Outdoor Holding Co Q1 FY2024 earnings call

• Welcomed Jared Smith as the new Chief Executive Officer. - Expanding Gunnbroker.com's platform with centralized payment processing, carding, and added services. - Focusing the ammunition division on enhancing margins through expansion of rifle brass lines, vertical integration, and operational improvements. - Aligned management team goals with shareholder interest. - First quarter results: gross margins 40.9%, adjusted EBITDA $6.6 million, cash from operations $13 million. - Rolling out beta testing for payment platform on Gunnbroker.com, with launch expected by end of current quarter, and cart platform expected by end of fiscal year. - Repurchased approximately 739,000 shares of common stock in the quarter.

The company has two main segments: Gunnbroker.com's Marketplace and the Ammunition division. For Gunnbroker.com's Marketplace: Revenue was $13.9 million for the quarter. Product movement on the platform was $238.8 million this quarter, down from $281.2 million in the prior quarter. Margins remained strong at 87% compared to 85.5% in the prior quarter. For the Ammunition division: Reported $20.3 million in revenue with a 9.5% gross margin, up from negative 8.6% in the previous quarter. OEM brass casings revenue increased to $6.2 million, up from $3.5 million in the previous quarter. Total revenues for the first quarter were approximately $34.3 million, down from $60.8 million in the prior year quarter. Cost of goods sold was $20.2 million, down from $42.6 million in the comparable prior year quarter. Gross margin for the quarter was 40.9% compared to 29.8% in the prior year period.

• Expect lift on Gunnbroker.com platform starting in Q3 and Q4 with centralized payment processing and multi-item cart, aiming for high single-digit final value fees compared to current 5%-6%. - Ammunition division anticipates strong headwinds for loaded ammunition sales in next two quarters but focuses on most profitable segments. - Rifle brass casings business expected to be 25%-35% of total business going forward.

• Softening in U.S. commercial ammunition markets. - Nonrecurring legal expenses in the first fiscal quarter (included as an add back to adjusted EBITDA). - Dependence on successful rollout of payment processing and cart platforms on Gunnbroker.com.

Q: What percentage of casing production are currently sold to OEMs?

A: Jared Smith states that the casings business is easily going to be 25% to 35% of the business going forward.

Q: How is pricing for shell cases?

A: Jared Smith says price is very stable currently with new factory increasing capacity and no further price erosion expected related to the market on casing demand.

Q: Any remaining bulk-loaded AMMO inventory to clear?

A: Jared Smith says for the most part, they're done, with some slow-moving inventory but not a major factor.

Q: Margin on brass patent sales versus on loaded ammo?

A: Jared Smith explains that cost to produce ball ammo is between $2.20 to $2.40 per 1,000 with retail price at $2.05, making loaded ammo unprofitable, while brass casings can have 20% to 35% margins.

Q: Outlook on high demand calibers?

A: Jared Smith says 9-millimeter and 223 are stable, with revolver inventory lower than pre-pandemic levels where they plan to play.

Q: Contractual vs open orders for brass casings?

A: Jared Smith says contractual sales are now making up somewhere between 15% to 25% of total capacity of the plant.

Q: Consumer outlook for Gunbroker?

A: Jared Smith says streamlining checkout process, internalizing credit card services, and the cart item will spur buying activity in Q3 or Q4 of this year