Q4 2020 BK Technologies Corp Earnings Call
Okay.
Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation Conference call for the fourth quarter and full year 2020. This call is being recorded all participants have been placed in a listen only mode. Following management's remarks the call.
We'll be open to questions before turning the call over to our president Mr. Timothy but you for opening remarks, I will provide the following safe Harbor statement.
Statements made during this conference call that are not based on historical facts are forward looking statements.
Statements include but are not limited to projections or statements of future goals and targets regarding the companys revenue and profits. These.
These statements are subject to known and unknown factors and risks the company's actual results performance or achievements may differ materially from those expressed or implied by these forward looking statements and some of the factors and risks that could cause or contribute to such material differences have been described in yesterday's press release and didn't BK.
Filings with the U S Securities and Exchange Commission. These.
These statements are based on information and understandings that are believed to be accurate as of today and we do not undertake any duty to update such forward looking statements I will now turn the call over to Mr. Timothy <unk> President of BK technologies. Mr. Ritchie you may begin.
Thank you Kate.
And thanks, everyone for joining today.
I'll arrange my comments as follows first I'll highlight our financial results next I'll spend some time, providing operational updates and then I'll turn the call over to our executive Vice President and Chief Financial Officer, Bill Kelly to dive deeper into our financial results.
We will conclude by opening up the call for a brief Q&A.
Moving to financial results, we had a strong fourth quarter revenue grew 43%.
And we generated an operating profit of $900000 on.
Operating margins were eight 4% a substantial improvement compared with a negative 32, 4% for last year's fourth quarter.
Our gross profit margins and key metrics continued to benefit from revenue growth and new products combined with our restructuring and the related expense reductions.
Taken altogether 2020, Q4 results continue to highlight the earnings power of our new expense structure.
Moreover, we believe BK is just getting started with the strong results. We think that over the next few years, we have a path to reach up to a $100 million in revenue and an ability to generate substantial profits.
We feel we can achieve that goal by remaining focused on increasing sales of existing communications technology products.
Growing sales of our newly launched BK or 5000.
And preparing for the planned launch of the multi band BK or 9000 in midyear 2021.
The BK or 9000 should significantly increase contract sizes, we can compete for.
We're looking forward to its launch complementing the performance of our existing and relatively new offerings.
Turning to an update on sales and exist of existing products and solutions. During the fourth quarter of 2020, we were awarded a contract totaling approximately $1 $5 million from the U S Department of interior.
The order was for BK as digital P 25 kg two series Portables, and K and G series Mobile communications technologies with related accessories.
Our mantra at BK is that we build products with accountability and integrity.
It's gratifying to see continued adoption of our K N G mobiles in individual deals as well as in mixed deals that include our new BK or 5000.
In fact after the quarter.
We won business from a municipal fire Department in Virginia that included both BK or 5000, and K and G series products.
Okay.
Moving on to our next growth initiative launching an increasing sales from new products. Just ahead of Q4, we announced the market introduction of our BK or 5000 portable communication technology. The first model in the new BK or series.
During the fourth quarter, we were pleased to announce our first order, which totaled approximately $1 1 million from an agency of the state of Tennessee.
We were particularly excited about the disorder since we had launched the product only a month prior.
Additionally, the Tennessee State Agency was the first time BK customer.
The BK or 5000 is just the initial model and a comprehensive new line of communications technology, which will include multi band products scheduled for release mid year.
Securing such an extensive order from a new customer shortly after new product launch was very encouraging.
Momentum for the 5000 has continued into the first quarter of 2021, and we have issued multiple announcements regarding new orders.
And to make sure interested parties or more fully informed of our continued progress we intend to increase our rate of announcements.
Recently, we announced an order from a new and strategic customer in Montana for our BK or 5000 for their first responders.
We also announced an order from a county fire Department and the state of Texas.
During these challenging times of severe weather in electrical disruptions. We are pleased to provide hero firefighters on the great state of Texas with BK or five thousands.
As this raging whether another emergency events occur with increasing frequency, we take great pride in outfitting the public safety heroes that are keeping our communities safe with solutions. They can trust.
Which brings us to our next growth initiatives.
Launching our first multi band communications product, the BK or 9000.
We have continued to make solid progress toward being able to launch the BK or 9000 later this year.
The BK or 9000 addresses a much greater market at a significantly higher price point, along with exponentially larger contract opportunities.
We believe the 9000 will open a ray of new markets and customers force serving as the primary driving force for our growth in the next several years and.
And complementing the BK or 5000 expansion.
The newly launched BK or 5000 in forthcoming BK on 9000.
It will allow us to penetrate new vertical markets.
We're largely inaccessible to us previously.
Good day, BK or BK <unk> market share is relatively small less than 2%.
We see a huge opportunity for market gains through the introduction of these new products.
We view the market opportunity is so significant that we announced just this morning, a new technology innovation center located in South Florida.
The primary initial focus of the center is the completion this year the BK on 9000, which coupled with the new BK or 5000 allows Kate BK to expand into new vertical markets totaling an estimated $1 $2 billion.
Leading the technical innovation Center is BK as Chief Technology Officer Doctor Bronco event it.
Along with our highly skilled team with deep backgrounds, and a broad array of technology disciplines and extensive direct experience designing state of the art Communications technology solutions.
They will serve as the cornerstone of our new technology initiatives, helping bk's technology footprint expand into new addressable markets.
Given the present moment of weather disturbances.
Social upheaval in the pandemic.
The role of public safety plays increases significantly.
We are confident that our new communications technologies allows us to tap into greater market share rapidly.
And while we're excited about the prospects of the BK or nine thousands launch and the potential implications I would like to reemphasize that current performance has been tremendous.
Q4 revenue grew 43% year over year and operating results improved by $5 million benefiting from our new expense structure and with the BK or 5000, just introduced in August last year.
Our existing new.
And forthcoming communications solutions will facilitate our goal of creating substantial shareholder value.
As the fourth quarter results highlight.
This concludes my overview I'll now turn the call over to Bill Kelley, Our Chief Financial Officer, who will review the financial and operating highlights.
Thank you Tim.
Following is a summary of our financial and operating results for the periods ending December 31 2020.
Our overall financial and operating results for the full year of 2020 improved markedly from the preceding year.
Sales for 2020 grew over 10% compared with 2019.
While gross profit margins as a percentage of sales increased 2% year over year.
Additionally, our balance sheet strengthened during the year.
With a $4 million or 30% reduction in inventory, which was a significant contributor to positive cash flow for the year of approximately $2 $4 million.
Meanwhile, as Tim mentioned, we launched the first portable radio the BK or 5000, and a new line of land mobile radio products with additional models planned for 2021.
Total sales in 2020 grew 10, 1% to approximately $44 $1 million compared with $40 1 million for the prior year.
The increase was attributed to federal and state public safety agencies, some of which were new customers.
We also realized sales from our new BK or 5000 portable which was introduced during the third quarter of 2020.
Gross profit margin as a percentage of sales in 2020 increased to approximately 41% compared with 39% for the previous year.
The improvement the improvement was attributed primarily to improved mix of product sales and reduced manufacturing costs.
Selling general and administrative expenses for 2020 declined approximately $3 million or 15%.
To approximately $17 million or 38, 6% of sales.
Compared with $20 million or 50% of sales in 2019.
The decrease in SG&A expenses was the result of broad based cost reduction actions, including a reduction in our work force.
The combined impact of sales growth gross profit margin improvement and reduced operating expenses yielded an increase of over $5 $4 million on operating income from the prior year.
We recognized other expenses totaling approximately $797000 in 2020, primarily attributed to an unrealized loss from our investment in PIH.
Made through <unk> 13, 47 holdings, a consolidated variable interest entity.
This compares with other income of $762000 last year, which was primarily related to an unrealized gain from the investment in PIH.
For 2020, we recognized pre tax income of approximately $251000 a significant.
Second improvement from last year's pre tax loss of approximately $3 6 million.
We recognized income tax expense of approximately $3000 for 2020, compared with a benefit of $987000 from the prior year.
Our income tax expense and benefit was largely non cash as a result of deferred items.
Net income for 2020 of approximately $248000 or <unk> <unk> per basic and diluted share improved to $9 million from last year's net loss of approximately $2 6 million or.
We're 21 21 per basic and diluted share.
As of December 31, 2020.
Working capital totaled approximately $15 1 million.
Of which $13 3 million was comprised of cash cash equivalents and trade receivables.
This compares with working capital of approximately $14 $5 million at 2019 year end, which included $8 $6 million of cash cash equivalents and trade receivables.
During 2020, we fulfilled the limit of our stock repurchase program repurchasing an additional 121261 shares of our common stock utilizing cash of approximately $280000.
At our capital return program has now paid 19 consecutive quarterly dividends with the last one paid on January 19th 2021.
That concludes my remarks, we'll now move on to the question and answer portion of the call.
I'd like to remind everyone that we do not provide financial and operating guidance on a quarterly or annual basis.
Kate we're ready to open the floor for questions.
Thank you ladies and gentlemen on the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask if you are listening via speakerphone. Please pick up your handset for optimum sound quality. Once again, if you have any questions or comments. Please press star one on your phone at this.
Time.
Hold on moment, while we poll for questions.
Our first question today is coming from Walter Ramsey your.
Your line is live.
Thank you congratulations.
Great quarter, and it looks like you're ready to go for the current year as well.
The question I have has to do with your supply chain there has been.
Talk anyway on the industry of getting problems, obtaining semiconductors and other electric components have you had any.
Issues, there and are there any cost pressures that you foresee.
And the current on here.
Well. Thank you for the question Walter This is Tim.
Yeah.
Randy Willis, our CLO, who is in charge and monitors.
Procuring.
All of our components on our <unk>.
Hourly basis.
Is.
Constantly giving us signals that there are certain components in certain pieces that we do acquire that are starting to lengthen their lead time, so instead of having a typical three or four or five week lead time. It may be a 567 lead times, so that causes us to have to adjust.
<unk>.
And potentially maybe some inventory levels in order to continue the product flow.
He is driving.
Mantra is constantly protect the flow make sure that we're always prepared.
To answer the customer requirements on shipping product that said.
Team I believe has done a fantastic job of keeping our inventory under control as Bill mentioned earlier in his remarks, our inventory levels are substantially lower than what we went into the year with.
So it's a balancing act, but right now we believe that we've got.
Eyes on all the products, we need there is some tightening in certain components that we do source on a global basis, but at this point, we haven't gotten any signals that there's major cost issues or supply issues.
Well that sounds good.
And just one other question as far as the.
Selling cycle.
Corona virus abating have you been able to get out into the field more on your potential customers face to face or is it still more of a remote operations at this point.
Another great question Walter.
It's kind of a mixed bag when we see it at the <unk> deal that the city the county, the state and the federal level of governments.
The fed boys and ladies have been pretty straight armed on allowing us to come into their facilities.
The states depending on the state has opened up the ability to actually get in and do a sales presentations on a very small scale its usually.
One on one kind of thing we're used to have one on 10 kind of conversation theyre not packing their rooms full of people, it's usually one or two people at all if that.
Again, it varies at the county and city level, we have seen some opening but there is still the vast majority of what we do as a buyer.
Zoom or Skype or some other technology for off site presentations.
Remote presentations I should say, so I believe it's opening up a little bit I'm in constant contact with all of our sales guys trying to monitor exactly that level of activity.
So once it does open up do you think that will shorten the sales cycle or just.
Just make it easier, but it really won't have a financial impact.
I don't think well.
I look at the sales cycle is what's the effect from a budget standpoint, and if we go in we present, our product that customer falls in love with us on the product and wants to buy it typically it still takes quite a while for them to get the product or the procurement into their budget cycle.
It's a well known fact on the land mobile radio industry that you could see anywhere from a six to 12 months.
Cycle by the time, the customer agrees to buy between before we see a po. So as we've been able to talk with our customers at least remotely we've been able to keep the interest.
They are very very keen on seeing the 5000, so we're sending a lot of product out. So they can demo the gear themselves and see the gear, we walk them through it remotely and there's an enormous backup demand for the 9000 as well I don't know that the sales cycle shortens I haven't seen it yet.
I think.
There is a bit of a backup demand for land.
Land mobile radio products.
But it's just a matter of the individual city County state and Fed agency to allow us to get in and see them, but as last year showed we are we were setting some records in our sales and bookings department throughout the year, we had our second best sales year ever.
Even with the constraints of Covid. So I'm very very excited about this year and our ability to move the needle.
It sounds good well thanks for taking the questions those were great answers I appreciate it.
Thank you Walter and have a great day.
Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press star one on your phone now.
Our next question today is coming from Alan Lyons Your line is live.
Thank you.
Bill congratulations on the.
Efforts that you have put it in with the engineering reengineering and revamping. The company is starting to look to really pay off.
Exciting opportunities.
A question about with COVID-19 slowly getting under control what are you seeing your international opportunities in 2021.
Thank you for the question Alan.
Love talking and thinking internally strategizing on international markets.
On the as you know <unk> been around for a while with the company. We have historically been kind of on North America centric organization, we have had.
Success in certain markets like Australia, Philippines, Indonesia, a couple of markets in Latin America, we see our ability to start to expand our.
Marketplace, especially with the upcoming.
Up coming BK or 9000, as well as in BK or 5000, we think we can address some international markets a little bit better.
The age old question on international business, they'll become service and how do we support service. So we're very careful that if we're chasing which we are international opportunities that theres going to be some level of infrastructure in that country that we can support our customers. So it's very very key to our business.
This model, that's what helps us win quite a bit of our businesses are.
<unk> sales support and basically living with a customer.
So I do believe 'twenty, one we'll start to grow some of our international business I think we will do it in a very controlled effort. So that we can do the support of those.
Those sales, but I think.
The new product line to BK R series really lends itself terrific to the international marketplace.
Thank you.
It appears we have no further questions in queue at this time.
Alright, well, thank you Kate and thank you all for participating in today's call. We look forward to talking with you again low we report our Q1 'twenty one results in May all the best to all of you and have a great day to day.
Thank you ladies and gentlemen, this does conclude todays event you may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.