Exhibit 99.1

 

Contact:

[email protected]

(413) 747-3448    

Smith & Wesson Brands, Inc. Reports

Second Quarter Fiscal 2021 Financial Results

 

-

Record Quarterly Revenue of $249 Million

-

GAAP EPS of $0.87/Share, non-GAAP EPS of $0.93/Share

-

$0.05 per Share Dividend

SPRINGFIELD, Mass., December 3, 2020 – Smith & Wesson Brands, Inc. (NASDAQ Global Select: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the second quarter of fiscal year 2021, ended October 31, 2020. On August 24, 2020, the company completed the previously announced spin-off of its outdoor products and accessories business. Therefore, beginning with this quarter, all historical financial information for that business is reported as discontinued operations. Unless otherwise indicated, any reference to income statement items refers to results from continuing operations.

Second Quarter Fiscal 2021 Consolidated Financial Highlights

 

•

Quarterly net sales were $248.7 million compared with $113.7 million for the comparable quarter last year, an increase of 118.7%.

 

•

Gross margin for the quarter was 40.6% compared with 28.4% for the comparable quarter last year.

 

•

Quarterly GAAP income was $49.1 million, or $0.87 per diluted share, compared with $343,000, or $0.01 per diluted share, for the comparable quarter last year.

 

•

Quarterly non-GAAP income was $52.8 million, or $0.93 per diluted share, compared with $472,000, or $0.01 per diluted share, for the comparable quarter last 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.

 

•

Quarterly non-GAAP Adjusted EBITDAS was $78.9 million, or 31.7% of net sales, compared with $13.4 million, or 11.8% of net sales, for the comparable quarter last year.

Mark Smith, President and Chief Executive Officer, commented, “Today, I am pleased to report a second consecutive record-breaking quarter for our 168 year old company. These results are a testament to Smith & Wesson’s devoted team of employees, and their ability to deliver strong performance in the face of any challenge. Because of the hard work of our employees, who have been diligently following our safety protocols, we have been able to continue safely operating our business and, during these extremely difficult times when so many of our fellow Americans are out of work, we successfully created and filled 287 new jobs during our second quarter. Along with our existing employees, our new team members played a critical role in achieving these record-breaking numbers.”

 

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Deana McPherson, Executive Vice President and Chief Financial Officer, commented, “Smith & Wesson’s record-breaking financial performance enabled us to generate $49.1 million in net income, seed the outdoor products and accessories business with $25 million of cash at the spin date, repay the final $25 million on our revolving loan, and left us with $55.5 million of cash on hand, and zero bank debt, significantly sooner than our prior internal targets. Additionally, our Board again authorized a $0.05 per share dividend to shareholders of record as of December 17, 2020, with payment to be made on January 5, 2021.”

Conference Call and Webcast

The company will host a conference call and webcast today, December 3, 2020 to discuss its second quarter fiscal 2021 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 8990013. 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, the company considers and uses these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends. The company believes it is useful for itself and the reader to review, as applicable, both (1) GAAP measures that include (i) amortization of acquired intangible assets, (ii) transition costs, (iii) the tax effect of non-GAAP adjustments, (iv) COVID-19 expenses, (v) net cash used in investing activities, (vi) interest expense, (vii) income tax expense, (viii) depreciation and amortization, and (ix) stock-based compensation expenses; and (2) the non-GAAP measures that exclude such information. The company presents these non-GAAP measures because it considers them an important supplemental measure of its performance. The company’s definition of these adjusted financial measures may differ from similarly named measures used by others. The company believes 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 the company’s GAAP measures. The principal limitations of these measures are that they do not reflect the company’s 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^®, Thompson/Center Arms^™, and Gemtech^® brands. The company also provides manufacturing services including forging, machining, and precision plastic injection molding services. For more information call (844) 363-5386 or visit www.smith-wesson.com.

 

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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 ability to deliver strong performance in the face of any challenge. 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; speculation surrounding fears of terrorism and crime; our anticipated growth and growth opportunities; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; our penetration rates in new and existing markets; our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to introduce new products; the success of new products; our ability to expand our markets; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

 

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		As of:
		October 31, 2020				April 30, 2020
		(In thousands, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents		$	55,549			$	125,011
Accounts receivable, net of allowances for credit losses of $1,067 on October 31, 2020 and $1,038 on April 30, 2020			68,637				60,879
Inventories			78,889				103,741
Prepaid expenses and other current assets			7,599				7,556
Current assets of discontinued operations			—				94,673
Income tax receivable			4,713				1,595
Total current assets			215,387				393,455
Property, plant, and equipment, net			147,907				147,739
Intangibles, net			4,458				4,375
Goodwill			19,024				19,024
Other assets of discontinued operations			—				148,485
Other assets			14,309				16,437
			401,085				729,515
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	60,985			$	31,476
Accrued expenses and deferred revenue			41,254				57,678
Accrued payroll and incentives			11,405				12,448
Accrued income taxes			337				5,503
Accrued profit sharing			6,810				2,197
Accrued warranty			4,352				3,297
Current liabilties of discontinued operations			—				17,372
Total current liabilities			125,143				129,971
Deferred income taxes			457				457
Notes and loans payable, net of current portion			—				159,171
Finance lease payable, net of current portion			39,343				39,610
Other non-current liabilities of discontinued operations			—				2,299
Other non-current liabilities			9,264				10,889
Total liabilities			174,207				342,397
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, 74,122,674 issued and 55,955,812 shares outstanding on October 31, 2020 and 73,526,790 shares issued and 55,359,928 shares outstanding on April 30, 2020			74				74
Additional paid-in capital			269,911				267,630
Retained earnings			179,195				341,716
Accumulated other comprehensive income			73				73
Treasury stock, at cost (18,166,862 shares on October 31, 2020 and April 30, 2020)			(222,375	)			(222,375	)
Total stockholders’ equity			226,878				387,118
		$	401,085			$	729,515

 

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)

(Unaudited)

 

		For the Three Months Ended October 31,								For the Six Months Ended October 31,
		2020				2019				2020				2019
		(In thousands, except per share data)
Net sales		$	248,729			$	113,717			$	478,614			$	209,153
Cost of sales			147,656				81,405				285,117				141,254
Gross profit			101,073				32,312				193,497				67,899
Operating expenses:
Research and development			1,855				1,795				3,761				3,692
Selling, marketing, and distribution			11,614				10,841				21,609				20,374
General and administrative			23,224				16,103				45,007				33,312
Total operating expenses			36,693				28,739				70,377				57,378
Operating income from continuing operations			64,380				3,573				123,120				10,521
Other income/(expense), net:
Other income/(expense), net			693				83				760				90
Interest expense, net			(1,490	)			(3,046	)			(2,806	)			(5,687	)
Total other (expense)/income, net			(797	)			(2,963	)			(2,046	)			(5,597	)
Income from operations before income taxes			63,583				610				121,074				4,924
Income tax expense			14,465				267				28,657				2,396
Income from continuing operations		$	49,118			$	343			$	92,417			$	2,528
Discontinued operations:
Income/(loss) from discontinued operations			3,123				950				8,209				(3,343	)
Net income/(loss)		$	52,241			$	1,293			$	100,626			$	(815	)
Net income/(loss) per share:
Basic - continuing operations		$	0.88			$	0.01			$	1.66			$	0.05
Basic - net income/(loss)		$	0.93			$	0.02			$	1.81			$	(0.01	)
Diluted - continuing operations		$	0.87			$	0.01			$	1.64			$	0.05
Diluted - net income/(loss)		$	0.92			$	0.02			$	1.78			$	(0.01	)
Weighted average number of common shares outstanding:
Basic			55,914				54,912				55,691				54,847
Diluted			56,531				55,424				56,475				54,847

 

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Six Months Ended
		October 31, 2020				October 31, 2019
		(In thousands)
Cash flows from operating activities:
Income from continuing operations		$	92,417			$	2,528
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			17,129				16,483
Loss on sale/disposition of assets			3				15
Provision for losses on notes and accounts receivable			29				(219	)
Change in fair value of contingent consideration			—				100
Stock-based compensation expense			2,075				2,826
Changes in operating assets and liabilities:
Accounts receivable			(7,787	)			(5,585	)
Inventories			24,852				(29,260	)
Prepaid expenses and other current assets			(43	)			(2,979	)
Income taxes			(8,267	)			(2,932	)
Accounts payable			28,331				3,486
Accrued payroll and incentives			(1,043	)			(9,510	)
Accrued profit sharing			4,613				(1,462	)
Accrued expenses and deferred revenue			(16,212	)			(1,134	)
Accrued warranty			1,055				(436	)
Other assets			2,561				753
Other non-current liabilities			(1,625	)			(1,358	)
Cash provided by/(used in) operating activities - continuing operations			138,088				(28,684	)
Cash used in operating activities - discontinued operations			(2,225	)			(6,187	)
Net cash provided by/(used in) operating activities			135,863				(34,871	)
Cash flows from investing activities:
Payments to acquire patents and software			(350	)			(279	)
Payments to acquire property and equipment			(14,964	)			(8,249	)
Cash used by investing activities - continuing operations			(15,314	)			(8,528	)
Cash used by investing activities - discontinued operations			(1,143	)			(840	)
Net cash used in investing activities			(16,457	)			(9,368	)
Cash flows from financing activities:
Proceeds from loans and notes payable			25,000				75,000
Cash paid for debt issuance costs			(450	)			—
Payments on finance lease obligation			(479	)			(431	)
Payments on notes and loans payable			(185,000	)			(28,150	)
Distribution to AOUT			(25,000	)			—
Dividend distribution			(2,795	)			—
Proceeds from exercise of options to acquire common stock			2,195				936
Payment of employee withholding tax related to restricted stock units			(2,173	)			(550	)
Cash used in/(provided by) financial activities - continuing operations			(188,702	)			46,805
Cash used in financial activities - discontinued operations			(166	)			—
Net cash (used in)/provided by financing activities			(188,868	)			46,805
Net decrease in cash and cash equivalents			(69,462	)			2,566
Cash and cash equivalents, beginning of period			125,011				40,853
Cash and cash equivalents, end of period		$	55,549			$	43,419
Supplemental disclosure of cash flow information
Cash paid for:
Interest		$	2,188			$	5,767
Income taxes		$	40,888			$	4,184

 

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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 Six Months Ended
		October 31, 2020								October 31, 2019								October 31, 2020								October 31, 2019
		$				% of Sales				$				% of Sales				$				% of Sales				$				% of Sales
GAAP gross profit		$	101,073				40.6	%		$	32,312				28.4	%		$	193,497				40.4	%		$	67,899				32.5	%
COVID-19			10				0.0	%			—				—				896				0.2	%			—				—
Non-GAAP gross profit		$	101,083				40.6	%		$	32,312				28.4	%		$	194,393				40.6	%		$	67,899				32.5	%
GAAP operating expenses		$	36,693				14.8	%		$	28,739				25.3	%		$	70,377				14.7	%		$	57,378				27.4	%
Amortization of acquired intangible assets			(83	)			0.0	%			(113	)			-0.1	%			(166	)			0.0	%			(222	)			-0.1	%
Transition costs			(4,338	)			-1.7	%			(164	)			-0.1	%			(7,933	)			-1.7	%			(164	)			-0.1	%
COVID-19			(92	)			0.0	%			—				—				(159	)			0.0	%			—				—
Spin related stock-based compensation			(442	)			-0.2	%			—				—				(442	)			-0.1	%			—				—
Non-GAAP operating expenses		$	31,738				12.8	%		$	28,462				25.0	%		$	61,677				12.9	%		$	56,992				27.2	%
GAAP operating income		$	64,380				25.9	%		$	3,573				3.1	%		$	123,120				25.7	%		$	10,521				5.0	%
Amortization of acquired intangible assets			83				0.0	%			113				0.1	%			166				0.0	%			222				0.1	%
Transition costs			4,338				1.7	%			164				0.1	%			7,933				1.7	%			164				0.1	%
COVID-19			102				0.0	%			—				—				1,055				0.2	%			—				—
Spin related stock-based compensation			442				0.2	%			—				—				442				0.1	%			—				—
Non-GAAP operating income		$	69,345				27.9	%		$	3,850				3.4	%		$	132,716				27.7	%		$	10,907				5.2	%
GAAP income from continuing operations		$	49,118				19.7	%		$	343				0.3	%		$	92,417				19.3	%		$	2,528				1.2	%
Amortization of acquired intangible assets			83				0.0	%			113				0.1	%			166				0.0	%			222				0.1	%
Transition costs			4,338				1.7	%			164				0.1	%			7,933				1.7	%			164				0.1	%
COVID-19			102				0.0	%			—				—				1,055				0.2	%			—				—
Change in contingent consideration			—				—				(100	)			-0.1	%			—				—				(100	)			0.0	%
Spin related stock-based compensation			442				0.0	%			—				—				442				0.0	%			—				—
Tax effect of non-GAAP adjustments			(1,241	)			-0.5	%			(48	)			0.0	%			(2,399	)			-0.5	%			(77	)			0.0	%
Non-GAAP income from continuing operations		$	52,842				21.2	%		$	472				0.4	%		$	99,614				20.8	%		$	2,737				1.3	%
GAAP income from continuing operations per share - diluted		$	0.87							$	0.01							$	1.64							$	0.05
Amortization of acquired intangible assets			—								—								—								—
Transition costs			0.08								—								0.14								—
COVID-19			—								—								0.02								—
Change in contingent consideration			—								—								—								—
Spin related stock-based compensation			0.01								—								0.01								—
Tax effect of non-GAAP adjustments			(0.02	)							—								(0.04	)							—
Non-GAAP income from continuing operations per share - diluted		$	0.93				(a)			$	0.01							$	1.76				(a)			$	0.05

 

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

 

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO FREE CASH FLOW

(In thousands)

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		October 31, 2020				October 31, 2019				October 31, 2020				October 31, 2019
Net cash provided by/(used in) operating activities		$	55,265			$	(3,544	)		$	138,088			$	(28,684	)
Net cash used in investing activities			(8,674	)			(5,326	)			(15,314	)			(8,528	)
Free cash flow		$	46,591			$	(8,870	)		$	121,988			$	(35,514	)

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

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

(In thousands)

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		October 31, 2020				October 31, 2019				October 31, 2020				October 31, 2019
GAAP income from continuing operations		$	49,118			$	343			$	92,417			$	2,528
Interest expense			1,517				3,266				2,879				6,029
Income tax expense			14,465				267				28,657				2,396
Depreciation and amortization			8,145				8,137				16,282				16,267
Stock-based compensation expense			1,191				1,295				2,075				2,820
Change in contingent consideration			—				(100	)			—				(100	)
COVID-19			102				—				1,055				—
Transition costs			4,338				164				7,933				164
Non-GAAP Adjusted EBITDAS		$	78,876			$	13,372			$	151,298			$	30,104

 

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