Smith & Wesson Brands(SWBI) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the third quarter was $129 million, a 1$11.1 million, down from $30.5 million in the prior year, but$6.9 million higher than in fiscal 2020 due to higher average selling prices (ASPs) and lower interest expenses [45] - EBITDA increased by nearly 60%, with a gross margin improvement of 440 basis points, reflecting higher ASPs and lower operating costs [20][21] Business Line Data and Key Metrics Changes - New products accounted for 21% of sales during the third quarter, with recent launches performing exceptionally well [38] - Operating expenses were $27.7 million,$3 million lower than the prior year, primarily due to reduced relocation costs and lower sales-related expenses [30] Market Data and Key Metrics Changes - NICS data showed a 6.5% increase in January, marking the first quarterly increase in fiscal 2023, although year-over-year comparisons were flat [14] - The market has seen a bifurcation in demand, with core buyers becoming more price-conscious while others focus on innovation and quality [54] Company Strategy and Development Direction - The company is focused on innovation and new product introductions, with a healthy pipeline expected to continue into calendar 2024 [24] - The relocation to Tennessee is on track, with operational startup expected in the summer, which will enhance manufacturing flexibility and reduce costs [26][99] Management's Comments on Operating Environment and Future Outlook - Management noted that inflationary pressures are expected to continue impacting margins, but they anticipate revenue growth sequentially from Q3 to Q4 [43][49] - The company believes that the adjustment period from the surge in demand is largely over, with consumer demand returning to a more normal seasonal cadence [34] Other Important Information - The company authorized a quarterly dividend of $0.10 to be paid to stockholders [47] - Cash generated from operations was$6.9 million, with capital spending for the fiscal year expected to be between $115 million and$120 million [46][58] Q&A Session Summary Question: Insights on new product sales and potential for increase - Management confirmed that new products are performing well and the pipeline is healthy, with expectations to maintain current sales percentages [66][67] Question: ASP and long guns performance - ASPs decreased due to targeted rebates aimed at reducing channel inventory, with expectations for modest declines in the next quarter [75][80] Question: Inventory levels in the channel - Inventory levels have stabilized, with a slight decline from Q2 to Q3, indicating that distributors feel comfortable with their inventory [81][83] Question: Flexible manufacturing and macroeconomic factors - The move to Tennessee will enhance manufacturing flexibility, allowing for better inventory management and cost reduction despite ongoing inflationary pressures [96][99]