Good morning, and welcome to Byrna's Fiscal Third Quarter 2024 Earnings Conference Call. My name is Kevin, 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, Lauri Kearnes. Following the remarks, we'll open the call to questions. Earlier today, Byrna released results for its fiscal third quarter ended August 31, 2024. A copy of the press release is available on the company's website. Before I turn 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 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. 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'd like to turn the call over to Byrna's CEO, Bryan Ganz. Sir, please proceed.

Thank you, Kevin, and thank you, everyone for joining us today. This morning, we issued a press release providing our financial results for the fiscal third quarter ended August 31, 2024, as well as highlighting key business accomplishments for the quarter. We'll be filing our 10-Q with the SEC on Friday of this week. I'll start by passing the call to Lauri Kerns, our CFO, who will discuss our financial results for the third quarter. Following her remarks, I'll review the operational highlights for the third quarter, which resulted in the record $20.9 million of revenue and our continued GAAP and non-GAAP EBITDA profitability. I will then offer insights into our go-forward strategy. Lastly, I'll open the call to questions from our covering research analysts. Lauri?

Thank you, Bryan, and good morning, everyone. Let's review our financial results for the fiscal Q3 ended August 31, 2024. Net revenue for Q3 2024 was $20.9 million, a 194% jump from the $7.1 million reported in the fiscal third quarter of 2023. This $13.8 million increase is primarily due to the transformational shift in our advertising strategy, which began in September 2023. The ongoing success of our Celebrity Endorsement Strategy helps drive the $10.5 million increase in direct-to-consumer revenues through our website and Amazon compared to the prior year period. For the first-nine months of 2024, net revenue totaled $57.8 million, which is up 114% from $27 million in the first-nine months of 2023. Gross profit for Q3 2024 was $13 million or 62.4% of net revenue, compared to $3.2 million or 44.6% of net revenue for Q3 2023. The improvement in gross profit margin is largely attributable to additional sales through our higher margin DTC channels an intensive cost component reduction effort, which was spearheaded by Byrna's engineering team and the economies of scale resulted -- resulting from increased production volumes. For the first-nine months of 2024, gross profit was $35.2 million or 60.9% of net revenue, compared to $14.6 million or 54.1% of net revenue for the same period in 2023. Operating expenses for Q3 2024 were $12.2 million compared to $7.3 million for Q3 2023. The increase in operating expenses was driven by an increase in variable selling costs such as freight and sales transaction processing fees, an increase in marketing spend related to the company's new advertising strategy and an increase in payroll primarily in marketing and engineering as the company made focused improvements in these areas. For the first-nine months of 2024, operating expenses were $32.6 million compared to $21.5 million for the same period in 2023, reflecting a 52% year-over-year increase. Net income for Q3 2024 was $1 million, a $5.1 million improvement from a net loss of $4.1 million for Q3 2023. For the first-nine months of 2024, net income was $3.1 million compared to a net loss of $7.4 million in the first-nine months of 2023, which was a $10.5 million improvement. Adjusted EBITDA, a non-GAAP metric for Q3 2024 totaled $1.9 million compared to a negative $2.4 million for Q3 2023. This brings adjusted EBITDA for the first-nine months to $6.3 million, an $8.1 million improvement from the prior year. Cash and cash equivalents at August 31, 2024, totaled $20.1 million compared to $20.5 million at November 30, 2023. Inventory at August 31, 2024, totaled $19.8 million compared to $13.9 million at November 30, 2023. The company has no current or long-term debt. I'll now turn the call back over to Bryan.

Thanks, Lauri. As you can see from the financial results, we are continuing to see significant growth even during what is traditionally a seasonally slow quarter for us with the dog days of summer. For the quarter, revenues were up 194% compared to the same period last year. For the full year, revenues are expected to be up by almost 100%. What we didn't initially expect sequential growth from Q2 to Q3, which was now our fourth consecutive quarter of sequential growth, the seasonal -- the slow seasonal effect of Q3 was overwhelmed by the strong growth for Byrna. The four quarters of sequential growth highlights the continued impact our celebrity endorsement advertising strategy. And I think also the ongoing normalization of both less-lethal product category and Byrna's growing brand awareness. Since launching the Celebrity Endorsement Advertising program in Q4 of last year, we've consistently maintained a minimum ROAS or return on advertising spend of at least 5x, which is highly accretive to Byrna's bottom line. This has resulted in driving Byrna to profitability. As a result of this, Byrna is now a stable, profitable enterprise with positive cash flow, and as Lauri mentioned, approximately $20 million of cash in the bank. Today, we are working with more than 10 celebrity influencers, who are actively evangelizing Byrna's less-lethal mission and helping to normalize less-lethal weapons as a legitimate alternative to lethal force. Most importantly, we are continuing to see success with a number of influencers that have been on board for many months, including Glenn Beck, Bill O'Reilly, Judge Jeanine Pirro, Dan Bongino, and Jesse Kelly. In fact, Sean Hannity, our original celebrity endorser has been promoting Byrna for well over a year now and is still generating more than $1 million a month in sales. Our high margin DTC…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question is coming from Jeff Van Sinderen from B. Riley Securities. Your line is now live.

Hello. Good morning, everyone and let me say, congratulations on the considerable progress that you guys are making and the strong metrics that reflect that. Can you speak a little bit more about adding the other shift as we get into Q1, where that will bring you in terms of production capacity? And then, I guess, how you're further evolving the supply chain for that ramp? I know you touched a little bit on that. And then, also kind of where inventory stands today versus the current sales trend that seems to be really strong and just kind of expected sales during the peak holiday period?

Yeah. As you saw, we can produce approximately $18,000 -- 18,000 launches in one shift at our facility. We are -- this coming month and next month, probably selling somewhere 18,000 launches or more a month. So we clearly need to be expanding our production capacity. The good thing is, we've got a second and third shift open to us as a guy who's been in the manufacturing business, most of my life, you hate to see a factory run at just one shift. So we're excited about utilizing the factory more fully. So we think that next year we'll probably be pushing production up to 24,000 launches a month, maybe 28,000 launches a month. And we clearly have the capability of doing that. What we need to do is to hire more people and Jeff, that was one of the reasons that I wanted to raise the wages. It has a very, very modest impact on the cost of the launcher and, in fact, is more than offset by the increased volume. So even with the increased wages, the cost of the launch will go down as we expand our production. In terms of the supply chain, we have been adding suppliers continuously. I've spoken for a long time about the all-truck strategy and we are very close to being there. When this port strike came about, we only had one product that would have been affected by the port strike out of the 115 components that go into producing a launcher. So we're really in very, very good shape from a supply chain standpoint, almost every single product now has a dual source, some of the products that are not quite there yet are accessories and not critical to the production of launches. So we're excited to expand the capacity, and we're in a good position to do so.

Okay. Great. And then your gross margins came in well above what we were looking for. And considering the production ramp, what do you expect or I guess, any thoughts on gross margin for Q4? And then, any change in promotional plans -- sorry, any change in promotional plans [Multiple Speakers]

I'll let Lauri take the gross margin question, if you don't mind, Lauri.

Sure. Yeah. I mean I think we expect gross margin to stay pretty close to that for Q4, could be a slight uptick, but because of the sales and the promotional sales that we will be running in Q4, I don't expect much of an uptick. We're looking for more of an uptick on gross margin going into 2025.

And the second half of your question, Jeff, was about promotions.

Yeah.

So the interesting thing is, we were running at a $25 million clip for September. There were no sales in September. We will have a sale in October. In fact, today is the second day of Prime days. Just to give you a little heads up here, we sold more yesterday on Amazon than we normally do in five days on Amazon, and we expect to do the same. So we would expect sales for Prime days and also for Black Friday to have some impact on revenues. Although, it may have a somewhat negative impact on margins, but I wouldn't imagine that to be more than maybe 1 percentage point.

Okay. Great. Thanks so much for taking my questions. I’ll take the rest offline.

Thank you.

Thank you. [Operator Instructions] Our next question is coming from Matt Koranda from ROTH Capital Partners. Your line is now live.

Hey, everybody. Congrats on the great results. So maybe just wanted to cover the commentary that it sounded like you were making there, Bryan, during the prepared remarks. I guess, you don't give official guidance, but it sounded like you did say that revenue could be up by as much as 100% for the full year. And I think, you also mentioned there was a run rate in September, if we pull that forward that could result in about $25 million in revenue for the fourth quarter. So just wanted to hear about the sort of the range of outcomes that you expect for the fourth quarter and some of the swing factors that might drive you sort of above that range or below?

Yeah. We're -- I mean, we're now 10.5 months into the year. So it's not too much of a stretch to give where we think we're going to be for the year. As I said, we're running at a $25 million clip. I don't see any reason we would be less than that. There is the possibility that we're more, but I don't know. September is generally a weaker month in the fourth quarter. But this is -- honestly, Matt, above where we had anticipated being. We didn't expect to be up at $25 million. If we're at $25 million, that clearly is going to put us over $80 million. Last year, we were $42 million, and that was the reason I gave that will be up by 100%. We are not giving guidance because we don't see any real benefit from it. But we know that there's been very strong momentum. We don't expect the momentum to stop. We're seeing the ability to attract more and more celebrity endorsers. We're seeing a continued normalization of the product. We're seeing our retail investors increasing their purchases. And this is before we bring on the new retail stores and before we bring on the new products. So we think that there'll be pretty good growth for next year, but we're low to put a number to it.

Okay. Fair enough. And then I wanted to see, if you could maybe just dig a layer deeper around the promotions that you ran in the third quarter. Maybe just any learnings in terms of what induces consumer demand. I noticed there were some 10% of sort of promotions that were run in August. I assume there's probably more in plan for the fourth quarter. How should we think about that heading into sort of that critical Black Friday period? And maybe just -- since Black Friday and Cyber Monday are kind of happening pretty late in your quarter, maybe any commentary around how that impacts the fourth quarter versus the first?

Yeah. So first on the last part of that, Matt. So Black Friday this year, right, is November 29, I think, it's 29. Anyway, our fiscal year end is November 30. So as you can imagine, a lot of the sales from Black Friday, Cyber Monday, those are actually going to fall into our first quarter because we're not going to have a lot of those delivered other than maybe some Amazon one, but it's really late for us on the fiscal year. I think some of the learnings that we had, I think, 10% -- when we do 10% off-site wide, and we also did 10% off the LE for the first-time in that August sale, that certainly drove some traffic. We know that these Prime days on Amazon, we've got the best products like -- some of the products we've got the best products badge for the air guns in the category for Amazon now. So that is certainly helping to drive that additional sales. And as Bryan said, it was -- yesterday, it was more than 5 times what we would normally do on a day in Amazon.

So we don't expect another Amazon sale this quarter. We'll have the Prime sales, and then we'll have a Black Friday sale. Amazon will be the same as Byrna. We traditionally run a Byrna Black Friday at the end of October. So that will really be the sale that impacts Q3. That will probably -- Q4, excuse me. And that will probably be a five day sale, again, in the 10% range. There's a lot of people that wait for that sale. We want to make sure everybody gets stuff in time for Christmas. The other thing we're seeing is, we're seeing incredible power in our e-mail list. So our e-mail list has grown this year from -- we had 201,000 e-mail subscribers that were active. In other words, if they had bought something or engaged with us over the last 90 days, as of the end of last year. At the end of September, that list had grown to 526,000 active e-mail subscribers. Every time we send an e-mail out, we see a jump in sales. We have traditionally run two e-mails a week because you have to have a balance between annoying people so much that they start to unsubscribe and getting the message out. We are now moving that to three e-mails a week for Q4 because of the holiday season. And we keep very, very close analysis of our unsubscribed rate. And I will tell you, the unsubscribe rate is now down to 0.12%, so about 0.1%. At the end of last year, it was 0.47%. So we've seen our e-mail unsubscribed list rate go down, even as the size of our e-mail list has grown. And not every e-mail is about a call to action. A lot of these are about people using the Byrna, stories of people as to why they bought the Byrna, they're about topical events. So they're interesting and they get people to open the e-mail. What we've discovered is that when they open the e-mail, we have a click through rate of over 50%. So it really doesn't matter what we're talking about on the e-mail. We just want them to open the e-mail and to click through to our website, and then we see growth in sales. So we're doing two things. One, we're having a sale in October, the Byrna Black Friday sale, as Lauri said, the actual Black Friday sale that happens at the end of November, will have some effect, but a very modest effect in Q4. Most of that effect will be in Q1 of next year. But we have gone from two to three e-mails a week and we think that, that will have some effect.

Okay. Super helpful. Maybe just one more, if I could sneak one in. So on marketing, you mentioned that there may be some new advertising channels opening up, Bryan. So it sounds like perhaps some mainstream sort of cable news channels, maybe an opportunity. Just wondering, if you were willing to put a time frame on that, where you think it could happen, what that would open up for you in terms of marketing dollars to be spent? Any color on that would be great.

Yeah. So we expect -- we're bringing on three new endorsers this quarter, and we expect that rate to somewhat stay consistent for next year. And we're growing our marketing spend by about $200,000 a month. So in Q2, we were at about $800,000 a month. In Q3, we're at about $1 million a month. This quarter, we're at about $1.2 million a month. And we expect it to continue to grow at that rate. That's why I'm saying, I think over next year, we'll probably be at a 50% growth rate in terms of marketing spend. And so long as our ROAS stays consistent at 5%. And again, we see no reason that it wouldn't – we’ll see a commensurate increase in DTC sales.

Okay. Great. Appreciate it. I’ll jump back in queue. Thank you.

Thank you. We’ve reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Well, I just want to say to everybody, thank you very much. We appreciate your support. Obviously, we're very pleased with the continued growth in Byrna and our continued acceptance by the media generally and by all of our customers. So once again, thank you very much, and we’ll talk to you shortly.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.