Good day, everybody, and welcome to Smith & Wesson Brands, Inc. Third Quarter Fiscal 2026 Financial Release and 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. You may begin.

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, 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 of 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. 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 and any reference to EBITDA to adjusted EBITDA. Before I hand the call over to our speakers, I would like to remind you that 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. 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. 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. We are very pleased with our third quarter results, which demonstrated continued market share growth while simultaneously maintaining resiliency in our pricing power and profitability. This is a direct function of the entire team's discipline in staying focused and executing against our long-term strategy. The strength of the iconic Smith & Wesson brand, along with our laser focus on innovating to keep ahead of market trends. Once again drove impressive average selling prices in the quarter, which, together with increased unit shipments delivered not only solid top line performance, but also translated into both strong profit margins and balance sheet performance. Our Q3 performance exceeded our expectations across the board. Net sales increased over 17% year-over-year to nearly $136 million. EBITDAS of $16.8 million was up nearly 21% and adjusted EPS was $0.08 compared with $0.03 in the prior year period. Importantly, we also delivered another quarter of significant growth in operating cash flow, which is up more than $30 million year-over-year. We believe our purposeful deployment of capital will allow us to continue consistently delivering long-term value for our stockholders. Looking at our performance by category. Our handgun results were exceptional. Our unit shipments of handgun into the sporting goods channel were up 28%, while mix was down 2.2%. With distributor inventory weeks of supply remained flat during the period, this indicates significant market share growth. This outstanding performance was driven by several factors, including strong demand for our newer products, a favorable shift in product mix towards higher price models, robust consumer demand and the benefit of a modest 2% to 3% price increase that we implemented late in the quarter on January 1. Notably, we saw this growth across our entire semi-auto pistol line, indicating that the…

Thanks, Mark. Please note that all comparisons are between the third quarter of fiscal 2026 and the third quarter of fiscal 2025, unless stated otherwise. Net sales for our third quarter of $135.7 million were $19.8 million or 17.1% above the prior year on the strength of our new handgun products. During the quarter, distributor inventory in terms of actual units increased by approximately 20% over the end of the prior quarter, but only by about 4% compared with the end of January 2025 with weeks of supply remaining steady at approximately 9 weeks. We believe, based on feedback from our customers, that strong demand for our products will continue in the coming months. Handgun ASPs were up slightly versus Q2 levels due to continued strong demand for certain premium products, but offset by the strength of certain of our lower-priced products. Long gun ASPs decreased by about 11% due to lower overall volume of certain of our higher-priced products, driven by channel fill for new products in the prior year, as Mark covered earlier. Gross margin of 26.2% was up 210 basis points over the prior year on increased production volume combined with lower promotion costs and lower federal excise taxes partially offset by a 160 basis point negative impact from tariffs. Having focused on driving inventory levels down over the last 12 months, we are now turning our focus to increasing production to meet market demand which should continue to have a positive impact on margins. Operating expenses of $28.9 million were $5.7 million higher than the prior year due primarily to a $2.3 million gain on the sale of real estate that was reported last year. Increased profit related and stock-based compensation expense contributed to the remaining increase. Higher revenue and related margin resulted in net income…

[Operator Instructions] Our first question is from Mark Smith with Lake Street Capital.

I want to ask first about kind of recent pricing changes. Can you talk about any price that's been taken, whether that's been across the board? And anything that you can quantify?.

Sure, Mark. The price increase we put in was effective January 1, as I covered in the prepared remarks. And it was largely across the board. It was -- there were some categories that took a little bit steeper increase and some categories took a little bit, little bit less so just really driven on market demand and our position within each category. But overall, across the board, it was pretty close to 3%.

Okay. Any feedback for as you look at distributors? Or as you think about kind of consumers on that, does it seem like that's gone through well? Or has there been any pushback on the pricing?

No, it's no pushback whatsoever. As you may recall, it's been a little bit since we've taken a price increase and really has gone through smoothly, no impact whatsoever. And I think as you saw from the results, an uptick in demand throughout the quarter. So...

Perfect. And I want to look at just handgun sales, really strong results there, especially as we think about new products. I'm curious, without giving out too much competitive details here, anything that you can expand on, on what's kind of helped drive some of that strength. I'm curious like colorways, some of your ported options? Are these things that have helped or is just having the right product for consumers right now?

Yes. You know we've had great success with BODYGUARD over the last -- really the last couple of years. That category, we kind of own it. On the -- we've done a lot of work and that strategy, I talked about a lot, long-range strategy is let's make sure we're refreshing the entire product line. And I think we're starting to see the results of that. And it's really just it's across the board. It's all of what you just talked about Mark. And obviously, we're not going to give too much detail for the reason you just covered. It's looking at the market trends and having a team that really understands the industry and what is trending out there, where do we need to make some updates and changes. And making those changes, and we've been really happy with the results that are coming out with that. And now that polymer pistol line across the board is really starting to gain a lot of profitable share. And obviously, as we start to move now into one of the -- out of the subcompact into the compact and full-size markets, that's obviously at the higher end of the pricing hierarchy and that is really helping ASPs and the momentum continues.

Perfect. And then just similar question shifting over to long guns. I'm curious, anything that you guys can do today to kind of drive more strength in that long gun market. And I realize there's some things in the comparable that make it this quarter tough. But as we think about the hunting category. Is there interest in entering there? Is there more maybe on SBRs or anything that you can do to drive more long gun business?.

Yes, the SBRs, as you're well aware, the tax changes that occurred on January 1 are helping a little bit there in that category. But at the end of the day, as I covered in the prepared remarks, it really is, it's one is the difficult comp versus last year as we were introducing kind of the last couple of calibers and the lever action rifle, which obviously are at the very high end of our pricing hiearchy on long guns, but also that our product portfolio is kind of more weighted towards that self-defense market and the hunting market, obviously, we're in it with the 1854 and very pleased with the performance there. But there's -- I'll just leave it at this, is there's a lot of white space there for us and we're always looking at long-term opportunities.

Perfect. And I think the last one for me. You called it out a bit in your commentary, just the law enforcement opportunity and improving sales there. I'm curious, just where you're at in that process? It seems like that's a big market and maybe just scratching the surface. Is that something that is a big focus and where you think you can really move the needle on revenue as there's more drive in law enforcement. And then similarly, I'm curious as we think about maybe international within military, if there are similar opportunities.

Yes, it's definitely a focus area as I think you've been around long enough now you know that's a much longer sales cycle than on the consumer side. So what I'm pleased about is the pipeline that we have even with the strong results this quarter, we've got a pretty healthy pipeline coming up behind it. And that is a direct result of all of the intangibles of the academy and being able to service that law enforcement customer in a more meaningful way, purpose-built products, changes to the product, there's innovation happening there as well. And that expands beyond just domestic law enforcement, it moves into federal agencies. state, local and federal and then outside into foreign militaries as well. So a lot of good things happening in that space. Still does remain kind of a smaller section of our business right now, but a lot of momentum there and a pretty healthy pipeline coming up behind it.

Our next question is from Rommel Dionisio with Aegis Capital. Rommel please check for line is muted. I believe he was having some technical difficulties. We do not have any further questions at this time. I would like to turn the conference back over to Mark for closing remarks.

Thank you, operator, and thanks, everyone, for joining us today and your interest in Smith & Wesson. We look forward to speaking with you all again next quarter.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.