AMMO, Inc. Reports Third Quarter 2023 Financial Results

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
[email protected]

Source: AMMO, Inc.

AMMO, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

    December 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 Measures

We 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  

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