BYRN - Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the Byrna Technologies Fiscal Third Quarter 2022 Earnings Conference Call and Webcast.

As a reminder, this conference call is being recorded and all participants are in a listen-only mode.

Before turning the call over to Bryan Ganz, Byrna Technologies’ Chief Executive Officer, I will read the Safe Harbor statement.

Some discussions made today may include forward-looking statements. Actual results could differ materially from the statements made today. most description and could of projections assumptions. Byrna’s a filings affect to and complete more risk refer recent XX-Q XX-K for these Please factors that a obligation otherwise. or forward-looking The future to assumes new information, no statements company as result of events update

in will ir.bynra.com release now for reconciliations regarding statements Investor this further the call results, of see of over to Sir, call Ganz. ahead. and to the I’ll references information turn include As Relations GAAP non-GAAP non-GAAP section to please Bryan press the website, results. go results our forward-looking Mr. please

Bryan Ganz

Thank you very XXXX for everyone, much. fiscal quarter for third and thank joining year Good Byrna’s you morning, call. earnings us

additional North our over the and be I discussing quarter discuss will be David like which discuss conclusion performance. financial recent usual, questions quarter David? events. time the so and start David, will our call on provide of the color third by presentation. turning financial at I'd the after As can some he to to results, I taking will David

David North

And joining thanks, for us everyone, today. Bryan. Thanks,

walk a down third statement. quarter's with start Let's income to

in manufacturing quarter with million $X.X ship Revenues third million unshipped for of after variances. unfavorable of $X.X Third in quarter million, million $XX.X reserves increase quarter XX% charges making orders, which the was ended Byrna’s this the quarter. year came another this quarter over this to inventory We gross we $X.X $X.X of revenue $X.X of XXXX. expect of in of profit of growth million consecutive and at of XXXX. XX.X% all million up of were revenues quarter also an from revenues the second third the margin

past goods a and are up of is in can raw pacific. a were Indiana this facility and some million disruptions. supply higher in to larger levels minor quarters. inefficiencies both shipments raw was smoothly quarter, manufacturing million the inevitable a variance materials are we and that company of startup manufacturing three expenses sell to that levels across such past comparison third of efficient move ago, adequate Ft. two relying any takes we're for same built the those. XX-days of efficiency incoming in and to we and of variance facility. the increase and margin both larger the Operating The result we reduce should period up about $X.X Gross the of from chain unforeseen one relatively our back freight freight move Wayne, unfavorable in fiscal well by the operations risk our a flat Our position with on by of running is ocean which far more the or first a in that but quality is container up the levels, The Nevertheless, a we've inventory new finished from further went million in so has experiencing our more more Greenfield expensive into significantly it year freight $X.X the $X.X more anticipate ocean to were margin now as been as reason benefits ocean our to we for of years. transition transition wait result shipments material shipments favorably airfreight affected receiving in

loss to use from XXXX. for EBITDA of was which estimate adjusted third quarter, the cash third of million of ongoing we compared positive an a $X.X measure, as quarter million $X.X in the operations fiscal Our a non-GAAP flow

that's million. of at from million the to $XX.X EBITDA, increased cash from second the XXXX, Despite end at quarter sheet. by the quarter the because at of dropped $X.X look $XX.X let's to second $XX.X end million a take of the our $XX.X $X.X Now inventory at the end adjusted million balance of third the million million quarter positive

inventory As fourth of We've traditionally built levels the quarter built I've quarter. less in expensive, explained, slower also strong but the we've third inventory very for during anticipation to ocean freight. allow

We in of At $X.X during the total or long-term of quarter. expect by down quarter fourth company a to $X.X The in comparison million an surge to debt. shareholders' in assets from million the Total liabilities reduction time, were the end same $X.X end million the quarter. inventory see up of levels holiday $XX to second no million. the previous a with increase current the year-end in as continues expected have sales equity result the to were of

Now back it to I'll over hand Bryan.

Bryan Ganz

Hannity, quarter much, Thank of last lines. year, demonstrate third quarter EBITDA and line The Moreover, $XX.X excluding its of million inflection improvement record. adjusted sales results Byrna this continuing third set marked basis. bottom And quarter important Sean Financial new a from of quarter company very an top for the point profitability to is the both due profitable leverage. David. it an included company operating top from this incremental an The on consecutive for sales million unexpected second growth. improving of posted $X as on you endorsement was improving which

only the profitability in expected in new last We've the all the the grew this million fourth to to period a $XX revenue sales improvement fourth the would the without growth year. measures of of line while expects be XX%, million further any range. to we exception in this the to the As issued record with David quarter, OpEx same in at of for XX% quarter. and quarters, expect Byrna represent further guidance over four see by operating company would midpoints rate pointed XX%. out, improvements of the $XX last compared be run of quarter by year grew With expenses for

consumer top awareness from increased see of in Byrna as growing XXXX, numbers. expect brand to see web in line to can We traffic our We growth evidence continues awareness. continued benefit

registered X.X to In the on growth XXXX, sessions. sessions period build nine first of million fiscal same Amazon byrna.com during and expect channel. web the XXXX, For web on million we particular, see sessions in web X.X this year X momentum of in total for seeing another last X.X a months million of amazon.com This year that Byrna year. million we're total sales continued as to compares in

the We these products also XXXX. expect as had in under same of aerosol particularly a the launcher sellers M-X half of to products acquisition XXXX. acquired expect the Moreover, TCR for also the not Labs what Bad strong sales to the we Byrna have to these sale sales during XXXX the as see for price we Repellent significant of and of perceived with to may be and lines, growth labels, only Fox in prove be we more during point second economic products add difficult full-year Guy available Mission were products Less-Lethal the times XXXX. the they sales to Along specifically

within Finally, demand products strong expectations expect several as discretionary economy or whether that have a year, is we landing and the Byrna for introduce such growth next the impact should we SD a do in consumer plan negatively soft XXXX a quarter these impact the we XXXX, the recession And LE products experience headwinds the XX-gauge on sales. will material to the softening. continued for clearly through launcher. ammunition a for next and Byrna our the fourth months launcher and Despite

continued we to do growth have XX% As last we and expectations. several not a XXXX, expect seen result, to accordingly tempered as we see our XX% these in quarters have

the growing than XX% to XX% We with growth XXXX to year-over-year XX%, are rather recently. revenues expecting more by tempered we've seen growth in XX%

is Byrna Given trimming of in our operating the expectations of more difficult XXXX, in economic costs. environment process

of Our this so And less process, operating expenses credit we productive growth. goal part is of of designed initiatives drive embarked a to business. X% on past reduce variable year-over-year, as year, excluding will be to expenses fees card areas as the by Byrna and This forth. such deemphasizing number

the to in school our network. dealer safety more cuts In the in costs program, resulted should school shutting expense less with sales have despite will its and program been Accordingly, acquisition Byrna of savings with Fox acquisition, and Others, budget operating than products, successful which Byrna the offer $X.X the be price of down sincere our incremental its conjunction and successful, the overhead a best school Mission multiple and Labs Less-Lethal belief been the resulting ROI. This like initiative, reduce slow Ballistipax of other through sales million will Byrna to formed result purchase $XXX,XXX. and have extremely the little efforts by high than acquisition specifically with intends associated Shield online annual basis our like our as in have poor more be Byrna XXXX. in safety that in will project the overhead. Some this safety planned continue we although annual Ballistipac

our with In now controlling growing plan planned. We will line terms are far of positive flow appropriately. terms operations acquisitions the is cash revenue stock of us operating point this flow top that in we've valuing allow adjusted the program. should positive reinstitute previously both accordingly, year than consistently on excellent future. more from perspective that conclusion, adequate approved cash We expenses. growth. to year-over-year Byrna’s to in believe foreseeable no and for have stock EBITDA, do As fund hand We we to cash the buyback generate believe not the of made the market have reached we've so leverage we progress and And strong we

it operator and questions from you. Thank happy to to to our like back turn analysts. I'd take the be Now we'll

Operator

you. Thank

has the Please line your a conducting questions. question Van with be now B. will session. We from with [Operator Our of come proceed Instructions] first Jeff question-and-answer Riley. Sinderen

Jeff Van Sinderen

Good morning, everyone.

color think gross $X.X year? start SG&A, SG&A And for on to you're realize I then But year? there margin to wanted you directionally QX? planning P&L, next to year? And things couple how we what you be wanted expectations follow-up for the next SG&A -- I as of also maybe on for by other million your in for reduce you're should with Just on QX next any thoughts just outlook terms for was modeling of maybe have a said

Bryan Ganz

to the Yes, part discuss margins David it I'm for I'll the question. SG&A to and turn over your going of

We two expect the impact expect we slightly be one will specials a that a margin do continuing points. last we saw be as expect or margins this to of QX there We trend. it dip holiday upward We to to year and result offering. in

shipment variance QX, freight. and pointed was from result out, favorable benefited we $XXX,XXX air freight David in single in by than As the ocean of from freight rather coming a of components that Malaysia

to a continuing components and water, we As and more to the we that margins. positive put expect of on on ammunition start more have the impact

issues? margin expect percentage is David, higher be average to you So the we our year. several it points this next SG&A can year, address than

David North

please? question, exact the repeat you Would

Jeff Van Sinderen

I'm get we're to sure. year how operating expenses you're thinking some making you're -- just just QX sense Yes, about that trying for cuts. of next a realize

I for think you so next pointed million out $X.X year. or

get sense you're total to how trying should is about -- or that that of or how we whatever Just $X.X a next year? million for thinking

David North

Sure.

had little capital we a And public mean, did. of more I we a a a year invest and So had lot business ago, that very and the year quite would lot successful than we funding that we and ago, growing a and we a said of issue.

line preparation of would more aren't. Bryan what so budget we've process, And senior safety, example, there, are that. has much the in line what is part on. spending down was on what -- and safety I And as as than phase detail of what so now Bryan performing to said, one through program work of school and management but done gone mentioned carefully gone the very of here school investments mentioned through we've look part and the a into gone these annual we've with by at seeing

have Specifically, up to what would that working really analyze spending we we and decide we marketing would places was of spend. return the on look and we at was one that And dollars ramped advertising wasn't. said what

detailed of as think spending. or in result found gone we this they And that that million can exactly can where part through detail we're returning the of is efficient. aren't so we've this expenditures $X.X review because we be be eliminated, more because And worth we've

organization. really it's whole been the -- kind So of detailed that a review of

Bryan Ganz

able million having add feel strongly would without any not we've expenses to investments. we And into -- I I as negative I of on not said were that -- cut or identified significant on we those muscle that were $X.X We've really growth felt And return the bone. any prospects impact getting of David remove we that think

David North

to so I more Byrna find basis. in you've used background was being lot difficult think this But thing, it that a I'm in sort to a I going yesterday, done a manufacturing Yes, regular used saying a and is many just very company, through is this more a marginal mature of company. mature lot young to on it and of times to I'm Bryan industrial my because success it's in more difficult very more but process

was it’s, a So go find exercise these it quite through you know, to efficiencies. and productive

Jeff Van Sinderen

That's enough. generally mentioned it maybe to go then more as high And to speaking, that, that your aerosol on I that’s end say, more know relates a consumer? follow-up And guess are that, thinking seems affluent line? thoughts after the just to about that perhaps product evolving phenomenon the being consumer. Fair I end broadly you as accessible? as consumer to holding How Okay. let's the be up than better lower helpful. then you more given marketing

Bryan Ganz

seeing Yes. of it being Look, the except the the luxury fall as to is sales that off extent you're auto we're is I same the market, high-end not the start affected correct, segment to think [indiscernible]. in average consumer clear that

is product is demographic relatively We high-end a Our relatively wealthy a think our demographic. product.

next will focusing we are we be marketing year, push wealthier. planning that demographics As start our for on

be owners, So own going we're that stores owners, be be stores. to to board convenience People and targeting we're targeting we're business going RV liquor owners. going to targeting

that cognizant where very robs as the of money in fact John the is. banks, because infamous words we're of to So he why the Dillinger that's

the and going wealthier the the are that where after money We consumer. market is is

Jeff Van Sinderen

in I'll and it more turn could just a Okay, little thanks. squeeze I over. here if then And

Just on us the And launch response in Guy then anything the Bad Repellent dealer Walmart? could you about the and tell channel? to Amazon

Bryan Ganz

with eclipse Labs Fox we're sales in sales it's What spray. Labs brand known is the well see of we Bad Repellent has beginning off are The enforcement. very Guy because just Guy been of Fox launch brand, received. the started the Repellent and to Fox continuing to well are We Bad law so to offer starting Labs

markets think we are take can stages early the share domestically markets we we significant we're a aerosol very in of of think that just excess well So market. large this. very very, at These million of $XXX,XXX and very,

Jeff Van Sinderen

queue. jump very Thanks the I'll in Okay. much. back

Operator

Thank you.

Jim question McIlree next James. Our coming from is proceed of Dawson the with questions. your line with Please

Jim McIlree

you. the to Thank on are launch? you the What’s Hi, get to done about needs in the order talk morning. that the LE what and what steps Good getting can to market? XX-gauge be -- the final

Bryan Ganz

testing right first We've in our We're now. a is preproduction engineering build. LE in The done now build.

But we As operating significantly to law feel of does and ensure lot significantly of it you of of improved its it consumers range, can the terms to testing. be temperatures. imagine, of the with of operate products from be we like the speed both to a cold at SD We the the into launcher, the have find a rounds, lot pull think will with the it of trigger is consumers in extremely pleased enforcement LE. very testing goes in the able Byrna terms lighter Byrna, the require But that in are there's our that safety it. will

November because think scheduled So into now to we to then and XX-gauge, doing this be a were into we or and amount of we would serial expect pivot I the bit of XX go XX-gauge we're serial we're little products. just on to inavailability are of of production, to production -- going testing go between for forced the calls. a XX-gauge, The significant the

is originally producing ammunition, and readily the not this Fiocchi a will injection to it product. in standard better available. hulls two hull, XX-gauge a for these molded We've much hull. the long product pivoted like because of a the So like designed a differentiates think look over run, one, to shortage It solution we not had reasons: work of in hull this We the plastic a are round. normal

round Less So never shotgun. a one a is instead it Less Lethal with and XX-gauge confused put the normal their might And think Lethal round be Lethal a will round. think for they're risks people that I XX-gauge using in of

get So that be injection by from hull, plastic molded to going risk. with able away will we a

control able our we're destiny. Secondly, to own

So right of to hulls of were wake thousands need a or when was now, able number tens when to we up in were of call this get millions the unable thousands hulls in them frankly secure the we good wanted, we the we of hulls. hundreds

if experience molded injection millimeter So by able plastic going because we that. with molded for and own hulls, be to the you have destiny. business the with we remember was injection the lot hull, injection XX molded use of control a genesis we'll a plastic hull of business this our And do plastic

that bit, production to do be So put this expect we in quarter. a later little back us but

to The XX-gauge be at are Range in official an have week introducing Vegas. SHOT of We Day. Show going will Las kickoff XX the January at

think to extremely be we'll people fire allow these So be able I to we to it rounds. well And received. expect

Jim McIlree

I a by uncertain QX. about on whether were clarify XXX margin basis impacted Great. margins incentives in basis that you. Can for to points you Thank margin if impacted of QX? confused total from gross about to then little or gross that your or me the an was answer there questions points as the And was I in gross was XXX talking please? or not aspect bit was being you just getting

Bryan Ganz

We've participate will days. Day hundred mind basis margin impacted Prime a or gross got coming a offering points. to we second Day, in be Prime up the XXX basis be points total order to need will we specials. the of Amazon in think And XX% in Keep in we that Amazon Yes, negatively by XXX discount. large couple give

Black our to sales. give, the discounts for somewhat Cyber website and create dealers we Friday also MAP own our to not our on discounts when significant discount holiday. below same if of pricing course, we commensurate relatively drop sales have exact our MAP And giving a we be Monday then will and We

points decline basis So we points. do see That volumes said, margins we pretty substantially. increased to by basis to sales XXX for QX, XXX or expect overall expect

Jim McIlree

year? against Right. decline prior And is the that measured it's QX? against Or measured

Bryan Ganz

No, measured against QX.

Jim McIlree

for Fantastic. That's all All lot a guys. me. right. Thanks

Bryan Ganz

Jim. Thanks,

Operator

Thank you.

Our Please next question Riley. of Jeff is questions. coming with the Sinderen your B. proceed with from line Van

Jeff Van Sinderen

Thanks.

follow-ups quick mentioned in were think QX? reserves reserves? couple inventory the What inventory of a I you Just here. a taken

David North

the avoid cleanup, South various did in were There it their about Yes. half thing we of so was would went on The inventory a through we QX, but to a transit of some that's inventories where kind it's really things. that a all can't it, there in put -- small We reserve and $XX,XXX. in where past. Africa are happened things quite Amazon maybe that reconcile

reserve a intend product who to all in put we for repurchased also We that things. to customers, certain send have

shipments the of in slight of some problems first them. had round Some mag our seven

sent So of to those we customers merchandise some and as that out was part well. it

of So bunch a small things.

Jeff Van Sinderen

international if opportunities to a we the then And moment, internationally? you about if you're for to turn more could wanted Okay. seeing speak just could,

Bryan Ganz

The very off international Indonesia seen the significantly over focused sale we on are the our the of international opportunities channel in domestic are a that We very, in have Federal than bigger for as went Police. the starting consumer Domestically, last The Byrna market. to to a results. market market. you've Internationally, $X law several different million enforcement did somewhat much is us. is over really for take quarters QX

have the throughout frankly agencies. with in will through product. the a now, one And we've companies to a Argentina see Byrna think restrictions Right attractive and owning They firearms of announced, be America cooperation We really sales in the police are in of number that two those to large other South expect that on America, because gun South QX. Bersa. a we go of we talking as

The So margins growth lower. that we of continued our caveat internationally continued one to expect are growth. see is

sales South XX%. we at Africa and margins our only So for project generally XX% our into margins at international for

albeit we see a growth margins. rapid in relatively So expect to lower international sales, somewhat next year at

Jeff Van Sinderen

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

Bryan Ganz

much. Thank you very

Operator

you. Thank

Jim James. Dawson from with is line question your coming next questions. the McIlree of Please with proceed Our

Jim McIlree

again. thanks Yes,

in margin improving, larger about in margins gross Or about projections stories than an ocean because your be improvement costs. you're about include there's reduction recent even of that talked significant and what talked significant I'm to could declines that wondering, ocean ocean the been freight recently? you've if freight, suggesting? freight shift if You that

Bryan Ganz

because the ocean We are we are ocean reduction costs, not in by not in building significant freight. shipping currently freight

we've with sort So the freight crazy of these ocean a behind its of eight fraction shipping airfreight. because and by the day and ocean was supply, freight even short we’ve our our rates, airfreight, out we've into shipping we've sold everything freight we've by rate. at from been ball peak, And of the factories been air everything factories first the Byrna, been in even been operating

landed XXX% a you very cost round is our kinetic example, quick give for our FOB to than a So cost. higher

the we ocean to you of for these shipment our think cost transitioning our the by rounds if landed about So freight. second, about have that XXX% of to a kinetic cost, opportunity save

see issue freight, a of to do much freight. is bigger ocean significant of availability think the what we So rather difficult improvement I what line, in is is ocean the rate how the bottom is not but for quantify, somewhat us

spoke, So the earlier coming containers. of deal of with now, is that faced discussion. we find in He said XX-day as we're about the David But lot up with inventory a that water. part containers a delay could right across to built what of we inability this so the

ocean containers freight softens bit freight us I in as meaningful terms cost be think reducing little will free rates. than of up, economy the more that a actual the of to and our

David North

Yes.

it, starting how what to asked answer words, discussed can out the we expect water as only getting that on of potential all the other slow quarter? of we're to happen, getting but this, little built you is built we is that's the out into but it's what's and going. the we there. to is the everything still the fourth in estimates for a happen So experience expect bit In much potential is we just And what

Bryan Ganz

freight. to going most next take to of ocean everything that's to transition year Yes,

margins quarter-by-quarter. to see improving And so next we expect year

Jim McIlree

shipments in are would freights that air the [Multiple a be the now shipments say to by estimate will the And year end year -- be the most we have good it of and next most freight? so so ocean Speakers] of of And right it's fair

David North

Yes, -- in freight. ocean quarter, saw of our third I impact we We from got beginnings the favorable said this very first

Bryan Ganz

shimpment. One

David North

to because long sales. take And in we our mix quarter. year, really expect them haven't going leave shipment Far over that measuring for improving East international cause be. to expect margin seeing international a also working this. East to -- then just one that's mainly potential Bryan for we Yes, our great of and And States And Far this -- even and is China to a ammo. lower containers those are in shift a started that we see the first time. stuff course do But or container what ships all slight as the is sales that from the in the on of United going coming we margins, from will for the We've said, started getting potential, the potential next getting either resourced sales into securing to

budget So we'll together pass, be the improving margin already next of of that first we at a through though net year. run moderately it it we that budget net all the we expect have putting numbers The is as percentages. gross of

Jim McIlree

good. Very right. Thank All you.

Operator

I time. us Bryan over further any no would to to call the like are this closing at now turn There you. Ganz comments. back Thank for

Bryan Ganz

everybody the call. and like to are to they'd have with much very this always, like morning. And joining a day. you thank Thank analysts whenever would us set speaking Daryl. open to you, up I for good as a Thank we just

Operator

teleconference. today's We conclude your does appreciate This participation.

You rest your may the lines of disconnect day. time. at your this Enjoy

Byrna (BYRN) 5 Oct 222022 Q3 Earnings call transcript