Q1 2025 AMMO Inc Earnings Call

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the Ammo, Inc. Fiscal First Quarter 2025 earnings call. At this time, all participants are in a listen-only mode, and should you need any assistance during the call, please signal a conference specialist by pressing the star key followed by zero.

Operator: At this time, all participants are in an echo-only mode. To introduce any assistance during the call, please signoy the 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 the star and one on your telephone keypad. To withdraw your question, please press the star then too. Participants on 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 Matt Blazei, of Korayar, the company's investor relations firm. Please go ahead, sir. Good afternoon,

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two.

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.

Matt Blazei: I would now like to turn the call over to Matt Blazei of CoreIR, the company's investor relations firm. Please go ahead, sir.

Matt Blazei: Good afternoon, and thank you for participating in today's conference call. Joining me from Ammo's leadership team are Jared Smith, Chief Executive Officer, Rob Wiley, Chief Financial Officer, and Paul Kassowski, Chief Compliance and Transformation Officer. 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 expressed.

Speaker Change: Good afternoon and thank you for participating in today's conference call. Joining me from Ammo's leadership team are Jared Smith, Chief Executive Officer, Rob Wiley, Chief Financial Officer, and Paul Kosowski, Chief Compliance and Transformation Officer.

Matt Blazei: For more information about these risks, please refer to the risk factors described in Ammo's most recently filed periodic reports on form 10K and form 10Q, as well as the form 8K filed with the SEC today and the company's press release that accompanies this call, particularly the cautionary statements in it. 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.

Speaker Change: During this call, management will be making forward-looking statements, including statements that address Ammo's expectations for future performance or operational results.

Speaker Change: for looking statements involved risks and other factors that may cause actual results to differ materially from these statements.

Speaker Change: for more information about these risks.

Speaker Change: Please refer to the risk factors described in Ammo's most recently filed periodic reports on F110K and F110Q

Speaker Change: The Form 8K filed with the SEC today and the company's press release that accompanies this call, particularly the cautionary statements in it.

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: For 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 company's earnings press release.

Matt Blazei: For 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 company's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, August 8th, 2024. 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 Smith.

Speaker Change: The content of this call contains time-sensitive information that is accurate only as of today, August 8, 2024, 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.

Speaker Change: It is now my pleasure to turn the call over to Amos Chief Executive Officer, Jared Smith.

Jared Smith: Good afternoon, everyone. Thank you for joining us for our first quarter fiscal 2025 earnings call. First, I want to take this opportunity to thank all of our employees for their commitment to this company and to the mission and for their contributions to the massive transformation underway in our business. It takes true grit and perseverance to implement changes at this scale and at this level of quality. We have some extraordinary teams along the way, and I'm proud to be a part of this ongoing effort. In our first quarter of fiscal 2025, we continued to make progress on the primary core initiatives for each of our business units, transforming our ammunition plant to higher-margin rifle, and pistol production and transforming our marketplace to an innovative e-commerce leader.

Jared Smith: Good afternoon everyone. Thank you for joining us for our first quarter fiscal 2025 earnings call. First I want to take this opportunity to thank all of our employees for their commitment to this company, the mission, and for their contributions to the massive transformation underway in our business.

Speaker Change: It takes true grit and perseverance to implement changes at this scale and at this level of quality. We have some extraordinary teams leading the way and I'm proud to be a part of this ongoing effort.

Speaker Change: In our first quarter of fiscal 2025, we continue to make progress on the primary core initiatives for each of our business units, transforming our ammunition plant to higher margin rifle and pistol production, and transforming our marketplace to an innovative e-commerce leader.

Jared Smith: Despite the immense challenges of operating in this ever-changing regulated market, we continue to make progress on these initiatives. We remain focused on building long-term shareholder value and strategically positioning this company for sustainable success. Despite the ongoing turbulence in our industry, we are confident that the company's recalibration is the shortest path to long-term stability and reliability. As has been reported market-wide, ammunition and firearm cells have been down across all segments of the commercial market throughout the summer months. While this is in line with historic seasonality in the industry, we've been slowly pulling production back from non-attractive product segments due to low margins and propel

Speaker Change: Despite the immense challenges of operating in this ever-changing, regulated market, we continue to make progress on these initiatives.

Speaker Change: We remain focused on building long-term shareholder value and strategically positioning this company for sustainable success.

Speaker Change: Despite the ongoing turbulence in our industry, we are confident that the company's recalibration is the shortest path to long-term stability and reliability.

Speaker Change: As has been reported, market-wide ammunition and firearm cells have been down across all segments of the commercial market throughout the summer months.

Speaker Change: While this is in line with historic seasonality in the industry, we've been slowly pulling production back from non-attractive product segments due to low margins and propellant supply. We will continue to focus on strategic product categories that more heavily contribute to the bottom line.

Jared Smith: We will continue to focus on strategic product categories that more heavily contribute to the bottom line. We've been building ammunition inventories to accelerate sales this fall for the launch of our new premium rifle hunting segments, and we started delivering on our 12.7x108 cases under our contractual obligations to Zero Delta. Ammo is at a pivotal point as we start the second quarter of our 2025 fiscal year.

Speaker Change: We've been building ammunition inventories to accelerate cells this fall for the launch of our new premium rifle hunting segments and we started delivering on our 12.7 by 108 cases on our contractual obligations to the road Delta.

Speaker Change: Emma was at a pivotal point as we start the second quarter of our 2025 fiscal year. We've been delivering and releasing code over the last month on gun broker that are starting to take noticeable effects.

Speaker Change: changes that will positively affect both our 8 million plus registered users and our monthly 13 million unique visitors to the site.

Speaker Change: We launched our cart just four months ago, and this last month began cross-selling accessories for the firearms purchased through the cart. We will continue to cultivate the algorithms and analytics over the coming months and fine-tune the recommended offerings across all categories as our environment accelerates its learnings.

Jared Smith: This will be an ongoing development now that we pivot away from the historic single-seller, single-item framework to a platform with the capability for buyers to buy from multiple sellers in one transaction and includes suggested placement of products at checkout. We are building out a solution that will create strong revenues for our shareholders in an e-commerce industry with high barriers to entry and low market consolidation. This is an e-commerce industry and a marketplace that's still in its infancy.

Speaker Change: This will be an ongoing development now that we've pivoted away from the historic single-seller, single-item framework to a platform with the capability for buyers to buy from multiple sellers in one transaction and includes suggestive placement of products at checkout.

Speaker Change: We are building out a solution that will create strong revenues for our shareholders in an e-commerce industry with high barriers to entry and low market consolidation.

Speaker Change: This is an e-commerce industry and a marketplace that is still in its infancy. While we've been around for 25 years, our transformation in fiscal year 2025 is game changing and will result in an evolution to the face of Gun Broker and for our shareholders.

Jared Smith: While we've been around for 25 years, our transformation in fiscal year 2025 has gained change, and it will result in an evolution to the face of gun broker and for our shareholders. As we communicated last quarter, Gun Broker has been committed to growing its service offerings and increasing our take rate on the GMV we do through the site. In Q1, we increased our take rate by roughly 40 basis points. 6.2% versus 5.8% last year.

Jared Smith: This was accomplished through category fee changes on non-firearm sales, increases in advertising revenue, enhanced listing option fees, and the launch of Collector's Elite. We see this take a great further increase in the quarters ahead as we push ahead with our gear finance solution and an anticipated increase in non-firearm accessory sales as we monetize the algorithms and tune our cross-selling capabilities. Turning to the Ammunition Division, we are now laser-focused on increasing rifle production at the plant and are strategically pulling back on all-range training 9mm and low-to-negative-margin pistol production as rifle capacity increases.

Speaker Change: As we communicated last quarter, Gun Broker has been committed to growing its service offerings and increasing our take rate on the GMV we do through the site.

Speaker Change: In Q1, we increased our take rate by roughly 40 basis points.

Speaker Change: 6.2% versus 5.8% over last year. This was accomplished through category fee changes on non-fire ourselves, increases in advertising revenue, enhanced listing option fees, and the launch of collector's elite.

Speaker Change: We see this take rate further increasing in the quarters ahead as we push ahead with our gear fire financing solution and an anticipated increase on non firearm accessory sales as we monetize the algorithms and tune our cross selling capabilities.

Speaker Change: Turning to the ammunition division, we are now laser focused on increasing rifle production at the plant, and our strategically pulling back on all range, training 9mm, and load a negative margin pistol production is rifle capacity increases.

Jared Smith: We will continue to shift our production away from high volumes and top line revenue, and we'll continue to focus on streamlining our operations and creating bottom line profitability. This will negatively affect top line revenue, but we'll create higher margins and higher profitability. The transition from pistol to rifle ammunition in their components is hard.

Speaker Change: We will continue to shift our production away from high volumes in top line revenue and we'll continue to focus on streamlining our operations and creating bottom line profitability.

Speaker Change: This will negatively affect the top line revenue, but will create higher margins and higher profitability.

Speaker Change: The transition from pistol to rifle ammunition in their components is hard. The quantities, processes, and teamwork required must be fine-tuned, and it has required us to cultivate talent and the resources to handle the transformation to manufacture this much anticipated rifle capacity.

Speaker Change: While we struggle with overhead absorption due to the lower capacity yields of a new factory, we continue to see opportunities for cost-out initiatives. In conjunction with our manufacturing consulting partner.

Speaker Change: We will be working to eliminate inefficiencies in the coming months through continuous improvement initiatives to reduce our labor, scrap, and quality issues.

Jared Smith: This extensive operations review will proceed for the next 20 weeks, focusing on improving financial results by removing critical constraints through continuous improvement initiatives and enhancing our engineering processes. We are excited to see the transformation underway and couldn't be more excited as we come into our second and third quarters. Before I turn it over to our next speaker, I want to remind everyone of the progress we've made since our last earnings call.

Speaker Change: This extensive operations review will proceed for the next 20 weeks.

Speaker Change: focusing on improving financial results by removing critical constraints through continuous improvement initiatives and enhancing our engineering processes.

Speaker Change: We are excited to see the transformation underway and couldn't be more excited as we come into our second and third quarter.

Speaker Change: Before I turn it over to our next speaker, I want to remind everyone of the progress we've made since our last earnings call.

Jared Smith: Just this last month, we delivered 211,000 pieces of 12.7x108 for zero delta. We were clear to start production on our 6.5, Creedmore, I-VAC, and BMMPR rounds, and we increased our take rate from 5.8% to 6.2% in less than a year. We've enabled cross-selling and have accessories with firearms inside the marketplace cart for the last 30 days. And this last quarter, we signed a financing agreement with GearFire with an anticipated Q2 rollout. And lastly, we executed share repurchases in excess of $1 million this last quarter.

Speaker Change: Just this last month, we delivered 211,000 pieces of 12.7x108 for zero delta. We were clear to start production on our 6.5, Creedmore, IVAC and BMMPR rounds.

Speaker Change: and we increased our take rate from 5.8 to 6.2%.

Speaker Change: and less than a year. We've enabled Cross Selling of accessories with firearms inside the marketplace cart in the last 30 days. And this last quarter we signed a financing agreement for with gear fire with an anticipated Q2 rollout.

Jared Smith: And lastly, we executed share repurchases in excess of $1 million this last quarter.

Jared Smith: One of the biggest initiatives we are now undertaking is streamlining all corporate and divisional processes. In January, we brought in Paul Kuzowski as our chief compliance and transformation officer to start identifying opportunities for savings throughout the company and making the changes necessary for improving return. Paul has 21 years of experience in manufacturing in the consumer product goods space and has a firm handle on our opportunities for cost savings and process efficiencies. I will now turn it over to Paul Cadaso, our Chief Compliance and Transformation Officer.

Speaker Change: One of the biggest initiatives we are now undertaking is streamlining of all corporate and divisional processes.

Jared Smith: In January , we brought on Paul Kozlowski as our Chief Compliance and Transformation Officer to start identifying opportunities for savings throughout the company and making the changes necessary for improving returns.

Paul Cadaso: Paul has 21 years of experience in manufacturing in the consumer product goods space and has a firm handle on our opportunities for cost savings and process efficiencies.

Jared Smith: I will now turn it over to Paul Kozlowski.

Paul Kassowski: Thanks, Jared. This is an exciting time at Ammo. We're executing on a strategy that will enable long-term profitable growth for the ammunition division by focusing on rifle brass production, while positioning Gun Broker as the most versatile online site for outdoor enthusiasts through increased functionality and diversified product offerings.

Paul Kassowski: our Chief Compliance and Transformation Officer.

Paul Kassowski: Thanks, Jared. This is an exciting time at ammo. We're executing on a strategy that will enable long-term profitable growth for the ammunition division by focusing on rifle brass production.

Paul Kassowski: while positioning GunBroker as the most versatile online site for outdoor enthusiasts through increased functionality and diversified product offerings.

Paul Kassowski: Since joining the company, we've identified up to $15 million in cost-cutting and working capital opportunities in an effort to simplify our business model, improve visibility to costs, and enable us to actively manage operating margins. We believe these opportunities can be realized over the next 18 to 24 months. Importantly, we now have the organizational alignment and the talent to execute these initiatives. However, this type of change takes time as we institutionalize a cultural mindset that emphasizes profitable growth. I will now turn it over to Rob Wiley, our CFO, to discuss our Q1 financial performance and provide further detail.

Paul Kassowski: The joining of the company, we've identified up to 15 billion in cost cutting and working capital opportunities in an effort to simplify our business model, improve visibility to cost and enable us to actively manage operating margins.

Rob Wiley: We believe these opportunities can be realized over the next 18 to 24 months.

Paul Kassowski: Importantly, we now have the organizational alignment and the talent to execute these initiatives.

Rob Wiley: The type of change takes time as we institutionalize a cultural mindset that emphasizes profitable growth.

Rob Wiley: I will now turn it over to Rob Wiley, our CFO to discuss our Q1 financial performance and further detail.

Rob Wiley: Thank you, Paul. Welcome, everyone.

Rob Wiley: Thank you, Paul. Welcome, everyone. Let me now review the financials for the first quarter of fiscal year 2025 in more detail.

Rob Wiley: Let me now review the financials for the first quarter of fiscal year 2025 in more detail. We ended the first quarter of our 2025 fiscal year with total revenues of approximately $31 million, in comparison to $34.3 million in the prior year quarter. Our ammunition segment made up $18.7 million of total revenues, and our marketplace segment generated the remaining $12.3 million in revenues. The decryson revenue was primarily related to decryson activity across both our reports, which we believe decreased as a result of the current macroeconomic environment impacting our industry as well as others.

Rob Wiley: We ended the first quarter of our 2025 fiscal year with total revenues of approximately $31 million in comparison to $34.3 million in the prior year quarter.

Rob Wiley: Our ammunition segment made up 18.7 million of full revenues and our marketplace segment generated a remaining 12.3 million revenues.

Rob Wiley: The decrease in revenue was primarily related to the a decrease in activity across both over 4-5 minutes.

Rob Wiley: which we believe decreased as a result of the current macroeconomic environment impacting our industry as well as others.

Rob Wiley: Cost of revenues was approximately $21.2 million for the quarter compared to $20.2 million in the comparable prior year quarter. Costa Brabany was for our marketplace segment was 1.8 million, and our ammunition segment cost of revenues was 19.4 million. This resulted in a total gross margin for the quarter of 9.8 million, or 31.6%, compared to 14 million, or 40.9%, in the prior year period. Our marketplace segment gross margin was $10.5 million, or 85.6%.

Rob Wiley: Cost of revenues was approximately $21.2 million for the quarter compared to $20.2 million in the comparable prior year quarter.

Rob Wiley: Costs of Brebinus for our Marketplace segment was 1.8 million, and our ammunition segment cost of Brebinus were 19.4 million.

Rob Wiley: This resulted in a total gross margin for the quarter of 9.8 million or 31.6% compared to 14 million or 49% and the prior year period.

Rob Wiley: Our marketplace segment gross margin was $10.5 million or 85.6%. The gross margin of our ammunition segment was negative $0.7 million or negative 4%.

Rob Wiley: The gross margin of our ammunition segment was negative $0.7 million, or negative 4%. The increasing cost of goods sold and decreasing gross profit margin were related to the shift in our sales mix and production inefficiencies in our ammunition segment in comparison to the prior year period. Although our margins decreased from the prior period, the robust margins on gunbroker continue to hold strong, and while the margins in our ammunition segment remain down, as a plant ramp is still underway, we're beginning to see increased production throughput, and expect that we will see increased product marginality in due periods if we are able to continue with this trend.

Rob Wiley: The increasing cost of goods sold and decreasing gross profit margin was related to the shift in our sales mix and production inefficiencies in our ammunition segment in comparison to the prior year period.

Rob Wiley: Although our margin's decrease from the prior period, the robust margins on gunbroker continue to hold strong.

Rob Wiley: And while the margins in our ammunition segment remain down, as the plant ramp is still underway, we are beginning to see increased production throughput and expect that we will see increased product marginality in future periods if we are able to continue with this trend.

Rob Wiley: There were approximately 6.3 million of non-recurring expenses in the quarter related to legal and professional fees, which we have included as an add-back to adjust EBITDA. The $6.3 million of non-recurring expenses also included $3.2 million of expenses related to a contingency stemming from litigation GunBroker was involved with prior to our acquisition. We expect to recover 2.9 million shares of common stock as a result of this settlement, which will be cancelled and returned to our authorized but unissued share pool.

Speaker Change: There was approximately 6.3 million of non-occurring expenses in the quarter related to legal and professional fees, which we have included as an add-back to a Justin Bieber down.

Rob Wiley: The 6.3 million non-referring expenses also included 3.2 million expenses related to a contingency stemming from litigation, gun broker was involved with prior to our acquisition.

Rob Wiley: We expect to recover 2.9 million shares of Common Sock as a result of the settlement, which will be canceled and returned to our authorized but unissued share pool.

Rob Wiley: For the quarter, we recorded adjusted EBITDA of approximately $2 million compared to the prior quarter adjusted EBITDA of $6.5 million. This resulted in a loss per share of $0.07 for the quarter or adjusted net income per share of $0.01, in comparison to a loss per share of two cents in the prior quarter or adjusted net income per share of four cents.

Rob Wiley: For the quarter, we recorded adjusted EBITDA of approximately $2 million compared to the prior quarter adjusted EBITDA of $6.5 million.

Rob Wiley: This resulted in a loss per share of $0.07 for the quarter, or adjusted net income per share of $0.01, in comparison to a loss per share of $0.02 in the prior quarter, or adjusted net income per share of $0.04.

Rob Wiley: Looking forward, we're continuing to focus on streamlining our manufacturing processes, which should improve product throughput and marginality. For GunBroker, efforts to offer a flexible financing option to customers are well underway, as well as our cross-selling solution, which provides our users with the ability to view and purchase compatible items when going through the checkout process. We expect these enhancements will drive sales growth through better functionality and enhance the purchasing power of buyers. Our financial position remains strong, given our networking capital position, as we have reported 134 million incurred assets, including 50.8 million of cash and cash co-blinds, along with 42.3 million of current liabilities.

Rob Wiley: Looking forward, we are continuing to focus on streamlining our manufacturing processes, which should improve product throughput and marginality.

Rob Wiley: For Gunbroker, efforts to offer a flexible financing option to customers as well underway, as well as our cell and solution was provides our users with the ability to view and purchase compatible items when going through the checkout process.

Rob Wiley: We expect these enhancements will drive sales growth through better functionality and enhanced purchasing power of buyers.

Rob Wiley: Our financial position remains strong, given our net working capital position, as we have reported $134 million in current assets, including $50.8 million of cash and cash equivalents, along with $42.3 million of current liabilities.

Rob Wiley: We believe this strong position will continue to stimulate our transformation effort. We purchased approximately 580,000 shares of our common stock under our purchase plan in the corporate quarter, bringing us to just over 1.9 million total shares for purchase under the plan since December of 2022.

Rob Wiley: We believe this strong position will continue to stimulate our transformation efforts.

Rob Wiley: We repurchased approximately 580,000 shares of our common stock under our purchase plan in the reported quarter, bringing us to just over 1.9 million total shares repurchased under the plan since December of 2022.

Rob Wiley: That concludes our opening remarks. I will now turn the call over to the operator for questions. Thank you.

Rob Wiley: That concludes our opening remarks. I'll now turn the call over to the operator for questions. Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys, and if at any time your question has been addressed and you would like to withdraw your question, please press star then, too, at this time. We will take our first question, which will come from Matt Koranda with Roth Capital Partners. Please go ahead.

Operator: We will now begin the question and answer session.

Operator: To ask a question, you may press star then 1 on your telephone keypad.

Operator: If you're using a speaker phone, please pick up your handset before pressing the keys and at any time your question has been addressed and you would like to withdraw your question, please press star then too.

Operator: At this time, we will take our first question, which will come from Matt Karenda with Rough Capital Partners. Please go ahead.

Joseph (on behalf of Matt Koranda): Good afternoon. This is Joseph on for Matt. We just wanted to know how we should expect Cacens or a needs to ramp up from here. Can we assume to get back to growth in two Q&B on and also regarding your comments on growth margins for the Alamos segment? Can we also expect a positive inflection for the second Q&B on?

Joseph (on behalf of Matt Koranda): Good afternoon, this is Joseph on for Matt.

Joseph (on behalf of Matt Koranda): We just wanted to know how should we expect casing revenues to ramp up from here?

Joseph (on behalf of Matt Koranda): Can we assume to get back to growth in 2Q and beyond? And also, regarding your comments on growth margins for the ammo segment, can we also expect a positive inflection for the second quarter and beyond?

Jared Smith: Joseph, great question. So last quarter, we shipped an additional million dollars in our centerfire rifle brass casings business. And yes, we expect steady progress with rifle case production in the quarters ahead.

Jared Smith: Joseph, great question.

Jared Smith: So last quarter, we shipped an additional million dollars in our Center for Rifle Brass Cacings business and yes. We expect steady progress with rifle case production in the quarter's head.

Jared Smith: And if I could get just one more in there. Anything you have observed in the recent months about firearms in the shooting sports consumer? Did you see any uptick in demand in July? And what about the recent weeks with the presidential election becoming more competitive? Are there any trends in AOV or financing attach rates? Yeah.

Jared Smith: And if I could get just one more in there.

Jared Smith: Anything you have observed in the recent months about firearms in the shooting sports consumer? Did you see any uptick in demand in July ? And what about the recent weeks with the president election becoming more competitive? Is there any trends in AOV or financing attach rates?

Jared Smith: So, what we saw in NICS was a decline in Q1, well, our Q4 into Q1, but we've seen a slight uptick in NICS for July. We anticipate that to hold through the election period, but once again, I'm not unfortunate when it comes to the election in the next, but yeah, you know what we're seeing today, the trend in July looks healthy compared to Q1 and Q4.

Jared Smith: You know, so what we saw next was a decline in Q1, well, our Q4 and the Q1, but we've seen slide it uptick and next for July.

Jared Smith: We anticipate that to hold through the election period, but once again,

Jared Smith: I'm not a fortune teller when it comes to the election and to Nick's, but yeah, you know, what we're seeing today, the trend in July looks healthy compared to Q1 and Q4.

Joseph: Okay, thank you for answering my questions. I'll go back and see you.

Joseph: Okay, thank you for answering my questions. I'll go back into the queue.

Operator: and our next question will come from Mark Smith on Lake Street. Please go ahead.

Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to our channel.

Speaker Change: and our next question will come from Mark Smith with Lake Street. Please go ahead.

Mark Smith: Hi guys, I wanted to start on gun broker and the kind of sales decline there. Jared, and this is maybe a big picture question, how much of this is maybe a function of channel inventory and supply, as mom and pops and other gun stores kind of have everything in stock that they need and want? And if so, how in the future do you compete more in kind of steady markets with brick-and-mortar?

Mark Smith: Hi guys, I wanted to start on Gun Broker and kind of the sales decline there. Jared, and this is maybe a big picture question, is

Mark Smith: How much of this is maybe a function of, you know, channel inventory and supply, you know, as mom and pops and other gun stores kind of have everything in stock that they need and want?

Speaker Change: And if so, how in the future do you compete more in kind of steady markets with brick-and-mortar?

Jared Smith: Excellent question, Mark. There's definitely a steady inventory that we saw through the summer. Gun broker really has to compete in that premium space, but we will continue to control the ability to shop and price. We own the used market, and we're seeing an increase in firearms in the used market. So there are bright spots within our market segments and our ability to go after and be able to really leverage cross-selling in the months ahead.

Speaker Change: and for a question mark.

Speaker Change: You know...

Jared Smith: There's definitely a steady inventory that we saw through the summer months with NIC checks being down.

Jared Smith: Gun Broker really has to compete in that premium space. We will continue to control the ability to shop and price. We own the used market.

Jared Smith: We're seeing an increase in firearms in the use market, so there are bright spots within our market segments and our ability to go after and be able to really leverage cross-selling in the months ahead. But you're right, there is a tendency as wallet share shrinks.

Jared Smith: But you're right, there is a tendency as wallet share shrinks due to a reduction in consumer discretionary spending that impacts the business. But at the end of the day, we own the premium side, we own the used market, and with us now turning over and turning on the ability to cross sell within the cart, we see tremendous potential going forward.

Jared Smith: Due to a reduction in consumer discretionary spending that impacts the business. But at the end of the day...

Jared Smith: We own the premium side, we own the use market, and with us now turning over and turning on the ability to cross out within the car, we see a tremendous potential going forward.

Jared Smith: And that was kind of my next question, just where are we at, you know, as far as cross-selling? Are we still just kind of in the first inning here as far as being able to directly market and show customers, you know, when they put a certain firearm in their cart, an optic or new grips or whatever it may be for that? Where are we in that process? And are you seeing any early signs of success?

Jared Smith: Okay, and that was kind of my next question just

Jared Smith: Where are we at, you know, as far as cross-selling? Are we still just kind of first inning?

Speaker Change: Here, as far as being able to directly market and show customers when they put a certain firearm in their cards, you know, an optic or new grips or whatever it may be for that is where we at that process and are you seeing any early signs of success.

Jared Smith: That functionality just came on in the last 25 days, and our algorithms get better as we categorize and prioritize what we're positioning in front of the customer. You know, it's part of the answer to the take rate that we're going to be able to promote products and be able to promote items where we have greater margins, from an ability to grow the business. It's really about getting out in front of those consumers that are shopping for these premium items and doing a better job of accessorizing those firearms before they check out.

Jared Smith: That functionality just came on in the last 25 days, Mark.

Jared Smith: And as our algorithms get better, as we categorize and prioritize what we're positioning in front of the customer,

Jared Smith: You know, it's part of the answer to the take rate is that we're going to be able to be able to promote products and be able to promote items where we have greater margins.

Jared Smith: and from a ability to grow the business, it's really about getting out in front of those consumers that are shopping these premium items and doing a better job of accessorizing those firearms before they check out.

Jared Smith: Okay, and then I think last for me, just shifting over to the ammo side of the business. Any additional updates on plant operations? I know you, you know, with Paul coming on, it sounds like there's a lot of places to kind of come in and pick up nickels and dimes, but, you know, just curious, are there any big headaches that are out there that are kind of remaining from the last couple quarters, any equipment that's not running, things that need replaced, you know, maybe talk about kind of the, any big things that are remaining that are kind of Well, we just took delivery of a new car.

Jared Smith: Okay.

Jared Smith: And then I think last for me, just shifting over to the ammo side of the business, any additional updates on kind of plant operations? I know you, you know, with Paul coming on, it sounds like there's...

Jared Smith: A lot of places kind of come in and pick up nickels and dimes, but just curious, are there any big headaches that are out there that are kind of remaining from the last couple quarters and equipment that's not running, things that need to be replaced?

Jared Smith: you know maybe talk about kind of the any big things that are remaining that are kind of hurting operations within the plant and manor clock.

Jared Smith: Well, we just took delivery of an annealing oven that has been an issue for over a year, a year and a half, and it'll be starting up in late August. So that's one hurdle that's been in place. There are certainly issues as we bring on more capacity that we'll run into, but we've had a massive uptick in.50 cal production, a line item that we've not been able to lean into in the past.

Jared Smith: Well, we just took delivery of an evening oven that has been an issue for over a year and a half and it'll be starting up and late August or September.

Jared Smith: So that's one hurdle that's been in the way.

Jared Smith: There are certainly issues as we bring on more capacity that we'll run into, but we've had a massive uptick in .50 cal production, a line item that we've not been able to lean into in the past. We have firm deliveries scheduled out for the next year, year and a half.

Jared Smith: We have firm deliveries scheduled out for the next year and a half. Medium Action 2 is growing its capability. We've had some mechanical issues with another press. But at the end of the day, more and more rifle production comes on, and we are making steady progress, and you will continue to see steady progress in Q2 and Q3.

Jared Smith: Media Action 2 is growing its capability. We've had some mechanical issues with another press.

Jared Smith: But at the end of the day, more and more rifle production comes on, and we are making steady progress, and you will continue to see steady progress in Q2 and Q3.

Speaker Change: Okay, great, thank you.

Operator: and With no remaining questions, we will conclude our question and answer session. I'd like to turn the conference back over to Jared Smith for any closing remarks. I want to thank you.

Operator: And with no remaining questions, we will conclude our question and answer session. I'd like to turn the conference back over to Jared Smith for any closing remarks.

Jared Smith: I want to thank you 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 second quarter 2025 results in November. Thanks, and have a great day.

Jared Smith: I want to thank you 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 fiscal second quarter 2025 results in November . Thanks, and have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Operator: [inaudible]

Operator: [inaudible]

Jared Smith: The quantities, processes, and teamwork required must be fine-tuned, and it has required us to cultivate talent and the resources to handle the transformation to manufacture this much anticipated rifle capacity. While we struggle with overhead absorption due to the lower capacity yields of a new factory, we continue to see opportunities for cost-out initiatives in conjunction with our manufacturing consulting partners. We will be working to eliminate inefficiencies in the coming months through continuous improvement initiatives to reduce our labor, scrap, and quality issues.

Jared Smith: We've been delivering and releasing code over the last month on Gunbroker that are starting to take noticeable effect, changes that will positively affect both our 8 million plus registered users and our monthly 13 million unique visitors to the site. We launched our cart just four months ago, and this last month began cross-selling accessories for the firearms purchased through the cart. We will continue to cultivate the algorithms and analytics over the coming months and fine-tune the recommended offerings across all categories as our environment accelerates its learning.