Ruger(RGR) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Results Overview Sturm, Ruger & Company, Inc. reported a decline in net sales and diluted earnings per share for Q1 2024 compared to Q1 2023, with net sales at $136.8 million and diluted EPS at 40¢ Financial Performance Highlights Sturm, Ruger & Company, Inc. reported a decline in net sales and diluted earnings per share for Q1 2024 compared to Q1 2023, with net sales at $136.8 million and diluted EPS at 40¢ Q1 2024 vs. Q1 2023 Key Financials | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Net Sales | $136.8 million | $149.5 million | -8.4% | | Diluted EPS | 40¢ | 81¢ | -50.6% | Quarterly Dividend Declaration The Board of Directors declared a quarterly dividend of 16¢ per share for Q1 2024, payable on June 7, 2024, to stockholders of record as of May 20, 2024, representing approximately 40% of net income - The Company declared a quarterly dividend of 16¢ per share, representing approximately 40% of net income[4] CEO Commentary and Business Review The CEO's commentary highlights market conditions, strategic initiatives, and key performance observations for the quarter Market Conditions and Product Demand Despite an overall decline in the firearms market during Q1 2024, Sturm, Ruger experienced strong demand for several product families, including recently introduced and anniversary products, which drove sales increases from the fourth quarter and led to significant reductions in inventory - Overall firearms market declined in Q1 2024, but demand for several product families, including recently introduced and anniversary products (e.g., 75th Anniversary Mark IV Target pistol, 10/22 rifles, LCP MAX pistol, American Rifle Generation II), remained strong[5][7] - Strong distributor sell-through led to significant reductions in both finished goods inventory and distributor inventory during Q1 2024[6] Strategic Initiatives and Operational Efficiency The company implemented strategic moves to ensure long-term success and enhance efficiency, including a business reorganization and a reduction in force affecting approximately 80 employees, with half reassigned to manufacturing, incurring a $1.5 million severance expense but projected to generate $9 million in annualized savings - Reorganized specific aspects of the business to achieve greater efficiency and productivity[6] - Undertook a reduction in force impacting about 80 employees, with approximately half reassigned to manufacturing positions[6] Impact of Reduction in Force | Metric | Amount | | :----- | :----- | | Severance Expense (Q1) | $1.5 million | | Annualized Savings | ~$9 million | Key Performance Observations Key observations for Q1 2024 include a 1% increase in unit sell-through to retailers despite a decline in NICS background checks, significant growth in new product sales, and a decrease in gross margin from 26% to 21% due to product mix, deleveraging, and inflation, alongside strong cash flow, reduced inventories, and $7.3 million returned to shareholders Sales and Market Trends Unit sell-through to retailers increased despite a decline in NICS background checks, with new product sales showing significant growth - Estimated unit sell-through from independent distributors to retailers increased 1% in Q1 2024 compared to prior year, while NICS background checks decreased 4%[8] New Product Sales Performance | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | New Product Sales | $42 million | $30 million | +40.0% | | % of Firearm Sales | 32% | 21% | +11 ppts | Profitability and Cost Drivers Gross margin decreased due to product mix shift, deleveraging of fixed costs, and inflationary pressures on materials and services - Gross margin decreased from 26% in Q1 2023 to 21% in Q1 2024[8] - Lower margin driven by product mix shift to lower-margin products, unfavorable deleveraging of fixed costs from decreased production/sales, and inflationary cost increases (materials, commodities, services, energy, fuel, transportation)[8][11] Inventory Management The company achieved significant reductions in both finished goods and distributor inventory during the quarter Q1 2024 Inventory Reductions | Inventory Type | Q1 2024 Decrease (Units) | | :------------- | :----------------------- | | Finished Goods | 30,900 | | Distributor | 51,300 | Cash Flow and Liquidity Strong cash flow from operations and a robust liquidity position were maintained, with no outstanding debt Q1 2024 Cash Flow and Liquidity | Metric | Q1 2024 | | :----- | :------ | | Cash Provided by Operations | $7.3 million | | Cash & Short-term Investments (as of Mar 30, 2024) | $115.3 million | | Current Ratio | 5.2 to 1 | | Debt | None | Capital Expenditures Capital expenditures for Q1 2024 were $1.8 million, with an estimated full-year total of approximately $15 million Capital Expenditures | Metric | Q1 2024 | Full Year 2024 Estimate | | :----- | :------ | :---------------------- | | Capital Expenditures | $1.8 million | ~$15 million | Shareholder Returns The company returned $7.3 million to shareholders through quarterly dividends and common stock repurchases Q1 2024 Shareholder Returns | Shareholder Return Component | Q1 2024 Amount | | :--------------------------- | :------------- | | Quarterly Dividend Payment | $4.1 million | | Common Stock Repurchase | $3.2 million | | Total Shareholder Returns | $7.3 million | - Repurchased 75,024 shares of common stock in the open market at an average price of $42.89 per share[11] Stockholders' Equity Stockholders' equity remained strong at $332.0 million, with a book value of $19.08 per share Stockholders' Equity as of March 30, 2024 | Metric | As of March 30, 2024 | | :----- | :------------------- | | Stockholders' Equity | $332.0 million | | Book Value Per Share | $19.08 | | Cash & Short-term Investments Per Share | $6.63 | Corporate Communications and Financial Filings The company filed its Q1 2024 Form 10-Q and will host an investor webcast to discuss operating results SEC Filings and Investor Webcast Sturm, Ruger & Company, Inc. filed its Quarterly Report on Form 10-Q for Q1 2024 and will host a webcast on May 8, 2024, to discuss the operating results, with the report available on the SEC website and Ruger's corporate website - Filed Quarterly Report on Form 10-Q for Q1 2024[9] - Will host a webcast on May 8, 2024, at 9:00 a.m. ET to discuss Q1 2024 operating results[10] - Form 10-Q is available on SEC.gov and Ruger.com/corporate[11] Company Information Provides an overview of Sturm, Ruger & Co., Inc. as a leading firearms manufacturer and includes a disclaimer regarding forward-looking statements About Sturm, Ruger & Co., Inc. Sturm, Ruger & Co., Inc. is a leading U.S. manufacturer of rugged, reliable firearms for the commercial sporting market, offering nearly 800 variations across over 40 product lines under both the Ruger and Marlin brands, with a 75-year commitment to corporate and community responsibility - Leading US manufacturer of firearms for the commercial sporting market, offering almost 800 variations of over 40 product lines (Ruger and Marlin brands)[12] - 75 years of corporate and community responsibility with the motto 'Arms Makers for Responsible Citizens'[12] Forward-Looking Statements Disclaimer The company cautions investors that forward-looking statements are based on current expectations and are subject to various qualifying risks and uncertainties that could cause actual results to differ materially, advising readers not to place undue reliance on these statements and undertaking no obligation to update them - Forward-looking statements are subject to qualifying risks and uncertainties (e.g., market demand, sales levels, litigation, legislation, accounting estimates) that could cause actual results to differ materially[13] - Readers are cautioned not to place undue reliance on these statements, and the Company undertakes no obligation to publish revised statements[13] Condensed Consolidated Financial Statements (Unaudited) Presents the unaudited condensed consolidated balance sheets, statements of income, and cash flows for the first quarter of 2024 Condensed Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets from $398.8 million at December 31, 2023, to $385.0 million at March 30, 2024, primarily driven by reductions in short-term investments and net inventories, while total stockholders' equity remained stable at approximately $332.0 million Condensed Consolidated Balance Sheets (Dollars in thousands) | Metric (in thousands) | March 30, 2024 | December 31, 2023 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Total Current Assets | $258,575 | $271,395 | $(12,820) | | Net Property, Plant & Equipment | $67,755 | $71,534 | $(3,779) | | Total Assets | $384,977 | $398,817 | $(13,840) | | Total Current Liabilities | $50,052 | $63,195 | $(13,143) | | Total Stockholders' Equity | $331,956 | $331,721 | $235 | Condensed Consolidated Statements of Income and Comprehensive Income For the three months ended March 30, 2024, net sales decreased to $136.8 million from $149.5 million in the prior year, leading to a significant drop in net income from $14.4 million to $7.1 million and diluted EPS from $0.81 to $0.40, with gross profit declining due to higher cost of products sold relative to sales Condensed Consolidated Statements of Income (Dollars in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended March 30, 2024 | Three Months Ended April 1, 2023 | Change (YoY) | | :------------------------------------ | :-------------------------------- | :------------------------------- | :----------- | | Total Net Sales | $136,820 | $149,453 | $(12,633) | | Cost of Products Sold | $107,417 | $110,967 | $(3,550) | | Gross Profit | $29,403 | $38,486 | $(9,083) | | Operating Income | $7,531 | $17,021 | $(9,490) | | Income Before Income Taxes | $9,047 | $18,492 | $(9,445) | | Net Income | $7,084 | $14,350 | $(7,266) | | Diluted Earnings Per Share | $0.40 | $0.81 | $(0.41) | Condensed Consolidated Statements of Cash Flows Cash provided by operating activities increased to $7.3 million in Q1 2024 from $5.3 million in Q1 2023, primarily due to changes in inventories and employee compensation, while cash used for financing activities decreased significantly due to lower dividend payments compared to the prior year Condensed Consolidated Statements of Cash Flows (Dollars in thousands) | Metric (in thousands) | Three Months Ended March 30, 2024 | Three Months Ended April 1, 2023 | Change (YoY) | | :-------------------- | :-------------------------------- | :------------------------------- | :----------- | | Cash Provided by Operating Activities | $7,345 | $5,284 | $2,061 | | Cash Provided by Investing Activities | $1,211 | $35,456 | $(34,245) | | Cash Used for Financing Activities | $(7,923) | $(97,861) | $89,938 | | Increase (Decrease) in Cash | $633 | $(57,121) | $57,754 | | Cash and Cash Equivalents at End of Period | $15,807 | $8,052 | $7,755 | Non-GAAP Financial Measures Provides definitions and reconciliations for non-GAAP financial measures, specifically EBITDA and EBITDA margin, to offer additional insights into the company's operating performance EBITDA Definition and Rationale The company provides non-GAAP financial measures, EBITDA and EBITDA margin, to offer investors additional insights into operating results and underlying business performance, believing these metrics are useful for understanding the company's ability to meet capital expenditure and working capital requirements, and as an indicator of profitability - EBITDA is defined as earnings before interest, taxes, and depreciation and amortization[20] - EBITDA and EBITDA margin provide useful information for understanding operating results, ongoing business performance, ability to meet capital expenditure and working capital requirements, and profitability[19] Non-GAAP Reconciliation – EBITDA For Q1 2024, EBITDA was $13.5 million, resulting in an EBITDA margin of 9.9%, a decrease from $23.8 million and 16.0% in Q1 2023, reflecting the decline in net income and overall profitability Non-GAAP Reconciliation – EBITDA (Unaudited, dollars in thousands) | Metric (in thousands) | Three Months Ended March 30, 2024 | Three Months Ended April 1, 2023 | Change (YoY) | | :-------------------- | :-------------------------------- | :------------------------------- | :----------- | | Net Income | $7,084 | $14,350 | $(7,266) | | Income Tax Expense | $1,963 | $4,142 | $(2,179) | | Depreciation and Amortization Expense | $5,833 | $6,536 | $(703) | | Interest Income | $(1,355) | $(1,214) | $(141) | | Interest Expense | $17 | $25 | $(8) | | EBITDA | $13,542 | $23,839 | $(10,297) | | EBITDA Margin | 9.9% | 16.0% | -6.1 ppts |