Earnings call transcript Q3 2023

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Operator

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the AMMO, Inc. Fiscal Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. recorded this call advised over is and also on of the the Participants is conference purposes. this being being Instructions] call that are audio Internet [Operator playback for broadcast live

would of IR, go Arnold ahead, like to firm. Investor CORE turn call the the I over now Scott sir. Relations company’s Please to

Scott Arnold

morning thank you call. and for conference Good participating in today’s

President Officer; Executive leadership Chief Smith, Joining Fred Chief Wiley, are AMMO’s Officer. and and team Officer; me and Chief Financial from Chairman Wagenhals, Rob Jared Operating

management this including During operational future making statements that will call, be performance forward-looking address results. for statements, AMMO’s expectations or

statements to other differ Forward-looking factors results those from cause statements. actual and risks materially that involve may

most Form information Form risks, in For about that recently it. the the the XX-Q, the please periodic these call, Risk releases press statements reports and X-K accompanies SEC XX-K today to this the on particularly filed in company’s with and more refer filed Form AMMO’s Factors described cautionary

call conference in that includes can believes Today’s its measures performance. evaluating be useful non-GAAP financial AMMO

should information or for a substitute accordance in prepared additional not in consider as results with isolation GAAP. You this

reconciliation GAAP financial measure a directly of most net please company’s comparable press in located For loss, reconciliation see its to measure the non-GAAP this the earnings table financial release.

or call. contains The AMMO information law any by occur is accurate to content disclaims February this that or information revise sensitive Except events any call of required update as only publicly XX, this after that time to as XXXX. circumstances of obligation reflect today,

turn Wagenhals. my to now Fred to pleasure over call is It the

Fred Wagenhals

newest team and by how earnings call. introduce to our for start excited Thanks XXXX I COO, I quarter the of joining over at am manufacturing and moved to operations I us join person Manitowoc. everyone Smith President The us management time third appreciate would our member past spent our Jared saying like call fiscal to for searching new right facility us into team our as focused the we to year the a lot help to shareholders. management our refine

I've what team in the the months a level to board he's Jared be since and is of our who growth. management across market colleagues. floor items and to great before our the came of my want job the will this Jared someone discuss marketplace our over detail past to take and Wiley, seen integral a piece on just company our segment to did an I And environment next the from aboard, but Rob the hand CFO, in finding will one. the business, in manufacturing both comment performance did I few and

We started the this while staying focused company ammunition of our product bring working with capture the meaningful on a manufacturing mission vision in innovate and operations. our spots the for picking share the they to improving customers XXXX market, desire. All acquisitions, always and to

the Regardless have of grown are drivers to to the but the am leaps I bounds proud these already us. we consumers political before of left of out and the all in have hitting by work accomplished, lie and plus meet in and we've about are team excited challenges the is We their hard much hear and and inflationary U.S. years now there throes these that assembled the coming Washington, recession, short what a opportunities pocketbooks. spin of in is we do, seven

peers market and both by felt Those its alike. AMMO pressures across are the being

of will and in operational within continue And to the as we will and face environment to capacity position the those we made are will our these company doing number what increase efficiencies. However, are have we responding of make the to already changes a highlight to best positive Jared headwinds continue we challenge. outline and

excited are about take AMMO’s advantage occasions few and can to leverage opportunities. revenues both off we platform, bottom are going sellers driving these will this and that spring the enhanced the significantly of and I a have new profitability users, that start spoken greater buyers so on amazing GunBroker.com development marketplace enhancements these the rolling to GunBroker.com line. This at platform

the We of are is the bringing join for continuing additional focus prime the table. experience are Jared to and of adding best-in-class XX strategic explore new a market leadership we team. our to folks example to the the mix, years to very

marketplace going already the without further a COO. At together He lot President this AMMO, and forward. to both has through shareholders. time the I of the about in-store spent call future AMMO's have and Jared time over ado, would our plans what We our its with we speaking of you to turn industry and state and will our team believe walk Smith, current new and operations for like

Jared Smith

Thank morning, you, Fred. everyone. Good

I've First, want opportunity COO. this for January been a saddle and the President as the the I on days. mere I be here to AMMO so X of team thank in the XX to for company year, joined

with bear ground got a So, to we've because cover. me bit quite of

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in with this must the operations, to trajectory innovate, of I before position Inc.'s bring of of the the ultimately current understand vision I'm and market, the excited you, opportunities company. growth well the as continue the one AMMO this it. state share potential but the ammunition begin, team joined huge ability as to of to change, for transformative company we because my

XXXX. For the last customer's inflations highs cause for as confidence wallet erosion milk, and such other industry two from and quarters, in of headwinds has seen Consumer serious an record early the XXXX and gas, bread. items its increased the

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All these a issues of in lead to the [ph]. [.XXX calibers] for time X market, high and cost especially normalizing

see margins. impact not sell-off do have will an and higher moving will and slower continue last factories sell-off effect flushing continue components, Our commodities as adverse inventory to overnight we out to quarter this in pivot we on a negative priced

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focused most where time, towards Sales based on and opportunities top weren't on and are and us this sufficiently companies today. our revenues which during teams oriented were trend. maintenance growing sourcing brand margin purchasing leaves were we line we like this Our

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the new least gun expensive purchase is likely you make. hunting/shooting consumer, For the any most

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on transactions In no to processing based in a carve has GunBroker website transaction. past, that and the buyer our based singular XXXX, for exchange marketplace on a revenue between seller facilitated In with X.X singular only received product. GunBroker fee on billion ability

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about sales sellers. different to multiple X%. managing think and to shift implications, while locations state different all You We that, got managing buyers tax

efficiency. value terms, real data and value in customers Our privacy,

cost this space is the all This kind of largest managed the and We is for our in, this higher value more and while complicated entry protects the that intricate The the competition. maintaining operate marketplace moat for auction its us. we of offering industry.

the seamlessly We this efficiencies and largest to flow space make tech this are the in player in the security space. and us operational the keep

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I messaging now. and feel we GunBroker's messaging the articulated lost. and how must our must to portfolio, buyer, our going The future got experience, excited forward be user The change. not I is Within new future and change. of team. about how until go hope can I I am this the seller experience look tell market you our the couldn't was why company. about of more joined bullish that

facing every and tailwinds. have creating passion to can't the team own While we this our currently energy day. I table industry is the busy been express single the brings headwinds,

creating on to seeking we constantly are We facilitate we're leaders that into this here. are top the boarding to larger and new they growth analysts, engineers talent see and can fit accountants, how ecosystem talented

allowing you At time, my over Wiley onboard financials. would to team, it like this this to me through thoughts Rob for to walk us the Thank come turn today. taking and the listen to I to time,

Rob Wiley

Jared. Thank you, Welcome everyone.

our review detail. third now me quarter in financials Let more

and the We marketplace in with online first profitability. in direction market the excited drive two of our our the our are enhancements new headwinds strategy, year quarters the of upcoming along facing the in industry, about in which fiscal rest with segments the coming manufacturing but next of today our remain will half shift

the expenses contention, have cost with compensation, in the our net of in The drivers margin payroll commercial proxy expenses, reduction slow costs, increased across in by corporate to one-time U.S. operating to global and stock inflationary As from expenses impact to most legal as the being market within freight along operating the ammunition period. the commodity, see higher such related felt space, increased recessionary for remainder revenues a and of the and our segment. is the industries. we sales, compression resulting loss our on peers ammunition insurance, observed continue continues

toward our increases our recoup of in our such of our the And expanded ending opportunities plan operations up brass. our [indiscernible] enhanced the earlier the caliber operations these cash brass, offerings [toward] [ph] inventory in in address direction quarter to call, and provide tied To as and direction as including in discussed we the of profitability manufacturing premium rights manufacturing that large of opportunities March.

Additionally, we regard, we currently this robust confident site. profitability and continue to improvement leveraging the next which to spring this which to the remain payment growth drive from are opportunities we will represent first fiscal launch for tracking push the platform GunBroker.com forward site. half that year, incredibly on our to and in marketplace, of cart In reasonably our the suite great

mainly ended comparison period. This the in third quarter. was XX.X impacts impacted revenue approximately of and segment also our marketplace quarter to the was the These prior for affecting year decrease the of in that of approximately attributable the from our are a We year decrease XX% a ammunition revenue with currently million in market. revenues from conditions decrease million affecting year market XX.X period. the inflationary total segment XX% prior The prior

operating and still wavered, our top performance. GunBroker.com still margins performance strong our line comparable revenues remains to of are However, historical our marketplace although

was in XX.X prior compared costs. cost reduced increased quarter, to million related year million to and for of were revenues XX.X the This volume Our the sales approximately commodity comparable decrease quarter.

of to this XX.X in resulted compared XX.X a Accordingly, million. margin million, gross

to premium caliber but starting transition large to and we profitable quarter sales more these first quarter volume compression reported next of our activity do increased ammunition more our sales of another focus by our sales rounds. As fiscal quarter, brass costs, the swiftly expect shifting anticipate in to fell in margin the our of year to

our year-end assets our remains liabilities since with sheet current by virtually unchanged. our decreasing strong total and current total XX% balance Our

revising our income We believe adjusted share EBITDA a adjusted moving accurate with of forward, operations. representation our calculations which the provide we are market net per will and more

are calculations, the incorporated historical To new our net into you to and our guidance. income transition forward providing see per expect can well adjusted our we and to calculations as adjusted share calculations, EBITDA as moving updated

to For per adjusted X.X X.X the prior of our forward moving adjusted quarter XX.X of adjusted million, EBITDA using million. of adjusted income recorded XX.X to the $X.XX compared net a year per quarter, million and share in we comparison EBITDA compared EBITDA, year adjusted recorded historical resulted or historical $X.XX in we prior adjusted share share income prior the per our period. EBITDA for million year in the period. calculation, loss approximately in calculation, $X.XX Using period, to in This EBITDA of net the adjusted

guidance adjusted calculation, was activity net in per to updated net of period. per we the our a as for our in $X.XX Using the year income to Due XXXX share reducing result market share our the year. in $X.XX adjusted shift, comparison decline fiscal of are sales income prior

We million using calculation are of XXX million new adjusted million. XX updating EBITDA to guidance of and EBITDA our XX revenues of

next direction a and our ammunition our sales profitability gross new we brass the our year, rifle casings to fiscal of to performance of segment. expect increase our margins the company forward of increase increased through that Looking will ammunition

GunBroker.com profitability. for Additionally, result, the in processing anticipated offerings a analytics the [ph] increases gross [cart are allow as and position increasing and in] our payment and suite, platform, launch revenue of volume our marketplace merchandise to to

the call opening turn I the for will our operator over now concludes Thank questions. That to you. remarks.

Operator

is Matt Please Roth with question you. from Instructions] Koranda the go And Capital. [Operator ahead. Thank first

Matt Koranda

Hey, guys. Good afternoon.

AMMO quarter? in you start Just price Can declines an demand to out versus want sort seems be curious embedded that the like, in disentangle of for mentioned third segment the curious any Just us, in it issue also during of volume to business. with you just how sort the of, production And at there that the was the terms or facility issue, currently about but decline? you're demand all a supply was disruption to think quarter? just experiencing the

Jared Smith

is this Matt, Smith. Jared Hey,

to to your repeat of sure you question. I'm the First I And question make back thank going heard all, correctly. it for

correct the or quarter of related issues? this of asking lack production of to You're your market sales, issues just that lack assumption about or pure in past question? volume was demand in that Is the

Matt Koranda

crux of the Thanks, it. that's Yes, Jared.

Jared Smith

Fantastic.

to facility, mix reality is a have and the to any up. on. into walls XXX,XXX When is, racking that There back both. So, set, it's this have turned you that square new of Machines facility move go laid, in there's has new foot to place. like be go

higher in the by our is there in Absolutely. the Was market? X from move? factory the recordings, X was from X but the to real have powder, to is be too fundamentals reality [ph] an these we of and have [.XXX] relation and the that an as the the total capacity there impact [ph] we Absolutely. the didn't the primers, will we on market, to And other months [.XXX] shift have said X impact we the tuning didn't that plays sheer So, months. volumes to and demand over affected didn't prior I our margin next

Matt Koranda

more expect I'm curious It center go cut in just over quarter, embedded Okay, you in over the the that Curious to more terms into to for mix a terms three the, and this over, of sort within should alluded to a AMMO next, expect it, to? going we sounds the more differentiated the but us we capacity? more of casing business how mix capacity as could maybe what the could the production it. obviously two next capacity you've casings cuts the kind to rifle you you've as also how you quarters, of call of basis. and path of, to couple quarters just rounds on trend to to some [indiscernible] if forward rounds, that draw you're fourth helpful, Maybe got after fire just of going alluded you've like the if be speak That's changeover in Jared.

Jared Smith

existing to going production historic have AMMO what compare its can't forward. we factory You in

unique our this the XXX every fact factory lines. we have not is that capability in a very blackout other millimeter interesting The is on to that change from market. to of about X exist one does this That ability almost over

off of of action both the draw days in alluded premium to and unique. out our ability truly long capacity. action earlier, sell already rifle low in sold cases to is entire short, And as our I we So, rifle XX first

So, see off already course we'll heavy a May, of inventories process be the sorry, February, we loaded that of brass. our to in products is then April commodities built what will that have been and I'm production are have shift that you'll in and that March, April, moving of we the capacity selling being

margins. we'll So, instead XX% of X%, losing be gaining margins, XX%

top You bottom will but is. in a and see line reduction line, the you'll see that's a the growth in the focus where

Matt Koranda

And maybe just could with got share it. guys about that you or you how market that just with retailers. Okay, whether think then whether be OEMs clarify be

about think Just over couple talked curious of volume customers how How about just purchase over and defending quarters? they and the retailers next or lower have you are volumes, of couple have do lost currently what downsizing quarters share about any – essentially last across have you the there you're the board? to guys think you market

Jared Smith

they across downsized They've that these are commodity positions profitable not in also They've the products. realized board. around

this the total this really Our factory There what space we There premium is the on which is ammunition out share this for market there the ammunition less share line manufacture. around. is the position X% and was we is built market manufacturer. total trend massive is than market for [massive] U.S. rifle, for [ph]

that match don't with capacity in capacity, we beauty our facility story have is case to forward rifle Wisconsin that going but manufacturer with we a brass to loading the AMMO. And capacity cases. produce of in The produce the full the is ability pistol

our following be our lines that there. production Our see orient to partners, trend goal the around within for facility opportunities. The products niche industrial we the is to large by to OEM goal us out GunBroker manufacturers support those the to able is find

those European very, It's the are capacities now seeing It's theater. across like .XX collision to rimmed colt] and heavy very cartridges that opportunities? due What mag impacts right trend we're [.XX [ph]. from

able and are follow because lines don't we [ph]. We dedicated [.XXX] to have to those X

calibers [XXX [ph]. flexible dedicated blackout] a of from completely to have range X to lines We

It's up we ability produce of that meet we machines at can't X to turn a X third demand don't high margins, our new margins. projectile don't AMMO or I When we'll that [projectile] sell to sell factory. on make millimeter because [ph], turn brass millimeter off our at high have

Matt Koranda

Super you clear. us And if could for finally that Rob. maybe Got just Jared either just together it. then or stitch

especially should Just forward be the is in margin the we manufacturing the relatively gross thinking like for looks the front. it GunBroker about rocksteady path business, margins, way for on

So, really curious think manufacturing XX% about to mid-to-high margin? core How business. the call it back about do we that getting gross

Jared Smith

piece Every – go the time between it the the we a and margin and as in brass, we make even on XX% is. XX% up more sell you anywhere caliber, of higher margin

So, which .XXX for, have XX% Lapua, to capacity are those we .XXX Norma XX% Magnum, plays. BMG, margin .XX

is that the days, have opportunities We to shelves. don't goal we over So, in around niche profitability. focus And those fill through our next completely this based focus to on XXX sell on existing opportunities can load. brass. The throughputs turn we to when ship we see will to load, profitability, we'll

putting we're this in the to because next done. say seat budget lot team sat into with following this week the are go XX days, of a there's I more and in still weeks, only – but and forecast, our down we be here to have our a new I'll on for I've work lot and

Matt Koranda

and Thanks. appreciate Fair I all I'll guys. enough. leave it there the commentary

Operator

Edward Riley Please is EF from go the next from question Hutton. And ahead.

Edward Riley

still Last is Thanks you today? export the market, Hi, wondering the quarter, if my case demand question. for expectation cited from guys. this strong of taking

Jared Smith

up this market. we're focus from demand and are small and manufacturers today seeing focused by freeing capacity opportunities, on XX] actually again case export that volume, output the is larger [ph]. it's high the some which to XX cases around for export those the [indiscernible], internationally. on space doing? Because It's is. especially stronger lines And It's diverting Lake what space, domestically It the [XXX, XXX in – their once high in in City, both larger

Edward Riley

the Okay, give could sold great. details out if around the customer XX mix over capacity And then just around days, long past already on the us maybe wondering the you there? rifle comments being any

Jared Smith

now them and .XXX Norma, players heavy this have things their those large X coming It's bought players the they've the Rem and industrial .XXX quality tremendous that XX can to back come the in that shift They [XXX, odd for are margins. Win OEM, that's Mag, partner And an want say are known year-out. market. long that demands very, are that [indiscernible] we to we very where [ph], year-in, a they’ve action, help strong Mag] When past. partner, towards seeing X, millimeter that meet

business. That So, it's not credit. bad our non-strategic to a with is one-time customer

Edward Riley

Okay, Thank got you. it.

Operator

And Mark Lake Smith Street. Please the next question ahead. is from go from

Mark Smith

guys. Hi, handful want here. stay a AMMO of Jared, of I've on questions just kind the first. piece to, got

to type how see the [.X Just of these kind some mill the are issues walk channel channel you even and potentially how domestically where and some heavy? of .XXX, specialty inventory – long rounds at you too takes gotten up is of clean as today? today, [ph], increase that rifle it through that in in us have inventory seeing of we calibers fire a center other lot looking are .XXX] Obviously,

Jared Smith

[ph], of .XX millimeter the are factories as every mag, is overly I [X.X years. they've And X long on new in There see [.X still overly are Norma [.XX really focused And and you filled. earlier, spaces cyclical is up channels think space strong last demand in this focused the where we've .XXX end calibers market, that it on been that's with art, said yet be cartridges, your millimeter still colt] this [ph]. seen market over the really that to towards. our PRC] market our capacities bright we'll Magnum. and for [ph], X XX Those I .XXX] PRC, tuning rimmed all

in total recessionary to effect, of in market share. and on share the about is say elsewhere. divert production that volumes there's once and sitting those not due that's the inventories, terms coming again an When our we primarily space commodity And back inventory you space. high in But dollars too will sitting those yes, inflationary total in shelf just we're because concerned retail market

Mark Smith

of and just to selling the of as other by brass of shifting other maybe, whatever over PRC] about you [ph] purely shifting to demand through, walk lines into some decision over these of how to And [X brass that kind OEMs we calibers how kind Okay. hit think you weigh rounds, or kind weigh some versus of to shifted making? over us this

Jared Smith

call answer market line we like direct what we the clients have high creditworthy When account Creedmoor, there going that that continue to been Did going we for marketplace. are and to find have that in divert a feed We're those the management. at time look are are to are space. will from is this our that areas Is relationship that we oversaturated we again. and decision coming and X.X segment calibers based getting how making and Our to upon last strategic X.X clients time that year clients the that's are trend other away that we question? these the look that your six Creedmoor at the things focus then can we underserved

Mark Smith

That does.

new done why perhaps maybe little mirror other get it build was or some a just that other couldn't of some was wasn't to that just you of having slower some to maybe on want you through, piece of sooner? powder of bit shift, look some it walk plant these rounds? The And the that the on me it being rearview projectiles the needed of shift I

Jared Smith

get enough but fast we're we we we're But powders way, in and We and after primers after operations We shifting [ph] now but done fast to of never We and enough it get months supply did enough. by [annealing record couldn't couldn't here enough. in go those up XX get fast the tuned rounds. couldn't the that's the factory get those pace couldn't go our staffing to opportunities. other lines] the time, the up we're It was pivoting. once again, up factory reorganized. set and the and And and

Mark Smith

just And we at maybe just manufacturing, brass purely the about as capacity look purely added new meeting, we plant and on you're walk capacity Okay. through, as of your kind think in then today at as us your far casing what's casings? as where

Jared Smith

current Historically, to facility XXX cases ever maximum of of that's operation. that XXX to shift facility within plant capacity our ever million in AMMO, that the came exceeds cases that of out out in related past, million came previous the XXX space available this The any any AMMO maximum related the million out to previous

So, we can double of the cases. capacity

for going of these to ample have not be We manufacturing forward. space and go opportunities. lack It's to going a after capacity loading

Mark Smith

And ahead, talked oh, go – Great. Okay. you guys Jared.

Jared Smith

coming what to beauty where as we out a the No, allows this that a making on upon saying is our rich forecast analytics environment that us basis decisions with and can coming in we're lines all GunBroker. the of the I is the that was until trend really of just I better our didn't realize team make such down and we're door weekly investment. tune seeing data It manufacturers next based on sitting

Mark Smith

easy Is you pretty or that and you that you shift production do from are maybe have within for hit over? more casing? to more in pretty other instance Okay. of shifting some able straight if wall And there Are flexibility is more on OEMs? brass demand tooling dyes shift some that casing that see and quickly to brass needed

Jared Smith

that and as invest are but There's There's tooling not evolve, put sets the CapEx need calibers we the always dyes to to of have we already breadth tooling in the that there. dye we to I existing and we massive to said really can and into XXX [X [ph] in from profitable. unheard industry. It's go, like this place machine. on can go blackout] make of same earlier, It's this new

Mark Smith

the far do you you're trends end like well. at, Good. demand can anymore decision-making you're that through as at And over from where to sounds ammunition. in manufacturing some that us GunBroker of shifting just that learning Walk today and the to as then up on seeing GunBroker continues

Jared Smith

is baffles months. awareness transaction space that my today six the This single it's of going because are lack people into a by next a seeing of this shift as the the a X buying only the this of Look, their they're by piece been where mind where way transaction go I not a that and has within to dollars. is is, we're to capped and the GunBroker is really where that's also seeing investing came single a for development GunBroker. of And huge ability cart where done the rifle, millimeter PRC

PRC] [X [ph] to with put or leverage that able work going I firearm with those latest relationships industrial to build That's that and the ability next our and data a forward. and to want within for our with of go, partners, manufacturer. package the marketers factories, can those to together are market data So, holster work the those to millimeter us take going the kind own of be we people

Mark Smith

maybe additional the us one be for for at guidance look guidance, any as give well built quarter, give might and you and it's but any line info sales] on sales even though that's what Rob, think your you as you. GunBroker Any into last as of breakdown breakout within, March be top us this [ph] I question I for small may best they can a me are maybe as we the can your within just [casing the shifts realize quarter? guidance kind

Rob Wiley

come sure for of Mark. Yes. of platform. that side up at QX, and give Wiley. forecasting looking XX% granular the the we're of business we the from GunBroker revenue Thank think with the our of of we of This can you, on Typically, just XX% the you remainder too the don't the but ammunition is casing remainder split but there, guidance, Rob really

Mark Smith

guys. Thank Perfect. you,

Operator

to for any this would closing remarks. session. turn Ladies to concludes like the conference question-and-answer Wagenhals gentlemen, and I our Fred back over

Fred Wagenhals

the you're came company investors made Have we good day and been a of can't just months to see months. X you a this see sitting, lot In it since you watch but the Jared and we've a X big XX Thank days, progress over onboard. very change Yes. where I Thank go from there's next know where in much. gentlemen.

Operator

has Thank today's conference you And concluded. attending for presentation. now thank you, sir. The

disconnect. now may You

AMMO (POWW) 14 Feb 232023 Q3 Earnings call transcript