STURM RUGER & CO INC Q3 FY2024 earnings call

Financial Results

• Third quarter 2024 net sales were $122.3 million, diluted earnings per share were $0.28; corresponding 2023 period had net sales $120.9 million and diluted earnings per share $0.42. Nine months ended September 28th, 2024 had net sales $389.9 million and diluted earnings per share $1.15; corresponding 2023 period had net sales $413.2 million and diluted earnings per share $2.13.

Market and Operations

• Overall market demand recovered in Q3 with NICS background checks up 4.5% and distributor sell-through up 9% compared to last year. For the first nine months of 2024, adjusted NICS decreased 3% while distributor sell-through increased 4%.

Product Innovation

• Ruger introduced numerous new offerings during its 75th anniversary, including the American Gen II family of rifles, Marlin Lever Action Rifles, LC Carbine, and various anniversary models. New product sales in the first nine months of 2024 were $113 million, 31% of firearm sales.

Awards and Recognition

• Ruger was named Firearm Manufacturer of the Year for the second consecutive year and 12th time in 15 years at NASGW. The Ruger American Gen II Rifle earned Best New Rifle and Best New Overall Product awards at NASGW.

For the third quarter of 2024, net sales were $122.3 million. In the corresponding period of 2023, net sales were $120.9 million. For the nine months ended September 28th, 2024, net sales amounted to $389.9 million. New product sales in the first nine months of 2024 totaled $113 million, which constitutes 31% of firearm sales.

Capital Expenditures

• Expect 2024 capital expenditures to total approximately $20 million. Year-to-date capital expenditures in 2024 totaled $17.2 million.

Dividends and Share Repurchases

• Board declared a $0.11 per share quarterly dividend payable on November 27, 2024. In the first nine months of 2024, $39.3 million was returned to shareholders through dividends and share repurchases. Plan to maximize Marlin production in Q4 with backlog from Marlin likely continuing into Q1 and Q2 2025.

Forward-Looking Statements

• Statements made in the call are forward-looking and actual results could differ materially from those projected. Factors causing such differences are contained in the company's SEC filings, including Form 10-K for the year ended December 31st, 2023 and Form 10-Q for the third quarter of 2024.

Q: Discuss the delta between the average selling price (ASP) of orders versus orders still in the backlog, which is much higher.

A: The biggest impact is from Marlins, which have a much higher selling price. There are also a good number of American Gen IIs, but Marlins skew the number north. A lot of Marlin backlog items are going into 2025, and the team in Mayodan, NC is maximizing Marlin production in Q4 but ensuring quality, so backlog numbers will likely continue into at least Q1 and Q2 2025.

Q: Comment on the gross profit margin being down during the quarter.

A: There is some mix impact. The company didn't take an overall price increase based on market competition. Strategic decisions were made on 75th anniversary guns to implement sharp prices for volume. Also, fewer work days in Q3 due to the July shutdown negatively impact the margin. Additionally, deleveraging fixed costs from current volume levels compared to several years ago is a factor.

Q: Thoughts on the competitive promotional environment and consumer demand.

A: There is crisis fatigue in the customer base, possibly due to an election year not seeing the usual uptick in demand. There is significant capacity in the industry with some manufacturers over-inventoried, leading to discounting. Ruger focuses on gaining market share through exciting new product launches rather than discounting. The American Centerfire Gen II family of rifles and Marlin are strong drivers, and there's an exciting fourth quarter launch planned to take market share via new products.