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

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


SPRINGFIELD, Mass., Sept. 8, 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 first quarter fiscal year 2023, ended July 31, 2022.

First Quarter Fiscal 2023 Financial Highlights

Mark Smith, President and Chief Executive Officer, commented, "As expected, our first quarter results reflected a return to a normal demand pattern at the retail counter for firearms combined with temporary headwinds from inventory corrections within the channel.  Despite a challenging quarter from a top-line perspective, the team delivered impressive profitability, which far exceeded the pre-pandemic comparable quarter in fiscal 2020 ? not just in relative percentages but in absolute dollars.  With a pickup in order rates over the past few weeks and a significant drop in unit inventory levels within the channel, we believe the inventory correction should now largely be in the rearview mirror.  We continue to expect strong profitability over the remainder of the year aided by our disciplined approach to cost control and promotional spending."

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "Our financial performance continues to reflect tough year-over-year comparisons due to the return to more normalized levels of demand following the surge.  We were pleased with our gross margin, which was equal to our gross margin in the first quarter of fiscal 2020 in spite of lower sales and 1.5% better when adjusted for the relocation.  Our balance sheet remains strong with $110.5 million of cash and no debt, and we expect to continue generating strong cash flow for the foreseeable future.  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 September 22, 2022 with payment to be made on October 6, 2022."

Conference Call and Webcast
The company will host a conference call and webcast on September 8, 2022 to discuss its first 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 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 belief that, with a pickup in order rates over the past few weeks and a significant drop in unit inventory levels within the channel, the inventory correction should now largely be in the rearview mirror, (ii) our expectation of strong profitability over the remainder of the year aided by our disciplined approach to cost control and promotional spending, and (iii) 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:
[email protected]
(413) 747-3448

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited)





As of:


July 31, 2022


April 30, 2022



(In thousands, except par value and share data)


 ASSETS


 Current assets:





Cash and cash equivalents

$         110,452


$          120,728


Accounts receivable, net of allowances for credit losses of $15 on
   July 31, 2022 and $36 on April 30, 2022

23,781


62,695


Inventories

182,501


136,660


Prepaid expenses and other current assets

8,893


5,569


Income tax receivable 

748


1,945


Total current assets

326,375


327,597


 Property, plant, and equipment, net

160,793


135,591


 Intangibles, net

3,614


3,608


 Goodwill

19,024


19,024


 Deferred income taxes

1,221


1,221


 Other assets

10,229


10,435


 Total assets

521,256


497,476


 LIABILITIES AND STOCKHOLDERS' EQUITY


 Current liabilities:





Accounts payable

$           53,865


$             30,042


Accrued expenses and deferred revenue

24,628


23,482


Accrued payroll and incentives

15,936


17,371


Accrued income taxes

1,829


2,673


Accrued profit sharing

17,031


13,543


Accrued warranty

1,763


1,838


Total current liabilities

115,052


88,949


 Deferred income taxes 

?


?


 Finance lease payable, net of current portion

37,323


37,628


Other non-current liabilities

9,435


10,385


Total liabilities

161,810


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, 74,810,967
   issued  and 45,770,597 shares outstanding on July 31, 2022 and 74,641,439
   shares issued and 45,601,069 shares outstanding on April 30, 2022

75


75


Additional paid-in capital 

278,297


278,101


Retained earnings

503,376


504,640


Accumulated other comprehensive income

73


73


Treasury stock, at cost (29,040,370 shares on April 30, 2022 and April 30, 2021)

(422,375)


(422,375)


Total stockholders' equity

359,446


360,514


 Total liabilities and stockholders' equity

$         521,256


$          497,476


 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)








For the Three Months Ended July 31,



2022


2021



(In thousands, except per share data)

Net sales


$84,394


$274,609

Cost of sales


52,923


144,667

Gross profit


31,471


129,942

Operating expenses:





Research and development


1,673


1,808

Selling, marketing, and distribution


8,027


10,634

General and administrative


17,854


17,614

Total operating expenses


27,554


30,056

Operating income


3,917


99,886

Other income/(expense), net:





Other income/(expense), net 


673


660

Interest expense, net


(433)


(544)

Total other income/(expense), net


240


116

Income from operations before income taxes


4,157


100,002

Income tax expense


845


23,120

Net income


$   3,312


$   76,882

Net income per share:





Basic - net income


$     0.07


$       1.59

Diluted - net income


$     0.07


$       1.57

Weighted average number of common shares outstanding:



Basic


45,739


48,394

Diluted


46,102


49,050

 


For the Year Ended


July 31, 2022


July 31, 2021



(In thousands)

Cash flows from operating activities:





Net income

$         3,312


$       76,882


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





Depreciation and amortization 

7,549


7,466


Loss on sale/disposition of assets

(46)


57


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

(21)


(56)


Stock-based compensation expense

1,177


1,452


Changes in operating assets and liabilities:





     Accounts receivable

38,935


26,300


     Inventories

(45,841)


(18,663)


     Prepaid expenses and other current assets

(3,324)


(96)


     Income taxes

353


21,988


     Accounts payable

2,721


(2,443)


     Accrued payroll and incentives

(1,435)


(9,114)


     Accrued profit sharing

3,488


3,834


     Accrued expenses and deferred revenue

1,119


405


     Accrued warranty

(75)


(297)


     Other assets

206


1,677


     Other non-current liabilities

(973)


(305)


Net cash provided by operating activities

7,145


109,087


Cash flows from investing activities:





Payments to acquire patents and software

(94)


(69)


Proceeds from sale of property and equipment

46


70


Payments to acquire property and equipment

(11,538)


(5,769)


Net cash used in investing activities

(11,586)


(5,768)


Cash flows from financing activities:





Payments on finance lease obligation

(278)


(264)


Payments to acquire treasury stock

?


(40,000)


Dividend distribution

(4,576)


(3,844)


Payment of employee withholding tax related to restricted stock units

(981)


(815)


 Net cash used in financing activities

(5,835)


(44,923)


Net (decrease)/increase in cash and cash equivalents

(10,276)


58,396


Cash and cash equivalents, beginning of period

120,728


113,017


Cash and cash equivalents, end of period

$     110,452


$     171,413


Supplemental disclosure of cash flow information





Cash paid for:





Interest

$            546


$            538


Income taxes

$            551


$         1,131


 

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 



July 31, 2022


July 31, 2021



$


% of Sales


$


% of Sales


GAAP gross profit

$ 31,471


37.3 %


$ 129,942


47.3 %


Relocation expenses

1,244


1.5 %


?


?


COVID-19

?


0.0 %


28


0.0 %


Non-GAAP gross profit

$ 32,715


38.8 %


$ 129,970


47.3 %











GAAP operating expenses

$ 27,554


32.6 %


$   30,056


10.9 %


Amortization of acquired intangible assets

?


0.0 %


(72)


0.0 %


COVID-19

?


0.0 %


(48)


0.0 %


Spin related stock-based compensation

(28)


0.0 %


(72)


0.0 %


Relocation expenses

(976)


-1.2 %


?


?


Non-GAAP operating expenses

$ 26,550


31.5 %


$   29,864


10.9 %











GAAP operating income

$   3,917


4.6 %


$   99,886


36.4 %


Amortization of acquired intangible assets

?


0.0 %


72


0.0 %


COVID-19

?


0.0 %


76


0.0 %


Spin related stock-based compensation

28


0.0 %


72


0.0 %


Relocation expenses

2,220


2.6 %


?


?


Non-GAAP operating income

$   6,165


7.3 %


$ 100,106


36.5 %











GAAP net income

$   3,312


3.9 %


$   76,882


28.0 %


Amortization of acquired intangible assets

?


0.0 %


72


0.0 %


COVID-19

?


0.0 %


76


0.0 %


Spin related stock-based compensation

28


0.0 %


72


0.0 %


Relocation expenses

2,220


2.6 %


?


?


Tax effect of non-GAAP adjustments

(450)


-0.5 %


(51)


0.0 %


Non-GAAP net income

$   5,110


6.1 %


$   77,051


28.1 %











GAAP net income per share - diluted

$      0.07




$        1.57




Amortization of acquired intangible assets

?




?




COVID-19

?




?




Spin related stock-based compensation

?




?




Relocation expenses

0.05




?




Tax effect of non-GAAP adjustments

(0.01)




?




Non-GAAP net income per share - diluted

$      0.11




$        1.57













(a) Non-GAAP net income per share does not foot due to rounding. 









Net Sales

84,394




274,609





-








Weighted average number of common shares outstanding - diluted

46,102




49,050




 

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



July 31, 2022


July 31, 2021






GAAP net income


$             3,312


$          76,882

Interest expense


569


584

Income tax expense


845


23,120

Depreciation and amortization


7,527


7,443

Stock-based compensation expense


1,177


1,452

COVID-19


?


76

Relocation expense


2,220


?

Non-GAAP Adjusted EBITDAS


$          15,650


$        109,557








18.5 %


39.9 %

 

 

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



July 31, 2022


July 31, 2021


Net cash provided by operating activities

$                        7,145


$              109,087


Net cash used in investing activities

(11,586)


(5,768)


Free cash flow

$                       (4,441)


$              103,319


 

SOURCE Smith & Wesson Brands, Inc.


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