Smith & Wesson Brands, Inc.

Good day, everyone, and welcome to Smith & Wesson Brands Inc. Fourth Quarter and Full Fiscal 2023 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us some information about today's call.

Thank you, and good afternoon. Our comments today may contain forward-looking statements. Our use of the words anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify forward-looking statements. Forward-looking statements may also include statements on topics such as our product development, objectives, strategies, market share, demand, consumer preferences, inventory conditions for our products, growth opportunities and trends, and industry conditions in general. Forward-looking statements represent our current judgment about the future and are subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by our statements today. These risks and uncertainties are described in our SEC filings, which are available on our website, along with a replay of today's call. We have no obligation to update forward-looking statements. We reference certain non-GAAP financial results Our non-GAAP financial results exclude costs related to the planned relocation of our headquarters and certain manufacturing and distribution operations to Tennessee, the spinoff of our outdoor products and accessories business in fiscal 2021, COVID-19 related expenses and other costs. Reconciliations of GAAP financial measures to non-GAAP financial measures can be found in our SEC filings and in today's earnings press release, each of which is available on our website. Also, when we reference EPS, we are always referencing fully diluted EPS, and any reference to EBITDAS is to adjusted EBITDAS. Before I hand the call over to our speakers, I would like to remind you that when we discuss NICS results, we are referring to adjusted NICS, a metric published by the National Shooting Sports Foundation based on FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than firearms purchases. Adjusted NICS is generally considered the best available proxy for consumer firearm demand at the retail counter. Because 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. Joining us on today's call are Mark Smith, our president and CEO, and Dena McPherson, our CFO. With that, I will turn the call over to Mark.

Thank you, Kevin, and thanks, everyone, for joining us today. Before we move into a discussion of our results, on behalf of the company, our board, and the entire Smith & Wesson family, I want to take a moment to acknowledge the significant contributions to Smith & Wesson of Mike Golden, who passed away unexpectedly earlier this month. Mike served as our president and CEO from 2004 to 2011, and as a member of our board of directors since 2004. The impact of his leadership and dedication to our industry, our company, and most of all our employees cannot be understated. Mike had a long and very successful professional career across multiple industries, and he will be remembered fondly for accomplishing so much with a management philosophy and style of kindness, generosity, and gentle guidance. We are grateful for our memories of Mike and deeply appreciate his commitment to the success of Smith & Wesson. Our thoughts and prayers are with his family and friends. Now onto a review of our business. And fiscal 2023 ended with a very solid fourth quarter, as the headwinds we faced from elevated channel inventory throughout the first half of the fiscal year abated. Focus consumer promotions in the second half were successful in driving retail and distributor inventories down significantly, and we are now at or below targeted levels with every major customer. And most importantly, our retail market share data indicates that we've maintained our leadership position at the sales counter with the firearm consumer. Combined with lower inventory levels, this points to continued success throughout fiscal 2024. This is all thanks to our seasoned team who navigated through an extremely busy and challenging year, never losing sight of our long-term focus. Our operations team leveraged our flexible manufacturing model, adjusting production rates to match normalizing demand patterns while still delivering impressive profitability. Our sales and marketing teams work to maintain a strong presence with our consumers and our channel partners, designing and executing strategic promotions to take advantage of opportunities as they arose to maintain our market share leadership. And the impressive slate of new products launched throughout the year, thanks to our new product development team, have bolstered Smith & Wesson's position as an innovation leader. Last but not least, none of this would be possible without the tireless dedication of our back office support functions of HR, finance, legal, compliance, and IT, without whom we simply could not run the business day to day. And all of this while simultaneously navigating the challenges associated with our move to Tennessee, which is fully on track as I'll cover in a few moments, I could not be more proud of the team and humbled to lead such a tremendous organization. Moving on now to a discussion of market conditions. All factors continue to point towards stable demand and normal seasonality. NYX was down low single digits on a year-over-year basis during our fourth quarter, modestly below trends in Q3 and within normal variability. And May NYX results continue to support the view that overall consumer demand remains steady compared to a year ago. Therefore, we expect that NYX will continue this trend throughout FY24, largely following the same demand pattern at the retail counter as we experienced in FY23. Taking into account the channel inventory declines I just covered, we expect that our results will compare favorably to last year. We are still seeing a somewhat bifurcated market at retail, with entry-level price points and fully featured premium products both remaining strong. In our view, this continues to reflect overall macroeconomic conditions, where the average consumer spending is being squeezed by inflation. Importantly, we continue to be in a strong position to succeed, despite these headwinds, as evidenced by our solid Q4 results. In this competitive environment, in addition to constantly monitoring and adjusting key aspects of production, pricing, and promotion to ensure supply is aligned with demand, we remain very focused on innovation. We view new product introductions as a key point of competitive differentiation. Our new product launches in the second half of FY23, The M&P SPC, the M&P 5.7, the M&P Metal, the Competitor, and the Equalizer have all been top-selling products, not just for us, but for our retailers as well. With a robust pipeline of upcoming releases, you can expect us to continue this cadence throughout FY24. Before I hand the call over to Dina, just a quick update on the move to Tennessee. As I mentioned in my earlier comments, the project continues on track, with construction nearing completion. We have begun hiring and training our operations workforce, and equipment installation and testing is well underway. We expect to begin operations in August with the distribution go live, and are planning to have the front office employees in place by the fall. It's also worth noting that with our upcoming move to Tennessee at the end of Q1, inventory on the balance sheet will remain elevated compared to historical levels, consistent with our plan for mitigating any potential disruptions. With that, I'll hand the call over to Dina to cover the financials.