Outdoor Holding Company

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the Ammo, Inc. Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Participants of this call are advised that the audio of this conference is being broadcast live over the internet and is also being recorded for playback purposes. I would now like to turn the call over to Scott Arnold of CoreIR, the company's investor relations firm. Please go ahead, sir.

Good afternoon, and thank you for participating in today's conference call. Joining me from AMA's leadership team are Fred Wagenhals, Executive Chairman of Jared Smith, Chief Executive Officer, and Rob Wiley, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address AMLO's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in AMLO's most recent filed periodic reports on Form 10-K and Form 10-Q the form 8K filed with the SEC today and the company's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes non-GAAP financial measures that AMA believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, it most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, November 9, 2023. Except as required by law, AMO disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to AMO's Chief Executive Officer, Jared Smith.

Good afternoon, everyone. Our fiscal second quarter was a very difficult quarter for our industry, which had been previously anticipated and reported by our major competitors. With that said, the market is moving very quickly due to recent international and domestic events. From our perspective, we continue to transition our business to a leaner and more profitable operating model and remain focused on addressing operational inefficiencies. Of note, during our fiscal second quarter for which we report today, we incurred 3.9 million of non-recurring expenses due to legal and professional fees. Payments incurred upon change in control and accruals or contingencies from activity originating in the 2021 and 2022 fiscal years. There was an additional 0.9 million stock compensation expense due to the change in control activities and 0.4 million write-offs of deposits from the 2022 fiscal year. These actions, while not favorable in the quarter, allow us to move forward without the burdens of prior fiscal year activities. We believe that these actions are illustrative of the necessary adjustments that we believe are necessary to transition Ammo, Inc. for greater transparency and profitability in the years to come. On a positive note, we lowered our working inventory by $1.3 million, created $9.9 million in cash, and reduced working capital by $8.9 million since year end. Revenues were flat sequentially, but profitability suffered as we cleared out slow-moving inventory at a loss so that future reporting quarters could be clean and a true measure of the changes we are making. We believe these strategic moves were timely as recent international events have created strong tailwinds for the ammunition division. And we are beginning to see increased traffic and conversion through GunBroker.com as our enhancements are beginning to pay off. This past quarter, GunBroker.com has successfully launched its centralized payment processing gateway and is now onboarding sellers as anticipated. This is the first major step in our evolution to a multi-item cart and streamlining the checkout process as we transition from an auction house to an Amazon-like model with auction functionality. In line with our expectations, we experienced a sequential decline in sales in Q2 from the previous quarter, tracking $1.4 million down in top-line revenue. This decline in sales was anticipated, and we are now starting to see the lift in our sales for Q3, including a 14.7% decrease sequential increase in volume through our platform in October versus September, which is in line with seasonal trends in the current macro environment. This acceleration is amplified as we onboard new sellers and users begin to experience outdoor pay for the first time, which is our centralized payment processing platform and escrow service. We have onboarded 2,826 sellers since we went live with outdoor pay. We remain very enthusiastic about the progress and outlook for GunBroker.com. Now let me turn our attention to some specifics on our ammunition division. Tough news is best served straight. As with any transition year with a new management team, we have taken certain steps to clean up our inventories, books, and outstanding debts and liabilities. While we anticipated a rough market, we also took substantial margin losses on slow-moving inventory as we cleaned up our stocks. In context, the ammunition market in our Q2 as reported by other publicly traded companies was well below our already low expectations. With this backdrop, our results were further impacted because the major investments we've made in contact tooling for brass production equipment did not come online in a quarter and our overhead absorption for the plant suffered. This is by no means from a lack of demand, but due to the mechanical and electrical failure of our primary presses for our rifle case production. While we initiated the investments for mechanical and electrical failure redundancy, we did not have the investments in place to keep our workforce and the downstream presses operational. This led to an additional $1.75 million in expenses for the quarter. Of the $1.75 million, there is roughly $800,000 in tooling expenses incurred in the quarter that will help offset future costs as these presses come back online. The fundamentals of our transition to OEM brass sales become even more crucial in our go-to-market strategies. Our demand for products exceeds our current industrial throughput due to these mechanical and supply issues we experienced in the quarter. We expect to see strong demand and high margin growth in future quarters, but we are roughly a quarter behind where we thought we would be by now. On a positive note, we have brought on an additional 132 new domestic ammunition customers and continue to sign new OEM customers for supply of rifle and pistol brass. Events around the world have driven demand for our product offering, and we are increasing the output of the facility to continue that capex. While our highest margin presses continue to sit idle, we have not sat idle over the last quarter. We have expanded brass sales by 47% compared to this quarter last year, and brass sales now make up 30% of total sales, a 27% increase over last year. Although I am disappointed with our performance this quarter, these trends reinforce my confidence in the strategic direction of our ammunition business. Since we last reported our earnings in August, we have seen the international market increase its demand for our products, and due to recent news of further consolidation in our industry, coupled with limited sales of 5.56 into the commercial market from Lake City, we simply cannot have been down at a worse time. Events in October have completely flipped the market on its head, and we see a return to revenue growth and improved margins in both the brass and loaded ammunition market today. BenBroker.com is starting to see the payoff of carding and payment processing capabilities on the platform. We continue to add talent to our team and recently brought on industry veteran Paul Schreiner to help us recruit and retain talent in our organization. The turnaround is in place and bearing fruit, albeit with more bumps along the way than we hoped. I look forward to better results in our fiscal third quarter and the remainder of the year. With that, I will turn the call over to our CFO, Rob Wiley, to review the second quarter results in more detail. Rob?