Good day, ladies and gentlemen, thank you for standing by. Welcome to today's conference call to discuss AMMO, Inc.’s Financial Results for the First Fiscal Quarter of 2022. At this time, all participants are in a listen-only mode. Following the formal remarks, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up. Hosting today's conference call will be Reed Anderson with ICR. As a reminder, today's conference is being recorded. And now I would like to turn the conference over to Mr. Anderson. Please go ahead, sir.

Thank you. Good afternoon and welcome to AMMO, Inc.’s conference call to discuss results for the first fiscal quarter of 2022. On the call today from AMMO, Inc. with prepared remarks are Fred Wagenhals, Chairman and Chief Executive Officer; Rob Goodmanson, President; and Rob Wiley, Chief Financial Officer. By now everyone should have access to the earnings release, which went out this afternoon at approximately 4:10 PM Eastern time. If you have not received the release, it is available on the investor relations portion of AMMO, Inc.’s website at www.ammoinc.com. This call is being webcast, and a replay will be available on the company's website as well. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the risk factors section of AMMO Inc.’s most recently filed forms 10-K and 10-Q. Please know that during today's call, we will discuss non-GAAP financial measures, including results on an adjusted basis. Management believes these financial measures can facilitate a more complete analysis and greater transparency into AMMO Inc.’s ongoing results of operations, particularly when comparing underlying operating results from period-to-period. We've included a reconciliation of these non-GAAP measures with today's release. This call also contains time-sensitive information that is accurate only as of the date of this live broadcast, August 16, 2021. AMMO Inc. assumes no obligation to update any forward-looking projections that may be made in today's release or call. Now, I will turn the call over to Fred Wagenhals, Chairman and Chief Executive Officer of AMMO Inc.

Thanks, Reed. I would like to extend my personal appreciation to all of our great employees, customers, and shareholders for continuing to support our company during these exciting times. I am pleased with our first quarter results, which showed significant growth in sales, along with substantially improved profitability. The ammunition segment was a key sales driver reflecting strong demand for our core product and AMMO Inc.’s leadership position in the market. Our marketplace segment was the other significant factor behind our strong first quarter results as we had two months of high-margin revenue from GunBroker.com, which we acquired on April 30. The GunBroker.com acquisition was a big event for AMMO Inc., and we are just in the early innings of realizing its true potential. Over the next 12 months, we expect to leverage this dominant marketplace to significantly broaden our growth and increase margin. I would like to bring you up to date and answer most of our questions that I get hit with weekly from investors. Our board of directors is a strong board as far as our team effort. Chris Larson and I put together a team that I feel very proud of to take this company to the next level. Our Vice President, John Flynn, did a great job in securing enough land from the city of Manitowoc to build our new factory on and room for expansion in the future. My son, Tod Wagenhals, Executive Vice President, is in charge of getting the building built on time and under budget. The move-in date is summer of 2022. This will be a 165,000 square foot state-of-the-art manufacturing facility. Jim Mann, our plant manager, has done a remarkable job of integrating our patient loading operation into Manitowoc brass facility. Jim has had to read two additional warehouses totaling 70,000 square feet to keep up with the production demand until we move into our new building. Mark Hanish, our President of Global Marketing, and John Flynn have been working diligently on new product development for commercial use and government contracts. At the present time, we have a DOD contract with the government. Rob Wiley, our CFO, and Susan Lokey, CFO of GunBroker.com, and their team have worked around the clock to bring our accounting team up to par with the growth of our company. We are fortunate to have our new accounting firm. Matt Nicholson, our Vice President of Sales, and Anthony Tate, our Director of National Accounts, have done a tremendous job over the past 16 months, putting together an outstanding call center with current backorders over $200 million. This includes working with dealers, distributors, and big box retailers. Also, Matt, Anthony, and Nathan Acord, head of our purchasing, have found primers and gunpowder throughout the world to keep our factories running. We also have signed a five-year contract with a federal district to supply them with brass casings, and they supply us with GunBroker.com. The acquisition allowed Ammo Inc. to have a dominant marketplace platform. Steve Urvan is on our board and is also active in the future growth of the GunBroker.com business. Steve Bershka is the man in charge of GunBroker.com on a daily basis and has been running GunBroker for the past 10 years. We've put together a team with Steve Bershka, Matt Cross, Director of Purchasing, Matt Nicholson, and Anthony Tate, that is leading that team to secure ammunition and other items to put on GunBroker.com. This year our goal is to put $25 million worth of items through GunBroker.com with high margins. Rob Goodmanson, our President and Board Member, was brought in to help me run the day-to-day operations of this company because of his financial background and Wall Street experience to help me line up with bankers for future growth. The other thing that keeps coming up is my retirement. I don't plan on retiring. I plan on being here every day at 5:30 in the morning and conducting our eight o'clock production meetings. With that, I want to turn it over to Rob Goodmanson.

Thank you, Fred, and welcome to our earnings call. We couldn't be more proud of the incredible team that Fred has put together and the hard work everyone has put forth to create an outstanding quarter and all the successes we will have moving forward. Total sales rose 360%, almost $45 million, by the way, which only includes two months of our marketplace GunBroker.com. Our gross margins were 42.7% compared to last year of 11.1%. The demand trends in the US domestic market and international ammunition markets remain extremely strong and show no signs of slowing. As most of you know, when Fred had the idea of AMMO, it was not just an ammunition company. It was to take an industry that is extremely antiquated and bring technology and patented ideas to the forefront. Our acquisition of GunBroker has been transformative. The integration of the marketplace business with AMMO, albeit in the early stages, has been wildly successful, even though we've owned it for just over 90 days. As a leading marketplace to firearms and shooting sports enthusiasts, we're very excited about the impact of this business in accelerating our sales and earnings in 2022 and beyond. The marketplace is 70% of our profits and AMMO is 78% of our revenue. This should show the Street who we are, but we're not just a manufacturing company. We've implemented many new initiatives that are focused on improving the overall experience in the marketplace. For example, we've been adding personnel within customer service to speed up the process, whether it be the sale or any issues that come to light. We're adding new products, as Fred mentioned, to the site as we speak. We will provide easy access to third-party financing options along with loyalty programs to capture a broader share of potential transactions while increasing our average ticket size, and making the relationships we have with our customers stronger. As Fred stated, this acquisition of GunBroker was truly transformational for our company. First Quarter results give you an early glimpse of the significant long-term potential. This leading marketplace platform is highly leverageable and complimentary to our businesses. With that, I will turn this over to our CFO, Rob Wiley.

Thank you, Rob. Welcome, everyone. Let me walk you through our first quarter financials in more detail. Total net revenue for the first quarter of fiscal 2022 was $44.5 million, up 360% from the $9.7 million that we reported in the year earlier period. Growth in ammunition was the largest factor contributing to the year-over-year increase. For the quarter, ammunition sales were $28.4 million compared to $6.4 million in last year's first quarter. Our marketplace segment had revenue of $12.3 million versus nothing a year earlier, reflecting the acquisition of GunBroker.com at the end of April 2021. Our perspective on the significant growth we're seeing in our marketplace segment—note that the two months of GunBroker.com revenue we reported in the first quarter were 59% higher than the comparable two-month period last year. Other sales drove a significant increase in gross profit to $19.0 million in the first quarter versus $1.1 million in the year earlier period. The improvement in gross profit margin was equally impressive, reflecting the influence of our rapidly growing marketplace revenues. For the quarter, gross profit margin rose to 42.7% from 11.1% in last year's first quarter due to the inclusion of marketplace revenues, which had an 86.5% gross margin in the quarter. First quarter operating expenses totaled $9.3 million, up from $3.9 million a year ago. Several factors accounted for the increase including the addition of marketplace operations, our ammunition payments stemming from the growth in our ammunition sales, higher non-cash stock-based compensation expense, and professional fees related to the acquisition of GunBroker.com. As a percentage of net sales, operating expenses declined to 20.9% in the first quarter of fiscal 2022 and 40% in the year earlier period, reflecting operating leverage, manufacturing scale, and the mix shift in favor of higher margin marketplace revenues. Operating income was $9.7 million for our first quarter compared to an operating loss of $2.8 million in the year earlier period. As a percentage of net sales, operating income was 21.8%, driven by a 60.5% operating margin in the marketplace segment. Net income available to common shareholders for the first quarter of fiscal 2022 was $9.2 million, or $0.08 per diluted share compared to a net loss of $3.1 million or negative $0.07 per diluted share in the first quarter for fiscal 2021. Adjusted net income per share was $0.13 versus an adjusted per share loss of $0.01. Adjusted EBITDA was $16.3 million compared to adjusted EBITDA loss of $0.03 million in the year earlier period. The significant improvement in adjusted EBITDA was due to the increased sales and improved gross margins, reflecting growth in the core ammunition segment, plus the addition of our higher margin marketplace segment. Please note that adjusted EBITDA is a non-GAAP measure and you should refer to the reconciliation of our GAAP to non-GAAP results in today's press release for additional details. Our total assets have increased significantly following the acquisition of GunBroker.com, from $170 million to $381 million. Notable increases in our assets include intangible assets and goodwill from the acquisition as well as accounts receivable, which increased by $14.8 million, and inventories, which increased by $12.1 million. We’ve built a backlog of $238 million even as we continue to increase our sales and deliver to our customers. Now, let me provide you an update on our guidance. Given strong underlying demand and our better-than-expected results in the latest quarter, we're increasing our full-year fiscal 2022 revenue guidance from $190 million to $210 million. This includes reiterating our second quarter estimate of $51 million that we first shared with you on July 15 and the expectation that revenues will be approximately $60 million in the third fiscal quarter. Our full-year adjusted EBITDA estimate for fiscal 2022 is now $70 million, up from the prior forecast of $65 million, mostly reflecting higher expectations for revenue growth. As we look towards the remainder of our fiscal 2022, we expect to be able to offset a significant portion of our potential tax liability with our $31 million in net operating losses generated through our prior fiscal year end. This concludes our prepared remarks. We're now ready to take questions, so I'll pass it back to our moderator. Thank you.

Thank you. We will now open the floor for questions. Our first question comes from Matt Koranda with ROTH Capital. Please go ahead with your questions.

Hi, guys. Thanks. Just wondering in the outlook that you provided the $210 million for revenue, how to think about the split between GunBroker and the core ammunition business? Then I guess, if I plug your second quarter and third quarter guidance with a full year guide, it does seem to imply a sequential drop in the fourth quarter. So just wanted to see if you could speak to seasonality that maybe you're betting and the outlook or if there's just conservatism there?

Hey, Matt, this is Rob Wiley. Thank you for the question. So the way we look at our guidance increasing from $190 million to $210 million is really made up of an even split of the activity that will be generated through the GunBroker.com marketplace as well as our ammunition manufacturing operations. And we really don't view any sort of seasonality impacting that total guidance overall.

Okay. Got you. And then I guess the other piece of the outlook, if I just take sort of the remaining year worth of EBITDA, and the remaining year worth of revenue. It does seem to imply margins ticked down a little bit and just wanted to get your thoughts on, we put up a 37% EBITDA margin, it looks like in the first quarter with only a partial contribution from GunBroker. And so, is there any reason we should expect any margin degradation for the remainder of the year?

No. We don't expect margin degradation. In fact, looking on to our next quarter, with a full three months of GunBroker activity, coupled with our increasing ammunition operations, and leveraging that platform, we expect our margins to end up at approximately 45% conservatively, and you mentioned, just our adjusted EBITDA may seem low in comparison to the increase in guidance. Historically, we feel like we've been conservative with our guidance. And we'll update the Street on potential updates and guidance as we feel necessary.

Okay. That's fair. And then I guess a couple more on, one on backlog. So the $238 million implies a pretty strong order flow in the first quarter. So I just wondered if you guys could maybe entangle and speak to what drove the order flow in the first quarter? Is there any military orders that you guys have released within that backlog, or is it all commercial, or any sort of new customer orders that you can call out on the commercial side that maybe drove the backlog as well?

Hey, this is Fred Wagenhals. It's mostly commercial.

Okay. Got you. I'll take that offline. And then the one more for me, and I'll leave it to someone else here. But the $25 million goal of new goods through GunBroker.com, I think that was interesting and kind of incremental here. Is that all ammunition? Or are there other products that you can put through the platform? Any more detail you can provide? And sort of tracking toward that $25 million goal for the year? Have we achieved any of it as of yet, or is that along the column for the rest of the year?

That's all for the rest of the year. But it's not all ammunition. And other items that we're going to be putting on. And you'll be seeing those other items probably within the next 30 days.

Thank you. Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your questions.

Hi, guys. Quick question for me first on demand, and I think Rob Goodmanson said, you might have talked about it a little bit in your commentary. But have you seen any change in demand, primarily for ammunition at this point?

We have not seen any change. As you think we could get rid of our backlog as everything is shipped, more orders come in. The backlog keeps growing. The manufacturing assembly has completed a shift. That is what we're seeing. We have not seen really we've seen the only thing, we've seen is a little price compression in some of the different rounds. But nothing significant. But the demand is still very strong, internationally and domestically.

Okay. And a change in your production, as we look at just different calibers and different ammunition, is it safe to assume that still, nine millimeter and two to three continue to be in high demand, or have you started to mix into maybe some other rounds of ammunition that maybe are starting to meet some of the demand for some of those high demand rounds?

Sure. The two to three and the nine millimeter is always going to be there. But there has been a shift to more of the specialized rounds. Frankly, the margins are better. There's been no price compression at all. And the demand is out there for. Oftentimes the lots of manufacturers convert into doing virtually nothing but nine millimeter. And rather than compete to lower prices, we'd rather compete at a higher margin.

Okay. And then, I know you guys have had a lot of changes at Manitowoc as your current facility. Can you talk about kind of during the quarter, any capacity increases, maybe within the footprint that you've got today, potential on increasing capacity? And, even if you can speak to kind of if you're pleased with the level of you're operating out of that facility today?

I'm very pleased with what we're doing up there. As I said earlier, Jim has done a great job of when they shutdown patient, integrating patient into the brass manufacturer. We found out real quickly. We couldn't put our whole operation in a 50,000 square foot building. John Flynn went out and helped give us two new buildings or two buildings that we rented of 70,000 square feet. Jim has done a great job of getting those buildings up and running. In today's world, you always have a people problem. But we seem to be toughing it out and solving that problem on a daily basis. It's definitely going to be a lot better. We're in one building, and we have a new facility that's going to be the state-of-the-art ammunition facility in this country. But for right now, it's tough every day, but we're making our numbers. As I said earlier, we get on a call every morning at 8 o'clock, and we focus on numbers, numbers, numbers.

And Fred, you talked a little bit about people and maybe some inflationary pressure in wages. Are there other places where you guys are maybe seeing some inflationary pressure and commodities or components that may be either; A, have seen price come up quite a bit; or B, that are just hard to get?

Well, I think it's not been easy, but we've kept the factory running and we seem to find primers when we need them. We seem to find the means to get past the brass increases. As you can see from our margins, we've done a great job of raising prices when we had to, finding product when we had to. But nothing's easy today. But I think we've got a great team of people, especially in purchasing, and we've had to go outside the United States to buy a lot of primers and gunpowder and whatever. But we feel comfortable with these numbers. And we feel comfortable every day that we've got the right mix of product and the right mix of inventory coming in to supply our customers.

Okay. Sounds great. Thank you, guys.

Thank you. Our next question comes from Brandon Beylo with Macro Ops. Please go ahead with your question.

Hey, everyone, fantastic quarter. I have one short-term question and two long-term questions, and I won't take up too much of your time. For the short-term, regarding GunBroker.com, you mentioned an approximate $25 million opportunity from ammunition and other products. Can you explain how the user interface and experience will be designed on the site? Specifically, when I check the ammunition section, will the products be prominently featured at the top for immediate purchase? What is your strategy for listing your products to ensure the best experience for users?

We are not planning to separate the products or highlight them prominently. However, we are introducing additional offerings that we believe will benefit our customers. These may include financial services such as credit options, gift cards, loyalty programs, and short-term funding for purchases. We are also looking to enhance our cross-selling platform to integrate these new products and services effectively. Our goal is to create a more robust customer experience, moving away from some past practices. Additionally, we are refining our promotional strategies and being more targeted in our activities with existing clients, which means we won't be distributing as much general outreach as usual.

Thank you for your questions. You have $118 million in cash, which is more than double from the previous quarter. What are your long-term plans for this cash over the next three, five, or ten years? Are you considering pursuing other verticals like you did with Jagemann Stamping, or are you focused on reinvesting in the AMMO business or the GunBroker marketplace? How do you plan to allocate that $118 million in cash?

I believe some of that money will be directed towards another area that we feel will be beneficial and will generate a significant portion of cash. We continually explore various opportunities, and if they align with our requirements, some funds could be allocated to enhance GunBroker or invest in additional machines. There isn't a single focus for our capital expenditure.

Got it. You might not be able to answer this in detail, but when you refer to ideas and verticals that meet your requirements, are you talking about a specific internal rate of return you aim for, or is it more about the qualitative aspect, meaning it has to perform better than what's currently in place?

I don't think there's a black or white answer to that. It's part of the things that we've always done, whether it be the Armor Piercing or the STREAK everything has had a unique, let's call it just technology to it. So it possibly would not be accretive to the point where it could be, you know, if they had the capital and the market behind it. Then again, it could be something simple as a unique project.

Got it. Yeah, okay, cool. And then last question, Fred, I know you said that you have no plans of retiring, which is very comforting to hear as a long-term shareholder. You said that you wake up at 5:30 every day, and it sounds like you're excited to go into work. So maybe can you just give us some reasons why you're so excited about what you're doing? I mean, obviously, given your history and your background, you could just be relaxing on the beach. So it is fascinating to see someone at your age engaging in this type of business building?

I like business, and I like this lifestyle. And I guess when my partner Chris and I started out five years ago and then I’ll work few years, three years ago, we said, I think we can build a nice little ammunition company that's profitable. Now, we sit here and say, I think we can build a big ammunition company that's very profitable. And so it's the thrill of the deal. I like the deal. I like what I'm doing. I think we've got a great staff of people. I think this company, I did $407 million a year in sales one time with my old company; I think we can beat that in the next two years. So my goal is record setting and beating records. So I'm excited to be here.

Awesome. And I'm excited as a shareholder to hear that. So again, great quarter, guys, keep up the good work. I'm going to hop off and just listen for now. Thanks again.

Thank you, there are no further questions at this time, I'd like to turn the call back over to management for any closing comments.

Yeah. Yeah. So thank you, everybody, for joining us today. A closing comment we'd like to leave you guys with is that we're very excited about this fiscal year and, in fact, raising guidance. The point we'd like to make is that we have over $31.5 million in net operating losses coming out of our previous fiscal year. And we expect to utilize these by the end of our current fiscal year. So once again, thank you very much for joining us on the call today. We pass it over to Rob for some additional comments.

Just in closing, and then I'll throw it to Fred. Just want to reiterate that the acquisition of the GunBroker platform transformed AMMO from a commodity focused product manufacturer to a marketplace. Over 6 million registered users and structural competitive advantages. Most investors see commodity-linked businesses, like the straight ammunition business, benefiting from short-term supply constraints and high geopolitical demand. Those leveraging that miss the point. They miss this opportunity I think to invest in a company to disrupt one of America's most boring industries. Fred.

Thank you. I want to thank everybody for participating in the call and watching our company grow. I firmly believe we've got a company here that has a lot of excitement to it. Especially the GunBroker thing; it puts us not just in the manufacturing and selling ammo, but we're a company now that is in the marketplace and just happens to sell ammo and other items that we're going to put on that site. And I just hope everybody watches it to see what we're going to do over the next several months with our marketplace company. Thank you very much.

Thank you. This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a great day.