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AMMO, Inc. Reports Third Quarter 2023 Financial Results
Source: Nasdaq GlobeNewswire / 14 Feb 2023 15:05:01 America/Chicago
SCOTTSDALE, Ariz., Feb. 14, 2023 (GLOBE NEWSWIRE) -- AMMO, Inc. (Nasdaq: POWW, POWWP) (“AMMO” or the “Company”), the owner of GunBroker.com, the largest online marketplace serving the firearms and shooting sports industries, and a leading vertically integrated producer of high-performance ammunition and components, today reported results for its third quarter of fiscal 2023, ended December 31, 2023.
Third Quarter Fiscal 2023 vs. Third Quarter Fiscal 2022
● Net Revenues decreased 40% to $38.7 million. ● Gross profit margin of approximately 32.3%. ● Historical Adjusted EBITDA of $7.9 million compared to $20.1million. ● Updated Adjusted EBITDA of $4.8 million compared to $10.7 million. ● Net loss of ($4.1) million, compared to net income of $9.1 million. ● Diluted EPS of ($0.04), compared to $0.07. ● Historical Adjusted EPS of $0.05, compared to $0.14. ● Updated Adjusted EPS of $0.05 compared to $0.08 GunBroker.com “Marketplace” Metrics – Third Quarter 2023
● Marketplace revenue of approximately $15.4 million. ● New user growth averaged 40,000 per month. ● Average take rate increased to 5.7% compared to 5.4% in fiscal 2022. Fred Wagenhals, AMMO’s Chairman & CEO, commented that “[t]he entire ammunition market is currently facing significant headwinds primarily due to the current inflationary and recessionary drivers impacting the consumer. Despite these near-term challenges, the management team and AMMO Board remains excited about the Company’s prospects in both the short and long term. Our confidence is supported by the continued ramp up in the production capacity at our state-of-the-art facility in Manitowoc, along with the continuing rollout of enhancements to our Gunbroker.com Marketplace site.
“These opportunities, coupled with the exciting addition of our newest executive management team member, Jared Smith, President & COO, supports the high level of confidence I have in AMMO’s future. Jared’s experience, the wealth of his relationships, intellect and drive are all valuable assets for our organization as we chart our path forward to a bright future through the balance of this fiscal year and beyond,” Mr. Wagenhals concluded.
Third Quarter 2023 Results
We ended our third quarter with total revenues of approximately $38.7M in comparison to approximately $64.7M in the prior year quarter - this was a decrease of 40% from the prior year quarter. The decrease in revenue was mainly attributable to our ammunition segment and the inflationary impacts that are currently affecting the market. These market conditions also impacted the revenue of our Marketplace segment effecting a 12% decrease from the prior year period. However, operating performance of our Marketplace, GunBroker.com still remained strong and although our top line revenues waivered, our margins are still comparable to historical performance.
We continue to see margin compression on our ammunition segment as we have seen further pricing pressure as the US commercial markets continue to slow from the inflationary impact and approaching global recession. The reduction in sales, higher commodity and freight costs along with increased operating expenses such as, the remainder of the one-time legal expenses related to the proxy contention, stock compensation, corporate insurance and payroll have increased our cost of revenues and operating expenses resulting in a net loss for the period.
To address these increases and as discussed earlier in the call we plan to recoup cash tied up in our inventory in our quarter ending in March and pivot the direction of our manufacturing operations to more profitable opportunities such as premium rifle brass. Additionally, we continue to push forward on the improvements to our marketplace, GunBroker.com, and expect the payment suite and cart platform to launch in the first half of our next fiscal year, which should drive growth and profitability to the site.
Our Cost of Revenues was approximately $26.2M for the quarter compared to $42.2M in the comparable prior year quarter. This decrease was related to reduced sales volume and increased commodity costs. Accordingly, this resulted in a gross margin of $12.5M compared to $22.5M. As our sales volume fell in the reported quarter, we anticipate another quarter of margin compression due to these increased costs, but expect to swiftly transition to more profitable sales activity starting in the first quarter of our next fiscal year.
Our balance sheet remains strong with our total current liabilities decreasing by 21% since our year end and our total current assets at virtually unchanged.
We are revising our Adjusted EBITDA and Adjusted Net Income Per Share calculations moving forward, which we believe will provide the market with a more accurate representation of our operations. To transition to our new calculations, we are providing our historical Adjusted EBITDA and Adjusted Net Income Per Share calculations and as well the calculations you can expect to see moving forward and incorporated into our updated guidance. For the quarter, using our historical Adjusted EBITDA and Adjusted EPS calculation we recorded adjusted EBITDA of approximately $7.9M busing, compared to prior year quarter Adjusted EBITDA of $20.1M. Using our Updated Adjusted EBITDA calculation, we recorded $4.8M in Adjusted EBITDA for the period compared to $10.7M.
This resulted in a loss per share of $(0.04) or Historical Adjusted Net Income per Share of $0.05 in comparison to $0.14 in the prior year period. Using our updated calculation, Adjusted Net Income per Share was $0.05 in comparison to Adjusted Net Income per Share of $0.08 in the prior year period.
Outlook
Due to the decline is sales activity due to the market shift, we are reducing our guidance for our 2023 fiscal year. We are updating our guidance to revenues of $185 million, adjusted EBITDA using our new calculation of $22 million, and EBITDA of $17 million.
Conference Call
Management will host a conference call to discuss the Company’s Fiscal second quarter 2023 results at 5:00 p.m. ET today, February 14th, 2023.
Investors interested in participating in the live conference call or audio-only webcast, may join by dialing 1-866-777-2509 (domestic), 1-412-317-5413 (international), or via webcast at
https://event.choruscall.com/mediaframe/webcast.html?webcastid=yW2dwlnP.
Please join at least 5-10 minutes prior to the scheduled start and follow the operator’s instructions. When requested, please ask for “AMMO, Inc. Third Quarter 2023 Conference Call.”
About AMMO, Inc.
With its corporate offices headquartered in Scottsdale, Arizona, AMMO designs and manufactures products for a variety of aptitudes, including law enforcement, military, sport shooting and self-defense. The Company was founded in 2016 with a vision to change, innovate and invigorate the complacent munitions industry. AMMO promotes branded munitions as well as its patented STREAK™ Visual Ammunition, /stelTH/™ subsonic munitions, and specialty rounds for military use via government programs. For more information, please visit: www.ammo-inc.com.
About GunBroker.com
GunBroker.com is the largest online marketplace dedicated to firearms, hunting, shooting and related products. Aside from merchandise bearing its logo, GunBroker.com currently sells none of the items listed on its website. Third-party sellers list items on the site and Federal and state laws govern the sale of firearms and other restricted items. Ownership policies and regulations are followed using licensed firearms dealers as transfer agents. Launched in 1999, GunBroker.com is an informative, secure and safe way to buy and sell firearms, ammunition, air guns, archery equipment, knives and swords, firearms accessories and hunting/shooting gear online. GunBroker.com promotes responsible ownership of guns and firearms. For more information, please visit: www.gunbroker.com.
Forward Looking Statements
This document contains certain “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, goals and objectives of management for future operations; any statements concerning proposed new products and services or developments thereof; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words, or the negative thereof. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures and risk factors we include in Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Reports filed on Form 8-K.
Investor Contact:
CoreIR
Phone: (212) 655-0924
IR@ammo-inc.comSource: AMMO, Inc.
AMMO, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETSDecember 31, 2022 March 31, 2022 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 27,093,614 $ 23,281,475 Accounts receivable, net 30,419,611 43,955,084 Due from related parties - 15,000 Inventories 67,145,401 59,016,152 Prepaid expenses 3,838,968 3,423,925 Current portion of restricted cash 500,000 - Total Current Assets 128,997,594 129,691,636 Property and Equipment, net 55,290,328 37,637,806 Other Assets: Deposits 9,656,907 11,360,322 Patents, net 5,156,120 5,526,218 Other intangible assets, net 126,870,205 136,300,387 Goodwill 90,870,094 90,870,094 Right of use assets - operating leases 1,378,711 2,791,850 TOTAL ASSETS $ 418,219,959 $ 414,178,313 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 20,964,686 $ 26,817,083 Factoring liability 1,678,450 485,671 Accrued liabilities 4,298,739 6,178,814 Inventory credit facility - 825,675 Current portion of operating lease liability 518,778 831,429 Current portion of note payable related party 358,263 684,639 Current portion of construction note payable 258,430 - Insurance premium note payable 119,449 - Total Current Liabilities 28,196,795 35,823,311 Long-term Liabilities: Contingent consideration payable 158,570 204,142 Notes payable related party, net of current portion - 181,132 Construction note payable, net of unamortized issuance costs 10,967,947 38,330 Operating lease liability, net of current portion 980,009 2,091,351 Deferred income tax liability 2,819,962 1,536,481 Total Liabilities 43,123,283 39,874,747 Shareholders’ Equity: Series A cumulative perpetual preferred Stock 8.75%, ($25.00 per share, $0.001 par value) 1,400,000 shares issued and outstanding as of December 31, 2022 and March 31, 2022, respectively 1,400 1,400 Common stock, $0.001 par value, 200,000,000 shares authorized 118,044,417 and 116,485,747 shares issued and 117,894,417 and 116,485,747 outstanding at December 31, 2022 and March 31, 2022, respectively 117,894 116,487 Additional paid-in capital 390,501,876 385,426,431 Accumulated deficit (15,233,633 ) (11,240,752 ) Treasury Stock (290,861 ) - Total Shareholders’ Equity 375,096,676 374,303,566 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 418,219,959 $ 414,178,313
AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)For the Three Months Ended
December 31,For the Nine Months Ended
December 31,2022 2021 2022 2021 Net Revenues Ammunition sales $ 20,250,965 $ 44,069,473 $ 90,607,817 $ 112,629,655 Marketplace revenue 15,419,202 17,596,769 46,486,842 46,646,051 Casing sales 3,041,327 3,022,944 10,661,420 10,891,897 38,711,494 64,689,186 147,756,079 170,167,603 Cost of Revenues 26,184,315 42,166,320 104,257,529 102,457,775 Gross Profit 12,527,179 22,522,866 43,498,550 67,709,828 Operating Expenses Selling and marketing 1,010,543 1,510,574 3,987,214 4,226,817 Corporate general and administrative 7,835,201 3,737,455 17,920,197 10,976,288 Employee salaries and related expenses 4,705,636 2,939,095 11,414,434 7,943,076 Depreciation and amortization expense 3,309,074 3,725,921 9,950,752 10,044,994 Total operating expenses 16,860,454 11,913,045 43,272,597 33,191,175 Income/(Loss) from Operations (4,333,275 ) 10,609,821 225,953 34,518,653 Other Expenses Other income/(expense) (170,403 ) 363 28,193 21,788 Interest expense (320,439 ) (190,319 ) (538,191 ) (468,404 ) Total other expense (490,842 ) (189,956 ) (509,998 ) (446,616 ) Income/(Loss) before Income Taxes (4,824,117 ) 10,419,865 (284,045 ) 34,072,037 Provision for Income Taxes (721,125 ) 1,351,998 1,369,427 1,351,998 Net Income/(Loss) (4,102,992 ) 9,067,867 (1,653,472 ) 32,720,039 Preferred Stock Dividend (782,639 ) (782,582 ) (2,339,409 ) (1,902,966 ) Net Income/(Loss) Attributable to Common Stock Shareholders $ (4,885,631 ) $ 8,285,285 $ (3,992,881 ) $ 30,817,073 Net Income/(Loss) per share Basic $ (0.04 ) $ 0.07 $ (0.03 ) $ 0.28 Diluted $ (0.04 ) $ 0.07 $ (0.03 ) $ 0.27 Weighted average number of shares outstanding Basic 117,348,511 114,757,014 116,950,013 111,289,024 Diluted 117,348,511 116,717,500 116,950,013 113,350,998
AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)For the Nine Months Ended
December 31,2022 2021 Cash flows from operating activities: Net Income/(Loss) (1,653,472 ) 32,720,039 Adjustments to reconcile Net Income/(Loss) to Net Cash provided by (used in) operations: Depreciation and amortization 12,950,972 12,778,103 Debt discount amortization 62,440 18,905 Employee stock awards 4,457,973 2,898,250 Stock grants 135,344 197,110 Stock for services - 4,200 Warrants issued for services 106,909 148,508 Contingent consideration payable fair value (45,572 ) (362,753 ) Allowance for doubtful accounts 1,327,419 1,097,985 (Gain) on disposal of assets - (12,044 ) Reduction in right of use asset 512,063 496,469 Deferred income taxes 1,283,481 958,019 Changes in Current Assets and Liabilities Accounts receivable 12,208,054 (20,755,245 ) Due to (from) related parties 15,000 - Inventories (8,129,249 ) (30,599,676 ) Prepaid expenses 1,941,206 1,569,928 Deposits 1,678,415 (13,051,850 ) Accounts payable (5,852,397 ) 7,538,451 Accrued liabilities (2,044,248 ) 1,310,641 Operating lease liability (522,917 ) (514,872 ) Net cash provided by (used in) operating activities 18,431,421 (3,559,832 ) Cash flows from investing activities: Purchase of equipment (10,566,182 ) (50,517,840 ) Gemini acquisition - (12,868,156 ) Proceeds from disposal of assets - 59,800 Net cash used in investing activities (10,566,182 ) (63,326,196 ) Cash flow from financing activities: Payments on inventory facility, net (825,675 ) (896,287 ) Proceeds from factoring liability 57,300,000 86,465,962 Payments on factoring liability (56,107,221 ) (84,210,284 ) Payments on note payable - related party (507,508 ) (463,192 ) Payments on insurance premium note payment (1,916,070 ) (1,922,651 ) Proceeds from construction note payable 1,000,000 - Payments on construction note payable (66,586 ) - Preferred stock dividends paid (2,195,075 ) (1,758,405 ) Common stock repurchase plan (291,011 ) Common stock issued for exercised warrants 56,046 943,907 Payments on assumed debt from Gemini - (50,000,000 ) Payments on note payable - (4,000,000 ) Sale of preferred stock - 35,000,000 Common stock issuance costs - (3,199,922 ) Net cash used in financing activities (3,553,100 ) (24,040,872 ) Net increase/(decrease) in cash 4,312,139 (90,926,900 ) Cash, beginning of period 23,281,475 118,341,471 Cash and restricted cash, end of period $ 27,593,614 $ 27,414,571 (Continued)
AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)For the Nine Months Ended
December 31,2022 2021 Supplemental cash flow disclosures: Cash paid during the period for: Interest $ 433,761 $ 474,454 Income taxes $ 1,302,811 $ - Non-cash investing and financing activities: Construction note payable $ 10,237,032 $ -
Non-GAAP Financial MeasuresWe analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance. In addition to total net sales, net loss, and other results under accounting principles generally accepted in the United States (“GAAP”), the following information includes key operating metrics and non-GAAP financial measures we use to evaluate our business. We believe these measures are useful for period-to-period comparisons of the Company. We have included these non-GAAP financial measures in this Quarterly Report on Form 10-Q because they are key measures we use to evaluate our operational performance, produce future strategies for our operations, and make strategic decisions, including those relating to operating expenses and the allocation of our resources. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Historical Reconciliation of GAAP net income to Adjusted EBITDA
For the Three Months Ended For the Nine Months Ended 31-Dec-22 31-Dec -21 31-Dec -22 31-Dec -21 Reconciliation of GAAP net income to Adjusted EBITDA Net Income (Loss) $ (4,102,992 ) $ 9,067,867 $ (1,653,472 ) $ 32,720,039 Provision for Income Taxes (721,125 ) 1,351,998 1,369,427 1,351,998 Depreciation and amortization 4,356,004 4,623,355 12,950,972 12,778,103 Excise Taxes 1,669,206 3,982,221 7,816,598 10,317,110 Interest expense, net 320,439 190,319 538,191 468,404 Employee stock awards(1) 2,106,535 1,045,125 4,457,973 2,898,250 Stock grants 43,750 65,098 135,344 197,110 Stock for services - 4,200 - 4,200 Warrant Issuance 106,909 145,508 106,909 145,508 Other income/(expenses), net 170,403 (363 ) (28,193 ) (21,788 ) Contingent consideration fair value (20,326 ) (359,309 ) (45,572 ) (362,753 ) Proxy contention fees 3,983,254 - 4,724,385 - Adjusted EBITDA $ 7,912,057 $ 20,116,019 $ 30,372,562 $ 60,496,181 (1) Includes proxy contention fees of $910,000 for Employee Stock Awards issued as a result of the Settlement Agreement as discussed in our Quarterly Report on Form 10-Q.
Updated Reconciliation of GAAP net income to Adjusted EBITDA
For the Three Months Ended For the Nine Months Ended 31-Dec-22 31-Dec -21 31-Dec -22 31-Dec -21 Reconciliation of GAAP net income to Adjusted EBITDA Net Income (Loss) $ (4,102,992 ) $ 9,067,867 $ (1,653,472 ) $ 32,720,039 Provision for Income Taxes (721,125 ) 1,351,998 1,369,427 1,351,998 Depreciation and amortization 4,356,004 4,623,355 12,950,972 12,778,103 Interest expense, net 320,439 190,319 538,191 468,404 Employee stock awards(1) 2,106,535 1,045,125 4,457,973 2,898,250 Stock grants 43,750 65,098 135,344 197,110 Stock for services - 4,200 - 4,200 Warrant Issuance 106,909 145,508 106,909 145,508 Other income/(expenses), net 170,403 (363 ) (28,193 ) (21,788 ) Contingent consideration fair value (20,326 ) (359,309 ) (45,572 ) (362,753 ) Proxy contention fees 3,983,254 - 4,724,385 - Tax effect(2) (1,438,439 ) (5,476,081 ) (5,350,584 ) (5,290,304 ) Adjusted EBITDA $ 4,804,412 $ 10,657,717 $ 17,205,381 $ 44,888,767 (1) Includes proxy contention fees of $910,000 for Employee Stock Awards issued as a result of the Settlement Agreement as discussed in our Quarterly Report on Form 10-Q.
(2) Tax effect computed at statutory rates.Historical Adjusted EPS For the Three Months Ended 31-Dec-22 31-Dec-21 Reconciliation of GAAP net income to Fully Diluted EPS Net Income (Loss) $ (4,102,992 ) $ (0.03 ) $ 9,067,867 $ 0.08 Provision for income taxes (721,125 ) (0.01 ) 1,351,998 0.01 Depreciation and amortization 4,356,004 0.04 4,623,355 0.04 Interest expense, net 320,439 - 190,319 - Employee stock awards 2,106,535 0.02 1,045,125 0.01 Stock grants 43,750 - 65,098 - Stock for services - - 4,200 - Warrants issued for services 106,909 - 145,508 - Other income, net 17,403 - (363 ) - Contingent consideration fair value (20,326 ) - (359,309 ) - Proxy contention costs 3,983,254 0.03 - 0.04 Adjusted Net Income $ 6,242,851 $ 0.05 $ 16,133,798 $ 0.14 Historical Adjusted EPS For the Nine Months Ended 31-Dec-22 31-Dec-21 Reconciliation of GAAP net income to Fully Diluted EPS Net Income (Loss) $ (1,653,472 ) $ (0.01 ) $ 32,720,039 $ 0.29 Provision for income taxes 1,369,427 0.01 1,351,998 0.01 Depreciation and amortization 12,950,972 0.11 12,778,103 0.11 Interest expense, net 538,191 - 468,404 - Employee stock awards 4,457,973 0.04 2,898,250 0.03 Stock grants 135,344 197,110 - Stock for services - - 4,200 - Warrants issued for services 106,909 ) - 145,508 - Other income, net (28,193 ) (21,788 ) - Contingent consideration fair value (45,572 ) - (362,753 ) - Proxy contention costs 4,724,385 0.04 - - Adjusted Net Income $ 22,555,964 $ 0.19 $ 50,179,071 $ 0.44 Updated Adjusted EPS For the Three Months Ended 31-Dec-22 31-Dec-21 Reconciliation of GAAP net income to Fully Diluted EPS Net income/(loss) $ (4,102,992 ) $ (0.03 ) $ 9,067,867 $ 0.08 Depreciation and amortization 4,356,004 0.04 4,623,355 0.04 Interest expense, net 320,439 - 190,319 - Employee stock awards 2,106,535 0.02 1,045,125 0.01 Stock grants 43,750 - 65,098 - Stock for services - - 4,200 - Warrants issued for services 106,909 - 145,508 - Contingent consideration fair value (20,326 ) - (359,309 ) - Proxy contention costs 3,983,254 0.03 - - Tax effect (1) (1,390,215 ) (0.01 ) (5,476,184 ) (0.05 ) Adjusted Net Income $ 5,403,358 $ 0.05 $ 9,305,979 $ 0.08 (1) Tax effect computed at statutory rates.
Updated Adjusted EPS For the Nine Months Ended 31-Dec-22 31-Dec-21 Reconciliation of GAAP net income to Fully Diluted EPS Net income/(loss) $ (1,653,472 ) $ (0.01 ) $ 32,720,039 $ 0.29 Depreciation and amortization 12,950,972 0.11 12,778,103 0.11 Interest expense, net 538,191 - 468,404 - Employee stock awards 4,457,973 0.04 2,898,250 0.03 Stock grants 135,344 - 197,110 - Stock for services - - 4,200 - Warrants issued for services 106,909 - 145,508 - Contingent consideration fair value (45,572 ) - (362,753 ) - Proxy contention costs 4,724,385 0.04 - - Tax effect (1) (5,358,562 ) (0.05 ) (5,296,470 ) (0.05 ) Adjusted Net Income $ 15,856,168 $ 0.14 $ 43,552,391 $ 0.38 (1) Tax effect computed at statutory rates.
For the Three Months Ended
December 31,For the Nine Months Ended
December 31,2022 2021 2022 2021 Weighted average number of shares outstanding Basic 117,348,511 114,757,014 116,950,013 111,289,024 Diluted 117,348,511 116,717,500 116,950,013 113,350,998 
