Byrna Technologies Q2 2024 Earnings Call Transcript

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Provided by Quartr
July 9, 2024

There are 6 speakers on the call.

Operator

Good morning, and welcome to Verna's Fiscal Second Quarter 2024 Earnings Conference Call. My name is Kevin, and I'll be your operator for today's call. Joining us for today's presentation is the company's CEO, Brian Ganz CFO, David North and CFO designate, Laurie Kearns. Following their remarks, we'll open the call to questions. Earlier today, Werner released results for its fiscal Q2 ended May 31, 2024.

Operator

A copy of the press release is available on the website. Before turning the call over to Brian Ganz, Vernus 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 Werner's most recent 10 ks and 10 Q filings for a more complete description of risk factors that could affect these projections and assumptions.

Operator

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.burna.com, for further information regarding forward looking statements and reconciliations of non GAAP results to GAAP results. Now I would like to turn the call over to BERNA's CEO, Brian Ganz. Sir, please proceed.

Speaker 1

Thank you, Kevin, and thank you everyone for joining us today. This morning, we filed our 10 Q with the SEC and issued a press release providing our financial results for the fiscal Q2 ended May 31, 2024, as well as highlighting key business accomplishments from the year so far. I'll start by passing the call to David North, discuss our financial results for Q2. Following his remarks, I'll review our record breaking quarter, highlighted by 20 $300, 000 in revenue and continued GAAP profitability. I will then offer insights into our operation and discuss our go forward strategy.

Speaker 1

Lastly, we'll open the call to questions from research analysts. David? Thank you, Brian, and good

Speaker 2

morning, everyone. Let's discuss our financial results for the 2nd fiscal quarter ended May 31, 2024. Net revenue for Q2 2024 was $20, 300, 000 that's up 76% from the $11, 500, 000 we reported in the fiscal Q2 of 2023. This $8, 800, 000 increase is primarily due to the transformational pivot in our advertising strategy, which we kicked off in September of 2023. The success of our celebrity endorsement strategy resulted in a $7, 900, 000 increase in direct to consumer revenues through our web website and Amazon compared to the prior year period.

Speaker 2

Gross profit for Q2 20 $1, 000, 000 or 62 percent of net revenue compared to $6, 200, 000 or 54 percent of net revenue for Q2 2023. Higher margin direct to consumer channels and was further improved by an intensive component cost reduction effort spearheaded by Verna's engineering team as well as the economies of scale resulting from increased production volumes. Operating expenses for Q2 2024 were $10, 600, 000 compared to $7, 200, 000 for Q2 2023. The increase in operating expenses was driven by an increase in variable selling costs such as freight and sales transaction processing fees, an increase in marketing spend as part of the company's new advertising strategy and an increase in payroll primarily in marketing and engineering as the company improves capabilities in these areas. Net income for Q2 2024 was $2, 100, 000 a 3 point from a net loss of approximately $1, 100, 000 for Q2 of 2023.

Speaker 2

Adjusted EBITDA, which is a non GAAP metric, for Q2 2024 Totaled $2, 900, 000 compared to negative $800, 000 for Q2 2023. Cash and cash equivalents at May 31, 2024, totaled $24, 800, 000 compared to $20, 500, 000 at November 30, 2023. And inventory at May 31, 2024 totaled $15, 500, 000 compared to 13 $900, 000 at November 30, 2023. The company continues to have no current or long term debt. As mentioned during our last call, I'll be retiring at the end of this week.

Speaker 2

I am truly proud of the work we've done at BERNA and the financial milestones we've achieved. We took sales from less than $1, 000, 000 in the entire fiscal year of 2019 to $20, 300, 000 in the Q2 of 2024. And we've turned Verna into a thoroughly profitable enterprise. I want to thank Brian for the opportunity to be part of this incredible journey and for his leadership in driving Verna's mission forward. As a shareholder, I'm confident in the future of the company with Lori Kearns leading our financial department.

Speaker 2

Lori has extensive experience as a public company executive and is well suited to help take Bernard to new heights. I'll be staying on as a consultant to ensure a smooth transition and supporting Lori as needed. And now, Lori, the floor is yours.

Speaker 3

Thank you, David, and good morning, everyone. I'm quite honored to be joining Verna at a time when the company is building such strong momentum. Verna's recent performance highlighted by leaps in year over year revenue reflects the success of our strategic initiatives and operational efficiencies. I chose to join BERNA because I'm passionate about the company's mission to provide innovative, less lethal personal security solutions. My background as a public company CFO, particularly my experience driving financial strategy at consumer focused businesses aligns well with Verna's needs as we continue to scale and innovate.

Speaker 3

The transformational changes implemented by the team have laid a strong foundation for our future trajectory, and I'm eager to leverage my background to further enhance our operations and drive sustained growth. We wish David all the best in his retirement and look forward to continuing to work with him as an advisor to Berna. I'll now turn the call back over to Brian.

Speaker 1

Thanks, Laurie. Thank you, David. As you can see from the financial results with record sales, record gross profit margins, record net income, record adjusted EBITDA and record cash flow, burn it is incredibly well positioned for continued financial success. The key to that success is of course continued top line growth. For that reason, I'd now like to provide an update on Burnet's key growth initiatives and outline our plans for the year ahead and beyond, starting with our marketing strategy.

Speaker 1

As is plainly evident, our pivot last September to a new advertising strategy based on the power of celebrity endorsement is continuing to deliver strong year over year revenue growth. With the recent addition of more celebrity influencers, Burns brand recognition continues to grow, driving strong top line growth particularly in our DTC channels. We are now working with more than 10 celebrity influencers including Sean Hannity, Glenn Beck, Bill O'Reilly, Judge Jeanine Pirro, Dan Bongino, Jesse Kelly, Dana Lash, Michael Berry, Howie Carr and Mike Gallagher. Of our record $20, 300, 000 in revenue in Q2, DTC sales on burner.comandamazon.com accounted for $14, 600, 000 or 72% of that number as compared to $6, 800, 000 or 59% of total revenue in the same period last year. And keep in mind that the DTC sales channel is our highest margin sales channel with a gross profit percentage for this past quarter of 69.5%.

Speaker 1

So the question is, is this model sustainable? Simply put, yes. The current model is sustainable and we expect it to continue to drive impressive year over year growth. Well, we do not anticipate that we will see the extraordinary 6x to 7x ROAS levels or return on advertising spend that we achieved during the holiday selling season, we are confident that we can maintain a highly accretive 4x to 5x ROAS ensuring substantial profitability and positioning us for long term success. Our current ROAS target for our discretionary marketing spend is a 5x multiple, which we are continuing to achieve.

Speaker 1

This means that for every $1 of advertising spend, we are generating at least $5 in DTC sales With a 69.5 percent gross profit margin for direct to consumer sales, this translates into $3.48 in gross profit for every $1 of advertising spend. With variable expenses running at 10% of sales, the additional profit earned from each incremental dollar of advertising spend is $2.98 or $1.98 net of the advertising spend itself. This translates into a 198% return on investments. Even if we were to lower our minimum acceptable ROAS requirement to 4x for incremental advertising spend, we would still have 140% return on investment. At a 3x ROAS, each incremental advertising dollar would generate an 80% return on investment.

Speaker 1

Consequently, sustainability of the celebrity endorser advertising model is not an issue as we could accept, if necessary, lower ROAS multiples while still generating ever increasing EBITDA margins. That said, our goal clearly is to keep our ROAS as high as possible. Towards this end, we are continuously monitoring the performance of not only the influencers themselves, but also the platforms, time of day and content of the message. This requires us to look at several variables. First, we take into account the frequency of the endorsement.

Speaker 1

We learned early on that there is an optimal frequency for each endorser. Too frequent and the sales generated do not justify the incremental ad spend. Too infrequent and we are unable to reinforce the message. Our goal is to find and maintain the appropriate balance for each influencer. Secondly, we evaluate the platforms used.

Speaker 1

While radio continues to deliver strong returns, our returns on TV tend to be even higher because people can see the launchers in operation. Podcasts on the other hand have been hit or miss. For some endorsers, podcasts are extremely effective, for others not so much. Our goal is to find what works for each endorser. 3rd, we evaluate the tone, tenor and content of the endorsement.

Speaker 1

We tailor the message to best resonate with each influencer's audience. Some audiences appreciate a forceful message. In other words, it's a scary world out there and you need to be prepared. Other audiences require a more nuanced message focused on the less lethal nature of burnout. Our job is to find what works best for each individual influencers audience and to craft the message best suited to that demographic.

Speaker 1

With the information gleaned from monitoring all these factors, we can then fine tune our ad spend selecting the right frequency, platform and message for each influencer and then allocating additional resources to those influencers who are moving the needle while strategically reducing spend where returns are subpar. So while the celebrity endorsement model may not be infinitely scalable, and while there are diminishing returns over time for any single influencer, we are confident that we can sustain top line growth with the celebrity endorser model as a whole through both the expansion and rotation of our roster of endorsers and the judicious management of each influencer. So for this reason, the correct question is not really whether Bernard's advertising strategy is sustainable, it is. The right question to be asking is how far and how fast can we scale this model? First, as I already mentioned, we believe that there is still significant upside growth to be had simply by expanding our roster of celebrity endorsers.

Speaker 1

Currently, we are working with just 10 across several platforms, including among others, Iheart, Westwood 1, Salem Media and Radio America. Not only does each of these networks have many additional influencers that we can work with, but there are also a number of other networks that we have not even begun to tap into. While our celebrity endorser advertising spend is pretty much locked in for the balance of 20 asking for RFPs from all of the above mentioned networks and others for 2025 so that we can build a program for next year that continues to grow Bernard's brand awareness and market presence by tapping into the audiences of these influencers. In dollar terms, our goal is to increase our celebrity endorser advertising spend by an incremental 50% in 2025 over 2024. Next question then is what can we do beyond celebrity endorsement based advertising model?

Speaker 1

The Burnham marketing team is constantly looking to new advertising channels to both augment and amplify our celebrity endorsement model and to expand our reach. Towards this end, we are once again exploring billboards. As most of you are aware, we used billboards in the past. They proved to be effective, growing sales by several 100% in the markets where they appeared. Unfortunately, they were not necessarily cost effective, generating ROAS multiples in the 2.5x range.

Speaker 1

We believe that circumstances are now sufficiently different to merit another try of this advertising medium. As our product is becoming more broadly accepted and our ad buying power more formidable, we are now getting quotes from the large billboard companies that are significantly lower than what we were paying previously on measured as measured on a CPM or cost per 1, 000 basis. We are hopeful that the reduced rates will allow us to achieve an acceptable ROAS on billboards as billboards are an almost infinitely scalable advertising medium. We are also exploring television advertising for the same reason. We know that it is effective.

Speaker 1

In the past, it was simply not cost effective with returns in the 3x ROAS range. With the increasing normalization of the less lethal market and with Burns growing public awareness, we are already being approached by a number of smaller cable and broadcast channels that are interested in working with We will be devoting approximately 10% of our advertising budget to television for the balance of 2024. And if it proves successful in terms of ROAS, we will increase our commitment to this channel for 2025. Finally, we are looking at partnerships with other industry players that work with the same demographic as burnout. 1 of the more interesting opportunities we are currently exploring is a partnership with US CCA or the United States Concealed Carry Association.

Speaker 1

US CCA is a membership organization that provides education, training and insurance to gun owners if they were to be arrested or sued in civil court after using their firearm or more frankly any other means of self defense. They also provide extensive gun safety education and training. The USCCA currently has over 800, 000 members. We believe that these 800, 000 gun owners are also our target demographic as they are the most responsible gun owners interested in protecting their families, but doing so in the safest and most responsible manner possible. We believe that there is an enormous cross marketing opportunity for both companies.

Speaker 1

Specifically, we would want to offer the Bernal line of self defense products to U. S. CCA members, providing them with a non lethal option lower down on the continuum of force. At the same time, we believe that many of Burnet's customers would interested in the U. S.

Speaker 1

CCA membership for training and for legal preparation in the event they find themselves charged with a crime or facing civil suit after using self defense. In short, the management team at burnout is not sitting on its hands nor resting on its laurels. Rather, we are constantly expanding and refining the programs that are working, while at the same time exploring new advertising channels as we look to increase the public's awareness that there are viable alternatives to lethal force. We are convinced that there is significant growth potential for both Burna specifically and for our industry generally as less lethal becomes more broadly recognized as legitimate product categories. The last 5.5 years since the burner was launched, sales have climbed from little more than $200, 000 a year to more than $200, 000 a day.

Speaker 1

That is a CAGR, a compound annual growth rate of 160%. By the way, over the same period, our stock has appreciated just 37% a year. More importantly, despite selling this seeing this massive growth in sales, we still have captured less than 1 quarter of 1% of our core constituency gun owners. What is a reasonable goal within this demographic? 5%, 10%, 20%, there are 100, 000, 000 gun owners in the United States.

Speaker 1

Even a modest 10% market penetration over the next 10 years would result in more than $10, 000, 000, 000 in revenue based on the current estimated lifetime value of a Verna customer. And that does not take into account families that don't own a gun, but want something to protect themselves. It does not take into account our law enforcement sales or the international market. So while we cannot yet know whether the TAM can support $500, 000, 000 in annual revenues or $1, 000, 000, 000 in annual revenues, we do know that there remains significant upside opportunity from here. I'd now like to take this opportunity to update everyone on our retail store strategy, which we have alluded to in our last earnings call.

Speaker 1

We remain convinced that there is a very real opportunity to reach customers through dedicated Verna retail stores. As I previously explained, we opened a dedicated company owned burner store in Las Vegas 2 years ago. This store has proven that a dedicated burner retail location with a shooting range for potential customers to try the product before making a purchase is an extremely effective marketing tool and is economically viable on a standalone basis. 1 of the reasons for this success is that when potential customers can demo the product, there is an 80% conversion rate. That means 8 out of 10 people that walk into the store walk out with a burnout.

Speaker 1

This compares to just slightly over 1% conversion rate in our online store. Our Las Vegas store is currently operating at a run rate of about $1, 000, 000 a year in sales and generating a 65% gross profit margin. With relatively modest operating cost compared to most retail store models, at this level of sales, the Burna store is generating contribution margins of approximately 35%. As previously stated, based on the success of this first location and the success of the premier dealer model, we now intend to open 3 to 4 more company owned retail stores before the end of the year. We've tentatively selected Scottsdale, Nashville, the Greater Boston area and somewhere in Southern California for these pilot stores.

Speaker 1

Our goal will be to use these stores to both fully prove out the concept and to refine the store model. So specifically, we will use these stores to perfect the look and feel of the physical premises, develop the store operating manuals, build out employee training program, develop and debug the ERP and point of sale computer systems, work out the advertising strategies and finalize the products and services to be offered. If these stores perform on par with the Las Vegas store, we will then look to roll out a hybrid retail store model later next year consisting of a combination of company owned and franchise stores. We believe that the market could easily support 100 or more Verna stores across the United States. The precise split between company owned and franchise stores will be determined based on how quickly we feel that we could support the rollout of new stores from a product availability perspective.

Speaker 1

If we believe that we could roll out 100 stores in short order, we would need to rely more heavily on franchisees to be able to roll out such a large number of stores quickly. On the other hand, if we feel that we could only support 20 new stores a year, we will likely keep these as company owned operations. Keep in mind that even at $500, 000 in sales per year per location, 100 stores would require us to ramp up production by 100, 000 units just to support our retail locations. At $1, 000, 000 per location, we would need to produce an additional 200, 000 units annually. This would be in addition to the 50, 000 to 100 1, 000 additional annual units we will need to produce simply to support the growth we expect from our current DTC and dealer business.

Speaker 1

While we are confident our current facility can be expanded to support these volumes, it cannot happen overnight. As we have seen this year, it has taken us more than 6 months to increase production by 8, 000 units a month. For all the reasons just stated, we are very excited about the retail store opportunity and possibilities. This could be an entirely new leg of the sales and distribution stool for Burnham, a channel that could ultimately be as large as our online sales channel. We will continue to keep everyone apprised of our progress in rolling out these first few locations.

Speaker 1

Law enforcement, last quarter we discussed exploring whether we should expand the resources devoted to our law enforcement efforts. The conclusion we have reached is that the high cost of marketing to domestic law enforcement coupled with the cost of our products when compared to many of our competitors results in a subpar return on investment compared with other opportunities available to burn up, such as obviously e commerce and retail stores. For this reason, we have made the decision not to dedicate additional monetary resources to our domestic law enforcement program at this time. That said, law enforcement is important to Verna as it provides the credibility and social proof necessary to support our consumer business. So while we will not devote additional monetary resources to growing our presence in this market, we will continue to take steps to further professionalize our law enforcement program, improving the range of products and services offered to our law enforcement and private security customers.

Speaker 1

This will include reintroducing our iconic 40 millimeter impact round, the Burna Bip to our law enforcement customers. As some of our older investors will remember several years ago, we sold our original 40 millimeter business including the IP and Molds to Facta Global of Canada when we pivoted to our current consumer base model. Facta Global was our largest 40 millimeter consumer at the time and a global leader in 40 millimeter sales and training. As part of the sale, Bernard negotiated royalty on every BIP sold worldwide, and we retained the exclusive rights to sell the BIP in the United States. As part of burner's revamped law enforcement program, burner will once again be offering the 40 millimeter BIP to our law enforcement consumers.

Speaker 1

In terms of financial resources, however, our law enforcement and military efforts will continue to be focused primarily on the international markets, where there are fewer but larger agencies and there is a greater acceptance of less lethal weapons. These large international agencies can place much larger orders than we typically see in the U. S, which results in a better return on investment for BERNA. This can be seen with the several large international and military orders we have filled in recent quarters. Notably, we just announced that we received an order for 2, 500 launchers from a prominent Central American Armed Forces unit.

Speaker 1

So far, we have delivered 1500 out of the 2, 500 unit launcher order. The balance of the order will be delivered this quarter and we believe will be followed up by a string of similarly sized orders over the next 12 months. This win underscores our expanding influence in the region and further enhances our reputation globally, adding valuable social proof that supports our sales initiatives. Additionally, our success in South America has further demonstrated the global demand for less lethal solutions. Now I'd like to speak a little bit about production.

Speaker 1

To keep up with this growing demand, we have been increasing our production capacity throughout the year. Specifically, we increased production to 48, 600 units for the quarter, hitting our internal goal of 18, 000 units produced in the month of May. At the start of this year, we are producing less than 10, 000 units per month. With the expansion of our launch for production capacity, we've been able to successfully work through our backlog and we are now building inventory for the expected upswing in demand during the upcoming holiday season. While we do not hope for it, we also want to be prepared for any surge in demand that may result from a spike in civil unrest in the wake of the upcoming presidential election.

Speaker 1

As we look to year, it is clear that we must continue to ramp up production capacity and we are taking steps to do so. In addition to expanding our launch of production capacity, however, we must also expand our ammunition production capacity. Accordingly, we are in the process of building a U. S.-based ammunition production facility that will be located just a few miles from our launcher production facility in Fort Wayne. We hope to have this new facility up and running by year end.

Speaker 1

This move is aimed at 1, increasing our overall ammo capacity 2, reducing the risk of supply chain disruption 3, shortening lead times and 4, gaining greater control over the manufacturing process to ensure that we have the highest quality rounds in the market. With this facility, we can guarantee that we can meet the forecasted demand for our high margin ammunition products even if international shipments become more difficult for any reason. In conclusion, our success in significantly increasing consumer demand through new advertising strategies combined with the planned expansion of our retail store program and our continued international law enforcement efforts is expected to sustain top line growth throughout 2024 2025. At the same time, the expansion of our production capacity and the resulting manufacturing efficiencies we have been able to achieve should mean continued improvements in both gross and net margins. In short, Bernat is well positioned to build upon our recent successes, setting the stage for further top and bottom line growth, ensuring that Burna remains at the forefront of the less lethal industry.

Speaker 1

I'll turn it back over to the operator.

Operator

Thank you. We'll now be conducting a question and answer session. Our first question is coming from Jeff Van Sinderen from B. Riley Securities. Your line is now live.

Speaker 4

Good morning, everyone. Let me say congratulations. Thanks for taking my questions. Wanted to circle back to the ROAS. And I'm wondering what sort of traction levels you're seeing as you add the newer or let's call it the latest influencers to your program?

Speaker 4

In other words, how do you think about adding more advertising influencers at point and the ROAS that you're expecting to get from each new 1?

Speaker 1

So, Jeff, first off, thank you very much. I appreciate the question. As we stated, we are currently using a 5x ROAS as the threshold. So both the existing celebrity endorsers and the new celebrity endorsers must maintain that 5x ROAS for us to continue to support their efforts. Right now that does not seem to be an issue and So interestingly, you never know, we have brought on some celebrity endorsers, given them a 8 week or 12 week trial program and then determine that for whatever reason they just are not resonating with their audience.

Speaker 1

They are getting ROAS levels that do not achieve our minimum threshold and we do not re up. So all of the new celebrity endorsers that we've mentioned are achieving the same ROAS levels as the original celebrity endorsers.

Speaker 4

Okay, great to hear. And then I'm curious on the I know you mentioned expanding into cable or just into television in general, and more openness there, I think, on some of those platforms. Is there early traction you can point to there? And then also what are your plans now for expansion there?

Speaker 1

Well, we started off advertising on television with Newsmax. So Newsmax approached us, said that they would be willing to run our ads. And we've had a very strong return on advertising spend with our advertising on Newsmax. Now we have also been approached by several other slightly smaller networks than Newsmax. Some have worked, some have not.

Speaker 1

And I think it's really dependent upon the audience. I think when we look at the audience, it breaks down really into 2 different groups of people. Those people that are willing to protect themselves and their family if they were put in a position of needing to do so and those people that are not. And we don't do particularly well with the audience that is not willing to use pepper spray or a non lethal launcher to protect themselves. So it is not every cable channel that will work for us.

Speaker 1

I think it is again very dependent on the particular audience that these news networks reach.

Speaker 4

Okay, fair enough. And then if I could just squeeze in 1 more, thoughts on what we should expect for gross margins, operating expenses, just kind of any sense you could give us there as we think about the next quarter or 2? Just wondering if we should see further expansion, leverage?

Operator

Yes. I'm going to actually turn this

Speaker 1

over to Laurie.

Speaker 3

Hi, Jeff. Yes, I mean, I think on the gross margin, we've been doing a lot of work around designing for manufacturability. We've done some SKU rationalization. So we're going to continue in that and we just launched an initiative of lean

Operator

manufacturing within our facility. So I think

Speaker 3

all of those are going obviously it's also the mix of the direct to consumer being in the 70% of our sales, 72%, 74% of our sales, that should lead to slight improvement in gross margins going forward. As far as operating expenses, Brian mentioned the ROAS, we're looking at 5x. So that's kind of where we see our marketing sales and marketing expenses. The variable expenses are about 10% of sales. So that's our Amazon fees, credit card fees freight out.

Speaker 3

The rest of the operating expenses should remain fairly stable. I mean, as you grow, you'll see a little bit of incremental some people costs in there, but fairly stable in the short term on those.

Speaker 4

Okay, great. Thanks, Laurie, and welcome to Berna. I'll let someone else jump in.

Speaker 3

Thank you.

Operator

Thank you. Our next question is coming from John Hickman from Ladenburg Thalmann. Your line is now live.

Speaker 1

Hi, Brian. Hey, John.

Speaker 5

Could you elaborate a little more on the production side? I think you said you're doing 18, 000 a month now. And what do you expect that to get to by the end of the year?

Speaker 1

So we hit 18, 000 a month in May and we expect to continue to run at the level of 18, 000 a month for the balance of the year. We are not selling 18, 000 launchers a month. We're selling closer to 12, 000 or 13, 000 launches a month at this point. So by producing 18, 000 launchers, it's allowed us both to work through the backlog and to start building inventory for the Q4 period. We are now taking steps so that as we get into 2025, we will be able to once again increase our production.

Speaker 1

But each increase, it's not like turning a variable dial. It happens somewhat in plateaus because we have to add either another shift or another line or a bunch more workers. So we would expect that as we get into Q1 of next year, we'll probably start to ramp up from the current 18, 000 units a month to some number above that. I don't know whether it's 22, 000 or 25, 000, but I wouldn't see expect to see that increase prior to 2025.

Speaker 5

Okay. And then unless I missed it, you didn't mention the smaller launcher and when you like are you still planning on having that out by the end of this fiscal year?

Speaker 1

No, it will not be out by the end of this fiscal year. First, we never really expected to hit that. I will say that the development is going according to plan. We're excited about this. We expect to see that out sometime in the second half of

Speaker 5

2025. The second half of the calendar year or the fiscal year?

Speaker 1

They're very close. So yes, I was thinking second half of the calendar year, but yes, somewhere around this time next year.

Speaker 5

Okay. And then I have a question for Laurie. Your operating expenses are like over $10, 000, 000 a year or $10, 000, 000 a quarter. Is there any thoughts breaking those out into different categories, sales and marketing, that kind of thing? Yes.

Speaker 3

I mean, I think it might be helpful, especially to see those variable expenses, sales and marketing, that's something that we could look at. I think that would be helpful for you all to understand the components a little bit better. So I'll take that down to look at going forward.

Speaker 5

This analyst would appreciate that.

Speaker 3

Okay.

Speaker 1

Yes. And just, John, for back of the envelope, as Laurie said, the variable costs are and let's just use $10, 000, 000 as a bogey for the quarterly OpEx. 10% of our sales or $20, 000, 000 is variable. So that was $2, 000, 000 of the $10, 000, 000 If you are at a 5x ROAS and we are expecting, let's say, dollars 15, 000, 000 in DTC business, that's going to be another $3, 000, 000 of the 10. There's about $500, 000 of professional costs, public company costs.

Speaker 1

There's another $3, 500, 000 of people costs. And then there's $1, 000, 000 of everything else. And that's sort of the bigger buckets. Laurie can give you more granular detail when you get on a private call with her, but that's sort of the 30, 000 foot breakdown of the expenses.

Speaker 5

Okay. Thank you.

Operator

If there are no further questions, I'd like to turn the floor back over to management for any further or closing comments.

Speaker 1

Thank you, Kevin. Again, thank you, everyone. We appreciate your continued interest in Verna. And to our investors, thank you for your continued support.

Operator

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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