Q1 2025 Smith & Wesson Brands Inc Earnings Call

First Quudder: Good day, everyone and welcome to Smith and Western brands in Corporate I've First Quudder.

School 2025 Financial Results Conference Call. This call is being recorded.

Speaker Change: SISCO 2020-25 financial results conference call.

Kevin Maxwell: At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us some information about today's call. Thank you and good afternoon. Our comments today may contain forward-looking statements. Our use of the words anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify forward-looking statements. Forward-looking statements may also include statements on topics such as our product development, objectives, strategies, market share, demand, consumer preferences, inventory conditions for our products, growth opportunities, and trends, and industry conditions in general. Forward-looking statements represent our current judgment about the future and are subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by our statements today.

Speaker Change: This call is being recorded.

Kevin Maxwell: at this time I would like to turn the call over to Kevin Maxwell, Smith and Wes in general council. We'll give us some information about today's call.

Kevin Maxwell: Thank you and good afternoon. Our comments today may contain forward-looking statements. Our use of the words anticipate, project, estimate, expect, intent, believe, and other similar expressions are intended to identify forward-looking statements.

Speaker Change: For looking statements may also include statements on topics such as our product development, objectives, strategies, market share, demand, consumer preferences, inventory conditions for our products, growth opportunities and trends and industry conditions in general.

Speaker Change: We're looking statements represent our current judgment about the future and our subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by our statements today.

Kevin Maxwell: These risks and uncertainties are described in our SEC filings, which are available on our website, along with a replay of today's call.

Speaker Change: These risks and uncertainties are described in our SEC filings, which are available on our website, along with a replay of today's call. We have no obligation to update for looking statements.

Kevin Maxwell: We have no obligation to update forward-looking statements. We reference certain non-GAAP financial results. Our non-GAAP financial results exclude relocation expense and other costs. Reconciliation of GAAP financial measures to non-GAAP financial measures can be found in our SEC filings and in today's earnings press release, each of which is available on our website. Also, when we reference EPS, we are always referencing fully diluted EPS, and any reference to EBITDOS is to adjusted EBITDOS.

Speaker Change: We reference certain non-gap financial results. Our non-gap financial results exclude relocation expense in other costs.

Speaker Change: Reconciliation of GAP Financial Measures to non-GAP Financial Measures can be found in our SEC filings and in today's earnings press release, each of which is available on our website.

Speaker Change: Also, when we were reference EPS, we were always referencing fully diluted EPS, and any reference to EBITDAUS is to adjust the EBITDAUS.

Kevin Maxwell: Before I hand the call over to our speakers, I would like to remind you that when we discuss NYX results, we are referring to adjusted NYX, a metric published by the National Shooting Sports Foundation based on FBI NYX data. Adjusted NYX removes those background checks conducted for purposes other than firearms purchases. Adjusted NYX is generally considered the best available proxy for consumer firearm demand at the retail counter. Because we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers, and not to end consumers, NYX generally does not directly correlate to our shipments or market share in any given time period.

Speaker Change: Before I hand the call over to our speakers, I would like to remind you that when we discuss next results, we are referring to a Justin Nick, a metric published by the National Shooting Sports Foundation based on FBI Nick's data.

Speaker Change: Adjusted Next, removes those background checks conducted for purposes other than firearms purchases.

Speaker Change: Justin Knicks is generally considered the best available proxy for consumer firearm demand at the retail counter.

Speaker Change: Because we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers, and not to end consumers, Nick's generally does not directly correlate to our shipments or market share in any given time period. We believe mostly due to inventory levels in the channel.

Mark Smith: We believe, mostly due to inventory levels in the channel.

Mark Smith: Joining us on today's call are Mark Smith, our President and CEO, and Dean McPherson, RCFO.

Speaker Change: Joining us on today's call, our Mark Smith, our President and CEO in Deana McPherson, or CFO. With that, I will turn to call over to Mark.

Mark Smith: With that, I will turn the call over to Mark. Thank you, Kevin, and thanks everyone for joining us today. Overall firearms demand during our first fiscal quarter was softer than we anticipated, but our results once again proved the resiliency of our flexible manufacturing model, which allows us to adapt quickly to any market conditions and still deliver on bottom line profitability targets. And importantly, while the usual summer seasonality was more pronounced this year, demand has already begun to rebound as we enter the busy fall season, and our outlook for the balance of fiscal 2025 has not changed.

Mark Smith: and thanks everyone for joining us today.

Mark Smith: Overall firearms demand during our first fiscal quarter was softer than we anticipated, but our results once again proved the resiliency of our flexible manufacturing model, which allows us to adapt quickly to any market conditions and still deliver on bottom-line profitability targets.

Mark Smith: and importantly, while the usual summer seasonality was more pronounced this year, demand has already begun to rebound as we enter the busy fall season and our outlook for the balance of fiscal 2025 has not changed. We continue to expect to grow sales and earnings over fiscal 2024.

Mark Smith: We continue to expect to grow sales and earnings over fiscal 2024. We believe continued inflationary pressure on consumer discretionary spending, with the primary driver of the lower foot traffic reported by our channel partners throughout the summer. Yet, despite these headwinds, we still delivered nearly $10 million of EBITUS, which was in line with expectations and, again, proves the resiliency of our flexible manufacturing model. Propertability was aided by our discipline cost management as well as growth margins, which improved 80 basis points versus a year ago, in part reflecting higher-6 cost absorption as we continued to ramp capacity and realize efficiencies in our Tennessee operations.

Speaker Change: We believe continued inflationary pressure on consumer discretionary spending with the primary driver of the lower foot traffic reported by our channel partners throughout the summer.

Speaker Change: Yet, despite these headwins, we still deliver nearly $10 million of e-badas, which was in line with expectations. And again, prove the resiliency of our Flexumum manufacturing model.

Speaker Change: Profitability was aided by our discipline cost management as well as growth margins, which improved 80 basis points versus a year ago. In part reflecting higher six cost absorption, as we continued to ramp capacity and realize efficiencies in our Tennessee operations.

Mark Smith: On the revenue side, during our fourth quarter call, we shared our view that the firearms market was expected to be much more competitive over the near term, primarily due to pressure on consumer discretionary spending from factors like high inflation. While we were directionally accurate, the magnitude of the weakness was more pronounced than we anticipated. Adjusted NYX was down 3% during our first quarter from the comparable period last year, and while NYX was up 4% during July, this growth appears to have been driven mostly by the hunting category, where we are still early in establishing a foothold.

Speaker Change: On the revenue side, during our fourth quarter call, we shared our view that the firearms market was expected to be much more competitive over the near term. Primarily due to pressure on consumer discretionary spending from factors like high inflation.

Speaker Change: While we are a directionally accurate, the magnitude of the weakness was more pronounced than we anticipated.

Speaker Change: A justed nicks was down 3% during our first quarter from the comparable period last year. And while nicks was up 4% during July, this growth appears to have been driven mostly by the hunting category, where we are still early in establishing a foothold.

Mark Smith: We also continued to see heightened promotional activity across the industry, especially around lower-priced entry-level handguns. While the introduction of our entry-level price Bodyguard 2.0, which I will cover in a moment, has been a huge success, the launch occurred late in the quarter, resulting in somewhat limited shipments during Q1. On this note, we continued to be pleased with ASPs, which held overall and were up fractionally versus a year ago and up over 5% from Q4, despite a highly competitive market throughout the summer. This was consistent with the expectations we shared on the Q4 call, and we continued to believe it reflects our consumers' deep loyalty and trust in this myth and lesson brand.

Speaker Change: We also continue to see heightened promotional activity across the industry, especially around lower priced entry-level handguns.

Speaker Change: While the introduction of the entry-level price bodyguard 2.0, which I will cover in a moment, has been a huge success, the launch occurred late in the quarter, resulting in somewhat limited shipments during Q1.

Speaker Change: On this note, we continue to be pleased with ASPs, which held overall and were up for actually versus a year ago and up over 5% from Q4, despite a highly competitive market throughout the summer.

Speaker Change: This was consistent with the expectations we shared on the Q4 call, and we continue to believe it reflects our consumer's deep loyalty and trust in this myth and lesson brand.

Mark Smith: The success of the 1854 lever-action rifle continued to be the key factor in driving the nearly 32% year-over-year increase in our long-gone ASPs. In handguns, ASPs were down over 9%, due to focus promotional activity in this category to stimulate demand, as well as mixed factors associated with the successful launches of several entry-level price products, combined with the lower overall pistol shipments. On the innovation front, we continued to maintain a solid cadence of new product introductions, and in total, our new product portfolio continues to perform very well, accounting for over 41% of the price. As I mentioned earlier, in Q1, we introduced the Bodyguard 2.0, which is the next generation of the very popular Bodyguard line that we introduced in 2010, and has been a huge success.

Speaker Change: The success of the 1854-level action rifle continues to be the key factor in driving the nearly 32% year-over-year increase in our long-an ASPs.

Speaker Change: In handguns, ASPs were down over 9% due to focus promotional activity in this category to stimulate demand, as well as mixed factors associated with the successful launches of several entry-level price products, combined with the lower overall pistol shipments.

Speaker Change: On the Innovation Front, we continue to maintain a solid cadence of new product introductions. And in total, our new product portfolio continues to perform very well, accounting for over 41% of sales in the first quarter.

Speaker Change: As I mentioned earlier in Q1 we introduced the Bodyguard 2.0, which is the next generation of the very popular Bodyguard line that we introduced in 2010 and has been a huge success.

Mark Smith: Our product management and engineering teams pack this tiny pistol with all the features that our consumers desire in an everyday defense of concealed carry firearm. In addition, demand for our 1854 lever-action rifle remains robust for the models we've launched so far, with many more introductions coming as we continue to build out this line throughout the remainder of the fiscal year. As a reminder, we view the lever-action as a major platform opportunity with a multi-year pipeline of potential growth drivers. Both the 1854 and the Bodyguard production will also be supported by significant capacity expansion throughout the remainder of the fiscal year.

Speaker Change: Our product management and engineering teams packed this tiny pistol with all the features that our consumers desire in an everyday defense of concealed carry firearm.

Speaker Change: In addition, demand for our 1854 lever action rifle remains robust for the models we've launched so far, with many more introductions coming as we continue to build out this line throughout the remainder of the fiscal year.

Speaker Change: As a reminder, we view the lever action as a major platform opportunity with multi-year pipeline of potential growth drivers.

Speaker Change: Both the 1854 and the bodyguard production will also be supported by significant capacity expansion throughout the remainder of the fiscal year.

Mark Smith: Turning now to the balance sheet, as usual, we've been building inventories throughout the summer to support the strong demand for our new products and prepare for the busy fall season ahead. The nearly $30 million increase in internal inventory at the end of the first quarter was slightly elevated versus expectations, simply due to the softer market, but also reflects very clean channel inventories and is indicative of our confidence in the outlook for the balance of the year as we still expect to end the year with inventory levels flat to last year, excluding new product launches. Finally, from a capital allocation standpoint, we accelerated our buyback activity in Q1 with the repurchase of nearly 871,000 shares for nearly $13 million, in addition to paying our regular quarterly dividend.

Speaker Change: Turning now to the balance sheet, as usual, we've been building inventories throughout the summer to support the strong demand for our new products and prepare for the busy fall season ahead.

Kevin Maxwell: at this time I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us some information about today's call. For looking statements may also include statements on topics such as our product development, objectives, strategies, market share, demand, consumer preferences, inventory conditions for our products, growth opportunities and trends, and industry conditions in general. For looking statements represent our current judgment about the future and our subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by our statements today.

Speaker Change: The nearly $30 million increase in internal inventory at the end of the first quarter was slightly elevated versus expectations, simply due to the softer market.

Speaker Change: But also, reflects very clean channel inventories and is indicative of our confidence in the outlook for the bounce of the year as we still expect to end the year with inventory levels flat to last year, excluding new product launches.

Speaker Change: Finally, from a capital allocation standpoint, we accelerated our buy-back activity in Q1, with the repurchase of nearly $871,000, for nearly $13 million in addition to paying our regular quarterly dividend.

Mark Smith: In total, for the past 12 months, we have repurchased nearly 1.7 million shares. With CAPEX normalizing this year, coupled with our strong profitability and cash generation outlook, buybacks will remain a priority to drive long-term value for stockholders. As we announced earlier today, our Board of Directors has also just authorized a new $50 million buyback program to replace the program that is set to expire in mid-September. In summary, once again, I am very proud of our team's commitment and discipline to deliver on our key strategic initiatives around brand, marketing, innovation, operational excellence, and driving shareholder value.

Speaker Change: In total, for the past 12 months, we have repurchased nearly 1.7 million shares.

Speaker Change: With CapEx normalizing this year coupled with our strong profitability and cash generation outlook, buybacks will remain a priority to drive long-term value for stockholders.

Kevin Maxwell: These risks and uncertainties are described in our SEC filings which are available on our website along with a replay of today's call. We have no obligation to update for looking statements.

Speaker Change: As we announced earlier today, our Board of Directors has also just authorized a new $50 million buy-back program to replace the program that is set to expire in mid-September.

Kevin Maxwell: We reference certain non-gap financial results. Our non-gap financial results exclude relocation expense and other costs.

Speaker Change: In summary, once again, I am very proud of our team's commitment and discipline to deliver on our key strategic initiatives around brand marketing, innovation, operational excellence, and driving shareholder value.

Kevin Maxwell: Reconciliation of gap financial measures to non-gap financial measures can be found in our SEC filings and in today's earnings press release, each of which is available on our website. Also, when we reference EPS, we are always referencing fully diluted EPS and any reference to EBITDOS is to adjusted EBITDOS.

Mark Smith: Despite a very challenging environment in Q1, we still delivered on our bottom-line profitability targets, and as we look forward with new capacity coming online for our very popular new products, strong pipeline innovation, and typically busy firearms demand season now upon us, we expect to more than offset these temporary headwinds during the balance of the fiscal year and continue to expect top and bottom-line growth for the full year.

Speaker Change: Despite a very challenging environment in Q1, we still delivered on our bottom line profitability targets.

Speaker Change: and as we look forward with new capacity coming online for our very popular new products.

Speaker Change: Strong pipeline innovation and typically busy firearms demands he's in now upon us. We expect to more than offset these temporary headwinds during the balance of the fiscal year and continue to expect top and bottom line growth for the full year.

Kevin Maxwell: Before I hand the call over to our speakers, I would like to remind you that when we discuss NYX results, we are referring to adjusted NYX, a metric published by the National Shooting Sports Foundation based on FBI NYX data. Adjusted NYX removes those background checks conducted for purposes other than firearms purchases. Adjusted NYX is generally considered the best available proxy for consumer firearm demand at the retail counter. Because we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers and not to end consumers, NYX generally does not directly correlate to our shipments or market share in any given time period. We believe mostly due to inventory levels in the channel.

Deana McPherson: With that, I'll turn the call over to Dina to cover the financials. Thanks, Mark. Net sales for our first quarter of $88.3 million, or $25.9 million, or 22.7% below the prior year comparable quarter. During the quarter, inventory in the distribution channel remained relatively flat from the prior quarter in terms of actual units, indicating positive sell-through of our products at retail. As expected, handgun ASPs declined slightly from Q4 levels due to promotions and a shift in mix to lower price products, while ASPs for long guns increased due to the mix of higher price products and lower overall volume.

Speaker Change: With that, I'll turn the call over to Deana to cover the financials.

Deana McPherson: Thanks Mark, that sales for our first quarter of $88.3 million, which $25.9 million, or $22.7% below the prior year comparable quarter.

Deana McPherson: During the quarter, inventory in the distribution channel remained relatively flat from the prior quarter in terms of actual units, indicating positive self-through of our products at retail.

Deana McPherson: As expected, Handgun ASPs declined slightly from Q4 levels due to promotions in a shift in McPherson lower price products, while ASPs for long guns increased due to the mix of higher price products and lower overall volume.

Kevin Maxwell: Joining us on today's call are Mark Smith, our President and CEO and Dean McPherson RCFO.

Deana McPherson: Although revenue was below our expectations, we were pleased with new product launches this quarter and began to see positive momentum from a demand perspective as we neared the end of the first quarter. Gross margin of 27.4% was 0.8% above the comparable quarter last year due primarily to increased absorption on higher production, lower inventory reserve adjustments, a small price increase that went into effect in January 2024, and lower relocation costs, partially offset by higher promotional costs. As a reminder, we typically generate lower margins in our first quarter due to reduced operating days, resulting from our summer operating shutdown.

Mark Smith: With that, I will turn the call over to Mark. Thank you, Kevin, and thanks everyone for joining us today. Overall firearms demand during our first fiscal quarter was softer than we anticipated, but our results once again proved the resiliency of our flexible manufacturing model, which allows us to adapt quickly to any market conditions and still deliver on bottom line profitability targets.

Deana McPherson: Although revenue was below our expectations, we were pleased with new product launches this quarter and began to see positive momentum from a demand perspective as we

Deana McPherson: Gross margin of 27.4%

Deana McPherson: was 0.8% of off the comparable quarter last year due primarily to increased absorption on higher production, lower inventory reserve adjustments.

Mark Smith: And importantly, while the usual summer seasonality was more pronounced this year, demand has already begun to rebound as we enter the busy fall season and our outlook for the balance of fiscal 2025 has not changed. We continue to expect to grow sales and earnings over fiscal 2024. We believe continued inflationary pressure on consumer discretionary spending with the primary driver of the lower foot traffic reported by our channel partners throughout the summer.

Deana McPherson: A small price increase that went into effect in January 2024, and lower relocation costs, partially offset by higher promotional costs.

Deana McPherson: As a reminder, we typically generate lower margins in our first quarter due to reduced operating days resulting from our summer operating shutdown. We continue to target margins in the low 30s for the full year.

Deana McPherson: We continue to target margins in the low 30s for the full year. Operating expenses of $26.1 million for our first quarter were flat to the prior year comparable quarter. It should be noted that the prior year included a $2 million impairment of distribution equipment as part of the relocation. Excluding that impairment, operating expenses rose during the current quarter due to increased new product development costs, increased compensation-related costs, the timing of the NRA show in May of this year versus April of last year, increased promotional costs, and higher legal costs, partially offset by the lack of profit sharing due to our operating loss this quarter.

Deana McPherson: Operating expenses of $26.1 million for our first quarter were flat to the prior year comparable quarter.

Deana McPherson: It should be noted that the prior year included a $2 million impairment of distribution equipment as part of the relocation.

Deana McPherson: Excluding that impairment, operating expenses rose during the current quarter due to increased new product development costs. Increase compensation related costs.

Deana McPherson: The timing of the NRA show in May of this year versus April of last year, increased promotional costs and higher legal costs, partially offset by the lack of profit sharing due to our operating loss this quarter.

Deana McPherson: A lower revenue combined with an increase in interest expense due to outstanding borrowings resulted in a $2.1 million net loss or a $0.05 loss per share. On a non-gap basis, our loss per share was two cents and in line with expectations. Cash used in operations for the first quarter was $30.8 million compared with cash generated of $40.6 million in the prior year comparable quarter due to a networking capital increase of $38.6 million, driven by a $30 million increase in inventory. We expect inventory to return to prior year levels by the end of the year, excluding new products.

Deana McPherson: A lower revenue combined with an increased and interest expense due to outstanding borrowings resulted in a $2.1 million net loss or a 5 cent loss per share. On a non-gap basis, our loss per share was two cents and in line with expectations.

Deana McPherson: Cash used in operations for the first quarter was $30.8 million, compared with cash generated of $40.6 million in the prior year comparable quarter due to a networking capital increase of $38.6 million, driven by a $30 million increase in inventory.

Deana McPherson: We expect inventory to return to prior year level by the end of the year, excluding new products.

Deana McPherson: We spent $4.7 million in capital projects this quarter compared with $32.1 million in the prior year comparable quarter, primarily due to the relocation being nearly completed during fiscal 2024. We expect our capital spending for the year to be between $25.30 million. We continue to opportunistically repurchase shares under our $50 million authorization. During the quarter, we repurchased approximately $871,000 shares at an average price of $14.75 for a total of $12.9 million. We paid $5.9 million in dividends and ended the quarter with $35.5 million in cash and $70 million in borrowing on our line of credit. Absent any opportunistic share repurchase opportunities or compelling capital investments, we continue to expect to be in a position to fully repay our line before the end of the fiscal year.

Deana McPherson: We spent $4.7 million in capital projects this quarter, compared with $32.1 million in the prior year comparable quarter, primarily due to the relocation being nearly completed during fiscal 2024. We expect our capital spending for the year to be between $25 and $30 million.

Deana McPherson: We continue to opportunistically repurchase shares under our $50 million authorization. During the quarter, we repurchase approximately $871,000 at an average price of $14.75 for a total of $12.9 million.

Deana McPherson: We paid $5.9 million in dividends, and ended the quarter with $35.5 million in cash, and $70 million in borrowing from our line of credit.

Deana McPherson: Absent any opportunistic share-reperture's opportunities or compelling capital investments we continue to expect to be in a position to fully repay our line before the end of the fiscal year.

Deana McPherson: As this goes in our press release today, our Board of Directors has approved a new $50 million share repurchase program that will become effective on September 20th, the day after the current authorization expires. This new program positions us to opportunistically repurchase shares for another 12 months. Just to recap the expiring $50 million authorization through July 31st, we have already repurchased nearly 1.7 million shares at an average price of $13.84.

Deana McPherson: As just close to our press release today, our Board of Directors has approved a new $50 million share-reported program that will become effective on September 20th, the day after the current authorization expires. This new program positions us to opportunistically repurchase shares for another 12 months.

Deana McPherson: Just to recap the expiring 50 million dollar authorization through July 31st, we have already repurchased nearly 1.7 million shares at an average price of $13.84.

Deana McPherson: Finally, our board has authorized our 13 cent quarterly dividends to be paid to stockholders of record on September 19th, with payment to be made on October 3rd. Looking forward to our second quarter, as Mark noted earlier, then the end during the summer was slower than we expected, but we started to receive reports of improved foot traffic in August. Channel inventory remains stable and at healthy levels. Overall, inventory is about 12 percent higher than last year at this time, but nearly 30 percent below this time two years ago, when we last experienced a similarly slow first quarter.

Deana McPherson: Finally, our Board of Authorized our 13-cent quarterly dividends to be paid to stockholders or record on September 19th with payment to be made on October 3rd.

Deana McPherson: Looking forward to our second quarter? As Mark noted earlier, the Mandarin-Lessummer was slower than we expected, but we started to receive reports of improved foot traffic in August.

Speaker Change: Channel inventory remains stable in at healthy levels. Overall, inventory is about 12% higher than last year at this time, but nearly 30% below this time 2 years ago, when we last experienced a similarly slow first quarter.

Deana McPherson: As we experienced two years ago, we expect our second quarter sales to grow significantly over the first quarter, and we expect to be in the range of 5 to 10 percent above Q2 fiscal 2024. We remain confident with the expectation we shared with you on the Q4 call that our full year revenue will be up mid to high single digits compared to fiscal 2024. We expect gross margins to improve in the second quarter on the increased sales volume, but don't expect to hit the 30% lullia due to operating days being impacted by the second half of our summer shutdown.

Speaker Change: As we experienced two years ago, we expect our second fiscal quarter sales to grow significantly over the first quarter, and we expect to be in the range of 5 to 10% above Q2 fiscal 2024.

Speaker Change: We remain confident with the expectation we shared with you on the Q4 call that our full year revenue will be up mid to high single digits compared to fiscal 2024.

Mark Smith: The nearly $30 million increase in internal inventory at the end of the first quarter was slightly elevated versus expectations simply due to the softer market but also reflects very clean channel inventories and is indicative of our confidence in the outlook for the balance of the year as we still expect to end the year with inventory levels flat to last year, excluding new product launches.

Speaker Change: We expect Rose margins to improve in the second quarter on the increased sales volume, but don't expect to hit the 30% lollia due to operating days being impacted for the second half of our summer shutdown. We do continue to expect that we will achieve the low 30s for margins for the full year due to increased operating days in the second half.

Deana McPherson: We do continue to expect that we will achieve the low 30s for margins for the full year due to increase operating days in the second half. Operating expenses in Q2 will likely be about 15% higher than in Q1, with half the increase driven by profit sharing and the remaining portion driven by promotions, sales activity, and distribution costs associated with the increased volume. Our effective tax rate is expected to be approximately 25%. Finally, as I noted earlier, absent opportunistic share repurchases, are other new opportunities to invest in our business. We continue to expect to have a debt-free balance sheet by the end of the fiscal year.

Mark Smith: Finally, from a capital allocation standpoint we accelerated our buyback activity in Q1 with the repurchase of nearly 871,000 shares for nearly $13 million in addition to paying our regular quarterly dividend. In total, for the past 12 months, we have repurchased nearly 1.7 million shares. With CAPEX normalizing this year coupled with our strong profitability and cash generation outlook, buybacks will remain a priority to drive long-term value for stockholders.

Speaker Change: Operating expenses in Q2 will likely be about 15% higher than in Q1, with half the increased driven by profit sharing and the remaining portion driven by promotions, sales activity, and distribution costs associated with the increased volume.

Speaker Change: Our effective tax rate is expected to be approximately 25%

Speaker Change: Finally, as I noted earlier, absent opportunistic share-reportances are other new opportunities to invest in our business. We continue to expect to have a debt-free balance sheet by the end of the fiscal year. With little left to spend on the relocation, capital investments for this project is nearly complete.

Deana McPherson: With little left to spend on the relocation, capital investments for this project are nearly complete. Consistent with prior commentary, we expect to generate operating cash of at least $75 million annually, and normal capital spending requirements are approximately $25 million per year, providing significant excess cash flow. As a reminder, our capital allocation plan continues to be: invest in our business, remain debt-free, and return cash to our stockholders.

Mark Smith: As we announced earlier today, our Board of Directors has also just authorized a new $50 million buyback program to replace the program that is set to expire in mid-September. In summary, once again I am very proud of our team's commitment and discipline to deliver on our key strategic initiatives around brand, marketing, innovation, operational excellence and driving shareholder value.

Speaker Change: and Assistant with Prior Commentary, we expect to generate operating cash of at least $75 million annually and normal capital spending requirements are approximately $25 million per year, providing significant excess cash flow.

Speaker Change: As a reminder, our capital allocation plan continues to be, Invest in our Business, Remained at Free, and Returning Catch to our Stockholders.

Operator: With that operator, can we please open the call to questions from our analysts? Yes. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Mark Smith: Despite a very challenging environment in Q1, we still delivered on our bottom line profitability targets and as we look forward with new capacity coming online for our very popular new products, strong pipeline innovation and typically busy firearms demand season now upon us, we expect to more than offset these temporary headwinds during the balance of the fiscal year and continue to expect top and bottom line growth for the full year.

Speaker Change: with that operator. Can we please open the call to questions from our analysts.

Speaker Change: Yes.

Speaker Change: If you would like to ask a question, please press star one on your telephone keypad. A confirmation total indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, maybe necessary to pick up your handset before pressing the star keys.

For a participant using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Mark Smith: Our first question is from Mark Smith with Lake Street Capital; please proceed. First question from me: I just wanted to dig into the inventory just a little bit. It looks like a lot of that was finished goods. Maybe walk through kind of your confidence level on being able to kind of push through and work your way through these finished goods here in queue two or in queue three. As you pointed out, the majority of the inventory bill wasn't finished goods. As I think you know, Mark and I've been around a while. The inventory in the summertime always grows.

Deana McPherson: With that, I'll turn the call over to Dina to cover the financials. Thanks Mark.

Speaker Change: with Lake Street Capital, please proceed.

Deana McPherson: Net sales for our first quarter of $88.3 million, or $25.9 million, or 22.7% below the prior year comparable quarter. During the quarter, inventory in the distribution channel remained relatively flat from the prior quarter in terms of actual units, indicating positive sell-through of our products at retail. As expected, handgun ASPs declined slightly from Q4 levels due to promotions and a shift in mix to lower price products, while ASPs for long guns increased due to the mix of higher price products and lower overall volume.

Speaker Change: Hi guys, first question for me, just wanted to dig into the inventory just a little bit, it looks like a lot of that was finished goods.

Speaker Change: Now, maybe walk through kind of your confidence level on being able to kind of push through and work your way through these finished goods here in Q2 or in Q3.

Speaker Change: Yeah, as you point out, the majority of the inventory that wasn't finished good and, you know, as we go.

Mark Smith: I think you know, you know, Mark and...

Mark Smith: It did grow a little bit beyond expectations simply because, as we mentioned in the prepared marks, July was a little bit below expectations. But as we kind of look forward now to coming into this fiscal year, I'll just kind of usually don't do this, but give you a little color that August has been very, very strong so far. So, while I think the summer slowdown occurred, it probably came a little early and lasted a little longer than we anticipated. The flip side to that is it's kicked in; the fall pick up is kicked in a little sooner as well.

Deana McPherson: Although revenue was below our expectations, we were pleased with new product launches this quarter and began to see positive momentum from a demand perspective as we neared the end of the first quarter. Gross margin of 27.4% was 0.8% above the comparable quarter last year due primarily to increased absorption on higher production, lower inventory reserve adjustments, a small price increase that went into effect in January 2024, and lower relocation costs partially offset by higher promotional costs. As a reminder, we typically generate lower margins in our first quarter due to reduced operating days, resulting from our summer operating shutdown. We continue to target margins in the low 30s for the full year.

Speaker Change: Miner on a while, the inventory in the summer time always grows, it did grow a little bit, you know, beyond expectations simply because, you know, as we mentioned, the prepared marks, the Angela, I was a little bit below expectations, but, you know, as we kind of look forward now to, you know, coming into this fiscal year, I'll just come.

Speaker Change: Usually, don't do this, but give you a little color that August has been.

Speaker Change: Very, very strong so far, so while, you know, I think the summer slowed down.

Speaker Change: Accord, you know, probably came a little early and lasted a little longer, you know, then we anticipated the flip side to that is it's kicked in, you know, the fall takeoff is kicked in a little sooner as well, so, you know, we, that inventory that we built is in, is in good.

So that inventory that we built is in good high volume A skews, and it's already started to move back out the door again.

Speaker Change: Good, hi volume, A, B, A skews and you know and it's already starting to move back out the door.

Deana McPherson: Operating expenses of $26.1 million for our first quarter were flat to the prior year comparable quarter. It should be noted that the prior year included a $2 million impairment of distribution equipment as part of the relocation. Excluding that impairment, operating expenses rose during the current quarter due to increased new product development costs, increased compensation-related costs, the timing of the NRA show in May of this year versus April of last year, increased promotional costs and higher legal costs, partially offset by the lack of profit sharing due to our operating loss this quarter.

Mark Smith: Okay, and then I want to look at just ASPs within long done specifically, you know, up pretty significantly here. You know, was this primarily, you know, 1854s that drove ASPs higher in long guns and, you know, and then any insight into kind of how you feel about your mix of the rest of the long gun business, you know, is it mixing okay, you know, how you feel like demand is for kind of more traditional MSR platform on a firearm. Yeah, the uptick in the ASP for long guns definitely was driven by the 1854 combined with the overall lower shipments of the rest of the core line on long guns throughout the summer months.

Speaker Change: [inaudible]

Speaker Change: and then I want to look at just ASPs within long guns specifically up.

Speaker Change: of the pretty significant glacier.

Speaker Change: was just primarily 1854's that drove ASB higher in long guns and then any incitement can how you feel about.

Speaker Change: You're mix of the rest of the long-gun business. You as it mix, you know, okay, you know, how you feel like demand is for kind of more traditional MSR platform on a firearms.

Deana McPherson: The lower revenue combined with an increased and interest expense due to outstanding borrowings resulted in a $2.1 million net loss or a $5 cent loss per share. On a non-gap basis, our loss per share was 2 cents and in line with expectations.

Speaker Change: Yeah, the uptick in the A-S-Fee Thread, long-distance, definitely was driven by the 1854 combined with the overall lower shipments of the rest of the core line.

So obviously an outside impact that of the 1854 as we kind of come into the more traditional busy season here in the fall, I think that's going to level back out and normalize again. So I think if you're thinking about ASP for the back half of the year and then Q2 it's kind of, you know, I'll be go back to, you know, same type of levels as you saw in Q4.

Speaker Change: I think that's going to level back out and normalize again. So I think if you're thinking about ASP for the back out of the year and in the Q2, it's kind of, you know, are we going back to, you know, same type of levels as you saw in Q4?

Deana McPherson: Cash used in operations for the first quarter was $30.8 million compared with cash generated of $40.6 million in the prior year comparable quarter due to a networking capital increase of $38.6 million driven by a $30 million increase in inventory. We expect inventory to return to prior year levels by the end of the year excluding new products.

Mark Smith: Okay, and then you talked about a little bit on the call, but, you know, what are you seeing competitively, you know, as we enter the kind of important fall and holiday season, you know, especially around pricing and, you know, in the same vein, you know, any insights into kind of how you feel about some of the rebate programs that you guys were running up here pretty recently. Yeah, I think the startup of the rebate program we ran recently, but that was very successful. You know, the idea there was to kind of obviously simulate as much demand as we possibly could.

Deana McPherson: We spent $4.7 million in capital projects this quarter compared with $32.1 million in the prior year comparable quarter primarily due to the relocation being nearly completed during fiscal 2024. We expect our capital spending for the year to be between $25 and $30 million. We continue to opportunistically repurchase shares under our $50 million authorization. During the quarter, we repurchase approximately 871,000 shares at an average price of $14.75 for a total of $12.9 million.

Speaker Change: Okay.

Speaker Change: and then you talked about a little bit on the call but you know what have you seen competitively you know as we enter the kind of important fall and holiday season you know especially around pricing and you know in the same vein you know any insights into kind of how you feel about some of the you know rebate programs that you guys were running up here pretty recently

Speaker Change: Yeah, I think the start off at the remake program we're in recently.

Speaker Change: So, that was very successful, you know, the idea there was sort of...

Deana McPherson: We paid $5.9 million in dividends and ended the quarter with $35.5 million in cash and $70 million in borrowings on our line of credit. Absent any opportunistic share repurchase opportunities or compelling capital investments, we continue to expect to be in a position to fully repay our line before the end of the fiscal year.

And, you know, I think that rebate definitely met our expectations, and that was great. And as we look now forward to the fall, you know, we expect to continue, you know, promotional activity strategically. You know, I mean, and I don't think that that competitive environment is going to be as, you know, bad as it was during the summer, I think it's going to kind of start to, you know, kind of wane a little bit. As I said, you know, we see saw the next results for office were pretty strong and, you know, I think, you know, the field reports that we've been getting is that, you know, the foot traffic is definitely improved.

Speaker Change: Obviously, it seems like as much demand as we possibly could.

Speaker Change: I think that everybody definitely met our expectations and that was great and as we look now forward to the fall, we expect to continue the promotional activity.

Deana McPherson: As this goes in our press release today, our Board of Directors has approved a new $50 million share repurchase program that will become effective on September 20th, the day after the current authorization expires. This new program positions us to opportunistically repurchase shares for another 12 months. Just to recap the expiring $50 million authorization through July 31st, we have already repurchased nearly 1.7 million shares at an average price of $13.84.

Speaker Change: Strategicly, I don't think that that competitive environment is going to be as, you know.

Speaker Change: Bad as it was during the summer, I think it's going to kind of start to kind of wane a little bit. As I said, you know, we see saw the next results for office were pretty strong and, you know, I think, you know, the field reports that we've been getting is that the foot traffic is definitely improved. And so I think that should take some of the pressure off.

And so I think that should take some of the pressure off on the promotional environment. That said, you know, as we go into the summer, or sorry, as we go into the holiday season, there will always be some promotional activity happening, but I don't think it's going to be anything unusual.

Speaker Change: on the promotional environment that said, you know, as we go into the summer, I'm sorry as we go into the holiday season, there will always be some promotional activity happening, but I don't think it's going to be anything unusual that we haven't seen before and fast.

Deana McPherson: Finally, our Board has authorized our 13 cent quarterly dividend to be paid to stockholders of record on September 19th with payment to be made on October 3rd.

Mark Smith: Yeah, seeing the one fast. Okay, and then I think the last question for me, you know, we heard from one of your retailers earlier this week, and they talked about, you know, demand within firearms being better at kind of the higher-end products and the lower-end kind of entry products. Well, that mid range; it has been tough. You know, this, do some of your products that newer products that you've launched kind of fit within a barbell strategy. And does it make sense? I'm thinking kind of 18 54s versus, you know, maybe bodyguards, which I wouldn't say are entry novel, but, but certainly a smaller kind of handgun.

Deana McPherson: Looking forward to our second quarter, as Mark noted earlier, the end during the summer was slower than we expected, but we started to receive reports of improved foot traffic in August. Channel inventory remains stable and at healthy levels. Overall, inventory is about 12 percent higher than last year at this time, but nearly 30 percent below this time two years ago, when we last experienced a similarly slow first quarter. As we experienced two years ago, we expect our second fiscal quarter sales to grow significantly over the first quarter, and we expect to be in the range of 5 to 10 percent above Q2 fiscal 2024.

Speaker Change: Okay.

Speaker Change: and then I think the last question for me, you know, we heard from one of your retailers earlier this week and they talked about.

Speaker Change: You demand within firearms being better at kind of the higher end products and the lower end kind of entry products while that mid range is has been tough.

Speaker Change: You know, do some of your products that newer products that you've launched kind of fit within a barbell strategy and doesn't make sense.

Kevin Maxwell: I'm thinking, Kevin 1854's versus...

Kevin Maxwell: and you know, maybe body guards which I wouldn't say are entry novel but certainly a smaller kind of handgun.

Yeah, I think, you know, the success of the bodyguard that I mentioned, the prepared remarks that the bodyguard has been extremely well received by the marketplace. You know, I think it's a combination of the fact that, you know, yes, it is kind of hitting on that entry level price point, but it's also, you know, it's in that price point and feature packed with everything that, you know, that our consumers are looking for in a concealed carrier pistol. So that one is doing very, very well. 18 54s, you know, as you mentioned, and, you know, some of our retailers have pointed out, is that, you know, that consumer at the high end tends to be a little bit more inflation-proof or recession-proof.

Deana McPherson: We remain confident with the expectation we shared with you on the Q4 call that our full year revenue will be up mid to high single digits compared to fiscal 2024. We expect gross margins to improve in the second quarter on the increased sales volume, but don't expect to hit the 30% level yet, due to operating days being impacted by the second half of our summer shutdown. We do continue to expect that we will achieve the low 30s for margins for the whole year, due to increased operating days in the second half.

Speaker Change: Yeah, I think, you know, the success of the bodyguard that I mentioned in the prepared remarks is that the bodyguard has been extremely well received by the marketplace, you know, I think it's a combination of the fact that, you know, yes it is kind of hitting on that actually a little price point, but it's also, you know.

Speaker Change: It's in that price point and feature packed with everything that our consumer is looking for in a attempt to carry concealed carry pistol. So that one is doing very very well 1854, as you mentioned.

Deana McPherson: Operating expenses in Q2 will likely be about 16% higher than in Q1, with half the increased driven by profit sharing, and the remaining portion driven by promotions, sales activity, and distribution costs associated with the increased volume. Our effective tax rate is expected to be approximately 25%. Finally, as I noted earlier, absent opportunistic shared purchases are other new opportunities to invest in our business, we continue to expect to have a debt-free balance you by the end of the fiscal year.

Speaker Change: You know, some of our retailers have pointed out that consumer at the high end tends to be a little bit more inflation proof or recession proof.

And so those, yes, those categories up there, and that, you know, we have a lot of our product portfolio that kind of fits into that. that higher end, and that's kind of what we've been trying to push those ASPs up and really command the brand. The command of value that Smith & Wesson Brands deserves, with a lot of the revolvers and et cetera. So we have a pretty good, we're comfortable with the breadth of the line on the pricing hierarchy.

Speaker Change: and so those categories up there and we have a lot of our cover.

Speaker Change: Product portfolio that kind of fits into that higher end, and that's kind of what we've been trying to push those ASPs up and really command the brand. The current value that Smith and Wilson brand deserves.

Speaker Change: with a lot of revolvers and etc. And we have a pretty good, comfortable with the breath of the line on the pricing hierarchy.

Deana McPherson: With little left to spend on the relocation, capital investments for this project is nearly complete. Consistent with prior commentary, we expect to generate operating cash of at least $75 million annually and normal capital spending requirements are approximately $25 million per year, providing significant excess cash flow. As a reminder, our capital allocation plan continues to be, investor or business, remained at free, and returning cash to our stockholders.

Thank you, yes. Thanks, Mark.

Matthew Raab: Our next question is from Steve Dyer with Craig Hall and Capitol Group. Please proceed.

Mcpherson: McPherson, thank you guys.

Speaker Change: Thanks for watching!

Speaker Change: Our next question is from Steve Dreyer with Craig Hall and Capitol Group, please proceed.

Matthew Raab: Hi guys, this is Matthew Raab on First Steve. I guess I'll just start with the revenue outlook, mid-single digit, high-single digit growth for the full year. I think that implies something like 15-16% revenue growth in the second half. What gives you the confidence that that is doable at this point? And then, sort of on the cadence there, sort of implying 8% revenue growth in Q2 and then in the back half ramping, is that kind of the right way to look at that? Yeah, I'll just cover the confidence portion.

Matthew Robb: Hi guys, this is Matthew Robb on First Steve, and I'll just start with the revenue outlook mid-single digital high-single digital growth for the full year. I think that implies something like 15-16% revenue growth in the second half. What gives you the confidence that is doable at this point?

Operator: With that operator, can we please open the call to questions from our analysts? Yes. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation total will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: and then sort of on the cadence there, sort of implying a percent revenue growth in Q2 and then in the back half ramping is that kind of the right way to look at that.

Mark Smith: I'll turn over to Deana for some of the more detailed financial questions. On the confidence side, Matthew, I think if you go back and look at kind of a quote-unquote normal year, this is the volatility of the firearms industry sometimes. And two years ago, I believe our Q1 to Q2 ramped in the mid-40% at percentage range. And we're very much expecting and have been encouraged by the results so far in the first month that, in fact, this will be another very similar situation. And so that's just kind of the volatility of the firearms market and how usually the revenue just kind of falls in in a normal year, which we expect this to be a good, healthy, but also a normal year in terms of seasonality.

Speaker Change: Yeah, I'll just cover the confidence for some of the more detailed financial questions. On the confidence side, you know, Matthew, I think if you go back and look at it, you know.

Mark Smith: Our first question is from Mark Smith with Lake Street Capital. Please proceed. Hi, guys. First question for me. Just wanted to dig into the inventory just a little bit. It looks like a lot of that was finished goods. Now, maybe walk through kind of your confidence level on being able to kind of push through and work your way through these finished goods here in Q2 or in Q3. Yeah. As you point out, the majority of the inventory bill wasn't finished good.

Speaker Change: kind of a quote unquote normal year. This is just that you know this is the volatility of the firearms industry sometimes and two years ago I believe our Q1 to Q2 ripped you know in the mid-40% percentage range You know and we're very much expecting and and

Speaker Change: I've been encouraged by the...

Speaker Change: is also far in the first month that, in fact, this will be another very similar situation. And so that's just kind of the volatility of the fire as a market and how to get how usually the revenue just kind of falls in in a normal year, which we expect this to be a good healthy, but also a normal year in terms of seasonality.

Mark Smith: As we think you know, you know, Mark and Mineran Wally, the inventory in the summer time always grows. It did grow a little bit beyond expectations simply because you know, as we mentioned in the prepared marks, you know, July was a little bit below expectations.

Deana McPherson: And I'll leave it over to Deana for the numbers. Yeah, so the way to think about it is that if you compared to last year's 125 million or so, I said on my call, you know, on the call, you know, 5% to 10% above that quarter. So it's 5% to 10% above the 125. And then the rest, yeah, we look at more operating days in the back half of the year, you know, more opportunity in the way that, you know, the nature of the way our quarters fall. You know, we get Christmas in the second and the third quarter, and we get, you know, the really busy winter season in the fourth quarter.

Speaker Change: and I'll leave it over to Deana McPherson.

Deana McPherson: and I guess the way to think about it is that if you compare to last year's 125 million or so I said on my call, you know, on the call note 5 to 10 per cent above.

Mark Smith: But you know, as we kind of look forward now to coming into this fiscal year, I'll just kind of usually don't do this, but give you a little color that, you know, August has been very, very strong so far. So, while I think the summer slowed down occurred, you know, probably came a little early and lasted a little longer. You know, let me anticipate it. The flip side to that is it's kicked in, you know, the fall pick up is kicked in a little sooner as well. So, you know, we that inventory that we built is in is in good. Good high volume A, A skews and, you know, and it's already starting to move back out the door again.

Deana McPherson: that quarter, so it's five to ten percent above the one twenty-five.

Deana McPherson: and then the rest of the year, we look at more operating days in the back half of the year, more opportunity in the way that the nature of the way our quarters fall. We get Christmas in the second and the third quarter and we get the really busy winter season in the fourth quarter. So those would be, you know.

Mark Smith: So those would be, you know, growth over last year, you know, also. So not as much as Q1 to Q2, but, you know, consistent growth on a quarter basis like we would normally have. Yeah, Matthew, one last thing on that. I'll just point out that Q3 and Q4 are usually our two biggest quarters. In addition, as I mentioned, the prepared remarks, there's some significant capacity coming online in Lake Q2, which will definitely bully those usually strong quarters even further.

Deana McPherson: Gross over last year, you know, also, not as much as Q1 to Q2, but, you know...

Mark Smith: Okay, and then I want to look at just ASPs within long guns specifically, you know, up pretty significantly here. You know, was this primarily, you know, 1854's that that drove ASB higher in long guns.

Chris St.: and Chris St. Gross on a quarter basis, like we would normally have.

Matthew Robb: and Matthew one last thing on that, on this point out that Q3 and 4 are usually our two biggest quarters. In addition, as I mentioned at Procure, Mark says, there's some significant capacity coming online in Blake Q2, which will definitely bully those usually strong quarters even further.

Mark Smith: And, you know, and then any insight into kind of how you feel about your mix of the rest of the long gun business, you know, is it mixing okay, you know, how you feel like demand is for kind of more traditional MSR platform on a firearm. Yeah, the uptake in the AFB's very long guns, it definitely was driven by the 1854 combined with the overall lower shipments of the rest of the core line on long guns throughout the summer months. So obviously, and outside the impact that on the 1854 is kind of come into the more traditional busy season here in the fall. I think that's going to level back out and normalize again.

Okay, great. And then on capital allocation, added the 50 million buyback, so if we just kind of view this as more of a balanced approach between leverage and the buyback, kind of going forward. Yeah, I think we look at the opportunity to invest in the business first as our first priority. We look at where we are in our forecast for where we are with leverage, and then we, you know, look at where the stock price is. You know, we'd love to always be able to, you know, take more shares off the table, but, you know, we've got to have a measured approach and the opportunistic one we can.

Speaker Change: Okay, great. And then on capital allocation, added the 50 million buyback. So if we just kind of view this as more of a balanced approach between leverage and the buyback, we're kind of going forward.

Speaker Change: Yeah, I think we look at opportunity to invest in the business versus our first priority. We look at where we are and our forecast for where we are at leverage.

Speaker Change: and then we look at where the stock price is. We'd loved to always be able to take more shares of the table, but we've got to have a measure of approach and the opportunistic one we can.

Mark Smith: I will say, you know, we're looking at our current revolver to give us, you know, more flexibility there. We're in the process of negotiating that because that comes due in the next year. So we'll pay attention to, you know, what our opportunities are there as well.

Mark Smith: So I think if you're thinking about ASP for the back out of the year and then to Q2, it's kind of, you know, are we going back to, you know, same type of levels as you saw on Q4? Okay.

Speaker Change: I will say, you know, we're looking at our current revolvers.

Speaker Change: to give us more flexibility there, in the process of negotiating that, because that comes due in the next year, so we'll pay attention to what our opportunities are there as well.

Mark Smith: And then you talked about a little bit on the call, but, you know, what have you seen competitively, you know, as we enter the kind of important fall and holiday season, you know, especially around, around pricing and, you know, in the same vein, you know, any insights into kind of how you feel about some of the, you know, rebate programs, just because we're running up here pretty recently. Yeah, I think the start up at the rebate program we're in recently.

Okay, great. That is it for me. Thank you.

We have reached the end of our question-and-answer session.

Speaker Change: Okay great, that is it for me, thank you

Mark Smith: I would like to turn the conference back over to Mark Smith for closing remarks. I'd like to thank everybody for joining us today, and we look forward to speaking with you on the second quarter of Fall. Thank you.

Speaker Change: We have reached the end of our question and answer session. I would like to turn the conference back over to Mark Smith for closing remarks.

Mark Smith: I'd like to thank everybody for joining us today and we look forward to speaking with you on the second quarter call.

Operator: This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Thank you.

Speaker Change: Thank you, this will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

Mark Smith: So that was very successful, you know, the idea there was sort of, obviously, seemingly as much demand as we possibly could. And, you know, I think that rebate definitely met our expectations and that was great. And as we look now forward to the fall, you know, we expect to continue, you know, promotional activity strategically. You know, I mean, and, yeah, I don't think that that competitive environment is going to be as, you know, bad as it was during the summer.

Speaker Change: Episode 2

Speaker Change: In the next episode, we'll see you in the next episode

Mark Smith: I think it's going to kind of start to, you know, kind of weigh in a little bit. As I said, you know, we see saw the next results for, for office were pretty strong. And, you know, I think, you know, the field reports that we've been getting is that the foot traffic is definitely improved. And so I think that should take some of the pressure off on the promotional environment that said, you know, as we go into the summer, I'm sorry, as we go into the holiday season. There'll always be some promotional activity happening, but I don't think it's going to be anything unusual that we'll get us in the form of that.

Mark Smith: And then I think the last question for me, you know, we heard from one of your retailers earlier this week, and they talked about, you know, demand within firearms being better at kind of the higher end products and the lower end kind of entry products. Well, that mid range is has been tough.

Mark Smith: You know, this, do some of your products that newer products that you've launched kind of fit within a barbell strategy and this is makes sense. I think it kind of 1854 versus, you know, maybe body guards, which I wouldn't say are entry novel, but certainly a smaller kind of handgun. Yeah, I think, you know, the success of the bodyguard that I mentioned in the prepared remarks is that the bodyguard has been extremely well received by the marketplace.

Mark Smith: You know, I think it's a combination of the fact that, you know, yes, it is kind of hitting on that actually a little price point, but it's also, you know, it's in that price point and feature packed with everything that, you know, that our consumer is looking for and it doesn't have to carry a concealed carry pistol. So that one is doing very, very well, 1854 is, you know, you mentioned, and, you know, somewhere retail has appointed out, is that, you know, that consumer at the high end tends to be a little bit more inflation proof or recession proof.

Mark Smith: And so those, yes, those categories up there and that, you know, we have a lot of our product portfolio that kind of fits into that, that higher end and that's kind of what we've been trying to push those ASPs up and really command the brand. The current value that Smith & Wesson Brand deserves with a lot of the revolvers and etc. And we have a pretty, pretty good, we're comfortable with the, with the breadth of the line on the pricing hierarchy.

Mark Smith: That's so, thank you, yes. There's work.

Matthew Robb: Our next question is from Steve Dreyer with Craig Halm Capital Group, please proceed.

Mark Smith: Hi guys, this is Matthew Robb, on First Steve. I guess I'll just start with the revenue outlook, mid-Signal Digital High-Signal Digital Growth for the full year. I think that implies something like 15-16% revenue growth in the second half. What gives you the confidence that that is doable at this point. And then sort of on the cadence there, sort of implying a percent revenue growth in Q2. And then in the back half ramping, is that kind of the right way to look at that?

Mark Smith: Yeah, I'll just cover the confidence for some of the more details on answer questions. On the confidence side, Matthew, I think if you go back and look at that, you know, kind of a quote unquote normal year. This is just that, you know, this is the volatility of the firearms industry sometimes. And you know, two years ago, I believe, you know, our Q1 to Q2 ramped, you know, in the mid-40% percentage range.

Mark Smith: You know, and we're very much expecting. And then, you know, encouraged by the, by the results so far in the first month that, in fact, this will be another very similar situation. And so that's just kind of the volatility of the firearms market. And how usually the revenue just kind of falls in a normal year, which we expect this to be a good healthy, but also a normal year in terms of seasonality.

Mark Smith: I don't know, not even over to the end of the number. Yeah, so I guess the way to think about it is that if you compare to last year's 125 million or so, I said on my call, you know, on the call, note five to 10% above that quarter. So it's five to 10% above the 125. And then the rest, yeah, we, we look at more operating days in the back half of the year, you know, more opportunity in the way that, you know, the nature of the way our quarters fall, you know, we get Christmas in the second in the third quarter, and we get, you know, the really busy winter season in the fourth quarter.

Mark Smith: So those would be, you know, gross over last year, you know, also. So, you know, not as much as Q1 to Q2, but, you know, consistent growth on a quarter quarter basis, like we would normally have. Yeah, I'm happy one last thing on that. I'll just point out that Q3 and 4 usually are two biggest quarters. In addition, as I mentioned, the prepared remarks are some significant capacity coming online in, like Q2, which will definitely bully those usually strong quarters even further. Okay, great.

Deana McPherson: And then on capital allocation, added the 50 million buyback. So we just kind of view this as more of a balanced approach between leverage and the buyback.

Deana McPherson: I'm kind of going forward. Yeah, I think we, we look at opportunity to invest in the business versus our first priority. We look at where we are in our forecast for where we are at leverage. And then we, you know, look at where the stock price is, you know, we'd love to always be able to, you know, take more shares off the table. But, you know, we've got to have a measured approach and the opportunistic one we can.

Deana McPherson: I will say, you know, we're looking at our current revolver. You know, to give us, you know, more flexibility there. We're, you know, in the process of negotiating that because that comes due in the next year. So we'll pay attention to, you know, what our opportunities are there as well.

Matthew Robb: Okay, great.

Matthew Robb: That is it for me.

Matthew Robb: Thank you.

Operator: We have reached the end of our question and answer session.

Mark Smith: I would like to turn the conference back over to Mark Smith for closing remarks. I'd like to thank everybody for joining us today, and we look forward to speaking with you on the second quarter of fall. Thank you.

Operator: This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Thank you.