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Classified in: Business, Sports and recreation, Covid-19 virus
Subject: ERN

Smith & Wesson Brands, Inc. Reports Second Quarter Fiscal 2023 Financial Results


SPRINGFIELD, Mass., Dec. 6, 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 second quarter fiscal year 2023, ended October 31, 2022.

Second Quarter Fiscal 2023 Financial Highlights

Mark Smith, President and Chief Executive Officer, commented, "With firearm demand continuing to normalize, our second quarter results once again demonstrated the significant progress we've made over the past several years in creating a highly adaptive and robust business model that consistently delivers strong profitability, regardless of market conditions.  Consumer demand for firearms was significantly down from a year earlier, coinciding with a broader consumer slowdown driven by persistently high inflation, the beginning of the winter heating season across the northern half of the country, and rising interest rates.  Nonetheless, compared to the second quarter of fiscal 2020, our current quarter results reflected a significant increase in profitability.  While fiscal 2023 continues to be a year of recalibration and adjustment for our industry and Smith & Wesson, we expect to remain highly profitable and continue delivering on our commitments to customers, employees, and stockholders well into the future."

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "An ongoing inventory correction combined with the impact of promotional activity by our competitors and the trading down by consumers to lower priced products negatively affected our quarterly sales. On a positive note, however, the discipline that we've exhibited in promotions during the current quarter has improved our overall profitability when compared with pre-pandemic levels, reflecting average selling prices that were approximately 45% above fiscal 2020.  We remain focused on managing the business for long-term profitability, market share performance, and capital returned to our stockholders.  Consistent with our capital allocation strategy, our board of directors has authorized a $0.10 per share quarterly dividend, which will be paid to stockholders of record on December 20, 2022 with payment to be made on January 3, 2023."

Conference Call and Webcast

The company will host a conference call and webcast on December 6, 2022 to discuss its second quarter fiscal 2023 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 should click "here" to pre-register for the conference call and obtain your dial-in number and unique PIN number.  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-based 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, (i) our second quarter results once again demonstrated the significant progress we've made over the past several years in creating a highly adaptive and robust business model that consistently delivers strong profitability, regardless of market conditions, (ii) while fiscal 2023 continues to be a year of recalibration and adjustment for our industry and Smith & Wesson, we expect to remain highly profitable and continue delivering on our commitments to customers, employees and stockholders well into the future and (iii) we remain focused on managing the business for long-term profitability, market share performance, and capital returned to 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 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


(Unaudited)





As of:


October 31, 2022


April 30, 2022



(In thousands, except par value and share data)


 ASSETS


 Current assets:





Cash and cash equivalents

$                 42,975


$              120,728


Accounts receivable, net of allowances for credit losses of $24 on
   October 31, 2022 and $36 on April 30, 2022

44,384


62,695


Inventories

196,474


136,660


Prepaid expenses and other current assets

8,062


5,569


Income tax receivable 

10,988


1,945


Total current assets

302,883


327,597


 Property, plant, and equipment, net

169,265


135,591


 Intangibles, net

3,688


3,608


 Goodwill

19,024


19,024


 Deferred income taxes

1,221


1,221


 Other assets

9,914


10,435


 Total assets

505,995


497,476


 LIABILITIES AND STOCKHOLDERS' EQUITY


 Current liabilities:





Accounts payable

$                 45,178


$                 30,042


Accrued expenses and deferred revenue

23,845


23,482


Accrued payroll and incentives

17,042


17,371


Accrued income taxes

161


2,673


Accrued profit sharing

5,628


13,543


Accrued warranty

1,708


1,838


Total current liabilities

93,562


88,949


 Finance lease payable, net of current portion

37,013


37,628


Other non-current liabilities

8,780


10,385


Total liabilities

139,355


136,962


 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, 74,934,815
   issued  and 45,894,445 shares outstanding on October 31, 2022 and 74,641,439
   shares issued and 45,601,069 shares outstanding on April 30, 2022

75


75


Additional paid-in capital 

280,420


278,101


Retained earnings

508,447


504,640


Accumulated other comprehensive income

73


73


Treasury stock, at cost (29,040,370 shares on October 31, 2022 and April 30, 2022)

(422,375)


(422,375)


Total stockholders' equity

366,640


360,514


 Total liabilities and stockholders' equity

$              505,995


$              497,476


 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)












For the Three Months Ended October 31,


For the Six Months Ended October 31,



2022


2021


2022


2021



(In thousands, except per share data)

Net sales


$              121,035


$              230,479


$              205,429


$              505,088

Cost of sales


81,773


128,484


134,696


273,151

Gross profit


39,262


101,995


70,733


231,937

Operating expenses:






34.4 %


45.9 %

Research and development


1,869


1,744


3,542


3,552

Selling, marketing, and distribution


9,431


11,423


17,458


22,057

General and administrative


15,435


23,436


33,288


41,049

Total operating expenses


26,735


36,603


54,288


66,658

Operating income


12,527


65,392


16,445


165,279

Other income/(expense), net:









Other income/(expense), net 


790


833


1,463


1,493

Interest expense, net


(420)


(466)


(854)


(1,011)

Total other income/(expense), net


370


367


609


482

Income from operations before income taxes


12,897


65,759


17,054


165,761

Income tax expense


3,249


14,824


4,094


37,944

Net income


$                   9,648


$                 50,935


$                 12,960


$              127,817

Net income per share:









Basic - net income


$                     0.21


$                     1.06


$                     0.28


$                     2.65

Diluted - net income


$                     0.21


$                     1.05


$                     0.28


$                     2.63

Weighted average number of common shares outstanding:







Basic


45,815


48,147


45,777


48,270

Diluted


46,106


48,692


46,104


48,524

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)








For the Six Months Ended


October 31, 2022


October 31, 2021



(In thousands)

Cash flows from operating activities:





Net income

$                   12,960


$                 127,817


Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization 

15,171


15,210


(Gain)/loss on sale/disposition of assets

(43)


57


Provision for (recoveries)/losses on notes and accounts receivable

(13)


781


Impairment of long-lived tangible assets

?


86


Stock-based compensation expense

2,605


2,366


Changes in operating assets and liabilities:





     Accounts receivable

18,324


22,435


     Inventories

(59,814)


(41,800)


     Prepaid expenses and other current assets

(2,493)


87


     Income taxes

(11,555)


(243)


     Accounts payable

5,889


(8,514)


     Accrued payroll and incentives

(329)


(6,313)


     Accrued profit sharing

(7,915)


(6,668)


     Accrued expenses and deferred revenue

307


(1,205)


     Accrued warranty

(130)


(57)


     Other assets

521


2,030


     Other non-current liabilities

(1,650)


(705)


Net cash (used in)/provided by operating activities

(28,165)


105,364


Cash flows from investing activities:





Payments to acquire patents and software

(256)


(156)


Proceeds from sale of property and equipment

85


70


Payments to acquire property and equipment

(39,419)


(10,113)


Net cash used in investing activities

(39,590)


(10,199)


Cash flows from financing activities:





Payments on finance lease obligation

(559)


(531)


Payments to acquire treasury stock

?


(40,000)


Dividend distribution

(9,153)


(7,692)


Proceeds from exercise of options to acquire common stock, including employee stock purchase plan

753


831


Payment of employee withholding tax related to restricted stock units

(1,039)


(1,399)


 Net cash used in financing activities

(9,998)


(48,791)


Net (decrease)/increase in cash and cash equivalents

(77,753)


46,374


Cash and cash equivalents, beginning of period

120,728


113,017


Cash and cash equivalents, end of period

$                   42,975


$                 159,391


Supplemental disclosure of cash flow information





Cash paid for:





Interest

$                     1,089


$                     1,116


Income taxes

$                   15,721


$                   38,186


 


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, 2022


October 31, 2021


October 31, 2022


October 31, 2021



$


% of Sales


$


% of Sales


$


% of Sales


$


% of Sales


GAAP gross profit

$    39,262


32.4 %


$    101,995


44.3 %


$        70,733


34.4 %


$      231,937


45.9 %


Relocation expenses

1,735


1.4 %


1,087


0.5 %


2,978


1.4 %


1,087


0.2 %


COVID-19

?


?


3


0.0 %


?


?


31


0.0 %


Non-GAAP gross profit

$    40,997


33.9 %


$    103,085


44.7 %


$        73,711


35.9 %


$      233,055


46.1 %



















GAAP operating expenses

$    26,735


22.1 %


$      36,603


15.9 %


$        54,288


26.4 %


$        66,658


13.2 %


Amortization of acquired intangible assets

?


?


(70)


0.0 %


?


?


(142)


0.0 %


Transition costs

?


?


80


0.0 %


?


?


80


0.0 %


COVID-19

?


?


(52)


0.0 %


?


?


(100)


0.0 %


Spin related stock-based compensation

(25)


0.0 %


10


0.0 %


(54)


0.0 %


(62)


0.0 %


Relocation expenses

(1,354)


-1.1 %


(4,461)


-1.9 %


(2,330)


-1.1 %


(4,461)


-0.9 %


Non-GAAP operating expenses

$    25,356


20.9 %


$      32,110


13.9 %


$        51,904


25.3 %


$        61,973


12.3 %



















GAAP operating income

$    12,527


10.3 %


$      65,392


28.4 %


$        16,445


8.0 %


$      165,279


32.7 %


Amortization of acquired intangible assets

?


?


70


0.0 %


?


?


142


0.0 %


Transition costs

?


?


(80)


0.0 %


?


?


(80)


0.0 %


COVID-19

?


?


55


0.0 %


?


?


131


0.0 %


Spin related stock-based compensation

25


0.0 %


(10)


0.0 %


54


0.0 %


62


0.0 %


Relocation expenses

3,088


2.6 %


5,548


2.4 %


5,308


2.6 %


5,548


1.1 %


Non-GAAP operating income

$    15,640


12.9 %


$      70,975


30.8 %


$        21,807


10.6 %


$      171,082


33.9 %



















GAAP net income

$      9,648


8.0 %


$      50,935


22.1 %


$        12,960


6.3 %


$      127,817


25.3 %


Amortization of acquired intangible assets

?


?


70


0.0 %


?


?


142


0.0 %


Transition costs

?


?


(80)


0.0 %


?


?


(80)


0.0 %


COVID-19

?


?


55


0.0 %


?


?


131


0.0 %


Spin related stock-based compensation

25


0.0 %


(10)


0.0 %


54


0.0 %


62


0.0 %


Relocation expenses

3,088


2.6 %


5,548


2.4 %


5,308


2.6 %


5,548


1.1 %


Tax effect of non-GAAP adjustments

(778)


-0.6 %


(1,258)


-0.5 %


(1,287)


-0.6 %


(1,328)


-0.3 %


Non-GAAP net income

$    11,983


9.9 %


$      55,260


24.0 %


$        17,035


8.3 %


$      132,292


26.2 %



















GAAP net income per share - diluted

$        0.21




$           1.05




$             0.28




$             2.63




Amortization of acquired intangible assets

?




?




?




?




Transition costs

?




?




?




?




COVID-19

?




?




?




?




Spin related stock-based compensation

?




?




?




?




Relocation expenses

0.07




0.11




0.12




0.11




Tax effect of non-GAAP adjustments

(0.02)




(0.03)




(0.03)




(0.03)




Non-GAAP net income per share - diluted

$        0.26




$           1.13




$             0.37




$             2.73

(a)



















(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, 2022


October 31, 2021


October 31, 2022


October 31, 2021










GAAP net income


$                    9,648


$                  50,935


$                  12,960


$               127,817

Interest expense


566


516


1,135


1,101

Income tax expense


3,249


14,824


4,094


37,944

Depreciation and amortization


7,599


7,724


15,126


15,166

Stock-based compensation expense


1,428


914


2,605


2,366

COVID-19


?


55


?


131

Transition costs


?


(80)


?


(80)

Relocation expense


3,088


5,548


5,308


5,548

Non-GAAP Adjusted EBITDAS


$                  25,578


$                  80,436


$                  41,228


$               189,993












21.1 %


34.9 %


20.1 %


37.6 %

 

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, 2022


October 31, 2021


October 31, 2022


October 31, 2021


Net cash (used in)/provided by operating activities

$                    (35,310)


$                 (3,723)


$               (28,165)


$              105,364


Net cash used in investing activities

(28,004)


(4,431)


(39,590)


(10,199)


Free cash flow

$                    (63,314)


$                 (8,154)


$               (67,755)


$                 95,165


 

SOURCE Smith & Wesson Brands, Inc.


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