RevenueNet revenue (three months ended August 31, 2026)
$15.3M
$16.3M
▼ Miss -6.0%
EPS(GAAP diluted)
$(0.13)
$(0.16)
▲ Beat +20.0%
EPS — API Ninjas actual matches multiple Quartr EPS bases
Verdict
Revenue missed: net revenue of $15.3 million against a $16.3 million estimate, 6.0% short, and down approximately 46% from $28.2 million a year ago.
EPS beat on a loss: diluted $(0.13) against a $(0.16) estimate, 20.0% better, versus $0.09 of diluted earnings in the prior-year quarter.
Gross margin of 79% against 60% is not operating leverage. A one-time $2.3 million refund of previously paid tariffs contributed approximately 15.0 of the 19.4 percentage point increase, and adjusted gross margin was approximately 65%.
No numeric guidance was given. Management expects results to improve sequentially as the fiscal year ends and expects inventory to keep normalizing through the holiday sales period.
The one thing that matters: the EPS beat is funded by a non-recurring tariff refund. Excluding the $2.3 million refund and a $0.2 million lease-termination gain, adjusted EBITDA was a loss of approximately $3.8 million rather than the reported $(1.4) million.
Key metrics
Metric
Reported
Prior year
Change
Net revenue
$15.3 million
$28.2 million
approximately 46% year-over-year decrease
Gross margin
79%
60%
from 60% to 79% year-over-year
Adjusted gross margin (non-GAAP)
approximately 65%
60%
—
Net income (loss)
$(2.9) million
$2.2 million
—
Adjusted EBITDA (non-GAAP)
$(1.4) million
$4.1 million
—
Cash, cash equivalents and marketable securities
$9.4 million
$9.0 million
—
Guidance changes
Item
New guidance
Prior guidance
Sequential results through fiscal year end
expect to improve sequentially as we approach the end of our fiscal year
—
Inventory levels
expects inventory levels to continue normalizing in subsequent quarters and more substantially during the upcoming holiday sales period leading to improved working capital efficiency
—
Quality of earnings
The margin expansion is a refund, not the business. Of the 19.4 percentage point gross-margin increase, approximately 15.0 points came from $2.3 million of previously paid tariffs recognized as a reduction of cost of goods sold; adjusted gross margin was approximately 65% against 60% a year ago.
Strip the non-recurring items and the shortfall widens. Excluding the $2.3 million tariff refund and the $0.2 million gain on terminating the Scottsdale retail lease, adjusted EBITDA was a loss of approximately $3.8 million, against the reported $(1.4) million and $4.1 million a year ago.
The loss carries no tax shield. No material income tax benefit was recognized on the third-quarter pre-tax loss, an effective rate of 0.0% against 21.9% a year ago, so the full $(2.9) million falls through to net loss.
Gotchas & watch items
Operating expenses rose 7% to $15.1 million while revenue fell approximately 46%, including a $1.7 million increase in bad debt expense from full reserves against the Byrna LATAM royalty receivable and two other customer balances.
Inventory is falling in the wrong place: total inventory of $30.0 million is down from $32.7 million at November 30, 2025, but finished goods rose to $15.1 million from $9.6 million while raw materials fell to $10.7 million, and days in inventory stretched to approximately 292 from 228.
Certain Fox Labs defense sprays are formulated with trichloroethylene, prohibited for consumer use under an EPA rule since June 2025. Shipments and dealer sales are suspended, the products were approximately 1.3% of nine-month net revenue, and no accrual has been recorded for penalties or reformulation costs.
Wholesale revenue fell 61.1% to $4.2 million, and the prior-year quarter included approximately $3.2 million of national chain store shipments that did not recur.