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SMITH & WESSON BRANDS, INC. (SWBI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 net sales were $129.7M (+3.8% YoY; +46.8% QoQ) with GAAP diluted EPS of $0.09 and adjusted EPS of $0.11; adjusted EBITDAS was $18.5M (14.3% margin) .
  • Management guided down: full-year FY2025 revenue now 5–10% below FY2024 and Q3 revenue ~10–15% below the prior-year quarter; margins expected in line to slightly below FY2024 due to promotions/lower ASPs .
  • Mix and pricing headwinds: handgun ASPs -11% YoY; long gun ASPs +11% YoY; adjusted NICS +1.1% in the quarter but -5% in October; new products drove 44% of sales and share gains (handgun shipments +19.2% YoY) .
  • Capital allocation and liquidity: new $50M buyback authorization, a new unsecured $175M revolver (matures Oct-2029), and a $0.13 quarterly dividend (record 12/19, payable 1/2/2025) .
  • Stock reaction catalysts: guide-down on revenue/margins amid inflation-driven consumer trade-down and heightened promotions vs. positives from strong new product momentum and continued share repurchases .

What Went Well and What Went Wrong

What Went Well

  • New products represented 44% of sales; Bodyguard 2.0 and 1854 lever-action continue to perform strongly, contributing to share gains (overall channel units +8.7%; handgun shipments +19.2%) .
  • Gross margin improved YoY to 26.6% (non-GAAP 27.1%) aided by mix and prior-year legal accrual; GAAP EPS rose to $0.09 vs. $0.05 LY .
  • Strengthened capital position: new $175M unsecured line of credit (availability +$75M) and new $50M buyback; continued dividend at $0.13/share .
    • “We are well positioned to navigate this challenging demand environment…we expect to preserve profitability and a strong balance sheet. Additionally, we expect to maintain and gain share through innovation.” — Mark Smith .

What Went Wrong

  • Results came in below management’s expectations as demand normalized late in the quarter; inflation weighed on discretionary spend and increased promotional activity compressed ASPs/margins .
  • Handgun ASPs declined 11% and overall ASPs -8% YoY due to entry-level mix (Bodyguard 2.0), promotions, and lower revolver sales; Q3 margin expected “a few points lower” YoY .
  • Guide-down: FY2025 revenue now 5–10% below FY2024; Q3 revenue ~10–15% below prior-year quarter; effective tax rate ~25% (higher vs. prior 24%) .

Financial Results

Consolidated P&L and Margins (chronological: oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Millions)$159.1 $88.3 $129.7
Gross Margin (%)35.5% 27.4% 26.6%
GAAP Net Income ($USD Millions)$26.1 -$2.1 $4.1
Diluted EPS ($USD)$0.57 -$0.05 $0.09
Non-GAAP Diluted EPS ($USD)$0.45 -$0.02 $0.11
Adjusted EBITDAS ($USD Millions)N/AN/A$18.5
Adjusted EBITDAS Margin (%)N/AN/A14.3%

YoY comparison (Q2 FY2025 vs. Q2 FY2024)

MetricQ2 2024Q2 2025
Net Sales ($USD Millions)$125.0 $129.7
Gross Margin (%)25.4% 26.6%
Non-GAAP Gross Margin (%)28.3% 27.1%
Diluted EPS ($USD)$0.05 $0.09
Non-GAAP Diluted EPS ($USD)$0.14 $0.11
Adjusted EBITDAS ($USD Millions)$19.3 $18.5
Adjusted EBITDAS Margin (%)15.5% 14.3%

KPIs and Operating Metrics (Q2 FY2025)

KPIQ2 2025
New Products as % of Sales44%
Channel Units Shipped (YoY)+8.7%
Distributor/Strategic Retail Inventories+2.7% units; weeks outstanding down on higher volume
Handgun Shipments (YoY)+19.2%
Long Gun Shipments (YoY)-26.4%; core long guns -4.8%
Handgun ASP Change (YoY)-11%
Long Gun ASP Change (YoY)+11%
Adjusted NICS (Quarter/October)+1.1% quarter; -5% October

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (FY2025)Full yearUp mid–high single digits vs FY2024 5–10% lower vs FY2024 Lowered
RevenueQ3 FY2025Not previously specified~10–15% below prior-year quarter New; Lower
Gross Margin (FY2025)Full yearLow-30s% target In line or slightly below FY2024 Lowered
Gross MarginQ3 FY2025Not specified“A few points lower” vs prior-year quarter Lowered
Operating ExpensesFull year+3–5% YoY Q3: +5–10% YoY (R&D, promotions, marketing) Higher (quarter)
Effective Tax RateFull year~24% ~25% Higher
Cash GenerationFull year≥$75M annual operating cash Lower than $75M target Lowered
Capital ExpenditureFull year$25–$30M $25–$30M Maintained
Leverage/CashYear-end FY2025Expected debt-free Debt similar/slightly above last year; roughly equivalent cash Higher net debt
Share RepurchaseAuthorizationNew $50M program effective 9/20/2024 New $50M authorization in Q2 Maintained/Extended
Credit FacilityFacilityNegotiating revolver New unsecured $175M revolver; maturity Oct 2029 Increased liquidity
DividendQuarterly$0.13 (authorized July) $0.13; record 12/19, payable 1/2/2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Macro/Inflation & DemandAnticipated competitive summer; inflation pressuring discretionary spend ; Q1 softer than expected, promotions elevated Demand normalized late in Q2; inflation primary driver of pressure; October NICS -5% Worsening near-term
Pricing/Promotions & ASPsFocused promotions; ASPs held broadly, long gun ASPs strong (lever-action) ASPs under pressure; handguns -11% YoY; expect sustained ASP pressure Worsening
Innovation/New Products1854 lever-action, SD 2.0 launches; new products ~29% of Q4 sales Bodyguard 2.0 and 1854 lever-action strong; new products 44% of sales Improving (mix/share)
Channel & InventoryHealthy distributor/retail inventories; build internal inventory for fall Channel units +8.7%; inventories +2.7% units; weeks outstanding down; stable outlook Stable
Capital Allocation/LiquidityDividend increased to $0.13; repurchases; plan to be debt-free New $175M revolver; $50M buyback; expect year-end debt similar/slightly above last year; dividend maintained Mixed (more liquidity, higher debt)
Regulatory/Fear-based buyingExpected election-cycle tailwinds Fear-based buying has abated; personal protection remains driver Neutral/Lower regulatory-driven spikes

Management Commentary

  • “Second quarter results came in below our expectations as overall demand for firearms normalized late in the quarter…we continued to outperform the market and believe we gained share, led by our best-in-class innovation — with new products representing 44% of our sales.” — Mark Smith, CEO .
  • “Based on the softer demand trends…we have reduced our expectations for the second half of fiscal 2025, and for our third quarter, we expect our top line to be approximately 10–15% lower than fiscal 2024.” — Deana McPherson, CFO .
  • “Overall, ASPs were down 8% versus a year ago…handgun ASPs declined 11%…we do anticipate sustained pressure on ASPs throughout the remainder of the fiscal year from promotional spending.” — Mark Smith .
  • “We signed a new unsecured $175 million line of credit…extended the maturity to October 2029…board authorized a new $50 million share repurchase…and a $0.13 per share quarterly dividend.” — Deana McPherson .

Q&A Highlights

  • ASP pressure and promotions: Management expects continued promotional intensity but anticipates ASPs to be flat to slightly up in 2H on product launches; Q3 handguns largely flat, long guns up slightly .
  • Channel inventory confidence: Inventories rose more than anticipated on late-quarter softness, but S&OP discipline supports inventory reduction by year-end; channel partners managing inventory thoughtfully .
  • New product cadence and retailer adoption: Retailers/distributors are focused on innovation-led products; Bodyguard 380 named “Handgun of the Year,” lever-action momentum expected to build in 2H FY25 .
  • Macro backdrop: Inflation the primary headwind; fear-based buying has abated; personal protection remains a demand driver .
  • Guidance clarifications: Q3 top line -10–15% YoY; OpEx +5–10% YoY; tax rate ~25% .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY2025 EPS and revenue was unavailable due to SPGI daily request limit; therefore, we cannot formally score beat/miss vs. consensus for this quarter [GetEstimates attempt; SPGI limit].
  • Management indicated results were below internal expectations due to late-quarter demand normalization and inflation-driven trade-down/promotions .

Key Takeaways for Investors

  • Near-term headwinds: Guide-down on FY2025 revenue (5–10% below FY2024) and Q3 margin pressure signal a tougher promotional/pricing environment; expect elevated volatility into Q3 .
  • Mix-driven share gains: New products driving 44% of sales and strong handgun shipment growth (+19.2% YoY) underpin share capture despite softer industry demand (adjusted NICS +1.1%, October -5%) .
  • Pricing dynamics: Handgun ASPs -11% and overall ASPs -8% YoY highlight competitive intensity; expect sustained ASP pressure through FY2025, partially offset by new product introductions .
  • Liquidity/capital return: New $175M unsecured revolver and $50M buyback provide flexibility; dividend maintained at $0.13/share; expect year-end debt similar/slightly above last year and lower-than-target operating cash generation .
  • Operational execution: Flexible manufacturing model continues to support profitability (Q2 adjusted EBITDAS $18.5M; 14.3% margin) even amid demand normalization .
  • Watch catalysts: Sell-through of new launches, ASP/Promo trajectory in Q3, inventory normalization pace, and any change in macro/inflation signals impacting discretionary spend .
  • Medium-term thesis: Innovation cadence (Bodyguard 2.0; lever-action platform expansion), operational efficiencies in Tennessee, and disciplined capital allocation could re-expand margins when promotional intensity eases .

Notes:

  • All figures and commentary sourced from SWBI’s Q2 FY2025 8-K (press release) and earnings call transcript, plus prior-quarter transcripts, as cited above.
  • Consensus estimates were unavailable due to S&P Global request limits; therefore, estimate comparisons are not provided this quarter.