Byrna Technologies Inc. (BYRN) on Q3 2021 Results - Earnings Call Transcript
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.:
Operator: 00:04 Greetings, and welcome to the Byrna Technologies Fiscal Third Quarter twenty twenty one Earnings Conference Call and Webcast. As a reminder, this conference call is being recorded and all participants are in a listen-only mode. 00:15 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. 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 obligations to update forward-looking statements as a result of new information, future events or otherwise. 00:45 As this call will include references to non-GAAP results, please see the press release in the Investors section of our website ir.byrna.com. For further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. 00:59 I'll now turn the call over to Mr. Bryan Ganz. Sir, please go ahead.
Bryan Ganz: 01:04 Thank you. Good morning. Thank you for joining us for Byrna's twenty twenty one third quarter earnings call. Just as a clarification at the end of the call, we will be taking questions from analysts and investors as time permits. 01:24 During this quarter, we have continued to execute on our strategy to grow Byrna through increased visibility and brand awareness, new product introductions and the opening of new markets and new sales channels. Our performance in the third quarter was marked by success, I think in all of these areas. Perhaps most importantly, we completed a successful public offering as all of you know, raising fifty six point eight million dollars after fees, and now with sixty million dollars of the bank and no debt. We really have the resources to fully implement our growth strategy. 02:03 Compared with Q3, twenty twenty we have more than doubled our net revenues to eight point seven million with a strong contribution from our international dealer network although admittedly we were down from the prior quarter, which benefited from a five million dollar surge in sales attributed to Sean Hannity mentioning the Byrna HD on his nightly show. 02:25 Gross profit more than doubled to four point nine million and our gross margin improved to fifty six percent. This margin was higher than we had projected our last earnings call as the introduction of a number of our new higher margin products offset pressure from growth in our lower margin international sales. We introduced a slate of new game changing products this quarter that are helping us transform our business, scale our brand, improve our margins and open new markets. 03:01 So we took an important step this quarter to expand from essentially a one product, one sales channel company to a multi-product multi-channel company with the launch of Bryna's Amazon e-commerce platform, the introduction of the Byrna SD personal security device and the Mission 4 long barrel launcher. At the same time, we expanded our retail footprint with the addition of eighty two by Bi-Mart locations throughout the Pacific Northwest. We acquired the assets of Ballistipax and introduced the Byrna Shield product line. We conducted our first learn safe school training program for a public school district in Texas. And we strengthened our management team with the addition of Mike Gillespie, as Chief Operating Officer, many of you may have had a chance to see Mike on our Analyst Day a few weeks ago. And Michael Wager is Chief Strategy Officer, who is going to be tasked with finding strategic opportunities for us. 04:05 Although I personally have the privilege each quarter of addressing our investors and discussing our operations and successes, none of it would be possible without the continued hard work and dedication of everyone at Byrna. As I noted during our Analyst Day presentation, the Byrna teammates are a unique breed. They prioritize our mission of saving lives. They sacrifice to achieve our objectives and they live our ideals. These are truly special people, and I cannot thank them enough for what they do every day. 04:41 This is a script that I wrote last night, but I just want to add something on a personal note. Last night I left the office at 8:00 P.M., and there were still a half-dozen Byrna team members working away and when I arrived this morning a little past seven, once again the office was already bustling with activity. You cannot buy this type of dedication or loyalty. It is only possible when people truly believe in the mission as is the case with the Byrna team. 05:12 Now I'm going to hand this call over to David North, our CFO to discuss our third quarter financial performance, and then I'll come back on to discuss some recent developments and take questions. David?
David North: 05:25 Thanks, Bryan and thanks everyone for joining us today. Today, I'll review the financial results for the fiscal third quarter ended August thirty one, twenty twenty one, provide an update on the company's liquidity position and discuss the company's full year twenty twenty one outlook. 05:40 Revenues for the third quarter of twenty twenty one were eight point seven million dollars compared to four point two million dollars in the third quarter of twenty twenty. The increase was driven by higher e-commerce and international sales, new product launches, and growing market awareness of the Byrna product portfolio. 05:58 Third quarter gross profit rose at faster rate than net revenues, up one hundred and thirty percent to four point nine million dollars from two point one million dollars in last year's third quarter. Gross profit margin was fifty six point two percent of net revenue, compared to fifty point seven percent of net revenues in last year's third quarter and fifty six point four percent last quarter. 06:20 These improvements were driven by higher sales volumes, greater manufacturing efficiencies following investments in the company's U.S. production facility and the introduction of new higher margin products. Gross margins were essentially flat compared to the immediately preceding prior quarter as higher margins, new product sales were offset by an increase in lower margin international sales. 06:44 Operating expenses for the third quarter were six point seven million dollars compared to two point seven million dollars in the prior year period, and five point five million for the previous quarter. The year-over-year increase was driven largely by investments in corporate infrastructure necessary to support Byrna's continuing growth, this included expanding and retaining our management team and administrative staff, which resulted in a payroll increase of one point five million dollars and a one million dollar increase in long term stock based compensation expense from last year's third quarter. 07:19 The increase also reflected higher variable expenses such as freight, which rose by zero point three million dollars and insurance, which also increased by zero point three million dollar from last year's third quarter, and also incremental costs including public company cost, legal expenses and increased R&D expenditures. Third quarter operating expenses were one point one million dollars higher than operating expenses of five point five million dollars reported for the second quarter. This increase is primarily due to further expansion of, and incentives to retain our management team in support of continued growth, including zero point three million due to increases in headcount, zero point four million dollar increase in the accrual for annual bonuses and zero point one million dollars increase in stock compensation expense. 08:10 In order to promote continuing growth, we also increased marketing expenses by zero point two million dollars over the prior quarter. Legal expenses were zero point three million dollars higher, primarily due to the one-time cost of an investment in protection of our intellectual property. Finally, insurance expense increased by zero point one million dollars. 08:30 Net loss for the third quarter of twenty twenty one was one point eight million dollars, or zero point zero eight per share compared with a net loss of zero point six million dollars, or zero point zero four per share in the third quarter of twenty twenty. Adjusted for approximately one million dollars of non-cash stock-based compensation costs, non-GAAP adjusted net loss was approximately zero point nine million dollars, or zero point zero four per share compared to a loss of zero point five million dollars or zero point zero four per share in last year's third quarter. 09:02 Non-GAAP adjusted EBITDA was a loss of zero point nine million dollars compared with a loss of zero point five million dollars for the third quarter of fiscal year twenty twenty. For twenty twenty one year-to-date, the company was reporting a modest profit of forty eight thousand dollars adjusted for non-cash items including depreciation, amortization and approximately two point five million dollars of non-cash stock-based compensation costs. 9:28 Non-GAAP adjusted net income is approximately two point four million dollar, or zero point zero seven per share. As of August thirty one, we had an open order backlog of approximately four hundred thousand dollars with e-commerce orders being fulfilled an average of two to three days. 09:45 Now turning to the balance sheet. We ended the third quarter with the strongest balance sheet in our history following the completion of our public offering in July of twenty twenty one. At that time, the company issued and sold an aggregate of two million eight hundred and seventy five thousand registered shares of its common stock at a price of twenty one dollars per share. 10:05 The net proceeds to the company after deducting four point four million dollars in underwriting discounts and commissions and offering expenses were approximately fifty six million dollars. We ended the quarter with fifty eight point four million dollars of available cash and no current or long term debt on our balance sheet. 10:23 We intend to use the proceeds from the offering to fund the working capital needs of the company's continued growth and to take advantage of strategic acquisition opportunities. Following the public offering, our total share count at quarter end was twenty three million six hundred and three thousand nine hundred ninety six shares. We've continued to focus on inventory management and sourcing initiatives in anticipation of growth. We currently have approximately nine thousand three hundred finished SD and HD launches in stock and enough raw materials and componentry on hand to build another five thousand. 11:01 For the opening of Byrna's Amazon store in August and our desire, we able to handle a surge in sales. We believe that this has been the prudent approach particularly considering fulfillment issues we faced due to surges, while we were building capacity over the past two years. 11:18 We are reiterating our fiscal year twenty twenty one revenue guidance of forty million dollars to forty two million dollars reflecting year over year growth of approximately one hundred and forty six percent at the midpoint of the range. The guidance is based on the company's current order flow and the growth expected from one, the recent and planned introduction of new products. Two, e-commerce sales by our dedicated Amazon store that kicked off at the end of August this year. Three, anticipated increases in domestic and international dealer sales. And four, broader brand awareness among customers. 11:55 With respect to gross margin our fiscal year twenty twenty one expectation call for a range of fifty three percent to fifty six percent as compared to a gross margin of forty five point three percent in fiscal year twenty twenty. The anticipated improvement in gross margin it is expected to be driven by the planned introduction of new higher margin products and the benefits of our investments in the Fort Wayne production facility. 12:21 Now I'll turn the call back over to Bryan.
Bryan Ganz: 12:22 Thanks, David. Let me start with Amazon. I get more questions about Amazon than anything else. So I thought, I would start there. At the very end of August, we launched on Amazon, and use this platform as the avenue to introduce the new Byrna SD. The sales contribution for the third quarter was de minimis, I think we did about forty nine thousand dollars of sales on Amazon during the last few days of August. However, we expect to see Amazon become an increasingly important sales channel over time and we are already beginning to see a positive trend. 13:05 Over the last month, Amazon sessions grew from approximately seven hundred and fifty per day, the first week of September to approximately three thousand sessions per day the last week of September. And well, this is still less than fifteen percent of the almost twenty two thousand average daily sessions on Byrna's own website during the month of September, Amazon traffic is growing rapidly, and we expect to see activity on our Amazon storefront ultimately equal or exceed the activity on our own Byrna website. 13:38 We've also seen a significant increase in members of Byrna Nation. This is the group of consumers that have opted into our email database. Today Byrna Nation numbers one hundred and eighty five thousand subscribers, this is up from approximately thirty five thousand at the beginning of this year, at the beginning of twenty twenty one. 14:00 We talk a lot about our e-commerce sales platforms and they are very important component of our strategy. For example, as I mentioned, our average daily sessions at Byrna.com was twenty one thousand nine hundred in September. If we look at September of twenty twenty, our average daily sessions were seven thousand six hundred and sixty. So we've seen one hundred and eighty six percent increases over the last twelve months. 14:31 During the same time, as I mentioned, Byrna Nation email subscriptions have risen from around thirty thousand to one hundred and eighty five thousand for a five hundred percent increase and we are seeing an open rate an excess of forty percent. So this list enables Byrna to keep members of Byrna Nation aware of new product developments, special offerings, per date news regarding non-lethal self-defense. 15:00 However, along with the e-commerce presence, the retail presence is vital for new customer acquisition, particularly for a relatively young company like Byrna. People want to touch and feel the product, many people want to purchase it from a trusted location. If one were to look at a Venn diagram of consumer buying habits, there are essentially two types of consumers. Those that prefer to buy online. And those that prefer to buy in a brick-and-mortar store and well, there is some overlap it's not as great as one would think. 15:37 Moreover we see our brick-and-mortar stores, driving business to our website as people go into the store and then go online to buy, and we also see conversely our website driving business to our brick-and-mortar store as people come on, access our dealer locator, and then go to a brick-and-mortar store, so that they can touch the product. We are going to be putting a tremendous emphasis over the next several quarters on the development of our retail presence. 16:12 As I mentioned, at the beginning of this call, with the recent capital raise, Byrna is now able to kick-off a number of new marketing campaigns that we've only been dreaming of since our inception. Specifically, starting October eleven, Byrna will launch a billboard campaign in five test markets San Diego, Kansas City, Dallas, St. Louis and Orlando. If this works as we expect it will, we will expand this campaign in many, many more cities. 16:48 We are also going to be kicking off a Direct Mail campaign. In October, we'll be sending out more than three hundred and fifty thousand pieces of direct mails. Now this is an extremely cost effective way for us to build brand awareness and drive sales, and although, conversion rates are low with Direct Mail, even a one percent conversion rate would result in a row as or return on advertising spend in excess of ten times. We are buying outsourced email lists. We'll be sending emails to more than five hundred thousand gun enthusiasts one of our target demographics. Again, this is a very cost effective way for us to reach out to potential customers. 17:35 We've hired a firm to help us with our influencer campaign. There will be ten to fifteen anchor influencers, who will launch content in October, and another twenty five to thirty influences that will launch content in November. Now the influencer campaign is more hit or miss. I'll have it, when it hits, the returns can be enormous. 17:59 In September, one of our customers posted a video showing him using Byrna to fend off a home invasion. This video went viral on YouTube getting more than six million views and driving significant traffic to the Byrna website. We'll also be kicking-off an SMS Text Message Marketing Campaign. This will allow Byrna to reach out to members of Byrna Nation by text, where the open rates are much higher than they are with email. And finally, we are kicking off a Print Media Advertising campaign this month of October with ads in Gun Digest, Conceal Carry, RV living magazines among others. 18:48 One of the other ways that we look to grow revenue is through new product introductions. And I just want to review some of the new product introductions during Q3. First was the Byrna Banshee personal safety alarm. Byrna was looking for something we could first advertise on platforms where we could not advertise the Byrna personal security device, and two, provide visitors to the Byrna store with a price point product. With the Byrna HD, our AOV or Average Order Value for first time customers was over four hundred and eighty dollars. So this is a significant purchase. And we were concerned that a lot of folks that were coming to the website left without buying anything. By providing a twenty nine point ninety nine Byrna Banshee, we have a product that is affordable to almost everyone. 19:44 The Banshee is a personal safety alarm that can attest to a purse, or backpack, a belt loop and when deployed produces an ear piercing one hundred thirty decibel siren and flashing strobe that draws attention, and does can thwart a potential attack. We introduced the Byrna Banshee on July twenty two. We did had an initial production run of two thousand, which we sold out in the first forty eight hours. To-date, we have sold more than five thousand seven hundred Banshees and that's just as July twenty two. We think just anecdotally that this will be a very good stocking stopper for Christmas. 20:25 The Byrna Eco-Kinetic 68 caliber round, one of the unintended consequences of our success is that we've been selling millions of rounds of ammunition that are produced from plastic. And the remnants of these rounds are often left in lawns and fields, strewn across America, it was important to the management team at Byrna that we develop projectiles that we're not just biodegradable, which would take years to decade, but we're in fact water soluble that would simply dissolve in matter of weeks when left out in the elements. 21:06 The Eco-Kinetic round which is constructed of food products is completely safe for the environment and enough toxic in case it's ingested by pets or small children. So we brought out the Eco-Kinetic projectile to replace both the Kinetic and the Inert practice rounds, it is one of the lowest priced non-lethal rounds of the market at only zero point twenty five per round when people buy it in the four hundred count container. 21:38 We launched this product on August one, and in the last two months, we have shipped more than one point two five million Eco-Kinetic rounds not counting the tens of thousands around we shipped as part of our Byrna HD and SD ready kits. We believe that our Eco-Kinetic round will become the best-selling projectile as consumers embrace its environmental friendliness and the recreational use of the Byrna. So we are going to be kicking-off a recreational campaign encouraging people to practice their shooting skills in their backyard, having fun with friends and family, from a selfish standpoint this, of course, will drive ammo sales and sales of CO2 and other accessories, but it will also help owners become more proficient with their personal security devices and more comfortable in the event that they need to deploy their Byrna in a real world self-defense situation. 22:44 The next thing that we launched was the Byrna HD XL. The HD XL is an extended lengths of version of the HD. It was designed for consumers who wanted to fire more rounds at higher speeds of the standard HD. The HD XL is produced by incorporating a longer barrel and the Byrna Boost which allows for a twelve gram CO2. The HD XL sells for one hundred dollars more than the standard HD and during the third quarter, the XL represented twenty five percent of all HD launcher sales and this went a long way to helping us boost Byrna's gross profit margin. 23:32 The Byrna SD Launcher, this is our next generation launcher. It is the natural evolutionary step from our popular, extremely popular HD model. The SD incorporates an improved trigger, a honeycomb grip, enhanced sighting system, the Byrna SD became available on August twenty six, just a few days before the end of the quarter, in connection with our launch on Amazon. And the Byrna SD was initially offered exclusively on Amazon, although, can now be ordered directly on the Byrna website, and through the Byrna retail network. 24:08 With an MSRP for the basic SD ready kit of three hundred ninety nine, which is forty dollars more than the Byrna HD. The Byrna SD is also helping us grow our profit margin, while at the same time providing for greater customer satisfaction. 24:28 We introduced at the end of the quarter, in August, the Byrna M4 high capacity rifle. The M4 is created from technology acquired in the Mission acquisition, and it expands our brand solidly into law enforcement and the private security arena, as well as to the gun enthusiast market. The M4 or Mission four is modeled on the AR M4 platform fires around at three hundred twenty five feet per second, and is an extremely effective non-lethal security device that will be immediately familiar to all AR users. 25:07 Since August one, we have sold six hundred sixty units to both consumers and law enforcement officers at a price of eight hundred and ninety nine dollars. Now, while I received some feedback that the Mission four too closely resembles an actual ARR, and as such appeals only to gun owners. We believe that every time we are able to put a non-lethal security device in the hands of someone that might otherwise be carrying the lethal weapon. We are taking one more step toward accomplishing our mission of saving lives. 25:47 Speaking of saving lives we -- in August, we announced the acquisition of Ballistipax or certain assets of Ballistipax. This was a company that had developed a single handed readily deployable bulletproof backpack. As part of the transaction we acquired inventory, several patents, trademarks and other assets. It was a very, very small acquisition, but we felt it was important tuck-in acquisition, because it allowed us to go after not just offensive way of protecting oneself, but also a defensive way of protecting oneself. 26:27 On August twenty, we launched the Byrna Shield Ballistic Backpack, which features as we said a patented, concealable, readily deployable ballistic body armor system. Since that time, we have sold one hundred and sixty backpacks. The Byrna Shield looks just like an ordinary backpack until it's deployed at which time the backpack is actually transformed into full body armor capable of stopping multiple rounds. The backpack also comes with an anti-bleed kit allowing the wear to immediately attend to any victims of gunfire. We believe that the ballistic backpack will have strong appeal to our approximately one hundred eighty five thousand members of Byrna Nation. 27:15 But more importantly to other consumers and security professionals, looking for a really discrete way to have access to full body armor without the intimidation of wearing a tactical bullet proof vest. In fact, one of the first purchasers of these backpacks was the DEA, who purchased five backpacks for a trial program. We are going to be focusing on Byrna Shield, on school safety officers. We believe that the Byrna Shield will allow them to be prepared for an active shooter situation without having to wear a tactical vest which would be very, very intimidating. With the Byrna Shield, a school resource officer would be prepared to both confront the threat and to treat any victims of gunfire with the anti-bleed kit that comes with it. 28:10 New products are going to be released in the balance of this year and into twenty twenty two. The Byrna MLR, this is a law enforcement only weapon. This will be offered very, very shortly. We expect to see sales of this in our fourth quarter. It's offered in both the semi-automatic and fully automatic configuration which is capable of firing twelve rounds per second. The MLR has a one hundred twenty shot capacity fired rounds three hundred forty feet per second. 28:45 Law enforcement will be able to order the MLR in either CO2 or HPA or High Pressure Air configuration and we've already seen significant interest from our law enforcement customers. We've been talking about the Byrna LE for a while, this is also a security device geared towards law enforcement. It is planned for release in the first quarter of twenty twenty two. It will -- it is modeled on the Byrna SD, and outwardly will look very similar to the Byrna SD, but it has a new valve system, which results in significantly higher muzzle velocity. It also has fiber optic sites, a seven plus one magazine, extreme cold weather capabilities. And we will be offering this to our consumer market once we initially open it up to our law enforcement customers. 29:40 We also plan to launch the Byrna TCR or Tactical Compact Rifle later this quarter. This will be the first launcher that we build completely in house on IP acquired from the Mission acquisition. The TCR is a very easy to use, semi-automatic launcher that can fire nineteen rounds in rapid succession at more than three hundred feet per second and it stands apart from other shoulder fired launchers because it uses easy to find and readily available twelve gram CO2 cartridges. 30:21 We'll be introducing next year our Pump Action Launcher and the significance of this is that the Pump Action Launcher will be the first launcher designed to fire Byrna's patented fintail projectile. And these are the projectiles that are designed to spin stabilize and flight. They are significantly more accurate, carry greater payloads, travel at higher speeds over longer distances than the traditional round ball projectiles that are used today. It's being designed to offer law enforcement the ability to disarm a threat at distances of up to one hundred fifty feet without the need to resort to lethal force. We demonstrated the capabilities of this launcher in June in Los Angeles, where there were representatives of several police and sheriff's departments, and they were able to test fire a prototype PAL. 31:13 Now, before the PAL comes out, we are hoping to release the twelve gauge round. The twelve gauge round will be a shotgun round with the sixty eight caliber fintail projectile inside. What this does for us, is it allows Byrna to access the owners of almost one hundred million shotguns in the United States alone and provides them with a highly effective sixty eight caliber non-lethal round without having to spend as much as one thousand dollars to purchase the Pump Action Launcher. We expect that these twelve gauge rounds based on the sixty eight caliber fintail projectile will sell in five count and ten count boxes with approximately seven dollar per round price. 32:11 Other third quarter highlights, law enforcement last quarter, we discussed the formation of a team dedicated to bring Byrna suite of non-lethal products to the law enforcement and private security markets. During the third quarter, this team trained and certified eighty five law enforcement officers and private security professionals from thirty agencies as Byrna instructors bringing the total number of agencies using the Byrna to more than one hundred fifty. 32:44 In conclusion, I want to say that, I'm extremely proud of the amazing progress that the company has achieved this year. Sales for twenty twenty one are already up more than o0ne hundred percent compared with full year twenty twenty. Based on the Amazon launch, the new marketing campaigns, the company is implementing and the extremely robust, new product development pipeline, we believe we are really well positioned for continued significant growth in twenty twenty two and beyond. 33:18 With that, I'd like to turn this back over to the operator, and we will be happy to take questions from our analysts and institutional investors.
Operator: 33:27 At this time, we will be conducting a question-and-answer session. Our first question is from Jeff Van Sinderen from B. Riley. Please proceed with your question.
Jeff Van Sinderen: 34:01 Good morning, everyone, and thanks for taking my question. Can you speak more about the new products that are being added to Amazon or plans to add new products to Amazon, since I know Amazon is a topic on a number of people's minds?
Bryan Ganz: 34:19 We are -- we started off with a limited number of products at Amazon because they gave us limited quote on quote shelf space. So initially we could have one thousand units at Amazon within the first week as they saw the traffic they raise, that's a three thousand and we added additional products they have now raised that limit again. We are adding ammunition and holsters and lasers, additional colors. 34:52 Our goal will be for Amazon to carry everything that we carry on the Byrna website. So, I don't know how long it will take, the way these algorithms work as the more success we have, the more they promote the product and the more shelf space they give us, but our intention is to have the complete range available on Amazon.
Jeff Van Sinderen: 35:19 Okay. And then I just wanted to touch on, I know there was another sadly, another school shooting this week that was in the news. Just maybe, if you could touch on your strategy going after the school market, what are the milestones that maybe we should look for in the school market over the next year or so?
Bryan Ganz: 35:39 The school mark -- the interesting thing, the ironic thing is, we develop the Byrna because at the time, we were offering products that were available only to law enforcement, military school resource officers, in other words the government, and making sales to the government is a lengthy and difficult process involving budgetary concerns and bureaucratic concerns. So we pivoted to the consumer market. With the success that we've had in the consumer market, our products have come to the attention of law enforcement agencies. In fact, this week, we are training the ATF. They are now buying Byrna as well, but it's still a slow process. As I mentioned, we've run on one hundred fifty law enforcement agencies, that's a one hundred fifty out of eighteen thousand five hundred agencies in the U.S. We are finding the same thing with breaking into schools. 36:47 So, although we've been making a lot of presentations, we have to have sign off from the school resource officers and from the school principal and from the Superintendent of Schools for the school districts. So we have not built anything into our projections for the school program. Although, this is an important project for me personally, there is nothing that I would like more than to be able to have the Byrna Shield and the Byrna personal security devices on every school resource officer in America. I just don't know how quickly that's going to happen, Jeff. But it is something that we're devoting resources to, and we'll continue to focus management’s attention on.
Jeff Van Sinderen: 37:44 Okay. Great. And then if I can squeeze in one more. I know you've added new accounts recently and new retailers. And anymore color you can give us on the latest trends you're seeing in the dealer channel? And then I know that's a focus just anything we should look for over the next couple of quarters in new retailers?
Bryan Ganz: 38:03 What we've discovered is that the retailers that are best for us. Our companies like this new retailer Bi-Mart. Bi-Mart has ordered numerous times this quarter since coming on board. Bi-Mart is sort of a mini Walmart. It's sort of a general merchandise store that caters to a broad population within its regional footprint. So that tells us that other stores like Walmart should be a target for us. And we are currently in discussions with many of the, sort of big box stores that you would imagine. And I think that this is an approach that we should take, where we found that we are not making good headway is with the FFLs, with the firearms dealers themselves as those of you who are firearms owners know many of these locations people are buzzed in, there is not a lot of foot traffic going up and down the aisles, people go to a gun store specifically to buy something that they want either ammunition or specific weapon that they want. 39:18 And rarely buy something on a whim when going to a gun store. So we are not going to focus our efforts on going after the gun market through gun stores. We think going after the gun market to gun shows through things like the Print Media advertising that we're talking about, the email campaign that we're talking about, but we're going to try to pull back on our efforts to sell through federally licensed firearms dealers and refocus our attention on more general merchandised stores.
Jeff Van Sinderen: 39:54 Okay. Thanks so much and best of luck for the rest of the quarter.
Bryan Ganz: Thank you very much, Jeff.
Operator: 40:05 Our next question is from Brian Gesuale from Raymond James. Please proceed with your question.
Brian Gesuale: 40:11 Hey. Good morning and thanks for taking my question. Bryan, can you maybe talk a little bit about how you might see the evolution of product sales during the holiday season? What incremental marketing you may do? How we might start thinking about the seasonality of natural shape of the business over the course of a given year?
Bryan Ganz: 40:30 Up until this point, we've not had enough product to ever really participate in the holiday season. So, last year we did not run any specials. This year, I'm happy to say that we're in a much better position in terms of product. As David North mentioned, we're going out of our way to use some of cash that we raise to significantly increase inventory level, so that we will be prepared for a surge in demand. Because of our unusual fiscal year ending at the end of November, Black Friday or Cyber Monday sales will not result in any sales for this quarter. Because by the time we get the sale and ship it out, will be passed November thirty which I think is a Tuesday. So, we are -- but that said, we do think that there will be a significant consumer demand, particularly as we now have a very large installed user base. We're well over one hundred and ten thousand launchers sold, and these are people that are continuing to buy ammo. 41:51We're bringing on additional products from Apparel to the Byrna Banshee, obviously these new Eco-Kinetic rounds, new holsters. So we will be running a robust Black Friday, Cyber Monday campaign, because of our year-end at November thirty, we will probably also do something like a Byrna Friday, maybe a week or two ahead of Black Friday, so that we can try to gain some of these holiday sales in the fourth quarter, but I would expect that most of the holiday sales will end up in Q1 of next year.
Brian Gesuale: 42:31 That makes sense. And so we would obviously expect Q1 to sequentially grow off of your 4Q, not only with the momentum and inherent growth in the business, but perhaps even maybe a little bit of a bigger increase sequentially than we typically see?
Bryan Ganz: 42:47 Yes. I would have to say that's right. Q1 should seasonally be a strong quarter for us.
Brian Gesuale: 42:56 Okay, terrific. You've really grown out kind of awareness. You've got one hundred and eighty five thousand email subscribers. Can you talk maybe about potentially making these subscription model available, it seems like the ammunition is tracking ahead of plan, presumably that leads to more used cartridges. Are there any plans underway to get some subscribers from that list? And maybe how might you think that could progress over time?
Bryan Ganz: 43:27 You're welcome to join the management, because you're thinking exactly as we do. We are planning on introducing a subscription model. We're going to kick it off with Amazon, because Amazon purchases very familiar with subscription models. Up until this point, we've really been constrained on ammo. And we've been particularly constrained because we had a sole source supplier. If people read through Byrna Nation or Byrna Owners group, I think the one consistent complaint has been the fact that we don't have a regular supply of ammo or we haven't had a regular supply of ammo. Some of the quality problems we have with ammo, with the introduction of the Eco-Kinetic round and with the introduction of our own production of ammo now. So we are actually producing Byrna Pepper ourselves. We are producing Byrna training or Byrna Inert rounds ourselves, in addition to the third-party supplier that we are buying from. 44:31 We do have ample supply of ammo. We will be introducing ammo in more configuration. So we've always sold the Inert rounds in ninety five count. We'll be introducing a twenty five count this month. We think that would be an ideal thing for the subscription model. So we will test out the markets on the subscription model first with Amazon, and then if that successful, roll it out to the Byrna website as well.
Brian Gesuale: 45:05 It sounds exciting. And maybe just final one for me, can you maybe give us just a little bit of help on how we want to think about OpEx growth as you're in this hyper growth period over the course of the next twelve or eighteen months? And how you just see that running its course?
Bryan Ganz: 45:06 Yeah. Look, I will be completely honest with you, I was not happy with the OpEx numbers for this quarter, and we are working hard to reduce what I will call structural OpEx. So, in other words, payroll and other infrastructure costs, and we've already -- I will just tell you, I've already reduced payroll by over five hundred and thirty thousand dollars on an annual basis. 45:53 David, do you want to chat a little bit about what we're doing there?
David North: 45:57 Yeah. I mean, looking at it from the big picture, and I think in our last call, I said that we should expect OpEx to continue growing as sales continue growing, but not at the rate that we had seen in the prior year. That's continues to be the case, and that's just the natural development of maturity of the company. Right now, we are in the fourth quarter and so, naturally, we are going through the intensive process of building out our budget for next year, and we'll be looking at all of this in that context, but something very biggest change between this quarter and in the prior quarter and that's that capital range. We've got fifty six million dollars in the bank. It's very safely invested, but that means that it could vary a little current, and we've got to figure out how to invest in marketing and also in people to promote the growth of those sales. So we do not expect to have quarter on quarter increases of this percentage that we've seen from Q2 to Q3. And we do expect to see continuing gradual growth in this number however.
Bryan Ganz: 47:04 Yeah. And again, just the way, we're going to be looking at this is what structural and what sort of marketing. So right now, we are spending, so like drunken sailors, but I went through all of the marketing programs we're kicking off this quarter. We plan to spend heavily on marketing. Infrastructure, we plan to tighten the belt a little bit. I think that we're going to look to see how we can control those costs. But from a marketing standpoint, getting the brand recognition is everything. I think, I mentioned -- every once in a while you think boy, we've been so successful look, how we've grown, but the fact is very, very few people know who Byrna is, when I meet people invariably it's one out of twenty, one out of fifty that have any idea, who Byrna is, what Byrna does. So it's clear to us that we need to continue to expand the brand recognition and to the extent that there is growth in OpEx, it's going to be on the marketing side.
Brian Gesuale: 48:22 That's great. Thanks so much. I'll jump back into the queue.
Bryan Ganz: 48:25 Okay. Thank you.
Operator: 48:34 Our next question is from Jim McIlree from Dawson James. Please proceed with your question.
Jim McIlree: 48:41 Thank you. Good morning. I was hoping you could share with us data that you have on purchases by customers after the initial purchase of launcher, that is, if I purchased a launcher a year ago, how much in additional sales do you average with that customer for accessories, ammo, maybe an additional launcher things like that? Do you have those statistics and can you share that with us?
Bryan Ganz: 49:12 I don't have those statistics at my fingertip, honestly, but they are trending in accordance with industry standards. So if we look at the Mission acquisition, so Mission was a more mature company had been in business longer, they had approximately fifty percent of their income came from recurring sales. If we look at PepperBall, and we had a number of people that were -- they work for us that we're at PepperBall. PepperBall also has about fifty percent -- of their fifty percent of their revenue from recurring sales. 50:01 We see of the twenty thousand, twenty two thousand people to come to our website, fifty percent are first time visitors and fifty percent are recurring visitors. We would expect as a result that over time, hopefully, many, many years into the future, when our growth starts to moderate that we will see the repeat sales being fifty percent of our business. In this industry generally, most purchasers spend as much on ammo and accessories over the first eighteen months of their purchase as they spend on the initial purchase itself. But keep in mind that well, we've sold one hundred ten thousand launchers, if we look back eight quarters to sort of the very beginning of what we started to sell launchers the numbers were very small. 50:58 So, the largest number of launchers have been sold in the last two quarters. So we are seeing probably eighty percent of our people come back and order at least one additional time in the first ninety days. We have probably twenty percent of people to come back and order five times in the first twenty -- first ninety days. But we are counting on this becoming a more important part of our business as our installed user base grows.
Jim McIlree: 51:33 And thank you, that's helpful. And just to clarify, Bryan, the metric that you mentioned, a purchaser spending as much in the next eighteen months that they did on the launcher that is currently or that's what you saw initially?
Bryan Ganz: 51:52 No. That's an industry statistic for the firearms industry. So when we were trying to build out our model for Byrna, we were looking at what were analogous industries and in the firearms industry people -- and this was before the price of ammunition went crazy, people are spending as much on ammo and accessories during the first eighteen months. And the other thing that we're hoping with, that will be analogous to the firearms industry is the average gun owner in the United States owns three point five firearms, and generally, what happens is, they'll buy a firearm, initially they'll use it quite a bit. They'll go to the range. They'll use a lot of ammo. They'll buy accessories. And after eighteen months that will start to trail off and they will buy another firearm, so if they had a revolver, they'll buy a nine millimeter. 52:49 We think with the introduction of these new products, both the long guns, and the Byrna LE, the upcoming Byrna PE that we will be able to take advantage of the same trend. That those people that really likes there Byrna HD will want to have the latest greatest model. So we think that will benefit not only from the recurring sales of ammo and accessories for the existing launcher that they have, but that we will also benefit from them being a brand supporter, and that they will buy a follow-on products.
Jim McIlree: 53:30 Okay. That’s helpful.
Bryan Ganz: 53:30 And we have seen that happen, so of the Mission 4, which was not an insignificant quantities. So we've sold six hundred and sixty in two months at nine hundred dollars each. So this is about six hundred thousand dollars of sales. This was all to existing Byrna customers. So we have not advertised, this at all outside of our own ecosystem. So this was all sold off of emails to our existing Byrna Nation subscribers. We are in the process of putting together creative for advertising programs. So we think that our thesis that we will see our customers come back and by our new products has proven to be true. 54:28 Are there any other questions?
Operator: 54:34 We have reached the end of the question-and-answer session. And I will now turn the call over to Mr. Bryan Ganz for closing remarks.
Bryan Ganz: 54:42 Great. Thank you very much. Again, I just want to thank everybody for their support. It's -- I can assure you that we remain as committed and convinced as ever in the Byrna Mission and the Byrna thesis. We're strong believers that we are just at the very early stages, just beginning to scratch the market in terms of brand awareness and growth and we're excited about the prospects for this quarter and for twenty twenty two, and beyond. And again, thank you very much for your support.
Operator: 55:25 This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
