Outdoor Holding Company - 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock Q1 FY2024 earnings call

• Welcomed Jared Smith as the new Chief Executive Officer, with Fred Wagenhals remaining as Executive Chairman to support the transition.
• Drove the business through three major categories: expanding gunbroker.com's platform, enhancing margins in the ammunition division through rifle brass lines and vertical integration, and aligning management incentives with shareholder interest.
• First quarter results: gross margins at 40.9% (up from 27.3% prior quarter), adjusted EBITDA of $6.6 million (up from $3.8 million in Q4), cash generated from operations $13 million (up from $5.2 million same quarter last year), sales down $34.3 million due to business transition and market conditions.
• Progress on gunbroker.com: beta testing payment platform with launch expected end of current quarter, cart platform expected to launch by end of fiscal year.
• Ammunition division: first positive margins since June 2022, OEM brass revenue increased to $6.2 million since January transition.

The company has two main segments. The gunbroker.com segment had revenue of $13.9 million for the reporting quarter, with margins remaining strong at 87% (compared to 85.5% in the prior quarter). The ammunition division reported $20.3 million in revenue with a 9.5% gross margin, up from negative 8.6% in the previous quarter. The OEM market for brass casings saw revenue increase to $6.2 million, up from $3.5 million in the previous quarter. In terms of revenue contribution, gunbroker.com's $13.9 million and ammunition division's $20.3 million are key components of the total $34.3 million revenue for the quarter.

• Expect lift on gunbroker.com platform starting Q3/Q4 with rollout of centralized payment processing and multi-item cart, anticipating high single digits in final value fees compared to current 5%-6%.
• Ammunition division anticipates strong headwinds for loaded ammunition sales in next two quarters but sees opportunities in rifle brass and OEM market.
• Continue to focus on strengthening balance sheet through capital allocation with strategic buybacks.

Q: What percentage of casings production are currently sold to OEMs and where does it need to go over time?

A: Jared Smith said casings business is easily going to be 25% to 35% of the business going forward, as it's a growing business with strong margins.

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

A: Jared Smith said for the most part, they're done, but will always manufacture some range ammo, inventory is healthy with some slow-moving items not a major concern.

Q: Progression and timing of getting loaded AMMO gross margins back to 20% range?

A: Jared Smith said margins improve with more rifle brass capacity coming in next two quarters, focusing on rifle ammunition both domestically and internationally.

Q: Updates on high demand calibers like 9-millimeter, 223/556 and demand changes in pricing/channel inventory?

A: Jared Smith said 9-millimeter and 223 have no further price erosion currently, market stable for next two quarters, with opportunities in revolver where inventory is lower than pre-pandemic levels.

Q: Margin on brass sales versus loaded ammo?

A: Jared Smith said cost to produce ball ammo is $2.20-$2.40 per 1,000 with retail price $2.05, can't play there, while brass cases can have 10% margins, sold between $75,000-$85,000 with demand in international and domestic markets.

Q: Percentage of contractual sales in brass casings production?

A: Jared Smith said contractual sales are now 15%-25% of total capacity of the plant, all new contracts within last 6 months.

Q: Consumer outlook for gun broker and spurring buying activity?

A: Jared Smith said gun broker reflects the market, new guns in retail, unique items brokered, and streamlining checkout process, credit card services, and cart item will drive users back in Q3/Q4.