Q4 2024 Sturm Ruger & Company Inc Earnings Call
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Speaker Change: Good day and thank you for standing by. Welcome to the Q4 2024 Sturm Ruger earnings conference call. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded.
Speaker Change: Of course, you filed last night on the Form 10-Q filed previously copies of these documents may be obtained by contacting the company or the SEC one of the company website at Ruger Dot Com Forest corporate of course, the SEC website at SEC Gov, We do reference non-GAAP EBITDA.
Speaker Change: Note that a reconciliation of GAAP net income to non-GAAP EBITDA can be found in our Form 10-K.
Speaker Change: And at December 31, 2024, and our previously filed forms 10-Q, which are also posted to our website. Furthermore, the company disclaims all responsibility to update forward looking statements Chris.
Speaker Change: Thank you Kevin now Tom will discuss the company's 2024 results.
Chris: Thanks, Chris.
Tom: For 2024, net sales were $536 million and diluted earnings were $1 77 per share.
Tom: For 2023, net sales were $544 million and diluted earnings were $2 71 per share.
Tom: Our profitability declined in 2024 from 2023.
Tom: Gross margin decreased from 25% to 21%.
Tom: The lower margin was driven by unfavorable deleveraging of fixed costs, resulting from decreased production and sales.
Tom: Inflationary cost pressures and a product mix shift toward toward products, a product mix shift towards products with relatively lower margins that remain a stronger demand.
Tom: In the fourth quarter of 2024, net sales were $146 million and diluted earnings were <unk> 62 per share.
Tom: For the corresponding period in 2023, net sales were $131 million and diluted earnings were <unk> 58 per share.
Tom: Our fourth quarter results improved significantly from the third quarter as our production increased 10%.
Tom: Sales increased 19% and our profitability more than doubled.
Tom: At December 31, 2024, our cash and short term investments totaled $105 million.
Tom: Our short term investments are invested in the United States Treasury bills.
Tom: And our money market fund that invests exclusively in the United States Treasury instruments, which mature within one year.
Tom: Our current cash and short term investments totaled $120 million.
Tom: At December 31, 2024, our current ratio was four two to one and we had no debt.
Tom: Stockholders' equity was $320 million, which equates to a book value of $19 <unk> per share of which $6 in 2008 with cash and short term investments.
Tom: In 2024, we generated $56 million of cash from operations and invested $21 million in capital expenditures.
Tom: We expect our 2025 capital expenditures will total $20 million.
Tom: In 2024, we returned $46 million to our shareholders through the payment of $12 million of quarterly dividends.
Tom: And the repurchase of 835000 shares of our common stock at an average price of $41 19 per share for a total of $34 million.
Tom: Our board of directors declared a <unk> <unk> per share quarterly dividend for shareholders of record as of March 14th 2025.
Tom: Payable on March 28, 2025.
Tom: As a reminder, our quarterly dividend is approximately 40% of net income and therefore varies quarter to quarter.
Tom: Our variable dividend strategy, coupled with our strong debt free balance sheet allows us to continually and consistently provide returns to our shareholders.
Speaker Change: Sacrificing our ability to capitalize on opportunities that emerge.
Chris: That's the financial update for 2020 for Chris.
Tom: Thanks, Tom.
Ruger celebrated its 70 <unk> anniversary in 2024 as attribute to our founder Bill Ruger and one thousands of hardworking men and women who have left their mark on Ruger since its humble beginnings of $19 49, there were many events throughout the year. They brought people together to honor our past and celebrate our future.
Tom: We kicked off the festivities in January 2024, with a 75 to anniversary gala at the shot show we were on.
Tom: Article how is the event with our friends at heart of the ammunition, who were also founded in $19 49.
Tom: Two American manufacturing companies that stood the test of time at our thriving after 75 years.
Tom: Maybe there will be a co hosted centennial anniversary Gala at 249 shot show I wouldn't bet against it.
Tom: Last year's National Ruger day, which of course is October 22, or $2 22 was another highlight is our biggest day, yet with hundreds of events. It ranges shooting clubs at retailers, where Ruger fans came together to shoot and spend time with friends and neighbors they share their passion for <unk> and our products.
Tom: The most satisfying a fitting way that we celebrate our <unk> anniversary was with a flurry of new product introductions culminated with the December launch of the new RSM nine millimeter pistol that was imagined designed and developed in collaboration with <unk> industries.
Tom: This partnership resulted in a truly innovative product that offers maximum flexibility and customization with our removable stainless steel fire control insert set inside an interchangeable nagpal enhanced handgun grip demand for the RSM has been tremendous.
Tom: Our roster of new product introductions. In 2024 also includes the American rifle generation, two family of rifles, and standard ranch and predator configurations.
Tom: Marlin models, 18, $94 95, and $3 36 lever action rifles, including the Dark series models available in $45 70 government and 30 30, Winchester with other calibers to follow.
Tom: DLC carving chambered in 45 auto a 10 millimeter auto you call along with our original offerings in the five seven by 28 caliber.
Tom: The May 2014 was side holding stock.
Tom: And 75th anniversary commemorative models of some of our most popular classic firearms, including that Mark for target pistol, and <unk> rifle and the LCP Max Tesla.
Tom: New product sales totaled $159 million or 32% of firearm sales in 2024.
Tom: New product sales include only major new products that were introduced in the last two years.
Tom: On the strength of these offerings, particularly American satisfy a rifle Gen two and Marlin lever action rifles, the estimated sell through of our products from distributors to retailers increased for both the fourth quarter and the full year. Despite the decrease in adjusted mix background checks during the same periods.
As a reminder, we use adjusted mix as a proxy for overall consumer purchase activity at retail and adjusted next does not distinguish between used gun sales and new gun sales.
Tom: Data suggests it used gun sales in 2024 represented a larger percentage of overall retail firearm sales in 2023.
Tom: Which would not be surprising given higher interest rates and rising consumer debt.
Tom: This suggests that our market share gains or perhaps even greater than the adjusted mix data would indicate.
We entered 2025, our strong debt free balance sheet reduced inventories are independent distributors and a full pipeline of recently launched new products and many others still under development.
Tom: We remain focused on our long term goal of creating shareholder value, our disciplined pricing and market strategy from a consistency throughout the distribution channel.
Tom: This allows both distributors and retailers to confidently invest in our inventory regardless of market fluctuations and volatility.
Tom: As such and is essentially <unk> long term success and leadership in the firearms market.
Speaker Change: In January we announced that Todd Siefert will become president and Chief Executive Officer on March 1st allows for a smooth transition before my planned retirement in May.
Speaker Change: I want to take this opportunity to publicly welcome Todd to Ruger Todd attended the shot show last month I've spent time with many of our employees and customers and a host of industry folks many of whom we already knew from his past experience in the industry.
Speaker Change: I've been very impressed with Todd I know he and the rest of the team will continue to deliver innovative and exciting new products to our consumers profitability to our independent distributors or retailers and long term value to our shareholders.
Speaker Change: Those are the highlights of 2024, operator may we please have the first question.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: One moment for questions.
Speaker Change: Our first question comes from Mark Smith with Lake Street, You May proceed.
Mark Smith: Hi, guys.
Speaker Change: First question for me I wanted to dig in a little bit more into new products, Chris I don't know if you can quantify or talk at all about maybe the impact that just Rx I'm had.
Mark Smith: During the quarter.
Mark Smith: Yeah.
Mark Smith: Yes, Thank you mark or some of the big impact in December we had.
Mark Smith: Pre plan the launch of the <unk> for a while we had conducted a series of retailer summits as what we call a meeting with key retailers throughout the U S. Over the course of 2024 and at the summit.
Mark Smith: Under the under an NDA, we introduced and unveiled the RSA onto those key retailers and solicited preorders so that when as we are closer to our actual launch date.
Mark Smith: We shipped both to those key big independent retailers some of the key national accounts as well as our distributors. So product was in place at both wholesale and retail prior to our public unveiling unveiling in December that made for.
Mark Smith: I will say smooth.
Launch at all levels, we've got a lot of hype <unk> sales and marketing folks combined to do a great job getting the word out social media.
Mark Smith: It really kind of blew up the internet with.
Mark Smith: Reaction to this firearm and as a result, we had quite a few of those products.
Mark Smith: Shipped in December we don't disclose the exact amount, but it was a significant launch the most we've ever had out in the marketplace at time of launch and then because we have already ramped up the product we didn't see a dip at all we just continued right through filling orders that came in from our distributors over the next couple of weeks. So it was really fun.
Mark Smith: Way to launch a really great product.
Mark Smith: Perfect and then correct me, if I'm wrong, but it seems like our ex Im really gives you a platform for other frame sizes.
Mark Smith: You can do with that fire control in search I mean is that how you view it and then.
Speaker Change: This partnership with Michael are you guys able to move pretty quickly on on new products.
Speaker Change: Yes, Mark as you likely know we had other.
Projects with Mag, Paul SaaS for R 22, and some of our other rifle products, but this is the biggest and strongest collaboration we've ever had and the folks have therefore, a lot of fun to work with.
Really creative and.
Speaker Change: Good engineer and good marketing and so we're going to continue to work with them on that in fact, we've got a meeting in the next couple of weeks to talk about some other other new products that we can collaborate on but to the point of the RSM.
Speaker Change: There's going to be continued rollout of new frame sizes colors and things like that so you'll see us flesh out that accessory pipeline for the different versions of the grip as well as different sizes. So youll see those different frame sizes coming out.
Speaker Change: That's something that we have planned and they are still working on what a rule that out in a logical fashion and again our teams at both places went back Paul and Ruger are very excited about it.
Speaker Change: Perfect and then just wanted to kind of balance sheet and cash flow as we look out at this next year are there any other any uses of cash that we should be looking at it seems like Youre plan separate things in good place, but any other uses of cash and then.
Speaker Change: If you can give any insight into.
Kind of your desire and appetite for continued share repurchases.
Speaker Change: Well we've done both.
Speaker Change: Special dividends over time, as well as share repurchases over time.
Speaker Change: And both of those.
Speaker Change: <unk> remain an option of course, we're always open to if there was another strategic acquisition that came our way along the lines of Marlin for a few years back that would make sense for us, but one of the reasons as I think you know what.
Speaker Change: Pretty conservative on our cash balance.
Speaker Change: Having been.
Speaker Change: Fired by both Bank of America, and Wells Fargo over the last five or six years during my tenure.
Speaker Change: We remain pretty cautious about the banking situation in the U S. There are steps.
Speaker Change: Being taken now to shore that up with a defined act at the at the federal level, but again, we're going to keep that conservative approach and we will probably have both share repurchases and certainly our quarterly dividends and of course, if we get to a certain balance will look at special dividends as well that's something we'll always take a hard look at.
Speaker Change: Number one we want to make sure we're funding the business with our capital expenditures.
Speaker Change: Investing in new products, Thats, probably our highest and best use.
Speaker Change: Watching for acquisitions, and if either of those makes sense of course return it to shareholders, either special dividends or share buybacks.
Speaker Change: Excellent. Thank you guys.
Speaker Change: Thanks Mark.
Speaker Change: Thank you. Our next question comes from <unk> with Aegis capital you May proceed.
Ryan: Thank you Ryan good morning.
Speaker Change: Just a question on gross margins I realized.
Ryan: Yeah.
Ryan: You mentioned the.
Ryan: Adverse product mix shift.
Ryan: On the flip side, you know you have the strong success of new products, which I imagine are coming in higher margin I Wonder if you could just give us a little more granular granularity on that on those trends. Thanks.
Rommel: Thanks Rommel.
Rommel: The biggest thing we saw in 2024, when we talk about gross margin as it relates to product mix was you'll recall is the 75th anniversary models 10, 22 March four and LCP in particular.
We're really well done well executed, but we price pretty competitively we stayed away from promotional programs and discounting, but we were pretty aggressive in pricing. The 70, <unk> anniversary models and that from a mix standpoint was probably the biggest I'll say mix related contributed to decreased gross margins and again, they're very success.
Rommel: Well they did the trick they didn't disrupt.
Rommel: Inventory at retail or distributor level, so they really work well with our strategy for 2024.
Speaker Change: Okay, Great. That's very helpful. And then just wanted to personally I wish you all the very best Chris Hopefully chat again soon but I wish you all the best in your transition.
Speaker Change: Thanks, Rommel, we appreciate it and appreciate your support and Youre right.
Speaker Change: Thank you I would now like to turn the call back over to Chris Conway for any closing remarks.
Speaker Change: In closing I would like to start by thank you all of you for attending our call. This morning and for our shareholders for their continued investment in our company.
Speaker Change: And I would like to thank our loyal customers in the 1800 hard working members of the Ruger team, who design manufacture and sell rugged reliable firearms every day in our American factories.
Speaker Change: I hope, we will be able to join us at our virtual 2025 annual meeting on Thursday may 29th.
Speaker Change: Further details will become available in April.
Speaker Change: And on a personal note I want to thank everyone, who has helped me since I joined this industry and 1989.
Speaker Change: For the past 36 years I've been fortunate to work with some truly great people, it's been a fun ride and I'm going to Miss it but I look forward to continuing to serve on the Ruger Board of directors and supporting Todd and the Ruger team as we head into 2025.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
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