Good morning. Welcome to the Byrna’s Fiscal Third Quarter 2023 Earnings Conference Call. My name is Rob and I’ll be your operator for today’s call. Joining us for today’s presentation are the Company’s CEO, Bryan Ganz, and CFO, David North. Following the remarks, we’ll open the call for questions. Earlier today, Byrna released results for its fiscal third quarter ended August 31st, 2023. Copy of the press release is available on the company's website. Before turning the call over to Bryan Ganz, Byrna Technologies’ Chief Executive Officer, I will read the Safe Harbor statement. Some discussions made held today include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Byrna’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 Relations section of our website, ir.bynra.com for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. No, I’ll like to turn the call over to Byrna’s CEO, Bryan Ganz. Sir, proceed.

Thank you, operator. And thank you everyone for joining us today. This morning, we filed our 10-Q with the SEC and issued a press release providing our financial results for the fiscal third quarter ended August 31, along with key business accomplishment. To begin today's call, however, I'd like to share some highlights and recent developments, including a discussion of the actions we're taking to address the recent DTC marketing challenges. Afterwards, I'll pass the call over to David to discuss our financial results in greater detail. And following that, I'll offer additional insights into our performance and our forward-looking strategy. And as usual, we will open the floor to questions from our publishing analysts at the end of the presentation. Okay. As we previously announced a few weeks ago, our total revenue for the third quarter was just $7.1 million, down from $12.4 million in the same period last year. This significant decline was due primarily to the advertising restrictions imposed by Meta and Google in March of this year. And interestingly, Twitter, the self-proclaimed last bastion of free speech, also banned Byrna advertising two months later. When these major platforms imposed their advertising bans, it had an immediate negative impact on daily web sessions. In the period from December 1, 2022 through March 31, 2023, while we could still advertise on these platforms, we averaged approximately 24,000 daily web sessions on Byrna.com. In April, just after the advertising ban, that number dropped to 10,570 daily web sessions. It took several more months for the advertising ban to negatively impact sales due to what we call the tail effect, where consumers that were reached prior to the advertising ban continue to come back to the Byrna site to make purchases. However, by the third quarter, we encountered a significant…

Thank you, Bryan. Let's discuss our financial results for the fiscal third quarter and get this out of the way. Net revenue for Q3 2023 was $7.1 million compared to $12.4 million in the fiscal third quarter of 2022. The decrease in revenue is primarily attributed to challenges in the company's direct-to-consumer marketing efforts, which resulted from reduced advertising during the six months since bans on Meta and Google platforms. Direct-to-consumer sales on the company's website and Amazon accounted for $3.3 million of the decline from the prior year period. Another $1.9 million of the difference was due to lower international sales. International sales are characterized by very large infrequent orders, which were high in Q3 of 2022 at $2.1 million, but low in Q3 of this year at only $0.2 million. Gross profit for the third quarter of 2023 was $3.2 million or 45% of net revenue compared to $6.9 million or 55% of net revenue for Q3 of 2022. The decrease in gross margin was primarily due to approximately $650,0 00 of charges to cost of goods sold for inventory write-downs and additions to reserves for excess and obsolete inventory which were recorded during Q3 of 2023. This charge consisted primarily of about a $400,000 addition to the reserve to cover specifically slow moving inventory. As a relatively new company, we haven't yet had a component of our reserve specifically for slow moving inventory. However, recent high inventory levels and low turns makes it necessary to add this component to the reserve now. Taking these one-time adjustments into consideration, gross margins are consistent with the prior year period. Operating expenses for Q3 2023 were $7.3 million compared to $8.3 million for Q3 of 2022. The decrease in operating expenses was primarily due to reduced marketing spend and ongoing cost management efforts. Net loss for Q3 2023 was $4.1 million compared to $1.5 million for the third quarter of the prior year. The increase in net loss was primarily due to the drop in revenue and secondarily to the addition to inventory valuation reserves. Adjusted EBITDA, on a non-GAAP, which is non-GAAP metric, for the third quarter of 2023, totaled a loss of $2.4 million compared to earnings of $0.3 million for Q3 2022. The decrease in adjusted EBITDA was primarily due to the increase in net loss previously noted. Cash and cash equivalents at August 31, 2023, totaled $13.7 million, $15.4 million at May 31, 2023. Inventory at August 31, 2023, totaled $16.7 million compared to $17.5 million on May 31, 2023. The company currently has no current or long-term debt. And that concludes my prepared remarks. I'll turn it back to Bryan.

Thank you, David. I'd like to provide some additional operational updates from Q3. In addition to our DTC marketing efforts, we continue to build on the strong success of our Premier Dealership Program, which we launched in the second quarter. At the end of Q3, we had a total of 16 Premier Dealers, of which 15 of these were onboarded in the last five months. Just as a reminder, these are brick-and-mortar stores that derive more than 50% of their revenue from Byrna products. In other words, they're dedicated Byrna stores. We are in the early days of our Premier Dealer rollout, but as these dealers become more integrated with our offerings and as we continue to increase the number of Premier Dealers that we have, we expect this channel to contribute significantly to our long-term sales growth. These dealers, in conjunction with participants in Byrna's side hustle program, play a pivotal role in expanding our customer reach with minimal upfront costs. The side hustle program empowers members of the Byrna community to become authorized Byrna resellers and serve as advocates for our products. These dedicated individuals typically operate without any traditional physical store, showcasing Byrna products at trade shows, gun shows, state fairs, boating shows, and other events, and capitalizing on their valuable network of contacts. This alignment not only provides them with a means of a livelihood, but effectively contributes to our growth strategy. During the third quarter, we witnessed substantial growth in this segment of our business as an increasing number of individuals explored the possibility of becoming dealers to the Byrna Side Hustle Program. Notably, Side Hustle Dealers are demonstrating clear pathways to becoming premier dealers, a development that further expands and strengthens Byrna’s network. And looking ahead, we're placing a stronger emphasis on our side…

[Operator Instructions] Our first question is from Jeff Van Sinderen with B. Riley Securities.

Good morning, everyone. And great to hear about the increase in web session recently. I'm wondering, can you speak a little bit more about the conversion build you're seeing with the new marketing versus what you saw in terms of marketing on Google and Meta previously and then maybe also speak more about the other marketing platforms that you're looking into or testing?

Yes, as I said, I don't have the numbers in front of me, but I think that we were about 0.65% conversion rate in our first quarter and the beginning of the second quarter through the end of March. And recently that has climbed to 0.9% which is consistent with our long-term conversion rate. So the thing that's so interesting is we expect to see high conversion rates when we have a lot of returning customers because they come to the website with the intent to buy something. So what is so encouraging now is that we have a very high percentage of first-time visitors to the website and new customers, and yet we're seeing the conversion rate increase. In addition to an increase in conversion rate, we are seeing an increase in average order value. So in September our average order value was $352.53. For the first 11 days of October, our average order value is $353.67. And if I look at during the period where we were advertising on Meta, our average order value was much closer to $300 as we had a lot of returning customers that were buying more ammo and more CO2 and more accessories. So again, Jeff, I think as I tried to point out, there was a concern, I know, that a lot of investors had that had we saturated the market, was it going to be difficult to find new investors? And I think the answer is -- new purchasers. And I think the answer is, if we can get people to the website, we can get them to convert. And we can get them to convert at historical rates. So that was, I think, the most encouraging part of this new advertising campaign.

Okay, good to hear. And then, you just mentioned ammo, so I'm wondering if there's any other color you can give us on ammo sales, and then also if you could touch on the 12 Gauge.

Yes, I mean, our ammo sales remain consistent. I have to say that when we -- when our ammo sales start to become a higher percentage of our overall sales, it's going to mean that we've stopped growing. So during these periods of rapid growth, obviously people are buying new kits, returning customers will come back and buy ammo and accessories. But we've not seen any significant change in our percentage of ammo sales.

Yes, ammo and accessories have remained consistently about 25% of sales and in Q3 that was 26%.

And in terms of 12 Gauge, the 12 Gauge sales honestly have been disappointing. What we've discovered is that less lethal 12 Gauge is not a thing for civilians. The existing market for less lethal 12 Gauge is really a law enforcement market. And although we're making good inroads with law enforcement on 12 Gauge, as I've always said, this is law enforcement is a very lengthy sales cycle. So I remain convinced that there is a good market for 12 Gauge over the long term. But we've not seen any significant increase in it currently. And honestly, our focus over the last several months has been overcoming this social media advertising ban. And every waking moment has been trying to pivot our advertising approach and focusing on our iconic and flagship products. So we really have not done any advertising of 12 Gauge. At this point, everything has really been focused on attracting new customers for the Byrna Launchers.

Okay, and then just one more, if I can squeeze it in. And just wanted to confirm, I think you said that you expected the cash generative in Q4, including what you're doing with inventory.

That's correct.

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Ganz for his closing remarks.

I just want to thank everybody for their support during what's been a very difficult period for the company. As I've expressed, I have complete faith in the team here at Byrna. I believe that we were able to identify the problem, find a solution, and implement it in a relatively short period of time. I believe that we are back on our growth trajectory as we will see sales and cash both increases. Again, I appreciate everybody's support. Thank you very much.

Thank you for joining us today for B Byrna's Fiscal Third Quarter 2023 Conference Call. You may now disconnect.