AXIL Brands Reports Q3 Earnings: Revenue Increases, Earnings Decline
Shares of AXIL Brands, Inc. (AXIL) experienced a 2.2% decline following the release of its third-quarter fiscal 2025 results. In contrast, the S&P 500 index reported a growth of 7.8% during the same period. Over the last month, AXIL’s stock has dropped 37%, significantly underperforming the S&P 500’s decline of 2.6%. This marked underperformance highlights investor concerns regarding AXIL’s recent results and wider market trends.
Third Quarter Financial Performance
During the third quarter of fiscal 2025, AXIL reported revenues of $6.92 million, a 7% rise from $6.47 million in the same quarter last year. Conversely, net income fell by 26.1% to $0.6 million, down from $0.8 million year-over-year. Diluted earnings per share (EPS) were recorded at 7 cents, a decrease from 4 cents for the comparable prior-year period. This decline signifies a reversal from past profitability trends, despite the revenue growth. The adjusted EBITDA for the quarter was $0.9 million, a notable improvement from a negative $11,052 in the previous year, indicating enhanced operational efficiency amidst weaker bottom-line results.
AXIL Brands, Inc. Price, Consensus and EPS Surprise
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Operating Metrics and Segment Performance
The primary driver of revenue for AXIL Brands was the hearing enhancement and protection segment, contributing approximately $6.45 million, or 93% of quarterly revenues, an increase from $5.99 million last year. This segment generated a gross profit of $4.71 million. In contrast, the hair and skin care segment showed negligible growth, with revenues remaining at $0.5 million and gross profit at $0.3 million. Total consolidated assets increased to $12.95 million from $10.97 million as of May 31, 2024.
Gross profit improved to $4.97 million compared to $4.62 million a year earlier, with margins expanding to 71.7% from 71.5%. Cost of sales also rose, increasing by 6% year-over-year to $1.96 million, aligning with the higher sales volume.
Operating expenses were recorded at $4.38 million, down 7.3% from the previous year due to a reduction in advertising costs and a transition to targeted marketing strategies. However, stock-based compensation saw a significant rise to $0.3 million from approximately $59,099 a year prior. Notably, adjusted EBITDA as a percentage of sales improved to 12.9%, a strong recovery from last year’s negative figures.
AXIL’s cash position saw considerable improvement, with cash balances increasing to $4.74 million from $3.25 million at the close of the last fiscal year. Operating cash flow surged to $1.73 million for the nine months ending February 28, 2025, up from $339,323 in the previous year’s period, primarily driven by inventory optimization and approximately $220,000 in forgiven accounts payable.
Management Insights
Management attributed the reduction in advertising spending in prior quarters to a slump in direct-to-consumer sales. However, they affirmed that the third quarter reflected a recovery, bolstered by post-Thanksgiving sales and improved distribution channels. CEO Jeff Toghraie expressed confidence in AXIL’s strategies to address market challenges, emphasizing efforts to broaden geographic reach and enhance cost efficiency through strengthened domestic manufacturing.
Management pointed out that the benefits from recent geographic expansion and new product initiatives have yet to be fully realized. In this quarter, AXIL incurred around $195,000 in consulting fees, mainly for these strategic developments, which included about $116,000 in stock-based compensation.
Key Influencing Factors
Multiple factors influenced the latest quarterly outcomes. AXIL witnessed an uptick in direct-to-consumer sales driven by favorable seasonal demand. The company also shifted towards wholesaler sales, particularly in the hearing enhancement segment, which helped boost sales volume but at lower profit margins.
On the cost side, a deliberate reduction in advertising expenses benefitted overall operating costs, while consulting fees rose as AXIL sought new market opportunities. The increase in stock-based compensation also pressured profitability.
Furthermore, although revenues grew, net income faced pressure due to an unfavourable comparison with the previous year’s income tax benefit of $0.8 million, against this quarter’s tax expenses of $53,085.
Outlook
Management remains optimistic about achieving positive cash flow and net income by the end of the fiscal year on May 31, 2025. They expect that current cash reserves and enhanced operating cash flow will meet working capital needs for at least the next 12 months. Ongoing investments aimed at improving manufacturing resilience and addressing risks associated with tariffs and international supply chains were also noted.
Recent Developments
In the latest quarter, AXIL executed a reverse stock split at a 1-for-20 ratio effective January 16, 2024, and converted 3.36 million shares of its Series A Preferred Stock into 168,000 shares of common stock. Management indicated that the repurchased and converted preferred shares were retired as of March 24, 2025, refining the company’s capital structure.
Additionally, AXIL accelerated its supply chain transition to respond to rising tariffs and geopolitical challenges. Key steps included relocating senior manufacturing leadership to the United States and establishing domestic facilities to enhance cost stability and responsiveness to changing customer demand.
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