Q4 2023 Byrna Technologies Inc Earnings Call

Good morning, welcome to <unk> fiscal fourth quarter and full year 2023 earnings conference call.

Operator: Good morning. Welcome to Byrna's fiscal fourth quarter and full year. Mining, I will be your operator. Joining us for today's presentation are the company's CEO, Brian Ganz, and CFO. Following their remarks, we will open the call. Earlier today, Byrna released results for its fiscal fourth quarter and full year ended on November 30th, 2020. A copy of the press release is available on the, Before turning the calls over to Brian Ganz, Byrna Technology's Chief Executive Officer, I'll read the safe part.

My name is Charlotte and I will be your operator for today's call.

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

Following their remarks, we will open the call to questions.

Earlier today, we released results for its fiscal fourth quarter and full year ended November 32020 through a copy of the press release is available on the company's website.

Before turning the call over to Brian Dan Brennan Technologies, Chief Executive Officer, I will read the Safe Harbor statement.

Operator: Some discussions held today include... Actual results could differ materially from the statements made today. Please refer to Byrna's most recent 10-K and 10-Q files. The company assumes no obligation to update for the, as a result of the new infrastructure, future events, or others, as his call will include references to non-Gabrielian.

Some discussions held today include forward looking statements actual results could differ materially from the statements made today.

Please refer to the burn is most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward looking statements as a result of new information future events or otherwise. After this call will include references to non-GAAP results. Please see the press release in the investors section language.

Operator: Please see the press release in the investors section of our website, ir.gov. For further information regarding forward-looking statements and reconciliations of non-GAB, Now, I'd like to turn the call over to Byrna's CEO, Brian. Sir, please.

I I got burnt out dotcom.

Further information regarding forward looking statements and reconciliations of non-GAAP results to GAAP results.

Now I'd like to turn the call over to Bernie CEO, Brian again, Sir Please proceed.

Brian Ganz: Thank you, operator. And thank you everyone for joining us today. This morning, we issued a press release providing our financial results for the fiscal fourth quarter and full year ended November 30, 2023, along with key business accomplishments for 2023 and an update on Q1 2020 performance and 2024 performance. We will also be filing our 10k with the SEC later today. I'm going to begin this morning by passing the call to David North, our CFO, to discuss our financial results for both the fourth quarter and the full year 2023. Following that, I'll review what was a very eventful year and offer insights into our operations and future strategy. Lastly, we'll open the call to questions from our publishing analysts. David.

Thank you operator, and thank you everyone for joining us today.

This morning, we issued a press release, providing our financial results for the fiscal fourth quarter and full year ended November 32023, along with key business accomplishments for 2023, and an update on Q1 'twenty 'twenty performance 2020 for performance.

We will also be filing our 10-K with the SEC later today.

I'm going to begin this morning by passing the call to David North our CFO to discuss our financial results for both the fourth quarter and the full year 2023 following that I'll review, what was a very eventful year and offer insights into our operations and go forward strategy.

Lastly, we will open the call to questions from our publishing analysts David Thank you, Brian and good morning, everyone.

David North: Thank you, Brian, and good morning, everyone. Let's discuss our financial results for the fiscal fourth quarter and full year of 2023, which ended on November 30, 2023. Net revenue for the fourth quarter of 2023 was $15.6 million compared to $16.0 million in the fiscal fourth quarter of 2022. The slightly lower net revenue is primarily attributed to exceptional international sales in Q4 of 2022, which included a $3.4 million stocking order for the company's distributor in Argentina. Total international sales in Q4 of 2023 were $225,000, compared to $4.3 million in the prior year. Without this one-time surge in international sales in the prior year, the fourth quarter displayed strong growth. Domestic revenue in the quarter totaled $15.4 million.

Let's discuss our financial results for the fiscal fourth quarter and full year of 2023 ended November 30th 2023.

Net revenue for the fourth quarter in 2023 was $15 6 million compared to $16.1 million in the fiscal fourth quarter of 2020 to the slightly lower net revenue is primarily attributed to exceptional international sales in Q4 of 2022, which included a $3 $4 million.

Stocking order for the company's distributor in Argentina total international sales in Q4 of 2023 were 225000 compared to $4 3 million in the prior year without this one time surge in international sales in the prior year, the fourth quarter displayed strong growth.

Domestic revenue in the quarter totaled $15 $4 million, that's 32% of 30% to 32% increase from Q4 of 2022, and it's a quarterly record gross profit for Q4, 2023 was $9.1 million or 58% of net revenue compared to $8.

David North: That's a 32% increase from Q4 of 2022, and it's a quarterly record. Gross profit for Q4 2023 was $9.0 million, or 58% of net revenue compared to $8.7 million, or 54% of net revenue for Q4 of 2022. The increase in gross margin primarily resulted from a much smaller percentage of lower margin international sales. Operating expenses for Q4 2023 were $9.7 million compared to $8.8 million for Q4 2022. The increase in operating expenses was primarily driven by an increase in marketing spend as part of the company's influencer partnership strategy. Net loss for Q4 2023 was negative $800,000 compared to negative $100,000 for Q4 of 2022, and the increase in net loss was primarily due to the increase in marketing spend. Adjusted EBITDA, which is a non-gap metric, for Q4 of 2023 totaled $0.4 million compared to $1.4 million for Q4 of 2022. Net revenue for the full year totaled $42.6 million, compared to $48.0 million for the prior year.

$7 million or 54% of net revenue for Q4 of 2022 the increase in gross margin primarily resulted from much smaller percentage of lower margin International sales operating expenses for Q4, 2023 were $9.7 million compared to $8 $8 million for Q4.

For US 2022, the increase in operating expenses was primarily driven by an increase in marketing spend as part of the company's influenced your partnership strategy.

Net loss for Q4, 2023 was negative $800000 compared to negative $100000 for Q4 of 2022 and the increase in net loss was primarily due to the increase in marketing spend.

Adjusted EBITDA, which is a non-GAAP metric for Q4 of 2023 total.

Zero point $4 million compared to $1 $4 million for Q4 of 2022.

Net revenue for the full year totaled $42 $6 million compared to $48.1 million for the prior year.

David North: This decline was, again, largely due to a $7.6 million decrease in international sales from South Africa, South America, and Asia, which are characterized by large but infrequent orders as experienced in the prior year. However, this impact was partially offset by a $900,000 increase in sales on Amazon and a $400,000 increase in Fox Labs, despite temporary headwinds from social media advertising. Domestic dealer and distributor sales, which are less dependent on online advertising, grew by 1.6 million. Gross profit for the full year ended 2023 was $23.6 million, or 56% of net revenue, compared to $26.3 million, or 55% of net revenue for the prior year period. Gross margins remained stable as the increase in lower margin dealer and distributor sales was counterbalanced by the reduction in lower margin international sales. Payroll expenses decreased by $340,000, contributing to our overall more efficient cost structure.

Decline was again largely due to.

Two seven.

$7 6 million.

Increase in international sales from South Africa, South America, and Asia, which are characterized by large but infrequent orders has experienced in the prior year.

This impact was partially offset by a $900000 increase in sales on Amazon and a $400000 increase in Fox slab sales despite temporary headwinds from social media advertising bans.

Domestic dealer and distributor sales, which are less dependent on online advertising grew by $1 $6 million.

Gross profit for the full year ended 2023 was $23 $6 million or 56% of net revenue compared to $26 $3 million or 55% of net revenue for the prior year period gross margins remained stable as the increase in lower margin dealer and distributor sales was counter balanced by the.

Reduction in lower margin international sales for the full year operating expenses were $31 $4 million, which is a decrease from $33 $7 million in the previous year. There's $2 3 million dollar decrease was largely achieved through strategic realignments and cost optimizations and key areas, notably.

Sales and marketing expenses were reduced by approximately $920000 due to lower advertising spend earlier in the year, resulting from the social media advertising ban Additionally, professional fees, including legal and accounting service were reduced by $680000, while insurance costs decreased by five.

$510000 due to renegotiated premiums payroll expenses decreased by $340000 contributing to our overall more efficient cost structure. Looking ahead, we are focused on maintaining a balanced approach to managing our operating expenses. We are preparing for a measured uptick in these costs as part of our strategic investment.

David North: Looking ahead, we are focused on maintaining a balanced approach to managing our operating expenses. We are preparing for a measured uptick in these costs as part of our strategic investment to drive revenue growth. The net loss for the full year was $8.2 million compared to a loss of $7.9 million for the prior year.

To drive revenue growth.

Net loss for the full year was $8 $2 million compared to a loss of $7 $9 million for the prior year. The slight increase in net loss was primarily due to the decrease in revenue, partly offset by a decrease.

David North: The slight increase in net loss was primarily due to the decrease in revenue, partly offset by a decrease in operating expenses. The balance of cash and cash equivalents was $13.7 million at the end of the third quarter on August 31, 2023. By year-end on November 30, 2023, cash and cash equivalents had risen to $20.5 million due to the increase in sales and also to our ability to sell down high inventory levels. Inventory at November 30, 2023 totaled $13.9 million compared to $16.7 million at August 31, 2023. The company currently has no current or long-term debt.

And operating expenses.

For the full year, adjusted EBITDA totaled negative $2.1 million compared to a negative $1.1 million in the prior year. The decrease in adjusted EBITDA was primarily due to the increase in net loss previously noted.

Cash and cash equivalents here I wanted to call attention to a complete reversal of the trend of declining cash balances that prevailed through the first quarter.

Three quarters of the year due to declining sales in high inventory balances the balance of cash and cash equivalents equivalents was $13 $7 million at the end of the third quarter on August 31, 2023 by year end on November 30th 2023, cash and cash equivalents had risen to $25 million due to the increase.

And the sales and also to our ability to sell down high inventory levels inventory at November 32023 totaled $13 $9 million compared to $16 $7 million at August 31, 2023.

Brian Ganz: And that concludes my prepared remarks, so I'll turn it back over to Brian. Thanks, David. 2023 was a pivotal year for Byrna, and it was marked by both formidable challenges and, frankly, remarkable achievements. The year began with Byrna running headlong into two extremely challenging problems. The first was a number of unforeseen production problems related to the rollout of the new Byrna LE launcher. The second was, in essence, a total ban on our ability to advertise on social media when we were deemed to be a contraband product by Meta, Google, and Twitter. First, Byrna LE.

He currently has no corner of long term debt and that concludes my prepared remarks, I will turn it back over to Brian. Thanks, David.

2023 was a pivotal year for fair enough.

And it was marked by both formidable challenges and frankly remarkable achievements are the year began with burner running headlong into two extremely challenging problems. The first was a number of unforeseen production problems related to the rollout of the newborn or early launch or the second was what was in essence.

Total ban on our ability to advertise on social media, when we redeemed to be contraband product by metal matter, Google and Twitter.

First the burn in L. A.

Brian Ganz: We rolled out our new, much more powerful Byrna LE launcher to great fanfare at SHOT Show in January 2023, where we gave industry insiders and the press the chance to test fire the Byrna LE at Industry Day, better known as Range Day. The Byrna LE was tremendously well-received, and it generated a flood of orders in the wake of SHOT Show. However, as we ramped up production, we ran into a number of production problems and quality control issues that required us to halt production and stop taking orders. Not only was this a black eye for the company, but it had a material negative impact on sales, as many customers wanted to wait for the more powerful Byrna LE after it was introduced at SHOT Show.

Rolled out our new much more powerful Burnett early launch or to great fanfare fanfare at shot show in January 2023, where we gave industry insiders in the press the chance to test firing the burner L. E had industry day, better known as range day, the burden of Ellie was tremendously well received and it generates.

A flood of orders in the wake of shot show. However, as we ramped up production, we ran into a number of production problems and quality control issues as it required us to halt production and stopped taking orders or.

Not only was this a black eye for the company.

It had a material negative impact on sales as many customers wanted to wait for the more powerful Barnett L. E. After it was introduced at shot show.

The production problems stemmed from out of spec components received from our vendors as they transition from prototype production to serial production.

Brian Ganz: The production problem stemmed from out-of-spec components received from our vendors as they transitioned from prototype production to serial production. This led to an unforeseen stack-up of tolerances that adversely affected the operation of the launcher. The team went into high gear as we worked closely with our vendors to improve DFM, or design for manufacturability. In fact, I personally spent three weeks essentially living at the factory.

This led to an unforeseen stack up with tolerances that adversely affected the operation the launch or the team went into high gear as we work closely with our vendors to improve DFM or design for manufacture ability in fact, I personally spent three weeks essentially living at the factory.

Brian Ganz: The incredible effort by the entire Byrna team in combination with our vendors paid off, and in May, we were able to relaunch the Byrna LE. Since then, production and demand for the LE have remained strong, and for the most part, we've been able to keep up with the elevated demand for the LE launcher, even though it has proven to be much stronger than originally predicted. Prior to the launch of the LE, we forecast that 10% of the demand would be for the much more expensive Byrna LE. However, LE demand has been running at more than a third of our total demand. In the wake of this production problem and product launch, we terminated the VP of New Product Development and Production, and we demoted our Chief Technology Officer, which ultimately led to his resignation. We have since replaced both these positions with two highly qualified individuals. To replace our VP of New Product Development and Production, we hired Jon Brasseur as our Head of Product Development and Production.

The incredible effort by the entire burner team in combination with our vendors paid off and in May we were able to relaunch the burner Lee since then production and demand for the early have remained strong and for the most part we've been able to keep up with the elevated demand for the early launch or even though it has proven to be much.

Stronger than originally predicted prior to the launch of the <unk>, we forecast a 10% of the demand would be for the much more expensive burner. Lee. However, early demand has been running a more than a third of our total demand.

In the wake of this production problem and product launch we terminated the VP of new product development and production and we promoted our chief Technology Officer, which ultimately led to his resignation we have century place. Both these positions with two highly qualified individuals to replace our VP of new product.

<unk> and production, we hired John <unk> as our head of product development and production John joins burden it with more than two decades of on points experience.

Including more than 10 years as VP of product management at six hour, a leading manufacturer of firearms. This gun industry experiences given John extremely good understanding of both the particular engineering issues we face.

Brian Ganz: Jon joins Byrna with more than twenty decades of on-point experience, including more than ten years as VP of Product Management at Sig Sauer, a leading manufacturer of firearms. This gun industry experience has given Jon an extremely good understanding of both the particular engineering issues we face, as well as the nature of our market. In addition, we just recently hired Stuart Puth as Director of Design and Manufacturing Engineering. Stuart, who will be starting later this month, brings more than 30 years of design and engineering experience to Byrna. Most recently, Stuart was Director of Test and Manufacturing Engineering for Walmart Advanced Systems and Robotics, where he successfully led the development of internal and external manufacturing technology resources for the Alphabot Warehouse Micro-Fulfillment System.

As well as the nature of our market.

In addition, we just recently hired start foods as director of design and manufacturing Engineering Stewart, who will be starting later this month brings more than 30 years of design and engineering experience to burner. Most recently Stuart was director of test and manufacturing engineering for Wal Mart advanced systems, and robotics, where he saw.

<unk> led the development of internal and external manufacturing technology resources for the Alpha bought warehouse micro fulfillment system.

We are confident that the new policies procedures and processes that we've put into place along with the addition of these two very senior and experienced managers that.

We've added to the engineering team will prevent a repeat of the mistakes made with the early rollout and will ensure a smooth introduction of the much vaunted and highly anticipated burn a compact launcher, which is due out next year.

The second and frankly much more serious challenge that we ran into in the early part of 2023.

Yeah.

Brian Ganz: We are confident that the new policies, procedures, and processes that we have put into place, along with the addition of these two very senior and experienced managers that we've added to the engineering team, will prevent a repeat of the mistakes made with the LE rollout and will ensure a smooth introduction of the much wanted and highly anticipated Byrna Compact Launcher, which is due out next year. The second and, frankly, much more serious challenge that we ran into in the early part of 2023 was the almost total prohibition on advertising our products on the major social media platforms, including Facebook, Instagram, Google, and Twitter. We have never been able to advertise on mainstream media, including both broadcast and cable TV, due to the nature of our products.

Was the almost total prohibition on advertising our products on the major social media platforms, including Facebook, Instagram, Google and Twitter.

We have never been able to advertise on mainstream media, including both broadcast and cable TV due to the nature of our products. However, we had spent millions of dollars on social media advertising over the prior two years in truth up until just recently social media advertising had been our primary means for both.

Hitting the public about less lethal self defense and driving demand for burner products.

When without warning we were denied access to this advertising venue. The effect frankly was devastating we saw an immediate 60% drop in web traffic from Q1 to Q2 initially sales were somewhat resilient due to the tail effect of our prior advertising. However by Q3, we saw a significant.

Negative impact on sales posting our worst quarter in years at just $7 1 million in revenues as we averaged only $44000 a day on Brian Dot Com and $11000 a day on Amazon Dot com.

Brian Ganz: However, we had spent millions of dollars on social media advertising over the prior two years. In truth, up until just recently, social media advertising had been our primary means for both educating the public about less lethal self-defense and driving demand for Byrna products. When, without warning, we were denied access to this advertising venue, the effect, frankly, was devastating. We saw an immediate 60 percent drop in web traffic from Q1 to Q2.

This sharp decline in sales, resulting from the social media advertising ban.

It had the potential to be an existential threat to the company. If we could not find a way to manage around it we simply could not cut expenses enough well, maintaining our robust R&D efforts and new product development.

The pipeline to be profitable at $7 million a quarter well other industries, such as firearms and tobacco have also had to deal with what wide ranging advertising bans. These were mature industries with well known products and large well established markets and customer bases by contrast few American.

Brian Ganz: Initially, sales were somewhat resilient due to the tail effect of our prior advertising. However, by Q3, we saw a significant negative impact on sales, posting our worst quarter in years at just $7.1 million in revenues, as we averaged only $44,000 a day on Byrna.com and $11,000 a day on Amazon.com. This sharp decline in sales resulting from the social media advertising ban had the potential to be an existential threat to the company if we could not find a way to manage around it. We simply could not cut expenses enough while maintaining our robust R&D efforts and new product development pipeline to be profitable at $7 million a quarter. While other industries, such as firearms and tobacco, have also had to deal with wide-ranging advertising bans, these were mature industries with well-known products and large, well-established markets and customer bases. By contrast, few Americans know what less lethal is, and even fewer have ever heard of Burna.

No what less lethal is and even fewer have ever heard a burner.

We needed to find a way to both educate the general public as to the benefits of less lethal self defense and drive demand for our products and we needed to find it quick.

Management team worked around the clock exploring every conceivable option to build brand awareness before settling on the celebrity endorsement model pioneered by Phil Knight at Nike in September of 2023, BARDA signed its first celebrity endorser, Sean Hannity and committed to a multimillion dollar advertising camp.

Pain on Sean's afternoon drive time radio show aired nationally on I Heart radio.

This shift in strategy not only helped us circumnavigate around the mainstream and social media advertising bans, but a prebuilt propelled us to a record breaking fourth quarter as our daily sales spiked to $120000 a day on burner dot com and $35000 a day on an Amazon Dot com.

Posting $15 4 million in domestic sales. This represented a 182% increase from the third quarter.

Our new marketing approach has significantly enhanced brand visibility and has driven a dramatic increase in website visits and sales in the fourth quarter Daily Web sessions jumped to 32500, an increase of 174% from the third quarter and a 22% increase from the same period.

Brian Ganz: We needed to find a way to both educate the general public as to the benefits of less lethal self-defense and drive demand for our products, and we needed to find it quick. The management team worked around the clock, exploring every conceivable option to build brand awareness before settling on the celebrity endorsement model pioneered by Phil Knight at Nike. In September of 2023, Byrna signed its first celebrity endorser, Sean Hannity, and committed to a multi-million dollar advertising campaign on Sean's afternoon drive time radio show, which aired nationally on iHeartRadio. This shift in strategy not only helped us circumnavigate around the mainstream and social media advertising bands, but it propelled us to a record-breaking fourth quarter as our daily sales spiked to $120,000 a day on Byrna.com and $35,000 a day on Amazon.com, posting $15.4 million in domestic sales.

In 2022 before the social media advertising ban this surge in web traffic led to a 41, 2% year over year increase in fourth quarter direct to consumer sales.

Based on the initial success of our partnership with Sean Hannity.

Our network of celebrity partners has expanded over the past several months with the addition of judge Jeanine Pirro Glen back and Bill O'reilly. These partners, who is whose influence spans radio television and social media have been instrumental in our success offering a substantial return on AD.

<unk> spend or ROE as a row as for the holiday fourth quarter.

<unk> reached seven five X, we are seeing a continuation of this momentum with a five nine X ROE as in the first two months of fiscal 2024, that's December and January.

These campaigns had been particularly effective in attracting new customers with first time customer rates soaring to 66, 5% of daily orders in Q4, and 11% increase from the prior year when our first time customer rate was 55, 5%.

Brian Ganz: This represented a 182 percent increase from the third quarter. Our new marketing approach has significantly enhanced brand visibility and has driven a dramatic increase in website visits and sales. In the fourth quarter, daily web sessions jumped to 32,500, an increase of 174 percent from the third quarter and a 22 percent increase from the same period in 2022 before the social media advertising ban. This surge in web traffic led to a 41.2 percent year-over-year increase in fourth-quarter direct-to-consumer sales. Based on the initial success of our partnership with Sean Hannity, our network of celebrity partners has expanded over the past several months with the addition of Judge Jeanine Pirro, Glenn Beck, and Bill O'Reilly.

Higher first time customer rates means higher average order values a O V. As first time customers purchase a launch or kit at the very minimum for Q4, we saw a 15, 2% increase in average order value higher first time customer rates also give us the opportunity to go back.

Well as we engage these customers with fallen offers of ammunition and accessories as we look to garner the lifetime value of these new customers.

I am extremely proud of what the team at Barnett accomplished in dealing with these twin challenges.

It's no secret that we are under tremendous pressure our stock price had fallen as low as $2.24 at the end of September giving the Mark the company a market cap of less than one time sales as investors headed to the exits analysts reduce both sales projections and price targets and some even downgraded the stock.

Despite the already precipitous decline some investors even question, whether burn I had enough cash to survive. This led to some mid level management employees, giving notice in the face of these mounting pressures the senior leadership team at Barnett remained laser focused on finding a way around these problems and as my dad always used to say.

Brian Ganz: These partners, whose influence spans radio, TV, and social media, have been instrumental in our success, offering a substantial return on advertising spend, or ROAS. Our ROAS for the holiday fourth quarter reached 7.5x. We are seeing a continuation of this momentum with a 5.9x ROAS in the first two months of fiscal 2024, that is, December and January. These campaigns have been particularly effective in attracting new customers, with first-time customer rates soaring to 66.5% of daily orders in Q4, an 11% increase from the prior year when our first-time customer rate was 55.5%. Higher first-time customer rates mean higher average order values, AOV, as first-time customers purchase a launcher kit at the very minimum. For Q4, we saw a 15.2% increase in average order value.

Say when the going gets tough the tough get going I am proud to say that I am surrounded by a group of tough sob's here at BARDA that do not know the words surrender and it was through their grit tenacity and determination that we were able to lift these twin challenges and frankly come out the other side even stronger.

I would now like to discuss our 2023 performance across the various sales channels first let me start with international sales.

David mentioned the primary reason for the dip in our full year revenue for 2023 with the $7 $6 million decline in year over year International sales.

While the timing of large international orders is often sporadic and hard to predict the real reason for the decline in international sales is it starting in 2023, our sales to South America no longer showed up in Barnett technologies numbers.

Rather they are reported in burn out Latam numbers and because we do not consolidate burner Latam results for financial statement reporting purposes. Their sales are not included in Brian's topline revenue number.

Brian Ganz: Higher first-time customer rates also give us the opportunity to go back to the well as we engage these customers with fall-in offers of ammunition and accessories as we look to garner the lifetime value of these new customers. I'm extremely proud of what the team at Byrna accomplished in dealing with these twin challenges. It's no secret that we were under tremendous pressure.

For this reason, we expect that our reported international sales number in 2024 will remain depressed and we will come in well below our 2022 record of $9 million that said, we expect to see continued strong sales in South America, particularly in Argentina, and with some luck Brazil.

If you remember in October we announced two large sales in Argentina through burn is Argentina in Argentinian distributor and our Latin American partner versa, notably one of these was the landmark $6 million order from Cordoba provincial police the largest single order for burn of launches.

Brian Ganz: Our stock price had fallen as low as $2.24 at the end of September, giving the company a market cap of less than one-time sales as investors headed to the exits. Analysts reduced both sales projections and price targets, and some even downgraded the stock despite the already precipitous decline. Some investors even questioned whether Byrna had enough cash to survive. This led to some middle-level management employees giving notice. In the face of these mounting pressures, the senior leadership team at Byrna remained laser-focused on finding a way around these problems. And, as my dad always used to say, when the going gets tough, the tough get going.

As in the company's history since the launch is sold to the Cordoba police by birth. So we're part of the initial stocking order versus a place last year in Q4. This sale wasn't reflected in our 2023 numbers, but rather was part of the $4 3 million in international sales, we reported in Q4 of 2022.

This year we project.

We're in a Latam will do $8 million in sales and while these revenues will not show up as part of Barnett technologies reported sales numbers, we will benefit as a 51% owner.

Brian Ganz: I am proud to say that I am surrounded by a group of tough SOBs here at Byrna that do not know the word surrender, and it was through their grit, tenacity, and determination that we were able to overcome these twin challenges and, frankly, come out on the other side even stronger. I'd now like to discuss our 2023 performance across the various sales channels. First, let me start with international sales. As David mentioned, the primary reason for the dip in our full-year revenue for 2023 was the $7.6 million decline in year-over-year international sales. While the timing of large international orders is often sporadic and hard to predict, the real reason for the decline in international sales is that, starting in 2023, our sales to South America no longer showed up in Byrna Technologies' numbers. Rather, they are reported in Byrna LATAM's numbers, and because we do not consolidate Byrna LATAM's results for financial statement reporting purposes, their sales are not included in Byrna's top-line revenue number.

A burn of Latam.

More importantly, the breakthrough in Argentina, with the Cordoba police as well as agencies and <unk>, Santa Fe News highlights the products appeal to two police departments around the world as the demand for less lethal use of force grows ever stronger orders like the one from the Cordoba police.

<unk> can only serve to further validate burn a suite of less lethal products and confirmed burns position as one of the leading less lethal companies globally.

With sales in South America going through our burner Latam joint venture subsidiary our focus in 2024 as it pertains to international sales will be heavily reliant on Mexico and Canada.

In 2023 sales into Canada were slightly more than $1 million with most of this coming through our online DTC efforts, we expect to see significant growth in this market in 2024 with the opening of our first premier dealer in Canada, Barnett Toronto, starting with only a $25000.

You'll stocking order in January Burnett, Toronto sold out in just two days, the owner and operator of Burnet Toronto Emiliano months reported that the second order for 100000 placed two days after selling out the initial stocking order was also sold out before the product even arrived he has since placed a third order.

Paul in the span of less than two months.

Brian Ganz: For this reason, we expect that our reported international sales number in 2024 will remain depressed and will come in well below our 2022 record of 9 million. That said, we expect to see continued strong sales in South America, particularly in Argentina and, with some luck, in Brazil. If you remember, in October, we announced two large sales in Argentina through Byrna's Argentinian distributor and our Latin American partner, Bursa. Notably, one of these was the landmark $6 million order from Cordova Provincial Police, the largest single order for Byrna launchers in the company's history.

Overwhelming success in Barnett Toronto underscores the opportunity that exists in Canada as restrictive gun laws serve to drive the demand among Canadians looking for a means to be able to protect themselves and their families based on the success of Bernadotte CA and a burn of Toronto. The company has made a decision to higher person.

Dedicated to the Canadian market with a particular emphasis on growing our online presence in Canada with both in online and dealer presence in this important market to our north we expect to see our Canadian sales eclipsed $1 5 million in 2024.

In 2023, our sales into Mexico were de Minimis. In fact, they were so insignificant we did not even bother to report our sales into Mexico as a separate line item as they amounted to less than $200000, rather we simply lump them in with dealer sales.

Brian Ganz: Since the launchers sold to the Cordova Police by Bursa were part of the initial stocking order Bursa placed last year in Q4, this sale wasn't reflected in our 2023 numbers but rather was part of the $4.3 million in international sales we reported in Q4 of 2022. This year, we project that Byrna Latham will do $8 million in sales, and while these revenues will not show up as part of Byrna Technologies' reported sales numbers, we will benefit as a 51% owner. With sales in South America going through our Byrna Latam joint venture subsidiary, our focus in 2024 as it pertains to international sales will be heavily reliant on Mexico and Canada. In 2023, sales into Canada were slightly more than a million dollars, with most of this coming through our online DTC efforts.

Recently, however, burner has seen significant interest from Mexico and orders during the first two months of the year for Mexican dealers have already exceeded our full year 2023, Mexico sales, we believe that Mexico offers an amazing opportunity for growth as we expand our presence into both law enforcement and <unk>.

Military market as well as the consumer market through dealers and our soon to be created online presence. We project 2024 sales into Mexico will be more than $1 million.

Turning to our domestic dealer channel dealer sales were one of the bright spots for 2023 with sales growth of $1 6 million or 21%. This was on the heels of $2 9 million and gross or 52%. The prior year, we expect to see strong continued growth in the dealer segment.

Well dealer sales are less impacted by burn as Abbott advertising efforts, we have seen a recent spike in dealer sales, which can be attributed to increased brand recognition, resulting from our celebrity endorsement program.

Brian Ganz: We expect to see significant growth in this market in 2024, with the opening of our first premier dealer in Canada, Byrna Toronto. Starting with only a $25,000 initial stocking order in January, Byrna Toronto sold out in just two days. The owner and operator of Byrna Toronto, Emiliano Manz, reported that the second order for $100,000, placed two days after selling out the initial stocking order, was also sold out before the product even arrived. He has since placed a third order, all in the span of less than two months. The overwhelming success of Byrna Toronto underscores the opportunity that exists in Canada as restrictive gun laws serve to drive the demand among Canadians looking for a means to be able to protect themselves and their families.

In addition to the growth we expect to see from our traditional brick and mortar dealers, we expect significant growth in our dealer our premier dealer program.

As we have previously explained premier dealers are essentially burn our franchisees, while we do not require a franchise fee to become a premier dealer premier dealers must derived more than 50% of their revenue from burn of products and can only sell non lethal self defense products the minimum annual purchase.

Commitment for a premier dealer is 250000.

And the store must adhere to strict brand standards, including a firing range on premises so the potential customers.

Test firing the burner launchers, and return we assist with the design of the store provide point of sale display materials and allow these dealers to use the burner name and nomenclature for example, BARDA Toronto.

And garden bar in Breckenridge, Colorado and of course, our original Premier dealer lives safe Hawaii in Oahu.

Brian Ganz: Based on the success of Byrna.ca and of Byrna Toronto, the companies made the decision to hire a person dedicated to the Canadian market with a particular emphasis on growing our online presence in Canada. With both an online and dealer presence in this important market to our north, we expect to see our Canadian sales eclipse $1.5 million in 2024. In 2023, our sales into Mexico were de minimis. In fact, they were so insignificant, we did not even bother to report our sales into Mexico as a separate line item as they amounted to less than $200,000.

The Premier dealer concept was developed in May of last year and in just six short months. We opened 15 Premier dealers. In addition to the original Premier dealer live safe, Hawaii, We look for potential Premier dealer partners from the ranks of entrepreneurs, who are committed to our mission of saving.

Lives. This year, we will be attending several franchise shows in the hopes of finding enough new premier dealer partners to double the size of our Premier dealer program in 2024.

The Big story of 2023 as I previously explained was of course the turnaround.

Of our online DTC program on both burner Dot com and Amazon Dot Com, if we look at full year online sales through burner dot com and Amazon Dot com.

Sales were relatively flat ending the year at $29 2 million down less than 2% from 2020 to that of course is very misleading as strong Q4 sales are up 33% for the prior year made up for a significant shortfall in Q3 before we had settled on a means to <unk>.

Brian Ganz: Rather, we simply lumped them in with dealer sales. Recently, however, Byrna has seen significant interest from Mexico, and orders during the first two months of the year from Mexican dealers have already exceeded our full year 2023 Mexico sales. We believe that Mexico offers an amazing opportunity for growth as we expand our presence in both law enforcement and military markets, as well as the consumer market, through dealers and a soon-to-be-created online presence.

Place the sales driven by social media advertising.

While dealing with the social media advertising ban was extraordinarily stressful it was a blessing in disguise, while our social media advertising program was effective its effectiveness had been waning as consumers were becoming numb to the barrage of social media ads compounding the problem was the reduced effectiveness of.

Ads on Facebook, Instagram, Google and Twitter due to the fact that the big Tech companies were borrowing to public pressure when it came to capturing and selling personal data, making it more difficult for us.

Brian Ganz: We project 2024 sales in New Mexico will be more than $1 million. Turning to our domestic dealer channel, dealer sales were one of the bright spots for 2023, with sales growth of 1.6 million, or 21%. This was on the heels of 2.9 million in growth, or 52%, the prior year. We expect to see strong continued growth in the dealer segment. While dealer sales are less impacted by Byrna's advertising efforts, we have seen a recent spike in dealer sales, which can be attributed to increased brand recognition resulting from our celebrity endorsement program. In addition to the growth we expect to see from our traditional brick-and-mortar dealers, we expect significant growth in our premier dealer program. As we have previously explained, premier dealers are essentially Byrna franchisees.

Other businesses to micro target consumers.

Net result is that our online growth had waned in terms of both sessions in sales in 2022 prior to the advertising ban sessions growth had gone from 95% in Q1 to 56% in Q2 to 35% in Q3 to 22% by Q4.

This negative trend accelerated in 2023 once the advertising ban took effect for the first 10 months of 2022 the year over year sessions growth was <unk>.

56, 3% by contrast for the first 10 months of 2023 year over year over year sessions growth was a negative 11%.

The last two months of the year. However.

Once we have fully implemented the celebrity endorsement program.

Sessions grew to 37550, a day up 41% from the 27000 daily sessions for the last two months of 2022, demonstrating the effectiveness of the new celebrity endorsement program compared with the social media advertising.

Brian Ganz: The big story of 2023, as I previously explained, was, of course, the turnaround of our online DTC program on both Byrna.com and Amazon.com. However, if we look at full-year online sales through Byrna.com and Amazon.com, sales were relatively flat, ending the year at 29.2 million, down less than 2% from 2022. That, of course, is very misleading, as strong Q4 sales, up 33% for the prior year, made up for a significant shortfall in Q3 before we had settled on a means to replace the sales driven by social media advertising. While dealing with the social media advertising ban was extraordinarily stressful, it was a blessing in disguise. While our social media advertising program was effective, its effectiveness had been waning as consumers were becoming numb to the barrage of social media ads. Compounding the problem was the reduced effectiveness of ads on Facebook, Instagram, Google, and Twitter due to the fact that the big tech companies were bowing to public pressure when it came to capturing and selling personal data, making it more difficult for us and other businesses to micro target consumers.

Graham employed the prior year.

Yes.

What do we see when we look forward to 2024 and beyond how confident are we that we can maintain the current sales momentum and what is the risk of further production problems or supply chain disruptions.

First let's talk about sales.

When we initiated the celebrity endorsement program, we had three questions. One wasn't replicable to was it scalable and three what is sustainable.

After almost six months, we can answer the first two questions first it is replicable at.

After kicking off the program was Shawn Hannidy, we have been able to successfully add three additional celebrities to the mix Jud Janine Glen back and Bill O'reilly in each instance, we have seen very similar ROE as numbers.

Second.

We found out that it is not scalable, adding more money to these individual campaigns results and diminishing returns once your average advertising three to four days a week, increasing the frequency does not yield a commensurate increase in revenue third with regards to sustainability. This simple answers.

We do not yet know how sustainable. This program is will we see a drop in row as over time once we have saturated each celebrity endorses market.

To date, we've not seen any material decline in effectiveness over time. However, it's still early and we will be closely monitoring ROE as numbers for any changes in the trend.

Brian Ganz: The net result is that our online growth waned in terms of both sessions and sales. In 2022, prior to the advertising ban, session growth had gone from 95% in Q1 to 56% in Q2 to 35% in Q3 to 22% by Q4. This negative trend accelerated in 2023 once the advertising ban took effect. For the first 10 months of 2022, the year-over-year sessions growth was 56.3 percent. By contrast, for the first 10 months of 2023, year-over-year sessions growth was a negative 11 percent.

What does that mean for growth as we look ahead to the rest of the year based on what we have seen to date, we are quite optimistic about the sustained impact of our celebrity endorsement in the model.

For the month of December the only month in 2024, where we've closed the books burner Dot coms preliminary revenue numbers were up 89% over last year and Amazon Dot Coms preliminary revenue numbers were up 98% over last year, well this torrid pace.

This has slowed somewhat in the post holiday selling season, the trend in January and February to date remains very strong. There is of course no assurance that these trends will continue and given the fact that we are still in the early innings of our new celebrity endorsement program, we will not be giving guidance. However, it is safe to.

Brian Ganz: In the last two months of the year, however... Once we had fully implemented the celebrity endorsement program, sessions grew to 37,550 a day, up 41% from the 27,000 daily sessions for the last two months of 2022, demonstrating the effectiveness of the new celebrity endorsement program compared with the social media advertising program employed the prior year. What do we see when we look forward to 2024 and beyond? How confident are we that we can maintain the current sales momentum? And what is the risk of further production problems or supply chain disruption? First, let's talk about sales. When we initiated the Celebrity Endorsement Program, we had three questions. One question is, was it replicable?

Say that based on the first 11 weeks of Q1, we expect to see strong growth in our online business in Q1, and hopefully well beyond.

Of course strong sales requires significant ad expenditures and.

And we expect to see a significant increase in marketing expenses related to our celebrity endorsement program. However, with a five times ROE as and a 60% plus gross profit margin for our online sales. The return on marketing spend is very accretive.

At the same time that we expect to see strong sustainable growth in DTC sales. We also expect to see a marked increase in dealer sales driven largely by our premier dealer program as we look to double the number of participating dealers. We also expect to see strong double digit growth from both Canada and Mexico. This year all in.

Told we have every reason to expect strong yet manageable year over year growth in 2024.

In 2025, we may look to add additional names to our roster of celebrity endorsers. However that decision will depend largely upon the success of our new compact launcher, which we hope to debut early in 2025.

Brian Ganz: Two, was it scalable? And three, was it sustainable? After almost six months, we can answer the first two questions. First, it is replicable. After kicking off the program with Sean Hannity, we have been able to successfully add three additional celebrities to the mix: Judge Jeanine, Glenn Beck, and Bill O'Reilly.

This launcher will be the size of a micro compact pistol.

Similar to the Cig P. Six hour at <unk> hundred 65, the most popular handgun in the world.

We believe that the compact launch will be a game changer for burner as the number one complaint. We currently get about the Barnett <unk> as its size for this reason we believe that this new much smaller launcher will appeal to many of burn as current customers and at the same time expand our market to.

Brian Ganz: In each instance, we have seen very similar ROAS numbers. Second, we've found that it's not scalable. Adding more money to these individual campaigns results in diminishing returns.

To women and those consumers interested in easily can sealable non lethal launcher.

Brian Ganz: Once we're advertising three to four days a week, increasing the frequency does not yield a commensurate increase in revenue. Third, with regard to sustainability, the simple answer is that we do not yet know how sustainable this program is. Will we see a drop in ROAS over time once we have saturated each celebrity-endorsed market? To date, we haven't seen any material decline in effectiveness over time.

If six our success with the introduction of their micro compact pistol is any indication we should see a dramatic increase in overall sales when we introduced this micro compact launcher.

For 2024, we also expect to see improved operational efficiencies reduce product costs and improved margins as a result of a number of initiatives that we're undertaking one recent change we made is to simplify our product offering recognizing the need for simplicity and ease in the purchasing process.

Brian Ganz: However, it's still early, and we will be closely monitoring ROAS numbers for any changes in the trend. So what does that mean for growth? As we look ahead to the rest of the year, based on what we have seen to date, we are quite optimistic about the sustained impact of our celebrity endorsement model. For the month of December, the only month in 2024 where we closed the books, Byrna.com's preliminary revenue numbers were up 89% over last year. And Amazon.com's preliminary revenue numbers were up 98% over last year. Of course, strong sales require significant advertising expenditures, and we expect to see a significant increase in marketing expenses related to our Celebrity Endorsement Program. However, with a five-times ROAS and a 60%-plus gross profit margin for our online sales, the return on marketing spend is very accretive. All told, we have every reason to expect strong yet manageable year-over-year growth in 2024. This launcher will be the size of a micro-compact pistol, similar to the Sig Sauer P365, the most popular handgun in the world.

Last month, we introduced the burn of Universal Kit, a one size fits all solution that is legal in all 50 States and Canada. This replaces the burn of pepper and burn of Connecticut's, having two different different configurations created a lot of confusion for first time customers now we have only one configuration.

Customers are asked to choose between the burn of SD are most popular pistol and the Barnett Li our most powerful pistol. There then asked to choose their color black orange or Tan every other color will be a special offering for example, pink on Valentine's day, which we're actually rolling out today.

Finally customers will be asked if they want to launch it with or without a thumb safety to configuration of each kid. However will be the same one launcher one extra five round magazine, one five count tube of kinetic one five count tube of Veeco kinetic and one five count tube pro training chemical irritant rounds will be sold separately.

Lately.

This streamlines the checkout process and offers additional opportunities to up sell ammunition, making this a win win for customers and burner we.

The pace of this change will lead to a slight increase in average order value over time as the Universal kit is selling for the same price as the Pepper kit was previously selling four despite the fact that it does not come with chemical irritant rounds. This change has also allowed us to reduce the number of project variance offered by more than 25 Skus.

Brian Ganz: We believe that the compact launcher will be a game changer for Byrna, as the number one complaint we currently get about the Byrna SD is its size. For this reason, we believe that this new, much smaller launcher will appeal to many of Byrna's current customers and, at the same time, expand our market to women and those consumers interested in easily concealable, non-lethal launchers. If their six-hour success with the introduction of their micro-compact pistol is any indication, we should see a dramatic increase in overall sales when we introduce this micro-compact launcher. For 2024, we also expect to see improved operational efficiencies, reduced product costs, and improved margins as a result of a number of initiatives that we are undertaking. One recent change we made was to simplify our product offering. Recognizing the need for simplicity and ease in the purchasing process, last month, we introduced the Byrna Universal Kit, a one-size-fits-all solution that is legal in all 50 states and Canada. This replaces the Byrna Pepper and Byrna Kinetic Kits.

This should allow us to both reduce inventory levels and improved factory efficiency, which in turn should bring down costs over time, the simplified offering coupled with our new expedited shipping offering option should a lot should help improve both revenues and margins to be able to keep up with the anticipate.

The growth this year.

We've recently initiated plans to scale up our manufacturing capabilities. This initiative includes increasing our production facility personnel by 25% and opening a second Assembly line. These steps are designed to increase launch or production capacity from 10000 units per month to 12500 units per month since we.

We're still operating on only one shift a day, we have significant excess capacity for expansion as needed in.

In addition to the expansion of our production launch of production capacity. We are also focusing on increasing ammunition production by opening a second ammunition production facility, which will be located here in the U S. This move is aimed at both strengthening our supply chain and reducing the risk of supply chain disruption, thereby.

Brian Ganz: Having two different configurations created a lot of confusion for first-time customers. Now, we have only one configuration. Customers are asked to choose between the Byrna SD, our most popular pistol, and the Byrna LE, our most powerful. They are then asked to choose their color, black, orange, or tan.

Shoring that we can meet the forecast demand for our high margin ammunition products, even if international shipments become more difficult for any reason, we expect these projects to be completed.

In the second half of 2024, setting a strong foundation for burn is continued growth and operational efficiency. Fortunately burn a strong financial footing provides the foundation to be able to undertake these projects and handle the expected growth in sales.

Brian Ganz: Every other color will be a special offering. For example, pink on Valentine's Day, which we're actually rolling out today. Finally, customers will be asked if they want the launcher with or without a thumb safety. The configuration of each kit, however, will be the same.

At the end of December cash it actually climbed to $23 million.

Brian Ganz: One launcher, one extra five-round magazine, one five-count tube of kinetic, one five-count tube of eco-kinetic, and one five-count tube of pro-training. All irritant rounds will be sold separately. To be able to keep up with the anticipated growth this year, we've recently initiated a plan to scale up our manufacturing capability. This initiative includes increasing our production facility personnel by 25% and opening a second assembly line. These steps are designed to increase launcher production capacity from 10,000 units per month to 12,500 units per month. Since we are still operating on only one shift per day, we have significant excess capacity for expansion as needed. In addition to the expansion of our launcher production capacity, we are also focusing on increasing ammunition production by opening a second ammunition production facility, which will be located here in the U.S.

And as David mentioned, there is no debt on our books.

So we are well positioned for growth in conclusion, we believe the 2023 demonstrated that this management team can react to whatever challenges are thrown our way safe.

Safely navigating burner through troubled waters on the way to our charted destination.

Now, let's open the call for your questions operator, please provide the appropriate instructions.

Thank you the company will now be taking questions from publishing analysts.

I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the starkey.

Our first question will come from Jeff Van.

Xinyuan with BYD Securities.

Proceed with your question.

Hi, good morning, everyone and thanks for.

For taking our questions I guess the first question I had is really just around marketing.

Realize that you've added a bunch of new folks here Influencer group and just wondering what we should anticipate for the advertising budget in 2024.

Brian Ganz: This move is aimed at both strengthening our supply chain and reducing the risk of supply chain disruption, thereby ensuring that we can meet the forecasted demand for our high-margin ammunition products even if international shipments become more difficult for any reason. We expect these projects to be completed in the second half of 2024, setting a strong foundation for Byrna's continued growth and operational efficiency. Fortunately, Byrna's strong financial footing provides the foundation to be able to undertake these projects and handle the expected growth in sales.

The advertising budget in 2024 is currently around $7 5 million, that's up from $5 million that we had when we were focused on social media advertising.

Okay.

And then thank you were just mentioning the universal kit, maybe you can just touch.

Sales trend by product I'm wondering if your new marketing is driving sales of any of the other products, maybe higher velocity products versus lower velocity products.

Operator: Thank you. The company will now be taking questions. If you would like to ask something, press star one. A confirmation tone will indicate your line. You may press star two if you would like to remove your question. Please note that it may be necessary to pick up your handset before pressing the start button. Our first question comes from Jeff Van Sinderen with B-Radio.

And then which products you're seeing the ramp in the most outside of the Universal kit.

Well again.

The big surprise for US was the demand for the early so the Ali.

It has a M.

MSRP of $479 versus an MSRP for the SD of $379. So for an extra $100, we thought that we'd only get about 10% of customers opting for the Li.

Jeff Van Sinderen: Good morning, everyone, and thanks for taking our questions. I guess the first question I had is really just around marketing. I realize that you've added a bunch of new folks to your influencer group. I'm just wondering what we should anticipate for the advertising budget in 2024. The advertising budget for 2019 is currently around $7.5 million.

That's run as high as 40% right now, it's averaging about 33%.

So that's been a little bit of a surprise.

<unk> also seen some very strong interest in.

Accessories. So again one of the benefits of this new advertising campaign is that we are bringing in a lot of new customers.

Brian Ganz: That's up from the $5 million that we had when we were focused on social media advertising. Okay, and then since you were just mentioning the universal kit, maybe you can just touch on sales trends by product, wondering, you know, if your new marketing is driving sales of any of the other products, maybe higher velocity products versus lower velocity products, and then which products you're seeing the ramp up on the most outside of the universe. Well, again, the big surprise for us was the demand for the LE. So the LE has an MSRP of $479 versus an MSRP for the SD of $379. So for an extra $100, we thought that, you know, we'd only get about 10% of customers opting for the LE. That's run as high as 40%. Right now, it's averaging about 33%.

And these.

New customers are then coming back buying things like our.

Target tent.

Holster is site.

Sites et cetera, So we've seen a pre.

Across the board interest, where we've not seen significant strengths frankly is in our 12 gauge.

That's been disappointing.

We're going to be looking to partner with a.

Manufacturer of.

Pump action shotguns.

So that we can have the 12 gauge sent out with each new shotgun.

But that's probably been the biggest disappointment is 12 gauge.

Uh-huh Uh-huh do you think that that at.

At 12 gauge would be more something for law enforcement at this point or do you think it's still consumer.

No. We think that there is a large law enforcement market keep in mind, our law enforcement sales in the U S are still relatively small they represent 1% to 2% of our overall domestic sales.

Brian Ganz: So that's been a little bit of a surprise. We've also seen some very strong interest in accessories. So again, one of the benefits of this new advertising campaign is that we're bringing in a lot of new customers. And these new customers are then coming back, buying things like our... Target Tent, Holsters, Sites, etc. So we've seen pretty much across-the-board interest. Where we've not seen significant strength, frankly, is in our 12-gauge. That's been disappointing. We are going to be looking to partner with a manufacturer of pump-action shotguns so that we can have the 12-gauge sent out with each new shotgun. But that's probably been the biggest disappointment, this 12-gauge.

We do have interest in the 12 gauge outside of the U S. But again there is issues with.

Manufacturing and shipping and so forth.

But I do think that ultimately law enforcement will probably be the bigger market for 12 gauge.

Okay, and then just as a final follow on to that maybe you can just touch on kind of the trend in <unk>.

And then what the outlook is for them ourselves given the increasing base of launches.

Yes <unk>.

Always bounced around for about 25%, if we look at the full year.

They are at 25% plus accessories.

However, in the fourth quarter was down to 22% and I think that that's due to the fourth quarter.

Real extreme growth and probably a lot of new customers.

Okay fair enough. Thanks for taking my questions and best of luck.

Thanks, Jeff.

Thank you. Our next question comes from the line of Jon Hickman with <unk>. Please proceed with your question.

Brian Ganz: Do you think that the 12 days would be more something for law enforcement at this point, or do you think it's still? No, we think there's a large law enforcement market. But keep in mind, our law enforcement sales in the U.S. are still relatively small. They represent, you know, 1 to 2 percent of our overall domestic sales. We do have interest in the 12-gauge outside of the U.S., but again, there's issues with manufacturing and shipping and so forth.

Yeah.

Hey, Brian could you walk through what.

What would happen on your income statement.

Got another order from Latin America.

Well again.

The orders what do you mean orders from Latin America do you mean, just in accounting terms, how that works or.

Yeah.

Oh sure.

Yes.

Basically right now we're using the equity method of accounting, which means that Latin America shows up simply as.

Brian Ganz: But I do think that ultimately, law enforcement will probably be the bigger market for 12-gauge. Okay, and then just as a final follow-on to that, maybe you can just touch on kind of the trend in MO sales and then what the outlook is for MO sales given the increasing... Yeah, animal cells have always bounced around about 25%. If we look at the full year, they are at 25% IMO plus accessories. However, in the fourth quarter, it was down to 22%.

An investment on our balance sheet and each quarter, we give our 51% of there.

Net loss or gain so if.

If they have an order.

They're locally say the Cordova police order more launches from them.

You don't see anything on our financial statements, you'll simply see that okay. They're more profitable. So we've got better results from investment in joint venture.

Brian Ganz: And I think that that's due to the fourth quarter, real extreme growth, and probably a lot of new customers. Fair enough. Thanks for taking my questions and best of luck.

If they make an order if they make an order from US right now from Berna technologies that does show up as an external sale.

But keep in mind that there is a manufacturing facility down in Buenos Aires, So hopefully, they're not ordering too much directly from US right now they are producing their own launches that burn of Latam.

Jeff Van Sinderen: Thanks, Jeff. Thank you. Our next question comes from the line of Jon Hickman with Landenburg Dialysis.

Jon Hickman: Hey, Brian, could you walk through what... What would happen on your income statement if you got another order from Latin America? Well, again. The orders. What do you mean by orders from Latin America? Do you mean just in accounting terms how that works, or? Yeah. Oh, sure. Yeah, basically, right now, we're using the equity method of accounting, which means that Latin America shows up simply as an investment on our balance sheet, and each quarter, we give our 51% of their net loss or gain. So if they have an order there locally, say the portable police order more launchers from them, you don't see anything on our financial statements. You simply see that, okay, they're more profitable, so we've got better results from investment in joint ventures. If they make an order, if they make an order from us right now, from Byrna Technologies, that does show up as an external sale.

They are buying parts directly components parts directly from burn of Latam. So the only sales that go from burner technologies to burn a latam our ammo. So we're still supplying them with ammo because we don't produce ammo in Latin America, but otherwise that really are very little in the way of sales from burner technology.

He has to burn in Latam.

Okay.

Thank you.

Okay.

Thank you and as a reminder, if anyone has any questions. You May press star one on your telephone keypad to join the question and answer session.

Our next question comes from Jim <unk> with <unk>.

James Please proceed with your question.

Thank you. Thank you good morning.

I'm trying to understand the increase in operating expenses and here's how I'm looking at it.

In Q4 of this year your Opex was $9 7 million.

And that's up about $1 million from the from the year ago quarter, and sales were down a little bit and I understand all the puts and takes as.

Brian Ganz: Okay. Thank you. Thank you, and as reminderd, press 1 on your telephone keypad to join the question. Thank you. Thank you. Good morning.

So what's going on with the sales, but you talk about your current marketing campaign and being much more efficient than the prior one but.

We're seeing similar sales and much higher opex and and Youre talking about a meaningful increase in opex going forward.

Operator: I'm trying to understand the increase in operating expenses, and here's how I'm looking at it, and that's up about a million from the year ago quarter, and sales were, you know, down a little bit, and I understand all the puts and takes about what's going on with the sales. But you talk about your current marketing campaign being much more efficient than the prior one, but We're seeing similar sales and much higher OPEX, and you're talking about a meaningful increase in OPEX going forward. So I'm just trying to figure out what's going on. Yeah, as we said, in Q4 of 2022, 4.3 million in sales were international, with 3.4 million of that going directly to our partner in Argentina, Bursa. So the real comparison is not 15.6 versus 16. It's 15.6 versus 11.

Just trying to figure out what's what's going on there.

Yeah.

As we said in Q4 of 2020 to $4 3 million in sales were <unk>.

International with $3 4 million of that going directly to our.

Partner in Argentina versa.

No.

The real comparison is not 15 six versus 16.

$15 six versus 11, so we had a significant sales growth accompanied by an increase in.

An increase in marketing spend as I explained with a five X ROE as as a minimum and as as we described our ROE as numbers have been running above five X and with a 60% gross profit margin as a minimum with our online DTC.

Brian Ganz: So we had significant sales growth accompanied by an increase in marketing spend. As I explained, with a 5X ROAS as a minimum, and as we described, our ROAS numbers have been running above 5X, and with a 60% gross profit margin as a minimum with our online DTC, every advertising dollar we spend is quite accretive. David, is there anything you want to add to that? Yeah, I mean, what you need to do is, if you're looking at the fourth quarter, yes, that advertising spend does make our break-even point go up. But when we talk about efficiencies, I go back to what I said in my remarks, that domestic revenue in the quarter totaled $15.4 million, and that's a 32 percent increase from the same quarter a year ago.

Every advertising dollar we spend is quite accretive.

David is there anything you want to add to that.

What you need to do is if youre looking at the fourth quarter, yes that advertising spend does make our breakeven point go up.

But when we talk about efficiencies and go back to what I said in my remarks that domestic revenue in the quarter totaled $15 4 million and that's a 32% increase from the same quarter a year ago. So that's that's where we're really seeing the effectiveness.

And those are our highest margin sales as well.

Okay, and then also Brian you talked about.

I just want to make sure I heard you properly you said that increasing the frequency of advertising does not increase.

David North: So that's where we're really seeing the effect of it. And those are our highest-margin sales as well. Okay, and then also, Brian, you talked about, I just want to make sure I heard you properly. You said that increasing the frequency of advertising does not increase sales. Is that it?

Sales is that it.

Is that true and then so what is the current frequency of advertising that you were referring to when you said.

The increasing it doesn't increase sales.

So once we've reached kind of the threshold of around four days a week.

Going up too.

Five adds a week 10 adds a week with the same celebrity doesn't.

Brian Ganz: Is that true? And then, what is the current frequency of advertising that you were referring to when you said... So, once we've reached kind of the threshold of around four days a week, going up to, you know, five ads a week, ten ads a week with the same celebrity doesn't have the same impact. You start to see a diminishing return in terms of ROAS.

Have the same impact.

You start to see a diminishing return in terms of ROE as so if we're spending let's just say $2 million a year with Shawn hannidy spending $4 million a year with Sean Hannity would not double our return from Sean Hannity. So you reach a point, where you can't just pour more money into.

And to the successful celebrity endorsers, but you have to add celebrity endorsers to the roster.

Brian Ganz: So you know, if we're spending, let's just say $2 million a year with Sean Hannity, spending $4 million a year with Sean Hannity would not double our return from Sean Hannity. So you reach a point where You can't just pour more money into the successful celebrity endorsers, but you have to add celebrity endorsers to the roster. This year, our intention is to add one more celebrity endorser, which will start next quarter in March. But beyond that, we do not intend to add any more celebrity endorsers to the roster because we feel that with these five, we will be able to generate all the growth we can handle. Okay, and just one other thing on this same issue. So when you start with a new one, do you scale up to that, let's call it, that four-times-a-week baseline, and does it take a little time to get that ROAS that you referred to, or do you get it? It's somewhat instantaneous.

This year.

Our intention is to add one more celebrity endorser, which will start.

Quarter in March.

But beyond that we do not intend to add any more celebrity endorsers to the roster because we feel that with these five.

We will be able to generate all the growth we can handle.

Okay, and just one other thing on the same issue.

So when you start with a new.

Celebrity Endorser do you.

Do you scale up to that.

Let's call it four times, a week baseline or.

Does it take and does it take a little time to.

Get that rollout that you referred to.

Or do you get it.

Somewhat instantaneously.

Our experience has been that we get it somewhat instantaneously one of the things that we've discovered is.

If we can get on their show.

Brian Ganz: Our experience has been that we get it somewhat instantaneously. One of the things that, you know, we've discovered is if we can get on their show. In other words, if we can get an interview on their show, as we did with Sean, as we hope to do with Glenn Beck and Bill O'Reilly, it allows us to really jumpstart the advertising effectiveness. But so far, we've not seen any delay in hitting our ROAS numbers.

In other words, if we can get an interview on their show as we did with Sean.

As we hope to do with Glenn Beck and.

Bill O'reilly it allows us to really jumpstart the advertising.

Effectiveness.

But so far.

<unk> not seen any delay in hitting our ROE as numbers in.

In fact, we.

Glen back the ROE as numbers were extraordinarily strong right out of the box because in December.

Brian Ganz: In fact, with Glenn Beck, the ROAS numbers were extraordinarily strong right out of the box because, in December, Glenn spoke about our product on his show, not as part of our advertising, but just as something that he was interested in. So we're looking for those celebrity endorsers that really believe in our product, that are passionate about our product, that believe in less lethal self-defense. And as a result, there's a tendency for them to talk about it beyond just the advertising that we're paying for. The other thing is that with all of these, we start out with a relatively short-term contract so that we can make sure that this is going to be effective before we commit to anything long-term. Yeah, that's correct. So, for example, with Sean, we started with a 90-day contract, but then we, you know, this year, we've now committed to the full year 2024.

Glenn spoke about our product on his show not as part of our advertising, but just as you know.

Something that he was interested in so we're looking for those.

Celebrity endorsers that really believe in our product that are passionate about our products that believe in less lethal.

Defense and as a result, there is a tendency for them to talk about it beyond just the advertising that we're paying for the other thing is that with all of these we started out with a relatively short term contracts. So that we can make sure that this is going to be effective when we commit to anything long term.

Yes, that's correct. So for example, with Sean we started with a 90 day contract, but then this year, we've now committed to the full year 2024.

With Glenn back the same thing with Bill O'reilly the same thing.

Yeah.

Okay. Thank.

Thank you that's it for me.

Jim.

Thank you.

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

Brian Ganz: With Glenn Beck, the same thing with Bill O'Reilly, the same, Okay, thank you. That's it for me. Jim.

Operator: Thank you. At this time, this concludes our question. Now I'd like to turn the call back over to Mr. Gans for a closed, Okay, thank you, operator. And thank you everybody who participated today and particularly our investors. I want to thank you for your continued support. Thank you. And this concludes today's conference. Thank you for joining us today for Byrna's Frisco Fort, www.youtube.com or www.youtube.com or www.youtube.com by Zola Levitt Ministries, www.byrnatech.com

Okay. Thank you operator.

Thank you everybody, who participated today and particularly our investors I want to thank you for your continued support.

Thank you.

And this concludes today's conference.

We thank you for joining us today for <unk> fiscal fourth quarter.

Conference call you may now disconnect.

Okay.

Hum.

Okay.

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