Q3 2023 Byrna Technologies Inc Earnings Call

[music].

Speaker 1: Good morning. Welcome to Burna's fiscal third quarter 2023 earnings conference call. My name is Rob and I'll be your operator for today's call.

Good morning, welcome to Burnish fiscal third quarter 2023 earnings conference call.

My name is Rob and I'll be your operator for today's call.

Speaker 1: Joining us for today's presentation are the company's CEO Brian Ganz and CFO David North.

Joining us for today's presentation are the company's CEO , Brian <unk> and CFO David North.

Following their remarks, we'll open the call for questions.

Speaker 1: Earlier today, Burner released results for its fiscal third quarter ended August 31, 2023. Press release is available.

Really today burner released results for its fiscal third quarter ended August 31st 2023.

A copy of the press release is available on the company's website.

Speaker 1: Before turning the call over to Brian Ganz, Burnet Technologies Chief Executive Officer, I'll read the Safe Harbor Statement.

Before turning the call over to Brian gas Burner technologies, Chief Executive Officer, I will read the Safe Harbor statement.

Speaker 1: Some discussions held today include forward-looking statements...

Some discussion held today.

Include forward looking statements.

Speaker 1: actual results could differ materially from the statements made today.

Actual results could differ materially from the statements made today.

Speaker 1: Please refer to Berner's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections.

Please refer to <unk>, most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions.

Speaker 1: The company assumes no obligation to update forward-looking statements as a result of new information, future events, or otherwise.

The company assumes no obligation to update forward looking statements as a result of new information future events or otherwise.

Speaker 1: As this call will include references to non-GAAP results, please see the press release in the investors section of our website, ir.verna.com, for further information regarding forward looking statements and reconciliations of non-GAAP results to GAAP results.

As this call will include references to non-GAAP results. Please see the press release in the investors section of our website IR Dot burn a dot com for further information regarding forward looking statements and reconciliations of non-GAAP results to GAAP results.

Speaker 1: Now I would like to turn the call over to Berna's CEO Brian Ganz.

Now I would like to turn the call over to Vern as CEO , Brian <unk>. Sir. Please proceed.

Speaker 2: Thank you, operator, and thank you everyone for joining us today. This morning, we filed our 10-Q with the SEC and issued a press release providing our financial results for the fiscal third quarter ended August 31st.

Thank you operator, and thank you everyone for joining US today. This morning, we filed our 10-Q with the SEC and issued a press release.

Providing our financial results for the fiscal third quarter ended August 31st.

Speaker 2: along with key business accomplishment. To begin today's call, however, I'd like to share some highlights and recent developments, including a discussion of the actions we're taking to address the recent DTC marketing challenges.

Along with our key business accomplishments to begin today's call. However, I'd like to share some highlights and recent developments.

A discussion of the actions, we're taking to address the recent DTC marketing challenges afterwards, I'll pass the call over to Jamie to discuss our financial results in greater detail and following that I'll offer additional insights into our performance and our forward looking strategy.

Speaker 2: Afterwards, I'll pass the call over to David to discuss our financial results in greater detail. And following that, I'll offer additional insights into our performance and our forward-looking strategy. And as usual, we will open the floor to questions from our publishing analysts at the end of the presentation.

And as usual, we will open the floor to questions from our publishing analysts at the end of the presentation.

Okay.

Speaker 2: As we previously announced a few weeks ago, our total revenue for the third quarter was just $7.1 million down from 12.4 million in the same period last year.

We previously announced a few weeks ago, our total revenue for the third quarter was just $7.1 million down from $12 4 million in the same period last year.

Speaker 2: This significant decline was due primarily to the advertising restrictions imposed by Meta and Google in March of this year. And interestingly, Twitter, the self-proclaimed last-fast gen of free speech, also banned Berna advertising two months later. When these major platforms imposed their advertising bands, it had an immediate negative impact on daily web sessions.

This significant decline was due primarily to the advertising restrictions imposed by meta in Google in March of this year and interestingly Twitter are the self proclaimed last bastion of free speech also banned burner advertising two months later.

When these major platforms impose their advertising band it had an immediate negative impact on daily web sessions.

Speaker 2: In the period from December 1st, 2022 through March 31st, 2023, while we could still advertise on these platforms, we average approximately 24,000 daily web sessions on burnit.com. In April , just after the advertising ban, that number dropped to 10,570 daily web sessions.

In the period from December 1st 2022 through March 31st 2023, well, we could still advertise on these platforms. We averaged approximately 24000 daily web sessions on burden of Dot com.

In April just after the advertising ban that number dropped to 10570 daily web sessions.

Speaker 2: It took several more months for the advertising ban to negatively impact fails due to what we call the tail effect where consumers that were reached prior to the advertising ban continue to come back to the Burnus site to make purchase.

It took several more months for the advertising ban to negatively impact sales due to what we call the tail effect, where consumers that were reached prior to the advertising ban continue to come back to the burn a site to make purchases.

Speaker 2: However, by the third quarter, we encountered a significant decline in sales and in new customer acquisitions. Specifically, daily sales, which had averaged 55,000 through March, declined by 20% in Q3, falling to just $44,000 a day. And our new customer acquisition rate declined from 55% in the period prior to the advertising ban to just 50% in Q3.

However by the third quarter, we encountered a significant decline in sales and in new customer acquisitions, specifically daily sales, which had averaged 55000 through March declined by 20% in Q3 falling to just $44000 a day and our new customer.

[noise] rate declined from 55% in the period prior to the advertising ban to just 50% in Q3.

Speaker 2: We have responded to these challenges by pivoting.

We have responded to these challenges by pivoting.

Speaker 2: completely changing our advertising strategy. So rather than relying on social media sites to reach new potential customers, as almost every business does today, we started advertising on talk radio. At the same time, we kicked off a non-social media online advertising effort.

Clearly changing our advertising strategy, so rather than rely on social media sites to reach new potential customers as almost every business does today, we started advertising on talk radio at the same time, we kicked off a non social media online advertising effort.

Speaker 2: We commence our online advertising efforts in August and commence advertising on the Sean Hannity afternoon drive time radio show on September 5th.

We commenced our online advertising efforts in August and commence advertising on the Shawn Hannidy afternoon drive time radio show on September 5th.

Speaker 2: While our online advertising efforts in August generated some additional sales, the results were initially muted as we had yet to understand how to optimize our spend.

Our online advertising efforts are in August generated some additional sales are the results were initially muted as we had yet to understand how to optimize our spend instead, we threw everything against the wall to see what would stick advertising across six different markets with six different.

Speaker 2: Instead, we threw everything against the wall to see what would stick, advertising across six different markets with six different pieces of creative. This included advertising to boaters, our beers, runners, realtors, veterans, convenience store owners.

Pieces of creative this included advertisers to boaters are veers runners realtors veterans convenience store owners.

Speaker 2: As a result, our combined row as, or return on advertising spend for August , was approximately 2.5 times, meaning for every dollar of spend we had $2.5 in sales, certainly nothing to write home about. That said, certain markets and certain creatives did much better than others, and we were able to use this information to optimize our spend in September .

As a result of our combined ROE as for return on advertising spend for August was a practice approximately 2.5 times, meaning for every dollar of spend we had two and a half dollars in sales.

Certainly nothing to write home about.

That said certain markets and certain creative did much better than others, and we were able to use this information to optimize our spend in September .

Speaker 2: Almost immediately in September , we observed a significant increase in sales, sessions, and new cost of acquisition.

Almost immediately in September we absorb observed a significant increase in sales sessions and new customer acquisitions for September average daily sessions increased by 89% from Q3 to 22400 nearly matching the levels we saw before.

Speaker 2: For September , average daily sessions increased by 89% from Q3 to 22,400. Nearly matching the levels we saw before the advertising ban on social media.

The advertising ban on social media. This led to average daily sales in September of approximately $77500, a 76% increase from Q3.

Speaker 2: This led to average daily sales in September of approximately $77,500, a 76% increase from Q3, and a 40% increase from the period prior to being kicked off of Facebook, Instagram, Google, and Twitter.

And a 40% increase from the period prior to being kicked off of Facebook, Instagram, Google and Twitter.

Speaker 2: Most notably, our new customer acquisition rate rose 14.6% from Q3 to 65% in September .

Most notably our new customer acquisition rate Rose 14, 6% from Q3 to 65% in September .

We have continued to see this upward trend in the first 11 days of October with daily sessions, increasing by 168% compared to Q3, hitting 30856 daily sessions. This is a 29% increase from that period pre.

To being kicked off of social media and represents a new record for burner.

Speaker 2: Average daily sales for the first 11 days of October were up a staggering 161% from Q3, averaging $114,902, and our new customer rate climbed to 65.2%.

Average daily sales for the first 11 days of October were up a staggering, 161% from Q3, averaging $114902 and our new customer rate climbed to 65, 2%.

Speaker 2: Despite the influx of first-time visitors, our conversion rate climbed to 0.91% compared to 0.75% prior to the advertising ban.

Despite the influx of first time visitors, our conversion rate climbed to 0.91% compared to 0.75% prior to the advertising ban.

Speaker 2: We have also seen similar results on Amazon.

We are also seeing similar results on Amazon.

Speaker 2: When radio listeners hear our ads, they often search for our products on Amazon.

When radio listeners hear our ads, they often searched for our products on Amazon.

Speaker 2: Before the advertising ban on social media, we were averaging $14,700 in daily sales on Amazon.

Before the advertising ban on social media, we were averaging $14700 in daily sales on Amazon.

Speaker 2: During Q3, after the ban took effect, daily sales dropped by over 25% to just around $11,000 a day.

During Q3 after the ban took effect daily sales dropped by over 25% to just around $11000. A day. However, with the launch of the Hana you campaign and our online advertising in September average daily sales on Amazon jumped to 22400 <unk>.

Speaker 2: However, with the launch of the Hannity Campaign and our online advertising in September , average daily sales on Amazon jumped to $22,400. 104% increase from Q3, and a 52% increase from the period prior to the advertising ban.

100% to 4% increase from Q3, and a 52% increase from the period prior to the advertising ban and this trend has persisted into the first nine days of October and I'm, giving you only the first 90 days because the last two days have been prime days and are somewhat have been.

Speaker 2: And this trend has persisted into the first nine days of October . And I'm giving only the first nine days because the last two days have been prime days and or somewhat have been outlier. During the first nine days of October , sales on Amazon averaged $30,000 a day.

Outlier.

During the first nine days of October sales on Amazon averaged $30000 a day and October seven we sold more than $42000 on Amazon setting a new non prime day company record.

Speaker 2: And October 7th, we sold more than $42,000 on Amazon, setting a new non-prime day company record. Over the last two days, which have been prime days, October 10th and 11th.

Over the last two days, which had been prime days October 10th and 11th our sales exceeded $250000, which is a new record for us for a for prime days in the last 30 days on Amazon sales have exceeded $950000, which is an all time record.

Speaker 2: Our sales exceeded $250,000.

Speaker 2: which is a new record for us for prime days. In the last 30 days on Amazon, sales have exceeded $950,000, which is an all-time record for any 30-day period on Amazon, including the holiday sales period.

For any 30 day period on Amazon, including the holiday sales periods.

Speaker 2: Due to the slow start of the production of our LE, we did not initially offer on Amazon. We added the Berna LE launcher to the site in mid July . Since then, the LE launcher has become the leader in sales on Amazon, surpassing the Berna SD.

Due to the slow start of the production of our L. A we did not initially offered on Amazon.

We added the Barnett L a launch or to the site in mid July since then the early launch or it has become the leader in sales on Amazon, surpassing the burner S D.

We believe that as we refine our advertising strategy, our sales and Amazon will continue to rebound.

Speaker 2: We believe that as we refine our advertising strategy, our sales and Amazon will continue rebounds along with our direct to consumer sales. So.

Along with our direct to consumer sales so.

Why is all this so important first it confirms that we can reach customers without relying on social media I know that this was a big question in the wake of our announcement of the social media ban at our last earnings call and although we are only six weeks into the new advertising initiatives.

Speaker 2: I know that this was a big question in the wake of our announcement of the social media ban at our last earnings call.

Speaker 2: And although we are only six weeks into the new advertising initiatives,

Speaker 2: Celebrity endorsements on the radio have proven to be highly effective evident by the increased incessions and the improved conversion rate.

Celebrity endorsements on the radio have proven to be highly effective evidenced by the increase in sessions and the improved conversion rates. We are currently in discussions with four other celebrity endorsers that speak to different audiences. This approach is much more work than simply placing AD on ads and social media.

Speaker 2: We are currently in discussions with four other celebrity endorsers that speak to different audience.

Speaker 2: This approach is much more work than simply placing ads on social media sites as we must identify, contact, cajole, vet, educate, charm, and work closely with these individuals and their teams, but honestly, that's what you're paying us for.

He says we must identify contact cajoled that educate charm and work closely with these individuals and their teams, but honestly that's what you are paying us for.

Speaker 2: Secondly, the success of the current campaign confirms that we have not saturated the market or captured all the low-hanging fruit.

Secondly, the success of the current campaign confirms that we have not saturated the market or captured all the low hanging fruit.

Speaker 2: Because as our sessions grew, so too did our sales. We did not see any decline in conversion rates despite the significant increase in new customers coming to the site. In fact, we saw just the office.

Because as our sessions grew so too did our sales we did not see any decline in conversion rates. Despite the significant increase in new customers coming to the site. In fact, we saw just the opposite.

Speaker 2: In the first quarter of calendar 23, our conversion rate average just 0.63%. Since September 1, our conversion rate has average 0.88%, despite our new customer rate jumping to 65%. This tells us to paraphrase field of dreams, if we can get them to the website, they will buy.

In the first quarter of calendar 'twenty three our conversion rate average, Jeff 0.63% since September 1st our conversion rate has averaged eight 8%. Despite our new customer rate jumping to 65%. This tells us to paraphrase field of dreams, if we can get them.

The website they will buy.

Speaker 2: This means that our primary challenge is to increase public awareness of Burna and educate both civilians and law enforcement professionals that there is a safe, effective, and reliable alternative to deadly force.

This means that our primary challenge is to increase public awareness of burnout and educate both civilians and law enforcement professionals that there is a safe effective and reliable alternative to deadly force.

Speaker 2: i believe that we've only begun to scratch the surface in this regard well shanah anity has the number one talk radio show in america he reaches only seven point five million americans each month we need to reach all americans so that burnabee comes as well known as taste

I believe that we've only begun to scratch the surface in this regard well Shawn Hannidy has the number one talk radio show in America. He reaches only $7 5 million Americans each month, we need to reach all Americans. So the burnaby columns as well known as Taser.

Speaker 2: Thirdly, the success of these initiatives reaffirms my confidence in the team here at Burnup.

Thirdly, this excess of these initiatives reinsurer reaffirms my confidence in the team here at burner.

Speaker 2: When faced with adversity, the team rose to the occasion. When the stock price fell more than 90% to new lows that we've not seen since the company was doing just a few thousand dollars in daily sales, which put everyone's options significantly out of the money.

When faced with adversity the team rose to the occasion, when the stock price fell more than 90% to new lows that we've not seen since the company was doing just a few thousand dollars in daily sales, which put everyone's options significantly out of the money when every analyst downgraded burner and drastically reduced their forecast when no.

Speaker 2: When every analyst downgraded Berna and drastically reduced their forecast, when nobody believed that we could turn this around, no one here at Berna gave up. No one threw in the towel, back just the office, as the team at Berna stepped up to the challenge, figured out a way forward,

But he believed that we could turn this around no. One here at Bernie gave up no one threw in the towel fact, just the opposite the team at burnt a stepped up to the challenge.

Out of way forward and executed well I was just a boy my dad taught me that when the going gets tough the tough get going and I can assure you that we have a group of tough sob's here at Burnup. This is a team that doesn't back down when they're obstacles thrown in their past. This is a team that thrives on adversity.

Speaker 2: When I was just a boy, my dad taught me that when the going gets tough, the tough get going, and I can assure you that we have a group of tough SOBs here at Burnup. This is a team that does impact down when an obstacle is thrown in their path. This is a team that tries on adversity. So what does this mean on a go-

So what does this mean on a go forward basis.

Speaker 2: First, we've committed to advertising on Hannity throughout all of 2024. We were able to lock in the same rates as this year, despite 2024 being an election year, which will certainly raise Hannity's profile and increases active listener base. And in fact, we've already seen a rise in traffic from Hannity's audience in the wake of this horrific tragedy in Israel as the viewership and listenership increase.

First we've committed to advertising on hannity throughout all of 'twenty 'twenty four we were able to lock in the same rate as this year. Despite a 2024 being an election year, which will certainly raise hannitys profile and increases active listener base and in fact, we've already seen a rise in traffic.

Hannitys audience in the wake of this horrific.

Tragedy in Israel, as the viewership and listenership increases.

Speaker 2: We are also developing fresh video content with Sean Hannity and which Sean and his assistant Linda will go through training with Berners-Londt Forceman training team, all X-Swat officers. This will allow us to expand our cooperation with Sean beyond his radio broadcast. Using this freshly created video, Sean will promote Berner on his website and through his social media platforms and email.

We are also developing fresh video content with Sean Hannity, and which Shawn and his assistant Linda will go through training with burn as law enforcement training team all ex Swat officers. This will allow us to expand our cooperation with Shawn beyond his radio broadcasts using this freshly created video Sean will promote burn off.

On its website and through social media platforms and email. In addition, we'll be able to use this video content outside the hannity ecosystem as we see fit as part of the agreement with Hannidy, we're entitled to a certain number of email blasts, social media posts and even a live appearance, we expect that as we expand our cool.

Speaker 2: In addition, we'll be able to use this video content outside the Hannity ecosystem as we see fit.

Speaker 2: As part of the agreement with Hannity, we're entitled to a certain number of email blast, social media posts, and even a live appearance. We expect that as we expand our cooperation to include these other non-radio initiatives, we'll see the row as on our Hannity spend increase further.

Operation to include these other non radio initiatives, we will see the ROE as a on our Hana spend increase further.

Speaker 2: Additionally, as I mentioned earlier, we're exploring engagements with other celebrity endorsers and I heart media talent for different time slots in an attempt to reach a more diverse audience.

Additionally, as I mentioned earlier, we're exploring engagements with other celebrity endorsers and I heart media talent for different time slots are in an attempt to reach a more diverse audience.

Speaker 2: One such engagement that we're exploring is an overnight show where the audience is comprised of long haul truckers, security guards, law enforcement officers, nurses and other graveyard shift workers.

One such engagement that we're exploring is an overnight show where the audience is comprised of long haul truckers security guards law enforcement officers nurses and other graveyard shifts workers. We believe that this audience is ripe for burner as they're out and about in the dead of the night. Moreover, the cost of.

Speaker 2: We believe that this audience is ripe for Berna as they are out and about in the dead of the night. We're over the cost of advertising late night is a fraction of the daytime rates. We're also in discussions with other celebrity influencers outside of the I-Hart stable. It is clear from our work with Hannity that celebrity endorsers can really move the needle. We see a higher conversion rate with a traffic that chondrives to the website that we do with traffic from other online advertise.

Rising late night is a fraction of the daytime rates. We're also in discussions with other celebrity influencers outside of the IHOP stable. It is clear from our work with Kennedy that celebrity Endorsers can really move the needle we see a higher conversion rate with the traffic that Shawn drives to the web site than we do with <unk>.

<unk> from other online advertising and well we believe that China is somewhat unique given that he is the number one talk show are in America and it's following is extremely committed to him. It is not expect inexpensive to advertise on the Hannity Radio show as a result, we believe we can achieve the same types of.

Speaker 2: and what we believe the chan is somewhat unique given that he is the number one talk show uh... in america and his following is extremely committed to him it is not expect inexpensive advertise on the hand at the radio show as a result we believe we can achieve the same types of returns on our advertising spend with other celebrity endorsers uh... not because their reaches as large as the hand in the end it's not but because their rates are lower

Turns on our advertising spend with other celebrity endorsers, not because they're reaches as largest hannity and it's not but because their rates are lower.

Speaker 2: Now that we have ample opportunity, inventory of finished goods, and our production is running smoothly, we intend to expand our advertising initiatives to reinvigorate sales, particularly as we go into the holiday season.

Now that we have ample opportunity our inventory of finished goods at our production is running smoothly, we intend to expand our advertising initiatives to reinvigorate sales, particularly as we go into the holiday season, well it is always difficult and dangerous to extrapolate from six weeks' worth of data we.

Speaker 2: will it is always difficult and dangerous to extrapolate from six weeks for the data we are highly encouraged by our ability to overcome uh... the metta in google social media advertising band uh... and we are far outpacing our performance when we were able to advertise on facebook google twitter and instagram

Our highly encouraged by our ability to overcome.

The meta and Google Social media advertising ban.

And we are far outpacing our performance when we were able to advertise on Facebook, Google Twitter and Instagram, We will continue to closely monitor our ROE as we fine tune and optimize our marketing strategy for scalability. So despite a temporary dip in overall sales during late Q2.

Speaker 2: We will continue to closely monitor our ROAS as we fine tune and optimize our marketing strategy for scalability.

Speaker 2: So despite a temporary dip in overall sales during late Q2 and frankly all of Q3, we believe that we have successfully navigated our way through these challenges. And with our revamped marking strategies and the expansion of our dealer channels with the addition of new premier and side hustle dealers, combined with the enormous global opportunities for Burna, we are confident that we are well positioned for a resurgence in sales growth in the upcoming quarters.

Frankly, all of Q3, we believe that we have successfully navigated our way through these challenges and with our revamped marketing strategies and the expansion of our dealer channels with the addition of new Premier inside Hustle dealers.

Combined with the enormous global opportunities for burner, we are confident that we are well positioned for a resurgence in sales growth in the upcoming quarters.

Speaker 2: Before I go any further, I'd like to turn the call over to David to discuss our financial results for the last quarter to get that out of the way. And then I'll come back and talk about some of our other initiatives in the dealer and international side. David.

Before I go any further I'd like to turn the call over to David to discuss our financial results for the last quarter to get that out of the way.

And then I'll come back and talk about some of our other initiatives in the dealer and international side David.

Speaker 1: Thank you, Brian . Let's discuss our financial results for the fiscal third quarter and get this out of the way. Net revenue for Q3 2023 was $7.1 million compared to $12.4 million in the fiscal third quarter of 2022. The decrease in revenue is primarily attributed to challenges in the company's direct to consumer marketing efforts.

Thank you Brian .

Let's discuss our financial results for the fiscal third quarter and get this out of play.

Net revenue for Q3, 2023 was $7 $1 million compared to $12 $4 million in the fiscal third quarter of 2022.

The decrease in revenue is primarily attributed to challenges in the company's direct to consumer direct to consumer marketing efforts.

Speaker 3: which resulted from reduced advertising during the six months since bands on meta and Google platform.

Which resulted from reduced advertising during the six months since bans on meta and Google platforms.

Speaker 3: Direct to customer sales on the company's website and Amazon accounted for $3.3 million of the decline from the prior year period Another 1.9 million dollars of the difference was due to lower international sales International sales are characterized by very large infrequent orders Which were high in Q3 of 2022 at 2.1 million but low in Q3 of this year at only 0.2 million

Customer sales on the company's website and Amazon accounted for $3 $3 million of the decline from the prior year period, and another $1.9 million of the difference was due to lower international sales.

International sales are characterized by very large infrequent orders, which were high in Q3 of 2022 at 2.1 million, but low in Q3 and this year it only 0.2 million.

Speaker 3: Gross profit for the third quarter of 2023 was

Gross.

Profit for the third quarter of 2023 was $3 $2 million or 45% of net revenue compared to $6 $9 million or 55% of net revenue for Q3 of 2022 the decrease in gross margin was primarily due to approximately 605.

Speaker 3: $3.2 million or 45% of net revenue compared to $6.9 million or 55% of net revenue for Q3 of 2022.

Speaker 3: The decreasing gross margin was primarily due to approximately $650,000 or charges to cost a good sold for inventory write downs and additions to reserves for excess and obsolete inventory, which were recorded during 2, 3 of 2023.

$50000 of charges to cost of goods sold for inventory write downs and additions to reserves for excess and obsolete inventory, which were weak recorded during Q3 of 2023.

Speaker 3: This charge consisted primarily of about a $400,000 addition to the reserve to cover specifically slow moving inventory. As a relatively new company, we haven't yet had a equivalent of our reserve specifically for slow moving inventory. However, if recent high inventory levels and low turns makes it necessary to add this component to the reserve now.

This charge consisted primarily of about a $400000 addition to the reserve to cover specifically slow moving inventory as a relatively new company, we haven't yet had a.

Of our reserves specifically for slow moving inventory. However, recent high inventory levels and low turns makes it necessary to add this component to the reserves now.

Speaker 3: Taking these one-time adjustments into consideration, gross margins are consistent with the prior year period.

Taking these one time adjustments into consideration gross margins are consistent with the prior year period.

Speaker 3: Operating expenses for Q3 2023 were $7.3 million compared to $8.3 million for Q3 of 2022. The decrease in operating expenses was primarily due to reduced marketing spend and ongoing cost management.

Operating expenses for Q3, 2023 were $7 $3 million compared to $8 $3 million for Q3 of 2022. The decrease in operating expenses was primarily due to reduced marketing spend and ongoing cost management efforts.

Speaker 3: Net loss for Q3 2023 was $4.1 million compared to $1.5 billion for the third quarter of the prior year. The increase in net loss was primarily due to the drop in revenue and secondarily to the addition to inventory evaluation reserves.

Net loss for Q3, 2023 was $4 $1 million compared to $1 $5 billion for the third quarter of the prior year. The increase in net loss was primarily due to the drop in revenue and secondarily to the addition to inventory valuation reserves.

Operator: Actual results could differ materially from the statements made today.

Speaker 3: Adjust the EBITDA on a non-GAP, which is a non-GAP metric. For the third quarter of 2023, totaled a loss of $2.4 million compared to earnings of $0.3 million for the third quarter of 2022. The decrease in adjusted EBITDA was primarily due to the increase in that loss previously enough.

Adjusted EBITDA, a non-GAAP , which is a non-GAAP metric.

Operator: Please refer to Bernan's most recent 10K and 10Q 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.

For the third quarter of 2023 totaled a loss of $2 $4 million compared to earnings of zero point $3 million for the third quarter of 2022. The decrease in adjusted EBITDA was primarily due to the increase in loss previously enough.

Operator: As this call will include references to non-gap results, please see the press release in the investor section of our website, ir.burna.com for further information regarding forward-looking statements and recommendations of non-gap results to gap results.

Speaker 3: Cash and Cash Equivalents at August 31st, 2023 total $13.7 million, $15.4 million May 31st, 2023, inventory at August 31st, 2023 totaled $16.7 million compared to $17.5 million on May 31st, 2023. The company currently has no current or long-term debt.

Cash and cash equivalents at August 31, 2023 totals a $13 $7 million $15 4 million at May 31st 2023.

Bryan Ganz: Now I would like to turn the call over to Bernan's CEO Brian Gans. Sir, please proceed. Thank you, operator. And thank you everyone for joining us today. This morning we filed our 10Q with the SEC and issued a press release providing our financial results for the fiscal third quarter ended August 31st. Along with key business accomplishment.

Inventory at August 31, 2023 totaled $16 $7 million compared to $17 $5 million on may 31st 2023.

The company currently has no current or long term debt.

Speaker 3: And that concludes my shared remarks. I'll turn it back to Brian .

That concludes my prepared remarks, I'll turn it back to Brian .

Speaker 2: Thank you David. I'd like to provide some additional operational updates from Q3.

Thank you David I'd like to provide some additional operational updates.

Bryan Ganz: To begin today's call, however, I'd like to share some highlights and recent developments, including a discussion of the actions we're taking to address the recent DTC marketing challenges. Afterwards, I'll pass the call over to David to discuss our financial results in greater detail. And following that, I'll offer additional insights into our performance and our forward-looking strategy. And as usual, we will open the floor to questions from our publishing analysts at the end of the presentation.

From Q3.

Speaker 2: In addition to our DTC marking efforts, we continue to build

In addition to our DTC marketing efforts, we continue to build on the strong success of our Premier dealership program, which we launched in the second quarter.

Speaker 2: on the strong success of our premier dealership program which we launched in the second quarter. At the end of Q3, we had a total of 16 premier dealers of which 15 of these were onboarded in the last five months.

At the end of Q3, we had a total of 16 premier dealers of which 15 of these were on boarded in the last five months.

Speaker 2: Just as a reminder, these are brick and mortar stores that derive more than 50% of their revenue from Burner products. In other words, they're dedicated Burner stores. We are in the early days of our premier dealer rollout, but as these dealers become more integrated with our offerings, and as we continue to increase the number of premier dealers that we have, we expect this channel to contribute significantly to our long-term sales growth.

Just as a reminder, these are brick and mortar stores that drive more than 50% of their revenue from burn of products. In other words. There are dedicated burner stores. We are in the early days of our premier dealer rollout, but as these dealers become more integrated with our offerings and as we continue.

Bryan Ganz: Okay, as we previously announced a few weeks ago, our total revenue for the third quarter was just $7.1 million down from $12.4 million in the same period last year. This significant decline was due primarily to the advertising restrictions imposed by Meta and Google in March of this year. And interestingly, Twitter, the self-proclaimed last bastion of free speech, also banned Berna advertising two months later. When these major platforms imposed their advertising bands, it had an immediate negative impact on daily web sessions.

To increase the number of Premier dealers that we have we expect this channel to contribute significantly to our long term sales growth.

Speaker 2: These dealers, in conjunction with participants in Burnett's side hustle program, play a pivotal role in expanding our customer reach with minimal upfront costs. The side hustle program empowers members of the Burnett community, become authorized Burnett resellers and serve as advocates for our product.

These dealers in conjunction with participants in burn aside hustled program play a pivotal role in expanding our customer reach.

With minimal upfront costs, the sulfide Hustle program empowers members of the burn of community become authorized burn of resellers and serve as advocates for our products. These dedicated individuals typically operate without any traditional physical store showcasing burner products at Tradeshows ghansham.

Bryan Ganz: In the period from December 1st, 2022 through March 31st, 2023, while we could still advertise on these platforms, we average approximately 24,000 daily web sessions on Berna.com. In April, just after the advertising ban, that number dropped to 10,570 daily web sessions. It took several more months for the advertising ban to negatively impact sales due to what we call the tail effect where consumers that were reached prior to the advertising ban continue to come back to the Berna site to make purchases.

Speaker 2: These dedicated individuals typically operate without any traditional physical store, showcasing burner products at trade shows, gun shows, state fairs, boating shows, and other events, and capitalizing on their valuable network of contacts. This alignment not only provides them with a means of a livelihood, but effectively contributes to our growth strategy.

Jos State fairs, boating shows and other events and capitalizing on their.

They are valuable network of contacts this alignment not only provides them with a means of a livelihood, but effectively contributes to our growth strategy. During the third quarter, we witnessed substantial growth in this segment of our business as an increasing number of individuals' explored the possibility.

Speaker 2: During the third quarter, we witnessed substantial growth in this segment of our business as an increasing number of individuals explored the possibility of becoming dealers to the Bernace-Side Hustle Program. Notably, side-hustle dealers are demonstrating clear pathways to becoming premier dealers, a development that further expands and strengthen Bernace network.

Becoming dealers through the burn aside hustle program, notably side Hustle dealers are demonstrating clear pathways to becoming premier dealers a development that further expands and strengthen strengthens burden is network and.

Bryan Ganz: However, by the third quarter, we encountered a significant decline in sales and in new customer acquisitions. Specifically, daily sales, which had averaged 55,000 through March, declined by 20% in Q3, falling to just $44,000 a day. And our new customer acquisition rate declined from 55% in the period prior to the advertising ban to just 50% in Q3.

Speaker 2: And looking ahead, we're placing a strong rampant on our side hustle program, recognizing that the side hustle program and the premier dealer program are a key pillar of our strategy.

And looking ahead, we're placing a stronger emphasis on our side Hustle program recognizing that decide household program and the Premier dealer program are a key pillar of our strategy.

Speaker 2: We've also made strategic investments beyond simply spending and advertising to stimulate sales growth.

We've also made strategic investments beyond simply spending in advertising to stimulate sales growth first we've added a dedicated sales remember to manage the Amazon web sales and I attribute some portion of it as a success at Amazon that I spoke about earlier to the efforts of this individual.

Bryan Ganz: We have responded to these challenges by pivoting, completely changing our advertising strategy. So rather than relying on social media sites to reach new potential customers, as almost every business does today, we started advertising on talk radio. At the same time, we kicked off a non-social media online advertising effort. We commenced our online advertising efforts in August and commenced advertising on the Sean Hannity afternoon drive time radio show on September 5th. While our online advertising efforts in August generated some additional sales, the results were initially muted as we had yet to understand how to optimize our spend.

Speaker 2: First, we've added a dedicated sales member to manage the Amazon web sales, and I attribute some portion of the success at Amazon that I spoke about earlier to the efforts of this individual. We are currently looking to hire similar channel managers for our email campaigns and our social media outreach. We have also expanded our inside sales team. In Q3, we added three new inside sales representatives for our current count to six.

We are currently looking to hire similar channel managers for our email campaigns and our social media outreach. We have also expanded our inside sales team in Q3, we added three new inside sales representatives, bringing our current count to six our goal is to have 10 inside sales members by the <unk>.

Speaker 2: Our goal is to have 10 inside sales members by the end of 2024.

End of 'twenty 'twenty four this team is dedicated to identifying and onboarding smaller owner operated dealers across various sectors, including gun stores outdoor stores sporting goods stores voting dealers trucking companies and even private security agencies.

Speaker 2: This team is dedicated to identifying and onboarding smaller owner operated dealers across various sectors, including gun stores, outdoor stores, sporting goods stores, voting dealers, trucking companies, and even private security agents.

Bryan Ganz: Instead, we threw everything against the wall to see what would stick. Advertising across six different markets with six different pieces of creative. This included advertising to boaters, our beers, runners, realtors, veterans, convenience store owners. As a result, our combined row-as or return on advertising spend for August was approximately 2.5 times, meaning for every dollar of spend we had two and a half dollars in sales, certainly nothing to write home about. That said, certain markets and certain creatives did much better than others, and we were able to use this information to optimize our spend in September.

Speaker 2: We see potential in these places to connect with customers who are open to having a burn of personal protection.

We see potential in these places to connect with customers, who are open to having a burner personal protection.

Speaker 2: In addition to seeking new Bernadillas, our inside sales team has tasked with growing our side hustle business, which has shown tremendous promise this quarter. In fact, last week I was notified that one of our dealers that had started life as a side hustle dealer sold more than $50,000 of products at a local fair in one weekend.

In addition to seeking newborn or dealers our inside sales team is tasked with growing our side hustle business, which has shown tremendous promise. This quarter. In fact last week I was notified that one of our dealers that had started life as a side household dealer sold more than $50000 of products any local fair.

They're in one weekend.

Speaker 2: Like this dealer, most of our side hustle dealers emerge from our passionate customer base. And we periodically advertise to our customer base this side hustle opportunity. This initiative, the side hustle initiative yielded $1.2 million in business at our best margins. And most payments are made by a credit card eliminating any receivables.

Like this deal or most of our side hustle dealers emerge from our passionate customer base and we Perry periodically advertise to our customer base this side hustle opportunity.

Bryan Ganz: Almost immediately in September, we observed a significant increase in sales sessions and new customer acquisitions. For September, average daily sessions increased by 89% from Q3 to 22,400, nearly matching the levels we saw before the advertising ban on social media. This led to average daily sales in September of approximately $77,500, a 76% increase from Q3, and a 40% increase from the period prior to being kicked off of Facebook, Instagram, Google, and Twitter.

This initiative decided hustle initiatives yielded $1 $2 million in business at our best margins.

And most payments are made via credit card eliminating any receivables.

Speaker 2: with regard to international markets. The story is really about South America.

With regard to international markets. The story is really about South America.

Speaker 2: Well, our sales in Latin America for 2023 do not appear in our revenue line due to our accounting methodology. Our success, particularly in Argentina, is noteworthy.

Well our sales in Latin America for 2023 do not appear in our revenue line due to our accounting methodology, our success, particularly in Argentina is noteworthy.

Speaker 2: In 2023, we have secured significant law enforcement contracts in Argentina.

In 2023, we have secured significant law enforcement contracts in Argentina.

Speaker 2: We recently announced an oppressed release of a thousand launchers being sold to the province of Cordoba as well as the capital city of Buenos Aires.

We recently announced in a press release, a 1000 launches being sold to the province of Cordoba.

Bryan Ganz: Most notably, our new customer acquisition rate rose 14.6% from Q3 to 65% in September. We have continued to see this upward trend in the first 11 days of October, with daily sessions increasing by 168% compared to Q3, hitting 30,856 daily sessions. This is a 29% increase from the period prior to being kicked off of social media, and represents a new record for Berna. Average daily sales for the first 11 days of October were up a staggering 161% from Q3, averaging $114,902, and our new customer rate climbed to 65.2%. Despite the influx of first-time visitors, our conversion rate climbed to 0.91%, compared to 0.75% prior to the advertising ban.

As well as the capital City Buenos Aires.

Speaker 2: We are also selling to police departments of Lannus, Tigra, Aziza, all municipalities near Buenos Aires.

We are also selling to police departments of Llanos Tigra Aziza all municipalities near Buenos Aires.

Speaker 2: So far, the Cordoba Provincial Police have experienced significant early success deploying the Bernal launchers. According to the Cordoba Chief of Police, there have been more than 40 documented cases of the Bernal being used in various situations to disarm and apprehend suspects underscoring the need for less lethal solutions in this market.

So far the Cordoba provincial police have experienced a significant early success deploying.

The burner launchers. According to the Cordoba Chief of police there have been more than 40 documented cases of the burden of being used in various situations to disarm and apprehend suspects underscoring the need for less lethal solutions in this market.

Speaker 2: our growing foothold in argentina is really a testament to the effectiveness and demand for less lethal law enforcement solutions in this region and frankly

Our growing foothold in Argentina is really a testament to the effectiveness and demand for less lethal law enforcement solutions in this region and frankly globally and our success in Argentina has been further amplified.

Speaker 2: And our success in Argentina has been further amplified by the presidential campaign in which multiple presidential candidates have been promoting Burna as a way to stop street crime without the risk of taking a life or causing permanent injury.

By the presidential campaign in which multiple presidential candidates are have been promoting BARDA as a way to stop street crime without the risk of taking a life or causing permanent injury.

Bryan Ganz: We have also seen similar results on Amazon. When radio listeners hear our ads, they often search for our products on Amazon. Before the advertising ban on social media, we were averaging $14,700 in daily sales on Amazon. During Q3, after the ban took effect, daily sales dropped by over 25% to just around $11,000 a day. However, with the launch of the Hannity Campaign and our online advertising in September, average daily sales on Amazon jumped to $22,400, 104% increase from Q3, and a 52% increase from the period prior to the advertising ban.

Speaker 2: These tales in Argentina represent validation of our mission.

These sales are in Argentina represent validation of our mission that less lethal saves lives and it shows just how large the opportunity is within the law enforcement community.

Speaker 2: that less lethal saves lives. And it shows just how large the opportunity is within the law enforcement community. As I said, well, these fails are not yet reflected in Berners-Reported Numbers. These recent wins underscore the strategic importance of Berners-Latam Joint Fenture and the long-term growth potential for Berner internationally. We view our...

As I said, while these sales are not yet reflected in burn as reported numbers.

These recent wins underscore the strategic importance of burn as Latam joint venture and the long term growth potential for burner internationally, we view our.

Speaker 2: uh... progress in argentina as a stepping stone as we expand our presence across south america particularly into brisill

Progress in Argentina, as a stepping stone as we expand our presence across South America, particularly into Brazil.

Speaker 2: further commitment to advancing less lethal security solutions in Latin America.

Further furthering our commitment to advancing less lethal security solutions in Latin America.

Bryan Ganz: And this trend has persisted into the first nine days of October, and I'm giving only the first nine days because the last two days have been prime days, and are somewhat of an outlier. During the first nine days of October, sales on Amazon averaged $30,000 a day, and October 7th, we sold more than $42,000 on Amazon, setting a new non-prime day company record. Over the last two days, which have been prime days, October 10th and 11th, our sales exceeded $250,000, which is a new record for us, for prime days.

Okay.

Speaker 2: There's been a lot that we've talked about in this call. Obviously, we've made substantial progress since our last update with these new marketing strategies, expanding our inside sales team, implementing the ongoing initiatives with premier dealers and side hustle dealers. And I firmly believe that we've overcome the ban on social media advertising and we are well positioned for growth.

There's been a lot that we've talked about in this call. Obviously, we've made substantial progress since our last update with these new marketing strategies, expanding our inside sales team.

Implementing the ongoing initiatives with premier dealers inside hustle dealers and I firmly believe that we've overcome the.

The ban on social media advertising, and we are well positioned for growth.

Speaker 2: We are currently cash flow positive. David mentioned that we had 13.7 million of cash and at the end of the quarter. At the end of September , that number was 14.4 million. And as of yesterday, it was 14.8 million.

We are currently cash flow positive David mentioned that we had $13 7 million of cash and at the end of the quarter.

At the end of September that number was $14 4 million and as of yesterday. It was $14 8 million and we expect to see continued improvement in our cash position as we continue to work through our excess inventory in coming quarters.

Bryan Ganz: In the last 30 days on Amazon, sales have exceeded $950,000, which is an all-time record for any 30-day period on Amazon, including the holiday sales periods. Due to the slow start of the production of our LE, we did not initially offer on Amazon. We added the Burnett LE launcher to the site in mid-July. Since then, the LE launcher has become the leader in sales on Amazon, surpassing the Burnett SD.

Speaker 2: And we expect to see continued improvement in our cash position as we continue to work through our excess inventory in coming quarters. This strong financial foundation gives us flexibility in exploring new marketing channels and allows us to make investments in key areas of our business including bringing on people to manage our email campaigns and social media outrage.

Bryan Ganz: We believe that as we refine our advertising strategy, our sales in Amazon will continue rebounds along with our direct-to-consumer sales.

This strong financial foundation gives us flexibility in exploring new marketing channels.

It allows us to make investments in key areas of our business, including.

Bringing on people to manage our E mail campaigns and social media outreach.

Speaker 2: And our focus, however, remains on maintaining a strong and robust cash flow trajectory as we move forward.

And our focus however remains on maintaining a strong and robust cash flow trajectory as we move forward.

Speaker 2: So despite the Edwin's, we encountered in 2023 and despite what are frankly, you know, extremely disappointing results, we believe that we'll finish the year off very strong as we enter into the holiday season. And we remain committed to making Burner the premier provider of less lethal personal security solutions.

Bryan Ganz: So why is all this so important? First, it confirms that we can reach customers without relying on social media. I know that this was a big question in the wake of our announcement of the social media ban at our last earnings call. And although we are only six weeks into the new advertising initiatives, celebrity endorsements on the radio have proven to be highly effective evident by the increase in sessions and the improved conversion rates.

So despite the headwinds we encountered in 2023 and despite what are frankly.

STREAMWAY disappointing results, we believe that we'll finish the year off very strong as we enter into the holiday season.

And we remain committed to making burn as a premier provider of less lethal personal security solutions.

Speaker 2: And we believe that the actions that we're taking today position the company for sustainable growth going forward.

And we believe that the actions that we're taking today are positioned the company for sustainable growth going forward.

Bryan Ganz: We are currently in discussions with four other celebrity endorsers that speak to different audiences. This approach is much more work than simply placing ads on social media sites as we must identify, contact, cajole, vet, educate, charm, and work closely with these individuals and their teams. But honestly, that's what you're paying us for. Secondly, the success of the current campaign confirms that we have not saturated the market or captured all the low-hanging fruit.

Speaker 2: So now I'd like to turn the call over to questions operator if you please

So now I'd like to turn the call over to questions operator.

Operator, if you please.

Speaker 1: Thank you. The company will now be taking questions from its publishing analysts.

Thank you.

The company will now be taking questions from its publishing analysts.

Speaker 1: If you'd like to ask a question at this time, please press star one from your telephone keypad and a confirmation telephone to indicate your line in the question queue. If you'd like to press star two, if you'd like to...

If you'd like to ask a question at this time. Please press star one from your telephone keypad and.

And then a confirmation tone will indicate your line is in the question queue.

Press Star two if you like to move your question from the queue.

Speaker 1: Just in case you're using speaker equipment, it may be necessary to pick up your handset before a person in the star keys. One moment please, will we pull for questions once again at the Star 1?

For participants are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please pull for questions once again Thats star one thank you.

Bryan Ganz: Because as our sessions grew, so too did our sales. We did not see any decline in conversion rates despite the significant increase in new customers coming to the site. In fact, we saw just the opposite. In the first quarter of calendar 23, our conversion rate average just 0.63%. Since September 1, our conversion rate has average 0.88%, despite our new customer rate jumping to 65%. This tells us to paraphrase field of dreams if we can get them to the website, they will buy.

Thank you.

Our first question is from Jeff Van syndrome, with B Riley Securities. Please proceed with your questions.

Speaker 1: Good morning, everyone. And great to hear about the increase in web sessions recently. I'm wondering, can you speak a little bit more about the conversion build you're seeing with the new marketing versus what you saw in terms of marketing on Google and made it previously? And then maybe also speak more about the other marketing platforms that you're looking into or test.

Hi, good morning, everyone.

Great to hear about the increase in web sessions recently I'm wondering can you speak a little bit more about the conversion build youre seeing with the new marketing versus what you saw in.

In terms of marketing on Google and Meda previously and then maybe also speak more about the other marketing platforms that you're looking into or testing.

Bryan Ganz: This means that our primary challenge is to increase public awareness of burnout and educate both civilians and law enforcement professionals that there is a safe, effective, and reliable alternative to deadly force. I believe that we've only begun to scratch the surface in this regard.

Speaker 2: Yeah, as I said, I don't have the numbers in front of me, but I think that we were about 0.65% conversion rate.

Yeah as I said I don't have the numbers in front of me, but I think that we were about six 5% conversion rate.

Speaker 2: in our first quarter and the beginning of the second quarter through the end of March. And recently that has climbed to 0.9 percent which is consistent with our long term conversion rate.

In our first quarter and the beginning of the second quarter through the.

The end of March and recently that has climbed to 9%, which is consistent with our long term conversion rate.

Bryan Ganz: Well, Sean Hannity has the number one talk radio show in America. He reaches only 7.5 million Americans each month. We need to reach all Americans so that Burnaby comes as well known as Taser. Thirdly, the success of these initiatives reaffirms my confidence in the team here at Burnaby. When faced with adversity, the team rose to the occasion. When the stock price fell more than 90% to new lows that we've not seen since the company was doing just a few thousand dollars in daily sales, which put everyone's options significantly out of the money.

Speaker 2: So the thing that's so interesting is we expect to see high conversion rates when we have a lot of returning costs.

So the thing Thats. So interesting is we expect to see high conversion rates. When we have a lot of returning customers because they come to the website with the intent to buy something.

Speaker 2: because they come to the website with the intent to buy some.

Speaker 2: So what is so encouraging now is that we have a very high percentage of first time visitors to the website and new customers and yet we're seeing the conversion rate increase. In addition to an increasing conversion rate, we are seeing its increase in average order .

So what is so encouraging now is that we have a very high percentage of first time visitors to the website and new customers and yet we're seeing the conversion rate increase.

In addition to an increasing conversion rate, we are seeing an increase in average order value.

Bryan Ganz: When every analyst downgraded Burnaby and drastically reduced their forecast, when nobody believed that we could turn this around, no one here at Burnaby gave up. No one threw in the towel. In fact, just the opposite. The team at Burnaby stepped up to the challenge, figured out a way forward and executed. When I was just a boy, my dad taught me that when the going gets tough, the tough get going, and I can assure you that we have a group of tough SOBs here at Burnaby. This is a team that does impact down when an obstacle is thrown in their path. This is a team that thrives on adversity.

Speaker 2: So in September , our average order value was $352.53. For the first 11 days of October , our average order value is $353.67.

So in September our average order value was $352.53 for.

For the first 11 days of October our average order value was $353 67.

Speaker 2: And if I look at, you know, during the period where we were advertising on Meta, our average order value was much closer to $300 as we had a lot of returning customers that were buying more ammo and more CO2 and more accessories. So again, Jeff, I think as I tried to point out,

And if I look at you know during the period, where we were advertising on meta.

Our average order value was much closer to $300 as we had a lot of returning customers that were buying more ammo and more C. O two and more accessories. So again, Jeff I think as I tried to point out.

Bryan Ganz: So, what does this mean on a go-forward basis? First, we've committed to advertising on Hannity throughout all of 2024. We were able to lock in the same rate as this year, despite 2024 being an election year, which will certainly raise Hannity's profile and increases active listener base. And in fact, we've already seen a rise in traffic from Hannity's audience in the wake of this horrific tragedy in Israel as the viewership and listenership increases.

Speaker 2: There was a concern, I know that a lot of investors had that, had we saturated the market, was it going to be difficult to find new investors? And I think the answer is, a new purchaser. And I think the answer is, if we can get people to the website, we can get them to convert. And we can get them to convert at historical rates. So that was, I think, the most encouraging part of this new advertising campaign.

There was a concern I know that a lot of investors had debt.

Have we saturated the market wasn't going to be difficult to find new investors and I think the answer is new purchasers and I think the answer is if we can get people to the website.

We can get them to convert and we can get them to convert at historical rates.

Bryan Ganz: We are also developing fresh video content with Sean Hannity, and which Sean and his assistant Linda will go through training with Burners Law Enforcement Training Team, all ex-swat officers. This will allow us to expand our cooperation with Sean beyond his radio broadcast. Using this freshly created video, Sean will promote Burner on his website and through his social media platforms and email. In addition, we'll be able to use this video content outside the Hannity ecosystem as we see fit.

So that was I think the most encouraging part of this new advertising campaign.

Speaker 4: Okay, good to hear. And then you just mentioned ammo. So I'm wondering if there's any other code you can give us on ammo sales And then also if you could touch on the 12 gate

Okay. Good to hear and then I know you just mentioned the ammo. So I'm wondering if there's any other color you can give us on AML cells and then also if you could touch on the 12 gauge.

Speaker 2: Yeah, I mean our ammo sales remain consistent. I have to say that...

Yeah, I mean, our ammo sales remained consistent I have to say that.

Speaker 2: When our ammo sales start to become a higher percentage of our overall sales, it's going to mean that we've stopped growing.

We win our ammo sales start to become a higher percentage of our overall sales.

Bryan Ganz: As part of the agreement with Hannity, we're entitled to a certain number of email blasts, social media posts, and even a live appearance. We expect that as we expand our cooperation to include these other non-radio initiatives, we'll see the row-as on our Hannity spend increase further. Additionally, as I mentioned earlier, we're exploring engagements with other celebrity endorsers and I heart media talent for different time slots in an attempt to reach a more diverse audience.

It's going to mean that we've stopped growing so during these periods of rapid growth. Obviously people are buying new kits are returning customers will come back and buy ammo and accessories, but we've not seen any significant change in our percentage of ammo sales.

Speaker 3: So during these periods of rapid growth, obviously people are buying new kits. Returning customers will come back and buy ammo and accessories. But we've not seen any significant change in our percentage of ammo sales. Yeah, 20 ammo and ammo and accessories.

Bryan Ganz: One such engagement that we're exploring is an overnight show where the audience is comprised of long haul truckers, security guards, law enforcement officers, nurses, and other graveyard shift workers. We believe that this audience is ripe for Burner as they are out and about in the dead of the night. Moreover, the cost of advertising late night is a fraction of the daytime rates. We're also in discussions with other celebrity influencers outside of the I heart stable.

Ammo in ammo and accessories have remained consistently about 25% of sales in Q3 that was 26%.

Speaker 3: have remained consistently about 25% of sales and in Q3 that was 26.

Speaker 2: And in terms of 12 gauge, the 12 gauge sales honestly have been disappointing.

And in terms of well engage the 12 gauge sales honestly have been.

Disappointing.

Speaker 2: What we've discovered is that less lethal 12 gauge is not a thing for civilians. The existing market for less lethal 12 gauge is really a law enforcement market. And although we're making good inroads with law enforcement on 12 gauge, as I've always said, this is law enforcement is a very lengthy sales cycle.

What we've discovered is that less lethal 12 gauge is not a thing for civilians.

Existing market for less lethal 12 gauge is really a law enforcement market and although were making good inroads with law enforcement on 12 gauge as I've always said this is law enforcement is a very lengthy.

Sales cycle.

Speaker 2: So I remain convinced that there is a good market for 12 gauge over the long term, but we've not seen any significant increase in it currently. And honestly, our focus over the last several months has been

I remain convinced that there is a good market for 12 gauge over the long term.

Bryan Ganz: It is clear from our work with Hannity that celebrity endorsers can really move the needle. We see a higher conversion rate with a traffic that Sean derives to the website than we do with traffic from other online advertising. And what we believe that Sean is somewhat unique given that he is the number one talk show in America and his following is extremely committed to him, it is not inexpensive to advertise on the Hannity radio show.

But we've not seen any significant increase in it currently and honestly our focus over the last several months has been overcoming the social media advertising ban and every waking moment has been trying to pivot our advertising approach.

Bryan Ganz: As a result, we believe we can achieve the same types of returns on our advertising spend with other celebrity endorsers, not because their reaches as large as Hannity and it's not, but because their rates are lower.

Speaker 2: overcoming this social media advertising ban and every waking moment has been trying to to pivot our advertising approach uh... and focusing on our iconic and flagship products

Focusing on our iconic and flagship products.

Speaker 2: So we really have not done any advertising of 12 gauge. At this point, everything has really been focused on attracting new customers for the Bernal launchers.

So we really have not done any advertising of 12 gauge at this point everything has really been focused on attracting new customers for the BARDA launchers.

Speaker 4: Okay, and then just one more effect that squeezes it in. Just wanted to confirm, I think you said that you expected the cash generative in Q4, including what you're doing with inventory. That's correct.

Okay, and then just one more if I can squeeze it in.

Bryan Ganz: Now that we have ample opportunity inventory of finished goods and our production is running smoothly, we intend to expand our advertising initiatives to reinvigorate sales, particularly as we go into the holiday season. Well, it is always difficult and dangerous to extrapolate from six weeks worth of data. We are highly encouraged by our ability to overcome the meta and Google social media advertising ban. And we are far outpacing our performance when we were able to advertise on Facebook, Google, Twitter and Instagram.

Just wanted to confirm I think you said that you expect to be cash generative in Q4, including what you're doing with inventory.

That's correct.

Okay. Thanks for taking my questions I'll take the rest offline.

Thank you Jeff.

Speaker 1: You like to ask a question at this time, may you press star one from your telephone keypad.

I'd like to ask a question at this time May press Star one from your telephone keypad.

Okay.

Thank you.

At this time. This concludes our question and answer session I would now like to turn the call back over to Mr. Kantor for his closing remarks.

Bryan Ganz: We will continue to closely monitor our ROAS as we fine tune and optimize our marketing strategy for scalability. So despite a temporary dip in overall sales during Lake Q2 and frankly all of Q3, we believe that we have successfully navigated our way through these challenges.

Speaker 2: I just want to thank everybody for their support during what's been a very difficult period for the company as I express.

I just wanted to thank everybody for their support during what's been a very difficult period for the company.

As I've expressed.

Speaker 2: You know, I have a complete faith in the team here at Berna. I believe that, you know, we were able to identify the problem, find a solution, and implement it in a relatively short period of time. I believe that we are back on our growth trajectory, as we will see sales and cash both increase. Again, I appreciate everybody's support. Thank you very much.

I have complete faith in the team here at Burnout I believe that we were able to identify the problem.

Bryan Ganz: And with our revamped marketing strategies and the expansion of our dealer channels with the addition of new premier and side hustle dealers, combined with the enormous global opportunities for Burna, we are confident that we are all positioned for a resurgence in sales growth in the upcoming quarters.

Find a solution.

And implemented in a relatively short period of time.

I believe that we are back on our growth trajectory as.

As we will see sales and cash both increase again I appreciate everybody support thank you very much.

Bryan Ganz: Before I go any further, I would like to turn the call over to David to discuss our financial results for the last quarter to get that out of the way. And then I will come back and talk about some of our other initiatives in the dealer and international side.

Speaker 1: Thank you for joining us today for Burnus Fiscal Third Quarter 2023 Conference Call. You may now...

Thank you for joining us today for <unk> fiscal third quarter 2023 Conference call you may now disconnect.

David North: David. Thank you, Brian.

David North: Let's discuss our financial results for the fiscal third quarter and get this out of the way. Net revenue for Q3 2023 was $7.1 million compared to $12.4 million in the fiscal third quarter of 2022. The decrease in revenue is primarily attributed to challenges in the company's direct and consumer marketing efforts, which resulted from reduced advertising during the six months since Bans on Metta and Google Platforms. Directed customer sales on the company's website and Amazon accounted for $3.3 million of the decline from the prior year period.

David North: Another $1.9 million of the difference was due to lower international sales. International sales are characterized by very large infrequent orders which were high in Q3 of 2022 at $2.1 million, but low in Q3 of this year at only $0.2 million. Gross profit for the third quarter of 2023 was $3.2 million or $45% of net revenue compared to $6.9 million or $55% of net revenue for Q3 of 2022. The decrease in gross margin was primarily due to approximately $650,000 of charges to cost a good sold for inventory write downs and additions to reserves for excess and obsolete inventory which were recorded during Q3 of 2023.

David North: This charge consisted primarily of about $400,000 in our addition to the reserve to cover specifically slow-moving inventory. As a relatively new company we haven't yet had a equivalent of our reserve specifically for slow-moving inventory. However, recent high inventory levels and low-turns make it necessary to add this component to the reserve now. Taking these one-prime adjustments into consideration gross margins are consistent with the prior year period. Operating expenses for Q3, 2023 were $7.3 million compared to $8.3 million for Q3 of 2022. The decrease in operating expenses was primarily due to reduced marketing spend and ongoing cost management efforts.

David North: Net loss for Q3, 2023 was $4.1 million compared to $1.5 billion for the third quarter of the prior year. The increase in net loss was primarily due to the drop in revenue and secondarily to the addition to inventory evaluation reserves. Adjust the EBITDA on a non-GAP, which is a non-GAP metric for the third quarter of 2023 totaled a loss of $2.4 million compared to earnings of $0.3 million for the third quarter of 2022.

David North: The decrease in adjusted EBITDA was primarily due to the increase in net loss previously enough. Cash and cash equivalents at August 31st, 2023 totaled $13.7 million, $15.4 million May 31st, 2023. Inventory at August 31st, 2023 totaled $16.7 million compared to $17.5 million on May 31st, 2023. The company currently has no current or long-term debt.

David North: And that concludes my fair remarks. I'll turn it back to Brian. Thank you, David.

Bryan Ganz: I'd like to provide some additional operational updates from Q3. In addition to our DTC marketing efforts, we continue to build on the strong success of our premier dealership program, which we launched in the second quarter. At the end of Q3, we had a total of 16 premier dealers, of which 15 of these were onboarded in the last five months. Just as a reminder, these are brick-and-mortar stores that derive more than 50 percent of their revenue from Burner products.

Bryan Ganz: In other words, they're dedicated Burner stores. We are in the early days of our premier dealer rollout, but as these dealers become more integrated with our offerings, and as we continue to increase the number of premier dealers that we have, we expect this channel to contribute significantly to our long-term sales growth. These dealers, in conjunction with participants in Burner's side hustle program, play a pivotal role in expanding our customer reach with minimal upfront costs.

Bryan Ganz: The side hustle program empowers members of the Burner community, become authorized Burner resellers, and serve as advocates for our products. These dedicated individuals typically operate without any traditional physical store, showcasing Burner products at trade shows, gun shows, state fairs, boating shows, and other events, and capitalizing on their valuable network of contacts. This alignment not only provides them with a means of a livelihood, but effectively contributes to our growth strategy. During the third quarter, we witness substantial growth in this segment of our business as an increasing number of individuals explored the possibility of becoming dealers to the Burner side hustle program.

Bryan Ganz: Notably, side hustle dealers are demonstrating clear pathways to becoming premier dealers, a development that further expands and strengthens Burner's network. And looking ahead, we're placing a stronger emphasis on our side hustle program, recognizing that the side hustle program and the premier dealer program are a key pillar of our strategy. We've also made strategic investments beyond simply spending and advertising to stimulate sales growth. First, we've added a dedicated sales member to manage the Amazon web sales, and I attribute some portion of the success at Amazon that I spoke about earlier to the efforts of this individual.

Bryan Ganz: We are currently looking to hire similar channel managers for our email campaigns and our social media outreach. We have also expanded our inside sales team. In Q3, we added three new inside sales representatives, bringing our current count to six. Our goal is to have 10 inside sales members by the end of 2024. This team is dedicated to identifying and onboarding smaller, owner-operated dealers across various sectors, including gun stores, outdoor stores, sporting goods stores, voting dealers, trucking companies, and even private security agencies.

Bryan Ganz: We see potential in these places to connect with customers who are open to having a burn of personal protection. In addition to seeking new Bernadillers, our inside sales team has tasked with growing our side hustle business, which has shown tremendous promise in this quarter. In fact, last week I was notified that one of our dealers that had started life as a side hustle dealer sold more than $50,000 of products at a local fair in one weekend.

Bryan Ganz: Like this dealer, most of our side hustle dealers emerge from our passionate customer base, and we periodically advertise to our customer base this side hustle opportunity. This initiative, the side hustle initiative yielded $1.2 million in business at our best margins, and most payments are made by a credit card eliminating any receivables. With regard to international markets, the story is really about South America. Well, our sales in Latin America for 2023 do not appear in our revenue line due to our accounting methodology.

Bryan Ganz: Our success, particularly in Argentina, is noteworthy. In 2023, we have secured significant law enforcement contracts in Argentina. We recently announced an oppressed release of 1,000 launchers being sold to the province of Cordova, as well as the capital city of Buenos Aires. We are also selling to police departments of Lano's, Tigra, Aziza, all municipalities near Buenos Aires. So far, the Cordova provincial police have experienced significant early success deploying the Bernal launchers. According to the Cordova chief of police, there have been more than 40 document cases of the Bernal being used in various situations to disarm and apprehend suspects, underscoring the need for less lethal solutions in this market.

Bryan Ganz: Our growing foothold in Argentina is really a testament to the effectiveness and demand for less lethal law enforcement solutions in this region and, frankly, globally. Our success in Argentina has been further amplified by the presidential campaign in which multiple presidential candidates have been promoting Berna as a way to stop street crime without the risk of taking a life or causing permanent injury. These fails in Argentina represent validation of our mission that less lethal saves lives, and it shows just how large the opportunity is within the law enforcement community.

Bryan Ganz: As I said, well, these fails are not yet reflected in Berna's reported numbers. These recent wins underscore the strategic importance of Berna's Latam joint venture and the long-term growth potential for Berna internationally. We view our progress in Argentina as a stepping stone as we expand our presence across South America, particularly into Brazil, further our commitment to advancing less lethal security solutions in Latin America. There's been a lot that we've talked about in this call.

Bryan Ganz: Obviously, we've made substantial progress since our last update with these new marketing strategies, expanding our inside sales team, implementing the ongoing initiatives with premier dealers and side hustle dealers, and I firmly believe that we've overcome the ban on social media advertising, and we are well positioned for growth. We are currently cash flow positive. David mentioned that we had 13.7 million of cash at the end of the quarter. At the end of September, that number was 14.4 million, and as of yesterday, it was 14.8 million.

Bryan Ganz: And we expect to see continued improvement in our cash position as we continue to work through our excess inventory in common quarters. This strong financial foundation gives us flexibility in exploring new marketing channels and allows us to make investments in key areas of our business, including bringing on people to manage our email campaigns and social media outrage. And our focus, however, remains on maintaining a strong and robust cash flow trajectory as we move forward.

Bryan Ganz: So, despite the Edwin's, we encountered in 2023, and despite what are, frankly, extremely disappointing results, we believe that we'll finish the year off very strong as we enter into the holiday season. And we remain committed to making Burner the premier provider of less lethal personal security solutions. And we believe that the actions that we're taking today position the company for sustainable growth going forward.

Operator: So now I'd like to turn the call over to questions. Operator, if you please. Thank you. The company will now be taking questions or it's publishing analysts. If you'd like to ask a question at this time, please press star one from your telephone keypad and a confirmation telephone to indicate your line in the question queue. You may press star two if you'd like to remove your question from the queue. For persons who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please so we pull for questions once again at star one. Thank you.

Jeffrey Sinderen: Our first question is from Jeff van Sinderen with B Riley securities.

Bryan Ganz: Please just use your questions. Good morning everyone and great to hear about the increase in web sessions recently. I'm wondering can you speak a little bit more about the conversion build you're seeing with the new marketing versus what you saw in terms of marketing on Google and made it previously and then maybe also speak more about the other marketing platforms that you're looking into or testing. As I said, I don't have the numbers in front of me, but I think that we were about 0.65% conversion rate in our first quarter and the beginning of the second quarter through the end of March and recently that has climbed to 0.9% which is consistent with our long term conversion rate.

Bryan Ganz: The thing that's so interesting is we expect to see high conversion rates when we have a lot of returning customers because they come to the website with the intent to buy something. So what is so encouraging now is that we have a very high percentage of first time visitors to the website and new customers and yet we're seeing the conversion rate increase. In addition to an increasing conversion rate, we are seeing increase in average order value.

Bryan Ganz: So in September, our average order value was $352.53 for the first 11 days of October, our average order value is $353.67. And if I look at during the period where we were advertising on meta, our average order value was much closer to $300 as we had a lot of returning customers that were buying more ammo and more CO2 and more accessories. So again, Jeff, I think as I tried to point out, there was a concern, I know that a lot of investors had we saturated the market, was it going to be difficult to find new investors and I think the answer is, if we can get people to the website, we can get them to convert. And we can get them to convert at historical rates. So that was, I think the most encouraging part of this new advertising campaign.

Bryan Ganz: Okay, good to hear.

Bryan Ganz: And then you just mentioned ammo, so I'm wondering if there's any other code you can give us on ammo sales, and then also if you could touch on the 12 gauge. Yeah, I mean, our ammo sales remain consistent.

Bryan Ganz: I have to say that when our ammo sales start to become a higher percentage of our overall sales, it's going to mean that we've stopped growing. So during these periods of rapid growth, obviously people are buying new kits, returning customers will come back and buy ammo and accessories. But we've not seen any significant change in our percentage of ammo sales. Yeah, ammo and accessories have remained consistently about 25% of sales, and in Q3 that was 26%.

Bryan Ganz: And in terms of 12 gauge, the 12 gauge sales honestly have been disappointing. What we've discovered is that less lethal 12 gauge is not a thing for civilians. The existing market for less lethal 12 gauge is really a law enforcement market. And although we're making good inroads with law enforcement on 12 gauge, as I've always said, this is law enforcement is a very lengthy sales cycle. So I remain convinced that there is a good market for 12 gauge over the long term, but we've not seen any significant increase in it currently.

Bryan Ganz: And honestly, our focus over the last several months has been overcoming this social media advertising ban. And every waking moment has been trying to pivot our advertising approach and focusing on our iconic and flagship products. So we really have not done any advertising of 12 gauge. At this point, everything has really been focused on attracting new customers for the Bernal launchers. Okay.

Jeffrey Sinderen: And then just one more effect that squeeze it in. Just wanted to confirm. I think you said that you expected the cash generative in Q4, including what you're doing with inventory. That's correct. Okay. Thanks for taking my questions. I'll take the rest off one. Thank you, Jeff.

Operator: You like to ask a question at this time? Maybe press star one from your telephone keypad. Thank you.

Operator: At this time, this concludes our question and answer session.

Bryan Ganz: I'd now like to turn the call back over to Mr. Gantz for his closing remarks. I just want to thank everybody for their support during what's been a very difficult period for the company. As I express, I have complete faith in the team here at Bernal. I believe that we were able to identify the problem, find a solution and implement it in a relatively short period of time. I believe that we are back on our growth trajectory as we will see sales and cash both increase. Again, I appreciate everybody's support.

Operator: Thank you very much. Thank you for joining us today for Byrna's fiscal 3rd quarter, 2023 conference call. You may now...