Byrna Technologies Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 9, 2024

There are 5 speakers on the call.

Operator

Good morning, and welcome to Verna's Fiscal Third Quarter 20 24 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, Laurie Kearns. Following the remarks, we'll open the call to questions. Earlier today, Werner released results for its fiscal 3rd quarter ended August 31, 2024.

Operator

A copy of the press release is available on the company's website. Before turning the call over to Brian Gans, Werner 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 Werner's most recent 10 ks and 10 Q filings for a more complete description of risk factors that could affect these projections and assumptions.

Operator

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 section of our website, ir. Burner.com, for further information regarding forward looking statements and reconciliations of non GAAP results to GAAP results. Now, I'd like to turn the call over to Verna's CEO, Brian Ganz. Sir, please proceed.

Speaker 1

Thank you, Kevin, and thank you everyone for joining us today. This morning, we issued a press release providing our financial results for the fiscal Q3 ended August 31, 2024, as well as highlighting key business accomplishments for the quarter. We will be filing our 10 Q with the SEC on Friday of this week. I'll start by passing the call to Laurie Kearns, our CFO, who will discuss our financial results for the Q3. Following her remarks, I'll review the operational highlights for the Q3, which resulted in the record $20,900,000 of revenue and our continued GAAP and non GAAP EBITDA profitability.

Speaker 1

I will then offer insights into our go forward strategy. Lastly, I'll open the call to questions from our covering research analysts. Laurie?

Speaker 2

Thank you, Brian, and good morning, everyone. Let's review our financial results for the fiscal Q3 ended August 31, 2024. Net revenue for Q3 2024 was $20,900,000 a 194% jump from the $7,100,000 reported in the fiscal Q3 of 2023. This $13,800,000 increase is primarily due to the transformational shift in our advertising strategy, which began in September 2023. The ongoing success of our celebrity endorsement strategy helps drive the $10,500,000 increase in direct to consumer revenues through our website and Amazon compared to the prior year period.

Speaker 2

For the 1st 9 months of 2024, net revenue totaled $57,800,000 which is up 114 percent from $27,000,000 in the 1st 9 months of 2023. Gross profit for Q3 twenty $13,000,000 or 62.4 percent of net revenue, compared to $3,200,000 or 44.6 percent of net revenue for Q3 2023. The improvement in gross profit margin is largely attributable to additional sales through our higher margin DTC channels and intensive cost component reduction effort, which was spearheaded by Berna's engineering team and the economies of scale resulting from increased production volumes. For the 1st 9 months of 2024, gross profit was $35,200,000 or 60.9 percent of net revenue compared to $14,600,000 or 54.1 percent of net revenue for the same period in 2023. Operating expenses for Q3 2024 were $12,200,000 compared to $7,300,000 for Q3 2023.

Speaker 2

The increase in operating expenses was driven by an increase in variable selling costs, such as freight and sales transaction processing fees, an increase in marketing spend related to the company's new advertising strategy and an increase in payroll, primarily in marketing and engineering, as the company made focused improvements in these areas. For the 1st 9 months of 2024, operating expenses were $32,600,000 compared to $21,500,000 for the same period in 2023, reflecting a 52% year over year increase. Net income for Q3 2024 was 1,000,000 dollars a $5,100,000 improvement from a net loss of $4,100,000 for Q3 2023. For the 1st 9 months of 2024, net income was $3,100,000 compared to a net loss of $7,400,000 in the 1st 9 months of 2023, which was a $10,500,000 improvement. Adjusted EBITDA, a non GAAP metric, for Q3 2024 Totaled $1,900,000 compared to a negative $2,400,000 for Q3 2023.

Speaker 2

This brings adjusted EBITDA for the 1st 9 months to $6,300,000 $8,100,000 improvement from the prior year. Cash and cash equivalents at August 31, 2024 totaled 20.1 to $20,500,000 at November 30, 2023. Inventory at August 31, 2024, totaled $19,800,000 compared to $13,900,000 at November 30, 2023. The company has no current or long term debt. I'll now turn the call back over to Brian.

Speaker 1

Thanks, Laurie. As you can see from the financial results, we are continuing to see significant growth even during what is traditionally a seasonally slow quarter for us with the Dog Days of summer. For the quarter, revenues were up 194% compared to the same period last year. For the full year, revenues are expected to be up by almost 100%. What we didn't initially expect sequential growth from Q2 to Q3, which was now our 4th consecutive quarter of sequential growth, the slow seasonal effect of Q3 was overwhelmed by the strong growth for burnout.

Speaker 1

The 4 quarters of sequential growth highlights the continued impact of our celebrity endorsement advertising strategy. And I think also the ongoing normalization of both less lethal product category and Burnham's growing brand awareness. Since launching the celebrity endorsement advertising program in Q4 of last year, we've consistently maintained a minimum ROAS or return on advertising spend of at least 5x, which is highly accretive to burn its bottom line. This has resulted in driving burn its profitability. As a result of this burn it is now a stable profitable enterprise with positive cash flow and as Laurie mentioned approximately $20,000,000 of cash in the bank.

Speaker 1

Today, we are working with more than 10 celebrity influencers who are actively evangelizing Berna's less lethal mission and helping to normalize less lethal weapons as a legitimate alternative to lethal force. Most importantly, we are continuing to success with a number of influencers that have been on board for many months, including Glenn Beck, Bill O'Reilly, Judge Jeanine Pirro, Dan Bongino and Jesse Kelly. In fact, Sean Hannity, our original celebrity endorser has been promoting burner for well over a year now and is still generating more than $1,000,000 a month in sales. Our high margin DTC or direct to consumer business continues to be the dominant factor in our sales growth. Of the $20,900,000 in revenue in Q3, DTC sales on burnett.comandamazon.comaccounted for $15,500,000 or 74 percent of total sales compared to just $5,000,000 or 70% of total revenue in the same period last year.

Speaker 1

Keep in mind that the DTC sales channel is our highest margin sales channel with a gross profit percentage of 68.7% in this past quarter. While we were initially focused solely on terrestrial radio, when we pivoted away from social media advertising, we have since expanded to additional advertising mediums including podcasts and TV. Keep in mind that the reason our advertising program is generating such strong results, however, is not the medium. It's the endorser. As I've said before, we took a page out of Phil Knight's playbook at Nike by using celebrity endorsers.

Speaker 1

That said, we are now beginning to run traditional 32nd ads on Newsmax. These ads do not feature an endorser and they're doing extremely well, generating a 6.3x ROAS since the inception and a 5.6x ROAS over the past 13 weeks. Based on our success with Newsmax, we started advertising on TBN and NewsNation and we have been approached by OAN and the CW. As Verna gains greater brand awareness and the less lethal industry gains greater public acceptance, we expect that additional broadcast and cable networks will start to allow us to advertise. In fact, personally, I suspect that it's only a matter of time before we're able to run our ads on Fox, CNN and MSNBC.

Speaker 1

Even without the ability currently to advertise on these mainstream broadcast and cable networks, we believe that there is still significant upside growth to be had simply by expanding our roster of celebrity endorsers on terrestrial radio, podcasts and the smaller cable networks. Currently, we are working with celebrity endorsers across several platforms, including Iheart, Westwood One, Salem Media and Radio America among others. Not only does each of these networks have many additional celebrity endorsers that we can work with, but there are also a number of other networks that we have not even begun to tap into. Looking ahead, we plan to continue growing our celebrity influencer program by adding 2 to 3 additional personalities each quarter. We recently signed Governor Mike Huckabee on TBN, and we have agreements in place with nephew Tommy of the Steve Harvey Show and Dave Ramsey, 2 extremely well known celebrities.

Speaker 1

These celebrities are set to kick off in the next few months. In addition to our paid advertising, we have been pursuing the earned media route with the help of a public relations firm. Our goal is to both drive brand awareness for Burna and to continue to normalize the less lethal industry. To date, Burn has been featured on more than 2 dozen news programs on channels such as ABC, Fox, Newsmax, NewsNation and numerous local radio and television shows. Interestingly, not every interview is about the benefits of less lethal.

Speaker 1

Many of these interviews are simply about business, like the port strike or inflation or law enforcement topics such as school shootings or the trouble at the border. Nevertheless, these interviews help legitimize burn up and establish me, Luan Pham, our Sales and Marketing Officer and Josh Sherrard, Head of Law Enforcement as credible spokespeople. While the goal is not necessarily to drive immediate sales, when I was on Fox News with Dana Perino last week, web sessions jumped from 200 people to more than 1900 people, while I was on air and drove record revenues for a day in which we were not running a sale, which proves that when people learn about burnout and the non lethal industry sales go up. The added benefit is that it drives people to look for burnout not just online, but also at brick and mortar stores. Over the last few weeks, Bass Pro Shop and Cabela's upgraded our status from a regional pilot program to a national account.

Speaker 1

This increased our store count from 42 stores to 137 stores and allowed us to bring on a significant number of additional new products. At the same time, both Sportsman's Warehouse and Buy Mart substantially increased their purchases in anticipation of the upcoming holiday season due to strong customer interest and a growing acceptance of less lethal as a legitimate alternative to lethal force. As these outlets increase their efforts to move to burnout, we are hopeful that we can convince them to open stores within a store. This model has proven quite successful at a number of FFL gun stores and I think can be successfully adopted by these big box retailers. With the new partnerships kicking off at the end of the Q4, we expect our discretionary marketing spend to tick up by $200,000 a month this quarter.

Speaker 1

As I look to 2025, we expect to further increase our budget for celebrity influencers by approximately 50% for the year as compared to our 2024 spend. We are holding our growth in advertising spend to 50% for 2025. As you need to keep in mind, we are a manufacturer and we cannot outpace our ability to produce launchers. We are not selling insurance or software that can be easily downloaded. We are selling complicated products built from over 100 parts, most of which are unique custom made components.

Speaker 1

Moreover, burner launchers must be airtight holding air at over 800 PSI. And of course, most importantly, they must be able to reliably stop an assailant. Beyond our advertising efforts, we are actively expanding our retail store footprint. As we see a strong opportunity to reach customers through dedicated burner retail stores. As of today, we have signed lease agreements for new stores in Nashville, Tennessee, Scottsdale, Arizona and Salem, New Hampshire with plans to finalize a lease in Pasadena in the next few weeks.

Speaker 1

We also intend to open a retail location at our new Verna ammo manufacturing facility in Fort Wayne. These new stores are based on the successful proof of concept store that we opened in Las Vegas 2 years ago. The Las Vegas store currently has a run rate of more than $1,000,000 a year at a 65% gross profit margin with relatively modest operating costs when you compare it to other retail stores. At this level of sales, the burn it store is generating contribution margins of approximately 35%. Moreover, customers who demoed our products in store convert at around 80% rate.

Speaker 1

That means 8 out of 10 people that shoot the product by a launcher. This compares to our online conversion rate of 1.2%. We intend to open these new stores in the coming months with most of them open by the end of this calendar year. Our goal is to use these stores to further validate and refine our store model as we prepare for a much broader rollout. Specifically, we plan to use these stores to perfect the look and feel of the physical premises, develop the store operating manuals, build out the employee training programs, develop and debug the ERP and point of sale computer systems, work out the advertising strategies and finalize the product and services to be offered at these stores.

Speaker 1

If the stores perform as expected, we will begin rolling out additional retail stores later next year. We believe that the market could easily support 100 or more of these stores across the U. S. The precise split between company owned and franchised stores will be determined based on how quickly we feel that we could support the rollout of new stores from a product availability perspective. In other words, how quickly can we manufacture the product to support these stores.

Speaker 1

If we believe we could roll out 100 stores in short order, we will need to rely more heavily on franchisees to be able to roll out such a large number of stores quickly. On the other hand, if we determine that we could only support 20 new stores a year, we will likely keep these as company owned store operations because the margins of course are much, much higher. We will update you in the near future as we open these locations. On the international front, as our store model comes online, we're making strong progress overseas. As you may have seen, we made several announcements throughout the quarter that demonstrate our traction in Latin America and highlight the region's significant growth potential.

Speaker 1

With deployments in Uruguay and the expanding programs in Argentina, such as the airport security agency, so we are now carried by every airport guard all through Argentina. We continue to be the leading solution as these large law enforcement agencies shift towards less lethal alternatives. Because of this success in South America, we made the strategic decision in Q3 to transfer our 51% stake in Bernalatam to our joint venture partner, Fusati. We felt that the accounting and reporting requirements of a U. S.

Speaker 1

Public company limited the ability of our startup company in Argentina to rapidly grow. This agreement enables Verna to fully recognize the revenue from future sales to BERNAD TAM and also to earn royalties on every launcher produced in Argentina. The royalty starts at $45 per launcher and grows to 55 dollars $65 in years 2 3, respectively. Based on current projections, this should add more than $1,000,000 in royalty income next year. By restructuring our relationship, we have optimized our ability to allocate resources more effectively, while Birna LatAm can now operate more nimbly on developing opportunities, particularly with major law enforcement agencies in the region.

Speaker 1

We will provide dedicated support to Berner LatAm as it pushes to gain access in key markets, particularly Brazil. Importantly, this sale means that Berner no longer needs to report Berner LatAm's losses as it's in its early years of operation in our financial statements, which will improve our reported net income and will allow us to focus on our core markets. We have structured the deal so that we have the right to reacquire our stake in 3 years should burner LatAm reach critical scale and should it be able to implement the accounting and internal controls necessary to be part of the U. S. Public company.

Speaker 1

In the meantime, burner will continue to manufacture burner products, maintain local inventory, offer customer service in the local language, manage invoicing and collections in the local currency. Ultimately, this move is expected to optimize operations and increase efficiencies across both North and South America. This quarter, we also expanded our sales reach into Mexico. After working with our distributors in the country to partner with one of the country's government offices, we are able to create a federally certified training program for our products. So this means that once a Mexican citizen completes the training program, they are able to legally use our launches throughout the country.

Speaker 1

In conclusion, as our international presence grows, particularly with our recent expansions in Latin America and Mexico, Verna is experiencing very strong demand across both consumer and institutional channels. This has continued into the start of the Q4. In September, our 1st month of the first quarter, and traditionally our weakest month of the seasonally strong Q4, sales were $8,300,000 or $275,000 a day. This is up from $220,000 a day in the quarter we just finished. The math is quite easy.

Speaker 1

If we continue this run rate and we have every reason to believe we will, sales for the quarter should be $25,000,000 compared to analyst consensus of $21,650,000 for the quarter. What makes us all the more remarkable is that in 2018, the year before we introduced the burnout launcher, our sales for the entire year was 252,000. We now do more than that every single day, Saturdays Sundays included. As we continue to post record sales, our focus has shifted to scaling up production to meet the increasing demand. In Q3, we produced over 55,000 units, allowing us to build sufficient inventory to support the anticipated strong holiday selling season and the election surge and to prepare for the upcoming launch of our compact launcher in summer of 2025.

Speaker 1

To further boost our production capacity, we are implementing a partial second shift this quarter with plans to operate a full second shift by the end of Q1 of 2025. Additionally, we're adding a third production line, which can be used for new products, engineering builds and rework. We are also scaling up domestic ammunition production in Q4 by building a new facility 4 miles from our existing launcher facility in Fort Wayne, Indiana. The new ammunition facility expected to be operational by year end will help us increase our overall capacity for ammunition. It reduces the risk of a supply chain disruption by having ammo produced here in the U.

Speaker 1

S. It shortens our lead time and it ensures that we can offer the full range of ammunition that is made in America. Even before the recent port strike discussions, we had already begun dual sourcing key components as part of our long term strategy to mitigate supply chain risks. These efforts continue to help us maintain supply continuity if an issue arises like this port strike or a worldwide pandemic in the future. Last week, I was at the factory and I announced that we are raising the starting wage for our production line workers by $2 an hour or roughly 10%.

Speaker 1

We also raised wages for all factory employees by 10%, effective this week. In addition, we're offering bonuses for perfect attendance records that can add up to $2,500 a year and we are giving our employees a 3rd week of vacation after 2 years of service. We decided to make these changes to attract and retain the very best talent. With this increase, we are now one of the best paying companies in Fort Wayne. And this is not just about remaining competitive in the labor market.

Speaker 1

It's about ensuring that we have the very best workers to meet the growing demand and to maintain high levels of productivity and quality. This investment in our workforce is part of a broader strategy to sustain operational efficiencies as we continue to grow. These investments are critical to maintaining our growth momentum without interruption. At the same time, our initiatives like dual sourcing and scaling domestic production are designed to drive long term efficiencies and support growth. By scaling our launcher and ammunition production capabilities, we are positioning Verna to meet the continued expected growth in demand while we prepare for the launch of our compact launcher and future product lines later next year.

Speaker 1

In conclusion, we believe that we are now just scratching the surface of our total addressable market and we have a significant runway for future growth. While we don't expect to maintain the same 100% annual growth rate that we're experiencing this year and while we do not expect Q1 2025 to be higher sales revenue than Q4 of 2024, we are confident that this momentum will carry us to record growth and profits in 2025, driven by the continued momentum of our advertising program and the free earned publicity generated by our public relations firm. Also as we continue to expand the roster celebrity endorsers and maintain a 5x row as we will see sales growth simply from the additional celebrity endorsers. We also expect this exposure to drive incremental sales, not only through the advertising itself, but through the add on effect of friends and family recommendations. Friends and family is still one of our most significant drivers of sales.

Speaker 1

And as we find more and more new customers, each of them bring their own cadre of friends and family with them. On top of this advertising driven growth, the launch of our retail of our new retail stores and mobile trailers will provide additional sales channels and brand visibility. The introduction of new products including the compact launcher in the summer 2025 is also expected to drive incremental growth as we expand our target audience to include women and those seeking smaller easier to carry easier to carry and easier to conceal alternatives. We are also strategically investing in initiatives designed to enhance shareholder value. In the Q3, we authorized a $10,000,000 share buyback and we have already repurchased $3,000,000 in shares at an average price of $10.25 demonstrating our confidence in Werner's long term potential growth.

Speaker 1

This brings the total number of shares repurchased to date to 2,458,634 shares at an average price of $8.31 and it represents 85% of the approximately 2,880,000 shares sold in 2021. Even after buying the $3,000,000 of Bona stock, we still have an additional $7,000,000 of dry powder that we can buy additional stock if we determine we need to do this. At the same time, our expansion of production capacity and improvements in manufacturing efficiency are expected to continue and will result in improvement in both gross and net margins. As we scale, Verna has become a self sustaining, profitable, cash flowing enterprise that is well positioned for sustained growth in 20252026. In short, we are building on our successes and setting the stage for further top and bottom line growth ensuring that Werner remains at the forefront of our industry.

Speaker 1

And this concludes my prepared remarks. Operator, if there are questions from any of our analysts, I'd be happy to take them at this time.

Operator

Thank you. We'll now be conducting a question and answer session. Our first question is coming from Jeff Van Sinderen from B. Riley Securities. Your line is now live.

Speaker 3

Hi, good morning, everyone. And let me say congratulations on the considerable progress that you guys are making and the strong metrics that reflect that. Can you speak a little bit more about adding the other shift as we get into Q1, where that will bring you in terms of production capacity? And then I guess how you're further evolving the supply chain for that ramp? I know you touched a little bit on that.

Speaker 3

And then also kind of where inventory stands today versus the current sales trend that seems to be really strong and just kind of expected sales during the peak holiday period?

Speaker 1

Yes. As you saw, we can produce approximately $18,000 Launchers in one shift at our facility. We are this coming month and next month probably selling somewhere 18,000 launches or more a month. So we clearly need to be expanding our production capacity. The good thing is we've got a second and third shift open to us.

Speaker 1

As a guy who's been in the manufacturing business most of my life, you hate to see a factory run at just one shift. So we're excited about utilizing the factory more fully. So we think that next year we'll probably be pushing production up to 24,000 launches a month, maybe 28,000 launches a month. And we clearly have the capability of doing that. What we need to do is to hire more people.

Speaker 1

And Jeff, that was one of the reasons that I wanted to raise the wages. It has a very, very modest impact on the cost of the launcher and in fact is more than offset by the increased volume. So even with the increased wages, the cost of the launch will go down as we expand our production. In terms of the supply chain, we have been adding suppliers continuously. I've spoken for a long time about the all truck strategy and we are very close to being there.

Speaker 1

When this port strike came about, we only had one product that would have been affected by the port strike out of the 115 components that go into producing a launcher. So we are really in very, very good shape from a supply chain standpoint. Almost every single product now has a dual source. Some of the products that are not quite there yet are accessories and not critical to the production of launchers. So we're excited to expand the capacity and we're in a good position to do so.

Speaker 3

Okay, great. And then your gross margins came in well above what we were looking for. And considering the production ramp, what do you expect or I guess any thoughts on gross margin for Q4? And then any change in promotional plans? Sorry, any change in

Speaker 1

Yes. I'll let Laurie take the gross margin question, if you don't mind, Laurie. Sure.

Speaker 2

Yes. I mean, I think we expect gross margin to stay pretty close to that for Q4. Could be a slight uptick, But because of the sales and the promotional sales that we will be running in Q4, I don't expect much of an uptick. We're looking for more of an uptick on gross margin going into 2025.

Speaker 1

And the second half of your question, Jeff, was about promotions.

Speaker 3

Yes.

Speaker 1

So the interesting thing is we were running at a $25,000,000 clip for September. There were no sales in September. We will have a sale in October. In fact, today is the 2nd day of Prime Days. Just to give you a little heads up here, we sold more yesterday on Amazon than we normally do in 5 days on Amazon and we expect to do the same.

Speaker 1

So we would expect sales for Prime Days and also for Black Friday to have some impact on revenues, although it may have a somewhat negative impact on margins, but I wouldn't imagine that to be more than maybe 1 percentage point.

Speaker 3

Okay, great. Thanks so much for taking my questions. I'll take the rest offline.

Speaker 1

Thank you.

Operator

Thank you. Our next question is coming from Matt Koranda from Roth Capital Partners. Your line is now live.

Speaker 4

Everybody, congrats on the great results. So maybe just wanted to cover the commentary that it sounded like you were making there, Brian, during the prepared remarks. I guess you don't give official guidance, but it sounded like you did say that revenue could be up by as much as 100% for the full year. And I think you also mentioned there was a run rate in September. If we pull that forward, that could result in about $25,000,000 in revenue for the Q4.

Speaker 4

So just wanted to hear about the sort of the range of outcomes that you expect for the Q4 and some of the swing factors that might drive you sort of above that range or below?

Speaker 1

Yes. We're now 10.5 months into the year. So it's not too much of a stretch to give where we think we're going to be for the year. As I said, we're running at a $25,000,000 cliff. I don't see any reason we would be less than that.

Speaker 1

There is the possibility that we're more, but I don't know. September is generally a weaker month in Q4. But this is honestly, Matt, above where we had anticipated being. We didn't expect to be up at 25,000,000 dollars If we're at 25,000,000 that clearly is going to put us over $80,000,000 Last year, we were $42,000,000 And that was the reason I gave that we'll be up by 100%. We are not giving guidance because we don't see any real benefit from it.

Speaker 1

But we know that there's been very strong momentum. We don't expect the momentum to stop. We're seeing the ability to attract more and more celebrity endorsers. We're seeing a continued normalization of the product. We're seeing our retail investors increasing their purchases.

Speaker 1

And this is before we bring on the new retail stores and before we bring on the new products. So we think that there will be pretty good growth for next year, but we are loathe to put a number to it.

Speaker 4

Okay, fair enough. And then I wanted to see if you could maybe just dig a layer deeper around the promotions that you ran in the Q3. Maybe just any learnings in terms of what induces consumer demand. I noticed there were some 10% off sort of promotions that were run-in August. I assume there's probably more in plan for the Q4.

Speaker 4

How should we think about that heading into sort of that critical Black Friday period? And maybe just since Black Friday and Cyber Monday are kind of happening pretty late in your quarter, maybe any commentary around how that impacts the Q4 versus the first?

Speaker 2

Yes. So first on the last part of that, Matt. So Black Friday this year, right, is November 29, I think it's 29. Anyway, our fiscal year end is November 30. So as you can imagine, a lot of the sales from Black Friday, Cyber Monday, those are actually going to fall into our Q1, because we're not going to have a lot of those delivered other than maybe some Amazon ones.

Speaker 2

But it's really late for us on the fiscal year. I think some of the learnings that we had, I think 10% when we do 10% off-site wide and we also did 10% off the LE for the first time in that August sell, that certainly drove some traffic. We know that these Prime days on Amazon, we've got some of the best products like some of the products we got the best product badge for the air guns in the category for Amazon now. So that is certainly helping to drive that additional sales. And as Brian said, it was yesterday was more than 5 times what we would normally do on a day on Amazon.

Speaker 1

Yes. And so we don't expect another Amazon sale this quarter. We'll have the Prime sales and then we'll have a Black Friday sale. Amazon will be the same as Verna. We traditionally run a Verna Black Friday at the end of October.

Speaker 1

So that will really be the sale that impacts Q3. That will probably Q4, excuse me, and that will probably be a 5 day sale. Again, in the 10% range, there's a lot of people that wait for that sale. We want to make sure everybody gets stuff in time for Christmas. The other thing we're seeing is, we're seeing incredible power in our email list.

Speaker 1

So our email list has grown this year from we had 201,000 email subscribers that were active. In other words, if they had bought something or engaged with us over the last 90 days as of the end of last year. At the end of September, that list had grown to 526,000 active e mail subscribers. Every time we send an e mail out, we see a jump in sales. We have traditionally run 2 emails a week because you have to have a balance between annoying people so much that they start to unsubscribe and getting the message out.

Speaker 1

We are now moving that to 3 emails a week for Q4 because of the holiday season. And we keep very, very close analysis of our unsubscribe rate. And I will tell you, the unsubscribe rate is now down to 0.12%, so about 0.1 percent. At the end of last year, it was 0.47%. So we've seen our email unsubscribed list rate go down even as the size of our email list has grown.

Speaker 1

And not every email is about a call to action. A lot of these are about people using the burnout, stories of people as to why they bought the burnout, they're about topical events. So they're interesting and they get people to open the e mail. What we've discovered is that when they open the e mail, we have a click through rate of over 50%. So it really doesn't matter what we're talking about on the e mail.

Speaker 1

We just want them to open the e mail and to click through to our website, and then we see growth in sales. So we're doing 2 things. 1, we're having a sale in October, the burn of Black Friday sale. As Laurie said, the actual Black Friday sale that happens at the end of November will have some effect, but a very modest effect in Q4. Most of that effect will be in Q1 of next year.

Speaker 1

But we have gone from 2 to 3 emails a week, and we think that that will have some effect.

Speaker 4

Okay, super helpful. Maybe just one more if I could sneak one in. So on marketing, you mentioned that there may be some new advertising channels opening up, Brian. So it sounds like perhaps some mainstream sort of cable news channels maybe an opportunity. Just wondered if you were willing to put a timeframe on that where you think it could happen, what that would open up for you in terms of marketing dollars to be spent?

Speaker 4

Any color on that would be great.

Speaker 1

Yes. So we expect we're bringing on 3 new endorsers this quarter and we expect that rate to somewhat stay consistent for next year. And we're growing our marketing spend by about $200,000 a month. So in Q2, we were at about $800,000 a month. In Q3, we're at about $1,000,000 a month.

Speaker 1

This quarter, we're at about $1,200,000 a month. And we expect it to continue to grow at that rate. That's why I'm saying, I think, over next year, we'll probably be at a 50% growth rate in terms of marketing spend. And so long as our ROAS stays consistent at 5, and again, we see no reason that it wouldn't, we'll see a commensurate increase in DTC sales.

Operator

We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments.

Speaker 1

Well, I just want to say to everybody, thank you very much. We appreciate your support. Obviously, we're very pleased with the continued growth in Burna and our continued acceptance by the media generally and by all of our customers. So once again, thank you very much and we'll talk to you shortly.

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Key Takeaways

  • In Q3 2024, Verna reported record net revenue of $20.9 million, up 194% year-over-year, and achieved GAAP net income of $1 million versus a $4.1 million loss a year ago.
  • The company’s celebrity endorsement–focused advertising strategy has consistently delivered a 5× return on advertising spend, driving four consecutive quarters of sequential growth and making direct-to-consumer sales 74% of Q3 revenue.
  • Verna is expanding its physical retail presence with new store leases in Nashville, Scottsdale, Salem, and Fort Wayne, where in-store demos convert at an 80% rate versus about 1.2% online, aiming for a broader rollout in 2025.
  • Production capacity is being scaled with the addition of a second shift, a third production line, a new U.S. ammunition facility, and dual sourcing of key components to support rising demand and mitigate supply chain risks.
  • The board authorized a $10 million share buyback program and has repurchased $3 million of stock to date at an average price of $10.25, underscoring management’s confidence in Verna’s growth outlook.
AI Generated. May Contain Errors.
Earnings Conference Call
Byrna Technologies Q3 2024
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