Q4 2021 Ammo Inc Earnings Call
[music].
Good afternoon, and welcome to ammo Inc's 2021 fiscal year and earnings call.
Please note this event is being recorded.
I'd now like to turn it over to John Flynn animals, Vice President. Please go ahead John Thank.
Thank you operator, good afternoon, everyone and thank you for joining us today.
Before we begin please let me remind you that this discussion along with the question and answer session that follows will include statements regarding estimates or expectations of future performance.
Please note that these are forward looking statements and that actual results could differ materially from those projected.
Some of the factors that could cause actual results to differ from our projections and described without limitations and the risk factors section of our most recent form 10-K for third quarter 2021 form 10-Q, and in our fiscal fourth quarter and full fiscal year earnings press release.
A copy of today's transcript will be available on our website and the Investor Relations section of our earnings press release and the other financial data and information are also available under Investor Relations.
With me this morning of Fred Wagon, Hals, Atmos, Chairman and CEO and Rob wildly CFO for.
And we'll begin with some initial remarks and thereafter, we'll be happy to take your questions I will now turn it over to Fred.
Thanks, John and Hello to everyone. It is great to be able to talk for a few minutes about where our company stands today and what we see moving forward and the next fiscal year.
Last year was an exciting and challenging.
And Im pleased to note that our team rose to the occasion.
Making certain we met our lofty.
Spectation.
Actually beating those expectations.
And when I spoke to you.
The entire world was and the grips of the Covid pandemic.
We were also dealing with the even more volatile election season, and troubling daily news, resulting from the continuing civil unrest.
The campaign is over we now have the new president with the mid term election process is already starting to move a bit.
And civil unrest continues to rear its ugly head.
We have all learned to go above of our daily personal and business lives and this post COVID-19 environment, making certain we get the job done.
And that is exactly what the ammo team his thought and this past year.
Let me take a few minutes talk about what our incredible team of professionals have accomplished this past fiscal year.
During our last earnings call I talked about the incredible growth, we've seen well that growth pattern Hasnt change in fact it continues today.
We have achieved over year revenue growth of 300%.
Our team achieved annual revenue of $62.5 million up from $14.8 million for the prior year.
We completed and additional capital raise early this calendar year debt was incredibly well received by the markets raising of $150 million.
While our manufacturing team worked around the clock to increase production and shipping.
The abilities to address the purchase orders stacked out into next year, our management team.
Identified another key acquisition opportunity that we believe would further enhance our vertical integration strategy.
Gunn brokered dotcom.
Non broker dotcom as the worlds, leading online marketplace for the legal sales of firearm and ammunition and accessories.
We entered into a LOI and net our team worked hard to swiftly closed the $240 million transaction, bringing gun broker dotcom into the ammo family of companies.
We are integrating all of these operations at this time like.
By bringing a gun broker dotcom into our corporate family, we will be able to enjoy approximately 70 million and and.
Annual revenue.
EBITDA margin in excess of 75 per cent.
While operating the largest online auction site for the legal sale of firearms and ammunition and accessories.
And we now have the ability to leverage our amazing technology of gun broker dotcom to bring and the assortment of additional product offerings to the market.
With this transaction close we are transforming the company from a pure manufacturer <unk>.
<unk> World class marketplace.
This will allow us to increase our consumer exposure and enhance our customer experience.
And we are.
We reasonably believe this transaction will allow our shareholders to enjoy increased value.
Our team has worked hard to answer the call of the.
The United States military.
As the result, we recently awarded a development contract by the U S Department of defense to create holistic match emulation to place in the hands of.
Of the world's greatest Warfighters.
We closed on the purchase of the giant piece of land and Westcott and around the corner from our current manufacturing plant.
And we have now broken ground.
On the construction of a new World class state of the art plant that will.
Operational this time next year.
That 160000 square foot facility will allow us the.
Continue to accelerate our production capabilities.
Our new plant will place all of our operational assets under 1 roof income.
Increasing revenue.
Margins and helping us to continue build value for our growing shareholder base.
We were included within the Russell 2000 index.
And the strength of our financial performance.
Ammo being included in the Russell 2000 is the incredible statements and the market's confidence and.
And the company, we have built and continue to grow each and every day.
As you have heard me say before we formed this company too.
Disrupt the stagnant ammunition industry.
Our focus has always been and remains on execution.
We set goals look for accretive business opportunities and work tirelessly to develop new products, both the commercial and the military market needs aspire.
Especially those service so.
Servicing the U S military and the service of our Allied Nations.
We see the international market starting to slowly open up and we remain hopeful that will continue and.
Coming weeks and months.
For teamwork.
Hey at night on other products for the military applications and some requested by.
Them and.
Some we just are doing on our own.
So the needs of our new plant will only enhance those R&D efforts into the coming years.
We have always been on the leading edge, bringing technology to the ammunition industry through innovations and hard work.
And acquisitions.
And to be clear.
We're not finished.
Through continued execution and the expansion.
We will forge ahead with our team working hard to create.
Create increased value for all of our shareholders.
Speaking to you today my goal is to make sure our.
Shareholders and the market.
Are informed and aware of all of our corporate developments and the amazing progress we've seen the date.
With gun broker dotcom transaction close.
We have been involved from and ammunition manufacturing to a world class marketplace to be enjoyed by the firearms shooting hunting and consumers.
For years to come.
I would again like to extend my personal appreciation to all of our great employees.
Customers and shareholders for continuing to support our company during these exciting times.
Oh, the didn't stop is political unrest didn't distrail us.
And failing second amendment of the tax by certain politicians and special interest groups will only continue devoted to motivate me.
And to do my job better.
The leader of this company.
Now I would like to turn the call over to Rob Wiley.
Our CFO Rob will provide.
Additional color.
And detail of our company's financial performance through the past year.
Thank you.
Thank you Fred.
Matt referenced in his comments the company continues to grow and and exceptional pace for.
First I'd like to review our balance sheet.
We've increased our total assets to $179 million since our fiscal 2020 year and.
This is mainly due to an increase and cash on hand, resulting from the completion of our capital raise in March our accounts receivable and inventories have more than doubled for the fiscal year.
Accounts receivable increased $6 million and inventories increased by 11, and a half million dollars as our sales volume continues to increase.
We continue to add production equipment to be able to service our customers with quicker delivery times the <unk>.
Company restructured debt since our prior year and to free up cash flow and facilitate growth.
Our fiscal fourth quarter delivered the best quarterly performance in company history, which had been better quarters expected throughout fiscal 2022.
Now I'd like to move on and talk about sales.
And our sales for the quarter were $24.2 million and 409% increase in comparison to the 2020 fiscal quarter.
Sales for the year increased 300 per cent to $62.5 million.
We also experienced sales growth of 46% quarter over quarter, a $7.6 million increase from the previous fiscal quarter.
This is a testament to the hard work of our diligent employees the support of our shareholders suppliers and customers coupled with the strength of our expanding distribution channels.
We've recently given guidance on our fiscal 2020 revenue of $190 million with the addition of gun broken dot com world's leading marketplace for the outdoor sporting enthusiasts.
Next I'd like to talk about our gross margins.
Along with our sales our margins have also increased to approximately 23% for $7.1 million for our fourth fiscal quarter of year over year increase of 179%.
And depreciation and amortization of added back to the cost of goods sold our gross profit margin increased to 27% for the quarter.
Our margins continued to rapidly and inquiry.
The increase as we enjoy additions to our margin achieved from developing scale and our operations.
We expect to see significant growth of our margins for the fiscal 2020 year with the addition of gun broker Dot com.
I would now like to discuss our operating expenses are.
Our operating expenses as a percentage of sales was 25 per cent for the fourth quarter. This is the 58% decrease from the prior year quarter.
For the year for operating expenses as a percentage of sales was 27% a 61% and decreased from the prior year quarter.
Net loss for the quarter was approximately 463000. However, this included approximately $3.4 million of noncash expenses.
Net loss for the year was approximately $7.8 million.
And this included noncash expenses of approximately $10.1 million.
Next I would like to discuss the metric that the company values adjusted EBITDA.
Adjusted EBITDA is the EBITDA calculation with other noncash or unusual expenses added back and.
Adjusted EBITDA has grown to $4.8 million for the quarter of 296% increase from the prior year for.
For the year, our adjusted EBITDA was $8.1 million of 213% increase from the prior year.
As the reference from discussing margin improvement the continuing adjusted EBITDA improvement shows the impact of the scaling we are continuing to see and our operational costs.
It also bears, noting we expect our first half fiscal 2022 EBITDA to be better than the second half of fiscal 2021 at the stand alone.
Through a combination of improved adjusted EBITDA. The addition of gun broker dotcom and disciplined capital expenditures and debt reduction, we expect the EBITDA to be and access of $65 million within the next 12 months.
I will now move on to adjusted earnings per share.
Our adjusted earnings per share increased to <unk> for our fiscal fourth quarter and 167% increase from the prior year fourth quarter for.
For the year adjusted earnings per share increased to 7.
And 150% increase from the prior year.
Adjusted earnings per share is a metric that the company values and we believe it is a better representation of the Companys true operating performance.
As we expand our view and look beyond fiscal 2021.
We have the team knowledge operating model and assets necessary to generate at least $190 million and annual revenue.
It should translate into excess of $65 million and adjusted EBITDA.
Additionally, we have adjusted our for annual capital spend requirements to around $3 million, reflecting a better match of plant assets to our model.
Men fundamentals and the U S domestic ammunition markets are exceedingly strong and we are seeing no indication of slowing.
We believe that this will take us to higher sales level of this gross profit margins and EBITDA.
We see significant transactional volume through our gun broker dot com marketplace to further support demand fundamentals for the market.
The guidance for our fiscal fourth quarter is $41 million and will include 2 months of operations from our newly acquired gun broker dotcom assets.
As previously announced we expect to achieve profitability and this quarter.
We look forward to speaking with you and the future of about our fast expanding business. So that concludes my opening comments, we're now ready to take questions. So I will pass it back to our moderator.
And.
Thank you.
And ladies and gentlemen at this time, we will conduct a question and answer session.
Answering questions today, we have Fred Wagon Hall, Chairman and CEO, Rob widely CFO and Rob Goodman and.
President and director.
If you would like to ask the question at this time. Please press star 1 on your telephone keypad, a confirmation tone will indicate that your line is and the question queue.
You May press the Star key followed by the number 2 if you would like to remove your question from the queue.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. Once again to ask the question Press Star 1 we'll pause for a moment, while we poll for questions. Thank you.
Our first question comes from Matt Koranda with Roth Capital Partners. Please state your question.
Yeah.
Hey, guys. Thanks for taking the questions.
Just wanted to start off with an update if you could on the commercial ammo demand environment I think in the past you guys have.
Typically provided sort of of backlog figure are you are you able to disclose sort of where the backlog stands right now and then just maybe also if you could threat and.
As we think about sort of how far out we're booked for the year is does that create and any deterrent in terms of new orders just given that you guys are likely.
Even looking at the prior backlog relatively booked up for the full year for fiscal pointing to.
Yes, this is Fred Wag and all.
We've seen no slowdown and the consumer demand following the election, if anything our sales of increase at this point in time, and we have about $200 million and back orders and.
And we've continued to.
Buy more equipment.
The to scale, our coating capacity and.
And.
Fulfill our orders and right now I see of.
The big surge over the last 2 weeks since we've moved and do everything from Pes and into our facility and Manitowoc.
We've had some record breaking year.
Days over the last few weeks. So we feel very comfortable that we're probably 3 to 6 months out but when you look at debt you got to look at the caliber.
But I would say, we're close to 3 months out now on the orders.
Okay got it and then since you mentioned the sort of the more recent surge Fred it'd be helpful to understand.
And where that specifically is coming from.
And is that also just due to your your capacity expansion and maybe you could also speak to.
Or quantify loaded ammo capacity at this current point and time and then what we expect to add over the next quarter or 2 or however, you want to kind of get it out for us.
Well I would say that.
Everything we've been building recently and he is loaded the ammo.
And the worst.
We're scaled up right now to where we're running at about 700000 rounds of day.
And we want the scale up to 1 million of ounce per day.
And the.
It all depends on supply of those couple of items, but we feel very confident we've got debt under control now.
So.
Our goal was.
And the rounds per day for millions of pounds per day I'm sorry.
Okay that makes sense and since you mentioned supply as well I did want to kind of touch on that because.
I did notice.
And it looks like inventory days kind of coming up a little bit this last quarter and I would assume.
You guys are potentially trying to build some safety stock and and AD inventory of where you can just given the strong demand environment, but could you speak to sort of.
Where you guys are still.
Sort of scrambling, so to speak to get additional components and the supply chain what is still tight.
How are we addressing tightness and that component supply.
Sure Matt This is Rob good medicine.
Answer that question.
As a major rats case component and.
And where do we feel we believe and kind of very strong position, we have contracts with multiple large primer for suppliers and suppliers of other necessary stuff.
And we just continue to manage the law.
Layered and the leveraged primary supplier relationships to make certain that we.
To achieve our goal of maintaining consistent and reliable supply of cross say for.
Rest of the whole supply chain not just the parameters.
So I think we've got to go out and then it sounds like.
It sounds like the primary is still relatively tight though.
<unk>.
The article words in your mouth, but just wanted to make sure I put a fine point on it is that the case.
Well, the there tight but again.
And there'll be and thankfully.
Thankfully, we don't use just 1 primary supplier, we have multiple contacts and contracts with them.
And.
And just the primary process industry are little bit scarce.
Got it okay, maybe 1 for 1 more for me and then I'll turn it over to take turns here, but.
Just in terms of gun broker now that it's been brought online and wanted to get an update from you guys on sort of maybe priorities in terms of what you see as.
Some of the first kind of add on product lines, you can bring to that obviously I think and the password.
And I talked about the potential to be able to put ammunition through that platform, but theres also additional kind of low hanging fruit that we've talked about as well in terms of payments and financing and whatnot and you guys have put some press releases out around that but maybe you could just talk a little bit about the priority lists and and why are you see that headed.
Or are you kind of talk and you are hitting some of the priorities right there.
And now we are and what kind of broker being the world's leading online marketplace.
We are going to leverage that marketplace got fixed.
And plus active users.
And we really wanted to enhance the customer experience and I think 1 of the best ways to do that is really the host of additional product offerings and the lift from the lines.
1 of the things we will do of course, we talked about.
Ammunition.
It seems like a low hanging fruit for the ammunition was only approximately 3% of their sales last year of gun brokers.
And we feel that by going direct to.
And to the customer.
We can really drive revenues for Oregon broker.
On top of that I think youre going to see a number of financing options.
Come available tour of users yeah. So this conversion is going to help us the retention.
I believe they're going to help us for retention.
And it's also going to grow the average ticket size.
And until this point has been pretty much and AC age thing. So I think youre going to see the financing options are going to be well received.
And with that company.
Okay got it.
And I've been doing more of and then I'll jump back in queue promised and this 1 but just wanted to get a a quick update from you guys. Just in terms of now that you have got broker.
Under the umbrella so to speak.
And maybe talk a little bit about what youre seeing in terms of just consumer demand trends and <unk>.
<unk> has trended there I know it's been running at a relatively elevated rate over the last several months, but just wanted to see how does the.
That changed and that any material way.
And in recent weeks or months and and how do you see that trending for the rest of this fiscal year if you could.
Hey, Matt This is Rob Wiley.
So at G. M B and 2020 was a record set a year and 2021, we're seeing GMB actually outpacing the prior year record setting year.
For the remainder of the year, we're not seeing any indication of slow and getting that so very excited of the year to come.
Okay, excellent and I'll turn it up for someone else and I'll come back with more.
Thanks, Matt.
Our next question comes from Mark Smith with Lake Street Capital markets. Please state your question.
Hey, guys I wanted to ask the first on gum broker and you guys have hit on it a little bit share, but just the the integration do you feel like you've got kind of everything done and that you need at this point and now it's just kind of add ons and improving service or is there still and it work that needs to be done on bringing it fully online with you guys.
Hi, Mark the spread wag and all of the integrations for the gone real well.
You know and as you expected probably our team was working on the integration planning, while we were working on closing the transaction.
But John broker Dot com marketplace.
Is there I T platform, the second to none of which made the job much easier for us.
And the.
People that were working with there it's very cooperative.
And we're real happy where we are today with the.
And and as we look at consumer behavior. I know you guys have talked about that you haven't seen any slowdown yet.
And this gun broker and having that in house really gives you a much better lens on the consumer and what's happening and I'll kind of day to day transactions or even price sensitivity or is there things of that you can learn from consumers now with gum brokered that you wouldn't have had the insights before.
Oh, I think it's a huge win for us to have that insight.
Not only from the gun broker site, but with that insight and the manufacturing side as well.
Which products are selling and which products or not.
To go with that.
And though we have added people.
And that space directly for that space.
For a lot of the additional products that we can put on.
And brokers said theres not there yet.
Very well.
We're very excited and very optimistic.
This coming year, it's going to be extremely bullish for us.
Excellent and as.
We look at just pricing on ammunition.
Have you seen any.
Any changes here or any pressure from peers or competitors or are you still in the situation, where if you build that day will come and now and no buyer debt just about any price.
Yeah.
Well I'll take a quick stab at the Sir.
There are a few skus that ran up very fast and have slowed down a little bit.
I think of lot of that possibly have to do with <unk>.
Excess of importing of ammunition.
And the demand is still there.
Still very broad and then.
Of the Skus that are out there.
Truly is build it and they will come.
And I think the last 1 for me is just if we look at kind of government and military contracts you've had some good announcements on that business, but how do you guys weigh kind of with your capacity.
The military contract versus consumer ammunition, you know what are the margins like and and do you have capacity to be able to take on new contracts. This year.
Well listen.
Let's break that into a couple of different answers you know we put up the team together a few years ago for work.
And the military and the Allied and the import business.
So actually acquire equipment that were.
And they'll spec grade manufacturing and.
And that was before we have any of the contracts with the U S Department of defense and I will.
Say that that's probably helped us secure of those contracts you know as far as a requirement for performance and.
Volume.
But when it comes to the capacity.
Yeah.
And so this team has done a fabulous job.
And moving and within the <unk>.
Military and machine if you will.
But.
For this company and you know, we're not kind of go pursue or go under any contract with the U S military for military branches of.
And it makes them unless we're confident we can perform and.
And supply of the.
And for class level and in all respects.
And we're not going to be everything for everybody.
But we do have a few products that.
So we think that.
A lot of things, we can't talk about some of the potential opportunities with the armor piercing and the streak applications.
And.
Okay.
And we.
We think that future is very bright and moving forward.
Okay, that's great and then and I guess that kind of hits. The point that you guys have always been for.
Focus more so on innovation and being differentiated rather than just selling plane ammunition is and as we look forward is that still the goal. It sounds like you guys are transitioning from.
Just a manufacturer of ammunition to specialty ammunition proprietary products and and really now of more technology company.
Maybe more so than just manufacturer.
Yeah, well I mean, so far it's working very well for us and we don't see any reason to change what we've tried to do.
You Wanna be a disruptor, you can call it whatever you'd like but it's antiquated needs change and I think the the ecommerce platform.
It was a solid move that way and <unk>.
<unk> of our product lines.
This is Fred.
I don't think we're ever going to be a company that's going to be a little white box on the shelf for some red or blue lettering wallet change selling of the cheapest price.
And I'm gonna be us.
Excellent.
Sounds great. Thank you guys.
Yeah.
Thank you thanks, Mark and.
Our next question comes from Brandon below with macro ops. Please state your question.
Hey, guys can you hear me well.
Yes.
Awesome and congrats on the corner I just had 1 quick question going way back to when you opened and built the call Center that you guys did back in and I believe it was April of 2020, and it was such an interesting move.
And because we are aggressively kind of at the start of the pandemic and.
And Youre doing call centers when a lot of people are just kind of moving towards the digital online only H. So from an operational and kind of decision, making perspective, what went into deciding on building that call Center and I know, it's done really well since the take us through maybe the early days and kind of why you were thinking about doing it and why you decided to go through with it.
Well, you know and my previous experience and my partner Crystal Oceans previous experience. We both wanted to do a call center and had done it before.
And the.
And finally took the is finding the right guy to run it.
And we found the guy that.
<unk> had several years, helping build the company from the 100 millions of 500 belly and with the call Center and.
And we just happen to bring him mens and March and it took off in April and.
With 10 employees and the.
It's continued that way and right now they're doing more customer service than they are selling for 100 or 200 million of Backorder right now so.
And so I would say timing is everything.
And we pick the right Guy at the right time to do it.
Got it and then 1 more 1 more question and then I'll hop off.
When it comes to the revenue percentage split between your retail orders and then your international and I'll call, It and military and government.
Looking out over the next 3 to 5 years, what percentage do you think.
And will comprise most of your revenue will it will it will it be from the military government, which I know is probably a more lumpy.
And revenue generation process or do you think that the revenue that youre seeing from the retail side higher and so maybe you'll get a higher percentage of all of the mix from from retail.
Well I'll take a stab at debt, but I think we've always thought that.
Retail.
The retail might be a 40, 50% some point in time.
And I just know if we got 1 of these orders that our team has been working on.
You know the wharf and the size of this company so.
You know hopefully someday.
Speaking for myself I would like to see a 50.50 split where were down 15% for the military and 50% of the consumer market.
Okay.
And what do you have any plans on disclosing winter if those deals happen.
The actual number because I know you guys have been bringing on Ben and releasing some order.
Releases in terms of of signed deals and stuff like that but in terms of actual dollar amounts do you of any plans on maybe disclosing those right now.
Well from our standpoint, we're kind at the mercy of the United States government.
So you know and they typically.
We do with them, we have to run any press releases by them to get approval.
And.
As Rob said earlier, there are some things that we're working on and that's very exciting the we'd love to talk to people about the.
We're not able to do that so we got it and it worked.
And the mindset government.
Yep and.
And I said that.
That was the other.
And my question when it comes to the margin expansion and I know you guys are starting to see a lot of that operational leverage kicking in now on a percentage basis.
Where do you guys think you are at in terms of realizing full operational leverage capability of our you're 70 per cent of the way there 60 per cent of the way there or is it with the kind of.
To quote or too early to call at this point.
Hey, Brandon this is Rob Wiley.
And kind of enter this and a little bit of of roundabout way, but our margins are growing rapidly as you can see from our financial statements and we expect them to do so and this next fiscal year with the addition of gun broker historically, they were kicking off gross margins of approximately 100, and sorry, approximately 87% and with the.
And.
The growth and the margin we've had just from the loading operations over the past year, we've been able to increase our margins by 170, 170% and the next fiscal year and.
To answer part 2 of your question, we really look at the revenue mix of our next fiscal year of broken out.
And 1 third gun broker and 2 thirds to our load of day, I know operations and Rick.
And so you announced guidance of 101 hundred $90 million.
Got it.
And your lifestyle makes the.
The big difference there now that we've acquired gun broker.
We're not just the manufacturing company anymore, and Bacon of Apple where in the marketplace.
So right.
And.
Do you think at some point you guys are going to eventually see maybe the the public market think of you and maybe you can re rates you as more of a marketplace business and just the commodity producer.
Yes, I think they are yes.
Got it all right I'll hop off thanks, so much guys and like I said great quarter.
Hope you guys enjoy it and celebrate.
Thank you Brandon.
Our next question comes from Matt Koranda with Roth Capital Partners. Please state your question.
Sure.
Hey, guys. Thanks for taking the follow up.
Just wanted to see if you could touch on cash balance post gun broker acquisition and the preferred issuance maybe if the if you could just kind of give us an update on where that sits.
And those transactions and then.
Interestingly I guess I think of as Fred mentioned sort of the.
The willingness to continue the transact and and look at additional potential acquisitions and.
Any way to quantify the M&A pipeline, and how that looks and and sort of could we see something happen. This fiscal year. It would be really helpful to get your thought process around that.
Well this is Fred.
And for me and I, Thank our board of directors.
It has to be accretive.
It has to be and our channels of marketing, where we're not looking for a tech company or a flashlight company, we're looking for something that.
Fits our.
Our game.
And <unk> plan.
And the.
First thing we're looking at is is it accretive to us.
And by adding it to this family of companies can 1 and 1 add up to 3 or 4.
And Matt to answer your first question, we ended the year with approximately $120 million of cash to close the acquisition. It was a combination of cash and stock and debt.
So it would be close to $50 million of cash we took out the debt that gun broker had on their books, which was approximately $50 million and after that as you had mentioned we completed the preferred offering which was in total of $35 million of gross proceeds.
Gotcha, so the the big moving pieces that's helpful. Okay I'll leave it there guys. Thank you.
Thanks, Matt.
The next question comes from John Berman with Berman capital. Please state your question.
Oh, Hi, I was the.
I'm wondering if you could give sort of a broader overview of your exposure to.
The increases in commodity prices and <unk>.
If you have long term deals the did you.
And with the suppliers could you.
The talk about the the time frame.
For the sales and how long the left.
Yes, we do have and <unk>.
<unk> to commodity increases, but consistent with the recipe industry. We have passed on price increases through the increases of our product pricing to our customers.
Okay.
Yeah.
Hum.
That's all.
Final question Sir.
And then and that's all okay. Thank you.
Our next question comes from Michael Dwyer with Raymond James Please state your question.
Hi, guys. Thanks for taking my call.
Rob where do you see gross profit margin over the coming fiscal year, and if you could give some color around the <unk>.
Mentation of bad debt would be helpful.
And Mike and thank you and so.
We can grow our gross margins increasing rapidly as I mentioned previously the gun broker dot com historically has kicked off margins of approximately 87% and with our margins continuing to grow due to our scale and we're very excited at the potential increases that we expect to see it throughout this next fiscal year.
Yes.
I've heard the word marketplace mentioned a few times.
By the Fred and you and your introductory comments.
How do you see that going forward.
And should the street looking at this from a re rating standpoint.
I think hi, Mike This is Rob good medicine, and I think the street will.
Just starting to realize really what we're doing here.
And being a part of our plan was not to be just the straight manufacturing company.
The marketplace and as the place to be.
This is the new way to do it and I think that they will actually see the numbers come out and moving forward this year and next year and year after that.
So we will carry a different valuation and then the manufacturing company.
Mike This is Fred.
You know I've been asked this question of lives and I.
My answer is we did not buy gun broker.
Just be gun broker, we bought it because we knew we could put other stuff on that product line.
And my past experience with action performance.
You saw what I did there.
We just sit and have a little day cash car T shirt, we probably have the 160 skus before was over so.
The plan is to grow gun broker.
Could you see of 160 Skus on gun brokers website.
Probably.
Thank you guys no further questions.
Thank you Mike.
Okay.
Our next question comes from Paul Carter with RBC. Please state your question.
Sure.
Yeah, Hi, guys. Thank you very much great quarter, and a big shooter and and I. Appreciate all the work that you guys are doing.
I wanted to talk a little bit about the <unk> the new facility, that's going to be if I understood you correctly, it's going to be up and running at about 12 months is that correct.
Yeah. This is Rob good mentioned, yeah, we just broke ground here about a week ago and Manitowoc.
It will be completed by June 1st.
And we're anxious to move everything and there.
It is.
The sandy of picture of what it looks like right now, but it's just a bunch of dirt being moved.
Yes.
The metal go and later.
Yeah, that's right. So some of my question really surrounding that is I didn't hear anything about the cost of that facility or how you plan on carrying the cost of debt new operational facility.
And I believe the cost of the facility is about 18 million.
Million.
Okay.
The land however was.
Free or I think we pay the dollar.
Theres tip of money involved.
Very beneficial brokers carry of mortgage on it.
Okay.
So.
So that's it I appreciate the answer so I just I wanted to ask 1 curiosity question. If you don't mind I'm, a I'm a shareholder.
Of of Ammo, Inc.
Who develop the the brilliant idea of the strength gamble.
It was developed by the University, and Louisiana and Lafayette.
And its patent and then and we own that patent forever.
Okay, and we pay a very slight royalty to use that Pat.
Yeah and for.
And as a as a shooter I would love to get my hands on and some of that [laughter]. So thanks.
For product.
Thank you.
Thank you. Our next question comes from Brandon Bela with macro ops. Please state your question.
Hey, guys, sorry, I thought it was done but I've just got 1 more question. So you guys are clearly fast growing disrupting and otherwise super boring industry is and it's kind of Fred alluded to and as an industry comment have you seen any pushback for sort of attempted retaliation.
From the larger gun.
It's the gun manufacturers of the ammo manufacturers like I said, the western or of Stern River have you seen them trying to position themselves to adjust to what we're doing with the marketplace and with some of our differentiated products or do you just still CNA and the industry. That's for lack of a better term just lackadaisical and just really doesn't care about the interface.
And that's the only home.
Well of.
This is Fred Wag and laws.
And about a year ago, we've had the companies come to us and 1 of the license.
Our streak ammo.
And but we haven't.
Graham and then anybody push.
Bush of surround.
Or I haven't seen anybody tried to copy what we've done.
But I think theres licensing opportunities and the future for us if we if we decided we'd like the license the strict prana.
Got it and in terms of licensing.
I assume you know you turn you turned down that first offer that came to you for that is there a reason why you decided not to license at that time was it just a it wasn't a favorable deal for us or what was sort of as youre thinking behind that.
And I just don't think we at that time were.
Able to produce what we had orders for.
And we want the touch the market first and made sure we had a good foothold and the market.
And the people we have ever went out and licensed the product.
And then just a little add on this and Rob the good medicine.
You had mentioned that these companies and they're just being lackadaisical I don't think its lackadaisical I just think it's very hard for them to change their business model, but they've had.
And Winchester for 200 years federal for 100.
How do you change.
And without making everybody mad.
You know they just.
And we've just taken a different approach and we didn't have any break and Mcmahon.
So it sounds like licensing would be something you guys could do once you are at capacity and you're comfortable and fulfilling all of your orders.
And and not to say that you have room to add product, but you would add licensing maybe if you're if you're comfortable and what youre developing for your existing backlog and you don't feel like you have more than enough work to the kind of keep going up.
What's the answer that with the solid maybe.
And I like and I'll take it.
All of that.
That works, alright, and so on and off guys. Thanks again.
Thank you.
Thank you and there are no further questions at this time I'll turn it back to management for closing remarks. Thank you.
Well, thank you and look forward to.
The next time, we talk to you guys.
And have a good day and watch us grow.
Thank you. This concludes today's conference all parties may disconnect have a great day.