Smith & Wesson Brands Q1 2026 Earnings Call Transcript

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Provided by Quartr
September 4, 2025

Key Takeaways

  • Positive Sentiment: Q1 results beat expectations with $85.1 million in sales and $8 million EBITDA, driven by a 35% year-over-year increase in handgun shipments versus NICS down 2.4%.
  • Negative Sentiment: Long gun shipments fell 28.1% year-over-year compared to a 7.8% NICS decline, highlighting weak performance outside Smith & Wesson’s MSR and lever-action niches.
  • Neutral Sentiment: Average selling prices declined 6.1% sequentially but remained healthy thanks to selective promotional participation, and the company expects ASPs to stay strong through fiscal 2026.
  • Positive Sentiment: Innovation drove 37.3% of Q1 sales, with the well-received Shield X launch underscoring a robust pipeline of new products.
  • Positive Sentiment: Smith & Wesson reopened its state-of-the-art Smith & Wesson Academy in Tennessee, offering free advanced training to law enforcement, military, and consumers to bolster brand engagement.
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Earnings Conference Call
Smith & Wesson Brands Q1 2026
00:00 / 00:00

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Operator

Good day, everyone, and welcome to Smith & Wesson Brands, Inc. First Quarter Fiscal 2026 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us some information about today's call.

Kevin Maxwell
Kevin Maxwell
General Counsel at Smith & Wesson

Thank you, and good afternoon. Our comments today may contain forward-looking statements. Our use of the words "anticipate," "project," "estimate," "expect," "intend," "believe," and other similar expressions are intended to identify forward-looking statements. Forward-looking statements may also include statements on topics such as our product development, objectives, strategies, et share, demand, consumer preferences, inventory conditions for our product, growth opportunities and trends, and industry conditions in general. Forward-looking statements represent our current judgment about the future and are subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by our statements today. These risks and uncertainties are described in our SEC filings, which are available on our website, along with a replay of today's call. We have no obligation to update forward-looking statements. We reference certain non-GAAP financial results. Our non-GAAP financial results exclude reallocation expense.

Kevin Maxwell
Kevin Maxwell
General Counsel at Smith & Wesson

Reconciliations of GAAP financial measures to non-GAAP financial measures can be found in our SEC filings and in today's earnings press release, each of which is available on our website. Also, when we reference EPS, we are always referencing fully diluted EPS, and any reference to EBITDA is to adjusted EBITDA. Before I hand the call over to our speakers, I would like to remind you that when we discuss NICS results, we are referring to adjusted NICS, a metric by the National Shooting Sports Foundation based on FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than firearms purchases. Adjusted NICS is generally considered the best available proxy for consumer firearm demand at the retail counter.

Kevin Maxwell
Kevin Maxwell
General Counsel at Smith & Wesson

Because we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers, and not to any consumer, NICS generally does not directly correlate to our shipments or market share in any given time period, we believe mostly due to inventory levels in the channel. Joining us on today's call are Mark Smith, our President and CEO, and Deana McPherson, our CFO. With that, I will turn the call over to Mark.

Mark Smith
President, CEO at Smith & Wesson

Thank you, Kevin, and thanks everyone for joining us today. First quarter results came in better than expected, with sales of $85.1 million and EBITDA of $8 million, reflecting robust demand for our new products and continued strong market share for our broader portfolio in every firearms category in which we compete. Our performance during the seasonal slow period for firearms demonstrates the strength of our brand and the ongoing success of our innovation strategy. During the first quarter, our performance in handguns was exceptional, with our shipments into the sporting goods channel increasing just over 35% year-on-year versus NICS being down 2.4%. These results were driven by strength across several product lines, including Bodyguard, Shield, and M&P, showing the power of the Smith & Wesson brand supported by our incredibly passionate and loyal customers.

Mark Smith
President, CEO at Smith & Wesson

In long guns, our shipments into the sporting goods channel were down 28.1% year-over-year versus NICS being down 7.8%. However, this reflects the divergent conditions between the shotgun and bolt-action rifle market, where we do not play meaningfully, and the MSR and lever-action market, where we continue to maintain very strong market position. As expected, average selling prices trended lower in the first quarter, declining 6.1% sequentially. Handgun ASPs were down 4%, while long guns declined 13% due to NICS. While the market remains highly promotional, our focus on new products, strong marketing campaigns such as the Red, White, and Big Blue campaign we ran throughout July, and continued consumer preference for our brand have allowed us to participate in promotions more selectively. As a result, we maintained relatively healthy ASPs throughout the summer.

Mark Smith
President, CEO at Smith & Wesson

With the typically busy fall and winter seasons now upon us, we continue to expect to maintain strong ASPs throughout fiscal 2026. Moving now to market conditions, we continue to view the market as relatively "normal." It remains cyclical and reflects traditional seasonality throughout the year. While the current environment is more challenging than a few years ago, as we have seen many times before during these market cycles, underlying consumer demand is above what we saw before the last surge, as we now have more consumers who are participating in the category. Through all the ups and downs of the market over time, our leadership position in key categories has endured, and feedback from our distributor and retail partners supports the view that our disciplined execution of our strategy continues to position Smith & Wesson at or near the top in the categories in which we compete.

Mark Smith
President, CEO at Smith & Wesson

Innovation remains a cornerstone of that strategy, with new products accounting for 37.3% of sales in the first quarter. Underscoring this, we've seen a very positive initial reception to our Shield X, which we introduced in late July, and as I've said many times before, our award-winning engineering and design teams consistently deliver products that resonate with consumers. With a strong pipeline of new products upcoming, we will continue to invest in innovation to keep the line fresh and ensure that we maintain our leadership position. Looking at inventory levels in the channel, distributor inventory is very healthy, with strong sell-through of our products. Distributor inventory was down more than 13,000 units at the end of July compared with the end of fiscal 2025, and down more than 17,000 units year-over-year, which indicates strong demand for our products at the retail counter.

Mark Smith
President, CEO at Smith & Wesson

Due to this clean inventory position, we are well placed to quickly convert incremental demand into shipments as we enter the typically busy firearms season. As we now prepare for the traditionally stronger second half of the year, we remain disciplined in managing our business, and our capital allocation strategy is unchanged. Invest in our business, maintain our strong balance sheet, and return value to stockholders. In fiscal 2026, our internal investments continue to prioritize leveraging our state-of-the-art facility in Tennessee, optimizing and modernizing several value-add elements of our facility in Massachusetts, and investing in special initiatives to further enhance our brand and support our customers. On that note, and before I hand the call over to Deana, I want to provide an update on a very special project that the team has been hard at work on at our Tennessee facility.

Mark Smith
President, CEO at Smith & Wesson

For decades prior to its closure several years ago, the Smith & Wesson Academy in Springfield, Massachusetts, was an industry staple, providing training for countless law enforcement officers, consumers, and agencies around the world. Today, I'm thrilled to announce that the Smith & Wesson Academy is back and better than ever. This state-of-the-art facility encompasses nearly 30 acres of purpose-built ranges, training facilities, fitness equipment to allow training under physical duress, classrooms, and even a two-story modular building rated for simulation live fire to allow situational training for law enforcement and military customers. The Academy will be run by Mark Colciollo, a true American hero. Mark is a retired U.S. Navy SEAL veteran and firearms training expert.

Mark Smith
President, CEO at Smith & Wesson

After proudly serving our country for 25 years, including with the prestigious SEAL Team Six, he spent the next 13 years of his career as one of the top firearms instructors at Basic Underwater Demolition SEAL Training, or BUD/S, in San Diego, where he helped revamp the firearm training curriculum and train nearly 4,000 Navy SEAL candidates. The goal with this new facility will be to provide yet another advantage to our current and prospective law enforcement, federal agency, and military customers, who will all have access to Mark and his team's knowledge and our facilities free of charge.

Mark Smith
President, CEO at Smith & Wesson

In addition, and in keeping with our goal to promote responsible firearms ownership, we aim to enhance the firearms proficiency of our loyal consumers, who will be able to sign up for a variety of courses custom designed for any skill set from beginners to experts, and come to Smith & Wesson to learn from the best of the best. All, of course, while showcasing our world-class firearms. We'll be hosting a grand opening celebration next Friday on September 12, and are excited to share more details as we begin leveraging this amazing asset. Finally, and as always, I just want to thank our entire team of talented Smith & Wesson employees for their tireless dedication to our brand and in putting their skills to work each and every day to make us successful. With that, I'll turn the call over to Deana to cover the financials.

Deana McPherson
Deana McPherson
CFO at Smith & Wesson

Thanks, Mark. Net sales for our first quarter of $85.1 million were $3.3 million, or 3.7% below the prior year comparable quarter. During the quarter, inventory at distributors declined by over 10% from the end of the prior quarter and over 13% compared with the end of July 2024 in terms of actual units, indicating positive sell-through of our products at retail and a good position for us as we look forward to the coming month. As expected, handgun ASPs declined slightly from Q4 levels due to promotions and continued strong demand for our lower-priced products. Long gun ASPs decreased due to the mix of lower-priced products and lower overall volume.

Deana McPherson
Deana McPherson
CFO at Smith & Wesson

Gross margin of 25.9% was 1.5% below the comparable quarter last year, due primarily to decreased absorption on lower production and a 120 basis point negative impact from tariffs stemming primarily from steel, partially offset by lower promotional costs and lower federal excise taxes as a result of the favorable outcome of a recent audit. Operating expenses of $25 million for our first quarter were $680,000 lower than the prior year comparable quarter, with increases in R&D being more than offset by lower selling and marketing costs due to lower promotional costs and the absence of costs related to the NRA show, which was held in Q4 of last fiscal year. The lower revenue and associated margin, combined with an increase in interest expense due to higher outstanding borrowings, resulted in a $3.4 million net loss or an $0.08 loss per share.

Deana McPherson
Deana McPherson
CFO at Smith & Wesson

Cash used in operations for the first quarter was $8.1 million compared with $30.8 million in the prior year comparable quarter due to a net working capital decrease of $24 million. Inventory increased $13.3 million during the current quarter versus $29.3 million in the prior year comparable quarter. As a reminder, we typically level-load our factories and build inventory in our first quarter. We spent $4.3 million on capital projects this quarter compared with $4.7 million in the prior year comparable quarter and expect our capital spending for the year to be between $25 million and $30 million. We paid $5.9 million in dividends and ended the quarter with $21 million in cash and investments and $95 million in borrowings on our line of credit.

Deana McPherson
Deana McPherson
CFO at Smith & Wesson

Finally, our board has authorized our $0.13 quarterly dividend to be paid to stockholders of record on September 18th, with payment to be made on October 2nd. Looking forward to our second quarter, we expect a normal seasonal environment, causing our second fiscal quarter sales to grow significantly over the first quarter and to land roughly at 3% to 5% below our Q2 fiscal 2025. With channel inventory at healthy levels, we don't expect inventory to have an impact, positively or negatively, on our second quarter. Although we remain cautious regarding the full fiscal year due to macroeconomic conditions, we believe that our current product lineup and planned new product introductions will allow us to maintain or expand our market share in the foreseeable future.

Deana McPherson
Deana McPherson
CFO at Smith & Wesson

With the extended shutdown in August that we discussed last quarter resulting in lower absorption, combined with the impact of steel tariffs, we expect Q2 gross margin to be in line with Q1 gross margin. Operating expenses in Q2 will likely be about 20% higher than Q1, with half of that increase driven by profit sharing. In addition, costs associated with the grand opening of the Smith & Wesson Academy, combined with promotions, sales activity, and distribution costs associated with the increased volume, will make up the remainder of the increase. Our effective tax rate is expected to be approximately 33%. With that, operator, can we please open the call to questions for our analysts?

Operator

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Mark Smith with Lake Street Capital Markets. Please proceed with your question.

Mark Smith
Lake Street Capital Markets

Hi, guys. I wanted to ask first about ASPs, kind of both in handgun and long gun, just given kind of the competitive dynamics, but more so kind of where the consumer is. How do you feel about your pricing today on products? Do you feel that there's any shifting that potentially could happen as we look through the rest of the year?

Mark Smith
President, CEO at Smith & Wesson

Hey, Mark. Yeah, we're pretty pleased with the ASPs throughout the summer. As you know, that's our typically slow season throughout the year in firearms. We were able to kind of maintain that. The promotional environment still remains fairly robust out there. For us, as I said in the prepared remarks, with the innovation making up a significant portion of our pipeline of products and the strength of even the core portfolio, we were able to be pretty selective. We did participate, but we were able to maintain those ASPs. As we now go into the busy season, I think that bodes pretty well for us to be able to pull those up throughout the rest of the year.

Mark Smith
Lake Street Capital Markets

Okay. I wanted to ask about the long gun business. You talked about some markets where you don't really participate or have products. What opportunities do you have in expanding your product offerings maybe to hit some of these segments?

Mark Smith
President, CEO at Smith & Wesson

Yeah, I mean, I think we've been, we have definitely been very successful with the 1854, you know, entering into that lever-action market. I think that's kind of paved the way for us to continue expanding into more of the white space for us in the industry that we don't play in. We're going to continue, we're still expanding that lever-action platform. There are two more calibers that we're still kind of working on filling out, and those will be coming here very shortly. After that, it's on to the next thing.

Mark Smith
Lake Street Capital Markets

Perfect. The last one for me is just as we look out to changes in regulations with the recent tax law, is there opportunities for some NFA items, you know, potentially, you know, suppressors and SBRs for some higher demand as we move into January?

Mark Smith
President, CEO at Smith & Wesson

Yeah, good question. For sure. I think there's a lot of pent-up demand there in the suppressor market as folks are kind of waiting for that law to go into effect in January. I think, and that, from a long-term perspective, bodes very well for us with the Gemtech brand. We're already seeing some movement there with some promotions for early discounts and on the tax stamp promos that we're running with some of our suppressor retailers. I think that's an early indication that that should be a pretty healthy market come January.

Mark Smith
Lake Street Capital Markets

Excellent. Thank you.

Mark Smith
President, CEO at Smith & Wesson

Yep.

Operator

Thank you. Our next question comes from the line of Steve Dyer with Craig-Hallum. Please proceed with your question.

Matthew Raab
Matthew Raab
Craig-Hallum

Hey, thanks. This is Matthew Raab on for Steve. I just want to hone in on the legacy products. On my math, legacy products were actually up very slightly year-over-year in the quarter. I guess, you know, two sort of questions there. One, what do you credit the better performance to in the quarter? Two, how do you feel about getting through the rest of that inventory as we look towards the back half of the year?

Mark Smith
President, CEO at Smith & Wesson

Thanks, Matthew. Yeah, the legacy products did very well for us. We continue to gain share there. I think that's a combination of the strength of the brand. We are definitely taking share in that category of the more in-line products, excluding the new stuff. We continue to see that we have some more runway there to go as we go through the rest of the year. From an inventory perspective, we're hyper-focused on that this year and bringing our internal inventories back down again. Just to be completely honest, we ended last year with maybe a little bit more than we wanted. I'll just remind you that for us in the firearms industry, that's not necessarily a concern. We obviously have a strong balance sheet and we're able to navigate the ups and downs of the marketplace pretty well, I think we've proven over time.

Mark Smith
President, CEO at Smith & Wesson

For us now, that just means, again, these products, there's no expiration date on our inventory. We'll just make some adjustments to the production run rate and bring that down throughout the rest of the year.

Matthew Raab
Matthew Raab
Craig-Hallum

Sure. That's great. Just on promos, you know, really thinking about the back half of the year, should we expect promo activity to accelerate to aid the inventory reductions, or should we expect promos to remain pretty rational? Maybe comparing that cadence to last year would be helpful. It sounds like you're being pretty thoughtful about promos in the near-term, but any other thoughts there would be great?

Mark Smith
President, CEO at Smith & Wesson

On the promotional side, I don't foresee any need for us to be leaning in there any more than we already have throughout the summer. As I mentioned, we are participating. We're just doing it in a very thoughtful manner. We're having a lot of conversations internally about maybe a couple of pockets here and there where we want to promote. I think you can kind of expect that our ASPs will kind of hold up throughout the rest of the year. We'll participate, but I think we're probably in a little bit better position, just given the strength of the brand and, again, that strong balance sheet where we can be a little bit more measured in our participation. We'll participate, but I don't think you should expect that we're going to have a significant increase as we go through the back half.

Matthew Raab
Matthew Raab
Craig-Hallum

Okay, that's great. Thank you very much.

Operator

Thank you. We have reached the end of the question-and-answer session, and I would like to turn the floor back to Mark Smith for closing remarks.

Mark Smith
President, CEO at Smith & Wesson

Thank you, operator, and thanks everyone for joining us today and your interest in our company. We look forward to speaking with everybody again next quarter.

Operator

Thank you. This concludes today's conference, and you may disconnect your line at this time. We thank you for your participation. Have a great day.

Executives
Analysts
    • Matthew Raab
      Craig-Hallum
    • Kevin Maxwell
    • Kevin Maxwell
      General Counsel at Smith & Wesson
    • Mark Smith
      Lake Street Capital Markets
    • Mark Smith
      President, CEO at Smith & Wesson
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