Smith & Wesson Brands, Inc. Reports Third Quarter Fiscal 2024 Financial Results
- Net sales for Q3 were $137.5 million, a 6.5% increase from the previous year.
- Gross margin was 28.7%, with non-GAAP gross margin at 29.1%.
- GAAP net income was $7.9 million, or $0.17 per diluted share, compared to $11.1 million, or $0.24 per diluted share, in the previous year.
- Non-GAAP net income was $8.7 million, or $0.19 per diluted share, compared to $11.6 million, or $0.25 per diluted share, in the previous year.
- Adjusted EBITDAS margin was 15.6% of net sales.
- Smith & Wesson Brands, Inc. believes it gained market share with strong shipments and robust demand for new products.
- The company expects healthy demand in the firearm market through the 2024 election cycle.
- Cash generated by operations was $25.4 million, with inventory in the distribution channel declining.
- The company repurchased shares and paid dividends in the third quarter.
- A $0.12 per share quarterly dividend was authorized for stockholders.
- The company will host a conference call and webcast to discuss Q3 financial results.
- None.
Insights
The reported increase in net sales by 6.5% is a positive indicator of Smith & Wesson Brands, Inc.'s market performance, particularly given the broader economic context. However, the decline in gross margin from 32.4% to 28.7% year-over-year suggests increasing costs or pricing pressures that could affect profitability. The discrepancy between GAAP and non-GAAP net income, with adjustments for significant costs such as the relocation of headquarters, highlights the importance of understanding one-time expenses and their impact on the company's financial health.
From a cash flow perspective, the increase in cash generated by operations is commendable and suggests efficient management of working capital, particularly in maintaining receivables and reducing inventory. The share repurchase activity, although modest relative to the authorization, signals confidence by management in the intrinsic value of the company's stock. The dividend payment consistency aligns with a shareholder-friendly capital allocation strategy, which is often appreciated by income-focused investors.
The assertion of market share gains by Smith & Wesson, as indicated by shipments outpacing the overall firearm market, requires further analysis against industry reports and competitors' performance. The company's anticipation of healthy demand through the 2024 election cycle could be predicated on historical trends where firearm sales often increase during election years due to potential policy changes. However, this should be weighed against any potential regulatory risks that could emerge from the political environment.
The decline in inventory levels in the distribution channel is an indicator of strong retail demand, which is a positive sign for the company's sell-through rates. This could also imply better inventory management and a leaner supply chain, which can be a competitive advantage. The focus on new product development and innovation is crucial in the firearms industry, where product differentiation can drive consumer preference and loyalty.
The Adjusted EBITDAS margin reduction from 19.5% to 15.6% reveals a contraction in operational efficiency or profitability that warrants attention. This metric is significant as it provides insight into the company's earnings before interest, taxes, depreciation, amortization and stock-based compensation, which is a proxy for the company's ability to generate cash from operations. The contraction may be due to a variety of factors, including increased operational costs, changes in product mix, or market dynamics.
It's also important to consider the broader economic factors at play. The company's performance must be contextualized within the current macroeconomic environment, which includes factors such as consumer spending power, inflation rates and supply chain issues. Any shifts in these areas can have a material impact on Smith & Wesson's business operations and future financial results.
- Q3 Net Sales of
$137.5 Million - Q3 Gross Margin of
28.7% ; Non-GAAP Gross Margin of29.1% - Q3 EPS of
$0.17 /Share; Q3 Adjusted EPS of$0.19 /Share - Q3 Adjusted EBITDAS Margin of
15.6%
Maryville, Tennessee--(Newsfile Corp. - March 7, 2024) - Smith & Wesson Brands, Inc. (NASDAQ: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the third quarter of fiscal 2024, ended January 31, 2024.
Financial Highlights
Net sales were
$137.5 million , an increase of$8.4 million , or6.5% , over the comparable quarter last year.Gross margin was
28.7% compared with32.4% in the comparable quarter last year.GAAP net income was
$7.9 million , or$0.17 per diluted share, compared with$11.1 million , or$0.24 per diluted share, for the comparable quarter last year.Non-GAAP net income was
$8.7 million , or$0.19 per diluted share, compared with$11.6 million , or$0.25 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the move of our headquarters and significant elements of our operations to a new facility in Maryville, Tennessee, or the Relocation, and other costs. For a detailed reconciliation, see the schedules that follow in this release.Non-GAAP Adjusted EBITDAS was
$21.4 million , or15.6% of net sales, compared with$25.1 million , or19.5% of net sales, for the comparable quarter last year.
Mark Smith, President and Chief Executive Officer, commented, "Our team delivered another strong quarter on both the top and bottom line. We believe we gained market share as our shipments outpaced the overall firearm market, reflecting the continuing robust demand for our best-in-class, innovative new products and sustained momentum in our core product portfolio. We continue to expect the firearm market to experience healthy demand through the 2024 election cycle. With our deep pipeline of new products, leading brand, new state-of-the-art facility in Tennessee, strong balance sheet, and most importantly, world-class dedicated employees, we are well positioned to continue delivering value for our stockholders."
Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "Net sales for our third quarter were
Conference Call and Webcast
The company will host a conference call and webcast on March 7, 2024 to discuss its third 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: 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 (i) we continue to expect the firearm market to experience healthy demand through the 2024 election cycle and (ii) with our deep pipeline of new products, leading brand, new state-of-the-art facility in Tennessee, strong balance sheet, and most importantly, world-class dedicated employees, we are well positioned to continue delivering value for our stockholders. 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: | ||||||
| January 31, 2024 | April 30, 2023 | |||||
| (In thousands, except par value and share data) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 47,367 | $ | 53,556 | ||
| Accounts receivable, net of allowances for credit losses of | ||||||
| January 31, 2024 and | 60,647 | 55,153 | ||||
| Inventories | 153,529 | 177,118 | ||||
| Prepaid expenses and other current assets | 9,020 | 4,917 | ||||
| Income tax receivable | 5,613 | 1,176 | ||||
| Total current assets | 276,176 | 291,920 | ||||
| Property, plant, and equipment, net | 256,830 | 210,330 | ||||
| Intangibles, net | 2,670 | 3,588 | ||||
| Goodwill | 19,024 | 19,024 | ||||
| Deferred income taxes | 8,085 | 8,085 | ||||
| Other assets | 7,781 | | 8,347 | |||
| Total assets | $ | 570,566 | $ | 541,294 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 36,141 | $ | 36,795 | ||
| Accrued expenses and deferred revenue | 24,333 | 20,149 | ||||
| Accrued payroll and incentives | 19,897 | 18,565 | ||||
| Accrued income taxes | 190 | 1,831 | ||||
| Accrued profit sharing | 3,473 | 8,203 | ||||
| Accrued warranty | 2,110 | 1,670 | ||||
| Total current liabilities | 86,144 | 87,213 | ||||
| Notes and loans payable, net of current portion | 64,858 | 24,790 | ||||
| Finance lease payable, net of current portion | 35,809 | 36,961 | ||||
| Other non-current liabilities | 7,324 | 7,707 | ||||
| Total liabilities | 194,135 | 156,671 | ||||
| Commitments and contingencies | ||||||
| Stockholders' equity: | ||||||
| Preferred stock, | ||||||
| or outstanding | - | - | ||||
| Common stock, | ||||||
| issued and 45,568,550 shares outstanding on January 31, 2024 and 75,029,300 | ||||||
| shares issued and 45,988,930 shares outstanding on April 30, 2023 | 75 | 75 | ||||
| Additional paid-in capital | 287,827 | 283,666 | ||||
| Retained earnings | 520,050 | 523,184 | ||||
| Accumulated other comprehensive income | 73 | 73 | ||||
| Treasury stock, at cost (29,757,239 shares on January 31, 2024 and 29,040,370 shares | ||||||
| on April 30, 2023) | (431,594 | ) | (422,375 | ) | ||
| Total stockholders' equity | 376,431 | 384,623 | ||||
| Total liabilities and stockholders' equity | $ | 570,566 | $ | 541,294 | ||
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| For the Three Months Ended January 31, | For the Nine Months Ended January 31, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| (In thousands, except per share data) | ||||||||||||
| Net sales | $ | 137,484 | $ | 129,036 | $ | 376,686 | $ | 334,465 | ||||
| Cost of sales | 98,060 | 87,195 | 275,094 | 221,890 | ||||||||
| Gross profit | 39,424 | 41,841 | 101,592 | 112,575 | ||||||||
| Operating expenses: | ||||||||||||
| Research and development | 1,969 | 2,133 | 5,492 | 5,675 | ||||||||
| Selling, marketing, and distribution | 10,108 | 9,996 | 31,101 | 27,454 | ||||||||
| General and administrative | 16,065 | 15,576 | 45,599 | 48,867 | ||||||||
| Total operating expenses | 28,142 | 27,705 | 82,192 | 81,996 | ||||||||
| Operating income | 11,282 | 14,136 | 19,400 | 30,579 | ||||||||
| Other income/(expense), net: | ||||||||||||
| Other income(expense), net | (11 | ) | 840 | 176 | 2,304 | |||||||
| Interest (expense)/income, net | (955 | ) | (508 | ) | (1,448 | ) | (1,361 | ) | ||||
| Total other (expense)/income, net | (966 | ) | 332 | (1,272 | ) | 943 | ||||||
| Income from operations before income taxes | 10,316 | 14,468 | 18,128 | 31,522 | ||||||||
| Income tax expense | 2,434 | 3,389 | 4,629 | 7,483 | ||||||||
| Net income | $ | 7,882 | $ | 11,079 | $ | 13,499 | $ | 24,039 | ||||
| Net income per share: | ||||||||||||
| Basic - net income | $ | 0.17 | $ | 0.24 | $ | 0.29 | $ | 0.52 | ||||
| Diluted - net income | $ | 0.17 | $ | 0.24 | $ | 0.29 | $ | 0.52 | ||||
| Weighted average number of common shares outstanding: | ||||||||||||
| Basic | 45,618 | 45,897 | 45,901 | 45,817 | ||||||||
| Diluted | 46,028 | 46,166 | 46,315 | 46,133 | ||||||||
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended January 31, | ||||||
| 2024 | 2023 | |||||
| (In thousands) | ||||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 13,499 | $ | 24,039 | ||
| Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | ||||||
| Depreciation and amortization | 24,291 | 21,795 | ||||
| Loss/(gain) on sale/disposition of assets | 785 | (43 | ) | |||
| Provision for recoveries on notes and accounts receivable | (23 | ) | (1 | ) | ||
| Stock-based compensation expense | 4,264 | 3,859 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (5,471 | ) | 4,444 | |||
| Inventories | 23,589 | (56,767 | ) | |||
| Prepaid expenses and other current assets | (4,103 | ) | (384 | ) | ||
| Income taxes | (6,079 | ) | (8,220 | ) | ||
| Accounts payable | 11,230 | 134 | ||||
| Accrued payroll and incentives | 1,332 | 1,073 | ||||
| Accrued profit sharing | (4,730 | ) | (5,737 | ) | ||
| Accrued expenses and deferred revenue | 3,917 | (4,078 | ) | |||
| Accrued warranty | 440 |
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FAQ
What were Smith & Wesson Brands, Inc.'s (SWBI) Q3 net sales?
Smith & Wesson Brands, Inc. reported Q3 net sales of $137.5 million.
What was the Q3 gross margin for Smith & Wesson Brands, Inc. (SWBI)?
The Q3 gross margin for Smith & Wesson Brands, Inc. was 28.7%.
What was the GAAP net income for Smith & Wesson Brands, Inc. (SWBI) in Q3?
Smith & Wesson Brands, Inc.'s GAAP net income in Q3 was $7.9 million.
What was the non-GAAP net income for Smith & Wesson Brands, Inc. (SWBI) in Q3?
Smith & Wesson Brands, Inc.'s non-GAAP net income in Q3 was $8.7 million.
What was the adjusted EPS for Smith & Wesson Brands, Inc. (SWBI) in Q3?
The adjusted EPS for Smith & Wesson Brands, Inc. in Q3 was $0.19 per diluted share.
What was the Adjusted EBITDAS margin for Smith & Wesson Brands, Inc. (SWBI) in Q3?
Smith & Wesson Brands, Inc.'s Adjusted EBITDAS margin in Q3 was 15.6% of net sales.
What did Smith & Wesson Brands, Inc. (SWBI) comment on regarding their Q3 performance?
Smith & Wesson Brands, Inc. commented on gaining market share, robust demand for new products, and expecting healthy demand in the firearm market through the 2024 election cycle.
How much cash was generated by operations for Smith & Wesson Brands, Inc. (SWBI) in Q3?
Cash generated by operations for Smith & Wesson Brands, Inc. in Q3 was $25.4 million.
What dividend was authorized for stockholders of Smith & Wesson Brands, Inc. (SWBI) in Q3?
A $0.12 per share quarterly dividend was authorized for stockholders of Smith & Wesson Brands, Inc. in Q3.
Smith & Wesson Brands, Inc.
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SWBI Stock Data
609.77M
44.85M
1.28%
60.26%
3.35%
Aerospace & Defense
Ordnance & Accessories, (no Vehicles/guided Missiles)
United States of America
SPRINGFIELD
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