Q1 2027 Smith & Wesson Brands Inc Earnings Call
Speaker #1: Good day, everyone, and welcome to Smith & Wesson Brands, Incorporated's first quarter fiscal 2027 financial results conference call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us information about today's call.
Operator: Good day everyone, and welcome to Smith & Wesson Brands, Inc. First Quarter Fiscal 2027 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us information about today's call. Thank you. You may begin.
Operator: Good day everyone, and welcome to Smith & Wesson Brands, Inc. Q1 Fiscal 2027 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us information about today's call. Thank you. You may begin.
Speaker #1: Thank you. You may begin.
Speaker #2: 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.
Kevin Maxwell: 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, 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. 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 forward-looking statements. We reference certain non-GAAP financial results.
Kevin Maxwell: 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, 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. 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 forward-looking statements. We reference certain non-GAAP financial results.
Speaker #2: Forward-looking statements may also include statements on topics such as our product development, strategies, market share, demand, consumer preferences, inventory conditions for our products, growth opportunities and trends, and industry conditions in general.
Speaker #2: 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 #2: 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 forward-looking statements.
Speaker #2: We reference certain non-GAAP financial results. Reconciliations of GAAP financial measures to non-GAAP financial measures can be found in our SEC filings and in today's earnings press release.
Kevin Maxwell: Reconciliations 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 EBITDA is to adjusted EBITDA. When we discuss NICS results, we are referring to adjusted NICS, a metric published by the National Shooting Sports Foundation based on FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than firearms purchases. Adjusted NICS 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, NICS generally does not directly correlate to our shipments or market share in any given time period.
Kevin Maxwell: Reconciliations 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 EBITDA is to adjusted EBITDA. When we discuss NICS results, we are referring to adjusted NICS, a metric published by the National Shooting Sports Foundation based on FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than firearms purchases. Adjusted NICS 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, NICS generally does not directly correlate to our shipments or market share in any given time period.
Speaker #2: Each of which is available on our website. Also, when we reference EPS, we are always referencing fully diluted EPS, and any reference to EBITDA is to adjusted EBITDA.
Speaker #2: When we discuss NICS results, we are referring to adjusted NICS—a metric published by the National Shooting Sports Foundation, based on FBI NICS data.
Speaker #2: Adjusted NICS removes those background checks conducted for purposes other than firearms purchases. Adjusted NICS is generally considered the best available proxy for consumer firearm demand at the retail counter.
Speaker #2: Because we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers, and not to end consumers, NICS generally does not directly correlate to our shipment or market share in any given time period.
Speaker #2: We believe this is mostly due to inventory levels in the channel. Joining us on today's call are Mark Smith, our President and CEO, and Deana McPherson, our CFO.
Kevin Maxwell: We believe mostly due to inventory levels in the channel. Joining us on today's call are Mark Smith, our President and CEO, and Deana McPherson, our CFO. With that, I will turn the call over to Mark.
Kevin Maxwell: We believe mostly due to inventory levels in the channel. Joining us on today's call are Mark Smith, our President and CEO, and Deana McPherson, our CFO. With that, I will turn the call over to Mark.
Speaker #2: With that, I will turn the call over to Mark.
Speaker #3: Thank you, Kevin. And thanks, everyone, for joining us today. As we expected, we are off to an excellent start to fiscal 2027, with strong first-quarter performance.
Mark Smith: Thank you, Kevin, and thanks everyone for joining us today. As we expected, we are off to an excellent start to fiscal 2027 with strong first quarter performance. Continued solid demand for our products in both the consumer and professional channels in Q1 were a direct result of our purposeful focus on innovation, the strength of our industry partnerships, operational execution, and the power of the iconic Smith & Wesson brand. We delivered significant year-over-year increases in all key financial metrics, including 32% in growth in net sales, 86% growth in adjusted EBITDA, and an increase in EPS to $0.06 from a loss of $0.08 last year. The firearm market continues to be solid, with overall NICS up 7.7% over our first quarter last year.
Mark Smith: Thank you, Kevin, and thanks everyone for joining us today. As we expected, we are off to an excellent start to fiscal 2027 with strong Q1 performance. Continued solid demand for our products in both the consumer and professional channels in Q1 were a direct result of our purposeful focus on innovation, the strength of our industry partnerships, operational execution, and the power of the iconic Smith & Wesson brand. We delivered significant year-over-year increases in all key financial metrics, including 32% in growth in net sales, 86% growth in adjusted EBITDA, and an increase in EPS to $0.06 from a loss of $0.08 last year. The firearm market continues to be solid, with overall NICS up 7.7% over our first quarter last year.
Speaker #3: Continued solid demand for our products in both the consumer and professional channels in Q1 were a direct result of our purposeful focus on innovation, the strength of our industry partnerships, operational execution, and the power of the iconic Smith & Wesson brand.
Speaker #3: We delivered significant year-over-year increases in all key financial metrics, including 32% growth in net sales, 86% growth in adjusted EBITDA, and an increase in EPS to $0.06 from a loss of $0.08 last year.
Speaker #3: The firearm market continues to be solid, with overall NICS up 7.7% over our first quarter last year. And with our shipments up nearly 20% in the same time period, we once again outperformed, demonstrating that strong consumer preference for our leading product portfolio is driving sustained share growth and continued positive momentum into FY27.
Mark Smith: With our shipments up nearly 20% in the same time period, we once again outperformed, demonstrating that strong consumer preference for our leading product portfolio is driving sustained share growth and continued positive momentum into FY27. From a product line perspective, we gained share in both handguns and long guns in the quarter. Our handgun unit shipments into the sporting goods channel increased nearly 17%, while NICS was up only about 5%. Importantly, and continuing the trend from FY26, channel inventories were flat during the same period, indicating strong pull-through and meaningful share gains at the retail counter. This was driven by strong demand for our semi-auto pistols across the board, including our market-leading concealed carry products and new products within our full-size M&P lines.
Mark Smith: With our shipments up nearly 20% in the same time period, we once again outperformed, demonstrating that strong consumer preference for our leading product portfolio is driving sustained share growth and continued positive momentum into FY 2027. From a product line perspective, we gained share in both handguns and long guns in the quarter. Our handgun unit shipments into the sporting goods channel increased nearly 17%, while NICS was up only about 5%. Importantly, and continuing the trend from FY 2026, channel inventories were flat during the same period, indicating strong pull-through and meaningful share gains at the retail counter. This was driven by strong demand for our semi-auto pistols across the board, including our market-leading concealed carry products and new products within our full-size M&P lines.
Speaker #3: From a product line perspective, we gained share in both handguns and longguns in the quarter. Our handgun unit shipments into the sporting goods channel increased nearly 17%, while NICS was up only about 5%.
Speaker #3: Importantly, and continuing the trend from fiscal year 2026, channel inventories were flat during the same period, indicating strong pull-through and meaningful share gains at the retail counter.
Speaker #3: This was driven by strong demand for our semi-auto pistols across the board, including our market-leading concealed carry products and new products within our full-size M&P lines.
Speaker #3: Long guns also performed well in the quarter, with our unit shipments into the sporting goods channel increasing almost 22%, well ahead of the 10% increase in NICS.
Mark Smith: Long guns also performed well in the quarter, with our unit shipments into the sporting goods channel increasing almost 22%, well ahead of the 10% increase in NICS. And within the long gun category, channel inventories of our products were actually down 5,000 units during the period, again indicating solid share gains at retail. Growth in long guns was led by the MSR category and weighted to May and June ahead of state-level regulatory changes. But we also saw strong growth in our 1854 lever action rifles, with shipments doubling compared to last year. A great indicator of our increasing foothold in the hunting segment of the long gun market, where we have historically had limited exposure.
Mark Smith: Long guns also performed well in the quarter, with our unit shipments into the sporting goods channel increasing almost 22%, well ahead of the 10% increase in NICS. And within the long gun category, channel inventories of our products were actually down 5,000 units during the period, again indicating solid share gains at retail. Growth in long guns was led by the MSR category and weighted to May and June ahead of state-level regulatory changes. But we also saw strong growth in our 1854 lever action rifles, with shipments doubling compared to last year. A great indicator of our increasing foothold in the hunting segment of the long gun market, where we have historically had limited exposure.
Speaker #3: And within the long gun category, channel inventories of our products were actually down 5,000 units during the period, again indicating solid share gains at retail.
Speaker #3: Growth in long guns was led by the MSR category and weighted to May and June ahead of state-level regulatory changes, but we also saw strong growth in our 1,854 lever-action rifles, with shipments doubling compared to last year.
Speaker #3: A great indicator of our increasing foothold in the hunting segment of the longgun market, where we have historically had limited exposure. The breadth of our growth in Q1 was a further testament to our ability to react to market shifts through our flexible manufacturing model, consumer preference for our brand and innovative product line, and the strength of our relationship with industry partners.
Mark Smith: The breadth of our growth in Q1 was a further testament to our ability to react to market shifts through our flexible manufacturing model, consumer preference for our brand and innovative product line, and the strength of our relationship with industry partners. We had success not only across all of our product lines, but also across our customer segments. Within the consumer channel, we saw strong double-digit gains in wholesale, big box, and buying groups. In addition, we drove high double-digit growth in law enforcement and international shipments, a strong indication of professional endorsement of the product lines and our full capabilities to service these brave men and women, not only with our firearms, but with our world-class Smith & Wesson Training Academy, which continues to be a competitive differentiator. Moving now to ASPs.
Mark Smith: The breadth of our growth in Q1 was a further testament to our ability to react to market shifts through our flexible manufacturing model, consumer preference for our brand and innovative product line, and the strength of our relationship with industry partners. We had success not only across all of our product lines, but also across our customer segments. Within the consumer channel, we saw strong double-digit gains in wholesale, big box, and buying groups. In addition, we drove high double-digit growth in law enforcement and international shipments, a strong indication of professional endorsement of the product lines and our full capabilities to service these brave men and women, not only with our firearms, but with our world-class Smith & Wesson Training Academy, which continues to be a competitive differentiator. Moving now to ASPs.
Speaker #3: We had success not only across all of our product lines, but also across our customer segments. Within the consumer channel, we saw strong double-digit gains in wholesale, big-box, and buying groups.
Speaker #3: In addition, we drove high double-digit growth in law enforcement and international shipments, a strong indication of professional endorsement of the product lines and our full capabilities to service these brave men and women not only with our firearms, but with our world-class Smith & Wesson Training Academy, which continues to be a competitive differentiator.
Speaker #3: Moving now to ASPs, we continued the trend of outperforming in unit shipments versus the broader market, while simultaneously demonstrating resiliency in our pricing. Sustained demand for our core products throughout the period limited our need for promotions in the quarter and, combined with new products accounting for 35% of our shipments, our ASPs continued to move higher even in the typically slower summer months.
Mark Smith: We continued the trend of outperforming in unit shipments versus the broader market while simultaneously demonstrating resiliency in our pricing. Sustained demand for our core products throughout the period limited our need for promotions in the quarter, and combined with new products accounting for 35% of our shipments, our ASPs continued to move higher even in the typically slower summer months. Handgun ASPs held steady sequentially versus Q4 and were up nearly 9% year-over-year. While long gun ASPs increased nearly 11% sequentially and over 18% year-over-year. Finally, a quick few notes on inventory. As I mentioned earlier, channel inventories were flat and combined with our strong results indicate we continue to see healthy pull-through of our products at the retail counter. At the end of Q1, our internal inventory was $181 million, down from $203 million a year ago, and up from $156 million at the end of Q4.
Mark Smith: We continued the trend of outperforming in unit shipments versus the broader market while simultaneously demonstrating resiliency in our pricing. Sustained demand for our core products throughout the period limited our need for promotions in the quarter, and combined with new products accounting for 35% of our shipments, our ASPs continued to move higher even in the typically slower summer months. Handgun ASPs held steady sequentially versus Q4 and were up nearly 9% year-over-year. While long gun ASPs increased nearly 11% sequentially and over 18% year-over-year. Finally, a quick few notes on inventory. As I mentioned earlier, channel inventories were flat and combined with our strong results indicate we continue to see healthy pull-through of our products at the retail counter. At the end of Q1, our internal inventory was $181 million, down from $203 million a year ago, and up from $156 million at the end of Q4.
Speaker #3: Handgun ASPs held steady sequentially versus Q4 and were up nearly 9% year over year, while long gun ASPs increased nearly 11% sequentially and over 18% year over year.
Speaker #3: Finally, a quick few notes on inventory. As I mentioned earlier, channel inventories were flat, and combined with our strong results, indicate we continue to see healthy pull-through of our products at the retail counter.
Speaker #3: At the end of Q1, our internal inventory was $181 million, down from $203 million a year ago and up from $156 million at the end of Q4.
Speaker #3: The sequential growth reflects our normal seasonal build as we prepare for the busy fall and winter seasons, as well as restocking of longgun inventories following a strong Q4.
Mark Smith: The sequential growth reflects our normal seasonal build as we prepare for the busy fall and winter seasons, as well as restocking of long gun inventories following a strong Q4. Our disciplined sales and operations planning process, which aims to align production to forward demand across every product line, gives us confidence in our inventory position as we look to the balance of fiscal 2027. Looking forward, we believe we are well positioned to continue gaining momentum as we move into the traditionally stronger second half of the year. Our award-winning product line is in high demand with both our loyal consumers and law enforcement and professional customers, as indicated by our shipments consistently outpacing the market and our growth in professional sales. We are making significant investments in our operational infrastructure to support our growth and drive further efficiencies.
Mark Smith: The sequential growth reflects our normal seasonal build as we prepare for the busy fall and winter seasons, as well as restocking of long gun inventories following a strong Q4. Our disciplined sales and operations planning process, which aims to align production to forward demand across every product line, gives us confidence in our inventory position as we look to the balance of fiscal 2027. Looking forward, we believe we are well positioned to continue gaining momentum as we move into the traditionally stronger second half of the year. Our award-winning product line is in high demand with both our loyal consumers and law enforcement and professional customers, as indicated by our shipments consistently outpacing the market and our growth in professional sales. We are making significant investments in our operational infrastructure to support our growth and drive further efficiencies.
Speaker #3: Our disciplined sales and operations planning process, which aims to align production to forward demand across every product line, gives us confidence in our inventory position as we look to the balance of fiscal 2027.
Speaker #3: Looking forward, we believe we are well-positioned to continue gaining momentum as we move into the traditionally stronger second half of the year. Our award-winning product line is in high demand with both our loyal consumers and law enforcement and professional customers, as indicated by our shipments consistently outpacing the market and our growth in professional sales.
Speaker #3: We are making significant investments in our operational infrastructure to support our growth and drive further efficiencies. And we are well underway with installation of this new equipment in our machining center in Springfield, Massachusetts.
Mark Smith: We are well underway with installation of this new equipment in our machining center in Springfield, Massachusetts. Our balance sheet remains strong, and we continue to deploy capital efficiently to drive long-term growth and stockholder value. With this momentum, we expect our Q2 to significantly outperform last year on both the top and bottom lines, which Deana will cover in a few minutes. In closing, this continues to be a story about brand strength paired with a purposeful long-term strategy. Our focus on innovation, marketing, strong partnerships and operational excellence, and importantly, our team's relentless focus on execution across every function is what drives our outperformance. As always, I just want to note that none of this is possible without each and every member of our team across all functions working together towards making Smith & Wesson the number one firearms brand.
Mark Smith: We are well underway with installation of this new equipment in our machining center in Springfield, Massachusetts. Our balance sheet remains strong, and we continue to deploy capital efficiently to drive long-term growth and stockholder value. With this momentum, we expect our Q2 to significantly outperform last year on both the top and bottom lines, which Deana will cover in a few minutes. In closing, this continues to be a story about brand strength paired with a purposeful long-term strategy. Our focus on innovation, marketing, strong partnerships and operational excellence, and importantly, our team's relentless focus on execution across every function is what drives our outperformance. As always, I just want to note that none of this is possible without each and every member of our team across all functions working together towards making Smith & Wesson the number one firearms brand.
Speaker #3: Our balance sheet remains strong, and we continue to deploy capital efficiently to drive long-term growth and stockholder value. With this momentum, we expect our second quarter to significantly outperform last year on both the top and bottom lines, which Deana will cover in a few minutes.
Speaker #3: In closing, this continues to be a story about brand strength paired with a purposeful long-term strategy. Our focus on innovation, marketing, strong partnerships, and operational excellence—and, importantly, our team's relentless focus on execution across every function—is what drives our outperformance.
Speaker #3: And, as always, I just want to note that none of this is possible without each and every member of our team across all functions working together to make Smith & Wesson the number one firearms brand.
Speaker #3: I'm incredibly proud of all of them for their exceptional talent, dedication, always striving to exceed the expectations of our passionate and loyal customers. With that, I'll turn the call over to Deana to cover the financials.
Mark Smith: I am incredibly proud of all of them for their exceptional talent and dedication, always striving to exceed the expectations of our passionate and loyal customers. With that, I will turn the call over to Deana to cover the financials.
Mark Smith: I am incredibly proud of all of them for their exceptional talent and dedication, always striving to exceed the expectations of our passionate and loyal customers. With that, I will turn the call over to Deana to cover the financials.
Speaker #2: Thanks, Mark. Net sales for our first quarter were $112.6 million, up $27.5 million, or 32.3%, above the prior year, on strong polymer pistol, MSR, and lever action shipments.
Deana McPherson: Thanks, Mark. Net sales for our Q1 of $112.6 million were $27.5 million or 32.3% above the prior year on strong polymer pistol, MSR, and lever-action shipments. During the quarter, inventory at distributors declined by 6.8% from the end of the prior quarter and 3.5% compared with the end of July 2025 in terms of actual units, indicating continued strong sell-through of our products at retail. Handgun ASPs remained sequentially flat versus Q4, but higher than Q1 2026 due to lower promotional spend during the current quarter and continued strong demand for our products. Long gun ASPs increased sequentially and year over year due to a favorable mix. Gross margin of 28.7% was 2.8% above the prior year, primarily driven by $2.9 million of tariff refunds, which accounted for 260 basis points of increased margin during the quarter.
Deana McPherson: Thanks, Mark. Net sales for our Q1 of $112.6 million were $27.5 million or 32.3% above the prior year on strong polymer pistol, MSR, and lever-action shipments. During the quarter, inventory at distributors declined by 6.8% from the end of the prior quarter and 3.5% compared with the end of July 2025 in terms of actual units, indicating continued strong sell-through of our products at retail. Handgun ASPs remained sequentially flat versus Q4, but higher than Q1 2026 due to lower promotional spend during the current quarter and continued strong demand for our products. Long gun ASPs increased sequentially and year over year due to a favorable mix. Gross margin of 28.7% was 2.8% above the prior year, primarily driven by $2.9 million of tariff refunds, which accounted for 260 basis points of increased margin during the quarter.
Speaker #2: During the quarter, inventory at distributors declined by 6.8% from the end of the prior quarter, and 3.5% compared with the end of July 2025 in terms of actual units, indicating continued strong sell-through of our products at retail.
Speaker #2: Handgun ASPs remained sequentially flat versus Q4, but higher than Q1 2026, due to lower promotional spend during the current quarter and continued strong demand for our products.
Speaker #2: Long gun ASPs increased sequentially and year over year due to a favorable mix. Gross margin of 28.7% was 2.8% above the prior year, primarily driven by $2.9 million of tariff refunds, which accounted for 260 basis points of increased margin during the quarter.
Speaker #2: Increased absorption on higher production was almost entirely offset by higher volume-related spending, supplier cost increases, and increased labor costs—both from increased headcount and increased wage rates.
Deana McPherson: Increased absorption on higher production was almost entirely offset by higher volume-related spending, supplier cost increases, and increased labor costs, both from increased headcount and increased wage rates. Operating expenses of $28.1 million for our Q1 were $3 million higher than the prior year comparable quarter, with legal expenses, profit-related compensation costs, volume-related increases in selling expenses and freight, and higher advertising costs driving the increase. The higher revenue and associated margins, combined with a decrease in interest expense due to lower net debt, resulted in $2.6 million of net income, or $0.06 of EPS, compared with a $3.4 million net loss, or an $0.08 loss per share last year. Cash used in operations for the Q1 was $8.8 million, compared with $8.1 million in the prior year, due to higher net income being offset by a bigger increase in inventory and the payment of profit-related compensation.
Deana McPherson: Increased absorption on higher production was almost entirely offset by higher volume-related spending, supplier cost increases, and increased labor costs, both from increased headcount and increased wage rates. Operating expenses of $28.1 million for our Q1 were $3 million higher than the prior year comparable quarter, with legal expenses, profit-related compensation costs, volume-related increases in selling expenses and freight, and higher advertising costs driving the increase. The higher revenue and associated margins, combined with a decrease in interest expense due to lower net debt, resulted in $2.6 million of net income, or $0.06 of EPS, compared with a $3.4 million net loss, or an $0.08 loss per share last year. Cash used in operations for the Q1 was $8.8 million, compared with $8.1 million in the prior year, due to higher net income being offset by a bigger increase in inventory and the payment of profit-related compensation.
Speaker #2: Operating expenses of $28.1 million for our first quarter were $3 million higher than the prior year comparable quarter, with legal expenses, profit-related compensation costs, volume-related increases in selling expenses and freight, and higher advertising costs driving the increase.
Speaker #2: The higher revenue and associated margin, combined with a decrease in interest expense due to lower net debt, resulted in 2.6 million dollars of net income.
Speaker #2: Or 6 cents of EPS. Compared with a 3.4 million dollar net loss, or an 8 cent loss per share last year. Cash used in operations for the first quarter was 8.8 million dollars, compared with 8.1 million dollars in the prior year, due to higher net income being offset by a bigger increase in inventory and the payment of profit-related compensation.
Speaker #2: Because of increased demand during last quarter, internal inventory in certain product lines was depleted. In addition, we generally build inventory during the first half of the fiscal year in order to level load our operations in preparation for the busy fall and winter seasons.
Deana McPherson: Because of increased demand during last quarter, internal inventory in certain product lines was depleted. In addition, we generally build inventory during the H1 of the fiscal year in order to level load our operations in preparation for the busy fall and winter seasons. We spent $11.9 million in capital projects this quarter, compared with $4.3 million last year, and continue to expect our capital spending for the year to be between $45 million and $50 million. As a reminder, our capital spending this year is approximately $25 million higher than our historical run rate due to investments we are making in our Springfield facility, combined with advanced manufacturing initiatives at multiple locations. We paid $6 million in dividends and ended the quarter with $25.2 million in cash and investments and $40 million in borrowings on our line of credit.
Deana McPherson: Because of increased demand during last quarter, internal inventory in certain product lines was depleted. In addition, we generally build inventory during the H1 of the fiscal year in order to level load our operations in preparation for the busy fall and winter seasons. We spent $11.9 million in capital projects this quarter, compared with $4.3 million last year, and continue to expect our capital spending for the year to be between $45 million and $50 million. As a reminder, our capital spending this year is approximately $25 million higher than our historical run rate due to investments we are making in our Springfield facility, combined with advanced manufacturing initiatives at multiple locations. We paid $6 million in dividends and ended the quarter with $25.2 million in cash and investments and $40 million in borrowings on our line of credit.
Speaker #2: We spent $11.9 million on capital projects this quarter, compared with $4.3 million last year, and continue to expect our capital spending for the year to be between $45 and $50 million.
Speaker #2: As a reminder, our capital spending this year is approximately 25 million dollars higher than our historical run rate, due to investments we are making in our Springfield facility, combined with advanced manufacturing initiatives at multiple locations.
Speaker #2: We paid $6 million in dividends and ended the quarter with $25.2 million in cash and investments, and $40 million in borrowings on our line of credit.
Speaker #2: Finally, our board has authorized our $0.13 quarterly dividend to be paid to stockholders of record on September 17, with payment to be made on October 1.
Deana McPherson: Finally, our board has authorized our $0.13 quarterly dividend to be paid to stockholders of record on 17 September, with payment to be made on 1 October. Looking forward to our Q2, we continue to expect a normal seasonal environment and strong demand for our products, resulting in anticipated sales for Q2 of roughly 10% above last year. With channel inventory continuing to remain at healthy levels, we don't expect inventory to have an impact, positively or negatively, on our Q2. For the full year, we continue to expect that our fiscal 2027 revenue will grow approximately 5% to 7% over FY26. We expect Q2 gross margins to be 200 to 300 basis points higher than last year's Q2 on increased absorption, partially offset by increased volume-related spending and inflationary cost increases.
Deana McPherson: Finally, our board has authorized our $0.13 quarterly dividend to be paid to stockholders of record on 17 September, with payment to be made on 1 October. Looking forward to our Q2, we continue to expect a normal seasonal environment and strong demand for our products, resulting in anticipated sales for Q2 of roughly 10% above last year. With channel inventory continuing to remain at healthy levels, we don't expect inventory to have an impact, positively or negatively, on our Q2. For the full year, we continue to expect that our fiscal 2027 revenue will grow approximately 5% to 7% over FY26. We expect Q2 gross margins to be 200 to 300 basis points higher than last year's Q2 on increased absorption, partially offset by increased volume-related spending and inflationary cost increases.
Speaker #2: Looking forward to our second quarter, we continue to expect a normal seasonal environment and strong demand for our products, resulting in anticipated sales for Q2 of roughly 10% above last year.
Speaker #2: With channel inventory continuing to remain at healthy levels, we don't expect inventory to have an impact, positively or negatively, on our second quarter. For the full year, we continue to expect that our fiscal 2027 revenue will grow approximately 5 to 7 percent over FY26.
Speaker #2: We expect Q2 gross margin to be 200 to 300 basis points higher than last year's Q2 on increased absorption, partially offset by increased volume-related spending and inflationary cost increases.
Speaker #2: Operating expenses in Q2 will likely be 10% to 15% higher than in Q1, due to volume-related customer and freight costs, combined with continued investment in R&D and increased profit-related costs, such as profit sharing.
Deana McPherson: Operating expenses in Q2 will likely be 10% to 15% higher than in Q1 due to volume-related customer and freight costs, combined with continued investment in R&D and increased profit-related costs such as profit-sharing. Our effective tax rate is expected to be approximately 30%. With that, operator, can we please open the call to questions from our analysts?
Deana McPherson: Operating expenses in Q2 will likely be 10% to 15% higher than in Q1 due to volume-related customer and freight costs, combined with continued investment in R&D and increased profit-related costs such as profit-sharing. Our effective tax rate is expected to be approximately 30%. With that, operator, can we please open the call to questions from our analysts?
Speaker #2: Our effective tax rate is expected to be approximately 30%. With that, operator, can we please open the call to questions from our analysts?
Speaker #3: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Operator: Thank you. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Mark Smith with Lake Street Capital Markets. Please proceed.
Operator: Thank you. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Mark Smith with Lake Street Capital Markets. Please proceed.
Speaker #3: 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 #3: Our first question is from Mark Smith with Lake Street Capital Markets. Please proceed.
Speaker #4: Hey, this is Alex Ewig asking questions for Mark Smith.
Alex Ewig: Hey, this is Alex Ewig asking questions for Mark Smith.
Alex Ewig: Hey, this is Alex Ewig asking questions for Mark Smith.
Speaker #5: Hey, Alex.
Mark Smith: Hey, Alex.
Mark Smith: Hey, Alex.
Speaker #4: Q1 net sales grew 32% versus the 15 to 20 percent you guys guided in June, but the full year guidance, you guys kind of left unchanged at 5 to 7 percent, and Q2 is only 10% above last year.
Mark Smith: Q1 net sales grew 32% versus the 15% to 20% you guys guided in June. But the full year guidance you guys kind of left unchanged at 5% to 7%, and Q2 is only 10% above last year. What drove this upside, and was it timing or pull forward from Q2? What does the implied back half deceleration look like, kind of projecting flat to down in the back half? What does this kind of assume about demand?
Mark Smith: Q1 net sales grew 32% versus the 15% to 20% you guys guided in June. But the full year guidance you guys kind of left unchanged at 5% to 7%, and Q2 is only 10% above last year. What drove this upside, and was it timing or pull forward from Q2? What does the implied back half deceleration look like, kind of projecting flat to down in the back half? What does this kind of assume about demand?
Speaker #4: What drove this upside, and was it timing or a pull-forward from Q2? And what does the implied back-half deceleration look like? You're kind of projecting flat to down in the back half, so what does this assume about demand?
Speaker #5: Yeah, thanks, Alex. So, the growth this year—I'll just point you back to the full year. Yeah, I mean, it's going to be a little bit more steady this year.
Mark Smith: Yeah, thanks, Alex. The growth this year, I will just point you back to the full year. Yeah, it is going to be a little bit more steady this year. I think last year, as you can see, it was a big Q4. Some of that was some of the state regulatory changes driving a pretty big Q4 for us, specifically on the MSRs. This year, great start to the year with a little outperformance in Q1. We just think this year it is going to be just a little steadier than it was last year. But at the end of the day, we kind of think of that as that is good news. It is steady growth, it is sustained market share gains, and something that we can kind of really build on that momentum as we go into the back half of the year.
Mark Smith: Yeah, thanks, Alex. The growth this year, I will just point you back to the full year. Yeah, it is going to be a little bit more steady this year. I think last year, as you can see, it was a big Q4. Some of that was some of the state regulatory changes driving a pretty big Q4 for us, specifically on the MSRs. This year, great start to the year with a little outperformance in Q1. We just think this year it is going to be just a little steadier than it was last year. But at the end of the day, we kind of think of that as that is good news. It is steady growth, it is sustained market share gains, and something that we can kind of really build on that momentum as we go into the back half of the year.
Speaker #5: I mean, I think last year, as you can see, it was a big Q4, and some of that was due to state regulatory changes driving a pretty big Q4 for us, specifically on the MSRs.
Speaker #5: So this year, great start to the year with a little outperformance in Q1, and we just think this year is going to be a little steadier than it was last year. But at the end of the day, we kind of think of that as good news.
Speaker #5: It's steady growth. It's sustained market share gains, and something that we can really build on—that momentum—as we go into the back half of the year.
Speaker #5: So, just still up significantly versus last year—5 to 7 percent growth. Pretty happy with that, and it's going to be a little smoother this year than it was last.
Mark Smith: Still up significantly versus last year, 5% to 10% growth, pretty happy with that. And it is going to be a little smoother this year than it was last.
Mark Smith: Still up significantly versus last year, 5% to 10% growth, pretty happy with that. And it is going to be a little smoother this year than it was last.
Speaker #4: And then ASP, on both handguns and long guns, outpaced our expectations. How much of this is mix versus price increases this year, and do you guys expect ASPs to kind of remain at these levels moving forward?
Alex Ewig: ASP on both handguns and long guns outpaced our expectations. How much of this is mix versus price increases this year? Do you guys expect ASPs to remain at these levels moving forward?
Alex Ewig: ASP on both handguns and long guns outpaced our expectations. How much of this is mix versus price increases this year? Do you guys expect ASPs to remain at these levels moving forward?
Speaker #5: Yeah, we've been pretty happy with the ASPs. I think in Q1, as Deana covered, on the long gun side, definitely mix.
Mark Smith: Yeah, we have been pretty happy with the ASPs. I think in Q1, as Deana covered, on the long gun side, definitely mix. We are really happy with the performance of the Model 1854, which as you know is kind of the top end of the pricing hierarchy for us. So that was really good and continued proof that we are really gaining a nice foothold there in that hunting segment of the market, whereas like Kurt in the prepared remarks, we historically had a smaller presence. So a little bit of mix, but a lot of it also is really limited promotions. We have had pretty solid demand for our core line as well.
Mark Smith: Yeah, we have been pretty happy with the ASPs. I think in Q1, as Deana covered, on the long gun side, definitely mix. We are really happy with the performance of the Model 1854, which as you know is kind of the top end of the pricing hierarchy for us. So that was really good and continued proof that we are really gaining a nice foothold there in that hunting segment of the market, whereas like Kurt in the prepared remarks, we historically had a smaller presence. So a little bit of mix, but a lot of it also is really limited promotions. We have had pretty solid demand for our core line as well.
Speaker #5: We're really happy with the performance of the 1854, which, as you know, is kind of the top end of the pricing hierarchy for us.
Speaker #5: So that was really good, and continued proof that we're really gaining a nice foothold there in that hunting segment of the market, whereas at current prepared marks, we historically kind of had a smaller presence.
Speaker #5: So, a little bit of a mix, but a lot of it also is really limited promotions. We've had pretty solid demand for our core line as well.
Speaker #5: And so Q1, I think, was a story—a little bit of a mix, but a lot of no need to participate to a meaningful degree in promotions, and we do anticipate that those ASP levels will continue.
Mark Smith: Q1, I think, was a story, a little bit of mix, but a lot of no need to participate to a meaningful degree in promotions, and we do anticipate that those ASP levels will continue going forward.
Mark Smith: Q1, I think, was a story, a little bit of mix, but a lot of no need to participate to a meaningful degree in promotions, and we do anticipate that those ASP levels will continue going forward.
Speaker #5: Going forward.
Speaker #4: And then professional channel units jumped pretty sharply. Off of a relatively small base, what type of long-term opportunity do you guys see in that professional channel?
Alex Ewig: Professional channel units jumped pretty sharp off of a relatively small base. What type of long-term opportunity do you guys see in that professional channel?
Alex Ewig: Professional channel units jumped pretty sharp off of a relatively small base. What type of long-term opportunity do you guys see in that professional channel?
Speaker #5: Yeah, we're really pleased with the performance on the LE side. The investments in the Academy are really starting to pay dividends, and a lot of the efforts we've been putting in over the last 12 to 18 months are really coming to fruition.
Mark Smith: Yeah, we are really pleased with the performance on the LE side. The investments in the academy are really starting to pay dividends, and a lot of the efforts we have been putting in over the last 12, 18 months really coming to fruition. That is a longer sales cycle there with the professional channel. I think you are starting to see some of the results and some of those efforts come to fruition. So really starting to gain momentum there. We are pretty pleased there. We are continuing to invest in the academy. A lot of traction there with the law enforcement professional user community, and we expect that to continue. We have a lot in the pipeline, nice pipeline as we look to the back half of the year.
Mark Smith: Yeah, we are really pleased with the performance on the LE side. The investments in the academy are really starting to pay dividends, and a lot of the efforts we have been putting in over the last 12, 18 months really coming to fruition. That is a longer sales cycle there with the professional channel. I think you are starting to see some of the results and some of those efforts come to fruition. So really starting to gain momentum there. We are pretty pleased there. We are continuing to invest in the academy. A lot of traction there with the law enforcement professional user community, and we expect that to continue. We have a lot in the pipeline, nice pipeline as we look to the back half of the year.
Speaker #5: That's a longer sales cycle there with the professional channel, and so I think you're starting to see some of the results of those efforts come to fruition.
Speaker #5: So it's really starting to gain momentum there. We're pretty pleased there. We're continuing to invest in the academy. A lot of traction there with the law enforcement and professional user community, and we expect that to continue.
Speaker #5: We have a lot in the pipeline—a nice pipeline—as we look to the back half of the year.
Speaker #4: Great, thank you. I'll turn it over.
Alex Ewig: Great, thank you. I will turn it over.
Alex Ewig: Great, thank you. I will turn it over.
Speaker #5: Thanks, Alex.
Mark Smith: Thanks, Alex.
Mark Smith: Thanks, Alex.
Speaker #3: There are no further questions at this time. I would now like to turn the conference back over to Mark Smith for closing remarks.
Operator: There are no further questions at this time. I would like to turn the conference back over to Mark Smith for closing remarks.
Operator: There are no further questions at this time. I would like to turn the conference back over to Mark Smith for closing remarks.
Speaker #5: All right, thank you, operator, and thanks to the company and Smith & Wesson. We look forward to speaking with everybody again next quarter.
Mark Smith: All right. Thank you, operator. Thanks, everyone, for joining us today and your interest in the company and Smith & Wesson. We look forward to speaking with everybody again next quarter.
Mark Smith: All right. Thank you, operator. Thanks, everyone, for joining us today and your interest in the company and Smith & Wesson. We look forward to speaking with everybody again next quarter.
Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
