Smith & Wesson Brands, Inc. Reports Fourth Quarter and Full Year Fiscal 2022 Financial Results

–          Q4 Net Sales of $181.3 Million
–          Q4 Gross Margin of 39.8%
–          Q4 EPS of $0.79/Share; Q4 Adjusted EBITDAS Margin of 31.8%
–          $120.7 Million of Cash on Hand
–          Board of Directors Authorized 25% Increase in Quarterly Dividend

SPRINGFIELD, Mass., June 23, 2022 /PRNewswire/ — Smith & Wesson Brands, Inc. (NASDAQ Global Select: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the fourth quarter and full fiscal year 2022, ended April 30, 2022. Unless otherwise indicated, any reference to income statement items refers to results from continuing operations.

Fourth Quarter Fiscal 2022 Financial Highlights

  • Net sales were $181.3 million, a decrease of $141.6 million, or 43.9%, from the comparable quarter last year, and $11.7 million, or 6.1%, lower than the comparable quarter in fiscal 2020.
  • Gross margin was 39.8% versus 45.1% in the comparable quarter last year and 32.2% in the comparable quarter in fiscal 2020.
  • GAAP net income was $36.1 million, or $0.79 per diluted share, compared with $89.2 million, or $1.70 per diluted share, for the comparable quarter last year.
  • Non-GAAP net income was $37.6 million, or $0.82 per diluted share, compared with $89.6 million, or $1.71 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the planned relocation of our headquarters and certain manufacturing and distribution operations to Tennessee, the spin-off of the outdoor products and accessories business in fiscal 2021, COVID-19 related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.
  • Non-GAAP Adjusted EBITDAS was $57.7 million, or 31.8% of net sales, compared with $125.6 million, or 38.9% of net sales, for the comparable quarter last year.

Full Year Fiscal 2022 Financial Highlights

  • Net sales were $864.1 million compared with $1.1 billion for the prior year, a decrease of 18.4%.
  • Gross margin was 43.3% versus 42.4% for the prior year.
  • GAAP net income was $194.5 million, or $4.08 per diluted share, compared with $243.6 million, or $4.40 per diluted share, for the prior year.
  • Non-GAAP net income was $202.8 million, or $4.25 per diluted share, compared with $251.5 million, or $4.54 per diluted share, for the prior year. GAAP to non-GAAP adjustments for income exclude costs related to the spin-off of the outdoor products and accessories business, COVID-19 related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.
  • Non-GAAP Adjusted EBITDAS was $299.6 million, or 34.7% of net sales, compared with $366.6 million, or 34.6% of net sales, for the prior year.

Mark Smith, President and Chief Executive Officer, commented, “Our fourth quarter and full year results speak to the quality and dedication of our employees, the strength of our iconic brand, and the resiliency of our flexible manufacturing model.  We delivered strong financial results, including gross profit and Adjusted EBITDAS margins for fiscal 2022 that exceeded prior year levels despite continued moderation in demand for firearms that led to lower net sales. Although we expect inflationary pressures to persist and for firearm market conditions to return to more normalized levels in fiscal 2023, we are confident in our flexible manufacturing model and expect to benefit from the pricing and product portfolio adjustments that we made during the surge. In summary, we believe that we remain well positioned for long-term growth with an agile business model designed to quickly adapt to changes in the marketplace and deliver strong, consistent levels of profitability and drive long-term stockholder value.”

Deana McPherson, Executive Vice President and Chief Financial Officer, commented “Our financial performance reflects tougher year-over-year comparisons due to the return to more normalized levels of demand following the surge. However, in spite of the lower demand, we are now realizing the benefits of the proactive steps we took during the surge to enhance our profitability profile.  Fourth quarter gross margin was down on a year-over-year basis, as expected, but 760 basis points above the comparable quarter in fiscal 2020 despite a 6.1% decline in net sales.  Our balance sheet remains strong with $120.7 million of cash and no debt, and we expect to continue generating strong cash flow for the foreseeable future.  Accordingly, our Board of Directors has authorized a 25% increase in our quarterly dividend to $0.10 per share, which will be paid to stockholders of record on July 7, 2022 with payment to be made on July 21, 2022.”

Conference Call and Webcast
The company will host a conference call and webcast on June 23, 2022, to discuss its fourth quarter and full fiscal 2022 financial and operational results. Speakers on the conference call will include Mark Smith, President and Chief Executive Officer, and Deana McPherson, Executive Vice President and Chief Financial Officer. The conference call may include forward-looking statements. The conference call and webcast will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Those interested in listening to the conference call via telephone may call directly at (844) 309-6568 and reference conference identification number 2371913.  No RSVP is necessary. The conference call audio webcast can also be accessed live on the company’s website at www.smith-wesson.com, under the Investor Relations section.

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
In this press release, certain non-GAAP financial measures, including “non-GAAP net income,” “Adjusted EBITDAS,” and “free cash flow” are presented. From time-to-time, we consider and use these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends.  We believe it is useful for us and the reader to review, as applicable, both (1) GAAP measures that include (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) COVID-19 expenses, (vi) transition costs, (vii) amortization of acquired intangible assets, (viii) spin related stock compensation, (ix) Relocation expense, and (x) the tax effect of non-GAAP adjustments; and (2) the non-GAAP measures that exclude such information. We present these non-GAAP measures because we consider them an important supplemental measure of our performance. Our definition of these adjusted financial measures may differ from similarly named measures used by others. We believe these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis.  These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for our GAAP measures.  The principal limitations of these measures are that they do not reflect our actual expenses and may thus have the effect of inflating its financial measures on a GAAP basis.

About Smith & Wesson Brands, Inc.
Smith & Wesson Brands, Inc. (NASDAQ Global Select: SWBI) is a U.S.-based leader in firearm manufacturing and design, delivering a broad portfolio of quality handgun, long gun, and suppressor products to the global consumer and professional markets under the iconic Smith & Wesson®, M&P®, and Gemtech® brands.  The company also provides manufacturing services including forging, machining, and precision plastic injection molding services.  For more information call (800) 331-0852 or visit www.smith-wesson.com.

Safe Harbor Statement
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and we intend that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, among others, our expectation that inflationary pressures will persist and firearm market conditions will return to more normalized levels in fiscal 2023; our confidence in our flexible manufacturing model; our expectation that we will benefit from the pricing and product portfolio adjustments that we made during the surge; our belief that we remain well positioned for long-term growth with an agile business model designed to quickly adapt to changes in the marketplace and deliver strong, consistent levels of profitability and drive long-term stockholder value; and our expectation that we will continue generating strong cash flow for the foreseeable future. We caution that these statements are qualified by important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, economic, social, political, legislative, and regulatory factors; the potential for increased regulation of firearms and firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability, and costs of raw materials and components; our anticipated growth and growth opportunities; our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to effectively manage and execute the planned relocation of our headquarters and certain of our operations to Tennessee; our ability to introduce new products; the success of new products; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2022. 

Contact:
[email protected]
(413) 747-3448

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of:

April 30, 2022

April 30, 2021

(In thousands, except par value and share data)

 ASSETS

 Current assets:

Cash and cash equivalents

$          120,728

$          113,017

Accounts receivable, net of allowances for credit losses of $36 on April 30, 2022 and $107 on April 30, 2021

62,695

67,442

Inventories

136,660

78,477

Prepaid expenses and other current assets

5,569

8,408

Income tax receivable 

1,945

909

Total current assets

327,597

268,253

 Property, plant, and equipment, net

135,591

141,612

 Intangibles, net

3,608

4,417

 Goodwill

19,024

19,024

 Deferred income taxes

1,221

 Other assets

10,435

13,082

 Total assets

497,476

446,388

 LIABILITIES AND STOCKHOLDERS’ EQUITY

 Current liabilities:

Accounts payable

$             30,042

$            57,337

Accrued expenses and deferred revenue

23,482

33,136

Accrued payroll and incentives

17,371

17,381

Accrued income taxes

2,673

1,157

Accrued profit sharing

13,543

14,445

Accrued warranty

1,838

2,199

Total current liabilities

88,949

125,655

 Deferred income taxes 

904

 Finance lease payable, net of current portion

37,628

38,786

Other non-current liabilities

10,385

14,659

Total liabilities

136,962

180,004

 Commitments and contingencies

 Stockholders’ equity:

Preferred stock, $.001 par value, 20,000,000 shares authorized, no shares issued or outstanding

Common stock, $.001 par value, 100,000,000 shares authorized, 74,641,439 issued and 45,601,069 shares outstanding on April 30, 2022 and 74,222,127 shares issued and 49,937,329 shares outstanding on April 30, 2021

75

74

Additional paid-in capital 

278,101

273,431

Retained earnings

504,640

325,181

Accumulated other comprehensive income

73

73

Treasury stock, at cost (29,040,370 shares on April 30, 2022 and 24,284,798 on April 30, 2021)

(422,375)

(332,375)

Total stockholders’ equity

360,514

266,384

 Total liabilities and stockholders’ equity

$          497,476

$          446,388

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended April 30,

For the Years Ended April 30,

2022

2021

2022

2021

(In thousands, except per share data)

Net sales

$181,299

$322,947

$864,126

$1,059,195

Cost of sales

109,072

177,139

489,562

610,212

Gross profit

72,227

145,808

374,564

448,983

Operating expenses:

39.8 %

45.1 %

43.3 %

42.4 %

Research and development

1,994

1,963

7,262

7,480

Selling, marketing, and distribution

9,581

10,507

43,156

42,603

General and administrative

14,000

17,207

72,493

79,268

Total operating expenses

25,575

29,677

122,911

129,351

Operating income from continuing operations

46,652

116,131

251,653

319,632

Other income/(expense), net:

Other income/(expense), net 

624

540

2,868

2,252

Interest expense, net

(531)

(563)

(2,135)

(3,919)

Total other income/(expense), net

93

(23)

733

(1,667)

Income from operations before income taxes

46,745

116,108

252,386

317,965

Income tax expense

10,610

26,929

57,892

74,394

Income from continuing operations

$   36,135

$   89,179

$194,494

$    243,571

Discontinued operations:

Income/(loss) from discontinued operations, net of tax

(144)

8,478

Net income

$   36,135

$   89,035

$194,494

$    252,049

Net income per share:

Basic – continuing operations

$       0.79

$       1.72

$       4.12

$           4.46

Basic – net income

$       0.79

$       1.72

$       4.12

$           4.62

Diluted – continuing operations

$       0.79

$       1.70

$       4.08

$           4.40

Diluted – net income

$       0.79

$       1.70

$       4.08

$           4.55

Weighted average number of common shares outstanding:

Basic

45,547

51,816

47,227

54,613

Diluted

45,937

52,423

47,728

55,352

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended

April 30, 2022

April 30, 2021

(In thousands)

Cash flows from operating activities:

Income from continuing operations

$      194,494

$      243,571

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 

30,073

31,575

Loss on sale/disposition of assets

625

154

Provision for losses/(recoveries) on notes and accounts receivable

689

(739)

Impairment of long-lived tangible assets

86

Deferred income taxes

(2,125)

447

Stock-based compensation expense

4,536

4,706

Changes in operating assets and liabilities:

     Accounts receivable

4,058

(5,824)

     Inventories

(58,183)

25,264

     Prepaid expenses and other current assets

2,839

(852)

     Income taxes

480

(3,643)

     Accounts payable

(26,957)

25,540

     Accrued payroll and incentives

(10)

4,933

     Accrued profit sharing

(902)

12,248

     Accrued expenses and deferred revenue

(9,725)

(24,633)

     Accrued warranty

(361)

(1,098)

     Other assets

2,561

1,579

     Other non-current liabilities

(4,364)

4,032

     Cash provided by operating activities – continuing operations

137,814

317,260

     Cash used in operating activities – discontinued operations

(1,926)

        Net cash provided by operating activities

137,814

315,334

Cash flows from investing activities:

Refunds on machinery and equipment

310

Payments to acquire patents and software

(283)

(632)

Proceeds from sale of property and equipment

139

113

Payments to acquire property and equipment

(23,972)

(22,052)

Cash used in investing activities – continuing operations

(24,116)

(22,261)

Cash used in investing activities – discontinued operations

(1,143)

        Net cash used in investing activities

(24,116)

(23,404)

Cash flows from financing activities:

Proceeds from loans and notes payable

25,000

Cash paid for debt issuance costs

(450)

Payments on finance lease obligation

(1,087)

(996)

Payments on notes and loans payable

(185,000)

Distribution to AOUT

(25,000)

Payments to acquire treasury stock

(90,000)

(110,000)

Dividend distribution

(15,035)

(8,223)

Proceeds from exercise of options to acquire common stock, including employee stock purchase plan

1,719

3,154

Payment of employee withholding tax related to restricted stock units

(1,584)

(2,243)

Cash used in by financial activities – continuing operations

(105,987)

(303,758)

Cash used in financial activities – discontinued operations

(166)

         Net cash used in financing activities

(105,987)

(303,924)

Net decrease in cash and cash equivalents

7,711

(11,994)

Cash and cash equivalents, beginning of period

113,017

125,011

Cash and cash equivalents, end of period

$      120,728

$      113,017

Supplemental disclosure of cash flow information

Cash paid for:

Interest

$          2,219

$          3,306

Income taxes

$        59,183

$        80,874

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, except per share data)
(Unaudited)

For the Three Months Ended 

For the Year Ended

April 30, 2022

April 30, 2021

April 30, 2022

April 30, 2021

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

GAAP gross profit

$ 72,227

39.8 %

$ 145,808

45.1 %

$ 374,564

43.3 %

$  448,983

42.4 %

Relocation expenses

1,031

0.6 %

3,361

0.4 %

COVID-19

1

0.0 %

43

0.0 %

33

0.0 %

560

0.1 %

Non-GAAP gross profit

$ 73,259

40.4 %

$ 145,851

45.2 %

$ 377,958

43.7 %

$  449,543

42.4 %

GAAP operating expenses

$ 25,575

14.1 %

$   29,677

9.2 %

$ 122,911

14.2 %

$  129,351

12.2 %

Amortization of acquired intangible assets

(71)

0.0 %

(83)

0.0 %

(285)

0.0 %

(332)

0.0 %

Transition costs

(22)

0.0 %

80

0.0 %

(7,975)

-0.8 %

COVID-19

(71)

0.0 %

(67)

0.0 %

(207)

0.0 %

(685)

-0.1 %

Spin related stock-based compensation

(43)

0.0 %

(296)

-0.1 %

(147)

0.0 %

(738)

-0.1 %

Relocation expenses

(685)

-0.4 %

(6,884)

-0.8 %

Non-GAAP operating expenses

$ 24,705

13.6 %

$   29,209

9.0 %

$ 115,468

13.4 %

$  119,621

11.3 %

GAAP operating income

$ 46,652

25.7 %

$ 116,131

36.0 %

$ 251,653

29.1 %

$  319,632

30.2 %

Amortization of acquired intangible assets

71

0.0 %

83

0.0 %

285

0.0 %

332

0.0 %

Transition costs

22

0.0 %

(80)

0.0 %

7,975

0.8 %

COVID-19

72

0.0 %

110

0.0 %

240

0.0 %

1,245

0.1 %

Spin related stock-based compensation

43

0.0 %

296

0.1 %

147

0.0 %

738

0.1 %

Relocation expenses

1,716

0.9 %

10,245

1.2 %

Non-GAAP operating income

$ 48,554

26.8 %

$ 116,642

36.1 %

$ 262,490

30.4 %

$  329,922

31.1 %

GAAP income from operations

$ 36,135

19.9 %

$   89,179

27.6 %

$ 194,494

22.5 %

$  243,571

23.0 %

Amortization of acquired intangible assets

71

0.0 %

83

0.0 %

285

0.0 %

332

0.0 %

Transition costs

0.0 %

22

0.0 %

(80)

0.0 %

7,975

0.8 %

COVID-19

72

0.0 %

110

0.0 %

240

0.0 %

1,245

0.1 %

Spin related stock-based compensation

43

0.0 %

296

0.1 %

147

0.0 %

738

0.1 %

Relocation expenses

1,716

0.9 %

10,245

1.2 %

Tax effect of non-GAAP adjustments

(432)

-0.2 %

(119)

0.0 %

(2,486)

-0.3 %

(2,400)

-0.2 %

Non-GAAP income from  operations

$ 37,605

20.7 %

$   89,571

27.7 %

$ 202,845

23.5 %

$  251,461

23.7 %

GAAP income from  operations per share – diluted

$      0.79

$        1.70

$        4.08

$         4.40

Amortization of acquired intangible assets

0.01

0.01

Transition costs

0.14

COVID-19

0.01

0.02

Spin related stock-based compensation

0.01

0.01

Relocation expenses

0.04

0.21

Tax effect of non-GAAP adjustments

(0.01)

(0.05)

(0.04)

Non-GAAP income from  operations per share – diluted

$      0.82

$        1.71

$        4.25

(a)

$         4.54

(a) Non-GAAP net income per share does not foot due to rounding. 

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP INCOME FROM OPERATIONS TO NON-GAAP ADJUSTED EBITDAS

(in thousands)

(Unaudited)

For the Three Months Ended

For the Year Ended

April 30, 2022

April 30, 2021

April 30, 2022

April 30, 2021

GAAP net income

$          36,135

$          89,179

$       194,494

$       243,571

Interest expense

570

585

2,310

4,056

Income tax expense

10,610

26,929

57,892

74,394

Depreciation and amortization

7,636

7,420

29,982

30,685

Stock-based compensation expense

972

1,314

4,536

4,706

COVID-19

72

110

240

1,245

Transition costs

22

(80)

7,975

Relocation expense

1,716

10,245

Non-GAAP Adjusted EBITDAS

$          57,711

$        125,559

$       299,619

$       366,632

 

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF OPERATING CASH FLOW FROM OPERATIONS TO FREE CASH FLOW
(In thousands)
(Unaudited)

For the Three Months Ended

For the Year Ended

April 30, 2022

April 30, 2021

April 30, 2022

April 30, 2021

Net cash provided by operating activities

$     25,539

$   118,823

$   137,814

$   317,260

Net cash used in investing activities

(8,905)

(3,691)

(24,116)

(22,261)

Free cash flow

$     16,634

$   115,132

$   113,698

$   294,999

 

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SOURCE Smith & Wesson Brands, Inc.

Smith & Wesson Brands, Inc. Reports Fourth Quarter and Full Year Fiscal 2022 Financial Results WeeklyReviewer

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