Smith & Wesson Brands, Inc. Q2 FY2026 earnings call

• Second quarter results showed solid profitability with $15M EBITDA on $125M net sales. - Inventory reduced significantly to $183M, generating over $27M operating cash flow. - New products contributed nearly 40% of sales, driven by innovation. - Handguns had 7.7% sell-through increase after inventory adjustment, long guns had seasonality impact but ASPs increased. - Balance sheet strong with $27.3M cash from operations. - Smith & Wesson Academy grand opening on September 12, with positive feedback on training for law enforcement and consumers, led by Mark Cochiolo (retired US Navy SEAL).

In the second quarter, net sales were nearly $125 million with $15 million of EBITDA. Handgun ASPs increased to $418 (a 2.1% increase from prior year) and long gun ASPs rose to $602 (a 10.2% increase from prior year). New products accounted for nearly 40% of sales. Handgun unit shipments into sporting goods channel had a 7.7% sell-through increase after adjusting for inventory, while long gun shipments into sporting goods channel declined but ASPs increased due to mix of higher-priced products. Revenue contribution: new products were nearly 40% of total sales.

• Expect Q3 sales to be 8% to 10% over Q3 fiscal 2025 sales with no significant channel inventory impact. - Q3 gross margins expected to increase a few percentage points sequentially and year over year. - Expect high single digit to low double digit growth in Q4 over Q3.

• Forward-looking statements subject to risks and uncertainties including macro conditions like tariffs. - Risks described in SEC filings which could cause actual results to differ from forward-looking statements.

Q: Could you walk through input costs, tariffs, and gross margins over next couple of quarters?

A: Tariffs may pick up but shouldn't materially impact profitability; back half of year has more operating days and absorption should offset tariff impact.

Q: Should we expect G&A to tick up through rest of year?

A: Operating expenses are usually consistent; expect SHOT Show in January to cause increase but overall disciplined in managing OpEx.

Q: Early thoughts on how Q4 is shaping up?

A: Expect high single digit to low double digit growth in Q4 over Q3 as market is stable and brand strength continues.

Q: Feedback from retailers/distributors regarding SHOT Show and industry outlook?

A: Conversations with channel partners are positive, inventory is in great spot, and expect momentum on new products to continue through back half of year