David Cannon

David Cannon inquired about the quantified investment in the Master FFL partnership and its impact on COGS, the evolving landscape of bank regulations and the potential for traditional financing given the company's strong cash position and preferred dividend rate, levers for increasing the take rate, internal targets for used GMV as a percentage of overall revenue, and observations on increased activity at the start of the year.

Answer

CEO Steve Urvan explained the Master FFL partnership aims to streamline the FFL transfer process. CFO Paul Kajewski quantified the investment at $60,000-$120,000 per month, intended to become a profit center. Urvan noted recent changes in bank attitudes (e.g., JPMorgan) due to executive orders, making traditional, reasonably priced bank debt more accessible, though the company is not currently engaged in discussions. He identified universal payments and Master FFL as drivers for increasing the take rate through new services. Paul Kajewski stated no internal target for used GMV percentage, but Urvan emphasized a continuous push for more used product. Urvan attributed increased early-year activity primarily to the NFA tax stamp removal.

David Cannon inquired about the quantified impact of the Master FFL investment on COGS for the quarter and anticipated 12-month period, the evolving landscape of bank financing for the gun industry and its potential to replace preferred stock, current engagement with banks for debt, levers to increase take rate, internal targets for used GMV percentage, and observed increases in activity at the start of the year.

Answer

Chairman and CEO Steve Urvan explained the Master FFL investment aims to streamline firearm transfers, with CFO Paul Kasowski quantifying the cost at $60,000-$120,000 per month, expected to become a profit center. Mr. Urvan noted that recent regulatory changes, like JPMorgan rescinding policies, are opening avenues for substantial, reasonably priced bank debt, making it more accessible to potentially pay off preferred stock or fund buybacks, though they are not currently engaged in bank conversations. He identified universal payments and Master FFL as levers to increase take rates through new services. Paul Kasowski stated no internal target exists for used GMV percentage, but driving more used product is a goal. Mr. Urvan attributed the year's increased activity primarily to the NFA tax stamp removal, renewing interest in the space.

Sought details on the future OpEx run rate, asked about order improvement in Q1, and questioned the progress in expanding to non-automotive verticals. Followed up on the significance of tracking adapter sales and whether this was a previously missed opportunity.

Answer

Management aims to keep expenses low while making strategic investments, noting Q1 is typically higher. They confirmed Q1 bookings are trending better than Q4's low mark. Progress in new verticals is evidenced by a 20% increase in adapter activity with service providers. They clarified that focusing on service providers is a strategic shift to grow their device library, which is critical for long-term growth and was a 'defocus' in the past.