Smith & Wesson Brands(SWBI) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $177.7 million, representing a 31% decrease from the previous year but a $50.3 million increase compared to two years ago [31] - Gross margin was 39.6%, down 300 basis points from 42.6% in the prior year but up 1,160 basis points from 28% in Q3 2020 [33] - GAAP earnings per share were $0.65, down $0.47 from $1.12 in the prior year [35] - Non-GAAP earnings per share were $0.69 compared to $1.12 during the same quarter last year [35] - EBITDAS was $51.9 million, a decrease of $37.9 million from the prior year [36] Business Line Data and Key Metrics Changes - The long gun category experienced steeper declines compared to handguns, with polymer frame pistols also seeing lower volumes, while revolvers remained in high demand [20] - Average selling prices (ASPs) remained strong, with pricing and mix offsetting nearly 22% of volume-related declines [23] Market Data and Key Metrics Changes - NICS background checks declined 23.4% compared to the same period last year, while units shipped into the consumer channel declined 41.1% [32] - Year-to-date, sporting goods shipments were up 56.3% compared to a 25.7% growth in NICS [32] Company Strategy and Development Direction - The company focuses on long-term sustainable growth, emphasizing safety, quality, new product innovation, and operational excellence [19] - A flexible manufacturing model allows the company to quickly adjust production capacity in response to market demand [51] Management's Comments on Operating Environment and Future Outlook - The firearms market is returning to more normalized demand patterns, making comparisons to the prior fiscal year challenging [30] - The company expects fourth-quarter financial performance to return to pre-pandemic levels, with stable inventory levels in the channel [40] Other Important Information - The company has paid down $160 million of debt, repurchased $200 million of stock, and paid nearly $20 million in dividends [15] - The relocation project to Maryville, Tennessee is on track for completion by the third or fourth quarter of calendar 2023 [29] Q&A Session Summary Question: Pricing and ASP Discussion - The company implemented an average price increase of 3% in January [47] - New products are typically priced higher, and the company is realigning its product portfolio to maintain ASPs [48] Question: Promotional Environment and Inflation - Early signs of a promotional environment are emerging, but it is not a panic situation [50] - The company believes it can pass through inflationary pressures via price increases [49] Question: Flexible Manufacturing Model - The flexible manufacturing model allows the company to ramp up and down production quickly, maintaining profitability [51]