Prepared remarks
Hello everyone, thank you for joining us and welcome to the Sturm, Ruger & Company Q2 Earnings Call. I will now hand the conference over to Todd Seyfert, CEO. Please go ahead.
Good afternoon, and thank you for joining us for the Sturm, Ruger & Company's Second Quarter 2026 Earnings Conference Call. I'm Todd Seyfert, President and Chief Executive Officer. Before we get started, I would like to turn it over to Sarah Colbert, our General Counsel, for the caution on forward-looking statements.
I'd like to remind everyone that some of the statements we make today will be forward-looking in nature. These statements reflect our current expectations, but actual results could differ materially due to several uncertainties and risks. You can find more information about these factors in our most recent Form 10-K and other filings with the SEC. We do not undertake any obligation to update these forward-looking statements. Reconciliations of any non-GAAP measures discussed today are available in our earnings release and on our website.
Thank you, Sarah. As you saw in today's earnings release, the second quarter represented another meaningful step forward in executing our 2026 plan. We delivered another quarter of strong financial results while making meaningful progress in strengthening the foundation of the business. We improved our manufacturing performance and formally established the Ruger Business System, which will serve as the framework for how we manage and continuously improve the business going forward. While we're encouraged by our financial performance during the quarter, I'm equally encouraged by how we achieved those results. Let me first take you through the financials for the quarter. Net sales were $158 million, a 19% increase over Q2 2025. This was driven by continued strength across our core product portfolio, higher average selling prices, and increased manufacturing output. Adjusted EBITDA margin expanded to 10.5%, driven by favorable product mix, continued premiumization within our existing product families, and improved manufacturing efficiencies. Diluted earnings were $0.43 per share, compared to a diluted loss of $1.05 in the prior year period. On an adjusted basis, diluted earnings increased to $0.52 per share compared with $0.41 per share last year. Cash generated from operations totaled more than $17 million for the quarter. We also continued returning capital to shareholders through our quarterly dividend, consistent with our long-standing capital allocation philosophy. The Board of Directors declared a dividend of $0.21 per share for the second quarter. While those results are positive, equally important is the operational progress that made those results possible. One trend I'm particularly encouraged by is our consistency. This marks our fifth consecutive quarter of both sequential and year-over-year sales growth, while profitability has continued improving as we execute initiatives to simplify the business and reduce costs. During our first quarter call, we discussed production constraints that limited our ability to fully meet customer demand. Our operations teams responded with urgency while remaining focused on maintaining the quality and reliability our customers expect from Ruger products. Throughout the second quarter, we improved manufacturing execution, increased throughput, and began rebuilding finished goods inventory in a disciplined manner. That allowed us to improve product availability without compromising our inventory management objectives. Another important milestone during the quarter was the continued expansion of our accessory business. Accessories represent an important extension of our strategy to build complete product ecosystems that complement our core firearm platforms. Our most recent offerings focus on the vast modern sporting rifle market and leverage the success of our new Harrier rifle. From a market perspective, consumer demand throughout the quarter developed as we anticipated. Normal seasonality presented itself April through June, as summer months saw a slowing of retail foot traffic as consumers prepared to shift from spring range demand into fall hunt and holiday season. Adjusted NICS remained above prior year levels during the quarter, and our estimated distributor sell-through increased 19% year-over-year, significantly outperforming the approximately 5% increase in adjusted NICS over the same period. Taken together, these trends reinforce our confidence in the health of the business. Consumer demand for the Ruger brand remains strong. Our new products continue gaining traction, and inventory throughout the channel remains balanced. We saw distributors reduce inventory on a year-over-year basis while retail sell-through remained strong, providing additional evidence that demand continues to be driven by consumers rather than inventory replenishment alone. At the same time, we improved product mix while rebuilding inventory both internally and at distribution, compared to the first quarter. We believe this positions us well heading into the important fall hunting and holiday season, while allowing us to continue increasing production of the products consumers are demanding most. Perhaps the most important milestone of the quarter wasn't reflected in any single financial metric. During the second quarter, we formally established the Ruger Business System. While the name is new, the objective is straightforward. The Ruger Business System establishes a common operating framework for how we plan, execute, measure performance, and continuously improve across the enterprise. It aligns our teams around common objectives, reinforces accountability, and creates a shared language for operational excellence across all of our facilities and functions. Most importantly, it provides the structure necessary to execute both our annual operating plans and our long-term Ruger 2030 strategy. For shareholders, the Ruger Business System should be viewed as an investment in growth and consistency. We know that the firearms market fluctuates, but our objective is to build an organization that can execute regardless of the macro environment. It's designed to improve the way we make decisions, solve problems, and execute across every part of the business to deliver predictive results each quarter. As we look forward to the back half of the year, I would like to walk us through our progress on the 2026 plan and the overall health of the business. Throughout the first six months, net sales were $299 million, a 12% increase over 2025. Cash generated from operations was up 39% during the period and totaled $36 million. Sales of new products accounted for $81 million, or 29% of firearm sales for the period. As of June 27, 2026, our cash and short-term investments totaled $118 million. Our current ratio is 3.3:1, and we have no debt. Year-to-date, capital expenditures total $8 million. As we've mentioned before, we expect capital expenditures to total approximately $30 million for the year. In the first six months, we returned $3 million to our shareholders through the payment of quarterly dividends. Our priorities for the balance of 2026 remain unchanged. Improving profitability through focusing on direct material cost, insourcing of components, and driving product premiumization. Aligning factory capacity with demand by redeploying capital assets across locations that can better leverage our footprint, and cross-training employees to create flexibility across product lines. Right-sizing the business to our future product portfolio by intentionally mapping product life cycles and roadmaps to meet consumer demand. Carefully listening to voice of the customer feedback, innovating where possible, and exiting unprofitable platforms where demand is waning. Increasing output on proven high-demand product lines by reducing bottleneck cycle times, increasing productivity through improved shop floor leadership, and where needed, leveraging existing capital with increased shifts. Expanding into new markets through complete product ecosystems, increased accessory offerings, a broader international presence, and new market segments in domestic and international law enforcement and security. As I've stated before, these priorities are not short-term actions. They are foundational steps that position us for sustained growth and performance. There is still important work ahead. We believe the operational foundation we've built over the past year positions Ruger to execute more consistently, respond more effectively to market conditions, and create durable long-term value. I'd like to thank our employees for their commitment and execution throughout the quarter. Operator, can we please have the first question?
Questions and answers
The first question is from the line of Mark Smith with Lake Street.
Hey, Todd, I wanted to ask a little bit about new products. Was there anything that fell off the new products list and impacted your comfort level, and was anything added? Also, is the mix within new products driving average selling prices a little higher?
Sure. One important factor on the new products is that we only track things that have been launched in the past two years. In the second quarter, the Gen II rifles rolled off, so think about that volume in terms of our total volume. The good news is that we have a tremendous pipeline of new products, not only in Gen II, but across the portfolio. It's really the timing of the roll-off of those as we launch new products. Another point is that because of the demand in Q2, we postponed some product launches. Given demand for current products, we wanted to make sure we were fulfilling those products first before launching more.
And that maybe fits into my next question, which is, as we look at the back orders, units on back order are up a fair amount here. Walk us through your comfort level with that number and your ability to reduce that number going forward.
A lot of the work we discussed earlier is what we're doing to increase volumes. There's a lot happening in the facilities, and a lot of work around the product roadmaps to really understand where demand is, which lines, and what we can do to increase production. If you recall, in Q1 we had issues at some facilities due to snowstorms. We focused on increasing output in Q2 to catch up. We also had a number of 250th anniversary products launched in the quarter, which added volume pressure in the short term. Looking to the back half of the year, we're focusing on where demand is highest and what product lines those are. We are adding the appropriate people and also looking at additional shifts where it makes sense.
Okay, and if I could squeeze one more in. You talked a little bit about capital allocation and use of cash. I'm curious if you can provide any insights as we think about upcoming CapEx needs. Are there investments you need to make or plans for excess cash?
Sure. Over the next few years, our target is roughly $30 million of capital expenditures. That primarily supports additional capacity and innovation, including efficiency gains in the facilities through newer machines. We're piloting migration to mini cells in some facilities, which gives us more flexibility in the types of machines we buy and more capability in how we make product, including more fifth-axis capability. That is part of the thought process around the $30 million target. Regarding our cash position, we're around $118 million. We're being thoughtful about capital deployment. Our clear priority is to invest in the business first. Then we'll evaluate other uses of cash, including share repurchases if we believe the stock is undervalued, and M&A opportunities where it makes strategic sense. Given the cyclicality of this business, we also like to hold cash to weather potential downturns. We're feeling good about where we are and will continue to treat investor capital thoughtfully.
Perfect. Thank you.
Absolutely. Thanks, Mark.
Your next question is from the line of Rommel Dionisio with Aegis Capital.
Thank you very much. Todd, you alluded to possibly delaying some new product launches to help get through the strong demand in the current period. Can you provide a sense for the timing? Are these delays into next year or just a few months? How should we think about the pace of new product introductions over the next few months and quarters?
Thanks. I would describe it as a short-term prioritization. For example, on Gen II, given current demand for those calibers heading into hunting season, we didn't feel it appropriate to add new products to those lines now. Where lines share production, we avoid introducing new products or new parts to those lines during peak demand. So our focus is on short-term prioritization of what we introduce and when.
Okay, and dovetailing with that, should we think about capital expenditures moving more into the fourth quarter rather than the third quarter, given the cadence of new product introductions? You reiterated the $30 million for the full year, but does timing shift?
Yes, timing is partly calendar driven. Typically many projects are green-lighted in the fourth quarter of the prior year, we get traction in the first quarter, and actual investment and spending of dollars tends to happen later in the year. Much of the CapEx activity often occurs after mid-year, so you'll see more spending across Q3 and Q4.
Okay, perfect. Thank you very much.
Absolutely. Thank you.
There are no further questions at this time. I will now turn the call back to Todd Seyfert, CEO for closing remarks. Please go ahead.
Thank you again for joining us today and for your continued investment in Ruger. The progress we've made during the first half of the year gives us confidence that we're building a stronger, more agile Ruger while remaining focused on delivering value for our customers, employees, and shareholders. We look forward to talking again next quarter. Thanks.
This concludes today's call. Thank you for attending. You may now disconnect.