Smith & Wesson Brands(SWBI) - 2025 Q3 - Quarterly Report

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].