Form 8-K - Current report

SMITH & WESSON BRANDS, INC.

Date: December 7, 2023

/s/ Deana L. McPherson

Deana L. McPherson

Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 7, 2023

Smith & Wesson Brands, Inc.

(Exact Name of Registrant as Specified in Charter)

Nevada

001-31552

87-0543688

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

2100 Roosevelt Avenue

Springfield, Massachusetts 01104

(Address of principal executive offices) (Zip Code)

(800) 331-0852

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, Par Value $0.001 per Share

SWBI

Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 §CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.

Results of Operations and Financial Condition.

We are furnishing the disclosure in this Item 2.02 in connection with the disclosure of information in the form of the textual information from a press release issued on December 7, 2023.

The information in this Item 2.02 (including Exhibit 99.1) is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

We do not have, and expressly disclaim, any obligation to release publicly any updates or any changes in our expectations or any change in events, conditions, or circumstances on which any forward-looking statement is based.

The text included with this Current Report on Form 8-K is available on our website at www.smith-wesson.com, although we reserve the right to discontinue that availability at any time.

Item 9.01.

Financial Statements and Exhibits.

(d)

Exhibits.


Exhibit No.

99.1		Press release from Smith & Wesson Brands, Inc., dated December 7, 2023, entitled “Smith & Wesson Brands, Inc. Reports Second Quarter Fiscal 2024 Financial Results

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

LOGO

Smith & Wesson Brands, Inc. Reports

Second Quarter Fiscal 2024 Financial Results

•

Q2 Net Sales of $125.0 Million

•

Q2 Gross Margin of 25.4%; Non-GAAP Gross Margin of 28.3%

•

Q2 EPS of $0.05/Share; Q2 Adjusted EPS of $0.14/Share

•

Q2 Adjusted EBITDAS Margin of 15.5%

MARYVILLE, Tenn., December 7, 2023 – 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 of fiscal 2024, ended October 31, 2023.

Second Quarter Fiscal 2024 Financial Highlights

•

Net sales were $125.0 million, an increase of $3.9 million, or 3.2%, over the comparable quarter last year.

•

Gross margin was 25.4% compared with 32.4% in the comparable quarter last year.

•

GAAP net income was $2.5 million, or $0.05 per diluted share, compared with $9.6 million, or $0.21 per diluted share, for the comparable quarter last year.

•

Non-GAAP net income was $6.5 million, or $0.14 per diluted share, compared with $12.0 million, or $0.26 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to an accrued legal settlement, the relocation, and other costs. For a detailed reconciliation, see the schedules that follow in this release.

•

Non-GAAP Adjusted EBITDAS was $19.3 million, or 15.5% of net sales, compared with $25.6 million, or 21.1% of net sales, for the comparable quarter last year.

Mark Smith, President and Chief Executive Officer, commented, “We were very pleased with our second quarter results, which continued to reflect our innovative new product introductions and our consumers’ enduring loyalty to the Smith & Wesson brand. Top line revenue and unit shipments were both up versus last year, while channel inventories actually decreased slightly in the period. This robust sell through, combined with our shipments outperforming NICS in the quarter by over 7%, underscores our belief that our strong performance was due to share gains at the retail counter. With demand levels expected to remain elevated through our traditionally busy season, a strong balance sheet, and a significant reduction in capex on the horizon as we wind down the major investment in our new facility in Tennessee, we expect to be in a very strong position to drive returns for our stockholders throughout the second half of fiscal 2024 and in fiscal 2025.”

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, “Although our gross margin continues to be temporarily pressured by fixed-cost absorption, inflationary factors, and inventory reserve adjustments, we strengthened our working capital position by reducing production to drive internal inventory levels down and we anticipate that the temporary margin headwinds will abate in the fourth quarter. We repurchased nearly 646,000 shares during the third quarter, utilizing $8.2 million 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 December 21, 2023 with payment to be made on January 4, 2024.”

Conference Call and Webcast

The company will host a conference call and webcast on December 7, 2023 to discuss its second 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 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^® 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 we expect to be in a very strong position to drive returns for our stockholders throughout the second half of fiscal 2024 and in fiscal 2025 and we anticipate that the temporary margin headwinds will abate in the fourth quarter. 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:
	October 31, 2023			April 30, 2023

	(In thousands, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents	$	44,192		$	53,556
Accounts receivable, net of allowances for credit losses of $22 on October 31, 2023 and $23 on April 30, 2023		59,773			55,153
Inventories		163,291			177,118
Prepaid expenses and other current assets		9,870			4,917
Income tax receivable		4,713			1,176

Total current assets		281,839			291,920

Property, plant, and equipment, net		253,253			210,330
Intangibles, net		2,823			3,588
Goodwill		19,024			19,024
Deferred income taxes		8,085			8,085
Other assets		7,949			8,347

Total assets	$	572,973		$	541,294

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	44,536		$	36,795
Accrued expenses and deferred revenue		23,197			20,149
Accrued payroll and incentives		19,889			18,565
Accrued income taxes		190			1,831
Accrued profit sharing		1,504			8,203
Accrued warranty		1,578			1,670

Total current liabilities		90,894			87,213
Notes and loans payable, net of current portion		64,836			24,790
Finance lease payable, net of current portion		36,209			36,961
Other non-current liabilities		7,532			7,707

Total liabilities		199,471			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, 75,322,622 shares issued and 46,636,482 shares outstanding on October 31, 2023 and 75,029,300 shares issued and 45,988,930 shares outstanding on April 30, 2023		75			75
Additional paid-in capital		286,341			283,666
Retained earnings		517,682			523,184
Accumulated other comprehensive income		73			73
Treasury stock, at cost (29,686,140 shares on October 31, 2023 and 29,040,370 shares on April 30, 2023)		(430,669	)		(422,375	)

Total stockholders’ equity		373,502			384,623

Total liabilities and stockholders’ equity	$	572,973		$	541,294

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	For the Three Months Ended October 31,						For the Six Months Ended October 31,
	2023			2022			2023			2022

	(In thousands, except per share data)
Net sales	$	124,958		$	121,035		$	239,201		$	205,429
Cost of sales		93,192			81,773			177,034			134,696

Gross profit		31,766			39,262			62,167			70,733

Operating expenses:
Research and development		1,724			1,869			3,522			3,542
Selling, marketing, and distribution		10,952			9,431			20,993			17,458
General and administrative		15,322			15,435			29,536			33,288

Total operating expenses		27,998			26,735			54,051			54,288

Operating income		3,768			12,527			8,116			16,445

Other income/(expense), net:
Other income(expense), net		141			790			188			1,463
Interest (expense)/income, net		(646	)		(420	)		(492	)		(854	)

Total other (expense)/income, net		(505	)		370			(304	)		609

Income from operations before income taxes		3,263			12,897			7,812			17,054
Income tax expense		765			3,249			2,196			4,094

Net income	$	2,498		$	9,648		$	5,616		$	12,960

Net income per share:
Basic - net income	$	0.05		$	0.21		$	0.12		$	0.28

Diluted - net income	$	0.05		$	0.21		$	0.12		$	0.28

Weighted average number of common shares outstanding:
Basic		45,977			45,815			46,042			45,777
Diluted		46,361			46,106			46,458			46,104


SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Six Months Ended October 31,
	2023			2022

	(In thousands)
Cash flows from operating activities:
Net income	$	5,616		$	12,960
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization		17,327			15,171
Loss/(gain) on sale/disposition of assets		682			(43	)
Provision for recoveries on notes and accounts receivable		(1	)		(13	)
Stock-based compensation expense		2,759			2,605
Changes in operating assets and liabilities:
Accounts receivable		(4,619	)		18,324
Inventories		13,827			(59,814	)
Prepaid expenses and other current assets		(4,953	)		(2,493	)
Income taxes		(5,178	)		(11,555	)
Accounts payable		14,682			5,889
Accrued payroll and incentives		1,324			(329	)
Accrued profit sharing		(6,699	)		(7,915	)
Accrued expenses and deferred revenue		2,859			307
Accrued warranty		(92	)		(130	)
Other assets		397			521
Other non-current liabilities		(175	)		(1,650	)

Net cash provided by/(used in) operating activities		37,756			(28,165	)

Cash flows from investing activities:
Payments to acquire patents and software		(125	)		(256	)
Proceeds from sale of property and equipment		45			85
Payments to acquire property and equipment		(66,983	)		(39,419	)

Net cash used in investing activities		(67,063	)		(39,590	)

Cash flows from financing activities:
Proceeds from loans and notes payable		50,000			—
Payments on notes and loans payable		(10,000	)		—
Payments on finance lease obligation		(681	)		(559	)
Payments to acquire treasury stock		(8,212	)		—
Dividend distribution		(11,080	)		(9,153	)
Proceeds to acquire common stock from employee stock purchase plan		722			753
Payment of employee withholding tax related to restricted stock units		(806	)		(1,039	)

Net cash provided by/(used in) financing activities		19,943			(9,998	)

Net decrease in cash and cash equivalents		(9,364	)		(77,753	)
Cash and cash equivalents, beginning of period		53,556			120,728

Cash and cash equivalents, end of period	$	44,192		$	42,975

Supplemental disclosure of cash flow information
Cash paid for:
Interest, net of amounts capitalized	$	1,725		$	1,089
Income taxes	$	7,353		$	15,721

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, 2023						October 31, 2022						October 31, 2023						October 31, 2022

	$			% of Sales			$			% of Sales			$			% of Sales			$			% of Sales

GAAP gross profit	$	31,766			25.4	%	$	39,262			32.4	%	$	62,167			26.0	%	$	70,733			34.4	%
Relocation expenses		409			0.3	%		1,735			1.4	%		1,312			0.5	%		2,978			1.4	%
Settlement		3,200			2.6	%		—			0.0	%		3,200			1	%		—			0.0	%

Non-GAAP gross profit	$	35,375			28.3	%	$	40,997			33.9	%	$	66,679			27.9	%	$	73,711			35.9	%


GAAP operating expenses	$	27,998			22.4	%	$	26,735			22.1	%	$	54,051			22.6	%	$	54,288			26.4	%
Spin related stock-based compensation		(3	)		0.0	%		(25	)		0.0	%		(7	)		0.0	%		(54	)		0.0	%
Relocation expenses		(1,652	)		-1.3	%		(1,354	)		-1.1	%		(4,661	)		-1.9	%		(2,330	)		-1.1	%

Non-GAAP operating expenses	$	26,343			21.1	%	$	25,356			20.9	%	$	49,383			20.6	%	$	51,904			25.3	%


GAAP operating income	$	3,768			3.0	%	$	12,527			10.3	%	$	8,116			3.4	%	$	16,445			8.0	%
Settlement		3,200			2.6	%		—			0.0	%		3,200			—			—			0.0	%
Spin related stock-based compensation		3			0.0	%		25			0.0	%		7			0.0	%		54			0.0	%
Relocation expenses		2,061			1.6	%		3,088			2.6	%		5,973			2.5	%		5,308			2.6	%

Non-GAAP operating income	$	9,032			7.2	%	$	15,640			12.9	%	$	17,296			7.2	%	$	21,807			10.6	%


GAAP net income	$	2,498			2.0	%	$	9,648			8.0	%	$	5,616			2.3	%	$	12,960			6.3	%
Settlement		3,200			2.6	%		—			0.0	%		3,200			1.3	%		—			0.0	%
Spin related stock-based compensation		3			0.0	%		25			0.0	%		7			0.0	%		54			0.0	%
Relocation expenses		2,061			1.6	%		3,088			2.6	%		5,973			2.5	%		5,308			2.6	%
Tax effect of non-GAAP adjustments		(1,234	)		-1.0	%		(778	)		-0.6	%		(2,580	)		-1.1	%		(1,287	)		-0.6	%

Non-GAAP net income	$	6,528			5.2	%	$	11,983			9.9	%	$	12,216			5.1	%	$	17,035			8.3	%


GAAP net income per share - diluted	$	0.05					$	0.21					$	0.12					$	0.28
Settlement		0.07						—						0.07						—
Relocation expenses		0.04						0.07						0.13						0.12
Tax effect of non-GAAP adjustments		(0.03	)					(0.02	)					(0.06	)					(0.03	)

Non-GAAP net income per share - diluted	$	0.14	(a)				$	0.26					$	0.26					$	0.37

(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, 2023			October 31, 2022			October 31, 2023			October 31, 2022
GAAP net income	$	2,498		$	9,648		$	5,616		$	12,960
Interest expense		1,233			566			1,788			1,135
Income tax expense		765			3,249			2,196			4,094
Depreciation and amortization		7,972			7,599			17,203			15,126
Stock-based compensation expense		1,484			1,428			2,759			2,605
Settlement		3,200			—			3,200			—
Relocation expense		2,195			3,088			4,113			5,308

Non-GAAP Adjusted EBITDAS	$	19,347		$	25,578		$	36,875		$	41,228

		15.5	%		21.1	%		15.4	%		20.1	%


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, 2023			October 31, 2022			October 31, 2023			October 31, 2022
Net cash provided by/(used in) operating activities	$	(2,874	)	$	(35,310	)	$	37,756		$	(28,165	)
Net cash used in investing activities		(34,996	)		(28,004	)		(67,063	)		(39,590	)

Free cash flow	$	(37,870	)	$	(63,314	)	$	(29,307	)	$	(67,755	)

Document and Entity Information	Dec. 07, 2023
Cover [Abstract]
Amendment Flag	false
Entity Central Index Key	0001092796
Document Type	8-K
Document Period End Date	Dec. 07, 2023
Entity Registrant Name	Smith & Wesson Brands, Inc.
Entity Incorporation State Country Code	NV
Entity File Number	001-31552
Entity Tax Identification Number	87-0543688
Entity Address, Address Line One	2100 Roosevelt Avenue
Entity Address, City or Town	Springfield
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01104
City Area Code	(800)
Local Phone Number	331-0852
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock, Par Value $0.001 per Share
Trading Symbol	SWBI
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false