Good day, everyone, and welcome to Smith & Wesson Brands, Inc. Fourth Quarter and Full Fiscal 2022 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson’s General Counsel, who will give us some information about today's call.

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, objectives, 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. Our non-GAAP financial results exclude costs related to the planned relocation of our headquarters and certain manufacturing and distribution operations to Tennessee, the spin-off of the Outdoor products and accessories business in fiscal 2021, COVID-19-related expenses and other costs. 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. Finally, 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. Please remember that 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, we believe, mostly due to inventory levels in the channel. Before I hand the call over to our speakers, I would like to remind you that any reference to income statement items refers to results from continuing operations unless otherwise indicated and any reference to EBITDAS is to adjusted EBITDAS. Joining us on today's call are Mark Smith, our President and CEO; and Deana McPherson, our CFO. With that, I will turn the call over to Mark.

Thank you, Kevin, and thanks, everyone, for joining us today. Before we discuss our results, I want to express the deep sorrow that all of us at Smith & Wesson feel for the victims of the unthinkable acts of evil that have befallen our nation recently. It is impossible to rationalize the actions of these perpetrators of violence, especially those who show such disregard for the lives of the most innocent among us. Smith & Wesson continues to work closely with the ATF, industry partners, lawmakers and law enforcement to find real solutions and to augment existing programs that will have a meaningful impact in making our communities safer by keeping firearms out of the hands of criminals and the mentally unstable, while always respecting the constitutional rights of law-abiding Americans. Please join me in offering prayers for our nation and our communities, but most of all, for the families facing unimaginable loss. Our top and bottom line results for the fourth quarter were in line with expectations. Our fourth quarter revenue was up approximately 2% on a sequential basis, reflecting slightly higher volumes despite adjusted NICS being down 3% over the same timeframe. Compared to the prior year period, we faced very difficult comps. As 12 months ago, we were in the height of the pandemic surge, and we were able to leverage our flexible manufacturing model to significantly outpace the competition. Therefore, and as expected, in comparison to last year's fourth quarter, our revenue this year was significantly impacted by the overall normalization of consumer demand for firearms. As I have mentioned before in the past, during the surge, we were able to make long overdue pricing and product portfolio adjustments, which has resulted in ASPs rising by nearly 12%. Although our fourth quarter results benefited from these…

Thanks, Mark. Net sales for our fourth quarter of $181.3 million was $141.6 million or 43.9% below the prior year comparable quarter and $11.7 million lower than the fourth quarter of fiscal 2020 when the pandemic-related surge began. During our fourth quarter last year, we achieved record net sales due to a nearly 60% increase in production capacity, combined with strong demand that allowed every unit produced to be quickly sold. During our current fourth quarter, however, demand as evidenced by NICS checks, was 14.5% lower than the prior year. This, combined with plenty of inventory in the distribution channel, resulted in an expected decline in our shipments at a faster rate than the reduction in NICS. As we have been reporting, the unprecedented 18-month surge in demand for firearms began to moderate last summer, as we saw adjusted NICS checks began to no longer hit record levels and inventory in the channel begin to grow. Our ability to achieve record production and unit shipments throughout this time naturally has resulted in lower year-over-year sales in more recent quarters. Gross margin in the fourth quarter of 39.8% was 530 basis points below the 45.1% realized in the prior year comparable quarter, but 760 basis points above the 32.2% realized in the fourth quarter of fiscal 2020. The decrease in margin from last year was due primarily to reduced volume and a shift in mix to certain lower price long guns, and was only partially offset by the impact of two price increases, reduced spending and lower inventory reserve adjustments. In addition, last year included a $1.9 million accrual related to a special bonus that we paid to our employees in recognition of their efforts in helping us to achieve $1 billion in annual sales. Operating expenses of $25.6 million for…

Thank you. [Operator instructions] Our first question comes from the line of Mark Smith of Lake Street Capital Markets. Your line is open.

Hi, guys. First question, just wanted to ask something kind of broad here, if you had any commentary on today's Supreme Court ruling and then maybe if you can speak to how important kind of this concealed carry market is to your business today?

Sure. So just broadly on the real ruling, I mean, it simply clarifies that responsible law-abiding citizens don't need to ask the government's permission to exercise their constitutional rights. We obviously agree with this. And insofar as impact to concealed carry in our products, conceal carry is a pretty big portion of our market, we expect as it expands the access of those products to those law-abiding citizens, that that'll have a positive impact on us, what that is probably too early to tell.

Okay. And then you guys talked a fair amount about the inventory levels that are out there, but any additional insight into kind of your comfort levels with inventory today? And if there's anything that you're seeing kind of shift in this inventory, if there's anything that's kind of getting more age that's out there in the channel today?

Sure. As we've talked about many times before, inventory for us in this industry is not necessarily such a bad thing. We go through - as you well know, we go through ups and downs. And in order to be prepared and allow enough time for our flexible manufacturing model to kick in, we need inventory both in the channel and in our warehouses. So I would say that overall, Mark, our inventory levels that we're holding at the end of the year were probably still under what we want them to be. So expect a little bit of growth in the inventory. And then just remember as we come into a normal year where Q1 is typically our lowest, it's typically the quarter where we build a little bit of inventory in preparation and for the rest of the year. In terms of the inventory levels in the channel, obviously, there's mix there where certain categories like revolvers are - continue to be sold out and really just a week's worth. And then there's obviously with 13 weeks of on averages of the categories that are higher than that, but in all, there's nothing really out there that kind of makes us get any heartburn or heartache. It's - the inventory, as you saw, dropped throughout from March to today. So that's a good sign. It's pulling through even in some of our slower times.

Okay. And then the last question for me is just, you did talk about inflationary pressures that you're seeing out there. And any additional insight into price increases, you maybe talk about kind of last time that you took price? And is there anything set that normally you would take or are you looking at taking any additional price in the near-term?

Sure. As you know, we took several adjustments throughout the pandemic and not only was there pricing adjustments, it was also portfolio adjustments to kind of that was really -- that's really what's driven the ASP changes and the increase or it really given a benefit to our ASPs overall. And I think that's going to carry forward. In terms of pricing, now, as we look at it, we're trying to be very judicious with that just because we're not the only one seeing inflationary impact; our consumers are seeing it as well. So we're trying to balance that, not pricing yourself out of the market, but also offsetting the - some of the pressures we've seen. As you can see from our profitability, we still remain extremely profitable and you know we have a very, very strong brand. So, we can take pricing actions if we see the need in the future. Right now, our usual cadence is we do a price increase, kind of as we near the end of the calendar year, November, December timeframe right now, the jury's still out on what we'll do there, but again, we feel very comfortable, we can take one if we need to,

Okay. Maybe, I'll squeeze in just one follow-up on that. I think you said you've got maybe half a dozen or so new products, you expect to come over this next year. Has that been a place where you've been able to maybe drive higher ASP is with some of these new product releases and would that be kind of the plan going forward?

100% yes. So, our pricing -- our overall pricing, which for the portfolio of products that we offer, was definitely impacted by the price increases that we took throughout the pandemic. But, I'd tell you that the bigger impact was probably by making product -- fundamental product line adjustments and new products were a huge part of that and will continue to be a huge part of that going forward.

Excellent. Thank you, guys.

Thank you, Mark.

Thank you. [Operator instructions] And at this time, I'd like to turn the call back over to President and CEO, Mark Smith, for closing remarks. Sir?

Thank you, and thank you, everyone, for joining us today. We'll talk to you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.