Byrna Technologies, Inc.

Greetings and welcome to the Berna Technologies second quarter 2022 earnings conference call and webcast. As a reminder, this conference call is being recorded and all participants are in listen-only mode. Before turning the call over to Brian Ganz, Berna 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 Berna'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, as this call will include references to non-GAAP results Please see the press release in the investor section of our website, ir.berna.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. I'll now turn the call over to Mr. Brian Gantz. Sir, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us for Berna's second quarter fiscal year 2022 earnings call. David North, our CFO, will be discussing our second quarter results, after which I will provide some additional color on the quarter and discuss recent developments. So I'd like to start the call by turning it over to David so that he can discuss our second quarter financial performance. After my section, David and I will be taking questions. David.

Thanks, Brian. And thanks everyone for joining us. Now I'll review the financial results for the second quarter ended May 31st, 2022. Revenues were $11.6 million this quarter. This is a decrease of $1.8 million compared to the $13.4 million in last year's second quarter. That's because revenue in the second quarter of 2021 was unusually high. due to a surge in sales after Burna's product was featured on Fox News' Hannity Show, a nationally syndicated news program, on April 3rd of that year. This Hannity effect generated approximately $7.5 million in additional orders in the three weeks following Hannity's mention of the Burna on national TV. Second quarter revenue of $11.6 million is in line with expectations and is $3.6 million higher than first quarter revenue of $8.0 million. Gross profit was $6.1 million or 52.7% of reported net revenue in the second quarter of fiscal 2022. This was down from 56.4% of net revenue in the second quarter of 2021. Reduction in gross profit margin was due to higher freight costs, which are a result of increased energy costs and the lingering effects of the supply chain disruption, and a higher proportion of lower margin international sales in the current quarter. We estimate that higher freight costs account for about 1.9% of the difference from prior year gross margin percentage. And gross profit margin, as I said, also decreased due to an unusually high percentage of international sales this past quarter. International sales are made to distributors rather than direct to customer or to dealers and consequently have lower margins. In Q2 of 2022, international sales represented 23.3% of Burna's total sales versus just 4.0% in Q2 of 2021. The higher proportion of international sales in 2022 accounted for 2.6% of the difference in Burna's gross profit margin when compared to the same period in fiscal year 2021. Operating expenses rose to $8.7 million in the second quarter of 2022 from $5.5 million in the same quarter last year. Payroll and compensation related costs in operating expenses increased $1.8 million from $2.8 million last year to $4.6 million in the second quarter of this year. The increase is due primarily to Berta's investment in future growth of the company and the hiring of additional staff needed to support these growth initiatives. In addition to the investment in these growth initiatives, payroll and compensation related costs in the second quarter were also impacted by a $0.6 million non-cash accounting adjustment to reflect a modification of Berna's long-term equity incentive plans. The second quarter also included $0.4 million of one-time severance costs while there were no severance costs in the prior year period. Net loss for the second quarter of 2022 was $3.0 million or 13 cents per share compared to net income available to common stock shareholders of $1.0 million or 6 cents per share in the second quarter of 2021. For the six months ended May 31st, 2022, the company is reporting a net loss of $6.2 million, heading back certain non-cash and one-time expenses. Non-GAAP adjusted EBITDA for this quarter was a loss of $0.9 million, bringing year-to-date non-GAAP adjusted EBITDA to a loss of $2.4 million. Taking a look at the balance sheet, cash and cash equivalents decreased $30.5 million from $56.4 million at the end of last fiscal year on November 30th, 2021 to $25.8 million on May 31st, 2022. About half of this reduction or $15 million was used to repurchase 1,779,000 shares of common stock under a stock buyback plan announced earlier. $6.9 million of cash was used to build inventory balances, which rose from $6.6 million at the fiscal year end to $13.5 million at the end of the second quarter. The adjusted EBITDA loss accounts for about $3 million of cash use, while about $2 million was used for capital expenditure. We paid about $2 million to enter the self-defense aerosol spray market with the acquisition of Fox Labs International on May 25th towards the end of the quarter. Now I'll hand it back over to Brian.