Yahoo Finance AMMO, Inc. (NASDAQ:POWW) Q4 2024 Earnings Call Transcript
AMMO, Inc. (NASDAQ:POWW) Q4 2024 Earnings Call Transcript June 13, 2024
AMMO, Inc. misses on earnings expectations. Reported EPS is $0.01 EPS, expectations were $0.04.
Operator: Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the AMMO, Inc. Fourth Quarter and Fiscal Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. I would now like to turn the call over to Scott Arnold of CoreIR, the company's Investor Relations firm. Please go ahead, sir.
Scott Arnold : Good afternoon, and thank you for participating in today's conference call. Joining me from AMMO’s leadership team are Fred Wagenhals, Executive Chairman; Jared Smith, Chief Executive Officer and Rob Wiley, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address AMMO’s expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in AMMO's most recently filed periodic reports on Form 10-K and Form 10-Q, the Form 8-K filed with the SEC today, and the company's press release that accompanies this call, particularly the cautionary statements in it.
Today's conference call includes non-GAAP financial measures that AMMO believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliation of this non-GAAP financial measure to net loss, it's most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The content of this call contains time-sensitive information and is accurate only as of today, June 13, 2024. Except as required by law, AMMO disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to AMMO's Chief Executive Officer, Jared Smith.
Jared Smith : Good afternoon, everyone. Thank you for joining us for our fourth quarter and fiscal year 2024 earnings call. When I joined AMMO at the beginning of last year, we undertook a number of major initiatives to improve profitability and growth. This past fiscal year has provided several unforeseen challenges, but we remain confident in the changes we are making at both GunBroker and at our ammunition manufacturing facility in Wisconsin. We continued to make progress in our fiscal fourth quarter and ended the fiscal year with a strong pipeline for ammunition and casing sales while accelerated our buildout of GunBroker's capabilities. Sales increased sequentially for AMMO, Inc., despite a softening market as reported by other publicly-traded competitors in this space.
We have started to execute on the strongest development roadmap for GunBroker in its 25-year history and continue to bring on additional capacity at our plant, as we begin delivery on our open orders and contractual commitments. AMMO is at a pivotal point as we start our 2025 fiscal year. We have changed the trajectory of the business in these past 12 months and continue to optimize the business onto a path toward building shareholder value. We have reduced our working inventory and generated $32.6 million in cash from operations, increasing our cash balances by $16 million in the fiscal year. We have established a credit line of $20 million with Sunflower Bank, reduced working capital needs, paid down $3.6 million in debt, and delivered adjusted EBITDA margins of 10.6%.
As we sit here in June, we have never been more poised for success. I will now go into detail on our execution and our positioning for the future. Let me first speak to our progress at GunBroker. As we start to stretch our marketplace legs, we are finding new opportunities to empower our sellers on the platform to bundle accessories and cross -- and contrast to the singular transaction firearm business of the past. I would also like to highlight a few recent additional enhancements to GunBroker made by our dedicated team. We've taken an aggressive customer acquisition approach and launched over 200 different persona lifestyle campaigns where customers can choose their passion and be transported into a shopping experience specific to the user selection.
Just last week we launched our new Collector's Elite site, which is focused on catering to serious sellers and collectors by curating a premium experience without the hefty fees seen at other luxury firearm auctions. Most importantly, we signed with Gearfire Capital, which will enable GunBroker to extend its offerings to include consumer financing solutions tailored specifically for the firearms industry, making it easier for buyers to purchase the products they need and want. We've never had a roadmap and delivery plan as aggressive as the team is delivering today. In the coming months, we'll be adding shipping solutions, cross-selling enhancements specific to searched items, and we'll be adding the tools and category algorithms to facilitate the growing sales of firearm accessories.
In combination, we believe these will provide the largest platform for shooting enthusiasts to determine market value and do comparison shopping across the largest marketplace for firearms and accessories in the industry. GunBroker continues to be the premier marketplace for outdoor enthusiasts connecting buyers and sellers around a community of passionate users, collectors, and professionals. This has played out as we've added new metrics for customer satisfaction and ensuring our internal metrics are in-line with market expectations. We recently scored a Net Promoter Score, or NPS, of 71%, where above 50% is excellent and 80% is considered world-class. It is independent metrics like these that demonstrate how closely our community and our leadership team work in [unison] (ph).
GunBroker is evolving into a community where not just products, but expertise and experiences can be shared. This is our future, and it will chart how we will continue to drive shareholder returns for years to come. Now for an update on AMMO. In the fourth quarter, ammunition demand remained solid despite a tough environment and we continued the infilling of our production facility. We brought in-house tooling design and manufacturing and set new drawing equipment on the floor for our 50-caliber production line, necessary to start on our contract with ZRO Delta. We take delivery next month of a new Annealing Oven that will remove a constraint that continued to be a bottleneck for our process. As well, we delivered the first 15,000 pieces of 12.7x108, the Russian equivalent of 50 caliber, last week for our delivery to ZRO Delta and will continue production for our other clients throughout 2024.
While we struggle with overhead absorption due to the lower capacity yields of a new factory, we continue to see improved margin and pricing going into 2025, as we start to increase our capacities for medium and large rifle calibers. We believe propellant production will impose constraints in the market, which will continue to affect imports and smaller manufacturers, giving AMMO, Inc., and the markets some breathing room at the retail shelf, as we head into the fall. AMMO, Inc., started delivery last quarter on its new hunt line, as well as delivering new calibers to our rifle lineup, like 45-70, 6.5 Grendel, and 35 Whelen. While we see higher commodity pricing for copper and powder, we are still able to absorb or pass on these costs this year as demand for our brass casing business has not waned and inventory levels of AMMO seem to be stabilized at retail.
The measurable softness in the market has resulted in a decrease in firearm sales, but we have not seen a decrease in premium rifle ammunition demand, rifle casings, or for calibers that feed the emerging lever action at rifle category. We believe this trend will continue through the second and third quarters. As we brought our rifle production online in Q4, we recognized the need for organizational and operational process improvements. In response, we engaged a global consulting firm focused on process and continuous improvement. This extensive operations review will proceed for the next 28 weeks, focused on increasing financial results through improving accountability, material flows, better sales inventory operations and planning processes, and remove critical constraints that will pay dividends for years to come as we infill our new plant capacity with best-in-class process and organizational improvements.
As we've discussed on previous calls, this past year has been focused on resetting the factory from low margin pistol production to high volume, high margin rifle production. These changes have not come easily and have not come overnight. But we are seeing the fruits of our efforts. And while not providing guidance at this time, we see a strong path to profitability in the coming quarters for the Ammunition division. I will now turn it over to Rob Wiley, our CFO, to discuss our financials in further detail.
Rob Wiley : Thank you, Jared. Welcome, everyone. Let me now review the financials for the fourth quarter and 2024 fiscal year in more detail. We experienced sequential revenue growth in our ammunition segment in the final quarter of our fiscal year, while the margins of the GunBroker marketplace segment remain robust. We ended the fourth quarter of our 2024 fiscal year with total revenues of approximately $40.4 million in comparison to $43.7 million in the prior year quarter. The decrease in revenue was primarily related to a decrease in activity in our marketplace segment, which we believe decreased as a result of the current macroeconomic environment impacting our industry, as well as others. Our casing sales, which afford us higher gross margins, increased $0.9 million up from the prior year period.
Revenues for our ammunition segment decreased $0.2 million from the prior quarter, but increased $4.8 million, or 21.9%, quarter-over-quarter as a result of increased ammunition sales in our fourth fiscal quarter. Cost of goods sold was up approximately $31 million for the quarter compared to $31.8 million in the comparable prior year quarter. The decrease in cost of goods sold was related to the decrease in sales volume. Our gross margin for the quarter was $9.4 million or 23.3% compared to $11.9 million or 27.3% in the prior year period. The decrease in gross profit margin was related to the shift in our sales mix. The robust margins on GunBroker remained steady through our final quarter, but the margins in our ammunition segment did not meet expectations.
We expect improvement as production capacities increase. Our inventory levels continue to decrease, generating $4.3 million in cash from operations for the quarter, bringing us to $32.6 million for the full fiscal year. There was approximately $2.4 million of nonrecurring expenses in the quarter related to legal and professional fees. We have included these as addbacks to adjusted EBITDA. For the quarter, we recorded adjusted EBITDA of approximately $2.2 million compared to the prior quarter adjusted EBITDA of $3.8 million. This resulted in a loss per share of $0.05 for the quarter or adjusted net income per share of $0.01 in comparison to a loss per share of $0.04 in the prior quarter or adjusted net income per share of $0.03. For our full fiscal year, a loss per share of $0.16 or adjusted net loss per share of $0.09 in comparison to a net loss per share of $0.07 or adjusted net income per share of $0.16 in the prior year.
Looking forward, we are focused on increasing plant capacity with the engagement of a global consulting firm, which will improve the product marginality. For GunBroker, we launched our cart platform in March of 2024, and will be bringing other efforts online in Fiscal 2025 like Collector's Elite, a high end auction platform featuring rare and distinct firearms and collectibles, and also additional financing partnerships with firms like Gearfire Capital, which will allow retailers the option to offer flexible financing options to customers. We expect these enhancements will drive sales growth through better functionality and enhanced purchasing power of buyers. We are well positioned financially heading into fiscal 2025 given our strong net working capital position, as we have reported $131.5 million in current assets including $55.6 million of cash and cash equivalents, along with $30.9 million of current liabilities.
Additionally, we have generated $32.6 million in cash from operations for the period. That concludes our opening remarks. I'll now turn the call over to the operator for questions. Thank you.
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