Byrna Technologies, Inc. Common Stock 2026 Q3 Earnings Call

Thank you everyone for joining us today. Over the past several months, we have made significant progress in building the foundations necessary to support sustainable long-term growth. Our results in the quarter reflect our ongoing transition, and while they remain below the level of performance we expect for Byrna, we are seeing signs that many of the initiatives we began implementing this year are starting to gain traction, and that reinforces my conviction in the opportunity ahead. We continue to believe Byrna is uniquely positioned at the intersection of personal safety and consumer self-defense. The need for a less lethal option remains significant. Consumer awareness of the category remains relatively low, and we believe the long-term opportunity to expand adoption is substantially larger than the business today.

Our focus since I arrived in March has been centered around three priorities: improving customer conversion and retail productivity, transforming how Byrna builds demand, and enhancing operational efficiency across the business. During the quarter, we began seeing encouraging progress across each of these priorities. Our direct-to-consumer metrics improved, with website sessions averaging approximately 29,000 per day in August, the highest since March this year. While conversion rates improved from June to August sequentially. We also expanded our social creator ecosystem to more than 50 active creators, helping us reach new consumer audiences and driving engagement up 95% across our social channels compared to Q1. Beyond the individual metrics, what encourages me most is that many of the building blocks we have set out to establish earlier this year are now coming into place, and we still have more to come to help re-accelerate growth.

Many of our refreshed marketing programs are now active. Our creator ecosystem is live and expanding. Our retail initiatives are rolling out ahead of the holiday season, and our leadership team has been strengthened. We are also seeing measurable operational progress, with first-pass yield exceeding 89% and approaching the 90% target we set for Q4, gross margins outperforming our internal expectations, and inventory beginning to trend lower. Collectively, these indicators reinforce our confidence that the actions we are taking today are creating a stronger platform for future growth. As we move toward the upcoming holiday season, our focus remains on execution. We still have meaningful work ahead of us and remain realistic about the uphill climb. At the same time, we believe the foundation we have spent much of fiscal 2026 building is materially stronger than it was six months ago.

I'll discuss more on our quarter and also introduce a longer-term outlook for the business in a bit. But first, I will turn the call over to Lori to review our results from the quarter.

Lori? Thank you, Conn, and good morning, everyone.

Let's review our financial results for the fiscal third quarter ended August 31, 2026. Net revenue for the third quarter was $15.3 million, down approximately 46% from $28.2 million in the prior year period. This was driven primarily by a decline in e-commerce sales and slower reorder activity from dealers and chain stores following substantial restocking in fiscal Q1 and slower than expected sell-through. Gross profit was $12.2 million or 79% of revenue, compared to $16.9 million or 60% of net revenue in the prior year quarter. Reported gross profit includes the impact of a $2.3 million tariff refund. Adjusting for this item, adjusted gross profit, a non-GAAP measure, was $9.9 million, representing an adjusted gross margin of approximately 65%.

The increase in adjusted gross margin is primarily attributable to operational efficiency gains in both manufacturing and supply chain, as well as favorable product and channel mix. Operating expenses for Q3 2026 were $15.1 million compared to $14.1 million for Q3 2025, an increase of 7%. The increase primarily reflects continued investment in new marketing initiatives, as well as $1.7 million in bad debt expenses related to two large international customers, partially offset by the change in variable selling expenses associated with the decrease in sales. As we've previously discussed, we expect incremental expense as our new commercial and consumer acquisition programs ramp. Those investments will precede their full potential revenue contributions, and outside of those targeted areas, we are managing spending against the current revenue base and continuing to evaluate costs.

We reported a net loss for the quarter of $2.9 million, or a loss of $0.13 per diluted share, compared to net income of $2.2 million, or $0.09 per diluted share in the same period a year ago. Adjusted EBITDA, a non-GAAP metric, for Q3 2026, was negative $1.4 million, compared to $4.1 million in the same period a year ago. Cash, cash equivalents, and marketable securities totaled $9.4 million as of August 31, 2026, compared to $9 million in the prior year period. It was $15.5 million in November 30, 2025, and $10.4 million at the end of the fiscal second quarter. Lower collections of accounts receivable weighed on cash during the quarter, and we ended the period with no debt.

Inventory totaled $30 million as of August 31, 2026, compared to $34.1 million in the prior year period, $32.7 million at November 30, 2025, and $30.4 million at the end of the fiscal second quarter. As we head into the holiday sale season, we expect inventory levels to decrease by $2 million-$3 million during the fourth quarter and to continue to decrease in 2027, leading to improved working capital efficiency. In summary, we believe we have a strong financial position today and the available resources to further invest in our long-term growth objectives. I'll now pass the call back to Conn to discuss more on the quarter and the actions underway across the business.

Conn? Thank you, Lori. As I mentioned in my opening remarks, we are starting to see encouraging early signs in many of the long-term growth initiatives we previously outlined.

For the remainder of today's call, I'd like to spend time specifically covering each of those areas in detail before getting into our longer-term outlook. Let me start with customer conversion and retail productivity. One of our primary objectives this year has been improving how effectively we convert consumer interest into purchases across both our direct-to-consumer and retail channels. We are beginning to see meaningful evidence that these efforts are producing results, both in initial discovery and in conversion. For Q3, website conversion improved from June to August sequentially. While we see ample room for continued improvement in conversion, this tells us that our early investments are starting to show initial signs of progress.

Heading into the holiday season, we expect conversion to continue moving in the right direction, both as a result of it being a higher intent period and as we apply our early learnings to better tune our approach. Getting into details, the improvement is being driven by several factors. First, we are doing a better job of targeting, meaning we are attracting more new consumers who are more likely to purchase. Through updated messaging, updated media placement, improved targeting, and added influencer partnerships, we are doing a better job of reaching audiences that are closely aligned with Byrna's products and mission. Second, once consumers arrive at byrna.com, we are doing a better job of educating them and ultimately assisting them in making an informed purchase decision. Our Find the Right Launcher quiz continues to generate valuable insights while helping consumers better understand the differences across our product portfolio.