Smith & Wesson Brands, Inc. reported sales were down 31 percent year-over-year in the third quarter ended January 31 but surged more than 118 percent on a two-year basis.

EPS came in at 69 cents a share on an adjusted basis, below Wall Street’s consensus estimate of 83 cents. Sales of $177.7 million were below Wall Street’s average target of $198.29 million.

Third Quarter Fiscal 2022 Financial Highlights
Net sales were $177.7 million, a decrease of $79.9 million, or 31.0  percent, from the comparable quarter last year, but $50.3 million, or 139.5  percent, higher than the third quarter in fiscal 2020.

Gross margin was 39.6  percent versus 42.6  percent in the comparable quarter last year and 28.0  percent in the third quarter in fiscal 2020.

Quarterly GAAP net income was $30.5 million, or $0.65 per diluted share, compared with $62.3 million, or $1.12 per diluted share, for the comparable quarter last year.

Quarterly non-GAAP net income was $32.9 million, or $0.69 per diluted share, compared with $62.4 million, or $1.12 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the planned relocation of our headquarters and certain manufacturing and distribution operations to Tennessee, the spin-off of the outdoor products and accessories business in fiscal 2021, COVID-19-related expenses, and other costs.

Quarterly non-GAAP Adjusted EBITDAS was $51.9 million, or 29.2  percent of net sales, compared with $89.8 million, or 34.9  percent of net sales, for the comparable quarter last year.

During the quarter, we purchased 2,788,152 shares of our common stock for $50.0 million, using cash on hand.

Mark Smith, president and chief executive officer, commented, “I am very proud of our team for demonstrating Smith & Wesson’s ability to deliver meaningful profitability no matter the overall market conditions. Although the firearms market remains elevated and healthy with new entrants, it has cooled significantly from the height of the pandemic surge and seems to now be following pre-pandemic historical demand patterns. This macro demand pattern is very familiar to us and is exactly what our business model is designed to accommodate. Our ability to ramp production aggressively to meet surging demand over the past couple of years fueled significant market share gains for Smith & Wesson and provided a demonstrable proof point for our flexible manufacturing strategy. Our manufacturing team increased throughput by over 82 percent during the surge, which has enabled us to not only gain impressive market share, but also to set a very solid business foundation for long-term success. Since the demand surge began in March of 2020, we have paid down $160 million of debt and are now debt-free, bought back $200 million of stock, which reduced our outstanding shares by nearly 20  percent, paid nearly $20 million in dividends, invested nearly $40 million into our business, and today have a strong and healthy balance sheet with over $107 million in cash. Our long-term commitment is to continue to return value to stockholders through regular fixed dividends and share repurchases and, as a result of these accomplishments, we are well-positioned to do so.”

Deana McPherson, executive vice president and chief financial officer, said: “Looking back to where we were during the same quarter in fiscal 2020, you can see how our response to the surge in demand over the last two years has strengthened our foundation, creating an agile business model that optimizes profitability to drive long-term value. Revenue for our third quarter grew from $127.4 million in fiscal 2020 to $257.6 million in fiscal 2021, or a 202.6  percent increase, and is now at $177.7 million in fiscal 2022. While this represents a 31  percent decrease from the historic levels recorded last year, it is truly remarkable that we were able to achieve a $50.3 million increase in revenue this quarter versus two years ago on nearly the same number of units shipped. Further, gross margin was 39.6  percent in the third quarter, which was 300 basis points below the 42.6  percent realized in the prior year comparable quarter, but 1,160 basis points above the 28  percent realized in the third quarter of fiscal 2020. Our Board of Directors has again authorized our $0.08 per share quarterly dividend, which will be paid to stockholders of record on March 17, 2022 with payment to be made on March 31, 2022.”

Photo courtesy Smith & Wesson/American Gun Association