Outdoor Holding Co Q3 FY2023 earnings call

Introduction - Introduced new President and COO Jared Smith. - Highlighted the company's journey since 2016, facing economic challenges like recession and inflation, but responding and assembling a team to meet challenges. ### GunBroker.com - Excited about enhancements to GunBroker.com starting to roll out spring, leveraging the platform for greater revenues and profitability. - GunBroker.com is a top 500 U.S. website with over 5 million unique users monthly, transitioning to a cart-based platform in 2023-2024 to offer multiple revenue sources. ### Ammunition Business - Past reliance on manufacturing commodity products due to easier throughput and top-line focus, now shifting to high-margin brass and high-performance rifle ammunition. - New 185,000 square foot facility with unique capabilities to change over calibers, already sold out of long action rifle brass in the last 40 days, secured domestic gunpowder sources to free up cash flow.

In the third quarter, total revenues were approximately $38.7 million compared to approximately $64.7 million in the prior year period, a 40% decrease. The decrease in revenue was mainly attributable to the ammunition segment affected by inflationary market impacts and a 12% decrease in the marketplace segment. Cost of revenues were approximately $26.2 million for the quarter, compared to $42.2 million in the comparable prior year quarter, resulting in a gross margin of $12.5 million vs. $22.5 million. The ammunition segment is shifting to producing higher-margin brass casings and high-performance rifle ammunition. The marketplace segment's GunBroker.com is tracking for a payment suite and cart platform launch in the first half of the next fiscal year to drive growth and profitability.

2023 Fiscal Year - Revised guidance to revenues of $185 million, adjusted EBITDA (new calculation) of $22 million, and EBITDA of $17 million. ### Future Fiscal Year - Anticipate increased profitability through sales of brass casings and high-performance rifle ammunition. - Expect GunBroker.com's payment processing suite and cart platform launch in the first half of the next fiscal year to increase GMV, revenue, and profitability.

Market Factors - Inflationary and recessionary drivers impacting consumer purchasing power, affecting both ammunition and marketplace segments. ### Supply Chain - Difficulties sourcing European primers and powders at high prices and unpredictable volumes, impacting production and margins. ### Production Transition - Large manufacturing operations take time to pivot, and the company may not fully respond to market shifts quickly enough. ### Platform Development - GunBroker.com platform development requires time and resources, and there's a risk the expected revenue growth from the new platform may not materialize as planned.

Q: Matt Koranda asked about disentangling price declines vs volume in the ammunition segment, production issues during the quarter.

A: Jared Smith said it's a mix of market issues and production transition impacts due to moving to new facility and lack of primers/powder.

Q: Edward Riley asked about export market demand.

A: Jared Smith said export demand is still strong, diverting larger manufacturers' focus and freeing up capacity.

Q: Mark Smith asked about channel inventory, production shift decision-making, brass casing capacity.

A: Jared Smith answered about channel inventory in high commodity space, decision-making based on strategic account management, and the new plant's capacity exceeding previous facilities, plus flexibility in shifting production in brass casing.