Byrna Posts Strong Revenue Growth But Cash Flow Concerns Linger

What happened

Byrna Technologies announced preliminary fiscal Q4 2025 revenues of $35.1 million, up 26% year-over-year, with full-year revenues reaching $118.0 million, a 38% increase, highlighting continued momentum in its less-lethal personal protection business. This top-line performance aligns with the DeepValue report's recognition of Byrna's rapid scaling and attractive unit economics, including gross margins above 60%. However, the report critically notes that trailing-twelve-month free cash flow remains negative at about $11 million, driven by a significant inventory and receivables build that has shrunk cash reserves. Investors must question whether this revenue growth is sustainable or merely masking working capital inefficiencies and potential channel stuffing, as the stock trades at rich multiples—78% above a conservative DCF estimate. While the growth story is compelling, the lack of cash conversion and high valuation keep the investment case unproven.

Implication

Byrna's strong revenue growth reinforces its niche position in the less-lethal market, yet negative free cash flow and a valuation 78% above DCF estimates persist as major headwinds. Investors should closely monitor upcoming financials for signs of working capital normalization, such as reduced inventory days and improved DSO, to gauge cash flow sustainability. Without evidence of positive free cash flow conversion, the stock's premium multiples (P/E ~27x, EV/EBITDA ~52x) may not be justified given the volatile regulatory and competitive backdrop. The shrinking cash cushion—down from $16.8 million to $6.5 million in nine months—adds liquidity risk, potentially forcing dilutive capital raises if execution stumbles. Therefore, patience is warranted until the company demonstrates disciplined capital allocation and self-funded growth.

Thesis delta

The revenue announcement does not shift the fundamental investment thesis, which remains a 'WAIT' due to unaddressed cash flow and valuation issues. It confirms growth potential but underscores the critical need for working capital discipline and cash generation. No upgrade to a buy is warranted until FCF turns sustainably positive and the margin of safety improves.