GrabAGun Digital Holdings Inc. (PEW) Q3 2026 Earnings Call Transcript

Good afternoon, and welcome to the Grab-A-Gun Digital Holdings Third Quarter 2026 Earnings Conference Call. On today's call are Mark Namatti, Chairman and Chief Executive Officer, and Jonathan Terry, Chief Financial Officer. A recording of this conference call will be available on the Grab-A-Gun 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. These statements include, among other things, statements regarding our business strategy, growth opportunities, future financial and operating performance, anticipated benefits of the CAM4 acquisition, our ability to successfully integrate CAM4's operations, the continued development and expansion of PEW logistics, expected improvements in margins and operating efficiency, And our plans and priorities for capital allocation. Forward-looking statements are based on management's current expectations, estimates, and assumptions, and are subject to risks and uncertainties that could cause actual results, performance, or achievements to differ materially from those expressed or implied by these statements. These risks and uncertainties include those described under risk factors in our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the SEC, which are available on our Investor Relations website and at sec.gov. Forward-looking statements speak only as of the date of this call, and should not place undue reliance on them. Except, as required by applicable law, Grab-A-Gun undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Today's discussion will include non-GAAP financial measures, including adjusted EBITDA. These non-GAAP measures should not 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 our earnings release, which we filed with the SEC earlier today, and is available on the company's Investor Relations site. I will now turn the call over to Mark Nomadi. Mark, please go ahead.

Good afternoon, and thank you for joining us. I want to focus on three key areas today. First, the quality of our core business continued to improve. Gross margin expanded significantly in the quarter, despite a decline in revenue. Second, P Logistics continued to add manufacturers and delivered its highest quarterly service revenue since launch. And third, shortly after quarter end, we closed the acquisition of CAMFOR, a national wholesale distributor for approximately $34 million in cash, with no external financing and no shares issued. Many of you have told us that the central question in our story is how we will use our capital. It is the right question. With that, I will spend a good part of my time today on CAM4 and on the framework for how we are thinking about every dollar that is deployed. Let me first start with the headline numbers. Third quarter revenue was approximately $21 million, down just under 5% year-over-year. Our gross margin expanded 480 basis points to 14.4%. Firearm sales declined approximately 4%. With the 14% decline in units partially offset by a 10% increase in average sales price, while non-firearm sales declined approximately 12%. I want to be straightforward about volume. Sequentially, orders moderated following a second quarter surge driven by specific regulatory changes, while a heavier mix of suppressors lowered our average order value. Year over year, we faced a difficult comparison against elevated IPO-driven demand last year. Our margins tell a different story. Gross profit increased 44% versus the prior year, and gross margin was also up 90 basis points from the second quarter. This marks our third consecutive quarter of year-over-year gross margin expansion. Three factors drove the margin improvement. Higher average selling price, better sourcing, including an increase in direct-for-manufactured purchasing, and PEW logistics, which carries gross margins significantly higher than our retail business. Through the first nine months of the year, total revenue increased 5%, while gross margin increased 280 basis points. Our customer metric continued to move in the right direction. Customer lifetime value increased 4% year-over-year to $825, with new user growth of 26% in the quarter. Total site traffic increased 4% year-over-year, with mobile engagement remaining a key driver of our business, accounting for approximately 70% of site traffic and 68% of revenue in the third quarter. Pew Logistics, our white label direct consumer platform for manufacturers, has grown service revenue every quarter since we launched in the first quarter. Service revenue is approximately $300,000 in the third quarter, up 28% from the second quarter, and up nearly 80% from our first quarter of operations, bringing year-to-date service revenue of just over $600,000. The platform has now processed more than $3.1 million in gross merchandise value. While Pew is still early, we believe the indicators that matter most are moving in the right direction, which is consistent sequential growth, the quality of manufacturers joining the platform, and a margin profile well above our e-commerce retail business. In October, we added Saar as our fourth manufacturer through its exclusive U.S. importer, Saar USA. Founded in 1880, Saar has a long and trusted history of serving military and law enforcement customers in more than 80 countries. Together with Kel-Tec, Deria Arms, and Backwood Suppressors, Pew Logistics now serves a diverse manufacturer base spanning an established American firearms manufacturer, two international brands, and a suppressor maker. We are also expanding the service we provide to our manufacturer customers. Last week, we launched Kel-Tec's new website, which Pew Logistics operates on a full-service basis, including direct-to-consumer sales and merchandising, expanding our role and value proposition beyond fulfillment to full e-commerce operations. Suppressors are one of the fastest-growing categories in the industry. NFA background checks, which include suppressors, increased 129% year-over-year in September, and then on October 9th, ATF announced it will no longer enforce NFA registration requirements for suppressors. Federal background checks and state laws still apply, which means demand is growing while compliance remains. That plays directly into our strength. We've built compliant direct-to-consumer infrastructure over 16 years, and through P-Logistics and our partnership with Backwoods Suppressors, we're positioned to serve that demand for both consumers and manufacturers. We believe these developments further increase the value of compliant direct-to-consumer infrastructure. Now, let me turn to CAMFOR. On October 26, we completed the acquisition of 100% of CAMFOR, a wholesale distributor of firearms, ammunition, and outdoor products. Founded in 1952 and headquartered in Westfield, Massachusetts, they serve independent dealers nationwide. CAMFOR generated an audited net revenue of approximately $77 million in 2025, a portion of which came from sales to Grab-A-Gun and will be eliminated in consolidation on a go-forward basis. With CAMFOR, Grab-A-Gun now reaches the market three ways, consumers through Grab-A-Gun.com, independent dealers through CAMFOR, and manufacturers directly through Pew Logistics. As the industry consolidates, we believe manufacturers will increasingly value partners that can reach both dealers and consumers efficiently and compliantly. What we bring to CAMFOR is the technology we have built over 16 years. AI-powered demand prediction, automated pricing across approximately 73,000 active SKUs, automated procurement, and our eGumba compliance system, which has supported more than 1 million direct-ship transactions. We believe applying these capabilities to CAMFOR's wholesale operations can improve purchasing economics and inventory productivity. In turn, CAMFOR expands our product access, purchasing scale, and extends our reach into the independent dealer channel. The purchase price was approximately $34 million on a cash-free, debt-free basis, subject to customary adjustments, and was valued primarily on the inventory and receivables acquired. We funded the transaction entirely with cash on hand, with no external financing and no shares issued. As a result, the acquisition did not dilute existing shareholder ownership. CAMFOR continues to operate under its own name with its own sales team and dealer terms. Our fourth quarter results will include CAMFOR from October 26th, and we expect to file its audited financial statements and pro forma information on a Form 8KA in early January. Let me speak directly to how we allocate capital. Our objective is simple. Build long-term shareholder value per share while keeping our balance sheet strong. Liquidity comes first. Next, we fund the core business, including our new headquarters and the CAMFOR integration. Then we invest in organic growth, like Pew Logistics, where we can build on infrastructure we already own. After that, come bolt-on acquisitions that fit our industry and clear a high return bar. And we may consider share repurchases when we believe our stock trades below its intrinsic value. Every dollar has to earn its place on that list. CAMFOR is the first real test of our capital discipline. It is asset-backed, all cash, and non-dilutive, and it sits squarely in our industry. We have also strengthened the team behind these decisions. J.T. has joined as Chief Financial Officer in August, and John Swanigan joined as Chief Technology Officer in September. Both bring a strong background in their respective areas of expertise and are already making contributions in a relatively short amount of time they've been with us. With that, I'll pass it over to J.T. to walk us through the financial details for the quarter. J.T.

Thank you, Mark. I'll now provide additional details on our third quarter financial performance. Third quarter revenue was $21.2 million, a decrease of approximately $1 million, or 4.7% compared to the $22.3 million in the third quarter of 2025. Firearms product sales were $17.3 million, down 4.5% year-over-year. The decline was primarily due to a 14% decrease in unit volume, partially offset by a 10% increase in average sales price. Non-firearms product sales were $3.7 million, a decrease of 11.8% year-over-year, and was primarily due to a 27% decrease in unit volume, partially offset by a 20% increase in average sales price. Few logistics service revenue of $0.3 million partially offset this decline. During the quarter, we redirected marketing investment towards search engine optimization and organic customer acquisition, which has helped to fuel new customer growth, improve website engagement, and resulted in customer lifetime value expansion. We also believe the year-over-year declines in unit volume across both categories reflect, in part, the heightened customer awareness and engagement with our online sales platform during the same period last year following our July 2025 public listing. Gross profit in the third quarter increased $0.9 million to $3.1 million, representing 14.4% of revenue. Compared to $2.1 million, or 9.6% of revenue, in the prior year period. Gross margin expanded 480 basis points, driven by the higher average sales price across both firearm and non-firearm products, increased direct purchasing from manufacturers, as well as growth in the higher margin Pew Logistics business. We remain focused on building on this progress through disciplined pricing, continued optimization of our product mix, and the expansion of higher margin revenue opportunities, including Pew Logistics. We believe these efforts can support further margin improvement over time while remaining competitive and delivering value to our customers. Q3 also represented the continued investment in our team and public company infrastructure. These investments, together with costs related to the CAMFOR acquisition, added approximately $2.5 million of operating expenses, primarily $1.3 million of employee compensation and $0.9 million of professional services, including $0.7 million related to CAMFOR. These increases were offset by a $2.6 million decrease in stock-based compensation. As a result, total operating expenses were $6.8 million compared with $6.9 million in the prior year quarter. Net loss for the third quarter was $3 million, an improvement of $0.8 million compared to the prior year period net loss of $3.8 million. The year-over-year improvement was primarily driven by the increase in growth profit, a reflection of continued gross margin expansion. Adjusted EBITDA for the third quarter was a loss of $2.1 million, compared to an adjusted EBITDA loss of $0.9 million in the prior year period. The $1.2 million change resulted from normalized operating costs increasing $2.1 million related to our continued investment in the business to support our longer-term growth initiatives and operating as a public company. This increase was partially offset by the $0.9 million year-over-year gross profit improvement. Now turning to the balance sheet. We ended the quarter with $96 million in cash, down $1.5 million from the end of the second quarter. We incurred $2.8 million in CapEx spend, primarily related to the continued build-out of our new corporate headquarters, which was partially offset by $1.3 million of positive operating cash flow. When compared to year-end 2025, our ending third-quarter cash balance declined $14.3 million, primarily reflecting three factors during the first nine months of the year. We used approximately $2.4 million for share repurchases, invested $5.7 million in property and equipment, including expenditures related to our new headquarters, as well as capitalized software additions, and net cash used in operating activities of $7.3 million, largely reflecting our net loss year to date. As we look to the fourth quarter and into 2027, We remain focused on disciplined capital allocation, expense management, and improving operating performance and cash generation. Pew Logistics gives us an opportunity to broaden our revenue streams and improve our overall business mix over time. Because the platform runs on infrastructure and capabilities we already own, incremental activities carry attractive margins with limited additional investment. We're focused on deepening each manufacturer relationship, as we've done with Caltech, where we've moved from fulfillment to operating their full direct-to-consumer business. Over time, CAM4's established manufacturer relationships may also create opportunities to expand our reach and generate additional activity across the platform. Our focus is on developing these opportunities and translating increased activity into a more meaningful contribution to revenue and profitability over time. During the first nine months of the year, we repurchased approximately $2.4 million of our common stock under our previously authorized $20 million share repurchase program. No shares were repurchased during the third quarter, and our prior share repurchase plan expired in early August. As Mark previously mentioned, we continue to take a disciplined approach to capital allocation, balancing investment in our business and growth initiatives, along with evaluating strategic M&A opportunities, all with the overarching objective of maintaining balance sheet flexibility and creating long-term shareholder value. Moving briefly now to CAM4. From a financial and operating perspective, we believe CAMFOR is a complementary addition to Grab-A-Gun that broadens our capabilities across the industry. The opportunity is to build on the strengths of our retail and logistics operations by adding an established wholesale distribution platform. Our focus is on disciplined execution and translating the capabilities across our businesses into tangible operating improvements. We will be monitoring CAMFORS performance, inventory productivity, Purchasing efficiency, and cash generation, whilst identifying opportunities to apply our technology and operating expertise where they can create value. At the same time, we recognize the importance of preserving CAMFOR's established manufacturer and dealer relationships, and the operating model that has supported the business for decades. We approached this transaction with a focus on capital discipline. Funding the acquisition entirely with cash on hand, without external financing or equity issuance, allowed us to expand our capabilities without adding transaction-related debt or diluting shareholders. As Mark mentioned earlier, we expect to file CAMFOR's audited financial statements and the required pro forma financial information in an amended Form 8K within the time period permitted by SEC rules, currently expected to be early January. Beyond the information already disclosed, we do not have additional financial details to share at this time. As we gain experience and traction with the combined businesses, we will continue to communicate meaningful developments through our regular reporting process. From here, our focus is on translating our investments and operating initiatives into stronger financial performance. That means maintaining fiscal discipline, improving operating efficiency, and generating cash as we execute across our businesses. Ultimately, we are focused on strengthening our operating performance and building sustainable value for shareholders. With that, I'll turn the call back over to Mark before we move into Q&A. Mark? Thank you, JT.

Let me quickly reiterate the key themes from today's discussion. First, gross margin rose 480 basis points to 14.4%, marking our third consecutive quarter of year-over-year expansion, even as unit volume softened. Second, Pew Logistics now serves four manufacturers and is expanding beyond fulfillment into full e-commerce operations. Third, our acquisition of CAMFOR was a disciplined all-cash investment that gives us three complementary routes to market without diluting shareholders. And finally, we will stay disciplined with Every dollar we deploy. With liquidity as our first priority. We believe the market will measure us by execution, not announcements. Our focus now is on realizing the potential of CAMFOR, continuing to scale P-Logistics, returning the core business to growth, and demonstrating measurable progress every quarter. I want to close by recognizing our entire team for the dedication and hard work they bring to the business every day. I also want to thank our shareholders for their continued interest, engagement, and support. We appreciate your confidence in our company and look forward to delivering on our commitments in the quarters ahead. With that, operator, please open the line for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Matt Caranda with Roth Capital. Matt, your line is open. Please go ahead.

Hey, guys. Good afternoon. Maybe just starting with the core grab-a-gun business. I wanted to hear if you could speak to any early sort of Q4 demand trends that are notable. Is it sort of a continuation of the third quarter trend of, I guess, lower volumes, but higher ASPs that you're seeing? And then just anything observable around the midterms in terms of any uptick, downtick, and demand that you've observed more recently?

Hey, Matt. Yeah, thanks for joining the call today. You know, so the business is pretty seasonal. So, you know, Q1, Q2, this pattern is very consistent. I'm sorry, Q2 and Q3, very consistent with normal firearms seasonality. Q3 orders typically moderate, especially this year, following the Q2 surge by all the suppressor and regulatory changes. As far as Q4 is concerned, we typically are not going to comment on the current period trends in the middle of a quarter, but we'll continue to monitor traffic conversion unit volumes closely.

Okay, and then maybe just on the gross margin, pretty strong relative to at least my expectations, any way to isolate sort of how much of that margin improvement on a year-over-year basis came from the mix shift that you mentioned towards suppressors versus maybe the better sourcing and then the PE logistics tailwinds as well?

Yeah, I don't know if I can really isolate that for you. Definitely, you know, the more favorable mix, you know, those higher-priced firearms bring a lot of that increase on the margin. P-Logistics as well, obviously P-Logistics being still kind of in its infancy, although the margin is higher, it's still kind of relatively low amount of revenue compared to the core business. So, you know, you can see that the product mix and the sourcing from direct from manufacturers by getting at that lower unit volume cost. is really what's kind of driving the margin expansion.

Okay, got it. And then just on P-Logistics, Ramping really nicely. Just want to hear your thoughts on sort of the growth drivers over the next few quarters. Seems like there's still a lot of opportunity to add more manufacturing partners, but maybe there's also some opportunity to expand the services with your existing partners. I was thinking about that due to the Caltech website announcement that you guys made on the call here. Maybe just speak to the drivers of the logistics growth over the next few quarters and the way we should be thinking about it ramping.

Yeah, that's definitely correct. So interest in the platform is definitely strong. We've intentionally picked and added these manufacturers with different operating models to really grow the profiles and the platform itself to have different offerings to different customers of the platform. Obviously, Kel-Tec being our first customer, they've been on the platform now for about three quarters. We can see the things that they needed in addition to our initial offerings. So we've made those modifications and added those services to their new core offerings. So now we're offering significantly more features to Kel-Tec, which allow us, obviously, to scale the revenue to Kel-Tec as well as our revenue as a services layer to Kel-Tec. So we're going to continue to add more manufacturers to kind of build up the platform and the offerings of the platform, while also listening to our existing customers and adding the features that they want to need so we can expand our value proposition to existing customers.

Does the expanded services change at all the revenue model, which is kind of a take rate on GMB? Any way to think about ways we should be modeling the change there, if there is any?

No, not really. It just kind of broadens the assortment of products that we can sell for them. So they were selling previously non-firearm items themselves. So now we can kind of move their entire product line, parts, accessories, and all of that stuff. So it allows consumers to buy even larger basket sizes, so increase in AOVs and stuff like that. But in terms of the... The pricing of the platform to our customers, it stays the same. It's just a broadened product assortment, which allows customers to acquire more of what they want from their manufacturers.

Yeah, okay. Makes sense. Maybe if I could ask a couple on CAM4, I know there's more details to come, but maybe just in terms of... The, there was like a revenue run rate provided at the acquisition announcement, but there was some amount that you guys were previously acquiring from them. So maybe just wanted to hear how we should be thinking about sort of a, I guess, an external run rate of revenue under Grab a Gun's purview or under your ownership.

Yeah, JT, you want to take that one?

Yeah, obviously, we're not really in a position to disclose yet all of the financials related to the CAM4 acquisition, and that's going to come as fast as we can. End of the year into early January, when you get the AKA published. But yeah, we're not in that position right now to be able to split out those dynamics between intercompany and rim rate sales for you.

Okay, all right, we'll stay tuned on the numbers at least. I guess one higher level question I had on it was just how the integration of CAM4 might affect or change your existing supplier and distributor relationships that you have currently, maybe just. Speak to sort of, does it change the competitive environment at all for you, or does it change the nature of any supplier relationships that you currently have?

Yeah, so Grab-A-Gun and CAM4 still stay kind of separate as isolated businesses. Grab-A-Gun still runs on the same model that it did prior to the acquisition. You know, product availability and assortment and having a wide breadth of products is kind of one of the key components of Grab-A-Gun, and although, you know, things have changed with how Grab-A-Gun pulls inventory depending on which distributors and which brands directly, there's really no significant delta in how Grab-A-Gun operates or the catalog offering to customers. Okay.

All right. I'll leave it there in the interest of time here, and thanks for taking the questions. Thanks, Matt.

This concludes our question-and-answer session. I will now turn the call back to Mark Nnamadi for closing remarks.

Thank you again for joining us today and for your continued interest in Grab-A-Gun. We look forward to connecting with many of you at our upcoming investor conferences and sharing further progress on our fourth quarter and full-year earnings call in March. Thank you and have a great day.

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