• Net Sales: $115.9 million, down 15.7% from the prior year comparable quarter.
• Gross Margin: 24.1%, 4.6% below the comparable quarter last year.
• Operating Expenses: $23.8 million, $4.3 million lower than the prior year comparable quarter.
• Net Income: $1.7 million or $0.04 per share.
• Non-GAAP Income Per Share: $0.02.
• Cash Used in Operations: $9.8 million.
• Capital Expenditures: $6.3 million for the third quarter.
• Share Repurchase: Approximately 220,000 shares at an average price of $12.94, totaling $2.8 million.
• Dividends Paid: $5.7 million.
• Cash and Borrowings: $26.7 million in cash and $110 million in borrowings on the line of credit.
• Quarterly Dividend: $0.13 per share, payable on April 3.
• Average Selling Prices (ASPs): Overall ASPs declined 3.1% year-over-year.
• Handgun ASPs: Declined 7.8%.
• Long Gun ASPs: Increased 17.2%.
• Adjusted NICS: Down 4.5% for the third quarter.
• Shipments: Declined 7.7% in the period.
• Inventory Levels: Slightly elevated due to lower than anticipated Q3 sales.
• Share Count Reduction: More than 1.5 million shares net of dilution in the first nine months of fiscal 2025.

• Warning! GuruFocus has detected 3 Warning Sign with SWBI.

Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Smith & Wesson Brands Inc (NASDAQ:SWBI) achieved strong performance in new product sales, with products introduced within the past year accounting for over 41% of sales in the quarter.
• The company maintained solid profitability by leveraging a flexible manufacturing model, despite top-line revenue coming in slightly below target.
• Smith & Wesson Brands Inc (NASDAQ:SWBI) gained market share in the handgun category, with shipments declining less than the overall market.
• The introduction of the Bodyguard 2.0 has been successful, driving strong demand and contributing to market share gains.
• The company has a robust pipeline of new products expected to be introduced in the final quarter of FY25 and throughout the next year, positioning it well for future growth.

Negative Points

• Overall net sales for the third quarter were down 15.7% compared to the prior year, reflecting softer consumer demand and persistent inflation.
• Average selling prices (ASPs) for handguns declined by 7.8%, driven by lower-priced products and promotions.
• Long gun shipments declined by 26.7% due to outperformance in the prior-year period and a narrow product offering in the seasonal hunting category.
• Gross margin decreased by 4.6% compared to the prior year, impacted by unfavorable fixed cost absorption and higher promotional costs.
• The company anticipates full-year revenue to decline by 5% to 10% from fiscal 2024, with expectations closer to a 10% decline due to softer demand trends.

Q & A Highlights

Q: Can you explain the impact of new product sales on your legacy products? A: Mark Smith, President and CEO, explained that the new Bodyguard 2.0 is likely cannibalizing some of their own product line, impacting legacy product sales. The competitive market and consumer discretionary spending pressures are also factors.

Q: How is the overall health of the industry and behavior of distributors? A: Mark Smith noted that distributor inventory is stable at about 8.5 weeks, indicating a healthy channel. The market is expected to remain steady, with no major demand catalysts anticipated. Economic improvements could provide a tailwind.

Q: What is Smith & Wesson's exposure to tariffs and the regulatory environment? A: Mark Smith stated that tariffs have been accounted for in their financial guidance and are not expected to materially impact results. The regulatory environment appears stable, which is beneficial for business operations.

Q: What are the expectations for ASPs in Q4, particularly for handguns and long guns? A: Mark Smith indicated that Q4 ASPs for handguns and long guns are expected to remain consistent with Q3. The mix of lever-action rifles and core products should remain stable.

Q: How is the shift towards smaller frame concealed carry handguns affecting the market? A: Mark Smith explained that the trend towards concealed carry firearms is driven by both consumer preference and price sensitivity. The Bodyguard 2.0 is successful due to its entry-level price and suitability for concealed carry.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.