Sturm, Ruger & Company, Inc. Q2 FY2025 earnings call

• Conducted inventory rationalization, reassessing raw materials, work in process, and finished goods, including legacy models and Marlin-related items not in strategy.
• Repositioned product portfolio, resulting in nonrecurring charges: $17M inventory/asset write-off, $5.7M product rationalization/SKU reduction, $3.7M organizational realignment expense.
• Acquired Anderson Manufacturing to expand capacity, strengthen manufacturing, and broaden product offerings using cash on hand.
• Reorganized operations to give business units flexibility and unified product strategy under one team.
• Returned $23M to shareholders in the first half of 2025 via dividends and stock repurchases; declared a $0.16 per share quarterly dividend.

Net sales for the second quarter of 2025 were $132.5 million, with a diluted loss of $1.05 per share. On an adjusted basis, diluted earnings per share were $0.41. For the six months ended June 28, 2025, net sales were $268.2 million, and adjusted diluted earnings per share for the first half were $0.87. Cash and short-term investments on June 28, 2025, totaled $101 million. The current ratio was 4.0:1 with no debt. In the first half of 2025, $23 million was returned to shareholders via dividends and stock repurchases. The Board declared a $0.16 per share quarterly dividend.

• Expect capital expenditures in the second half of 2025 to increase for new product introductions, capacity expansion, etc.
• Completed $16M Anderson acquisition using cash on hand.
• Dividend strategy is ~40% of adjusted diluted earnings, with the second quarter dividend aligning with this.

• Macroeconomic pressures like tariff/interest rate uncertainty, weak job market, inflation affecting discretionary spending.
• Softening firearms industry demand as NICS checks fall below pre-2019 levels.
• Potential industry consolidation.

Q: About adjustment to sales from product rationalization and SKU reduction, insight into number of products, lines, impact on top line?

A: Biggest impact was American Gen 1 in terms of SKUs, AR consolidation, MSR consolidation with Anderson, and product rationalization on pistols like EC9; around 70,000 units involved.

Q: Impact on ASP, units shipped, distributor inventory?

A: Brought ASP down about 16 across ~70,000 units; involved using raw material inventory to build specific SKUs instead of writing off.

Q: Organizational realignment status and long-term savings?

A: Realignment was completed ~45 days ago; not a cost savings initiative but a realignment of talent for strategy; no large ongoing savings expected.

Q: Consumer demand for firearms, shifts?

A: Ruger is outpacing the market; focused on share gain, producing desired SKUs timely; slightly insulated due to product line depth.

Q: Granularity on Marlin-related items not in future road map?

A: Model 60 was part of inventory written off as it's not in current product strategy; Marlin has a robust pipeline for Centerfire Rifles with exciting road map ahead.