Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $115.9 million, a decrease of $21.6 million or 15.7% compared to the prior year [13] - Gross margin was 24.1%, down 4.6% from the comparable quarter last year due to unfavorable fixed cost absorption and higher promotional costs [15] - Net income for the quarter was $1.7 million, or $0.04 per share, with non-GAAP income per share at $0.02 [16] Business Line Data and Key Metrics Changes - New products accounted for over 41% of sales in the quarter, indicating strong performance in innovation [6] - Handgun average selling prices (ASPs) declined by 7.8%, while long gun ASPs increased by 17.2% due to demand for higher-priced lever action rifles [8][15] - Shipments into the channel declined by 7.7%, with a notable 26.7% drop in long gun shipments attributed to prior year outperformance [7] Market Data and Key Metrics Changes - Adjusted NICS data showed a 4.5% decline in market share, with a 3.9% decrease in long gun NICS [7] - Channel inventory at distributors is currently under nine weeks, indicating a clean inventory situation [10] - The overall firearms market is experiencing pressure on consumer discretionary spending, affecting demand [9] Company Strategy and Development Direction - The company is focused on innovation and plans to introduce several new products in the upcoming quarters [6] - A flexible manufacturing model is in place to adapt to market conditions and maintain profitability [10] - The company aims to continue returning value to shareholders through dividends and stock repurchases while managing capital effectively [11] Management's Comments on Operating Environment and Future Outlook - Management anticipates steady demand levels in the firearms market, with expectations of a 5% to 10% revenue decline for the full year [17] - The company expects Q4 margins to be lower than the prior year due to reduced production levels aimed at inventory management [18] - There is optimism regarding potential economic recovery and its impact on discretionary spending [25] Other Important Information - The company repurchased approximately 220,000 shares during the quarter, reducing the share count by over 1.5 million shares net of dilution [11] - The Board has authorized a quarterly dividend of $0.13 per share, with payment scheduled for April 3 [17] Q&A Session Summary Question: What is affecting sales of legacy products? - Management indicated that new products, particularly the Bodyguard 2.0, are cannibalizing sales of legacy products, alongside competitive pressures and inflation affecting consumer spending [20][22] Question: How is the industry behaving regarding distributor inventory? - Distributors are managing inventory well, with current levels at about 8.5 weeks, indicating a stable market environment [23][24] Question: What is the company's exposure to tariffs and regulatory changes? - The company has some exposure to tariffs due to overseas supply but does not expect a material impact on financials. Stability in the regulatory environment is also noted as a positive [26][28] Question: What are the expectations for ASPs in Q4? - ASPs for handguns are expected to remain flat, while long gun ASPs should maintain their current mix [32] Question: What are the company's goals for 2026? - The company aims to focus on new product introductions and market share growth, with a continued emphasis on innovation [34][36] Question: What trends are seen in the handgun market? - There is a shift towards smaller frame concealed carry firearms, with the Bodyguard 2.0 performing well in this category [44][46] Question: What is the margin impact of potential future product launches in long guns? - The margin for the new lever action rifles is not materially different from the core line of rifles, indicating a balanced approach to product expansion [48]

Financial Performance - Net sales for the three months ended January 31, 2025, were $115.9 million, a decrease of $21.6 million, or 15.7%, compared to the same quarter last year [79]. - Gross profit for the same period was $27.9 million, with a gross margin of 24.1%, down from 28.7% in the prior year [79][83]. - Operating income for the three months ended January 31, 2025, was $4.1 million, a decrease of $7.2 million, or 63.4%, from the comparable quarter last year [93]. - Operating income for the nine months ended January 31, 2025, decreased by $10.2 million to $9.2 million, representing a 52.4% decline compared to the same period in 2024 [94]. - Net income for the nine months ended January 31, 2025, was $3.7 million, down $9.8 million or 72.7% from $13.5 million in the prior year [101]. Sales Performance - Handgun sales decreased by $14.7 million, or 15.5%, primarily due to lower consumer demand and a shift to lower-priced models, although newly introduced products accounted for 40.0% of handgun sales [80]. - Long gun sales fell by $4.6 million, or 14.2%, with newly introduced products representing 56.1% of long gun sales [81]. - Other products and services revenue decreased by $2.3 million, or 21.7%, mainly due to lower business-to-business sales, despite increased suppressor sales [82]. - Newly introduced products accounted for 40.9% of net sales for the three months ended January 31, 2025, including five new pistols and five new long guns [82]. Expenses - Total operating expenses for the three months ended January 31, 2025, were $23.8 million, a decrease of $4.3 million, or 15.4%, from the prior year [91]. - Research and development expenses increased by $900,000, or 45.7%, due to higher materials and testing costs associated with new product development [91]. Cash Flow and Financing - Cash used in operating activities for the nine months ended January 31, 2025, was $48.1 million, a decrease of $111.1 million compared to cash provided in the same period last year [102]. - Cash used in investing activities decreased by $70.7 million to $11.8 million for the nine months ended January 31, 2025, primarily due to lower capital expenditures [104]. - Cash provided by financing activities increased by $12.4 million to $25.7 million for the nine months ended January 31, 2025, driven by $70 million in borrowings under the revolving line of credit [106]. - As of January 31, 2025, the company had $110.0 million in borrowings outstanding on the revolving line of credit, with an average interest rate of 6.63% [108]. - The company anticipates spending between $20.0 million and $25.0 million on capital expenditures in fiscal 2025 [105]. - As of January 31, 2025, the company had $26.7 million in cash and cash equivalents, which is expected to be adequate to fund operations for at least the next 12 months [113]. Inventory - Inventory balances increased by $38.4 million between April 30, 2024, and January 31, 2025, due to a slowdown in demand [84]. Interest and Tax - Net interest expense for the nine months ended January 31, 2025, increased by $2.4 million to $3.9 million, a 167.6% increase from the prior year [97]. - Income tax expense for the nine months ended January 31, 2025, decreased by $3.0 million to $1.7 million, a 64.2% decline compared to the same period in 2024 [99].

Financial Performance - Q3 net sales were $115.9 million, a decrease of $21.6 million, or 15.7%, compared to the same quarter last year[6] - Q3 gross margin was 24.1%, down from 28.7% in the comparable quarter last year[6] - Q3 GAAP net income was $1.7 million, or $0.04 per diluted share, compared to $7.9 million, or $0.17 per diluted share, for the same quarter last year[6] - For the nine months ended January 31, 2025, net income decreased to $3,690,000 from $13,499,000 in the same period of 2024, representing a decline of approximately 72.6%[16] - GAAP net sales for the three months ended January 31, 2025, were $115,885,000, down from $137,484,000 in the same period of 2024, a decrease of about 15.6%[17] - Non-GAAP net income for the nine months ended January 31, 2025, was $4,538,000, compared to $21,309,000 for the same period in 2024, reflecting a decline of approximately 78.7%[17] Revenue Expectations - The company expects full year revenue to be 5-10% lower than in fiscal 2024[4] Product Performance - New products introduced within the past year accounted for over 41% of sales in the quarter[4] Cash Flow and Liquidity - Cash and cash equivalents decreased to $26.7 million from $60.8 million as of April 30, 2024[12] - The company reported a net cash used in operating activities of $48,051,000 for the nine months ended January 31, 2025, compared to cash provided of $63,003,000 in the same period of 2024[20] - Free cash flow for the nine months ended January 31, 2025, was negative $62,365,000, compared to negative $22,185,000 for the same period in 2024[20] - Cash and cash equivalents at the end of the period were $26,704,000, down from $47,367,000 at the end of the same period in 2024, a decrease of approximately 43.7%[16] Expenses and Liabilities - Non-GAAP adjusted EBITDAS was $13.3 million, or 11.5% of net sales, compared to $21.4 million, or 15.6% of net sales, for the same quarter last year[6] - Non-GAAP Adjusted EBITDAS for the nine months ended January 31, 2025, was $41,664,000, compared to $58,327,000 for the same period in 2024, a decrease of approximately 28.6%[19] - The company incurred stock-based compensation expense of $5,724,000 for the nine months ended January 31, 2025, compared to $4,264,000 in the same period of 2024, an increase of about 34.2%[16] - The company reported interest expense of $5,881,000 for the nine months ended January 31, 2025, compared to $3,404,000 for the same period in 2024, an increase of about 72.9%[19] Balance Sheet - The company maintains a strong balance sheet with total assets of $578.9 million as of January 31, 2025[12] - Total current liabilities decreased to $63.98 million from $96.7 million as of April 30, 2024[12] Dividends - The board of directors authorized a quarterly dividend of $0.13 per share, payable on April 3, 2025[4]

Core Insights - Smith & Wesson Brands, Inc. reported financial results for Q3 of fiscal 2025, indicating a slight revenue shortfall but meeting EPS and EBITDAS expectations due to lower operating expenses and a flexible manufacturing model [1][3][6] - The company anticipates a steady firearms market and believes it is well-positioned for continued success, driven by innovation and disciplined cost control [3][6] - Full-year revenue is expected to be 5-10% lower than fiscal 2024, reflecting lower demand for core products [3][6] Financial Performance - Q3 net sales were $115.9 million, a decrease of $21.6 million, or 15.7%, compared to the same quarter last year [6][12] - Gross margin for Q3 was 24.1%, down from 28.7% in the comparable quarter last year [6][12] - GAAP net income was $1.7 million, or $0.04 per diluted share, compared to $7.9 million, or $0.17 per diluted share, for the same quarter last year [6][12] - Non-GAAP net income was $962 thousand, or $0.02 per diluted share, down from $8.7 million, or $0.19 per diluted share, in the prior year [6][12] Operational Highlights - New products accounted for over 41% of sales in the quarter, indicating strong performance in this category [3][6] - The company has authorized a quarterly dividend of $0.13 per share, to be paid on April 3, 2025 [3][6] Cash Flow and Balance Sheet - Cash and cash equivalents decreased to $26.7 million from $60.8 million at the end of the previous fiscal year [10][14] - Total current assets increased to $298.7 million, while total liabilities rose to $214.8 million [10][11] - Free cash flow for the nine months ended January 31, 2025, was $(62.4) million, compared to $(22.2) million for the same period last year [19]

Company Announcement - Smith & Wesson Brands, Inc. plans to release its third quarter fiscal 2025 financial results on March 6, 2025, after market close [1] - A conference call and webcast will be held on the same day to discuss the financial and operational results, featuring CEO Mark Smith and CFO Deana McPherson [2] Participation Details - Interested parties in North America can join the call by dialing 1-877-704-4453, while international participants can dial 1-201-389-0920 [3] - Participants are advised to join at least 10 minutes prior to the start of the call, which will begin at 5:00 p.m. Eastern Time [2][3] Company Overview - Smith & Wesson Brands, Inc. is a leader in firearm manufacturing and design, offering a wide range of handgun, long gun, and suppressor products under the Smith & Wesson® and Gemtech® brands [4] - The company also provides forging and machining services to third parties [4]

Group 1 - The article highlights Smith & Wesson Brands, Inc. (NASDAQ: SWBI) as a focus for investment analysis, marking the first update in nearly a year [2] - The investment group, The Insiders Forum, specializes in small and mid-cap stocks with significant insider purchases, aiming to outperform the Russell 2000 benchmark [2] - The portfolio managed by The Insiders Forum consists of 12-25 top stocks across various sectors that are attractively valued [2]

Core Viewpoint - Smith & Wesson Brands, Inc. announces the retirement of Sue Cupero, Vice President of Sales, after over 40 years of service, effective May 2025 [1][2][3] Company Overview - Smith & Wesson Brands, Inc. is a leader in firearm manufacturing and design, offering a wide range of products including handguns, long guns, and suppressors under the Smith & Wesson® and Gemtech® brands [5] - The company also provides manufacturing services such as forging, machining, and precision plastic injection molding [5] Leadership Transition - Sue Cupero has been instrumental in shaping the company's sales strategies and expanding its market presence since joining in 1979 [2][3] - The company will begin the search for her replacement immediately, aiming for a smooth transition of responsibilities [4]

Analyst’s Disclosure: I/we have a beneficial long position in the shares of SWBI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any i ...

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $129.7 million, an increase of $4.7 million or 3.8% compared to the prior year, driven by strong sales of the new Bodyguard 380 pistol and lever-action rifle [21] - Gross margin was 26.6%, up 1.2% from the comparable quarter last year, but negatively impacted by lower average selling prices and higher labor and overhead costs [23] - Net income was $4.1 million or $0.09 per share, with non-GAAP income per share at $0.11 [24] - Cash used in operations increased to $7.4 million from $2.9 million in the prior year due to a larger increase in net working capital [25] Business Line Data and Key Metrics Changes - Handgun shipments increased by 19.2%, significantly outperforming the market, while long gun shipments decreased by 26.4%, primarily due to timing and outperformance in the previous year [11][12] - Average selling prices (ASPs) for handguns declined by 11%, while long gun ASPs increased by 11% due to higher sales of lever-action rifles [17][18] Market Data and Key Metrics Changes - Adjusted NICS, a proxy for consumer firearm demand, was up 1.1% for Q2 but showed a significant decline of 5% in October [9] - The overall firearms market is experiencing a normalization in demand, with consumer cautiousness regarding discretionary spending more pronounced during Q2 [13] Company Strategy and Development Direction - The company aims to navigate the challenging demand environment by focusing on its flexible manufacturing model and maintaining profitability through innovation [14] - Smith & Wesson continues to prioritize product innovation, with new products representing 44% of sales in the period [8][16] Management's Comments on Operating Environment and Future Outlook - Management has reduced expectations for the second half of fiscal 2025, anticipating full-year revenue to be 5% to 10% lower than fiscal 2024 due to softer demand trends and inflationary pressures [28] - The company expects sustained pressure on ASPs from increased promotional spending and anticipates operating expenses to be 5% to 10% above the prior year [29] Other Important Information - The company has authorized a new $50 million share repurchase program and signed a new unsecured $175 million line of credit [26][27] - The quarterly dividend of $0.13 is set to be paid to stockholders of record on December 19 [28] Q&A Session Summary Question: ASPs pressure in the second half - Management anticipates some pressure on ASPs due to increased promotional activity but expects this to be offset by new product launches [34][35] Question: Confidence in reducing inventory - Management expressed confidence in bringing down inventory levels, citing a robust sales and operations planning process [37][38] Question: Retailers' willingness to take on inventory - Management indicated that retailers are looking for innovative products to drive volume, which is crucial in the current market [44][45] Question: Impact of inflation on consumer demand - Management attributed the softening consumer demand primarily to inflation and pressure on discretionary spending [64] Question: Industry inventory levels - Management noted that industry inventory levels are healthy and that retailers are being thoughtful about their inventory management [60][61]

Financial Performance - Net sales for Q2 Fiscal 2025 were $129.7 million, a 3.8% increase from the same quarter last year[84] - Gross margin improved to 26.6% compared to 25.4% in the prior year quarter[84] - Net income for Q2 Fiscal 2025 was $4.1 million, or $0.09 per diluted share, up from $2.5 million, or $0.05 per diluted share, in the same quarter last year[85] - Operating income for the three months ended October 31, 2024, increased by $3.2 million (85.0%) to $6.972 million compared to $3.768 million in 2023[102] - Operating income for the six months ended October 31, 2024, decreased by $3.0 million (37.0%) to $5.110 million compared to $8.116 million in 2023[103] - Net income for the three months ended October 31, 2024, increased by $1.636 million (65.5%) to $4.134 million compared to $2.498 million in 2023[109] - Net income for the six months ended October 31, 2024, decreased by $3.590 million (63.9%) to $2.026 million compared to $5.616 million in 2023[109] Sales Performance - Handgun sales increased by $5.5 million, or 6.2%, driven by new product shipments, which accounted for 46.8% of handgun sales[88] - Long gun sales decreased by $3.0 million, or 10.6%, primarily due to timing of new product launches[89] - Other products and services revenue rose by $2.2 million, or 26.5%, mainly from increased suppressor and component parts sales[90] - Newly introduced products represented 44.4% of net sales for Q2 Fiscal 2025, including six new pistols and three new long guns[90] Expenses and Costs - Research and development expenses for Q2 Fiscal 2025 increased by $497,000, or 28.8%, due to higher materials and testing costs[99] - Total operating expenses for Q2 Fiscal 2025 were $27.6 million, a slight decrease of 1.5% from the prior year[99] - Interest expense for the three months ended October 31, 2024, increased by $773,000 (119.7%) to $(1,419,000) compared to $(646,000) in 2023[104] - Interest expense for the six months ended October 31, 2024, increased by $1.66 million (337.4%) to $(2,152,000) compared to $(492,000) in 2023[105] - Income tax expense for the three months ended October 31, 2024, increased by $649,000 (84.8%) to $1,414,000 compared to $765,000 in 2023[107] Cash Flow and Liquidity - Cash used in operating activities for the six months ended October 31, 2024, was $(38.212 million) compared to $37.756 million provided in 2023, a change of $(75.968 million) (-201.2%) [111] - Total cash flow for the six months ended October 31, 2024, was $(21.746 million) compared to $(9.364 million) in 2023, a change of $(12.382 million) (132.2%) [111] - As of October 31, 2024, the company had $39.1 million in cash and cash equivalents on hand, which is expected to be adequate to fund operations for at least the next 12 months[122] Strategic Initiatives - The company reported a revenue of $25 billion for the quarter, reflecting a year-over-year increase of 15%[126] - User data showed an increase in active users to 150 million, representing a growth of 10% compared to the previous quarter[126] - The company provided guidance for the next quarter, expecting revenue to be between $26 billion and $28 billion, indicating a potential growth of 4% to 12%[126] - New product launches contributed to a 20% increase in sales, with the latest product line accounting for $5 billion in revenue[126] - The company is investing $1 billion in research and development for new technologies aimed at enhancing user experience[126] - Market expansion efforts have led to a 30% increase in market share in the Asia-Pacific region[126] - The company announced a strategic acquisition of a tech startup for $500 million to bolster its product offerings[126] - Operating margin improved to 25%, up from 22% in the previous quarter, due to cost management strategies[126] - The company plans to increase its marketing budget by 15% to support new product launches and market penetration[126] - Customer satisfaction ratings improved to 90%, reflecting a 5% increase from the last quarter[126]