Smith & Wesson Brands, Inc. (NASDAQ:SWBI) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several negative factors, including a 15.7% decline in net sales, lower demand, and persistent inflation affecting consumer spending. Gross margins are down, and future revenue is expected to decline by 5-10%. Inventory levels are elevated, and market demand remains soft. Although there is a share repurchase program, the financial outlook is weak with no major demand catalysts. The Q&A session indicates internal cannibalization and competitive pressures. Overall, the financial performance and guidance suggest a negative outlook for the stock price.
Key Financial Performance
Net Sales $115.9 million, down $21.6 million or 15.7% year-over-year due to lower demand for core products and persistent inflation.
Gross Margin 24.1%, down 4.6% year-over-year due to unfavorable fixed cost absorption from lower production volumes and higher promotional costs, partially offset by lower labor costs.
Operating Expenses $23.8 million, down $4.3 million year-over-year primarily due to a $2.3 million gain on the sale of property, with lower costs associated with relocation and lower profit-related compensation.
Net Income $1.7 million or $0.04 per share, with non-GAAP income per share at $0.02.
Cash Used in Operations $9.8 million, compared to $25.4 million of cash provided in the prior year due to a larger increase in working capital and lower net income.
Capital Expenditures $6.3 million, down from $18.2 million in the prior year due to lower investment related to relocation.
Dividends Paid $5.7 million, with a quarterly dividend of $0.13 per share authorized.
Share Repurchase Repurchased approximately 220,000 shares at an average price of $12.94, totaling $2.8 million.
Cash Position $26.7 million in cash and $110 million in borrowings on the line of credit.
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Operating Highlights
New Product Performance: New products introduced within the past year accounted for over 41% of sales in Q3, with strong demand for the Bodyguard 2.0.
Innovation Pipeline: Several exciting new products are expected to be introduced during the final quarter of FY2025 and throughout next year.
Lever Action Rifle Introduction: The introduction of the lever action rifle has been positively received and is expected to contribute to sales growth.
Market Share: Adjusted NICS was down 4.5% in Q3, but Smith & Wesson gained share in handguns with shipments down only 3%.
Long Gun Market Dynamics: Long gun NICS was down 3.9%, but unit sales grew at a compounded annual rate of nearly 20% over two years.
Operating Expenses: Operating expenses were $23.8 million, $4.3 million lower than the prior year, due to lower costs and a gain on property sale.
Inventory Management: Internal inventory levels are slightly elevated, but channel inventory at distributors is clean, under nine weeks.
Capital Allocation Strategy: The company plans to continue paying down debt, paying dividends, and reinvesting in innovation and manufacturing.
Share Repurchase Program: Repurchased 220,000 shares in Q3, returning over $49 million to stockholders through buybacks and dividends.
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Risk or Challenges
Revenue Decline: Net sales for Q3 were $115.9 million, which is $21.6 million or 15.7% below the prior year comparable quarter, attributed to lower demand for core products and the impact of persistent inflation.
Inventory Levels: Internal inventory levels are slightly elevated due to lower than anticipated Q3 sales, which may lead to challenges in managing production and cash flow.
Market Demand: Post-consumer demand is expected to remain soft due to election results and ongoing inflation, which could negatively impact future sales and margins.
Gross Margin Pressure: Gross margin of 24.1% was 4.6% below the prior year due to unfavorable fixed cost absorption from lower production volumes and higher promotional costs.
Operating Expenses: Operating expenses were lower than the prior year, but ongoing investments in R&D and marketing may offset these savings.
Future Revenue Expectations: The company anticipates a revenue decline of 5-10% for the full year, with expectations leaning towards the lower end of this range due to softer demand trends.
Channel Inventory Management: The distribution channel remains cautious, managing inventory carefully, which may affect the company's ability to meet demand.
Economic Factors: Macroeconomic conditions are bifurcating, heavily skewing towards new products or lower price points, which may impact overall sales performance.
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Guidance & Outlook
New Product Performance: New products introduced within the past year accounted for over 41% of sales in Q3, with several exciting new products expected to be introduced during the final quarter of FY2025 and throughout next year.
Innovation Strategy: Innovation continues to be a core focus, with a strong pipeline of new products expected to drive momentum.
Flexible Manufacturing Model: The company leverages a flexible manufacturing model to ensure solid profitability regardless of demand conditions.
Capital Allocation Strategy: The company is disciplined in managing its business and allocating capital to drive value for stockholders, including stock repurchases and dividends.
Revenue Expectations: Full-year revenue is expected to decline by 5-10% from fiscal 2024, with a closer expectation to a 10% decline based on recent demand trends.
Fourth Quarter Revenue Guidance: Fourth quarter revenue is anticipated to be down from the prior year quarter in the 2-5% range.
Margin Expectations: Lower production levels in Q4 are expected to result in lower margins, leading full-year margins to end a few percentage points lower.
Capital Expenditure Guidance: Capital spending for the year is expected to be between $20 million and $25 million.
Dividend: The quarterly dividend of $0.13 per share is to be paid to stockholders of record on March 20th.
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Shareholder Return Plan
Quarterly Dividend: $0.13 per share, to be paid on April 3, 2025.
Share Repurchase: Repurchased approximately 220,000 shares at an average price of $12.94, totaling $2.8 million.
Total Capital Returned to Stockholders: Over $49 million returned through stock repurchase program and dividends in the past twelve months.
Shares Reduced: Lowered share count by more than 1.5 million shares net of dilution.
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Key Q&A
Q:Can you walk through the sales of non-new or legacy products? Is it consumer weakness or competitive pressures?
A:A large part of the decline is due to the Bodyguard 2.0 cannibalizing our own line. We're gaining share in the pistol category, but there's internal cannibalization and competitive pressures. Inflation is also impacting consumer discretionary spending.
Q:How do you feel about the health of the industry and distributor behavior?
A:Distributor inventory is at about 8.5 weeks, which is comfortable. The market is steady, and we don't see major demand catalysts coming up. We're optimistic about a potential economic turnaround.
Q:Can you discuss your exposure to tariffs and the regulatory environment?
A:We have some exposure to tariffs, but it's not material to our numbers. We're pleased with the stability in the regulatory environment and look forward to a decision on the recent Supreme Court case.
Q:What are your expectations for Q4 ASPs and the long gun category?
A:Expect more of the same in Q4 as in Q3. The mix of long guns will remain stable, and new products shouldn't materially change the numbers.
Q:What are your goals for 2026?
A:We're planning for growth, focusing on new product introductions and expanding into other areas of the firearms market.
Q:Can you discuss the shift towards smaller frame concealed carry handguns?
A:It's a combination of consumer preference for smaller frames and lower price points. The Bodyguard 2.0 is successful due to its entry-level price and appeal.
Q:What is the potential margin impact of shifting long guns towards traditional hunting categories?
A:We don't provide specific margin guidance by product line, but the margins of the 18.54 are not materially different from our core line of rifles.
Q:Review of Unclear Management Responses
A:Management avoided giving specific guidance on margin by product line and did not provide detailed insights on potential demand catalysts or the impact of tariffs.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ASPs decline
ASPs demand
Bodyguard example
Bodyguard retail
Channel inventory
FPC rifle
Inc inline
Missouri sale
NASDAQ Transcript
RD product
Transcript Smith
absorption factor
activity income
allocation line
allocation model
amount line
amount remainder
basis gun
caliber margin
capital allocation
capital stockholder
compensation
cost
demand Bodyguard
distribution channel
income share
introduction lever
inventory distribution
level sale
manufacturing model
marketing
momentum
price point
product price
production level
program
season
selling
sheet capital
success
SWBI Transcript
Smith & Wesson Brands, Inc. (SWBI) Q2 2026 Earnings Call Transcript
Unknown12-4
The earnings call presented mixed signals: decreased sales and net income, coupled with a decline in gross margin, suggest negative sentiment. However, the optimistic guidance for Q4, increasing product ASP, and positive feedback from distributors provide a balancing positive outlook. The absence of a share repurchase program and the impact of tariffs add uncertainty. The dividend announcement is a slight positive, but not enough to outweigh the negatives. Overall, the sentiment remains neutral, with potential for slight fluctuations depending on market reactions to guidance and economic conditions.
Smith & Wesson Brands, Inc. (SWBI) Q1 2026 Earnings Call Transcript
Unknown9-4
The earnings call reveals several challenges: declining net sales and ASPs, increased interest expenses, and a net loss. Despite strong handgun shipments and a quarterly dividend, the outlook is clouded by economic uncertainty and margin pressures due to tariffs. The Q&A section highlights some optimism in product expansion and suppressor market, but these are overshadowed by the overall financial struggles. The lack of a new partnership, disappointing results, and economic headwinds suggest a negative stock price movement.
Smith & Wesson Brands, Inc. (SWBI) Q4 2025 Earnings Call Transcript
Unknown6-18
The earnings call reveals a negative outlook: declining revenue, margins, and net income, with soft future demand and high costs due to tariffs. Despite some positive notes like market share opportunities from competitor exits and maintaining ASPs, the overall financial health is strained. The Q&A section shows management's cautious approach, with no clear guidance on tariff impacts. The lack of share repurchases and negative macroeconomic factors further weigh on the sentiment, leading to a negative stock price prediction.
Smith & Wesson Brands, Inc. (NASDAQ:SWBI) Q3 2025 Earnings Call Transcript
Unknown3-8
The earnings call reveals several negative factors, including a 15.7% decline in net sales, lower demand, and persistent inflation affecting consumer spending. Gross margins are down, and future revenue is expected to decline by 5-10%. Inventory levels are elevated, and market demand remains soft. Although there is a share repurchase program, the financial outlook is weak with no major demand catalysts. The Q&A session indicates internal cannibalization and competitive pressures. Overall, the financial performance and guidance suggest a negative outlook for the stock price.
SWBI Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
