GrabAGun Digital Holdings Inc. 2026 Q2 Earnings Call

Mark, please go ahead. Good afternoon, and thank you for joining us.

The second quarter reflected continued execution along the long-term strategy we have been building over the past several years. We grew ahead of the industry, expanded margins meaningfully, and continued extending the capabilities we have built into the new opportunities like PEW Logistics, which we believe will define the next era of firearms commerce, all while maintaining the operating discipline and balance sheet strength that sets us apart. Looking at the second quarter, net revenue increased 9% year-over-year to $23 million, with firearm sales up 8%, while gross margin expanded to approximately 13.5%. Firearm sales growth was primarily driven by an increase in average order value and a continued shift in mix towards higher price point products, reflecting the strength of our customer value proposition. We are especially pleased with our disciplined approach to driving profitability.

While revenue increased 9%, cost of goods sold increased by only 6%, resulting in a 39% increase in gross profit and gross margin expansion, I mentioned a moment ago, to approximately 13.5% compared to 10.6% a year ago. Those results reflect the benefits of our AI-driven pricing optimization, a favorable product mix, our sourcing capabilities, and the initial contribution of PEW Logistics as we continue to scale the platform. Just as important is how efficiently we acquire and serve customers. Sales and marketing expense remained approximately 1% of net revenue, reflecting a very lean customer acquisition profile. That efficiency reflects years of investment in technology, supplier relationships, and customer trust, creating a competitive advantage that we believe is difficult to replicate. PEW Logistics continues to make meaningful progress as we extend the capabilities we have built over many years.

It is a natural extension of our technology, compliance expertise, fulfillment capabilities, and industry relationships, allowing us to serve manufacturing customers while creating another avenue for long-term growth. PEW Logistics has now processed more than $1.9 million in gross merchandise value through the end of the second quarter. We recently welcomed our third manufacturer, Backwoods Suppressors, further expanding our reach into a growing product category. Combined with our nationwide FFL network, which places a licensed dealer within 15 miles of approximately 97% of the U.S. population, we continue to provide a fast, compliant customer experience with average checkout to delivery times of just under three business days. While the PEW Logistics business remains in its early stages, the progress we've made reinforces our confidence in the opportunity ahead.

As we onboard new manufacturers and scale operations, we believe PEW Logistics has the potential to become an increasingly meaningful contributor to revenue diversification while benefiting from a capital-efficient operating model and an attractive long-term margin profile. The combination of disciplined execution and a differentiated digital model continue to create meaningful operating advantages for our business. Mobile engagement remained strong in the quarter, increasing to 71% of traffic from 67% in the first quarter and accounting for 67.5% of revenue, up from 64% in the first quarter. As consumer behavior continues to shift towards digital channels, our technology platform enables a seamless customer experience while providing a structurally lower cost per transaction or cost to serve advantage compared to traditional retail. During the quarter, we continued outfitting our new headquarters and fulfillment and distribution facility, which remains on track to become fully operational in the fourth quarter of 2026.

This investment, which we made in Q4 2025, expands our operational capacity and positions us to support the continued growth of both the core business and PEW Logistics. This is a long-term infrastructure investment that reflects our conviction in where the business is headed. Our approach to mergers and acquisitions remains disciplined. We are closely monitoring the landscape and actively evaluating opportunities that could accelerate our long-term vision. Our strong balance sheet and liquidity position provides us with the flexibility to continue investing in our business while remaining disciplined in our approach to capital allocation. We will remain patient and act only when the right opportunity aligns with our strategy and creates compelling long-term value. Stepping back, the second quarter reflects the continued evolution of our business.

Our core e-commerce platform continues to grow and increase gross margin year-over-year, while the capabilities we've built over the past 15 years are beginning to create new opportunities through PEW Logistics. Firearms consumers increasingly expect a frictionless, digitally native experience, and we believe our capabilities, technology, compliance expertise, and a scalable operating model position us to compete effectively today while creating additional avenues for growth over time. The firearms industry is entering an important period of modernization, driven by evolving technology and changing consumer expectations. As the industry evolves, we believe technology can enable more efficient, lawful purchasing experience while preserving features that matter most. Background checks and core compliance safety cards that remain fundamental to the category. I want to be measured here. Any potential changes remain subject to the rulemaking process, and we won't speculate on where those regulations ultimately land.

Instead, we'll continue focusing on what we can control, investing in technology, compliance capabilities, and customer relationships required to operate successfully in one of the nation's most highly regulated industries. Regardless of how the rulemaking process ultimately unfolds, GrabAGun is well-positioned. For more than 15 years, we've invested in the digital infrastructure, compliance capabilities, and regulatory expertise required to operate at the intersection of e-commerce and a highly regulated market. If the industry continues to modernize, we believe few companies are better prepared to serve customers within a compliant framework. Our readiness is the result of our investments in technology, compliance, and customer relationships. With that, I'll turn the call over to Justin to walk through the financials in more detail.

Justin? Thank you, Marc. I'll now provide additional details on our second quarter financial performance.

Second quarter total revenues were $23.2 million, an increase of 9.4% compared to $21.2 million in the second quarter of fiscal 2025. Firearms product sales increased 8.5% year-over-year to $19.3 million, reflecting the continued benefits of our AI-powered pricing and demand forecasting capabilities, which enable us to better serve customers while optimizing our business performance. Non-firearms product sales were $3.6 million, an increase of 7% year-over-year, despite continued softness in ammunition demand across the broader 2A industry. We remain focused on leveraging our differentiated capabilities, including our data-driven approach to pricing, demand planning, and customer engagement, allowing us to navigate market conditions and effectively drive sustainable long-term growth.

Gross profit in the second quarter was $3.1 million, representing 13.5% of net sales, compared to $2.2 million, or 10.6% of net sales in the prior year period. Gross margin improved by approximately 290 basis points, driven by a more favorable sales mix towards higher-margin firearms categories and the continued execution of our pricing optimization initiatives. We remain focused on identifying opportunities to improve gross margin over time through continued mix optimization, pricing discipline, and the expansion of higher-margin opportunities such as PEW Logistics, while maintaining our competitive positioning and delivering value to our customers. Operating expenses in the second quarter were $5.7 million, compared to $1.5 million in the prior year period.

The year-over-year increase reflects investments to support the long-term growth of the business, including incremental resources and infrastructure required to operate as a public company, continued investments in the expansion of PEW Logistics, and headcount aligned with our growth initiatives. As a reminder, the second quarter of fiscal 2025 represented a pre-public period, and the current year comparison reflects the incremental costs associated with building the capabilities to support the business as we scale. We have now reached the final quarter of year-over-year comparisons reflecting these incremental costs. Beginning next quarter, our expense comparisons will be on a more consistent like-for-like basis, providing greater visibility into the underlying performance and cost structure of the business, while allowing us to continue leveraging the investments we have made to support our long-term growth.