AMMO, Inc. Reports Third Quarter 2023 Financial Results

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:CoreIRPhone: (212) [e-mail]

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 EndedDecember 31,								For the Nine Months EndedDecember 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 EndedDecember 31,								For the Nine Months EndedDecember 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