Smith & Wesson Brands(US:SWBI)2019-08-30 02:53Financial Data and Key Metrics Changes - Revenue for Q1 was $123.7 million, a decrease of 10.9% year-over-year [31] - GAAP EPS was a loss of $0.04 compared to EPS of $0.14 last year, while non-GAAP EPS was $0.03 compared to $0.21 in the prior year [35] - Total Company gross margin increased to 38.7% from 37.8% in the prior year [32] Business Line Data and Key Metrics Changes - Revenue from the firearms segment was $95.4 million, a decrease of 9.3% [31] - Revenue from the Outdoor Products & Accessories (OP&A) segment was $33.2 million, a decrease of 10.8% [31] - Bubba sales delivered year-over-year growth of 65% in Q1 [22] Market Data and Key Metrics Changes - Adjusted NICS background checks for handguns increased by 2.1% year-over-year, while units shipped to distributors and retailers decreased by 7% [14] - Background checks for long guns declined by 2.2% year-over-year, with units shipped to distributors and retailers declining by 8.1% [14] Company Strategy and Development Direction - The company is focused on innovation to support organic growth, with several major new product launches scheduled for the current fiscal year [19] - The establishment of the new Missouri Campus is a strategic initiative aimed at lowering costs and improving customer service [29] - The company is exploring mitigation opportunities regarding tariffs, including securing sources in other low-cost countries [26] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing softness in the firearms market and expects this trend to continue for the next few months [40] - The company anticipates a stronger second half of the fiscal year driven by new product introductions [40] - Management expressed cautious optimism regarding the retail environment, emphasizing the importance of promotional activities [62] Other Important Information - Cash used in operating activities was $29.1 million, primarily impacted by a $31.7 million increase in inventories [36] - The company expects full-year revenue to be in the range of $630 million to $650 million, with GAAP EPS projected between $0.41 and $0.49 [40] Q&A Session Summary Question: Can you provide more details on the Chinese tariff issue? - The guidance for EPS was lowered by just over $5 million, primarily due to tariffs, with the impact expected mainly in the second half of the year [44] Question: What was the reason for the earnings miss in the quarter? - The earnings miss was attributed to shipping constraints and a higher tax rate due to non-deductible items [57] Question: How do you expect to achieve a significant uptick in earnings in the second half? - The expected increase in earnings is driven by strong top-line growth and new product introductions in the second half [59] Question: What is the current state of firearm demand? - The firearms market is following normal seasonality, with expectations of a pickup in demand as the year progresses [94] Question: How is the company addressing elevated distributor inventory levels? - Management is not concerned about the inventory levels, as they believe they can manage promotions effectively to match market demand [62]