Q4 2024 AMMO Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the Ammo Inc. fourth quarter and fiscal year 2024 earnings call.
Ladies and gentlemen, thank you for standing by good afternoon, and welcome to the Ammo, Inc, fourth quarter and fiscal year 'twenty 'twenty four earnings call. At this time all participants are in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Operator: At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on the telephone keypad. To withdraw your question, please press star, then 2. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. I would now like to turn the call over to Scott Arnold of Kor IR, the company's investor relations firm. Please go ahead, sir.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on the telephone keypad to withdraw your question. Please press Star then two.
Speaker Change: Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes.
Speaker Change: I would now like to turn the call over to Scott Arnold of core IR, The company's Investor Relations firm. Please go ahead Sir.
Speaker Change: Good afternoon, and thank you for participating in today's conference call. Joining me from animals leadership team Slide wagon Halsey Executive Chairman, Sharon Smith, Chief Executive Officer, and Rob wildly Chief Financial Officer.
Scott Arnold: Good afternoon, and thank you for participating in today's conference call. Joining me from Ammo's leadership team are Fred Wagenhals, Executive Chairman; Jared Smith, Chief Executive Officer; and Rob Wiley, Chief Financial Officer.
During this call management will be making forward looking statements, including statements that address analysts' expectations for future performance or operational results forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements for more information about these risks please refer to the risk factors described.
Scott Arnold: During this call, management will be making forward-looking statements, including statements that address ammo's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Ammo's most recently filed periodic reports on Form 10-K and Form 10-Q, as well as the Form 8-K filed with the SEC today and the company's press release that accompanies this call, particularly the cautionary statements.
Speaker Change: And most recently filed periodic reports on Form 10-K, and Form 10-Q, the form 8-K filed with the SEC today and the company's press release that accompanies this call, particularly the cautionary statements in it.
Scott Arnold: Today's conference call includes non-GAAP financial measures that Ammo believes can be useful in evaluating its performance. However, you should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The content of this call contains time-sensitive information and is accurate only as of today, June 13, 2024.
Speaker Change: Today's conference call includes non-GAAP financial measures that ammo believes can be useful in evaluating its performance you should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP.
Speaker Change: A reconciliation of this non-GAAP financial measure to net loss its most directly comparable GAAP financial measure. Please see the reconciliation table located in the Companys earnings press release. The content of this call contains time sensitive information that is accurate only as of today June 13th 2024, except us.
Scott Arnold: Except as required by law, Ammo disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Ammo's Chief Executive Officer, Jared
Speaker Change: Required by law ammo disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call. It is now my pleasure to turn the call over to M S Chief Executive Officer Jeremy.
Jeremy: Good afternoon, everyone. Thank you for joining us for our fourth quarter and fiscal year 2024 earnings call. When I joined ammo at the beginning of last year, we undertook a number of major initiatives to improve profitability and growth.
Jared R. Smith: Everyone. Thank you for joining us for our fourth quarter and fiscal year 2024 earnings call. When I joined Ammo at the beginning of last year, we undertook a number of major initiatives to improve profitability and growth. This past fiscal year has provided several unforeseen challenges, but we remain confident in the changes we are making at both GunBroker and at our ammunition manufacturing facility in Wisconsin. We continued to make progress in our fiscal fourth quarter and ended the fiscal year with a strong pipeline for ammunition and casing cells while accelerating our build out of the gun broker capability. Sales increased sequentially for Ammo, Inc., despite a softening market as reported by other publicly traded competitors in the space.
Jeremy: This past fiscal year as per provided several unforeseen challenges, but we remain confident in the changes we are making at both gun broker and at our ammunition manufacturing facility in Wisconsin.
Jeremy: We continued to make progress on our fiscal fourth quarter and ended the fiscal year with a strong pipeline for ammunition and casing cells, while accelerated our build out of gun broker's capabilities.
Jeremy: Sales increased sequentially for ammo, despite a softening market as reported by other publicly traded competitors in this space.
Jared R. Smith: We have started to execute on the strongest development roadmap for GunBroker in its 25-year history and continue to bring on additional capacity at our plant as we begin delivery on our open orders and contractual commitments. Ammo is at a pivotal point as we start our 2025 fiscal year. We have changed the trajectory of the business in these past 12 months and continue to optimize the business onto a path toward building shareholder value. We have reduced our working inventory and generated $32.6 million in cash from operations, increasing our cash balances by $16 million in the fiscal year.
Jeremy: We have started to execute on our strongest development roadmap forgotten broker and his 25 year history and continue to bring on additional capacity at our plant as we begin delivery on our open orders and contractual commitments.
Speaker Change: Ammo is at a pivotal point as we start our 2025 fiscal year.
Speaker Change: We have changed the trajectory of the business in these past 12 months and continued to optimize the business onto a path toward building shareholder value.
Speaker Change: We have reduced our working inventory and generated $32 6 million in cash from operations.
Speaker Change: Increasing our cash balances by $16 million in the fiscal year.
Jared R. Smith: We have established a credit line of $20 million with Sunflower Bank, reduced working capital needs, paid down $3.6 million in debt, and delivered an adjusted EBITDA margin of 10.6%. As we sit here in June, we have never been more poised for success. I will now go into detail on our execution and our positioning for the future. But first, I will speak to our progress at Gunbrae. As we start to stretch our marketplace legs, we are finding new opportunities to empower our sellers on the platform to bundle accessories in contrast to the singular transaction firearm business of the past.
Speaker Change: We have established a credit line of $20 million with Sunflower bank reduced working capital needs paid down $3 6 million in debt and delivered adjusted EBITDA margins of 10, 6%.
Speaker Change: As we sit here in June we have never been more poised for success.
Speaker Change: I will now go into detail on our execution and our positioning for the future.
Speaker Change: Let me first speak to our progress at gun broker.
Jared R. Smith: I would also like to highlight a few recent additional enhancements to GunBroker made by our dedicated team. We've taken an aggressive customer acquisition approach and launched over 200 different persona lifestyle campaigns where customers can choose their passion and be transported into a shopping experience specific to their user selection.
Speaker Change: We start to stretch our marketplace lags, we are finding new opportunities to empower our sellers on the platform to bundle accessories and cross in contrast to the singular transaction firearm business in the past.
Speaker Change: I'd also like to highlight a few recent additional enhancements to gun broker made by our dedicated team.
Speaker Change: We've taken an aggressive customer acquisition approach and launched over 200 different persona lifestyle campaigns, where customers can choose their passion and be transported into a shopping experience specific to the user selection.
Jared R. Smith: Just last week, we launched our new Collector's Elite site, which is focused on catering to serious sellers and collectors by curating a premium experience without the hefty fees seen at other luxury firearm auctions. And most importantly, we signed with GearFire Capital, which will enable GunBroker to extend its offerings to include consumer financing solutions tailored specifically for the firearms industry, making it easier for buyers to purchase the products they need and want. We've never had a roadmap and delivery plan as aggressive as the team is delivering today.
Speaker Change: Just last week, we launched our new collectors elite site, which is focused on catering to serious sellers and collectors by Curating a premium experience without the hefty fees seen at other luxury firearm auctions.
Speaker Change: Most importantly, we signed with gear fire capital, which will enable gun broker to extend its offerings to include consumer financing solutions tailored specifically for the firearms industry, making it easier for buyers to purchase the products they need and want.
Speaker Change: We've never had a roadmap and delivery plan as aggressive as the team is delivering today and.
Jared R. Smith: In the coming months, we'll be adding shipping solutions, cross-selling enhancements specific to searched items, and we'll be adding tools and category algorithms to facilitate the growing sales of firearm accessories. In combination, we believe these will provide the largest platform for shooting enthusiasts to determine market value and do comparison shopping across the largest marketplace for firearms and accessories in the industry. Dunbroker continues to be the premier marketplace for outdoor enthusiasts, connecting buyers and sellers around a community of passionate users, collectors, and professionals.
In the coming months, we'll be adding shipping solutions cross selling enhancements specific to search items, and we'll be adding the tools category algorithms.
Speaker Change: Silicates growing cells, a firearm accessories.
Speaker Change: In combination we believe these will provide the largest platform for shooting enthusiast to determine market value and do.
Speaker Change: Do comparison shopping across the largest marketplace for firearms and accessories in the industry.
Speaker Change: Got in broker continues to be the premier marketplace for outdoor enthusiasts connecting buyers and sellers around a community of passionate users collectors and professionals.
Jared R. Smith: This has played out as we have added new metrics for customer satisfaction and ensured our internal metrics are in line with market expectations. We recently scored a Net Promoter Score, or NPS, of 71%, where above 50 is excellent and 80% is considered world class. It is independent metrics like these that demonstrate how closely our community and our leadership team work in unison.
Speaker Change: This is played out as we've added new metrics for customer satisfaction and ensuring our internal metrics are in line with market expectations.
We recently scored a net promoter score or NPS of 71% were above 50 is excellent and 80% is considered world class.
Speaker Change: It is independent metrics like these that demonstrate how closely our community and our leadership team work in unison.
Jared R. Smith: Gun Broker is evolving into a community where not just products but expertise and experiences can be shared. This is our future, and it will chart how we will continue to drive shareholder returns for years to come. Now for an update on ammo. In the fourth quarter, ammunition demand remained solid, despite a tough environment, and we continued the filling of our production facilities. We brought in-house tooling design and manufacturing and set new drawing equipment on the floor for our.50 caliber production line necessary to start on our contract with Zero Delta. We take delivery next month of a new annealing oven that will remove a constraint that continued to be a bottleneck for our process.
Speaker Change: Gunn broker is evolving into a community where not just products, but expertise and experiences can be shared.
Speaker Change: This is our future and it will chart, how we will continue.
Speaker Change: To drive shareholder returns for years to come.
Jared R. Smith: As well, we delivered the first 15,000 pieces of 12.7x108, the Russian equivalent of.50 caliber, last week for our delivery to Zero Delta and will continue production for our other clients throughout 2024. While we struggle with overhead absorption due to the lower capacity yields of a new factory, we continue to see improved margins and pricing going into 2025 as we start to increase our capacities for medium and large rifle calibers. We believe propellant production will impose constraints on the market, which will continue to affect imports and smaller manufacturers, giving Ammo Inc. and the market some breathing room at the retail shelf as we head into the fall.
Speaker Change: Now for an update on ammo.
Speaker Change: In the fourth quarter ammunition demand remained solid despite a tough environment and we continued the infill and of our production facility.
Speaker Change: We brought in house tooling design and manufacturing and set new drawing equipment on the floor for a 50 caliber production lines necessary to start on our contract with zero Delta.
Speaker Change: Take delivery next month of the new annealing oven that will remove that constraint that continued to be a bottleneck for our process.
Speaker Change: As well we delivered the first 15000 pieces of $12 seven by one Oh wait the Russian equivalent a 50 caliber last week for our delivery to zero Delta and will continue production for other clients throughout 2024.
Speaker Change: While we struggled with overhead absorption due to the lower capacity yields of the new factory, we continue to see improved margin and pricing going into 2025, as we start to increase our capacities for medium and large rifle calibers.
Speaker Change: We believe propel it production will impose constraints in the market, which will continue to affect imports and smaller manufacturers, giving ammo, Inc. And the market some breathing room at the retail shelf as we head into the fall.
Jared R. Smith: Ammo Inc. started delivery last quarter on its new hunt line, as well as delivering new calibers to our rifle lineup, like 45-70, 6.5 Grindle, and 35 Wieland. While we see higher commodity pricing for copper and powder, we are still able to absorb or pass on these costs this year as demand for our brass casing business has not waned, and inventory levels of ammo seem to be stabilized at retail The measurable softness in the market has resulted in a decrease in firearm sales, but we have not seen a decrease in premium rifle ammunition demand, rifle casings, or for calibers that feed the emerging lever-action rifle category.
Speaker Change: Emma started delivery last quarter on its new hotline as well as delivering new calibers to a rifle lineup like 45, 76, five grendel 35 Whelan.
Speaker Change: While we see higher commodity pricing for copper and powder, we are still able to absorb a pass on these costs. This year as demand for our brass casing business has not waned and inventory levels of ammo seem to be stabilized at retail.
Speaker Change: The measurable softness in the market has resulted in a decrease in firearm cells, but we've not seen a decrease in premium rifle ammunition demand rifle casings or for calories that feed the emerging lever action rifle category.
Jared R. Smith: We believe this trend will continue through the second and third quarters. As we brought our rifle production online in Q4, we recognized the need for organizational and operational process improvement. And in response, we've engaged a global consulting firm focused on process and continuous improvement. This extensive operations review will proceed for the next 28 weeks, focused on increasing financial results through improving accountability, material flows, better cells, inventory operations, and planning processes, and removing critical constraints that will pay dividends for years to come as we fill our new plant capacity with best-in-class process and organizational improvement.
Speaker Change: We believe this trend will continue through the second and third quarters.
Speaker Change: As we brought our rightful production online in Q4, we recognize the need for organizational and operational process improvements and.
Speaker Change: In response, we engaged a global consulting firm focused on process and continuous improvement.
Speaker Change: This extensive operations will review will proceed for the next 28 weeks focused on increasing financial results through improving accountability material flows better sales inventory operations planning processes and remove critical critical constraints that will pay dividends for years to come as we infill.
Speaker Change: Our new plant capacity with best in class process and organizational improvements.
Jared R. Smith: As we've discussed on previous calls, this past year has been focused on resetting the factory from low-margin pistol production to high-volume, high-margin rifle production. These changes have not come easily and have not come overnight, but we are seeing the fruits of our efforts, and while not providing guidance at this time, we see a strong path to profitability in the coming quarters for the ammunition division. I will now turn it over to Rob Wiley, our CFO, to discuss our financials in further detail.
Speaker Change: As we've discussed on previous calls this past year has been focused on resetting the factory from low margin pistol production.
Speaker Change: High volume high margin rifle production.
Speaker Change: These changes have not come easily and have not come overnight, but we are seeing the fruits of our efforts and while not providing guidance at this time, we see a strong path to profitability in the coming quarters for the ammunition Division.
Speaker Change: I will now turn it over to Rob <unk>, our CFO to discuss our financials in further detail.
Robert D. Wiley: Thank you Jared welcome everyone. Let me now review the financials for the fourth quarter and 2020 for fiscal year in more detail.
Robert D. Wiley: Thank you, Jared. Welcome, everyone.
Robert D. Wiley: Let me now review the financials for the fourth quarter and 2024 fiscal year in more detail. We experienced sequential revenue growth in our ammunition segment in the final quarter of our fiscal year, while the margins of the gun broker marketplace segment remain robust. We ended the fourth quarter of our 2024 fiscal year with total revenues of approximately $40.4 million, in comparison to $43.7 million in the prior year quarter. The decrease in revenue was primarily related to a decrease in activity in our marketplace segment, which we believe decreased as a result of the current macroeconomic environment impacting our industry as well as others.
Robert D. Wiley: Sequential revenue growth in our ammunition segment in the final quarter of our fiscal year, while the margins have begun broker marketplace segment remained robust.
Robert D. Wiley: We ended the fourth quarter of our 2020 for fiscal year with total revenues of approximately $44 million in comparison to $43 7 million in the prior year quarter.
Robert D. Wiley: The decrease in revenue was primarily related to a decrease in activity in our marketplace segment, which.
Robert D. Wiley: We believe decrease as a result of the current macroeconomic environment impacting our industry as well as others.
Robert D. Wiley: Our casing sales, which afford us higher gross margins, increased $0.9 million from the prior year period. However, revenues for our ammunition segment decreased $0.2 million from the prior year quarter. The increase to $4.8 million, or 21.9%, quarter-over-quarter, as a result of increased ammunition sales in our fourth fiscal quarter. Cost of goods sold was approximately $31 million for the quarter compared to $31.8 million in the comparable prior year quarter. The decrease in the cost of goods sold was related to the decrease in sales volume.
Robert D. Wiley: Our catering sales, which afford us higher gross margins increased <unk> 9 million from the prior year period.
Speaker Change: Revenues for our ammunition segment decreased <unk> 2 million from the prior year quarter, the increase of $4 8 million or 21, 9% quarter over quarter. As a result of increased ammunition sales in our fourth fiscal quarter.
Speaker Change: Cost of goods sold was up approximately $31 million for the quarter compared to $31 8 million in the comparable prior year quarter.
Speaker Change: The decrease in cost of goods sold was it related to a decrease in sales volume.
Our gross margin for the quarter was $9 4 million or 23, 3% compared to $11 9 million or 27, 3% in the prior year period.
Robert D. Wiley: Our gross margin for the quarter was $9.4 million, or 23.3%, compared to $11.9 million, or 27.3%, in the prior year period. The decrease in gross profit margin was related to the shift in our sales. The robust margins on Gun Broker remain steady through our final quarter, but the margins in our ammunition segment did not meet expectations. We expect improvement as production capacities increase. Our inventory levels continued to decrease, generating $4.3 million in cash from operations for the quarter, bringing us to $32.6 million for the full fiscal year. There were approximately $2.4 million of non-recurring expenses in the quarter related to legal and professional.
Speaker Change: The decrease in gross profit margin was it related to the shifting our sales mix.
Speaker Change: The robust margins on gun broker remained steady through a final quarter.
Speaker Change: But the margins in our ammunition segment did not meet expectations.
Speaker Change: We expect improvement as production capacity increase.
Speaker Change: Our inventory levels continue to decrease generating $4 3 million in cash from operations for the quarter, bringing.
Speaker Change: Bringing us to $32 6 million for the full fiscal year.
Speaker Change: There was approximately $2 4 million of nonrecurring expenses in the quarter related to legal and professional fees.
Robert D. Wiley: We have included these as add-backs to adjusted EBITDA. For the quarter, we recorded adjusted EBITDA of approximately $2.2 million compared to the prior quarter adjusted EBITDA of $3.8 million. This resulted in a loss per share of five cents for the quarter or adjusted net income per share of one cent, in comparison to a loss per share of $0.04 in the prior year quarter or adjusted net income per share of $0.03. And for our full fiscal year, a loss per share of $0.16 or adjusted net income per share of $0.09 in comparison to a net loss per share of $0.07 or adjusted net income per share of $0.16 in the prior year.
Speaker Change: We have included these add backs to adjusted EBITDA.
Speaker Change: For the quarter, we recorded adjusted EBITDA of approximately $2 2 million compared to the prior year quarter, adjusted EBITDA of $3 8 million.
Speaker Change: This resulted in a loss per share of <unk> <unk> for the quarter, our adjusted net income per share of <unk> <unk>.
This into a loss per share of <unk> from the prior year quarter.
Speaker Change: Our adjusted net income per share of three sons.
Speaker Change: For a full system <unk> a loss per share of <unk> 16.
Speaker Change: Our adjusted net income per share of <unk> in comparison to a net loss per share of <unk>, where adjusted net income per share of <unk> 16 cents in the prior year.
Speaker Change: Looking forward, we are focused on increasing plant capacity with the engagement of a global consulting firm.
Robert D. Wiley: Looking forward, we are focused on increasing plant capacity with the engagement of a global consulting firm, which will improve product marginality. For Gun Broker, we launched our platform in March of 2024 and will be bringing other efforts online in fiscal 2025 like Collectors Elite, a high-end auction platform featuring rare and distinct firearms and collectibles, and also additional financing partnerships with firms like Deerfire Capital, which will allow retailers the option to offer flexible financing options to customers.
Speaker Change: This should improve the product marginality.
Speaker Change: For gun broker, we last shared car platform in March of 2024 and.
Speaker Change: And we will be bringing other efforts online in fiscal 2025 like collectors of elite our high end auction platform, featuring rare and distinct firearms and collectibles.
Speaker Change: And also additional financing partnerships with firms like Deer Park capital.
Speaker Change: Which will allow retails retailers the option to offer flexible financing options to customers.
Robert D. Wiley: We expect these enhancements will drive sales growth through better functionality and enhance the purchasing power of buyers. We are well-positioned financially heading into fiscal 2025, given our strong network and capital position, as we have reported $131.5 million in current assets, including $55.6 million of cash and cash equivalents, along with $30.9 million of current liabilities. Additionally, we have generated $32.6 million in cash from operations for the period.
Speaker Change: We expect these enhancements will drive sales growth through better functionality and enhanced purchasing power of buyers.
Adil: We are well positioned financially heading into fiscal 2025, given our strong net working capital position as we have reported a $131 $5 million in current assets, including $55 6 million of cash cash equivalents, along with $3 9 million of current liabilities Adil.
Adil: Additionally, we have generated $32 6 million in cash from operations for the period.
Adil: That concludes our opening remarks, I'll now turn the call over to the operator for questions. Thank you.
Operator: That concludes our opening remarks. I'll now turn the call over to the operator for questions. Thank you. Thank you. We will now begin the question and answer session.
Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Matt Koranda with Ross Capital. Please go ahead.
Speaker Change: Youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and he would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Matt Koranda with Roth Capital. Please go ahead.
Matt Koranda: Hey, guys good afternoon.
Matt Koranda: Hey guys, good afternoon. Just wondering if you could maybe unpack a little bit more for us what the consulting firm is helping you sort out in terms of production. Any specific issues? Just any help in terms of how that's going to ramp up casings, utilization, and capacity this coming fiscal year.
Matt Koranda: Just wondered if you could maybe unpack a little bit more for us with a consulting firm, who is helping us sort out in terms of production.
Speaker Change: Any specific issues.
Speaker Change: Just any help in terms of how that's going to ramp up the casings utilization of capacity this coming fiscal year.
Jared R. Smith: Absolutely, Matt. Great question. This engagement is a 30-plus week, around-the-clock engagement where we are looking at material flows, setting up the equipment, making sure that handoffs between shifts are coordinated, that documentation is signed off, that we're producing the part that we're supposed to be producing, and that all the technical specifications are in place. There is not a single part of the factory that is not being reviewed, including our CIOP process for sales, inventory, and Matt, I would love to say, you know, to be specific to one area, but it is a universal lift of the factory where no stone will go unturned.
Matt Koranda: Absolutely Matt Great question.
Speaker Change: This engagement is a 30 plus week around the clock engagement, where we are looking at material flows setup of the equipment, making sure that handoffs between shifts.
Speaker Change: Our coordinated that.
Speaker Change: Documentation is signed off that we're producing the part that we're supposed to be producing at that all the technical specs are in place.
Speaker Change: There is not a single part of the factory that has not been reviewed including our SIOP process for sales inventory and operational planning.
Speaker Change: Matt I would love to say.
Speaker Change: To be specific to one area, but it is a universal lift of the factory.
Speaker Change: We're no stone will go in turn.
Speaker Change: Okay, and then just implications for how we should think about gross margins and they have a business and I guess, maybe if you could.
Robert D. Wiley: Okay, and then just implications for how we should think about gross margins in the ammo business. And I guess maybe if you could, just because it's hard to parse out, at least at the end of the year here, what were gross margins on the ammo manufacturing side, including casings, during the fourth quarter?
Speaker Change: Because it's hard to parse out or at least the end of the year here what were gross margins in the manufacturing side, including casings.
Speaker Change: During the fourth quarter.
Speaker Change: Yes.
Jared R. Smith: Rob, I don't know if you have that information at hand, but Matt, I'm going to answer part of the question: this engagement with this firm is really focused on rifle case production, just due to the massive amount of material flow that we've got to get through the factory. That's where we put the entire focus, but Rob, if you can speak to the margins, that'd be great.
Speaker Change: Rob I don't know if you have that information at hand, but man I'm going to answer part of the question is this engagement.
With this firm is really focused at rifle case production.
Speaker Change: Just due to the massive amount of material flow that we've got to get through the factory.
Speaker Change:
Speaker Change: That's where we put the entire focus but Rob if you can speak to the margins that would be great.
Speaker Change: Okay.
Robert D. Wiley: Hi, Matt. This is Rob, yes, we did see a little bit of a pullback in the margin from Q3 going into Q4.
Robert D. Wiley: Hi Matt, this is Rob. Yeah, we did see a little bit of a pullback in the margin from Q3 going into Q4. Part of that was coming off of older inventory, some older ammunition inventory, but as we have the production increases, we should be able to better absorb our overhead expenses across all of our products and see increased marginality heading into 2025.
Robert D. Wiley: That was coming off of.
Robert D. Wiley: You know.
Robert D. Wiley: Older inventory.
Robert D. Wiley: Munition inventory, but as we have the production increases we should be able to better absorb our overhead expenses across our all of our products and see increased marginality heading into that.
Robert D. Wiley: 2025 year.
Speaker Change: Okay got it and then just one more on the ammo side and then I wanted to ask one on non broker, but on the other side.
Matt Koranda: Okay, got it. And then just one more on the ammo side. And I wanted to ask one on gunbroker. But on the ammo side, I'm curious what's going on with the casing. So, like, the goal is, I guess, to increase utilization with one new business on that side of the house. But I guess it did drop a little bit sequentially, not a ton, but a little bit. I was wondering if you could speak to the dynamics in terms of casing and how that should be ramping up over the next couple of quarters.
Speaker Change: Curious, what's going on with casing. So like the goal is I guess to increase utilization.
Speaker Change: We've won new business on that side of the house.
Speaker Change: But I guess it did drop a little bit sequentially, not a ton, but a little bit.
Speaker Change: I was wondering if you could speak to the dynamics in terms of cases, and how that should be ramping up over the next couple of quarters here.
Jared R. Smith: Yeah, the way we look at casing ramping up over the next couple quarters. You know, by the end of the year, we expect roughly a 30 to 40% increase in Rifle Case and Manufacturing. I think we'll see that in Q2 and Q3. Specific to Q4, I believe your question was, we saw a little bit of a dip from Q3.
Speaker Change: Yes, the way we look at case seen ramping up over the next couple of quarters.
Speaker Change: By the end of the year, we expect roughly a 30% to 40% increase.
Speaker Change: Rifle case in manufacturing.
Speaker Change: I think we'll see that in Q2 and Q3.
Speaker Change: Specific to Q4 I believe your question was we saw a little bit of a dip from Q3.
Speaker Change: Is that correct just sequentially, yes, that's correct yes.
Matt Koranda: Is that correct? Yeah, correct. Just sequentially, yep, that's correct. Yeah, has everything to do with it.
Jared R. Smith: It has everything to do with lining up the equipment after that press beam is down, and we had to take some initial pieces of equipment down to streamline the rest of the process. We were also loading and manufacturing cases; actually, we were manufacturing cases for loading, and we're sitting on those inventories to start loading this summer to deliver throughout Q2 and Q3.
Speaker Change: It has everything to do with lining up the equipment after that <unk> being down and we had to take some initial pieces of equipment down to streamline the rest of the process. We are also loading and manufacturing cases actually we were manufacturing in cases for loading and we're sitting on those inventories.
Speaker Change: To start loading this summer to deliver throughout Q2 and Q3.
Speaker Change: For the fall hunting season.
Matt Koranda: Okay, all right, understood. And then just on the marketplace, wanted to see if there's any way that you guys could quantify any of the lift that you got within the quarter from implementing payments and getting the carding initiative up and running. I know we've only, you know, only got a very short period within the fourth quarter where we got the benefit of that, but just any early learnings on that front that you saw in terms of attach rate to carding, in terms of transaction value, whatever metrics you want to provide on that front. And then just on the financing initiative, maybe, if you could, any early learnings on that? Have we fully rolled that out? And is there some kind of take rate metric you could provide around that? Short.
Speaker Change: Okay, Alright gotcha understood.
Speaker Change: And then just on the marketplace wanted to see if there's any way that you guys could quantify.
Speaker Change: Any of the lift that you got within the quarter from implementing payments and getting the <unk> up and running I know we're only.
Speaker Change: <unk> got a very short period within the fourth quarter, where we got the benefit of that but just any early learnings on that front.
Speaker Change: But you saw it.
Speaker Change: Terms of attach rates of Karting.
Speaker Change: In terms of transaction value or whatever metrics you want to provide on that front and then just on the financing initiative, maybe if you could.
Speaker Change: Any early learnings on that we simply fully rolled that out and is there like a take rate metric you could provide around that.
Speaker Change: Sure.
Jared R. Smith: We've not rolled it out yet. We just signed the agreement. This is an agreement that we'll be executing on in Q2, Q3 as well. There's still quite a bit of development work that has to take place for that financing solution to come online.
Speaker Change: We have not rolled it out we just signed the agreement this is a.
Speaker Change: And agreement that we'll be executing on in Q2 Q3 as well.
Speaker Change: Theres still quite a bit of development work that has to take place for that financing solution to come online.
Jared R. Smith: If we looked at what we learned from launching the cart in Q4, you know, we saw early adoption. We saw a slightly higher value for the cart, but the quarter was so short and it was so new that, you know, in a lot of rollouts and developments, you actually see a dip. We didn't see that dip, so we felt like a flat line was actually a positive result. Since then, we have seen an increase in our take rate and our final value fees across the platform as we've adjusted those, as discussed in the prior quarter.
Speaker Change: If we looked at what we learned from.
Speaker Change: Launching the cart in Q4.
Speaker Change: We saw early adoption, we saw a slightly higher value car value, but the quarter was so short and it was so new.
Speaker Change: That and a lot of Rollouts in development do you actually see a dip we didn't see that dip. So we felt like a flat line. It was actually a positive result. Since then we have seen an increase in our take rate and our final value fees.
Speaker Change: Across the platform as we've adjusted those as discussed in the prior quarter.
Speaker Change: Okay very helpful guys I'll leave it there thank you.
Matt Koranda: Okay, very helpful guys. I'll leave it there. Thank you.
Matt Koranda: Thank you Matt.
Speaker Change: The next question comes from Mark Smith with Lake Street. Please go ahead.
Mark Eric Smith: The next question comes from Mark Smith with Lake Street. Please go ahead.
Mark Eric Smith: Hi, guys.
Mark Eric Smith: Hi guys, I wanted to dig through the margins just a little bit more here, and feel free to speak broadly on it if you don't have the numbers in front of you. But, you know, maybe first, was there any pressure as we think about ammo margins, primarily on casings? Is that where you saw some inventory issues, or is it more so on kind of loaded ammo? And then, just Jared, as we look out, input costs coming in, primarily on loaded ammo, anywhere where you're seeing pressure, I know you called out propellant here a little bit ago in the call, but anywhere where you're seeing pressure and things that may be pressure margin going forward.
Mark Eric Smith: I wanted to dig through the margins, just a little bit more here and see and.
Speaker Change: Feel free to speak.
Speaker Change: Broadly on it.
Speaker Change: You don't have the numbers in front of you, but maybe.
Speaker Change: Maybe first.
Speaker Change: Any pressure as we think about ammo margins, primarily on Kay seems is that where you saw some inventory issues or is it more so on kind of loaded ammo.
Speaker Change: And then just Jared as we look out.
Speaker Change: Costs coming in primarily on loaded ammo anywhere where you're seeing pressure I know you called out propellant here, a little bit ago in the call, but anywhere where you're seeing pressure in things that maybe pressure margins going forward.
Speaker Change: Alright.
Jared R. Smith: All right, I'm going to break the question down in a few parts from an ammo perspective. We believe our inventory position is strong. We do not have an inventory problem with casings. The inventory that we have is a lack of rifle inventory just because our production capacity has not come on as fast as anybody would like. And that was really why we engaged Brooks to engage and increase this consulting firm to engage and increase that output.
Western down in a few parts.
From an <unk> perspective, we believe our inventory position is strong.
Speaker Change:
Speaker Change: We do not have an inventory problem with casings.
Speaker Change: The inventory that we have is a lack of LIFO inventory just because of our production capacity.
Speaker Change: Has not come on as fast as anybody would like.
Speaker Change: And that was really why we've engaged brooks to engage and increase.
Speaker Change: This consulting firm to engage and increase that output.
Speaker Change: From a margin perspective across our portfolio.
Jared R. Smith: From a margin perspective across our portfolio, you know, the bright, shiny spots are things like 50 Cal and deliveries that we're making internationally this quarter and last. The other bright spot is, you know, pretty much anything touching a rifle in the hunting space still seems to be a much stronger portfolio play than playing in, you know, high volume 9mm. As we're sitting here in an election year, I think everybody thought there might have been a little bit more reprieve, but 9 mil still was pretty ubiquitous, and pricing's tough.
Speaker Change: The bright shiny spot are things like 50, cow and deliveries that we're making internationally throughout this quarter and last.
Speaker Change: The other bright spot is pretty much anything touching a rifle hunting space still seems to be a much stronger portfolio played in playing in.
Speaker Change:
Speaker Change: High volume nine millimeter.
Speaker Change: As we're sitting here in an election year.
Speaker Change: Thank everybody thought there might've been a little bit more of a priest, but nine mail still is pretty ubiquitous and pricing is tough.
Jared R. Smith: You know, the margins have been tough. The market's tough due to discretionary spending by the consumer, so we felt like we had a strong quarter finishing out Q4 with sales increasing over Q3. We're going into a little bit of a, you know, the typical summer slump in this industry, but things are still holding strong, and certainly as more and more capacity comes up. Does that answer your question, Mark?
Speaker Change: The margins have been tough the market is tough due to depressed discretionary spending.
By the consumer so we felt like we had a strong quarter, finishing out Q4 with sales increasing over Q3.
Speaker Change: We're going into a little bit of the typical summer slump.
Speaker Change: This industry, but things are still holding strong and certainly as more and more capacity comes online.
Speaker Change: Does that answer your question Mark.
Mark Eric Smith: Yeah, I think so, just the last part though, anything as you think about input costs, where do you think maybe we'll continue to see pressure going forward?
Mark Eric Smith: Yeah, I think so just the last part though anything is as you think about input costs.
Speaker Change: Where you think maybe we will continue to see pressure going forward.
Jared R. Smith: Yeah, there's been massive pressure on copper, and there's been some erratic speculation out there on where copper is going to go. And, you know, some people were saying it was going to double. But it's pulled back.
Mark Eric Smith: Yeah.
Speaker Change: There has been massive pressure on copper and there has been some erratic.
Speaker Change: <unk> out there on where copper is going to go and you know some people were saying it was got a double it's pulled back.
Jared R. Smith: You know, we believe in most of our long-term contracts, we work at a metals price so that we can absorb those costs or at least push them on downstream. You know, propellant is still going to be and will continue to be, as you go forward. We feel very strongly about our propellant supply and our position in the market. But for the rest of the industry, the pricing power and specialty propellants, which are what I'd call not mainstream, will continue to have an effect on this market.
Speaker Change: We believe in most of our long term contracts, we work in a metal price.
Speaker Change: So that we can absorb those costs or at least push them on.
Speaker Change: Downstream.
Speaker Change: Propellant is still going to be and will continue to be.
Speaker Change:
Speaker Change: An issue going forward.
Speaker Change: We feel very strongly about our propeller supply and our position in the market.
Speaker Change: But for the rest of the industry, the pricing power and specialty propellants.
Speaker Change: Or what I would call it not mainstream.
Speaker Change: We will continue to have an effect on this market.
Speaker Change: Okay.
Mark Eric Smith: Okay, the next question for me was just around Zero Delta, just any additional update that you can give there or maybe even kind of review on how things are going and I know it's early on kind of delivering some of that ammo, but any updates you can give us would be great. Yeah.
Next question for me was just around zero Delta just any additional update you can give there or maybe you could kind of review on how things are going and I know, it's early on kind of <unk>.
Speaker Change: Delivering some of that ammo.
Speaker Change: Any updates you can give us would be great.
Speaker Change: Yeah I mean.
Jared R. Smith: The Zero Delta contract, when the company first made the acquisition of JPMorgan, was paramount. We now have the line up and running, and we're streamlining that process. We're starting to make deliveries, and our quality control process is improving every day. We're super, super excited on the large rifle front. You know, as we've said in the past, there's not a lack of demand out there for rifle casings, and we get new requests all the time. Our biggest issue really comes down to just pure execution and streamlining our process to get maximum output.
Speaker Change: Zero Delta contract.
Speaker Change: When the FERC when the company first made the acquisition of judgments 50 Cal line.
Speaker Change: Is paramount and.
Speaker Change: We now have the line up and running and we're streamlining that process. We're starting to make deliveries were our QC process is improving every day.
Speaker Change: We're super Super excited.
Speaker Change: On the large rifle front.
As we've said in the past, there's not a lack of demand out there.
Or rifle casings, and we get new request all the time, our biggest issue really comes down to just pure execution and streamlining our processes.
Speaker Change: To get maximum output.
Speaker Change: Excellent. Thank you.
Mark Eric Smith: Excellent, thank you.
Speaker Change: Yes.
Speaker Change: Thank you Mark.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Jarrett Smith for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Jared Smith for any closing remarks.
Jared R. Smith: Absolutely I want to thank everyone for participating on today's call and for your interest in Ammo, Inc. We look forward to sharing our ongoing progress when we report our first our fiscal first quarter 2025 results in August Thanks, and have a great day.
Jared R. Smith: Absolutely. I want to thank everyone for participating in today's call and for your interest in Ammo, Inc. We look forward to sharing our ongoing progress when we report our fiscal first quarter 2025 results in August. Thanks, and have a great day.
Jared R. Smith: The conference.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: <unk> is now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: ?? ?? ?? ??
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].