Smith & Wesson Brands, Inc.

Good day, everyone, and welcome to Smith & Wesson Brands, Inc. Fourth Quarter and Full Fiscal 2021 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Rob Cicero, General Counsel, who will give us some information about today's call.

Thank you, and good afternoon. Our comments today may contain predictions, estimates, and other forward-looking statements. Our use of the words anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies, strategic evolution, market share, and demand for our products, as well as inventory conditions related to our products, growth opportunities and trends, and conditions in our industry in general. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties that could cause our actual results, levels of activity, performance, or achievements to be materially different from those expressed or implied by our statements today. These risks and uncertainties are described in detail in our securities filings, including our periodic reports on Forms 8K, 10K, and 10Q. which you can find on our website at smith-wesson.com, along with a replay of today's call. Our actual results, level of activity, performance, and achievements could differ materially from those expressed or implied by our statements today, and we expressly disclaim any obligation to update any forward-looking statements. I have a few important items to note about our comments on the call today. We reference certain non-GAAP financial results on this call. Our non-GAAP financial results exclude acquisition-related amortization, one-time transition costs, COVID-19 expenses, and the tax effect related to each of these exclusions. Reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call, can be found in our securities filings and also in today's earnings press release. Our securities filings and today's earnings press release can be found on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. Finally, when we discuss NICS results, we are referring to adjusted NICS, a metric published by the National Shooting Sports Foundation based on the FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than the purchase of a firearm. Please remember that adjusted NICS background checks are generally considered to be the best available proxy for consumer firearm demand at the retail counter. But since we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers and not to end consumers, 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. Before I hand the call over to our speakers today, I want to remind everyone that we completed the spinoff of our outdoor products and accessories business on August 24, 2020. As such, we are now reporting all historical financial information for that business as discontinued operations. Unless otherwise indicated, any reference to income statement items during this call refers to results from continuing operations. Joining us on today's call are Mark Smith, President and Chief Executive Officer, and Dena McPherson, Chief Financial Officer. With that, I will turn the call over to Mark.

Thank you, Rob, and thanks, everyone, for joining us. As we bring our fiscal year to a close, first and foremost, I'd like to take a moment to reflect on the unbelievable accomplishments of the Smith & Wesson employees in these last 12 months. As with the rest of the nation, Each and every member of our team has faced adversity in their personal and professional lives this year that we could not have ever imagined just 18 short months ago. And yet, as they have always done, the Smith & Wesson team rose to the challenge without hesitation, immediately jumping into action to redesign workstations, develop rigorous disinfectant programs, expand PPE requirements, secure cleaning and disinfecting supplies, repurpose manufacturing assets to make PPE for frontline workers in our communities, set up home offices, alter work procedures to minimize exposure risk, implement temperature scanners, and the list just goes on and on. But the most impressive and humbling thing to see was how our unbelievable family of employees came together to support each other throughout the most challenging times we've seen in our lifetime and made sure the company they love never missed a beat. Whether it was our order entry team working tirelessly to manage the influx of new orders, our operations team ramping production by over 60% in a few short months, our AP and AR teams keeping up with the immense volume of transactions that came along with this, our human resources team thinking outside the box to recruit almost 300 new employees in the midst of a pandemic, our sales team continuing to safely visit customers and make sure that their needs were met, our customer service team handling heavy call volume to ensure our reputation for world-class service never faltered and every other employee and function in the organization, the impressive results that Smith & Wesson delivered this year and the long-term success of the business simply would not be possible without them. Because of this firmly held belief, our company has maintained a long-standing profit-sharing program. And earlier today, we announced to our employees that this year we will be distributing over $14 million to eligible employees, which will be 15% of each employee's annual wages. In addition, the company achieved a very significant milestone in fiscal 2021, surpassing $1 billion in sales for the first time in our 169-year history. As I said, this would not have been possible without all of our employees, and so, In recognition of this milestone, we will also be awarding every employee who is not eligible for our management bonus program a special bonus of $1,200 per full-time employee and $600 for temporary workers, prorated for the months of service during the fiscal year and to be paid next Thursday, June 24th. Congratulations to each of you, and thank you to our entire Smith & Wesson family. Turning now to the business results. Our fourth quarter revenue of nearly $323 million was the highest quarter ever on record and marks the fourth consecutive record-breaking quarter for the company, capping off a year in which the company achieved just under $1.1 billion in revenue, as I mentioned just now, surpassing the $1 billion mark for the first time in our history. As far as profitability, our goal is always to keep costs low and leverage overhead during periods of heightened demand. And the team did an outstanding job this year. Even though we doubled our top-line revenue year on year, they held fixed costs largely flat and therefore drove net income of over $89 million for the fourth quarter and nearly $244 million for the year. Again, both new high-water marks for the company. All of this led to nearly $318 million in cash from operations for the year, And in keeping with our stated capital allocation strategies at the spinoff, we use this cash to completely pay off our $160 million debt, return over $8 million to shareholders through dividends, and reduce our outstanding shares by over 14% just in the short 10 months since the spinoff. And demonstrating our continued commitment to returning value to shareholders, our board this week approved a 60% increase in our fixed dividend and also authorized an additional $50 million share repurchase program. Undoubtedly, our fourth quarter and the year have been remarkable, but the most exciting aspect has been how these achievements have positioned Smith & Wesson for long-term success. Our manufacturing and logistics teams produced and shipped nearly 2.5 million units last fiscal year, representing a 70% increase year-on-year. While during this same timeframe, the U.S. firearms market, as measured by NICS, grew by 42%. So even though it was a record year of growth for the industry, we were still able to realize astounding market share gains. We did this by leveraging our flexible manufacturing model, which, as we've discussed on previous calls, enables us to react much more quickly to changes in market demand, ensuring that our product is more readily available at retail even during periods when the overall industry is capacity constrained. Our sales and marketing team has also been hard at work, ensuring that the millions of new firearms owners who have entered the market over the past 15 months are welcomed and encouraging them to learn how to responsibly enjoy the shooting sports, while also continuing to connect with the tens of millions of long-time loyal Smith & Wesson consumers who trust in our products every day. Just in the past year, We have conducted a thorough ANU study to understand the new firearm owner population and how we can best connect with them. We have recorded over 45 instructional videos for our Gun Smarts program, along with our professional shooting team, on topics ranging from the basics of responsible firearm ownership, how to find a local firearm social community, or increase your skills and become a proficient target shooter. And these videos have been viewed over 2 million times. We have completely redesigned and relaunched our website to improve ease of use and brand messaging, which has been very well received by the 16 million people who have visited our site for the first time this year. We held the first ever virtual show in the firearms industry, highlighting our brand and launching our extremely popular new pistol, the Shield Plus, which has sold over 148,000 units just in the first three months since we launched it. We produced the first ever brand anthem for the company, a powerful video highlighting the values and beliefs that Smith & Wesson shares with firearms owners across the nation. We completed a full strategic product line review, priming the next generation of Smith & Wesson products with 12 unique brand new products scheduled for launch in this upcoming year. And next month, we will be debuting a state of the art touchscreen interactive display at over 50 major retail locations around the country. designed to highlight Smith & Wesson products, features, brand messaging, and connect with firearms consumers directly at the retail level as they make their purchase decisions. As you can see, our renewed focus on being a pure play firearms company has allowed us to move the needle very quickly across every function of the business in a very short amount of time, and we are just getting started. When we combine our results of the past year the well-publicized influx of first-time firearms owners, our laser focus on driving market share growth within the firearm space, our iconic brand, and our millions of loyal followers even before the pandemic, we are extremely well-positioned to parlay the success of the past year into lasting long-term results. With that, I'll turn the call over to Dina to cover financial results before we take questions.