Executive Summary / Key Takeaways

• Byrna Technologies (NASDAQ:BYRN) is rapidly establishing itself as a leader in the less-lethal personal security market, driven by a strategic pivot to consumer channels and innovative distribution models.
• Recent performance, highlighted by 41% year-over-year revenue growth in Q2 2025 to $28.5 million and improved profitability, demonstrates the effectiveness of its celebrity endorsement marketing and expanding retail footprint.
• The launch of the Compact Launcher (CL) is a key catalyst, expected to broaden the addressable market, particularly among women, and enhance gross margins due to its favorable cost structure.
• Strategic partnerships, notably the Sportsman's Warehouse store-within-a-store pilot and the expansion of company-owned retail locations, are crucial for driving high conversion rates through experiential selling.
• Operational improvements, including onshoring manufacturing and increasing production capacity, are aimed at mitigating supply chain risks, improving quality, and supporting future growth, positioning Byrna for sustained profitability and cash generation.

Setting the Scene: A New Era for Personal Security

Byrna Technologies is at the forefront of a burgeoning segment within the security landscape: less-lethal personal protection. Specializing in innovative alternatives to traditional firearms, Byrna's core mission revolves around empowering individuals with effective self-defense tools that mitigate the risk of taking a life. This focus positions the company squarely within the growing demand for non-lethal options, a market segment management believes is poised for significant expansion over the next decade.

The company's journey has seen a strategic evolution. Incorporated in 2005, and initially operating as Security Devices International, Inc., Byrna pivoted away from military applications around 2020 to concentrate on consumer, private security, and public security markets. This shift culminated in the introduction of the Byrna Launcher in 2019, laying the foundation for its current business model. A transformative moment arrived in September 2023 with a decisive change in marketing strategy, moving from social media to leveraging celebrity endorsers. This proved highly effective, fueling significant direct-to-consumer sales growth and driving the company towards consistent profitability.

At the heart of Byrna's offering is its differentiated technology: CO2-powered launchers designed to fire kinetic and chemical irritant projectiles. These devices provide a non-lethal means of defense, usable by consumers in most U.S. states without requiring a firearms license. The technology is engineered for ease of use and effectiveness. The new Compact Launcher (CL), a key technological advancement, exemplifies this. Modeled after micro-compact handguns, the CL is 38% smaller and 36% lighter than the Byrna SD, yet delivers the same energy density (joules per square inch) as the more powerful Byrna LE. It is also 27% narrower, making it ideal for concealed carry and significantly easier for individuals with smaller hands, such as women, to operate comfortably. This innovation is expected to open up a critical new demographic for Byrna. The company is also exploring future technological integrations, including a planned chipset for the CL to enable subscription-based smart features like contacting authorities or integrating with smart homes upon deployment, leveraging its growing installed base of over 650,000 launchers sold.

In the competitive landscape, Byrna operates alongside larger players like Axon Enterprise (AXON), which dominates the law enforcement less-lethal market with its TASER devices, and traditional firearms manufacturers like Smith & Wesson (SWBI) and Sturm, Ruger & Co. (RGR), who also offer some personal security products like pepper sprays or stun guns. While Axon leads in advanced features and B2B relationships, and traditional manufacturers benefit from established distribution and brand heritage, Byrna carves out a niche with its focus on the civilian market, user-friendly non-lethal technology, and increasingly, its "Made in America" strategy. Byrna's products generally offer a lower upfront cost compared to Axon's TASERs, making them more accessible to consumers. While some competitors offer cheaper products like pepper sprays, Byrna differentiates with greater range and stopping power. The company's proprietary 61 caliber round for the CL also provides a temporary competitive moat in ammunition sales for that platform.

Performance Reflecting Strategic Execution

Byrna's recent financial performance underscores the effectiveness of its strategic initiatives. In the second fiscal quarter ended May 31, 2025, the company reported net revenue of $28.5 million, a robust 41% increase compared to $20.3 million in the prior-year quarter. This growth contributed to a first-half fiscal year revenue of $54.7 million, up 48.1% year-over-year. The increase was primarily fueled by the launch of the Compact Launcher, significant growth in dealer and chain store sales (up 106% in Q2), and continued strength in direct-to-consumer channels.

Gross profit in Q2 2025 was $17.6 million, maintaining a strong gross margin of 62%. For the first six months, the gross margin was 61.2%, a slight improvement from 60.1% in the prior year, benefiting from increased production volumes and a more favorable product mix driven by the higher-margin CL. Operating expenses increased to $14.2 million in Q2 and $28.5 million for the six months, reflecting planned increases in marketing spend, variable selling costs tied to higher sales volume, and investments in payroll and the CL launch. Despite these investments, Byrna achieved net income of $2.4 million in Q2 and $4.1 million for the six months ended May 31, 2025, a significant improvement over the prior year and marking a transition to full taxpayer status in 2025 with an expected effective tax rate of approximately 23%. Adjusted EBITDA for the six-month period totaled $7.1 million.

Liquidity saw a planned decrease in the first half of 2025, with cash and cash equivalents totaling $7.0 million at May 31, 2025, down from $16.8 million at November 30, 2024. Cash, cash equivalents, and marketable securities combined were $13.0 million.

This decrease was primarily due to a significant build-up in inventory, which increased from $20.0 million to $32.3 million, in anticipation of the Compact Launcher launch. Cash used in operating activities was $9.2 million for the six months, largely driven by this inventory investment and an increase in accounts receivable. Capital expenditures were also elevated due to investments in retail stores and the new ammo facility but are expected to decrease in the second half of the year. The company maintains a debt-free balance sheet and expects its cash position to rebound as inventory levels normalize.

Expanding Reach and Operational Excellence

Byrna's growth strategy extends beyond product innovation to encompass a multi-channel distribution approach and operational optimization. The company continues to leverage its e-commerce presence, with Amazon (AMZN) sales growing faster than Byrna.com, benefiting from Amazon's vast customer base and lower net margins compared to direct website sales. The wholesale channel, including dealers, retailers, and big box stores, is experiencing rapid growth, notably driven by the new partnership with Sportsman's Warehouse (SPWH). This partnership involves rolling out store-within-a-store concepts and point-of-sale displays, leveraging Sportsman's existing foot traffic and converting archery ranges into Byrna shooting lanes to capitalize on the high conversion rates observed when customers can experience the product firsthand. Byrna aims to have a presence in approximately 140 Sportsman's locations by year-end.

Company-owned retail stores, such as those recently opened in Scottsdale, Nashville, and Fort Wayne, are exceeding expectations, becoming profitable within five months and serving as valuable test beds for refining the retail model and supporting the premier dealer program. International expansion continues, with significant success in South America, including large ammo orders from law enforcement in Argentina, and expansion into Mexico through a certified training program. The divestiture of the Byrna LATAM joint venture, transitioning to a licensing and distribution agreement, is expected to provide over $1 million in royalty income next year and allow Byrna LATAM to operate more nimbly in the region.

Operationally, Byrna is focused on scaling production and enhancing efficiency. Production capacity was ramped up to 24,000 units per month ahead of the CL launch and is now at a steady state of 15,000 units per month with the flexibility to adjust. The company is transitioning to a more efficient assembly pod-based manufacturing system and is actively onshoring production. While moving component manufacturing to the U.S. has increased costs by approximately 14%, management views this as a strategic investment to mitigate tariff risks, reduce supply chain disruptions, improve quality by working with domestic suppliers, and reduce manufacturing variances (currently 2-3% of gross margin). The new U.S. ammo facility in Fort Wayne, with an annual capacity of 8 million rounds, further supports this onshoring strategy and provides a proprietary source for the CL's 61 caliber ammunition. Investments in employee wages and benefits are aimed at attracting and retaining skilled labor to support increased production and quality.

Outlook and Risks

Management is optimistic about the company's trajectory, guiding for top-line growth between 25% and 40% for the full fiscal year 2025. This outlook is driven by the continued impact of the Compact Launcher, the expanding retail and wholesale footprint (especially the Sportsman's rollout), the ongoing effectiveness of the celebrity endorsement marketing strategy (with plans to add 2-3 new endorsers quarterly), and the potential for new revenue streams like Byrna Care and future smart features. They anticipate profitability to continue expanding, with margins expected to exceed Q4 2024 levels in the second half of 2025, benefiting from the higher-margin CL and operational efficiencies from onshoring. Cash flow is expected to improve as inventory levels normalize.

However, potential risks could impact this outlook. Subdued consumer sentiment and economic headwinds, including uncertainty over interest rates and tariffs, could pressure sales. While Byrna has taken steps to mitigate tariff impacts through onshoring, potential retaliatory tariffs or unforeseen supply chain disruptions remain a concern. The effectiveness of the celebrity endorsement strategy is critical, and while current ROAS is strong, maintaining this requires continuous effort and investment. Dependence on key distribution partners like Sportsman's Warehouse introduces concentration risk. Legal proceedings and regulatory changes, particularly concerning less-lethal weapons, could pose challenges. The company's ability to successfully scale production and integrate new manufacturing processes without impacting quality is also vital.

Conclusion

Byrna Technologies is executing a multi-faceted strategy centered on product innovation, diversified distribution, and operational efficiency to capitalize on the growing less-lethal security market. The successful launch of the Compact Launcher, coupled with expanding retail partnerships and effective marketing, provides a clear path for continued top-line growth, guided at 25-40% for 2025. While investments in inventory and infrastructure have temporarily impacted cash flow, the company's debt-free status and expected normalization of working capital support its financial health. The strategic shift towards U.S. manufacturing and proprietary technology enhances its competitive positioning against rivals like Axon, Smith & Wesson, and Sturm, Ruger, offering differentiation in cost, quality, and product features. Investors should monitor the adoption rate of the CL, the success of the Sportsman's Warehouse rollout, and the company's ability to maintain operational efficiencies as it scales, as these factors will be key determinants of Byrna's ability to sustain its growth trajectory and expand profitability in the years ahead.