Ammo Inc., the owner of GunBroker.com, continued to show strong momentum in both its ammunition and marketplace divisions in the first quarter of Fiscal 2023, as revenue increased 37 percent from the first quarter of Fiscal 2022.
First Quarter Fiscal 2023 vs. First Quarter Fiscal 2022
- Net Revenues increased 36.6 percent to $60.8 million;
- Gross profit margin of approximately 29.8 percent;
- Adjusted EBITDA of $14.3 million compared to $16.3 million;
- Net Income of $3.2 million, compared to a net income of $9.5 million;
- Diluted EPS of $0.02, compared to $0.08; and
- Adjusted EPS of $0.09, compared to $0.13.
GunBroker.com Marketplace Metrics – First Quarter 2023
- Marketplace revenue of approximately $16.5 million;
- New user growth averaged 38,000 per month;
- Average take rate increased to 5.3 percent compared to 4.5 percent in fiscal 2022; and
- Loyalty program revenue increased 139.1 percent year-over-year.
Reiterating Fiscal Year 2023 Guidance
- Total Revenues of $300 million to $310 million;
- EBITDA of $82 million to $85 million; and
- Adjusted EBITDA of $108 million to $111 million.
With the recent opening of its manufacturing facility in late July, along with the ongoing enhancements to the GunBroker.com marketplace platform, Ammo reiterated its guidance for over $300 million in revenues and Adjusted EBITDA between $108 million and $111 million for Fiscal 2023, with projected annual growth rates of 25 percent and 45 percent, respectively.
“With our revenue momentum continuing into Fiscal 2023, Ammo’s management team and board completed a detailed analysis and assessment of our operations, business units, and growth opportunities, all with the goal of unlocking and enhancing shareholder value. With this analysis, and with the support of our advisors, the Board has determined that the optimal path for unlocking shareholder value is through the separation of these divisions into two separately traded companies” said Fred Wagenhals, Ammo’s chairman and CEO. “We believe this separation will allow investors to more appropriately value the business models of each segment and create greater shareholder value by facilitating the expansion and value we have created in both brands while pursuing compelling and distinct growth opportunities.”
“Our entire team remains singularly focused and committed to working collectively through this transformational process to best position each company with the right team members and full spectrum of resources to continue to deliver exceptional products, innovation, and an overall enhanced experience for the outdoor sporting and shooting enthusiast. The reiteration of our 2023 outlook reflects our ongoing confidence that both companies will continue to grow revenues, enhance margins, and drive even greater shareholder value as we move towards these strategic goals,” concluded Wagenhals.
First Quarter 2023 Results
Sales for the three months ended June 30, 2022 increased 36.6 percent or approximately $16.3 million over the three months ended June 30, 2021. This increase was the result of approximately $10.9 million of increased sales in bulk pistol and rifle ammunition, an increase of approximately $1.7 million in Proprietary Ammunition sales, a decrease of approximately $0.6 million in sales from its casing operations, and an increase of approximately $4.2 million of revenue generated from its GunBroker.com Marketplace, which includes auction revenue, payment processing revenue, and shipping income. Management expects the sales growth rate of Proprietary Ammunition to greatly outpace the sales of its Standard Ammunition.
Ammo said it focused on continuing to grow top line revenue quarter-over-quarter as it continues to further expand distribution into commercial markets, introduce new product lines and continue to initiate sales to U.S. law enforcement, military (domestic and allied nations) and international markets.
Its gross margin percentage decreased temporarily to 29.8 percent in the current quarter. This was primarily attributable to near-term cost of materials increase, as well as additional labor for a new facility, and overhead costs in preparation for the late July opening of its new manufacturing facility. Management’s informed opinion is these cost increases are temporary and should swiftly subside as its new plant becomes fully operational, which the company expects to be by the end of its second fiscal quarter.
Ammo said, “We believe our gross margins will increase in the second half of this fiscal year as we add a host of operating efficiencies through the fully integrated and ramped up operation of our new production facility, while we continue to grow sales through new markets and expanded distribution. Our goal in the next 12 to 24 months is to continue to improve our gross margins. This will be accomplished through the following:
- Increased product sales, specifically of proprietary lines of ammunition, including the Streak Visual Ammunition, Stelth, in addition, the ammunition it developed in support of the military and government programs;
- Introduction of ammunition that historically carries higher margins in the consumer and government categories;
- Reduced component costs through the operation of its ammunition segment and expansion of strategic relationships with component providers;
- Expanded use of automation equipment that reduces the total labor required to assemble finished products; and
- Better leverage of its fixed costs through expanded production to support the sales objectives.
“Overall, our operating expenses for the quarter increased by approximately $3.8 million over the three months ended June 30, 2021, or 140 basis points as a percentage of sales as a result of a full quarter of GunBroker.com in comparison to a partial quarter in the prior year period due to the timing of the 2021 GunBroker acquisition. We expect to see administrative expenditures decrease as a percentage of sales in the 2023 fiscal year, as we leverage our work force and expand our sales opportunities.”
Operating expenses includes non-cash depreciation and amortization expense of approximately $3.4 million for the period and consisted of commissions related to its sales increases, stock compensation expense associated with issuance of its Common Stock in lieu of cash compensation for employees and board members during the period. Operating expenses included noncash expenses of approximately $4.6 million.
Operating income was $5.1 million for the quarter compared to operating income of $9.7 million in the year-earlier. As a percentage of net revenues, operating income was 8.3 percent.
Ammo said, “We ended the quarter with a net income of approximately $3.2 million compared with a net income of approximately $9.5 million for the three months ended June 30, 2021. The decrease was mostly attributable to the decrease in our margin and the addition of a tax provision in the current period in comparison to the prior year period in which we had a full valuation allowance. As we increase our margin in upcoming quarters, we expect our net income to increase in comparison to the prior year.
“Our goal is to continue to improve our operating results as we focus on increasing sales and controlling our operating expenses through the integration and fully ramped up operation of our new manufacturing facility, coupled with the expanded leveraging of the GunBroker.com Marketplace,” said Wagenhals.
Adjusted EBITDA was $14.3 million compared to Adjusted EBITDA of $16.3 million in the year-earlier period. The decline in Adjusted EBITDA was mostly attributable to the temporary decrease in the gross margin of its ammunition segment as discussed above.
Adjusted net income per diluted share was $0.09 versus an adjusted net income per share of $0.13 in the prior year period.
For the three months ended June 30, 2022, net cash provided by operations totaled approximately $5.2 million. This was primarily the result of net income of approximately $3.2 million, which was offset by increases in its inventories of approximately $5.6 million, increases in deposits of approximately $0.5 million, decreases in its accounts receivable of approximately $4.2 million, decreases in prepaid expenses of approximately $0.9 million, and decreases in its accounts payable of $3.0 million. Non-cash expenses for depreciation and amortization totaled approximately $4.3 million and non-cash expenses for employee stock awards totaled $1.2 million.
Ammo reiterated its 2023 Fiscal Year guidance of 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