Ammo, Inc. reported a loss in its fiscal year ended March 31, as sales dropped 20.3 percent; however, company officials forecasted improved profitability in FY24 due to its focus on premium brass and large-caliber ammunition rounds within its ammunition business and several enhancements, including a payment suite and cart platform, to its GunBroker.com marketplace.
“While it’s been a challenging period for all of us and the market in general, I firmly believe we have laid the foundation for the next great growth cycle for our company,” said Fred Wagenhals, chairman and CEO, on a call with analysts.
Sales were down 9.0 percent in the fiscal year to $191.4 million. Among segments, sales in the year were down 29.3 percent to $161.5 million in ammunition, eased 2.3 percent at its GunBroker.com marketplace division to $63.2 million and were flat at $14.2 million in casings.
The company’s gross margin of approximately 28.9 percent was down from 36.9 percent a year ago.
The loss in the year came to $4.6 million, or 7 cents a share, against earnings of $33.2 million, or 27 cents, a year ago. Adjusted EBITDA fell 56.6 percent to $26.4 million, while adjusted earnings fell 63.5 percent to $19.3 million, or 16 cents a share. Adjusted results exclude several non-recurring expenses, including those involved with a resolved proxy contest.
In the fourth quarter, revenues decreased 37.7 percent to $43.7 million. Sales declined 51.9 percent to $23.5 million in ammunition, slid 7.2 percent to $16.7 million in the marketplace, and grew 6.1 percent to $3.5 million in casings.
Gross margin of approximately 27.3 percent was slightly down from 30.3 percent a year ago.
Net loss in the quarter totaled $2.9 million, or 3 cents, compared to net income of $0.5 million, or less than 1 cent, a year ago. Adjusted EBITDA was down 64.5 percent to $3.8 million, while adjusted earnings slumped 63.3 percent to $3.2 million, or 3 cents.
Updating on progress within businesses, Wagenhals said the ammunition segment continues to be repositioned as a long-term supplier of pistol and brass casings to OEM and international markets. He said that as the ammunition market normalizes, Ammo will continue its penetration into higher-margin, niche ammunition markets with its proprietary technology.
The shift is being supported by the opening, in August 2022, of a 185,000-square-foot brass manufacturing, loading and testing facility in Manitowoc, WI, that can produce calibers ranging from 25 auto to 50 BMG.
“This pivot in strategic was designed to substantially improve the profitability of our pistol, rifle and brass sales while also reducing our working capital needed and improving the balance sheet,” said Wagenhals. “We are confident that these changes, along with the significantly greater capacity at our state-of-the-art manufacturing Wisconsin facility, will put us in an excellent position to rapidly improve profitability as we execute in the coming quarters.”
Jared Smith, a 17-year veteran in the firearms and ammunition industry who was named COO and president on January 3, added that over the last six months, its ammunition division had transitioned away from top-line revenue and focused on margin creation in conjunction with contractual growth with its premium OEM partners.
Sales margins improved, volumes stabilized and strict inventory reduction plans were implemented to manage more normalized demand post-pandemic in the ammunition space. Smith added, “Despite the current recessionary and inflationary macroeconomic effects, the ammunition division still benefits from geopolitical events and conflicts that you read in the news today. Demand for our brass lines is growing, and the word is getting out there that Ammo, Inc. is open for business and has significant capacity for its growing customer base.”
Wagenhals said Ammo, Inc. also continues enhancing its GunBroker.com Marketplace site, although the business performs better than the overall space.
“While brick-and-mortar retailers have suffered from the significant decrease in revenue and foot traffic, our GunBroker.com revenue and profitability have remained steady throughout the past fiscal year,” said Wagenhals. “We believe this has been a function of improving customer acquisition tools, significantly upgrading our targeting, marketing and better overall customer experience, which the team has spent a lot of time and effort in enhancing in every material way.”
Upgrades to the GunBroker.com platform include carting and credit card processing capability, prepped for rollout following extensive beta testing. Wagenhals said the recent layoffs in the technology sector allowed GunBroker.com to expand its development capabilities with several strategic hires.
The payment suite and cart platform, expected to launch in the first half of Ammo, Inc.’s 2024 fiscal year, will drive growth and profitability to the site.
Smith said that with the onboarding of credit card processing and carding, the GunBroker.com platform would change, streamline and expedite processes within the systems to help buaild trust with users. He also discussed the benefits of GunBroker.com’s move to restructure its customer service, add product specialists and enable buy-now links for manufacturer sites and manufacturer stores within GunBroker.com.
Said Smith, “As a whole, the entire GunBroker.com team feels, they’re just really hitting their stride, with the past two years focused on this strategic planning and development of what is now being deployed, bringing a whole new breadth of services and opportunities to the platform and its users.”
Ammo reduced total inventories by $12.8 million in the fourth fiscal quarter due to the shift to a leaner operating model focusing on higher margin classes of ammunition and increased brass sales.
“2023 and the first half of 2024 will be a challenging year for the Ammo and this industry,” said Smith. “Markets normalized, shelves are restocked and our customers are once again looking for value as they tighten their belts. To thrive in this environment, we must create opportunities in the marketplace to build long-term relationships and communicate the value and strength of our platform and products.”
“I remain confident that we are only in the early stages of what we believe will be a long runway of revenue, growth and increasing profitability,” added Wagenhals. “We started the company in 2016 with the vision and mission to innovate and capture a meaningful share of the ammunition market. Picking our spots for acquisitions, staying focused on always improving manufacturing operations, all while working to bring our customers the product they desire. We have grown by leaps and bounds in the short seven-plus years, and I am proud of the future going forward, but there is much work left to be done.”
Photo courtesy Ammo, Inc.
