Smith & Wesson Brands(SWBI) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 was $162 million, an increase of 2.9% year-over-year [33] - Total company gross margin for the quarter was 33.4%, compared to 29.8% in the prior year [34] - GAAP EPS for Q3 was a loss of$ 0.10, compared to income of $0.21 in the prior year [38] - Non-GAAP EPS was$ 0.16 in the current quarter, up from $0.09 in the prior comparable quarter [39] Business Line Data and Key Metrics Changes - Firearms segment revenue was$ 123.6 million, an increase of 5.1% year-over-year [33] - Outdoor products and accessories segment revenue was $41.9 million, a decrease of 6.3% year-over-year [33] - The outdoor products and accessories division delivered 4.3% organic growth, offset by declines in the electro-optics division [12] Market Data and Key Metrics Changes - Adjusted NICS background checks for handguns declined 8% year-over-year, while units shipped to distributors increased 10% [17] - Adjusted NICS background checks for long guns declined 7% year-over-year, while units shipped increased nearly 12% [17] - February adjusted NICS results were down 12.8% year-over-year, the lowest for any February since 2011 [18] Company Strategy and Development Direction - The company is restructuring the electro-optics division into the outdoor products and accessories division to improve operating efficiencies [13] - A new logistics and customer services facility is being established to centralize operations and enhance efficiencies [28] - The focus remains on innovation and new product development to support organic growth [23] Management's Comments on Operating Environment and Future Outlook - Management maintains a positive long-term view of the electro-optics business despite recent challenges [15] - The firearms market is described as soft, with expectations for modest changes in Q4 [62] - The company is optimistic about the outdoor products and accessories market, citing good growth prospects [64] Other Important Information - A partial impairment of goodwill of$ 10.4 million was recorded for the electro-optics division due to revised revenue forecasts [35] - Operating cash flow for the quarter was $11.7 million, with capital spending of$ 8.3 million primarily related to the new logistics facility [40] Q&A Session Summary Question: Impairment on electro-optics and firearms sales - The impairment was based on long-range forecasts and market conditions, not solely on Q4 performance [49] Question: Duplicative costs of the new facility - Duplicative costs are expected to peak in Q4 and Q1 of the next year, with benefits seen after integrating the Jacksonville facility [53] Question: Future growth prospects - Growth is anticipated from the outdoor products and accessories division, with a focus on consolidating operations and potential acquisitions [65] Question: Industry outlook and stability - The market is expected to remain stable in the absence of fear-based buying, with distributors and retailers managing inventory well [76] Question: Tax rates and CapEx expectations - The tax rate for Q4 is expected to be around 28%, with CapEx projected to remain similar to the current year [80][81]