Morning, everyone.
Morning.
I'm gonna go ahead and get started here. Byrna Technologies is our next presenting company. They trade on NASDAQ under the ticker BYRN. Byrna is a less lethal self-defense technology company specializing in the development, manufacture, and sale of less lethal personal security solutions. We're joined today by the company's CFO, Lori Kearns, and Chief Revenue and Marketing Officer, Luan Pham.
Hi, can you hear me? Great.
Perfect. Good morning.
Good morning. I'd like to say that we are in the business of saving lives, and our core mission is to reduce death by firearm. As gun practitioners ourselves, we are. We take the position of being common sense gun owners, but it's really about this product's not about just that crowd. It's about anyone that's concerned about personal safety. For those that have, own a gun, we firmly believe that you need to have options because the firearm should be considered in anybody's defense strategy as the nuclear option. That is when there is no other resort to escape that situation, that you have to, you know, address that imminent threat.
And for those that are averse to owning firearms, we provide the most accessible, easy-to-use platform that gives that person the protection with the formidable stopping power without all the complexities of taking a life. We're gonna try to keep this very brief 'cause we're gonna open it up for a Q&A. We bring to market a platform of pistols, shoulder-fired rifles, but our pistols are halo products. We have a proprietary technology called Pull-Pierce, where the pistol and our rifles are powered by CO2. When you insert that CO2 canister into the pistol, looks like a Glock 19, you load the ammunition, you can store that weapon indefinitely, and that is - we are the only brand in this category that has that technology.
Most of the other products or companies, people in brands in our competitive set, once that CO2 is inserted, it is immediately punctured, and so what you have is essentially a leaky balloon that will dissipate over 12-14 hours. That doesn't make a lot of sense in a self-defense scenario because you don't know when you're gonna get attacked, and you can't say to your aggressor, "Time out, let me load my weapon." That's just not realistic. So those are primarily training tools at best, and the quality and the engineering that we put in our products, that's why we are the most premium in this category is all designed for durability, stability, as well as, you know, always at the ready.
The products, the ammo that goes with our weapon consists of kinetic rounds, rock-hard polymer rounds, .68 caliber projectiles that can break side auto glass from 60 ft away. We sell chemical irritant rounds consisting of tear gas and pepper that can incapacitate an attacker for up to 40 minutes, essentially attacking the central nervous system, regardless if they're on drugs or not. Their lungs will feel like they're shutting down. All areas of exposed skin feel like they're on raging fire. Eyes will involuntarily close for the same reasons, and then nose will run heavy mucus uncontrollably. All these symptoms happen at the same time for 40 minutes. So if you inflict pain, take away their ability to breathe and see, they're no longer worried about you. They're worried about escaping themselves.
In the last four and a half years to five years, we are close to selling 500,000 units. 5% of our business is law enforcement and military. The reason why that's the case is, like, the law enforcement sector is very low, long sales cycle, right? You know, you can take anywhere from eight to 12 to 16 months to get a department through based on budgetary cuts and all the various barriers they have to go through. Our bread and butter is the consumer, private citizen world. The reason why, no background checks required, no permits required to carry the Byrna, legal in all 50 states, and unlike firearms, we can ship directly to our consumer doors. That allows us to build a very strong DTC business.
We launched on Byrna.com, and then we opened our business on Amazon, and those sectors are growing tremendously well, as you see in our revenue. But that is essentially the platform that we have. You know, we do have an international business, primarily military and law enforcement, but the brand is continuing to grow. We had issues last year where our ability to bring and build awareness on the national level was thwarted by the banning of our products and our advertising on social media. We had an incredible three-year, three-and-a-half-year relationship with Meta, Google, YouTube, and when our ads were picked up by the bots, "Oh, this looks like a weapon.
Cancel the ad," we were able to appeal it to humans at these companies. Unfortunately, they all had layoffs, and there were no more humans to talk to, and the bots, you know, don't have that ability to have that conversation. So it forced us to pivot to our influencer strategy. We signed with Sean Hannity and iHeartRadio and then started expanding our roster of influencers. And so, as you may have not have seen our flash yesterday, we had a record year-over-year Q3 financials of 194% growth. And this year has been really a record-breaking year, and we don't see the momentum stopping.
We have figured out a way to target our consumer, and now all we're doing is just rinsing and repeating and scaling by adding different influencers to the mix. Oh, am I supposed to control this?
Yeah.
We figured we brought a deck, but let's not do the deck 'cause that'll take 40 minutes. I hope that was a clear explanation of our platform. But as you see here, with countervailing 'cause societal trends, crimes going up, consumer access to weapons, they're very unsatisfied. Gun restrictions are getting a lot more harder, and so people need a resource. That's where the Byrna opportunity comes into play. That's. I think I mentioned our mission. We are public on the NASDAQ under BYRN. We're headquartered in Andover, Massachusetts, 30 minutes from Boston. Sales and marketing is out of Las Vegas. This is where my office is at, and we have a factory in Fort Wayne, Indiana. Our products are hand-assembled in Indiana. We source from all over the world.
We also produce lots of our products in-house. We are also working on having ammo in-house. So the opportunity is this: There's 100 million gun owners out there, and there's 150 million non-gun owners. These people need options. You can't just have the nuclear option. These people need something that is better than hand-to-hand combat or pepper spray or waiting for the police to come. If you're lucky, 12 minutes, they will arrive. A lot of bad things can happen in 12 minutes. So for us, we're just scratching the surface, and, you know, our business is really segment--
Sorry, I went back.
No worries.
For you.
So yeah, so our business, the total addressable market is huge. The potential is $250 billion. And, you know, again, we're just building brand awareness now. And so the opportunity is still. We're still in the early innings of our growth. This is where we focus. The majority of our business is U.S.-based. We did open Canada for the same reasons, that we see the opportunity there. Gun restriction is very hard there, and their crime is out of control. We also opened up Mexico, which, on both the national level with the government, as well as the civilian side. Mexico just signed into law that for civilians that want to own a Byrna, they have their own version of a concealed carry card.
You take the Byrna training. Byrna is listed in their wording, and then if you take the class, you qualify, you then can carry a Byrna in Mexico concealed. Law enforcement really is our international business. We have a distributor in Latin America called Bersa. They are the oldest gun manufacturer in Latin America, operating out of Argentina. We recently sold over 10,000-15,000 units to the Argentinian police and military there. And, you know, we continue to grow. But here's our product offering: pistols and rifles, the ammo, as I mentioned, the kinetic round. We have pepper for states that prohibit tear gas, and then we have the tear gas and pepper combination.
All of our weapons run on CO2 in different sizes, eight gram, 12 gram, and for the AR variant, eighty-eight gram. We do create or manufacture and market different defensive sprays. Our vision is to have a product for every member of the family. Below, you see our Byrna Banshee. It's a high-decibel alarm that kids can attach to their backpack. If there's trouble, they yank that alarm. It creates this ear-piercing sound in a long you know combined with you know cries for help to create attention. And then for those that want pepper spray, we have the strongest pepper spray allowable by U.S. law.
Combination of tear gas and pepper, similar to our ammo, but it also comes with an invisible skin dye that, once you spray it on an aggressor, if the police are able to locate this person, if they run a UV light, that aggressor will, their skin or affected area will shine or glow like a Christmas tree.
You kind of-
One second.
Back.
One previous slide. Yeah, so we sell a lot of accessories, but, you know, the reality here is we're taking a whole different approach to marketing. Our consumer product in the spray, we call it Bad Guy Repellent. We speak English. Like, you go talk, look at the other brands, 5.4 million Scovilles or whatever. Like, I don't know what that means as a regular citizen. We say, like, "This is military grade. It is going to destroy you." And so, like, easy language, so our younger audience, customers can understand what we're talking about, and it hasn't been so scientific. Then Fox is really a law enforcement brand. It's been around for decades, and we purchased the company and reformulated the sprays. I just mentioned how it works.
There's 150 pieces in this launcher. It's the most well-made launcher in the category, operates on CO2, and we have different variants from the SD that starts at $379, and our Byrna LE at $479, which is a little more powerful, designed for law enforcement, but also very popular with our consumer base. As I mentioned before, the ammo hits impact. It creates a six-foot dispersion cloud. Dispersion cloud attacks the central nervous system. What makes our chemical rounds very advantageous is that missed shots could be very effective. So if someone's in your house, they're hiding behind a wall, and you can't get a direct shot, you shoot the rounds into the back wall, the ceiling, the floor. What you're looking to do is get these chemicals airborne, and humans need to breathe.
Once they inhale the chemical irritants, and they start coughing, that's when you know it starts to be game over for them. But we do sell a variety of ammo from training. That includes our very affordable Eco-Kinetic, which is essentially a sugar pill. You shoot it, it shows about a 60% dispersion of what the real chemical rounds is, so you can have that perspective. Our products are legal to train in your backyard, so extremely convenient. We have an inert round called ProTraining that law enforcement uses. It simulates the full dispersion of the cloud, but it's essentially just talcum powder that's, you know, that's put into the air. Now I want to turn over the numbers to Lori.
So this is just a look at our growth history. Quarterly growth of revenue, as we announced this week, record quarter at $20.8 million, following another record quarter, last quarter of $20.3 million. Luan mentioned last year that we had kind of the blip in the marketing where Google, Facebook said, "You can't advertise with us. It's against our weapons policy." We pivoted the strategy, and you can see that pivot happened in Q4 of last year, and we just continued this growth with obviously the vast majority of it being direct to consumer. This is Q2, so we haven't done full earnings release yet, so we just got some Q2 over Q2 metrics. You can see, though, that our average daily sessions on our web, which is a key factor that we look at, you know, more than doubled.
So more than doubled the increase, and we've continued that momentum. Conversion rate is down slightly, but the average order value is up, and it's a much higher number that we're looking at for sessions coming in. So our direct-to-consumer market, which is really our website, and Amazon makes up about 75% of the business. Then we're selling through dealers, distributors as well, most of that going directly to consumers, and as Luan mentioned, about 5% to law enforcement. So, future growth strategy, you know, we're going to continue this marketing. You know, as we get this product more normalized and people accept it, they understand, "Oh, well, you know, maybe we need to think about our weapons policy and how we advertise." We're doing video commercial advertising on Newsmax. We've done NewsNation. More of these channels are starting to accept it.
We've got radio stations, podcasts with these celebrity influencers, and more of those networks are starting to accept the advertising as well and understanding what the product is. We're looking to open some additional retail stores. So we have dealers, we have distributors, we have our own retail store in Las Vegas. We plan to open another four retail stores of our own. We think that, one, you know, it's great brand awareness to get it out there. It gives people a place to visit if they're having any issues, if they wanna, you know, buy some additional accessories. But every one of these stores will have a shooting range, a demonstration area, so they can try it. When people try it, we're getting over 80% conversion.
So if we can drive traffic into the stores, people can get it in their hands and try it, it's very successful. So we have a few of those stores. We hope to have several of them open by the end of this year. And then just another quick look at financials. So great revenue growth. Gross profit were above 60%. Last quarter, we were at 62%. We did have some sales in Q3. So we don't normally do a lot of sales, so that was a different thing for us. Prime Days, we participated in Prime Days, which requires you to do a 20% discount. Very successful. We are getting nine to 10 times our normal sales volume on the Prime Days. We've turned to GAAP net income profitable, great adjusted EBITDA, and then on the balance sheet, good cash position.
We have great net working capital, no debt, so we're in a really good position to move forward and being cash flow positive. So this is our new product that's going to come out next year. I think you talked about it. Luan, if you want to talk about it.
Yeah. So this is the CEl, the compact launcher that I alluded to earlier. It is going to be substantially smaller than our SD and our LE, but that advantage is it allows you to conceal carry, but it opens the market to women and to folks that want to conceal. It will be using, instead of a 68 caliber round, we'll be using a 61 caliber round, and that round is only produced by Byrna. And so we manufacture our own, our own ammunition, but .68 caliber is kind of like the general size in this space. We think this is gonna be a very transformative product. Not only that, from a standpoint where I mentioned earlier, we're about 500,000 units of the SD and the LE sold in the marketplace.
Well, we already have, you know, a built-in consumer base for the CEL or demand for it. So our customers will add this to their portfolio of Byrna products, and that will allow us to go out there and then really target another demographic. And quite frankly, the biggest request that we've received from our customers is: Do you have a smaller, you know, version of your pistol? So, this product now is in final R&D, and we hope to launch it sometime next year.
Another great thing about this product is it's going to be 61 caliber rounds, so everything right now is 68 caliber. We will be the only ones doing 61, so if people want ammo, they have to buy it from us. They can't buy it from anyone else.
It's going to be priced very premium, and so it's going to be more expensive than the other two. We're still locking in the price because we want it to be the halo product of the brand and making sure that there's price separation, so there's no cannibalization of the existing, the other two launchers.
So just a summary of our investment thesis, right? I mean, we're in a great position, so very, very clean balance sheet. We've got, you know, all the tailwinds coming at us with, you know, the sentiments towards less lethal. We're seeing this adoption. We're seeing people, you know, really understand the message that I'm going to save lives, and not only am I going to save the life of someone who was shot, but I'm going to save my life and the trouble that I'm going to go through with potential litigation and, you know, civil litigation as well. We certainly have improving profitability metrics. We did a lot of manufacturing or design for manufacturability to try and increase our gross profit and make sure that we're making these more efficient to produce.
We started a lean manufacturing initiative this year as well to really make sure that those lines are as effective as they possibly can be.
We'll open it up for questions.
We've got about five minutes for questions. I'm going to play mic runner 'cause-
I see from your balance sheet, you got about just under 23 million of shares. Is that fully diluted?
Yes.
Okay, and how are you compensating the influencers?
It's, you know, paid sponsorship, and-
So you're not doing it with stock?
No, cash.
And then the very interesting aspect about that is we have a very high expectation on ROAS, so our threshold is five X. So we start these guys off with a 90-day trial, and they have to hit five X. For every dollar we put in, we got to get five back, and we measure that. And so there are some partnerships where we shook hands and walked away, "Hey, that was a nice try," and then some we, you know, triple down because they're performing. So we extend from the radio show to the podcast to the digital, and so that's with anyone. It doesn't matter who you are, you don't hit that five X, it was worth a shot, but, you know, we wish each other luck and part ways.
Your sales growth have been very impressive, but that also tends to attract competitors. So what's prevent cheaper alternative from Asia from flooding the market?
So we have the Pull-Pierce patent, and there are cheaper players in the game now, Umarex, to name one. But when you touch and compare both, one, it's not a weapon for self-defense 'cause you have to load the CO2. Two, the ammo is small, and the parts are very cheap. And so we are proud to be the most expensive unit in the game because if your life is worth saving $200, you really need to reevaluate your situation. So, there's no concern there. We're obviously mindful of those guys, but we lead the pack in not only product, technology, marketing, and all of that. So, you know, they're in our rearview, but we are keeping one eye, you know, on them.
I see on your website that you're repurchasing $10 million of stock. Do you think that's the best allocation of your capital? Why are you doing that?
So really, we found we had a prior authorization for buyback, and it had expired. So we look at it as, you know, it's something that, it's just good governance. You should have a stock repurchase plan in place. So when we look at it and think that the price is just, that we're really undervalued, that might be the best use of our capital because it's a good return to the stockholders. I'm not saying we're necessarily-
How are you measuring it?
How are we measuring...?
The valuation. You said good return to the shareholders. How are you measuring the repurchase of the $10 million?
Yeah, I mean, we're not, we're not saying that we are repurchasing 10 million. There's an authorization available to repurchase up to 10 million.
What's the metric, the criteria you'll be using to make that decision?
Really, when we feel like the stock price is showing that it's undervalued and people are seeing decreases in their value of their stock.
What's the criteria for whether it's valued or not? Right?
Yeah, I mean, we would look at EBITDA multiples and revenue multiples compared to competitors.
Because I think you're doing well. I just wondered if that's the best deployment of your-
You know, I think this has been a fabulous week, quite frankly. And I don't think that that would necessarily mean that we're repurchasing stock. But, you know, I think we want to make sure that our stockholders know that that is an available tool for us, and it doesn't mean that we have to use it, but we have an authorization in place.
Any more questions? Have about two more minutes.
Just, can you talk to me about the leverage on the income statement that as revenues drive?
Sure.
You know?
Sure. You know, I mentioned we've done some things to try and improve the gross profit, so we're really targeting a gross profit margin at 65%, so we're still doing some things to get some efficiency to get that gross profit margin up. Then, when you look at the operating expenses, we have some variable expenses, which would be, you know, our freight out, Amazon fees, you know, all of those, you know, credit card fees, and that runs about 10%-11%. Then, we talked about the marketing spend, so the marketing spend, we're looking at five times ROAS, so that's obviously profitable. So if I take... you know, I spend $1 of marketing, I get $5 of revenue, so I take off the $1, I'm at $4. I take off another $0.50 for the variable...
Selling expenses, I'm at $3.50. Then I've got some of the other costs that we can control. We've got public company costs, you know, some people costs that are non-direct, and the people costs will go up slightly, but it's going to be greatly leveraged. Like, we don't have to add that much, right? So those other costs, so that other $3.50 that's left, you're gonna have some increase in that, but it's certainly not gonna increase at the same level. So as we increase the sales, we definitely have a lot of leverage there.
All right, 'cause when I look at the estimates, it looks like revenues are growing far faster than earnings estimates at this point. Maybe I-
Yeah.
I'm gonna look at the numbers.
Obviously, you know, we can't control what the analysts project. But I think that there's a lot of leverage, and we kind of walked through that on our last earnings call as well. We really think that there's a lot of leverage with the operating expense and some increase in gross profit margin.
You know, in parting, I would say, you know, beyond our numbers and everything else, there's another key factor you need to consider is who's flying the airplane? And this time last year, this thing was taking a nosedive, and we were facing an existential threat. And instead of like what normal people do, hit the exit doors, right, internally, we all, as a management team, buckled down and locked in, and we pulled this thing up. And then, if you want a management team that's forged by fire, that's gonna continue to lead this company, that has seen it through its worst times and leading it to its best times, that's the group that you get today. Like, we work in, day in, day out, we're bleeding through our eyeballs to make this thing work because it's more than just a for-profit company.
This is a mission to have social impact and to save lives, and so that's what we're all about, and if you're on that train, you know, come join us.
That concludes the presentation. Thank you, all.