• Q2 Net Sales of $125.0 Million
  • Q2 Gross Margin of 25.4%; Non-GAAP Gross Margin of 28.3%
  • Q2 EPS of $0.05/Share; Q2 Adjusted EPS of $0.14/Share
  • Q2 Adjusted EBITDAS Margin of 15.5%

Maryville, Tennessee--(Newsfile Corp. - December 7, 2023) - Smith & Wesson Brands, Inc. (NASDAQ: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the second quarter of fiscal 2024, ended October 31, 2023.

Second Quarter Fiscal 2024 Financial Highlights

  • Net sales were $125.0 million, an increase of $3.9 million, or 3.2%, over the comparable quarter last year.

  • Gross margin was 25.4% compared with 32.4% in the comparable quarter last year.

  • GAAP net income was $2.5 million, or $0.05 per diluted share, compared with $9.6 million, or $0.21 per diluted share, for the comparable quarter last year.

  • Non-GAAP net income was $6.5 million, or $0.14 per diluted share, compared with $12.0 million, or $0.26 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to an accrued legal settlement, the relocation, and other costs. For a detailed reconciliation, see the schedules that follow in this release.

  • Non-GAAP Adjusted EBITDAS was $19.3 million, or 15.5% of net sales, compared with $25.6 million, or 21.1% of net sales, for the comparable quarter last year.

Mark Smith, President and Chief Executive Officer, commented, "We were very pleased with our second quarter results, which continued to reflect our innovative new product introductions and our consumers' enduring loyalty to the Smith & Wesson brand. Top line revenue and unit shipments were both up versus last year, while channel inventories actually decreased slightly in the period. This robust sell through, combined with our shipments outperforming NICS in the quarter by over 7%, underscores our belief that our strong performance was due to share gains at the retail counter. With demand levels expected to remain elevated through our traditionally busy season, a strong balance sheet, and a significant reduction in capex on the horizon as we wind down the major investment in our new facility in Tennessee, we expect to be in a very strong position to drive returns for our stockholders throughout the second half of fiscal 2024 and in fiscal 2025."

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "Although our gross margin continues to be temporarily pressured by fixed-cost absorption, inflationary factors, and inventory reserve adjustments, we strengthened our working capital position by reducing production to drive internal inventory levels down and we anticipate that the temporary margin headwinds will abate in the fourth quarter. We repurchased nearly 646,000 shares during the third quarter, utilizing $8.2 million of our $50 million authorization, and paid $5.5 million in dividends. Consistent with our capital allocation strategy, our board of directors has authorized a $0.12 per share quarterly dividend, which will be paid to stockholders of record on December 21, 2023 with payment to be made on January 4, 2024."

Conference Call and Webcast
The company will host a conference call and webcast on December 7, 2023 to discuss its second quarter fiscal 2024 financial and operational results. Speakers on the conference call will include Mark Smith, President and Chief Executive Officer, and Deana McPherson, Executive Vice President and Chief Financial Officer. The conference call may include forward-looking statements. The conference call and webcast will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Interested parties in North America are invited to participate by dialing 1-877-704-4453. Interested parties from outside North America are invited to participate by dialing 1-201-389-0920. Participants should dial in at least 10 minutes prior to the start of the call. The conference call audio webcast can also be accessed live on the company's website at www.smith-wesson.com, under the Investor Relations section.

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

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

Safe Harbor Statement
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and we intend that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, among others, that we expect to be in a very strong position to drive returns for our stockholders throughout the second half of fiscal 2024 and in fiscal 2025 and we anticipate that the temporary margin headwinds will abate in the fourth quarter. We caution that these statements are qualified by important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, economic, social, political, legislative, and regulatory factors; the potential for increased regulation of firearms and firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability, and costs of raw materials and components; our anticipated growth and growth opportunities; our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to effectively manage and execute the relocation; our ability to introduce new products; the success of new products; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2023.

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

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

 
As of: 
 October 31, 2023

April 30, 2023 
 (In thousands, except par value and share data) 
ASSETS
Current assets:
 

 
Cash and cash equivalents $44,192
 $53,556
Accounts receivable, net of allowances for credit losses of $22 on October 31, 2023       
and $23 on April 30, 2023
59,773

55,153
Inventories
163,291

177,118
Prepaid expenses and other current assets
9,870

4,917
Income tax receivable   4,713
  
1,176 
Total current assets
281,839
  
291,920 
Property, plant, and equipment, net
253,253

210,330
Intangibles, net
2,823

3,588
Goodwill
19,024

19,024
Deferred income taxes
8,085

8,085
Other assets  7,949
  
8,347 
Total assets $572,973
 $541,294 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 

 
Accounts payable $44,536
 $36,795
Accrued expenses and deferred revenue
23,197

20,149
Accrued payroll and incentives
19,889

18,565
Accrued income taxes
190

1,831
Accrued profit sharing
1,504

8,203
Accrued warranty  1,578
  1,670 
Total current liabilities
90,894

87,213
Notes and loans payable, net of current portion
64,836

24,790
Finance lease payable, net of current portion
36,209

36,961
Other non-current liabilities  7,532
  
7,707 
Total liabilities
199,471
  
156,671 
Commitments and contingencies
 

 
Stockholders’ equity:
 

 
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued      
or outstanding
—

—
Common stock, $0.001 par value, 100,000,000 shares authorized, 75,322,622 shares issued      
and 46,636,482 shares outstanding on October 31, 2023 and 75,029,300 shares issued and      
45,988,930 shares outstanding on April 30, 2023
75

75
Additional paid-in capital 
286,341

283,666
Retained earnings
517,682

523,184
Accumulated other comprehensive income
73

73
Treasury stock, at cost (29,686,140 shares on October 31, 2023 and 29,040,370 shares on      
April 30, 2023)  (430,669)  
(422,375)
Total stockholders’ equity  373,502
  
384,623 
Total liabilities and stockholders' equity $572,973
 $541,294 

 

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

 
For the Three Months
Ended October 31,

For the Six Months
Ended October 31,		 
 
2023

2022

2023

2022 
 
(In thousands, except per share data) 
Net sales $124,958
 $121,035
 $239,201
 $205,429
Cost of sales
93,192

81,773

177,034

134,696 
Gross profit
31,766

39,262

62,167

70,733 
Operating expenses:
 

 

 

 
Research and development
1,724

1,869

3,522

3,542
Selling, marketing, and distribution
10,952

9,431

20,993

17,458
General and administrative
15,322

15,435

29,536

33,288 
Total operating expenses
27,998

26,735

54,051

54,288 
Operating income
3,768

12,527

8,116

16,445 
Other income/(expense), net:
 

 

 

 
Other income(expense), net 
141

790

188

1,463
Interest (expense)/income, net
(646)
(420)
(492)
(854)
Total other (expense)/income, net
(505)
370

(304)
609 
Income from operations before income taxes
3,263

12,897

7,812

17,054
Income tax expense
765

3,249

2,196

4,094 
Net income $2,498
 $9,648
 $5,616
 $12,960 
Net income per share:
 

 

 

 
Basic - net income $0.05
 $0.21
 $0.12
 $0.28 
Diluted - net income $0.05
 $0.21
 $0.12
 $0.28 
Weighted average number of common shares outstanding:

 

 

 
Basic
45,977

45,815

46,042

45,777
Diluted
46,361

46,106

46,458

46,104

 

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

 For the Six Months
Ended October 31,		 
 
2023

2022 
 
(In thousands)
Cash flows from operating activities:
 

 
Net income $5,616
 $12,960
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
 

 
Depreciation and amortization 
17,327

15,171
Loss/(gain) on sale/disposition of assets
682

(43)
Provision for recoveries on notes and accounts receivable
(1)
(13)
Stock-based compensation expense
2,759

2,605
Changes in operating assets and liabilities:
 

 
Accounts receivable
(4,619)
18,324
Inventories
13,827

(59,814)
Prepaid expenses and other current assets
(4,953)
(2,493)
Income taxes
(5,178)
(11,555)
Accounts payable
14,682

5,889
Accrued payroll and incentives
1,324

(329)
Accrued profit sharing
(6,699)
(7,915)
Accrued expenses and deferred revenue
2,859

307
Accrued warranty
(92)
(130)
Other assets
397

521
Other non-current liabilities  (175)
(1,650)
Net cash provided by/(used in) operating activities
37,756

(28,165)
Cash flows from investing activities:
 

 
Payments to acquire patents and software
(125)
(256)
Proceeds from sale of property and equipment
45

85
Payments to acquire property and equipment  (66,983)
(39,419)
Net cash used in investing activities  
(67,063)
(39,590)
Cash flows from financing activities:
 

 
Proceeds from loans and notes payable
50,000

—
Payments on notes and loans payable
(10,000)
—
Payments on finance lease obligation
(681)
(559)
Payments to acquire treasury stock
(8,212)
—
Dividend distribution
(11,080)
(9,153)
Proceeds to acquire common stock from employee stock purchase plan
722

753
Payment of employee withholding tax related to restricted stock units  (806)
(1,039)
Net cash provided by/(used in) financing activities
19,943

(9,998)
Net decrease in cash and cash equivalents
(9,364)
(77,753)
Cash and cash equivalents, beginning of period  53,556

120,728 
Cash and cash equivalents, end of period $44,192
 $42,975 
Supplemental disclosure of cash flow information
 

 
Cash paid for:
 

 
Interest, net of amounts capitalized $1,725
 $1,089
Income taxes $7,353
 $15,721

 

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

 
For the Three Months Ended 

For the Six Months Ended 
 October 31, 2023
October 31, 2022
October 31, 2023
October 31, 2022 
 
$

% of
Sales

$

% of
Sales

$

% of
Sales

$

% of
Sales		 
GAAP gross profit $31,766

25.4%
 $39,262

32.4%
 $62,167

26.0%
 $70,733

34.4%
Relocation expenses
409

0.3%

1,735

1.4%

1,312

0.5%

2,978

1.4%
Settlement 
3,200

2.6%

—

0.0%

3,200

1%

—

0.0% 
Non-GAAP gross profit $35,375

28.3%
 $40,997

33.9%
 $66,679

27.9%
 $73,711

35.9% 
 
 

 

 

 

 

 

 

 
GAAP operating expenses $27,998

22.4%
 $26,735

22.1%
 $54,051

22.6%
 $54,288

26.4%
Spin related stock-based compensation
(3)
0.0%

(25)
0.0%

(7)
0.0%

(54)
0.0%
Relocation expenses
(1,652)
-1.3%

(1,354)
-1.1%

(4,661)
-1.9%

(2,330)
-1.1% 
Non-GAAP operating expenses $26,343

21.1%
 $25,356

20.9%
 $49,383

20.6%
 $51,904

25.3% 
 
 

 

 

 

 

 

 

 
GAAP operating income $3,768

3.0%
 $12,527

10.3%
 $8,116

3.4%
 $16,445

8.0%
Settlement 
3,200

2.6%

—

0.0%

3,200

—

—

0.0%
Spin related stock-based compensation
3

0.0%

25

0.0%

7

0.0%

54

0.0%
Relocation expenses
2,061

1.6%

3,088

2.6%

5,973

2.5%

5,308

2.6% 
Non-GAAP operating income $9,032

7.2%
 $15,640

12.9%
 $17,296

7.2%
 $21,807

10.6% 
 
 

 

 

 

 

 

 

 
GAAP net income $2,498

2.0%
 $9,648

8.0%
 $5,616

2.3%
 $12,960

6.3%
Settlement 
3,200

2.6%

—

0.0%

3,200

1.3%

—

0.0%
Spin related stock-based compensation
3

0.0%

25

0.0%

7

0.0%

54

0.0%
Relocation expenses
2,061

1.6%

3,088

2.6%

5,973

2.5%

5,308

2.6%
Tax effect of non-GAAP adjustments
(1,234)
-1.0%

(778)
-0.6%

(2,580)
-1.1%

(1,287)
-0.6% 
Non-GAAP net income $6,528

5.2%
 $11,983

9.9%
 $12,216

5.1%
 $17,035

8.3% 
 
 

 

 

 

 

 

 

 
GAAP net income per share - diluted $0.05

 
 $0.21

 
 $0.12

 
 $0.28

 
Settlement 
0.07

 

—

 

0.07

 

—

 
Relocation expenses
0.04

 

0.07

 

0.13

 

0.12

 
Tax effect of non-GAAP adjustments
(0.03)
 

(0.02)
 

(0.06)
 

(0.03)
 
Non-GAAP net income per share - diluted $0.14
 (a)

 $0.26

 
 $0.26

 
 $0.37 


 
 

 

 

 

 

 

 

 
(a) Non-GAAP net income per share does not foot due to rounding.


 

 

 

 

 

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

 
For the Three Months Ended

For the Six Months Ended 
 October 31, 2023
October 31, 2022
October 31, 2023
October 31, 2022 
 
 

 

 

 
GAAP net income $2,498
 $9,648
 $5,616
 $12,960
Interest expense
1,233

566

1,788

1,135
Income tax expense
765

3,249

2,196

4,094
Depreciation and amortization
7,972

7,599

17,203

15,126
Stock-based compensation expense
1,484

1,428

2,759

2,605
Settlement
3,200

—

3,200

—
Relocation expense
2,195

3,088

4,113

5,308 
Non-GAAP Adjusted EBITDAS $19,347
 $25,578
 $36,875
 $41,228 
 
 

 

 

 
 
15.5%

21.1%

15.4%

20.1%

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF OPERATING CASH FLOW FROM OPERATIONS TO FREE CASH FLOW
(In thousands)
(Unaudited)

 
For the Three Months Ended

For the Six Months Ended 
 October 31, 2023
October 31, 2022
October 31, 2023
October 31, 2022 
Net cash provided by/(used in) operating             
activities $(2,874) $(35,310) $37,756
 $(28,165)
Net cash used in investing activities
(34,996)
(28,004)
(67,063)
(39,590)
Free cash flow $(37,870) $(63,314) $(29,307) $(67,755)

 

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/190149