Earnings call transcript Q4 2022

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Operator

Thank you for standing by and welcome to Sturm Ruger's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the call over to President and CEO, Chris Killoy. ahead. go Please

Chris Killoy

statements. morning Company's Good Reid, to Sturm you of the fourth an on your the that General CFO Thank XXXX get the and results market. XXXX quarter operations our questions. of conference & forward-looking will to caution I After the year-end to Kevin then Dineen, call. discuss Ruger overview our Counsel Kevin? and will give you. read and welcome Tom I'll our financial then and the state we'll ask

Kevin Reid

is Thanks in Chris. intentions, We company's the that want such of everyone forward-looking or projected remind could important state results in from to actual those It the beliefs, meeting hopes, forward-looking made the materially to Good morning of note this management's everyone. that are predictions statements that or statements. differ expectations, the company's future course statements.

to may third the on of Form XXst, second, time sec.gov. Additional actual not cause the information website from company and results including on filings the the first, in contained website XX-Q limited XXXX. or the SEC and or by ended from obtained December at for year or XXXX Cautionary the materially for factors is Forms but the to in company's that on the concerning to company's SEC contacting statements course reports differ XX-K those the of documents company be time SEC could quarters the at ruger.com/corporate forward-looking

Form the ended all and XX-Q quarters responsibility reconciliation disclaims EBITDA which forward-looking first Chris? be income for non-GAAP of XXXX non-GAAP Furthermore, company reference can for our also of that on EBITDA. year our GAAP in the the do posted Please our update net XXst, are to Form three the statements. website. We note XXXX, December found to XX-K

Chris Killoy

Kevin. Thanks

results. company's Tom? will Tom XXXX discuss the Now,

Tom Dineen

Chris. Thanks

For XXXX, were $X.XX $XXX.X share. earnings million net diluted per were sales and

share. per were million were and sales $X.XX net diluted $XXX.X XXXX, For earnings

fourth sales were were $XXX.X and million the diluted per of For quarter XXXX, net $X.XX earnings share.

and were sales For per the XXXX, million corresponding earnings period $X.XX were net $XXX diluted in share.

below reduction XXXX part was often XX% spending. in to the by led prior our an which from demand This sales demand constrain in Consumer dampened in level discretionary the inflationary in year. XXXX, pressures of

which profitability significant as decreased by Our commodities, resulting from in XX% increased XXXX driven unfavorable services, lower sales offset gross pricing. deleveraging XX%. XXXX transportation, inflationary of and margin margin in increases declined The from partially from and cost materials, our well energy, were decreased by as costs, as fixed production to was fuel

increased costs disproportional The from gross a prior increased impact margin impacted adversely year, amount the fourth quarter. million which which inventory LIFO of our the of the was by $X.X exacerbated expense,

Our evident balance our on continued debt-free the financial cultivation is strong value focus in shareholder of discipline long-term and sheet.

investments and XXst, December short-term XXXX, At cash million. totaled $XXX our

Our within and United market a investments fund United invested mature year. that in one which money short-term are in exclusively treasury instruments, in States States treasury invests bills

At December Xth, and our million. XXXX, current X.X:X balance payment special XXst, our the and $X we on share After XXXX, approximates debt. per was current had dividend our ratio cash investment no January $XXX of

Stockholders' per $XX.XX $XX.XX cash equates of which book per equity $XXX.X of short-term share and a was which to share, value investments. was million,

product of into use to million $XX $XX back $X.X generated we and million of in new North that and XXXX, for company Carolina leased to of related from introductions, the capital the in in for our and a square facilities In equipment warehousing operations. of expenditures upgrades reinvested previously We manufacturing our facility foot manufacturing, form cash million operations. the XXX,XXX Mayodan purchase

approximately total capital our $XX XXXX expenditures expect million. We to

with the to returned $XX million returned share shareholders additional the of X, $XX $X payment payment through primarily of In dividends. aforementioned million An XXXX, the was to XXXX we special shareholders, on per our dividend. January

Our March March XXXX, of of record Board quarterly as share for per shareholders on a declared XX, payable $X.XX XXXX. XX, dividend Directors of

the As therefore, a for reminder, That's and update XXXX. our quarterly dividend is financial of net approximately quarter-to-quarter. XX% varies income

Chris?

Chris Killoy

Tom. Thanks,

our XXXX levels fell in most XXXX As of on the quarterly early calls, for we began XXXX consumer previous that XXXX. remained discussed demand unprecedented and in from

rates, In addition, climbing household card debt record interest spending. increased debt credit discretionary and curbed

from by Shooting In Consequently, to Foundation, to the in XXXX, of decreased Sports checks, company's XX%. decreased the the XXXX adjusted sell-through the unit NICS XX% XXXX. the estimated distributors National retailers compared products background independent as

are The and aggressive of products by attributable encouraging more in used of to not which sell-through greater extension decreased to an but our retail, retailers. included be firearms are sale inventories, be and the buying discounts, background by reduction checks NICS payment as gun may cautious the at distinguished sales; offered of company's anticipation in further the may from adjusted retailer of new discounting behavior the the competitors; apparent checks rebates the promotions, in following: the relative adjusted terms NICS increase

Despite in sales the in decrease we our production, in fourth distributor of our the quarterly quarter. by overall increased demand are products XXXX, encouraged sell-through consumer and

the often As sell-through to inventories and match review family calls, a distributor product our demand. earnings mentioned distributor on on better quarterly product family basis, the we we each production our by week to

our Rifle action some remain are XX/XX. many include and Precision of categories pre-pandemic single Precision the inventory there Ruger revolvers, families others Mini-XX centerfire, the all These the whose the of virtually our Ruger and below inventories product Ruger Rimfire, the rifle American of double-action including While levels. healthy, are

families, also strong are work at which In hard addition to up new with production several these ramping demand. were for offerings, we met product

XXXX product the Model Guide lever-action is of reintroduction new gun family of Gun, which launches rifles. first Govt, the .XX-XX the Marlin chambered included in Marlin major Guide in Our XXXX

SFAR, of The with or which to Rifle, weight Trapper Ruger-X.X Auto X.XxXX size chambered Model of Winchester Small-Frame .XXX XXXX full-featured lever-action rifle, Marlin traditional Pistol, The ballistics the a companion the in or modern chambered Lite combines pistol stainless advantages in the chambered the the at sporting .XX-XX. steel millimeter, pistol, a rifle. Security-XXX LC Rack and light-recoiling Autoloading Carbine, .XXX

XX% Sales of firearm of pistol, products, also LCP the in million, new XXXX. PC $XX.X sales MAX-X which pistol, or Charger, Max included represented

for product sales were new years. now the new revolver, pistol considered that New past not years Several X.X the in two in in included II were the pistol been calculations launched only the popular major Ruger two LCP XXXX, the .XX product Wrangler production have and new products firearms including over and were products for sales that XXXX. rifle in and include

additional chambered look hard met that XXX great additional we were products Vegas, Ruger Marlin We work Rifle SHOT the year plan and Show XX-XX with Marlin remain classic .XXX shipping this later summer. Magnum calibers like The this at Marlin to in At we spring. revolver month's caliber iconic Marlin excitement. two chambered this likely Ruger the last the Las made lever-action that plan ship that to rifle innovative And XXXX .XX forward lever-action XXXX. and firearms we in to in introducing in and unveiled start

show for way outstanding the enter an off as a and kick year. we of excited was to great XXXX We're us reasons. lots It for

industry. of Our products broad and diverse is unmatched in portfolio the

catalog will and will again new further Our XXXX. our exciting that firearms innovative in development product commitment enrich product yield to

quality the of to to our commitment improve enhance Our employees. excellence our the of continues manufacturing products, safety

day. gifts of employees, workforce whom American than industry. of and factories been to every no more X,XXX in Ruger There's our with team bring have talents a our for dedicated better Our their XX% decade,

to deliver as reliable to years. continue from have customers rugged loyal almost XX us the firearms we Our us come inspire innovate expect they for and

of be promise arms citizens to of brand and Our a world mind. on delivers for embodies makers and our our peace a spirit recreation provides motto, responsible leader that as freedom,

robust long-term debt-free provides shareholder finally of Our capital and value versatility sheet they and strength and disciplined relentless strategy when emerge. remains And steadfast. cultivating consider as we balance explore opportunities pursuit may our

question. Operator may first we have the

Operator

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

question, Mark. Your please

Mark Smith

morning, guys. Hey, good

about as as First Marlin a you total just Any can sales would to us and I ask be that's how wanted great. info trending far bit additional mix? give little

Chris Killoy

XX-XX the we and with and Magnum. line in will the full that SBL And North with the factory particular, the basically in we we versus and then squareable The North a morning, the started and Carolina. that talk great That's our Guide and in make XXXX what steel. And XXX We've are separate XXXX then recently double in got original round a XXX call model and in as at capability and XXXX, continues progress Good alloy XX configuration line Marlin the line. steel the XXX Trapper SHOT Show, bolts in unveiled also Yes, that's we production swing. in our the the Mayodan, about to Gun Carolina. stainless XXXXs Mark.

coming get production that up will increase of that us overall out Mayodan. So help volume and

Mark Smith

Okay.

staying the assume for Marlin skewing QX dollars flat up price. these higher mix that mix plus the of becoming and significantly have kind at That look it rifles overall were that pretty of you XX-K, of orders given you we to safe numbers of some kind year-over-year. sales? solid is Is ASPs guys a that during your in is As in

Chris Killoy

QX selling in Yes. higher both when you the incoming at than say, American significantly the XXXX points assumption, rifle in price Ruger price rifles small-frame or especially the category. with in orders good That's say and a average look Marlin autoloading Rimfire the carry

Mark Smith

you and and feel filings we at channel Chris, give Ruger, Marlin also overall, additional where and think just as you retailers on can about And as you have of you're Marlin look competitors, distributors inventory is? today – kind inventory any that Okay. today and how us you where at where

Chris Killoy

we nonexistent. distributors Marlin retailers to holding through of inventory strong having and a really any time It's hard go gone. still Marlin on see be inventory. retailers. And question. from excitement that virtually that inventory in very The fact continues right is are to Good The

product. And good consumers find it's That to the tougher for so is news. that's

that So we're that find Marlins. can doing to our best up people get those so production

fairly for about distributor normal distributors, when and to have inventory our we'd On look overall is target. maybe the we probably areas Xx to of see and there. turns they're it's in think slightly There's we few in the But to by higher across inventory, at where like. like like right inventory terms Ruger I'd a you large, of We base, what normalized. about say, than

And who significant like to deals we're product have share terms maintaining there. as of we try market it do lot maintain us, with line or that of deep out one pretty our as inventory. extended to protecting We that. be that those value makes things – balancing act margins particularly competitive because protecting a particularly and our of So only challenging to it the may do always pressure comfortable and and competitors discounting distributors' nature. things of payment that for and course resorted well people trying We see and see

Mark Smith

start you'll we've need a to follow question. aggressive my on to kind just promotion and next gate, get your do pricing what the on peers expect was that your It more thoughts of of on was And out you as or do that what in end? promotions, way maybe are of seen light and you your kind

Chris Killoy

and for bit a Well, are running. past. little distributor family. pick phone months. get XXXX we've tougher frankly, environment currently promotional the effect. got as Those contact three LCP And the retailers. some in of Frankly, we've into little a not having aggressive lighter to than past, had QX summer enter the we excitement a what salesperson but They as years would in provide in they're that expect, as include some particularly maybe the up MAX, I will and a years promotions they they're

certainly saw we well. from Ruger if surprised, additional some be activity our competitors wouldn't from as and promotional I likely So,

Mark Smith

me Perfect. last it, on I if don't and one outlook for And profit take gross wants know, just to then margin. Tom the but

then do margin if to expect give in pressure forward inflationary this deleverage? how of go squeezed any pressure just you you much and costs continue gross to profit you the versus breakdown As can on of was get

Chris Killoy

goes mean, volume impact Well, seen way or on that deleveraging on up the down years, gross over in of down can as terms I Ruger you've the significant when the be margins. our

as up However, even of XX%. inflationary We're aluminum seeing up up our as things, packaging our on a environment, significant pressures lot to commodities. I seeing XX% this are mean, high XX%, we ammo XX%, wood and in material like

the So protected our continue some of to largely pressure agreements, but forward. inflationary steels expect going had we in the were with place long-term we that

of I it's a think increases. those deleveraging So price commodity combination and that

Mark Smith

you. Thank Great. Okay.

Chris Killoy

Mark. Thanks,

Operator

Thank you.

of of from Our next Aegis Rommel comes line Capital. Dionisio the question

line Your open, Rommel. is

Rommel Dionisio

and run than if I efficiently you about talk lot Thanks you very a just have many could competitors. And talk your wonder, chain profitability? your maximize about morning. to generally just competitive gains wonder, a to want you XXXX are Good that Do chain from that. for where share? longer could marketing. obviously kind XXXX from I of possibly do just about a How time sort strategically? standpoint to of mean, Do could in are market much. you gain think share from how you guys guys over squeezed of positions supply you pricing Because of, in kind for market side the this term you Thanks. guys the where you terms your people the of the getting – just side, want you quantity if certainly I you more supply about think do to be approach

Chris Killoy

Thanks, Rommel. Good question.

a looking in maintaining versus share act this As market balancing I gross at it's margin said, marketplace.

example little a on for do our do strong no we use to position manufacturing. debt, of our is leverage steels we'll opportunity we buy deeper sheet. the a One and specialty things if lot have like We of commodities the cash try steel our balance it. With to in

are things we certainly being our our We process And little that goods don't in mind deeper finished raw certain there work so and materials. in watch a inventory.

When that. little than our comes allows bit do balance to raw deeper okay. competitors, We're a in some our sheet material, maybe of because it going to us we're

sure making I so whether or call future, sure future and increased availability the And just a production have make it against up commodities. steels the ramping we hedge won't we way prepared one of can it's specialty for those but that's we're

something In market the and aggressive, perhaps ability share at. be we share more look grab terms of and maintaining that's to market

little gross retailers. our I some before, do as we want said margins. it this us wholesalers But for when forward a as to to profitably. promotional the business year may not We But our an be are environment and I up expect our ourselves, that and for to don't profitable We we to of maintaining to both that it bit comes business and go from make the some take take heat conservative competitors. like it opportunity

Rommel Dionisio

And maybe to just Chris. that, as a follow-up

the maybe sort kind period transaction, for add-on again significant many your without things perhaps as acquisition. you of make guys pretty going of of somewhat to were, another bolt-on made acquisition? cyclical competitors last be you During proclivity specific a discussing industry could where the to enter overall, as downturn obviously And it discuss are your challenging we or obviously

Chris Killoy

on our January right of of $XXX that side, balance reasons $XX And short-term we've balance one of cash today, in again, firearms a at think right million know, paying likely came our mean, investments we'd after we're to maintaining love still today, core it firearms mean, out sheet right the if could cash as little special at the comes million. side, the be the price. make -- when that's miserly doing But business. anything frankly, the even assets. from our But about on dividend, a and price. the to got I I far you for on Yes. a the I you at we'll look we're notoriously don't sense, opportunity us, particularly field

that significant dividend. pretty out So, paying after

So dry we've lot the to powder. a we're capitalize of is on -- if And there, opportunity we'd right got it. like

Rommel Dionisio

much. very Thanks, Great.

Chris Killoy

Thanks, Rom.

Operator

you. Thank

Our next of question from Dempsey of the comes Morgan Ryan Hamilton line Capital.

please, question Ryan. Your

Ryan Hamilton

are inability meaningful demand. Where of seeing to pushing where build Hey of good new you releases are pretty in of surge because taking any for the are, Thanks about the product talked build sizable new meet any you first inventory? call. morning have to guys. a we like you inventory my question, kind releases to -- you currently My the guys back the past

Chris Killoy

the you is it standpoint bring from to reliable length usually have drives No. and product. out product and an time a safe of sure what releases, not. Absolutely make obviously, completely just engineering new We --

not candidly, it. inventory, anything we're got to smart we sure, some ready back. So, holding things release, getting -- of to got are we but we do that We've -- how we've want we're a have couple make about we're do

consumers. I meaningful it think again, shortly. we it are that -- continue of to get distributors those pattern out retailers our announce see to before and our You'll And to like inventory we we'll having

reads slug morning retailers it. it search, on least distributors are time our at away So, getting call that about of inventory as by somebody have a their Hopefully, first well. our phone the from e-mail

Ryan Hamilton

it bit little I frame could guess differently. I a

maybe down of issues chain cadence the supply see bit, potentially As new you and picking come a inflation up? do releases

Chris Killoy

to not Well, see certainly, we're we fast tougher. can, supply go We ability or to been as metal on products. honest our makes inflationary we pedal mean, to I it release we pressures going But the as to don't the can. inflationary go pressures fast factor as whether not. has those be the going as it -- we're and and chain to with keep a

Ryan Hamilton

Okay. know about always I No, that's color the good to accessories hear. business. ask there? I Any

Chris Killoy

margin. again, remained Well, us. strong great a contributor they're to accessories And for gross

However, sale business, decline, with guns is in which guns sales. -- driven magazines, trends downward upwards lockstep, heavily that typically, new as firearm exactly or by but new not -- trends also of new our accessory

Ryan Hamilton

When look is sharp say are a late demand, where that into healthier in than would you spike at XXXX XXXX? currently Right. current this you we level

Chris Killoy

I don't some nonstandard we that factors call movement know there. global the of everything in cetera. demand from course, hope I politics, I et the police and if mean, sustainable that saw I steady. unrest, from period obviously pandemic, XXXX XXXX civil it's outsized healthy it defund

traditional I bolt-action strong like now a demand or think categories rifles we're XX/XXs. seeing for back where some we're

the particular some think has out in look the slowed, of there, likely I overall, during XXXX. course at when data handguns you of

the sale be And seem checks the even adjusted of into a marketplace. the checks, NICS used that for guns. include used more to seeing coming also that's reminder, just We're NICS NSSF guns

a experience gun used and books those at sometimes back home, a some when gun, store will pressures those hit will buy turn buying pocket will our purchased inflationary into cash. time go guns the when been, has people -- rather people in fact, recently than the new So and into guns gun -- over

So NICS we're And checks include, -- but somewhat retail. we're just seeing used those sales both a that a anecdotal, again, used seeing what increase an to gun new sales. seems at in be and gun reminder

Ryan Hamilton

to – the That’s the time. Great. Keep good I good good work appreciate know. up

Tom Dineen

Thank you

Chris Killoy

Ryan. Thanks,

Operator

you. Thank

the next [indiscernible]. Stefan comes line question from Our of

is open, line Stefan Your

Unidentified Analyst

Hello.

Did that how up Following increasing? right, Mark's margins? get on it is And I costs pressure margins on are labor questions. affecting

Chris Killoy

question. good Stefan, Hi,

but with pressure cost, the volume I there, our think is decreases. have also the commodity Ruger we deleveraging as fixed pricing of

probably margin, when in report. was the we decrease this have our that at as gone up look costs primary gross that's current Labor So, well.

All labor of increased had our shift hourly like the added some wages, costs. sense. factories, We've our We've things to increase additional we've in increases made premiums where it differentials, most there.

it's need our to keep retain in so, to and good And folks to pace, do to just attract we factories. something -- continue

Unidentified Analyst

those costs higher include you in sales Can labor prices?

Chris Killoy

X% across Well, past four They increases. had board. about years, in the the we've were three approximately price

was in raise And balance So recent year. the the of we X be most to prices, ability competitive this not some with that we again, X% to it retail competitive of price market, increase the captures it. all frankly, -- have of at have counter. And this January to but staying

Unidentified Analyst

will again? it from the tax about is, back Last the my quarters. two or go it Will was in It extremely Understand. stay low last side there, question rate.

Chris Killoy

ask to you. Tom, going I'm one that take to for

Tom Dineen

R&D emanated that Good XXXX, prior we not Stefan. going The short some no. stay taking In cash answer to by from question, benefited credits there. is, It's years.

reduction, year. tax our a had rate XXXX, won't next most X% be about X% there in differential or a in of we which So

up and XX% compares So will said the about and be year, this tax we all done XX.X% in the XX% think when rate range, kind our year. that to to of next

four going points we'll so. those or So, up of be kind

Unidentified Analyst

Those Okay. Thank questions. my very much. you were

Tom Dineen

you. Thank

Operator

this call for At over Thank like remarks. to Sir? to I'd time turn back Killoy, closing Chris the you.

Chris Killoy

for closing, like In and I on join would build who all by shareholders And to at customers, this thank loyal this morning, you XXXX start for day. their will become to us, design, attending in April. for every investment thanking would our June the X. and virtual like I able X,XXX to our firearms details rugged Thursday, hard-working of I our our be members and in Ruger sell call Further all continued company. you team, available will reliable Thank of Meeting Annual you. hope our

Operator

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

may disconnect. You now

Sturm, Ruger & Company (RGR) 23 Feb 232022 Q4 Earnings call transcript