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Smith & Wesson Brands, Inc. (NASDAQ:SWBI) Q4 2024 Earnings Conference Call June 21, 2024 5:00 PM ET Company Participants Kevin Maxwell - General Counsel Mark Smith - President & Chief Executive Officer Deana McPherson - Chief Financial Officer Conference Call Participants Mark Smith - Lake Street Capital Matthew Raab - Craig-Hallum Operator Good day, everyone, and welcome to Smith & Wesson Brands, Inc. Fourth Quarter and Full Fiscal 2024 Financial Results Conference Call. This call is being recorded. At thi ...

Financial Performance - Net sales for fiscal 2024 reached $535.8 million, an increase of $56.6 million, or 11.8%, compared to fiscal 2023[222]. - Gross profit increased by $3.6 million, or 2.3%, but gross margin decreased by 2.7% due to unfavorable fixed-cost absorption and inflation impacts[222][228]. - Net income for fiscal 2024 was $39.6 million, or $0.86 per diluted share, compared to $36.9 million, or $0.80 per diluted share, in the prior year[222]. - Operating income decreased by $3.6 million, or 7.5%, primarily due to an accrued legal settlement and increased promotional spending[231]. - Other income surged to $6.7 million, a significant increase of 4360.3%, mainly from the sale of intangible assets[232]. - Interest expense rose by $1.7 million, or 521.2%, due to higher average outstanding debt balances[233]. - The effective tax rate decreased to 19.8% from 23.5% in the prior year, influenced by a favorable adjustment related to foreign derived income deductions[234]. - Net income for fiscal year 2024 was $39.6 million, an increase of $2.7 million or 7.4% from 2023[235]. - Basic and diluted net income per share increased to $0.86, up 7.5% from $0.80 in the previous year[235]. Cash Flow and Investments - Cash provided by operating activities was $106.7 million, a significant increase of $90.0 million or 537.9% compared to fiscal 2023[236][238]. - Cash used in investing activities decreased by $8.3 million to $(81.5) million, primarily due to $6.5 million received from the sale of intangible assets[236][239]. - Cash used in financing activities was $(18.0) million, compared to cash provided of $5.9 million in fiscal 2023, mainly due to $22.0 million in dividend distributions[236][240]. - The company expects to spend between $25.0 million and $30.0 million on capital expenditures in fiscal 2025[239]. Capital Expenditures and Projects - The company incurred capital expenditures of approximately $157.0 million related to the relocation project, with total expected costs between $160.0 million and $170.0 million[222]. Sales Performance - Sales of handguns increased by $21.2 million, or 5.9%, while long guns saw a significant increase of $42.3 million, or 56.9%[224][226]. - New products accounted for 27.6% of net sales for the 12 months ended April 30, 2024, including one new pistol and three new long guns[227]. Debt and Credit Facilities - As of April 30, 2024, the company had $40.0 million in borrowings outstanding on its revolving line of credit, with an average interest rate of 7.18%[244]. - The company maintains compliance with all debt covenants as of April 30, 2024[244]. - The company has a $100.0 million revolving line of credit with variable interest rates based on the Base Rate or SOFR rate plus an applicable margin[268]. - The company amended its credit agreement on April 28, 2023, replacing LIBOR with SOFR as the interest rate benchmark[268]. - The amendment also changed the definition of "Consolidated Fixed Charge Coverage Ratio" to exclude unfinanced capital expenditures related to the Relocation[268]. Shareholder Actions - The company authorized a share repurchase program of $50.0 million, purchasing 793,551 shares for $10.2 million during fiscal 2024[245]. Economic and Operational Challenges - Inflationary pressures have increased costs for components and labor, expected to continue impacting operations in fiscal 2025[249].

• Net sales were $535.8 million, an increase of $56.6 million, or 11.8%, over the prior fiscal year. • Gross margin was 29.5% compared with 32.2% in the prior fiscal year. • GAAP net income was $39.6 million, or $0.86 per diluted share, compared with $36.9 million, or $0.80 per diluted share, for the prior fiscal year. • Non-GAAP net income was $42.6 million, or $0.92 per diluted share, compared with $43.3 million, or $0.94 per diluted share, for the prior fiscal year. GAAP to non-GAAP adjustments for incom ...

Core Viewpoint - Smith & Wesson Brands, Inc. reported strong financial results for the fourth quarter and full fiscal year 2024, highlighting significant increases in net sales, gross margin, and net income compared to the previous year [27][28][19]. Financial Performance - For the fourth quarter ended April 30, 2024, net sales were $159.1 million, an increase of $14.4 million, or 9.9%, compared to the same quarter last year [28]. - Gross margin for the fourth quarter was 35.5%, up from 29.0% in the comparable quarter last year [26]. - Full year net sales reached $535.8 million, an increase of $56.6 million, or 11.8%, over the prior fiscal year [14]. - GAAP net income for the fourth quarter was $26.1 million, or $0.57 per diluted share, compared to $12.8 million, or $0.28 per diluted share, for the same quarter last year [11][12]. - Non-GAAP net income for the fourth quarter was $20.9 million, or $0.45 per diluted share, compared to $14.6 million, or $0.32 per diluted share, for the same quarter last year [12][16]. Operational Highlights - The company generated operating cash of $43.6 million during the fourth quarter and $106.7 million for the full year [19]. - The board of directors authorized an 8.3% increase in the quarterly dividend, reflecting the company's strong financial position [19]. - Smith & Wesson repurchased 793,551 shares, utilizing $10.2 million of its $50 million authorization during fiscal 2024 [19]. Strategic Outlook - The company expects healthy demand for firearms in fiscal 2025, supported by a deep pipeline of new products and a new state-of-the-art facility now fully operational [18]. - Despite a competitive marketplace and inflationary impacts, Smith & Wesson anticipates growth in both net sales and gross margin in fiscal 2025 [19].

Group 1 - Smith & Wesson Brands, Inc. is expected to report fourth-quarter earnings of 34 cents per share, an increase from 28 cents per share in the same period last year [1] - The company anticipates revenue of $156.8 million for the quarter, compared to $144.78 million in the year-ago quarter [1] - Smith & Wesson Brands reported better-than-expected third-quarter financial results on March 7 [2] Group 2 - The company offers an annual dividend yield of 2.94%, translating to a quarterly dividend of 12 cents per share, or 48 cents annually [2] - To earn $500 monthly from dividends, an investment of approximately $204,250 or around 12,500 shares is required [2] - For a more modest income of $100 per month, an investment of $40,850 or around 2,500 shares is needed [2] Group 3 - The dividend yield is calculated by dividing the annual dividend payment by the stock's current price, which can fluctuate based on stock price changes [4] - Changes in dividend payments also impact the yield; an increase in dividends raises the yield if the stock price remains constant [5] - Smith & Wesson Brands' shares gained 1.1% to close at $16.34 on Tuesday [5]

Interested parties in North America are invited to participate by dialing 1-877-704-4453. Interested parties from outside North America are invited to participate by dialing 1-201-389-0920. Participants should dial in at least 10 minutes prior to the start of the call. A live and archived webcast of the event will be available on the company's website at www.smith-wesson.com under the Investor Relations section. Maryville, Tennessee--(Newsfile Corp. - June 6, 2024) - Smith & Wesson Brands, Inc. (NASDAQ: SWB ...

Financial Data and Key Metrics Changes - Net sales for Q3 were $137.5 million, an increase of $8.4 million or 6.5% compared to the prior year [6] - Gross margin was 28.7%, which was better than anticipated, but 3.7% lower than the comparable quarter last year [75] - EPS was $0.17, driven by cost discipline and increased production rates [50] Business Line Data and Key Metrics Changes - Long gun shipments doubled compared to the year-ago period, while handgun shipments were largely flat, down less than 4% [71] - ASPs for handguns declined by about 6% year-over-year, while long gun ASPs improved by about 7% [51][53] - New products accounted for over 20% of sales in the quarter, with the FPC being the top-selling product [71] Market Data and Key Metrics Changes - The overall firearms market, as measured by NICS checks, was up only 5% in long guns and down 4% in handguns [71] - Channel inventory levels remained healthy, with a decline of about 12% in distributor inventories during the quarter [4] Company Strategy and Development Direction - The company is focused on gaining market share in firearms, particularly through innovative new products [3][15] - The new 1854 lever-action rifle is viewed as a significant growth opportunity and a platform product for the company [5][27] - The company plans to maintain a debt-free balance sheet and continue returning cash to stockholders [30][56] Management's Comments on Operating Environment and Future Outlook - Management expects healthy demand in the firearms market throughout the 2024 election cycle [73] - The company anticipates Q4 sales to grow at a slightly higher rate than last year, with stable demand and low channel inventory [29] - Operating expenses are expected to be 5% to 7% higher than in Q3, primarily due to increased profit sharing [9] Other Important Information - The company paid $5.5 million in dividends and ended the quarter with $47.4 million in cash [8] - Capital spending for the quarter was $18.2 million, primarily related to the relocation [76] Q&A Session Summary Question: What are the early wins or challenges encountered since the move to the Tennessee facility? - Management noted some start-up inefficiencies but expressed optimism about improvements as operations stabilize [10] Question: How is the new product pipeline looking for FY '25? - The new product pipeline remains robust, with expectations for increased ASPs driven by long guns [11] Question: Can you provide granularity on market share gains in long guns and handguns? - The company is gaining share in long guns, primarily due to the performance of the FPC, while maintaining a focus on handguns [15][37] Question: What are the expectations for operating expenses next year? - Operating expenses are expected to remain flat, with no significant changes anticipated [43][65] Question: How is the promotional activity in the market? - The company noted that promotional activity has been rational, with no panic promotions observed among competitors [43]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2024 Commission File No. 001-31552 Smith & Wesson Brands, Inc. (Exact name of registrant as specified in its charter) Nevada 87-0543688 (State or other jurisdiction of incorporation or organization) 2100 Ro ...

Financial Performance - Q3 net sales reached $137.5 million, an increase of $8.4 million or 6.5% compared to the same quarter last year[5] - Q3 gross margin was 28.7%, down from 32.4% in the comparable quarter last year[5] - GAAP net income for Q3 was $7.9 million, or $0.17 per diluted share, compared to $11.1 million, or $0.24 per diluted share, in the same quarter last year[5] - Non-GAAP net income for Q3 was $8.7 million, or $0.19 per diluted share, compared to $11.6 million, or $0.25 per diluted share, in the same quarter last year[5] - For the nine months ended January 31, 2024, net income decreased to $13,499,000 from $24,039,000 in the same period last year, representing a decline of 43.5%[16] - Non-GAAP net income for the nine months ended January 31, 2024, was $21,309,000, down from $28,627,000 in the same period last year, a decrease of 25.7%[17] - GAAP operating income for the nine months ended January 31, 2024, was $19,400,000, down from $30,579,000 in the same period last year, a decrease of 36.3%[17] - Non-GAAP Adjusted EBITDAS for the nine months ended January 31, 2024, was $58,327,000, down from $66,372,000 in the same period last year, a decrease of 12.1%[18] Cash Flow and Assets - Cash generated by operations was $25.4 million, an increase of $18.5 million from the previous year, primarily due to a $9.8 million decline in inventory[4] - The company reported a net cash provided by operating activities of $63,123,000 for the nine months ended January 31, 2024, compared to a net cash used of $(21,248,000) in the prior year[19] - Free cash flow for the nine months ended January 31, 2024, was $(22,065,000), a significant decline from $(86,000) in the same period last year[19] - Cash and cash equivalents at the end of the period were $47,367,000, compared to $44,596,000 at the end of the previous year[16] - The company reported a net decrease in cash and cash equivalents of $(6,189,000) for the nine months ended January 31, 2024, compared to $(76,132,000) in the prior year[16] - The company incurred $85,188,000 in payments to acquire property and equipment for the nine months ended January 31, 2024, an increase from $64,586,000 in the prior year[16] Shareholder Returns - The company repurchased nearly 71,000 shares during Q3, utilizing $916,000 of its $50 million authorization[4] - The board of directors authorized a quarterly dividend of $0.12 per share, payable on April 4, 2024[4] Market Outlook - The company expects healthy demand in the firearm market through the 2024 election cycle, supported by a deep pipeline of new products[9] Balance Sheet - Total assets as of January 31, 2024, were $570.6 million, an increase from $541.3 million as of April 30, 2023[12] - Total liabilities increased to $194.1 million as of January 31, 2024, compared to $156.7 million as of April 30, 2023[12] Gross Profit - GAAP gross profit for the three months ended January 31, 2024, was $39,424,000, accounting for 28.7% of sales, compared to $41,841,000 or 32.4% of sales in the prior year[17]