AXIL Brands Faces Stock Decline After Q3 Fiscal 2025 Earnings Report
AXIL Brands, Inc. (AXIL) experienced a 2.2% decrease in stock value following its third-quarter fiscal 2025 earnings report. In contrast, the S&P 500 index surged 7.8% during the same period. Notably, the company’s stock plummeted 37% over the past month, underperforming the S&P 500’s 2.6% decline. This significant decline reflects investor concerns regarding AXIL’s latest financial outcomes and existing market conditions.
Financial Performance Overview
In the third quarter, AXIL reported revenues of $6.92 million, reflecting a 7% increase compared to $6.47 million in the same quarter last year. However, net income fell by 26.1%, down to $0.6 million from $0.8 million a year prior. Diluted earnings per share (EPS) were reported at 7 cents, down from 4 cents in the comparable period of 2024. While revenues rose, these results reveal a reversal of previous profitability trends. The company also achieved an adjusted EBITDA of $0.9 million for the quarter, a meaningful improvement from a negative $11,052 last year, indicating enhanced operational efficiency despite reduced bottom-line profits.
AXIL Brands’ Performance Metrics
AXIL Brands, Inc. Price, Consensus and EPS Surprise Chart | AXIL Brands, Inc. Quote
Segment Analysis and Operating Metrics
AXIL Brands’ hearing enhancement and protection segment was the primary revenue driver, contributing $6.45 million, or approximately 93%, of quarterly revenues, an increase from last year’s $5.99 million. This segment also recorded a gross profit of $4.71 million. Conversely, the hair and skin care segment showed flat revenues of $0.5 million and a gross profit of $0.3 million. The company reported total consolidated assets of $12.95 million, an increase from $10.97 million as of May 31, 2024.
Gross profit climbed to $4.97 million from $4.62 million, leading to an improved gross margin of 71.7%, compared to 71.5% in the previous year. The cost of sales rose by 6% year over year to $1.96 million, consistent with increased sales volumes.
Operating expenses were reported at $4.38 million, which is a 7.3% decrease from the prior year, attributed to reduced advertising expenditures and a transition to targeted marketing. Nevertheless, stock-based compensation surged to $0.3 million from only $59,099 a year earlier. Adjusted EBITDA as a percentage of sales improved to 12.9% from negative figures in the previous year.
The company’s cash position strengthened significantly, with cash rising to $4.74 million from $3.25 million at the end of the last fiscal year. The operating cash flow turned around sharply to $1.73 million for the nine months ending February 28, 2025, from $339,323 in the previous year, primarily due to improved inventory management and around $220,000 in accounts payable forgiveness.
Management Insights
Management acknowledged that reduced advertising spending in prior quarters impacted direct-to-consumer sales. However, they noted stronger performance in the third quarter, thanks to increased sales during the post-Thanksgiving holiday period and expanded distribution channels. CEO Jeff Toghraie expressed confidence in navigating market challenges and highlighted ongoing initiatives focused on geographic expansion and enhanced cost efficiency through the company’s domestic manufacturing capabilities.
Management also mentioned that the company has not yet fully captured the advantages of its recent geographic expansion and new product introductions. In the recent quarter, AXIL Brands incurred about $195,000 in consulting fees related to these strategic initiatives, of which around $116,000 was attributed to stock-based compensation.
Factors Impacting Quarterly Results
Several factors influenced the latest quarterly performance. AXIL reported higher direct-to-consumer sales driven by seasonal demand. However, there was a notable shift toward distributor sales, particularly in the hearing enhancement and protection segment, which, while boosting overall volume, resulted in lower profit margins.
On expenses, operating costs benefitted from a strategic reduction in advertising. Still, consulting fees increased as AXIL explored new market opportunities. Additionally, a rise in stock-based compensation negatively impacted overall profitability, despite revenue growth year over year.
Moreover, even with revenues up from last year, net income faced pressures from a previous income tax benefit of $0.8 million compared to current tax expenses amounting to $53,085.
Outlook for AXIL Brands
AXIL Brands remains optimistic about sustaining positive cash flow and net income through the fiscal year ending May 31, 2025. The company anticipates that its current cash reserves, along with improved operating cash flow, will adequately support working capital needs for at least the next year. Additionally, there are ongoing investments aimed at boosting manufacturing resilience and managing the geopolitical risks associated with tariffs and international supply chains.
Recent Developments
In this quarter, AXIL executed a reverse stock split at a rate of 1-for-20, effective January 16, 2024. Moreover, the company converted 3.36 million shares of its Series A Preferred Stock into 168,000 shares of common stock. Management confirmed that the repurchased and converted preferred shares were retired as of March 24, 2025, resulting in a streamlined capital structure.
AXIL Brands also accelerated its supply chain transition strategy in response to rising tariffs and geopolitical challenges. The relocation of senior manufacturing leadership to the U.S. and the establishment of domestic facilities were key steps taken to enhance cost stability and improve responsiveness to customer demand.
Stock Recommendations and Insights
From a pool of thousands of stocks, Zacks experts have selected their top five favorites expected to increase by 100% or more in the coming months. Among these, Director of Research Sheraz Mian has picked one stock predicted to have extraordinary growth potential.
This particular company, appealing to millennial and Gen Z audiences, generated nearly $1 billion in revenue last quarter. Given its recent decline, this could be an opportune time to invest. While not every recommendation may succeed, this stock has the potential to outperform previous Zacks picks, such as Nano-X Imaging, which experienced a rise of +129.6% within nine months.
Free: See Our Top Stock And 4 Runners Up
AXIL Brands, Inc. (AXIL) – Free Stock Analysis Report
This article was originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
