Q4 2020 Smith & Wesson Brands Inc Earnings Call
Good day, everyone and welcome to Smith, <unk> Wesson brands, Inc. fourth quarter and full year 2020 financial results Conference call.
This call is being recorded.
At this time I would like to turn the call over to Liz Sharp Vice President of Investor Relations will give us some information about today's call.
Thank you and good afternoon.
Half of all of US at Smith, <unk> Wesson brands, we hope you're all healthy insight.
Before we begin please know that in order to socially distance. Our team is speaking to you for multiple remote locations. So please bear with us as we conduct today's call.
Our comments today may contain predictions estimates and other forward looking statements.
Use of words like anticipate project estimate expect intend believe and other similar expressions is intended to identify those forward looking statements.
Forward looking statements also include statements regarding our product development focus objectives strategies and vision.
Our strategic evolution.
Our market share in market demand for product.
Market inventory conditions related to our products and in our industry in general.
And growth opportunities and trends.
Our forward looking statements represent our current judgment about the future.
And they are subject to various risks and uncertainties.
Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings.
You can find those documents as well as a replay of today's call on our website at <unk> Dot com.
Today's call contains time sensitive information that is accurate only as of this time and we assume no obligation to update any forward looking statements.
Our actual results could differ materially from our statements today.
I have a few important items to note about our comments on today's call.
First we reference certain non-GAAP financial measures on this call.
Our non-GAAP results exclude acquisition acquisition related costs, including amortization recall related expenses compensation related items related to the separation of our former president and CEO.
Onetime transition cost fair value inventory step up changing contingent consideration goodwill impairment Covitz 19 expenses and the tax effect related to all of those adjustments.
Reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they were discussed on today's call can be found in our filings as well as today's earnings press release, which are posted on our website.
Also when we reference C.P.S., we are always referencing fully diluted D. P. S.
As many of you know, we're preparing to spin off our outdoor products and accessories or okay, and a business from our firearms business later this summer.
In preparation on May 29, we changed our name to Smith, <unk> Wesson brands, Inc., and our ticker symbol to SW <unk>.
The new name and ticker symbol will remain with the firearms company post spin off.
The spinoff company will be named American outdoor brands Inc. and it will train under the ticker symbol eight O U T.
On today's call, we will refer to the spinoff company as able UTI.
Now, let me introduce you to our speakers today.
Mark Smith and Brian Murphy are currently co presidents and co Ceos of our company.
Upon completion of the spinoff Mark will be president and CEO of Smith, <unk> Wesson brands, while Brian will become the president and CEO of Eylea tea.
Jeff Buchanan as our Chief Financial Officer, and has been our CFO since 2011.
As announced previously Jeff will be retiring when the spinoff is complete.
Do you know Macpherson is our controller and Chief Accounting Officer.
After the spin off Deanna will become the CFO for Smith, almost some brands.
And Andy farmers are vice President of financial planning and analysis. After the spin off Andy will become the CFO for Eylea U T.
On today's call Mark in Dino will discuss the firearms segment, after which Brian and Andy will discuss the LPMI segment.
Then Jeff will present, some key financial highlights and an update on our spin off after which we'll open the call up for questions from our analysts.
Before I hand, it off to Mark. Please note that we're currently expecting the spin off to be completed early in our second fiscal quarter.
Probably in the August timeframe barring any unforeseen delays.
Therefore, this is likely to be our final earnings call as a combined company.
Because the financial results for EF W.B. I will not include the financial results for Eylea U T from the spin off date onward, we are not issuing any forward looking guidance on today's call.
And with that I will turn it over to Mark.
Thank you Liz and thanks, everyone for joining us.
Let me begin by first addressing the Corona virus pandemic and our response over the last several months and I'm speaking now for both Brian and myself as co Ceos.
During our fourth quarter, we were able to keep our factories and distribution center operating thanks, mostly to our operations teams across the company, who immediately implemented a broad range of safety procedures and cleaning protocols, which remain in place today to significantly reduce the risk of cobot 19 transmission and keep our workforce safe.
We want to thank each of our employees for their extraordinary efforts. During this time and for their unwavering commitment to safety ever servicing our customers and to supporting our communities.
As the global outbreak of Cobot 19 emerged we took several rapid and decisive actions to keep our employees and our business healthy and safe.
Those actions occurred across all facilities and included travel restrictions staggered shifts enhance cleaning and sanitizing.
Remote work where possible.
Social distancing use a face masks temperature screening and many many more.
In addition to keeping our employees safe. These actions allowed us to continue manufacturing operations, which we immediately leverage to support our communities in short order. Our engineers had re purpose or manufacturing lines to produce space yield which were in dire need by frontline personnel.
To date, we have donated over 8000 base yields and 14000 sets of protective eyewear to over 30, frontline hospitals and first responder organizations.
We've also donated bonds to multiple food banks and charities and the communities in which we operate.
It is evident that cobot 19 continues to plague many communities across our nation and the world.
For our part we will continue to support our frontline heroes and the communities in need while maintaining the health and safety of our employees and our company as our top priority.
As we do so we believed that our actions the dedication of our employees.
And the loyalty of our customers position us very well to navigate that future.
With that let me turn to our firearms segment.
Revenue of nearly $530 million in fiscal 2000 represents growth of 10% over the prior year.
Our growth was driven by strong consumer demand for firearms as reflected by adjusted Nics results.
Consumer preference for our innovative products.
And our ability to keep our employees safe and our facilities operational.
Our results were favorably impacted by changes in the timing of our excise tax assessment as well as strong consumer acceptance of our MMP shield easy pistol that helped us drive market share gains in the year.
In the fourth quarter consumer demand for firearms increase dramatically and our revenue of $193 million represented just over a 37% increase year on year.
The primary driver of this increase was strong orders from retailers and distributors driven by a sudden and heightened consumer demand for the firearms, which began in March and it should which is reflected by adjusted Nics in the period.
I'll now turn to the firearms market trends.
As a reminder, adjusted Nics background checks are generally considered to be the best available proxy for consumer fire on demand at retail.
However, since we transfer firearms only for law enforcement agencies, and federally license to distributors and retailers not directly to end consumers next is a measure of consumer activity and therefore does not directly correlate to our shipments in any given time period.
In our fiscal Q4 background checks for hand guns increased 66% year on year, while our handgun units shipped to distributors and retailers increased by 20 and a half a percent.
In long guns for the same period background checks grew 48% year on year, while our units shipped to distributors and retailers grew by 42.5%.
We believe the difference between our shipments.
And adjusted Nics results in this period is that retailers and distributors were able to address the increased consumer demand in part with their existing inventories, which declined substantially during the quarter.
Distributor inventory of our firearms decreased on a sequential basis from 157000 units at the end of Q3.
To 117000 units at the end of Q4.
And since the end of Q4 distributor inventories have further declined and are currently below our eight week threshold.
Our internal inventories allowed us to address the sudden increase in demand in the quarter, while we ramped our capacity in implemented our flexible manufacturing model in preparation for ongoing strength that we are seeing in the consumer firearms market.
You may recall that we have used this approach in the past to help us capture the benefit of sudden increases in demand without adding costly infrastructure that then as idled normal demand continues.
Turning now to the future well our flexible manufacturing model has clearly helped us to be responsive in the near term our longer term growth and prosperity lies in the power of our brands combined with our ability to innovate.
Nothing demonstrates that better than our she'll be easy category of pistols.
Several years ago, we identified a significant unmet market needs.
The existence of a large group of firearms owners that had difficulty operating semi automatic pistol.
Our engineers set out to develop and easy to use personal protection pesto that these customers could competently operate practice with the range and carry for personal protection.
That process yielded are exceptionally popular MMP shield easy platform, which is easy to rack easy to load easy to operate and available in nine millimeter and threeeighty caliber versions.
These two pistols alone have generated over $90 million in revenue in fiscal 2000.
The speaks volumes to the power of understanding the consumer and market needs and being able to innovate rapidly marketing and innovation, our core to our strategy and I look forward to sharing many more success stories like this with you in the future.
When the spin off of our outdoor products business occurs in August Smith, and Wesson will once again become a standalone firearms company.
Going forward, our focus is on just that understanding the consumers need and combining rapid innovation ability with our impressive brands to drive long term market share gains.
And then returning excess capital to our stockholders.
We believe our stockholders will be best served by focusing on that long term strategy as well.
And by understanding the growth drivers in our industry and our business.
Therefore, while we look forward to meeting with you to discuss and provide some added visibility into those drivers and our strategy. We do not plan to provide forward looking guidance as a standalone firearms company.
With that I'll turn the call over Dina took over financial highlights for the firearms segment.
Okay.
Thanks Mark.
As Mark noted our fourth quarter in firearms was marked by a sudden increase in customer orders that began in March.
Because of our strong balance sheet and our dedicated workforce, we were able to quickly ship our customers a significant amount of product from inventory, earning praise for our ability to meet their needs and keep product on their shelf.
Meanwhile, our manufacturing facilities Swip swiftly ramped and increased production in the quarter, while carefully adhering to multiple new and the very strict safety and cleaning protocols required to combat covered 19.
This commitment to meet the needs of our customers led to a 35.6 million dollar year over year increase in firearms quarterly revenue, excluding federal excise tax.
Gross margins for the fourth quarter and the firearms segment, excluding federal excise tax increased 430 basis points, primarily due to improved absorption related to increased production volumes and to a lesser extent increased prices that we implemented on November 1st.
Fiscal 2020 operating expenses for the firearms segment increased $8.5 million over the prior year, primarily due to our new distribution center, which increased operating expenses by $9 million.
Oh that amount $5.9 million represented depreciation and approximately $1 million represented shipping costs.
Which were previously reported in cost of sale.
In addition, cobot 19 pandemic related costs were offset by pandemic related cost savings, including trade shows conventions travel and entertainment.
Firearms operating income of $33.9 million in the fourth quarter was $8.5 million higher than the $25.4 million generated in the year ago quarter.
This strong performance was a direct result of our ability to support customers, but the immediate shipment of product from inventory as well as the flexibility and dedication of our operations team that works tirelessly through a difficult period to keep us operating an increased product availability.
Although we don't provide balance sheets by segment I would like to point out the although the firearms inventory values increased slightly year over year due to federal excise tax now being included in the carrying value.
Actually units and inventory decreased 19% from the prior year as we ship to meet the sudden increase in demand.
We were also able to delay our April thirtyth federal excise tax payment until July 31st which preserved approximately $15 million in cash for three months.
With that I'll hand, the call over to Brian and Andy to discuss the outdoor products and accessories segment Brian.
Thanks Dana.
Fiscal 20 presented challenges that included the impact of increased tariffs and disruptions caused by a global pandemic.
Our opening a business saw consistent point of sale growth in hunting shooting calorie products with our core brick and mortar customers as well as strong growth from our newly implemented ecommerce platform.
In addition, we achieved several key objectives in okay and made significant progress on our preparations to spin off the business as a standalone.
Look we traded company in August.
During the year, we successfully launched over 300, new products and extensions some of which represent our entry into completely new product categories, such as meat processing.
At a time when consumers are increasingly looking to outdoor activities, such as fishing hunting shooting sports camping and hiking as a way to address cobot 19 restrictions. We believe our branding strategy provides us with an ideal competitive advantage for developing exciting on trend and highly innovative new products.
I turned new consumers into strong long term advocates for our brands.
So how do we do that.
We believe our brands are in the infancy and have yet to be fully explored.
Representing significant runway for long term growth.
We developed our brownlee structure as a way to tease out the so called DNA spark within each brand.
Which is then fan to buy talented teams that specialize in taking brands from niche to known.
Significantly expanding the revenue potential for each brand.
The result is four distinct consumer activity based lines within which every brand has a solid fit.
Once the docked intuit's appropriate brand line. We can then begin to unlock a brands true potential by leveraging the respective lanes resources, including brand marketing product development sourcing and E commerce.
Perhaps the Best example, demonstrating the success of this dock and unlock formula is our bubble brand.
When we acquired probably late in 2017, it was known for its red handled flay knives, seizing an opportunity to recast the brand under our adventurer line, we expanded its potential by dropping blade from the name and positioned to capture the water to plate lifestyle.
Which was largely overlooked by other fishing brands.
Obama is now among our fastest growing brands, having entered new product categories, such as pliers net gas gloves and apparel, whereas now has permission to play reaching a wider audience as it transitions from a niche brand to a known brand.
The result, Bubba sales in fiscal 20 grew more than 100% year over year. Similarly, our bog hunting brand, which was known as bog pod before we repositioned to delivered nearly 200% growth year over year.
Both Bubba and bog benefited from our dog can unlock formula and while they comprise a small part of our revenue today on a relative basis. They represent a family of brands with significant runway for growth.
We're excited to share more dock and unlock results from our other brands that have benefited from this formula in the quarters to come.
Our strengthening E. Commerce platform is an important element within our growth strategy and importantly, it is positively impacting our results in the current environment.
We believe our E commerce platform, which includes both are online customers as well as their own websites, which largely responsible for our consolidated year over year fourth quarter revenue growth of 2.4% as consumers responded to retail store closures by seeking out our popular brands and products online.
In the fourth quarter, our ecommerce channel grew 103% compared to the prior year and included a significant increase in direct to consumer sales.
This increase further validates our decision two years ago to invest in our new ecommerce platform. In fact, our revenue growth in Q4 occurred despite over 1000 brick and mortar locations in our retail network being closed at one point.
Turning now to discussion of our supply chain as I outlined last quarter, a vast majority of our products and the LPTA segment are sourced from China or rely upon components coming from China. So we are particularly tuned in to the impacts of China related tariffs in the cobot 19 pandemic.
We're pleased that our suppliers in China are all operational.
That said, it's important to note that when tariffs began to emerge last year, we immediately embarked on a strategic initiative to diversify our supply base over time.
This is a long term objective that includes establishing dual sourcing partners.
And it will evolve over an extended period of time since we're not willing to compromise quality or cost the cost advantages.
Lastly, and as long as explained this is likely our final earnings calls the combined company. So we're not providing guidance today.
Once we file our form 10 and have the ability to present, our strategy as American outdoor brands Inc., we expect to provide guidance at that time.
Now, we'll ask Andy to cover the financial results for the segment Andy.
Thanks, Brian.
Revenue in our opinion a segment for fiscal 20 was $167.5 million compared to $177.3 million in the prior year a decrease of 5.5%.
The decrease was primarily driven by lower OEM sales of laser say products, the bankruptcy and financial distress to certain customers.
And the unexpected acceleration of one major retailers private label strategy relating to camping accessories.
Despite the challenges from code with 19 that Brian discussed our Q4 revenue was $43.2 million, reflecting growth of 2.4% over the prior year quarter.
Increased sales to our online retailers as well as a significant increase and our own direct to consumer sales more than offset declines that were driven by retail closures in Q4.
We plan to continue investing in our direct to consumer platform and marketing strategies further strengthening our direct engagement with consumers.
Our fourth quarter revenue growth is also particularly notable because it occurred even though one of our largest customers a major online retailer did not place orders with us for a full month as they chose to ship only essential products during that time.
We're excited to deliver revenue growth against this backdrop and are pleased to report that this large retailer is back to shipping regularly and retail stores are beginning to reopen.
Gross margin for fiscal 20 was 41.4%.
Decrease of 380 basis points from the prior year.
The decline was driven primarily by unfavorable manufacturing variances and the increase in tariff costs.
The manufacturing variances are related to lower production of Crimson trace laser site products, which are made in Oregon.
With respect to terrorists most of our products are sourced from China, and therefore subject to tariffs ranging from 7.5% to 25%.
Tariff changes in fiscal 20, most of which were increases negatively impacted our gross margins.
Turning to inventory our Opn a inventory at the end of fiscal 20 was flat to the prior year.
Looking ahead to fiscal 21, we're taking steps now to optimize our inventory levels and best position us for the possibility that cobot 19 may be around for some time to come.
First we plan to invest an additional inventory of certain of our high demand products.
Second and over time, we plan to launch promotional programs on certain slower moving inventory in order to convert those items back to cash.
We believe these actions will help us mitigate supply chain risk, while maximizing cash flow for operations.
I'm pleased to announce that we have established a bank relationship for Endo UTI and received a commitment letter for a 50 million dollar senior secured credit facility, which will be immediately available after the spin off.
That facility will be expandable by an additional $15 million under certain conditions and will be an asset based loan subject to typical provisions.
This new credit facility combined with our $25 million of starting cash from SWS CPI means that we will have $75 million to $90 million and capital available as a new company to support achieving our long term organic and inorganic goals.
Lastly, our team has been hard at work preparing our form 10, which will provide insight into our business structure and key strategies as well as audited Standalone financial statements from fiscal 18 through fiscal 2000.
We expect to publicly filed a form 10 soon after which we look forward to meeting virtually with many of you to discuss our very exciting future.
Ill now turn the call over to Jeff.
Thanks, Andy.
I said theme to add the have provided our or PML information by.
Segment and the interest of time I will refer you to our press release for details on our consolidated financial results.
I'd like to uncover just a few highlights of note.
Although repo, although we reported a GAAP loss in the quarter end the year because of a Q4 impairment of goodwill and intangibles related to prior acquisitions overall, we had a very strong fourth quarter.
Quarter, both operationally and on a non-GAAP basis.
As a result in Q4, we generated $120 billion of cash flow from operation.
Compared with $36.7 million in the prior year.
In fiscal year, 2020, we generated $95 million of cash from operations compared with $57.5 million in the prior year.
Capex spending in fiscal 2020 was $13.9 million primarily related to new products.
As compared to $33.9 billion in the prior year.
On April.
Our thirtyth at the end of our fiscal year, we had cash of $125.4 million and total bank debt of $160 million for net bank debt of just over $34 million a reduction of $120 million and just one.
A quarter.
We have sense pay down another $65 million on the bank debt.
Looking forward our spin off plan is on track and expected to.
Take place in August.
When that happens you t. will own all assets relating to.
To our existing Opn a.
The segment.
The new company will be well capitalized as Andy discussed and will have no outstanding debt.
We expect we expect it to form 10 detailing ale, you tease business and the prior three your financials will be made public soon.
And with that operator, please open the call for questions.
From our analysts.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Our first question comes from the line of Cai von Rumohr with Cowen. Your line is now open.
Yes. Thank you very much so housekeeping question when will the 10-K B outreach as you kind of fire those numbers out pretty quickly and they were not in.
The formal release.
Hi, yes.
We have quite a bit going on this year as you can imagine.
In addition to our regular.
Got it for Smith <unk> Wesson, we had to do audits for Eylea UTI for 18, 19 and 20.
And we've also been working on the form 10. So the 10-K is not due until the 14th of July but I think it's going to be filed.
Within the next day or two.
Okay.
And then.
Maybe if you could give us some color you I mean, you mentioned, the big gains and outdoor products and Bob.
But obviously sales were down so laser sites was a negative can you give some color on the issues the laser size the private labels trending bankruptcy and so we should get some sense I mean, our sales you expect them to be up or how should we think about.
Yeah.
The outdoor products business.
Hi, guys, Andy I'll take that one.
Moving forward.
You know the year over year comps.
From the private label, we expect that to kind of.
After our Q1 in fiscal 2001 that will kind of remediate itself, we're not really going to provide any kind of forward looking numbers at this point, but you know the bankruptcies. Obviously those are resolved. So I think a lot of the trends we're seeing in point of sale data are very positive. So we're looking forward to this.
Coming here.
I would say too when you look at our brands.
You know we talked about in the in the opening remarks about the we dr. brands into the brand lines.
To unlock the value. We just started talking about that concept, but a year ago, a year ago almost to the day.
And and it really was kind of a turning point for us as we began to do you really.
Start feeding those brands in this do sort of playbook.
And so bubba and bog for us, but just being our latest acquisition.
Within the traditional outdoor products and accessory business.
Really.
To have really pleased us I mean, the results really exceeded our expectations.
And so we're doing that same exercise and we have been doing not you'll see some exciting.
Results from our other brands in the quarters to calm or we would expect as a as we continue to unlock some of that value based on the brand repositioning going into new product categories, where our brands have permission to play.
So.
Quite a bit exciting stuff on the horizon, but what Andy said is true some some specific customer headwinds.
Related to distrust in retail bankruptcies, along with some of that that private label initiative that you mentioned.
And E Commerce is an Amazon together or roughly how big as a percent of sales in the fourth quarter.
We can't really get into specifics on those but.
All of those rolled up again, you'll see some some more data when the form 10 comes out.
I'll give you some more color on that but we at this point really can't get into that.
I'll tell you that Alaska.
Excuse me go ahead.
Yeah, I mean, it's I'd say again until the form 10 comes out which will have much more detail I just I want to jump ahead of that is obviously, we appointed pointed out for E Commerce, which again includes all online retailers and direct to consumer.
For us is meaningful.
Enough that it's a driver of the business.
Hey, guys.
I just wanted to have this is.
This is that.
Difficult time to do the earnings call because the form 10 will be like public in a couple of weeks.
And.
So you can we can't really talk about.
What's in the form 10 until its publicly filed.
So we'll try to give you as much color is we can but the form 10 will will pretty much answer a lot of the questions that you've had on this call.
So the one last question is fire arms obviously.
You have an election coming up.
I think in the last election anticipation of a democratic when tends to bolster demand you have all these protest I think that bolsters demand Cove bid. So it would look like the fire arms demand just based on search trends in the past.
Should be pretty strong.
What's your ability to kind of immediate.
Your prior peak was there was producing 2.1 million units, what's what's your capacity could you produced 2.32 0.5, how should we think about that.
Hey, guys, it's Mark Smith.
Well you you probably know we're not going to answer that question any great detail on me off but just.
Qualitatively, we have talked about our flexible manufacturing ability before in the past. So we kind of a strategy that we haven't place where we have our existing.
Manufacturing footprint here and we also have a number of external third parties that are able to to partner with us and one of these demand surge is like we're seeing right. Now. So we have the you know I am extremely flexible manufacturing footprint and I would say that are you know I mean, I think directionally you can probably look at where we were and now.
Probably dropped pretty.
Good good conclusion that there's no reason, we couldn't get back there.
Thank you very much.
Our next question comes from Scott Stember CL King Your line is now open.
Good evening, Thanks for taking my questions.
Okay.
You maybe talk about this surge in.
How it compares to other surges in the past.
More specifically about the consumers that are coming into the market. Other new people that are coming into the market, which could stick, meaning does this have more staying power potentials in some of the other panic buying situations that we've seen over.
Over the past five to seven years.
Yeah. Scott This is mark good question.
Yeah definitely this is a different type of surgeons really two types of surges right. One is fear of gun control regulation and one is fear of personal protection.
And when we get into personal protection I'm, sorry, when we get under the gun control its tends to be a lot of firearms owners and enthusiasts going out purchasing more firearms and one of these type of what's happening right. Now is really really driven by in large part. We believe is driven by the by the fear of personal protection and that brings new shooters into the marketplace and expand.
Sounds that.
People who are.
Our second amendment advocates and gets more people into the shooting sports and I think just this past week theres been a couple of studies out by the NSSF.
Based on some retailers surveys that is as high as two and a half million news new shooters into the marketplace in the last six weeks so.
Obviously shows bode well for for us in the future.
It obviously other this environment I imagine the pricing environment is quite favorable for you guys is that correct.
The promotional environment is definitely subsided, yes.
Okay.
Got it and.
Could you just saw maybe give us a little more clarity I know there were some numbers corner.
Again, we don't up to 10-K to look at yet.
The firearms well break it out between handguns and.
And logs.
Sure Scott This is Dina handguns for the year were 390.711 million.
And for two.
2019, where that 336 nine alone.
Long guns were one on one 540.
And prior year with Windows seven 717.
And then other products and services was 37 361.
And last year was 36 717, so you've got a 16% increase in handgun revenue.
7.5, sorry, excuse me, 5.7% decrease in London, and a 1.8% increase and other products and services.
Now keep in mind that that does have a federal excise tax impact on that and that number.
But overall our unit.
Were handguns were up 7.8% for the year long guns were down 9.8% for the year.
And as you probably recall the first three quarters and long guns were relatively slow quarters and things just sort of changed around a bit. So we made up a lot of ground in the fourth quarter.
Im sorry can I, just probably you one last thing for the quarter. So those same statistics.
Sure one moment, let me pull that out.
So for the quarter handguns were 129.4 million.
Compared to last year at one or 5.8.
Long guns were 35.6 million.
Again 25.9.
And 11.3 million for other products and services and 9 million.
For the prior year, so overall handguns up 22.3% in the quarter.
Long guns up 37.3% for the quarter and other products and services up 25.8%.
Got it thank you so much.
The numbers I, just gave you worthy efficacy excluded numbers by the way.
Okay. So that's a comparable last quarter to this quarter number for that for the quarter Ali.
Got it thanks.
Our next question comes from Steve Dyer with Craig Hallum. Your line is now open.
Thanks, Good afternoon, I, just want make sure I got the guidance cadence or lack thereof, correct going forward. So am I am I right and understanding no more guidance for firearms period before or after the spin.
Guidance on Occhionero only after the spend is that right.
That's correct.
Okay not for.
And upper outdoor products, so just to.
Well, we will be providing guidance after the spin, but once the form 10 comes out.
On the road show prior to the spin this is Brian by the way Brian Murphy.
Prior to the spend we will be providing guidance.
Okay got you just not for replay or arms.
I guess with respect to firearms, just because Q1 your fiscal Q1 is normally meaningfully year softest quarter. You know I would expect just given the main mixed results in our check certainly suggesting that that's continuing.
Is there any reason why your results wouldn't look substantially more like mix rather than a big fall off from Q4.
Again, I mean, we've got to be very careful we were not issuing 411 looking guidance, but you know I think we talked about the fact that we're implementing our flexible manufacturing.
Strategy and we're increasing capacity.
And you can look in the next results and I think you can probably of draw some pretty.
Accurate conclusions from that.
Sure.
Just within it looks like you're all your overall inventory as you know certainly sooner than it was but you know I think year over year for the entire companies sort of on par with last year, but are there any particular skews that you're planning are really stand right now that are causing you to potentially miss out on sales.
Well.
Yeah all of them.
The market kind of back into our surge environment typically kind of starts off with you know the MSR ours, and then moves into pistols and move into revolvers, and then frankly anything that you know any any firearm is going to is going to move and I think we're you know.
We're kind of into the any firearm it's going to move category right now so inventory in the channel is very low.
Inventory.
And in internally is pretty low and we're kind of you know we're kind of back into one of those surge environments that we have been before on the path. So.
No I wouldn't have right now I mean, I think we're we're pretty well positioned as I mentioned before.
Before we have a very flexible manufacturing.
Footprint and capability to two really ramp up quickly and I think we're probably better off than most of the most of the other players out there and better positioned to take advantage immediately.
Got it.
Last one for me last quarter, we we talked about some excess sort of pockets of inventory by retailers, who are looking to exit that business.
At the time that she's pretty told that I think you had thought it was going to kick another quarter quarter behalf to flush that through suffices to say that you all all done at this point.
Going forward.
Yeah, a lot of a lot of.
Changes since we have that goal.
Yes.
For sure Okay. Thanks very much.
As a reminder, ladies and gentlemen, if he'd like to ask a question at this time that Star then one.
Our next question comes from Mark Smith with Lake Street Capital Markets. Your line is now open.
Hi, guys.
A couple of housekeeping items here first.
Maybe can you talk about post spin you guys reporting the federal excise tax does that go away or would you continue to have that built into the post spin numbers. It will continue to be built into the post spin numbers that as a a distribution as long as we have a distribution facility we will be.
Subject to reporting assay t. and our sales numbers.
Okay.
One thing and that will be comparable year on year at once we get through the first quarter.
Yeah.
And then Mark you just talked about the demand for for long guns during the quarter.
As you look at the.
And I know, it's kind of hard to tell the mix of maybe new firearm owners that came into MSR versus kind of that historical surged by or buying their second tour FIS.
Yeah.
Yes.
I think it's kind of hard for us to say exactly where the where those new buyers went and did they what specific product that they buy but as I mentioned earlier.
We're watching some trends right now and definitely hearing some feedback and getting some numbers out of the NSSF that are estimating there somewhere in the neighborhood of two and a half million new buyers out there. So.
Is there.
Obviously, equating out quite a lot of firearms and do the US who are going out and want buying their second or if it's gone as you said, but there's also a whole lot of new shooters are coming into the market.
So.
What the what there.
Whether theyre moving towards MSR is or were polymer friends vessels are revolvers or we're not sure.
Okay.
Might be better question for Jeff, but anybody wants to take it as we look at selling and marketing expense.
Is it safe to assume that you maybe didn't have to and maybe looking for don't have to be as aggressive on marketing on the firearms side and.
Given the the surge in E com do we see a little bit more of the more spending on the UTI side.
You know.
Actually I'll, let I'll, let idina answer per firearms in any answer for you too.
Yes, so I think mark sort of indicated in in a previous answer that we are likely not to doing as many promotions as we are so that affects our price. It also affects how the margins operate with regard to sort of general advertise.
I think in marketing expenses I don't think those will change significantly we do some percentage based co op advertising or with some of our bigger customers.
And I don't think the marketing line will change all that much other than if we're not able to have certain of the shows based on the cobot environment.
So from a.
General perspective, I would say the sales marketing line won't change significantly, but what we'll see is the benefit of not running the promotions, which will affect the topline and the margin line as well.
Hey, Mark this is Andy I'll answer on the open a site so.
No. We didn't really have any decrease per se in that type of spending we.
Essentially spent on to plan I'm really consistent with our ongoing investment in E com and marketing initiatives.
And in fact, I mean, we're seeing with our POS data that we're looking at in the results for Q4 consumers are finding us. So it's been a very good investment and we expect to continue that.
Okay, and then a couple more questions just on the you to side.
Can you guys talk a little bit about the cadence of sales during the quarter, how maybe within ecommerce if that crude later in the quarter and then maybe how much of what we saw on revenue from the quarter really came late as we saw people migrate to outdoor activities and some retailers reopened in April.
Yes, I can't really comment on a month by month, but we were very happy with how Q4 ended up.
Especially on the E com side, we saw a lot of.
Growth both in the with our on time online retailers and our direct to consumer and again, we're looking forward to continued growth in the future on that yes. This is Brian I would also add you know like I said in the prepared remarks.
At one point, we were tracking we had a spreadsheet and tracking all of the number of closed doors that we could at least track and it got exceeded 1000 at one point.
So like Andy said.
And now has three.
Throughout the quarter it it change right, depending on what was coming out hour by hour it seemed to be.
But but yeah consumers continue to block to our sites into our other online retailers.
Where they could get product so.
Yeah very strong quarter.
Okay and then the last one from me.
And if you want to talk just a little bit about the meat kind of product and rolling that out and I know, it's still early but you know maybe initial successes or what you're seeing there that kind of maybe changes any thought process that you have in acquisition versus kind of building out your own Brent.
Yeah, So great question and.
We're very pleased with how meat has performed we intentionally launched it.
Again, it's an organic you mentioned, it's a brand that we have developed organically, we we've talked it into our brand lanes and really now starting to to grow it.
We didn't see anything else in the market quite like it and so we built it ourselves.
So we launched it outside of the sort of typical timeframe that folks would be doing their meat processing, which for us we're really targeting in the fall.
In the in the reason for that is really to build up that fan base and our ambassador network.
And but with everything going on with co bid and I think some some folks just an increase in meat processing on their own.
Well ahead of the fall people getting into it new entrants.
Which which we have we benefited from so.
Very pleased with results in it so so far it's exceeding our expectations and also proving out the Doc analog formula that we put into place.
Okay, great. Thank you.
Hi.
Today's question and answer session I'd like to turn the call back to lose shops for closing remarks.
Thank you operator, and thank you everyone for joining us today.
Please stay safe and we look forward to speaking with you next quarter as two separate very very separate and very exciting companies. Thanks for joining us.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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