Q4 2026 AXIL Brands Inc Earnings Call

August 18, 2026

Speaker #1: Greetings, and welcome to the AXIL Brands fiscal year 2026 financial results call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If you would like to ask a question, you must be dialed in, and you must press star 1 on your telephone keypad.

Operator: Greetings, and welcome to the Axil Brands Fiscal Year 2026 Financial Results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you must be dialed in, and you must press star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Peter Saltzberg, Vice President, Investor Relations. Thank you, Peter. You may begin.

Operator: Greetings, and welcome to the Axil Brands Fiscal Year 2026 Financial Results. At this time, all participants are in a listen-only mode. A Q&A session will follow the formal presentation. If you would like to ask a question, you must be dialed in, and you must press star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Peter Saltzberg, Vice President, Investor Relations. Thank you, Peter. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: I would now like to turn the conference over to Peter Seltzberg, Vice President of Investor Relations. Thank you, Peter, you may begin.

Speaker #2: Good afternoon, and thank you for joining us for AXIL Brands' fourth quarter and fiscal year 2026 financial update and earnings conference call. I'm Peter Seltzberg, working with the team here at AXIL.

Peter Saltzberg: Good afternoon, and thank you for joining us for Axil Brands' Q4 and fiscal year 2026 financial update and earnings conference call. I'm Peter Saltzberg, working with the team here at Axil, and we're all indeed quite pleased to take the next step with our disclosure and engagement platform in launching quarterly conference calls for our shareholders. Presenting on behalf of management today are Jeff Toghraie, Axil's Chief Executive Officer, and Jeff Brown, Axil's Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements made during today's call may constitute forward-looking statements and are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Speaker #2: And we're all indeed quite pleased to take the next step with our disclosure and engagement platform by launching quarterly conference calls for our shareholders.

Speaker #2: Presenting on behalf of management today are Jeff Tokrai, Axil's Chief Executive Officer, and Jeff Brown, Axil's Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements made during today's call may constitute forward-looking statements and are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Speaker #2: Please refer to our filings with the SEC for a discussion of these risks and other important factors, as well as an explanation of any non-GAAP items that we may refer to in today's press release and on this call.

Peter Saltzberg: Please refer to our filings with the SEC for discussion of these risks and other important factors, as well as an explanation of any non-GAAP items that we may refer to in today's press release and on this call. Without further ado, I'll turn the call over to Jeff. Go ahead, please.

Speaker #2: Without further ado, I'll turn the call over to Jeff. Go ahead, please.

Speaker #3: Thanks, Peter. Good afternoon, everyone. Today, I'm pleased to welcome you to AXIL's first public quarterly earnings conference call. Consistent with our increased engagement with the investment community over the past year, we are holding this call and plan to do so each quarter going forward.

Jeff Toghraie: Thanks, Peter. Good afternoon, everyone. Today, I'm pleased to welcome you to Axil's first public quarterly earnings conference call. Consistent with our increased engagement with the investment community over the past year, we are holding this call and plan to do so each quarter going forward. With the scale and visibility we have now reached, we believe these updates will be of benefit to our shareholders, potential investors, and all stakeholders. We hope that these calls will give us an opportunity to communicate what's driving our success and help stakeholders better understand our progress, strategy, and the milestones that lie ahead. We are working towards building a world-class brand and product platform that we believe offers a unique growth opportunity for investors in our company.

Speaker #3: With the scale and visibility we have now reached, we believe these updates will benefit our shareholders, potential investors, and all stakeholders.

Speaker #3: We hope that these calls will give us an opportunity to communicate what's driving our success and help stakeholders better understand our progress, strategy, and the milestones that lie ahead.

Speaker #3: We are working towards building a world-class brand and product platform that we believe offers a unique growth opportunity for investors in our company. From a strategic standpoint, we have continued our efforts to transition our business, pursuant to our growth strategy, from what was predominantly a direct-to-consumer e-commerce business into a true multi-channel consumer products platform.

Jeff Toghraie: From a strategic standpoint, we have continued our efforts to transition our business pursuant to our growth strategy from what was predominantly a direct-to-consumer e-commerce business into a true multi-channel consumer products platform. Among other things, we have announced new distribution agreements with large retailers, including some of the most recognizable names in consumer retail. With that in mind, I'll begin with the highlights of our Q4 and full year results, followed by a review of the operational progress we made. Jeff Brown, our Chief Financial Officer, will then provide a more detailed discussion of our financial position, followed by an outlook on our objectives for the year ahead, and we'll close with a Q&A session. Fiscal 2026 was an exciting year of growth for us.

Speaker #3: Among other things, we have announced new distribution agreements with large retailers, including some of the most recognizable names in consumer retail. With that in mind, I'll begin with full-year results, followed by a review of the operational progress we made.

Speaker #3: Jeff Brown, our Chief Financial Officer, will then provide a more detailed discussion of our financial position, followed by an outlook on our objectives for the year ahead. We'll close with a Q&A session.

Speaker #3: Fiscal 2026 was an exciting year of growth for us. In the fourth quarter, net revenues increased 48.9% year over year to $8.6 million, up from $5.8 million in the prior-year period, which was within our guidance range.

Jeff Toghraie: In the Q4, net revenues increased 48.9% year over year to $8.6 million, up from $5.8 million in the prior year period, which was within our guidance range. Gross margin expanded to 72% from 70%, which exceeded our guidance range. Full-year sales were up 17.5% and surpassed the $30 million mark, a record for Axil. Income from operations for the quarter rose to $1.4 million compared with just $46,000 a year ago, and adjusted EBITDA reached $1.7 million or 20.3% of net revenues, up from $0.4 million or 6.1% of revenues in the prior year quarter. Based largely on the orders that we have been receiving from new retail partners, we achieved a strong finish to the year and reported net income of $1.5 million or $0.21 per basic share and $0.18 per diluted share for the quarter.

Speaker #3: Gross margin expanded to 72% from 70%, which exceeded our guidance range. Full-year sales were up 17.5% and surpassed the $30 million mark—a record for Axil.

Speaker #3: Income from operations for the quarter rose to $1.4 million, compared with just $46,000 a year ago, and adjusted EBITDA reached $1.7 million, or 20.3% of net revenues, up from $0.4 million, or 6.1% of revenues, in the prior year quarter.

Speaker #3: Based largely on the orders that we have been receiving from new retail partners, we achieved a strong finish to the year and reported net income of $1.5 million, or $0.21 per basic share and $0.18 per diluted share for the quarter.

Speaker #3: This compares to a net loss of $0.2 million, or 4 cents loss per diluted share, in the fourth quarter of fiscal '25. These outstanding results reflect the cumulative impact of the investments we've made over the past 18 months in distribution, product development, and operational infrastructure.

Jeff Toghraie: This compared to a net loss of $0.2 million or $0.04 loss per diluted share in the Q4 of fiscal 2025. These outstanding results reflect the cumulative impact of the investments we've made over the past 18 months in distribution, product development, and operational infrastructure. For the full fiscal year, net income was $2.7 million, compared to $855,000 in fiscal 2025, representing a gain of over 216%. This translates to $0.33 in diluted EPS, compared to just $0.10 in fiscal 2025, and indicates a steep acceleration at the bottom line that we believe is very exciting for our investors. We believe that we can continue to realize similar results going forward, and Jeff Brown will discuss the drivers of our financial performance shortly. Moving to operational highlights.

Speaker #3: For the full fiscal year, net income was $2.7 million, compared to $855,000 in fiscal '25, representing a gain of over 216%. This translates to $0.33 in diluted EPS, compared to just $0.10 in fiscal '25, and indicates a steep acceleration at the bottom line that we believe is very exciting for our investors.

Speaker #3: We believe that we can continue to realize similar results going forward, and Jeff Brown will discuss the drivers of our financial performance shortly. Moving to operational highlights, this year we introduced the GS Extreme 3.0 lanyard earbuds, the MX2 over-the-ear hearing protection platform, the X-Series filtered earplugs, and the CRX digital hearing protection platform.

Jeff Toghraie: This year, we introduced the GS Extreme 3.0 lanyard earbuds, the MX2 over-the-ear hearing protection platform, the X Series filtered earplugs, and the CRX digital hearing protection platform. Our expanded product offering and operational readiness supported the expansion of our retail channel, which was the primary driver of revenue growth in the Q4. These included the MX PRO and MX PASSIVE earmuffs, now available in approximately 1,250 Walmart locations nationwide, and the previously announced rollout of our X Series earplugs across 3,700 stores. We've now expanded our total store count to approximately 6,000 locations, up from roughly 1,800 at the end of the prior fiscal year, representing more than a 200% increase in a single year. That growth spans big box, specialty, and military channels, which we believe reflects the broadening appeal of the Axil brand and the expanding product use cases, which is a key priority for us.

Speaker #3: Our expanded product offering and operational readiness supported the expansion of our retail channel, which was the primary driver of revenue growth in the fourth quarter.

Speaker #3: These included the MX Pro and MX Passive earmuffs, now available in approximately 1,250 Walmart locations nationwide, and the previously announced rollout of our X-Series earplugs across 3,700 stores.

Speaker #3: We've now expanded our total store count to approximately 6,000 locations, up from roughly 1,800 at the end of the prior fiscal year, representing more than a 200% increase in a single year.

Speaker #3: That growth spans big box, specialty, and military channels, which we believe reflects the broadening appeal of the AXIL brand and the expanding product use cases, which is a key priority for us.

Speaker #3: While we have publicly named some of our larger customers in our filings, including Costco, Walmart, and Home Depot, many of our relationships remain in the early stages.

Jeff Toghraie: While we have publicly named some of our larger customers in our filings, including Costco, Walmart, and The Home Depot, many of our relationships remain in the early stages. Separately, we have expanded our product offerings in the public safety and security markets with the introduction of the CRX product platform. We see a meaningful opportunity here to raise the standard on what's currently available by delivering clearer situational awareness, stronger protection, and modular connectivity that better meets real-world demands. On the innovation front, we continue to invest in a portfolio centered on smaller form factors with higher functionality and performance, particularly our GSX lanyard earbuds and the XCOR wireless platform. Although our over-the-ear products or earmuffs have gained solid traction with the introduction of the MX2, and we see significant potential in that segment going forward, from a revenue standpoint, XCOR remains our best-selling platform.

Speaker #3: Separately, we have expanded our product offerings in the public safety and security markets with the introduction of the CRX product platform. We see a meaningful opportunity here to raise the standard on what's currently available by delivering clearer situational awareness, stronger protection, and modular connectivity that better meet real-world demands.

Speaker #3: On the innovation front, we continue to invest in a portfolio centered on smaller form factors with higher functionality and performance, particularly our GSX lanyard earbuds and the X-Core wireless platform.

Speaker #3: Although our over-the-ear products—or earmuffs—have gained solid traction with the introduction of the MX2, and we see significant potential in that segment going forward, from a revenue standpoint, X-Core remains our best-selling platform.

Speaker #3: At the same time, X-Core is now entering its third year without a major upgrade, which makes the next-generation X-Core especially important in terms of our future growth.

Jeff Toghraie: At the same time, XCOR is now entering its third year without a major upgrade, which makes the next generation XCOR especially important in terms of our future growth. We are now on track to release the next generation of our flagship XCOR wireless earbud line, the XCOR 2, in September, coinciding with the start of our Q2. This is a highly anticipated launch with our retail and distribution partners and will be our most significant product introduction of the year. We believe XCOR 2 will further differentiate us in both the consumer and professional channels and help drive velocity as we expand our retail footprint. Turning to our financial position, we ended the year with $4.5 million in cash, generally in line with the end of fiscal 2025. Higher retail orders affected the timing of cash flows related to accounts receivable and customer return allowances.

Speaker #3: We're now on track to release the next generation of our flagship X-Core wireless earbud line, the X-Core 2, in September, coinciding with the start of our second quarter.

Speaker #3: This is a highly anticipated launch with our retail and distribution partners, and it will be our most significant product introduction of the year. We believe X-Core 2 will further differentiate us in both the consumer and professional channels, and help drive velocity as we expand our retail footprint.

Speaker #3: Turning to our financial position, we ended the year with $4.5 million in cash, generally in line with the end of fiscal '25. Higher retail orders affected the timing of cash flows related to accounts receivable and customer return allowances.

Speaker #3: As of August 14, our cash position stands at $7.4 million, and we're comfortable with our overall financial position. Our push into retail has strengthened operating income, and we believe we can continue funding these initiatives internally.

Jeff Toghraie: As of 14 August, our cash position stands at $7.4 million, and we are comfortable with our overall financial position. Our push into retail has strengthened operating income, and we believe we can continue funding these initiatives internally. We enter fiscal 2027 with no outstanding borrowings, a clean balance sheet, and the financial flexibility to continue investing in our growth. I will turn it over to Jeff Brown for a more detailed discussion on the financial side of the business.

Speaker #3: We enter fiscal 2027 with no outstanding borrowings, a clean balance sheet, and the financial flexibility to continue investing in our growth. I'll turn it over to Jeff Brown for a more detailed discussion on the financial side of the business.

Speaker #2: Thanks, Jeff. I'll begin with our full-year financial performance, then walk through what was distinctive about the fourth quarter, and then close with the balance sheet and liquidity.

Jeff Brown: Thanks, Jeff. I will begin with our full-year financial performance, then walk through what was distinctive about the Q4, then close with the balance sheet and liquidity. Before I get into the numbers, I want to frame how we think about fiscal 2026. This was the year our business model changed shape. A year ago, roughly four out of every five dollars we sold went directly to a consumer through our own e-commerce sites and online marketplaces. This year, that figure is closer to two out of three. That shift explains most of what you will see in our gross margin, operating leverage, and working capital. It is also worth noting that our operations include two additional business lines, our Reviv3 beauty and hair care operation, and our Sharper Vision marketing business. Together, these subsidiaries accounted for approximately 4% of reported sales and did not have a material impact on overall results.

Speaker #2: Before I get into the numbers, I want to frame how we think about fiscal 2026. This was the year our business model changed shape.

Speaker #2: A year ago, roughly $485 of every $1,000 we sold went directly to a consumer through our own e-commerce sites and online marketplaces. This year, that figure is closer to 2 out of 3.

Speaker #2: That shift explains most of what you'll see in our gross margin, operating leverage, and working capital. It's also worth noting that our operations include two additional business lines: our Revived3 beauty and hair care operation, and our Sharper Vision. Together, these subsidiaries accounted for approximately 4% of reported sales and did not have a material impact on overall results.

Jeff Brown: Together, these subsidiaries accounted for approximately 4% of reported sales and did not have a material impact on overall results.

Speaker #2: For the purposes of this call, my update will focus on our core hearing protection business. Net revenues for fiscal 2026 were $30.8 million, an increase of $4.6 million, or 17.5%, compared to the prior year.

Jeff Brown: For the purposes of this call, my update will focus on our core hearing protection business. Net revenues for fiscal 2026 were $30.8 million, an increase of $4.6 million or 17.5% compared to the prior year. This growth was driven primarily by the retail and wholesale channel within our hearing enhancement and protection segment. Retail and wholesale revenues grew 136.9%, from $4.2 million to $9.9 million, and rose from roughly 17% of segment revenue to about 33%. Direct-to-consumer revenue in the hearing segment declined 4.3% to $19.7 million. This was the result of a deliberate decision to redirect a portion of our sales and marketing efforts toward the retail and wholesale channel. We believe that the decline did not reflect weaker consumer demand, but instead reflected a shift in where we focused our spend.

Speaker #2: This growth was driven primarily by the retail and wholesale channel within our Hearing Enhancement and Protection segment. Retail and wholesale revenues grew 136.9%, from $4.2 million to $9.9 million, and rose from roughly 17% of segment revenue to about 33%.

Speaker #2: Direct-to-consumer revenue in the hearing segment declined 4.3% to $19.7 million. This was the result of a deliberate decision to redirect a portion of our sales and marketing efforts toward the retail and wholesale channel.

Speaker #2: We believe that the decline did not reflect weaker consumer demand, but instead reflected a shift in where we focused our spend. Overall, the hearing segment grew 19.5% to $29.6 million, and now represents approximately 96% of consolidated revenue.

Jeff Brown: Overall, the hearing segment grew 19.5% to $29.6 million and now represents approximately 96% of consolidated revenue. Gross profit was $21.4 million, up 14.7% from $18.6 million. Gross margin was 69.3%, compared with 71% last year, a decline of about 170 basis points. This net decline in gross margin was a combination of several items, the primary factors being channel mix and changes in tariff policy. Wholesale orders carry lower gross margins than our D2C business, and the wholesale share of consolidated revenue went from roughly 21% to roughly 35%, which explains the lower gross margins. If the retail and wholesale channel continues to outpace D2C growth, and we expect it will, consolidated gross margin percentage will likely face continued downward pressure. But that is only half the picture. While retail and wholesale carry a lower gross margin, they also come with a lower cost to serve.

Speaker #2: Gross profit was $21.4 million, up 14.7% from $18.6 million. Gross margin was 69.3%, compared with 71% last year, a decline of about 170 basis points.

Speaker #2: This net decline in gross margin was a combination of several items, the primary factors being channel mix and changes in tariff policy. Also, orders carry lower gross margins than our direct-to-consumer business, and the wholesale share of consolidated revenue went from roughly 21% to roughly 35%, which explains the lower gross margins.

Speaker #2: If the retail and wholesale channel continues to outpace D2C growth—and we expect it will—consolidated gross margin percentage will likely face continued downward pressure.

Speaker #2: But that's only half the picture. While retail and wholesale carry a lower gross margin, they also come with a lower cost to serve—no customer acquisition spend on each order, and reduced fulfillment overhead.

Jeff Brown: No customer acquisition spend on each order and reduced fulfillment overhead. We believe the give-up at the gross margin line is more than offset by the gains we see in operating margin. Total operating expenses were $18.4 million, up $922,500, or 5.3%. Operating expenses as a percentage of revenue fell from 66.6% to 59.7%, nearly 700 basis points of leverage in a single year. Breaking down operating expenses, sales and marketing was $12.2 million, up about $699,000. General and administrative expenses were $4.1 million, essentially flat year over year, up only about $53,000 against 17.5% revenue growth. The leverage came primarily from growing sales and marketing, only 6% against 17.5% revenue growth, with G&A essentially flat as lower professional fees and other efficiencies offset increases elsewhere. Non-cash stock-based compensation included in operating expenses was $785,000, down from $1.1 million.

Speaker #2: We believe the give-up at the gross margin line is more than offset by the gains we see in operating margin. Total operating expenses were $18.4 million, up $922,500, or 5.3%.

Speaker #2: Operating expenses, as a percentage of revenue, fell from 66.6% to 59.7%, nearly 700 basis points of leverage in a single year. Breaking down operating expenses, sales and marketing was $12.2 million, up about $699,000.

Speaker #2: General and administrative expenses were $4.1 million, essentially flat year-over-year—up only about $53,000—against 17.5% revenue growth. The leverage came primarily from growing sales and marketing expenses by only 6% against 17.5% revenue growth, with G&A essentially flat as lower professional fees and other efficiencies offset increases elsewhere.

Speaker #2: Non-cash stock-based compensation included in operating expenses was $785,000, down from $1.1 million. Income from operations was $3 million, compared with $1.2 million, an increase of $1.8 million, or 156.3%.

Jeff Brown: Income from operations was $3 million compared with $1.2 million, an increase of $1.8 million or 156.3%. Net income was $2.7 million, or $0.40 per basic share and $0.33 per diluted share, compared with $855,000, or $0.13 per basic share and $0.10 per diluted share in fiscal 2025. Adjusted EBITDA, a non-GAAP measure, was $4 million or 13.1% of net revenues, compared with $2.4 million or 9.3% last year, an increase of 66.2% and roughly 380 basis points of margin. Net cash used in operating activities was $9,635 compared with $1.9 million of cash provided last year. I want to walk through exactly what drove the change. Accounts receivable used $3.8 million of cash and inventory used another $1.9 million. Both were the direct result of material orders from a big box retail chain that shipped in the final month of the fiscal year.

Speaker #2: Net income was $2.7 million, or $0.40 per basic share and $0.33 per diluted share, compared with $855,000, or $0.13 per basic share and $0.10 per diluted share, in fiscal 2025.

Speaker #2: Adjusted EBITDA, a non-GAAP measure, was $4 million, or 13.1% of net revenues, compared with $2.4 million, or 9.3% last year—an increase of 66.2% and roughly 380 basis points of margin.

Speaker #2: Net cash used in operating activities was $9,635, compared with $1.9 million of cash provided last year. I want to walk through exactly what drove the change.

Speaker #2: Accounts receivable used $3.8 million of cash, and inventory used another $1.9 million. Both were the direct result of material orders from a big-box retail chain that shipped in the final month of the fiscal year.

Speaker #2: Those late shipments left a larger-than-usual receivable, still outstanding on May 31, and required us to restock inventory behind them. Partially offsetting those uses, accounts payable provided $1.2 million, and other current liabilities provided $1.1 million. Absent that year-end timing, we expect that operating cash flow would have been materially positive and broadly consistent with the prior year, and we currently remain comfortable managing our liquidity position going forward.

Jeff Brown: Those late shipments left a larger than usual receivable still outstanding on 31 May and required us to restock inventory behind them. Partially offsetting those uses, accounts payable provided $1.2 million and other current liabilities provided $1.1 million. Absent that year-end timing, we expect that operating cash flow would have been materially positive and broadly consistent with the prior year, and we currently remain comfortable managing our liquidity position going forward. Our Hearing Enhancement and Protection segment grew revenue 19.5% and segment non-cash operating income 54.8% to $5.4 million, and we achieved that on a 5.3% increase in segment sales and marketing expense. While we are accepting a lower gross margin per dollar of revenue, we are gaining a materially lower cost to acquire that dollar. We believe that our operating margin and adjusted EBITDA margin reflect the true improvement of the business.

Speaker #2: Our hearing enhancement and protection segment grew revenue 19.5%, and segment non-cash operating income 54.8%, to $5.4 million. We achieved that on a 5.3% increase in segment sales and marketing expense.

Speaker #2: So, while we are accepting a lower gross margin per dollar of revenue, we are gaining a materially lower cost to acquire that dollar. We believe that our operating margin and adjusted EBITDA margin reflect the true improvement of the business.

Speaker #2: This year, gross margin fell 170 basis points, and adjusted EBITDA margin rose 380 basis points. Before I turn to the quarter, note that prior period operating expense amounts have been reclassified to conform to our current presentation.

Jeff Brown: This year, gross margin fell 170 basis points and adjusted EBITDA margin rose 380 basis points. Before I turn to the quarter, note that prior period operating expense amounts have been reclassified to conform to our current presentation. These reclassifications had no effect on total operating expenses, income from operations, net income, or earnings per share in any period. Turning to the Q4, net revenues were $8.6 million, an increase of 48.9% over the $5.8 million we reported a year ago. The Hearing Enhancement and Protection segment contributed $8.2 million of that, up 48.4%, driven primarily by orders from our big box retail segment. Gross margin was 72%, compared with 70% a year ago. This runs opposite to the full-year trend. The improvement related to lower customs duties, including refunds received in the period, which reduced cost of revenues.

Speaker #2: These reclassifications had no effect on total operating expenses, income from operations, net income, or earnings per share in any period. Turning to the fourth quarter, net revenues were $8.6 million, an increase of 48.9% over the $5.8 million we reported a year ago.

Speaker #2: The Hearing Enhancement and Protection segment contributed $8.2 million of that, up 48.4%, driven primarily by orders from our big-box retail segment. Gross margin was 72%, compared with 70% a year ago.

Speaker #2: This runs opposite to the full-year trend. The improvement was related to lower customs duties, including refunds received in the period, which reduced cost of revenues.

Speaker #2: Those improvements were partially offset by the same factors I described earlier in the review of our annual results. Operating expenses were $4.7 million, up 18.6%, against revenue growth of 48.9%.

Jeff Brown: Those improvements were partially offset by the same factors I described earlier in the review of our annual results. Operating expenses were $4.7 million, up 18.6% against revenue growth of 48.9%. As a percentage of revenue, operating expenses fell from 69.2% to 55.1%, roughly 1,400 basis points of leverage in the quarter. General and administrative increased by approximately $220,000. Stock-based compensation in the quarter was $225,000, down modestly from $248,000. Income from operations was $1.4 million versus $46,000 a year ago, an operating margin of 16.9% compared with 0.8%. Net income was $1.5 million or $0.21 per basic share and $0.18 per diluted share compared with a net loss of $246,000 or $0.04 per basic and diluted share last year. Adjusted EBITDA was $1.7 million or 20.3% of net revenues compared with $354,000 or 6.1%. Tax provision was $28,000 against $333,000 in the prior year quarter.

Speaker #2: As a percentage of revenue, operating expenses fell from 69.2% to 55.1%, roughly 1,400 basis points of leverage in the quarter. General and administrative increased by approximately $220,000.

Speaker #2: Stock-based compensation in the quarter was $225,000, down modestly from $248,000. Income from operations was $1.4 million, versus $46,000 a year ago, and operating margin was 16.9%, compared with 0.8%.

Speaker #2: Net income was $1.5 million, or $0.21 per basic share and $0.18 per diluted share, compared with a net loss of $246,000, or $0.04 per basic and diluted share last year.

Speaker #2: Adjusted EBITDA was $1.7 million, or 20.3% of net revenues, compared with $354,000, or 6.1%. Tax provision was $28,000, against $333,000 in the prior year quarter.

Speaker #2: That reflects the full-year true-up of our effective rate, including the R&D credits. Accounts receivable was $4.7 million, compared with $1 million. As disclosed in our Form 10-K, those receivables have been substantially collected as of the date of filing.

Jeff Brown: That reflects the full-year true-up of our effective rate including the R&D credits. Accounts receivable was $4.7 million compared with $1 million. As disclosed in our Form 10-K, those receivables have been substantially collected as of the date of filing. Inventory was $4.4 million, up from $2.5 million. We recorded no inventory markdowns during the year. The wholesale channel is working capital intensive at the front end. Large retail orders require us to build inventory before we ship and to carry a receivable after we ship. As mentioned, we ended the year with $4.5 million of cash and cash equivalents compared with $4.8 million a year ago and with no outstanding borrowings. We are, as of today, debt-free and based on current cash balances and anticipated operating cash flows, we believe we have sufficient liquidity to meet our working capital needs for at least the next 12 months.

Speaker #2: Inventory was $4.4 million, up from $2.5 million. We recorded no inventory markdowns during the year. The wholesale channel is working capital intensive at the front end; large retail orders require us to build inventory before we ship and to carry a receivable after we ship.

Speaker #2: As mentioned, we ended the year with $4.5 million of cash and cash equivalents, compared with $4.8 million a year ago, and with no outstanding borrowings.

Speaker #2: We are, as of today, debt-free, and based on current cash balances and anticipated operating cash flows, we believe we have sufficient liquidity to meet our working capital needs for at least the next 12 months.

Speaker #2: Stepping back, fiscal 2026 delivered on the financial objectives we set for ourselves. We grew revenue 17.5%. We grew operating income 156%. We expanded adjusted basis points, and we did that while holding operating expense growth to 5.3% and retiring the last of our debt.

Jeff Brown: Stepping back, fiscal 2026 delivered on the financial objectives we set for ourselves. We grew revenue 17.5%. We grew operating income 156%. We expanded adjusted EBITDA margin by roughly 380 basis points, and we did that while holding operating expense growth to 5.3% and retiring the last of our debt. With that, I'll turn the call back over to Jeff.

Speaker #2: With that, I'll turn the call back over to Jeff.

Speaker #1: Thank you. We entered fiscal 2027 from what we believe is a position of greater strength than at any prior point in our history. Because our retail expansion is still in its early stages, the timing of large orders can create some quarter-to-quarter variability in our results across the income statement, balance sheet, and cash flow statement.

Jeff Toghraie: Thank you. We enter fiscal 2027 from what we believe is a position of greater strength than at any prior point in our history. Because our retail expansion is still in its early stages, the timing of large orders can create some quarter-to-quarter variability in our results across the income statement, balance sheet, and cash flow statement. However, we expect this effect to moderate as the segment continues to scale.

Speaker #1: However, we expect this effect to moderate as the segment continues to scale. Looking ahead, we plan to focus on expanding our presence in both existing and new channels, and advancing our product line to target broader markets.

Jeff Toghraie: Looking ahead, we plan to focus on expanding our presence in both existing and new channels and advancing our product line to target broader markets. We are targeting another year of top and bottom-line growth in fiscal 2027. Briefly on Reviv3, our personal hair and beauty care business, while it is included in our results of operations, it has not materially impacted results. It generated approximately $1.5 million in sales in fiscal 2025 and $1.2 million in fiscal 2026 with a marginal gross profit. The Reviv3 team is in the final stages of preparing a brand relaunch for September, and our goal is to build this operation into a viable asset that contributes meaningfully to Axil's overall value. Additional details are available in our annual report on Form 10-K, and we will provide updates as appropriate.

Speaker #1: We are targeting another year of top- and bottom-line growth in fiscal 2027. Briefly on Revite, our personal hair and beauty care business: while it is included in our results of operations, it has not materially impacted results.

Speaker #1: It generated approximately $1.5 million in sales in fiscal 2025 and $1.2 million in fiscal 2026, with a marginal gross profit. The Revive team is in the final stages of preparing a brand relaunch for September, and our goal is to build this operation into a viable asset that contributes meaningfully to Axil’s overall value.

Speaker #1: Additional details are available in our annual report on Form 10-K, and we'll provide updates as appropriate. In closing, I want to thank our entire team for their hard work and commitment throughout the year.

Jeff Toghraie: In closing, I want to thank our entire team for their hard work and commitment throughout the year. Their dedication has been essential to the progress we have made. We are excited about the opportunities ahead and remain focused on building long-term value for our shareholders. With that, I will turn the call over to the operator for questions.

Speaker #1: Their dedication has been essential to the progress we've made. We are excited about the opportunities ahead and remain focused on building long-term value for our shareholders.

Speaker #1: With that, I'll turn the call over to the operator for questions.

Speaker #3: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. 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 your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Greg Weaver with Invicta Capital. Please proceed.

Operator: Thank you. We will now be conducting a Q&A session. If you would like to ask a question, please press star one on your telephone keypad. 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 your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Greg Weaver with Invicta Capital. Please proceed.

Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue.

Speaker #3: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #3: Thank you. Our first question comes from the line of Greg Weaver with Invidica Capital. Please proceed.

Speaker #4: Hey, good afternoon, Jeff and Jeff. Thanks for doing the call here. Appreciate you taking some questions. And nice job on the quarter. I'm just trying to understand the tariff refund situation.

Greg Weaver: Hey, good afternoon, Jeff and Jeff. Thanks for doing a call here. Appreciate taking some questions. Nice job on the quarter. I am just trying to understand the tariff refund situation. You said it helped you in the fiscal Q4, so you got some level of money. How many dollars did you get in the Q4, and you actually received more than you asked for in the current fiscal quarter?

Speaker #4: So you said it helped you in the fiscal fourth quarter, so you got some level of money. I guess, how many dollars did you get in the fourth quarter, and did you actually receive more than you asked for in the current fiscal quarter?

Speaker #2: Yeah. Hi, Greg. Thank you for the question. We received approximately $910,000 collected after 5/31. We paid about $900,000 in tariffs, with the interest—I think, I believe it was about $980,000 that we recovered in total.

Jeff Brown: Yeah. Hi, Greg. Thank you for the question. We received approximately 910,000 collected after 5/31. We paid about 900 in tariffs. With the interest, I believe it was about 980 that we recovered in total. About 70 of that came in in fiscal 2026.

Speaker #2: So, about 70 of that came in during fiscal '26.

Speaker #4: Oh, great. Thanks, that's helpful. Okay, I'll do the math. What did that help for your gross margins? So I guess any color, I guess, on how the August quarter is looking here?

Greg Weaver: Oh, great. Thanks. That is helpful. Okay. I will do the math on what that helped for your gross margins. I guess any color on how the August quarter is looking here? We are almost done. How is that shaping up? Is there any additional channel fill? Did you do most of that Walmart SKU addition in the May quarter?

Speaker #4: We're almost done. How's that shaping up? Is there any additional channel fill, or do you do most of that Walmart SKU addition in the May quarter?

Speaker #2: Yeah. We don't really have a whole lot of confidence in providing guidance for the quarters and the year yet. The reason for that is, one order—whether it ends up being in this quarter or next quarter—makes a very big difference as far as earnings.

Jeff Toghraie: Yeah, we do not really have a whole lot of confidence in providing guidance for quarters and the year yet. Reason for that is one order, whether it ends up being in this quarter or next quarter, makes a very big difference as far as the earnings. The problem for us is that as we are onboarding, we cannot really control who comes in where. Big customers, they have their own schedules. They can push things around, and that is really where it is. We just have to be prepared. I think the bigger picture for us and what we are looking at is onboard as many customers and add customers on a daily basis, whether they are distributors, dealers, large guys. We have products at this point that I think is best in class.

Speaker #2: The problem for us is that as we're onboarding, we can't really control who comes in. We're big customers; they have their own schedules and can push things around, and that's really where it is.

Speaker #2: We just have to be prepared. I think the bigger picture for us, and what we're looking at, is to onboard as many customers and add customers on a daily basis, whether they're distributors, dealers, or large guys.

Speaker #2: We have products at this point that I think are best in class. And at some point, hopefully, we'll have enough uniformity so I can at that point kind of give guidance as far as where we are in a quarter or in a one-year outlook, and that type of thing.

Jeff Toghraie: At some point, hopefully, we will have enough uniformity so I can, at that point, give guidance as far as where we are in a quarter or in one year outlook and that type of thing. Unfortunately, today, I do not even want to do it. I am in a situation where we give some number, and we drastically beat it because I do not think that necessarily gives the investors real information or confidence as far as where the business is going and how we are truly doing. We will provide guidance, hopefully, as soon as we can reach a level of confidence that we do have enough visibility, and a couple of orders are not going to make or break a quarter if they are three days early or late.

Speaker #2: Unfortunately, today—and I don’t even want to do it—I’m in a situation where we give some number and we drastically beat it. I don’t think that necessarily gives investors real information or confidence as far as where the business is going and how we’re truly doing.

Speaker #2: So we'll provide guidance. Hopefully, as soon as we can reach a level of confidence that we do have enough visibility and we're not a couple of orders aren't going to make or break a quarter if they're three days early or late.

Speaker #4: Fair enough. I appreciate that. Just, we had two weeks left—that was the only reason I was pressing you a little. Okay. And just in a general sense, any color in terms of the pipeline, new logos, or rooftops that you're looking at here for fiscal '27?

Greg Weaver: Fair enough. I appreciate that. We had two weeks left. That was the only reason I was pressing you a little. In a general sense, any color in terms of the pipeline of new logos or rooftops that you are looking at here for fiscal 2027?

Speaker #2: I'm so sorry, I didn't understand your question.

Jeff Toghraie: I am so sorry. I did not understand your question.

Speaker #4: New stores that you might be trying to sign on, or maybe penetration of existing stores that you've already got some products in?

Greg Weaver: New stores that you might be trying to sign on or-

Jeff Toghraie: Oh, yeah.

Greg Weaver: maybe penetration of existing stores that you've already got.

Jeff Toghraie: Right

Greg Weaver: products in.

Speaker #2: I think what's important to note is we mentioned Home Depot, we mentioned Costco, and we mentioned Walmart, and I think that was important.

Jeff Toghraie: I think what's important to note is we mentioned The Home Depot, we mentioned Costco, and we mentioned Walmart, and I think that was important. We don't actually do a lot of our partnerships. We don't announce them. A lot of that has to do with competitive reasons. We don't necessarily want to give information out that. We've seen as soon as we do something, there's a slew of companies around the world that essentially try to copy what we're doing, and I think it's better for us once we announce something, if there's a company that has 5,000 locations, if we're in 2,000, 2,500 and then we're announcing, and that's great. We're pretty confident there. But for the reason that I think is pretty obvious, just because we're in such an early stage, we are hesitant in giving out information that may adversely affect us.

Speaker #2: We don't actually announce a lot of our partnerships. A lot of that has to do with competitive reasons. We don't necessarily want to give information out, because we've seen that as soon as we do something, there's a slew of companies around the world that essentially try to copy what we're doing.

Speaker #2: And I think it's better for us, once we announce something, if there's a company that has 5,000 locations—if we're in 2,500, and then we're announcing them, that's great.

Speaker #2: We're pretty confident there. But for reasons that I think are pretty obvious—just because we're in such an early stage—we are hesitant to give out information that may adversely affect us.

Speaker #2: As you can tell, we're not a very newsy company. We don't come out with a lot of news. We don't do any sort of promotional news stories or that sort of thing.

Jeff Toghraie: As you can tell, we're not a very newsy company. We don't come out with a lot of news. We don't do any sort of promotional news stories or that sort of thing. We'll do a much better job as far as real communication going forward. I think this quarter sort of puts us in a position where we can justify. I think it would make a lot of sense to people when we're saying, for example, there's new products coming out, there's new introduction of products.

Speaker #2: We'll do a much better job as far as real communication going forward. I think this quarter sort of pushed us into a position where we can justify—I think it would make a lot of sense to people when we're saying, for example, there's new products coming out, there's new introduction of products.

Speaker #2: It makes a lot more sense for people because then you can actually see how that translates into the bottom line, versus if you were with us the last couple of years, you didn't quite see how much that benefited us just because we were building that infrastructure so that if there's a 50,000-unit order or 80,000-unit order, we don't wait six months before we can deliver products—or actually sometimes longer.

Jeff Toghraie: It makes a lot more sense for people because then you can actually see how that translates into the bottom line versus, if you were with us the last couple of years, you didn't quite see how much that benefited us just because we were building that infrastructure so that if there's a 50,000 unit order or 80,000 unit order, we don't wait 6 months before we can deliver products or actually sometimes longer. We're now in a position where in 90 days we can create products for certain segments of the market and have that product in production after 90 days.

Speaker #2: We're now in a position where, in 90 days, we can create products for certain segments of the market and have that product in production after 90 days.

Speaker #2: I'm not sure if that was really your question, but I think it's really important to note that a part of what we actually created in the last 18 months is the ability that if Walmart wants something, or if somebody else has different requirements, we can contour a product and create a product where, whatever they're looking for, we can enhance those options and give them something that, at least for their application, is best in class.

Jeff Toghraie: I'm not sure if that was really your question, but I think that's really important to note that a part of what we actually created in the last 18 months is the ability that if Walmart wants something or if somebody else has different requirements, we can contour a product and create a product where whatever they're looking for, we can enhance those options and give them something that, at least for their application, is best in class. That took a long process, actually. It wasn't the easiest apparatus to put in place, but we're at a point now that we can actually achieve that level of delivery, which goes to how many stores that we're able to penetrate because they would be in different industry, whether it's manufacturing or construction or anywhere else.

Speaker #2: And that took a bit of—it took a long process, actually. It wasn't the easiest apparatus to put in place, but we're at a point now that we can actually achieve that level of delivery, which goes to how many stores we're able to penetrate, because there would be different industry-based—manufacturing or construction or anywhere else.

Speaker #2: We can now give them the product that they're actually looking for, versus a portfolio of products that we think is the best and greatest, but doesn't necessarily fit.

Jeff Toghraie: We can now give them product that they're actually looking for versus a portfolio of products that we think is the best and greatest that doesn't necessarily fit.

Speaker #4: Gotcha. Okay. Jeff, appreciate it. Keep up the good work. Thanks.

Greg Weaver: Got you. Okay, Jeff, appreciate it. Keep up the good work. Thanks.

Speaker #2: Thank you.

Jeff Toghraie: Thank you.

Speaker #1: Thank you. Peter will now be taking questions. Is that where they were submitted online? Please go ahead.

Operator: Thank you. Peter will now be taking questions that were submitted online. Please go ahead.

Speaker #5: Thank you. Jeff and Jeff, what do you believe is the potential for sales on the hearing product side, based on your current roster of customers?

Peter Saltzberg: Thank you. Jeff and Jeff, what do you believe is the potential for sales on the hearing product side based on your current roster of customers?

Speaker #2: So, current roster of customers—we really don't look at it that way. Taking a snapshot of today's customer is not necessarily going to give us a good window as far as where the company is three months or six months from now.

Jeff Toghraie: Current roster of customers, we really don't look at it that way. Taking a snapshot of today's customer is not necessarily going to give us a good window as far as where the company is, 3 months or 6 months from now. Again, we're trying to acquire customers on a daily basis, and we're very early stage in that process. I think a better question is probably how far is it until we reach market saturation. I think we're very far from that space. If you look at it from the early stage of when we implemented our new program, if we're able to show outsized performance based on whatever we've done historically, our plan is obviously to expand more into different places and expand our SKUs, essentially. That's where most of our effort is going to go to.

Speaker #2: Again, we're trying to acquire customers on a daily basis, and we're very early stage in that process. I think a better question is probably, how far is it until we reach market saturation?

Speaker #2: And I think we're very far from that space. So if you look at if from the early stage of what when we implemented our new program, if we're able to show outsized performance based on whatever we've done historically, our plan is obviously to create more expand more into different places and expand our SKUs, essentially.

Speaker #2: And that's where most of our effort is going to go. At some point in time, if we're at 60% or 70% of the market and now we're sitting and thinking, well, where do we find the next 10% or 15% growth?

Jeff Toghraie: At some point in time, if we're at 60%, 70% of the market and now we're sitting and thinking, "Well, where do we find the next 10%, 15% growth." We have to explain where that growth is coming from. I understand that, but today is not going to give you an accurate assessment of where everything is, just given our current roster of customers. They haven't reached their potential, for one thing, and they're nowhere near what we would assume would be our full set of customers in the next 6 months or 12 months.

Speaker #2: We have to explain where that growth is coming from. I understand that. But today is probably not—it's not going to give you an accurate assessment of where everything is, just given our current roster of customers, or they haven't reached their potential, for one thing.

Speaker #2: And they're nowhere near what we would assume would be our full set of customers in the next six or twelve months.

Speaker #5: Okay, next question we have is more on the balance sheet, so maybe Jeff Brown will take us through that. Can you talk about the increase in receivables, the quality of the payers, and the cash conversion cycle?

Peter Saltzberg: Okay. Next question we have is more on the balance sheet, so maybe Jeff Brown will take a look at that. Can you talk about the increase in receivables and about the quality of the payers and the cash conversion cycle. Do you track DSO, and what are payment terms generally, and are your customers current?

Speaker #5: Do you track DSOs, and what are payment terms generally, and are your customers current?

Speaker #2: Yeah, I can get into that. Our direct-to-consumer accounted for about two-thirds of our revenue in fiscal '26. And D2C is pretty much prepaid; they prepay the merchant.

Jeff Brown: Yeah, I can get into that. Our D2C accounted for about two-thirds of our revenue in fiscal 2026, and D2C is pretty much prepaid. They prepay the merchant. The merchant typically pays in about 48 business hours. The bulk of the receivables that are on the balance sheet are attributed to the wholesale and retail channels. Timing created a large receivable as of 31 May, which has been subsequently received. That's why as management, we felt it was important to disclose the cash on hand as of 14 August of approximately $7.4 million. Over the last fiscal year, less than 1% of the receivables from the retail and wholesale channel was expensed as bad debt. We have a very good quality of customer that is paying on time.

Speaker #2: The merchant typically pays in about 48 business hours. The bulk of the receivables on the balance sheet are attributed to the wholesale and retail channels.

Speaker #2: And timing created a large receivable as of 5/31, which has been subsequently received. That's why, as management, we felt it was important to disclose the cash on hand as of 8/14 of approximately $7.4 million.

Speaker #2: Over the last fiscal year, less than 1% of the receivables from the retail and wholesale channel was expensed as bad debt. We have a very good quality of customer that is paying on time.

Speaker #5: Okay, thanks. Also, going forward, what do you see as the most significant or material contributor, or contributors, to the future growth of the company?

Peter Saltzberg: Thanks. We also have, going forward, what do you see as the most significant or material contributor or contributors to the future of growth in the company?

Speaker #2: So when we do our analysis, we look at where we deploy our biggest investment, whether it's time or capital, for the fastest and highest ROI.

Jeff Toghraie: When we do our analysis, we look at where do we deploy our biggest investment, whether it's time or capital, for the fastest and the highest ROI. For us at this stage, it's really marketing. We're very good at marketing. I think our e-commerce marketing is unparalleled from anything I've seen, whether it's in our industry or other places. We have a very robust team. It's really marketing that gives us the footprint that allows us to not have to do a huge amount of advertising when our products goes offline, and R&D. These two areas are going to give us the biggest bang for the buck once we start deploying our marketing and we get branding, we get that out there. Once we start to put real dollars behind our We've increased our R&D team by 120%.

Speaker #2: And for us, at this stage, it's really marketing. We're very good at marketing. I think our e-commerce marketing is unparalleled compared to anything I've seen, whether it's in our industry or other places.

Speaker #2: We have a very robust team. It's really marketing that gives us the footprint that allows us to not have to do a huge amount of advertising when our products go offline.

Speaker #2: And R&D. So these two areas are going to give us the biggest bang for the buck once we start deploying our marketing, and we get market, we get branding, we get that out there. Then, once we start to put real dollars behind, we've increased our R&D team by 120%.

Speaker #2: We think this year we'll significantly increase the budget on the R&D. Well, we will. And the reason for that is new products are going to replace—even we've learned that even if you're using an actual product and you're happy with it and it's doing great, when you take a new product with new features, and looks a little bit nicer and it's newer, given that earbuds are at this point—hearing protection products are very comparable to what you would use as an AirPod, or something that you're using for other purposes than, other than, hearing protection.

Jeff Toghraie: We think this year we'll significantly increase the budget on the R&D, we will. The reason for that is new products are going to replace We've learned that even if you're using an actual product and you're happy with it and it's doing great, when you take a new product with new features and looks a little bit nicer and it's newer, given that earbuds are, at this point, hearing protection products are very comparable to what you would use as like AirPods or something that you're using it for other purposes other than hearing protection. When you see new features and products, we get a very large percentage of customers that are return customers for us. What we like to see is to have about an 18-month turnaround on new generation products for our flagship items.

Speaker #2: When you see new features in products, we get a very large percentage of customers that are return customers for us. So what we like to see is about an 18-month turnaround on new generation products for our flagship items. X-Core, as I mentioned in my opening remarks, it's been three years since we've brought in a new product.

Jeff Toghraie: XCOR, as I mentioned on my opening remarks, it's been three years since we're bringing a new product. Reason for that is we put a huge amount of effort into making sure that XCOR 2 has addressed essentially all the problems and all the complaints that customers had with that product. That product sold fantastic. It was best in class when it came out. I'm very hopeful, and from what we see as far as feedback from our customers, from our distributors, I think XCOR 2 is going to surpass a lot of expectations in performance, and it's going to open a new set of customers that weren't necessarily previously there for us. That's our expectation, that's our goal, and if we don't do it with this generation, we'll do it on the third generation. It's a matter of progress that we're going to have to work towards.

Speaker #2: The reason for that is we put a huge amount of effort into making sure that X-Core 2 has addressed essentially all the problems and all the complaints that customers had with that product.

Speaker #2: And that product sold fantastically. It was best in class when it came out. So I'm very hopeful, and from what we see as far as feedback from our customers and from our distributors, I think X-Core 2 is going to surpass a lot of expectations in performance. It's going to open a new set of customers that weren't necessarily previously there for us.

Speaker #2: That's our expectation. That's our goal. And if we don't do it with this generation, we'll do it with the third generation. It's a matter of progress that we're going to have to work towards.

Speaker #2: And I think those two elements are probably going to bring us the highest level of performance. As you know, we're very EPS-focused.

Jeff Toghraie: I think those two elements are probably going to bring us the highest level of performance. As you know, we are very EPS focused. We want to see a balance sheet that once the quarter ends, people who actually look at our balance sheet understand our mission, that they feel comfortable. I always say, we like our running game. I do not like to see a lot of 50-yard line passes. We like to work on defense and do a running game and reduce risk as much as possible. If there is an opportunity that can make us a lot of revenue, but it does not fit our model, we pass on it. Which is why you kind of see how our EPS grows in a much healthier pace than necessarily a focus on just bringing in revenue that may not be there tomorrow or the quality may not be as good.

Speaker #2: We want to see a balance sheet that, once the quarter ends, people who actually look at our balance sheet understand our mission.

Speaker #2: That they feel comfortable. They like to see, I always say, "We like our running game." I don't like to see a lot of 50-yard-line passes.

Speaker #2: We like to work on defense and focus on our running game, and reduce risk as much as possible. If there's an opportunity that could generate a lot of revenue, but it doesn't fit our model, we pass on it.

Jeff Toghraie: If there is an opportunity that can make us a lot of revenue, but it does not fit our model, we pass on it. Which is why you kind of see how our EPS grows in a much healthier pace than necessarily a focus on just bringing in revenue that may not be there tomorrow or the quality may not be as good.

Speaker #2: And which is why you kind of see how our EPS grows at a much healthier pace than necessarily a focus on just bringing in revenue that may not be there tomorrow, or the quality may not be as good.

Speaker #2: So that has worked out well for us until now. I think that's a very, very sound strategy—not to disappoint our investors, not to disappoint the people who put their confidence in us that we're going to manage the company well.

Jeff Toghraie: That has worked out well for us until now. I think that is a very, very sound strategy, not to disappoint our investors, not to disappoint the people who put their confidence in we are going to manage the company well. Essentially, for the foreseeable future, I think that will be our model as we have a huge market. We are not even doing anything in international that I would say is significant. That market is entirely open for us. Obviously, a lot of expansion that we can still do domestically.

Speaker #2: And essentially, that will be, for the foreseeable future, I think that will be our model. As we have a huge market, we are not even doing anything in international that I would say is significant.

Speaker #2: That market is entirely open for us, and obviously, there is a lot of expansion that we can still do domestically.

Speaker #5: Okay, the last question we've got time for is this: What specific end market or use cases do you think will have the most significant impact on sales in the next one to three years?

Peter Saltzberg: Okay, the last question we have got time for is this: what specific end market or use cases do you think will have the most significant impact on sales in the next 1 to 3 years?

Jeff Toghraie: I am sorry, would you repeat that?

Speaker #2: I'm sorry, would you repeat that?

Speaker #5: Yeah. The question was, what specific end markets or use cases do you think will have the most significant impact on sales in the next one to three years?

Peter Saltzberg: Yeah. The question was what specific end markets or use cases do you think will have the most significant impact on sales in the next one to three years?

Speaker #2: I think hearing protection has become a very—a lot of people pay attention to hearing protection now, and hearing loss prevention. I think that's become almost mainstream at this point.

Jeff Toghraie: I think hearing protection has become a lot of people pay attention to hearing protection now and hearing loss prevention. I think that's become almost mainstream at this point. I think what we're trying to do is create products that if you are using a product for hearing protection and now you want to listen to music, or you want to have a phone call and that sort of thing, because hearing protection historically is not a comfortable product to wear because you have to create a very tight seal because impulse sound will damage your hearing. What we like to achieve is to have a product that ultimately is going to have a hearing protection element to it, but be at the same level where you don't have to necessarily switch to a different product in order to do call.

Speaker #2: I think what we're trying to do is create products so that if you are using a product for hearing protection, and now you want to listen to music or you want to have a phone call and that sort of thing, you can. Because hearing protection, historically, is not a comfortable product to wear due to the need to create a very, very tight seal, since impulse sound can damage your hearing.

Speaker #2: What we’d like to achieve is to have a product that ultimately is going to have a hearing protection element to it, but be at the same level where you don’t necessarily have to switch to a different product.

Speaker #2: As a result, the quality of the calls will be as good as what you would see anywhere in the market. We’re very close to that.

Jeff Toghraie: The quality of the calls will be as good as what you would see anywhere in the market or very close to it, and the quality of the music. That's I think the product where, because most of these other products, although they have higher quality on the other side, they're not hearing protection products. If we can bring these three elements together, which is essentially what our team has been working on for the last good bit of time, we're pretty hopeful that that product, that family of product, is going to actually expand into a whole market that's not using our products right now. I think that's probably the future of Axil in the next one to three years.

Speaker #2: And the quality of the music—that's, I think, the product where, because most of these other products, although they have higher quality on the other side, they're not hearing protection products.

Speaker #2: If we can bring these three elements together, which is essentially what our team has been working on for quite a good bit of time, we're pretty hopeful that that product, that family of products, is going to actually expand into the whole market that's not using our products right now.

Speaker #2: And I think that's probably the future of AXIL in the next one to three years.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.