Good morning. Welcome to Byrna’s Fiscal First Quarter 2024 Earnings Conference Call. My name is Rob and I'll be your operator for today’s call. Joining us for today’s presentation are the company’s CEO, Bryan Ganz; and CFO, David North. Following their remarks, we will open the call to questions. Earlier today, Byrna released results for its fiscal first quarter ended February 29, 2024. A copy of the press release is available on the company’s website. Before turning the call over to Bryan Ganz, Byrna Technologies’ Chief Executive Officer, I'll read the Safe Harbor statement. Some discussions held today 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 obligation to update forward-looking statements as a result of new information, future events or otherwise. 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. Now, I would like to turn the call over to Byrna’s CEO, Bryan Ganz. Sir, please proceed.

Thank you, Rob, and thank you everyone for joining us today. This morning we filed our first quarter 10-Q with the SEC and issued a press release providing financial results for the fiscal first quarter ended February 29, 2024, along with key business accomplishments we've made so far this year. I'll begin this morning by passing the call over to David North, our CFO, to discuss our financial results for Q1. Following that, I'll review what was a strong start to the year highlighted by our GAAP profitability offer insights into our operations, and then discuss our go-forward strategy. And then lastly, we'll open the call to questions from our publishing analysts. David?

Thank you, Bryan, and good morning everyone. So let's discuss our financial results for the first fiscal quarter ended February 29, 2024. Net revenue for Q1, 2024 was $16.7 million and that's up 98% from the $8.4 million we reported in the first fiscal quarter of 2023. This $8.3 million increase is primarily due to the transformational pivot in our advertising strategy, which we kicked off in September of 2023. The success of our Celebrity Endorsement Strategy resulted in a $6.7 million increase in direct to customer revenues through our website and Amazon compared to the prior year period. We also experienced year-over-year growth throughout all of our business segments. Gross profit for Q1, 2024 was $9.6 million or 58% of net revenue compared to $5.2 million for Q1 of 2023. The increase in gross profit was a result of the increase in sales. Operating expenses for Q1, 2024 were $9.8 million compared to $7.2 million for Q1 2023. The increase in operating expenses was primarily driven by an increase in marketing spend as part of the company's new celebrity endorsement and television advertising strategy and also, of course, by an increase in variable expenses, which increased with sales volume. This quarter was profitable. Net income for Q1, 2024 was $17,000 compared to a net loss of approximately $2.2 million for Q1, 2023. There's a very significant improvement in net income was primarily due to the increase in sales associated with the new marketing campaigns. Adjusted EBITDA, which is a non-GAAP metric, for Q1, 2024 totaled $1.2 million compared to negative $0.6 million for Q1 of 2023. On to the balance sheet, cash and cash equivalents on February 29, 2024, totaled $24.2 million compared to $20.5 million on November 30, 2023. Inventory on February 29, 2024, totaled $12.1 million compared to $13.9 million on November 30, 2023. And the company has no current or long-term debt. That concludes my prepared remarks, and I'll now turn it back to Bryan.

Thank you, David. As you can tell from our financial results, the pivot we made in 2023 with respect to our advertising strategy is continuing to have an extremely positive impact on our business as we are seeing marked improvements across all segments of the business, and across all key performance metrics. Specifically, as David mentioned, revenue for the quarter was up 98% year-over-year to a record $16.7 million. Digging a little deeper, we see that the majority of this growth came from our DTC business as byrna.com and amazon.com sales combined for over $12.7 million or 76% of our total sales for the quarter. Most of these DTC sales are directly attributable to customers that learned about Byrna through our four celebrity influencers, Sean Hannity, Judge Jeanine Pirro, Bill O'Reilly and most recently, Glenn Beck, who we began working with in January. When we saw initially how successful we were with Sean Hannity back in September of 2023, we had three basic questions regarding our celebrity influencer strategy. One, was it replicable? Two, was it scalable? And three, was it sustainable? During our last earnings call, we answered the first two questions. First, yes, it is replicable. Meaning, we can use other influencers and achieve similarly strong return on advertising spend, or ROAS, as we have proven with Glenn Beck, Bill O'Reilly and Judge Jeanine. Secondly, although it is not infinitely scalable for any single influencer, meaning at some point running more ads with the same influencer will not continue to dramatically increase sales. It is scalable to the extent that we can sign up additional influences as we are continuing to do. In fact, we just signed Dan Bongino, who will be joining the Byrna roster of celebrity influencers in the third quarter of this year. As for…

Thank you. The company will be now be taking questions from its publishing analysts. [Operator Instructions] And our first question is from the line of Jeff Van Sinderen with B. Riley Securities. Please proceed with your questions.

Good morning everyone and let me say congratulations on the strong Q1 metrics. One thing that stood out to me was the gross margin percentage. And I'm just wondering, maybe you could just touch on that and expectations for gross margin each year in Q2, and then as the year progresses to the order of magnitude?

Yes, sure. This is David. First of all, in comparison, most of quarterly results, we usually compare to the same quarter a year earlier. And in this case, they just have to more and but that's not really a valid comparison this time around Q1 of 2023 was anomalous because there was an adjustment to absorption, which led to unusually high percentage last year. So that really isn't a good comparison point. But 58% is really great improvement on trend. We were about 55% for the full year 2023. And that's also what we were in Q4, I believe, of 2023. 58% is higher, for two reasons. First of all, of course, if you have higher volume, higher sales volume, you absorb your fixed costs better. But more importantly, more stronger effect is that the advertising campaigns that are really driving such success in sales growth. The sales growth is focused in our direct-to-customer channels, particularly website sales. And these are our highest margin channels. So I expect that the 58% is higher than what we had budgeted for Q1, but we have budgeted for continuing improvement. I expect this to stay around this level for the remainder of the year.

Okay. Fair enough. And then, if we could circle back to the production increase plans for a minute. I mean, I guess I would say you sort of have a high-class problem, which we welcome, frankly, at this point. But maybe you could just touch on how you're evolving production. I know you said you're ramping up again. Do you need to go to two shifts? Maybe you could just speak more about that.

Yes. I think right now, we're -- we do not need to go to two shifts at this time. Right now, we can go to 18,000 units a month on one shift by fully taking advantage of the second production line that we put into place. It will, of course, mean hiring additional personnel. We are undertaking a program to improve our efficiencies in the factory which will involve certain basic steps as well as implementing some automation. Automation that doesn't make sense when you're doing 5,000 units a month may make sense when you're doing 18,000 units a month. 18,000 units a month is somewhat above where we are running today in terms of sales. But we have to get ourselves first to the position where we -- where our shelves are full and that we're not advertising a two-week delay in shipping. We also anticipate that the growth trajectory will remain intact. And we know that it will be -- fourth quarter will be upon us pretty shortly when we know that demand will be much stronger. So we're hoping that -- although we don't expect to be at 18,000 units in April, we do expect to be at 18,000 units in May and to maintain that pace through the balance of the year which will allow us to restock our shelves and be ready for Q4. Now the factory, as it's currently laid out, is capable of doing somewhere between 36,000 and 40,000 units a year. So we still have a potential for significant growth.

Okay. Great. And then I know you mentioned you've got a shift here with a lot of new customers. But obviously, you can go back to them. That's part of the benefit of that to show the new other products and so forth. And perhaps part of that is the ammo sales. So maybe you could just mention what you're seeing in ammunition sales at this point?

Yes. Ammo sales combined with accessories constituted 22.6% of Q1 sales. And obviously, that is significantly lower than the 25% that we've tended to trend at. And the reason is the higher proportion of new customers.

Okay. Great. Terrific. Thanks for taking my questions. I'll jump back in the queue.

Jeff, thank you very much.

Our next question is from the line of Jon Hickman with Ladenburg Thalmann. Please proceed with your questions.

Hi. Nice quarter, by the way. Can you -- I might have missed this, you were talking pretty fast, but how many premier dealers do you have now?

We currently have 20 premier dealers.

And how many company-owned stores?

One, only the Las Vegas store the original store. And I think as we've been talking with people regarding the franchise program, if we're serious about doing this, we need to have a number of company-owned stores where we have full access to all of the data so that we can prevent -- present that to potential franchisees. And we're also very anxious to see ourselves how replicable this is as a company-owned store. We want to do one in Boston because it will frankly be easy for me to visit it and see the performance and see the customers on a regular basis, but we're also going to do one in Fort Wayne, where we have a factory and in Houston, where we have our law enforcement training team as I get to these areas on a pretty regular basis as do other members of the team, and this will allow us to stay in close contact with the performance of these new company-owned stores.

Okay. And then could you -- can you talk about the -- I can't remember the name, the shotgun.

Yes, the 12-gauge.

Yes, the non-lethal 12-gauge.

Yes. Nothing has really changed since last quarter. Honestly, with the strength in the demand for launchers, we've really been focusing all of our efforts in that area. We do think that the success of the 12-gauge program is going to be largely driven by law enforcement. It is one of the reasons that I've decided to start this study to determine whether it makes sense for us to devote more resources to law enforcement. And I think honestly, Jon, it's not a question of whether it makes sense for us to devote resources to law enforcement, but rather how much resources and what the program should look like because clearly, we have law enforcement customers today. We need to make sure that we're handling these customers appropriately. We're getting a fair number of inbound law enforcement inquiries, I would dare say somewhere between 50 and 100 a month of agencies that are reaching out to us looking to potentially buy Byrna product. And we simply do not have the resources at this time to be responding to them as we should. So we're going to have to devote some incremental level of resources. We think as we do that, we will have an opportunity to get law enforcement to adopt 12-gauge, which again, will help us then make the transition to consumer.

And then, I don't know if you gave us good tier now, but can you give us a percentage of what's being sold on your websites, LE versus SD?

The LE/SD breakdown is approximately 60% SD and 40% LE. Again, there's $100 difference in the price of the LE and the SD. So we would expect some reduced level of demand for the LE. But it's higher than we had expected. I mean, when we first came out with the LE, we really thought it was going to be 10% or 20% for the premium product and the demand has been very strong. And honestly, we don't know where it will be once there are no more limitations on shipping. So right now, the LE production has taken longer. Our availability of LE has not been as good as our availability of SD. So part of that 60/40 split may be a function of availability.

And then one last question is, do you know where you're going to price the compact devices [ph]?

We don't have a price for it at this point. It is clearly a premium product, and we're doing a lot of market research, but we have not made a decision yet.

And you think that will be available later this year?

No. It will not be available in 2024. It is in preproduction currently. We actually have RFQs out for the components. We are in testing of preproduction models. So as I mentioned, everything is going according to plan. And our plan would be to release it early in 2025.

And with SHOT Show?

Potentially at the SHOT show, based on the debacle we had with the release of the LE, we are not going to release the new compact launcher until we have more than 10,000 units on the shelf. So even though it may be ready for production prior to SHOT Show, we need to make sure that we're running it that it's going through testing smoothly, that we're getting a very high first pass yield, and we've got plenty of product on the shelf, because we do think this is going to be somewhat transformative. The other thing that we don't want to do is we don't want to undermine the sales of the SD and LE during the holiday period. So we think we'll have a very strong Q4, even without the LE -- even without the compact launcher. What we are hoping is that the Compact launcher will help us continue this growth trajectory into 2025.

Okay. Thanks. Appreciate it.

Thank you, Jon.

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Ganz for his closing remarks.

Thank you, Rob. In conclusion, I just want to again thank everybody for their support. I want to, again, publicly thank David and say that I could not have done this without him. And will speak to all of you soon. Thank you very much.

Thank you for joining us today for Byrna's Fiscal First Quarter 2024 Conference Call. You may now disconnect at this time.