Byrna Technologies, Inc.

Greetings and welcome to the Berna 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 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 Investors Select 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 Gant. Sir, please go ahead.

Thank you very much. Good morning, everyone, and thank you for joining us for BERNA's fiscal year 2022 third quarter earnings call. As usual, David North will be discussing our financial results, after which time I will provide some additional color on the quarter and discuss recent events. I'd like to start by turning the call over to David so he can discuss our third quarter financial performance. David and I will be taking questions at the conclusion of the presentation. David?

Thanks, Brian, and thanks, everyone, for joining us today. Let's start with a walk down the third quarter's income statements. Third quarter revenues came in at $12.4 million, an increase of 43% over revenues of 8.7 million in the third quarter of 2021. Revenues were also up 0.8 million from the second quarter of this year, making this the third consecutive quarter of revenue growth in 2022. We ended the quarter with $1.7 million of unshipped orders, all of which we expect to ship this quarter. Berna's gross profit margin was 55.4% after $0.2 million of charges for inventory reserves and another $0.2 million of unfavorable manufacturing variances. Our move of our manufacturing operations into our larger new greenfield facility in Fort Wayne, Indiana went well and we're back up running smoothly and experiencing higher levels of both efficiency and quality in this larger, more efficient facility. Nevertheless, some minor startup inefficiencies are inevitable in such a move, and the unfavorable manufacturing variances were a result of those. Gross margin was favorably affected by a variance of about $0.1 million as a result of receiving our first raw material shipments by ocean freight. And we anticipate further margin benefits as we transition more of our incoming shipments to ocean freight from the far more expensive air freight shipments that the company's been relying on for the past two years. The reason we're now in a position to transition to ocean freight is that we've built up adequate inventory levels so we can wait the 60 days or more that it takes to sail a container across the Pacific. The increase in levels of both finished goods and raw materials should significantly reduce the risk of any unforeseen supply chain disruptions. Operating expenses were $8.3 million in the third quarter, which is up from $6.7 million for the same period one year ago, but is relatively flat in comparison with the past three fiscal quarters. Our non-GAAP adjusted EBITDA measure, which we use as an estimate of cash flow from ongoing operations, was a positive $0.3 million in the third quarter compared to a loss of $0.8 million for the third quarter of fiscal 2021. Now let's take a look at the balance sheet. Despite our positive adjusted EBITDA, cash dropped $1.4 million from $25.9 million at the end of the second quarter to $24.5 million at the end of the third quarter of 2022. That's because inventory increased by $1.9 million from $13.5 million at the end of the second quarter to $15.4 million. As I've explained, we've built inventory during the third quarter to allow for less expensive but slower ocean freight We've also built inventory levels in anticipation of the traditionally very strong fourth quarter. We expect to see a reduction in inventory levels by year-end as a result of the expected surge in holiday sales during the fourth quarter. Total assets were up $1.2 million from the end of the second quarter to $58 million. At the same time, total liabilities were down $0.4 million with an increase in shareholders' equity of $1.6 million in comparison to the end of the previous quarter. The company continues to have no current or long-term debt. Now I'll hand it back over to Brian.