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Good morning. Welcome to the Outdoor Holding Company's fourth quarter FY 2026 earnings call. All participants are in listen-only mode. After the speaker's remarks, we will conduct a question-and-answer session. To ask a question at this time, you will need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to the company's investor relations representative, Michael Bacal. Thank you. Please go ahead.

Good morning. Thank you for participating in today's conference call. Joining me from Outdoor Holding Company's leadership team are Steve Urvan, Chairman and Chief Executive Officer, Paul Kasowski, Chief Financial Officer, and Jordan Christensen, Chief Legal Officer and Corporate Secretary. During this call, management will be making forward-looking statements within the meaning of the federal securities laws, including statements that address Outdoor Holding Company's expectations, strategy, future performance, operational results, margins, cost structure, legal matters, capital allocation, and other matters. Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such statements.

For more information about these risks and uncertainties, please refer to the risk factors and other cautionary statements described in Outdoor Holding Company's most recently filed annual report on Form 10-K and periodic reports on Form 10-Q and the company's earnings press release issued in advance of this call. Today's conference call includes non-GAAP financial measures that Outdoor Holding Company believes can be useful in evaluating its performance. These measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the reconciliation table located in the company's earnings press release. The information discussed on this call is current as of today, June 22, 2026.

Except as required by law, Outdoor Holding Company disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. Before we begin, please note that certain non-GAAP financial measures discussed on today's call, including adjusted EBITDA, are reconciled in the most directly comparable GAAP measures in the company's earnings materials. Reconciliations for the first, second, and third quarters of the fiscal year are available in the applicable quarterly earnings releases posted on the investor relations section of the company's website. It is now my pleasure to turn the call over to Outdoor Holding Company's Chairman and Chief Executive Officer, Steve Urvan.

Good morning, everyone. Thank you for joining us for our fiscal fourth quarter and full year 2026 earnings call. After just over a year as CEO, I'm excited to report that annual results reflect remarkable improvement for the company. I'm extremely proud of the tremendous progress we have made. Fiscal 2026 was a year of meaningful improvement across the business. The fourth quarter gave us a strong finish with continued operating momentum, stronger cash generation, growing profitability, and clear progress exceeding the profitability goals I laid out last August. First, I will review our quarterly results. Paul will review our financial performance in greater detail before I recap our accomplishments in fiscal 2026 and our priorities for fiscal 2027.

In the fourth quarter, net sales were $13.9 million, an increase of over 10%, or almost $1.3 million compared with the prior year period, despite a cautious consumer spending environment. Gross margin remained strong for the quarter at 87.6%. Gross merchandise value, or GMV, increased to $229 million from approximately $205 million in last year's period. Due to sales mix of increasing firearms GMV versus non-firearms GMV, we experienced a modest decline in our take rate to 6.06% from 6.15% in last year's period. We continue to execute our strategy of operating as a streamlined, pure-play e-commerce marketplace. In the fourth quarter, we made further progress reducing operating expenses. Total operating expenses declined significantly year-over-year to the tune of $23 million. During the quarter, the company resolved an open litigation item with a $4.4 million payment to fully and finally settle the DCP matter.

We inherited numerous litigation matters and have been working hard to resolve these matters, as evident by many successful resolutions in the fiscal 2026 year. We continue to demonstrate that GunBroker.com can be operated as effectively as a smaller, more streamlined organization by reducing redundancies and right-sizing our personnel to match the scope of our operations. Even after absorbing the one-time $4.4 million settlement expense in the DCP matter, we dramatically reduced our net loss from continuing operations in the quarter to $2.7 million, compared to a loss of $27 million in the same period last year. This translated to a loss from continuing operations per share of $0.02 for the quarter versus a loss from continuing operations of $0.23 for the prior year period.

Importantly, the significant cost improvements once again drove strong cash generation for the quarter, despite the restructuring costs, share repurchases, legal expenses, and other costs offsetting these cash gains for the quarter, which Paul will discuss in more detail. We view this continued recurring contribution of cash flow from operations as one of the clearest indicators of the underlying health of the business. The fourth quarter results reflect a continuation of trends we've seen in the last few quarters. For fiscal 2026, net sales and gross margins grew from fiscal 2025 levels. More importantly, we have been executing on our cost reduction efforts and curtailment of legal expenses, resulting in significantly lower year-over-year operating expenses. The net result was a dramatic reduction in operating losses from continuing operations and positive cash flow from operations for the year.

That positive cash generation is a milestone worth underscoring, as it's a direct result of the concerted efforts our team has put in place to increase operational efficiency. Before I turn things over to Paul, I would like to touch on a key metric we use to evaluate real-world performance: adjusted EBITDA. We believe this non-GAAP metric provides helpful insight into the underlying performance of the business, given the level of non-recurring items impacting reporting results. To help clarify our performance results and identify adjustments, we include a table detailing adjusted EBITDA in both our earnings release and Form 10-K. This quarter's adjusted EBITDA demonstrates our progress as we delivered more than double the adjusted EBITDA in the quarter of $7.7 million, compared to $2.9 million in the fiscal 2025 fourth quarter. Just as encouraging is the trajectory for the year.

Quarterly adjusted EBITDA grew from $3.1 million to $4.9 million, to $6.6 million, to $7.7 million from the first to fourth quarters respectively. For the full year, adjusted EBITDA improved to $22.3 million from $15.3 million in fiscal 2025. We are outperforming the run rate of $25 million adjusted EBITDA that I set as a goal just 10 months ago. I'm especially proud of the tremendous work our team undertook during fiscal 2026 to overhaul and strengthen our financial reporting infrastructure, culminating in the successful remediation of all previously identified material weaknesses in our internal control over financial reporting by year-end. I will now turn it over to Paul Kasowski, our Chief Financial Officer, to discuss the quarter and year's performance in greater detail.

Thanks, Steve. I'm pleased to share some highlights from our fourth quarter. Outdoor Holding Company's fourth quarter adjusted EBITDA was $7.7 million, a robust 55% of net sales. Q4 net revenue was $13.9 million, 10.1% higher than the fiscal 2025 fourth quarter. This marks the third consecutive quarter of sequential and year-over-year revenue growth. GMV was $229 million, 6.2% higher than Q3 and up 11.8% from Q4 of fiscal 2025. Firearm unit sales were up over 8.7% from last year's quarter, while adjusted NICS increased 1.6%, resulting in an increased share of adjusted NICS by 40 basis points. The significant increase in GMV was driven by firearms, while the non-firearms category showed a slight increase versus the prior year period. In Q4, we saw sales growth in both pistols and rifles, with sales of new units slightly outpacing sales in used.

The overall change in sales mix resulted in a modest decrease in take rate for the quarter. The company completed its integration with a compliant FFL transfer platform to improve the transfer process for items subject to FFL regulations. This integration has reinforced our commitment to reducing transaction friction and improving the user experience while generating incremental revenue. Our overall strong adjusted EBITDA was driven by our continued improvements in operating efficiency, reduced expenses, and increased GMV compared to last year's fourth quarter. The company's strong operating model and continued positive cash flow from operations helped the decline in our quarterly cash position to $1.8 million. Even after spending $4.4 million to resolve the DCP matter, incurring continuing legal indemnification expenses, repurchasing $1 million in stock, and resolving other legal disputes.

After including a half million dollars of interest income, we ended the fiscal year with a cash balance of $68.1 million, a substantial increase from our closing fiscal 2025 cash balance of $30.2 million. Regarding cash deployment, the company will continue returning cash to investors through the share repurchase program. Looking at full-year results for fiscal 2026, net sales increased 3.5% to $51.5 million as compared to $49.4 million in fiscal year 2025. Fiscal 2026 gross margins improved to 87.2% versus 86.9% in fiscal 2025. We expect our gross margins will continue to remain strong. A new revenue stream beginning in fiscal 2027 for FFL services will be accretive to sales, but not at the same 87% profitability rate. Full year GMV was $823.5 million, up 3.2% from fiscal 2025 GMV of $798 million.

As a percentage of adjusted mix, GunBroker increased share of firearm sales by 41 basis points for the year. The take rate for the year improved modestly to 6.21% from 6.19% in fiscal 2025. Reducing operating expenses and improving the user experience will continue to remain a focus. For fiscal 2026, our adjusted EBITDA was $22.3 million or $0.19 per share, compared to $15.3 million or $0.13 per share in fiscal 2025. Executing on this strategy and maintaining our focus on financial discipline has increased adjusted EBITDA by $7 million. This is a 46% improvement compared to fiscal year 2025 and includes over $5 million in reductions across SG&A following the corporate restructuring, less legal expenses, and lower bad debt expense. The net loss from continuing operations was $4.9 million for fiscal 2026, or a loss of $0.04 per share.

A significant improvement over the $65.2 million net loss or $0.55 per share in fiscal 2025. Just as important as our positive financial results, the company also remediated all material weaknesses. This was a key priority for management, and we completed it well before our anticipated deadline. Management continues to emphasize the importance of executing on these controls effectively going forward. Now, I'd like to turn it over to Steve for some final remarks before we address your questions.

Thanks, Paul. This was our third consecutive quarter of improved reported financial performance since I became chairman and CEO of the company approximately 13 months ago. As this concludes our 2026 fiscal year, now is a good time to look back and reflect on our progress in achieving the objectives I discussed in my shareholder letter last August. My biggest goals for the year were to substantially reduce the company's SG&A overhead cost structure and to increase adjusted EBITDA. I'm thrilled to report that we delivered on both fronts. We have reduced corporate expenses, reduced our physical footprint, and cut recurring ordinary course operating expenses by $5.4 million. Those actions translated directly into improved profitability, with fourth quarter adjusted EBITDA more than double what we achieved in the first quarter of fiscal 2026.

Importantly, the fourth quarter adjusted EBITDA also demonstrated that we passed the $25 million adjusted EBITDA annualized run rate that I identified as a goal last August. We are proud to achieve that milestone ahead of schedule, but we are not done. We still see opportunities to simplify the organization, improve efficiency, and build on this momentum in fiscal 2027. Paul also highlighted a major part of the story. Our operating model continued to generate positive cash from operations, even while we work through legacy matters and other one-time costs. That positive cash generation gave us capital allocation options. In the fourth quarter, we began to execute on our stock repurchase program, purchasing a little over 500,000 shares for over $1 million. We expect to continue buying stock in a disciplined manner in the quarters ahead as trading permits.

We have been disciplined in our capital allocation to support long-term shareholder value, selectively investing in new features like streamlining FFL compliance to improve the user experience on Gunbroker.com. We will continue to target similar select high-return enhancements to the platform with the goal of increasing traffic, transaction volume, conversion, and ultimately revenue. We will continue to leverage AI to improve the experience for both buyers and sellers on the site. In March, we deployed an AI-powered listing tool to produce standardized and marketplace-optimized product descriptions that we expect will reduce listing creation time, promote consistency, and increase conversion rates. Within the next month or so, we expect to release AI-driven virtual customer service to improve our customer support by providing faster and more accurate resolutions to customer issues. To further take advantage of AI, we recently announced the hiring of Erich Buerger as Director of AI Strategy and Implementation.

Erich will lead the development, coordination, and execution of AI initiatives across the company. Finally, as we look ahead to fiscal 2027, I am optimistic. With our strong margins, more efficient operations, positive cash generation from operations, and platform improvements, each incremental dollar of revenue has the potential to create meaningful profitability and shareholder value. This concludes our prepared remarks. I will now turn the call over to the operator for questions. Thank you.

Thank you. As a reminder to ask a question, please press star followed by the number one on your telephone keypad. To withdraw any questions, press star one again. Our first question comes from Matt Koranda from Roth Capital. Please go ahead, your line is open.

Hey, guys. Thanks. Wondered if you could talk a little bit about the shape of demand during the fourth quarter, in terms of overall GMV and firearms units. The unit data that you shared was helpful. Then, I guess since the quarter closed, since we're a couple months now into the first quarter, any trends to call out on demand in the April, May timeframe, and maybe even month-to-date in June in terms of what you're seeing on firearms demand?

Sure. Hey, Matt. Thanks for the question. We've continued to outperform the market. I think NICS was up a little bit in the quarter. We were up substantially more. That tells me that we're continuing to gain market share and we're continuing to execute on our plan to basically make our sellers happy, make our buyers happy, and then make GunBroker a very seamless experience for both sides of the transaction. That's leading to increases in market share. Obviously, we're not going to preview financial results for the time past the end of the quarter, demand in the marketplace seems better this year.

I think that it can be hard to predict exactly why, but you've got midterms coming up, you've got the elimination of the tax on silencers, and I think that there's a lot of built-up demand for suppressors, and I think that's just had a generally positive impact on the firearms market in general. Demand seems to be continuing to be good. It's not 2020, 2021 good, but it's better than it's been in the last couple of years.

Okay. That makes sense. Thanks for the commentary there, Steve. I wanted to hear a bit more about the AI strategy. I thought the hiring of a Director of AI Strategy and Implementation sounds interesting, and sounds like you see it as a large opportunity for the marketplace. Wanted to hear a little bit, I guess, about where he's going to be focused around. Is it first around seller initiatives, like the listing tool that you mentioned? Is it more around experience and buyer initiatives like the customer service initiative that you also talked about? Maybe just what the primary first areas of focus are going to be and where you see the biggest areas of opportunity?

It's a great question. Obviously, he's been on the job just since the 1st of June. So, step one is get your feet wet, meet with everybody, and start understanding the organization, and understanding behind the scenes how we conduct business. To me, there's so much that AI can do. There's a lot of repetitive tasks that it can perform, there's a lot of things that it can do 24 hours a day, whereas people aren't working 24 hours a day. We're not really focused on anything. We're focused on figuring out where we should be focused. Some of the opportunities we've already seen, obviously, are we have vast amounts of data. The site's been around since 1999. We have pricing data, we have descriptive data. We have all kinds of information about firearms.

Using AI, in the past, we've used traditional data mining tools to help us figure out pricing and certain other things. AI can do it so much more efficiently because it's capable of interpreting things a little more loosely. Figuring out what we can do with that data, how we can better use that data, help our sellers sell things, help our buyers find things. Marketing. AI is great at content generation. There's a lot of tasks that you can perform with AI. Erich's job is to really jump in and help us identify where we should be focused, and then the next step would be creating specific implementations to solve specific problems. The one that we were pretty far down the road, well, actually very far down the road even before he joined, is customer service.

We're probably about a month away from launching that. That one for me, I think is huge because questions come in 24 hours a day, and we don't have people working customer service 24 hours a day. Being able to get you immediate answers and really good answers, I think is going to be game-changing for the organization.

Great. I appreciate all that detail, Steve. Thanks for that. Maybe just the last one. There's still a little bit of residual noise, I guess, from some of the litigation matters, just trying to get my arms around how to think about core operating expenses now that you got the DCP litigation out of the way and the SEC matter is settled. I don't know if Jordan is on and wants to talk about that, or if Paul wants to take a crack at just how to think about core OpEx and the run rate going forward now that those matters are mostly behind us.

I'll tell you, the only open litigation issues are the class action and shareholder derivative lawsuit that were filed in Arizona. To the best of my knowledge, everything else has been resolved. We don't know what the end result of that will be. Aside from that, we don't have any visibility or knowledge of any $4.4 million settlements that we're going to have to make. Everything else has been cleaned up. Really that one issue looked at, the shareholder derivative matter and the class action, if you look at it as one interrelated issue. Aside from that, we believe everything else has been settled. Now, we still are paying indemnification to ex-officers for the SEC charge them in Arizona, and that's ongoing. That's going to come and go in waves. When you go to trial, there's a lot more expense.

In other times, there's a lot less expense. It's definitely kind of chunky. That ongoing cost, that and the class action are really the last two buckets of one-time expenses or legacy litigation expenses that we foresee.

Okay. The indemnification sort of expenses as they come will be called out, I guess, as sort of one-time items, I would assume.

Yeah. It ends up in our adjusted EBITDA bridge.

Got it. Okay. Super helpful. Appreciate it, Steve. I'll leave it there.

Our next question comes from Dave Kanen from Kanen Wealth Management. Please go ahead. Your line is open.

Hi. Good morning, guys. Congratulations. Great job. First question actually was posed by Matt, but I'm going to take a stab at it in a slightly different way, and it's in regards to any momentum. Did the momentum continue in fiscal Q1? What you called out was the NICS data was slightly positive in how you outperformed it and grew share. What is your confidence level? The question is, going forward, what is your confidence level of continued outperformance of the NICS data and continued share gains?

Thank you, Dave. I feel very positive about the way we're trending right now.

Okay. In terms of the costs for indemnification of the former officers, just remind me, is that being pulled out? Does the adjusted EBITDA number exclude it, or we're throwing that in there?

That is a cost that is pulled out for the purposes of adjusted EBITDA.

Okay. The last question is, what are some of the opportunities that you see incrementally in order to grow the business organically?

Absolutely. First of all, as you see from the outperformance relative to NICS, we continue to just basically capture market share. That's one thing that we've been doing, and I believe we'll continue going forward. We brought the Master FFL system online. That has now become a revenue source. In prior quarters, we were implementing it, so there was cost but no associated revenue. Now it's generating revenue. As we go forward, advertising, I think I've spoken about advertising in the past. Our ad business, when I owned the company, it was private. Our ad business was substantially larger than it is at present. We're working on that. We want to drive more advertising sales. That's something that wouldn't affect take rate. It's kind of a completely separate but complementary business line. It's something that we feel could generate substantial revenue growth and substantial profitability as well.

We're continuing to make progress on universal payments. Again, some of our sellers don't accept credit cards, don't have the ability to accept credit cards, and we believe that that is both a substantial revenue opportunity, but also a very substantial potential driver of GMV. Just eliminating the friction and having to go to the bank and then go to the post office and get a money order and mail it off and what have you, as opposed to just throwing down your credit card to make a purchase. We think that that will drive substantial incremental GMV as well.

One more question I thought of as you were speaking. Things have been quite calm in the country, relatively speaking, in terms of civil unrest or catalysts that spur people to go out and buy guns and firearms. Could you give us a reference point in the past, for example, when there was, like during the George Floyd riots and other events like that, in terms of run rate, historically, what you've seen in the business, in EBITDA, in case something like that happens.

Yeah, sure.

get a sense as to what the earnings power and EBITDA potential is.

In early 2021, through 2020, you had kind of a triple whammy. You had COVID. You had the Defund the Police. You had protests and some rioting and looting. You had an election. Going into the first calendar quarter of 2021, we were on a run rate that was in excess of $100 million in EBITDA. Of course, at that time we were private. I guess we were under a different accounting standard, so I don't want to get us in trouble or what have you, but we were in excess of $100 million in EBITDA as a run rate. When you have political events, like for example, in 2008, two days before Barack Obama got elected, our sales, they literally doubled, and then they doubled again.

During COVID, our sales, again, we ended up on a run rate of an excess of $100 million. The size of the spikes can be massive. From a GMV standpoint, it can be double and triple and quadruple the GMV that you're currently doing in a calmer period. Any kind of political changes, what you were talking about, things like social unrest, these things could really drive massive increases in revenue and GMV.

All right.

I think we'll add onto that, Steve. The big point is it's very scalable. Our operating expenses are pretty fixed and when the top line grows, we don't need to invest a lot more in the business to support it. It's pretty scalable. We were at 55% adjusted EBITDA as a percent of sales, I think it would expand as that grows.

Thank you. I appreciate the color, and good luck. I wish you a successful year.

Thanks, sir.

We have no further questions. I would like to turn the call back over to Steve Urvan for any closing remarks.

I want to thank you for participating in today's call and for your interest in Outdoor Holding Company. We look forward to sharing our ongoing progress when we report our first fiscal first-quarter results in August. Thank you all, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Morning, and welcome to the Outdoor Holding Company's fiscal third quarter 2026 earnings call. At this time, all participants are in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. I would now like to turn the call over to Michael Backel of Darrow Associates, the company's Investor Relations firm. Please go ahead, sir.

Good morning. And thank you for participating in today's conference call. Joining me from Outdoor Holding Company's leadership team are Steve Urban, Chairman and Chief Executive Officer, Paul Kaczowski, Chief Financial Officer, and Jordan Christensen, Chief Legal Officer and Corporate Secretary. During this call, management will be making forward-looking statements, including statements that address Outdoor Holding Company's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Outdoor Holding Company's most recently filed periodic reports on Form 10 and Form 10-Q, the Form 8-Ks filed with the SEC today, and the company's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes non-GAAP financial measures that Outdoor Holding Company believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net income or loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The information discussed on this call is current as of today, 02/09/2026. Except as required by law, Outdoor Holding Company disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Outdoor Holding Company's Chairman and Chief Executive Officer, Steve Urban.

Good morning, everyone. Thank you for joining us for our third quarter fiscal 2026 earnings call. We believe these communications help you better understand our progress in moving and improving the company's performance. We look forward to this quarterly dialogue and we remain committed to transparent and thoughtful communication with investors. Turning to the quarterly results, fiscal Q3 2026 was a strong period operationally and financially. I am going to provide some initial thoughts, then we will turn things over to Paul to discuss our financial performance. I will close things out with some thoughts on where we are headed. Net sales were $13.4 million, an increase of 7% or about $900,000, outperforming broader trends in our strained consumer spending environment. Gross margin remained strong for the quarter at 87%. Gross merchandise value increased to nearly $216 million and we experienced a modest improvement in our take rate to 6.2% from 6.17% in last year's period. We continue to execute our strategy to operate as a streamlined pure-play e-commerce marketplace. In the third quarter, we continued to make significant progress reducing operating expenses. Including depreciation and amortization, operating expenses declined significantly year over year, down about $22 million with our operating expenses being the largest component with a reduction of approximately $21 million. A closer look at this expense reduction shows that a significant portion of this improvement reflects lower litigation-related costs, but importantly, recurring ordinary course corporate operating expenses declined by approximately $1.4 million driven primarily by reductions in corporate headcount, legal spend, and facilities cost. As I have said before, gunbroker.com can be operated effectively with a smaller, more streamlined organization by reducing redundancies and rightsizing our personnel to match the scope of our operations. Our actions over the past several quarters reflect that view. These cost reductions contributed to net income before discontinued operations in the quarter of $1.465 million compared to a loss of $21.077 million in the same period last year. This translated to earnings per share of $0.01 for the quarter versus a loss of $0.18 from continuing operations in 2025's third quarter. The significant cost improvements drove strong cash generation of over $4 million from operations during the quarter even after restructuring costs, legal costs, dividends, and other costs, which Paul will discuss in more detail. Before I turn things over to Paul, I would like to touch on our most important financial metric, adjusted EBITDA, which we believe provides helpful insights into the underlying performance of the business given the level of non-recurring items impacting reporting results. To help clarify our performance, we include a table detailing adjusted EBITDA in both our earnings release and 10-Q. This quarter's adjusted EBITDA number confirms our progress as we delivered a 54% increase in adjusted EBITDA for the quarter to $6.5 million compared to $4.3 million in 2025's third quarter. I will now turn it over to Paul Kaczowski, our Chief Financial Officer, to discuss the quarter's performance in greater detail.

Thanks, Steve. Excited to share some highlights from our third quarter. Outdoor Holding Company reported net income for a second consecutive quarter at just under $1.5 million in Q3. Third quarter adjusted EBITDA was $6.5 million, a robust 49% of net sales. We reported an improvement in Q3 adjusting earnings per share from the previous year's $0.04 per share to $0.05 per share. Q3 is seasonally one of our highest quarters for sales, and that remains consistent this year. GMV was $215.8 million and grew 6.4% while net revenue was $13.4 million, an increase of 7% compared to the same period last year. Firearm unit sales were up over 8% from last quarter, while adjusted mix decreased by 3.7% resulting in an increased share of adjusted mix by 56 basis points. The significant increase in firearm GMV was partially offset by a decline in the non-firearms category. The company is committed to improving the user experience on Gunbroker and recently announced a strategic partnership with Master FFL to improve the transfer process for products subject to FFL regulations. This partnership required an upfront investment in Q3 impacting COGS, but margins remained strong at 87.1%. We anticipate this continued expense until the implementation is complete. Bottom line is that our strong adjusted EBITDA was driven by improved operating efficiency, reduced expenses, and increased GMV when compared to last year's third quarter. The strength of the company's operating model is also evidenced in the increased cash position of nearly $4.2 million from last quarter, including $500,000 of interest income bringing our current cash balance to $69.9 million. The company intends to deploy some of that cash through its share repurchase program as trading permits. Surplus cash generation continues to be impacted by legal costs, but we expect a larger percentage of cash from operations to gradually be retained by the company as these matters are resolved. Looking at results for the first nine months of fiscal 2026, net sales were up slightly at $37.2 million compared to $36.8 million in fiscal year 2025. Year-to-date fiscal 2026 gross margins were 87.1% versus 86.7% in last year's period. Reducing operating expenses and improving the user experience will remain a focus. For the first nine months of fiscal year 2026, our adjusted EBITDA per share is $0.12 compared to $0.10 per share for the first nine months of fiscal 2025. We have reduced operating expenses by $28.9 million year over year largely driven by legal resolutions and reduced corporate expenses. As a result, the net loss before discontinued operations was $4.5 million for the first nine months of fiscal 2026 or $0.04 per share, a significant improvement over the $40.6 million net loss from continuing operations or $0.34 per share for the first nine months of fiscal 2025. We expect our financial performance to continue progressing on this positive trajectory, but results may be tempered by legal costs in the short term as we continue to resolve remaining issues. Now, let me turn it over to Steve for some final remarks before we take your questions.

Thanks, Paul. Overall, we are pleased with the progress made this quarter. The results reflect the impact of the cost reduction initiatives implemented over the past several quarters and we believe there remains additional opportunity to further improve operational efficiency. We have made such progress by relocating the headquarters and eliminating other redundant costs, but we will continue to evaluate and execute on additional opportunities to simplify the organization. Our near-term objective remains to achieve a $25 million adjusted EBITDA run rate before sales growth over the next twelve months. Paul also pointed out our substantial cash position. In January, we announced a stock repurchase program. We have since been in earnings-related blackout, but look forward to deploying the repurchase program when we are in open trading window over the next couple of months. We remain focused on disciplined capital allocation to support long-term shareholder value. Looking forward, expect continued cost optimization alongside targeted investments to improve the user experience on the gunbroker.com site with the goal of increasing traffic, increasing transaction volume conversion, and ultimately revenue. With our gross margins and disciplined operational efficiency, each dollar of incremental revenue will have a tremendous impact on profitability, driving improved shareholder value. That concludes our opening remarks. I will now turn the call over to the operator for questions. Thank you.

We will now begin the question and answer session. Please pick up your handset before pressing the keys. Our first question comes from Matt Koranda with ROTH Capital. Please go ahead, sir.

Hey, guys. Good morning and nice job on the quarter. Curious to hear a little bit more about what you think is driving the good performance in firearm sales for you versus NICS? You are well outpacing that. Wanted to hear a little bit more about maybe some of the enhanced seller tools that you put into place. That might be helping that? How much is it the used, the shift in the used in the industry in general that's helping you out there. Maybe just to unpack that a little bit for us.

Sure. Thank you. Let's see. So our focus is on buyer experience. We have been working hard to basically streamline the process to make it as easy as possible for people to find things, to make it as easy as possible for them to buy things, transact, and then, we just did a release at SHOT Show, talked about Master FFL to streamline as much as possible the kind of the fulfillment process on the back end with the transfer dealers and what have you. So for us, it's all about buyer experience, you know, and we are creating seller tools as well. But it's all about customer experience, you know, making that experience as seamless as humanly possible. And I think that, you know, in part, that is what's playing, you know, that's helping us drive growth is getting back to our fundamentals and focusing on the experience of the marketplace. Additionally, yes, used guns continue to be very strong. Although, you know, we've just guns in general were a great category for us over the last quarter. So our continued just continuing to focus on that customer experience. We are also continuing to work on universal payments. We are trying to just look at every aspect of the transaction process and just make it as seamless as humanly possible.

Okay. That makes sense. Curious on the universal payments implementation, Steve, maybe where are we, I guess, in terms of implementation there? When is it realistic to expect that it might be rolled out across the platform? And what does that unlock for you in terms of incremental GMV, that you can go after?

Sure. So, in terms of what it could mean, right now, about 30% of our transactions are not done through credit card. And so what we look at is how many transactions are foregone because, you know, people do not want to have to send a check, go to the, you know, go to the post office, go to the bank, and get cash, go to the then take it to the post office and get a money order. So, you know, to our way of thinking, that part of the process is not as streamlined as it could be. And so you know, for us, universal payments we could make money on that 30%. Which would, you know, increase our take rate. But we also can make that experience to the buyer more seamless by allowing them to just pull out their credit card for anything on the site as opposed to, you know, certain transactions have to be paid for in a way that has a lot more friction. And so we consider that to be a very big opportunity for driving GMV, which in turn drives revenue. In terms of timeline, you know, it's actually there's a lot of complexity in payments. There's licensing issues. There's compliance issues, KYC, AML, you're dealing with banks. Banks are slow moving. You know, it's not a super easy process. The technology isn't that hard, but just all the process around it is, you know, challenging. So I do not really want to put out a timeline and miss it because I do not think we are quite close enough yet. But, you know, this is the highest priority for the engineering team we are working diligently every day to, you know, move the ball forward on that initiative.

Got it. Maybe just last one for me. I guess if we just run rate, which may be a little bit of a dumb way to do it, but if we just run rate the adjusted EBITDA from the third quarter here for a full year, tracking ahead of the $25 million in adjusted EBITDA target that you set out. Maybe help us understand maybe either Paul or Jordan, if he's on the call, can help us understand sort of what to expect in terms of legal fees and professional fees over the next several quarters that might kind of touch that down, that won't be adjusted. Any help on sort of where we are in the trajectory toward the putting up a full year, the $25 million that you set out several months ago?

Sure. Paul, you want to take that one?

Sure. You know, certainly, Matt, there's still work to do. I think the indication here is that, you know, there will still be some expenses. For items that are not settled and won't be pulled in. It's hard to say on the pure trajectory. I think, you know, some of those costs were lower than expected in Q3. And so just wanted to give you a heads up that, hey, you know, it may not always trend that same direction.

Matt, this is Jordan. Just to add to that. Legal costs are never straight line. So we budget them straight line, but they ebb and they flow. And we, of course, hope that we resolve as many legal issues as quickly as we can because spending money on legal fees is not a value add to us whatsoever. So we're constantly trying to get these things resolved. But there may be quarters where it's higher than expected, and there may be quarters where it's lower than expected. But the overall goal is just to knock those things out as quickly as possible.

Okay, guys. I'll leave it over to someone else here. Thank you.

And the next question comes from Mark Smith with Lake Street. Please go ahead.

Hi, guys. Wanted to ask first off just as we look at solid firearms sales and revenue across the board. Is there anything to call out for instance Florida with the tax holiday? Was that a driver of increased sales or anything else that you can point to that helped kind of the outperformance?

Yes. We did look at that. It was up, but it was not a large driver of the overall performance. And it was a combination of new and used firearms both that were up versus the same quarter a year ago. Okay. With used leading the way. But both categories were higher.

Okay. And looking forward, I would assume maybe similar thoughts around kind of NSA items with tax stamp going away, you know, sounds like this could be a positive for you. Here, especially in this next quarter. But is it big enough to really move the needle? Curious if you have any thoughts on that.

So I think it's a good question. And obviously, requires me to dust off my crystal ball. But I think that there's no question NSSF just put out adjusted mix numbers and obviously a lot of people were just holding off on NSA items for the tax to go away. So there's been kind of a burst of that activity around there. And I think that, you know, that same burst of activity specifically in NSA kind of drives interest in general in firearms. So, you know, I think that, you know, if this isn't a I wouldn't say this is a 2020 COVID situation or whatever, but I think the market's a little better than it was, you know, since the first of the year. Than it has been prior.

Okay. And then I did want to hit operating expenses again, you know, a good step down in operating expenses. This quarter. Does a lot of this feel like, and I know Paul just talked about, you know, some legal, some things that are still happening. But, you know, any thoughts as we look forward at when or where we get to kind of a mobile call, normalized quarterly OpEx.

Know, it's still off in the future. One of the biggest and actually, let me delineate, you know, OpEx versus things that are adjusted. In terms of OpEx, we are working to reduce our OpEx every day. There were certain requirements in our settlement with the SEC. There were certain requirements that require us to also just we want to make sure that we're doing everything by the book, you know, because we're under additional scrutiny here, just from, you know, having been under the SEC's eyes. For a long period of time. So we're really working hard to make sure that we do everything. We have, you know, a lot more that we are looking at things a lot closer than, you know, we're everything we do, we're just looking at it. Make sure that everything is right. We want to, you know, we don't want to make any mistakes. And so that increases our costs. We have, we're spending more money on legal, we're spending more money on compliance. We're spending more money on internal auditing. And so we're trying to kind of cost reduce that over time. But as we pointed out in the past, there's really, you know, it's twelve to eighteen months out in the future. It's been a few months since then. Was kind of the point at which, you know, we expect that stuff to drop off appreciably. And then from an adjusted standpoint, from a cash flow standpoint, the indemnification of, you know, former officers is one of the, it's just we spend a lot of money on legal fees indemnifying former officers and that won't end until such time as, you know, they settle with the or that they go through, you know, their process with the SEC and there's some resolution on that. And so we see the light at the end of the tunnel but we're not in control of, you know, when those things are gonna occur.

Okay. And the last one for me is just as we think about cash generation and capital allocation. And Steve, you talked a little bit about in your closing remarks. But you've got the buyback authorization that's out there now. Anything else that we think of that we should be thinking about that maybe takes a more significant investment here in the near term? And then if you want to talk at all about your thoughts maybe around the preferred later this year.

Sure. So, you know, we invest in the company we invest in our website every day. You know, most of what our engineering team does is really CapEx. You know, we're developing new software. We're developing new features. Developing new functionality, developing new processes. All of that is an investment. And so we have a substantial budget for, you know, investment in the platform. And we spend that money every day, and we've always done that. In terms of new things outside of that, we are looking at a number of initiatives. AI has come on the scene the last three years, and, you know, we're always looking at we use AI internally right now. We do a lot of things with AI, but we're always looking at ways to, you know, improve and streamline and, you know, improve the, again, the buying experience, improve the internal operations, what have you. And so we're looking at focused areas to potentially invest some money. But when you look at the pile of cash that we have, those investments would not be that significant compared to the amount of cash we generate, the amount of cash that we have on our balance sheet. So right now, I mentioned we were in a blackout period. Right now we consider our shares highly undervalued and we're going to be out executing on our repurchase plan now that the blackout has ended. And in terms of other things we're just always looking at what we can do with that cash and trying to be smart about it. We don't want to squander the cash. It's not that easy to make. We want to make smart decisions and we want to always drive shareholder value and so we're always looking at ways to deploy that capital to achieve those goals.

Excellent. That's helpful. Thank you, guys.

And the next question comes from David Cannon with Cannon Wealth Management. Please go ahead.

Hi, good morning. Congratulations and thank you, Steve, and your entire team for your hard work and execution. One more thing because I know you're not going to highlight this is you being so aligned with the shareholders is very welcome. By myself and probably the majority of shareholders. Some may not know that you've forgotten salary that essentially you're making $1 a year and you're aligned with us with the stock to a very high magnitude. So thank you for that. So first question, is in regard to the investment that you're making in FFL. And the impact that it had on COGS, if you could just quantify that for us? For the quarter? And then also for the twelve-month period, what you anticipate that to be in total?

You mean Master FFL. Correct?

Yes. You had said that you were investing. My apologies. You in the prepared remarks, you said that you were investing and I guess it was a consultant or a vendor that was helping in there and that there was a cost that impacted COGS.

Correct. I'll let Paul talk about the cost. But in terms of, you know, the Master FFL announcement, again, this is, you know, this is an attempt to streamline a point of friction in the buying process. Firearms have to be shipped to a licensed dealer in the US. You can't just ship a gun to your house. It has to be shipped to a licensed dealer and the buyer has to pick it up from a licensed dealer. And so there's a whole, there's paperwork that needs to change hands. There's things that need to be done to facilitate that. And we identified that as a point of friction again and with the goal of improving the buyer experience we are making an investment in that area and we expect it to be something that generates revenue over time. But there is a little bit of an initial investment. And I'll let Paul address that right now.

Yeah. So it's about, you know, $60,000 to $120,000 a month here in terms of the nominal investment, and it's really intended to get all the plumbing working coordination, to make the tool really seamless. The long run. Like Steve said, at a be a center and an opportunity to generate additional sales.

Paul, did you say $60,000 to $120,000 a month?

That's correct.

Okay. Okay. So probably maybe up to $400,000 or $500,000 for the quarter. Was the impact, which at some point we'll get back and then also as Steve mentioned, it should improve conversion.

Right. Okay? And then on another subject as it relates to the bank, could you give us an update on what you think is happening in terms of regulation and banks potentially offering traditional financing. So for reason I'm asking is, you know, you're paying eight and three-quarters on your preferred. You know, with the strong cash generation, I mean, we would if you were a regular company, you banks would be lining up to give you $50 million that probably sulfur plus two. And we could arb that and we could also thoughtfully opportunistically deploy that into, you know, other initiatives like share buybacks or whatever increases shareholder value. So could you talk a little bit about that landscape and what's happening and if this is an opportunity in the forward twelve months?

Yeah. I'll be happy to do that. So just in the last week or two, JPMorgan sent a letter to the NSSS and basically rescinded their policies that prohibited them from doing business with the gun industry. I think it was kind of veiled in the modern sporting rifles category. But, you know, I think under Trump, he signed an executive order. They've put out some additional requirements that they're prohibiting banks from discriminating against the number of categories of businesses including fossil fuels and what have you, but firearms was kind of very high up the list. And I think that what that does, you know, change the landscape in terms of being able to get bank debt sizable amounts of bank debt at a reasonable price. In the past, if you look at the top 100 banks, you know, maybe there were five or six that would do business with companies that were, you know, gun companies. We're not really a gun company. We're a technology company, but firearms are sold through our site. And I think that, you know, the executive orders and the change in attitude by the regulators is changing that, changing that attitude toward the gun industry and opening up avenues that were previously closed to us. And so I do agree with your thesis that, you know, the company probably has the ability to raise a substantial amount of reasonably priced debt from banks if we care to do that. Then obviously we could look at intelligent ways to deploy it including potentially paying off the preferred, potentially share buybacks, whatever intelligent capital allocation strategies that we wish to pursue. So, I believe very much that that avenue is much more accessible than it has been in the past.

Okay. Is that something that I'm sorry, is that something that you're currently engaged in? Are you in conversations with banks at this present time to get reasonable debt?

We are not. But you know, we're kicking I mean, we're always looking at capital allocation strategies and I've done a number of debt deals in my life. I don't like to be over-levered but a certain amount of leverage that we can easily service is a good thing and so we are always looking at these things.

Okay. And then I see take was up about 10 basis points. Can you talk to some of the levers that you think you have? And is there opportunity to move take up a little bit more? And then my last question is in regards to the progress that you've made in used over the next twelve to twenty-four months do you guys have an internal target as to the percentage that you'd like to see in GMV per use?

So I think in terms of moving take rate around, I'll let Paul give you some more details here. But in terms of moving take rate around, you know, things like the universal payments, potentially even the deal with Master FFL. These have the ability to, you know, increase our take rates over time. And we, you know, as these things roll in, you know, we're always trying to drive that number to our best of our ability. We're trying to drive it through, you know, new services, as opposed to straight fee increases. And so, we're trying to be very thoughtful and find ways to create more value and to be able to charge for it. And, you know, those the two examples I just gave are solid examples of that. Paul, do you want to talk some more about our kind of the other question David asked about where we expect to use to go?

Sorry. It was of where we expect I missed the last part of the Zotto question.

Just an internal target over the next twelve to twenty-four months that you'd like to see used become as a percent?

We have not set an internal target on used. I think some of the marketing programs kind of address users on the site by kind of profile is the goal. So we did not set a target on used GMV sales.

We are continually, we're always trying to drive more used product through the site. And we may not have quantified it, but that's a goal is to continue to get more used product on the site. Used product has a great sell-through rate. Margins to the person who's actually selling the product. So it's just always a push for us.

You know what? One more question. My apologies. So you had mentioned that to start the year probably given what's happening with, you know, ICE and some of this protesting. You had implied that there was an increase in activity that the year started off more positively. Could you just touch on that a little bit? And share with us what you're seeing? I mean, we check the traffic, and we do see it improving, but we don't see anything. Anything like, you know, really meaningful. But I'll, yeah, I'd like to hear what you're saying.

You know, I said, the NSSF, you know, does the adjusted mix and obviously, you know, the suppressor, the tax is going away on NFL items. Has driven activity. And I think NFA has probably more than, you know, the Minnesota occurrences, probably more so than that. It's just, you know, as of January 1, no more NSA tax and that's driving activity and that's driving interest. Not just in the restricted items, but, you know, across the board. I think that's probably your biggest driver is just the tax going away. It's caused renewed interest in the space.

Okay. That's helpful. Again, thank you for your hard work. Congrats to you and your entire team.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Steve Urban for any closing remarks.

I want to thank you for participating in today's call. For your interest in Outdoor Holding Company. We look forward to sharing our ongoing progress when we report our fiscal fourth quarter and full year 2026 results in June.

Thank you. Have a good day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.