Byrna Technologies Inc

NASDAQ:BYRN

Earnings Call Transcript 2023-Q1

[Operator]

Greetings, and welcome to the Byrna Technologies First Quarter 2023 Earnings Conference Call and Webcast. As a reminder, this conference call is being recorded and all participants are in a listen-only mode.

Before turning the call over to Bryan Ganz, Byrna Technologies’ Chief Executive Officer, I will read the safe harbor statement. Some discussions made 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 Investors section of our website, ir.bynra.com for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results.

I'll now turn the call over to Mr. Bryan Ganz. Please go ahead.

[Bryan Ganz, Chief Executive Officer]

Thank you. Good morning, everyone, and thank you for joining us for Byrna’s fiscal year 2023 first quarter earnings call. Our CFO, David North, will be discussing our Q1 results, after which I will provide some additional color on the quarter.

I'd like to start by turning the call over to David, so that he can discuss our results and financial performance for the first quarter. David and I will be taking questions at the conclusion of the presentation. David?

[David North, Chief Financial Officer]

Thanks, Bryan, and thanks all who have joined us today. Let's start with a review of the income statement for the first fiscal quarter.

Revenues for the first quarter of 2023 were $8.4 million, that's a 5.4% increase over the $8.0 million for last year's first quarter. Gross profit increased 13.7% to $5.2 million from $4.6 million in last year's first quarter, while gross margin, which is gross profit as a percentage of sales, improved to 62.4% of net revenue from 57.8% in last year's first quarter. The improvement in gross profit as a percentage of sales is primarily due to realization of significant cost reductions and switching from air freight to ocean freight and to lower cost suppliers for raw materials.

Operating expenses declined 9.8% or $0.8 million to $7.2 million compared to $8.0 million in last year's first quarter. Costs were managed lower in payroll and compensation, discretionary marketing, professional fees, public company costs and insurance premiums, combination of higher revenue, a higher gross margin percentage and a reduction of operating expenses resulted in improved profitability. Loss from operations for the first quarter was $2.0 million, an improvement of $1.4 million compared to the operating loss of $3.4 million in the first quarter of fiscal 2022.

On January 10, of this year the Company partnered with the owners of Argentinian Gunsmiths Bersa S.A. to form a new joint venture created to manufacture its products within the Mercosur trade zone to expand the Company's operations and presence in South American markets. The Company holds 51% of the stock in the joint venture entity, and our 51% share of start-up expenses this quarter was $167,000 shown as other expenses on our income statement.

Net loss after tax was $2.1 million compared to a net loss of $3.2 million in last year's first quarter. Excluding long-term stock-based compensation and one-time severance costs, adjusted EBITDA, which is a non-GAAP measure that excludes non-cash stock-based compensation and one-time severance costs, was a loss of $0.6 million for the quarter compared to a loss of $1.8 million in the first quarter of last year.

Now to our balance sheet and financial position. We ended the first quarter with $14.4 million of cash and cash equivalents. This is a decrease of $5.6 million from the balance of [$20.0 million] (ph) at the end of the fiscal year on November 30, 2022. This was principally due to three uses of cash. First, accounts payable and accrued expenses decreased by $2 million due to payments of certain annual expenses that come due in the first quarter. Second, we used $2.1 million to fund our new LATAM joint venture with a $0.5 million in capital and $1.5 million loan. And third, inventory increased by $2.5 million.

While the first two of these were according to our plans, the increase in inventory was the result of a long lead time between committing to the purchase by putting a ship on the water and delivery of the inventory at our plant, actual sales demand and inventory consumption during the first quarter when the inventory arrived were not as great as had been expected when the inventory was committed to and shipped.

As a consequence, we finally have several months of inventory on hand. At quarter end, there was no current or long-term debt.

And with that, I'll turn it back over to Bryan.

[Bryan Ganz, Chief Executive Officer]

Thank you, David. Well, we are very pleased with the improvements we saw in Q1 in terms of expanding gross profit margins and lower operating expenses, we were, of course, disappointed with the fact that our sales growth in Q1 was only 5.4%. The shortfall in sales versus our projections was directly attributable to the fact that we were unable to ship either of our new flagship products in Q1. Those, of course, are the much more powerful Byrna LE edition and our groundbreaking 12-gauge round.

At the end of the first quarter, we had approximately 5,000 customers on our Byrna LE waitlist at $479 MSRP per unit and with an average order value of well over $500, this represents $2 million in revenue. We also had a projected -- we also projected 250,000 12-gauge rounds with an average selling price of $4 each, representing another $1.0 million in deferred revenue. Had we been able to ship these product sales growth would have been well in excess of our internal Q1 projections. Of course, this sales shortfall also affected our cash position by reducing our cash by this $3 million.

Unfortunately, supplier issues and production problems prevented us from shipping either of these two new flagship products during Q1. In the case of the Byrna LE, out-of-spec components led to quality issues and production problems, which prevented us from going into serial production. In the case of the 12-guage less lethal round, a shortage of a particular raw material resulted in delays in the production of the proprietary casing used in Byrna’s 12-gauge round. To make matters worse, almost all of our Q1 marketing spend focused on these two new innovative products. Both the Byrna LE and our new less lethal 12-gauge round were introduced at the Las Vegas Shot Show in January to great fanfare. In fact, Byrna’s new 12-guage round made several best new products at SHOT Show list, including the NRA, Police One and Tactical Life. To support the introduction of the Byrna LE and the new 12-gauge route, the majority of Byrna’s Q1 marketing and promotional budget was dedicated to these two new breakthrough products.

As a result, a significant number of the orders received from both consumers and dealers were for these two new products, which we are unable to ship during the quarter. While the production and shipping delays are disappointing as everyone in manufacturing knows industrializing new products, particularly products that employ game-changing technology that has never been seen before, is extremely difficult and unforeseen delays are not unusual.

In the case of the Byrna LE, we have designed a revolutionary new valve that produces significantly greater force while using the same exterior volume as a traditional valve. This has increased the force of the launcher by 60%. This new technology will be used in all future Byrna launches and will allow us to produce the much anticipated and much smaller compact launcher. The first of these new products is due to be released in 2024.

The valve in Byrna LE, frankly, is analogous to the engine in a Formula 1 racecar. As with the Formula 1 engine, the ultra-high-performance valve used in the Byrna LE is extremely demanding and requires components of exact intolerances. Unfortunately, several components from the initial production runs were simply not up to spec. This caused us to suspend production as our suppliers scramble to produce new components. These are simply the growing pains associated with constantly pushing the envelope in terms of performance.

As of yesterday, we have now shipped 986 Byrna LE launchers. Yesterday, we had 704 units on back order and another 6,877 customers on the Byrna LE waitlist. Although production is still not where we would like it to be, as the Byrna LE is a much more difficult launcher to produce and our factory personnel are still getting up to speed. We hope to work through this backlog and wait list by the end of the quarter. The delays in the production of Byrna’s new state-of-the-art 12-gauge rounds were not due to nonconforming parts but rather the difficulty in obtaining the exact raw material needed to produce the components.

Well, to those not in the industry, plastic is plastic, nothing could be further from the truth to produce less lethal shotgun rounds capable of stopping an assailant at distances of up to 100 feet, we need to produce the various components that go into the round from very specialized plastics. Our testing showed that substituting a similar plastic for the very difficult to obtain plastic that we needed for the casing would have negatively impacted the accuracy of the rounds. For obvious reasons, when dealing with the rounds that are intended to be used for self-defense, any loss of accuracy is simply unacceptable. We have now secured adequate supplies of the required raw materials to produce up to 500,000 rounds per month.

The first shipment of a finished 12-gauge rounds left the factory on April 3, headed for our dealers, and we are now producing approximately 10,000 rounds per day in our Fort Wayne production facility. These revolutionary new grounds are also now available online at Byrna.com. There are an estimated 47 million shotgun owners in the United States. For $59.99, these shotgun owners can use their existing 12-gauge shotgun to fire less lethal rounds capable of stopping the assailant at distance. Our mission is to convince 10% of these 47 million shotgun owners to try Byrna’s new less lethal 12-gauge rounds. After all, Byrna was founded on the belief that no one really wants to take a life when protecting themselves and their family if they can avoid it.

There were several bright spots on the sales front in Q1. Essentially, Amazon and Canada, neither channel was affected by our inability to ship the Byrna LE or 12-gauge as neither of these products were offered through these channels. Amazon sales were up 60% year-over-year, and we expect this trend to continue. Canadian sales were up from almost nothing in Q1 of 2022 to $261,000 in Q1 of 2023. This was more than we sold in Canada during the entire year of 2022. Late in Q4, Canada essentially banned the sale of all handguns. This has resulted in a significant increase in web sessions and sales of Byrna launchers in Canada despite the continuing difficulties that we have had shipping into Canada. We expect to see this positive sales trend continue as we establish a 3PL shipping facility in Canada to better serve the Canadian market.

Our retail store in Las Vegas was also a bright spot as we are seeing continual improvement in retail sales numbers. We opened our Las Vegas retail store co-located with our sales and marketing office in Las Vegas. The purpose of the store is to one, gain first-hand knowledge of our customer demographics and two, to understand if stand-alone Byrna store could be economically viable. By meeting our customers and having a chance to speak with them directly, we can better understand our customer base, including the split between gun owners and non-gun owners between men and women, the age of our customers, the reason for their purchases, how they heard of Byrna. Additionally, the Las Vegas store is now starting to pay for itself. Sales in Q1 tracked at an annual pace of $215,000 a year versus $68,000 for all of last year. So far in Q2, the pace has climbed to $300,000. And last week, we were tracking at $500,000. And all of this to-date without any local advertising.

In summary, while we encounter challenges bringing to Byrna LE and our new 12-guage round to market during Q1, in the great scheme of things, the difference between starting to ship these two game-changing new products in March and April rather than January and February is not meaningful. The most important consideration at Byrna is that the products we released to market are of the highest quality and that our customers can use them with confidence. This is the only thing that drives our decisions.

So while we struggled to bring the LE and 12-gauge to market in Q1 of 2023, the significant improvement in gross profit margins and the reduction in our operating costs largely made up for the shortfall in sales as our operating loss for the quarter was less than $100,000 off of our budgeted number. Given all the challenges we faced during the quarter and the progress we have now made in getting these two revolutionary new products into production, we are not unhappy with this result.

Now I'd like to turn it back over to the operator, and we'll be happy to take any questions from our analysts.

[Operator]

Thank you. [Operator Instructions]. Our first question comes from the line of Jeff Van Sinderen with B. Riley Securities. Please proceed with your question.

[Jeff Van Sinderen, B. Riley Securities]

Good morning, everyone. Just wanted to touch on the backlog for Q2. And I'm just wondering what you anticipate for revenues for Q2, maybe a range there? And then gross margin, any impact to gross margin from some of the production difficulties maybe just a sense of where gross margin might wind up for Q2? And then also any change to your prior annual guidance?

[Bryan Ganz, Chief Executive Officer]

So we've got gross margin guidance and our Q2 numbers, which I'm not going to give you. So we are still, as I said, we're producing the Byrna LE, and we are shipping the Byrna LE every day, but the production numbers are not where we would like them to be. And we're not sure how long it's going to take for us to get this into production at the level of the SD.

That said, we do have 704 orders that are in our system. That means these are orders that people have actually given us their credit card and we are in the process of shipping. We have another 6,877 orders that we have not taken their money. And what we are doing is we put people on the wait list and then we are opening the wait list up 500 people at a time and letting them actually order the product. And the reason we're doing this is although people get angry with delays in shipping, they're significantly less angry if you haven't taken their money. So we recognize this from the significant rush of sales we got after Hannity. We sold with Hannity One, about 10,000 launchers in a couple of days, and we were struggling to get those out the door. Of course, because these people have put their orders in through our online e-commerce store, we had to build their credit card, and that created additional problems. So this time, when we knew we were having production issues with the LE, we said that we would not accept any orders, we would only allow people to sign up for the LE on the wait list.

As I said, we have -- essentially between the orders in our system and the wait list, we have 7,500 orders in the system. If we assume that each order is $500, and frankly, the average order value is above $500. That's $3.5 million of sales. We obviously expect to get the entire 250,000 rounds of 12-gauge out the door. That is predominantly to dealers but also some are to consumers. So if we assume that's $4 a round. That's another $1 million. So just based on the back order we have today, we have about $4.5 million of orders in the system.

And honestly, Jeff, we're sitting here very disappointed with Q1 because we missed our sales target, although in every other way, controlling expenses, margins, we had a very good quarter. If we had been able to get the production up and running as we anticipated, our sales levels would have been well in excess of the projections, and this would have been a banner quarter. So when you ask about what's our thoughts with guidance? Obviously, we're very disappointed that we were unable to ship $3.5 million of backorder in Q1, but I don't think that, that production problem that we had that resulted in our ability to -- inability to ship to $3.5 million is reason for us to change our guidance.

I think the one thing that has been a little surprising to us is the incredibly strong demand for the Byrna LE. The Byrna LE is $100 more than the Byrna SD. We anticipated that, that demand would be about 10% of our overall demand. It's actually about 40% of our overall demand. So we're frustrated that we haven't been able to fill this demand. We're incredibly encouraged at the very, very strong demand for the Byrna LE. I hope that answers your question.

[Jeff Van Sinderen, B. Riley Securities]

No, that helps. Just a couple of follow-ups to that. Just as you were talking about the LE, is that open to the general public now? Or is that the orders that you have are most of those law enforcement?

[Bryan Ganz, Chief Executive Officer]

No. These are mostly general public orders. Orders for law enforcement are a lengthy process. We're going to have to supply LE launchers to law enforcement for trial. They'll have to be what's called TD testing and evaluation. So that process will take some time. These are, for the most part, the 6,877 people in the customer wait list are all online customers at MSRP. So that does not include our dealer sales.

[David North, Chief Financial Officer]

Yes. We've lined it up so that the LE is aimed for first introduction on DTC through website and the 12-gauge on the other hand, is lined up for first introduction to dealers.

[Jeff Van Sinderen, B. Riley Securities]

Okay. So that's pretty interesting because it just -- I mean, it speaks to a more powerful launcher getting demand that's really a lot bigger than what you expected initially.

[Bryan Ganz, Chief Executive Officer]

Jeff, if I can just add, we introduced a third new product, which we did go into production on, that's the Byrna EP, which was our lower-priced product. And we had anticipated that with the $299 MSRP, that would be the product that had a lot of interest. And that's been only 10% of our revenue or 10% of our orders. So we were very, very pleased to see that there is more price elasticity than we had thought and that the $479 price point is not off putting to people.

[David North, Chief Financial Officer]

And really, the initial conclusions, let's hope that these indicators continue. But the initial conclusion is that the marketing strategy of putting in good, better, best options is leading to better upsell than we had anticipated.

[Jeff Van Sinderen, B. Riley Securities]

Okay. And then just one more follow-up on the production. What needs to happen to get the production levels running where you've targeted them at this point?

[Bryan Ganz, Chief Executive Officer]

There's two things that need to happen. One is just training of personnel. It's a completely different process and it requires retraining of personnel. The other is getting our suppliers to produce products within spec. So when we ask our suppliers, can you achieve the specification tolerances on the drawing everybody, of course, says, yes. And for the first 100 pieces that we use for the pre-production build, these are what we refer to the industry’s golden parts, they always achieve the specifications.

So, the first 100 launches that we built during pre-production worked incredibly well. We presented them at SHOT Show, they performed flawlessly. And then when we ordered 10,000 parts, they were not up to the same specifications or same tolerances as the original golden parts that we received.

So we've been working very closely with our suppliers to see what can they achieve in serial production. And what can we live with. So right now, we're both training our personnel and working closely with our suppliers. And we're not talking about dozens or hundreds of parts. We're talking about a couple of very critical parts where the tolerances are very exacting where we need suppliers to figure out how to be able to produce within the required specifications.

So, that's really -- these are just mechanical problems. They're not existential problems. I can assure you that they -- we will overcome these. We will get to a point where the production of the LE is smooth and easy and with a very high first pass yield. But it's going to take a number of weeks and or months, honestly, to get there.

[Jeff Van Sinderen, B. Riley Securities]

Okay. So just to clarify one point. When you guys reported Q4 at that point in time, it looks like you were going to have the orders out the door by the end of the quarter as planned. And then the last couple of weeks of the quarter, things just kind of got tough with the production levels and with the component availability to your specs. Is that an availability --.

[Bryan Ganz, Chief Executive Officer]

We did our preproduction build to prove that we could -- and the preproduction build is actually built not by the engineering team, but built by the factory personnel. And those 100 launches from preproduction work flawlessly and led us to believe that we would have no issues going into production. And so we introduced at SHOT Show. As you know, we debuted at Range Day and we fired thousands or maybe tens of thousands rounds the SHOT Show and everybody tested it, and we have very strong demand for the product. And as we went into production, that's when we discovered that the components that we had gotten for the preproduction build were perfect and the components we got for serial production were less than perfect.

[Jeff Van Sinderen, B. Riley Securities]

Okay. And you went into production, can you just refresh my memory on when you went into production?

[Bryan Ganz, Chief Executive Officer]

We went into production on January 23.

[Jeff Van Sinderen, B. Riley Securities]

Okay. Got it. Thanks for taking my questions.

[Bryan Ganz, Chief Executive Officer]

Thank you, Jeff.

[Operator]

[Operator Instructions]. Our next question comes from the line of Jim McIlree with Dawson James. Please proceed with your question.

[James McIlree, Dawson James]

Thank you. Good morning. What are the capital requirements for the rest of the year for both the investment in the JV as well as just normal capital spending?

[Bryan Ganz, Chief Executive Officer]

Hey Jim, how are you? For the investment in the JV, we don't anticipate any additional capital requirements for the balance of the year. I just got back from Argentina yesterday. I was down there working with our team and going through the budget for the year. We anticipate that the JV will be self-sustaining by the end of the year and that the capital contribution that we made and that our partners made to start the company will be more than adequate to fund it through cash flow profitability.

In terms of capital for other projects, the only big project we have in terms of capital is the payload projectile for the 12-gauge. So we introduced the 12-gauge with the Kinetic projectile initially. We are working on the payload projectile, which we expect to have in production later this year. This is a very expensive piece of equipment to fill and well these projectiles. We've been working on this, honestly, for probably 24 months.

[David North, Chief Financial Officer]

And most of the cash was already spent in the past fiscal year on that. The machines are -- the ammo loading machines are pretty much there and waiting for us to get the final design and the projectile. For the entire year, we've got a capital budget -- capital expenditure budget of $2.5 million. Most of that remains to be spent. It's molds and that sort of thing. So yes, those are the numbers.

[James McIlree, Dawson James]

That's great. Thank you. And then secondly, on the JV, do you have a right or an obligation to buy out your partner after a certain period of time or after hitting a revenue level, anything like that?

[Bryan Ganz, Chief Executive Officer]

Both. So we have the right to buy them out, and they also have the right to put their stock to us. Our partners are individuals. So unlike Byrna, which is a public company and theoretically has indefinite life, these people are going to want to cash out of their investment. So they have the right to put their stock to us after three years, and we have the right to call it away from them if they've not done so after 10 years. But we would anticipate that they'll probably put it to us long before that 10-year period. We wanted them involved for the first three years because of as the owners of Bersa, one of the only two large gun companies in South America, they have very, very good relationships with all of these law enforcement agencies and dealers throughout the Mercosur region.

So they've been making introductions. We sent our LE training folks down to Argentina two months ago, and they put on a presentation for 27 different major law enforcement agencies in Argentina, representing probably 75% of the law enforcement agents in Argentina. So their assistance and support early on will be critical, but once these relationships are solidified. And once we start to pick up these law enforcement agencies as customers, a lot of what they're bringing to the table, we will have taken advantage of. And my guess is at some point between that three years and 10 years, they'll put the stock to us.

[James McIlree, Dawson James]

And the price that, that transaction to take place is a third-party valuation or it's a fixed dollar amount now or a fixed value...

[Bryan Ganz, Chief Executive Officer]

It's a third-party valuation in a very commonly used practice. We've agreed on a set of valuation firms. Two will be selected, one by us, one by them, and that we'll take the midpoint between the two valuations unless the valuations are too far apart in which case, we'll bring in a third valuation firm. But we didn't want to use a fixed metric just because in different environments, these metrics change dramatically. If we were to use a metric based on valuations from two years ago, that would seem very high relative to valuations today. So we thought it better to use the third parties to set the value.

[James McIlree, Dawson James]

Got it. Great. That's it for me.

[Bryan Ganz, Chief Executive Officer]

Thank you, Jim.

[Operator]

Thank you. Our next question comes from the line of Ryan Rackley with Raymond James.

[Ryan Rackley, Raymond James]

Hi guys, thanks for the time. So it sounds like, I think you said that you're shipping the 12-guage round to consumers. And I think you said previously that you were going to fulfill the dealer demand before you started shipping to consumers. I just want to make sure that this basically means that you guys are meeting all of dealer demand at this point? Or is there a change of strategy there?

[Bryan Ganz, Chief Executive Officer]

No. All of the dealer orders have been shipped, and we're now into shipping online. We expect that we will get dealer reorders before the end of the quarter. And frankly, we expect that we'll be getting new dealer orders. We're in the process of using the 12-gauge also to open up new dealer business. So we are going to be doing several mailings of two 12-guage rounds to FFLs around the country. The first mailing will be to thousand dealers in four select states. We've been getting on the phone asking these dealers if they'd like to receive the rounds. So far, the response has been 100% in the affirmative. And we think this will be a very interesting way for us to open the doors to dealers that we have been unable to open the doors with our Byrna launchers. So we're really excited about the 12-guage not just from the sales perspective, but also from its ability to get us in front of FFLs and to get us in front of gun owners that up until this point, really don't know about Byrna.

[Ryan Rackley, Raymond James]

Okay. Great. And are most of these dealers are they shipping to all of their -- are they stocking all of their locations? Or are they just trying out a couple of locations? Is there a way to think about the kind of the broader trends?

[Bryan Ganz, Chief Executive Officer]

So far, the orders that we've gotten have generally been from the bigger box stores that we deal with, and they're putting a relatively small number of boxes in many of their locations. Because like us, they want to see what the demand is going to be. We are extremely encouraged from the anecdotal and empirical evidence that we get. But as of yet, we -- this is a new round. We just started shipping this, I think, a week ago, Monday. So these just went out the door. We're now starting to ship, I think, probably early next week, the online orders that we've been getting and potency of that response.

[David North, Chief Financial Officer]

We still realizes that the proof of the pudding will be in a sell-through in this case.

[Ryan Rackley, Raymond James]

Great. That makes sense. And shifting over to the LE. I just wanted the wait list, the 5,000 units on the wait list. Is there a way to think about the conversion on that? Are these people that just signed up for an e-mail notification or how strong is that interest? Or should we think of that as like a backlog?

[Bryan Ganz, Chief Executive Officer]

We're thinking of it as a backlog, but I would be surprised if it's 100%. Right now, though, it's more than just an e-mail notification because we are not taking orders online. So we're basically saying, we're uncertain as to when this is going to ship. We don't want to charge your credit card. But if you want the LE get on the list, if you go online, you'll see that there have been -- I mean we've shipped 1,000 of these launches already. And a lot of people have started to do reviews and the reviews have been very universally positive, and they sort of all end with the message, get on the wait list. So I think a lot of people that are sort of avid-Byrna customers want to upgrade from their SD. The LE is a significant upgrade. It is 60% more powerful than the SD, it has 40% more shot capacity. It has a 7 around Mag. It has an enhanced citing system. So I think that there's a lot of the -- among the 250,000 people that have bought Byrna domestically, there's a lot of people that are going to want to upgrade to the LE. So we would suspect the conversion rate on the wait list, which is now up to, as of yesterday, it was about 6,900 customers will probably be pretty high.

[Ryan Rackley, Raymond James]

Great. Well Thanks guys. I appreciate the time.

[Bryan Ganz, Chief Executive Officer]

Thanks, Ryan.

[Operator]

Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Ganz for any final comments.

[Bryan Ganz, Chief Executive Officer]

Thank you very much. Again, well, we were disappointed that we were unable to achieve our internal sales projections because of our inability to ship the 12-gauge in LE during Q1. Both of these products are now in production. We've begun shipping [bigger number] (ph) in Q2. This is a temporary delay. And frankly, the encouraging aspect is that there's very strong demand for both of these projects -- products, which we've been unable to ship. So that in conjunction with the fact that we were able to see a significantly improved gross profit margin, which we anticipate continuing throughout the year and that we've been able to control our expenses, which we also anticipate seeing throughout the year. We think it was not such a bad quarter as it may appear on its face. We think actually, we made very significant progress during Q1. Again, I want to thank everybody for their support and interest in Byrna. And as always, you can reach out to us if you have further questions.

[Operator]

Thank you. Ladies and gentlemen, that concludes our conference call. You may disconnect your lines at this time. Thank you for your participation.