• Total Revenue: $31 million, down from $34.3 million in the prior year quarter.

• Ammunition Segment Revenue: $18.7 million.

• Marketplace Segment Revenue: $12.3 million.

• Cost of Revenues: $21.2 million, compared to $20.2 million in the prior year quarter.

• Gross Margin: $9.8 million or 31.6%, down from $14 million or 40.9% in the prior year period.

• Marketplace Segment Gross Margin: $10.5 million or 85.6%.

• Ammunition Segment Gross Margin: Negative $0.7 million or negative 4%.

• Non-Recurring Expenses: $6.3 million, including $3.2 million related to litigation.

• Adjusted EBITDA: $2 million, compared to $6.5 million in the prior year quarter.

• Loss Per Share: $0.07 for the quarter.

• Adjusted Net Income Per Share: $0.01, compared to a loss per share of $0.02 in the prior year quarter.

• Net Working Capital: $134 million in current assets, including $50.8 million in cash and cash equivalents.

• Current Liabilities: $42.3 million.

• Share Repurchases: Approximately 580,000 shares repurchased in the quarter, totaling over 1.9 million shares since December 2020.

• Warning! GuruFocus has detected 4 Warning Signs with POWW.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AMMO Inc (NASDAQ:POWW) is transforming its ammunition plant to focus on higher-margin rifle and pistol production, which is expected to improve profitability.

• The company is strategically positioning its marketplace, GunBroker, as an innovative e-commerce leader with enhanced functionality and diversified product offerings.

• AMMO Inc (NASDAQ:POWW) increased its take rate on GunBroker by 40 basis points, from 5.8% to 6.2%, through category fee changes and increased advertising revenue.

• The company has identified up to $15 million in cost-cutting and working capital opportunities, which are expected to be realized over the next 18 to 24 months.

• AMMO Inc (NASDAQ:POWW) has a strong financial position with $134 million in current assets, including $50.8 million in cash and cash equivalents, supporting its transformation efforts.

Negative Points

• Total revenues decreased to approximately $31 million from $34.3 million in the prior year quarter, reflecting a decline in activity across both reporting segments.

• The ammunition segment reported a negative gross margin of 4%, attributed to production inefficiencies and a shift in sales mix.

• The company faced $6.3 million in non-recurring expenses, including legal and professional fees, impacting adjusted EBITDA.

• AMMO Inc (NASDAQ:POWW) is experiencing challenges with overhead absorption due to lower capacity yields in its new factory.

• The company is pulling back on non-attractive product segments due to low margins and propellant supply issues, which may negatively affect top-line revenue.

Q & A Highlights

Q: How should we expect casings revenues to ramp up from here, and can we expect a positive inflection in gross margins for the AMMO segment in the second quarter and beyond? A: Rob Wiley, Chief Financial Officer, responded that they shipped an additional million in their centerfire rifle brass casings business last quarter and expect steady progress with rifle case production in the quarters ahead.

Q: Have you observed any recent trends in firearms and shooting sports consumer demand, especially with the upcoming presidential election? A: Rob Wiley noted a decline in Q1 but observed a slight uptick in July, which they anticipate will hold through the election period. He mentioned that while they can't predict election outcomes, the trend in July looks healthy compared to Q1 and Q4.

Q: Regarding GunBroker, how does the company plan to compete in steady markets with brick-and-mortar stores, especially with current inventory levels? A: Matt Blazei, representing AMMO Inc, explained that GunBroker competes in the premium space and owns the used market. They are leveraging cross-selling capabilities to enhance their market position, despite challenges in consumer discretionary spending.

Q: What is the current status of cross-selling on GunBroker, and are there any early signs of success? A: Matt Blazei stated that the cross-selling functionality was recently implemented, and as algorithms improve, they expect to promote products with greater margins. The focus is on accessorizing firearms before checkout to enhance sales.

Q: Are there any significant operational challenges remaining in the AMMO plant, and what updates can you provide on plant operations? A: Matt Blazei mentioned the delivery of an annealing oven, which has been an issue for over a year, and is set to start up in late August. He acknowledged ongoing mechanical issues but emphasized steady progress in rifle production, with improvements expected in Q2 and Q3.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.