10-Q: Byrna Technologies Reports Q2 2026 Results, Sees Revenue Decline

Byrna Technologies Inc. reported a significant decrease in net revenue for the second quarter of fiscal year 2026, alongside substantial inventory write-downs and an impairment charge.

Summary

• Byrna Technologies Inc. reported net revenues of $16.4 million for the second quarter of fiscal year 2026, a decrease of 42.5% compared to $28.5 million in the prior year period.
• For the six months ended May 31, 2026, net revenues were $45.4 million, a decrease of 16.9% from $54.7 million in the prior year period.
• The company recorded a net loss of $10.1 million for the three months ended May 31, 2026, compared to a net income of $2.4 million in the prior year period.
• For the six months ended May 31, 2026, the net loss was $9.3 million, compared to a net income of $4.1 million in the prior year period.
• Cost of goods sold increased significantly due to a $5.9 million inventory write-down and a $3.5 million impairment charge related to the cessation of in-house ammunition production.
• Operating expenses were $14.6 million for the quarter, a slight increase from $14.2 million in the prior year, including a $1.0 million charge for abandoned equipment deposits.
• Cash and cash equivalents decreased to $9.4 million as of May 31, 2026, from $13.7 million at the end of the previous fiscal year.
• The company entered into an Asset Purchase Agreement to acquire Hero Defense Systems, LLC for $1.25 million in cash and stock, plus contingent royalties.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative filing due to significant revenue declines, substantial losses, and large write-downs, despite some positive cash flow improvements and strategic acquisition efforts.

Positives

• The company received tariff refunds totaling $1.1 million during the six months ended May 31, 2026, with an additional $2.3 million received subsequent to the period end, which will reduce cost of goods sold.
• Cash used in operating activities decreased to $3.0 million for the six months ended May 31, 2026, from $9.2 million in the prior year period.
• The company has access to a $20.0 million credit facility, with $5.0 million available under a revolving line of credit and $15.0 million in a delayed draw term loan, as of May 31, 2026.
• The company is pursuing strategic acquisitions, entering into an agreement to acquire Hero Defense Systems, LLC.

Negatives

• Net revenues decreased by 42.5% in the second quarter and 16.9% for the first six months of fiscal year 2026 compared to the prior year periods.
• The company reported a net loss of $10.1 million for the quarter and $9.3 million for the six-month period, a significant reversal from net income in the prior year.
• Gross profit margin declined sharply to 10.9% in the second quarter from 61.6% in the prior year, largely due to inventory write-downs and impairment charges.
• Cost of goods sold increased by 33.6% in the quarter despite a 42.5% decrease in revenue, primarily due to inventory write-downs and impairment charges.
• Significant inventory write-downs ($5.9 million) and impairment charges ($3.5 million) were recorded due to the cessation of in-house ammunition production.
• Operating expenses increased slightly in the quarter and significantly over six months, partly due to a $1.0 million charge for abandoned equipment deposits.
• Cash and cash equivalents decreased by $4.3 million during the six months ended May 31, 2026.

Risks

• The company has an accumulated deficit of approximately $56.4 million as of May 31, 2026.
• Future results depend on the ability to generate sufficient revenue to fund operating expenses and effectively market products.
• The company's business strategy includes expanding its product portfolio to broaden market reach and drive sales growth, which carries inherent execution risks.
• The company is subject to risks associated with its credit facility, including financial covenants and restrictions on indebtedness.
• The acquisition of Hero Defense Systems, LLC is subject to customary closing conditions and potential integration challenges.
• The departure of the President, Luan Pham, and the acceleration of his equity awards could impact operational continuity and future performance.
• The company faces risks related to international operations, currency fluctuations, and regulatory environments in markets like South Africa and Canada.

Future Outlook

The company's future results will depend on its ability to continue generating sufficient revenue to fund operating expenses and to effectively market its products. The company expects to fund operations primarily from cash generated from operations over the next twelve months and has access to a credit facility for additional liquidity if needed. They may also pursue additional equity offerings or debt financings.

Management Comments

• The company's mission is to provide effective, easy-to-use, and reliable less-lethal solutions that enable responsible self-defense and deescalation.
• The company's business strategy is twofold: (1) to fulfill the growing demand for less-lethal products in the law enforcement, correctional services, and private security markets and (2) to provide civilians with easy access to an effective, less-lethal way to protect themselves and their loved ones.
• Management believes demand for less-lethal products in the United States and internationally continues to rise and that this category will remain a growing segment of the broader security market.
• The company's decision to permanently cease in-house ammunition production at its Fort Wayne, Indiana facility was a strategic one, with ammunition now to be sourced from a third-party contract manufacturer.

Industry Context

StockSavvy.ai notes that Byrna Technologies operates in the growing less-lethal defense technology market, facing challenges in revenue generation and profitability despite strategic initiatives like product line expansion and acquisitions. The significant decline in revenue and gross margin, coupled with substantial write-downs, indicates intense market competition or execution challenges within the company.

Comparison to Industry Standards

• The gross margin of 10.9% for Q2 2026 is significantly below typical industry benchmarks for consumer product companies, which often aim for margins above 30-40%.
• The substantial inventory write-down and impairment charge of $9.4 million ($5.9M inventory + $3.5M impairment) in Q2 2026 is a significant event that would be closely scrutinized against industry norms for inventory management and asset utilization.
• The revenue decline of 42.5% in Q2 2026 is a sharp contraction, whereas many competitors in the broader security and defense sectors might be experiencing more stable or growing revenues, depending on specific market segments.
• The company's reported net loss of $10.1 million in Q2 2026 contrasts with the profitability often seen in established players within the defense and security technology sectors, though early-stage companies may experience similar losses during growth phases.

Management Changes

Legal Proceedings

• In the ordinary course of business, the Company may be involved in various legal actions and claims, including but not limited to product liability, consumer, commercial, tax, and governmental matters. Currently, the Company is engaged in a number of legal proceedings; however, in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss concerning loss contingencies for asserted legal and other claims.

Related Party Transactions

• The Company subleased office premises at its Massachusetts headquarters to a corporation owned and controlled by the former CEO of the Company from July 1, 2020 through April 30, 2026, at which point the sublease terminated. Sublease income recognized was a nominal amount for the three and six months ended May 31, 2026 and 2025.

Stakeholder Impact

• Shareholders: The significant net loss, revenue decline, and substantial write-downs may negatively impact shareholder value and confidence. The stock buyback program aims to mitigate dilution.
• Employees: The departure of the President and potential restructuring due to operational changes (like ceasing ammunition production) could affect employee morale and job security. Stock-based compensation continues to be a significant expense.
• Suppliers: The cessation of ammunition production may impact suppliers of related raw materials. The acquisition of Hero Defense Systems could lead to new supplier relationships.
• Creditors: The company's access to a credit facility provides some assurance, but the ongoing losses and cash burn rate could be a concern for creditors if not addressed.

Next Steps

• The company will continue to monitor royalty accruals as additional information from LATAM becomes available and will true-up such accruals as necessary in future periods.
• The company is evaluating the Hero Acquisition for purposes of ASC Topic 805, Business Combinations, and expects to provide additional disclosures, including a preliminary purchase price allocation, in a future filing.
• The Hero Acquisition is expected to close shortly after the Effective Date, subject to customary closing conditions.
• The company will recognize the $2.3 million tariff refund as a reduction of cost of goods sold in its third fiscal quarter of 2026.

Key Dates

Recommendation

The company is facing significant headwinds with declining revenues, substantial losses, and large write-downs. While there are strategic initiatives like an acquisition and access to credit, the current financial performance warrants a cautious approach. Investors should monitor the integration of the Hero Defense Systems acquisition and the company's ability to reverse the negative revenue and profitability trends before considering a more aggressive stance.

Keywords

Byrna Technologies, SEC Filing, 10-Q, Quarterly Report, Less-lethal defense, Personal security devices, Revenue decline, Net loss, Inventory write-down, Impairment charge, Ammunition production, Hero Defense Systems acquisition, Conn Davis, Laurilee Kearnes