SWBI - Earnings call transcript Q4 2022 | Smith & Wesson Brands, Inc.

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Operator

Good day, everyone, and welcome to Smith & Wesson Brands, Inc. Fourth Quarter and Full Fiscal 2022 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson’s General Counsel, who will give us some information about today's call.

Kevin Maxwell

Thank you, and good afternoon.

contain may today comments forward-looking statements. Our

of believe and use forward-looking the intended words intend, expect, statements. estimate, project, other identify anticipate, to Our similar are expressions

product on may preferences, consumer industry for opportunities such include conditions statements growth conditions strategies, statements products, trends, Forward-looking as share, also inventory our and development, our demand, in objectives, market topics and general.

uncertainties from results current and by today. are filings, expressed risks in our of and with on Forward-looking to implied future subject actual website, our available our materially the statements a replay that judgment represent call. our cause about today's These those uncertainties our or risks SEC differ could are along are to statements which and described

reference We have certain results. no obligation financial to We statements. non-GAAP update forward-looking

GAAP planned and results the costs fiscal business our distribution non-GAAP each always of in to manufacturing and products press the Tennessee, XXXX, EPS, when operations are expenses our reference of earnings can and other diluted to Our Outdoor in fully available today's financial SEC release, accessories related be found headquarters the relocation we financial to which our costs. website. certain Reconciliations and and filings is we in on Also, COVID-XX-related measures EPS. referencing of exclude of measures non-GAAP spin-off financial

does due consumers, transfer in to market mostly consumer share and Adjusted inventory enforcement is and licensed demand or retailers the given the for available period, Finally, correlate any and than shipments that adjusted generally to at those when removes our federally other we by end Foundation firearms the Please to NICS, time generally Shooting only remember National law channel. the not to we agencies firearm for counter. NICS NICS considered best published discuss conducted NICS metric Sports in believe, data. results, on we purchases. retail distributors we adjusted are not referring NICS NICS background proxy a to firearms directly Because purposes based checks FBI levels

our remind the would results call and items to any hand unless to refers I EBITDAS speakers, reference over like operations to Before EBITDAS. reference continuing is that indicated I otherwise from to adjusted any to income to statement you

on Mark and and With Deana Smith, are call today's Mark. us Joining to call President that, our CEO; CFO. turn will our McPherson, I over the

Mark Smith

and everyone, thanks, Kevin, joining you, today. Thank us for

perpetrators innocent It that nation the to discuss prayers for for victims for at those our us. of and of is us show of constitutional we feel partners, continues to firearms respecting Wesson with rationalize our actions industry express recently. criminals facing deep nation I have me Wesson law in programs Americans. most offering Smith unimaginable solutions enforcement to our unthinkable that Before impact results, law-abiding join of the disregard to all the want keeping of the existing of lawmakers by mentally work ATF, making our closely that these will the of have & among find a the & all, Please befallen communities impossible and safer always real our hands the in augment of and lives evil the and families the while the sorrow to out loss. meaningful most but communities, rights unstable, who the of acts of such Smith violence, for especially

quarter Our for top and fourth the line bottom in line expectations. with results were

faced year slightly sequential a difficult timeframe. up basis, fourth despite quarter Compared very NICS down Our on approximately prior period, to X% reflecting being volumes adjusted same comps. was X% over higher revenue we the the

as consumer expected, significantly the normalization was for we height our to flexible quarter, of outpace were we Therefore, significantly to and by comparison year year's to able the ago, months of manufacturing overall in in and the impacted last demand surge, this model XX As our leverage firearms. were the fourth pandemic revenue competition.

make As pricing overdue product by mentioned we I has and in adjustments, portfolio have before which rising resulted in to were during ASPs the past, long nearly the surge, XX%. able

quarter fourth down not our XX% results from these year. Although prior impact from benefited unit offset their volumes adjustments, to enough being was approximately

Turning evident to latest was flexible profitability, again manufacturing results. our the strength model of our in quarterly

times points margin gross gross our quarter the our despite upper cost year-over-year in margin it long In to As quarter, allow term Similarly, improved upswings rapidly in low near deceleration fourth significant many fourth still declines points model, does we've out not sharp higher model but us us margins absorption the in sequentially improved financial maintain periods cost of manufacturing sales. market of basis strong to was and by the in react high. by rates by keeping profitability also only pointed fixed a to and basis this net expenses. lower allows before, EBITDAS during demand, revenue, sequentially, XX operating driven XXX end and

Looking FY surge from forward, pandemic down levels expect throughout we the of the market to last will of demand remainder be significantly continue that 'XX, year.

all the with shooting While record not said, do and inflationary a transportation on hear recent see pressures to the main we pricing that of over street of activity remains of like American encouraged but material offsetting healthy risk the accelerating heavy interest the versus record we and good from offerings margin fiscal near promotional are 'XX. our and lot products a 'XX helped, our feel pocket is our pace consumers near the impact of many returning risk. channel the will at the factors. firearms position That are challenges of our about with Like purchase competitor's half additional encompassed demand fiscal relative as of months impact our levels in would've potential that to managing a to half books of households, reminder, in second year this sports term. have the we look face actions are which the market so inputs key there and anticipating first our in inflation first-time inflationary and XXXX, firearms significant with like partners today, labor, Pricing for calendar companies we the we as cost,

our more comfortable that a that this model line as financial at year cash volumes take margins expect reminder margins we normal more much will we From within line is with of calendar during and unit point revenue XXXX. to full includes this tracking our that come which than to a asset each year, XX% generating in last we traditional be calendar expect and year. to $XX which brand closer million rather of and on XX%. Investor consistent the top XXXX, communications, past release deliver in a we significant Additionally, we Day, our new a in and XX% have long-term with again, terms perspective, a of to are half development our dozen Maryville, updates. the Tennessee, actions product are we we than But if in relocation XX% gross confident fiscal could by is EBITDAS that shared no to products told, approximately remain of XXXX in end pricing ability the real All to future year results needed. our will

track remain completion progress steady in half make calendar XXXX. second the for of on and to continue We

our $XX stockholders. $XX and this that Turning repurchases we to repurchase year, X.X EPS that the in in rewards million are million million spent by shares to capital strategy paid to were 'XX long-term We years allocation; two last over estimate share $X.XX and accretive dividends. we we to FY last committed

quickly changes we Deana agile in and to matter today, XX% that, fact, of are the the for over our an growth levels has quarterly business long-term matter model driving we per of summary, well to cover a believe dividend hand that deliver $X.XX In share. strong, board approved financial no we for what with a remain marketplace As announcing consistent our our in that the call positioned designed I'll to stockholders. profitability, to to value details. With adapt increase

Deana McPherson

million fourth fiscal the quarter sales XX.X% the of lower fourth Net when Mark. $XXX.X $XX.X million comparable million than quarter for of surge or XXXX began. pandemic-related $XXX.X below quarter and prior was the year Thanks our

sales strong capacity, in fourth our to achieved every unit produced due last a we XX% During with allowed sold. record production net that increase quickly to quarter demand combined be year, nearly

by plenty than our of with current our demand was checks resulted quarter distribution decline inventory prior in combined shipments fourth however, rate evidenced XX.X% NICS. in in as NICS in channel a expected lower During faster reduction the This the than year. the an at

for unprecedented NICS and record month XX begin no to the demand summer, inventory in last began began surge saw been adjusted as to levels we channel hit grow. longer we to moderate firearms As the checks in have reporting,

in sales the the year quarter, of time unit below basis price XXX above XXXX. and partially a impact and production mix in reduced margin inventory record fourth basis shift was the has achieve lower Gross certain to in in XX.X% of the adjustments. two shipments was prior recent realized volume ability and resulted fourth of decrease reserve XXX naturally increases, in year-over-year margin in guns, this spending and primarily from points only but price reduced realized throughout last the XX.X% due lower the in The quarters. was long to quarter XX.X% points comparable Our quarter year to offset fiscal lower by more

increase sharing of that $X.X a to million we last slightly quarter, and achieve lower associated $XX.X bonus employees to in of our associated reductions reduced fourth advertising, the recognition and helping billion In relocation year of fourth sales million promotion due lower their expenses. territorial Operating and efforts margins, a positions, million Partially annual spending on advertising. year sales. quarter, the co-op operating in with included lower and primarily in net reduced to profit was addition, reduced accrual prior compared quarter to costs income us related an million expenses. $X reduction upsetting increased these and in prior year in paid of distribution and special million due wage comparable were benefits quarter our million costs legal cost local for in to incentives, a our $XX.X offset $X.X expenses shipments comparable $X.X the $XX.X digital by with than gross reflecting Net lower to vacant

$X.X than strong million of share at in but XXXX, million lower sales, net margins higher and in in $X.XX XXXX $X.XX XX.X% quarter year, income compared more but double quarter last $X.XX fourth was of fiscal reported higher than quarter of the of expenses. lower the the gross EBITDAS in fiscal of down slightly $XX.X we share per XXXX. than $X.XX remain sales. GAAP spite improved nearly $X.XX, XXXX. lower to fourth fiscal $XX.X earnings $X.XX of was earnings Non-GAAP when due quarter operating fourth this per was However, of in the million from to of

the million of review a year, full we to in $XXX.X fiscal XXXX. fiscal achieved XXXX, sales the billion below XX.X% above record Turning $X.X XX.X% of were but

enabled Our of during ability grow half the to XXXX that to demand first XXXX. second significant our capacity the respond the to us lasted half through production much of of fiscal

in shipments basis production resulted elimination As sales fiscal our shipped. away increase of demand margins lower, lower The in and The began Gross the less soften, points or were for product prices second company due fiscal fiscal the increased still with was mix second XXXX ASPs average partially in than priced two were from a history. of basis margin highest unit products. combined to shift lower XX XX.X% price and fiscal levels points primarily but higher increases selling half most resulted XXXX. profitable promotions in offset above XXXX XXXX higher by and from to year

slightly record earnings For $X.XX, non-GAAP share highest earnings the was our net $X.XX second per again, company income year year, and including last history, operating profitability of translate an full $XXX.X the our of EBITDAS of $XXX.X of sales, strength XX.X% per our which million, of model. of to the share GAAP of margin million, reflecting in year, EBITDAS above

million during with million in Turning equipment, in and $X.X quarter We $XX.X resulting $XXX.X the the million cash. capital spent quarter, million of we bank from cash debt. cash dividends, to in ending the paid resulting cash fourth no company on in in free operations million flows; and $X.X generated $XX.X

that $XX to the million cash year, million over on our years, $XX.X generated shares $XX capital allocation which used spent priorities $XXX.X dividends repurchase equipment, million $XXX.X During our to full in Executing resulted past for described paid in the have from we cash free capital stockholders. million cash. of in we operations stock and free X.X two common this in we million million our and

count XX.X nearly have As August our completed reminder, by spin and a share we reduced repurchased since nearly XX%. in million XXXX, the shares we

our We dividend in has our of the XXXX. will Consistent to increase allocation Mark noted, any authorized not be able and per additional August, shares $X.XX spin as to XX% to capital strategy anniversary with prior in quarterly repurchase the a two-year our share. board

will dividend be shareholders on with made be of XX. quarter's July This July record XX, to payment paid to

forward noted, of levels of Looking market has pleased the XX quarters. We've weeks as past over time. XX drop few inventory demand this firearm in approximately approximately into from the levels returned at fiscal weeks more Mark normalized XXXX, see to March to to been distribution

the we still that at varies inventory other mix any of are headwinds above appear so for modeling a perspective, they with offsetting increased the distributors maintaining. experience levels in calendar fiscal our on inventory factors average XXXX from framework given our demand and XXXX. target available the While based have and a demand our eight us weeks, firearms market inflationary time channel, number to With line weeks of and that are believe for provides of top comfortable seasonality, tells good feel many for now the

ASPs For hold the this levels. QX year, of between from XX% implies XX% a expectation and our that reduction will XXXX in to fiscal fiscal units XX% XX% XXXX our and full

at patterns. by XXXX we fiscal expect to historical normal quarter, seasonality Looking follow

We XX% We volume pick expect still QX XX% the unit of to XX% total to to total QX volume. XX% slightly to quarter into to volumes. for leading the season for then accounting up but begins, XX% unit sales. QX, of be season, hunting a XX% holiday we accounting of our as within to unit our expect our lowest expect higher between roughly see Then

pandemic unit with pre following our be XX% Finally, QX quarter patterns, of we will largest believe XX% our volume. roughly to

costs our levels, the within and to XXXX from range. to gross long-term pressures remain with fiscal relocation XXXX recruitment margin inflationary expect and Tennessee, Given in associated our decline but target we

inflation, lower will to grow well than levels. staffing but quarters. will first our relative With a the in the operating later wage costs recently overhead depending in levels bit that fourth as $XX on XXXX, expect year volume, $XX expenses in relocation to quarter be on to completed full lower We fiscal our quarter to regard million associated as expect be normal recovers reflecting higher with we higher costs approximately XXXX, million as it toward

questions operator, can to please call tax be approximately With XX%. Finally, from rate open our expected effective the is we that to our analysts?

Operator

first Street Capital. Our line of Lake question [Operator of from instructions] Mark the comes Smith

Your line open. is

Mark Smith

Hi guys.

if First you to today's to to here, your is carry question, of kind just business ask something concealed ruling market wanted kind broad Court how then of Supreme if on speak can maybe had today. any important and you this commentary

Mark Smith

Sure.

with rights. real to ask of concealed to broadly pretty is a to as agree the in just is while insofar those carry portion abiding access a our permission too clarifies simply government's that that We conceal tell. obviously citizens on products that products, exercise the responsible So it to the that'll don't us, have expands probably impact need positive their market, on our constitutional that this to law-abiding big what those as early and ruling, impact we it of expect citizens, carry

Mark Smith

this anything inventory, And fair more in age kind with are anything Okay. there's if your additional you And of guys about levels then, in you're there inventory amount inventory out that's there, the channel but seeing out shift insight talked levels kind today. if the that of into that getting comfort a today. there's that's any

Mark Smith

Sure.

enough for inventory need such and kick prepared to and thing. not in both As times well through necessarily time through as our and manufacturing you flexible in us we've the allow go a we industry warehouses. bad inventory many talked model We in our to this in, order downs channel for be we in about ups before know, go is and

be. levels say I So we to the inventory year that holding them would that at probably our under were overall the what want end we're of we still Mark, what

in inventory bit we growth and the a little a we where it's into typically a of remember little and bit year. preparation is just typically of in year our where then QX the the build rest normal the expect for So quarter of come inventory as lowest,

inventory In are channel, and revolvers a averages there's week's categories weeks mix It's you terms as the of the in certain continue but then the really March throughout really than And with levels from just the categories on that that, are there's like heartache. out dropped us XX obviously saw out to higher be of of kind heartburn or where there's sold in there there worth. nothing that all, any makes to get today. inventory of obviously

some It's of pulling sign. even slower through good a our in that's So times.

Mark Smith

last term? then any normally additional price talk the and of that did about near you take you're there out price into is took taking And there just, you at you me seeing last or you inflationary the additional any Okay. are maybe about price pressures in increases, anything that talk question time looking kind that insight for you would and is set

Mark Smith

Sure.

you and And adjustments think portfolio not it the kind really a driven ASP to overall. know, several also that's what's that I ASPs there only to benefit to it was changes the we adjustments the our or of adjustments, going really really was forward. As carry given -- took increase throughout pandemic and pricing was that's

seeing at just only because, it, terms pricing, with we're it our we're well. as In we impact; judicious of seeing inflationary now, are be the trying not very one as look to that consumers

not we've of seen. So but pressures pricing out we're some balance yourself market, that, the to of the trying also offsetting

from profitable know we a our we have remain you brand. and very As extremely see can strong still you very, profitability,

if end still if now, we price a increase, jury's November, there, our actions what we timeframe of Right cadence take on kind right out is one need December the but now, feel we year, see we we to, near of the comfortable, the pricing usual future. do as take very the we So, we'll in again, the we can do can calendar need

Mark Smith

I'll squeeze just follow in Maybe, up that. Okay. one on

I some or this come over half able and new ASP you've that plan been to is these been products, with higher so maybe next drive where you've place would of think product to dozen the said releases a got Has new maybe expect you kind forward? you that be year. of going a

Mark Smith

XXX% A yes.

by bigger and of was new line but, for tell the -- pandemic, the offer impact will So, overall of part our that that continue were pricing, we increases impacted products was fundamental -- took probably I'd part adjustments portfolio that price by our we forward. throughout and huge that pricing making of going the which that you the product a product a to huge be products definitely

Mark Smith

you Thank guys. Excellent.

Operator

instructions] And turn [Operator you. President and to closing like time, Smith Sir? to call Thank the I'd Mark over CEO, back at for remarks. this

Mark Smith

talk And you you. you thank us to for quarter. We'll Thank today. joining next everyone

Operator

This Thank concludes you today's conference for call. participating.

You may disconnect. now

Smith & Wesson Brands (SWBI) 24 Jun 222022 Q4 Earnings call transcript