SMITH WESSON BRANDS INC

Previous wording

Gross margin was 26.6% compared with gross margin of 25.4% for the comparable quarter last year.

Current wording

Gross margin was 24.1% compared with gross margin of 28.7% for the comparable quarter last year.

Previous wording

Net income was $4.1 million, or $0.09 per diluted share, compared with $2.5 million, or $0.05 per diluted share, for the comparable quarter last year.

Current wording

Net income was $1.7 million, or $0.04 per diluted share, compared with $7.9 million, or $0.17 per diluted share, for the comparable quarter last year.

Previous wording

Our operating results for the six months ended October 31, 2024 included the following:

Current wording

Our operating results for the nine months ended January 31, 2025 included the following:

Previous wording

Net sales were $218.0 million, a decrease of $21.2 million, or 8.9%, from the comparable period last year.

Current wording

Net sales were $333.9 million, a decrease of $42.8 million, or 11.4%, from the comparable period last year.

Previous wording

Gross margin was 26.9% compared with gross margin of 26.0% for the comparable period last year.

Current wording

Gross margin was 25.9% compared with gross margin of 27.0% for the comparable period last year.

Previous wording

Net income was $2.0 million, or $0.04 per diluted share, compared with $5.6 million, or $0.12 per diluted share, for the comparable period last year.

Current wording

Net income was $3.7 million, or $0.08 per diluted share, compared with $13.5 million, or $0.29 per diluted share, for the comparable period last year.

Previous wording

Sales of our handguns increased $5.5 million, or 6.2%, over the comparable quarter last year, primarily as a result of increased shipments of newly introduced products (defined as any new SKU not shipped in the comparable quarter last year), which represented 46.8% of handgun sales in the period, and a 2% to 5% price increase that became effective in the third quarter of fiscal 2024, partially offset by a shift in product mix to lower priced models. Handgun unit shipments into the sporting goods channel increased by 19.2% over the comparable quarter last year while overall consumer handgun demand remained relatively flat (as indicated by adjusted background checks reported in the National Instant Criminal Background Check System, or NICS).

Current wording

Sales of our handguns decreased $14.7 million, or 15.5%, from the comparable quarter last year, primarily as a result of lower consumer demand within the industry and a shift in product mix to lower priced models, partially offset by increased shipments of newly introduced products (defined as any new SKU not shipped in the comparable quarter last year), which represented 40.0% of handgun sales in the period. Handgun unit shipments into the sporting goods channel decreased by 3.0% from the comparable quarter last year while overall consumer handgun demand decreased 4.1% (as indicated by adjusted background checks reported in the National Instant Criminal Background Check System, or NICS).

Previous wording

Sales of our long guns increased $3.0 million, or 6.3%, over the comparable period last year, primarily as a result of increased shipments of newly introduced products, which represented 62.1% of long gun sales in the period, a shift in product mix to higher priced models, as well as a 2% to 5% price increase on select products that became effective in the third quarter of fiscal 2024. Long gun unit shipments into our sporting goods channel decreased 17.4% from the comparable period last year while overall consumer demand for long guns increased 1.8% (as indicated by NICS).

Current wording

Sales of our long guns decreased $4.6 million, or 14.2%, from the comparable quarter last year, primarily as a result of lower consumer demand within the industry, partially offset by a shift in product mix to higher priced models. Shipments of newly introduced products represented 56.1% of long gun sales in the period. Long gun unit shipments into our sporting goods channel decreased 26.7% from the comparable quarter last year while overall consumer demand for long guns decreased 3.9% (as indicated by NICS). We believe that our unit demand declined at a significantly greater rate than NICS as a result of the impact in the current year of newly introduced products from the prior year that are at lower price points.

Previous wording

Other products and services revenue increased $2.2 million, or 26.5%, over the comparable quarter last year, primarily because of increased suppressor and component parts sales.

Current wording

Other products and services revenue decreased $2.3 million, or 21.7%, from the comparable quarter last year, primarily because of lower business-to-business sales, partially offset by increased suppressor sales.

Previous wording

Newly introduced products represented 44.4% of net sales for the three months ended October 31, 2024 and included six new pistols, three new long guns, and many new product line extensions.

Current wording

Newly introduced products represented 40.9% of net sales for the three months ended January 31, 2025 and included five new pistols, five new long guns, and many new product line extensions.

Previous wording

Inventory balances increased $35.5 million between April 30, 2024 and October 31, 2024 as a result of a slowdown in demand combined with level loading of our manufacturing facilities to ensure our ability to satisfy anticipated future demand. While inventory levels, both internally and in the distribution channel, in excess of demand may negatively impact future operating results, it is difficult to forecast the potential impact of distributor inventories on future revenue and income as demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer tastes. We expect our inventory levels to decline during the remainder of the fiscal year.

Current wording

Inventory balances increased $38.4 million between April 30, 2024 and January 31, 2025 as a result of a slowdown in demand combined with level loading of our manufacturing facilities to ensure our ability to satisfy anticipated future demand. While inventory levels, both internally and in the distribution channel, in excess of demand may negatively impact future operating results, it is difficult to forecast the potential impact of distributor inventories on future revenue and income as demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer tastes. We expect our inventory levels to decline during the remainder of the fiscal year.

Previous wording

The following table sets forth certain information regarding firearm units shipped by trade channel for the six months ended October 31, 2024 and 2023 (units in thousands):

Current wording

The following table sets forth certain information regarding firearm units shipped by trade channel for the nine months ended January 31, 2025 and 2024 (units in thousands):

Previous wording

Sales of our handguns decreased $27.4 million, or 15.7%, from the comparable period last year, primarily as a result of lower consumer demand within the industry and a shift in product mix to lower priced models, partially offset by increased shipments of newly introduced products, which represented 43.0% of handgun sales in the period, and a 2% to 5% price increase that became effective in the third quarter of fiscal 2024. Handgun unit shipments into the sporting goods channel decreased by 4.7% from the comparable period last year while overall consumer handgun demand decreased 2.5% (as indicated by adjusted background checks reported by NICS).

Current wording

Sales of our handguns decreased $42.1 million, or 15.6%, from the comparable period last year, primarily as a result of lower consumer demand within the industry and a shift in product mix to lower priced models, partially offset by increased shipments of newly introduced products, which represented 41.9% of handgun sales in the period, and a 2% to 5% price increase that became effective in the third quarter of fiscal 2024. Handgun unit shipments into the sporting goods channel decreased by 4.1% from the comparable period last year while overall consumer handgun demand decreased 3.1% (as indicated by adjusted background checks reported by NICS).

Previous wording

Sales of our long guns decreased $3.0 million, or 10.6%, from the comparable quarter last year, primarily as a result of the timing of new product launches in the comparable quarter last year, partially offset by a shift in product mix to higher priced models, as well as a 2% to 5% price increase on select products that became effective in the third quarter of fiscal 2024. Shipments of newly introduced products represented 54.4% of long gun sales in the period. Long gun unit shipments into our sporting goods channel decreased 26.4% from the comparable quarter last year while overall consumer demand for long guns increased 3.6% (as indicated by NICS).

Current wording

Sales of our long guns decreased $1.6 million, or 2.0%, from the comparable period last year, primarily as a result of lower consumer demand within the industry, partially offset by increased shipments of newly introduced products, which represented 60.0% of long gun sales in the period, a shift in product mix to higher priced models, and a 2% to 5% price increase on select products that became effective in the third quarter of fiscal 2024. Long gun unit shipments into our sporting goods channel decreased 21.2% from the comparable period last year while overall consumer demand for long guns decreased 0.6% (as indicated by NICS). We believe that our unit demand declined at a significantly greater rate than NICS as a result of the impact in the current year of newly introduced products from the prior year that are at lower price points.

Previous wording

Other products and services revenue increased $3.2 million, or 18.1%, over the comparable period last year, primarily because of increased suppressor and component parts sales, partially offset by lower handcuff and business-to-business sales.

Current wording

Other products and services revenue increased $885,000, or 3.1%, over the comparable period last year, primarily because of increased suppressor and component parts sales, partially offset by lower business-to-business sales.

Previous wording

Newly introduced products represented 43.2% of net sales for the six months ended October 31, 2024 and included six new pistols, four new long guns, and many new product line extensions.

Current wording

Newly introduced products represented 42.4% of net sales for the nine months ended January 31, 2025 and included five new pistols, six new long guns, and many new product line extensions.

Previous wording

Gross margin for the three months ended October 31, 2024 was 26.6% compared with 25.4% for the comparable quarter last year, primarily because of a $3.2 million legal settlement recognized in the prior year comparable quarter. Excluding the impact of the prior year legal settlement, gross margin was lower by 130 basis points due to higher labor and overhead costs, partially offset by lower inventory adjustments (including standard cost revaluations, shrink, and excess inventory write downs) and favorable fixed-cost absorption from higher production volumes.

Current wording

Gross margin for the nine months ended January 31, 2025 was 25.9% compared with 27.0% for the comparable period last year, in spite of a $3.2 million legal settlement recognized in the prior year comparable period. Excluding the impact of the prior year legal settlement, gross margin was 190 basis points lower as a result of higher material costs, higher promotional costs, and a shift in product mix, partially offset by lower inventory adjustments (including standard cost revaluations, shrink, and excess inventory write downs) and favorable fixed-cost absorption from higher production volumes.

Previous wording

Research and development expenses increased $497,000 over the prior year comparable quarter because of higher materials and testing costs associated with new product development. Selling, marketing, and distribution expenses decreased $1.4 million from the prior year comparable quarter, primarily as a result of one-time costs related to our grand opening event at our Maryville facility in the prior year comparable quarter and lower spending on promotions. General and administrative expenses increased $457,000 over the prior year comparable quarter, primarily because of higher legal costs, partially offset by lower compensation-related expense and lower professional services.

Current wording

Research and development expenses increased $900,000 over the prior year comparable quarter because of higher materials and testing costs associated with new product development. Selling, marketing, and distribution expenses increased $256,000 primarily as a result of higher promotional costs. General and administrative expenses decreased $3.1 million from the prior year comparable quarter, primarily as a result of lower Relocation costs, lower profit-related compensation expenses, and lower legal costs. During the three months ended January 31, 2025, we sold certain real estate located adjacent to our former Missouri Distribution Center for $2.3 million, net of transaction costs, and recognized a $2.3 million pre-tax gain on sale.

Previous wording

The following table sets forth certain information regarding operating expenses for the six months ended October 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table sets forth certain information regarding operating expenses for the nine months ended January 31, 2025 and 2024 (dollars in thousands):

Previous wording

Research and development expenses increased $1.2 million over the prior year comparable period because of higher materials and testing costs associated with new product development and higher compensation-related costs. Selling, marketing, and distribution expenses decreased $1.6 million from the prior year comparable period, primarily as a result of a $1.9 million impairment on distribution equipment related to the Relocation and one-time costs related to our grand opening event at our Maryville facility in the prior year comparable period. Excluding the impact of these one-time prior year charges, selling, marketing, and distribution expenses increased $1.2 million, primarily as a result of the timing of certain industry events and higher spending on promotions. General and administrative expenses decreased $56,000 from the prior year comparable period, primarily because of lower Relocation costs, lower profit sharing expense, and lower compensation-related expense, partially offset by higher legal costs.

Current wording

Research and development expenses increased $2.1 million over the prior year comparable period because of higher materials and testing costs associated with new product development and higher compensation-related costs. Selling, marketing, and distribution expenses decreased $1.3 million from the prior year comparable period, primarily as a result of a $1.9 million impairment on distribution equipment related to the Relocation and one-time costs related to our grand opening event at our Maryville facility in the prior year comparable period. Excluding the impact of these one-time prior year charges, selling, marketing, and distribution expenses increased $1.5 million, primarily as a result of higher spending on promotions. General and administrative expenses decreased $3.1 million from the prior year comparable period, primarily because of lower Relocation costs and lower profit-related compensation expense, partially offset by higher legal costs.

Previous wording

Operating income for the three months ended October 31, 2024 increased $3.2 million over the comparable quarter last year, primarilyfor the reasons outlined above.

Current wording

Operating income for the three months ended January 31, 2025 decreased $7.2 million from the comparable quarter last year, primarilyfor the reasons outlined above.

Previous wording

Operating income for the six months ended October 31, 2024 decreased $3.0 million from the comparable period last year, primarilyfor the reasons outlined above.

Current wording

Operating income for the nine months ended January 31, 2025 decreased $10.2 million from the comparable period last year, primarilyfor the reasons outlined above.

Previous wording

Interest expense increased by $773,000 over the comparable quarter last year as a result of higher average debt balances, lower capitalized interest, and lower average cash balances during the three months ended October 31, 2024 compared with the comparable quarter last year.

Current wording

Interest expense, net increased by $768,000 over the comparable quarter last year, primarily as a result of higher average debt balances and lower average cash balances during the three months ended January 31, 2025 compared with the comparable quarter last year.

Previous wording

The following table sets forth certain information regarding interest expense, net for the six months ended October 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table sets forth certain information regarding interest expense, net for the nine months ended January 31, 2025 and 2024 (dollars in thousands):

Previous wording

Interest expense increased by $1.7 million over the comparable period last year as a result of higher average debt balances, lower capitalized interest, and lower average cash balances during the six months ended October 31, 2024 compared with the comparable period last year.

Current wording

Interest expense, net increased by $2.4 million over the comparable period last year as a result of higher average debt balances, lower capitalized interest, and lower average cash balances during the nine months ended January 31, 2025 compared with the comparable period last year.

Previous wording

Income tax expense increased $649,000 from the comparable quarter last year, primarily as a result of higher operating income. Before adjusting for discrete items related to stock-based compensation, the effective tax rate is 26.0% in the current quarter and 23.5% in the prior year comparable quarter. The increase in the effective tax rate was due to changes in state apportionment and a decrease in pre-tax profitability.

Current wording

Income tax expense decreased $1.7 million from the comparable quarter last year, primarily as a result of lower operating income. Before adjusting for discrete items related to stock-based compensation, the effective tax rate was 30.1% in the current quarter and 23.6% in the prior year comparable quarter. The increase in the effective tax rate was due to changes in state apportionment and a decrease in pre-tax profitability.

Previous wording

The following table sets forth certain information regarding income tax expense for the six months ended October 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table sets forth certain information regarding income tax expense for the nine months ended January 31, 2025 and 2024 (dollars in thousands):

Previous wording

Income tax expense decreased $1.3 million from the comparable period last year, primarily as a result of lower operating income. Before adjusting for discrete items related to stock-based compensation, the effective tax rate was 26.4% in the current period and 24.2% in the prior year comparable period. The increase in the effective tax rate was due to changes in state apportionment and a decrease in pre-tax profitability.

Current wording

Income tax expense decreased $3.0 million from the comparable period last year, primarily as a result of lower operating income. Before adjusting for discrete items related to stock-based compensation, the effective tax rate was 27.6% in the current period and 23.9% in the prior year comparable period. The increase in the effective tax rate was due to changes in state apportionment and a decrease in pre-tax profitability.

Previous wording

Net income for the three months ended October 31, 2024 was $4.1 million compared with$2.5 million for the comparable quarter last year for the reasons outlined above.

Current wording

Net income for the three months ended January 31, 2025 was $1.7 million compared with$7.9 million for the comparable quarter last year for the reasons outlined above.

Previous wording

The following table sets forth certain information regarding net income and the related per share data for the six months ended October 31, 2024 and 2023 (dollars in thousands, except per share data):

Current wording

The following table sets forth certain information regarding net income and the related per share data for the nine months ended January 31, 2025 and 2024 (dollars in thousands, except per share data):

Previous wording

Net income for the six months ended October 31, 2024 was $2.0 million compared with$5.6 million for the comparable period last year for the reasons outlined above.

Current wording

Net income for the nine months ended January 31, 2025 was $3.7 million compared with$13.5 million for the comparable period last year for the reasons outlined above.

Previous wording

The following table sets forth certain cash flow information for the six months ended October 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table sets forth certain cash flow information for the nine months ended January 31, 2025 and 2024 (dollars in thousands):

Previous wording

Cash used in operating activities was $38.2 million for the six months ended October 31, 2024 compared with $37.8 million of cash provided for the six months ended October 31, 2023. Cash used in operating activities for the six months ended October 31, 2024 was unfavorably impacted by a $35.5 million increase in inventory compared with a $13.8 million decrease in inventory in the prior comparable period, a $10.1 million decrease in accounts payable compared with a $14.7 million increase in accounts payable in the prior comparable period, and a $3.9 million decrease in accrued payroll and incentives compared with a $1.3 million increase in accrued payroll and incentives in the prior comparable period. Cash used in operating activities for the six months ended October 31, 2024 was favorably impacted by a $6.4 million decrease in accounts receivable compared with a $4.6 million increase in accounts receivable in the prior comparable period.

Current wording

Cash used in operating activities was $48.1 million for the nine months ended January 31, 2025 compared with $63.0 million of cash provided for the nine months ended January 31, 2024. Cash used in operating activities for the nine months ended January 31, 2025 was unfavorably impacted by a $38.4 million increase in inventory compared with a $23.6 million decrease in inventory in the prior comparable period, a $16.8 million decrease in accounts payable compared with a $11.2 million increase in accounts payable in the prior comparable period, a $8.2 million decrease in accrued payroll and incentives compared with a $1.3 million increase in accrued payroll and incentives in the prior comparable period, and lower net income. Cash used in operating activities for the nine months ended January 31, 2025 was favorably impacted by a $1.6 million decrease in accounts receivable compared with a $5.5 million increase in accounts receivable in the prior comparable period.

Previous wording

Cash used in investing activities decreased $59.2 million for the six months ended October 31, 2024 compared with the prior year comparable period. We paid $8.0 million for capital expenditures for the six months ended October 31, 2024, $58.9 million lower than the prior year comparable period, primarily as a result of payments related to the Relocation in the prior year period.

Current wording

Cash used in investing activities decreased $70.7 million for the nine months ended January 31, 2025 compared with the prior year comparable period. We paid $14.3 million for capital expenditures for the nine months ended January 31, 2025, which was $70.9 million lower than the prior year comparable period, primarily as a result of payments related to the Relocation in the prior year period.

Previous wording

We currently expect to spend $25.0 million to $30.0 million on capital expenditures in fiscal 2025.

Current wording

We currently expect to spend $20.0 million to $25.0 million on capital expenditures in fiscal 2025.

Previous wording

Cash provided by financing activities was $24.3 million for the six months ended October 31, 2024 compared with $19.9 million of cash provided in financing activities for the six months ended October 31, 2023. Cash provided by financing activities during the six months ended October 31, 2024 was primarily the result of $60 million in borrowings under our revolving line of credit, partially offset by $22.6 million of share repurchases and $11.7 million in dividend distributions.

Current wording

Cash provided by financing activities was $25.7 million for the nine months ended January 31, 2025 compared with $13.3 million of cash provided by financing activities for the nine months ended January 31, 2024. Cash provided by financing activities during the nine months ended January 31, 2025 was primarily the result of $70 million in borrowings under our revolving line of credit, partially offset by $25.5 million of share repurchases and $17.4 million in dividend distributions.

Previous wording

As of October 31, 2024, we had $100.0 million of borrowings outstanding on the Revolving Line, bearing interest at an average rate of 6.92%, which was equal to the SOFR rate plus an applicable margin.

Current wording

As of January 31, 2025, we had $110.0 million of borrowings outstanding on the Revolving Line, bearing interest at an average rate of 6.63%, which was equal to the SOFR rate plus an applicable margin.

Previous wording

Share Repurchase Programs — On September 19, 2023, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions through September 19, 2024, or the 2023 Authorization. During fiscal 2024, we purchased 793,551 shares of our common stock for $10.2 million under the 2023 Authorization. During fiscal 2025, we purchased 1,531,763 shares of our common stock for $21.4 million under the 2023 Authorization. The 2023 Authorization expired on September 19, 2024. On September 5, 2024, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions from September 20, 2024 through September 20, 2025, or the 2024 Authorization. During fiscal 2025, we have repurchased 92,537 shares of our common stock for $1.2 million under the 2024 Authorization.

Current wording

Share Repurchase Programs — On September 19, 2023, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions through September 19, 2024, or the 2023 Authorization. During fiscal 2024, we purchased 793,551 shares of our common stock for $10.2 million under the 2023 Authorization. During fiscal 2025, we have purchased 1,531,763 shares of our common stock for $21.4 million under the 2023 Authorization. The 2023 Authorization expired on September 19, 2024. On September 5, 2024, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions from September 20, 2024 through September 20, 2025, or the 2024 Authorization. As of January 31, 2025, we had repurchased 312,310 shares of our common stock for $4.1 million under the 2024 Authorization.

Previous wording

Dividends —In June 2024, our Board of Directors authorized a regular quarterly dividend for stockholders of $0.13 per share. The next dividend will be for stockholders of record as of market close on December 19, 2024 and will be payable on January 2, 2025.

Current wording

Dividends —In March 2024, our Board of Directors authorized a regular quarterly dividend for stockholders of $0.13 per share. We currently anticipate that the next dividend will be for stockholders of record as of market close on March 20, 2025 and will be payable on April 3, 2025.

Previous wording

Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the costs to ensure access to adequate manufacturing capacity, and costs related to the Relocation. Further equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained.

Current wording

Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the costs to ensure access to adequate manufacturing capacity, and costs related to the Relocation. Future equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained.