Rommel Dionisio

Rommel Dionisio asked about early feedback from retailers and distributors regarding new product interest, the outlook for calendar year 2026, and the overall industry, ahead of the SHOT Show.

Answer

President and CEO Mark Smith reported very positive feedback from channel partners, highlighting market share gains and strong portfolio performance. He noted that distributor inventory levels are healthy, around eight weeks of supply. For the upcoming SHOT Show, he encouraged observers to anticipate new product announcements, emphasizing the company's commitment to continued innovation in the back half of the year.

Rommel Dionisio of Aegis Capital Corp. asked about the drivers behind the trend in the handgun market towards smaller, concealed carry firearms. He also inquired about the potential margin impact of expanding the product line in the traditional hunting long gun category.

Answer

President and CEO Mark Smith explained that the handgun trend is driven by both a consumer preference for concealed carry and a move towards entry-level price points, noting the market is bifurcating. Regarding long guns, Smith confirmed plans to expand the traditional hunting line and stated that the margins on new products like the 1854 lever-action rifle are not materially different from the company's core rifle line.

Rommel Dionisio asked about the willingness of retailers and distributors to take on new product inventory given the inflationary environment, and whether unseasonably warm weather impacted the hunting season and overall demand.

Answer

CEO Mark Smith responded that innovation is paramount and channel partners are eager for new products, citing the success of the Bodyguard 380 and the 1854 lever-action rifle. He dismissed weather as a factor, stating that August was strong and the slowdown in late September and October was primarily driven by inflation and its pressure on consumer discretionary spending.

Rommel Dionisio asked about the strategic positioning of the Glenfield brand to avoid cannibalizing existing Marlin or Ruger sales, inquiring if it targets a different demographic or is purely a pricing play. He also requested clarification on the target consumer for the newly announced Patrol line, specifically if it is tailored towards law enforcement.

Answer

CEO Todd Seyfert clarified that the Glenfield line is positioned as an 'opening price point' brand, creating a 'good, better, best' stratification with Marlin at the top and Ruger in the middle. He emphasized it targets a new segment of the market where Ruger previously had no offerings, thus avoiding cannibalization. For the Patrol rifle, Seyfert stated it is not law enforcement-focused but rather a heavy barrel variant of the successful Gen 2 Ruger American Rifle, designed to expand the product line into new market categories like Western hunting and general consumer use.

Rommel Dionisio asked about the strategic positioning of the Glenfield product line, specifically how it avoids cannibalizing existing Marlin or Ruger sales, and what demographic it targets. He also sought clarification on the new Patrol rifle line, inquiring if it is tailored for law enforcement or a different consumer segment.

Answer

CEO Todd Seyfert clarified that the Glenfield line is positioned as an opening price point, or 'value' brand, to attract a new segment of the market where Ruger previously had no offerings, thus avoiding cannibalization. He described it as a 'greenfield, new opportunity.' Regarding the Patrol rifle, Seyfert stated it is not law enforcement-focused but rather a new variant of the successful Gen 2 rifle, featuring a heavy barrel, designed to open up new market categories for general consumers, such as Western hunting.

Rommel Dionisio from Aegis Capital Corporation asked for more details on the inventory rationalization, specifically concerning Marlin-related items not part of the brand's future roadmap. He sought clarification on the company's long-term strategy and level of enthusiasm for the Marlin brand going forward.

Answer

President & CEO Todd Seyfert clarified that the write-off was mainly for assets and materials related to the Marlin Model 60, which is not in the near-term product plan. He emphasized that these materials were part of the original 2020 acquisition. Seyfert strongly reaffirmed the company's enthusiasm for the Marlin brand, highlighting the phenomenal consumer feedback, strong backlog for its popular centerfire rifles, and a robust product pipeline for years to come.

Rommel Dionisio inquired about the strategy behind the planned increase in capital expenditures, asking if it signals a more aggressive pace for new product launches. He also questioned the potential impact on the bottom line from associated marketing expenses and whether the company sees a significant opportunity in any specific firearm category.

Answer

President and CEO Todd Seyfert confirmed the increased CapEx is intended to accelerate the pace of new product introductions and reduce time-to-market. He clarified that the investment will be primarily capital-related in the short term, with sales and marketing expenses expected to grow in parallel later. While declining to specify a product category, Seyfert noted a robust new product pipeline across all existing platforms, prioritized by market feedback and opportunities.

Rommel Dionisio asked for more detail on gross margin trends, specifically the balance between the adverse product mix shift and the introduction of successful, higher-margin new products.

Answer

Outgoing CEO Christopher Killoy clarified that the most significant factor contributing to lower gross margins from a product mix standpoint was the competitive pricing strategy for the 75th-anniversary models. He noted that while these products were very successful, their aggressive pricing impacted the overall margin.

Rommel Dionisio of Aegis Capital Corp. asked for perspective on the competitive promotional environment, questioning if it has become a permanent industry feature due to stable demand and potential oversupply. He also inquired about any significant shifts in broader market trends, such as participation from first-time shooters or women, in recent quarters.

Answer

President and CEO Christopher Killoy suggested the market may be experiencing 'crisis fatigue,' with less panic-buying than in previous election cycles. He agreed that significant industry capacity is fueling competitor discounting. Killoy reiterated Ruger's strategy to gain share through innovation, like the American Gen II rifles, rather than discounting. He also highlighted the focus on converting pandemic-era first-time buyers into lifelong customers with accessible products like the Mark IV pistols, 10/22 rifles, and the easy-to-operate Security-380, which also appeals to niche demographics.

Rommel Dionisio of Aegis Capital Corporation inquired about the impact of current tariff and retail inventory situations on the company's new product launch cadence. He also followed up with a request for more detail on the specific categories that created an unfavorable product mix, impacting gross margins during the quarter.

Answer

President & CEO, Armen Boehm, clarified that Escalade will not delay its product launch cadence and is, in fact, accelerating new product introductions in partnership with key accounts for the holiday season. Regarding the unfavorable product mix, Boehm explained it was driven by two factors: poor weather conditions impacting sales of seasonal basketball and outdoor recreational products, and a strategic, temporary pause in shipments with retailers to avoid exorbitant tariff costs, which affected Q2 results.

Rommel Dionisio of Aegis Capital Corporation inquired about the impact of tariffs and retail inventory levels on the company's new product launch cadence. He also asked for more detail on the specific product categories that created an unfavorable mix and negatively affected gross margins during the quarter.

Answer

President & CEO Armin Boehm responded that Escalade is accelerating its new product introduction frequency and will not alter its launch cadence, emphasizing a strong holiday season lineup. Boehm attributed the unfavorable product mix to two factors: poor weather impacting basketball and outdoor recreational product sales, and a temporary, coordinated halt in shipping with retailers to avoid peak tariff costs, which delayed shipments.

Rommel Dionisio of Aegis Capital Corporation inquired about Escalade's new product cadence, asking if tariff and retail inventory situations would delay future launches. He also requested more detail on the specific product categories that contributed to the unfavorable product mix impacting gross margins during the quarter.

Answer

President and CEO Armin Boehm stated that the company will not alter its product launch cadence and is, in fact, accelerating new product introductions while working closely with key accounts for the holiday season. Boehm explained that the unfavorable mix was driven by two main factors: unfavorable weather impacting sales of basketball and outdoor recreational products, and a temporary halt in shipments with retail partners to avoid exorbitant tariff costs, which affected Q2 results.

Rommel Dionisio of Aegis Capital Corporation inquired about whether the current tariff and retail inventory situation would alter Escalade's new product launch plans. He also requested more specific details on which product categories contributed to the unfavorable product mix that impacted gross margins during the quarter.

Answer

President & CEO Armen Boehm confirmed that Escalade will not change its product launch cadence and is actually accelerating new product introductions ahead of the holiday season. Boehm explained that the unfavorable gross margin mix was driven by two factors: poor weather conditions impacting sales of basketball and outdoor recreational products, and a temporary pause in shipments with retail partners to avoid peak tariff costs.

Rommel Dionisio of D.A. Davidson & Co. asked about Escalade's strategy to mitigate tariff impacts, including the speed of shifting production from China. He also sought to quantify the tariff impact on Q1 gross margins and clarify the trend in inventory levels.

Answer

President and CEO Armin Boehm detailed a multi-faceted strategy to manage tariff uncertainty, including supply chain optimization, surgical pricing actions, and leveraging their diversified sourcing network. Board Chairman Walt Glazer quantified the Q1 tariff headwind at over 100 basis points, which was more than offset by cost-saving initiatives. Glazer also clarified that the lower year-over-year inventory reflects a successful, ongoing effort to rightsize inventory levels and reduce associated costs.

Rommel Dionisio asked about Escalade's inventory strategy in light of potential tariffs and whether the company would build up safety stock. He also inquired if a product mix shift towards archery and table tennis provided a tailwind to gross margins in the quarter.

Answer

CFO Stephen Wawrin explained that while Escalade did advance some shipments to get ahead of tariffs, the primary goal remains inventory efficiency and further reductions are possible. Wawrin noted that the product mix impact on gross margin was not significant, and that future margins should improve as the company moves past costs associated with footprint and inventory reductions.

Rommel Dionisio inquired about Escalade's recent restructuring, seeking details on the Minnesota facility rationalization and the plan to wind down operations in Orlando, Florida. He also asked for clarification on a recent increase in amortization expense.

Answer

CEO Walter Glazer explained that the Minnesota facility's footprint and staffing were reduced to align with a temporary downturn in the water sports market. For the Orlando facility, he detailed a strategic shift from a print-on-demand model to a more cost-effective pre-printed import model, with inventory being consolidated into other locations. CFO Stephen Wawrin clarified that the higher amortization was a one-time charge tied to the Orlando restructuring and that historical levels are a better indicator for future quarters.

Asked about the long-term outlook and strategy for the millimeter-wave business and its potential impact on gross margins over time.

Answer

The company is focusing heavily on the high-growth millimeter-wave market with new products to gain share and outpace overall market growth. These new products could slightly improve gross margins, but the long-term target remains 35-38%, with competition and regional mix being key factors.

Rommel Dionisio of Aegis Capital Corp. asked for clarification on the total shares outstanding and requested an update on the execution of the company's subscription model strategy, noting the growth in deferred revenue.

Answer

Brody Green, President, clarified that shares outstanding were 3.5 million at quarter-end, rising to just under 3.9 million post-quarter after warrant exercises. He added that the subscription model is successfully converting large capital expenditures into recurring annual fees for clients, growing the deferred revenue balance to over $10.5 million and improving future cash flow.

Rommel Dionisio of Aegis Capital Corp. asked for clarification on the total shares outstanding and requested an update on the execution of the company's subscription model strategy, given the growth in deferred revenue.

Answer

Brody Green, President, clarified that shares outstanding were 3.5 million at the end of Q2 but have since increased to just under 3.9 million after prefunded warrants were exercised. Green also stated that the subscription model is performing well with clients like sports teams and cruise lines, as it converts large capital expenditures into manageable annual fees. This has successfully grown the deferred revenue balance to over $10.5 million, which supports recurring revenue and future cash flow.

Rommel Dionisio of Aegis Capital Corp. asked for clarification on the total shares outstanding and for an update on the execution of the company's subscription model strategy.

Answer

President Brody Green clarified that the quarter-end share count was 3.5 million before prefunded warrants were exercised, bringing the current total to just under 3.9 million. He added that the subscription model is succeeding by helping clients manage cash flow, which has grown Digital Ally's deferred revenue balance to over $10.5 million, boosting future recurring revenue.

Rommel Dionisio of Aegis Capital Corp. asked for clarification on the shares outstanding count and requested an update on the execution of the company's subscription model strategy, noting the growth in deferred revenue.

Answer

President Brody Green clarified that shares outstanding were 3.5 million at quarter-end but rose to just under 3.9 million post-quarter after prefunded warrants were exercised. He added that the subscription model is succeeding by converting large capital expenditures into annual fees for clients, which is steadily growing the company's deferred revenue balance and future recurring cash flow.

Rommel Dionisio of Aegis Capital Corp. asked for clarification on the current number of shares outstanding and requested an update on the performance of the company's subscription model strategy.

Answer

President Brody Green clarified that shares outstanding were 3.5 million at quarter-end (June 30, 2024) but have since increased to just under 3.9 million after the exercise of prefunded warrants. Regarding the subscription model, Green confirmed its success, noting the deferred revenue balance has grown to over $10.5 million. He explained the model helps clients across law enforcement, sports, and commercial sectors convert large upfront capital expenditures into manageable 3- or 5-year annual contracts, which in turn builds a strong base of recurring revenue and future cash flow for the company.

Inquired about the 2024 macro outlook for the core transmission business, the key factors in securing the Port of Baltimore deal, and the reason for higher shipping fees despite stabilized global rates.

Answer

The company sees a strong macro outlook for its core business, with 8-10% CAGR expected due to e-commerce logistics demand. The Port of Baltimore win was secured by a successful hands-on demonstration for their operators, though the sales cycle was long. Higher shipping costs were temporary, caused by air-freighting components for the new HEVI line to meet timelines and also to support some top-tier component clients.

Rommel Dionisio from Aegis Capital asked about the drivers behind the recent surge in contract signings and press releases. He also requested an updated perspective on the company's opportunities within the mining sector.

Answer

Chairman & CEO Lior Tal attributed the success to both strategic team growth, including new engineering and sales leadership, and increased market recognition driving inbound customer interest. Tal clarified that while the mining project is an important R&D effort generating NRE revenue, the company's primary commercial focus remains on material handling vehicles like forklifts and tuggers for logistics and manufacturing, which offer a clearer path to recurring license revenue.

Rommel Dionisio of Aegis Capital Corp. asked about the key drivers behind the recent surge in contract signings and press releases. He also requested an update on the company's strategic opportunities within the mining industry.

Answer

CEO Lior Tal attributed the recent commercial success to two main factors: the expansion of the team with experienced engineering and sales leadership, and growing market recognition of industrial automation's benefits, which is driving inbound customer interest. Regarding mining, Tal clarified that the company's primary focus is on material handling for logistics and manufacturing to generate recurring license revenue, while opportunities like mining are currently in an R&D phase contributing to non-recurring engineering (NRE) revenue.

Rommel Dionisio of Aegis Capital asked for perspective on the overall pace of technology adoption among potential customers and whether it has met, lagged, or exceeded the company's expectations.

Answer

Chairman and CEO Lior Tal expressed satisfaction with the progress and pace of adoption, especially since hiring the sales team a few months prior. He highlighted that the team is actively building the sales funnel and distribution channels and that he is pleased with the current focus and momentum.

Rommel Dionisio from Aegis Capital Corporation asked about the potential for international expansion, particularly in the mining and materials handling sectors, and the strategy for building an international sales force. He also requested an update on the role of Infinitracker in recent revenue generation and its outlook for 2023.

Answer

Chairman & CEO Lior Tal stated that Cyngn's software-centric model and partnerships with OEMs, who already have a global footprint, enable international expansion without a large direct sales force. He noted that focusing on private industrial sites also avoids complex cross-border regulations. VP of Business Development Ben Landen clarified that Infinitracker is viewed as a natural, integrated component of the broader Enterprise Autonomy Suite (EAS) and a cross-selling opportunity, rather than a standalone product.