AXIL Brands(AXIL) - 2024 Q2 - Quarterly Results

Fiscal Year 2024 Financial Results AXIL Brands achieved record net sales and significant EPS growth in fiscal year 2024, driven by strategic expansion despite slight margin compression Financial Highlights AXIL Brands reported record net sales of $27.5 million for fiscal year 2024, a 17% increase year-over-year, driven by marketing and sales initiatives in its hearing protection segment, while gross margin slightly decreased to 73.4% from 75.3%, and net income per diluted share more than doubled to $0.21 from $0.10 Fiscal Year 2024 Key Financial Metrics (vs. FY 2023) | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $27.5M | $23.5M | +17% | | Gross Profit Margin | 73.4% | 75.3% | -1.9 p.p. | | Operating Expense % of Revenue | 68.0% | 66.9% | +1.1 p.p. | | Diluted EPS | $0.21 | $0.10 | +110% | - The decrease in gross profit margin was primarily attributed to costs associated with expansion into new retail and distribution channels[3] - The increase in operating expenses as a percentage of revenue was mainly due to higher marketing and selling expenses, increased compensation, and costs related to the NYSE American exchange listing[3] - The company significantly reduced its weighted average outstanding shares on a diluted basis by 49% as of August 13, 2024, compared to the weighted average for fiscal year 2024[4][5] Management Commentary Management highlighted successful strategic execution leading to record revenue, with a fiscal year 2025 focus on international expansion, strategic partnerships, and product adaptation for broader market reach and sustainable growth - The CEO, Jeff Toghraie, stated that strategic initiatives for 2025 are focused on enhancing global presence, fostering strategic partnerships, and adapting offerings to diverse market needs[5] - The CFO, Jeff Brown, noted that the 17% revenue growth was largely driven by expanding distribution and retail channels[5] - The hearing protection and enhancement segment accounted for approximately 95% of total revenue for fiscal year 2024, with no single customer representing more than 10% of sales[5] Consolidated Financial Statements The consolidated financial statements detail the company's financial position and performance, showing total assets grew to $11.0 million, total liabilities decreased to $3.3 million, and stockholders' equity strengthened to $7.7 million, while net income was $2.0 million and operating cash flow was minimal at $2,677 due to a substantial increase in inventory Consolidated Balance Sheets As of May 31, 2024, AXIL's total assets increased to $11.0 million from $10.2 million in the prior year, primarily driven by a significant rise in inventory to $3.4 million, while total liabilities decreased to $3.3 million from $3.5 million, and total stockholders' equity strengthened to $7.7 million from $6.7 million Selected Balance Sheet Items (as of May 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Assets | $10,974,361 | $10,169,314 | | Total Liabilities | $3,278,575 | $3,497,355 | | Total Stockholders' Equity | $7,695,786 | $6,671,959 | - Inventory, net, more than doubled to $3,394,023 from $1,311,864 in the prior year[7] - Cash decreased to $3,253,876 from $4,832,682 in the prior year[7] Consolidated Statements of Operations For the fiscal year ended May 31, 2024, the company achieved net sales of $27.5 million, a 17% increase from $23.5 million in 2023, with gross profit growing to $20.2 million, but income from operations decreased to $1.5 million from $2.0 million due to higher operating expenses, while net income rose to $2.0 million, up from $1.8 million in the prior year Consolidated Statements of Operations (for the years ended May 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Sales, net | $27,498,539 | $23,521,027 | | Gross profit | $20,193,937 | $17,710,811 | | Income from operations | $1,503,380 | $1,984,211 | | Net income | $2,003,134 | $1,824,575 | - Sales and marketing expenses increased to $13.4 million from $11.7 million, and professional and consulting fees rose to $2.6 million from $1.4 million, contributing to higher total operating expenses[10] Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased from $6.7 million at the end of fiscal 2023 to $7.7 million at the end of fiscal 2024, driven by net income of $2.0 million, partially offset by a preferred stock buyback that cost approximately $1.25 million - Total Stockholders' Equity increased from $6,671,959 at the end of FY2023 to $7,695,786 at the end of FY2024[12][13] - The company executed a preferred stock buyback, which reduced equity by $1,246,490[12][13] - Net income of $2,003,134 contributed positively to the accumulated deficit and overall equity[12] Consolidated Statements of Cash Flows For fiscal year 2024, net cash provided by operating activities was only $2,677, a sharp decline from $2.9 million in the prior year, primarily due to a $2.1 million increase in inventory, while net cash used in investing activities was $160,525, and financing activities used $1.4 million, largely for a preferred stock repurchase, resulting in a net decrease in cash of $1.6 million, with the year-end cash balance at $3.3 million Summary of Cash Flows (for the years ended May 31) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $2,677 | $2,918,136 | | Net Cash from Investing Activities | ($160,525) | $1,000,764 | | Net Cash from Financing Activities | ($1,420,958) | $540,051 | | Net Decrease in Cash | ($1,578,806) | $4,458,951 | | Cash - End of year | $3,253,876 | $4,832,682 | - The significant decrease in operating cash flow was mainly driven by a $2,129,054 cash outflow for inventory buildup[13] - The primary use of cash in financing activities was a $1,246,490 repurchase of preferred stock[13] Company Overview and Outlook AXIL is a global consumer products company specializing in hearing enhancement/protection products under the AXIL® brand and hair/skincare products under the Reviv3 Procare brand, with forward-looking statements highlighting strategic goals such as international expansion and new partnerships, while acknowledging risks including competition, customer concentration, regulatory changes, and macroeconomic instability - AXIL is a global e-commerce company manufacturing and marketing premium hearing products (AXIL®) and hair/skincare products (Reviv3 Procare)[15] - Forward-looking statements emphasize a focus on international growth, strategic partnerships, and expanding distribution channels[16] - The company identifies several risks, including competition, ability to grow sales, reliance on key customers, regulatory changes, and the impact of unstable economic conditions[16]