Byrna Technologies (BYRN) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The company reported significant revenue growth for the three and six months ended May 31, 2025, with net income reaching $2.4 million and $4.1 million, respectively, while cash and cash equivalents decreased significantly due to negative operating cash flow. Condensed Consolidated Balance Sheets - Key changes from November 30, 2024, to May 31, 2025, include a $9.8 million decrease in cash and cash equivalents, a $12.3 million increase in inventory, and a $3.9 million increase in accounts receivable[8] Balance Sheet Highlights (in thousands) | Balance Sheet Items | May 31, 2025 (Unaudited) | November 30, 2024 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $7,001 | $16,829 | | Accounts receivable, net | $6,536 | $2,630 | | Inventory, net | $32,286 | $19,972 | | Total current assets | $55,738 | $50,958 | | Total Assets | $77,450 | $71,922 | | Total Liabilities | $17,314 | $17,553 | | Total Stockholders' Equity | $60,136 | $54,369 | Condensed Consolidated Statements of Operations - Net revenue grew 40.6% YoY for the second quarter and 48.1% YoY for the first six months of fiscal 2025[9] Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $28,505 | $20,269 | $54,695 | $36,923 | | Gross Profit | $17,564 | $12,560 | $33,488 | $22,199 | | Income from Operations | $3,326 | $1,913 | $5,022 | $1,749 | | Net Income | $2,427 | $2,077 | $4,089 | $2,094 | | Diluted EPS | $0.10 | $0.09 | $0.17 | $0.09 | Condensed Consolidated Statements of Cash Flows - The significant cash outflow from operations in H1 2025 was primarily driven by a $12.3 million increase in inventory and a $3.9 million increase in accounts receivable, despite a net income of $4.1 million[11] Cash Flow Summary for the Six Months Ended May 31 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(9,235) | $5,875 | | Net Cash Used in Investing Activities | $(590) | $(693) | | Net Cash Provided by (Used in) Financing Activities | $93 | $(925) | | Net (Decrease) Increase in Cash | $(9,828) | $4,290 | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies and provide further information on financial statement items, including revenue drivers, a joint venture sale, increased advertising, and a stock buyback program. - The company specializes in non-lethal self-defense launchers and accessories, sold primarily through e-commerce and retail channels in the United States, operating manufacturing facilities in Indiana and South Africa[16] - In August 2024, the company sold its 51% stake in the Byrna LATAM joint venture and entered into an exclusive licensing agreement, generating $0.8 million in royalty revenue in Q2 2025[34] - Advertising costs increased to $7.9 million for the six months ended May 31, 2025, up from $5.3 million in the prior-year period[36] - As of May 31, 2025, one customer accounted for approximately 37% of the total accounts receivable balance[95] Management's Discussion and Analysis (MD&A) Management attributes strong revenue growth to a new marketing strategy, leading to increased sales across channels and improved gross margin, despite a significant use of cash for operations to fund working capital. Overview - The company's core mission is to provide innovative non-lethal security solutions for both civilian self-defense and professional law enforcement/private security markets[101][102] - On July 31, 2024, the Board approved a stock buyback program of up to $10 million to return capital to shareholders and offset dilution from stock-based awards[105] Results of Operations - The 48.1% revenue increase for the first six months of 2025 is attributed to a new marketing strategy implemented in September 2023, which shifted advertising from social media to celebrity endorsers[117][118] - Gross margin for H1 2025 increased to 61.2% from 60.1% in H1 2024, driven by higher production volume, better absorption of fixed costs, and reduced reliance on price discounts[120] Revenue Growth Analysis (Q2 2025 vs Q2 2024) | Channel | Q2 2025 Revenue (M) | Q2 2024 Revenue (M) | Growth (%) | | :--- | :--- | :--- | :--- | | Total Net Revenue | $28.5 | $20.3 | 40.6% | | Direct to Customer | $16.6 | $14.8 | 12.2% | | Domestic Dealers/Retailers | $8.4 | $3.8 | 121.1% | Non-GAAP Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $2,427 | $2,077 | $4,089 | $2,094 | | Adjusted EBITDA | $4,300 | $2,780 | $7,069 | $3,799 | Liquidity and Capital Resources - Cash and cash equivalents decreased by $9.8 million during the first six months of fiscal 2025, from $16.8 million to $7.0 million[130] - Cash used in operating activities was $9.2 million for H1 2025, a significant shift from $5.9 million cash provided by operations in H1 2024, mainly due to a $12.3 million increase in inventory and a $3.9 million increase in accounts receivable[131][132] - Capital expenditures were higher than typical in H1 2025 due to the build-out of retail stores and a new ammunition manufacturing facility, but are expected to decrease in the second half of the year[133] Quantitative and Qualitative Disclosures about Market Risk This section is not applicable as per the report. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2025, with no material changes to internal controls over financial reporting during the quarter. - The CEO and CFO concluded with reasonable assurance that the company's disclosure controls and procedures were effective as of May 31, 2025[140] - No changes occurred during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[141] PART II – OTHER INFORMATION Legal Proceedings The company is occasionally involved in various legal proceedings but believes any liability from current proceedings would not materially adversely affect its financial condition. - The company states that at this time, any liability from pending legal proceedings would not have a material adverse effect on its business or financial condition[143] Risk Factors There have been no material changes to the risk factors disclosed in the company's 2024 Form 10-K, though the report highlights the potential impact of tariffs, sanctions, and other trade barriers. - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended November 30, 2024[144] - The company specifically notes risks related to tariffs, sanctions, and trade barriers, which could affect component imports, raise prices, and harm operating performance, and is actively reviewing sourcing options to mitigate these risks[145] Issuer Purchases of Equity Securities The company has a stock buyback program, approved on July 31, 2024, for up to $10 million, and repurchased 3,927 shares for approximately $55,000 during the three months ended May 31, 2025. - The stock buyback program, approved on July 31, 2024, authorizes up to $10 million in repurchases over two years[146] Share Repurchases in Q2 2025 | Period | Number of Shares Purchased | Average Cost per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | March 2025 | 0 | $— | $6,500,000 | | April 2025 | 3,927 | $14.0 | $6,445,000 | | May 2025 | 0 | $— | $6,445,000 | | Total | 3,927 | $14.0 | | Other Information During the quarter, two insiders, Northeast Industrial Partners LLP (an entity associated with CEO Bryan Ganz) and Herbert Hughes, adopted Rule 10b5-1 trading plans to sell shares of common stock. - In April 2025, Northeast Industrial Partners LLP (related to CEO Bryan Ganz) and director Herbert Hughes adopted Rule 10b5-1 trading arrangements to sell up to 100,000 and 15,000 shares, respectively, starting in July 2025[150]