Grabagun Digital Holdings (NYSE:PEW) Q2 2025 Earnings Call

0:00 Good afternoon, and welcome to GrabAGun Digital Holdings Second Quarter twenty twenty five Earnings Conference Call. On today's call are Mark Nemati, Chief Executive Officer and Justin Hilli, Chief Financial Officer. A recording of this conference call will be available on the GrabAGun Investor Relations website shortly after this call has ended. I'd like to take this opportunity to remind you that during the call, we will be making certain forward looking statements. This includes statements relating to the operating performance of our business, future financial results and guidance, strategy, long term growth and overall future prospects. We may also make statements regarding regulatory or compliance matters.

0:45 These statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call, in particular, those described in our risk factors included in the final prospectus and definitive proxy statement filed by the company with the SEC on 06/23/2025, as well as the current uncertainty and unpredictability in our business, the markets and the global economy generally. You should not rely on our forward looking statements as predictions of future events. All forward looking statements that we make on this call are based on management's assumptions and beliefs as of the date hereof, and GrabAGun disclaims any obligation to update any forward looking statements except as required by law.

1:38 Our discussion today will include non GAAP financial measures, including adjusted EBITDA. Those non GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Information regarding our non GAAP financial measures, including a reconciliation of our non GAAP financial measures to our most comparable historical GAAP financial measures may be found in the Management's Discussion and Analysts of GrabAGun attached as Exhibit 99.4 to the current report on Form eight ksA, which we filed with the SEC and is available on the company's Investor Relations site. I will now turn the call over to your host, Mark Nemati, Chief Executive Officer at GrabAGun.

2:28 Mark, please go ahead. Thank you, and good afternoon, everyone. Welcome to GrabAGun's first earnings call as a public company. This is truly a historic moment for our company, and I'm thrilled to share our progress with you today as we embark on the exciting new chapter. The completion of our public listing in July represents a transformational milestone that validates the strength of our business model and the support of our shareholders for Second Amendment principles. This transaction left us in a strong financial position with approximately $119,000,000 in net cash proceeds to accelerate our growth and acquisition plans. For those new to our story, GrabAGun is a digitally native e commerce retailer, firearms and ammunition, related accessories and other outdoor enthusiast products. GrabAGun is building out the infrastructure to scale lawful access to firearms while delivering the highest levels of speed and user experience.

3:18 We've developed industry leading solutions that revolutionize supply chain management, combining dynamic inventory and order management with AI powered pricing and demand forecasting. These advancements enable seamless logistics, efficient regulatory compliance, and a streamlined experience for customers, all while working with industry's leading brands. At a time when lawful access is under pressure, GrabAGun is built for growth, trust, and scale, operating with discipline and transparency while serving lawful gun owners and generating shareholder value. Turning to our performance this past quarter, we are pleased to announce strong financial performances with net revenues of $21,200,000 representing a 4% increase compared to that same period last year and generated positive operating income of $589,000 demonstrating the resilience of our business model.

4:08 Our firearm sales totaled $17,800,000 and increased 11% versus last year with unit growth up 16%. This was over 19 percentage points above adjusted FBI firearm background check statistics or NICS, which declined 3.4% over that same period, demonstrating GrabAGun's significant outperformance despite continued industry headwinds. Importantly, our business accelerated during the second quarter with our monthly year over year sales growth rates increasing significantly from April to June in sharp contrast to mix, which declined over that same period. Our growth this quarter was not just about higher sales volume, but we saw an increase to overall transaction quality and strength in our customer base. Average order value in Q2 was $453 up 16% year over year from $392 and up 7% sequentially from $423 in q one.

5:05 Our current LTM AOV is $431 which underscores the repeat purchasing power of our audience and the long term monetization potential of each new customer we acquire. On the engagement side, mobile continues to be the dominant channel for our business. In Q2, mobile sessions grew 11% year over year and mobile accounted for 67% of transactions and 65 of revenue, both above our twelve month averages of 6663% respectively. This reflects not only more customers shopping on mobile, but also a higher share of wallet coming from that channel. A year ago, in Q2 twenty twenty four, mobile accounted for 63% of transactions and 60% of revenue. So we've seen a meaningful step function shift in channel mix that aligns with our mobile first strategy.

5:54 Looking ahead to the rest of this year and next, our growth strategy centers around building upon our position in the two twenty five billion dollars plus firearms and ammunition industry through strategic acquisition opportunities that complement our core operations as well as access key adjacent categories, including e commerce platforms, brands and innovative technologies that integrate seamlessly into our tech stack. We are focused on acquisition opportunities that grow revenue, expand our market share, accelerate margin growth, improve customer acquisition, drive operational efficiency and provide first party customer data for enhanced insights into the industry. We have always employed a disciplined capital expenditure strategy, and we are evaluating multiple strategic opportunities that will enhance our platform capabilities and broaden our customer reach.

6:42 These acquisitions are deliberately selected for their accretive potential, expanding our market share in ways that are immediately impactful. Our disciplined approach focuses on acquisitions that demonstrate clear path to revenue growth, margin expansion and operational leverage with particular emphasis on technology integrations that enhance our customer acquisition efficiency and lifetime value metrics. In addition to these strategic acquisitions, we're always looking at strong partnerships that bolster GrabAGun's position in the industry and modernize the firearms purchasing experience for the next generation of buyers. We're also building upon GrabAGun's tech integration capabilities as we continue to modernize the firearms ammunition retail experience. Our proprietary tech stack includes AI driven listings, demand prediction and automated procurement systems that provide us with a competitive edge.

7:29 In Q3, we'll be rolling out our Compatio customization platform and launching cryptocurrency and stablecoin payments through trusted payment vendors. These enhancements are designed to expand our customer reach and improve conversion, furthering our commitment to modernizing firearms and ammunitions industry, and we are eager to see how they resonate with our growing mobile first audience. We're pleased to share that the strong momentum we saw building from April through June has carried into the early parts of the third quarter, particularly in average order value, mobile users and mobile transactions, demonstrating the success of our mobile first strategy and overall user session growth. Through our recent listing, GrabAGun has built out a world class team and board of directors, including Donald Trump junior, Blake Masters, Chris Cox, Colyon Wahr, Kelly Reisdorf, Andrew Keegan and Dusty Wanderlick, who bring invaluable expertise and leadership to our mission.

8:23 We are looking forward to executing our business model with added support from the public markets and driving growth and long term value. To that end, we recently announced a $20,000,000 share repurchase authorization, further demonstrating our conviction in the strength of our business and firm belief that the current share price is significantly below the company's intrinsic value. Repurchasing shares this level represents a compelling and efficient use of capital and underscores our long term commitment to maximizing shareholder value. I will now pass the call to our CFO, Justin Hilty to discuss our financial position and results in more detail. Justin? Thank you, Mark. The second quarter saw strong operational execution across key metrics. Net revenues of $21,200,000 represented solid growth with firearm sales contributing $17,800,000 and non firearm sales adding $3,400,000 Our gross profit margin of 10% demonstrates our ability to maintain pricing discipline while serving our customers effectively.

9:26 We generated net income of $630,000 and adjusted EBITDA of $751,000 showing a cash generative nature of our business model. The expansion in average order value of $453 this quarter, which was up 16% from the same period last year and up 7% from Q1 is a key driver of our margin resilience. Higher order values combined with our LTM AOB of $431 strengthen our payback periods on customer acquisition spend and improve the leverage of our fixed cost base. The continued rise in mobile engagement with mobile transactions up to 67 of total orders and 65% of revenue in Q2 creates operational efficiencies given our tech stack is optimized for mobile conversion.

10:16 These shifts allow us to scale without proportionally increasing fulfillment or marketing expense. We are also making progress on several initiatives to drive profitability as our business continues to scale. For example, over the past twenty four months, we've increased bulk buying deals with suppliers to lower unit costs, enabling us to deliver more value to customers while at least maintaining margins. Please also note that in addition to announcing Q2 results, as Mark mentioned, today, we also filed a current report on Form eight ksA with more detail on our historical performance to assist you in your analysis and understanding of our business. Following the completion of our SPAC transaction in July, we are well capitalized with over $120,000,000 in cash on our balance sheet. This strong financial position provides us with the resources needed to execute our strategy and accelerate our growth initiatives.

11:09 We're focused on disciplined capital allocation across three key areas, strategic acquisitions that expand our market share, operational scalability investments that improve our customer economics, and working capital optimization to support our growth trajectory. We've entered Q3 with healthy inventory positions in our highest demand SKUs and expanded supplier relationships, giving us the ability to respond quickly to demand spikes without compromising margins. Looking at longer term trends, GrabAGun is well positioned as a platform built for the digital age and a new generation of buyers who are mobile first and prefer online shopping experiences. This demographic shift represents a significant tailwind for our business model. I will now pass the call back to Mark.

11:57 Thanks, Justin. As you mentioned, GrabAGun is exceptionally well positioned to capitalize on the generational shift towards digital, mobile first retail preferences in the firearm and ammunitions industry. We are built for the digital age and the next generation of firearm enthusiasts, sportsmen and defenders who expect a seamless technology enabled shopping experience. Looking ahead, we remain excited about our strategic acquisition pipeline, our technology integration capabilities and our ability to scale while delivering exceptional value to our customers and shareholders. We're committed to delivering upon our strategic initiatives across platform enhancement, market expansion and operational excellence, which will also help to propel significant organic growth. The sustained increases we're seeing in average order value and mobile adoption gives us a highly attractive economic foundation to scale on.

12:44 As we expand into new categories, integrate acquisitions and roll out payment innovations like cryptocurrency and stablecoins as previously discussed, these customer engagement metrics provide confidence that we can grow profitably while extending our leadership in the mobile firearms e commerce space. Thank you everyone for joining us today on this historic first earnings call as a public company. We appreciate your support and confidence in our mission. We now open up the call for questions. Operator? Thank you. At this this time, we'll be conducting you. A question and answer session. Our Our first question comes from Matt Koranda with ROTH Capital Partners.

13:45 Please proceed with your question. Hey guys, good afternoon and congrats on the first call as a public company. I guess, I wanted to dig a little bit more into the outperformance relative to the industry. So plotting mix checks, adjusted mix in the quarter, those would have been down 3%. I think you guys cited unit growth of 16% in firearms. So maybe just if you could unpack a little bit of what you think is driving your market share gains in the industry and who you think you're taking share from in the category, that'd be super helpful. Yeah. Thanks, Matt. Yeah. Those metrics you've quoted are correct. Yeah.

14:31 We're definitely, seeing growth in the firearms, part of things. A lot of that, I think, is is driven by, you know, our mobile first strategy and people kinda coming to look for us as a new, or a more modern avenue to fill those firearm needs. So I think we're taking markets here from a lot of those that are less advanced as we are from a from a modernization perspective. Additionally, as we are as I mentioned, I think before, those added supplier relationships are giving us, you know, better access to product as we increase volume to give us better unit cost, which allows us to kind of offer better discounts to our consumers, especially in the firearm segment. And so that's really, we believe, driving a lot of that AOV as well as the increase in units.

15:19 Curious how customer acquisition has trended for you guys. I I guess in the recent months, you've you've been able to get a lot more earned media, just given sort of the the attention that's been garnered by the the SPAC. So maybe talk a little bit about has that helped with customer acquisition and and maybe how that's trended through, more recent months. Yes. Historically, you know, we haven't had, the best, operating industry for for marketing. So a lot of that earned media has definitely helped. A lot of that, we can be seen in the the growth of our sessions. So 11% increase in in overall session growth, meaning we're getting more eyeballs to the site, and then they're obviously converting, better because we're seeing a year over year increase in in revenue as well as unit growth too.

16:08 Okay. Great. And then maybe just if I could ask another one on AOV and the pricing environment. I guess pricing and firearms still, from what we hear, it sounds a little bit soft just in the general industry with the consumer trading down into lower price point firearms. But maybe just talk about how that plots against the increase in average order value that you guys put up this quarter and what you're seeing in terms of the AOV trend. Yes. So a lot of the economics that we're seeing that's increasing the AOV is an increased basket size of more firearm units. So the firearm, you know, is is kind of our bread and butter, our base unit versus, you know, ammo and other accessories. So we're seeing more customers flocking to the the firearm aspect, especially as we have more deals to open up because of those industry headwinds that you kind of spoke of and the price softening allowing us to offer these better deals on higher value products.

17:06 Okay. And then maybe if I could just ask one last one. So I think Justin cited a 120,000,000 on the balance sheet in cash post de SPAC. Maybe could for the benefit of folks on the call, could you just talk about where you are thinking the highest and best use of cash deployment is in the near term? I know you mentioned M and A is a priority. You do have a buyback authorization in place that you just put into place. So maybe how we should think about the way you balance capital allocation with the cash balance that you have? Yes. So the buyback, obviously, we authorized that because we believe that the current share price is below the company's intrinsic value. So it's definitely one of the first use of proceeds, for the $120,000,000 And then as you mentioned, M and A is definitely our key growth driver for inorganic growth.

17:59 So we're heavily looking into a pipeline of various acquisition targets. But then besides those two points, we also are gonna focus more on, obviously, growing our our business in terms of, human capital. So, you know, we're doing a a lot of hiring to kinda grow as as we expect to have massive growth in the near future, with acquisitions and everything else. And then finally, likely doing more spending, in terms of organic growth on some of the marketing spend and stuff like that that have been kind of more difficult to do in the past. Okay. I appreciate all that. I'll I'll leave it there. Our next question comes from Francisco Marmo with Maxim Group. Please proceed with your question.

18:50 Hi, Mark and Austin. Thank you for taking my call and congrats on the quarter. Two quick questions for me, if I may. So the first one on top line, can you share whether the growth is being driven by new customers' acquisition? Or is it more increased spending from existing customers? And then I have a follow-up call a follow-up question. Yeah. Thanks for joining, Francisco. I I think both of those, points are correct. So obviously, we're seeing a higher growth in AOV, which is driving the the top line number up because the more value per order, the higher top line. But then also as we're acquiring more customers through a lot of that earned media that Matt had even mentioned, as we're seeing, you know, traffic growth to the sites is driving more eyeballs and and more more new customers as well.

19:42 Okay. Great. Thank you. And then the second one, I was wondering if you guys could provide a bit more details on the launch of your partnership with, Compatio AI. I was curious, what the tool we the the customization tool, whether it would be available both on mobile and desktop, whether you're you're working with specific brands or product, or this is just something that you guys, would be able to roll out using your your existing entire product, database? So it'll it will be available on both mobile and desktop. It's gonna be fixed at least initially around, around rifles, and kind of the use case there is to increase basket size by by giving customers better insight to what's compatible with the with their firearm that they're purchasing. So think about adding optics and magazines and slings and all the various accessories to to grow basket size to, both increase AOV as well as increase total margin on the order.

20:43 Okay, great. Thank you very much. We have reached the end of the question and answer session. I'd now like to turn the call back over to Mark Nematze for closing comments. Thank you again, everyone, joining us on our first earnings call as a public company, and we look forward to speaking to you next quarter. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.