Outdoor (NASDAQ:POWW) reported what management described as a “strong” fiscal third quarter 2026, pointing to higher marketplace volume, continued high gross margins, and a sharp year-over-year reduction in operating expenses that helped drive a return to profitability.
Quarterly results: revenue growth and profitability
Chairman and CEO Steve Urvan said fiscal Q3 2026 net sales rose to $13.4 million, up 7% (about $900,000) from the prior-year period, which he said outperformed “broader trends in a restrained consumer spending environment.” Gross margin remained high at 87%.
Urvan said net income before discontinued operations was $1.465 million, compared with a $21.177 million loss in the prior-year quarter. Earnings per share from continuing operations were $0.01, versus a ($0.18) loss a year ago. Kajewski added that Outdoor posted net income for a second consecutive quarter at “just under” $1.5 million.
Adjusted EBITDA and cash generation
Management emphasized Adjusted EBITDA as a key indicator of underlying performance amid non-recurring items. Urvan said Adjusted EBITDA increased 54% to $6.5 million from $4.3 million in the year-ago quarter. Kajewski said Adjusted EBITDA of $6.5 million represented 49% of net sales, and he cited an improvement in adjusted earnings per share to $0.05 from $0.04 a year earlier.
Urvan also pointed to “strong cash generation” of over $4 million from operations during the quarter, even after restructuring costs, legal costs, dividends, and other costs. Kajewski said the company’s cash position increased by nearly $4.2 million from the prior quarter, including $500,000 of interest income, bringing cash to $69.9 million.
With that liquidity, management reiterated an intent to use the share repurchase program “as trading permits.” Urvan said the company had been in an earnings-related blackout and expected to begin executing on repurchases once back in an open trading window. He also said management viewed the shares as “highly undervalued.”
Cost reductions and the role of legal and compliance expenses
A major theme of the call was expense reduction. Urvan said operating expenses declined about $22 million year over year, with operating expenses “the largest component,” down approximately $21 million. He said the improvement was partly driven by lower litigation-related costs, but emphasized that recurring ordinary corporate operating expenses declined by roughly $1.4 million, driven by reductions in corporate headcount, legal spend, and facilities costs. Urvan reiterated his view that GunBroker.com can be operated effectively with a smaller, streamlined organization.
During Q&A, management cautioned that legal expenses may not trend evenly. Kajewski said some costs were lower than expected in Q3 and “may not always trend that same direction.” Chief Legal Officer Jordan Christensen added that legal costs “are never straight line,” noting the company’s goal is to resolve matters as quickly as possible, but quarterly spending can ebb and flow.
Urvan also said requirements connected to the company’s SEC settlement and heightened scrutiny have increased costs in areas such as legal, compliance, and internal auditing. He said management expects these costs to drop off “appreciably” over time, though he previously framed that as a 12–18 month horizon. He also highlighted that indemnification of former officers contributes to legal spend and will continue until those matters are resolved with the SEC.
Marketplace trends: firearms growth, used strength, and share gains
Kajewski said firearm unit sales increased over 8% from last quarter while Adjusted NICS declined 3.7%, resulting in an increased share of Adjusted NICS by 56 basis points. He said the increase in firearm GMV was partially offset by a decline in the non-firearms category.
Asked why Outdoor was outperforming broader NICS trends, Urvan attributed momentum to a focus on buyer experience—making it easier to find items, buy, and transact—along with efforts to streamline fulfillment steps tied to regulated transfers. He said used guns remained “very strong,” though he added firearms overall were a strong category during the quarter.
In response to a question about Florida-related demand (including a referenced tax holiday), Kajewski said the company did look at the impact and that it was “up,” but “not a large driver” of overall performance. He said both new and used firearms were higher versus the year-ago quarter, with used “leading the way.”
Product initiatives: Master FFL partnership and universal payments
Management highlighted initiatives intended to reduce friction for buyers and sellers on GunBroker.com. Kajewski said Outdoor recently announced a strategic partnership with Master FFL to improve the transfer process for products subject to FFL regulations. He said the partnership required an upfront investment in Q3 that impacted cost of goods sold, though margins remained strong at 87.1%, and the company expects the expense to continue until implementation is complete.
In Q&A, Kajewski quantified the Master FFL investment at approximately $60,000 to $120,000 per month, describing it as an effort to “get all the plumbing working” so the tool can be seamless and ultimately become a profit center that supports additional sales.
Urvan also discussed “universal payments” as a major opportunity, noting that about 30% of transactions are not paid by credit card today. He said enabling more transactions to be completed via credit card could reduce buyer friction, increase GMV, and potentially raise take rate. However, he declined to provide a rollout timeline, citing complexity around licensing, compliance (including KYC/AML), and bank processes, even if the technology itself is not the primary challenge.
Looking ahead, Urvan said the near-term objective is to achieve a $25 million Adjusted EBITDA run rate before sales growth over the next 12 months, while continuing cost optimization and targeted investments to improve traffic, transaction volume, conversion, and revenue.
About Outdoor (NASDAQ:POWW)
AMMO, Inc designs, produces, and markets ammunition and ammunition component products for sport and recreational shooters, hunters, individuals seeking home or personal protection, manufacturers, and law enforcement and military agencies. The company's products include STREAK Visual Ammunition that enables shooters to see the path of the bullets fired by them; and Stelth Subsonic ammunition primarily for suppressed firearms. It also owns and operates GunBroker.com, an auction site that supports the lawful sale of firearms, ammunition, and hunting/shooting accessories.
