SWBI - Earnings call transcript Q4 2024 | Smith & Wesson Brands, Inc.

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Operator

Good day, everyone, and welcome to Smith & Wesson Brands, Inc., Fourth Quarter and Full Fiscal 2024 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.

Our comments today may contain forward-looking statements.

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

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

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

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

in gain expense release, in and referencing fully to costs. financial our Also, reference EPS, always financial are sale related non-GAAP can filings on adjusted exclude each we the to when EPS financial costs we earnings and assets, GAAP found non-GAAP of other website. is available relocation is an and intangible to diluted results any accrued settlement, measures our SEC EBITDA. which measures to a from Reconciliations reference of of legal today's certain Our EBITDA press be

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

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

Mark Smith

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

are best-in-class that delivered close and discipline against quarter am process efficiencies. out Smith We strategic announce brand continuing to another team's innovation, very our pleased and excellence strong Wesson XXXX. of yet strong business operational & and initiatives fiscal marketing, the to messaging of proud I execution

focus and FY reinforces on in a our stockholder consistently market results returns. as Our 'XX these demonstrate our relentless long-term that position strategies leader again deliver solid

overall growth portfolio. once up the long demand new Our product reflects offerings robust market sustained QX outpaced last both our product driven our guns. top shipments market core line consumer as well to again and once revenue as for by year, again We unit excellent by believe in versus gains was this as XX% share driven reception handguns firearms our

X.X%. and On revenue up XX% were a by was full the our XX%, market year-on-year, unit NICS up basis, year was our outpacing down where shipments

This as line, products on delivered target maintain to by EPS rates quarter. and non-GAAP demand bottom QX. team levels the meet driven core $X.XX new mentioned the our in On to solid, our inventory for production last offerings was of increased we

efficiencies. Tennessee We and realizing stabilization operations have the of also begun from associated benefited continuing the

cover down handguns. handgun up X% by inventory healthy. X% with out-the-door and period shipments guns partners key to the X%, QX the sporting in some our in of channel, goods detail unit those led shipments under were more outperformance down long gun our during just unit at despite moment. checks the which sales, for our and Innovation making versus the by retail overall our ago I'll And and up in driver the further, XX% long over remained strategic increased by levels a a the market little into almost year the in in down rifle, products period, new numbers a channel, Breaking XXXX NICS be while lever-action sales as shipments distributor XX% continued measured was

factors X.X and of long We ASP gun consumers mix quarter, by by spot priced popular service. gun innovation XX%. an quarter is and consumers' has the improving long increase declining ASPs, less The for successful mostly was ASPs as ASPs expectations brand driven beat in hailed Wesson whereas classic reflects the deliver by the high than to spite largely the the Handgun associated lever-action nearly bright world-class very overall the new SD entry-level year the highly held industry due continued was versus to competitive of the at in Smith with of the & XXXX launch which healthy in quality been trust rifle, and firearms, introduction Another customer X our demand. millimeter, hold which levels instant prior this steady, the X% to landscape. believe by

successful & last covered white an space Wesson. quarter, this exciting opportunity launch new I creates As for Smith

include category extensions of new line plans near-term season. hunting the this throughout the introduction Our summer expansion and

our strong propel for helping second the expect products, add to line also capacity significant to in this the our We to new top fall growth demand half. support new

market. Turning firearms overall now the to

new constrained. up currently of healthy have fall, from summer capacity the tailwinds as bring our as competitive and where in This consumer we demand, normal more firearm likely slower at deliver introductions, throughout campaign our firearms and targeted same the the do we anticipating Wesson ] and expect month results. & offsetting by 'XX, additional we as to from activity time, FY traditionally we products year is much patterns second demand with growth. in spending solid expect Smith this to during online a ramps for another discretionary continue we busy At and positioned year are benefit product are some We well throughout continues consistent the of the new NICS season election typical seasonal is recent presidential half inflation, for to impacted stubborn seen be marketplace you [

slow be the summer, promotions busy our product aggressively campaigns building this in new and will marketing addition period market share cadence fall to the of for and season introductions. we preparation through continuing inventory in pursuing Throughout

Specifically, which with impacts as inflation provide in throughout price-sensitive consumers entry-level increasingly addressing half. and will second discretionary believe QX we launches on new summer, the spending, tailwinds will with this focused this be price we

over to want brand-new moment over year. products, revenue. take delivering of total our thank our XXX and employees we present for Finally, which of successful to I launched just fiscal sales XXXX, another for past a In XX% accounted

our we in by inventory We shipped on which million. and with for cash this, possible These more headquarters million roles relocating per improved even XX% year team, respectively, from and distribution $X.XX by earlier, dividend And and portions day ending operations of mentioned new the grew in they only many revenue Tennessee. million of X.X%. GAAP $XX.X in the be into $XXX though of over show accomplishments our Maryville, all stockholders, I payments million was repurchases. million year XX%, in successfully the unwavering by commitment units and reduced that our over generated We value $XX the $XX share company. operations dedication our than million. cash would facility while As their knew to our are whom to share down We and moving delivered continue due of nearly $XX.X be relocating NICS would outpacing $XX major ultimately hand they in amazing day on to and EPS and from delivering with and debt by million $XX including significant in only $X.XX of in EBITDA out

for impact present & personally on this of each tremendously Wesson bright I future. great year grateful the and exemplifies our the and employee and This Smith our results am way, past

quarter, we covered demand earlier, new experience fiscal for As for to market election the world-class new employees, 'XX. and brands, our the expect value of with to continue said through growth deep operational, and stockholders. healthy pipeline now I most year are of and and state-of-the-art firearms as cycle sheet balance facility we XXXX And our leading excited delivering another strong importantly, dedicated we products, last

With to the call that, cover to financials. Deana the over I'll turn

Deana McPherson

Net new million were prior up the of $XX.X quarter. year sales making with $XXX.X revenue our million above X.X% products the comparable quarter quarter Thanks, or Mark. fourth for XX.X% for of total

the XXXX of noted, lever-action January with significant the Mark launch met was interest. in rifle As consumer

XX III In new categories. and addition, Sport well their in SD performed the both M&P X.X, X

and costs prior production partially volumes, inventory combination impact comparable year higher percentage to due Gross a offset driven on fixed of and cost increased material increased of lower sales the reflecting XX.X% quarter, volumes was inflation of reserves. products, by new and above long-run points margin absorption labor ASPs the promotions by X.X favorable increased

the operating profit year. sharing, our prior combined including from of million reclassification is expenses income quarter of due in prior were income and for is costs, costs with increased $X than year Operating sublease expenses quarter a comparable increased earned to impact fourth the $XX.X the million in legal year-to-date profit-related higher recorded of quarter compensation it now which the other to

$X.XX comparable $X.XX, a year Net above double quarter the compensation to earnings while of share quarter of was a gross million margin earnings share GAAP well from of the combination by due fourth of sale non-GAAP profit-related net QX income in also intangible of than prior was partially $X.XX higher and assets, fiscal up $XX.X per million improved comparable $X.X offset per costs. sales, was $X.XX year of the more in prior quarter XXXX.

Turning to cash flow.

in cash net in capital resulting of During generated on the operations projects, $X.X million. $XX.X we and free million spent quarter, million cash from $XX

XX,XXX with $XX in million remaining we have a XXX,XXX $XX ended million the and of revolving authorization. our $XX.XX $X.X year-end, million credit. million average for million. credit price $X.X paid of already cash an dividends, at of and nearly average During an the borrowings million we've of approximately we of on on to $XX quarter repurchased repaid price Subsequent at quarter, shares our on and in $XX.X in shares still approximately total $XX.XX line line repurchased our We

operations in to an generated capital XX. raising from the XX X.X% During Board authorized quarterly our million resulting million spent of projects, payment of $XXX.X in be on full to the returning cash for July With $XX relocation with our on net $XX record than be to normal million increase stockholders our July million, we levels $XX.X paid in be made year, dividend to on capital $X to operating cash spent and it remaining less and free $X.XX on our year. to historical to million million of has $XX

With digits, firearms to positioned in of deliver healthy well demand we to another than Mark continue anticipated, in year. mid- will forward half are of the to more high fiscal the as 'XX single growth, sales weighted demand for expect be we mentioned, second year fiscal to near-term likely Looking to and believe solid softer originally we XXXX, the fiscal

to the a be and down guns growth units from in We partially quarter handguns. in of expect year prior terms in XX% QX offset dollars long approximately as decline

the as in QX down only to we expect the first rebound We last resulting half election, year. being approach a bit to moderately

second believe will revenue single impact up mid- from With increased in to pricing and seasonal expect but we and in or from benefit internally 'XX. spot, channel externally. products. inventory handguns, ASPs, in material inventory changes particularly a We anticipating product fiscal headwinds in good summer half therefore, guns not normal strong capacity, and either to that due a new in high we introductions new during reasonably over some investments year to the resulting slowdown digits We to believe remain normal is expect increases, long full regard are

distribution facility, to this onetime of later into footprint of with Tennessee the more an will with to 'XX, facility with combined fiscal associated the associated by and margins realize affected improvement impact impacted both expect stabilize fluctuations and over We by year. normal will the with which full automation operating moved low certain sales, year, days. our building of cost Margins fully XXs volume begin costs expected costs year the full benefits in consolidations. The operating out quarterly facility be for reduced

margins materially 'XX, fiscal should help in operation manufacturing Although of full and the from benefit for we don't level-loaded inflation expect will change year. will the channel that stable rate inventory, a we more which

and sales inflation, is year due quarter respect the an the Adjusted in expect year to X% higher line full grow compensation-related the in Operating prior to X% for levels. expected we With market likely be quarter also 'XX. at to first competitive R&D. to with will margin, be investment more in similar to a fiscal a expenses it first rate increased EBITDA to gross

expected is rate be our XX%. Finally, tax to effective approximately

With our that, from the operator, can we call to please questions open analysts.

Operator

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

Mark Smith

First question, more more seeing handguns. and put demand. product on you prices meet to little demand kind bit those a wanted in guys in a ASPs new to solid entry-level that I of Certainly of dig at out

So that ASPs up other can of I within give well, guess I maybe and you NICS products was insights us doing held any that surprised are as into but handguns? kind well

Mark Smith

Sure. Yes.

pretty entered price said is now still where there, our driven towards So point. up you from slower the the see held was, good little Mark, entire there, QX, on ASPs the product from were that demand entry season ASPs volume in our we much play that We you right the as kind demand definitely portfolio. summer as as down that level a is more bit and can of

we're a seen, leaning QX, -- a We'll rebate in also a couple tailwind to here category days give is, that volume launched that into going be already and second with consumer in up play the weeks launches anticipate us QX some more should in new nice and So kind might next in of we that we've get you to little half. bit be have product that as more into promotion. do coming entrants where some of

we So for will the still with a that come there to overall stay bit in definitely up, the but little QX. long expect good, LAR those be probably ASPs will handguns down guns still

Mark Smith

primarily think in kind up thoughts we're around and thoughts about Kind more positive, is Any how demand entry good level higher-end kind yet handguns. but of the . hearing holding expensive end you're of lower-end of kind of of Okay. higher on we is still pretty some up. that Center holding handguns. business pretty Performance how Any as the at

Mark Smith

mentioned, there. products revolvers. to hierarchy continue add Performance and mean frame Center to are Obviously, our our of added large our highest-end you've going I in capacity some Yes. we'll we that have products, and be as

Our [ up METAL ] there. M&P is also

where that's prepared capacity. we mentioned the a the little area more remarks, some going in be capacity That's we to give as to we're nice So well. second online towards us in tailwind -- adding there an a half alluded putting bit definitely

Mark Smith

guys know about products those insights Okay. I'd quarter, how gave of new And some quarter if I then don't you you kind but other the new got of hear in the that also bit those the kind and are know it, long of any mix love but for I going? and numbers if of talked new XXXX, additional into the a you've to guns how are performing. product

Mark Smith

Yes.

we I it mean, XX%. was number. XX.X%. like think just Deana? It for I just I QX, think under did give was -- that

Deana McPherson

Yes. XX.X,

Mark Smith

It's most continue I lot be the long was And time. that's mean launch, that Sport up I more going was towards terms that continue. but successful. holding The for selling FPC very if the in new weighted XXs a of of just but one our that it lot a #X cadence. because going of to still the was so We to to there. from not we're XX.X, XXs, the The level XXXX recent out was #X think our MSR continues selling III Mark, just high anticipate that, products. -- held in to it retailers, yes, obviously QX, kind low that of mean, of a I we've XXXX

to So of that we're going new continue cadence product.

same that of level going to expect forward. can you think I contribution product new revenue

Mark Smith

mid- margin Did single up operating things up mid-XX-ish revenue remarks, then to on number to I digits, and Deana, sure like a some similar of end put that to of don't up did we're your sum guidance, kind that's expenses maybe going that gross in us just it looking and looking formal of miss revenue. to make I sounds on kind prepared At And the you for of just, be Okay. give at kind right. EBITDA but pressure at know high I want or there? to anything sum growing much

Deana McPherson

see more low bringing sure we're I'm think say can I'd to to mid-XXs, online. we're but capacity going get not the I whether wait -- XXs. we and

I automation and as -- Tennessee we in As the at consolidation facility facility. my we're the up ramping remarks, having said

look make XXs. we around was, low one normally in whole think, be those at year, right? the but I that when I'd So quarter we'll the fourth point we'll we have year, quarter somewhere the XX%, like out whole doesn't do. So fluctuations

the no Fourth production quarters. quarter we we longest, for have in is are have shutdowns the shutdowns usually us because the best days other where

So as a up the front relocation getting used to we as the back the the ramps where of and bit where have But numbers half the probably we'll capacity lower. be on half then to to start completes the the automation we'll year half. to little back process towards mid-XXs will full the back see get the them, are and and

Mark Smith

on Okay. And maybe follow-up that. one

you Just guys It Mark guys for nothing just that's and the it. with is and growth that But at that maybe summer, or take to better outlook election seeing not in big demand for built expecting as sounds right? Deana around tough ramp But consumer you've that just look typical the today. it whoever growth numbers are the you're new -- where things is to kind in half, your are seasonal of looking built remain and expecting a like, sounds wants isn't like back some you like of for really products you whatnot. not kind given, into

Mark Smith

as kicks fall -- in election from the early expected period. the towards really definitely think really the I -- late usually Yes, through summer, the election tailwind activity we election campaign

But also in play tier. back season. half I some couple give -- where price additions entry-level obviously busy category. definitely, that also more online, categories some which So tailwinds weeks, price we I now also our that new of We've as into to that products of portfolio we're there where in tailwind capacity mentioned, tailwind right? some from, coming -- to entrance got got deeper have tier, volume we're really in in nice have good where there constrained, a product the mentioned, So a we next going is we've as coming be lower our that in a the a usual right will got of really, some deep couple can the

core but standard election, little So of back business just also yes, it's half. a the in as bit well it's

the nice historically, just be be has to going will it yes, a growth. towards -- overall weighted should So back as more It's year been it half. the

Operator

comes the line Dyer Our Craig-Hallum. next question Steve with from of

Matthew Raab

This slower, is have of Matthew talk just kind into you looking anything retailers, with the Most year. marketing doing you time other typically is -- can the already Raab the the discounts. on of vendor about talked mean you I you're looking been What Obviously, for are questions about But are for working you weaker there? at what side, marketing the summer Steve. on my areas said answered. on you the of rebates. Obviously, front?

Mark Smith

are with as find think competitive. market on into next see. we we come aggressive to -- as to active be focus as I what participate summer, promotions. see summer appropriate, From conditions results, going the depending can kind no Yes. we getting as you in going pretty it's the the is different on of always in very that retailers. We're is #X We're It's our working usually summer and

We're launched you that June. the early doing whole bunch consumer pretty we also a aggressive just So we're rebate of channels. saw with

the promotional rather lot individual with on While et targeted working retailers SPIFFs, on whether in want at are we on be some retailers inventory, promotions it always programs, push cetera. focus pull-through on also of with we distributors a or to than

playbook can Actually today, And facility in we So we actively deep doing we're of got pretty of our a we channel. right levers the of here -- pull that terms throughout working pretty on roundtable a kind number of have we've and retailers brainstorming. in kind now.

Operator

of back remarks. call end turn question-and-answer closing session. the the Smith now the for reached have I'll over we Mark to And

Mark Smith

speaking in you, thank And in interest everyone, us Wesson. Well, everybody right. again your All joining for our quarter. We to you, company look Smith next Ever. and forward & to thank today

Operator

concludes this lines may you for conference, this today's Thank And your disconnect and participation. you at time. your

Smith & Wesson Brands (SWBI) 20 Jun 242024 Q4 Earnings call transcript