SMITH & WESSON BRANDS, INC.

Smith & Wesson Brands, Inc. is one of the world’s leading manufacturers and designers of firearms, operating within the highly competitive domestic and international firearm industry. The company manufactures handguns (revolvers and pistols), long guns (modern sporting rifles, pistol caliber carbines, and lever-action rifles), handcuffs, firearm suppressors, and other firearm-related products. The annual domestic non-military firearm market based on industry shipments is estimated at approximately $2.7 billion for handguns and $1.7 billion for long guns, excluding shotguns. The company sells to firearm enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, law enforcement and security agencies, and military agencies in the United States and worldwide.

The company's primary competitors include Colt, Ruger, and Taurus in the revolver market; Glock, Ruger, Sig Sauer, Springfield Armory, and Taurus in the pistol market; Daniel Defense, Diamondback, Ruger, Sig Sauer, and Springfield Armory in the semi-automatic rifle market; and Ruger and Henry in the lever-action rifle market. The company competes primarily based upon innovation, quality, reliability, durability, price, performance, consumer brand awareness, and customer service and support. The company believes it can effectively compete with all its present competitors. The company's top five commercial distributors in the United States accounted for a total of 46% ¹ of net sales for fiscal 2026, 45% ² for fiscal 2025, and 46% ³ for fiscal 2024.

The company generates revenue through the sale of firearms and firearm-related products under the Smith & Wesson and Gemtech brands, as well as through manufacturing services provided to third-party customers under the Smith & Wesson and Smith & Wesson Precision Components brands. Revenue is primarily transactional, derived from two-step distribution, strategic retailers, buying groups, direct sales to law enforcement agencies, direct-to-consumer e-commerce for non-serialized parts and accessories, and international sales through distributors. International sales accounted for approximately 4% ⁴ of net sales in fiscal 2026, 5% ⁵ in fiscal 2025, and 5% ⁶ in fiscal 2024. The company also sells manufacturing services to other businesses to level-load factories and maximize capacity utilization.

The company manufactures a wide array of handguns including revolvers and pistols. Revolvers are marketed under the Smith & Wesson brand and range from small-frame models for concealed carry to extra-large frame models for handgun hunting. Pistols are offered under the Smith & Wesson brand, with the M&P line including full-size and compact models engineered for law enforcement, military, and consumer markets. In fiscal 2026, the company introduced the BodyGuard 2.0, the Performance Center BodyGuard 2.0 Carry Comp, the Shield X, the Performance Center Shield X Carry Comp, the steel frame M&P HD and M&P HD Competitor, the M&P 22X, and several new no-lock Classic revolvers, Mountain Gun, and Night Guard revolvers. The Performance Center introduced the sixth annual Spec Series M&P pistol and the first-ever Spec Series R Revolver, along with Carry Comp line extensions for the BodyGuard 2.0, Equalizer 9mm, Shield X 9mm, and M&P 10mm 2.0.

The company's long gun portfolio includes modern sporting rifles in five calibers (22LR, 5.56mm NATO, 308 Winchester, 6.5 Creedmoor, and 6mm ARC), two pistol caliber carbines (M&P FPC and Response), and lever-action rifles. In fiscal 2026, the company expanded the Model 1854 Lever-Action Rifle series in 30-30 and 360 Buckhammer calibers and expanded the M&P FPC in 22LR and 5.7 calibers. Other products include parts, handcuffs (one of the largest manufacturers in the United States), firearm suppressors under the Gemtech brand, and manufacturing services including forging, heat treating, rapid prototyping, tooling, finishing, plating, and machining. In fiscal 2026, the company introduced the Nebula 5.7 suppressor in the Gemtech line.

In fiscal 2026, the company generated a total of $114.2 million ⁷ in cash from operations, invested $28.2 million ⁸ in cash to acquire property, equipment, patents, and marketable securities, distributed $23.2 million ⁹ in dividends, and paid $60.0 million ¹⁰ on its revolving line of credit. The company launched the Smith & Wesson Academy in Maryville, TN, complete with a pistol range, shoot house, and 300-yard rifle range. The company also launched a direct-to-consumer e-commerce website for non-serialized parts, accessories, and branded goods in fiscal 2025. In fiscal 2026, the company introduced numerous new products including the BodyGuard 2.0, Shield X, steel frame M&P HD, and expanded lever-action and M&P FPC lines.

For fiscal 2026, net sales were $496.5 million ¹¹ compared to $527.7 million ¹² in fiscal 2025. Gross profit was $175.3 million ¹³ in fiscal 2026 versus $190.2 million ¹⁴ in fiscal 2025. Operating income was $83.5 million ¹⁵ in fiscal 2026 compared to $93.8 million ¹⁶ in fiscal 2025. Net income was $63.9 million ¹⁷ in fiscal 2026 versus $72.0 million ¹⁸ in fiscal 2025. Diluted earnings per share were $1.42 ¹⁹ in fiscal 2026 compared to $1.56 ²⁰ in fiscal 2025.

The company plans to continue to introduce new products in fiscal 2027. The company currently expects to spend between $40.0 million to $45.0 million ²¹ on capital expenditures in fiscal 2027. The company expects that inventory levels will increase modestly during fiscal 2027. The company expects that inflation will continue to impact it during fiscal 2027.

The company is focused on driving organic growth by producing a robust new product pipeline and leveraging its Smith & Wesson brand, which has a history of more than 170 years. The company intends to continue introducing new products to enhance its competitive position and broaden participation in the overall market. The company plans to continue expanding its brand recognition and product loyalty through social media and its websites, with generation of original content. The company also intends to continue investing in new digital marketing capabilities to provide best-in-class customer experiences.

The company intends to continue to streamline and standardize certain administrative functions of its business with a goal toward driving profitability and improving the ease with which customers are able to do business. The company intends to continue investing in systems to further enhance efficiency, improve information reporting, and strengthen internal controls. The company continues to implement various modules and additional usages of SAP, including in connection with the Relocation.

The company intends to continue its focus on developing, growing, and protecting its iconic firearm brands and using its cash flow from operations on actions that will maximize return on invested capital, including by investing in machinery, equipment, and new product development. The company's current expectation is to spend between $40.0 million to $45.0 million ²² on capital expenditures in fiscal 2027. The company believes that, based upon its current working capital position, current operating plans, and expected business conditions, its existing capital resources and credit facilities will be adequate to fund its operations for the next 12 months.

The company anticipates that it will continue to incur significant capital and other expenditures with respect to its Springfield facility, but it may not be successful in continuing to improve efficiencies. The company expects that inventory levels will increase modestly during fiscal 2027. The company expects that inflation will continue to impact it during fiscal 2027.

The company believes that high levels of inflation have depressed, and may continue to depress, consumer demand for its products as certain firearm consumers have traded down to purchase lower-priced firearms or delayed purchases due to cost concerns. Inflation can also adversely affect the company by increasing material, labor, and other costs required to operate and grow its business. The company has experienced increases in the cost of certain components, parts, raw materials, and other supplies necessary for production, and such increases may continue to impact it in the future.

The company faces risks associated with the Relocation, including meeting spending, headcount, and wage commitments required to receive and/or retain certain governmental incentives. The compliance period for the award from the State of Tennessee Department of Economic and Community Development is defined as January 1, 2027, January 1, 2028, and January 1, 2029. If the company fails to meet the performance requirements of the award, it may be required to repay all or a portion of the award amount.

The company is subject to tariffs on certain of its products, and other products could become subject to tariffs in the future. The company has been negatively impacted by the imposition of higher tariffs as a result of recent changes in U.S. tariff policies, and it may continue to be negatively impacted by these policies in the future, as well as by any retaliatory tariffs introduced by the United States' trading partners. In February 2026, the U.S. Supreme Court issued a ruling limiting the authority of the United States to impose tariffs under the International Emergency Economic Powers Act, creating uncertainty regarding tariffs previously assessed under that statute.

The company's performance is materially impacted by economic, political, social, legislative, and regulatory factors, including the perceived risk of federal gun control legislation; demand was negatively impacted in recent years by unified Republican control of the federal government. The company is subject to extensive regulation by the ATF, and failure to comply could limit activities or put the company out of business. The company faces risks from protectionist trade restrictions, including tariffs; it has been negatively impacted by higher tariffs and may continue to be impacted by retaliatory tariffs. High levels of inflation have depressed consumer demand and increased material and labor costs, reducing profitability. The company's top five commercial distributors accounted for 46% ²³ of net sales in fiscal 2026, and two customers represented 24.7% ²⁴ of total net sales and 30.2% ²⁵ of total accounts receivable as of April 30, 2026, creating customer concentration risk.

Management's message emphasizes the objective to be the undisputed market leader in the firearm industry. Key strategic priorities include driving organic growth by leveraging brands and designing innovative new products, designing and marketing high-quality products that drive customer satisfaction and loyalty, creating a leverageable infrastructure by streamlining and standardizing business operations, and deploying cash flow to maximize return on invested capital. Management states that the company plans to continue to introduce new products in fiscal 2027. Management also states the current expectation to spend between $40.0 million to $45.0 million ²⁶ on capital expenditures in fiscal 2027 and that inventory levels will increase modestly during fiscal 2027.