Smith & Wesson Brands, Inc. Reports Second Quarter Fiscal 2025 Financial Results

December 05, 2024 4:05 PM EST | Source: Smith & Wesson Brands, Inc

  • Q2 Net Sales of $129.7 Million; Sequential Increase of 46.8%
  • Q2 Gross Margin of 26.6%; Non-GAAP Gross Margin of 27.1%
  • Q2 EPS of $0.09/Share; Q2 Adjusted EPS of $0.11/Share
  • Q2 Adjusted EBITDAS Margin of 14.3%

Maryville, Tennessee--(Newsfile Corp. - December 5, 2024) - Smith & Wesson Brands, Inc. (NASDAQ: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the second quarter of fiscal 2025, ended October 31, 2024.

Second Quarter Fiscal 2025 Financial Highlights

  • Net sales were $129.7 million, an increase of $4.7 million, or 3.8%, over the comparable quarter last year and $41.3 million, or 46.8%, over the prior quarter.

  • Gross margin was 26.6% compared with 25.4% in the comparable quarter last year.

  • GAAP net income was $4.1 million, or $0.09 per diluted share, compared with $2.5 million, or $0.05 per diluted share, for the comparable quarter last year.

  • Non-GAAP net income was $4.8 million, or $0.11 per diluted share, compared with $6.5 million, or $0.14 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the relocation and an accrued legal settlement. For a detailed reconciliation, see the schedules that follow in this release.

  • Non-GAAP Adjusted EBITDAS was $18.5 million, or 14.3% of net sales, compared with $19.3 million, or 15.5% of net sales, for the comparable quarter last year.

Mark Smith, President and Chief Executive Officer, commented, "Second quarter results came in below our expectations as overall demand for firearms normalized late in the quarter. We believe that the primary driver of the demand pressure continued to be inflation. The consumer cautiousness with discretionary spend that we observed in recent quarters was more pronounced during the second quarter than we anticipated. Despite these headwinds, we continued to outperform the market and believe we gained share, led by our best-in-class innovation - with new products representing 44% of our sales in the period. We are well positioned to navigate this challenging demand environment, as we have many times before. By remaining focused on executing against our flexible manufacturing model, we expect to preserve profitability and a strong balance sheet. Additionally, we expect to maintain and gain share through innovation."

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "Net sales for our second quarter were nearly 4% above the prior year comparable quarter on the strength of our new Bodyguard 380 pistol and lever action rifles. Based on the softer demand trends we have seen across the industry in recent months, we have reduced our expectations for the second half of fiscal 2025, and for our third quarter, we expect our top line to be approximately 10-15% lower than fiscal 2024. During the quarter, our Board authorized a new $50 million share repurchase authorization and we signed a new unsecured $175 million line of credit, which increased our total available borrowings by $75 million and extended the maturity to October 2029. Consistent with our capital allocation strategy, our board of directors has authorized a $0.13 per share quarterly dividend, which will be paid to stockholders of record on December 19, 2024 with payment to be made on January 2, 2025."

Conference Call and Webcast
The company will host a conference call and webcast on December 5, 2024 to discuss its second quarter fiscal 2025 financial and operational results. Speakers on the conference call will include Mark Smith, President and Chief Executive Officer, and Deana McPherson, Executive Vice President and Chief Financial Officer. The conference call may include forward-looking statements. The conference call and webcast will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties in North America are invited to participate by dialing 1-877-704-4453. Interested parties from outside North America are invited to participate by dialing 1-201-389-0920. Participants should dial in at least 10 minutes prior to the start of the call. The conference call audio webcast can also be accessed live on the company's website at www.smith-wesson.com, under the Investor Relations section.

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
In this press release, certain non-GAAP financial measures, including "non-GAAP net income," "Adjusted EBITDAS," and "free cash flow" are presented. From time-to-time, we consider and use these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends. We believe it is useful for us and the reader to review, as applicable, both (1) GAAP measures that include (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) spin related stock-based compensation, (vi) an accrued legal settlement, (vii) relocation expense, and (viii) the tax effect of non-GAAP adjustments; and (2) the non-GAAP measures that exclude such information. We present these non-GAAP measures because we consider them an important supplemental measure of our performance. Our definition of these adjusted financial measures may differ from similarly named measures used by others. We believe these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for our GAAP measures. The principal limitations of these measures are that they do not reflect our actual expenses and may thus have the effect of inflating its financial measures on a GAAP basis.

About Smith & Wesson Brands, Inc.
Smith & Wesson Brands, Inc. (NASDAQ: SWBI) is a U.S.-based leader in firearm manufacturing and design, delivering a broad portfolio of quality handgun, long gun, and suppressor products to the global consumer and professional markets under the iconic Smith & Wesson® and Gemtech® brands. The company also provides manufacturing services including forging, machining, and precision plastic injection molding services. For more information call (800) 331-0852 or visit www.smith-wesson.com.

Safe Harbor Statement
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and we intend that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, among others, that (i) we are well positioned to navigate a challenging demand environment; (ii) by remaining focused on executing against our flexible manufacturing model, we expect to preserve profitability and a strong balance sheet; (iii) we expect to maintain and gain share through innovation; and (iv) based on the softer demand trends we have seen across the industry in recent months, we have reduced our expectations for the second half of fiscal 2025, and for our third quarter, we expect our top line to be approximately 10-15% lower than fiscal 2024. We caution that these statements are qualified by important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, economic, social, political, legislative, and regulatory factors; the results of the 2024 elections; the potential for increased regulation of firearms and firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability, and costs of raw materials and components; our anticipated growth and growth opportunities; our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to effectively manage and execute the Relocation; our ability to introduce new products; the success of new products; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.

Contact:
investorrelations@smith-wesson.com
(413) 747-3448

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

    As of:
  October 31, 2024
   April 30, 2024 
(In thousands, except par value and share data)
ASSETS    
    
Current assets:    
    
Cash and cash equivalents $ 39,093
 $ 60,839
Accounts receivable, net of allowances for credit losses of $5 on    
    
October 31, 2024 and $0 on April 30, 2024   52,707
   59,071
Inventories   196,035
   160,500
Prepaid expenses and other current assets   10,112
   4,973
Income tax receivable   8,120
   2,495 
Total current assets   306,067
   287,878 
Property, plant, and equipment, net   244,452
   252,633
Intangibles, net   2,523
   2,598
Goodwill   19,024
   19,024
Deferred income taxes   7,249
   7,249
Other assets   8,128
   8,614 
Total assets $ 587,443
 $ 577,996 
LIABILITIES AND STOCKHOLDERS' EQUITY    
    
Current liabilities:    
    
Accounts payable $ 31,627
 $ 41,831
Accrued expenses and deferred revenue   29,979
   26,811
Accrued payroll and incentives   13,198
   17,147
Accrued profit sharing   892
   9,098
Accrued warranty   1,485
   1,813 
Total current liabilities   77,181
   96,700
Notes and loans payable   98,994
   39,880
Finance lease payable, net of current portion   34,578
   35,404
Other non-current liabilities   7,625
   7,852
Total liabilities   218,378
   179,836 
Commitments and contingencies    
    
Stockholders' equity:    
    
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued    
    
or outstanding   -
   -
Common stock, $0.001 par value, 100,000,000 shares authorized, 75,677,848    
    
issued and 44,219,627 shares outstanding on October 31, 2024 and 75,395,490    
    
shares issued and 45,561,569 shares outstanding on April 30, 2024   76
    75
Additional paid-in capital   293,362
   289,994
Retained earnings   531,000
   540,660
Accumulated other comprehensive income   73
   73
Treasury stock, at cost (31,458,221 shares on October 31, 2024 and    
    
29,833,921 shares on April 30, 2024)   (455,446)   (432,642)
Total stockholders' equity   369,065
   398,160 
Total liabilities and stockholders' equity $ 587,443
 $ 577,996 

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

    For the Three Months
Ended October 31,		    For the Six Months
Ended October 31,		 
    2024
   2023
   2024
   2023 
    (In thousands, except per share data)
Net sales $ 129,679
 $ 124,958
 $ 218,013
 $ 239,201
Cost of sales   95,133
   93,192
   159,276
   177,034 
Gross profit   34,546
   31,766
   58,737
   62,167 
Operating expenses:    
    
    
    
Research and development   2,221
   1,724
   4,736
   3,522
Selling, marketing, and distribution   9,574
   10,952
   19,411
   20,993
General and administrative   15,779
   15,322
   29,480
   29,536 
Total operating expenses   27,574
   27,998
   53,627
   54,051 
Operating income   6,972
   3,768
   5,110
   8,116 
Other (expense)/income, net:    
    
    
    
Other (expense)/income, net   (5)   141
   (11)   188
Interest expense, net   (1,419)   (646)   (2,152)   (492)
Total other expense, net   (1,424)   (505)   (2,163)   (304)
Income from operations before income taxes   5,548
   3,263
   2,947
   7,812 
Income tax expense   1,414
   765
   921
   2,196 
Net income $ 4,134
 $ 2,498
 $ 2,026
 $ 5,616 
Net income per share:    
    
    
    
Basic - net income $ 0.09
 $ 0.05
 $ 0.05
 $ 0.12 
Diluted - net income $ 0.09
 $ 0.05
 $ 0.04
 $ 0.12 
Weighted average number of common shares outstanding:  
    
    
    
Basic
  44,523
   45,977
   44,922
   46,042
Diluted   44,935
   46,361
   45,404
   46,458

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the Six Months
Ended October 31,		 
    2024
   2023 
    (In thousands)

Cash flows from operating activities:    
    
Net income $ 2,026
 $ 5,616
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:    
    
Depreciation and amortization   16,261
   17,327
(Gain)/loss on sale/disposition of assets   (139)   682
Provision for losses/(recoveries) on notes and accounts receivable   -
   (1)
Stock-based compensation expense   3,722
   2,759
Changes in operating assets and liabilities:    
    
Accounts receivable   6,364
   (4,619)
Inventories   (35,535)   13,827
Prepaid expenses and other current assets   (5,139)   (4,953)
Income taxes   (5,625)   (5,178)
Accounts payable   (10,135)   14,682
Accrued payroll and incentives   (3,949)   1,324
Accrued profit sharing   (8,206)   (6,699)
Accrued expenses and deferred revenue   2,212
   2,859
Accrued warranty   (328)   (92)
Other assets   486
   397
Other non-current liabilities   (227)   (175)
Net cash (used in)/provided by operating activities   (38,212)   37,756 
Cash flows from investing activities:    
    
Payments to acquire patents and software   (112)   (125)
Proceeds from sale of property and equipment   237
   45
Payments to acquire property and equipment   (8,004)   (66,983)
Net cash used in investing activities   (7,879)   (67,063)
Cash flows from financing activities:    
    
Proceeds from loans and notes payable   60,000
   50,000
Cash paid for debt issuance costs   (941)   -
Payments on finance lease obligation   (89)   (681)
Payments on notes and loans payable   -
   (10,000)
Payments to acquire treasury stock   (22,620)   (8,212)
Dividend distribution   (11,652)   (11,080)
Proceeds to acquire common stock from employee stock purchase plan   749
   722
Payment of employee withholding tax related to    
    
restricted stock units   (1,102)   (806)
Net cash provided by financing activities   24,345
   19,943 
Net decrease in cash and cash equivalents   (21,746)   (9,364)
Cash and cash equivalents, beginning of period   60,839
   53,556 
Cash and cash equivalents, end of period $ 39,093
 $ 44,192 
Supplemental disclosure of cash flow information    
    
Cash paid for:    
    
Interest, net of amounts capitalized $ 2,353
 $ 1,725
Income taxes $ 6,785
 $ 7,353

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, except per share data)
(Unaudited)

    For the Three Months Ended
  For the Six Months Ended
  
    October 31, 2024
   October 31, 2023
   October 31, 2024
   October 31, 2023 
    $
 % of
Sales
   $
 % of
Sales
   $
 % of
Sales
   $
% of
Sales		 
GAAP net sales $129,679


100.0%
 $ 124,958
100.0%
 $ 218,013
100.0%
 $ 239,201
100.0%
Relocation   (2,554)
-2.0%
   -
0.0%
   (4,213)
-1.9%
   -
0.0%
Settlement   -
0.0%
   -
0.0%
   70
0.0%
   -
0.0% 
Non-GAAP net sales $127,125


98.0%
 $ 124,958
100.0%
 $ 213,870
98.1%
 $ 239,201
100.0% 
                         
GAAP gross profit $ 34,546
26.6%
 $ 31,766
25.4%
 $ 58,737
26.9%
 $ 62,167
26.0%
Relocation expenses   552
0.4%
   409
0.3%
   1,734
0.8%
   1,312
0.5%
Settlement   70
0.0%
   3,200
2.6%
   70
0.0%
   3,200
1.3% 
Non-GAAP gross profit $ 35,168
27.1%
 $ 35,375
28.3%
 $ 60,541
27.8%
 $ 66,679
27.9% 
                         
GAAP operating expenses $ 27,574
21.3%
 $ 27,998
22.4%
 $ 53,627
24.6%
 $ 54,051
22.6%
Spin related stock-based                         
compensation   -
0.0%
   (3)
0.0%
   -
0.0%
   (7)
0.0%
Relocation expenses   (312)
-0.2%
   (1,652)
-1.3%
   (437)
-0.2%
   (4,661)
-1.9% 
Non-GAAP operating expenses $ 27,262
21.0%
 $ 26,343
21.1%
 $ 53,190
24.4%
 $ 49,383
20.6% 
                         
GAAP operating income $ 6,972
5.4%
 $ 3,768
3.0%
 $ 5,110
2.3%
 $ 8,116
3.4%
Settlement   70
0.0%
   3,200
2.6%
   70
0.0%
   3,200
1.3%
Spin related stock-based                         
compensation   -
0.0%
   3
0.0%
   -
0.0%
   7
0.0%
Relocation expenses   864
0.7%
   2,061
1.6%
   2,171
1.0%
   5,973
2.5% 
Non-GAAP operating income $ 7,906
6.1%
 $ 9,032
7.2%
 $ 7,351
3.4%
 $ 17,296
7.2% 
                         
GAAP net income $ 4,134
3.2%
 $ 2,498
2.0%
 $ 2,026
0.9%
 $ 5,616
2.3%
Settlement   70
0.0%
   3,200
2.6%
   70
0.0%
   3,200
1.3%
Spin related stock-based                         
compensation   -
0.0%
   3
0.0%
   -
0.0%
   7
0.0%
Relocation expenses   864
0.7%
   2,061
1.6%
   2,171
1.0%
   5,973
2.5%
Tax effect of non-GAAP 
                        
adjustments   (238)
-0.2%
   (1,234)
-1.0%
   (700)
-0.3%
   (2,580)
-1.1% 
Non-GAAP net income $ 4,830
3.7%
 $ 6,528
5.2%
 $ 3,567
1.6%
 $ 12,216
5.1% 
                         
GAAP net income per share - diluted $ 0.09
 
 $ 0.05
 
 $ 0.04
 
 $ 0.12
 
Settlement   -
 
   0.07
 
   -
 
   0.07
 
Spin related stock-based                         
compensation   -
 
   -
 
   -
 
   -
 
Relocation expenses   0.02
 
   0.04
 
   0.05
 
   0.13
 
Tax effect of non-GAAP
                        
adjustments   (0.01)
 
   (0.03)
 
   (0.02)
 
   (0.06)
 
Non-GAAP net income per                        
share - diluted $ 0.11(a)
 
 $ 0.14(a)
 
 $ 0.08(a)
 
 $ 0.26 
 
(a) Non-GAAP net income per share does not foot due to rounding.

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDAS
(in thousands)
(Unaudited)

    For the Three Months Ended
  For the Six Months Ended  
  October 31,
2024
 October 31,
2023
 October 31,
2024
 October 31,
2023		 
GAAP net income $ 4,134
 $ 2,498
 $ 2,026
 $ 5,616
Interest expense   2,081
   1,233
   3,527
   1,788
Income tax expense   1,414
   765
   921
   2,196
Depreciation and amortization   8,181
   7,972
   16,206
   17,203
Stock-based compensation expense   1,869
   1,484
   3,722
   2,759
Settlement   70
   3,200
   70
   3,200
Relocation expense   738
   2,195
   1,913
   4,113 
Non-GAAP Adjusted EBITDAS $ 18,487
 $ 19,347
 $ 28,385
 $ 36,875 
Non-GAAP Adjusted EBITDAS Margin   14.3%
   15.5%
   13.0%
   15.4%

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(In thousands)
(Unaudited)

    For the Three Months Ended
   For the Six Months Ended
  October 31,
2024
October 31,
2023
 October 31,
2024
 October 31,
2023		 
Net cash (used in)/provided by operating activities $ (7,397) $ (2,874) $ (38,212) $ 37,756
Payments to acquire property and equipment   (3,302)   (34,926)   (8,004)   (66,983)
Free cash flow $ (10,699) $ (37,800) $ (46,216) $ (29,227)

 

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