Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the AMMO, Inc. Fourth Quarter and Fiscal Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. I would now like to turn the call over to Scott Arnold of CoreIR, the company's Investor Relations firm. Please go ahead, sir.

Good afternoon, and thank you for participating in today's conference call. Joining me from AMMO’s leadership team are Fred Wagenhals, Executive Chairman; Jared Smith, Chief Executive Officer and Rob Wiley, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address AMMO’s expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in AMMO's most recently filed periodic reports on Form 10-K and Form 10-Q, the Form 8-K filed with the SEC today, and the company's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes non-GAAP financial measures that AMMO believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliation of this non-GAAP financial measure to net loss, it's most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The content of this call contains time-sensitive information and is accurate only as of today, June 13, 2024. Except as required by law, AMMO disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to AMMO's Chief Executive Officer, Jared Smith.

Good afternoon, everyone. Thank you for joining us for our fourth quarter and fiscal year 2024 earnings call. When I joined AMMO at the beginning of last year, we undertook a number of major initiatives to improve profitability and growth. This past fiscal year has provided several unforeseen challenges, but we remain confident in the changes we are making at both GunBroker and at our ammunition manufacturing facility in Wisconsin. We continued to make progress in our fiscal fourth quarter and ended the fiscal year with a strong pipeline for ammunition and casing sales while accelerated our buildout of GunBroker's capabilities. Sales increased sequentially for AMMO, Inc., despite a softening market as reported by other publicly-traded competitors in this space. We have started to execute on the strongest development roadmap for GunBroker in its 25-year history and continue to bring on additional capacity at our plant, as we begin delivery on our open orders and contractual commitments. AMMO is at a pivotal point as we start our 2025 fiscal year. We have changed the trajectory of the business in these past 12 months and continue to optimize the business onto a path toward building shareholder value. We have reduced our working inventory and generated $32.6 million in cash from operations, increasing our cash balances by $16 million in the fiscal year. We have established a credit line of $20 million with Sunflower Bank, reduced working capital needs, paid down $3.6 million in debt, and delivered adjusted EBITDA margins of 10.6%. As we sit here in June, we have never been more poised for success. I will now go into detail on our execution and our positioning for the future. Let me first speak to our progress at GunBroker. As we start to stretch our marketplace legs, we are finding new…

Thank you, Jared. Welcome, everyone. Let me now review the financials for the fourth quarter and 2024 fiscal year in more detail. We experienced sequential revenue growth in our ammunition segment in the final quarter of our fiscal year, while the margins of the GunBroker marketplace segment remain robust. We ended the fourth quarter of our 2024 fiscal year with total revenues of approximately $40.4 million in comparison to $43.7 million in the prior year quarter. The decrease in revenue was primarily related to a decrease in activity in our marketplace segment, which we believe decreased as a result of the current macroeconomic environment impacting our industry, as well as others. Our casing sales, which afford us higher gross margins, increased $0.9 million up from the prior year period. Revenues for our ammunition segment decreased $0.2 million from the prior quarter, but increased $4.8 million, or 21.9%, quarter-over-quarter as a result of increased ammunition sales in our fourth fiscal quarter. Cost of goods sold was up approximately $31 million for the quarter compared to $31.8 million in the comparable prior year quarter. The decrease in cost of goods sold was related to the decrease in sales volume. Our gross margin for the quarter was $9.4 million or 23.3% compared to $11.9 million or 27.3% in the prior year period. The decrease in gross profit margin was related to the shift in our sales mix. The robust margins on GunBroker remained steady through our final quarter, but the margins in our ammunition segment did not meet expectations. We expect improvement as production capacities increase. Our inventory levels continue to decrease, generating $4.3 million in cash from operations for the quarter, bringing us to $32.6 million for the full fiscal year. There was approximately $2.4 million of nonrecurring expenses in the quarter…

Thank you. We will now be begin the question-and-answer session. [Operator Instructions] The first question comes from Matt Koranda with ROTH Capital. Please go ahead.

Hi, guys. Good afternoon. Just wondering if you could maybe unpack a little bit more for us what the consulting term is helping you sort out in terms of production, any specific issues? Just any help in terms of how that's going to ramp up in casings utilization and capacity this coming fiscal year?

Absolutely, Matt. Great question. This engagement is a 30-plus week, around the clock engagement where we are looking at material flows, setup of the equipment making sure that handoff between shifts are coordinated that documentation is signed off that we are producing the part that we are supposed to be producing that all the technical specs are in place. There is not a single part of the factory that is not being reviewed, including our [SIOP] (ph) process for sales inventory and operational planning. Matt, I would love to say to be specific to one area, but it is a universal lift of the factory where no stone will go unturned.

Okay. And then just implications for how we should think about gross margins in the AMMO business. And I guess maybe if you could because it's hard to parse out at least at the end of the year here. What were gross margins in the AMMO manufacturing side, including casings during the fourth quarter?

Rob, I don't know if you have that information at hand, but Matt, I'm going to answer part of the question is this engagement with this firm is really focused at rifle case production just due to the massive amount of material flow that we've got to get through the factory. That's where we put the entire focus. But Rob if you can speak to the margins, that would be great.

Hi Matt, this is Rob. Yes, we did see a little bit of a pullback in the margin from Q3 going into Q4. Part of that was coming off of older inventory, smaller ammunition inventory, but as we have the production increases, we should be able to better absorb our overhead expenses across all of our products and see increased marginality heading into the fiscal 2025 year.

Okay. Got it. And then just one more on the AMMO side, and then I wanted to ask one on GunBroker. But on the AMMO side, curious what's going on with casing. So like the goal is, I guess to increased utilization. We've won new business on that side of the house. But I guess it did drop a little bit sequentially, not a ton, but a little bit. Just wondering if you could speak to the dynamics in terms of casing and how that should be ramping up over the next couple of quarters.

Yes. The way we look at casing ramping up over the next couple of quarters. By the end of the year, we expect roughly a 30% to 40% increase in rifle casing manufacturing. I think we'll see that in Q2 and Q3. Specific to Q4 I believe your question was we saw a little bit of a dip from Q3, is that correct?

Just sequentially, Yes. That's correct.

Yes. Has everything to do with lining up the equipment after that press being down, and we had to take some initial pieces of equipment down to streamline the rest of the process. We were also loading and manufacturing cases. Actually, we were manufacturing cases for loading, and we're sitting on those inventories to start loading the summer to deliver throughout Q2 and Q3 for the fall hunting season.

Okay. All right. Got you. Understood. And then just on the marketplace. I wanted to see if there's any way that you guys could quantify any of the lifts that you've got within the quarter from implementing payments and getting the carting initiative up and running. I know we're only got a very short period within the fourth quarter where we got the benefit of that, but just any early learnings on that front that you saw in terms of attach rate to carting in terms of transaction value, whatever metrics you want to provide on that front? And then just on the financing initiative, maybe if you could, any early learnings on that? Have we fully rolled that out? And is there like a take rate metric you could provide around that?

Sure. We've not rolled it out. We just signed the agreement. This is an agreement that we'll be executing on in Q2, Q3 as well. There is still quite a bit of development work that has to take place for that financing solution to come online. If we looked at what we learned from launching the cart in Q4, we saw early adoption. We saw a slightly higher value -- cart value, but the quarter was so short, and it was so new that -- and a lot of rollouts and developments, you actually see a dip. We didn't see that dip. So we felt like a flat line was actually a positive result. Since then, we have seen an increase in our take rate and our final value fees across the platform as we've adjusted those, as discussed in the prior quarter.

Okay, very helpful guys. I’ll leave it there. Thank you.

Absolutely, thank you Matt.

The next question comes from Mark Smith with Lake Street. Please go ahead.

Hi guys. I wanted to dig through the margins just a little bit more here, and feel free to speak broadly on it if you don't have the numbers in front of you. But maybe first, was there any pressure as we think about AMMO margins primarily on casings, is that where you saw some inventory issues? Or is it more so on kind of loaded AMMO? And then just Jared as we look out input costs coming in, primarily on loaded AMMO anywhere where you are seeing pressure? I know you called out propellant here a little bit ago in the call, but anywhere where you're seeing pressure and things that maybe pressure margins going forward?

All right. I'm going to break the question down in a few parts. From an AMMO perspective, we believe our inventory position is strong. We do not have an inventory problem with casings. The inventory that we have is a lack of [LIFO] (ph) inventory just because our production capacity has not come on as fast as anybody would like. And that was really why we've engaged Brooks to engage and increase -- this consulting firm to engage and increase that output. From a margin perspective across our portfolio, the bright shining spots are things like 50 cal and deliveries that we're making internationally throughout this quarter and last. The other bright spot is pretty much anything touching rifle in the hunting space still seems to be a much stronger portfolio play than playing in high-volume nine-millimeter, as we are sitting here in an election year, I think everybody thought there might have been a little bit more reprieve, but nine-millimeter still is pretty ubiquitous and pricing is tough. The margins have been tough. The market's tough due to discretionary spending by the consumer. So we felt like we had a strong quarter finishing out Q4 with sales increasing over Q3. We're going into a little bit of the typical summer slump of this industry, but things are still holding strong. And certainly, as more and more capacity comes online. Does that answer your question, Mark?

Yes, I think so. Just the last part, though anything as you think about input costs, where you think maybe we'll continue to see pressure going forward?

Yes. There has been massive pressure on copper, and there is been some erratic speculation out there on where copper is going to go in. Some people were saying it was going to double, its pulled back. We believe in most of our long-term contracts, we work in a metals price so that we can absorb those costs or at least push them on downstream. Propellent is still going to be and will continue to be an issue going forward. We feel very strongly about our propellant supply and our position in the market. But for the rest of the industry, the pricing power and specialty propellents that are what I'd call, not mainstream, we'll continue to have an effect in this market.

Okay. Next question for me was just around ZRO Delta. Just any additional update that you can give there or maybe you can kind of review on how things are going. And I know it's early on kind of delivering some of that AMMO. Any updates you can give us would be great.

Yes. I mean, the ZRO Delta contract when the company first made the acquisition of Jagemann, the 50 Cal line was paramount. And we now have the line up and running, and we're streamlining that process, we're starting to make deliveries. We're -- our QC process is improving every day. We are super, super excited on the large rifle front. As we've said in the past, there's not a lack of demand out there for rifle casings and we get new request all the time. Our biggest issue really comes down to just pure execution and streamlining our processes to get maximum output.

Excellent. Thank you.

Thank you Mark.

This concludes our question-and-answer session. I would like to turn the conference back over to Jared Smith for any closing remarks.

Absolutely. I want to thank everyone for participating on today's call and for your interest in AMMO, Inc. We look forward to sharing our ongoing progress when we report our fiscal first quarter 2025 results in August. Thanks, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.