Smith & Wesson Brands, Inc. (NASDAQ:SWBI) has once again demonstrated its ability to consistently deliver strong financial results and shareholder value. The company's relentless focus on strategic initiatives, including robust brand messaging and marketing, best-in-class innovation, operational excellence, and business process efficiencies, has solidified its position as a market leader in the firearms industry.

Financials

For the fiscal year 2024, Smith & Wesson reported annual net income of $39,609,000 and annual revenue of $535,832,999. The company's annual operating cash flow reached $106,739,000, while its annual free cash flow stood at $15,794,000. These impressive financial metrics underscore the company's ability to generate consistent and sustainable returns for its shareholders.

In the fourth quarter of fiscal 2024, Smith & Wesson reported net sales of $159.1 million, a 9.9% increase compared to the prior-year quarter. This top-line growth was driven by the successful launch of the 1854 lever action rifle, which has been widely acclaimed by the industry and consumers as an instant classic, as well as the strong performance of other new product introductions, such as the M&P 15 Sport III and SD9 2.0. New products accounted for 29.1% of the company's total revenue in the quarter.

The company's gross margin in the fourth quarter was 35.5%, a 6.5 percentage point improvement over the prior-year period. This expansion was attributed to favorable fixed-cost absorption due to increased production volume, higher long gun average selling prices (ASPs) driven by new products, and lower promotional activity, partially offset by the impact of inflation on material and labor costs, as well as increased inventory reserves.

Operating expenses in the fourth quarter were $31.1 million, $7 million higher than the prior-year quarter, primarily due to increased profit-related compensation costs, including profit sharing, and higher legal expenses. The company also reclassified sublease income from other income to operating expenses, which contributed to the year-over-year increase.

Net income for the fourth quarter was $26.1 million, more than double the prior-year comparable quarter, driven by the combination of higher net sales, improved gross margin, and a $6.5 million sale of intangible assets, partially offset by the increase in operating expenses.

Outlook

Looking ahead to fiscal 2025, Smith & Wesson expects to deliver another year of solid growth, likely in the mid- to high-single digits. The company anticipates that near-term demand will be softer than originally anticipated, with sales more weighted towards the second half of the fiscal year. The first quarter is expected to be down approximately 10% from the prior-year quarter in terms of units and dollars, as growth in long guns partially offsets a decline in handguns. The second quarter is expected to rebound as the company approaches the election season, resulting in the first half being only moderately down compared to the prior year.

The second half of fiscal 2025 is expected to benefit from normal seasonal increases, new product introductions, and investments in increased capacity, leading to the full-year revenue growth in the mid- to high-single digits over fiscal 2024. The company believes channel inventory is in a good position and does not anticipate a material impact from changes in inventory, either internally or externally.

Regarding pricing and ASPs, Smith & Wesson expects some headwinds in handguns, particularly during the normal summer slowdown, but believes long guns will remain reasonably strong due to new product introductions. The company expects margins to stabilize in the low 30% range for the full year, an improvement over fiscal 2024, with normal quarterly fluctuations impacted by both volume and operating days.

The expected benefits associated with automation and the reduced facility footprint at the company's new Tennessee facility will begin to be more fully realized later in fiscal 2025. Although the rate of inflation is not expected to materially change, the company should benefit from a more level-loaded manufacturing operation and stable channel inventory, which will help margins for the full year.

Operating expenses for fiscal 2025 are expected to be 3% to 5% higher due to compensation-related inflation, a more competitive market, and increased investment in research and development. Adjusted EBITDAS is expected to grow at a similar rate to sales in fiscal 2025, and the effective tax rate is anticipated to be approximately 24%.

Conclusion

Smith & Wesson's strong financial performance, innovative product pipeline, and strategic initiatives have positioned the company for continued success. The company's relentless focus on delivering world-class quality firearms, innovation, and customer service has earned the trust of consumers and solidified its position as a market leader. With a robust balance sheet, new state-of-the-art facilities, and a dedicated team of employees, Smith & Wesson is well-equipped to navigate the evolving firearms market and continue generating value for its shareholders.