POWW Q2 2026 Earnings Call

Unknown Speaker: Welcome to the Outdoor Holding Company second quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Unknown Speaker: After today's presentation, there will be an opportunity to ask questions.

Unknown Speaker: To ask a question, you may press star then 1 on your telephone keypad to withdraw your question. Please. Press star then 2

Unknown Speaker: Please note this event is being recorded.

Unknown Speaker: I would now like to turn the conference over to Michael ble with Darrow Associates, the company's investor relations firm. Please go ahead.

Unknown Speaker: Good morning, and thank you for participating in today's conference call.

Unknown Speaker: Yes, sir Paul. Cazau Chief Financial Officer.

Unknown Speaker: And Gordon Christensen, Chief Legal Officer and Corporate Secretary.

Unknown Speaker: During this call management will be making forward-looking statements including statements, that address outdoor holding companies, expectations for future performance or operational results.

Unknown Speaker: Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements.

Unknown Speaker: For more information about these risks.

Unknown Speaker: Please refer to the risk factors. Described in outdoor holding companies. Most recently filed periodic reports on form 10 K and formed 10 Q.

Unknown Speaker: The Form 8K filed with the FCC today, and the company's press release that accompanies this call.

Unknown Speaker: Particularly the cautionary statements in it.

Unknown Speaker: Today's conference call includes non-gaap Financial measures. That outdoor holding company believes can be useful in evaluating its performance.

Unknown Speaker: You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

Unknown Speaker: For a reconciliation of this non-GAAP financial measure to net income or loss, its most directly comparable GAAP financial measure.

Unknown Speaker: Please see the reconciliation table located in the company's earnings release.

Unknown Speaker: The content of this call contains time-sensitive information. That is accurate only, as of today, November 10th 2025.

Unknown Speaker: Except as required, by law outdoor holding company. Disclaims any obligation to publicly update, or revise, any information to reflect events or circumstances that occur after this call?

Unknown Speaker: With that said, it is now my pleasure to turn the call over to Outdoor Holding Company's Chairman and Chief Executive Officer, Steve Irvin.

Unknown Speaker: Good morning everyone. Thank you for joining us. For our second quarter fiscal 2026 earnings call. I'm pleased to reinstate, quarterly calls with our shareholders. And hope that these communications help you better understand our progress, and improving outdoor holding company. As you are aware. There were some regulatory issues with necessitated suspension of our periodic reporting and these earnings calls. Once we filed, our restated and delinquent financials and held an annual meeting. We regained fall NASDAQ compliance and our prepared to resume, discussing our operating performance. I look forward to these calls being a regular part of our dialogue, with our investors. While there are remains certain legal matters that we are unable to discuss. At this time, we are committed to transparent and thoughtful communication with investors.

Unknown Speaker: With that being said, let's discuss what was a promising? Second quarter of fiscal 2026. I'm going to provide an initial thoughts. Then we'll turn things over to Paul to discuss our financial performance. I'll close things out with some thoughts on where we are heading.

Unknown Speaker: In the quarter, net sales have just under 12 million were essentially flat year-over-year. Outperforming broader Trends in the firearm market and overall consumer spending our gross margin remains strong for the quarter and increased by 22 basis points to 87.1%. Gross, merchandise value is close. Was relatively close to last year's quarter at almost 189 million, but we saw an improvement in our take rate, which rose to 6.34% as compared to 6.27% in last year's period.

Unknown Speaker: When I wrote my letter to shareholders, back in August, I sent our goal was to focus on being solely, a streamlined, e-commerce Marketplace, operator.

Unknown Speaker: And the second quarter we began to show results from those operating expense reductions operating expenses except depreciation and amortization the client significantly year over year on year by approximately 6.7 million dollars.

Unknown Speaker: Some of this improvement was the result of settling litigation and reducing ongoing litigation costs. But another component was the reduction in compensation-related expenses of over $1 million. We can operate gunbroker.com with a smaller, more streamlined team by reducing redundancies and right-sizing our headcount to match the scope of our operations.

Unknown Speaker: Our improved cost structure contributed to reporting. Net income from continuing operations in the quarter of 1,405,000 as compared to a loss of 5,868,000 in last year's period. This translated to earnings per share of 1 penny for the quarter versus a loss of 5 cents from continuing operations and fiscal 2025 second quarter. These cost Improvement efforts also LED ohc.

Unknown Speaker: Which Paul will discuss in more detail generating. Positive cash flow in the quarter was a remarkable Improvement, which we hope to continue improving on in future quarters.

Unknown Speaker: Before I turn things over to Paul, I would like to touch on an important Financial metric adjusted. Even up. The company, has been experienced, the volume of non-recurring costs, that tend to mask our underlying business performance.

Unknown Speaker: Now, clarify our performance.

Unknown Speaker: We include a table detailing adjusted Ava and both our earnings release and 10 Q. This quarter is adjusted even in number confirms our progress, as we delivered, a 24% Improvement in adjusted even after the quarter at 4.9 million, as opposed to 3.9 million in fiscal 2025 second quarter

Unknown Speaker: I will now turn it over to Paul Kazi, our Chief Financial Officer to discuss the Porter's performance in Greater detail.

Unknown Speaker: Thanks Steve and good morning. Let's dive deeper into our financial performance for Q2.

Unknown Speaker: We use adjusted mix checks data from the nssf to provide context on trends for the firearm industry.

Unknown Speaker: Adjusted NICS were down over 5% in Q2 versus the same 3 months in the prior year.

Unknown Speaker: Despite this metric firearm sales on GunBroker were up over 3% and are adjusted share of mix, increase 50 basis points to 6% for the same period.

Unknown Speaker: Gmv for firearms, increased 1.2% driven by a 7.8% increase in used firearms.

Unknown Speaker: This represents enthusiasm from the buyer and seller Community who have established GunBroker as the marketplace leader for firearms.

Unknown Speaker: While total GMV decreased by 1.2% to $189 million,

Unknown Speaker: Total revenue for the quarter was slightly up at $11,984 thousand versus prior year for the same three months.

Unknown Speaker: In addition, net revenue was 1.1% higher than q1 for fiscal year 26.

Unknown Speaker: Pay rate, increased 7 basis points to 6.34% with improved platform monetization and high margin. Seller services,

Unknown Speaker: This also resulted in a gross margin of 87.1%, compared to 86.9% for the 3 months ended September 30, 2024.

Unknown Speaker: Operating expenses decreased by approximately 6.7 million. For the 3 months, ended September 30th 2025 compared to the 3 months, ending September 30th of 2024

Unknown Speaker: The lower operating expenses were driven by a decrease in legal fees, a reduction of stock-based compensation, and salaries related to reduced headcount.

Unknown Speaker: We recorded a $100,000 reduction in bad debt expense due to increased collection efforts.

Unknown Speaker: These decreases were partially offset by a 1.8 million expense related to a settlement contingency with a vendor as part of the sale as the ammunition manufacturing business.

Unknown Speaker: The result is a net income of 1.4 million dollars for 3 months, ending September 30th 2025.

Unknown Speaker: Adjusted even I was 4.9 million which is 41% of net revenue compared to 3.9 million and adjusted eBid up for the prior year.

Unknown Speaker: As Steve mentioned earlier, cash, increased 2.3 million for the quarter.

Unknown Speaker: This was driven by the high operating margin of the GunBroker business model.

Unknown Speaker: We ended the second quarter with cash on hand of approximately 65.7 million.

Unknown Speaker: The company intends to use part of this cash, balance to repurchase shares.

Unknown Speaker: in September of 2025, independent and disinterested members of the board of directors approved, the exercise of the second notes prepayment option upon, which the company issued 13 million, warrants and satisfaction with the second note,

Unknown Speaker: This event resulted in an extinguishment of debt and a gain of approximately 801,000, which was recognized in the quarter.

Unknown Speaker: Finally at the end of the second quarter outdoor holding company qualified as a smaller reporting company due to the value of our public float, which will affect how our internal controls are audited and the scope of our financial reporting disclosures.

Unknown Speaker: Despite this change, we remain committed to continually improving internal controls and disclosure practices.

Unknown Speaker: And improving the user experience on GunBroker.

Unknown Speaker: Now, let me turn it over to Steve for some final remarks before we take your questions.

Unknown Speaker: Thanks Paul, as I said earlier, this is a very good quarter for the company.

Unknown Speaker: Financial results of which demonstrate the effect of our initiatives over over the last quarter. But we have room to continue improving. We've made progress in reducing overhead and redundant costs in the organization but there's more work to do just after a quarter ended. We announced the relocation of our corporate headquarters back to the Atlanta area. This action is resulted in a mo, modest, reduction in headcount and will eventually eliminate our Arizona, physical footprint. Additionally we will continue to have highly variable expenses, tied to advancement in identification of former officers and directors and the costs of ongoing litigation.

Unknown Speaker: Despite our expectation that operating results will remain stable. Our overall financial performance will be uneven until the litigation is resolved. And the company's indemnification obligations are extinguished.

Unknown Speaker: Paul also talked about our substantial cash position while we are, earning interest on those cash balances today. We believe there are other options that can provide better returns for our shareholders. We remain committed to exploring all methods of increasing shareholder value, both through continued cost reduction and by improving user experience on the gun broker.com website to increase traffic, transaction volume, and ultimately Revenue.

Unknown Speaker: This concludes presentation portion of our call, I will now turn the call over to the operator for questions. Thank you.

Unknown Speaker: We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad. If you are using a speaker-phone please pick up your handset before pressing the keys to withdraw your question. Please press star and then 2

Unknown Speaker: Our first question comes from Mark Smith with Lake Street Capital. Please go ahead.

Unknown Speaker: Hi, guys, I uh, I want to ask first just about kind of market share, uh, in how you felt about your performance, uh, during the quarter relative to peers, both brick and mortar, as well as online retailers.

Unknown Speaker: Okay, thank you Mark. Um, this is Steve Iran. Um I think in the uh in the presentation we said that adjusted mix were were um

Unknown Speaker: We're down 5% while our firearm sales increased 3%. So our view is that we are gaining market share and not losing market share, and that we're doing well compared to the industry trends.

Unknown Speaker: Okay. Um and and then just as, as we think about things, you know, as far as changes in strategy. Its first conference call in a while, you know, any anything that you can discuss or or want to around, you know, changes in strategy or even, you know, potential changes, kind of the, The Gun Broker site. And how users will will will see that. Is there anything that we should look forward to coming up? Or do you feel like you've got, kind of the the right platform and everything in place today that you need?

Unknown Speaker: Well, in terms of The Gun Broker site, um we we were improving this site every day we're we're improving the buyer experience every day. I'm focused on buyer experience. I want our buyers to go in and have, you know, a a very, um, convenient experience, uh, you know, make it really easy to purchase things, make it as um,

Unknown Speaker: As consistent, you know, across the entire site as humanly possible. And we do that, we do that day in day out. It's it's, um, our development process. You know, basically improves the software in little bite sizes, every every couple few weeks. And so we're always making changes. We're always driving that that user experience. We have been focusing from the seller side on helping sellers you know, sell more product that too is not a new initiative, it's just something we do, you know every single day I think we're just more.

Unknown Speaker: Drive incremental GMZ, which will drive incremental revenue.

Unknown Speaker: Okay.

Unknown Speaker: for me, it was just

Unknown Speaker: around.

Unknown Speaker: Doing a great job on on gross profit margin, and maintaining, and even improving a little bit on those margins. But just, as we think about operating expenses, it sounds like, you know, it's hard to say, what kind of 1 time things could still come up, but I'm curious about, you know, anything that you can say around, you know, corporate GNA your employee salaries related to expense is, you know, do you feel like this is a good sustainable level here? Do you think there's more to come, uh, you know, a lot more to come? I think there's a lot more to come. Um, we we, you know, this is the tip of the iceberg. We, you know, I, we have expenses that were in control of and expenses were not in control of, um, you know, Legacy things from from the past and we're every single day. We look at every dollar we spend and say, do we need to spend this? Is it required? Is it, generating revenue? Is it something we can live without, and we, you know, we, we cut, we, we cut where we can't but, um,

Unknown Speaker: There are certain expenses, you know, for example, the indemnification that we just are not in control of and, you know, that's going to kind of have in flow. Um, you know, as as as those people move through their processes. And so we're we're we're laser focused on continuing to make cuts and we've made some and I and there's and there's more to go. This is, you know, this is still early innings.

Unknown Speaker: Okay, great. Thank you.

Unknown Speaker: And the next question comes from, Matt Korea with Roth Capital, please go ahead.

Unknown Speaker: Hey guys. Good morning. Um, I guess if you wanted to pick up on some of the consumer trends that you saw during the quarter, um, it's nice to see the outperformance versus NICS. And I think you guys called out used firearms as particularly strong. I guess in my mind that might indicate there's a little bit of consumer trade-down that's happening. Um,

Unknown Speaker: But then I think he also called out AOVs or higher. So maybe I just wanted to hear you talk about some of the trends that you saw during the quarter and firearms demand, particularly used.

Unknown Speaker: So my you know, keeping in mind that obviously I've been running gun broker. You know, except for the brief window from 2021 till this year, you know, for 26 years. And I've seen a lot of these trends

Unknown Speaker: On the, on the used Side.

Unknown Speaker: Used items that are fairly priced have a near 100% sell through rate. I mean, you know, there there's there's uh, in the in the with new Firearms, there's basically Unlimited Supply right? Except in Surge periods, where there's shortages there's basically Unlimited Supply and so, you know, you can end up with a glut of new, but you basically don't ever end up with a lot of use use products, you know, sell through at a very efficient at a very high rate, very efficiently. And so you know the challenge is getting people to you know to list more of those used items for us to to sell. So I don't really think of it as a consumer Trend like a trade down or what have you. I I think it's just in general. There's, you know, you you're selling a lot. I mean you're sell through rate on use this so high because every items you need. And, and

Unknown Speaker: You know, there's less Supply than there is demand. Um, and so, you know, I think that is just something that has been the case, you know, since I started this site

Unknown Speaker: Okay, that's fair, Steve. Um, maybe just then the follow-on to that is how do you incentivize more used listings? And make sure that your sellers are bringing the right used supply onto the marketplace?

Unknown Speaker: I think, you know, there's— I mean, people with... It's amazing what people buy. People buy a rusted-out gun that doesn't even work if the, you know, if the price is right. It's not necessarily the right gun; it's literally just about getting that supply. And, you know, the vast majority of our transactions are done by gun shops. And I mean, you know, there'll be gun shops that have...

Unknown Speaker: We have to take a picture of the item you're selling, and there's a little more process—well, there's a lot more process behind it. So what we're always trying to do is streamline that process.

Unknown Speaker: Yeah, okay. Are there new new tools available to sellers, or do you envision and, and sort of the product pipeline for sellers? Maybe some AI enabled tools? That would help with listings, maybe to unlock some more of that Supply.

Unknown Speaker: Absolutely. And I mean, we, you know, we do so much behind the scenes with apis and connectivity to point of sale systems and, you know, a bunch of other things that you just don't see, unless you're in that business. But, um, absolutely, we're working on those tools every single day. Trying to make that process that listing process more streamlined and really the entire selling process, you know, the the keeping track of who paid um shipping, you know, we're we're we're doing our best to streamline and make that entire selling process more efficient for our sellers.

Unknown Speaker: Yeah. Okay. All right. Got it. And then I guess last 1 is is more focused on the profitability side. It looks like if I if I just annualize what you did in the second quarter, we're already pretty far along um toward the target of the 25th there in the shareholder letter. Steve um yes. And it sounds like you got a lot more to come on on sort of the cost savings side. Uh could we see

Unknown Speaker: That 25 million goal over time tick up. Just wanted to hear a little bit more about sort of the potential for

Unknown Speaker: For profitability, to kind of return to the historical levels that you kind of achieved before.

Unknown Speaker: Um, so yes, I believe that we can beat that number over time. You know, that was sort of a goal that was Set, uh, kind of at the end of, you know, for example, the indemnification of officers and certain other things. Um, so kind of a shorter term goal. But yes, we, you know, that our intention is to continue to drive or adjusted even a number higher and higher and higher Revenue growth will certainly help that but, you know, there's a lot of their, there's a lot to to still do on the on the cost savings side. And so you know, both of those will be a factor in driving that number higher

Unknown Speaker: Okay, I'll turn it over. Thanks guys.

Unknown Speaker: Thank you.

Unknown Speaker: This concludes our question and answer session. I would like to turn the conference back over to management for closing remarks.

Unknown Speaker: So this is Steve, Irvin I want to thank you for participating in today's call and for your interest in outdoor holding company. We look forward to sharing our ongoing progress. When we report, our fiscal third quarter 2026 results in February. Thank you all and have a great day.

Unknown Speaker: Conferences. Now concluded, thank you for attending today's presentation. You may now disconnect