Q2 2024 Byrna Technologies Inc Earnings Call
Good morning and welcome to Byrna's fiscal second quarter 2024 earnings conference call.
Operator: My name is Kevin, and I'll be your operator for today's call. Joining us for today's presentation is the company's CEO, Bryan Ganz, CFO, David North, and CFO designee, Lori Kern. Following their remarks, we'll open the call to questions. Earlier today, Byrna released results for its fiscal second quarter ended May 31st, 2024. A copy of the press release is available on the company's website. Before turning the call over to Bryan Ganz, Byrna Technologies' Chief Executive Officer, I'll read the Safe Harbor Statement.
Kevin: My name is Kevin, and I'll be your operator for today's call Joining us for today's presentation of the company's CEO Bryan Ganz CFO David North and CFO designee Lori Kearns Following their remarks. We'll open the call to questions
Kevin: Earlier today, Byrna released results for its fiscal second quarter ended May 31, 2024. A copy of the press release is available on the company's website. Before turning the call over to Bryan Ganz, Byrna Technologies' Chief Executive Officer, I'll read the Safe Harbor Statement.
Operator: Some discussions held today include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Byrna's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements as a result of new information, future events, or otherwise. As this call will include references to non-GAAP results, please see the press release in the investor section of our website, ir.byrna.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. Now, I'd like to turn the call over to Byrna's CEO, Bryan Ganz. Sir, please proceed.
Kevin: Some discussions held today include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Byrna's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions.
Kevin: The company assumes no obligation to update forward-looking statements as a result of new information, future events, or otherwise.
Kevin: As this call will include references to non-GAAP results, please see the press release in the investor section of our website, ir.byrna.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results.
Kevin: Now I'd like to turn the call over to Byrna's CEO Bryan Ganz. Sir, please proceed.
Bryan Scott Ganz: Thank you, Kevin, 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 second quarter ended May 31st, 2024, as well as highlighting key business accomplishments from the year so far. I'll start by passing the call to David North, our CFO, who will discuss our financial results for Q2. Following his remarks, I'll review our record-breaking quarter, highlighted by $20.3 million in revenue and continued gap profitability. I will then offer insights into our operation and discuss our go-forward strategy. Lastly, we'll open the call to questions from research analysts. David?
Bryan Scott Ganz: Thank you Kevin and thank you everyone for joining us today. This morning we filed our 10-Q with the SEC.
Bryan Scott Ganz: and issued a press release providing our financial results for the fiscal second quarter ended May 31st, 2024, as well as highlighting key business accomplishments from the year so far.
Bryan Scott Ganz: I'll start by passing the call to David North, our CFO , who will discuss our financial results for Q2.
Bryan Scott Ganz: Following his remarks, I'll review our record-breaking quarter, highlighted by $20.3 million in revenue and continued GAAP profitability. I will then offer insights into our operation and discuss our go-forward strategy. Lastly, we'll open the call to questions from research analysts. David?
David R. North: Thank you, Bryan, and good morning, everyone. Now, we'll discuss our financial results for the second fiscal quarter ended May 31st, 2024. Net revenue for Q2 2024 was $20.3 million; that's up 76% from the $11.5 million we reported in the fiscal second quarter of 2023. This $8.8 million increase is primarily due to the transformational pivot in our advertising strategy, which we kicked off in September of 2023. The success of our celebrity endorsement strategy resulted in a $7.9 million increase in direct-to-consumer revenues through our website and Amazon compared to the prior year.
David R. North: Gross profit for Q2 2024 was $12.6 million, or 62% of net revenue compared to $6.2 million, or 54% of net revenue for Q2 2023. The increase in gross profit margin is largely attributable to additional sales through our higher margin direct-to-consumer channels and was further improved by an intensive component cost reduction effort spearheaded by Byrna's engineering team, as well as the economies of scale resulting from increased production volume. Operating expenses for Q2 2024 were $10.6 million compared to $7.2 million for Q2 2023.
David R. North: Thank you, Bryan, and good morning, everyone. Let's discuss our financial results for the second fiscal quarter ended May 31st, 2024.
David R. North: The increase in operating expenses was driven by an increase in variable selling costs, such as freight and sales transaction processing fees, an increase in marketing spend as part of the company's new advertising strategy, and an increase in payroll, primarily in marketing and engineering as the company improves its capabilities in these areas.
David R. North: Net revenue for Q2 2024 was $20.3 million. That's up 76% from the $11.5 million we reported in the fiscal second quarter of 2023.
David R. North: This $8.8 million increase is primarily due to the transformational pivot in our advertising strategy which we kicked off in September of 2023.
David R. North: The success of our celebrity endorsement strategy resulted in a 7.9 million dollar increase in direct-to-consumer revenues through our website and Amazon compared to the prior year period.
David R. North: Gross profit for Q2 2024 was $12.6 million, or 62% of net revenue, compared to $6.2 million, or 54% of net revenue for Q2 2023.
David R. North: The increase in gross profit margin is largely attributable to additional sales through our higher margin direct-to-consumer channels and was further improved by an intensive component cost reduction effort spearheaded by Byrna's engineering team.
David R. North: as well as the economies of scale resulting from increased production volumes.
David R. North: Operating expenses for Q2 2024 were $10.6 million compared to $7.2 million for Q2 2023. The increase in operating expenses was driven by an increase in variable selling costs such as freight and sales transaction processing fees.
David R. North: an increase in marketing spend as part of the company's new advertising strategy and an increase in payroll primarily in marketing and engineering as the company improves its capabilities in these areas.
David R. North: Net income for Q2 2024 was $2.1 million, a $3.2 million improvement from a net loss of approximately $1.1 million for Q2 2023. Adjusted EBITDA, which is a non-GAAP metric, for Q2 2024 totaled $2.9 million compared to a negative $0.8 million for Q2 2023. Cash and cash equivalents at May 31st, 2024 totaled $24.8 million compared to $20.5 million at November 30th, 2023. And inventory at May 31st, 2024 totaled $15.5 million compared to $13.9 million at November 30th, 2023.
David R. North: Net income for Q2 2024 was $2.1 million, a $3.2 million improvement from the net loss of approximately $1.1 million for Q2 of 2023.
David R. North: Adjusted EBITDA which is a non-gap metric for Q2 2024 totaled 2.9 million dollars compared to negative 0.8 million dollars for Q2 2023.
David R. North: Cash and cash equivalents at May 31st, 2024 totaled $24.8 million compared to $20.5 million at November 30th, 2023.
David R. North: And inventory at May 31st, 2024 totaled $15.5 million compared to $13.9 million at November 30th, 2023.
David R. North: The company continues to have no current or long-term debt. As I mentioned during our last call, I'll be retiring at the end of this week. I am truly proud of the work we've done at Byrna and the financial milestones we've achieved. We took sales from less than a million dollars in the entire fiscal year of 2019 to $20.3 million in this second quarter of 2024, and we've turned Byrna into a thoroughly profitable enterprise.
David R. North: The company continues to have no current or long-term debt.
Speaker Change: As mentioned during our last call, I'll be retiring at the end of this week.
Speaker Change: I am truly proud of the work we've done at Byrna and the financial milestones we've achieved.
Speaker Change: We took sales from less than $1 million in the entire fiscal year of 2019 to $20.3 million in this second quarter of 2024, and we've turned Byrna into a thoroughly profitable enterprise.
David R. North: I want to thank Bryan for the opportunity to be part of this incredible journey and for his leadership in driving Byrna's mission forward. As a shareholder, I'm confident in the future of the company with Laurie Kearns leading our financial department. Laurie has extensive experience as a public company executive and is well suited to help take Byrna to new heights. I'll be staying on as a consultant to ensure a smooth transition and support Lori as needed. And now, Lori, the floor is yours. Thank you, David.
Speaker Change: I want to thank Bryan for the opportunity to be part of this incredible journey and for his leadership in driving Byrna's mission forward.
Speaker Change: As a shareholder, I'm confident in the future of the company with Lori Kearns leading our financial department. Lori has extensive experience as a public company executive and is well suited to help take Byrna to new heights.
Speaker Change: I'll be staying on as a consultant to ensure a smooth transition and supporting Lori as needed.
Lori Kearns: And now, Lori, the floor is yours. Thank you, David. And good morning, everyone. I'm quite honored to be joining Byrna at a time when the company is building such strong momentum.
Lori Kern: And good morning, everyone. I'm quite honored to be joining Byrna at a time when the company is building such strong momentum. Byrna's recent performance, highlighted by leaps in year-over-year revenue growth, reflects the success of our strategic initiatives and operational efficiency. I chose to join Byrna because I'm passionate about the company's mission to provide innovative, less lethal, personal security solutions. My background as a public company CFO, particularly my experience driving financial strategy at consumer-focused businesses, aligns well with Byrna's needs as we continue to scale and innovate.
Lori Kearns: Byrna's recent performance, highlighted by leaps in year-over-year revenue growth, reflects the success of our strategic initiatives and operational efficiencies.
Lori Kearns: I chose to join Byrna because I'm passionate about the company's mission to provide innovative, less lethal, personal security solutions.
Lori Kearns: My background as a public company CFO , particularly my experience driving financial strategy at consumer-focused businesses, aligns well with Byrna's needs as we continue to scale and innovate.
Lori Kern: The transformational changes implemented by the team have laid a strong foundation for our future trajectory, and I'm eager to leverage my background to further enhance our operations and drive sustained growth. We wish David all the best in his retirement and look forward to continuing to work with him as an advisor to Byrna. I'll now turn the call back over to Bryan.
Lori Kearns: The transformational changes implemented by the team have laid a strong foundation for our future trajectory, and I'm eager to leverage my background to further enhance our operations and drive sustained growth.
Bryan Scott Ganz: We wish David all the best in his retirement and look forward to continuing to work with him as an advisor to Byrna. I'll now turn the call back over to Bryan.
Bryan Scott Ganz: Thanks, Laurie. Thank you, David. As you can see from the financial results, with record sales, record gross profit margins, record net income, record adjusted EBITDA, and record cash flow, Byrna is incredibly well positioned for continued financial success. The key to that success is, of course, continued top-line growth. For that reason, I'd now like to provide an update on Byrna's key growth initiatives and outline our plans for the year ahead and beyond, starting with our marketing strategy.
Bryan Scott Ganz: Thanks, Laurie. Thank you, David. As you can see from the financial results with record sales, record gross profit margins, record net income, record adjusted EBITDA, and record cash flow, Byrna is incredibly well positioned for continued financial success.
Bryan Scott Ganz: The key to that success is, of course, continued top-line growth. For that reason, I'd now like to provide an update on Byrna's key growth initiatives and outline our plans for the year ahead and beyond, starting with our marketing strategy.
Bryan Scott Ganz: As is plainly evident, our pivot last September to a new advertising strategy based on the power of celebrity endorsement is continuing to deliver strong year-over-year revenue growth. With the recent addition of more celebrity influencers, Byrna's brand recognition continues to grow, driving strong top-line growth, particularly in our DTC channels. We are now working with more than 10 celebrity influencers, including Sean Hannity, Glenn Beck, Bill O'Reilly, Judge Jeanine Pirro, Dan Bongino, Jesse Kelly, Dana Lash, Michael Berry, Howie Carr, and Mike Gallagher.
Bryan Scott Ganz: As is plainly evident, our pivot last September to a new advertising strategy based on the power of celebrity endorsement is continuing to deliver strong year-over-year revenue growth.
Bryan Scott Ganz: With the recent addition of more celebrity influencers, Byrna's brand recognition continues to grow, driving strong top-line growth, particularly in our DTC channels.
Bryan Scott Ganz: We are now working with more than 10 celebrity influencers, including Sean Hannity, Glenn Beck, Bill O'Reilly, Judge Jeanine Pirro, Dan Bongino, Jesse Kelly, Dana Lash, Michael Berry, Howie Carr, and Mike Gallagher.
Bryan Scott Ganz: Of our record $20.3 million in revenue in Q2, DTC sales on Byrna.com and Amazon.com accounted for 14.6 million or 72% of that number as compared to 6.8 million or 59% of total revenue in the same period last year. And keep in mind that the DTC sales channel is our highest-margin sales channel with a gross profit percentage for this past quarter of 69.5%. So the question is, is this model sustainable? Simply put, yes.
Bryan Scott Ganz: Of our record, 20.3 million in revenue in Q2.
Bryan Scott Ganz: DTC sales on Byrna.com and Amazon.com accounted for $14.6 million, or 72% of that number.
Bryan Scott Ganz: as compared to $6.8 million or 59% of total revenue in the same period last year. And keep in mind that the DTC sales channel is our highest margin sales channel, with a gross profit percentage for this past quarter of 69.5%.
Bryan Scott Ganz: So, the question, is this model sustainable? Simply put, yes. The current model is sustainable and we expect it to continue to drive impressive year-over-year growth.
Bryan Scott Ganz: The current model is sustainable, and we expect it to continue to drive impressive year-over-year growth. However, we do not anticipate that we will see the extraordinary 6 to 7x ROAS levels or return on advertising spend that we achieved during the holiday selling season. We are confident that we can maintain a highly accretive 4 to 5x ROAS, ensuring substantial profitability and positioning us for long-term success. Our current ROAS target for our discretionary marketing spend is a 5x multiple, which we are continuing to achieve.
Speaker Change: Well, we do not anticipate that we will see the extraordinary 6-7x ROAS levels or return on advertising spend that we achieved during the holiday selling season. We are confident that we can maintain a highly accretive
Speaker Change: 4 to 5x ROAS, ensuring substantial profitability and positioning us for long-term success. Our current ROAS target for our discretionary marketing spend is a 5x multiple, which we are continuing to achieve.
Bryan Scott Ganz: This means that for every $1 of advertising spend, we are generating at least $5 in DTC sales. With a 69.5% gross profit margin for direct-to-consumer sales, this translates into $3.48 in gross profit for every $1 of advertising spend. With variable expenses running at 10% of sales, the additional profit earned from each incremental dollar of advertising spend is $2.98, or $1.98 net of the advertising spend itself. Even if we were to lower our minimum acceptable ROAS requirement to 4x for incremental advertising spend, we would still have a 140% return on investment.
Speaker Change: This means that for every $1 of advertising spend, we are generating at least $5 in DTC sales.
Speaker Change: With a 69.5% gross profit margin for direct-to-consumer sales, this translates into $3.48 in gross profit for every $1 of advertising spent.
Speaker Change: With variable expenses running at 10% of sales, the additional profit earned from each incremental dollar of advertising spend is $2.98, or $1.98 net of the advertising spend itself.
Speaker Change: This translates into a 198% return on investment.
Speaker Change: Even if we were to lower our minimum acceptable ROAS requirement to 4x for incremental advertising spend, we would still have 140% return on investment. At a 3x ROAS, each incremental advertising dollar would generate an 80% return on investment.
Bryan Scott Ganz: At a 3x ROAS, each incremental advertising dollar would generate an 80% return on investment. Consequently, sustainability of the celebrity endorser advertising model is not an issue, as we could accept, if necessary, lower ROAS multiples while still generating ever-increasing EBITDA margins. That said, our goal clearly is to keep our ROADS as high as possible.
Speaker Change: Consequently, sustainability of the Celebrity Endorser Advertising Model is not an issue as we could accept, if necessary, lower ROAS multiples while still generating ever-increasing EBITDA margins.
Speaker Change: That said, our goal clearly is to keep our ROAS as high as possible.
Bryan Scott Ganz: Towards this end, we are continuously monitoring the performance of not only the influencers themselves but also the platforms, time of day, and content of the message. This requires us to look at several variables. First, we take into account the frequency of the endorsement. We learned early on that there is an optimal frequency for each endorser. Too frequent, and the sales generated do not justify the incremental ad spend. Too infrequent, and we are unable to reinforce the message.
Speaker Change: Towards this end, we are continuously monitoring the performance of not only the influencers themselves, but also the platforms, time of day, and content of the message.
Speaker Change: This requires us to look at several variables.
Speaker Change: First, we take into account the frequency of the endorsement.
Speaker Change: We learned early on that there is an optimal frequency for each endorser. Too frequent and the sales generate do not justify the incremental ad spend. Too infrequent and we are unable to reinforce the message. Our goal is to find and maintain the appropriate balance for each influencer.
Bryan Scott Ganz: Our goal is to find and maintain the appropriate balance for each influence. Secondly, we evaluate the platforms used. While radio continues to deliver strong returns, our returns on TV tend to be even higher, because people can see the launchers in operation. Podcasts, on the other hand, have been hit or miss. For some endorsers, podcasts are extremely effective. For others, not so much.
Speaker Change: Secondly, we evaluate the platforms used. While radio continues to deliver strong returns, our returns on TV tend to be even higher because people can see the launchers in operation.
Speaker Change: Podcasts, on the other hand, have been hit or miss. For some endorsers, podcasts are extremely effective. For others, not so much. Our goal is to find what works for each endorser.
Bryan Scott Ganz: Our goal is to find what works for each endorser. Third, we evaluate the tone, tenor, and content of the endorsement. We tailor the message to best resonate with each influencer's audience. Some audiences appreciate a forceful message. In other words, it's a scary world out there, and you need to be prepared.
Speaker Change: Third, we evaluate the tone, tenor, and content of the endorsement. We tailor the message to best resonate with each influencer's audience. Some audiences appreciate a forceful message. In other words, it's a scary world out there and you need to be prepared.
Bryan Scott Ganz: Other audiences require a more nuanced message focused on the less lethal nature of burnout. Our job is to find what works best for each individual influencer's audience and to craft a message best suited to that demographic. So for this reason, the correct question is not really whether Byrna's advertising strategy is sustainable. It is.
Speaker Change: Other audiences require a more nuanced message focused on the less lethal nature of burnout. Our job is to find what works best for each individual influencer's audience and to craft the message best suited to that demographic.
Speaker Change: With the information gleaned from monitoring all these factors, we can then fine-tune our ad spend.
Speaker Change: Selecting the right frequency, platform, and message for each influencer. And then allocating additional resources to those influencers who are moving the needle, while strategically reducing spend where returns are subpar.
Speaker Change: So while the celebrity endorsement model may not be infinitely scalable, and while there are diminishing returns over time for any single influencer,
Speaker Change: We're confident that we can sustain top-line growth with the Celebrity Endorser model as a whole through both the expansion and rotation of our roster of endorsers and the judicious management of each influencer.
Speaker Change: So for this reason, the correct question is not really whether Byrna's advertising strategy is sustainable. It is.
Bryan Scott Ganz: The right question to be asking is how far and how fast we can scale this model. First, as I already mentioned, we believe that there is still significant upside growth to be had simply by expanding our roster of celebrity endorsers. Currently, we are working with just 10 across several platforms, including, among others, iHeart, Westwood One, Salem Media, and Radio America. Not only do each of these networks have many additional influencers that we can work with, but there are also a number of other networks that we have not even begun to tap into.
Speaker Change: The right question to be asking is how far and how fast can we scale this model?
Speaker Change: First, as I already mentioned, we believe that there is still significant upside growth to be had simply by expanding our roster of celebrity endorsers.
Speaker Change: Currently, we are working with just 10.
Speaker Change: across several platforms, including, among others, iHeart, Westwood One, Salem Media, and Radio America.
Speaker Change: Not only does each of these networks have many additional influencers that we can work with, but there are also a number of other networks that we have not even begun to tap into.
Bryan Scott Ganz: While our celebrity endorser advertising spend is pretty much locked in for the balance of 2024, we are asking for RFPs from all of the above-mentioned networks and others for 2025 so that we can build a program for next year that continues to grow Byrna's brand awareness and market presence by tapping into the audiences of these influencers. In dollar terms, our goal is to increase our celebrity endorser advertising spend by an incremental 50% in 2025 compared to 2024.
Speaker Change: Well our celebrity endorser advertising spend is pretty much locked in for the balance of 2024
Speaker Change: We are asking for RFPs from all of the above-mentioned networks and others for 2025.
Speaker Change: so that we can build a program for next year that continues to grow Byrna's brand awareness and market presence by tapping into the audiences of these influencers.
Speaker Change: In dollar terms, our goal is to increase our celebrity endorser advertising spend by an incremental 50% in 2025 over 2024.
Bryan Scott Ganz: The next question, then, is what can we do beyond the celebrity endorsement-based advertising model? The Byrna marketing team is constantly looking to new advertising channels to both augment and amplify our celebrity endorsement model and to expand our reach. Towards this end, as most of you are aware, we have used billboards in the past. They proved to be effective, growing sales by several hundred percent in the markets where they appeared. However, they were not necessarily cost-effective, generating ROAS multiples in the 2.5x range.
Speaker Change: Next question then is what can we do beyond the celebrity endorser based advertising model?
Speaker Change: The Byrna marketing team is constantly looking to new advertising channels to both augment and amplify our celebrity endorsement model and to expand our reach. Towards this end, we are once again exploring billboards. As most of you are aware, we used billboards in the past.
Speaker Change: They proved to be effective, growing sales by several hundred percent in the markets where they appeared.
Speaker Change: Unfortunately, they were not necessarily cost-effective, generating ROAS multiples in the 2.5x range.
Bryan Scott Ganz: We believe that circumstances are now sufficiently different to merit another try at this advertising medium. As our product is becoming more broadly accepted and our ad buying power more formidable, we are now getting quotes from the large billboard companies that are significantly lower than what we were paying previously as measured on a CPM or cost-per-thousand basis. We are hopeful that the reduced rates will allow us to achieve an acceptable ROAS on billboards as billboards are an almost infinitely scalable advertising medium. We are also exploring television advertising for the same reason. We know that it is effective, but in the past, it was simply not cost effective with returns in the 3X ROAS rate.
Speaker Change: We believe that circumstances are now sufficiently different to merit another try of this advertising medium.
Speaker Change: As our product is becoming more broadly accepted, and our ad buying power more formidable, we are now getting quotes from the large billboard companies that are significantly lower than what we were paying previously as measured on a CPM or cost per thousand basis.
Speaker Change: We are hopeful that the reduced rates will allow us to achieve an acceptable ROAS on billboards as billboards are an almost infinitely scalable advertising medium. We are also exploring television advertising for the same reason.
Speaker Change: We know that it is effective. In the past, it was simply not cost effective with returns in the 3x ROAS range.
Bryan Scott Ganz: With the increasing normalization of the less-lethal market and with Byrna's growing public awareness, we are already being approached by a number of smaller cable and broadcast channels that are interested in working with us. We will be devoting approximately 10 percent of our advertising budget to television for the balance of 2024, and if it proves successful in terms of ROAS, we will increase our commitment to this channel for 2025. Finally, we are looking at partnerships with other industry players that work with the same demographic as Byrna.
Speaker Change: With the increasing normalization of the less lethal market and with Byrna's growing public awareness, we are already being approached by a number of smaller cable and broadcast channels that are interested in working with us.
Speaker Change: We will be devoting approximately 10% of our advertising budget to television for the balance of 2024. And if it proves successful in terms of row ads, we will increase our commitment to this channel for 2025.
Speaker Change: Finally, we are looking at partnerships with other industry players that work with the same demographic as Byrna.
Bryan Scott Ganz: One of the more interesting opportunities we are currently exploring is a partnership with USCCA, or the United States Concealed Carry Association. USCCA is a membership organization that provides education, training, and insurance to gun owners if they were to be arrested or sued in civil court after using their firearm or, frankly, any other means of self-defense.
Speaker Change: One of the more interesting opportunities we are currently exploring is a partnership with USCCA or the United States Concealed Carry Association.
Bryan Scott Ganz: They also provide extensive gun safety education and training. The USCCA currently has over 800,000 members. We believe that these 800,000 gun owners are also our target demographic, as they are the most responsible gun owners, interested in protecting their families but doing so in the safest and most responsible manner possible. We believe that there is an enormous cross-marketing opportunity for both companies. Specifically, we would want to offer the Byrna line of self-defense products to USCCA members, providing them with a non-lethal option lower down on the continuum of force.
Speaker Change: USCCA is a membership organization that provides education, training, and insurance to gun owners if they were to be arrested or sued in civil court after using their firearm or frankly any other means of self-defense.
Speaker Change: They also provide extensive gun safety education and training.
Speaker Change: The U.S. CCA currently has over 800,000 members. We believe that these 800,000 gun owners are also our target demographic as they are the most responsible gun owners, interested in protecting their families, but doing so in the safest and most responsible manner possible.
Speaker Change: We believe that there's an enormous cross-marketing opportunity for both companies.
Speaker Change: Specifically, we would want to offer the Byrna line of self-defense products to USCCA members.
Speaker Change: providing them with a non-lethal option lower down on the continuum of force.
Bryan Scott Ganz: At the same time, we believe that many of Byrna's customers would be interested in USCCA membership for training and for legal preparation in the event they find themselves charged with a crime or facing civil suit after using their Byrna for self-defense.
Speaker Change: At the same time, we believe that many of Byrna's customers would be interested in the U.S. CCA membership for training and for legal preparation in the event they find themselves charged with a crime or facing civil suit after using their Byrna for self-defense.
Bryan Scott Ganz: In short, the management team at Byrna is not sitting on its hands, nor resting on its laurels. Rather, we are constantly expanding and refining the programs that are working, while at the same time exploring new advertising channels as we look to increase the public's awareness that there are viable alternatives to lethal force. We are convinced that there is significant growth potential for both Byrna specifically and for our industry generally as less lethal becomes more broadly recognized as a legitimate product category.
Speaker Change: In short, the management team at Byrna is not sitting on its hands, nor resting on its laurels. Rather, we are constantly expanding and refining the programs that are working, while at the same time exploring new advertising channels as we look to increase the public's awareness that there are viable alternatives to lethal force.
Speaker Change: We are convinced that there is significant growth potential for both Byrna specifically and for our industry generally as less lethal becomes more broadly recognized as a legitimate product category.
Bryan Scott Ganz: Over the last five and a half years since Byrna was launched, sales have climbed from little more than $200,000 a year to more than $200,000 a day. That is a CAGR, a compound annual growth rate, of 160 percent.
Speaker Change: Over the last five and a half years since the Byrna was launched, sales have climbed from little more than $200,000 a year to more than $200,000 a day.
Speaker Change: That is a CAGR, a compound annual growth rate, of a hundred and sixty percent. By the way, over the same period our stock is appreciated just 37% a year.
Bryan Scott Ganz: By the way, over the same period, our stock has appreciated just 37 percent a year. More importantly, despite seeing this massive growth in sales, we still have captured less than one quarter of one percent of our core constituency gun owners. What is a reasonable goal within this demographic? 5%, 10%, 20%?
Speaker Change: More importantly, despite seeing this massive growth in sales, we still have captured less than one quarter of one percent of our core constituency gun owners.
Speaker Change: What is a reasonable goal within this demographic? 5%? 10%? 20%? There are 100 million gun owners in the United States.
Bryan Scott Ganz: There are 100 million gun owners in the United States. Even a modest 10% market penetration over the next 10 years would result in more than $10 billion in revenue based on the current estimated lifetime value of a Byrna customer. And that does not take into account families that don't own a gun but want something to protect themselves.
Speaker Change: Even a modest 10% market penetration over the next 10 years would result in more than $10 billion in revenue based on the current estimated lifetime value of a Byrna customer.
Speaker Change: and that does not take into account families that don't own a gun but want something to protect themselves. It does not take into account our law enforcement sales or the international market.
Bryan Scott Ganz: This does not take into account our law enforcement sales or the international market. So while we cannot yet know whether the TAM can support $500 million in annual revenues or $1 billion in annual revenues, we do know that there remains significant upside opportunity from here. I'd now like to take this opportunity to update everyone on our retail store strategy, which we alluded to in our last earnings call. We remain convinced that there is a very real opportunity to reach customers through dedicated Byrna retail stores.
Speaker Change: So, while we cannot yet know whether the TAM can support $500 million in annual revenues or $1 billion in annual revenues, we do know that there remains significant upside opportunity from here.
Speaker Change: I'd now like to take this opportunity to update everyone on our retail store strategy, which we have alluded to in our last earnings call. We remain convinced that there is a very real opportunity to reach customers through dedicated Byrna retail stores.
Bryan Scott Ganz: As I previously explained, we opened a dedicated company-owned Byrna store in Las Vegas two years ago. This store has proven that a dedicated Byrna retail location with a shooting range for potential customers to try the product before making a purchase is an extremely effective marketing tool and is economically viable on a stand-alone basis. One of the reasons for this success is that when potential customers can demo the product, there is an 80% conversion rate. That means 8 out of 10 people that walk into the store will walk out with a purchase.
Speaker Change: As I previously explained, we opened a dedicated company-owned Byrna store in Las Vegas two years ago.
Bryan Scott Ganz: This compares to just slightly over a 1% conversion rate in our online store. Our Las Vegas store is currently operating at a run rate of about $1 million a year in sales and generating a 65% gross profit margin. With relatively modest operating costs compared to most retail store models, at this level of sales, the Byrna store is generating contribution margins of approximately 35%. As previously stated, based on the success of this first location and the success of the premier dealer model, we now intend to open three to four more company-owned retail stores before the end of the year. We've tentatively selected Scottsdale, Nashville, the greater Boston area, and somewhere in Southern California for these pilot stores.
Speaker Change: This store has proven that a dedicated Byrna retail location with a shooting range for potential customers to try the product before making a purchase is an extremely effective marketing tool and is economically viable on a standalone basis.
Speaker Change: One of the reasons for this success is that when potential customers can demo the product, there is an 80% conversion rate.
Speaker Change: That means 8 out of 10 people that walk into the store walk out with a burnout. This compares to just slightly over a 1% conversion rate in our online store. Our Las Vegas store is currently operating at a run rate of about a million dollars a year in sales and generating a 65% gross profit margin.
Speaker Change: With relatively modest operating costs compared to most retail store models, at this level of sales, the Byrna store is generating contribution margins of approximately 35%.
Speaker Change: As previously stated, based on the success of this first location.
Speaker Change: and the success of the Premier Dealer model. We now intend to open three to four more company-owned retail stores before the end of the year. We've tentatively selected Scottsdale, Nashville, the greater Boston area, and somewhere in Southern California for these pilot stores.
Bryan Scott Ganz: Our goal will be to use these stores to both fully prove out the concept and to refine the store model. So specifically, we will use these stores to perfect the look and feel of the physical premises, develop the store operating manuals, build out an employee training program, develop and debug the ERP and point-of-sale computer systems, work out the advertising strategies, and finalize the products and services to be offered. If these stores perform on par with the Las Vegas store, we will then look to roll out a hybrid retail store model later next year consisting of a combination of company-owned and franchise stores.
Speaker Change: Our goal will be to use these stores to both fully prove out the concept.
Bryan Scott Ganz: We believe that the market could easily support 100 or more Byrna stores across the United States. The precise split between company-owned and franchise stores will be determined based on how quickly we feel that we could support the rollout of new stores from a product availability perspective. If we believe that we could roll out 100 stores in short order, we would need to rely more heavily on franchisees to be able to roll out such a large number of stores quickly. On the other hand, if we feel that we could only support 20 new stores a year, we will likely keep these as company-owned operations.
Speaker Change: and to refine the store model.
Speaker Change: So, specifically, we will use these stores to perfect the look and feel of the physical premises.
Speaker Change: develop the store operating manuals, build out an employee training program, develop and debug the ERP and point-of-sale computer systems, work out the advertising strategies, and finalize the products and services to be offered.
Speaker Change: If these stores perform on par with the Las Vegas store, we will then look to roll out a hybrid retail store model later next year consisting of a combination of company-owned and franchise stores.
Speaker Change: We believe that the market could easily support 100 or more Byrna stores across the United States.
Speaker Change: The precise split between company-owned and franchise stores will be determined based on how quickly we feel that we could support the rollout of new stores from a product availability perspective.
Speaker Change: If we believe that we could roll out 100 stores in short order, we would need to rely more heavily on franchisees to be able to roll out such a large number of stores quickly. On the other hand, if we feel that we could only support 20 new stores a year, we will likely keep these as company-owned operations.
Bryan Scott Ganz: Keep in mind that even at half a million dollars in sales per year per location, 100 stores would require us to ramp up production by 100,000 units just to support our retail locations. At $1 million per location, we would need to produce an additional 200,000 units annually. This would be in addition to the 50,000 to 100,000 additional annual units we will need to produce simply to support the growth we expect from our current DTC and dealer business.
Speaker Change: Keep in mind that even at a half a million dollars in sales per year per location, 100 stores would require us to ramp up production by 100,000 units just to support our retail locations.
Speaker Change: At a million dollars per location, we would need to produce an additional 200,000 units annually. This would be in addition to the 50,000 to 100,000 additional annual units we will need to produce simply to support the growth we expect from our current DTC and dealer business.
Bryan Scott Ganz: While we are confident our current facility can be expanded to support these volumes, it cannot happen overnight. As we have seen this year, it has taken us more than six months to increase production by 8,000 units a month. For all the reasons just stated, we are very excited about the retail store opportunity and possibilities. This could be an entirely new leg of the sales and distribution stool for Byrna, a channel that could ultimately be as large as our online sales channel. We will continue to keep everyone apprised of our progress in rolling out these first few locations. Law enforcement.
Speaker Change: While we are confident our current facility can be expanded to support these volumes, it cannot happen overnight. As we have seen this year, it has taken us more than six months to increase production by 8,000 units a month.
Speaker Change: For all the reasons just stated, we are very excited about the retail store opportunity and possibilities. This could be an entirely new leg of the sales and distribution stool for Byrna, a channel that could ultimately be as large as our online sales channel.
Speaker Change: We will continue to keep everyone apprised of our progress in rolling out these first few locations.
Bryan Scott Ganz: Last quarter, we discussed exploring whether we should expand the resources devoted to our law enforcement efforts. The conclusion we have reached is that the high cost of marketing to domestic law enforcement coupled with the cost of our products, when compared to many of our competitors, results in a subpar return on investment compared with other opportunities available to Byrna, such as obviously e-commerce and retail stores. For this reason, we have made the decision not to dedicate additional monetary resources to our domestic law enforcement program at this time.
Speaker Change: Law enforcement. Last quarter we discussed exploring whether we should expand the resources devoted to our law enforcement efforts.
Speaker Change: The conclusion we have reached is that the high cost of marketing to domestic law enforcement, coupled with the low cost of our products when compared to many of our competitors, results in a subpar return on investment compared with other opportunities available to Byrna.
Speaker Change: such as obviously e-commerce and retail stores. For this reason we have made the decision not to dedicate additional monetary resources to our domestic law enforcement program at this time.
Bryan Scott Ganz: That said, law enforcement is important to Byrna as it provides the credibility and social proof necessary to support our consumer business. So while we will not devote additional monetary resources to growing our presence in this market, we will continue to take steps to further professionalize our law enforcement program, improving the range of products and services offered to our law enforcement and private security customers. This will include reintroducing our iconic 40mm impact round, the Byrna BIP, to our law enforcement customers.
Speaker Change: That said, law enforcement is important to Byrna as it provides the credibility and social proof necessary to support our consumer business.
Speaker Change: So while we will not devote additional monetary resources to growing our presence in this market, we will continue to take steps to further professionalize our law enforcement program, improving the range of products and services offered to our law enforcement and private security customers.
Speaker Change: This will include reintroducing our iconic 40mm impact round, the Byrna BIP, to our law enforcement customers.
Bryan Scott Ganz: As some of our older investors will remember, several years ago, we sold our original 40mm business, including the IP and molds, to Factor Global of Canada when we pivoted to our current consumer-based model. Factor Global was our largest 40mm consumer at the time and a global leader in 40mm sales and training. As part of the sale, Byrna negotiated royalties on every BIP sold worldwide, and we retained the exclusive rights to sell BIP in the United States.
Speaker Change: As some of our older investors will remember, several years ago, we sold our original 40mm business, including the IP and molds, to Factor Global of Canada when we pivoted to our current consumer-based model.
Speaker Change: Factor Global was our largest 40mm consumer at the time and a global leader in 40mm sales and training. As part of the sale, Byrna negotiated royalty on every BIP sold worldwide, and we retained the exclusive rights to sell the BIP in the United States.
Bryan Scott Ganz: As part of Byrna's revamped law enforcement program, Byrna will once again be offering the 40mm BIP to our law enforcement consumers. In terms of financial resources, however, our law enforcement and military efforts will continue to be focused primarily on the international markets, where there are fewer but larger agencies and there is a greater acceptance of less lethal weapons. These large international agencies can place much larger orders than we typically see in the U.S., which results in a better return on investment for Byrna.
Speaker Change: As part of Byrna's revamped law enforcement program, Byrna will once again be offering the 40mm BIFTAR law enforcement consumers.
Speaker Change: In terms of financial resources, however, our law enforcement and military efforts will continue to be focused primarily on the international markets, where there are fewer but larger agencies and there is a greater acceptance of less lethal weapons. These large international agencies can place much larger orders than we typically see in the U.S.
Bryan Scott Ganz: This can be seen with the several large international and military orders we have filled in recent quarters. Notably, we just announced that we received an order for 2,500 launchers from a prominent Central American armed forces unit. So far, we have delivered 1,500 out of the 2,500 unit launcher order. The balance of the order will be delivered this quarter, and we believe it will be followed up by a string of similarly sized orders over the next 12 months.
Speaker Change: which results in a better return on investment for Byrna. This can be seen with the several large international and military orders we have filled in recent quarters. Notably, we just announced that we received an order for 2,500 launchers.
Speaker Change: from a prominent Central American Armed Forces unit. So far we've delivered 1,500 out of the 2,500 unit launcher order. The balance of the order will be delivered this quarter, and we believe will be followed up by a string of similarly sized orders over the next 12 months.
Bryan Scott Ganz: This win underscores our expanding influence in the region and further enhances our reputation globally, adding valuable social proof that supports our sales initiatives. Additionally, our success in South America has further demonstrated the global demand for less lethal solutions.
Speaker Change: This win underscores our expanding influence in the region and further enhances our reputation globally, adding valuable social proof that supports our sales initiatives.
Speaker Change: Additionally, our success in South America has further demonstrated the global demand for less lethal solutions. Now I'd like to speak a little bit about production.
Bryan Scott Ganz: Now I'd like to speak a little bit about production. To keep up with this growing demand, we have been increasing our production capacity throughout the year. Specifically, we increased production to 48,600 units for the quarter, hitting our internal goal of 18,000 units produced in the month of May. At the start of this year, we were producing less than 10,000 units per month.
Speaker Change: To keep up with this growing demand, we have been increasing our production capacity throughout the year. Specifically, we increased production to 48,600 units for the quarter, hitting our internal goal of 18,000 units produced in the month of May.
Bryan Scott Ganz: With the expansion of our launch for production capacity, we've been able to successfully work through our backlog, and we are now building inventory for the expected upswing in demand during the upcoming holiday season. Additionally, while we do not hope for it, we also want to be prepared for any surge in demand that may result from a spike in civil unrest in the wake of the upcoming presidential election. As we look to next year, it is clear that we must continue to ramp up production capacity, and we are taking steps to do so.
Speaker Change: At the start of this year, we are producing less than 10,000 units per month. With the expansion of our launch for production capacity, we've been able to successfully work through our backlog, and we are now building inventory for the expected upswing in demand during the upcoming holiday season.
Speaker Change: While we do not hope for it, we also want to be prepared for any surge in demand that may result from a spike in civil unrest in the wake of the upcoming presidential election.
Speaker Change: As we look to next year, it is clear that we must continue to ramp up production capacity, and we are taking steps to do so. In addition to expanding our launch and production capacity, however, we must also expand our ammunition production capacity.
Bryan Scott Ganz: In addition to expanding our launcher production capacity, however, we must also expand our ammunition production capacity. Accordingly, we are in the process of building a U.S.-based ammunition production facility that will be located just a few miles from our launcher production facility in Fort Wayne. We hope to have this new facility up and running by year-end. This move is aimed at, one, increasing our overall ammo capacity, two, reducing the risk of supply chain disruption, three, shortening lead times, and four, gaining greater control over the manufacturing process to ensure that we have the highest quality rounds on the market.
Speaker Change: Accordingly, we are in the process of building a U.S.-based ammunition production facility that will be located just a few miles from our launcher production facility in Fort Wayne.
Speaker Change: We hope to have this new facility up and running by year end.
Speaker Change: This move is aimed at 1. increasing our overall ammo capacity, 2. reducing the risk of supply chain disruption, 3. shortening lead times, and 4. gaining greater control over the manufacturing process to ensure that we have the highest quality rounds on the market.
Bryan Scott Ganz: With this facility, we can guarantee that we can meet the forecasted demand for our high-margin ammunition products even if international shipments become more difficult for any reason. In conclusion, our success in significantly increasing consumer demand through new advertising strategies combined with the planned expansion of our retail store program and our continued international law enforcement efforts is expected to sustain top-line growth throughout 2024 and 2025. At the same time, the expansion of our production capacity and the resulting manufacturing efficiencies we have been able to achieve should mean continued improvements in both gross and net margins.
Speaker Change: With this facility, we can guarantee that we can meet the forecasted demand for our high-margin ammunition products, even if international shipments become more difficult for any reason.
Speaker Change: In conclusion, our success in significantly increasing consumer demand through new advertising strategies, combined with the planned expansion of our retail store program and our continued international law enforcement efforts, is expected to sustain top-line growth.
Speaker Change: throughout 2024 and 2025. At the same time, the expansion of our production capacity and the resulting manufacturing efficiencies we have been able to achieve should mean continued improvements in both gross and net margins.
Bryan Scott Ganz: In short, Byrna is well positioned to build upon its recent successes, setting the stage for further top and bottom line growth, ensuring that Byrna remains at the forefront of the less lethal industry.
Speaker Change: In short, Byrna is well positioned to build upon our recent successes, setting the stage for further top and bottom line growth, ensuring that Byrna remains at the forefront of the less lethal industry.
Speaker Change: I'll turn it back over to the operator.
Operator: Thank you. Now we're conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to move your question from the queue. One moment, please, while we poll for questions. Our first question is coming from Jeff Van Sinderen from B Riley Securities. Your line is now live.
Speaker Change: Thank you, and now we're conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
Speaker Change: One moment please while we poll for questions.
Speaker Change: Our first question is coming from Jeff Van Sinderen from B Riley Securities. Your line is now live.
Jeffrey Wallin Van Sinderen: Good morning, everyone. Let me say congratulations. Thanks for taking my question. I wanted to circle back to ROAS. And I'm wondering what sort of traction levels you're seeing as you add the newer, or let's call it the latest, influencers to your program. In other words, how do you think about adding more advertising influencers at this point and the ROAS that you're expecting to get from each new one?
Speaker Change: Good morning everyone. Let me say congratulations. Thanks for taking my questions.
Speaker Change: I wanted to circle back to the ROAS and I'm wondering what sort of traction levels you're seeing as you add the newer or let's call it the latest influencers
Speaker Change: to your program. In other words, how do you think about adding more advertising influencers at this point and the ROAS that you're expecting to get from each new one?
Bryan Scott Ganz: Jeff, first off, thank you very much. I appreciate the question.
Speaker Change: Jeff, first off, thank you very much. I appreciate the question. As we stated, we are currently using a 5X ROAS as the threshold.
Bryan Scott Ganz: As we stated, we are currently using a 5X ROAS as the threshold. Therefore, both the existing celebrity endorsers and the new celebrity endorsers must maintain that 5X ROAS for us to continue to support their efforts. Right now, that does not seem to be an issue, and we anticipate as we go into the holiday season that the ROAS levels will increase. So interestingly, you never know; we have brought on some celebrity endorsers, given them an 8-week or 12-week trial program, and then determined that, for whatever reason, they just are not responding with their audience, they're getting ROAS levels that do not achieve our minimum threshold, and we do not re- So all of the new celebrity endorsers that we've mentioned are achieving the same ROAS levels as the original celebrity endorsers.
Speaker Change: So, both the existing celebrity endorsers and the new celebrity endorsers must maintain that 5X ROAS for us to continue to support their efforts.
Speaker Change: Right now that does not seem to be an issue, and we anticipate as we go into the holiday season that the ROAS levels will increase.
Speaker Change: So, interestingly, you never know. We have brought on some celebrity endorsers, given them an 8-week or 12-week trial program, and then determined that, for whatever reason, they just are not resonating with their audience.
Speaker Change: They're getting ROAS levels that do not achieve our minimum threshold, and we do not re-up. So, all of the new celebrity endorsers that we've mentioned are achieving the same ROAS levels as the original celebrity endorsers.
Jeffrey Wallin Van Sinderen: Okay, great to hear. And then I'm curious about, I know you mentioned expanding into cable or just into television in general, and there being more openness there, I think, on some of those platforms. Is there early traction you can point to there? And then also, what are your plans now for expansion?
Speaker Change: Okay, great to hear. And then I'm curious on the, I know you mentioned expanding into cable or just into television in general, and more openness there, I think, on some of those platforms.
Speaker Change: Is there early traction you can point to there and then also what are your plans now for expansion there?
Bryan Scott Ganz: Well, we started off advertising on television with Newsmax. So Newsmax approached us, said that they would be willing to run our ads. And we've had a very strong return on advertising spend with our advertising on Newsmax. Now, we have also been approached by several other slightly smaller networks than Newsmax. Some have worked, some have not.
Speaker Change: Well, we started off advertising on television with Newsmax.
Speaker Change: So Newsmax approached us, said that they would be willing to run our ads.
Speaker Change: And we've had a very strong return on advertising spend with our advertising on Newsmax. Now, we have also been approached by several other slightly smaller networks than Newsmax.
Bryan Scott Ganz: And I think it's really dependent upon the audience. You know, I think when we look at the audience, it breaks down really into two different groups of people. Those people that are willing to, you know, protect themselves and their families if they are put in a position of needing to do so. And those people that are not. And we don't do particularly well with the audience that is not willing to, you know, use pepper spray or a non-lethal launcher to protect themselves. So it is not every cable channel that will, you know, work for us. I think it is, again, very dependent on the particular audience that these news appeals to.
Speaker Change: Some have worked some have not and I think it's really dependent upon the audience
Speaker Change: You know, I think when we look at the audience, it breaks down really into two different groups of people. Those people that are willing to, you know, protect themselves and their family if they are put in a position of needing to do so, and those people that are not.
Speaker Change: And we don't do particularly well with the audience that is not willing to, you know, use pepper spray or a non-lethal launcher to protect themselves. So it is not every...
Speaker Change: I think it is very dependent on the particular audience that these news networks reach.
Jeffrey Wallin Van Sinderen: Okay, fair enough. And then, if I could just squeeze in one more thought on what we should expect for gross margins and operating expenses. (Inaudible)
Speaker Change: Okay, fair enough. And then if I could just squeeze in one more, thoughts on what we should expect for gross margins, operating expenses,
Speaker Change: Just kind of any sense you could give us there as we think about the next quarter or two. Just wondering if we should see further expansion, leverage. Yeah, I'm going to actually turn this over to Laurie.
Lori Kern: Yeah, I mean, I think on the gross margin. We've been doing a lot of work around, you know, designing for manufacturability, and we've done some skew rationalization. So we're going to continue doing that.
Laurie: Hi Jeff!
Laurie: Yeah, I mean, I think on the gross margin, we've been doing a lot of work around, you know, designing for manufacturability. We've done some SKU rationalization, so we're going to continue in that, and we just launched an initiative of lean manufacturing within our facility. So,
Lori Kern: And we just launched an initiative of lean manufacturing within our facility. So I think all of those are going to continue to lead to a slight increase in margin. And obviously, it's also the mix of the direct-to-consumer being, you know, in 70% of our cells, 72, 74% of our cells, that should lead to a slight improvement in gross margins going forward. As far as operating expenses are concerned, Bryan mentioned, you know, the ROAS, we're looking at 5x.
Laurie: I think all of those are going to continue to lead to slight increase in margin and obviously it's also the mixed
Laurie: of the direct-to-consumer being, you know, in the 70% of our cells, 72, 74% of our cells. That should lead to slight improvement in gross margins.
Laurie: As far as operating expenses,
Lori Kern: So that's kind of where we see our marketing, sales, and marketing expenses. The variable expenses are about 10% of sales. So that's our Amazon fees, credit card fees, freight out. The rest of the operating expenses should remain fairly stable. I mean, as you grow, you'll see a little bit of incremental some people costs in there, but fairly stable in the short term on those.
Laurie: You know, Bryan mentioned, you know, the ROAS, we're looking at 5X, so that's kind of where we see our marketing, sales and marketing expenses. The variable expenses are about 10% of sales, so that's our Amazon fees, credit card fees.
Speaker Change: The rest of the operating expenses should remain fairly stable. I mean, as you grow, you'll see a little bit of incremental, some people costs in there, but fairly stable in the short term on those.
Jeffrey Wallin Van Sinderen: Okay, great. Thanks, Lori. And welcome to Byrna. I'll let someone else jump in. Thank you.
Burna: Okay, great. Thanks, Lori, and welcome to Byrna. I'll let someone else jump in.
Operator: Thank you. As a reminder, that's star number one to be placed in the question queue. Our next question is coming from Jon Hickman from Lattinburg-Fulman. Your line is now live.
Lori: Thank you.
Speaker Change: Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Jon Hickman from Lattinburg, Pullman. Your line is now live.
Jon Robert Hickman: Hi Bryan. Hey Jon, could you elaborate a little more on the production side? I think you said you're doing 18,000 a month now? And what do you expect that to get to by the end of the year?
Jon Robert Hickman: Hi Bryan, could you elaborate a little more on the production side? I think you said you're doing 18,000 a month now?
Bryan Scott Ganz: So we hit 18,000 a month in May, and we expect to continue to run at the level of 18,000 a month for the balance of the year. We are not selling 18,000 launchers a month. We're selling closer to 12,000 or 13,000 launchers a month at this point, so by producing 18,000 launchers, it's allowed us both to work through the backlog and to start building inventory for the Q4 period. We are now taking steps so that as we get into 2025, we will be able to once again increase our production.
Jon Robert Hickman: And what do you expect that to get to by the end of the year?
Bryan Scott Ganz: So we've hit 18,000 a month in May and we expect to continue to run at the level of 18,000 a month for the balance of the year
Bryan Scott Ganz: We are not selling 18,000 launchers a month. We're selling closer to 12 or 13,000 launchers a month at this point. So by producing 18,000 launchers, it's allowed us both to work through the backlog and to start building inventory for the Q4 period.
Bryan Scott Ganz: We are now...
Bryan Scott Ganz: taking steps.
Bryan Scott Ganz: So that as we get into 2025, we will be able to, once again, increase our production. But each increase, it's not like turning a variable dial. You know, it happens somewhat in plateaus because we have to add, you know, either another shift or another line or a bunch more.
Bryan Scott Ganz: But each increase is not like turning a variable dial. It happens somewhat in plateaus because we have to add either another shift or another line or a bunch more workers. So we would expect that as we get into Q1 of next year, we'll probably start to ramp up from the current 18,000 units a month to some number above that. I don't know whether it's 22,000 or 25,000, but I wouldn't expect to see that increase prior to 2025.
Bryan Scott Ganz: workers. So we would expect that as we get into Q1 of next year, we'll probably start to ramp up from the current 18,000 units a month to some number above that. I don't know whether it's 22,000 or 25,000, but I wouldn't see expect to see that increase prior to 2025.
Jon Robert Hickman: Okay, and then, unless I missed it, you didn't mention the smaller Launcher, and when are you, like, still planning on having that out by the end of this fiscal year?
Speaker Change: Okay, and then, unless I missed it, you didn't mention the smaller...
Speaker Change: Launcher, and when you, like, are you still planning on having that out by the end of this fiscal year?
Bryan Scott Ganz: No, it will not be out by the end of this fiscal year. First, we never really expected to hit that. I will say that, you know, the development is going according to plan. We're excited about this. We expect to see it out sometime in the second half of 2021.
Speaker Change: No, it will not be out by the end of this fiscal year. First, we never really expected to hit that. I will say that, you know,
Speaker Change: The development is going according to plan. We're excited about this. We expect to see that out sometime in the second half of 2025
Jon Robert Hickman: second half of the calendar year or the fiscal year? Well, they're very close. So yes, I was thinking second half of the calendar year. But yes, somewhere around this time next year. Okay, and then I have a question for Laurie. Your operating expenses are like over $10 million a year, or $10 million a quarter. Is there any thought to breaking those out into different categories, like sales and marketing?
Speaker Change: The second half of the calendar year, or the fiscal year? Well, they're very close, so I was thinking second half of the calendar year, but yes, somewhere around this time next year.
Speaker Change: Okay and then I have a question for Laurie. Your operating expenses are like over 10 million a year or 10 million a quarter. Is there any thought to breaking those out into different categories? Sales and marketing?
Lori Kern: Yeah, I mean, I think it might be helpful, especially to see those variable expenses for sales and marketing. That's something that we could look at. I think that would be helpful for you all to understand the components a little bit better. So I'll take that down to look at.
Laurie: That kind of thing. Yeah, I mean, I think it might be helpful, especially to see those variable expenses, sales and marketing. That's something that we could look at. I think that would be helpful for you all to understand the components a little bit better. So I'll take that down to look at going forward.
Jon Robert Hickman: This analyst would appreciate it. Okay.
Bryan Scott Ganz: And just, Jon, for, you know, back of the envelope, as Lori said, the variable costs are – and let's just use $10 million as a – as a bogeyman for the quarterly off-sets. 10% of our sales, or $20 million, is variable. So that was $2 million of the tax. If you are at a 5X ROAS, and we are expecting, let's say, $15 million in DTC business, that's going to be another $3 million of the 10.
Speaker Change: This analyst would appreciate that.
Jon Robert Hickman: And just Jon, back of the envelope, as Laurie said, the variable costs are, and let's just use $10 million as a bogey for the quarterly off-backs.
Speaker Change: Ten percent of our sales, or $20 million, is variable. So that was $2 million of the ten.
Speaker Change: If you are at a 5X ROAS, and we are expecting, let's say, $15 million in DTC business, that's going to be another $3 million of the 10.
Bryan Scott Ganz: There's about a half a million dollars of professional costs, public company costs. There's another $3.5 million of people costs, and then there's a million dollars of everything else. And that's sort of the bigger buckets. Lori can give you more granular detail when you get on a private call with her, but that's sort of the 30,000-foot breakdown of the expenses.
Speaker Change: There's about a half a million dollars of professional costs, public company costs. There's another three and a half million of people costs.
Speaker Change: And then there's a million dollars of everything else. And that's sort of the bigger buckets. Lori can give you more granular detail when you get on a private call with her, but that's sort of the 30,000-foot breakdown of the expenses.
Speaker Change: Okay. Thank you.
Operator: Thank you. As a reminder, that's star number one to be placed in the question queue. One moment, please, while we poll for questions. Once again, that's star number one to be placed in the question queue. If there are no further questions, I'd like to turn the floor back over to management for any further or closing comments.
Speaker Change: Thank you. As a reminder, that's star 1 to be placed in the question queue.
Speaker Change: One moment please while we poll for questions.
Speaker Change: Once again, that's star one to be placed in the question queue.
Speaker Change: If there are no further questions, I'd like to turn the floor back over to management for any further or closing comments.
Bryan Scott Ganz: Thank you, Kevin. Again, thank you, everyone. We appreciate your continued interest in Byrna, and to our investors, thank you for your continued support.
Kevin: Thank you, Kevin. Again, thank you, everyone. We appreciate your continued interest in Byrna, and to our investors, thank you for your continued support.
Operator: Thank you. This concludes today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Speaker Change: Thank you. It does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.