Sportsman's Warehouse Holdings, Inc.

future results of operations, demand for our products, and growth of our industry. Actual results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described in the company's most recent Form 10-K and the company's other filings made with the SEC. We will also disclose non-GAAP financial measures during today's call. Definitions of such non-GAAP measures, as well as reconciliations to the most directly comparable GAAP financial measures, are provided as supplemental financial information in our press release, included as Exhibit 99-1 to the Form 8-K we furnished with the SEC today, which is also available on the investor relations section of our website at sportsnews.com. I will now turn the call over to Paul.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our team of dedicated outfitters across the country. Each day, they deliver on our promise of great gear and exceptional service, and their commitment continues to help drive our momentum. Turning now to our third quarter results, I'm encouraged by the solid progress our team continues to make as we execute against our transformation strategy. Despite a tough consumer environment and the impact of prolonged government shutdown, we delivered our third consecutive quarter of positive same-store sales growth. Same-store sales grew 2.2% versus last year, with broad-based strength in our core categories of hunting and shooting sports, as well as fishing. Our firearms business once again outperformed adjusted NICS checks, extended our market share gains for yet another quarter. While adjusting NICS checks declined, our firearm unit sales increased. Despite the election-driven headwinds from Q3 last year, underscoring the continued focus and improvements on a curated assortment with depth in key products, strong in-stocks and seasonal readiness with inventory, our enhanced marketing efforts, and our outsider-led in-store experience. In ammunition, sales demand remains strong, growing nearly 2% in Q3. Our EDLP strategy on core calibers complemented by healthier in-stocks and bulk ammo strategy continue to resonate with customers, with average unit retail up in the low single digits. We are seeing sustained engagement from customers as we lean in further to drive the areas of our business. Looking now at our key categories. We drove meaningful growth across several strategically important departments. Hunting and shooting sports increased 5%, supported by strong inventory levels with relevant local assortments heading into our peak fall season. Fishing delivered exceptional growth of 14%, reflecting broad participation in the category and strong execution from our teams. Apparel grew about a percent and a half, with particular strength in technical outdoor wear that supports our solution selling approach. Camping, however, remained challenged. Sales declined versus last year, reflecting the highly discretionary nature of this category. This is a category where we continue to refine and curate the assortment to complement the pursuits that drive customers into our stores. In fact, inventory in this category was down more than sales, highlighting greater efficiency with our inventory, and investments in our key sales and traffic driving categories. E-commerce was another bright spot, delivering growth of 8% in the quarter. Both ship-to-home and buy-online, pickup and store perform well, with BOPAs continuing to drive traffic and improve conversion in our stores. Our digital-first marketing efforts are supporting higher engagement and customer acquisition across all channels. The improvements we're seeing across the business remain tied to the strategic priorities guiding our transformation. Inventory precision. We meaningfully reduced inventory from Q2 to Q3 while supporting peak seasonal demand, demonstrating improved planning, forecasting, and allocation disciplines. Importantly, we paid down debt during the quarter and remain on track to finish the year with lower total inventory than last year and positive free cash flow. Our focus on fast returning regionally relevant assortments continues to drive both margin and working capital efficiency. Local relevance. Aligning our merchandise and marketing to local outdoor pursuits continue to drive measurable results. We are expanding targeted marketing, community partnerships, and in-store educational events that reinforce our position as the local authority for outdoor enthusiasts. Personal protection. This category continues to resonate strongly with customers with strength across both lethal and non-lethal solutions. Berna and Taser remain strong growth drivers And the Try Before You Buy model in our archery lanes and enclosed pods is differentiating our store experience in meaningful ways. We added burn-in additional stores during Q3 and now have live demos available in 116 of our 147 stores across the country. We are committed to building on this momentum as we further position Sportsman's Warehouse as the authority in personal protection. Brand awareness. Q3 marked an important milestone in our brand awareness journey. Our Adventure Like a Local campaign and digital first go-to-market strategy has proven to resonate with customers as we noted highest year-to-date engagement, deepened our loyalty subscribers, and strengthened brand affinity. Using our new first-party data insights, this now gives us the foundation to strengthen retention and customer value through the transformation of our Explore Rewards program focused on increasing AOV, transactions per customer, and long-term customer value. Q4 will be dedicated to road mapping and enterprise level 2026 customer acquisition strategy that reduces reliance on promotion and shifts the business towards more sustainable, profitable growth. In early November, we were pleased to open our newest store in Surprise, Arizona, our 11th location in the state. Arizona is a market we know very well with several of our top performing stores already operating in the region. This new location features a unique personal protection focused format, the first of its kind in our fleet, designed to meet the needs of the customer seeking both lethal and non-lethal solutions. This will be our only planned stores opening for both 2025 and 2026, reflecting our disciplined approach to growth and our commitment to investing where we see the greatest opportunity for long-term returns. I'll now provide a little color in the current market conditions creating headwinds on the business. Starting in mid-October, we started to see a slowdown in our positive sales trend, which we believe was partially driven by external disruptions from a prolonged government shutdown impacting consumer confidence. This has made for a challenging start to Q4, and while still early in the quarter, we believe it's prudent to take a conservative approach to the balance of the year. With the U.S. consumer under pressure and a very promotional retail landscape, We are navigating the environment carefully and maintaining discipline control over variable costs and inventory productivity. Given these dynamics, we are taking a cautious view of the fourth quarter. So we remain confident that our strategic priorities and ability to adjust with speed will support modest sales growth for the full year. We remain confident in our ability to finish the year with lower inventory than last year, generate positive free cash flow, and a lower debt balance. I'll now turn the call over to Jennifer.

Thank you, Paul, and good afternoon, everyone. We delivered our third consecutive quarter of same-store sales growth in Q3, with comps up 2.2% year-over-year, maintaining our positive trend from the second quarter. Net sales for the quarter were $331.3 million, an increase of 2.2% compared to the prior year. We are pleased to report that the company achieved three consecutive quarters of year-over-year comp store sales growth. This has been the result of a focused strategy to win the seasons in hunting and fishing and our conviction to lean in heavy to the personal protection category, an area where others in the industry are backing away. Reflective of this focus is the 5.3% growth we achieved in Q3 in our hunting and shooting sports department and the 14.1% increase in fishing, which on a two-year comp stack is up 17.9%. Additionally, apparel is up 1.4% in the quarter. The combination of this growth was partially offset by decreases in our other departments. Gross margin for the quarter was 32.8%, a 100 basis point improvement versus Q3 last year. This increase was largely driven by improved overall product margins from healthier inventory, lower freight expense due to lower inventory receipts, improved shrink, and a higher penetration of sales from our fishing department, which has a higher overall gross margin. This increase was partially offset by an outsized mix shift to firearms and ammo, which has lower gross margin and a lower penetration in the camping and footwear departments, which carry higher margin rates. SG&A expenses were 104.5 million, or 31.5% of net sales, versus 30.8% in the prior year. This increase was driven by a reinvestment in our customer-facing areas of the business, including store and support area labor, and digital marketing to drive sales and omni-channel traffic. Additionally, SG&A was pressured this quarter from about a $3 million of additional non-recurring add-back expenses. Excluding add-back expenses in both years, SG&A as a percent of sales was 30.3% versus 30.1%. We will continue to closely manage our variable operating expenses. Net income approved, $8,000 or 0 cents per diluted share versus negative 1 cent per diluted share in the third quarter of last year. Adjusted net income in the third quarter was $3 million or 8 cents per diluted share compared with adjusted net income of $1.4 million or 4 cents per diluted share in the third quarter of last year. Adjusted EBITDA for the third quarter grew 13% to $18.6 million compared with adjusted EBITDA of $16.4 million in the third quarter of last year, an improvement of 50 basis points as a percentage of net sales. Now turning to inventory. Total inventory at the end of Q3 was $424 million, compared to $438.1 million in the same period last year, a decrease of $14.1 million, or 3.2%. As anticipated, we also reduced inventory by approximately $20 million compared with Q2. We strategically pulled inventory forward in the first half of the year and into early Q3. This was in an effort to ensure our stores were well prepared and set on time for the fall hunting and fishing seasons, and to be ready and on time to support the holiday selling season. Our focus remains to build depth in core items and eliminating the slow moving inventory that doesn't resonate with the customer. It's critical that our inventory is seasonally and regionally relevant, faster turning, and supported by predictable customer demand, which will produce lower inventory balances. This will continue to be a focus effort for 2026 and provide efficiency in our operating model. Through enhanced buying discipline, our goal is to be in season earlier, exit earlier, and achieve clean sell-throughs across the categories, which will improve the return on our working capital. Given the improvements in working capital efficiency, we expect to end the year with ending inventory less than $330 million, which is $12 million less than prior year on a higher base of sales. In regards to liquidity, during the quarter, we paid down $13.2 million of debt and ended the quarter with a total debt balance of $181.9 million and total liquidity of $111.9 million. Additionally, in November, we drew inventory down by $23 million and paid down an additional $9 million in debt. As we move through the holiday selling season and end of the year, we expect to end the year both free cash flow positive and total debt to be lower than our ending balance last year. Inventory efficiency and tight control of variable expenses remain top priorities as we manage the business prudently through Q4 and into 2026. Finally, let me speak to our update on full-year guidance. Starting late in the third quarter and now into Q4, we are seeing accelerated macroeconomic headwinds from a pressured U.S. consumer and what we believe are the prolonged effects of a government shutdown. Given this pressure, we have increased our promotional efforts to maintain inventory efficiency while driving sales, which is putting pressures on margins. Additionally, we have increased our digital marketing spend to be more competitive in the marketplace to accelerate omnichannel traffic during this period of high shopper demand. Accordingly, as we recognize and navigate current market conditions, we are revising our full year guidance. For the full fiscal year 2025, we are adjusting our net sales range to be flat to up slightly. Again, this adjustment reflects a tough Q4 environment due to a challenge due as consumer. Furthermore, we are adjusting our full year EBITDA guidance due to margin pressure from a very promotional Q4 and lower than anticipated Q4 sales. We now expect adjusted EBITDA to be in the range of $22 million to $26 million. As mentioned earlier, we expect ending inventory to be less than $330 million, and we expect our capital expenditures to be less than $25 million for the full year. As we move forward into 2026, we anticipate continued progress around our strategic initiatives with very modest top-line growth and a focus on improved profitability through disciplined cost management, inventory efficiency, and improved gross margins. I will now turn the call back to the operator to facilitate any questions.