Byrna Technologies Q2 FY2026 Earnings Call - Revenue Misses as Management Executes Strategic Reset

Operator: Morning. Welcome to Byrna’s fiscal second quarter 2026 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, Conn Davis, and CFO, Lauri Kearnes. Following their remarks, we will open the call to questions. Earlier today, Byrna released results for its fiscal second quarter ended May 31st, 2026. A copy of the press release is available on the company’s website. Before turning the call over to Conn Davis, Byrna 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 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.byrna.com for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. I’d like to turn the call over to Byrna’s CEO, Conn Davis. Sir, please proceed.

Conn Davis, Chief Executive Officer, Byrna Technologies: Thank you, operator, and thank you everyone for joining us today. Q2 came in below our expectations with revenue of $16.4 million and did not reflect the level of performance we believe Byrna can deliver. We entered the quarter knowing it would represent the beginning of a transition period as we worked to improve direct-to-consumer conversion, retail productivity, and the discipline and structure of our operations. The quarter ultimately became a steeper reset than we originally expected, and the results reinforced why the transformation underway is necessary and why we are moving with urgency. These results were driven by two things. First, the e-commerce pressure we discussed on our Q1 call continued, with website traffic down 13% through the quarter year-over-year. Second, in retail, many partners entered the quarter with elevated inventory levels following meaningful post-holiday restocking in Q1.

Sell-through during that quarter didn’t support the level of reorders we had incorporated into our plan. Those challenges came together during the quarter and drove revenue below our expectations. Q2 sharpened our priorities and accelerated decisions. The results are important, they do not tell the full story of Byrna or the work underway across the business. During the quarter, we started implementing tactical changes to demand generation and our cost structure with more in motion as we transition the Byrna brand more fully during the balance of fiscal 2026. These changes will take time to show up in revenue, we believe they are the right ones that will allow us to return to growth. A few weeks ago, I issued my first 100-day shareholder letter.

The letter, which is available in the investor relations section of our website, established a reference point for where Byrna stands today, where execution has fallen short, and what we are changing to position Byrna to capture the opportunity ahead in less lethal personal safety. Today, I want to build on the letter by connecting our three key near-term priorities directly to what Q2 showed us and detailing the work now underway against each. Our first priority is consumer conversion and retail productivity. Byrna has created a solid base of awareness with a core audience, and our products were available in roughly 1,500 retailer and dealer locations nationwide at quarter end. Our focus now is on turning our expanding reach into purchases, repeat engagement, and consumer advocacy. We know that the strongest results come when consumers understand the product, are able to compare options, and experience Byrna directly.

Our work under this priority is to make the consumer journey easier and more consistent online and in stores. The second priority is changing how Byrna builds demand. The narrow reach behind our Q2 traffic softness reflects a structural issue. Historically, Byrna has relied too heavily on a relatively narrow audience and lacked the visibility into which messages, media channels, and partnerships actually produced consumers. We are actively changing our message to consumers and the way sales and marketing operate, with the goal of reaching more people without losing the core consumer. We are building a systematic approach to demand generation that will allow us to better attribute traffic, conversion, and retail sell-through over time. The third priority is connecting demand more tightly to production, inventory, and cash generation.

We are building a rolling financial and operating model that brings together elements such as website trends, retail sell-through, partner inventory, confirmed orders, and manufacturing capacity to help us produce and purchase against visible demand trends. As the business returns to growth, our disciplined model should drive margin expansion, lower working capital, and better cash conversion. These priorities are all connected. Better marketing brings more qualified consumers into the funnel. Better online and retail execution turns new interests into sales more effectively. More refined forecasting and production lets those sales flow through to the bottom line more efficiently. When these pieces work together, Byrna becomes a more predictable and scalable business. Before getting into our progress against these priorities in greater detail, I’ll turn it over to Lauri to walk through the financial results. Lauri?

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Thank you, Conn, and good morning, everyone. Let’s review our financial results for the fiscal second quarter ended May 31, 2026. Net revenue for Q2 2026 was $16.4 million compared to $28.5 million in the prior year period. E-commerce sales through our website at Amazon decreased by $5.8 million or 35% compared to the prior year due to a reduction in traffic and lower conversion rates. Our domestic dealer channel, including dealers, distributors, and chain stores, decreased $3.5 million or 47%. This was mainly due to the slower reorder activity following substantial restocking in fiscal Q1 and slower than expected sell-through. Product sales through our international dealer and distributor channel decreased $1.2 million or 43% due to large orders last year that were not repeated in the current year.

Gross profit for Q2 2026 was $1.8 million or 11% of net revenue, compared to $17.6 million or 62% of net revenue for Q2 2025. The reported gross margin included one-time $3.6 million inventory write-down, a $3.5 million impairment loss on manufacturing equipment, and a $2.3 million inventory reserve due to strategic product rationalization. These were partially offset by a $1.1 million tariff refund recorded in cost of goods sold. Excluding these items, adjusted gross profit was $10.1 million, representing adjusted gross margin of approximately 62%. We expect our adjusted gross margin to remain near or above this level through the balance of the year.

The inventory write-down of $3.6 million and the $3.5 million impairment loss were directly related to the closure of our Fort Wayne ammunition manufacturing facility. The additional $2.3 million inventory reserve was a combination of finished goods and raw materials that will either end of life or will not be used due to engineering process changes. Operating expenses for Q2 2026 were $14.6 million compared to $14.2 million for Q2 2025, an increase of 3%. The increase primarily reflected an impairment charge of $1 million, as well as continued investment in marketing, partially offset by the change in variable selling expenses associated with a decrease in sales. During the second half, we expect incremental expense as our new commercial and consumer acquisition programs ramp.

Those investments will precede their full potential revenue contributions. Outside of those targeted areas, we are managing spending against the current revenue base and continuing to evaluate costs. Net loss for Q2 2026 was $10.1 million compared to net income of $2.4 million for Q2 2025. Net loss included non-cash impairment and inventory write-down charges of $10.4 million related to the shutdown of our ammunition manufacturing facility in Fort Wayne and product rationalization. A tax benefit of $2.7 million was also recorded for the quarter. Adjusted EBITDA, a non-GAAP metric for Q2 2026, was negative $600,000 compared to $4.3 million for Q2 2025. Cash, cash equivalents, and marketable securities at May 31, 2026, totaled $10.4 million, compared to $9.6 million at February 28, 2026, and $15.5 million at November 30, 2025.

Collections of accounts receivable supported cash during the quarter. We ended the quarter with no debt. Inventory on May 31, 2026, totaled $30.4 million, compared with $33.1 million at February 28, 2026, and $32.7 million at November 30, 2025. The decline in reported inventory primarily reflected the write-down discussed earlier. We remain focused on reducing physical inventory and improving working capital efficiently. We continue to expect inventory turns to approach 2 times by year-end. I will now pass the call back to Con to discuss what we learned during the quarter and the actions underway across the business. Con?

Conn Davis, Chief Executive Officer, Byrna Technologies: Thank you, Lauri. At the time of our Q1 call, website traffic was generally holding, and conversion was the primary issue. During Q2, traffic weakened as well. byrna.com generated approximately 2.6 million sessions, down 13% year-over-year. Conversion averaged 0.59%, compared with 1% in Q2 2025. Average order value declined 19% to approximately $302. byrna.com sessions declined from approximately 1.1 million in March to roughly 783,000 in April and 779,000 in May. During the quarter, we continued to spend through many of our historical media and influencer relationships, but those channels generated less traffic and fewer purchases. The performance reinforced our need to address both sides of the funnel, how we bring people to byrna.com, and what happens after they arrive. Our Find the Right Launcher experience online shows the positive impact of better education.

More than 150,000 responses have been completed, and those consumers continue to convert at approximately twice the rate of the overall website. The quiz responses are also telling us why consumers are considering Byrna, which products fit their needs, and where the website might be leaving questions unanswered. Just over 7% of all byrna.com visitors are engaging with and completing our Find the Right Launcher experience, and we are working to highlight the experience better across the site. More importantly, we are now using the data gained from this experience to improve product comparisons, landing pages, consumer onboarding, and follow-up communications. Within the next two weeks, we will be launching personalized experiences in guided product selection across byrna.com. These are the first steps in an ongoing process to improve our digital experience and conversion using our proprietary data.

Our limited Try Before You Buy program addresses the same education gap through direct product experience. A consumer pays $50 to receive a demonstration unit, training ammunition, CO2, and educational materials for a two-week trial. This fee covers the principal program costs and becomes a $50 purchase credit. The program has generated strong conversion, near 30%. Most participants are new to Byrna, and purchasers are generally adding ammunition and accessories at healthy rates. The test has been small and has not yet meaningfully contributed to revenue, but we are currently evaluating the processes and economics required to expand it responsibly. Given the success of the program, we are expanding it beyond an initial test so that eight times the number of consumers will be able to participate in the next phase of the program. The same core principle of improving education applies in our retail channel as well.

Byrna performs better when consumers are able to understand the differences across the product lineup and receive useful guidance from store associates. During the quarter, we worked with one of our premier chain partners to move from basic shelf placements to dedicated Byrna end caps across more than 20 stores. Before the change, the partner averaged approximately $81,000 in monthly purchases. Purchases increased to approximately $200,000 in April, the first full month after the rollout and expanded product assortment. Every location with this chain partner has placed a stocking order since the new program began. These results don’t mean every retail store will produce these same increases, but they show how we can materially support partner load-ins and revenue. We are applying our learnings across the footprint now and working more closely with our partners on inventory planning and improving sell-through.

The Byrna CL platform continued to gain share during Q2 and represented more than 40% of launcher sales in retail. The Byrna CL accounted for an even greater share in Byrna-owned stores and at some of our higher-performing partners. Looking at overall unit sales, the Byrna CL share grew by 11% from our fiscal second quarter of last year to this year. This mix shift supports our margin profile and provides another example of the value of focusing on and investing in product education. As more consumers understand the advantages of the Byrna CL platform, we believe it will continue to gain share. The work we are doing inside the sales funnel only matters if we are bringing the right people into it. Q2 showed that Byrna cannot reach its full potential by repeatedly targeting the same audience with the same message.

Our core consumer is important, but we have still only reached a small portion of our addressable market in the U.S. With HLK’s support, we have identified several priority consumer segments with a strong potential fit for Byrna, including personal safety-minded urban professionals, security-minded suburban homeowners, and preparedness-focused outdoor enthusiasts. Together, these segments represent more than 50 million likely buyers that Byrna has not historically addressed in a focused way. Reaching those consumers requires more than simply placing Byrna in front of a larger audience. We need to explain where the product fits into their lives and communicate through the media channels with marketing campaigns that are relevant to them. That’s why we are shifting towards safety and use case first messaging across areas such as home protection, outdoor activity, travel, and small business activity.

In June, we made organizational moves to transform the marketing and sales functions, separating the two areas so that we can build them back stronger with more accountability, focus, and ownership. Q2 showed our prior organizational structure didn’t create enough accountability within each function and channel. As performance fell short, the old system made it too difficult to isolate root causes and move quickly to address the changing demand environment. The teams will remain closely connected, but there will be a clearer division of responsibility, allowing us to respond more quickly and allocate resources more effectively. The separation should make problems easier to identify and faster to address. Our recent agency and media appointments support different parts of this new operating model. HLK is helping us define and refine our audiences, main use cases, and creative expression to broaden Byrna’s relevance.

Acceleration Partners is building a more measurable creator and affiliate program in a way that will allow us to link individual partners and campaigns to traffic, conversion, and revenue. We also announced the Fox Sports activation, which kicked off in recent weeks and was funded by reallocating dollars from relationships that were underperforming rather than adding incremental media expense. We are still on schedule to deliver the core brand repositioning work for the 2026 holiday season, followed by the complete brand and website experience in Q1 2027. We are already busy testing and implementing shorter cycle improvements in our creative, media allocations, and owned channels. This broader approach to consumer acquisition is also supported by our definitive agreement to acquire HERO Defense Systems. HERO adds a complementary, less lethal self-defense product family that sits below and adjacent to our core Byrna launcher platform.

Today, our launchers serve consumers looking for a more robust, less lethal launcher solution. HERO would add smaller, more discreet everyday carry options, including the HERO 2020 irritant launcher and AIIRO pepper gel platform, which can appeal to consumers who are interested in personal safety but may not yet be ready to purchase a full launcher system. Strategically, this gives us a fuller product ladder. We can meet consumers earlier in their personal safety journey, introduce them to the less lethal categories through a more accessible form factor and price point, and then use our evolving marketing platform to support long-term engagement across our product ecosystem. HERO fits directly with our marketing redesign. As we move towards more targeted, use case-driven messaging, HERO gives us another product family to match against specific consumer needs.

Over time, this should allow us to build more relevant creative and a more effective consumer journey across channels. The transaction is structured on a debt-free basis, with consideration consisting of $625,000 in cash and $625,000 in restricted shares of Byrna common stock and a performance-based royalty tied to future net sales of HERO products and derivative products. We expect the transaction to close within approximately 30 days, subject to customary closing conditions. Because these changes will influence revenue gradually over the coming quarters, we also acted during Q2 to align production with the current demand trends we see today. In May, we reduced launcher assembly from four production lines to two. We are now producing below the current sales rate, which should allow physical inventory to decline while preserving the ability to add capacity as demand improves.

We also stopped manufacturing ammunition in-house because purchasing it from qualified external suppliers costs less. We completed a make versus buy analysis of ammunition production and qualified external suppliers that can produce the required ammunition at a lower fully loaded cost than our previous internal operation. The change does not affect our quality standards or ability to meet anticipated consumer demand. These decisions relate to the larger planning change that I discussed earlier. We are rolling out a model that connects e-commerce trends and retail sell-through to production and inventory by product. We will be reviewing this model on a monthly cadence, allowing us to purchase components and plan manufacturing against real-time dynamic data rather than against a static assumption.

The changes in our launcher production lines in May were a direct result of this process, and we expect our inventory level to work its way down, especially as the holiday season load-ins begin this fall. We are applying the same discipline to production as well. We improved the CL’s first pass yield by 6.5% from May to the end of June, with the expectation we can move it north of 90% in Q4. As Lori mentioned, we had an inventory write-down this quarter. Some of that was connected to the parts we are now using with the CL. Instead of continuing to use parts that produced inconsistent results in our process, we went back to core manufacturing principles and evaluated what was causing the issues. After a thorough assessment, we focused on remedying the top causes of fallout and made targeted improvements that led to major production improvements immediately.

While there is still more work to be done, the higher first pass yield reduces rework, increases effective production capacity, and lowers the cost required to produce each unit. As we think about longer-term product development, we have moved from a hardware-first development process towards one that starts with a consumer need and aligns R&D, marketing, and operations before a product reaches launch. Further, we are including design for manufacturing as a core component of our product development process, so products launch with a higher quality at a lower manufacturing cost. The refined process has begun now in the development stage, and we are looking forward to demonstrating how a successful product launch can perform with this more modern approach. Turning to the remainder of the year, based on current expectations, fiscal 2026 will not be a revenue growth year.

Q2 reset the revenue baseline. We are continuing to execute our strategic transition against current demand signals and expanding the long-term opportunity rather than assuming a quick return to prior growth rates. We expect improvement from the first half of the fiscal year to the second half results as retailers prepare for the holidays and more of the new marketing and consumer acquisition initiatives enter the market. The improvement will build in stages. Q3 remains a transition quarter as these initiatives ramp, while we expect Q4 to improve with the holiday season and the work we are doing across marketing, conversion, and retail activation more fully deployed in the market. We are building from a more realistic baseline with the opportunity to outperform as the new initiatives begin to contribute.

Our current focus and initiatives are centered around improving website traffic and conversion through the second half, along with retail sell-through and reorder cadence to support a return to revenue growth in the near term. We still expect to exit fiscal 2026 with gross margins of approximately 62%. We are continuing to reduce inventory levels and improve cash flow. We move into the second half of the year with a stronger organizational structure, a production base aligned more closely with current demand, and several consumer conversion and demand generation initiatives that are already producing encouraging signs. The opportunity ahead remains as important as ever. We are now bringing the operating discipline required to continue leading the charge in less lethal personal safety.

We believe this reset positions us to finish fiscal 2026 on a stronger footing and enter fiscal 2027 with a business capable of delivering more consistent growth. We know confidence will grow from results. Our focus is now on executing against our three-point plan and showing progress from here. With that, operator, we are ready to take questions.

Operator: Thank you. We’ll now be conducting a question and answer session. If you’d like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Thank you. Our first question is from the line of Jeremy Hamblin with Craig-Hallum. Please proceed with your questions.

Jeremy Hamblin, Analyst, Craig-Hallum: Thanks for taking our question. In terms of looking at the reorganization that’s happening, obviously significant amount of change, can you talk to how you’re looking at your operating expense structure? Obviously, with lower expectations on revenue for the back half of the year then starting to build off that into 2027, how should we be thinking about your operating expense structure given the amount of heavy lift that you need to do in reformulating your marketing and realigning the organization as a whole? Should we assume that operating expense run rate that we saw in Q2 is where things might fall in Q3 and Q4? How are you addressing right-sizing your cost base?

Conn Davis, Chief Executive Officer, Byrna Technologies: Hi, Jeremy. Thanks for the question. When we look at operating expenses for the back half of the year, you can start with Q2 as a baseline, but we are going to be making some investments that we talked about with some of the marketing agencies as we move forward in this new plan. Some of those expenses are going to come ahead of when the revenue comes. We will have some investment there to the tune of, it’s $250,000 or so a month, $750,000 maybe a quarter. As you know, we have variable selling expenses, those will fluctuate in OpEx as kind of a roughly 10% of sales. As sales increase, which especially in Q4 with the holiday, that piece will go up. The rest of the OpEx we’re trying to hold as much as possible.

We do obviously have some investments in some of these new positions that we’re trying to hire to support the sales and marketing. I think if you use Q2 as a baseline and make those adjustments, that should be good for the back half of the year.

Jeremy Hamblin, Analyst, Craig-Hallum: Got it. Just looking at top line and relationships. A little bit surprised certainly with where the wholesale revenue was in Q2. I know you’d signed a deal with Academy to roll out, and they’ve got roughly 300 locations across the U.S. Can you provide us with an update on the rollout with that large partner and, in terms of building back the wholesale business, which seems like kind of the area of potential growth on a go-forward basis, what other feedback are you getting from your retail partners when you talk about retail sell-through that disappointed in the quarter? What else are they sharing that you feel like needs to change and be addressed to really drive that channel of business going forward?

Conn Davis, Chief Executive Officer, Byrna Technologies: Thanks, Jeremy. As you know, we don’t have the same level of visibility into conversion at the retail side as we do on byrna.com or our own retail stores. What we do know is that our product sells better when consumers can engage with it directly, and there’s really strong education at the retail point of sale. That’s where we’re focused from a sell-through point of view, is really ramping our education and the ability for the consumer to learn about the product, frankly, on their own in that retail experience as they discover it. Similarly, we’ve moved to more of an in-cab environment, more of a easy-to-discover environment than being in the gun case, where it’s a little bit more hidden.

I spent some time in the quarter talking with all of our major retail partners, and frankly, all of them remain very excited about Byrna, what we can deliver, and where we’re going together. I will tell you that in the quarter, we really did enter with pretty high inventories in the retail channel following really strong demand through the holiday period last year. There was just really large restocking that occurred, and throughout the quarter, we just didn’t see the sell-through at that high of a level to generate as quickly of reordering there. Reordering and sell-through remained consistent, but just not quite at a level to drive what we had hoped. As far as Academy, in that particular business, that shifted from a load-in from Q2 into Q3, just from a timing end on their side.

Jeremy Hamblin, Analyst, Craig-Hallum: Okay, got it. In terms of the HERO acquisition, taking that, I wanted to see, A, what type of annual revenues the business was doing prior to acquisition. Their launchers are a little bit less expensive than the Byrna launchers. In terms of thinking about the fit with the business and where Byrna goes from here, I don’t know what you’re hinting at is that part of the issue with Byrna is simply the price points being too high for broadening the marketing to kind of a different audience than what your traditional kind of conservative gun-owning customer has been over the last five years or so.

Conn Davis, Chief Executive Officer, Byrna Technologies: Thanks, Jeremy. I’m really excited about the Hero opportunity and what that represents for the business. For me, it really goes back to kind of the four Ps of marketing and where we’re going as an organization. HLK is really leaning in to help us from a promotion point of view, how we talk about Byrna, the customers we’re targeting, and the media channels we’re moving through there. Similarly, what we’re doing from a retail point of view in the door expansion is really driving our placement and making Byrna much more accessible. Where Hero comes in is really on the product and the price point of view, as you say. We are a very tactical brand today, the way we show up in the marketplace.

The product form factor of Hero is really a different, less gun-forward product structure, which really opens up a new consumer opportunity from us from just a product point of view. Similarly, if you look at it from a pricing point of view, you mentioned they come in slightly below where we are. Frankly, there’s a pretty big gap in our portfolio from the sprays business that we have to the SD, right? That’s a $20 price point to a $400 price point. What’s nice about Hero is we’ve been able to dig into their product pretty deeply, and we believe there’s an opportunity to significantly reduce the build cost of that product and provide a solution for consumers in the $250-ish dollar range that will really open up a new consumer opportunity for us there.

Jeremy Hamblin, Analyst, Craig-Hallum: Okay, great. Thanks for taking my questions, and best wishes.

Conn Davis, Chief Executive Officer, Byrna Technologies: Thank you, Jeremy.

Operator: Our next questions are from the line of Matt Koranda with ROTH Capital Partners. Please proceed with your questions.

Matt Koranda, Analyst, ROTH Capital Partners: Hey, guys. Good morning. Maybe just attacking this from a different angle on channel. Wanted to hear a little bit more about the e-com channel and how traffic and conversion has trended in June and July. I know you mentioned some of the trends in April and May, Conn, but just any help with sort of what that looked like quarter to date, any improvement that we’ve seen in terms of traffic or conversion metrics, and how much of the HLK messaging, I guess, has been rolled out, or when do you expect that to roll out and start to impact traffic on a broader basis?

Conn Davis, Chief Executive Officer, Byrna Technologies: Thanks, Matt. Let me address the first part of that question. From an HLK messaging point of view, we are still very much in the early stages of that, and almost none of that is live at this point in time. That will be ramping throughout Q3 as we do the work to really understand what messages will resonate across the core and the new audiences that we’re targeting. I expect that to really ramp through Q3, both from a Byrna-owned channel point of view and what we’re doing from a social media partnership point of view with Acceleration Partners. That’s kind of where we are from that point of view. Throughout Q2, we really were still focused and relied on some of the traditional media partnerships that we had.

You saw us, just a couple of weeks ago, launch the Fox Sports partnership. That was really by reallocating previously committed dollars with one partner to a different outlet that they had. That’s kind of where we are right now. I expect that to continue to ramp as we go through Q3 and really have a lot of that messaging and new targeting in place as we enter the holiday period in Q4. When you think about how we’ve performed from an e-commerce point of view, I would tell you traffic has still been fairly consistent from the end of Q2 into the start of Q3, and conversion roughly the same as well. We are seeing an increased engagement on our Find the Right Launcher quiz and our Try Before You Buy program.

Those are tailwinds that will really ramp both end of last month and through July that we believe will meaningfully move the needle there throughout the quarter.

Matt Koranda, Analyst, ROTH Capital Partners: Okay. Appreciate that. Then maybe just if we’re thinking about the HERO acquisition, when should we expect that to be, I guess, integrated into the Byrna website? How should we expect the product to sort of roll out? Is it gonna be with Byrna branding? Do you start with sort of the legacy HERO product, and eventually add your branding once you kind of re-engineer the product? How should we think about sort of how that unfolds over time?

Conn Davis, Chief Executive Officer, Byrna Technologies: No, that’s great. Let me address one thing that I forgot to mention in your prior question as well. We are ramping up our TV as well. From an advertising point of view, during the World Cup, it was a little expensive when there were all the games on, but now it’s more cost-effective for us to do that, so we’re ramping that back up as well to drive traffic. You think about HERO, once we close that transaction, we will focus on the existing HERO product line as it is and really promoting that and driving that forward. We will work to integrate the HERO product line into byrna.com, so that we can sell it through that channel towards the end of Q3, Q4.

Really you’ll see us in Q1 have that more tied in with the Byrna brand and the positioning overall, and really tied into a unified experience.

Matt Koranda, Analyst, ROTH Capital Partners: Maybe just last one from me. Sounds like with sort of sales trends kind of continuing from second quarter, maybe we see a little bit of a seasonal ramp into the fourth quarter, but we’re still ramping on the marketing expense. Seems like EBITDA profitability is gonna be a little bit challenging for the rest of the year. How should we think about free cash flow? Maybe Laurie, if you want to kind of address how much you think you can flush from inventory for the remainder of the year, how the cash balance looks toward the end of the year. In light of that, how should we be thinking about those trends?

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Sure. Thanks, Matt. We really expect cash to kind of hold through Q3. Q4 is when you’re really gonna see us reduce inventory, and then obviously we’ll have the holiday sale. We’re targeting a $5 million reduction in inventory to really generate cash. We expect to end the year with more cash than we have at the moment, and keeping that steady through Q3. We typically burn cash the first part of the year, but I think, cash-wise, we’re in good shape and still with no debt.

Matt Koranda, Analyst, ROTH Capital Partners: Okay. I’ll leave it there. Thank you, guys.

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Thanks, Matt.

Operator: Our next question comes from the line of Jeff Van Sinderen with B. Riley Securities. Please proceed with your questions.

Jeff Van Sinderen, Analyst, B. Riley Securities: Hi, everyone. Just to kind of follow up on the line of thinking with sales trends or engagement running pretty similar so far this quarter, is your thought that Q3 will look something similar to Q2, or do you think it’ll be down another notch from Q2? I realize it’s a tough question, tough to predict here, but just any other, I guess, sort of directional thoughts you have around kind of the sequential progression in Q3.

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Yeah. Q3 is always a challenge from a seasonality perspective, right? The summer tends to be the slower months for us anyway. We do expect to see some of those load-ins for holiday start at the end of Q3. As Khan mentioned, there’s actions we’re taking that are fairly new. The Fox Sports initiative, Acceleration Partners, getting influencers up online, some of those smaller influencers to target, the website changes we’re making, the new TV advertising that quite literally just started in the last couple of days to ramp up. Those are the things that we’re doing, and expect to see some of that improve. There is certainly as well the seasonality. We’ll continue to work all of those channels through Q3, and Q4 is when we really expect to see revenue increase.

Conn Davis, Chief Executive Officer, Byrna Technologies: Okay. If maybe we could turn back to the HERO acquisition for a minute. Just curious, having taken a quick look at some of their products, and I know you spoke to a $250 price point, are you thinking product rationalization there? Are you thinking there’s overlap? I’m just looking at where they have a product priced now that’s arguably a little bit similar to Byrna, although I guess it only fires two rounds, is what it looks like, and then you have to put in a new cartridge. Just thoughts on the overall product line there, if you’re planning to rationalize, and how you position that versus the entry-level Byrna product.

Right. If you think about the HERO product line, that will really be a more basic, straightforward, lower-feature product line than the core Byrna launchers. You are not going to be able to upgrade them like you can the SD, the CL, and the LE. However, they are going to really fit in well below from a price point where Byrna is today, and really open up access to a more accessible marketplace overall. What is also interesting about that product line, when you look at the AIIRO product as well, again, work has to be done to bring the price point on that down, but that would really get you down to a much more form factor less like a gun, and a much more accessible price point as well.

I believe these will be filtered in as a different part of the product line below the core Byrna launcher in a more simple, straightforward, less capable, but still effective personal safety solution.

Jeff Van Sinderen, Analyst, B. Riley Securities: Okay. Anything you can share about the revenue that HERO generates now. Were they profitable? Are the gross margins similar? I guess anything around how you expect the consumable part of that business to be, because it looks like there is a consumable part. How are the margins on that? Just anything else, any other color you can give us there.

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Sure, Jeff. I would say from a margin perspective, similar to where Byrna is at. As Kon mentioned, though, we are going to do some things to take the cost out as we bring the price down, right? We want to target a lower price for consumers but keep maintaining the same similar margins. They have been profitable. It was a small company, really these are people, the founders did not invest enough in marketing. We think we have a great opportunity with the Byrna brand behind it, with our marketing engine, and to get that out and through our retail partners as well. We are really excited for this, especially in 2027. 2026, we have a little bit of work to do to get that all integrated. The consumables, there are consumables there. They are more of a cartridge rather than the ammunition.

I would expect it to perform similar to Byrna as far as being the same kind of percentage of sales.

Jeff Van Sinderen, Analyst, B. Riley Securities: Okay. Thanks for taking my questions. I’ll take the rest offline.

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Thanks, Jeff.

Operator: As a reminder, to ask a question today, you may press star one at this time. The next question’s from the line of Eric Walsh with Texas Capital. Please proceed with your question.

Eric Walsh, Analyst, Texas Capital: Thanks. Good morning. A couple questions. Just one following up on HERO. How do you market those products to consumers? Will they be marketed completely separate as different products and different channels to different target customers, or do you expect to market a holistic portfolio of options out there, including Byrna and HERO simultaneously, kind of give that consumer choice up and down the scale as opposed to being too targeted?

Conn Davis, Chief Executive Officer, Byrna Technologies: When you think about the HERO product line specifically itself, I think that’s a product that will appeal to a certain consumer type. Again, probably outside of the majority of the core of the current Byrna consumer. That being said, we really want to set up byrna.com so that you can find that product regardless of which launcher you’re looking for. What’s exciting about that is when we see people come to byrna.com and potentially abandon carts with a core launcher product in there, this gives us the opportunity to retarget them at a lower price point with a still capable product to pull them into the Byrna ecosystem, which we believe there’s a clear upgrade path over time across these products.

Eric Walsh, Analyst, Texas Capital: Got it. Helpful. Then a multi-part question on the ammunition manufacturing. Is the expectation that this shift in ammo manufacturing to third party is the long-term permanent solution, given that you found a cheaper manufacturing all-in cost? What do you expect the improvement in margins or what is the difference in margins versus manufacturing in-house? Because I know that one of the benefits when you did bring it in-house was everything is now made in the U.S.A. Is that still the case with the third parties? Lastly, with the ammo inventory write-down, was that because the inventory was impaired in any way, or is this still ammo inventory that could be sold in the future?

Conn Davis, Chief Executive Officer, Byrna Technologies: Thanks, Eric. Let me address the first part of that question. I’ll turn it over to Lauri on the impairment. When you think about where we’re going from an ammo point of view at this point, this is the long-term solution, we believe, from an ammo perspective. Throughout the first part of the year, we really found that a new supply of ammunition came online that just wasn’t there when the original ammo facility decision was made. That lower cost ability to source that, it is international right now, and I think that will continue to be the case. When we look at that, it’s really an opportunity for us to lower the overall cost of the ammo portfolio while still maintaining the levels of quality that we would expect. Let me turn over to Lauri real quick.

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Hi, Eric. Yeah, I think the impairment, what we really had, it’s more raw materials that we had. The finished goods that we have will continue to sell through. That’s not what was impaired. It was just because we’re not going to manufacture them anymore. It was more raw material write-down.

Eric Walsh, Analyst, Texas Capital: Perfect. On the margin question, I know there’s a lot of sub-questions out there. What do you think the margin delta will be?

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Sorry, what did you say?

Eric Walsh, Analyst, Texas Capital: The margin delta between gross margin between manufacturing in-house and now using a third party.

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Yeah. Based on the cost that we have now and where we can buy it, we’re going to see improvement in margin. I think that was something that was hurting our gross margin. The targets that we gave from an overall gross margin perspective of being, we were at roughly 62%, we expect it to be above that for the rest of the year.

Eric Walsh, Analyst, Texas Capital: Perfect. Thank you both.

Lauri Kearnes, Chief Financial Officer, Byrna Technologies: Thanks, Eric.

Operator: Thank you. At this time, this concludes our question and answer session. I’d now like to turn the call back over to Mr. Davis for closing remarks.

Conn Davis, Chief Executive Officer, Byrna Technologies: Thank you all very much for joining us today. That concludes our call.

Operator: Thank you for joining us for Byrna’s fiscal second quarter 2026 conference call. You may now disconnect.