SWBI - Smith & Wesson Brands Inc. Reports Third Quarter Fiscal 2024 Financial Results

March, 07 2024 04:15 PM Smith & Wesson Brands Inc.

Q3 Net Sales of $137.5 Million
Q3 Gross Margin of 28.7%; Non-GAAP Gross Margin of 29.1%
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, or 6.5%, over the comparable quarter last year.
Gross margin was 28.7% compared with 32.4% 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, or 15.6% of net sales, compared with $25.1 million, or 19.5% 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 6.5% above the prior year comparable quarter. During the quarter, inventory in the distribution channel declined from October levels, in terms of actual units and weeks of inventory, indicating strong sell through of our products at retail. Cash generated by operations was $25.4 million, $18.5 million better than last year, primarily due to receivables remaining relatively flat to last quarter while inventory declined by $9.8 million. We repurchased nearly 71,000 shares during the third quarter, utilizing $916,000 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 March 21, 2024 with payment to be made on April 4, 2024."

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 $0 on






January 31, 2024 and $23 on April 30, 2023

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, $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, 75,325,789 shares






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


(156
)
Other assets

565


1,158

Other non-current liabilities

(383
)

(2,364
)
Net cash provided by/(used in) operating activities

63,123


(21,248
)
Cash flows from investing activities:






Payments to acquire patents and software

(164
)

(251
)
Proceeds from sale of property and equipment

2,877


85

Payments to acquire property and equipment

(85,188
)

(64,586
)
Net cash used in investing activities

(82,475
)

(64,752
)
Cash flows from financing activities:






Proceeds from loans and notes payable

50,000


25,000

Payments on notes and loans payable

(10,000
)

(231
)
Payments on finance lease obligation

(1,049
)

(856
)
Payments to acquire treasury stock

(9,128
)

-

Dividend distribution

(16,557
)

(13,744
)
Proceeds to acquire common stock from employee stock purchase plan

722


753

Payment of employee withholding tax related to restricted stock units

(825
)

(1,054
)
Net cash provided by financing activities

13,163


9,868

Net decrease in cash and cash equivalents

(6,189
)

(76,132
)
Cash and cash equivalents, beginning of period

53,556


120,728

Cash and cash equivalents, end of period
$
47,367

$
44,596

Supplemental disclosure of cash flow information






Cash paid for:






Interest, net of amounts capitalized
$
3,317

$
1,743

Income taxes
$
10,687

$
15,775

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 Nine Months Ended



January 31, 2024


January 31, 2023


January 31, 2024


January 31, 2023



$


% of Sales


$


% of Sales


$


% of Sales


$


% of Sales

GAAP gross profit
$
39,424


28.7%

$
41,841


32.4%

$
101,592


27.0%

$
112,575


33.7%

Relocation expenses

642


0.5%


305


0.2%


1,954


0.5%


3,285


1.0%

Settlement

-


0.0%


-


0.0%


3,200


1%


-


0.0%

Non-GAAP gross profit
$
40,066


29.1%

$
42,146


32.7%

$
106,746


28.3%

$
115,860


34.6%


























GAAP operating expenses
$
28,142


20.5%

$
27,705


21.5%

$
82,192


21.8%

$
81,996


24.5%

Spin related stock-based compensation

(3
)

0.0%


(26
)

0.0%


(10
)

0.0%


(79
)

0.0%

Relocation expenses

(431
)

-0.3%


(321
)

-0.2%


(5,092
)

-1.4%


(2,649
)

-0.8%

Non-GAAP operating expenses
$
27,708


20.2%

$
27,358


21.2%

$
77,090


20.5%

$
79,268


23.7%


























GAAP operating income
$
11,282


8.2%

$
14,136


11.0%

$
19,400


5.2%

$
30,579


9.1%

Settlement

-


0.0%


-


0.0%


3,200


-


-


0.0%

Spin related stock-based compensation

3


0.0%


26


0.0%


10


0.0%


79


0.0%

Relocation expenses

1,073


0.8%


626


0.5%


7,046


1.9%


5,934


1.8%

Non-GAAP operating income
$
12,358


9.0%

$
14,788


11.5%

$
29,656


7.9%

$
36,592


10.9%


























GAAP net income
$
7,882


5.7%

$
11,079


8.6%

$
13,499


3.6%

$
24,039


7.2%

Settlement

-


0.0%


-


0.0%


3,200


0.8%


-


0.0%

Spin related stock-based compensation

3


0.0%


26


0.0%


10


0.0%


79


0.0%

Relocation expenses

1,073


0.8%


626


0.5%


7,046


1.9%


5,934


1.8%

Tax effect of non-GAAP adjustments

(254
)

-0.2%


(153
)

-0.1%


(2,446
)

-0.6%


(1,425
)

-0.4%

Non-GAAP net income
$
8,704


6.3%

$
11,578


9.0%

$
21,309


5.7%

$
28,627


8.6%


























GAAP net income per share - diluted
$
0.17




$
0.24




$
0.29




$
0.52




Settlement

-





-





0.07





-




Relocation expenses

0.02





0.01





0.15





0.13




Tax effect of non-GAAP adjustments

(0.01
)




-





(0.05
)




(0.03
)



Non-GAAP net income per share - diluted
$
0.19


(a)

$
0.25




$
0.46




$
0.62

(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 Nine Months Ended


January 31, 2024

January 31, 2023

January 31, 2024

January 31, 2023














GAAP net income
$
7,882

$
11,079

$
13,499

$
24,039

Interest expense

1,615


671


3,404


1,806

Income tax expense

2,434


3,389


4,629


7,483

Depreciation and amortization

6,941


6,669


24,145


21,795

Stock-based compensation expense

1,504


1,253


4,264


3,859

Settlement

-


-


3,200


-

Relocation expense

1,073


2,082


5,186


7,390

Non-GAAP Adjusted EBITDAS
$
21,449

$
25,143

$
58,327

$
66,372
















15.6%


19.5%


15.5%


19.8%

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 Nine Months Ended


January 31, 2024

January 31, 2023

January 31, 2024

January 31, 2023

Net cash provided by/(used in) operating activities
$
25,367

$
6,917

$
63,123

$
(21,248
)
Net cash used in investing activities

(18,205
)

(25,162
)

(85,188
)

(64,752
)
Free cash flow
$
7,162

$
(18,245
)
$
(22,065
)
$
(86,000
)

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/200737

Company Name:	Smith & Wesson Brands Inc.
Stock Symbol:	SWBI
Market:	NASDAQ
Website:	smith-wesson.com

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