00:04 Greetings, and welcome to the Byrna Technologies Fiscal Third Quarter twenty twenty one Earnings Conference Call and Webcast. As a reminder, this conference call is being recorded and all participants are in a listen-only mode. 00:15 Before turning the call over to Bryan Ganz, Byrna Technologies’ Chief Executive Officer, I will read the Safe Harbor statement. Some discussions made today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Byrna's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events or otherwise. 00:45 As this call will include references to non-GAAP results, please see the press release in the Investors section of our website ir.byrna.com. For further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. 00:59 I'll now turn the call over to Mr. Bryan Ganz. Sir, please go ahead.

01:04 Thank you. Good morning. Thank you for joining us for Byrna's twenty twenty one third quarter earnings call. Just as a clarification at the end of the call, we will be taking questions from analysts and investors as time permits. 01:24 During this quarter, we have continued to execute on our strategy to grow Byrna through increased visibility and brand awareness, new product introductions and the opening of new markets and new sales channels. Our performance in the third quarter was marked by success, I think in all of these areas. Perhaps most importantly, we completed a successful public offering as all of you know, raising fifty six point eight million dollars after fees, and now with sixty million dollars of the bank and no debt. We really have the resources to fully implement our growth strategy. 02:03 Compared with Q3 twenty twenty, we have more than doubled our net revenues to eight point seven million with a strong contribution from our international dealer network, although, admittedly we were down from the prior quarter, which benefited from a five million dollar surge in sales attributed to Sean Hannity mentioning the Byrna HD on his nightly show. 02:25 Gross profit more than doubled to four point nine million and our gross margin improved to fifty six percent. This margin was higher than we had projected our last earnings call as the introduction of a number of our new higher margin products offset pressure from growth in our lower margin international sales. We introduced a slate of new game changing products this quarter that are helping us transform our business, scale our brand, improve our margins and open new markets. 03:01 So we took an important step this quarter to expand from essentially a one product, one sales channel company to…

05:25 Thanks, Bryan and thanks everyone for joining us today. Today, I'll review the financial results for the fiscal third quarter ended August thirty one, twenty twenty one, provide an update on the company's liquidity position, and discuss the company's full year twenty twenty one outlook. 05:40 Revenues for the third quarter of twenty twenty one were eight point seven million dollars compared to four point two million dollars in the third quarter of twenty twenty. The increase was driven by higher e-commerce and international sales, new product launches, and growing market awareness of the Byrna product portfolio. 05:58 Third quarter gross profit rose at faster rate than net revenues, up one hundred and thirty percent to four point nine million dollars from two point one million dollars in last year's third quarter. Gross profit margin was fifty six point two percent of net revenue compared to fifty point seven percent of net revenues in last year's third quarter and fifty six point four percent last quarter. 06:20 These improvements were driven by higher sales volumes, greater manufacturing efficiencies following investments in the company's U.S. production facility and the introduction of new higher margin products. Gross margins were essentially flat compared to the immediately preceding prior quarter as higher margins, new product sales were offset by an increase in lower margin international sales. 06:44 Operating expenses for the third quarter were six point seven million dollars compared to two point seven million dollars in the prior year period, and five point five million for the previous quarter. The year-over-year increase was driven largely by investments in corporate infrastructure necessary to support Byrna's continuing growth, this included expanding and retaining our management team and administrative staff, which resulted in a payroll increase of one point five million dollars and a one…

12:22 Thanks, David. Let me start with Amazon. I get more questions about Amazon than anything else. So I thought, I would start there. At the very end of August, we launched on Amazon, and use this platform as the avenue to introduce the new Byrna SD. The sales contribution for the third quarter was de-minimis. I think we did about forty nine thousand dollars of sales on Amazon during the last few days of August. However, we expect to see Amazon become an increasingly important sales channel over time and we are already beginning to see a positive trend. 13:05 Over the last month, Amazon sessions grew from approximately seven hundred and fifty per day, the first week of September to approximately three thousand sessions per day the last week of September. And well, this is still less than fifteen percent of the almost twenty two thousand average daily sessions on Byrna's own website during the month of September, Amazon traffic is growing rapidly, and we expect to see activity on our Amazon storefront ultimately equal or exceed the activity on our own Byrna website. 13:38 We've also seen a significant increase in members of Byrna Nation. This is the group of consumers that have opted into our email database. Today, Byrna Nation numbers one hundred and eighty five thousand subscribers, this is up from approximately thirty five thousand at the beginning of this year, at the beginning of twenty twenty one. 14:00 We talk a lot about our e-commerce sales platforms and they are very important component of our strategy. For example, as I mentioned, our average daily sessions at Byrna.com was twenty one thousand nine hundred in September. If we look at September of twenty twenty, our average daily sessions were seven thousand six hundred and sixty.…

33:27 At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Jeff Van Sinderen from B. Riley. Please proceed with your question.

34:01 Good morning, everyone and thanks for taking my question. Can you speak more about the new products that are being added to Amazon or plans to add new products to Amazon, since I know Amazon is a topic on a number of people's minds?

34:19 We are -- we started off with a limited number of products at Amazon because they gave us limited quote-on-quote shelf space. So initially, we could have one thousand units at Amazon within the first week as they saw the traffic they raise, that's a three thousand and we added additional products they have now raised that limit again. We are adding ammunition and holsters and lasers, additional colors. 34:52 Our goal will be for Amazon to carry everything that we carry on the Byrna website. So, I don't know how long it will take, the way these algorithms work as the more success we have, the more they promote the product and the more shelf space they give us, but our intention is to have the complete range available on Amazon.

35:19 Okay. And then I just wanted to touch on, I know there was another sadly, another school shooting this week that was in the news. Just maybe, if you could touch on your strategy going after the school market, what are the milestones that maybe we should look for in the school market over the next year or so?

35:39 The school mark -- the interesting thing, the ironic thing is, we develop the Byrna because at the time, we were offering products that were available only to law enforcement military, school resource officers, in other words to the government, and making sales to the government is a lengthy and difficult process involving budgetary concerns and bureaucratic concerns. So we pivoted to the consumer market. With the success that we've had in the consumer market, our products have come to the attention of law enforcement agencies. In fact, this week, we are training the ATF. They are now buying Byrna as well, but it's still a slow process. As I mentioned, we've run on one hundred fifty law enforcement agencies, that's a one hundred fifty out of eighteen thousand five hundred agencies in the U.S. We are finding the same thing with breaking into schools. 36:47 So, although, we've been making a lot of presentations, we have to have sign-off from the school resource officers and from the school principal and from the Superintendent of Schools for the school districts. So we have not built anything into our projections for the school program. Although, this is an important project for me personally, there is nothing that I would like more than to be able to have the Byrna Shield and the Byrna personal security devices on every school resource officer in America. I just don't know how quickly that's going to happen, Jeff. But it is something that we're devoting resources to, and we'll continue to focus management’s attention on.

37:44 Okay. Great. And then if I can squeeze in one more. I know you've added new accounts recently and new retailers. And anymore color you can give us on the latest trends you're seeing in the dealer channel? And then I know that's a focus just anything we should look for over the next couple of quarters in new retailers?

38:03 What we've discovered is that the retailers that are best for us. Our companies like this new retailer Bi-Mart. Bi-Mart has ordered numerous times this quarter since coming on board. Bi-Mart is sort of a mini Walmart. It's sort of a general merchandise store that caters to a broad population within its regional footprint. So that tells us that other stores like Walmart should be a target for us. And we are currently in discussions with many of the, sort of big box stores that you would imagine. And I think that this is an approach that we should take, where we found that we are not making good headway is with the FFLs, with the firearms dealers themselves as those of you who are firearms owners know many of these locations people are buzzed in, there is not a lot of foot traffic going up and down, the aisles, people go to a gun store specifically to buy something that they want either ammunition or specific weapon that they want. 39:18 And rarely buy something on a whim when going to a gun store. So we are not going to focus our efforts on going after the gun market through gun stores. We think going after the gun market to gun shows through things like the Print Media advertising that we're talking about, the email campaign that we're talking about, but we're going to try to pull back on our efforts to sell through federally licensed firearms, dealers and refocus our attention on more general merchandised stores.

39:54 Okay. Thanks so much and best of luck for the rest of the quarter.

39:57 Thank you very much, Jeff.

40:05 Our next question is from Brian Gesuale from Raymond James. Please proceed with your question.

40:11 Hey. Good morning and thanks for taking my question. Bryan, can you maybe talk a little bit about how you might see the evolution of product sales during the holiday season? What incremental marketing you may do? How we might start thinking about the seasonality of natural shape of the business over the course of a given year?

40:30 Up until this point, we've not had enough product to ever really participate in the holiday season. So, last year, we did not run any specials. This year, I'm happy to say that we're in a much better position in terms of product. As David North mentioned, we're going out of our way to use some of cash that we raise to significantly increase inventory level, so that we will be prepared for a surge in demand. Because of our unusual fiscal year ending at the end of November, Black Friday or Cyber Monday sales will not result in any sales for this quarter. Because by the time we get the sale in and ship it out, will be passed November thirty, which I think is a Tuesday. So, we are -- but that said, we do think that there will be a significant consumer demand, particularly as we now have a very large installed user base. We're well over one hundred and ten thousand launchers sold, and these are people that are continuing to buy ammo. 41:51We're bringing on additional products from Apparel to the Byrna Banshee, obviously these new Eco-Kinetic rounds, new holsters. So we will be running a robust Black Friday, Cyber Monday campaign, because of our year-end at November thirty, we will probably also do something like a Byrna Friday, maybe a week or two ahead of Black Friday, so that we can try to gain some of these holiday sales in the fourth quarter, but I would expect that most of the holiday sales will end up in Q1 of next year.

42:31 That makes sense. And so we would obviously expect Q1 to sequentially grow off of your 4Q, not only with the momentum and inherent growth in the business, but perhaps even maybe a little bit of a bigger increase sequentially than we typically see?

42:47 Yes. I would have to say that's right. Q1 should seasonally be a strong quarter for us.

42:56 Okay. Terrific. You've really grown out kind of awareness. You've got one hundred and eighty five thousand email subscribers. Can you talk maybe about potentially making these subscription model available, it seems like the ammunition is tracking ahead of plan, presumably that leads to more used cartridges. Are there any plans underway to get some subscribers from that list and maybe how might you think that could progress over time?

43:27 You're welcome to join the management, because you're thinking exactly as we do. We are planning on introducing a subscription model. We're going to kick it off with Amazon, because Amazon purchases are very familiar with subscription models. Up until this point, we've really been constrained on ammo. And we've been particularly constrained because we had a sole source supplier. If people read through Byrna Nation or Byrna Owners group, I think the one consistent complaint has been the fact that we don't have a regular supply of ammo or we haven't had a regular supply of ammo. Some of the quality problems we have with ammo, with the introduction of the Eco-Kinetic round and with the introduction of our own production of ammo now. So we are actually producing Byrna Pepper ourselves. We are producing Byrna training or Byrna Inert rounds ourselves, in addition to the third-party supplier that we are buying from. 44:31 We do have ample supply of ammo. We will be introducing ammo in more configuration. So we've always sold the Inert rounds in ninety five count. We'll be introducing a twenty five count this month. We think that would be an ideal thing for the subscription model. So we will test out the markets on the subscription model first with Amazon, and then if that successful, roll it out to the Byrna website as well.

45:05 It sounds exciting. And maybe just final one for me, can you maybe give us just a little bit of help on how we want to think about OpEx growth as you're in this hyper growth period over the course of the next twelve or eighteen months and how you just see that running its course?

45:06 Yeah. Look, I will be completely honest with you. I was not happy with the OpEx numbers for this quarter, and we are working hard to reduce what I will call structural OpEx. So, in other words, payroll and other infrastructure costs, and we've already -- I will just tell you, I've already reduced payroll by over five hundred and thirty thousand dollars on an annual basis. 45:53 David, do you want to chat a little bit about what we're doing there?

45:57 Yeah. I mean, looking at it from the big picture, and I think in our last call, I said that we should expect OpEx to continue growing as sales continue growing, but not at the rate that we had seen in the prior year that continues to be the case, and that's just the natural development of maturity of the company. Right now, we are in the fourth quarter and so, naturally, we are going through the intensive process of building out our budget for next year, and we'll be looking at all of this in that context, but something very biggest change between this quarter and in the prior quarter and that's that capital range. We've got fifty six million dollars in the bank. It's very safely invested, but that means that it could vary a little current, and we've got to figure out how to invest in marketing and also in people to promote the growth of those sales. So we do not expect to have quarter-on-quarter increases of this percentage that we've seen from Q2 to Q3. And we do expect to see continuing gradual growth in this number however.

47:04 Yeah. And again, just the way, we're going to be looking at this is what structural and what sort of marketing. So right now, we are spending, so like drunken sailors, but I went through all of the marketing programs we're kicking-off this quarter. We plan to spend heavily on marketing. Infrastructure, we plan to tighten the belt a little bit. I think that we're going to look to see how we can control those costs. But from a marketing standpoint, getting the brand recognition is everything. I think, I mentioned -- every once in a while you think boy, we've been so successful look, how we've grown, but the fact is very, very few people know who Byrna is? When I meet people invariably it's one out of twenty, one out of fifty that have any idea, who Byrna is, what Byrna does. So it's clear to us that we need to continue to expand the brand recognition and to the extent that there is growth in OpEx, it's going to be on the marketing side.

48:22 That's great. Thanks so much. I'll jump back into the queue.

48:25 Okay. Thank you.

48:34 [Operator Instructions] Our next question is from Jim McIlree from Dawson James. Please proceed with your question.

48:41 Thank you. Good morning. I was hoping you could share with us data that you have on purchases by customers after the initial purchase of launcher, that is, if I purchased a launcher a year ago, how much in additional sales do you average with that customer for accessories, ammo, maybe an additional launcher things like that? Do you have those statistics and can you share that with us?

49:12 I don't have those statistics at my fingertip, honestly, but they are trending in accordance with industry standards. So if we look at the Mission acquisition, so Mission was a more mature company had been in business longer, they had approximately fifty percent of their income came from recurring sales. If we look at PepperBall, and we had a number of people that were -- they work for us that we're at PepperBall. PepperBall also has about fifty percent -- of their fifty percent of their revenue from recurring sales. 50:01 We see of the twenty thousand -- twenty two thousand people to come to our website, fifty percent are first time visitors and fifty percent are recurring visitors. We would expect as a result that over time, hopefully, many, many years into the future, when our growth starts to moderate that we will see the repeat sales being fifty percent of our business. In this industry generally, most purchasers spend as much on ammo and accessories over the first eighteen months of their purchase as they spend on the initial purchase itself. But keep in mind that, well, we've sold one hundred and ten thousand launchers, if we look back eight quarters to sort of the very beginning of what we started to sell launchers the numbers were very small. 50:58 So the largest number of launchers have been sold in the last two quarters. So we are seeing probably eighty percent of our people come back and order at least one additional time in the first ninety days. We have probably twenty percent of people to come back and order five times in the first twenty -- first ninety days. But we are counting on this becoming a more important part of our business as our installed user base grows.

51:33 And thank you, that's helpful. And just to clarify, Bryan, the metric that you mentioned, a purchaser spending as much in the next eighteen months that they did on the launcher that is currently or that's what you saw initially?

51:52 No. That's an industry statistic for the firearms industry. So when we were trying to build out our model for Byrna, we were looking at what were analogous industries and in the firearms industry people -- and this was before the price of ammunition went crazy, people are spending as much on ammo and accessories during the first eighteen months. And the other thing that we're hoping with, that will be analogous to the firearms industry is the average gun owner in the United States owns three point five firearms, and generally, what happens is, they'll buy a firearm, initially they'll use it quite a bit. They'll go to the range. They'll use a lot of ammo. They'll buy accessories. And after eighteen months that will start to trail off and they will buy another firearm, so if they had a revolver, they'll buy a nine millimeter. 52:49 We think with the introduction of these new products, both the long guns, and the Byrna LE, the upcoming Byrna PE that we will be able to take advantage of the same trend. That those people that really likes there Byrna HD will want to have the latest greatest model. So we think that will benefit not only from the recurring sales of ammo and accessories for the existing launcher that they have, but that we will also benefit from them being a brand supporter, and that they will buy a follow-on products.

53:30 Okay. That’s helpful.

53:30 And we have seen that happen, so of the Mission 4, which was not an insignificant quantities. So we've sold six hundred and sixty in two months at nine hundred dollars each. So this is about six hundred thousand dollars of sales. This was all to existing Byrna customers. So we have not advertised, this at all outside of our own ecosystem. So this was all sold off of emails to our existing Byrna Nation subscribers. We are in the process of putting together creative for advertising programs. So we think that our thesis that we will see our customers come back and by our new products has proven to be true. 54:28 Are there any other questions?

54:34 We have reached the end of the question-and-answer session. And I will now turn the call over to Mr. Bryan Ganz for closing remarks.

54:42 Great. Thank you very much. Again, I just want to thank everybody for their support. It's -- I can assure you that we remain as committed and convinced as ever in the Byrna Mission and the Byrna thesis. We're strong believers that we are just at the very early stages, just beginning to scratch the market in terms of brand awareness and growth and we're excited about the prospects for this quarter and for twenty twenty two, and beyond. And again, thank you very much for your support.

55:25 This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.