Annual Report for Fiscal Year Ending 04-30, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth under Item 1A, "Risk Factors" and elsewhere in this Annual Report on Form 10-K.

This section generally discusses year-to-year comparisons between fiscal 2026 and fiscal 2025. A discussion of our results of operations, liquidity, and capital resources for fiscal 2025 compared with fiscal 2024 is not included in this Annual Report on Form 10-K and can be found in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for fiscal 2025, filed with the SEC on June 20, 2025.

2026 Highlights

Our operating results for fiscal 2026 included the following:

Key Performance Indicators

We evaluate the performance of our business based upon operating profit and net income, which includes net sales, cost of sales, selling and administrative expenses, and certain components of other income and expense. We also track our return on invested capital, and we use adjusted EBITDAS (earnings before interest, taxes, depreciation, amortization, and stock-based compensation expense, excluding certain non-operational items), which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends. We evaluate the performance of our products using measurements such as gross margin per unit produced, units produced per day, revenue by trade channel, and incoming orders per day.

External Factors that Impact the Firearm Industry

The firearm industry has been subject to many external factors in the past that have significantly increased the volatility of revenue generated by companies within the industry. These factors include, among others, fears surrounding crime and terrorism; significant news events; potential restrictions on the sale or makeup of firearms; actual and potential legislative, judicial, and regulatory actions; economic changes; and changes in the social and political environment, including congressional and presidential elections. See Item 1A, Risk Factors, for further discussion of external factors that impact the firearm industry. Although these external factors have created demand surges and volatility in the firearm market, and often make it difficult to predict demand, we believe that those external factors have also likely contributed to a long-term increase in consumer interest in firearms. We estimate that the annual domestic non-military firearm market is approximately $2.7 billion for handguns and $1.7 billion for long guns, excluding shotguns, based on the latest data for industry shipments as calculated by the National Shooting Sports Foundation, or NSSF, utilizing Firearms and Ammunition Excise Tax data for calendar year 2024. According to calendar 2025 reports by the ATF, the U.S. firearm manufacturing industry grew at a 6.2% compound annual growth

rate in units from 2019 through 2024, although there has been wide variation among years (e.g., 2019 to 2020 grew 58.0%). We believe that this expanding base of consumers combined with our strong brand reputation and attractive price points lend support to our goal of continuing to increase our market share.

Results of Operations

Net Sales and Gross Profit

The following table sets forth certain information regarding net sales and gross profit for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands):

The following table sets forth certain information regarding units shipped by trade channel for the fiscal years ended April 30, 2026, 2025, and 2024 (units in thousands):

Sales of our handguns increased $62.5 million, or 18.8%, over fiscal 2025, primarily as a result of increased shipments of newly introduced products (defined as any new SKU not shipped in the prior year), higher consumer demand, and a 2% to 3% price increase on select products that became effective on January 1, 2026. Shipments of new products represented 43.6% of handgun sales in the period. Handgun unit shipments into the sporting goods channel increased 19.0% over fiscal 2025, while overall consumer demand decreased 0.2% (as indicated by adjusted background checks for handguns reported to the National Instant Criminal Background Check System, or NICS).

Sales of our long guns decreased $13.5 million, or 13.0%, from fiscal 2025, primarily as a result of the timing of new product launches in fiscal 2025, which were at higher selling prices, combined with lower consumer demand during fiscal 2026. Shipments of new products represented 30.6% of long gun sales in the period. Long gun unit shipments into the sporting goods channel decreased 5.7% from fiscal 2025, while overall consumer demand for long guns decreased 4.6% (as indicated by NICS).

Other products and services sales increased $191,000, or 0.5%, over fiscal 2025, as higher e-commerce and suppressor sales offset lower business-to-business sales. Lower business-to-business sales resulted from the closure of our Deep River facility in fiscal 2025 as part of the Relocation.

New products represented 38.1% of net sales for the year ended April 30, 2026 and included four new pistols, four new long guns, and many new product line extensions.

Gross margin for fiscal 2026 was 26.9% compared with 26.8% for fiscal 2025, primarily due to lower promotional costs and lower federal firearms excise taxes as a result of the favorable completion of a recent audit, partially offset by unfavorable fixed-cost absorption from lower production volumes combined with higher tariffs on imported materials and components. We estimate that higher tariffs negatively impacted gross margin by approximately 100 basis points when compared to the comparable period last year.

Inventory balances declined $33.6 million between April 30, 2025 and April 30, 2026 as a result of our proactive inventory management and production planning efforts intended to optimize inventory levels and cash flows. While inventory levels, both internally and in the distribution channel, in excess of demand may negatively impact future operating results, it is difficult to forecast the potential impact of distributor inventories on future revenue and income as demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer tastes. We expect our inventory levels to increase modestly during fiscal 2027.

Operating Expenses

The following table sets forth certain information regarding operating expenses for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands):

Research and development expenses increased $737,000 because of higher tooling-related costs, partially offset by materials and testing costs, which were elevated in the prior year. Selling, marketing, and distribution expenses increased $284,000, primarily as a result of higher profit-related compensation expenses and one-time costs related to the grand opening event for the Academy, partially offset by lower promotional costs. General and administrative expenses increased $5.1 million over the prior year, primarily as a result of higher profit-related and stock-based compensation expenses, and higher legal expenses. During fiscal 2025, we sold certain real estate located adjacent to our former distribution center located in Columbia, Missouri for $2.3 million, net of transaction costs, and recognized a $2.3 million pre-tax gain on sale.

Operating Income

The following table sets forth certain information regarding operating income for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands):

Operating income for fiscal 2026 increased $5.3 million, or 22.3%, over the prior fiscal year, primarily for the reasons outlined above.

Other Income/(Expense), net

The following table sets forth certain information regarding other income for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands):

Other income for fiscal 2026 increased $686,000, primarily as a result of investment income on our marketable securities.

Interest Expense, net

The following table sets forth certain information regarding interest expense for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands):

Interest expense increased by $188,000, primarily as a result of lower average cash balances, partially offset by lower average interest rates on debt and lower average debt balances during fiscal 2026 compared with fiscal 2025.

Income Tax Expense

The following table sets forth certain information regarding income tax expense for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands):

We recorded income tax expense of $6.6 million for fiscal 2026, $769,000 higher than the prior fiscal year, primarily because of increased profitability. Our effective tax rates were 26.3% and 30.2% for fiscal 2026 and 2025, respectively. The 2026 rate was impacted favorably as a result of a decrease in state taxable income from the prior year and favorable return to provision adjustments.

Net Income

The following table sets forth certain information regarding net income and the related per share data for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands, except per share data):

Net income increased $5.1 million, or $0.11 per diluted share, over fiscal 2025 primarily for reasons outlined above.

Liquidity and Capital Resources

Our principal cash requirements are to finance the growth of our operations, including working capital and capital expenditures, and return capital to our stockholders. Capital expenditures for new product development and repair and replacement of equipment represent important cash needs.

The following table sets forth certain cash flow information for the fiscal years ended April 30, 2026, 2025, and 2024 (dollars in thousands):

Operating Activities

Operating activities generally represent the principal source of our cash flow.

Cash provided by operating activities was $114.2 million in fiscal 2026 compared with $7.2 million of cash used in fiscal 2025. Cash provided by operating activities in fiscal 2026 was favorably impacted by a $33.6 million decrease in inventory compared with a $29.3 million increase in inventory in fiscal 2025, a $5.4 million increase in accounts payable compared with a $14.8 million decrease in accounts payable in fiscal 2025, a $6.1 million increase in accrued payroll and incentives compared with an $8.1 million decrease in accrued payroll and incentives in fiscal 2025, a $15.8 million decrease in accounts receivable compared with a $3.2 million decrease in accounts receivable in fiscal 2025, a $519,000 increase in accrued profit sharing compared with a $4.5 million decrease in accrued profit sharing in fiscal 2025, and higher net income. Cash provided by operating activities in fiscal 2026 was unfavorably impacted by a $3.0 million decrease in accrued expenses and deferred revenue compared with a $268,000 decrease in accrued expenses and deferred revenue in fiscal 2025.

Investing Activities

Cash used in investing activities increased $9.1 million for the fiscal 2026 compared with fiscal 2025, primarily as a result of $4.6 million of purchases of marketable securities during fiscal 2026, a $2.1 million increase in capital expenditures related to the Academy, and $2.3 million of proceeds included in fiscal 2025 related to the sale of certain real estate located adjacent to our former distribution center located in Columbia, Missouri.

We currently expect to spend $40.0 to $45.0 million on capital expenditures in fiscal 2027.

Financing Activities

Cash used by financing activities was $83.0 million for fiscal 2026 compared with $9.2 million for fiscal 2025. Cash used by financing activities during fiscal 2026 was primarily the result of $60.0 million in net repayments under our revolving line of credit and $23.2 million in dividend distributions. Cash used in financing activities for fiscal 2025 was primarily the result of $40.0 million of net borrowings, $25.5 million of stock repurchases, and $23.1 million in dividend distributions. We had no stock repurchases during fiscal 2026.

Credit Facilities - We entered into the Second Amended and Restated Credit Agreement on October 3, 2024. The Second Amended and Restated Credit Agreement provides for a revolving line of credit of $175.0 million at any one time, or the Revolving Line. The Revolving Line bears interest at either the Base Rate (as defined in the Second Amended and Restated Credit Agreement) or the Adjusted Term SOFR rate (as defined in the Second Amended and Restated Credit Agreement), plus an applicable margin based on our consolidated leverage ratio. The Second Amended and Restated Credit Agreement also provides a swingline facility in the maximum amount of $5.0 million at any one time (subject to availability under the Revolving Line). Each Swingline Loan (as defined in the Amended and Restated Credit Agreement) bears interest at the Base Rate, plus an applicable margin based on our Adjusted

Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement). Subject to the satisfaction of certain terms and conditions described in the Second Amended and Restated Credit Agreement, we have an option to increase the Revolving Line by an aggregate amount not exceeding $50.0 million. The Revolving Line matures on the earlier of October 3, 2029 or the date that is six months in advance of the earliest maturity of any Permitted Notes (as defined in the Second Amended and Restated Credit Agreement) under the Second Amended and Restated Credit Agreement.

As of April 30, 2026, we had $20.0 million of borrowings outstanding on the Revolving Line, bearing interest at an average rate of 5.72%, which was equal to the Adjusted Term SOFR rate plus an applicable margin.

The credit agreement for the Revolving Line contains financial covenants relating to maintaining a maximum leverage ratio and a minimum debt service coverage ratio. We were in compliance with all debt covenants as of April 30, 2026.

Share Repurchase Programs - On September 19, 2023, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions through September 19, 2024, or the 2023 Authorization. During fiscal 2025, we purchased 1,531,763 shares of our common stock for $21.4 million under the 2023 Authorization. The 2023 Authorization expired on September 19, 2024. On September 5, 2024, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions from September 20, 2024 through September 20, 2025, or the 2024 Authorization. As of April 30, 2026, we had repurchased 312,310 shares of our common stock for $4.1 million under the 2024 Authorization. On September 15, 2025, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions from September 21, 2025 through September 21, 2026, or the 2025 Authorization. As of April 30, 2026, we had not repurchased any shares of our common stock under the 2025 Authorization.

Finance Lease - We are a party to a material finance lease, which is a $46.2 million lease that has an effective interest rate of approximately 5.0% and is payable in 240 monthly installments through fiscal 2039, as well as a related payment and performance guaranty, dated October 26, 2017, in favor of the Original Missouri Landlord. The building is pledged to secure the amounts outstanding. As part of the Relocation, on January 31, 2023, we entered into the Assignment and Assumption Agreement and the Amended and Restated Guaranty. Because of the Amended and Restated Guaranty, we continue to account for this lease as we have since prior to the Relocation. During fiscal 2025 and 2026, AOUT made payments pursuant to this lease directly to the landlord and we neither received nor paid any cash related to this arrangement. See Note 3 - Leases for additional information.

As of April 30, 2026, we had $28.2 million in cash and cash equivalents on hand.

Based upon our current working capital position, current operating plans, and expected business conditions, we believe that our existing capital resources and credit facilities will be adequate to fund our operations for at least the next 12 months.

Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, and the costs to ensure access to adequate manufacturing capacity. Future equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained.

Inflation

During fiscal 2026, 2025 and 2024 inflationary pressures resulted in increases in the cost of certain of the components, parts, raw materials, and other supplies necessary for the production of our products, as well as labor costs. We expect that inflation will continue to impact us during fiscal 2027.

Critical Accounting Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires that we make accounting estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. See Note 2 - Significant Accounting Policies for additional information.

Critical accounting estimates are defined as those reflective of significant judgments, estimates, and uncertainties, which may result in materially different results under different assumptions and conditions. We believe the following are our critical accounting estimates:

Inventories

Description: We value inventories at the lower of cost, using the first-in, first-out, or FIFO, method, or net realizable value.

Judgments and Uncertainties: An allowance for potential non-saleable inventory as a result of excess stock or obsolescence is based upon a detailed review of inventory, past history, and expected future usage.

Sensitivity of Estimate to Change: The assumptions used to assess inventory valuation consider historical activity. Changes in these estimates can have a significant impact on the assessment of excess and obsolete inventory, which could result in material losses.

Recent Accounting Pronouncements

The nature and impact of recent accounting pronouncements is discussed in Note 2 - Significant Accounting Policies to our consolidated financial statements, which is incorporated herein by reference.

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements, or other relationships with unconsolidated entities that are reasonably likely to affect our liquidity or capital resources. We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support or that engage in leasing, hedging, research and development services, or other relationships that expose us to liability that is not reflected in our consolidated financial statements.