AMMO, Inc. (NASDAQ: POWW) is a unique player in the firearms and outdoor sports industries, operating both a leading online marketplace and a vertically integrated ammunition manufacturing business. The company has undergone a significant transformation in recent years, positioning itself for long-term sustainable growth amid a dynamic regulatory environment.
Business Overview AMMO, Inc. has a rich history dating back to its inception in November 1990 as Retrospettiva, Inc., a company focused on manufacturing and importing textile products, including finished garments and fabrics. However, the company remained inactive for many years until a series of transformative events in late 2016 and early 2017.
In December 2016, a significant change occurred when the company’s majority shareholders sold their common stock to Fred W. Wagenhals. This transaction resulted in a change of control, with Wagenhals appointed as the sole officer and sole member of the company’s Board of Directors. Concurrent with this change, the company approved doing business as AMMO, Inc., changed its OTC trading symbol to POWW, implemented a 1-for-25 reverse stock split, and re-domiciled from California to Delaware.
The company’s transition into the ammunition and shooting sports industry was solidified on March 17, 2017, when it acquired all outstanding shares of AMMO Munitions, Inc. (formerly PRIVCO), a Delaware corporation. This acquisition marked a pivotal moment in the company’s history, setting the stage for its future focus on ammunition manufacturing and related products.
In the years following this transition, AMMO, Inc. continued to expand and innovate within the industry. In 2018, the company applied for additional patent coverage for its Hybrid Luminescence Ammunition Technology, demonstrating its commitment to technological advancement in ammunition manufacturing. The following year, in 2019, AMMO, Inc.’s subsidiary, Enlight Group II, LLC, completed the acquisition of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations, further strengthening its production capabilities.
The company’s business operations are organized into two primary segments: Ammunition and Marketplace. The Ammunition segment encompasses the design, production, and marketing of ammunition, ammunition components, and related products. The Marketplace segment refers to the company’s GunBroker.com platform, which is the largest online marketplace serving the firearms and shooting sports industries.
GunBroker.com, Acquired in 2021 In April 2021, AMMO, Inc. acquired Gemini Direct Investments, LLC, the parent company of GunBroker.com. This strategic move significantly expanded the company’s footprint in the online firearms and outdoor sports marketplace. GunBroker.com operates as an auction-style platform, allowing third-party sellers to list a wide range of items, including firearms, hunting gear, fishing equipment, and other outdoor accessories.
The acquisition of GunBroker.com has provided AMMO, Inc. with valuable insights into market trends and customer behavior within the firearms and outdoor sports industries. The platform’s large user base of over 8.1 million registered users and 31,000 federally licensed firearms dealers as transfer agents has enabled the company to better understand the dynamics of this specialized market.
Financials In the company’s latest reported fiscal year 2024, which ended on March 31, 2024, AMMO, Inc. generated total revenues of $145.05 million, a 24.2% decrease from the prior year. The company’s net loss for the year was $15.57 million, compared to a net loss of $4.6 million in the previous fiscal year. Operating cash flow for fiscal year 2024 was $32.63 million, with free cash flow of $24.61 million.
For the most recent quarter (Q1 2025), AMMO, Inc. reported revenues of $30.95 million, a 9.6% decrease compared to Q1 2024. The net loss for the quarter was $7.06 million. Operating cash flow for Q1 2025 was negative $0.55 million, with free cash flow of negative $1.97 million. The year-over-year revenue decrease was primarily due to declines in both the Ammunition and Marketplace segments, resulting from changes in market demand and pricing/sales mix in the Ammunition segment, as well as lower marketplace revenue.
AMMO, Inc.’s financial ratios paint a mixed picture. The company’s current ratio stands at 3.17, indicating a strong liquidity position. The quick ratio is 1.87, further supporting the company’s ability to meet short-term obligations. The debt-to-equity ratio of 0.037 suggests a conservative capital structure. However, the company’s return on equity of -6.03% and return on assets of -5.35% reflect the challenges it has faced in recent years.
Liquidity AMMO, Inc.’s current ratio of 3.17 indicates a strong liquidity position, suggesting that the company has sufficient short-term assets to cover its short-term liabilities. This healthy liquidity ratio provides the company with financial flexibility and the ability to meet its short-term obligations.
As of the most recent reporting period, AMMO, Inc. had $50.75 million in cash. The company also has access to a $20 million revolving loan facility with Sunflower Bank, which has not been utilized as of the most recent reporting. This additional available credit further strengthens the company’s liquidity position.
Transformation and Strategic Initiatives Over the past year, AMMO, Inc. has been focused on transforming its business model to drive long-term profitability. The company has shifted its ammunition production strategy to prioritize higher-margin rifle and pistol ammunition, while scaling back on low-margin bulk and training ammunition.
Additionally, the company has been investing in enhancing the functionality and user experience of its GunBroker.com marketplace. In the first quarter of fiscal 2025, AMMO, Inc. launched a multi-item cart and single payment portal, allowing customers to purchase multiple items from different sellers in a single transaction. This streamlined checkout process is expected to drive increased sales and improve the overall customer experience.
Furthermore, the company has partnered with Gearfire Capital to offer innovative financing solutions for its firearms retailer customers. This initiative aims to empower retailers by providing flexible financing options to their customers, enhancing purchasing power and driving sales growth.
Risks and Uncertainties AMMO, Inc. operates in a highly regulated industry, which presents a significant risk factor. The company’s ammunition and firearms-related businesses are subject to extensive federal, state, and local laws and regulations. Any changes in these regulations or the company’s ability to comply with them could have a material impact on its operations.
Additionally, the company faces competition from both established players and new entrants in the firearms and outdoor sports markets. Maintaining its competitive edge and market share will be crucial to AMMO, Inc.’s long-term success.
The company is also exposed to macroeconomic conditions, such as changes in consumer spending patterns and the overall health of the firearms and outdoor sports industries. Fluctuations in these areas could directly affect AMMO, Inc.’s financial performance.
Several legal issues have emerged that pose potential risks to the company. On April 30, 2023, Director and stockholder Steve Urvan filed a lawsuit against the company and certain directors/officers alleging fraudulent inducement related to the GunBroker acquisition. AMMO, Inc. believes Urvan’s claims are without merit and is defending the lawsuit. Additionally, on January 18, 2024, a third-party digital payment processor filed a $100 million breach of contract lawsuit against the company’s GunBroker subsidiary. GunBroker denies the allegations and plans to vigorously defend the claims.
Segment Performance Ammunition Segment: This segment focuses on the design, production, and marketing of ammunition, ammunition components, and related products. It includes both proprietary and standard ammunition offerings. For the three months ended June 30, 2024, the Ammunition segment reported net revenues of $18.67 million, a decrease of 8.2% compared to the prior year period. This decline was primarily due to a $1 million decrease in sales of bulk pistol and rifle ammunition, as well as a $1 million decrease in ammunition casing sales. The gross margin for this segment declined from 40.9% to 31.6%, driven by increased costs for materials, labor, and overhead.
Marketplace Segment: This segment consists of the GunBroker online auction platform. For the three months ended June 30, 2024, the Marketplace segment generated net revenues of $12.28 million, a decrease of 11.7% compared to the prior year period. This decline was primarily attributable to lower auction revenue, payment processing revenue, and shipping income. Despite the revenue decrease, the Marketplace segment maintained a high gross margin of 85.8% in the current quarter.
Industry Trends The overall ammunition and firearms industry has experienced some softening in demand across commercial channels in recent quarters, in line with historic seasonality. However, AMMO, Inc. continues to see opportunities for growth in premium ammunition products, rifle brass manufacturing, and expanding service offerings on the GunBroker marketplace.
Conclusion AMMO, Inc. is navigating a complex and dynamic industry, leveraging its dual-pronged business model to position itself for long-term growth. The company’s strategic focus on higher-margin ammunition production, enhanced marketplace functionality, and innovative financing solutions are all aimed at improving profitability and solidifying its market position.
While challenges remain, such as regulatory uncertainties, competition, and ongoing legal disputes, AMMO, Inc.’s transformation efforts and its unique integration of a leading online marketplace with a vertically integrated ammunition manufacturing business present compelling opportunities for investors who understand the nuances of this specialized industry. The company’s strong liquidity position and access to additional credit provide financial flexibility as it continues to navigate market challenges and pursue growth opportunities.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.