Executive Summary
Smith & Wesson Brands Inc (SWBI) reported Q2 FY2025 revenue of $129.7 million, up 3.8% year over year, as demand remained supported by new product introductions despite a softer macro environment. Gross margin stood at 26.6%, modestly above the prior-year period due to a one-time accrual in the prior year, with ex-onetime effects the prior-year margin would have been around 28%. Operating income was $6.97 million (operating margin ~5.38%), and net income totaled $4.13 million, equal to an EPS of $0.093 (diluted $0.092). Cash flow from operations deteriorated to negative $7.40 million, driven by a larger working capital outflow, while capital expenditures were modest at $3.3–4.7 million for the quarter, resulting in negative free cash flow of about $2.67 million. The balance sheet remains solid with $39.1 million in cash and equivalents and $135.6 million of total debt, producing a net debt position of roughly $96.5 million; total assets reached $587.4 million and stockholders’ equity was $369.1 million. Management highlighted a strong product cycle (Bodyguard 2.0 and lever-action rifles) and continued innovation as the primary driver of market share gains, even as inflation and promotional activity pressured ASPs. For the full year, guidance contemplates a 5–10% revenue decline versus fiscal 2024 with margins roughly flat to slightly below, and capital allocation remains focused on investing in the business, maintaining a debt-free posture, and returning cash to shareholders via dividends and share repurchases. The company signaled ongoing promotional activity and channel discipline to navigate a challenging demand backdrop, with inventory levels in the distribution channel described as healthy and not stockpiling. Investors should monitor ASP dynamics, promotional intensity, inventory evolution through H2, and the execution of new product launches as pivotal catalysts to SWBI’s profitability trajectory and market share progression.
Key Performance Indicators
QoQ: 474.44% | YoY:85.03%
QoQ: 296.30% | YoY:65.49%
QoQ: 299.78% | YoY:71.09%
Key Insights
Revenue: $129.679 million for Q2 2025, up 3.8% YoY; Gross profit: $34.546 million, gross margin 26.64% (YoY margin up 1.2 percentage points, largely due to a prior-year one-time legal accrual; ex-accrual, prior-year margin would have been about 28%); Operating income: $6.972 million, operating margin 5.38%; EBITDA: $6.972 million (EBITDA margin 5.38%); Net income: $4.134 million, net margin 3.18%; EPS: $0.0929 (diluted $0.092); Shares outstanding: 44.5–45.0 million for basic/diluted; Cash flow...
Financial Highlights
Revenue: $129.679 million for Q2 2025, up 3.8% YoY; Gross profit: $34.546 million, gross margin 26.64% (YoY margin up 1.2 percentage points, largely due to a prior-year one-time legal accrual; ex-accrual, prior-year margin would have been about 28%); Operating income: $6.972 million, operating margin 5.38%; EBITDA: $6.972 million (EBITDA margin 5.38%); Net income: $4.134 million, net margin 3.18%; EPS: $0.0929 (diluted $0.092); Shares outstanding: 44.5–45.0 million for basic/diluted; Cash flow from operations: -$7.397 million; Capital expenditures: $4.723 million; Free cash flow: -$2.674 million; Cash and equivalents: $39.093 million; Total debt: $135.633 million; Net debt: $96.54 million; Total assets: $587.443 million; Stockholders’ equity: $369.065 million; Current ratio: 3.97; Quick ratio: 1.426; Cash ratio: 0.507; Days sales outstanding: 36.58; Days inventory outstanding: 185.46; Net debt to EBITDA not disclosed in the quarter; Revenue mix: Handguns up 19.2% YoY while long guns down 26.4% (core long gun down 4.8% after excluding timing of shipments); ASPs: total ASP down 8% YoY; Handgun ASPs down 11% (Bodyguard 2.0 with ~$400 price point); Long gun ASPs up 11% (lever-action rifles mix); Channel inventories: broadly flat in weeks outstanding; Share repurchases: ~754k shares in Q2 for $9.8 million; Dividends: $0.13 per share declared for December 19 record date; Guidance: 3Q revenue ~10–15% below fiscal 2024; full-year revenue down 5–10% vs fiscal 2024; margins flat to slightly below 2024; effective tax rate ~25%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
129.68M |
3.78% |
46.81% |
| Gross Profit |
34.55M |
8.75% |
27.79% |
| Operating Income |
6.97M |
85.03% |
474.44% |
| Net Income |
4.13M |
65.49% |
296.30% |
| EPS |
0.09 |
71.09% |
299.78% |
Key Financial Ratios
operatingProfitMargin
5.38%
operatingCashFlowPerShare
$-0.17
freeCashFlowPerShare
$-0.06
dividendPayoutRatio
139.5%
Management Commentary
Themes and quotes from the earnings call: 1) Strategy and innovation: 'second quarter results came in below our expectations... we gained share, led by our best-in-class innovation with new products representing 44% of our sales in the period' and 'Bodyguard 2.0 has quickly become one of the most sought after concealed carry pistols.' 2) Demand and pricing: 'inflation remains the primary driver of demand pressure' and 'ASPs were down 8% YoY; handgun ASPs declined 11%; long gun ASPs increased 11%'; management expects some ASP pressure to persist due to promotions. 3) Volume and mix: 'handgun shipments up 19.2% YoY; long guns down 26.4% (timing)'; 'core long gun down 4.8%' after removing outliers. 4) Channel and inventory: 'inventory in the distribution channel grew slightly in units but weeks outstanding declined, indicating improved turnover'; 'channel inventory expected to remain stable.' 5) Capital allocation and liquidity: 'repurchased 1.6 million shares since the start of the year with 754,000 in Q2'; 'new unsecured line of credit of $175 million; new line extended to October 2029'; 'quarterly dividend of $0.13'; 6) Outlook: 'for the third quarter, top line about 10–15% lower than fiscal 2024 with margins several points lower due to promotional activity; full-year view calls for a 5–10% revenue decline with margins in line or slightly below 2024.'
"Second quarter results came in below our expectations as overall demand for firearms normalized late in the quarter. Despite these headwinds, we continue to outperform the market and believe we gained share, led by our best-in-class innovation with new products representing 44% of our sales in the period."
— Mark Smith
"ASPs were down 8% versus a year ago driven by mix factors as well as increased promotional activity. Handgun ASPs declined 11%, reflecting strong sales of the Bodyguard 2.0... In contrast, long gun ASPs increased 11% due to lever-action rifles."
— Mark Smith
Forward Guidance
Management guidance for the remainder of fiscal 2025 calls for: - Revenue down 5% to 10% versus fiscal 2024; - 3Q revenue approximately 10% to 15% lower than fiscal 2024; - Margin pressure as a result of higher promotional activity, with full-year margins expected to be in line with or slightly below fiscal 2024; - Operating expenses to rise 5% to 10% year-over-year in 3Q to support R&D, promotions, and marketing; - Effective tax rate around 25%; - Debt levels expected to be similar to or slightly above last year with cash on hand roughly equivalent; - Cash generation likely to be below the annual target of $75 million due to working capital needs, but capital spending lower given relocation completed; - Capital allocation remains: invest in the business, remain debt-free, and return cash to stockholders via dividends and buybacks.