Executive Summary

Returned to profitability: Net income from continuing operations reached $1.40M and diluted EPS was $0.01, versus a loss of ($5.87M) and ($0.06) a year ago; Adjusted EBITDA rose to $4.91M with margin of ~41% of revenue .
Outperformed industry demand despite soft market: revenue was $11.98M (flat YoY) on 87.1% gross margin; total GMV was $189M (-1.2% YoY) with firearm GMV +1.2% and used firearms +7.8%; take rate increased to 6.34% from 6.27% .
Beat consensus: revenue beat S&P Global consensus by ~3.0% ($11.98M vs. $11.63M*) and EPS beat by $0.05 ($0.01 vs. -$0.04*) on leaner opex and better monetization (2-estimate coverage)*. Values retrieved from S&P Global.
Cost actions and balance sheet strength: operating expenses fell $6.71M YoY; cash rose to $65.67M from $63.36M in Q1; management intends to repurchase shares; HQ relocation to Atlanta reduces footprint .
Legal/compliance overhang easing: regained full Nasdaq compliance; favorable federal court ruling affirmed marketplace status; management still flags variability from ongoing indemnification/legal matters as a near-term swing factor .

What Went Well and What Went Wrong

What Went Well
- Adjusted EBITDA inflected higher with strong margin: $4.91M (+24% YoY) and ~41% of net revenue, reflecting cost reductions and monetization improvements .
- Share gains vs industry: adjusted NICS down >5% YoY while firearm sales on GunBroker rose >3%; firearm GMV +1.2%, used firearms +7.8% .
- Take rate and gross margin expanded: take rate to 6.34% (from 6.27%) and gross margin to 87.1% (from 86.9%) .
- Management tone constructive on profitability trajectory: “we can beat [the $25M adjusted EBITDA run-rate goal] over time” as cost actions and revenue initiatives scale .
What Went Wrong
- Top-line still soft in aggregate: total GMV -1.2% YoY despite mix strength in used firearms; net revenues essentially flat YoY at $11.98M .
- Non-recurring/legal costs persist: $1.8M settlement contingency tied to ammunition sale; management expects overall performance to be “uneven” until litigation and indemnification obligations subside .
- Limited estimate coverage and visibility: only two Street estimates, no formal numeric guidance provided; continuing legal/SEC matters remain a watch item [GetEstimates: Q2 2026 coverage=2] .

Financial Results

Metric	Q2 FY2025	Q1 FY2026	Q2 FY2026
Net Revenues ($)	$11,983,021	$11,857,376	$11,984,314
Gross Margin %	86.9%	87.2%	87.1%
Net Income from Continuing Ops ($)	($5,868,205)	($5,862,693)	$1,404,828
Diluted EPS (Continuing Ops)	($0.06)	($0.06)	$0.01
Adjusted EBITDA ($)	$3,948,941	$3,138,115	$4,907,886

Consensus vs Actual – Q2 FY2026 (S&P Global)

Metric	Consensus	Actual	Surprise
Revenue ($)	$11,633,660*	$11,984,314	+$350,654 (~+3.0%)*
Primary EPS ($)	-$0.04*	$0.01	+$0.05*
Note: 2 estimates for both revenue and EPS*. Values retrieved from S&P Global.

Liquidity and Other KPIs

Metric	Q1 FY2026	Q2 FY2026
Cash & Cash Equivalents ($)	$63,363,812	$65,669,937
GMV Total ($)	N/A	$189,000,000
GMV YoY Change	N/A	(1.2%)
Firearm GMV YoY	N/A	+1.2%
Used Firearms Sales YoY	N/A	+7.8%
Take Rate	6.27% (prior-year comp)	6.34%

Guidance Changes

Metric/Item	Period	Previous Guidance	Current Guidance/Update	Change
Revenue	FY/Quarter	Not provided	Not provided	Maintained: no formal guidance
Gross Margin	FY/Quarter	Not provided	Not provided	Maintained: no formal guidance
Operating Expenses / Legal & Professional	FY/Quarter	Elevated	Expect gradual decline over time	Qualitative improvement expected
Capital Allocation – Share Repurchase	Ongoing	Discussed in prior letter	Intends to use part of cash to repurchase shares	Positive shift toward action
Corporate HQ / Footprint	FY2026	N/A	Relocating HQ to Atlanta; reducing AZ footprint	Execution underway
Preferred Dividend (Series A)	Sep 15, 2025	Recurring	$0.546875 per share paid	Confirmed

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q2 FY2026)	Trend
AI/Technology initiatives	Q1 FY26: search upgrades, seller analytics, buyer personalization	“Using a lot of AI” to streamline listings; universal payments in progress; continuous UX improvements	Increasing investment/velocity
Macro/Industry demand	Q1 FY26: macro softness; AOV up; stable GMV	NICS -5% YoY; firearm sales +3% on platform; used +7.8%	Outperforming industry
Regulatory/Legal	Q1 FY26: SEC investigation, indemnifications; costs to abate over 12–18 months	Performance may be “uneven” until legal matters resolved; favorable Microtech ruling	Overhang easing, still present
Capital allocation	Q1 FY26: repurchase “subject to Board approval”	Intends to use cash to repurchase shares	Moving toward action
Organizational restructuring	Q1 FY26: asset-light model; cost reductions	HQ relocation to Atlanta; opex down $6.7M YoY	Accelerating execution

Management Commentary

“This quarter's adjusted EBITDA number confirms our progress, as we delivered a 24% improvement in adjusted EBITDA for the quarter at $4.9 million as opposed to $3.9 million in fiscal 2025's second quarter.” — Steve Irvin (CEO) .
“Adjusted NICS were down over 5%... firearm sales on gun broker were up over 3%... take rate increased 7 basis points to 6.34%... gross margin of 87.1%...” — Paul Kasowski (CFO) .
“We are... using a lot of AI... working on universal payments to allow credit card payments for 100% of the merchandise... These things... will drive incremental GMV, which will drive incremental revenue.” — Steve Irvin .
“We ended the second quarter with cash on hand of approximately $65.7 million. The company intends to use part of this cash balance to repurchase shares.” — Paul Kasowski .
“Our overall financial performance will be uneven until the litigation is resolved and the company's indemnification obligations are extinguished.” — Steve Irvin .

Q&A Highlights

Share gains vs. industry: Management reiterated outperformance versus NICS and confidence in market share gains amid soft firearm demand .
Product/supply dynamics: Used firearms strength attributed to supply/demand balance and near-100% sell-through when priced fairly; focus on unlocking more used listings through tooling and process streamlining .
Tech roadmap: Emphasis on AI-enabled listing tools, POS integrations, and universal payments to reduce friction and expand monetization .
Cost trajectory and profitability: Opex cuts are “early innings”; management believes it can exceed the $25M adjusted EBITDA goal over time as costs normalize and growth initiatives scale .

Estimates Context

Q2 FY2026 results beat S&P Global consensus: revenue $11.98M vs. $11.63M* (~+3.0% surprise) and EPS $0.01 vs. -$0.04* (+$0.05); coverage limited (2 estimates each)*. Values retrieved from S&P Global.
Given the positive inflection to profitability and commentary on further cost reductions, Street models may need to lift EBITDA/EPS run-rate assumptions, though legal/indemnification variability tempers precision .

Key Takeaways for Investors

Profitability inflection with operating leverage: Strong gross margin (87.1%) and rising take rate, plus opex cuts, drove positive EPS and higher adjusted EBITDA; margin structure appears resilient in a soft demand backdrop .
Share repurchase intent and cash-rich balance sheet ($65.7M) offer capital deployment catalysts alongside organic improvements .
Platform initiatives (AI tools, universal payments) target GMV and monetization lift; used firearms supply unlock is a tangible growth lever .
Legal/compliance overhang easing with favorable court ruling and Nasdaq compliance restoration; however, management flags near-term variability until matters conclude—key swing factor for multiples .
Mix and market share tailwind: Outperformance vs NICS and used category strength support relative growth; continued take rate expansion and seller services mix provide monetization upside .
Watch adjusted items: settlement contingency ($1.8M), debt extinguishment gain ($0.80M), and ongoing legal/SEC spend influenced GAAP vs non-GAAP; focus on sustained EBITDA and cash conversion trajectory .
Near-term trading setup: Evidence of execution (profitability, EBITDA margin, cash build) and buyback intent vs. limited coverage and legal variability—stock likely reacts to continued EBITDA momentum and any concrete repurchase actions .

Additional Details and Events in the Quarter

Regained full Nasdaq compliance after the August 29, 2025 Annual Meeting; all proposals approved .
Federal court confirmed GunBroker.com marketplace status, supporting IP enforcement policies and potentially reducing future legal costs/distractions .
Preferred dividend (Series A) of $0.546875 per share paid on September 15, 2025 to holders as of August 31, 2025 .
Issued 13M warrants tied to second note prepayment; recognized ~$0.80M gain on extinguishment of debt .

Note on non-GAAP: Adjusted EBITDA excludes taxes, D&A, interest, stock-based comp, other (income)/expense, acquisition/divestiture costs, special committee/SEC/Delaware litigation costs, corporate restructuring costs, and other nonrecurring expenses; reconciliation provided in the release .

Values marked with an asterisk (*) are from S&P Global consensus estimates. Values retrieved from S&P Global.

Outdoor Holding Co (POWW)·Q2 2026 Earnings Summary