Ammo, Inc. slashed its guidance for its fiscal year while reporting a small loss in the second quarter ended September 30 on a 21 percent revenue decline. Ammo is the owner of GunBroker.com, the online marketplace for the firearms and shooting sports industries and a producer of ammunition and components.

Second Quarter Fiscal 2023 Highlights

  • Net revenues decreased 21 percent to $48.3 million;
  • Gross profit margin of approximately 26.6 percent;
  • Adjusted EBITDA of $8.2 million compared to $24.0 million;
  • Net loss of ($0.8) million, compared to net income of $14.1 million;
  • Diluted EPS of ($0.01), compared to $0.11; and
  • Adjusted EPS of $0.05, compared to $0.17.

GunBroker.com Marketplace Metrics
Second Quarter 2023

  • Marketplace revenue of approximately $14.6 million;
  • New user growth averaged 36,000 per month; and
  • Average take rate increased to 5.3 percent compared to 5.0 percent in fiscal 2022.

“This past quarter witnessed Ammo’s on-time and within budget grand opening of its new 185,000 square foot Wisconsin manufacturing facility. Our new plant is running smoothly, and we are diligently working to bring it to its full operational production capacity, to meet commercial demand and satisfy the understandably stringent technical and timeline requirements set out by our US military partners. Additionally, we continue on our charted path to strategically and continually optimize the GunBroker.com Marketplace to ensure it fully addresses our customers’ needs while leveraging that amazing platform to drive more revenue and increase earnings quarter over quarter. We are also pleased to have resolved the proxy contest issues and double the teams’ focus on the operational and financial tasks at hand. Namely, to provide optimal shareholder value as we endeavor to continue to position ourselves as leaders in the ammunition and firearms business, both as a manufacturer and operator of the premier outdoor and shooting sports Marketplace,” said Fred Wagenhals, chairman and CEO, Ammo.

Second Quarter 2023 Results
Ammo ended its second fiscal quarter increasing its ending cash by nearly 25 percent to $29 million. Current assets increased to approximately to $133 million while decreasing current liabilities to $32 million. In total for the quarter, Ammo had $424 million in total assets, $47 million in liabilities and $377 million in shareholder equity. This compares to its most recent year-end with $414 million in total assets, $40 million in liabilities and $374 million in shareholder equity.

Total revenues for the second fiscal quarter were approximately $48.3M in comparison to approximately $61M in the prior year quarter; this was a decrease of 21 percent from the prior-year quarter.

This decrease is in line with the industry decline of its peers of 23 percent quarter over quarter. The performance of its manufacturing operations has softened with the market and the move into its new facility brought production offline for a longer period than originally anticipated, notwithstanding extensive planning undertaken months in advance of the plant move. GunBroker.com also saw a softening in the marketplace revenue as well of approximately 13 percent.

Ammo’s COGS was approximately $35.5M for the quarter compared to $34.8M in the comparable prior-year quarter. In this quarter, the manufacturing operations were forced to absorb a significant increase in commodity pricing across the board, coupled with a dramatic increase in shipping costs. We have seen commodity pricing beginning to fall to a more “new” normalized level which Ammo believes should have a significant impact on margin in its fourth fiscal quarter. Accordingly, this resulted in a gross margin of $12.8M compared to $26.2M.

Coupled with the reduction in sales, the company also faced one-time like legal expenses related to the proxy contest and increased expenses related to higher commodity costs, substantially increased freight costs, stock compensation, corporate insurance, and payroll. Ammo will also see increased legal expenses, advisory service billings and other expenses impact its next quarter directly related to the proxy contest.

For the quarter, Ammo recorded an Adjusted EBITDA of approximately $8.2M, compared to the prior year quarter’s Adjusted EBITDA of $20.1 milloin. This resulted in a loss per share of $0.01 or adjusted net income per share of $0.05 in comparison to earnings per share of $0.11 and adjusted net income per share of $0.17.

To address these increased costs, Ammo implemented expense reductions of approximately $5 million in savings on an annualized basis for payroll-related expenses. Ammo is continuing to make cost-cutting measures it believes will not impact the future growth of its company. At the same time, Ammo and the market expect to see the stabilization of commodity pricing while its new plant continues to increase production capacity from approximately 400 million rounds at the end of its most recent fiscal year to rounds to approximately 1 billion rounds and absorb manufacturing-related expenses to drive down the cost of goods and increase gross profit. These reductions are designed to benefit its profit margin and net income.

Ammo also implemented marketplace enhancements at GunBroker.com, designed to drive revenue and gross profit while improving the users’ overall experience, including in-house ACH/credit card processing, loyalty programs, data analytics offerings, and carting ability on the site. Management has been working on these leveraging opportunities and a suite of others since the acquisition of GunBroker.com

Outlook
Ammo reduced its guidance for its 2023 Fiscal Year to revenues in the range of $220 million to $240 million, EBITDA in the range of $30 million to $40 million and Adjusted EBITDA in the range of $50 million to $60 million. Previously, Ammo expected revenues in the range of $300 million to $310 million, EBITDA in the range of $82 million to $85 million and Adjusted EBITDA in the range of $108 million to $111 million.

Photo courtesy Ammo