment to retained earnings[390](index=390&type=chunk) - Lease liabilities are calculated using the present value of future payments, discounted by the estimated incremental borrowing rate (IBR)[331](index=331&type=chunk)[393](index=393&type=chunk) [Recent Accounting Pronouncements](index=89&type=section&id=Recent%20Accounting%20Pronouncements) The company is evaluating ASU 2020-04, Reference Rate Reform, which provides optional expedients for contract modifications and hedge accounting to facilitate the transition from LIBOR - The company is evaluating ASU 2020-04, Reference Rate Reform, which offers optional expedients for transitioning from LIBOR to alternative reference rates[429](index=429&type=chunk)[430](index=430&type=chunk) - The standard is currently effective and can be applied prospectively to contract modifications made on or before December 31, 2022[430](index=430&type=chunk) [Non-GAAP Measures](index=89&type=section&id=Non-GAAP%20Measures) Adjusted EBITDA is a non-GAAP measure used by management and investors to evaluate operating performance, excluding non-recurring items, and is reconciled from net income - Adjusted EBITDA is defined as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other non-recurring gains/losses[274](index=274&type=chunk)[335](index=335&type=chunk) - Management uses Adjusted EBITDA and Adjusted EBITDA margin for business decision-making, evaluating store performance, budgeting, and managing expenditures[335](index=335&type=chunk) - Adjusted EBITDA Reconciliation (Thousands USD) | Metric | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | FY2020 (Feb 1, 2020) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Net income | $108,470 | $91,380 | $20,215 | | Interest expense | $1,379 | $3,506 | $7,995 | | Income tax expense (benefit) | $35,769 | $30,080 | $5,254 | | Depreciation and amortization | $26,226 | $21,830 | $19,321 | | Stock-based compensation expense | $3,328 | $3,302 | $2,104 | | Pre-opening expenses | $4,098 | $1,942 | $2,695 | | Hazard pay | — | $6,526 | — | | Acquisition costs | $9,733 | $3,710 | $662 | | Bargain purchase | — | $(2,218) | — | | Legal accrual | — | $2,125 | — | | Store closing write-off | — | $1,039 | — | | Executive transition costs | — | — | $770 | | Retention pay | $2,549 | — | — | | Merger termination payment | $(55,000) | — | — | | **Adjusted EBITDA** | **$136,552** | **$163,222** | **$59,016** | | Net sales | $1,506,072 | $1,451,767 | $886,401 | | Net income margin | 7.2% | 6.3% | 2.3% | | Adjusted EBITDA margin | 9.1% | 11.2% | 6.7% | [Quantitative and Qualitative Disclosures About Market Risk](index=93&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on its floating-rate debt, with a **100 basis point** increase potentially raising annual interest expense by **$0.8 million** - The primary market risk is exposure to changes in interest rates, as the revolving credit facility and term loan have floating rates tied to LIBOR, federal funds rate, and prime rate[344](index=344&type=chunk) - A **100 basis point** increase in interest rates would increase annual interest expense by **$0.8 million**, based on debt outstanding as of January 29, 2022[344](index=344&type=chunk) - The company does not currently use derivative financial instruments for speculative or trading purposes[344](index=344&type=chunk) [Financial Statements and Supplementary Data](index=94&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements, including balance sheets, income statements, stockholders' equity, cash flows, and comprehensive notes, along with independent auditor reports [Report of Independent Registered Public Accounting Firm – Grant Thornton LLP](index=95&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM%20%E2%80%93%20GRANT%20THORNTON%20LLP%20(PCAOB%20ID%20Number%20248)) Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements for fiscal years ended January 29, 2022, and January 30, 2021, and on the effectiveness of internal control over financial reporting - Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements for the periods ended January 29, 2022, and January 30, 2021[348](index=348&type=chunk) - An unqualified opinion was also issued on the effectiveness of the company's internal control over financial reporting as of January 29, 2022[349](index=349&type=chunk) [Report of Independent Registered Public Accounting Firm – KPMG LLP](index=97&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM%20%E2%80%93%20KPMG%20LLP%20(PCAOB%20ID%20Number%20185)) KPMG LLP, the company's auditor from 2002 to 2020, issued an unqualified opinion on the consolidated statement of income, stockholders' equity, and cash flows for the year ended February 1, 2020 - KPMG LLP issued an unqualified opinion on the consolidated financial statements for the year ended February 1, 2020[354](index=354&type=chunk) - KPMG LLP served as the company's auditor from 2002 to 2020[357](index=357&type=chunk) [Consolidated Balance Sheets](index=98&type=section&id=CONSOLIDATED%20FINANCIAL%20STATEMENTS:Consolidated%20Balance%20Sheets) Total assets increased from **$660.8 million** in 2021 to **$840.6 million** in 2022, driven by inventory and property, while total liabilities and stockholders' equity also grew - Consolidated Balance Sheet Highlights (Thousands USD) | Metric | January 29, 2022 | January 30, 2021 | | :-------------------------------- | :--------------- | :--------------- | | Cash and cash equivalents | $57,018 | $65,525 | | Merchandise inventories | $386,560 | $243,434 | | Total current assets | $467,470 | $324,653 | | Total assets | $840,581 | $660,818 | | Accounts payable | $58,916 | $77,441 | | Revolving line of credit | $66,054 | — | | Total current liabilities | $284,406 | $227,428 | | Total liabilities | $526,412 | $456,158 | | Total stockholders' equity | $314,169 | $204,660 | [Consolidated Statements of Income](index=99&type=section&id=CONSOLIDATED%20FINANCIAL%20STATEMENTS:Consolidated%20Statements%20of%20Income) Net sales increased to **$1,506.1 million** in FY2021, with net income significantly growing to **$108.5 million**, partly due to a **$55.0 million** merger termination payment - Consolidated Statements of Income Highlights (Thousands USD) | Metric | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | FY2020 (Feb 1, 2020) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Net sales | $1,506,072 | $1,451,767 | $886,401 | | Gross profit | $490,297 | $476,454 | $296,633 | | Selling, general, and administrative expenses | $399,678 | $353,706 | $263,169 | | Income from operations | $90,619 | $122,748 | $33,464 | | Merger termination payment | $(55,000) | — | — | | Net income | $108,470 | $91,380 | $20,215 | | Diluted EPS | $2.44 | $2.06 | $0.46 | [Consolidated Statements of Stockholders' Equity](index=100&type=section&id=CONSOLIDATED%20FINANCIAL%20STATEMENTS:Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased from **$110.3 million** in FY2020 to **$314.2 million** in FY2022, primarily driven by net income and stock-based compensation - Consolidated Statements of Stockholders' Equity Highlights (Thousands USD) | Metric | Balance at Feb 2, 2019 | Balance at Feb 1, 2020 | Balance at Jan 30, 2021 | Balance at Jan 29, 2022 | | :------------------------------------ | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Common Stock (Amount) | $430 | $433 | $436 | $439 | | Additional paid-in capital | $84,671 | $86,806 | $89,815 | $90,851 | | Retained earnings | $(6,441) | $23,029 | $114,409 | $222,879 | | Total stockholders' equity | $78,660 | $110,268 | $204,660 | $314,169 | [Consolidated Statements of Cash Flows](index=101&type=section&id=CONSOLIDATED%20FINANCIAL%20STATEMENTS:Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$21.6 million** in FY2021 (compared to **$238.8 million** provided in FY2020), primarily due to inventory buildup, with increased borrowings funding financing activities - Consolidated Statements of Cash Flows Highlights (Thousands USD) | Activity | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | FY2020 (Feb 1, 2020) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Net cash (used in) provided by operating activities | $(21,626) | $238,816 | $77,866 | | Net cash used in investing activities | $(53,452) | $(26,227) | $(49,064) | | Net cash provided by (used in) financing activities | $66,571 | $(148,749) | $(28,664) | | Net change in cash and cash equivalents | $(8,507) | $63,840 | $138 | | Cash and cash equivalents at end of period | $57,018 | $65,525 | $1,685 | [Notes to Consolidated Financial Statements](index=103&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on accounting policies, acquisitions, debt, leases, revenue recognition, stock-based compensation, income taxes, commitments, and the terminated merger [(1) Nature of Business](index=103&type=section&id=(1)%20Nature%20of%20Business) Sportsman's Warehouse Holdings, Inc. and its subsidiaries operate retail sporting goods stores, with **122 stores** across **29 states** as of January 29, 2022 - As of January 29, 2022, Sportsman's Warehouse operated **122 retail sporting goods stores** in **29 states**[370](index=370&type=chunk) [(2) Summary of Significant Accounting Policies](index=103&type=section&id=(2)%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines policies for consolidation, fiscal year, estimates, segment reporting, cash, receivables, inventory, property, leases (ASC 842), revenue recognition, sales returns, and recent accounting pronouncements - The company operates as a single operating and reportable segment, with financial information reviewed on a consolidated and individual store/cost center basis[375](index=375&type=chunk) - Inventory is measured at the lower of cost or net realizable value using the weighted average cost method, with write-downs for shrinkage, damage, or obsolescence totaling **$8.4 million** in FY2021[381](index=381&type=chunk) - Revenue is recognized when control of promised goods is transferred to customers, with gift card and loyalty reward program breakage recognized as revenue based on historical redemption patterns (**4.0%** for gift cards, **54%** for loyalty rewards)[396](index=396&type=chunk)[402](index=402&type=chunk) - The company adopted ASC 842 on February 3, 2019, recognizing operating lease ROU assets and liabilities, with a **$9.3 million** net adjustment to retained earnings[390](index=390&type=chunk) [(3) Acquisition of Field & Stream Stores](index=118&type=section&id=(3)%20Acquisition%20of%20Field%20%26%20Stream%20Stores) In FY2020, the company acquired **four Field & Stream stores** for **$6.5 million**, resulting in bargain purchase gains, following the acquisition of **eight stores** for **$28.7 million** in FY2019 - In fiscal year 2020, the company acquired **four Field & Stream stores** from DICK'S Sporting Goods for an aggregate consideration of **$6.5 million**, resulting in bargain purchase gains[431](index=431&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk)[438](index=438&type=chunk) - In fiscal year 2019, **eight Field & Stream stores** were acquired for **$28.7 million**, leading to the recognition of **$1.5 million** in goodwill[444](index=444&type=chunk)[445](index=445&type=chunk) - Pro forma results for the 2020 acquisitions, assuming consummation at the beginning of fiscal year 2019, show adjusted net sales of **$1,464.4 million** and net income of **$91.5 million** for FY2020, and **$909.1 million** and **$19.8 million** for FY2019, respectively[451](index=451&type=chunk)[452](index=452&type=chunk) [(4) Property and Equipment](index=126&type=section&id=(4)%20Property%20and%20Equipment) Property and equipment, net, increased to **$128.3 million** as of January 29, 2022, from **$99.1 million** in 2021, with depreciation expense of **$26.2 million** in fiscal year 2021 - Property and Equipment, Net (Thousands USD) | Category | January 29, 2022 | January 30, 2021 | | :-------------------------------- | :--------------- | :--------------- | | Furniture, fixtures, and equipment | $115,597 | $96,085 | | Leasehold improvements | $143,064 | $112,338 | | Construction in progress | $5,007 | $2,614 | | Total property and equipment, gross | $263,668 | $211,037 | | Less accumulated depreciation and amortization | $(135,364) | $(111,919) | | **Total property and equipment, net** | **$128,304** | **$99,118** | | Depreciation expense (FY) | $26,200 | $21,801 | [(5) Definite Lived Intangible Assets](index=127&type=section&id=(5)%20Definite%20Lived%20Intangible%20Assets) The company's definite-lived intangible assets, including domain names and intellectual property, had a net carrying amount of **$264 thousand** as of January 29, 2022, with **$26 thousand** in amortization expense in FY2021 - Definite Lived Intangible Assets (Thousands USD) | Asset Type | Amortization Period | Gross Carrying Amount (Jan 29, 2022) | Accumulated Amortization (Jan 29, 2022) | Net Carrying Amount (Jan 29, 2022) | | :-------------------- | :------------------ | :----------------------------------- | :-------------------------------------- | :--------------------------------- | | Domain Name | 10 years | $257 | $(78) | $179 | | Intellectual Property | 8 years | $100 | $(15) | $85 | | **Total** | | **$357** | **$(93)** | **$264** | | Amortization expense (FY2021) | | | | $26 | [(6) Leases](index=127&type=section&id=(6)%20Leases) Operating leases have terms up to **15 years**, with ROU assets and liabilities increasing by **$39.4 million** in FY2021, and total lease expense was **$74.9 million** in FY2021 - Operating leases have remaining terms of up to **15 years**, including extension options[455](index=455&type=chunk) - In fiscal year 2021, ROU assets and operating lease liabilities increased by **$39.4 million** due to lease remeasurements and new leases[457](index=457&type=chunk) - Lease Expense and Liabilities (Thousands USD) | Metric | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | FY2020 (Feb 1, 2020) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Total lease expense | $74,870 | $68,012 | $59,846 | | Operating cash flows from operating leases | $(59,502) | $(55,765) | $(49,713) | | Undiscounted cash flows (Jan 29, 2022) | $384,305 | - | - | | Weighted-average remaining lease term (Jan 29, 2022) | 5.83 years | - | - | | Weighted-average discount rate (Jan 29, 2022) | 8.29% | - | - | [(7) Accrued Expenses and Other Liabilities](index=129&type=section&id=(7)%20Accrued%20Expenses%20and%20Other%20Liabilities) Accrued expenses and other liabilities totaled **$109.0 million** as of January 29, 2022, with key components including unearned revenue (**$42.1 million**) and accrued payroll (**$26.3 million**) - Accrued Expenses and Other Liabilities (Thousands USD) | Category | January 29, 2022 | January 30, 2021 | | :-------------------------------- | :--------------- | :--------------- | | Book overdraft | $16,252 | $13,445 | | Unearned revenue | $42,058 | $38,454 | | Accrued payroll and related expenses | $26,309 | $28,453 | | Sales and use tax payable | $8,788 | $7,317 | | Accrued construction costs | $416 | $339 | | Other | $15,189 | $21,048 | | **Total accrued expenses** | **$109,012** | **$109,056** | [(8) Fair Value Measurements](index=131&type=section&id=(8)%20Fair%20Value%20Measurements) As of January 29, 2022, short-term investments (cash and cash equivalents) had a fair value of **$55.0 million**, approximating their carrying value due to short maturities - Fair Value Measurements (Thousands USD) | Asset Type | Measurement Level | Fair Value as of Jan 29, 2022 | Fair Value as of Jan 30, 2021 | | :----------------------- | :---------------- | :---------------------------- | :---------------------------- | | Short-term Investments | Level 1 | $55,000 | — | - Fair value approximates carrying value for short-term investments because maturities are less than three months[464](index=464&type=chunk) [(9) Revolving Line of Credit](index=131&type=section&id=(9)%20Revolving%20Line%20of%20Credit) The company maintains a **$250.0 million** senior secured revolving credit facility, with **$77.0 million** outstanding and **$146.1 million** available as of January 29, 2022, and was in compliance with all covenants - The company has a **$250.0 million** revolving credit facility, maturing on May 23, 2023[465](index=465&type=chunk)[470](index=470&type=chunk) - As of January 29, 2022, **$77.0 million** was outstanding, with **$146.1 million** available for borrowing and **$2.0 million** in stand-by commercial letters of credit[308](index=308&type=chunk)[467](index=467&type=chunk) - Borrowings bear interest based on the base rate or LIBOR plus an applicable margin, ranging from **0.25% to 0.75%** for base rate loans and **1.25% to 1.75%** for LIBOR loans[468](index=468&type=chunk) - The facility requires a minimum availability of not less than **10%** of the gross borrowing base and is secured by substantially all of the company's tangible and intangible assets[470](index=470&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk) [(10) Sale Leaseback Transactions](index=133&type=section&id=(10)%20Sale%20Leaseback%20Transactions) No deemed sale-leaseback or sale-leaseback transactions were completed in fiscal years 2021 or 2022, but one corporate office location was subject to such transactions in fiscal year 2020 - No deemed sale-leaseback or sale-leaseback transactions were completed in fiscal years 2021 or 2022[475](index=475&type=chunk) - In fiscal year 2020, the company completed deemed sale-leaseback and sale-leaseback transactions for one corporate office location, receiving **$9.5 million** in tenant allowance during fiscal year 2019[475](index=475&type=chunk) [(11) Common Stock](index=133&type=section&id=(11)%20Common%20Stock) Common stockholders are entitled to one vote per share, dividends, and proportional asset distribution upon liquidation, with no preemptive, redemption, or sinking fund rights - Common stockholders are entitled to one vote per share, dividends, and proportional asset distribution upon liquidation[476](index=476&type=chunk) - There are no preemptive or other subscription rights, nor redemption or sinking fund provisions for common stock[476](index=476&type=chunk) [(12) Earnings Per Share](index=133&type=section&id=(12)%20Earnings%20Per%20Share) Basic EPS is calculated by dividing net income by weighted-average common shares outstanding, while diluted EPS adjusts for potentially dilutive nonvested share awards and units - Basic EPS is calculated by dividing net income by weighted-average common shares outstanding[477](index=477&type=chunk) - Diluted EPS includes the potentially dilutive effect of nonvested share awards and units[477](index=477&type=chunk) - Earnings Per Share (EPS) (Thousands USD, except per share amounts) | Metric | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | FY2020 (Feb 1, 2020) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Net income | $108,470 | $91,380 | $20,215 | | Basic EPS | $2.47 | $2.10 | $0.47 | | Diluted EPS | $2.44 | $2.06 | $0.46 | | Weighted-average shares outstanding (Basic) | 43,827 | 43,525 | 43,166 | | Dilutive effect of common stock equivalents | 716 | 905 | 422 | | Weighted-average shares outstanding (Diluted) | 44,543 | 44,430 | 43,588 | [(13) Stock-Based Compensation](index=134&type=section&id=(13)%20Stock-Based%20Compensation) The company recognized **$3.3 million** in stock-based compensation expense in FY2021, with **$13.2 million** in unrecognized costs, under the 2019 Performance Incentive Plan - Total stock-based compensation expense was **$3.3 million** in fiscal year 2021, with **$13.2 million** in unrecognized compensation costs remaining as of January 29, 2022[479](index=479&type=chunk) - As of January 29, 2022, **2,015 shares** were available for awards under the 2019 Performance Incentive Plan, with **1,416 awards** outstanding[480](index=480&type=chunk) - Nonvested stock units granted to employees vest over a three-year period, while those for independent directors vest over **12 months**[484](index=484&type=chunk)[485](index=485&type=chunk) [(14) Employee Stock Purchase Plan](index=137&type=section&id=(14)%20Employee%20Stock%20Purchase%20Plan) The ESPP allows eligible employees to purchase common stock at **85%** of market value, was discontinued in FY2020 due to a merger, but reinstated in FY2021, with **$35 thousand** expense - The ESPP allows eligible employees to purchase common stock at **85%** of the lower of the market value on the first day of the offering period or the purchase date[489](index=489&type=chunk) - The ESPP was discontinued in fiscal year 2020 due to a proposed merger but reinstated in fiscal year 2021 after the merger termination[490](index=490&type=chunk) - Stock-based compensation expense related to the ESPP was **$35 thousand** in fiscal year 2021[489](index=489&type=chunk) [(15) Income Taxes](index=137&type=section&id=(15)%20Income%20Taxes) The income tax provision for FY2021 was **$35.8 million**, with an effective tax rate of **24.8%**, and management believes deferred tax assets will be realized - Income Tax Provision (Thousands USD) | Category | FY2022 (Jan 29, 2022) | FY2021 (Jan 30, 2021) | FY2020 (Feb 1, 2020) | | :-------------------- | :-------------------- | :-------------------- | :------------------- | | Current Federal | $23,107 | $24,023 | $4,004 | | Current State | $7,312 | $6,991 | $540 | | Deferred Federal | $5,133 | $(390) | $1,246 | | Deferred State | $217 | $(544) | $(536) | | **Total income tax provision** | **$35,769** | **$30,080** | **$5,254** | | Effective income tax rate | 24.8% | 24.8% | 20.6% | - Deferred Tax Assets and Liabilities (Thousands USD) | Category | January 29, 2022 | January 30, 2021 | | :-------------------------------- | :--------------- | :--------------- | | Total gross deferred tax assets | $80,113 | $77,004 | | Total gross deferred tax liabilities | $(85,892) | $(77,438) | | **Net deferred tax asset** | **$(5,779)** | **$(434)** | - As of January 29, 2022, the company had no unrecognized tax benefits[494](index=494&type=chunk) [(16) Commitments and Contingencies](index=138&type=section&id=(16)%20Commitments%20and%20Contingencies) A significant wrongful death lawsuit against a subsidiary was dismissed with prejudice on March 3, 2022, with no liability, while another lease-related complaint is ongoing with no estimable loss - A wrongful death and negligence lawsuit (Parsons v. Colt's Manufacturing Company) against a subsidiary, related to the Route 91 Harvest Festival shooting, was dismissed with prejudice on March 3, 2022, with no liability for the company[497](index=497&type=chunk) - An ongoing legal proceeding (TMS McCarthy, LP v. Sportsman's Warehouse Southwest, Inc.) involves a complaint about a wrongfully terminated lease, for which no reasonable estimate of potential losses can be determined at this time[498](index=498&type=chunk)[499](index=499&type=chunk) [(17) Retirement Plan](index=140&type=section&id=(17)%20Retirement%20Plan) The company sponsors a profit-sharing plan for employees, with discretionary contributions of **$1.97 million** in FY2021, **$1.53 million** in FY2020, and **$0.84 million** in FY2019 - The company sponsors a profit-sharing plan for employees, with discretionary contributions based on wages paid[500](index=500&type=chunk) - Retirement Plan Contributions (Thousands USD) | Fiscal Year Ended | Contributions | | :---------------- | :------------ | | January 29, 2022 | $1,974 | | January 30, 2021 | $1,532 | | February 1, 2020 | $835 | [(18) Terminated Merger with Great Outdoors Group](index=140&type=section&id=(18)%20Terminated%20Merger%20with%20Great%20Outdoors%20Group) The merger agreement with Great Outdoors Group, LLC was terminated on December 2, 2021, due to FTC feedback, resulting in a one-time **$55.0 million** termination payment recorded as other income - The merger agreement with Great Outdoors Group, LLC was terminated on December 2, 2021, due to feedback from the Federal Trade Commission[501](index=501&type=chunk) - The company received a one-time **$55.0 million** termination payment, recorded as other income[501](index=501&type=chunk) [(19) Subsequent Events](index=140&type=section&id=(19)%20Subsequent%20Events) On March 24, 2022, the Board authorized a share repurchase program of up to **$75.0 million** of common stock, commencing March 31, 2022, and terminating on its first anniversary - On March 24, 2022, the Board authorized a share repurchase program of up to **$75.0 million** of common stock[502](index=502&type=chunk) - The program commences on March 31, 2022, and will terminate on its first anniversary, with repurchases funded by cash on hand or available borrowings[502](index=502&type=chunk)[503](index=503&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=141&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure [Controls and Procedures](index=141&type=section&id=Item%209A.%20Controls%20and%20Procedures) The company's disclosure controls and procedures and internal control over financial reporting were evaluated as effective as of January 29, 2022, with no material changes during the quarter - The company's disclosure controls and procedures were evaluated as effective as of January 29, 2022[505](index=505&type=chunk) - Management concluded that internal controls over financial reporting were effective as of January 29, 2022, based on the 2013 COSO Internal Control—Integrated Framework[509](index=509&type=chunk) - Grant Thornton LLP issued an unqualified opinion on the effectiveness of the company's internal controls over financial reporting[514](index=514&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended January 29, 2022, that materially affected or are reasonably likely to materially affect internal control over financial reporting[511](index=511&type=chunk) [Other Information](index=146&type=section&id=Item%209B.%20Other%20Information) This item reports that there is no other information required to be disclosed [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=146&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company PART III [Directors, Executive Officers and Corporate Governance](index=147&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) The company has a Code of Conduct and Ethics for all personnel, with additional governance information to be included in the 2022 Annual Meeting of Shareholders Proxy Statement - The company has a Code of Conduct and Ethics for employees, directors, and officers, available on investors.sportsmanswarehouse.com[525](index=525&type=chunk) - Further details on directors, executive officers, and corporate governance will be provided in the 2022 Annual Meeting of Shareholders Proxy Statement[526](index=526&type=chunk) [Executive Compensation](index=147&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation will be included in the company's Proxy Statement for the 2022 Annual Meeting of Shareholders - Executive compensation details will be incorporated by reference from the 2022 Proxy Statement[527](index=527&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=147&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information concerning security ownership of certain beneficial owners and management will be provided in the company's Proxy Statement for the 2022 Annual Meeting of Shareholders - Security ownership information for beneficial owners and management will be incorporated by reference from the 2022 Proxy Statement[528](index=528&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=147&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%2

Financial Data and Key Metrics Changes - The company reported net sales for the fourth quarter of fiscal 2021 at $416.3 million, a decrease of 5% compared to $438.2 million in the fourth quarter of 2020 [43] - Full-year 2021 net sales were $1.51 billion, an increase of 3.7% from $1.45 billion in 2020 [50] - Fourth quarter gross profit was $136.6 million, down from $142 million in the prior year, while gross margin improved to 32.8% [46] - Full-year net income was $108.5 million or $2.44 per diluted share, compared to $91.4 million or $2.06 per diluted share in the prior year [55] Business Line Data and Key Metrics Changes - Same store sales decreased by 10.8% in Q4 2021, primarily due to a 23.1% decline in firearms sales and a 26% decline in ammunition sales [44] - Full-year same store sales decreased by 2.2%, driven by declines in firearms and ammunition categories of 12.5% and 13.7%, respectively, but offset by increases in footwear (21.2%) and apparel (12.7%) [51] Market Data and Key Metrics Changes - The company experienced a significant increase in outdoor participation, with 53% of Americans engaging in outdoor activities [30] - The record attendance at national parks and hunting and fishing license sales contributed to a record 14 million first-time firearm buyers since early 2020 [31] Company Strategy and Development Direction - The company plans to open 10 new stores in 2022, targeting underserved geographic locations with flexible store formats [24][25] - The strategic growth drivers include expanding the store footprint, increasing sales from the e-commerce platform, and improving customer shopping experiences [17][26] - The company aims to leverage its omnichannel capabilities and enhance its digital marketing efforts to capture sales from outside traditional geographic areas [26][30] Management's Comments on Operating Environment and Future Outlook - Management noted that the current inflationary pressures, including freight costs, are expected to continue through Q2 2022, but anticipate easier comparisons in the latter half of the year [68][77] - The company remains confident in its ability to weather economic changes better than most retailers due to the nature of its business [70] Other Important Information - The company ended fiscal 2021 with $57 million in cash and $77 million available on its line of credit, indicating strong liquidity [59] - A $75 million share buyback program has been approved as part of the capital allocation plan [60] Q&A Session Summary Question: Thoughts on gross profit margin and sales mix - Management indicated a healthy return to a normalized sales mix, expecting a shift away from firearms and ammunition towards other categories [67] Question: Observations on inflationary pressures - Management acknowledged ongoing freight pressures and the return to a normal promotional environment for marketing [68] Question: Current sales trends amid inflation - Management noted that stimulus checks from the previous year significantly impacted consumer behavior, but the outdoor industry is expected to perform well despite inflation [70] Question: E-commerce sales distribution and future distribution center plans - Management stated that a significant portion of e-commerce sales is now coming from store inventory, with plans for a potential new distribution center in 2023 [75][76] Question: Performance of refurbished stores - Management reported encouraging trends in customer traffic and basket size in refurbished stores, with plans for further refurbishments [79][82] Question: Performance metrics for new stores - New stores are performing ahead of expectations, with a disciplined approach to financial returns [83]

| --- | --- | --- | --- | |----------------|--------------------------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | FOURTH QUARTER AND | | | | FULL YEAR 2021 | EARNINGS CONFERENCE CALL | | | | | | | | | | | | | | | | | | | March 29, 2022 | | | | FORWARD LOOKING STATEMENTS AND NON-GAAP MEASURES This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21 ...

Financial Performance & Key Metrics - Sportsman's Warehouse's net sales for the December 2021 TTM period were $1528 million[11] - The gross profit for the same period was $494 million[11] - Adjusted EBITDA for the December 2021 TTM period was $138 million, representing a 9.1% margin[11] - The company's targeted marketing budget is approximately 1% of sales[20] - Over 10% of fiscal year 2021 sales were driven by e-commerce[21] Growth & Expansion - The company opened 10 new stores in 2021 and plans to open 7-10 new stores in 2022[36] - The company aims for >10% four-wall EBITDA margin upon maturity and >20% ROIC upon maturity for new stores[38] - The company has a long-term growth strategy targeting 300+ stores[60] Market & Industry - The estimated industry size is over $70 billion[13] - The company notes that 53% of Americans participate in outdoor activities[13] - Hunting and Shooting Sports see repeat customers, with 22.1% purchasing a second firearm within 18 months of their initial purchase[13] - 44.5% of first-time gun buyers in 2021 were under the age of 40[13] Balance Sheet - Total liquidity increased significantly, up $125 million since 2019[47] - The company has reduced debt, paying off $79 million compared to 2019[47]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited financial statements, management's analysis, and market risk disclosures [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's assets, liabilities, and stockholders' equity at the end of the reporting period **Condensed Consolidated Balance Sheets (Amounts in Thousands):** | Metric | October 30, 2021 | January 30, 2021 | | :--- | :--- | :--- | | Cash | $2,532 | $65,525 | | Merchandise inventories | $428,497 | $243,434 | | Total current assets | $447,419 | $324,653 | | Total assets | $814,714 | $660,818 | | Revolving line of credit | $57,551 | $0 | | Total current liabilities | $328,640 | $227,428 | | Total liabilities | $560,138 | $456,158 | | Total stockholders' equity | $254,576 | $204,660 | - A significant increase in merchandise inventories from **$243,434 thousand to $428,497 thousand** indicates a strategic buildup[14](index=14&type=chunk) - Introduction of a **$57,551 thousand revolving line of credit** as of October 30, 2021, compared to zero at January 30, 2021[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Outlines revenues, costs, and profits over the thirteen and thirty-nine week periods **Condensed Consolidated Statements of Operations (Amounts in Thousands, Except Per Share Data):** **Thirteen Weeks Ended:** | Metric | October 30, 2021 | October 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $401,014 | $385,748 | +4.0% | | Gross profit | $129,622 | $130,582 | -0.7% | | Income from operations | $29,648 | $38,330 | -22.6% | | Net income | $21,863 | $30,482 | -28.3% | | Diluted EPS | $0.49 | $0.68 | -27.9% | **Thirty-Nine Weeks Ended:** | Metric | October 30, 2021 | October 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $1,089,784 | $1,013,572 | +7.5% | | Gross profit | $353,723 | $334,450 | +5.8% | | Income from operations | $67,460 | $83,373 | -19.1% | | Net income | $50,036 | $61,813 | -19.0% | | Diluted EPS | $1.13 | $1.40 | -19.3% | - For the thirteen weeks, net sales increased by **4.0%**, but net income and diluted EPS decreased by **28.3%** and **27.9%** respectively, indicating margin pressure[17](index=17&type=chunk) - For the thirty-nine weeks, net sales increased by **7.5%**, but net income and diluted EPS decreased by **19.0%** and **19.3%** respectively[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Summarizes the changes in stockholders' equity over the reporting period **Condensed Consolidated Statements of Stockholders' Equity (Amounts in Thousands):** | Metric | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Total stockholders' equity | $254,576 | $174,101 | | Accumulated earnings | $164,445 | $84,842 | | Additional paid-in capital | $89,693 | $88,823 | - Total stockholders' equity increased by **$80,475 thousand** from October 31, 2020, to October 30, 2021, primarily driven by accumulated earnings[20](index=20&type=chunk)[22](index=22&type=chunk) - Net income contributed **$21,863 thousand** for the 13 weeks and **$50,036 thousand** for the 39 weeks ended October 30, 2021, to accumulated earnings[20](index=20&type=chunk)[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports the cash inflows and outflows from operating, investing, and financing activities **Condensed Consolidated Statements of Cash Flows (Amounts in Thousands, Thirty-Nine Weeks Ended):** | Metric | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(78,343) | $171,736 | | Net cash used in investing activities | $(38,463) | $(20,172) | | Net cash provided by (used in) financing activities | $53,813 | $(133,935) | | Cash at end of period | $2,532 | $19,314 | - A significant shift in operating cash flow from **$171,736 thousand provided in 2020 to $(78,343) thousand used in 2021**, primarily due to a substantial increase in merchandise inventories[25](index=25&type=chunk)[152](index=152&type=chunk) - Financing activities provided **$53,813 thousand in 2021**, a reversal from **$(133,935) thousand used in 2020**, driven by net borrowings on the revolving line of credit[25](index=25&type=chunk)[154](index=154&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides supplementary details on accounting policies and specific financial statement items - The Company operates **119 stores in 29 states** and an e-commerce platform, aggregated into one operating segment[27](index=27&type=chunk) - The merger agreement with Great Outdoors Group, LLC was terminated on December 2, 2021, resulting in a **$55.0 million termination fee** paid to Sportsman's Warehouse[83](index=83&type=chunk)[95](index=95&type=chunk) **Disaggregation of Revenue by Department (Percentage of Net Sales):** **Thirteen Weeks Ended:** | Department | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Camping | 12.6% | 12.9% | | Apparel | 9.1% | 8.6% | | Fishing | 7.7% | 7.8% | | Footwear | 6.4% | 5.6% | | Hunting and Shooting | 55.4% | 57.4% | | Optics, Electronics, Accessories, and Other | 8.8% | 7.7% | **Thirty-Nine Weeks Ended:** | Department | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Camping | 13.9% | 13.8% | | Apparel | 7.4% | 6.5% | | Fishing | 11.3% | 11.5% | | Footwear | 6.3% | 5.3% | | Hunting and Shooting | 53.7% | 56.3% | | Optics, Electronics, Accessories, and Other | 7.4% | 6.6% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial results, liquidity, and critical accounting policies [Overview](index=21&type=section&id=Overview) Summarizes the company's business, the terminated merger, and the impact of the COVID-19 pandemic - The Company operates **119 stores in 29 states** and an e-commerce platform, focusing on outdoor sporting goods[102](index=102&type=chunk) - The proposed merger with Great Outdoors Group was terminated on December 2, 2021, resulting in a **$55.0 million termination fee** received by the Company[105](index=105&type=chunk) - Experienced significant sales increases since March 2020 due to the COVID-19 pandemic, but **demand has begun to stabilize**[107](index=107&type=chunk) [How We Assess the Performance of Our Business](index=22&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) Details the key metrics and strategies used to evaluate business performance and drive growth - Key performance measures include net sales, same store sales, gross margin, SG&A expenses, income from operations, and **Adjusted EBITDA**[111](index=111&type=chunk) - Growth strategy targets annual square footage growth of **greater than 8%-10%** through new store openings or acquisitions[113](index=113&type=chunk) - Key drivers for increasing total net sales include expanding gross square footage, increasing same store sales, and enhancing **omni-channel capabilities**[115](index=115&type=chunk)[116](index=116&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Analyzes the company's operational results, comparing current and prior-year periods **Key Components as a Percentage of Net Sales:** **Thirteen Weeks Ended:** | Metric | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Net sales | 100.0% | 100.0% | | Cost of goods sold | 67.7% | 66.1% | | Gross profit | 32.3% | 33.9% | | Selling, general, and administrative expenses | 24.9% | 23.9% | | Income from operations | 7.4% | 10.0% | | Net income | 5.5% | 8.0% | | Adjusted EBITDA | 9.8% | 12.9% | **Thirty-Nine Weeks Ended:** | Metric | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Net sales | 100.0% | 100.0% | | Cost of goods sold | 67.5% | 67.0% | | Gross profit | 32.5% | 33.0% | | Selling, general, and administrative expenses | 26.3% | 24.8% | | Income from operations | 6.2% | 8.2% | | Net income | 4.6% | 6.1% | | Adjusted EBITDA | 9.0% | 11.0% | - Net sales increased by **4.0% for the 13 weeks** and **7.5% for the 39 weeks** ended October 30, 2021, primarily driven by seven new store openings[127](index=127&type=chunk)[135](index=135&type=chunk) - Same store sales **decreased by 1.5% for the 13 weeks** but **increased by 1.5% for the 39 weeks**, with strong growth in footwear and apparel[127](index=127&type=chunk)[130](index=130&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk) - **Gross profit margin decreased** for both periods (1.6 percentage points for 13 weeks, 0.5 percentage points for 39 weeks) due to higher freight costs[131](index=131&type=chunk)[139](index=139&type=chunk) [Seasonality](index=27&type=section&id=Seasonality) Discusses the seasonal patterns affecting the company's sales and profitability - Net sales are typically higher in the **third and fourth fiscal quarters** due to hunting season and holiday buying patterns[145](index=145&type=chunk) - The company does not expect higher sales volume in Q4 FY2021 compared to Q4 FY2020 due to the **significant sales spike in the prior year**[145](index=145&type=chunk) - New retail store openings incur **non-recurring expenses** and typically result in lower initial operating profit[146](index=146&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Details the company's sources of liquidity, capital requirements, and cash flow activities - Primary capital requirements are for **seasonal working capital** and capital expenditures for new store openings and acquisitions[148](index=148&type=chunk) - Received a **$55.0 million cash payment** from Great Outdoors Group on December 2, 2021, following the termination of the merger agreement[149](index=149&type=chunk) - Net cash used in operating activities was **$(78.3) million** for the 39 weeks ended October 30, 2021, a significant decrease from **$171.7 million provided** in the prior year, primarily due to inventory buildup[151](index=151&type=chunk)[152](index=152&type=chunk) - Net cash provided by financing activities was **$53.8 million** for the 39 weeks ended October 30, 2021, compared to net cash used of **$(133.9) million** in the prior year[151](index=151&type=chunk)[154](index=154&type=chunk) - As of October 30, 2021, **$73.8 million was outstanding** under the $250.0 million revolving credit facility, with **$149.3 million available** for borrowing[155](index=155&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Outlines the key accounting policies that require significant management judgment and estimates - Financial statements are prepared in accordance with GAAP, requiring assumptions, estimates, and judgments[163](index=163&type=chunk) - **No significant changes** to critical accounting policies from the Fiscal 2020 Form 10-K[164](index=164&type=chunk) [Off Balance Sheet Arrangements](index=29&type=section&id=Off%20Balance%20Sheet%20Arrangements) Confirms the absence of any off-balance sheet arrangements - The company is **not party to any off-balance sheet arrangements**[166](index=166&type=chunk) [Contractual Obligations](index=29&type=section&id=Contractual%20Obligations) Presents a summary of the company's contractual payment obligations as of the reporting date **Contractual Obligations as of October 30, 2021 (Amounts in Thousands):** | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $389,334 | $15,408 | $119,289 | $90,410 | $164,227 | | Standby letters of credit | $1,955 | $1,955 | - | - | - | | Revolving line of credit | $73,763 | $73,763 | - | - | - | - Operating lease obligations do not include additional payments for common area maintenance, real estate, taxes, and insurance[169](index=169&type=chunk) - Purchase/construction obligations with vendors are not included as they do not contain termination payments or other penalties if cancelled[172](index=172&type=chunk) [Non-GAAP Measures](index=29&type=section&id=Non-GAAP%20Measures) Defines and reconciles non-GAAP financial measures, such as Adjusted EBITDA, to their GAAP counterparts - **Adjusted EBITDA** is defined as net income plus interest expense, income tax expense, depreciation and amortization, and other specified adjustments[171](index=171&type=chunk) **Reconciliation of Net Income to Adjusted EBITDA (Amounts in Thousands):** **Thirteen Weeks Ended:** | Metric | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Net income (loss) | $21,863 | $30,482 | | Interest expense | $413 | $465 | | Income tax expense (benefit) | $7,372 | $9,530 | | Depreciation and amortization | $6,665 | $5,404 | | Stock-based compensation expense | $194 | $882 | | Pre-opening expenses | $1,712 | $958 | | Hazard pay | — | $2,000 | | Acquisition costs | $1,113 | $297 | | Bargain purchase | — | $(2,218) | | Legal accrual | — | $2,125 | | Store closure | — | — | | **Adjusted EBITDA** | **$39,332** | **$49,925** | | Net sales | $401,014 | $380,989 | | Adjusted EBITDA margin | 9.8% | 12.9% | **Thirty-Nine Weeks Ended:** | Metric | October 30, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Net income (loss) | $50,036 | $61,813 | | Interest expense | $905 | $3,016 | | Income tax expense (benefit) | $16,519 | $20,691 | | Depreciation and amortization | $18,801 | $16,085 | | Stock-based compensation expense | $2,237 | $2,436 | | Pre-opening expenses | $3,090 | $1,778 | | Hazard pay | — | $4,600 | | Acquisition costs | $6,419 | $332 | | Bargain purchase | — | $(2,218) | | Legal accrual | — | $2,125 | | Store closure | — | $1,039 | | **Adjusted EBITDA** | **$98,007** | **$111,697** | | Net sales | $1,089,784 | $1,013,572 | | Adjusted EBITDA margin | 9.0% | 11.0% | - **Adjusted EBITDA margin decreased** from 12.9% to 9.8% for the 13 weeks and from 11.0% to 9.0% for the 39 weeks ended October 30, 2021, compared to the prior year[177](index=177&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discloses the company's exposure to market risks, primarily interest rate fluctuations - Principal market risk exposure relates to changes in interest rates on its **revolving credit facility and term loan**, which carry floating interest rates[182](index=182&type=chunk) - A **100 basis point increase** in interest rates would not have significantly increased interest expense based on a sensitivity analysis as of October 30, 2021[182](index=182&type=chunk) - The company does **not use derivative financial instruments** for speculative or trading purposes[182](index=182&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures as of the reporting date - Disclosure controls and procedures were evaluated as **effective** as of October 30, 2021[184](index=184&type=chunk) - Management acknowledges that control systems provide only **reasonable, not absolute, assurance** against error and fraud due to inherent limitations[185](index=185&type=chunk) - **No material changes** in internal control over financial reporting occurred during the 13 weeks ended October 30, 2021[186](index=186&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part contains information on legal proceedings, risk factors, exhibits, and report signatures [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) Refers to financial statement notes for details on legal proceedings incidental to the company's business - Refers to **Note 11, "Commitments and Contingencies"** for additional information on legal proceedings[189](index=189&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) States there are no material changes to previously disclosed business and operational risk factors - The business faces **significant risks and uncertainties**[190](index=190&type=chunk) - **No material changes** in the assessment of risk factors from the Fiscal 2020 Form 10-K[190](index=190&type=chunk) [Item 5. Exhibits](index=34&type=section&id=Item%205.%20Exhibits) Lists all exhibits filed with the report, including key agreements and certifications - Includes a **Severance Agreement** with Jeff White, dated September 26, 2021[192](index=192&type=chunk) - Includes the **Termination Agreement**, dated December 2, 2021, among Sportsman's Warehouse Holdings, Inc., Great Outdoors Group, LLC, and Phoenix Merger Sub I, Inc[192](index=192&type=chunk) - Includes **Certifications of the CEO and Interim CFO** pursuant to the Sarbanes-Oxley Act of 2002[192](index=192&type=chunk) [Signatures](index=35&type=section&id=Signatures) Provides the official sign-off by the company's executive officers on the specified date - Signed by **Jon Barker**, President and Chief Executive Officer[196](index=196&type=chunk) - Signed by **Jeff White**, Interim Chief Financial Officer[196](index=196&type=chunk) - Date of signing: **December 8, 2021**[196](index=196&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-36401 SPORTSMAN'S WAREHOUSE HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 39-1975614 (State or other jurisdiction of incorporation or organization) 1475 West 9000 South, Suite A, West Jordan, Utah 84088 (Address of principal executive offices) (Zip code) Registr ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 1, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-36401 SPORTSMAN'S WAREHOUSE HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 39-1975614 (State or other jurisdiction o ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Sportsman's Warehouse operates 112 outdoor sporting goods stores across 27 states, with a proposed merger with Great Outdoors Group for $18.00 per share pending regulatory approval - As of January 30, 2021, the company operates **112 stores** across **27 states**, primarily in the Western United States and Alaska[19](index=19&type=chunk)[38](index=38&type=chunk) - On December 21, 2020, the company entered into a merger agreement with Great Outdoors Group, LLC, to be acquired for **$18.00 per share** in cash, pending regulatory approval and expected to close in the second half of calendar year 2021[21](index=21&type=chunk)[22](index=22&type=chunk)[28](index=28&type=chunk) Net Sales by Department (Fiscal Years 2019-2021) | Department | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | Hunting and Shooting | 57.6% | 49.1% | 48.3% | | Camping | 12.7% | 14.4% | 14.2% | | Fishing | 9.9% | 11.1% | 10.6% | | Apparel | 7.5% | 9.3% | 8.9% | | Optics, Electronics, Accessories, and Other | 6.7% | 8.6% | 10.7% | | Footwear | 5.6% | 7.5% | 7.3% | | **Total** | **100.0%** | **100.0%** | **100.0%** | - The company plans to open **8 to 12 new stores** in fiscal year 2021, targeting an annual square footage growth rate of **6% to 10%**[45](index=45&type=chunk)[59](index=59&type=chunk) - The company's loyalty program has approximately **2.7 million participants** and generated about **45% of revenue** as of January 30, 2021[81](index=81&type=chunk) - In response to the COVID-19 pandemic, the company provided **$6.5 million** in 'hero pay' to its employees during fiscal year 2020[139](index=139&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including potential merger failure, extensive firearms regulation, COVID-19 impacts, and operational reliance on a single distribution center - The consummation of the merger with Great Outdoors Group is subject to closing conditions, including HSR Act clearance, and failure to complete it could adversely affect stock price and business operations[147](index=147&type=chunk)[149](index=149&type=chunk)[154](index=154&type=chunk) - The business is highly susceptible to changes in federal, state, and local regulations concerning the sale of firearms and ammunition, which could decrease demand and increase operating expenses[164](index=164&type=chunk)[168](index=168&type=chunk) - The COVID-19 pandemic poses risks including potential store closures, supply chain interruptions, and shifts in consumer discretionary spending, with current high demand for firearms and ammunition outpacing supply[172](index=172&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - A majority of stores are located in the Western U.S., making the company vulnerable to regional economic conditions, natural disasters, and specific regulatory changes[177](index=177&type=chunk) - The company relies on a **single distribution center** in Salt Lake City, Utah, where any disruption could significantly impair its ability to stock stores and fulfill orders[183](index=183&type=chunk) - The discontinuation of LIBOR, a reference rate for the company's variable-rate debt, by the end of 2021 (or June 2023 for some tenors) could lead to increased interest costs[217](index=217&type=chunk)[218](index=218&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[236](index=236&type=chunk) [Properties](index=36&type=section&id=Item%202.%20Properties) The company leases all 112 retail stores, its corporate headquarters, and its 507,000 square foot distribution center in Salt Lake City, totaling approximately 4.5 million gross square feet - The company does not own any material real property and leases all **112 store locations**, its corporate headquarters, and its distribution center[237](index=237&type=chunk) - The main distribution center is a **507,000 square foot facility** in Salt Lake City, Utah, believed to be sufficient to support a network of **120 or more stores**[238](index=238&type=chunk) - The **112 retail stores** total approximately **4.5 million gross square feet**, with leases typically ranging from five to fifteen years, often with renewal options[239](index=239&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is facing seven purported stockholder lawsuits regarding the Great Outdoors Group merger proxy statement, three of which have been dismissed, and other incidental legal proceedings - As of April 1, 2021, **seven lawsuits** were filed by purported stockholders alleging the merger proxy statement was false and misleading, with **three actions subsequently dismissed**[240](index=240&type=chunk)[241](index=241&type=chunk) - The company is also a defendant in litigation related to the Route 91 Harvest Festival shooting and a lease termination dispute, believing the claims are without merit and unable to estimate potential losses[521](index=521&type=chunk)[522](index=522&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[245](index=245&type=chunk) Part II [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20For%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "SPWH," with no dividends paid in fiscal 2020 or 2019, nor anticipated due to merger restrictions - The company's common stock is listed on the Nasdaq under the symbol **"SPWH"**[247](index=247&type=chunk) - No cash dividends were paid in fiscal year 2020 or 2019, and none are anticipated in the foreseeable future, with the pending merger agreement also restricting dividend payments[248](index=248&type=chunk)[249](index=249&type=chunk) [Selected Financial Data](index=38&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, Sportsman's Warehouse is not required to provide this information - The company is a smaller reporting company and is not required to provide this information[250](index=250&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal year 2020 saw net sales increase by **63.8%** to **$1.45 billion**, driven by a **48.3%** rise in same-store sales and strong hunting and shooting category growth, while gross margin slightly decreased due to product mix shifts Fiscal Year 2020 vs. 2019 Performance | Metric | Fiscal Year 2020 | Fiscal Year 2019 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,451.8M | $886.4M | +$565.4M | +63.8% | | Same Store Sales | - | - | - | +48.3% | | Gross Profit | $476.4M | $296.6M | +$179.8M | +60.6% | | Gross Margin | 32.8% | 33.5% | - | -70 bps | | Net Income | $91.4M | $20.2M | +$71.2M | +352.2% | - The increase in net sales was driven by heightened demand from the COVID-19 pandemic, the presidential election, social unrest, and strong growth in the e-commerce platform[286](index=286&type=chunk) - The Hunting and Shooting category sales increased by **91.1%** (**$397.1 million**) in fiscal 2020, with firearm and ammunition sales growing **115.5%** and **93.7%**, respectively[287](index=287&type=chunk) - The company repaid its term loan and all outstanding amounts under its revolving credit facility during fiscal year 2020, leaving **no outstanding indebtedness** as of January 30, 2021[291](index=291&type=chunk)[314](index=314&type=chunk) Reconciliation of Net Income to Adjusted EBITDA (in thousands) | | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | | :--- | :--- | :--- | :--- | | **Net income** | **$91,380** | **$20,215** | **$23,750** | | Interest expense | 3,506 | 7,995 | 13,206 | | Income tax expense | 30,080 | 5,254 | 7,063 | | Depreciation and amortization | 21,830 | 19,321 | 18,250 | | Stock-based compensation expense | 3,302 | 2,104 | 1,742 | | Pre-opening expenses | 1,942 | 2,695 | 1,838 | | Hazard pay and CEO retirement | 6,526 | — | 2,647 | | Acquisition costs | 3,710 | 662 | — | | Bargain purchase | (2,218) | — | — | | Legal accrual | 2,125 | — | — | | Store closure | 1,039 | — | — | | Executive transition costs | — | 770 | — | | **Adjusted EBITDA** | **$163,222** | **$59,016** | **$68,496** | [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Sportsman's Warehouse is not required to provide this information - The company is a smaller reporting company and is not required to provide this information[350](index=350&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Fiscal year 2020 consolidated financial statements show total assets of **$660.8 million**, total liabilities of **$456.2 million**, net sales of **$1.45 billion**, and net income of **$91.4 million**, with strong operating cash flow of **$238.8 million** Consolidated Balance Sheet Data (in thousands) | | Jan 30, 2021 | Feb 1, 2020 | | :--- | :--- | :--- | | Total current assets | $324,653 | $291,638 | | Total assets | $660,818 | $616,641 | | Total current liabilities | $227,428 | $264,776 | | Total liabilities | $456,158 | $506,373 | | Total stockholders' equity | $204,660 | $110,268 | Consolidated Income Statement Data (in thousands, except per share data) | | FY ended Jan 30, 2021 | FY ended Feb 1, 2020 | FY ended Feb 2, 2019 | | :--- | :--- | :--- | :--- | | Net sales | $1,451,767 | $886,401 | $849,129 | | Gross profit | $476,454 | $296,633 | $284,930 | | Income from operations | $122,748 | $33,464 | $44,019 | | Net income | $91,380 | $20,215 | $23,750 | | Diluted EPS | $2.06 | $0.46 | $0.55 | Consolidated Cash Flow Data (in thousands) | | FY ended Jan 30, 2021 | FY ended Feb 1, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $238,816 | $77,866 | | Net cash used in investing activities | ($26,227) | ($49,064) | | Net cash used in financing activities | ($148,749) | ($28,664) | - In fiscal 2020, the company acquired **four Field & Stream stores** from DICK'S Sporting Goods for approximately **$6.5 million**, resulting in a bargain purchase gain of **$2.2 million**[440](index=440&type=chunk)[443](index=443&type=chunk)[445](index=445&type=chunk) - The company's Term Loan, with a **$30.0 million balance** at the beginning of the fiscal year, was paid in full during fiscal year 2020[486](index=486&type=chunk)[487](index=487&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=83&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[529](index=529&type=chunk) [Controls and Procedures](index=83&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of January 30, 2021, having remediated a prior material weakness in IT general controls, and the independent auditor issued an unqualified opinion on internal control effectiveness - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of January 30, 2021[530](index=530&type=chunk) - A material weakness in IT general controls (ITGCs) previously reported for the fiscal year ended February 1, 2020, has been **remediated** as of January 30, 2021[537](index=537&type=chunk)[539](index=539&type=chunk) - Management's assessment of internal controls excluded the **four Field & Stream stores** acquired during fiscal 2020, which represent **4.5% of total assets** and **2.4% of total revenues**[535](index=535&type=chunk) - The independent auditor, Grant Thornton LLP, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of January 30, 2021[542](index=542&type=chunk) [Other Information](index=87&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[550](index=550&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees](index=88&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information for these items is incorporated by reference from the company's Definitive Proxy Statement for its 2021 Annual Meeting of Shareholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Registrant's Definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[553](index=553&type=chunk)[554](index=554&type=chunk)[555](index=555&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=89&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed with the Form 10-K report, including the Merger Agreement and credit agreements - This section contains the list of financial statements and exhibits filed with the report[562](index=562&type=chunk) - Key exhibits filed include the Merger Agreement with Great Outdoors Group, credit agreements, and management compensation plans[561](index=561&type=chunk)[563](index=563&type=chunk) [Form 10-K Summary](index=91&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not Applicable[565](index=565&type=chunk)

| --- | --- | --- | --- | --- | |--------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | THIRD QUARTER 2020 | | | | | | | | | | | | EARNINGS CONFERENCE CALL | | | | | | December 2, 2020 | | | | | FORWARD LOOKING STATEMENTS AND NON-GAAP MEASURES This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the S ...