Outdoor Holding Company - 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock Q3 FY2024 earnings call

• 2023 was a challenging year, but AMMO transitioned to a stronger operating model and emerged with an impeccable balance sheet.
• Third quarter generated $5.1 million in cash, mostly from inventory reduction. Net loss improved to $1.6 million from $7.5 million in the prior quarter.
• Ammunition division saw strong demand, invested $3.6 million in CapEx projects, and is rebranding its portfolio, with the HUNT line launching in early summer and other lines hitting stores now. Also onboarded a new Chief Compliance and Transformation Officer.
• Marketplace division had seasonal sales increase, with the cart platform on GunBroker.com scheduled to launch on or before April 1, supporting credit card processing for over 80% of business and plans to onboard remaining 20% throughout the year.

The Ammunition segment had third quarter revenues of approximately $36 million, down from $38.7 million in the prior year quarter. Casing sales increased to $4.7 million from $3 million in the prior year period. Cost of goods sold was $25.1 million for the quarter compared to $26.2 million in the comparable prior year quarter, resulting in gross margins of $10.9 million or 30.3% compared to $12.5 million or 32.4% in the prior year period. The Marketplace segment had revenue of $14 million for the reported quarter, compared to $15.4 million in the prior year quarter, with margins remaining strong.

• Expect to return to profitability during the 2025 fiscal year.
• GunBroker.com's multi-item cart will go live on or before April 1.
• Continues to develop the platform to onboard the remaining 20% of business after the cart launch.

Q: Talk about the drivers of brass revenue in the quarter, why it fell sequentially and where it's headed.

A: Brass came back online in November but held back some for internal loading to meet future production for the HUNT lines. Production capacity is increasing, and brass sales are strong with a great pipeline.

Q: Levers to get gross margin positive in the fourth quarter.

A: Continue building out brass lines, the large contract with ZRODelta on the 50 cal, 12.7 X 108 line provides a big margin play, and focusing on larger calibers as more capacity comes online.

Q: GMV down year-over-year for GunBroker despite market pickup.

A: Abundance of guns on the shelf means less traffic to GunBroker, but there are positive trends ahead with the upcoming cart launch.

Q: Last hurdles for GunBroker's carting initiative to launch on April 1.

A: Just need a few more weeks of testing, including seeing a couple Sundays of higher volume traffic, with no major impediments keeping it from going live.

Q: Details on the recent contract's margin.

A: The contract for the 12.7 X 108 line has an estimated 40% margin, with 6 million pieces produced well into the first part of 2025 calendar year.

Q: Propellant constraints and ammo margin.

A: There is a propellant constraint, but inventory levels in the U.S. market are relatively healthy, and rebranding is helping sales.

Q: Outlook on military/global contract business.

A: Waiting for proof of performance before taking larger contracts, but gaining confidence with the recent contract and will start taking larger deals as confidence is gained