Q1 2027 AXIL Brands Inc Earnings Call

October 6, 2026

Speaker #1: Greetings, and welcome to the AXIL Brands first quarter 2027 financial results. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: Greetings, and welcome to the AXIL Brands Q1 2027 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. 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 will now turn the conference over to Peter Seltzberg, VP, Investor Relations. Thank you, Peter. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. I'll now turn the conference over to Peter Seltsberg, VP, Investor Relations.

Speaker #1: Thank you, Peter. You may begin.

Speaker #2: Good afternoon, and thank you for joining us for AXIL Brands' first quarter 2027 financial update and earnings conference call. I'm Peter Seltsberg, working with the team here at AXIL, and we're excited to get back in front of our shareholders with the Q1 2027 update.

Peter Seltzberg: Good afternoon, and thank you for joining us for AXIL Brands' Q1 2027 financial update and earnings conference call. I am Peter Seltzberg, working with the team here at AXIL, and we are excited to get back in front of our shareholders with the Q1 2027 update. Before we begin, I would 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. Please refer to our filings with the Securities and Exchange Commission 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. Presenting on behalf of management today are Jeff Toghraie, AXIL's Chief Executive Officer, and Jeff Brown, AXIL's Chief Financial Officer.

Speaker #2: 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 Securities and Exchange Commission 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.

Speaker #2: Presenting on behalf of management today are Jeff Tahori, Axil's Chief Executive Officer, and Jeff Brown, Axil's Chief Financial Officer. We will begin with prepared remarks, and then open the line for Q&A.

Peter Seltzberg: We will begin with prepared remarks and then open the line for Q&A. Thank you for the questions submitted in advance. You can continue to send questions during the call to investors@goaxil.com and we will add them to the queue. With that, I will turn the call over to Jeff Toghraie, AXIL's Chairman and Chief Executive Officer.

Speaker #2: Thank you for the questions submitted in advance. You can continue to send questions during the call to investors@goaxel.com, and we will add them to the queue.

Speaker #2: With that, I'll turn the call over to Jeff Tahori, Axil's Chairman and Chief Executive Officer.

Speaker #3: Good afternoon, and thank you for joining us. I am pleased to discuss our results for the three months ended August 31, 2026, and the direction we see in Axil's business at the start of the new fiscal year.

Jeff Toghraie: Good afternoon and thank you for joining us. I am pleased to discuss our results for the 3 months ended 31 August 2026, and the direction we see in AXIL's business at the start of the new fiscal year. We are more constructive on the business than we have been at any point. We see several milestones ahead that we believe will serve shareholders well. In Q1, we remained profitable, continued to fund the business from operations, and ended the quarter in the strongest cash position in our history. Operations provided $3.8 million, compared with the use of $739,000 a year ago. We closed 31 August with $7.9 million of cash, or approximately $0.96 per diluted share, up from $4.5 million on 31 May, and remain debt-free. That is the position from which we intend to fund the next phase of growth, including the XCOR II launch.

Speaker #3: We are more constructive on the business than we have been at any point. We see several milestones ahead that we believe will serve shareholders well.

Speaker #3: In the first quarter, we remained profitable, continued to fund the business from operations, and ended the quarter in the strongest cash position in our history.

Speaker #3: Operations provided $3.8 million, compared with the use of $739,000 a year ago. We closed August 31 with $7.9 million of cash, or approximately $0.96 per diluted share, up from $4.5 million on May 31, and remained debt-free.

Speaker #3: That is the position from which we intend to fund the next phase of growth, including the Ex-Core 2 launch. For those less familiar with the product, Ex-Core 2 is our next-generation flagship wireless platform.

Jeff Toghraie: For those less familiar with the product, XCOR II is our next-generation flagship wireless platform. It carries our most advanced active noise reduction and our most immersive soundstage to date. The transition to XCOR II is the context for the quarter. Turning to the quarterly results, sales were $6.1 million, down 11.2% from $6.9 million a year ago. Two items explain the comparison. The first is the shift from XCOR I to XCOR II. During the quarter, XCOR I orders slowed while customers prepared for the next generation launch. Direct-to-consumer in hearing was down less than 1%. The other side of that transition is already visible. XCOR II has produced the strongest early demand of any AXIL product to date, and demand remains healthy across retail, distribution, and direct-to-consumer. Those figures are orders, not revenue. On 26 August, we announced initial orders of more than $2.8 million.

Speaker #3: It carries our most advanced active noise reduction and our most immersive sound stage to date. The transition to Ex-Core 2 is the context for the quarter.

Speaker #3: Turning to the quarterly results, sales were $6.1 million, down 11.2 percent from $6.9 million a year ago. Two items explain the comparison: the first is the shift from Ex-Core 1 to Ex-Core 2. During the quarter, Ex-Core 1 orders slowed while customers prepared for the next generation launch.

Speaker #3: Direct-to-consumer in hearing was done less than 1 percent. The other side of that transition is already visible: Ex-Core 2 has produced the strongest early demand of any AXIL product to date, and demand remains healthy across retail, distribution, and direct-to-consumer.

Speaker #3: Those figures are orders, not revenue. On August 26, we announced the initial orders of more than $2.8 million. By September 30, that order book had grown to more than $3.6 million.

Jeff Toghraie: By 30 September, that order book had grown to more than $3.6 million. Those figures are orders, not revenue. The product became available on 15 September, and the majority of those orders have shipped and will be recognized in the second quarter, with the remainder expected to ship in October. Although orders can be canceled or returned, and this is not a guarantee of revenue, we expect that demand to begin showing up in revenue this quarter and in the periods that follow. The larger factor is the timing of orders from our retail partners. Last year's first quarter included a significant big box order that did not repeat this quarter. Our relationships with major retail chains continue to expand, and follow-on purchase orders have continued to come in. Those partners buy on their own shelf and promo calendars, so the timing of any one order sits outside our control.

Speaker #3: Those figures are orders, not revenue. The product became available on September 15, and the majority of those orders have shipped and will be recognized in the second quarter, with the remainder expected to ship in October.

Speaker #3: Although orders can be canceled or returned, and this is not a guarantee of revenue, we expect that demand to begin showing up in revenue this quarter and in the periods that follow.

Speaker #3: The larger factor is the timing of orders from our retail partners. Last year's first quarter included a significant big-box order that did not repeat this quarter.

Speaker #3: Our relationships with major retail chains continue to expand, and follow-on purchase orders have continued to come in. Those partners buy on their own shelf and promo calendars, so the timing of any one order sits outside our control.

Speaker #3: As we said in August, retail coverage is still early, and one order can move a quarter. We expect that effect to moderate as the footprint deepens.

Jeff Toghraie: As we said in August, retail coverage is still early, and one order can move a quarter. We expect that effect to moderate as the footprint deepens. That is a coverage issue, not a demand issue. In our observation, this channel is better judged over two to four quarters than by any single quarter comparison. Jeff Brown will now take you through the financials.

Speaker #3: That is a coverage issue, not a demand issue. In our observation, this channel is better judged over two to four quarters than by any single-quarter comparison.

Speaker #3: Jeff Brown will now take you through the financials.

Speaker #4: Thanks, Jeff. I will cover revenue and mix, gross margin and the IEPA refunds, operating expenses and profitability, a brief Revive accounting note, then cash flow and the balance sheet.

Jeff Brown: Thanks, Jeff. I will cover revenue and mix, gross margin, and the IEEPA refunds, operating expenses and profitability, a brief Reviv3 accounting note, then cash flow and the balance sheet. Consolidated retail and wholesale revenue was $2.2 million, or 35.5% of net revenues, compared with $2.9 million, or 42.5% a year ago. Direct-to-consumer was $3.9 million, or 64.2%, compared with 57.5%. The hearing enhancement and protection segment generated $5.8 million, down 12.4%. Within that, retail and wholesale were $1.9 million, down 29.2% from $2.7 million, and direct-to-consumer was $3.85 million, down less than 1%. Reviv3 and Sharper Vision Marketing together generated $328,000, or roughly 5% of net revenues. No customer represented more than 10% of net sales or more than 10% of gross receivables at quarter end. Gross profit was $5 million, up 8.6%. Reported gross margin was 82.6%, compared with 67.6% a year ago.

Speaker #4: Consolidated retail and wholesale revenue was $2.2 million, or 35.5 percent of net revenues, compared with $2.9 million, or 42.5 percent, a year ago.

Speaker #4: Direct-to-consumer was 3.9 million dollars, or 64.2 percent, compared with 57.5 percent. The hearing enhancement and protection segment generated 5.8 million dollars, down 12.4 percent, within that retail and wholesale were 1.9 million dollars, down 29.2 percent, from 2.7 million dollars, and direct-to-consumer was 3.85 million dollars, down less than 1 percent.

Speaker #4: Revive and Sharper Vision Marketing together generated $328,000, or roughly 5 percent of net revenues. No customer represented more than 10 percent of net sales or more than 10 percent of gross receivables at quarter end.

Speaker #4: Gross profit was $5 million, up 8.6 percent. Reported gross margin was 82.6 percent, compared with 67.6 percent a year ago. We collected $907,000 from the U.S.

Jeff Brown: We collected $907,000 from U.S. Customs and Border Protection, including interest. Of that, $551,000 related to duties on goods already sold and was recognized as a reduction of cost of revenues. $321,000 related to goods still in inventory and reduced inventory on the balance sheet. The remaining $35,000 was interest and is in other income. No IEEPA refund claims remain outstanding. Excluding the $551,000 cost of revenues benefit, gross profit would have been $4.48 million and gross margin 73.6%, still above last year's 67.6%. On operating expenses, we reclassified certain prior period amounts to match the current presentation. Stock-based compensation previously included in sales and marketing and professional fees is now in compensation and related taxes. Other professional and consulting costs relating to consulting fees are now in general and administrative. The reclassifications did not change total operating expenses or income from operations.

Jeff Brown: We collected $907,000 from US Customs and Border Protection, including interest. Of that, $551,000 related to duties on goods already sold and was recognized as a reduction of cost of revenues. $321,000 related to goods still in inventory and reduced inventory on the balance sheet. The remaining $35,000 was interest and is in other income. No IEEPA refund claims remain outstanding. Excluding the $551,000 cost of revenues benefit, gross profit would have been $4.48 million and gross margin 73.6%, still above last year's 67.6%. On operating expenses, we reclassified certain prior period amounts to match the current presentation. Stock-based compensation previously included in sales and marketing and professional fees is now in compensation and related taxes. Other professional and consulting costs relating to consulting fees are now in general and administrative. The reclassifications did not change total operating expenses or income from operations.

Speaker #4: Customs and Border Protection, including interest. Of that, $551,000 related to duties on goods already sold and was recognized as a reduction of cost of revenues.

Speaker #4: $321,000 related to goods still in inventory and reduced inventory on the balance sheet. The remaining $35,000 was interest and is in other income.

Speaker #4: No IEPA refund claims remain outstanding. Excluding the $551,000 cost of revenues benefit, gross profit would have been $4.48 million, and gross margin 73.6%, still above last year's 67.6%.

Speaker #4: Regarding operating expenses, we reclassified certain prior period amounts to align with the current presentation. Stock-based compensation, previously included in Sales and Marketing and Professional Fees, is now reported in Compensation and Related Taxes.

Speaker #4: Other professional and consulting costs relating to consulting fees are now included in general and administrative expenses. The reclassifications did not change total operating expenses or income from operations.

Speaker #4: Total operating expenses were $4.6 million, up $372,000, or 8.8 percent. As a percentage of revenue, they rose from 61.6 percent to 75.4 percent, primarily because of increased charges related to our build-out and marketing of Ex-Core 2, and because of a non-cash expense related to the issuance of Revive shares, which I will discuss shortly.

Jeff Brown: Total operating expenses were $4.6 million, up $372,000, or 8.8%. As a percentage of revenue, they rose from 61.6% to 75.4%, primarily because of increased charges related to our build-out and marketing of XCOR II and because of a non-cash expense related to the issuance of Reviv3 shares, which I will discuss shortly. R&D expense reflects employees and contractors who are focused on specific product development projects like XCOR II during the quarter. Under GAAP, that work is recorded as research and development rather than compensation or contractor costs. Sales and marketing was $2.84 million, up about $78,000, or 2.8%. Advertising was essentially flat at $1.53 million versus $1.55 million. About $360,000 of that spend went to XCOR II branding and launch and did not produce revenue in Q1. Those shipments began in September at the start of Q2.

Speaker #4: R&D expense reflects employees and contractors who are focused on specific product development projects, like Ex-Core 2 during the quarter. Under GAAP, that work is recorded as research and development rather than compensation or contractor costs.

Speaker #4: Sales and marketing was $2.84 million, up about $78,000, or 2.8 percent. Advertising was essentially flat at $1.53 million, versus $1.55 million.

Speaker #4: About $360,000 of that spend went to ex-core 2 branding and launch and did not produce revenue in the first quarter. Those shipments began in September at the start of the second quarter.

Speaker #4: Compensation and related taxes were 374,000 dollars, compared with 397,000 dollars, general and administrative expenses were 0.9 million dollars, compared with 1.1 million dollars, and include the one-time non-cash charge of 138,000 dollars related to the revive share issuance.

Jeff Brown: Compensation and related taxes were $374,000 compared with $397,000. General and administrative expenses were $0.9 million compared with $1.1 million and include the one-time non-cash charge of $138,000 related to the Reviv3 share issuance. Non-cash stock-based compensation and operating expenses was $322,000, up from $199,000, with the Reviv3 charge accounting for most of the increase. Income from operations was $437,000 compared with $412,000, up 6.1%. That increase primarily reflects the customs refunds, partially offset by lower revenue and higher operating expenses, including the XCOR II launch and the Reviv3 charge. The tax provision was $100,000, an effective rate of about 19%, compared with $115,000 or about 26% a year ago. Net income was approximately $420,000, or five cents per diluted share, compared with $334,000 or four cents per diluted share. Adjusted EBITDA, a non-GAAP measure, was $827,000 compared with $674,000. That figure includes the $551,000 refund benefit.

Speaker #4: Non-cash, stock-based compensation and operating expenses were $322,000, up from $199,000, with the Revive charge accounting for most of the increase. Income from operations was $437,000, compared with $412,000, up 6.1 percent.

Speaker #4: That increase primarily reflects the customs refunds, partially offset by lower revenue and higher operating expenses, including the EX-Core 2 launch and the Revive charge.

Speaker #4: The tax provision was 100,000 dollars, and effective rate of about 19 percent, compared with 115,000 dollars, or about 26 percent, a year ago. Net income was approximately 420,000 dollars, or 5 cents per diluted share, compared with 334,000 dollars, or 4 cents per diluted share.

Speaker #4: Adjusted EBITDA, a non-GAAP measure, was $827,000 compared with $674,000. That figure includes the $551,000 refund benefit; excluding this, adjusted EBITDA would have been approximately $276,000.

Jeff Brown: Excluding this, Adjusted EBITDA would have been approximately $276,000. The reconciliation of Adjusted EBITDA to net income is in today's release. On 25 August, Reviv3 issued 12,501 of its own common shares to three strategic partners for services at $11 per share or $137,511 in total. We expensed that amount at issuance. It is a non-cash charge. Because we kept control, the ownership change was recorded in equity. The non-controlling interest was adjusted to the partner's share of Reviv3 net assets, and the difference went to additional paid-in capital. That equity adjustment did not affect net income or cash. AXIL still owns about 75% and still consolidates Reviv3, and AXIL stockholders were not diluted. What the partners received is a minority stake in Reviv3, not a claim on AXIL. Reviv3 does not currently intend to pay dividends, and any distributions are at the discretion of Reviv3's board, which AXIL controls.

Speaker #4: The reconciliation of adjusted EBITDA to net income is in today's release. On August 25, Revive issued 12,501 of its own common shares to three strategic partners for services, at $11 per share, or $137,511 in total. We expense that amount at issuance.

Speaker #4: It is a non-cash charge. Because we kept control, the ownership change was recorded in equity, the non-controlling interest was adjusted to the partner's share of Revive net assets, and the difference went to additional paid-in capital.

Speaker #4: That equity adjustment did not affect net income or cash. Axel still owns about 75 percent and still consolidates Revive. Axel stockholders were not diluted.

Speaker #4: What the partners received is a minority stake in Revive, not a claim on Axil. Revive does not currently intend to pay dividends, and any distributions are at the discretion of Revive's board, which Axil controls.

Speaker #4: As a result, we expect the partners to realize the value of their interests principally upon a sale of Revive or another liquidity event. Net cash provided by operating activities was $3.8 million, compared with $739,000 used in the first quarter last year.

Jeff Brown: As a result, we expect the partners to realize the value of their interest principally upon a sale of Reviv3 or another liquidity event. Net cash provided by operating activities was $3.8 million, compared with $739,000 used in Q1 last year. The largest driver was collections. Accounts receivable fell from $4.7 million on 31 May to $1.3 million. Cash was strong this quarter in large part because we collected on the retail and wholesale shipments that were outstanding at year-end. That is the other side of the model we leaned into last year, a mix of offline retail and direct-to-consumer. That mix is what allows us to fund our growth from operations. Inventory was $4.4 million, flat with year-end, and included $1 million in transit. Prepayments to vendors for inventory rose to $558,000 from $145,000.

Speaker #4: The largest driver was collections. Accounts receivable fell from $4.7 million on May 31 to $1.3 million. Cash was strong this quarter, in large part because we collected on the retail and wholesale shipments that were outstanding at year-end.

Speaker #4: That is the other side of the model we leaned into last year—a mix of offline retail and direct-to-consumer. That mix is what allows us to fund our growth from operations.

Speaker #4: Inventory was $4.4 million, flat with year-end, and included $1 million in transit. Prepayments to vendors for inventory rose to $558,000 from $145,000.

Speaker #4: We used the quarter to pre-market and stage Ex-Core 2 so shipments could start when the product went live in September. We invested $165,000 in intangibles and equipment, including product certification testing.

Jeff Brown: We used the quarter to pre-market and stage XCOR II so shipments could start when the product went live in September. We invested $165,000 in intangibles and equipment, including product certification testing. We ended the quarter with $7.9 million of cash and cash equivalents, working capital of $10.3 million, and no outstanding borrowings. Based on current cash and anticipated operating cash flows, we believe we have sufficient liquidity to meet working capital needs. We intend to use that liquidity to fund inventory and the launch and do not see a need for outside capital. I will turn the call back to Jeff Toghraie.

Speaker #4: We ended the quarter with $7.9 million of cash and cash equivalents, working capital of $10.3 million, and no outstanding borrowings. Based on current cash and anticipated operating cash flows, we believe we have sufficient liquidity to meet working capital needs.

Speaker #4: We intend to use that liquidity to fund inventory and the launch and do not see a need for outside capital. I will turn the call back to Jeff Dogre.

Speaker #4: Thanks, Jeff. We expect fiscal 2027 to be a year of top-line and bottom-line growth, with results more visible from Q2 onward. That view rests on three things you are executing now: the first is Ex-Core 2. The product became available on September 15; by month-end we had fulfilled the majority of the pre-orders and backlog, and demand remains healthy in wholesale, retail, and direct-to-consumer.

Jeff Toghraie: Thanks, Jeff. We expect fiscal 2027 to be a year of top-line and bottom-line growth, with results more visible from Q2 onward. That view rests on three things we are executing now. The first is XCOR II. The product became available on 15 September. By month-end, we had fulfilled the majority of the pre-orders and backlog, and demand remains healthy in wholesale, retail, and direct-to-consumer. The launch is no longer ahead of us. It is on the market, and it is converting. The second is fuller retail coverage. The work now is to deepen that footprint so quarterly performance is less exposed to swing from any one order. The third is Reviv3. We brought highly experienced operators into the subsidiary ahead of the global relaunch without spending significant cash or issuing AXIL stock.

Speaker #4: The launch is no longer ahead of us; it is on the market, and it is converting. The second is fuller retail coverage. The work now is to deepen that footprint so quarterly performance is less exposed to swings from any one order.

Speaker #4: The third is revive. We brought highly experienced operators into the subsidiary ahead of the global relaunch, without spending significant cash or issuing AXIL stock.

Speaker #4: The team expects to start onboarding new distributors and retailers in the U.S. and overseas as early as next quarter. This concludes our prepared remarks.

Jeff Toghraie: The team expects to start onboarding new distributors and retailers in the US and overseas as early as next quarter. This concludes our prepared remarks. We are happy to take any questions.

Speaker #4: We are happy to take any questions.

Speaker #1: Thank you. Management has received questions in advance of the call, and we will now respond to as many as time will allow. Go ahead, Peter, and start the Q&A session.

Operator: Thank you. Management has received questions in advance of the call, and we will now respond to as many as time will allow. Go ahead, Peter, and start the Q&A session.

Speaker #2: Thank you. Your quarterly sales seem to fluctuate. Would you please describe the seasonality in the business? Specifically, will Q1 generally be the lowest of the four quarters, and will fiscal Q2 generally be the highest?

Peter Seltzberg: Thank you. Your quarterly sales seem to fluctuate. Would you please describe the seasonality in the business? Specifically, will Q1 generally be the lowest of the four quarters? Will fiscal Q2 generally be the highest? Thank you.

Speaker #2: Thank you.

Speaker #3: Well, I think Q2 has been a strong quarter because of the proximity to the holidays. But that dynamic is skewed with retailers and, for example, Q4 was our highest retailer last year.

Jeff Toghraie: Well, I think Q2 has been a strong quarter because of the proximity to the holiday. That dynamic is skewed when large orders from big retailers. For example, Q4 was our highest earner last year, last fiscal year, and I think it was the softest year prior. It really depends on when these big box orders come in, and that is essentially what creates the fluctuations. Also particular to Q- impacted revenues. I want to emphasize that we are more than making up for that shortfall in XCOR 2000 in Q2. Next question.

Speaker #3: Last fiscal year, and I think it was the softest year prior. So it really depends on when these big-box orders come in, and that is essentially what creates the fluctuations.

Speaker #3: Also, particular to Q3 holidays, lower impacted revenues. But I want to emphasize that we are more than in that shortfall in ex-core 2 sales in Q2.

Speaker #3: Next question.

Speaker #2: Okay, thank you. Another question is: How do you envision getting to $10 million per quarter in sales?

Peter Seltzberg: Okay. Thank you. Another question is, how do you envision getting to $10 million per quarter in sales?

Speaker #3: Well, we're pretty close to $10 million now. We did $8.6 million in Q4. Any given quarter can get us to $10 million moving forward.

Jeff Toghraie: Well, we are pretty close to $10 million now. We did $8.6 million Q4. Any given quarter can get us to $10 million moving forward. I think if the question is getting consistently over $10 million every quarter, a function of how many new doors are we able to open and how many SKUs are we able to put in existing doors. That has been our primary focus since 2025, and we are making excellent progress in that front. Next question.

Speaker #3: I think if the question is getting consistently over $10 million every quarter, the function of how many doors—how many new doors are we able to open and how many SKUs are we able to put in existing doors—and that's been our primary focus since 2025. We're making excellent progress on that front.

Speaker #3: Next question, please.

Speaker #2: Okay. What has been the range of your quarterly gross margin for the past three years?

Peter Seltzberg: Okay. We have, what has been the range of your quarterly gross margin for the past three years?

Speaker #3: You want to take that, Jeff?

Jeff Toghraie: You want to take that, Shawn?

[Company Representative] (AXIL Brands): I can jump in. Yeah, I can jump in for this.

Speaker #5: I can jump in. Yeah, I can jump in for this. Over the last three years, Axil Brands' quarterly gross margin has been in a pretty tight range.

Jeff Toghraie: Yeah.

[Company Representative] (AXIL Brands): Over the last three years, AXIL Brands' quarterly gross margin has been in a pretty tight range. It has been approximately 67% to 74%. Of course, that excludes this quarter, which was an outlier of 82.6% due to the customs and duties that were refunded. But if you remove that, it would have been a gross margin of 73.6%, which is in that range, and we expect to maintain that range going forward through fiscal 2027. Next question.

Speaker #5: It's been approximately 67% to 74%. Of course, that excludes this quarter, which was an outlier at 82.6% due to the customs and duties that were refunded. If you remove that, it would have been a gross margin of 73.6%, which is in that range.

Speaker #5: And we expect to maintain that range going forward through fiscal '27.

Speaker #2: Next question. Okay, next is: Can you describe the credit quality of your receivables?

Peter Seltzberg: Okay. Next is, can you describe the credit quality of your receivables?

Speaker #5: Yeah, the credit quality of our receivables remains high. Over the last year, we've reserved an expense of about half a percent of our accounts receivable.

[Company Representative] (AXIL Brands): Yeah. The credit quality of our receivables remains high. Over the last year, we have reserved and expensed about half a percent of our account receivables, which is a low loss rate. This quarterly provision was actually a gain under our policy. We expense receivables that are more than 90 days past due. So the gain came from recoveries of amounts that had already been written off under the rule.

Speaker #5: Which is a low loss rate. This quarterly provision was actually a gain under our policy. We expense receivables that are more than 90 days past due.

Speaker #5: So the gain came from recoveries of amounts that had already been written off under the rule.

Speaker #2: Okay, next question is: What business could Axil acquire to get this company to a level of $100 million in annual sales?

Peter Seltzberg: Okay.

[Company Representative] (AXIL Brands): Next question.

Peter Seltzberg: Next question is, what business could AXIL acquire to get this company to a level of $100 million in annual sales?

Speaker #5: $100 million in annual sales is completely achievable. I don't think we need to acquire a business to get to $100 million. If you look at the global hearing protection market, it's $3 billion, and we're a little over 1% of that a year.

[Company Representative] (AXIL Brands): $100 million in annual sales is completely achievable. I do not think we need to acquire a business to get to $100 million. If you look at the global hearing protection market, it is $3 billion, and we are at a little over 1% of that a year. I would argue that our customers are using our systems for more than just hearing protection. But either way, I think there is plenty of runway to get to $100 million a year, and it is quite achievable without acquisitions. Next question.

Speaker #5: I would argue that our customers are using our systems for more than just hearing protection, but either way, I think there's plenty of runway to get to $100 million a year, and it's quite achievable without acquisitions.

Speaker #2: Next question. Okay, we have a final question: Why is there a health and beauty care business in Axil?

Peter Seltzberg: Okay. We have a final question. Why is there a health and beauty care business in AXIL?

Jeff Toghraie: I can take that. Reviv3 is a small part of the company, 4% of the revenues last year. Where we find the business is attractive is we believe this deal gives us the ability to market and scale the brand globally. And we will have early indications how well we are executing by next quarter. But I think it is important for us to point out to AXIL shareholders that at this stage, Reviv3 is essentially running entirely independent. We are not drawing on AXIL people or AXIL resources to help out the Reviv3 team. There is not a drag as far as talent or time from whatever the AXIL team is doing in order to help Reviv3. Reviv3 team is extremely capable at this point, it is fully operational, and we have a lot of confidence that they are going to do great. Ultimately, it is a pretty straightforward equation for us.

Speaker #3: I tend to take that. So Revive is a small part of the company—4% of the revenues last year. We're behind the business; it's attractive as we believe this deal gives us the ability to market and scale the brand globally.

Speaker #3: And we'll have indications of how well we're executing by next quarter. But I think it's important for us to point out to Axil shareholders that, at this stage, Revive is essentially running entirely independently.

Speaker #3: There are no; we're not drawing on Axel people or Axel resources to help out the Revive team. There isn't a drag as far as talent or time from whatever the Axel team is doing in order to help Revive.

Speaker #3: Revive team is extremely capable at this point. It's fully operational, and we have a lot of confidence that they're going to do great. Ultimately, it's a pretty straightforward equation for us.

Speaker #3: If this plan executes, Axel can achieve a very meaningful upside. If it doesn't, for any other reason—if something was wrong—it's more or less a neutral for us.

Jeff Toghraie: If this plan executes, AXIL can achieve a very meaningful upside. If it doesn't for any other reason, if something goes wrong, it's more or less a neutral for us. So we see this as a high reward, low risk opportunity for AXIL. Makes a lot of sense to us. And we'll know soon enough. We'll have early indications how well we're doing, and we'll keep everyone updated. Is there another question?

Speaker #3: So we see this as a high-reward, low-risk opportunity for Axil. It makes a lot of sense to us, and we'll know soon enough. We'll have early indications of how well we're doing, and we'll keep everyone updated.

Speaker #3: Is there another question?

Speaker #2: No, we're all set.

Peter Seltzberg: No, we're all set.

Speaker #3: Awesome. Thank you, everyone, for participating. We'll see you early June.

Jeff Toghraie: Well, thank you everyone for participating. We'll do early next time.

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