Executive Summary / Key Takeaways

• Strategic Digital Pivot: Outdoor Holding Company has fundamentally transformed its business model, divesting its capital-intensive ammunition manufacturing segment to become a pure-play, high-margin e-commerce platform centered on GunBroker.com.
• Enhanced Marketplace Monetization: GunBroker.com is undergoing a significant technological evolution, introducing features like a multi-item cart, centralized payment processing (OutdoorPay), cross-selling algorithms, and consumer financing, which are already driving increased take rates and user engagement.
• Improved Financial Health & Efficiency: The divestiture has significantly bolstered liquidity, with $42.9 million in net proceeds, and is enabling a sharper focus on the highly profitable marketplace segment, alongside ongoing corporate restructuring and cost-cutting initiatives.
• New Leadership & Governance Focus: The company has appointed Steve Urvan, GunBroker.com's founder and largest shareholder, as CEO and Chairman, while actively addressing past litigation and implementing robust remediation efforts for identified material weaknesses in internal controls.
• High-Barrier Market Opportunity: Outdoor Holding Company is uniquely positioned to capitalize on the firearms and shooting sports e-commerce market, characterized by high barriers to entry and low consolidation, despite facing industry-wide sales softness and ongoing legal/regulatory scrutiny.

The Strategic Recalibration: A Digital Transformation

Outdoor Holding Company, formerly known as AMMO, Inc., has embarked on a profound strategic transformation, shedding its manufacturing roots to fully embrace its identity as a leading e-commerce pure-play. The company, now solely focused on its flagship GunBroker.com marketplace, aims to redefine the online experience for firearms and shooting sports enthusiasts. This strategic pivot, culminating in the sale of its ammunition manufacturing assets in April 2025, positions Outdoor Holding Company to unlock significant value in a specialized market with high barriers to entry and low consolidation.

The company's journey began in 2017 as an ammunition producer. A pivotal moment arrived in 2021 with the acquisition of GunBroker.com, an online marketplace supporting the lawful sale of firearms, ammunition, and hunting/shooting accessories. This acquisition initially diversified the business into two segments: Ammunition and Marketplace. However, the manufacturing segment faced persistent challenges, including higher supply costs compared to larger competitors, difficulties in securing government contracts due to capacity limitations, and historical operating losses that diverted resources. This led to the strategic decision in early 2025 to divest the ammunition manufacturing business to Olin Winchester, LLC, for approximately $42.9 million in net proceeds. The company officially rebranded to Outdoor Holding Company on April 21, 2025, signaling its new, singular focus.

Technological Edge: Building the "Amazon-eBay" of Firearms

At the heart of Outdoor Holding Company's investment thesis lies GunBroker.com's evolving technological platform. The company is actively transforming GunBroker.com from a traditional auction house into a comprehensive e-commerce leader, aiming to become the "Amazon eBay of the outdoor shooting sports industry." This involves a series of strategic technological enhancements designed to improve user experience, increase monetization, and deepen customer engagement.

Key technological differentiators and innovations include:

• Centralized Payment Processing (OutdoorPay): Launched in Q2 FY2024, this gateway streamlines transactions and acts as an escrow service. This foundational technology is crucial for enabling future e-commerce functionalities.
• Multi-Item Cart & Cross-Selling Algorithms: The multi-item cart, launched in March 2024, allows buyers to purchase from multiple sellers in a single transaction. Cross-selling accessories for firearms purchased through the cart began in Q1 FY2025. The company is continuously cultivating algorithms and analytics to fine-tune recommended offerings and suggestive product placement at checkout. This capability is expected to significantly increase non-firearm accessory sales.
• Enhanced Take Rate Mechanisms: The platform has already seen its take rate increase by 40 basis points, from 5.8% to 6.2% in Q1 FY2025, driven by category fee adjustments on non-firearm sales, increased advertising revenue, and enhanced listing options. Management anticipates a further 1% to 3% increase in the take rate as credit card fees are captured and financing solutions are rolled out.
• Consumer Financing Solutions: An agreement with Gearfire Capital was signed in Q1 FY2025, with an anticipated rollout in Q2 FY2026. This initiative aims to provide flexible financing options, enhancing buyers' purchasing power and driving sales growth.
• Collector's Elite: Launched in Q1 FY2025, this premium site caters to serious sellers and collectors, offering a curated experience without the hefty fees of other luxury firearm auctions.

These technological advancements are critical to building a robust competitive moat. By decreasing transaction friction, increasing Gross Merchandise Volume (GMV), and accelerating user adoption, GunBroker.com is positioned to capture a larger share of the specialized e-commerce market. The continuous development of cross-selling capabilities and financing solutions directly contributes to higher Average Order Values (AOV) and improved monetization, translating into stronger financial performance and long-term growth for investors.

Competitive Landscape and Strategic Positioning

The firearms and shooting sports industry is characterized by unique regulatory complexities and a fragmented online retail landscape, creating a high barrier to entry that GunBroker.com leverages. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, GunBroker.com's strong performance in its specialized segment suggests a leading position. The platform boasts over 8.5 million registered users and 13 million unique monthly visitors, alongside a Net Promoter Score (NPS) of 71%, indicating strong customer satisfaction and community loyalty.

Outdoor Holding Company competes against a diverse set of players, including larger, more diversified companies like Vista Outdoor Inc. and Olin Corporation , as well as firearms manufacturers with some ammunition offerings such as Smith & Wesson Brands Inc. and Sturm, Ruger & Co., Inc. .

• Against Vista Outdoor (VSTO): VSTO, with its broader product portfolio and established distribution, offers greater scale. However, GunBroker.com's e-commerce platform provides a direct-to-consumer channel and enhanced customer engagement that VSTO may not match in its digital-first approach. Outdoor Holding Company's focus on specialized, tech-enabled marketplace features aims to capture market share by offering a superior online experience.
• Against Olin Corporation (OLN): OLN, a large-scale ammunition manufacturer, excels in cost-efficient, high-volume production. Outdoor Holding Company's strategy, now purely focused on its digital marketplace, contrasts sharply with OLN's traditional manufacturing strengths. GunBroker.com's value proposition lies in its curated marketplace for firearms and accessories, rather than competing on commodity ammunition production.
• Against Smith & Wesson Brands (SWBI) and Sturm, Ruger & Co. (RGR): These firearms manufacturers have strong brand recognition and retail partnerships. GunBroker.com differentiates itself by offering a comprehensive marketplace that aggregates listings from numerous sellers, including used and premium items, providing a broader selection and price discovery mechanism than a single brand's direct sales channel. While SWBI and RGR may have an edge in brand-driven market share for new firearms, GunBroker.com "owns the used market" and the "premium side" of the online firearms space.

Outdoor Holding Company's competitive advantages, or "moats," are primarily its proprietary e-commerce platform, the network effects generated by its large user base, and its specialized focus on a highly regulated industry. The platform's ability to facilitate lawful sales through a network of approximately 32,000 federally licensed firearms dealers is a significant operational and compliance advantage. These strengths allow the company to command premium pricing for its services and foster strong customer loyalty, contributing to its robust gross margins.

However, the company faces vulnerabilities, including its relatively smaller scale compared to industry giants and the inherent market volatility of the firearms industry. Customer and supplier dynamics, such as industry-wide softness in gun and related product sales, can impact GMV. Despite these challenges, the company's strategic pivot allows it to be more agile and responsive to market shifts, focusing resources on digital innovation rather than capital-intensive manufacturing.

Financial Performance and Operational Transformation

Outdoor Holding Company's financial performance in the most recent quarter reflects its ongoing transformation and the strategic shift to a pure-play e-commerce model. For the three months ended June 30, 2025 (Q1 FY2026), the company reported net revenues from continuing operations (Marketplace) of $11.86 million. This represented a 3.5% decrease compared to $12.28 million in the prior year quarter, primarily attributed to an overall decrease in gun and related product sales across the industry, partially offset by an increased take rate.

Despite the slight revenue decline, the company demonstrated strong margin expansion and cost management in its continuing operations. Gross profit for the Marketplace segment was $10.33 million, resulting in an impressive gross margin of 87.08%. This is an increase from 85.83% in the prior year quarter, driven by "improved platform monetization and an increasing mix of high-margin seller services, such as advertising and listing enhancements." Operating expenses decreased by approximately $0.40 million year-over-year, benefiting from a $3.20 million reduction in settlement contingencies and a $0.70 million decrease in stock-based compensation. These reductions were partially offset by a $1.40 million increase in severance costs related to corporate restructuring and a $1.90 million increase in legal and professional fees. The net loss from continuing operations for the quarter was $5.86 million.

Liquidity has significantly improved following the divestiture. Cash and cash equivalents surged by $33.10 million from March 31, 2025, reaching $63.40 million as of June 30, 2025. This increase was primarily fueled by the $42.90 million net proceeds from the sale of the ammunition manufacturing business. Working capital dramatically increased from $10.06 million to $51.76 million over the same period, providing a robust financial foundation for future growth initiatives.

The company's revolving loan facility was reduced to zero, and there was no outstanding balance as of June 30, 2025, further strengthening its balance sheet.

The company also incurred significant non-recurring expenses in prior periods related to its transformation. In Q1 FY2025, non-recurring expenses totaled $6.3 million, primarily for legal and professional fees, including a $3.2 million litigation contingency. In Q2 FY2024, the ammunition division faced $1.75 million in expenses due to mechanical failures of primary presses, impacting profitability as slow-moving inventory was cleared at a loss to "clean up our stocks." These actions, while impacting past results, were deemed necessary to transition the company for greater transparency and profitability.

Outlook and Strategic Initiatives

Outdoor Holding Company's outlook is firmly anchored in the continued evolution and monetization of GunBroker.com. Management anticipates further increases in the platform's take rate, driven by the rollout of the Gearfire financing solution (expected Q2 FY2026) and the ongoing refinement of cross-selling capabilities. The company's strategic initiatives for fiscal year 2026 include launching universal payment processing to drive electronic transactions, decreasing transaction friction, increasing GMV, and accelerating user adoption.

Operational efficiency remains a key focus. The company expects to "gradually eliminate the vast majority of [increased corporate costs related to winding down ammunition manufacturing operations] by the end of Q3 2026," further enhancing profitability. Capital allocation priorities include potential share repurchases (subject to Board approval), general corporate purposes, and strategic acquisitions that align with its e-commerce focus. The company expects existing working capital and cash flows from operations to be adequate to fund its operations over the next 12 months, with longer-term funding from these sources for capital expenditures, debt repayments, and acquisitions.

Risks and Challenges

Despite its promising strategic direction, Outdoor Holding Company faces several pertinent risks and challenges. The company is currently subject to an "inestimable loss contingency" stemming from a pending SEC Division of Enforcement investigation. This investigation concerns various aspects of the company's financial disclosures and accounting practices, including valuation of share-based compensation, capitalization of share issuance costs, disclosure of perquisites, related party transactions, and Adjusted EBITDA calculation. The outcome of this investigation is uncertain, and it could lead to significant penalties or further legal fees.

Additionally, GunBroker.com is a defendant in the "MN Action" lawsuit, alleging breach of contract and seeking "$100.00 million in damages." While the company plans to vigorously defend against these claims, the matter is expected to proceed to trial in 2026, and the potential loss remains "inestimable."

Management has also identified and is actively working to remediate material weaknesses in its internal control over financial reporting, including issues related to the control environment, information and communication, monitoring activities, control activities (complex technical accounting, related party transactions, financial reporting), and segregation of duties. Remediation efforts include significant organizational enhancements, new policy implementations, and the adoption of a new accounting system. While these are critical steps, the effectiveness of these controls requires sustained validation.

The company also operates within a market susceptible to volatility. Industry-wide softness in gun and related product sales, coupled with reduced consumer discretionary spending, could impact GMV and revenue growth. However, the company's focus on the premium and used markets, combined with its digital innovation, aims to mitigate some of these broader market headwinds.

Conclusion

Outdoor Holding Company stands at a pivotal juncture, having decisively transformed into a pure-play e-commerce entity. The strategic divestiture of its ammunition manufacturing business, coupled with a renewed focus on enhancing GunBroker.com's technological capabilities, underpins a compelling investment thesis centered on high-margin growth and operational efficiency. The platform's evolution into a comprehensive digital marketplace, complete with advanced payment processing, cross-selling, and financing solutions, positions it to capture significant value in a specialized industry characterized by high barriers to entry.

While the company has addressed past operational and legal challenges, including a leadership transition and the settlement of significant litigation, ongoing risks such as the SEC investigation and the MN Action lawsuit, alongside the need to fully remediate internal control weaknesses, warrant careful monitoring. Nevertheless, with a strengthened balance sheet, a clear strategic roadmap for technological leadership, and a commitment to operational excellence, Outdoor Holding Company is well-positioned to capitalize on the unique opportunities within the outdoor sports and shooting e-commerce sector, aiming for sustainable success and long-term shareholder value.