American Outdoor Brands,  formerly known as Smith & Wesson, reported sales earnings on an adjusted basis grew 13.3 percent in its third quarter ended January 31 on a 10.8 percent revenue gain. However, the outlook for the current year was reduced due to a post-election slowdown in firearms sales.

Third Quarter Fiscal 2017 Financial Highlights

  • Quarterly net sales were $233.5 million compared with $210.8 million for the third quarter last year, an increase of 10.8 percent.
  • Gross margin for the quarter was 42.5 percent compared with 41.1 percent for the third quarter last year.
    Quarterly GAAP net income was $32.5 million, or 57 cents per diluted share, compared with $31.4 million, or 56 cents per diluted share, for the comparable quarter last year.
  • Quarterly non-GAAP net income was $37.6 million, or 66 cents per diluted share, compared with $33.2 million, or 59 cents per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments in net income exclude a number of acquisition-related costs, including amortization, one-time transaction costs, inventory valuation adjustments and a one-time holding company rebranding expense.
  • Quarterly non-GAAP Adjusted EBITDAS was $67.6 million, or 28.9 percent of net sales, compared with $61.5 million, or 29.2 percent of net sales, for the comparable quarter last year.
  • The company completed the acquisition of substantially all of the assets of Ultimate Survival Technologies, Inc. (UST), a provider of high-quality survival and camping products, for $33 million in cash and up to $2 million, due over two years, contingent upon the financial performance of the acquired business. UST is included in the company’s Outdoor Products & Accessories segment.

The quarterly results were well above guidance calling for earnings to land between 44 and 49 cents a share on a pro-forma basis and 52 to 57 cents a share on a reported basis. Revenues were on the lower end of guidance calling for sales between $230 million and $240 million.

James Debney, American Outdoor Brands Corporation president and chief executive officer, said, “Today we are pleased to report our third quarter results, which include a strategic acquisition in the rugged outdoor space, several new product introductions, revenue growth that was on target, and profitability that exceeded the high-end of our guidance range. Toward the end of the quarter, consumer firearm purchasing began to cool – a trend that underscores the importance of remaining focused on our strategy to continue growing and balancing our business across the shooting, hunting, and rugged outdoor enthusiast markets. In our Firearms segment, we attended the SHOT Show in January where we launched our next generation, full size M&P M2.0 pistol, significantly strengthening our growing family of innovative polymer pistols. Higher year-over-year revenue in the Outdoor Products & Accessories segment was driven largely by our acquisitions of Taylor Brands, LLC, Crimson Trace Corporation, and UST, all of which occurred in the current fiscal year, combined with organic segment revenue growth of 4.8 percent. During the quarter, we hired Brian Murphy, an industry veteran, who will focus on increasing our presence in the rugged outdoor recreation market, in areas such as camping, hiking and fishing – all of which resonate strongly with many of our core firearms consumers and retailers.”

“Lastly, during the quarter, we successfully rebranded our holding company as American Outdoor Brands Corporation, a name that better represents our strategic direction as we explore markets outside of our core firearms business. Overall, we remain committed to creating long-term shareholder value by innovating, preserving and selectively acquiring strong brands that best meet the needs and lifestyles of our valued customers,” concluded Debney.

Jeffrey D. Buchanan, executive vice president, chief financial officer, and chief administrative officer, said, “During our third quarter, strong November results more than offset late-quarter declines in both NICS background checks and firearm product shipments. That late quarter shift in consumer demand patterns has since carried forward into our fiscal fourth quarter. Accordingly, we have updated our full year guidance.”

“Operating cash flow during the quarter was $48.2 million and we invested $33 million in acquisitions and paid off the $25 million outstanding on our line of credit. We ended the quarter with cash of $54.3 million, outstanding long-term debt of $170.6 million, and no borrowings on our $350 million banking line of credit, which is expandable to $500 million. Our strong balance sheet provides us with opportunities to activate our unused $50 million stock buyback authorization, and to further diversify our company by investing in our future – both organically and through highly selective, strategic acquisitions,” concluded Buchanan.

For its year ended April 30, American Outdoor Brands lowered its guidance for sales to a range of $874 to 894 million from from $920 to $930 million previously. Earnings on an adjusted basis are expected to come in between$2.33 to $2.43 from a range of $2.42 t0 $2.47 a share previously.

Photo courtesy American Outdoor Brands