Smith & Wesson Brands, Inc. Reports Fourth Quarter and Full Year Fiscal 2022 Financial Results

Rhea-AI Summary

Smith & Wesson Brands, Inc. (SWBI) reported a Q4 net sales of $181.3 million, a 43.9% decrease year-over-year. The gross margin was 39.8%, down from 45.1% a year prior. The Q4 EPS was $0.79, compared to $1.70 the previous year. For the full year, net sales totaled $864.1 million, an 18.4% decline. However, the company continues to maintain a strong balance sheet with $120.7 million in cash and no debt. The Board approved a 25% increase in the quarterly dividend to $0.10 per share, reflecting confidence in future cash flows.

Positive

• No debt and cash reserves of $120.7 million indicating strong financial health.
• A 25% increase in quarterly dividend to $0.10 per share shows commitment to shareholders.

Negative

• Q4 net sales dropped by $141.6 million, or 43.9%, year-over-year.
• Gross margin decreased to 39.8% from 45.1% in the previous year.
• Full year sales declined by 18.4% compared to the prior year.

-          Q4 Net Sales of $181.3 Million
-          Q4 Gross Margin of 39.8%
-          Q4 EPS of $0.79/Share; Q4 Adjusted EBITDAS Margin of 31.8%
-          $120.7 Million of Cash on Hand
-          Board of Directors Authorized 25% Increase in Quarterly Dividend

SPRINGFIELD, Mass., June 23, 2022 /PRNewswire/ -- Smith & Wesson Brands, Inc. (NASDAQ Global Select: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the fourth quarter and full fiscal year 2022, ended April 30, 2022. Unless otherwise indicated, any reference to income statement items refers to results from continuing operations.

Fourth Quarter Fiscal 2022 Financial Highlights

• Net sales were $181.3 million, a decrease of $141.6 million, or 43.9%, from the comparable quarter last year, and $11.7 million, or 6.1%, lower than the comparable quarter in fiscal 2020.
• Gross margin was 39.8% versus 45.1% in the comparable quarter last year and 32.2% in the comparable quarter in fiscal 2020.
• GAAP net income was $36.1 million, or $0.79 per diluted share, compared with $89.2 million, or $1.70 per diluted share, for the comparable quarter last year.
• Non-GAAP net income was $37.6 million, or $0.82 per diluted share, compared with $89.6 million, or $1.71 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the planned relocation of our headquarters and certain manufacturing and distribution operations to Tennessee, the spin-off of the outdoor products and accessories business in fiscal 2021, COVID-19 related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.
• Non-GAAP Adjusted EBITDAS was $57.7 million, or 31.8% of net sales, compared with $125.6 million, or 38.9% of net sales, for the comparable quarter last year.

Full Year Fiscal 2022 Financial Highlights

• Net sales were $864.1 million compared with $1.1 billion for the prior year, a decrease of 18.4%.
• Gross margin was 43.3% versus 42.4% for the prior year.
• GAAP net income was $194.5 million, or $4.08 per diluted share, compared with $243.6 million, or $4.40 per diluted share, for the prior year.
• Non-GAAP net income was $202.8 million, or $4.25 per diluted share, compared with $251.5 million, or $4.54 per diluted share, for the prior year. GAAP to non-GAAP adjustments for income exclude costs related to the spin-off of the outdoor products and accessories business, COVID-19 related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.
• Non-GAAP Adjusted EBITDAS was $299.6 million, or 34.7% of net sales, compared with $366.6 million, or 34.6% of net sales, for the prior year.

Mark Smith, President and Chief Executive Officer, commented, "Our fourth quarter and full year results speak to the quality and dedication of our employees, the strength of our iconic brand, and the resiliency of our flexible manufacturing model.  We delivered strong financial results, including gross profit and Adjusted EBITDAS margins for fiscal 2022 that exceeded prior year levels despite continued moderation in demand for firearms that led to lower net sales. Although we expect inflationary pressures to persist and for firearm market conditions to return to more normalized levels in fiscal 2023, we are confident in our flexible manufacturing model and expect to benefit from the pricing and product portfolio adjustments that we made during the surge. In summary, we believe that we remain well positioned for long-term growth with an agile business model designed to quickly adapt to changes in the marketplace and deliver strong, consistent levels of profitability and drive long-term stockholder value."

Deana McPherson, Executive Vice President and Chief Financial Officer, commented "Our financial performance reflects tougher year-over-year comparisons due to the return to more normalized levels of demand following the surge. However, in spite of the lower demand, we are now realizing the benefits of the proactive steps we took during the surge to enhance our profitability profile.  Fourth quarter gross margin was down on a year-over-year basis, as expected, but 760 basis points above the comparable quarter in fiscal 2020 despite a 6.1% decline in net sales.  Our balance sheet remains strong with $120.7 million of cash and no debt, and we expect to continue generating strong cash flow for the foreseeable future.  Accordingly, our Board of Directors has authorized a 25% increase in our quarterly dividend to $0.10 per share, which will be paid to stockholders of record on July 7, 2022 with payment to be made on July 21, 2022."

Conference Call and Webcast
The company will host a conference call and webcast on June 23, 2022, to discuss its fourth quarter and full fiscal 2022 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). Those interested in listening to the conference call via telephone may call directly at (844) 309-6568 and reference conference identification number 2371913.  No RSVP is necessary. 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) COVID-19 expenses, (vi) transition costs, (vii) amortization of acquired intangible assets, (viii) spin related stock compensation, (ix) Relocation expense, and (x) 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®, M&P®, 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, our expectation that inflationary pressures will persist and firearm market conditions will return to more normalized levels in fiscal 2023; our confidence in our flexible manufacturing model; our expectation that we will benefit from the pricing and product portfolio adjustments that we made during the surge; our belief that we remain well positioned for long-term growth with an agile business model designed to quickly adapt to changes in the marketplace and deliver strong, consistent levels of profitability and drive long-term stockholder value; and our expectation that we will continue generating strong cash flow for the foreseeable future. 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 planned relocation of our headquarters and certain of our operations to Tennessee; 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, 2022. 

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

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	As of:
	April 30, 2022		April 30, 2021
	(In thousands, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents	$          120,728		$          113,017
Accounts receivable, net of allowances for credit losses of $36 on April 30, 2022 and $107 on April 30, 2021	62,695		67,442
Inventories	136,660		78,477
Prepaid expenses and other current assets	5,569		8,408
Income tax receivable	1,945		909
Total current assets	327,597		268,253
Property, plant, and equipment, net	135,591		141,612
Intangibles, net	3,608		4,417
Goodwill	19,024		19,024
Deferred income taxes	1,221		—
Other assets	10,435		13,082
Total assets	497,476		446,388
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$             30,042		$            57,337
Accrued expenses and deferred revenue	23,482		33,136
Accrued payroll and incentives	17,371		17,381
Accrued income taxes	2,673		1,157
Accrued profit sharing	13,543		14,445
Accrued warranty	1,838		2,199
Total current liabilities	88,949		125,655
Deferred income taxes	—		904
Finance lease payable, net of current portion	37,628		38,786
Other non-current liabilities	10,385		14,659
Total liabilities	136,962		180,004
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock, $.001 par value, 100,000,000 shares authorized, 74,641,439 issued and 45,601,069 shares outstanding on April 30, 2022 and 74,222,127 shares issued and 49,937,329 shares outstanding on April 30, 2021	75		74
Additional paid-in capital	278,101		273,431
Retained earnings	504,640		325,181
Accumulated other comprehensive income	73		73
Treasury stock, at cost (29,040,370 shares on April 30, 2022 and 24,284,798 on April 30, 2021)	(422,375)		(332,375)
Total stockholders' equity	360,514		266,384
Total liabilities and stockholders' equity	$          497,476		$          446,388

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		For the Three Months Ended April 30,				For the Years Ended April 30,
		2022		2021		2022		2021
		(In thousands, except per share data)
Net sales		$181,299		$322,947		$864,126		$1,059,195
Cost of sales		109,072		177,139		489,562		610,212
Gross profit		72,227		145,808		374,564		448,983
Operating expenses:		39.8 %		45.1 %		43.3 %		42.4 %
Research and development		1,994		1,963		7,262		7,480
Selling, marketing, and distribution		9,581		10,507		43,156		42,603
General and administrative		14,000		17,207		72,493		79,268
Total operating expenses		25,575		29,677		122,911		129,351
Operating income from continuing operations		46,652		116,131		251,653		319,632
Other income/(expense), net:
Other income/(expense), net		624		540		2,868		2,252
Interest expense, net		(531)		(563)		(2,135)		(3,919)
Total other income/(expense), net		93		(23)		733		(1,667)
Income from operations before income taxes		46,745		116,108		252,386		317,965
Income tax expense		10,610		26,929		57,892		74,394
Income from continuing operations		$   36,135		$   89,179		$194,494		$    243,571
Discontinued operations:
Income/(loss) from discontinued operations, net of tax		—		(144)		—		8,478
Net income		$   36,135		$   89,035		$194,494		$    252,049
Net income per share:
Basic - continuing operations		$       0.79		$       1.72		$       4.12		$           4.46
Basic - net income		$       0.79		$       1.72		$       4.12		$           4.62
Diluted - continuing operations		$       0.79		$       1.70		$       4.08		$           4.40
Diluted - net income		$       0.79		$       1.70		$       4.08		$           4.55
Weighted average number of common shares outstanding:
Basic		45,547		51,816		47,227		54,613
Diluted		45,937		52,423		47,728		55,352

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Year Ended
	April 30, 2022		April 30, 2021
	(In thousands)
Cash flows from operating activities:
Income from continuing operations	$      194,494		$      243,571
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	30,073		31,575
Loss on sale/disposition of assets	625		154
Provision for losses/(recoveries) on notes and accounts receivable	689		(739)
Impairment of long-lived tangible assets	86		—
Deferred income taxes	(2,125)		447
Stock-based compensation expense	4,536		4,706
Changes in operating assets and liabilities:
Accounts receivable	4,058		(5,824)
Inventories	(58,183)		25,264
Prepaid expenses and other current assets	2,839		(852)
Income taxes	480		(3,643)
Accounts payable	(26,957)		25,540
Accrued payroll and incentives	(10)		4,933
Accrued profit sharing	(902)		12,248
Accrued expenses and deferred revenue	(9,725)		(24,633)
Accrued warranty	(361)		(1,098)
Other assets	2,561		1,579
Other non-current liabilities	(4,364)		4,032
Cash provided by operating activities - continuing operations	137,814		317,260
Cash used in operating activities - discontinued operations	—		(1,926)
Net cash provided by operating activities	137,814		315,334
Cash flows from investing activities:
Refunds on machinery and equipment	—		310
Payments to acquire patents and software	(283)		(632)
Proceeds from sale of property and equipment	139		113
Payments to acquire property and equipment	(23,972)		(22,052)
Cash used in investing activities - continuing operations	(24,116)		(22,261)
Cash used in investing activities - discontinued operations	—		(1,143)
Net cash used in investing activities	(24,116)		(23,404)
Cash flows from financing activities:
Proceeds from loans and notes payable	—		25,000
Cash paid for debt issuance costs	—		(450)
Payments on finance lease obligation	(1,087)		(996)
Payments on notes and loans payable	—		(185,000)
Distribution to AOUT	—		(25,000)
Payments to acquire treasury stock	(90,000)		(110,000)
Dividend distribution	(15,035)		(8,223)
Proceeds from exercise of options to acquire common stock, including employee stock purchase plan	1,719		3,154
Payment of employee withholding tax related to restricted stock units	(1,584)		(2,243)
Cash used in by financial activities - continuing operations	(105,987)		(303,758)
Cash used in financial activities - discontinued operations	—		(166)
Net cash used in financing activities	(105,987)		(303,924)
Net decrease in cash and cash equivalents	7,711		(11,994)
Cash and cash equivalents, beginning of period	113,017		125,011
Cash and cash equivalents, end of period	$      120,728		$      113,017
Supplemental disclosure of cash flow information
Cash paid for:
Interest	$          2,219		$          3,306
Income taxes	$        59,183		$        80,874

 

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 Year Ended
	April 30, 2022				April 30, 2021				April 30, 2022				April 30, 2021
	$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales
GAAP gross profit	$ 72,227		39.8 %		$ 145,808		45.1 %		$ 374,564		43.3 %		$  448,983		42.4 %
Relocation expenses	1,031		0.6 %		—		—		3,361		0.4 %		—		—
COVID-19	1		0.0 %		43		0.0 %		33		0.0 %		560		0.1 %
Non-GAAP gross profit	$ 73,259		40.4 %		$ 145,851		45.2 %		$ 377,958		43.7 %		$  449,543		42.4 %
GAAP operating expenses	$ 25,575		14.1 %		$   29,677		9.2 %		$ 122,911		14.2 %		$  129,351		12.2 %
Amortization of acquired intangible assets	(71)		0.0 %		(83)		0.0 %		(285)		0.0 %		(332)		0.0 %
Transition costs	—		—		(22)		0.0 %		80		0.0 %		(7,975)		-0.8 %
COVID-19	(71)		0.0 %		(67)		0.0 %		(207)		0.0 %		(685)		-0.1 %
Spin related stock-based compensation	(43)		0.0 %		(296)		-0.1 %		(147)		0.0 %		(738)		-0.1 %
Relocation expenses	(685)		-0.4 %		—		—		(6,884)		-0.8 %		—		—
Non-GAAP operating expenses	$ 24,705		13.6 %		$   29,209		9.0 %		$ 115,468		13.4 %		$  119,621		11.3 %
GAAP operating income	$ 46,652		25.7 %		$ 116,131		36.0 %		$ 251,653		29.1 %		$  319,632		30.2 %
Amortization of acquired intangible assets	71		0.0 %		83		0.0 %		285		0.0 %		332		0.0 %
Transition costs	—		—		22		0.0 %		(80)		0.0 %		7,975		0.8 %
COVID-19	72		0.0 %		110		0.0 %		240		0.0 %		1,245		0.1 %
Spin related stock-based compensation	43		0.0 %		296		0.1 %		147		0.0 %		738		0.1 %
Relocation expenses	1,716		0.9 %		—		—		10,245		1.2 %		—		—
Non-GAAP operating income	$ 48,554		26.8 %		$ 116,642		36.1 %		$ 262,490		30.4 %		$  329,922		31.1 %
GAAP income from operations	$ 36,135		19.9 %		$   89,179		27.6 %		$ 194,494		22.5 %		$  243,571		23.0 %
Amortization of acquired intangible assets	71		0.0 %		83		0.0 %		285		0.0 %		332		0.0 %
Transition costs	—		0.0 %		22		0.0 %		(80)		0.0 %		7,975		0.8 %
COVID-19	72		0.0 %		110		0.0 %		240		0.0 %		1,245		0.1 %
Spin related stock-based compensation	43		0.0 %		296		0.1 %		147		0.0 %		738		0.1 %
Relocation expenses	1,716		0.9 %		—		—		10,245		1.2 %		—		—
Tax effect of non-GAAP adjustments	(432)		-0.2 %		(119)		0.0 %		(2,486)		-0.3 %		(2,400)		-0.2 %
Non-GAAP income from  operations	$ 37,605		20.7 %		$   89,571		27.7 %		$ 202,845		23.5 %		$  251,461		23.7 %
GAAP income from  operations per share - diluted	$      0.79				$        1.70				$        4.08				$         4.40
Amortization of acquired intangible assets	—				—				0.01				0.01
Transition costs	—				—				—				0.14
COVID-19	—				—				0.01				0.02
Spin related stock-based compensation	—				0.01				—				0.01
Relocation expenses	0.04				—				0.21				—
Tax effect of non-GAAP adjustments	(0.01)				—				(0.05)				(0.04)
Non-GAAP income from  operations per share - diluted	$      0.82				$        1.71				$        4.25	(a)			$         4.54
(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 Year Ended
		April 30, 2022		April 30, 2021		April 30, 2022		April 30, 2021
GAAP net income		$          36,135		$          89,179		$       194,494		$       243,571
Interest expense		570		585		2,310		4,056
Income tax expense		10,610		26,929		57,892		74,394
Depreciation and amortization		7,636		7,420		29,982		30,685
Stock-based compensation expense		972		1,314		4,536		4,706
COVID-19		72		110		240		1,245
Transition costs		—		22		(80)		7,975
Relocation expense		1,716		—		10,245		—
Non-GAAP Adjusted EBITDAS		$          57,711		$        125,559		$       299,619		$       366,632

 

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 Year Ended
	April 30, 2022		April 30, 2021		April 30, 2022		April 30, 2021
Net cash provided by operating activities	$     25,539		$   118,823		$   137,814		$   317,260
Net cash used in investing activities	(8,905)		(3,691)		(24,116)		(22,261)
Free cash flow	$     16,634		$   115,132		$   113,698		$   294,999

 

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SOURCE Smith & Wesson Brands, Inc.

FAQ

What were Smith & Wesson's Q4 2022 earnings results?

Smith & Wesson reported Q4 2022 net sales of $181.3 million and EPS of $0.79.

How did Smith & Wesson's full-year sales perform in 2022?

The full-year sales for Smith & Wesson in 2022 totaled $864.1 million, a decrease of 18.4% from the previous year.

What changes were made to Smith & Wesson's dividend?

Smith & Wesson's Board of Directors approved a 25% increase in the quarterly dividend to $0.10 per share.

What is the outlook for Smith & Wesson in fiscal 2023?

Smith & Wesson anticipates a return to more normalized market conditions, while maintaining confidence in its flexible manufacturing model.