Good day, everyone, and welcome to the American Outdoor Brands Corporation Second Quarter Fiscal 2020 Financial Results Conference Call. This call is being recorded. At this time, I'd like to turn the call over to Liz Sharp, Vice President of Investor Relations, who will give us some important information about today's call.

Thank you, and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, believe, and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding revenue; earnings per share; non-GAAP earnings per share; fully diluted share count and tax rate for future periods; our product development, focus, objectives, strategies and vision; our strategic evolution; our market share and market demand for our products; market and inventory conditions related to our products and in our industry in general; and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings, including our Forms 8-K, 10-K and 10-Q. You can find those documents as well as a replay of this call on our website at aob.com later today. Today's call contains time-sensitive information that is accurate only as of this time. And we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures on this call. Our non-GAAP results and guidance exclude acquisition-related costs, including amortization, recall-related expenses, onetime transition costs, fair value inventory step-up, change in contingent consideration and the tax effect related to all those adjustments. The reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call can be found in today's Form 8-K filing as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. For detailed information on our results, please refer to our annual report on Form 10-K for the year ended April 30, 2019, and our 10-Q for the quarter ended October 31, 2019. I'll now turn the call over to James Debney, President and CEO of American Outdoor Brands. P. Debney: Thank you, Liz. Good afternoon, and thanks, everyone, for joining us. With me on today's call is Jeff Buchanan, our Chief Financial Officer. We are pleased with our second quarter performance, which includes several achievements that I will outline for you today. Among them was our work to finalize the plan to spin-off our Outdoor Products & Accessories business as a tax-free dividend to our stockholders, a transaction we announced in early November that we expect to close in about 8 to 10 months. Because we plan to become 2 independent public companies at the spin-off date, I have organized my comments today to first address our firearms business, which will become Smith & Wesson Brands, Inc. and then our Outdoor Products & Accessories business, which will become American Outdoor Brands, Inc. After my comments, Jeff will discuss our financial results and our outlook, which will now include revenue guidance for each business for the balance of the year as we work to provide stockholders with enhanced visibility as we approach the spin-off date. With that, I will first address our firearms business. As you know, we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers, not directly to end consumers. That said, adjusted NICS background checks are generally considered to be the best available proxy for consumer demand for firearms at retail. In our fiscal Q2, background checks for handguns increased 14.8% year-over-year, while our units shipped to distributors and retailers increased by 14.2%. For the same period, background checks for long guns grew 7.8% year-over-year, while our units shipped to distributors and retailers declined by 30.3%. This decline occurred for 2 reasons. First, you'll remember that on our last call, I indicated we have proactively worked to reduce our inventory of a certain family of hunting rifles, with enough time for that inventory to clear out of the channel in advance of an upcoming major product launch. As a result, we believe consumer demand for our hunting rifles in Q2 was addressed with the inventory that we effectively moved into the channel during Q1. The balance of our long gun decline relative to adjusted NICS is due to lower sales of modern sporting rifles versus last year. In a more recent update, November adjusted NICS increased 2.1% versus a year ago, following the expected seasonal trend line. Within that result, unadjusted background checks of Black Friday were brisk, delivering the second-highest Black Friday on record and indicating that the consumer is willing to wait for a great deal on their next firearm purchase. Distributor inventory of our firearms decreased sequentially from 178,000 units at the end of Q1 to 153,000 units at the end of Q2. This sequential decline is normal as Q2 takes us into the beginning of the fall hunting and holiday shopping season. Since the end of Q2, distributor inventories have further declined, but remain above our 8-week threshold. New product introductions in Q2 included the Smith & Wesson Model 648 revolver, featuring an 8-round capacity and chambered in 22 magnum, ideal for target shooting and small game hunting; as well as the new M&P M2.0 Subcompact, the newest addition to our popular M2.0 family of pistols and ideal for concealed carry and personal protection. During the quarter, we also prepared for an exciting new upcoming major product launch. We seeded the channel with this new product late in Q2 in preparation for the official launch that will occur on December 12. The team also continued preparations for several exciting new product launches we have planned for SHOT Show in January. While I won't share more detail at this point, I can tell you that we look forward to providing consumers with some exciting new products from the brands they know and trust. So please stay tuned. Turning now to Outdoor Products & Accessories or OP&A. Revenue for OP&A in Q2 decreased by about $8 million from the comparable quarter last year. The prior year quarter was a challenging comparison since it included large discounted orders from 2 significant customers, and those orders did not repeat in the current Q2. That said, the decline does not concern us because point-of-sale data continues to indicate strong consumer demand for our products at retail. In fact, and as Jeff will outline later, we expect full year fiscal 2020 revenue in OP&A to grow over the prior year. Our decision to organize our OP&A business into brand lanes continues to yield exciting results. Our 4 primary brand lanes are orientated around distinct consumer archetypes: the marksman, the harvester, the defender and the adventurer, each containing 3 to 6 distinct brands. This focus has enabled our teams to establish clear positioning for each brand, which, in turn, defines where each brand has the consumer's permission to play in certain product categories. The result of this approach is evident in our new product launch plans. In January, primarily at SHOT Show, 15 of our 19 OP&A brands will launch a large number of new products, 1 of which is an entirely new brand, and many of which represent our entry into 6 completely new product categories. Those entries demonstrate meaningful progress towards our expansion into the $35 billion rugged outdoor market, while the remainder are introductions aimed at strengthening our position and taking market share within existing product categories. I look forward to sharing the details of those launches in the new year. Lastly, and before I hand over to Jeff, just a few comments on the planned spin-off of our OP&A business. We made the spin-off announcement just 3 weeks ago. So there are no significant new developments to share today. We currently have a dedicated project team in place that will keep us on track, while we work to develop the various business arrangements that will need to be in place by the spin-off date. In the meantime, the rest of our organization will remain focused on continuing to effectively and efficiently run the company. As we approach the spin-off, we will continue to provide regular updates. We look forward to getting our new leadership teams out on the road, providing us the opportunity to meet with many of you. The first of these opportunities will be at SHOT Show in January, and we hope to see some of you there. With that, I'll ask Jeff to provide more detail on our financial results and our updated guidance. Jeff?

Thanks, James. Revenue for the quarter was $154.4 million, a decrease of 4.5% from the prior year. Revenue from our Firearms segment was $113.7 million, an increase of 1.8%. Note that we recorded $8.1 million of incremental Firearm revenue because of a change in how we record federal firearms excise tax. Without that change, Firearms revenue would have been $105.6 million or a 5.5% decrease from the prior year. This decrease relates mostly to the decline in long gun sales that James discussed. Revenue from our OP&A segment was $47.8 million, a decrease of 14.6%. The decline in our OP&A revenue was due mainly to a reduction in large discount orders from certain significant customers as James discussed earlier in the call. Despite the decline, we expect full year OP&A revenue to be up versus the prior year. Intercompany eliminations were $7.1 million. So now let me take a moment to explain the change in firearms excise tax. The Firearms segment is now required to record and pay that tax when we ship firearms from our Massachusetts manufacturing plant to our Missouri distribution center. Previously, we paid the tax upon shipment to our third-party customers and recorded the tax as a reduction of revenue at that point. We petitioned to continue with that same treatment when shipping firearms from our distribution center. The Tax and Trade Bureau, however, denied our petition and insisted that the tax be assessed and paid on the first transfer of a firearm, which is when we ship it to our distribution center. This means that our revenue will no longer be reduced by that excise tax amount. Rather, that amount will be included in our cost of sales. Obviously, this change does not impact our gross profit dollars, but it will artificially increase revenue and cost of goods sold, and it will correspondingly reduce certain percentages based on revenue, such as gross margin, operating margin and EBITDAS margin. I will detail the tax-related revenue increase for the remainder of the fiscal year when I provide guidance later in the call. Now turning to gross margin. In Q2, the total company gross margin was 32.6% as compared to 34.9% in the prior year. The decline was driven by both the change in excise tax as well as lower margins in our OP&A business. In our Firearms segment, the gross margin was 28.2% as compared to 28.5% in the prior year. Although the gross margin percentage was unfavorably impacted by the change in federal excise tax, it was favorably impacted by moving firearm shipping costs down to OpEx, as we discussed in our last earnings call. In the OP&A segment, gross margin declined to 38.9% as compared to 45.4% in the prior year. This decline was the result of additional tariffs and unfavorable customer and product mix. We expect our gross margins in OP&A to rebound in the back half of the year to well above 40%. In the quarter, both GAAP and non-GAAP operating expenses were roughly equivalent to last year, even though Q2 marked the first full quarter of operation of our Missouri campus, which increased operating expenses by $3.2 million. That increase, however, was offset by savings from closing our Jacksonville location as well as reductions in compensation, bad debt and other costs. Additional savings will occur when we close original OP&A facility in Missouri and fully consolidate into the Missouri campus. For the second quarter, GAAP EPS came in above our guidance at $0.02 as compared with $0.12 last year. Our non-GAAP EPS was above our guidance at $0.09 as compared with $0.20 in the year ago quarter. Adjusted EBITDAS in Q2 was $20.9 million for a 13.5% EBITDAS margin as compared with a 16.5% margin in Q2 of last year. Excluding the excise tax change, adjusted EBITDAS margin would have been 14.3%. Turning to the balance sheet. In Q2, operating cash outflow was $5.5 million, and our CapEx was $5.6 million. Thus, our Q2 free cash outflow was $11 million as compared to free cash outflow of $13.1 million in Q2 of the prior year. Free cash flow in our second quarter is usually neutral to negative, but is typically strong in the back half of the fiscal year. We continue to expect CapEx spending to be about $25 million for the full fiscal year, and that's related to IT, new products and maintenance. At the end of Q2, we had $43.8 million of cash on hand. We had borrowings of a little over $200 million, comprised of $50 million drawn on our line of credit, a term loan of $78 million and bonds of $75 million. As a result, total net bank borrowings at the end of Q2 were just under $160 million. Our 1-year trailing EBITDAS is about $95 million, so our net leverage ratio is approximately 1.7:1, and we expect that ratio to be significantly lower at the end of the fiscal year. After the end of the quarter, we modified our banking facility with respect to certain terms that will take effect upon our planned spin-off. Most importantly, the banks have pre-approved the spin-off so long as certain debt levels are maintained. We believe the amended facility will provide more than enough borrowing capacity for the Firearms business after the spin-off. As a result of that pre-approval and modification, last week, we used the amended revolving line of credit to repay our bank term loan that was due in June of 2020. We also called our 5% bonds that are due in August of 2020 and expect to close that transaction in early January, also using the revolving line of credit. These 2 transactions will have the effect of extending 100% of our debt maturities out to October 2021 and reducing our overall blended annual interest rate by 35 basis points. So now I will discuss our guidance. For our full year fiscal 2020, we are revising upward our total company revenue guidance to reflect 2 factors. First, we are estimating a slightly improved outlook for product demand for the remainder of the fiscal year. Second, the change in federal excise tax will increase our full year revenue by $34 million to $36 million. Thus, we now expect total company full year revenue to be in the range of $680 million to $700 million. As James indicated earlier, in connection with our planned spin-off, we are providing revenue guidance for each separate business for the balance of the fiscal year to provide stockholders with enhanced visibility for each business. Accordingly, we expect full year revenue for firearms to be $520 million to $530 million and full year revenue for OP&A to be $180 million to $190 million. Intercompany eliminations between the 2 businesses are expected to be approximately $20 million. Regarding EPS. We are maintaining our full year GAAP EPS guidance of between $0.41 and $0.49 despite the following impact items: one, the beat in Q2 and our improved demand outlook, which have a favorable impact; and two, the expenses associated with the spin-off, which have an unfavorable impact. It should be noted that the spin-off expenses will not be included in our non-GAAP EPS. Thus, based on our beat in Q2 and the improved demand outlook, we are raising our full year non-GAAP EPS guidance to between $0.76 and $0.84. So turning to third quarter guidance and applying the adjustments that I just discussed, we expect total company revenue of $180 million to $190 million, GAAP EPS of between $0.11 and $0.15, and non-GAAP EPS of between $0.20 and $0.24. All of these estimates are based on our current fully diluted share count of 55 million shares and a tax rate for the full fiscal year of approximately 30%. James? P. Debney: Thank you, Jeff. With that, operator, please open up the call for questions from our analysts.

[Operator Instructions] Our first question comes from Cai von Rumohr with Cowen & Company.

James and Jeff, this is Jeff Molinari on for Cai today. Yes. To start off, can you update us on what your guidance assumes for negative impacts from tariffs on Chinese imports? And specifically, kind of what are your assumptions around the Phase I -- potential Phase I deal, if that's going to provide any relief? And then I have one follow-up after that.

Well, an easy answer is that the forecast assumes that tariffs in place right now, like, stay in place. So we're not making any guesses as to what's going to happen or not happen.

And what is the negative impact that what otherwise would mean? Could you quantify that?

Part -- I mean part of the reason that the gross margin, for example, in outdoor products was lower this quarter was tariffs. We haven't got into specific numbers on tariffs. But in general, obviously, like some of those tariffs are in inventory. And as the products are sold, it's reflecting a lower gross margin. And the forecast assumes that everything in place stays in place.

Okay. That makes sense. And what -- can you remind us what percent of outdoor product is manufactured in China, like roughly?

Not 100%, but it's in the 80s, probably. P. Debney: Yes. It's 80-plus percent.

Okay. And just switching gears to the other segment, the major new product that's coming out December 12, it kind of -- is that a long gun? It seems kind of like you imply that with -- when you said that you were letting an old inventory -- let the old inventory on an old product go through, is that what we should expect? Or anything else you can provide on that? P. Debney: Yes. I'm really not going to comment much. But when we were talking about the inventory that we had, let's say, pushed out into the channel in the last quarter because we wanted that inventory to move through before the new product launch, that was referencing a different product launch that will actually take place in January at SHOT Show.

And our next question comes from James Hardiman with Wedbush Securities.

A couple of questions from me. So let's start with outdoor. It seems like there's a lot of moving parts there. You talked about big purchases from discount retailers that didn't repeat in this year's second quarter. But coming into the quarter, there also seemed to be at least what I thought was going to be a benefit because if memory serves, there were some delayed shipments that moved from 1Q to 2Q. So is there any way to think about the outdoor sort of trajectory, excluding those sort of unusual items? P. Debney: Yes. I mean, I think you should think about it in terms of our guidance. As you can see, we've guided for the balance of the year. We haven't broken it down by quarters. We've just given what we believe we'll do in the second half of the year. And as you can see, we believe that it's going to show growth over the prior year. That's largely as a result of the new product introductions that we'll be making for the balance of the fiscal year. You heard me say earlier, we're going to be launching a significant number of new products, just in terms of SKUs, that's just over 300. And what's more exciting is that we're entering 6 completely new product categories as well. So we're really expanding our addressable market, and we're trying to live up to one of our long-term goals, which is to ultimately address that $35 billion rugged outdoor market that we've spoken about for some time. So a lot of organic growth driven by those new product introductions. Plus, even more exciting, we've created a new brand, which we think is really going to resonate with the consumer in that new product category as well. So we're very excited about that. So definitely a lot going on, as you say, James, and we've a lot of exciting things going on. So we're very bullish about the balance of the year. We have a lot of traction with the consumers, a good level of awareness. Remember, we have -- I actually misspoke in the remarks, we actually have 20 brands. When we create 1 more, we'll be at 21 brands, so -- and those brands really resonate with the consumer.

And James, if you look at the guidance, and we gave guidance for the first time for the whole year for outdoor products, which we said $180 million, $190 million, well we only did $81 million in the first half, which means that the second half is $100 million at the low end. And if you look in past years, just to show you how impressive that is, is it typically, like Q3 and Q4 are down. So the -- if you put in $100 million in the last half of the year, you're talking about increase over the prior year of over 30%. So just in terms of a trajectory, everything that James talked about, with the new products and brands, we're very positive on the second half of the year, and the...

That's helpful. And then -- I'm sorry, go ahead.

No. It's all right. It's all right. Go ahead.

Okay. So along those same lines, sales guidance is up $50 million versus the previous guide. You talked about the excise tax issue being $34 million to $36 million. So I get to about a $15 million increase in the underlying business. Can you help us think about which side of the business that $15 million increase is coming from? Obviously, NICS were much better than expected. So I would assume it's more weighted towards firearms, but you also sound pretty positive on the outdoor side, even though it had a decline in the first half of the year. How should we think about that?

Yes. Actually, it is more -- that $15 million you referenced is more weighted towards firearms, but there is a little bit of outdoor products in there. We have -- we always have planned a strong second half for outdoor products, but it is a bit better than we thought. But you're right, most of that increase, it relates to firearms.

Okay. And then just last question from me as we're putting together our models, I think you gave us the excise tax impact on the second quarter and for the full year '20. Can you also give us what that number would be -- the top line I'm talking about here. Can you tell us what that number would be for the third quarter? And then what is left over for next year, fiscal '21?

Yes. I mean the easy way to think about it is the excise tax is -- it's on the sale of a completed firearm. And it's approximately 10%. Not all of our sales are subject -- not all of our firearm sales are subject to that. So if you just take, I don't know, 9% or something of our firearms top line, 8.5% or 9%, then you'll probably get there approximately as to what the impact is on Q3. I mean it's probably, I don't know, $11 million to $12 million.

Our next question comes from Scott Stember with CL King.

James, you mentioned -- you were talking about NICS, the really good trajectory that we had during the quarter. But then the last month of November that things kind of flattened out, and you talked about consumers waiting for a good deal. Does that imply that a big chunk of the strong NICS, in your opinion, for the previous few months was driven by -- just by discounts? P. Debney: Definitely an element of that. I mean there's a lot of promotional activity still going on. We've talked about that for some time, and we have a strong promotional strategy as well, which we think is very appropriate in this environment. And we continue to invest in those types of promotions going forward. So as we think about the balance of the year, we're going to continue with the same strength of promotional activity that you've seen from us in the past. Certainly looking to repeat what we did last year as well. And just as a reminder to everybody, we are entering show season, so this is where the major promotions really for the trade start. And then, obviously, as we go into the new calendar year, we're at certain shows with 2-step distribution partners, we're obviously launching more products at SHOT Show, but then we're into the buy group shows as well in February, which are always very strong as well. And just as a reminder, the buy group shows, the membership there is the stronger, as we see them, the very stronger independent retailers that are out there. And obviously, we're working with the larger strategic retailers as well when it comes to their promotional plans as well. So there really is a lot going on to -- in an attempt to stimulate that consumer. And mostly, it seems to be working, and we've certainly been very successful with the bundled promotions as well, which has set us apart from the competition.

Got it, got it. And with regards to inventory, I think last quarter, you had talked about inventories are up a little bit. Part of it was because of some strong demand that you were expecting. Also, I guess, as we head into SHOT Show, you're trying to build up some inventories. Well, now in this quarter, we're talking about how [indiscernible] just trying to figure out is it -- what the disconnect is. Or is it because you were able to move out some older inventory a lot quicker than expected, is that the reason for inventories having come down sequentially? P. Debney: You're heading into that busier period that we've always spoken about. So you've got full hunting, for example, which really does stimulate the consumer to go back to these stores, where most of our product is obviously sold. And then we're into the holiday season. And that obviously, we've seen that before in terms of adjusted NICS, just continues to strengthen as you move from November to December. So that's the reason that you start to see more sales velocity, let's say, where our inventory mainly sits, which is with -- largely with our 2-step distribution partners. So it's always expected that it will come down. And you're quite right, we did build inventory over the summer as we always do, and it's in preparation for that busier holiday season. But this time, it was also in preparation for major new product launches because we had to make sure that we have the capacity in the future to serve to produce those new products so that we could serve the consumer with ample products and not have them frustrated because they can't find it.

Got it. And then last question on -- Jeff, on the excise tax. Maybe if you could just give a little bit more granular detail. I'm just trying to understand. I know that when you look at the fact that just -- it's basically a shift from sales down to cost of goods sold. So the overall gross profit dollars don't change. But maybe talk about the timing. I mean how does the timing get impacted here? It sounds as if it's immediately from when it's shipped from the factory to the DC. And before, it was, from my guess, from the DC to the endpoint. What's the difference in timing here that we could look at? I'm just trying to figure out how things change.

Yes, it's -- I mean it's a difference of ever how long the firearm product is in inventory, because, again, when we shipped it previously when we shipped it from the Springfield factory to a customer, it was assessed and paid at that point. And of course, we took that as contra revenue. So if it was $100 a product, we reported $90 of revenue. Now when the product is sold to the DC, it's assessed and paid, but we still have that product in inventory, so the offsetting entry to, in essence, paying that tax, it goes into the cost of goods sold. It goes into the inventory of that product. So when that product is sold, you now recognize $100 instead of the $90 that you had previously recognized. So it -- there is -- depending on how much inventory you have. And in the past, like a couple of years, we've had anywhere from, I don't know, as low as on a surge year, like $20 million of finished goods inventory up to as high as $60 million or something like $60 million or $70 million. So take roughly like 10% of that, and that is the cash is, in essence, out-of-pocket while you're waiting to sell the product.

And our next question comes from Steve Dyer with Craig-Hallum.

Just kind of touching base on the inventory question, again. It seems like kind of the overall industry and the inventory in the channel has been above that 8-week level, gosh, for probably since before Trump got elected. Is that just sort of the level? I mean, are DCs, distributors just more comfortable carrying more inventory now? Is that sort of the new level, do you think? Or any color around sort of how you anticipate that looking going forward. P. Debney: Yes, I think it really is a new level. It's certainly our 2-step distribution partners are comfortable carrying our inventory. As you know, we have some of the strongest brands, which means that they have a lot of confidence that they'll be able to sell our products. So we're relatively low risk compared to some of the lesser brands. So you're going to see that weeks of cover. It's going to fluctuate all the time. It depends where we are in seasonality. And obviously, over the summer, it's low velocity. The velocity starts to increase as we are into full hunting and into the holiday season. So it ebbs and flows, to be honest. So we don't get too hung up on it, and we're not concerned by the level of inventory that we see out there right now.

Okay. That's good. And then you talked about seeding the channel, I guess, a little bit with a new product at the end of the second quarter. I guess, first, are you willing to sort of talk about how much revenue you recognized from that at the end of the second quarter? And is the launch of that sort of in line, the timing of that sort of in line with your expectations at the beginning of the year? P. Debney: I would say that everything is on plan. If I was to give you any more color on that, I would say that we're slightly ahead of plan, which we're very pleased about. We're obviously not going to break down how much revenue was generated from that new product to date or what we believe that we'll generate for the balance of the year. We just don't give out that level of detail. But I will say that we're extremely excited about the product. We think it is -- we truly believe it is one that will be very, very well received by the consumer, and it is one that they will want to own.

Our next question comes from Mark Smith with Lake Street.

First, just a housekeeping item. As we break down average selling price on handguns and long guns, I assume that, that is higher due to the excise tax?

Yes, that certainly impacts it.

Okay. Perfect. And then even if we kind of back that out, it looks like long guns, maybe we saw a little higher price? Are we not seeing as promotional of activity in long guns as maybe we are in handguns?

Well, I -- as James mentioned, we sold out of a particular long gun product. We sold all the remaining mostly in Q1. It's a lower-priced product, so not having that -- those sales in Q2 probably helped the ASP.

Okay. Perfect. And then can you guys walk through the impact of the holiday season and maybe promotions around Black Friday and how that impacted this quarter? And any that maybe flows into the next quarter? P. Debney: Difficult because that -- obviously, Black Friday has really only just taken place, and it's in the current quarter. So we can't provide any updates there, but obviously, we are planning promotions around Black Friday well in advance with our customer base. And all of that is always built into our guidance.

Okay. And then this might be fishing a little bit too much. But as we look at OP&A and the new categories that you're looking at entering, can you talk about if you're -- if there's some more soft good-type categories that you're looking at entering that maybe drive higher margins than the typical products offered today? P. Debney: Yes. There's really no comment beyond what we've already said there. I'm afraid that we'll just be giving too much away, but -- and as I said, we're extremely excited to be entering 6 new product categories and there's a significant number of meaningful new product launches going to take place in January and for the balance of the fiscal year.

[Operator Instructions] Our next question comes from Max [indiscernible] with [ 2A Medium ].

A couple of questions. Can you -- do you have any thoughts or commentary about how it's going with your direct-to-consumer efforts for the Outdoor Products & Accessories brands? And do you have any goals as to how much you want to keep going direct-to-consumer versus your traditional 2-step distribution model? P. Debney: Yes. There's really nothing to speak about there at the moment. Way too early to discuss. I think, over time, you may see us slowly, very slowly build that part of the business, but it will be in a well-thought-out intelligent way. We obviously are respectful to our existing customers. We have some very, very strong retail partnerships that we value deeply. So we'll be cautious in that respect.

Okay. The second question. Any thoughts regarding the Sandy Hook lawsuit? And I guess, was it a part of divestment thinking?

No. I think it was overblown in the press with regards to the impact of that. I mean, basically, the Supreme Court just declined to get involved. It's on a very like tenuous thread of -- or a very tenuous claim. And even if -- and of course, the claim is about the marketing activity of Bushmaster. Even if that -- a claim were somehow found valid or adjudicated by a jury as finding Bushmaster liable, that could still be appealed, and the Supreme Court, at that time, could decide to get involved. So it's really -- I don't think there's really like much there right now.

Okay. And I guess the last question, I guess, more or less, for clarification. So the Outdoor Brands & Accessories are going to be spun off and driven to be unencumbered, and all the debt is going to remain with Smith & Wesson Holdings. And as a follow-up to that is I'm assuming Gemtech is going to remain with the Firearms rather than the outdoor brands. P. Debney: That's correct.

Yes. P. Debney: [ They bridge ] out to Gemtech?

Actually, everything that you said is correct.

And we have a follow-up from the line of Cai von Rumohr, Cowen & Company.

This is Jeff Molinari on again. So I wanted to ask kind of with the upcoming election year, how you are preparing for the various outcomes and whether or not you've seen any impact to demand to this point. P. Debney: I would say, at this point, no impact to demand whatsoever. As to preparing for the various outcomes, obviously, that's extremely, extremely difficult to do. We always think about what the future may look like. And we try and scenario play as best you can, which then allows us to create strong contingency plans that we can deploy, as quickly as we can react, depending on what happens. That's pretty much all I can say at the moment. Of course, it's a topic of conversation for us as we go through our business planning processes. So we do think about it deeply, and we do take it very seriously. We've, obviously, if you look back at history, we've been able to react before in a meaningful way. So we have that experience. We certainly have that skill set and knowledge how to do it.

Got it. Still a little early. Okay. Another question. Do the guided independent first 12-month sales and EBITDA ranges that you've previously announced, are those still hold? Or have you -- are they nudged up a little bit as well, given your increased outlook for this year?

Yes. Well, the -- so the first 12 months of the spin guidance that we gave for firearms, which was $450 million to $500 million, did not include FET. Now I know that doesn't impact the bottom line. But if you want to include FET -- you want to compare it to our guidance for the -- like the current year with FET, the guidance -- or no, it's not guidance, our estimate of the first 12 months of an independent firearms business, it would be about $500 million to $550 million. And that compares to about $520 million to $530 million, which is the number we gave for the current fiscal year. Obviously, the number for next year is a big range because it's a business that's difficult to forecast a quarter or 2 in advance, let alone a year in advance.

Understand. And so the firearms has kind of benefited a lot from bundled promotions. I believe you would -- a part of that would be bundling firearms with Crimson Trace products. How are you going to handle approach replacing that those bundles or kind of like the impact of going forward post spin? P. Debney: Yes. The bundled promotions, as we've said before, have been extremely successful. It's been more than just with Crimson Trace. It's been with multiple brands that are in our OP&A business. And our expectation is that, that will continue. That firearms will want to continue to do bundled promotions in the future and procure some of those items, maybe not all of them, but certainly some of them as they do now from the outdoor products company.

We have a follow-up from Mark Smith with Lake Street.

Our question was answered. Thank you. P. Debney: Thanks, Mark.

And we have another follow-up from James Hardiman with Wedbush Securities.

A follow-up from me and I don't think you've answered, certainly, versus the way that The Street was modeling this, the implied sort of fourth quarter numbers, both in terms of sales and earnings, much better. Some big growth rates in the fourth quarter. Is there any way to think about sort of, I don't know, any breadcrumbs you can give us in terms of how to think about the distribution between Firearms and OP&A sales or earnings between 3Q and 4Q? Or even just how to think about the drivers of those 2 things?

I would say that the big jump from Q3 to Q4 is in Firearms. There is an increase in outdoor products that we are expecting. But it is -- Q3 and Q4 is not the high sales months for outdoor products, but it is for Firearms. So Q4 is always like the biggest month for Firearms. And therefore, based on the new products that we have that James talked about earlier, I would say, a lot of the increase or the sequential increase in Q4 is Firearms.

Okay. That's helpful. And then last question from me. So you talked about OP&A revenues during the first 12 months being $200 million to $210 million. Is that comparable to the $180 million to $190 million that you've guided to today for 2020?

That is comparable. That's apples and apples there. So.

Thank you. And I'm showing no further questions in the queue. I'd like to turn it back to Mr. James Debney for any closing remarks. P. Debney: Thank you, operator. I want to thank everyone across the American Outdoor Brands team for their commitment and dedication to excellence. Thanks, everyone, for joining us today, and we look forward to speaking with you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.