Q4 2021 Smith & Wesson Brands Inc Earnings Call
Today's conference is scheduled to begin momentarily and just continue to standby. Thank you for your patience.
[music].
Yes.
Good day everyone.
And welcome to Smith, <unk> Wesson brands, Inc, fourth quarter and full fiscal 2021 financial results Conference call.
This call is being recorded.
At this time I would like to turn the call over to Rob Cicero General Counsel and will give us some information about today's call.
Thank you and good afternoon all.
Our comments today may contain predictions estimates and other forward looking statements. Our use of the words anticipate project estimate expect intend believe and other similar expressions are intended to identify those forward looking statements.
Forward looking statements also include statements regarding our product development focus objectives strategies strategic evolution market share and demand for our products as well as inventory conditions related to our products growth opportunities and trends and conditions in our industry and Jeff.
Our for forward looking statements represent our current judgment about the future and are subject to various risks and uncertainties that could cause our actual results.
The levels of activity performance or achievements to be materially different from those expressed or implied by our statements today.
These risks and uncertainties are described in detail and our securities filings, including our periodic reports on forms 8-K, 10-K and 10-Q.
Which you can find on our website and Smith, <unk> Wesson dotcom and <unk>.
Along with a replay of today's call.
Our actual results levels of activity performance and achievements could differ materially from those expressed or implied by our statements today and we expressly disclaim any obligation to update any forward looking statements.
I have a few important items to note about our comments on the call today first.
We referenced certain non-GAAP financial results on this call.
Our non-GAAP financial results exclude acquisition related amortization.
Onetime transition costs and co.
And 19 expenses and the tax effect related to each of these exclusions.
Reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call can be found in our securities filings and also in today's earnings press release.
Our securities filings and today's earnings press release can be found on our website.
Also when we reference EPS, we're always referencing fully diluted EPS.
Finally, when we discuss Nyx results, we are referring to adjusted mix a metric published by the National shooting Sports Foundation based on the FBI next data.
Adjusted Nick's removes those background checks conducted for purposes other than the purchase of a firearm.
Please remember that adjusted mix background checks are generally considered to be the best available proxy for consumer firearm demand at the retail counter.
But since we transfer firearms only to law enforcement agencies, and federally licensed distributors and retailers and nuts and consumers.
And generally does not directly correlate to our shipments for market share and any given time period.
We believe mostly due to inventory levels and the channel.
Before I hand, the call over to our speakers today I want to remind everyone and we completed the spin off of our outdoor products and accessories business on August 24th 2020.
As such we are now reporting all historical financial information for that business as discontinued operations.
Unless otherwise indicated any reference to income statement items during this call.
First to results from continuing operations.
Joining us on today's call are Mark Smith, President and Chief Executive Officer, and genomic fierce and Chief Financial Officer.
With that I will turn the call over to Mark.
Thank you, Rob and thanks, everyone for joining us.
As we bring our fiscal year to a close first and foremost I'd like to take a moment to reflect on the unbelievable accomplishments of the Smith and Wesson employees in these last 12 months.
As with the rest of the nation, each and every member of our team has faced adversity and their personal and professional lives. This year that we could not have ever imagined just 18 short months ago.
And yet as they have always done the Smith and Wesson team rose to the challenge without hesitation immediately.
Immediately jumping into action to redesign workstations developed rigorous disinfect and programs expand PPE requirements.
Secure cleaning and disinfecting supplies repurpose manufacturing assets to make PPE for frontline workers and our communities.
Set up home offices alter work procedures to minimize exposure risk implement temperature scanners and the list just goes on and on.
But the most impressive and humbling thing to see with how our unbelievable family of employees came together to support each other throughout the most challenging times, we've seen and our lifetime and made sure the company They love never missed a beat.
Whereas our order entry team working tirelessly to manage the influx of new orders.
Our operations team ramping production by over 60% and a few short months.
A P and a our teams keeping up with the immense volume of transactions that came along with this our human resources team thinking outside the box to recruit almost 300, new employees in the midst of a pandemic our sales team continuing to safely visit customers and make sure that their needs were met our customer service team handling heavy call volume to ensure our reputation.
And for World Class service never faltered, and every other employee and function and the organization. The impressive results that Smith <unk> Wesson delivered this year and the long term success of the business simply would not be possible without them.
Okay.
Because of this firmly held belief our company has maintained a long standing profit sharing program.
And earlier today, we announced to our employees that this year, we will be distributing over $14 million to eligible employees, which will be 15% of each employee's annual wages.
In addition, the company achieved a very significant milestone and fiscal 2021, surpassing $1 billion and sales for the first time and our 169 year history.
As I said this would not have been possible without all of our employees.
And so and recognition of this milestone we will also be awarding every employee who is not eligible for our management bonus program a special bonus of $200 per full time employee and $600 for temporary workers prorated for the months of service during the fiscal year and to be paid next Thursday June 24th.
Congratulations to each of you and thank you to our entire Smith <unk> Wesson family.
Yes.
Turning now to the business results.
Our fourth quarter revenue of nearly $323 million was the highest quarter ever on record and marks the fourth consecutive record breaking quarter for the company.
Capping off a year and which the company achieved just under $1.1 billion and revenue as I mentioned, just now surpassing the $1 billion Mark for the first time and our history.
As far as profitability. Our goal is always to keep costs low and leverage overhead during periods of heightened demand and the team did an outstanding job. This year, even though we doubled our top line revenue year on year, they held fixed costs largely flat and therefore drove net income of over 89.
For the fourth quarter and nearly $244 million for the year again, both new high watermarks for the company.
All of this led to nearly $318 million and cash from operations for the year and in keeping with our stated capital allocation strategies at the spinoff.
We used this cash to completely pay off our $160 million debt.
Return over $8 million to shareholders through dividends.
And reduce our outstanding shares by over 14% just in the short 10 months since the spinoff.
And demonstrating our continued commitment to returning value to shareholders. Our board. This week approved a 60% increase and our fixed dividend and also authorized an additional $50 million share repurchase program.
Yeah.
Undoubtedly our fourth quarter and the year have been remarkable but the most exciting aspect has been how these achievements and position Smith <unk> Wesson for long term success.
Our manufacturing and logistics teams produced and shipped nearly 2.5 million units last fiscal year, representing a 70% increase year on year, while during the same timeframe. The U S firearms market as measured by next grew by 42%.
So even though it was a record year of growth for the industry, we were still able to realize astounding market share gains.
We did this by leveraging our flexible manufacturing model, which as we've discussed on previous calls and enables us to react much more quickly to changes and market demand ensuring that our product is more readily available at retail even during periods. When the overall industry is capacity constrained.
Our sales and marketing team has also been hard at work ensuring that the millions of new firearms owners, who have entered the market over the past 15 months are welcomed and encouraging them to learn how to responsibly enjoyed the shooting sports.
We're also continuing to connect with the tens of millions of longtime loyal Smith, <unk> Wesson consumers, who trust and our products every day.
Just in the past year, we have conducted a thorough and new study to understand the new firearm owner population and how we can best connect with them.
We have recorded over 45 instructional videos for our gun Smarts program, along with our professional shooting team.
On topics ranging from the basics of responsible firearm ownership.
To find a local firearms social community or increase your skills and become a proficient target shooter.
And these videos have been viewed over 2 million times.
We have completely redesigned and re launched our website to improve ease of use and brand messaging, which has been very well received by the 16 million people who have visited our site for the first time this year.
We held the first ever virtual show and the firearms industry, highlighting our brands and launching our extremely popular new personal for shield, plus which has sold over 148000 units.
And the first 3 months since we launched it.
We produced the first ever brand anthem for the company a P.
Powerful video highlighting the values and beliefs that Smith, <unk> Wesson shares with firearms owners across the nation.
We completed a full strategic product line review priming. The next generation of Smith, and Wesson products with 12 unique brand new products scheduled for launch and this upcoming year and next month, we will be debuting a state of the art touch screen interactive display at over 50 major retail locations around the country designed to highlight Smith and <unk>.
And products features brand messaging and connect with firearms consumers directly at the retail level as they make their purchase decisions.
As you can see our renewed focus on being a pure play firearms company has allowed us to move the needle very quickly across every function of the business and a very short amount of time and we are just getting started.
When we combine our results for the past year and <unk>.
Well publicized influx of first time firearms owners.
Our laser focus on driving market share growth within the firearms space, our iconic brand and our millions of loyal followers, even before the pandemic, we are extremely well positioned to parlay. The success of the past year into lasting long term results.
With that I'll turn the call over to Diana to cover our financial results before we take questions.
Thanks Mark.
As Mark noted for the fourth consecutive quarter, we are reporting record revenues due to a combination of increases in capacity that were implemented in response to ongoing heightened demand.
And increase in average selling prices due to the lack of promotions being offered combined with a 3% price increase that was implemented in November.
And an increase and operating days during the quarter.
Revenue for the quarter reached $322.9 million.
$129.9 million or 67, 3% increase over the prior year comparable quarter.
And fourth quarter is typically our strongest quarter of the year with 65 operating days.
Finally, the introduction of our very popular share plus which began shipping during the middle of the quarter contributed to the strong fourth quarter performance.
Turning to a review of full year sales as Mark noted for the first time in company history, we achieved over $1 billion and sales.
And 1 billion $59000 actually doubling our fiscal 2020 sales of $529 million.
As Mark also noted this achievement is a result of the hard work and dedication of all of the Smith and Wesson employees, who worked throughout the pandemic, increasing volume by over 60% and the middle of the year and navigating numerous challenges and the supply chain due to the pandemic weather and other issues.
Gross margin and the fourth quarter, a 45, 1% was nearly 1300 basis points above the 32, 2% realized and the prior year comparable quarter.
This increase and margin was due to increased unit shipments combined with the elimination of substantially all promotional activity and 3% price increase and a mix shift toward higher margin products.
Margins were slightly negatively impacted by increased volume related spending and some inflation impacts increased depreciation.
Appreciation on machinery purchases.
And compensation related costs associated with increased head count and profitability.
We have fully accrued for the special bonus that we are paying to our team members and most of which work and operations.
For the full year gross margin of 42, 4% with over 1100 basis points higher than the 31, 3% recognized in fiscal 2020.
A full year of record production levels led to very favorable absorption, which when combined with increased average selling prices and strong cost control drove margins to a record high.
Operating expenses of $29.7 million for our fourth quarter were $1.5 million lower than the prior year comparable quarter and.
<unk> of the increased shipping costs and customer allowances associated with increased volume.
And $2.9 million of increased profit sharing expense increased legal fees and an increase and costs associated with market research and new product launches and the launch of a new marketing initiatives.
The net decrease in operating expenses was driven by reduced salaries for $3 million and reduced spend related costs.
Lower stock compensation, and lower trade shows and travel costs due to the pandemic.
And lower consulting.
For the full year operating expenses of $129.4 million or approximately $14 million higher than fiscal 2020, driven primarily by a $12.6 million increase and profit sharing that will be distributed to our hardworking Smith and Wesson and place later this year.
In addition increased volume related costs, combined with $3.2 million of spin related costs more than offset cost savings initiatives lower pandemic related costs and lower free goods and samples that are generally used as needed to spur sales.
We are thrilled that our team demonstrated the ability to leverage operating costs, while doubling revenue, resulting in operating expenses being 12, 2% of revenue for the full year as compared to 21, 8% for the prior year.
The increase in revenue and gross margin combined with strong expense containment led to record quarterly profitability.
<unk> net income of $89.2 million GAAP earnings per share of $1.70.
Non-GAAP earnings per share of $1.71.
And adjusted EBITDA of $125.6 million or almost 39% of revenue.
For the full year, our profitability exceeded expectations.
<unk> net income of $243.6 million.
GAAP earnings per share of $4.47.
Non-GAAP earnings per share of $4.50 for fans and.
<unk> EBITDA of 366, 6 million or 34, 6% of revenue.
During the fourth quarter, we generated $118.8 million and cash from operations and spent $3.7 million on capital equipment.
<unk> and $115.1 million and free cash.
We also spent $60 million to repurchase approximately $3.4 million shares of our common stock and paid $2.6 million and dividends for us.
Belting and accompany ending the quarter with $113 million of cash and.
No bank debt.
Looking at our full year, we generated $317.3 million and cash from operations and spent $22.3 million on capital equipment, which resulted in a record $295 million and free cash.
Executing the capital allocation priorities that we have described over the past year. We use this free cash to entirely pay off our $160 million revolving line of credit.
Repurchase $6.1 million shares of our common stock for $110 million.
And paid $8.2 million.
And dividends to our shareholders.
In addition, after the close of the year, we repurchased the remaining $40 million authorized and a share repurchase program.
Going back and other nearly 2 million shares for any.
And the total outstanding share count down by over 14% and just for 10 months since we became a pure play firearm company.
Consistent with our capital allocation strategy I am pleased to announce that our board has authorized a 60% increase and our quarterly dividend to 8 cents per share. This quarter's dividend will be paid to shareholders of record on July 1 with payment to be made on July 6.
The board has also authorized a new share repurchase program for up to $50 million of the company's common stock.
Looking forward into our first quarter fiscal 2022.
I'd like to remind you that and periods of high demand our ability to recognize revenue as primarily a function of our production capacity.
That production capacity is somewhat governed by the number of days that we have available day, the weekends holidays and other non operating days such as shutdowns.
Our fourth quarter had 65 operating day, whereas our first quarter 2022, we'll have only 58 operating days due to the first week of our 2 week shutdown occurring in July.
Our distributor inventory as of today still remains very low at 1 week of supply.
On June 14th we implemented a 3% price increase on our products.
In addition, as we always do we monitor our supply chain for indications of stress related to a significant increase in demand or issues related to the pandemic.
During the start of our first quarter, we did have 1 of our key suppliers shutdown for over a week due to COVID-19 issues.
We believe we have recovered from this situation, but it did impact our capacity for about a week.
As always and supply chain risks are subject to change and our team continues to develop contingencies to offset and avoid any additional interruptions.
We are not currently planning to add any capacity that will have an impact on our first quarter results.
And finally, our effective tax rate is approximately 24%.
With that operator can we please open the call to questions from our analysts.
If you'd like to ask a question at this time. Please press. The Star then the number 1 key on your Touchtone telephone to withdraw.
Your question press the pound key.
And again that is star then 1 if you'd like to ask a question at this time.
Our first question comes from Mark Smith with Lake Street capital.
Hi, guys.
And from our quarter, just just wanted to hit a little bit if you can give us any additional detail on.
New products, specifically shield, plus and you gave some great detail there, but kind of if new products are skewing heavier and your sales mix now than maybe they historically have.
And then any insight into kind of your outlook on new products and how that can help going forward.
Sure.
Yeah. So.
I think as we talked about maybe on the last call.
Our approach to new products right now and this environment, we're capacity constrained as to be a little bit more.
Strategic or judicious, if you will on launching them into the into the market just given the fact that we're capacity constrained so really want to make sure that the products that we're launching are the goal right now is to obviously just keep our our loyal consumers excited about our brand keep us fresh et cetera, and make sure that we're close.
And any of those big white spaces that we that we see out there and this youll plus was a great example of that and obviously been very very successful and very well received by the market as we go forward into the next fiscal year, we're going to continue that approach but.
And I will say that the new product pipeline is extremely healthy.
The NPD team and has done a tremendous job we've got a lot of new products teed up and kind of waiting and the wings and we've got plans as I mentioned on the prepared remarks for 12 of those to be launched into the marketplace over the next year. So it will be a bit of a heavier and heavier year. This year than it was last.
Okay, Great and then as we look at average selling price it moved higher and it was.
Continue to move a little higher and you took the 3% you it looks like especially and in long guns have you maybe had more success and price increases and long guns, rather than handguns or anything you can talk about on asps as far as any pushback that you're getting or just that used to take pricing.
Sure.
First of all and pushed back no no pushback whatsoever on pricing I think our customers understand that hey, we're capacity constrained and B theres been some some inflation impacts and I think we're very well publicized out there and just in general So no pushback on price increases and far as far as the S. P, though and the increase scenario and I think the.
The driver there mark is going to be promotional as lack of promotional activity. Overall is that we just don't need to participate and you know and we see that going forward here and we don't we don't foresee any need and the near future to be participating.
And promotional activity on the long gun side, what youre seeing there as.
Is a little bit.
That.
As we announced at the beginning of May we deemphasize the TC brand as we and we're gonna be coming back into hunting under the Smith, <unk> Wesson brand and Youll see that coming up here and the next.
Our beginning into that and the next few months, but a lot of that ASP and <unk>.
And so it is going to be that.
Okay, Great and the last 1 for me is really just looking at the cost side, Dean I talked a little bit about some some inflation, where you're seeing that where are you seeing any pressure on the cost side.
Yes.
Yes.
We've managed to hold off a lot of the cost increase but we are seeing some.
Obviously, that's just.
Across the entire manufacturing supply chain and the U S and general not just in firearms and I think it's pretty well publicized we're seeing inflation with.
And we passed on a lot of that.
And you saw the price increase that we just went into effect earlier. This week. So we've been able to pass on and so far we've either been able to mitigate it or for passive and pass it through so.
Okay excellent and this is helpful. Thank you guys. Thanks.
Thanks, Mark Smith.
Our next question comes from Cai von <unk> with Cowen and company.
Yes, thanks, so much and.
Pretty extraordinary quarter.
Thanks could you comment mark a little bit on.
Availability of Labor I think at 1 point, you mentioned that you know kind of with the.
With the payouts from the government that basically it was tough to get workers.
How is your ability to get workers.
It's still a challenge.
What I will say and I'll give kudos to our HR team.
They've been able to kind of think outside the box and do some some creative and come up with some creative ideas to get some some labor and so it hasnt impacted our ability obviously as you can see from the results materially to ramp production, but we're having to work twice or 3 times as hard to get those to get to labor and so it's just you know it's <unk>.
Definitely still continuing to have an impact on labor availability, however, due to the hard work and the team.
And we've been able to stave it off.
Got it and so I think everybody recognizes and you're in a cyclical industry, but.
You know not many companies that I follow have net cash positions as you look forward from what you see assuming you know we're going to see some deceleration.
How do you think about what kind of balance sheet or are you going to be net when you want to stay net cash positive or would you take on debt because interest rates are so low and.
Give us some color how you think about all of that if he could.
And that's great question, and we will talk and much more detail tomorrow on.
On the analyst day presentation about this guy but.
But the short answer to your question is we do continue to remain zero debt and net cash positive.
And we will talk some more tomorrow and this as well but.
And I think you can expect that.
As you mentioned, we're in a cyclical and and.
Industry, and you saw over $300 million and cash generated from operations. This year.
We don't expect that we'll ever dropped below $75 million range. So.
And we intend to always remain net cash positive.
Yeah, it's our as I stated strategy Cai that too to keep the zero debt and use cash to them.
<unk>.
Reinvest and the business to pay the dividend buy back stock as we can as you know and you'll probably remember and we're limited on how much stock we can buyback for the rest of the year.
And until we get to the anniversary the second anniversary of the spin.
But our intention is to build a little bit of a war chest and be prepared for the next time, we can do stock buybacks and and return cash back to our investors.
Refresh my memory, what what is the limit you just passed a new authorization of $50 million. So how much of that can you buy.
So we think based on the stock price that we can do we could do the rest of that through August of next year, but probably not a lot more than that there is a safe harbor limit when you do a spin.
But generally speaking you don't want to purchase more than 20% of your outstanding shares.
And so were at 14%.
And the first 10 months.
So.
That's the and that's what's behind the 50, and which is okay, because where we are on cash and you know our ability to to keep generating we raised the dividend and we have lots of lots of ideas and we're reinvesting and marketing and doing some other things there so.
And where.
Pretty comfortable with where we are.
Excellent and then you mentioned you know the day 65, and the fourth 58 and the first just so we can kind of for modeling purposes can you walk us through how many days you had and the first each of the first 3 quarters and.
Kind of how those days look like this year.
Yes, I sure can.
And I have that right here.
And.
<unk>.
Okay.
So last year fiscal 'twenty was.
50, 950.950 665.
Mhm fiscal 'twenty 2.
Will be 58 <unk>.
And 50.950.
<unk> 56.
65 pretty close.
Okay with fiscal 'twenty fiscal 'twenty that was 65 I thought.
You were you said 68, and the fourth quarter of 'twenty 1.
No 65, 50, 950.950, okay. So it's essentially so essentially essentially relative very close and there's 1 less operating day and 22, then there from 'twenty 1 just based on the way that our weekends and holidays fall.
Got it and.
So you know.
I don't know if you can give us.
And obviously, you have not and giving guidance, but can you give us any color about how you think about the opportunities for the year in terms from results.
Qualitatively what Steven.
Yeah.
Obviously, we can't give any quantitative notes.
Color as you as you noted, we're not giving guidance, but I think what we can tell you is that the firearms market still continues to be very active I think it's widely known and the ammunition shortages continue and it was still.
A lot of interest and firearms.
The second highest nix checks adjusted and extracts ever on record. So while it was a deceleration versus last year last year was a pretty tough comp and still remains if you look and kind of a stack chart. It's just.
And a different.
And at <unk>.
<unk> stratosphere from where it was in 2019 so.
We expect that the market will continue to remain elevated.
Obviously, we're going to be comping to a pretty tough year, though as we go forward. So we're pretty optimistic I think we've done a great job of taking market share.
And not just sitting back on our laurels and.
And.
And joined the fact that the operations team is cranking out product. We've also done a whole lot of work on the marketing side to be ready for for any eventuality and in terms of that so.
Pretty as I mentioned in my prepared comments, we're pretty pretty excited about the long term.
Terrific. Thanks, so much.
Thanks Scott.
Our next question comes from Scott <unk> with C. L King.
Good afternoon, guys congrats.
Very strong results and thanks.
And for taking my questions.
Of course.
You were just talking about the market and obviously you made despite the fact that it decelerated and were still working for the best months on record, but in general what are you hearing from you guys about the attitudes and with regards to usage.
Any.
For additional steps beyond what you gave last quarter about people and hitting the range is and just out there and actually using there.
Guidance versus prior.
And where it was more stockpiling.
Yes, I think.
And as we've talked about and I think it's been very well publicized the influx of new firearms owners over the last year 8.002 million 20, and probably another 2 or 3 on top of that since the end of 2020, so and you're probably talking north of 10 million, new firearms owners coming into the marketplace.
A lot of those R. R.
New entrants into the market excited about it and excited about using their product learning, becoming proficient and as you know and we've talked about quite a few times.
<unk> a lot on that to try and reach out to those folks how do we talk to them where do they you know.
And what are the best channels, what messaging should we be sending the gun smarts videos, but beyond that social media etcetera, reaching out on non endemic advertising and how do we how do we <unk>.
<unk> with those new consumers I think a lot of those new consumers are going to and again as we've talked about.
Spanning the demographics of the traditional firearms owner and.
And making it lessens.
Less of a partisan if you will got ownership less of a part of an issue and more just from an American issue, our American right and passion. So I think thats good for us for as Smith, and Wesson and good for us and industry in terms of the here and now right now I think we are.
We're seeing a little bit of a summer seasonality like we normally always do this time of year, but.
And the anecdotal feedback we're getting from our retailers is good summer seasonality, but it's not it's not back to 2019 by any way shape or form so it's.
And just maybe maybe down off of <unk>.
Remember December we usually have our peaks but.
It's at a different level than it was 2 years ago.
Yeah.
Got it and.
Most of them made with a lot of people.
And with the economy opening back up and people going back to some of their previous outdoor or just activities. In general you are not hearing anything to suggest.
And that some of these newer owners that have guns or just walking away.
Just trying to get a sense.
And now here and there we're not hearing anything to that effect.
Alright, and then lastly, just following up and the last question before that.
And you talked about.
Ammunition shortages and the impact that's having on a new gun sales can you just maybe expand upon that and is that getting any worse any better or is it just.
And probably be the same headwind for for this year coming up.
We are hearing a little bit of pockets of.
And folks being able to get a little bit ammunition on the shelf, but I will say the general and the general answer is no it's not getting any better and it's not getting any worse, either I think thats just kind of remains it remains to be an issue and I mean I think the.
And the Ying and Yang of that for Us frankly that yes.
Can have a dampening effect and the fire arm sales, but it also shows a pretty strong continued interest and shooting sports in general So I think thats.
That's it.
And bit of a headwind for us and the fire arm sales, but it was also a bellwether for the industry and John.
Got it alright.
Alright, Thats all I have talked to you Mark Thanks, Alright, thanks, guys.
As a reminder, if you'd like to ask a question at this time. Please press the Star then the number 1 key.
Our next question comes from James Hardiman with Wedbush Securities.
Hey, good afternoon.
Wanted to circle back to.
For the manufacturing capacity.
We talked about the difference in operating days for Q versus to reach you.
By my math.
And I guess for about a 6% sequential benefit if you want to call it that for Q versus <unk>, but you actually grew shipments more like 24%.
And handgun shipments were up 30% so.
And I understand that that production and capacity and shipments.
The same thing, but maybe fill us in on how you were able to accomplish that especially given.
And what you noted was a key supplier shutting down which we're doing.
What's a little bit of time.
Yeah. So we lost a little time that that level of payments for Q1 and that did not impact Q4, yes, okay. So that that comment reference kind of the first quarter look forward.
But.
And there's a definite mix issue.
From a positive benefit of mix and what it takes to make certain products versus other products, you can mix and product faster.
The other thing is that.
You might notice a little bit of inventory change.
And we're gearing up for a share plus launch at the end of January we had already made the product in January and.
And had put it into inventories so that we could stock our distributors and dealers ahead of time. So you would see more sales in that beginning part of March.
Mark noted that we sold.
And awful lot of those share losses during the quarter and so those what we would have been starting to stock those up and Q1, so I'll start and Q3 so.
Q4 ended up taking advantage of that.
That is really helpful and so as I think about.
Modeling this going forward.
And then think about sort of the fourth quarter shipment numbers.
Is that right.
And what sort of Max capacity and it seems like what Youre, saying is that maybe more than what your actual production and capacity use.
Assuming that youre going to be making as much as you can at least for the next.
Couple of quarters, which is what it sounds like you're saying.
Should we assume that there has been.
Closer to the third quarter level.
Adjusted for for the difference and production day right, Yes, I think that's because that's a great way to look at it and then Sarah layer and the fact that Q3 had you know a lot more holidays, there was a little bit lighter and I think that's 56 days.
And then consider that we did have a.
A bit of.
My chain disruption and May that we've we've recovered from that that you know you're not operating on 100 berth that as.
As you might always do so and I think about looking at Q3, we didn't add capacity and Q4, we just were able to.
With the.
And around some mix and then take advantage of the share plus lunch.
Got it that is extremely helpful. And then just lastly.
The most difficult 1 to actually.
No, but how long do you think it takes before.
Youre able to get back to.
Obviously, you have to make some assumptions about retail here, but given where inventories are.
How long do you think it takes to replenish.
And market environment.
<unk> from here.
Yes, obviously, there's a lot of factors that go into that James but.
The.
Obviously, the biggest 1 being the demand levels right, So where do they go from here and do they stay elevated and which we believe they will versus 2019, but and what will the seasonality look like et cetera, but I think the 1 thing on inventories to just note is that you know.
While we are hearing some anecdotal feedback from from some of the retailers that they are definitely able to get some pockets of inventory back on the shelf again and certain categories. There are other categories and that remains sold out.
For example for Us revolvers.
And pretty short supply out there and just in general.
And our distributor inventories remain at 1 week and that.
And that number that Dino gave there is actually as of today and that is at the end of our quarter. So there's still a significant restocking and that's gonna have to take place.
You know what.
When that happens I guess, there's going to be a factor of the demand.
Got it Mark Dean and thank you.
And cancers.
Our next question comes from Rommel Dionisio with Aegis capital.
Good afternoon. Thanks.
First question on the professional channel units shipped obviously, a smaller portion of your business and sporting goods, but those big jump on the handgun side and I Wonder if you could just talk about that a little it just doesn't seem and was.
52% increase year over year, and that doesn't seem to be and sector of the industry.
Is all that cyclical and I'm wondering sort of big contract or new products or what kind of drove that.
And can increase so I'll have to drive you back Rommel.
It's a great question and because it is a smaller part of our business, we didn't actually focus on and our prepared remarks that last year and the fourth quarter.
We were moving from state to Commerce.
So a lot of the ability to ship internationally.
And we're really held up by the government and the other thing is is that the European governments.
Really hard earlier then.
And then United States with COVID-19, and they actually shut down a lot of the shipments in and out for freight carriers couldnt get product in and out so that that was more of.
And the state to Commerce tariff between January and February and then in March and April the <unk>.
Impact of Covid on all of the European and and.
Other other countries that would normally receive shipments for the professional sales.
Okay.
And that have impacted the fiscal 'twenty, 1 as well or was that pretty much wrapped up by.
April of a year ago.
Yeah, it's been it's been wrapped up your Europe has been accepting shipments and commerce has been running for over a year now and so if you looked at February March April of this year compared to February March April of fiscal 'twenty.
And sort of night and day as to the way that you know.
Europe has been receiving product and the way that commerce and it's been running there is not any holdups and and licensing when you want to ship internationally anymore.
Okay, great. Thanks very much.
Thanks Rommel.
And as a reminder, if you'd like to ask a question at this time that is star then 1.
Yeah.
Im showing no further questions in queue at this time I'd like to turn the call back to Mark Smith for closing remarks.
Thanks, operator, and I just want to say thanks, everybody for joining us today once again, congratulations to my fellow Smith and Wesson team members for a record breaking year.
And just as a reminder, please note that as we mentioned earlier, we will be conducting and analyst day presentation Tomorrow at 9 a M. Eastern standard time Deane.
Dana and I will be presenting our long term strategy for Smith <unk> Wesson, we taking a few calls from our questions from our analysts presentation will be open to the public.
And available to call and using the information provided in our press release, and we will share the presentation materials on the Investor Relations page of our website.
With that please stay safe and look forward to speaking with you all next quarter.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
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