Shares of AXIL Brands, Inc. AXIL have fallen 2.2% since reporting results for the third quarter of fiscal 2025. This compares with the S&P 500 index’s 7.8% growth over the same time frame. Over the past month, the stock has lost 37%, notably underperforming the S&P 500’s 2.6% decline. The sharp underperformance reflects investor reaction to AXIL’s recent results and broader market dynamics.
In the third quarter of fiscal quarter, AXIL reported revenues of $6.92 million, a 7% increase from $6.47 million in the prior-year quarter. Net income, however, declined 26.1% to $0.6 million from $0.8 million a year earlier. Diluted earnings per share (EPS) were 7 cents, down from 4 cents in the comparable period of 2024. Notably, this reflects a reversal from the prior-year profitability trends despite the rise in revenues. The company’s adjusted EBITDA stood at $0.9 million for the quarter, a sharp turnaround from a negative $11,052 a year earlier, signaling improved operational efficiency despite softer bottom-line results.
AXIL Brands, Inc. Price, Consensus and EPS Surprise
AXIL Brands, Inc. price-consensus-eps-surprise-chart | AXIL Brands, Inc. Quote
Operating Metrics & Business Segments
AXIL Brands’ hearing enhancement and protection segment drove the bulk of sales, contributing $6.45 million or roughly 93% to quarterly revenues, up from $5.99 million last year. The segment also delivered $4.71 million in gross profit. Meanwhile, the hair and skin care segment reported essentially flat revenues of $0.5 million and gross profit of $0.3 million. Segment-level asset growth was modest, with consolidated total assets at $12.95 million, up from $10.97 million as of May 31, 2024.
Gross profit improved to $4.97 million from $4.62 million, reflecting a margin expansion to 71.7% from 71.5% in the prior-year period. Cost of sales increased 6% year over year to $1.96 million, largely in line with higher sales volumes.
Operating expenses totaled $4.38 million, down 7.3% from the prior year due to lower advertising costs and a shift to targeted marketing. Still, stock-based compensation surged to $0.3 million from $59,099 a year earlier. Notably, adjusted EBITDA as a percentage of sales rose to 12.9% from the negative territory last year.
The company’s cash position strengthened considerably, with cash rising to $4.74 million from $3.25 million at the end of the previous fiscal year. The operating cash flow improved sharply to $1.73 million for the nine months ended Feb. 28, 2025, from $339,323 in the prior-year period. This increase was mainly due to inventory optimization and accounts payable forgiveness of approximately $220,000.
Management Commentary
Management acknowledged the impacts of reduced advertising spending in earlier quarters, which weighed on direct-to-consumer sales. However, management emphasized that the company saw stronger performance in the third quarter, thanks to the timing of post-Thanksgiving holiday sales and expanded distribution channels. CEO Jeff Toghraie expressed confidence in AXIL’s ability to navigate market headwinds, and highlighted initiatives aimed at expanding geographic reach and enhancing cost efficiency through domestic manufacturing capabilities.
Management has noted that the company has not yet fully realized the benefits of its recent geographic expansion and new product lines. In the quarter, AXIL Brands incurred approximately $195,000 in consulting fees, primarily related to these strategic efforts, including about $116,000 in stock-based compensation.
Factors Influencing the Headline Numbers
Several factors shaped the latest quarterly performance. The company experienced higher direct-to-consumer sales due to favorable seasonal demand. AXIL saw a shift toward distributor sales, especially in the hearing enhancement and protection segment, which contributed to higher volumes but carried lower margins.
On the expense side, operating costs benefited from the company’s deliberate reduction in advertising spend, while consulting fees increased as AXIL Brands pursued new market opportunities. Stock-based compensation also rose significantly, which impacted overall profitability.
Additionally, while revenues increased year over year, net income was pressured by an unfavorable comparison to the prior year’s income tax benefit of $0.8 million versus tax expenses of $53,085 this quarter.
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The company expressed optimism about maintaining a positive cash flow and net income for the fiscal year ending May 31, 2025. It expects current cash balances, along with operating cash flow, to sufficiently meet working capital requirements for at least the next 12 months. The company also highlighted ongoing investments to enhance manufacturing resilience and mitigate geopolitical risks tied to tariffs and international supply chains.
Other Developments
In the quarter, AXIL completed a reverse stock split at a ratio of 1-for-20, which became effective on Jan. 16, 2024. Additionally, the company converted 3.36 million shares of its Series A Preferred Stock into 168,000 shares of common stock. Management confirmed that repurchased and converted preferred shares were considered retired as of March 24, 2025, streamlining the company’s capital structure.
AXIL Brands accelerated its supply-chain transition strategy in response to elevated tariffs and geopolitical risks. The relocation of senior manufacturing leadership to the United States and the establishment of domestic facilities were highlighted as key steps to improve cost stability and responsiveness to customer demand over time.
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