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Date
Thursday, March 5, 2026 at 5 p.m. ET
Call participants
- President and CEO — Mark Peter Smith
- Chief Financial Officer — Deana L. McPherson
- Vice President, Investor Relations — Kevin Alden Maxwell
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Takeaways
- Net sales -- $135.7 million, up 17.1% year over year, driven by new handgun products.
- Adjusted EBITDA -- $16.8 million, an increase of nearly 21% over the prior year.
- Adjusted EPS -- $0.08, compared to $0.03 in the year-ago quarter.
- Operating cash flow -- Over $20.5 million generated, up more than $30 million year over year.
- Handgun shipments -- Units into the sporting goods channel rose 28%, while adjusted NICS declined 2.2%, indicating market share gains.
- Handgun ASP -- Average selling price grew 5.2% to over $119 from the prior year and increased sequentially from Q2.
- Long gun shipments -- Decreased 25% into the sporting goods channel with adjusted NICS for long guns down 5.6%.
- Long gun ASP -- Reached $535, an 11% decrease from last year, attributed to prior-year channel fill of higher-priced models.
- New products -- Accounted for 44% of handgun shipments and 28% of long gun shipments.
- Gross margin -- 26.2%, up 210 basis points year over year, with margin improvement due to higher volume, lower promotions and excise tax, partly offset by a 160-basis-point drag from tariffs.
- Operating expenses -- $28.9 million, a $5.7 million increase, reflecting the absence of a prior-year real estate gain and higher compensation-related costs.
- Debt reduction -- Outstanding debt at quarter end of $75 million, down from $90 million at Q2 close, with a subsequent $20 million repayment post-quarter.
- Inventory -- Internal inventory at $175 million, decreased by $23 million compared to last year, supporting cash generation.
- Distributor inventory -- Weeks of supply maintained at approximately nine weeks with units rising 20% sequentially, 4% above January 2025 levels.
- Dividend -- Board authorized a $0.13 quarterly dividend, payable April 2 to holders as of March 19.
- Fiscal Q4 sales guidance (period ending April 30, 2026) -- Expected sales growth of 10%-12% over fiscal Q4 2025, with gross margins projected to improve by several percentage points versus Q3 and one to two points above last year’s fourth quarter.
- Operating expense guidance -- Anticipated fiscal Q4 expenses to rise about 10% year over year, primarily from R&D, stock compensation, and profit-related costs.
- Effective tax rate outlook -- Guidance of approximately 29% for fiscal Q4.
- Law enforcement and agency sales -- Shipments made to nearly 1,000 federal, state, and local agencies over 18 months, supporting pipeline growth in that channel.
- Handgun price increase -- A broadly implemented price increase averaging close to 3% effective January 1, with “no pushback” from distributors or consumers, according to Smith.
Summary
Smith & Wesson Brands (SWBI 1.07%) reported significant revenue growth and margin expansion in the quarter, underpinned by strong new product performance and pricing actions in the handgun segment. Management highlighted ongoing market share gains in handguns as shipments rose despite overall market declines, and the company delivered notable progress in operating cash flow and debt reduction. The business affirmed continued innovation, successful execution of its pricing strategy, and growth in law enforcement sales, while providing positive forward-looking commentary and raised guidance for sales and margin in the coming fiscal quarter.
- Smith asserted, “momentum is strong and building,” underscoring the company’s confidence in its brand and product assortment trajectory.
- Long gun results were framed as impacted by last year’s channel fill and product mix, highlighting strategic focus away from lower-growth hunting segments.
- “we continue to have success with the Bodyguard platform,” Smith said, crediting growth to both breadth of new introductions and effective marketing efforts.
- McPherson stated distributor inventory in unit terms rose 20% versus the prior quarter, but weeks of supply held steady, suggesting sales strength at retail.
- The company referenced the SHOT Show as affirmation of positive customer sentiment and strategy alignment.
- Smith signaled substantial momentum in law enforcement and military channels, citing a growing sales pipeline and successful deployment of the Smith & Wesson Academy.
- Capital spending was $3.6 million in the quarter, with full-year guidance reaffirmed at $25 million-$30 million.
Industry glossary
- Adjusted NICS: A National Shooting Sports Foundation-adjusted version of the FBI’s National Instant Criminal Background Check System data, removing non-firearm-purchase-related checks, used as a proxy for retail firearm demand.
- ASPs (Average Selling Prices): The average price realized per unit sold within a specific product category, key in assessing pricing power trends.
- SHOT Show: The Shooting, Hunting, Outdoor Trade Show, a premier annual firearms industry event used for new product launches and customer engagement.
Full Conference Call Transcript
Kevin Alden Maxwell: Thank you, and good afternoon. Our comments today may contain forward-looking statements. Our use of the words “anticipate,” “project,” “estimate,” “expect,” “intend,” “believe,” and other similar expressions are intended to identify forward-looking statements. Forward-looking statements may also include statements on topics such as our product development, strategies, market share, demand, consumer preferences, inventory conditions for our products, growth opportunities and trends, and industry conditions in general. Forward-looking statements represent our current judgment about the future and are subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by our statements today.
These risks and uncertainties are described in our SEC filings, which are available on our website along with a replay of today’s call. We have no obligation to update forward-looking statements. We reference certain non-GAAP financial results. Reconciliations of GAAP financial measures to non-GAAP financial measures can be found in our SEC filings and in today’s earnings press release, each of which is available on our website. Also, when we reference EPS, we are always referencing fully diluted EPS, and any reference to EBITDA is to adjusted EBITDA.
Before I hand the call over to our speakers, I would like to remind you that when we discuss NICS results, we are referring to adjusted NICS, a metric published by the National Shooting Sports Foundation based on FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than firearms purchases. Adjusted NICS is generally considered the best available proxy for consumer firearm demand at the retail counter. Because we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers, and not to end consumers, NICS generally does not directly correlate to our shipments or market share in any given time period, mostly due to inventory levels in the channel.
Joining us on today’s call are Mark Peter Smith, our President and CEO, and Deana L. McPherson, our CFO. With that, I will turn the call over to Mark. Thank you, Kevin.
Mark Peter Smith: Thanks, everyone, for joining us today. We are very pleased with our third quarter results, which demonstrated continued market share growth while simultaneously maintaining resiliency in our pricing power and profitability. This is a direct function of the entire team’s discipline in staying focused and executing against our long-term strategy. The strength of the iconic Smith & Wesson Brands, Inc. brand, along with our laser focus on innovating to keep ahead of market trends, once again drove impressive average selling prices in the quarter, which, together with increased unit shipments, delivered not only solid top-line performance, but also translated into both strong profit margins and balance sheet performance. Our Q3 performance exceeded our expectations across the board.
Net sales increased over 17% year over year to nearly $136,000,000, EBITDA of $16,800,000 was up nearly 21%, and adjusted EPS of $0.08 compared with $0.03 in the prior-year period. Importantly, we also delivered another quarter of significant growth in operating cash flow, which is up more than $30,000,000 year over year. We believe our purposeful deployment of capital will allow us to continue consistently delivering long-term value for our stockholders.
Looking at our performance by category, our handgun results were exceptional. Our unit shipments of handguns into the sporting goods channel were up 28%, while NICS was down 2.2%. With distributor inventory weeks of supply remaining flat during the period, this indicates significant market share growth. This outstanding performance was driven by several factors including strong demand for our newer products, a favorable shift in product mix towards higher-priced models, robust consumer demand, and the benefits of a modest 2% to 3% price increase that we implemented late in the quarter on January 1.
Notably, we saw this growth across our entire semi-auto line, indicating that the hard work the team has been putting in on marketing messaging, targeted promotions, and new product development execution across the line is paying dividends.
Performance in long guns was consistent with our strategic positioning in the market, and we were pleased with our performance in the categories where we actively compete. For the quarter, our long gun shipments into the sporting goods channel were down 25%, while overall NICS was down 5.6%. However, we believe this is largely due to channel fill in the prior-year period, with several new caliber introductions on our higher-end 1854 lever-action rifle products, combined with the relative outperformance in the industry of the hunting segment versus the self-defense segment, where our product line is more heavily weighted. Diving a little deeper into innovation, new products represented 44% of handgun shipments and 28% of long gun shipments during the quarter.
In handguns, we continue to have success with the Bodyguard platform. As I just mentioned, the growth we experienced in Q3 was across the entire line of our semi-auto pistols, where we introduced several new models outside the subcompact space, most of which are positioned at higher price points. Once again, I am incredibly proud of our award-winning product management, engineering, design, and production teams who consistently deliver products that resonate with consumers while meeting their expectations of world-class quality and reliability associated with our legendary brand.
Driven by this mix shift and as I mentioned earlier, we were again pleased to continue seeing strong overall average selling prices in the handgun category, with ASPs up 5.2% versus a year ago to over $119 and also above Q2 levels. On the long-gun side, ASPs were also strong at $535, although down about 11% versus a year ago. Similarly, mix is the primary driver here, as I just mentioned, with the year-ago period including the channel fill of higher-priced new product introductions from the 1854 rifles.
For both categories, the strength of the Smith & Wesson Brands, Inc. brand and our ability to ensure our product assortment is aligned to market trends continues to allow us to maintain healthy pricing and profitability while only participating selectively in promotions.
Turning now to our balance sheet, we continue to make significant progress reducing our debt and further strengthening our financial position. We ended Q3 with $75,000,000 in debt versus $90,000,000 at the end of Q2, and we paid down an additional $20,000,000 subsequent to the end of Q3. We were pleased with our internal inventory position, $175,000,000, which was down $23,000,000 versus last Q3, resulting in excellent cash generation in the period of over $20,000,000. I would like to once again commend the team for their hard work on our disciplined process for aligning production to sales expectations across the product portfolio, which drove these results.
We are also very pleased with our distributor inventory levels, which remained flat in terms of weeks of supply, maintaining at approximately nine weeks throughout the quarter, right in line with our target. With our strong sales in the period, this indicates solid sell-through of our products at the retail counter.
Before I turn the call over to Deana, I will touch on a couple of additional points. First, we attended the annual industry SHOT Show in Las Vegas at the end of the quarter, where we were very pleased with customer feedback on our performance, product portfolio, and forward strategy. This feedback, combined with our recent results and strong outlook for the remainder of the fiscal year—which Deana will cover in a moment—indicates we are winning in the marketplace. Looking forward, we will continue to be laser-focused on execution across the business and sustaining these gains. Next, the Smith & Wesson Brands, Inc.
Academy, which launched just six months ago, along with our focus on the professional channel, is already exceeding our expectations. Thanks to the hard work of our academy staff and law enforcement sales team, and the ongoing success of our purpose-built, rugged, and reliable duty weapons, we are not only growing in the consumer channel, but also gaining significant momentum on the law enforcement side. You may have seen that we were awarded a number of large agency awards and, as a matter of fact, have shipped to nearly 1,000 separate federal, state, and local law enforcement agencies just within the past 18 months.
With a strong sales pipeline and growing momentum, we are very pleased with the results to date, and beyond proud and humbled to be trusted by these men and women with the tools they need to come home safe to their families every day as they put themselves in harm’s way to protect and serve our country and our communities. In summary, momentum is strong and building, and our brand and product assortment are driving continued healthy profitability, and we remain confident in the direction and trajectory of our business against the backdrop of a healthy and stable market.
We continue to lead with a proven innovation strategy that consistently resonates with consumers, backed by the powerful Smith & Wesson Brands, Inc. brand along with our commitment to operational excellence and maintaining a strong balance sheet. We are well positioned to continue winning in the marketplace and delivering long-term value to our stockholders. As always, I want to thank our entire team of talented Smith & Wesson Brands, Inc. employees for their tireless dedication and for putting their skills to work each and every day to make us successful. I will now turn the call over to Deana to cover the financials.
Deana L. McPherson: Thanks, Mark. Please note that all comparisons are between 2026 and 2025 unless stated otherwise. Net sales for our third quarter of $135,700,000 were $19,800,000, or 17.1%, above the prior year on the strength of our new handgun products. During the quarter, distributor inventory in terms of actual units increased by approximately 20% over the end of the prior quarter, but only by about 4% compared with January 2025, with weeks of supply remaining steady at approximately nine weeks. We believe, based on feedback from our customers, that strong demand for our products will continue in the coming months.
Handgun ASPs were up slightly versus Q2 levels due to continued strong demand for certain premium products but offset by the strength of certain of our lower-priced products. Long-gun ASPs decreased by about 11% due to lower overall volume of certain of our higher-priced products, driven by channel fill for new products in the prior year, as Mark covered earlier. Gross margin of 26.2% was up 210 basis points over the prior year on increased production volume combined with lower promotion costs and lower federal excise taxes, partially offset by a 160 basis point negative impact from tariffs.
Having focused on driving inventory levels down over the last 12 months, we are now turning our focus to increasing production to meet market demand, which should continue to have a positive impact on margin. Operating expenses of $28,900,000 were $5,700,000 higher than the prior year due primarily to a $2,300,000 gain on the sale of real estate that was reported last year. Increased profit-related and stock-based compensation expense contributed to the remaining increase. Higher revenue and related margin resulted in net income of $3,800,000 compared with $2,100,000 in the prior-year period. GAAP earnings per share in the third quarter was $0.08 compared with $0.05 a year ago.
On a non-GAAP basis, earnings per share was $0.08 compared with $0.03 a year ago. Cash generated from operations during the third quarter was $20,500,000 compared with cash used from operations of $9,800,000 in the prior-year quarter. This was due primarily to lower inventory, which decreased $7,900,000 during this quarter versus an increase of $2,900,000 in the prior-year quarter. We spent $3,600,000 on capital projects in the third quarter compared with $6,300,000 a year ago. We expect our capital spending for the year to be between $25,000,000 and $30,000,000. We paid $5,800,000 in dividends and ended the quarter with $23,500,000 in cash and investments, and $75,000,000 in borrowings on our line of credit.
Subsequent to the end of the quarter, we repaid $20,000,000 on our line, bringing our outstanding borrowings down to $55,000,000. Finally, our board has authorized our $0.13 quarterly dividend to be paid to stockholders of record on March 19, with payment to be made on April 2. Looking forward to the fourth quarter, we believe the strength of our brand, product assortment, and new product offerings are helping us drive growth and take share in an otherwise stable market. Therefore, we expect our fourth quarter sales will be up 10% to 12% over Q4 2025 sales, with a small reduction in channel inventory as distributors begin to plan for the slower summer months.
With eight additional operating days compared with Q3, and an increase in production to meet demand, we expect Q4 gross margin to increase by several percentage points over Q3 and a point or two over last year’s fourth quarter. Operating expenses in Q4 will likely be about 10% higher than last year’s fourth quarter due to increases in research and development costs, stock compensation, profit sharing, and other profit-related costs. Additionally, we expect continued healthy cash generation during the fourth quarter. Our effective tax rate is expected to be approximately 29%. With that, operator, can we please open the call to questions from our analysts?
Operator: Thank you. Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Mark Eric Smith with Lake Street Capital. Please proceed.
Mark Eric Smith: Hi, guys. I want to ask first about recent pricing changes. Can you talk about any price that has been taken, whether that has been across the board, and anything that you can quantify?
Mark Peter Smith: Sure. Hey, Mark. The price increase we put in was effective January 1, as I covered in the prepared remarks, and it was largely across the board. There were some categories that took a little bit steeper increase and some categories took a little bit less, really driven by market demand and our position within each category. But overall, across the board, it was pretty close to 3%.
Mark Eric Smith: Okay. Any feedback as you look at distributors or as you think about consumers on that? Does it seem like that has gone through well, or has there been any pushback on the pricing?
Mark Peter Smith: No, no pushback whatsoever. You may recall it has been a little bit since we have taken a price increase, and it really has gone through smoothly. No impact, and I think, as you saw from the results, actually an uptick in demand throughout the quarter.
Mark Eric Smith: Perfect. Then I want to look at just handgun sales—really strong results there, especially as we think about new products. I am curious, without giving out too much competitive detail here, is there anything that you can expand on regarding what has helped drive some of that strength? I am curious about colorways, some of your ported options—are these things that have helped, or is it just having the right product for consumers right now?
Mark Peter Smith: Yes. We have had great success with Bodyguard over the last couple of years. In that category, we kind of own it, and we have done a lot of work. The long-range strategy I talk about a lot is to make sure we are refreshing the entire product line, and I think we are starting to see the results of that. It is really across the board; it is all of what you just talked about, Mark.
Obviously, we are not going to give too much detail for the reason you just covered, but it is looking at the market trends and having a team that really understands the industry and what is trending out there—where we need to make some updates and changes—and making those changes. We have been really happy with the results that are coming out of that, and now that the polymer pistol line across the board is really starting to gain a lot of profitable share. As we start to move out of the subcompact into the compact and full-size markets, that is at the higher end of the pricing hierarchy, and that is really helping ASPs, and the momentum continues.
Mark Eric Smith: Perfect. And then a similar question shifting over to long guns. I am curious, is there anything that you can do today to drive more strength in that long-gun market? I realize there are some things in the comparable that make this quarter tough, but as we think about the hunting category, is there interest in entering there? Is there more maybe on SBRs or anything that you can do to drive more long-gun business?
Mark Peter Smith: Yes, the SBRs—as you are well aware, the tax stamp changes that occurred on January 1—are helping a little bit there in that category. At the end of the day, as I covered in the prepared remarks, it really is a difficult comp versus last year as we were introducing the last couple of calibers on the lever-action rifle, which are at the very high end of our pricing hierarchy in long guns. Also, our product portfolio is more weighted towards the self-defense market, and the hunting market—we are in it with the 1854 and very pleased with the performance there—but there is a lot of white space for us, and we are always looking at long-term opportunities.
Mark Eric Smith: Perfect. And I think the last one for me—you called it out a bit in your commentary—just the law enforcement opportunity and improving sales there. I am curious where you are at in that process. It seems like that is a big market, and we are maybe just scratching the surface. Is that something that is a big focus, and where do you think you can really move the needle on revenue as there is more drive in law enforcement? Similarly, as we think about international within military, are there similar opportunities?
Mark Peter Smith: Yes, it is definitely a focus area. I think you have been around long enough now to know that it is a much longer sales cycle than on the consumer side. What I am pleased about is the pipeline that we have, even with the strong results this quarter. We have a pretty healthy pipeline coming up behind it, and that is a direct result of the intangibles of the academy and being able to service that law enforcement customer in a more meaningful way. Purpose-built products, changes to the product—there is innovation happening there as well—and that extends beyond just domestic law enforcement. It moves into federal agencies—state, local, and federal—and then outside into foreign militaries as well.
A lot of good things are happening in that space. It still remains a smaller section of our business right now, but there is a lot of momentum there and a pretty healthy pipeline coming up behind it.
Mark Eric Smith: Excellent. Thank you, guys.
Mark Peter Smith: Thanks, Mark.
Operator: Our next question is from Rommel Dionisio with Aegis Capital. Please proceed. Rommel, please check and see if your line is muted. I believe he was having some technical difficulties. We do not have any further questions at this time. I would like to turn the conference back over to Mark for closing remarks.
Mark Peter Smith: Thank you, operator, and thanks, everyone, for joining us today and your interest in Smith & Wesson Brands, Inc. We look forward to speaking with you all again next quarter.
Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.
