Byrna Technologies, Inc.

Good morning. Welcome to Berna's Fiscal Second Quarter 2023 Earnings Conference Call. My name is Kevin, and I'll be your operator for today's call. Joining us for today's presentation are the company's CEO, Brian Ganz, and CFO, David North. Following the remarks, we'll open the call for questions. Earlier today, Berna released results for its Fiscal Second Quarter ended May 31, 2023. A copy of the press release is available on the company's website. Before turning the call over to Brian Gans, Berna Technologies' Chief Executive Officer, I'll read the Safe Harbor statement. Some discussions held today 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 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.berna.com, for further information regarding forward-looking statements and reconciliation of non-GAAP results to GAAP results. Now, I'd like to turn the call over to Berna's CEO, Brian Ganz. Sir, please proceed.

Thank you, Kevin, and thank you, everyone, for joining us today. As Kevin mentioned, this morning we filed our 10Q with the SEC and issued a press release providing our financial results for the second quarter ended May 31, 2023, along with key business accomplishments. Today, I would like to start by providing a few key highlights and recent business developments. Then I will hand the call over to David North to discuss our financial results in more detail. After that, I'll come back and provide some color on our performance, touching on both those areas of the business we are pleased with and the underperforming areas of the business that require our attention. After that, we can take questions from our publishing analysts. And with that, let's begin. First, production. I am pleased to report that during the quarter, we commenced serial production of the new, more powerful Berna LE launchers. and successfully worked through the backlog and wait list of 5,800 units reported at the end of the first quarter of 2023, shipping out a total of 6,235 Berna LE kits during Q2. Berna is continuing to ramp up production of the Berna LE, and we intend to release it on Amazon this week. We believe while there is still room for improvement in terms of manufacturing efficiency, the manufacturing and supply chain challenges that we face while rolling out the Berna LE are firmly behind us. We also commenced production and shipment of our new revolutionary 12-gauge less lethal round during the quarter. The round was voted best of SHOT Show 2023 and was recently favorably reviewed by Firearms News. A copy of this article is available to view on our website in the 12-gauge section and is linked to our press release issued this morning. These accolades appear to be well-deserved, according to Biokinetics, a third-party testing lab. After extensive testing of Berna's round against NATO's AEP99 standards, Berna's 12-gauge kinetic rounds were judged to be, and I quote, extremely safe. AEP99 is a thorax injury risk assessment that quantifies the risk of rib and sternal fractures resulting from impact through a combination of empirical and numerical evaluations. This testing concluded that Burna's 12-gauge kinetic rounds are extremely unlikely to cause serious injury or death even when firing ranges inside of five feet. As a result of this very favorable report validating Burna's claims regarding the safety of its revolutionary new shotgun round and the demonstrated accuracy and effectiveness against humans, we were seeing tremendous interest from both domestic and international law enforcement agencies. I expect to be able to report the adoption of Berna's 12-gauge kinetic round by several large law enforcement agencies on our next quarter's earnings call. Next, premier dealers. Berna saw strong growth in dealer sales during Q2, posting a 47% year-over-year increase in revenue. This resulted in part from our focus on the development of premier dealers. Premier Dealers are owner-operated brick-and-mortar stores that derive more than 50% of their revenue from Berna products. Drawing upon the success of Berna's own retail store in Las Vegas and our dealer of the year, Live Safe Hawaii, we decided to institute a new Premier Dealer program for entrepreneurs that share Berna's passion for less lethal and believe in our mission of saving lives by giving consumers and law enforcement professionals a safe, effective, and reliable non-lethal alternative to traditional firearms. In the first 90 days of rolling out this quasi-franchise program, Berna was able to sign three new premier dealers. This includes Greener Motors, Integrated Marine Systems, operating as Live Safe SoCal, and KPGS, operating as Berna Manteca. The owners include a trucking company that came to embrace our mission when they provided Berna's to all of their drivers, a yacht restoration company that started selling Berna's at boat shows, and a private security company that issued Berna's to all its security guards. You can see the interview with the owner of the security company, Jim Vieira, on Berna's website, Berna Hot Take Episode 11. In the first 90 days of signing on with Burna, these three dealers have generated more than $180,000 in new business. Burna Latam. Burna also recently landed three large law enforcement accounts in Argentina, Cordoba, Lanus, and Buenos Aires. The agencies have ordered a combined 3,000 Burna SD launchers and ammunition. The orders, which total approximately 5 million U.S. dollars, will be filled by Berna Letem's distributor in Argentina, Bursa. So while they do not show up in Berna's revenue numbers, they are nonetheless a big win for Berna in terms of credibility with law enforcement and validation of the Berna products. Berna has benefited from a unique political situation in Argentina as the two leading candidates for presidency have been promoting Berna by name, citing Berna's non-lethal handguns as the answer to both police violence and street crime in Argentina. You can see these stories on Berna's website. Based on our success in Argentina, Berna's head of law enforcement training, Wayne Moody, has been invited to Brazil next week to speak at the Brazilian Congress of Municipal Guards and Public Safety. There will be over 1,000 government officials in attendance from 200 different municipalities. The subject of Wayne's presentation will be the use of less lethal devices, such as Burna, to manage threats to the public without the need to resort to lethal force. Wayne Moody, who heads up our law enforcement training program, is a highly decorated member of the Galveston PD and former SWAT commander. He brings more than 30 years of policing experience to Burna. In anticipation of Wayne's visit, several high-ranking Brazilian police officers who will be in attendance visited Berna's Fort Wayne production facility in June to inspect our operations and test fire the Berna launchers. While neither Berna LATAMs nor Berna's sales are reflected in Berna's reported numbers, these recent wins underscore the importance of Berna's Argentinian subsidiary and the long-term growth opportunity for Burna in the Latin American market. Finally, Australia. In Q2, Burna secured the company's first law enforcement contract in Australia, the New South Wales Correctional Facility. This achievement marks a significant milestone for Burna's regional expansion, establishing a promising foundation for increased market penetration in the large Australian market and the broader Asian Pacific region. Before I go any further, I'd like to turn the call back over to David to discuss our financial results for the quarter in greater detail. David?

Thank you, Brian, and good morning, everyone. Let's discuss our financial results for fiscal Q2. Net revenue for the second quarter of 2023 declined slightly by 1% year over year to $11.5 million from $11.6 million in Q2 of 2022. The slight decrease in sales are primarily due to a decline in international orders, specifically a one-time $1.1 million order from South Africa, which was recorded last year in Q2, as well as a temporary drop in online sales due to production delays affecting Burna LE products. The decrease in sales was offset by a $900,000 increase in sales domestic dealers, which were up 47% year over year. Gross profit for the second quarter of 2023 increased to $6.2 million from $6.1 million in the prior year period, Gross profit margin for the second quarter of 2023 improved to 53.9% from 52.7% in the same period last year. The improvement in gross profit and gross margin was primarily due to the decrease in the proportion of sales to lower margin international channels. Gross margin improvements were slightly offset by challenges in production and supply chain disruptions early in the quarter. On a sequential basis, gross margin declined due to both customer mix a larger percentage of lower margin dealer and international sales in Q2, as well as unfavorable manufacturing variances resulting from lower production volumes and resulting scrap as the factory worked to get the Berna LE into serial production. Operating expenses were $7.0 million. That's a 20% decrease from $8.7 million in Q2 of 2022. This reduction primarily resulted from a $600,000 decrease in payroll costs a reduction in marketing spend of $600,000, and lower professional fees and insurance costs of $400,000. Turning to our profitability measures, we recorded a net loss of $1.1 million, marking a 64% improvement from $3.0 million in the prior year period. The improvement was the result of reduction in operating expenses that I just mentioned. Adjusted EBITDA, which is a non-YAP metric, improved by $1.6 million to $700,000 in the second quarter of 2023 compared to a $900,000 loss in the second quarter of 2022. The improvement in EBITDA primarily stems from slightly higher margins coupled with the decrease in operating expenses as previously mentioned. On to the balance sheet, as of May 31st, 2023, We had $15.4 million in cash and cash equivalents, which was up from $14.4 million at the end of the fiscal first quarter on February 28th, 2023. At quarter end, we also held $17.5 million in inventory compared to $18.0 million at the end of the first quarter. We're also continuing to maintain a debt-free balance sheet That concludes my prepared remarks. I'll now turn it back to Brian.