Q1 2022 BK Technologies Corp Earnings Call

Good morning, ladies and gentlemen, and welcome to the Teekay Technologies Corporation Conference call for the first quarter 2022.

This call is being recorded.

<unk> has been placed in a listen only mode.

Management's remarks, the call will be open to questions.

Before turning the call over to our Chief Executive Officer, Mr. John <unk>.

For opening remarks, I will provide the following safe Harbor statement.

Statements made during this conference call.

Based on historical facts are forward looking statements.

Such statements include but are not limited to projections or statements of future goals and targets regarding the companys revenue and profits.

These statements are subject to known and unknown factors and risks.

The companys actual results performances or achievements may differ materially from those expressed or implied by these forward looking statements.

There is a mix.

Such material differences.

<unk> described today.

Bk's filings with the U S Securities and Exchange Commission.

These statements are based on information and understandings.

As of today, and we do take any duty to update such forward looking statements.

Ill turn the call over to John <unk> CEO of BK technologies. Mr. Suzuki you may begin.

Thank you everyone for joining today.

I'll start by reviewing some of our highlights of our operations and financial results. During the quarter, then I'll turn over the call to executive Vice President and Chief Financial Officer, Bill Kelly for a deeper dive in our financial results.

I'll conclude by opening up the call for a brief Q&A.

We continue to see strong market demand for our <unk> 5000 product line and this demand drove record first quarter bookings of $15 7 million.

The <unk> thousand has demonstrated proven success in the field and we're pleased to see continued strong interest from both existing and new customers as they upgrade their radio fleet.

While we've had a phenomenal quarter from new order bookings standpoint.

As expected and as mentioned on our fourth quarter call.

During January and February we contended contended with supply chain challenges and saw shortages of certain components.

As a result deliveries we planned to complete in the first quarter have been pushed into the second and third quarter of 2022.

Beginning in March and to date in the second quarter.

We've been able to resolve the supply chain issues and ramp up production give.

Given the shipment delays and higher and higher than expected demand for our <unk> 5000, we have increased the production rate for the BK or 5000% to 130% of plan.

We now plan to keep this run rate for the balance of the year.

With this elevated production rate, we're optimistic that our ability to convert orders into shipments will continue to improve as we move through the balance of 2022.

On the cost side, we are being impacted.

By many of the same factors that others are contending with we remain focused on controlling those costs to help mitigate the impact to our near term gross margin performance.

We are intended on establishing the resources and processes to optimize our supply chain. So that we're positioned to ensure that our customers are receiving the orders in a timely manner. It.

It is important to reiterate that demand has never been stronger for our products and we're doing everything we can to fulfill demand in a timely manner.

In addition to the success in the market. We've also made significant development progress and our new multi band radio the <unk> 9000.

I am pleased to report that we've begun deploying our <unk> 9000 radios in the field for engineering test purposes.

These radios will be tested on live customer trunk radio systems in both rural and urban environments.

Pending results of these field tests will be in a much better position to finalize our launch date.

As we've mentioned before our success in the marketplace is contingent upon our ability to deliver a product line that enables real time mission critical communications and we look forward to continuing this track record with our next generation <unk> 9000, multi band portable radio.

Finally in March we announced the launch of a dedicated business unit focused on delivering software as a service SaaS solutions to the public safety market.

This is a huge initiative for our company, which will be led by industry veteran James Teal.

The new unit will develop and deliver a comprehensive suite of state of the art subscription based software solutions to first responders via the LTE public cellular network.

I joined BK technologies last July with the vision of expanding the company beyond the traditional land mobile radio market and positioning us as a leader in the broader public safety LMR LTE communications market.

We've already filed for three patents related to push to talk over cellular and other cellular based smartphone applications for first responders.

To commercialize these ideas.

We're currently developing a BK branded smartphone application code named <unk> play.

<unk> will deliver an entirely new set of services to increase first responder safety and productivity.

With these offerings, we have a significant opportunity to increase our sales reach beyond wildland fire to penetrate markets, including the military urban structure fire law enforcement and an emergency response among others.

I am confident that BK technologies poised for growth in 2022.

We have a reliable and well received line of existing products.

We work continuously to improve and expand.

And we are ready to capitalize on numerous opportunities emerging for tethering LMR devices, such as the <unk> series radios.

In public safety smartphone applications.

On the public LTE cellular networks.

Additionally, our balance sheet remains strong.

Providing us the financial flexibility to develop cutting edge, new products and solutions and <unk>.

And explore strategic opportunities that will complement our growth as we continue scaling BK BK technologies.

At this point I'd like to turn it over to Bill Kelly, Our executive Vice President and Chief Financial Officer, who will review the financial and operating highlights.

Thanks, John .

Following is a summary of our financial and operating results for the period ending March 31 2022.

Sales for the first quarter totaled approximately $6 6 million.

Compared with $8 6 million for the same quarter last year.

Gross profit margins as a percentage of sales in the first quarter were 22, 4%.

Compared with 36, 4% for the first quarter last year.

Primarily due to cost increases in materials, and freight and lower manufacturing volumes.

Selling general and administrative expenses or SG&A for the first quarter totaled approximately $4 9 million.

Compared with $4 million for the same quarter last year.

Our operating loss totaled $3 $4 million compared with an operating loss of $853000 for the first quarter last year.

Our net loss for the first quarter of 2022 totaled approximately $3 9 million or 23 per basic and diluted share.

Compared with a net loss of approximately 670000 or <unk> <unk> per basic and diluted share for the same quarter last year.

For the first quarter of 2022, we recognized an unrealized loss of approximately five.

Im sorry 500000.

On our investment in <unk> financial group.

Compared to an unrealized gain of $205000 in the first quarter of 2021.

As of March 31, 2020 to.

Working capital totaled approximately $21 7 million.

Of which approximately $11 $1 million is comprised of cash cash equivalents and trade receivables.

This compares with working capital totaling approximately $25 $2 million at the end of 2021, which included $18 $8 million of cash cash equivalents and trade receivables.

And lastly, this quarter marks our 24th consecutive quarterly dividend to shareholders under our capital return program.

That concludes my remarks, I will now move on to the Q&A session of the conference call I would like to remind everyone that we do not provide financial and operational guidance on a quarterly or annual basis.

Ali we're now ready to open the floor for questions.

Ladies and gentlemen for fluids and I will open for questions. If you have any questions or comments. Please press star one on your phone at this time.

Aspen posing your question. Please pick up your house, if this thing on speaker phone to provide optimum sound quality.

Please hold while we poll for questions.

Thank you. Your first question is coming from Frank Jones.

Sir please announce your affiliation and pose your question.

Hey, guys.

Thanks for taking my question.

So I was just wondering given revenues.

Much lower than expected in Q1, but you guys have.

Very high bookings.

How should we think about Q2 revenues.

Thanks, Brian I. Appreciate the question this is bill Kelly.

We should think about Q2 and the second half of the year.

As anticipating growth.

As you mentioned and as John mentioned in his prepared remarks, we do have very strong demand and record bookings during the first quarter.

It was really material shortages that helped us are held us back from realizing greater shipments we have increased our production rate in the last couple of months, we have seen an increase.

Tangible increase in March, particularly and we also grew from March to April So we're trending in a growth direction and as we ramp up our production.

We anticipate that we will see substantial growth in the second quarter in the second half of the year.

Okay. Okay. That's helpful. Thanks, guys.

Once again, ladies and gentlemen, if you have any remaining questions or comments. Please press star one on your phone at this time.

Your next question is coming from Aaron Martin Sir.

Please state your affiliation and then pose your question.

Its Aaron Martin from <unk> investment partners good morning, guys.

Juggling a couple of different conference calls. This morning. So you may have.

Missed this.

On the inventory side, obviously, there's a very large step up in inventory.

How.

How should we think about that going forward in terms of your ability to bring it down and generate cash out of working capital from the extremely elevated inventory levels is at all.

Yes.

Work in progress finished products, how do we think about your inventory is how.

How much of it is older product that might not be able to convert to cash as quickly.

Yes.

What can you tell us there.

Good morning, Erin this is bill.

You should think about.

Inventory in terms of finished goods and raw materials. The increase in inventory has been driven primarily on the raw materials side and that relates directly to material shortages and extended lead times that we've seen throughout the supply chain.

We've when we've been able to locate particularly electrical components with the extended lead times, we've had to procure more in order to ensure our ability to manufacture and complete product in future quarters. So most of that ramp up.

You will see is in raw material.

We have procured a lot.

Lot of the componentry that.

That helped depress sales and limited our shipments in Q1 and having those items on hand is what's going to enable us to realize the revenue growth that we're anticipating for the rest of this quarter and on into the second half.

Later in your and.

In your question you mentioned about.

About aged product you should not think about the inventory is.

Aged or old product the <unk>.

<unk> tree that we've added is all related to our new <unk> series and I'll also add because of the.

The extended lead times, we've added inventory or bought inventory in advance for the introduction of the <unk> that we expect later this year, we couldn't wait to procure those components because of these extended lead times that we see in the supply chain today. So.

What we have on hand relates to new products, some of which the 9000, which hasnt even been introduced yet.

Yes.

Let's talk about the 9000, obviously you guys are doing the right things to make sure it's ready.

When it's finally released.

Sure.

Okay.

Aaron Hi, This is John Suzuki your audio cut out and we did not hear your question.

Sorry, gentlemen, your next call is coming from Alan Lyons.

Please state your affiliation and pose your question.

Yes.

<unk> private investor Good morning, John and Bill.

So my question is just that.

Is it fair to say that.

Based on your outlook.

The performance of the first quarter.

Youre thinking in terms of continuing your dividend policy and potential buyback.

Changes, particularly the dividend policy and then.

Second question I have is.

Where do you stand with potential strategic.

Opportunities.

<unk>.

Maybe in some respects will help diversify.

The business.

Thank you.

Hey, Al This is bill I'll address.

The capital return program and I'll, let John speak to the strategic M&A activities of the company.

There has been no change in our.

Our view of the capital return program.

Although we have.

We have increased inventory and use some cash we do anticipate.

That as I mentioned in an earlier question, we do anticipate a ramp up in shipments and to improve our cash flow. So from a dividend perspective, we have had no change.

From a share repurchase perspective, there have been no shares repurchased yet to date and of course, we've been in a blackout period since.

The approval was issued.

For that there has been no fundamental change in our view of that however, with the.

With the softness of the first quarter or an ability to.

To turn shipments.

We haven't declared any repurchases just yet.

I believe will probably.

Take a look.

Make sure that we see the anticipated revenue increases over the next couple of months and revisit.

The repurchase topic, probably later this year.

Thank you.

How this is John <unk> I'll address your question of dealing with the strategic opportunities.

I would say for this year for 2022, our primary focus is really getting our new business unit, the SaaS business unit up and running so we we created.

Some good ideas, what we believe are innovative ideas in.

In the end of 2021, we submitted them for patents. This focus is going to be primarily on getting these ideas commercialize getting them developed and getting these this new service or services launched this year.

So so that's really our focus for 2022 now that being said.

We believe this is a platform that we're going to be looking at.

Providing a host of services some of which is in the.

The case of BK or play either ideas and we're doing the development and we're going to get this thing launched in other cases, we know that theres a lot of other good ideas that could complement what we're trying to do in the marketplace and so I think that it's prudent for us to continue working with companies in the industry to identify those opportunities and see how we can.

Potentially partner with our.

Or potentially acquire them.

Okay. Thanks, good luck.

Executing your business.

The <unk> 5000, and then hopefully the 9000 sometime this summer.

That makes sense, what youre doing it really have to focus on that plus the new.

<unk> SaaS that youre working on them.

Plenty of opportunity I, just hope we can execute.

Thanks, We appreciate we appreciate the comment al Thank you.

Okay.

Your next comment or question, sorry is coming from Orin Hirschman, Sir Please state your affiliation.

Yes.

Hi, Jay its investment partners I also apologize to dive in a bit late.

Probably going to be a repetition, but could you just given the timing again on the 9000, but what do you feel you've passed through the technological hurdles.

That's all the time.

Thanks, <unk> this is John <unk>.

So on the 9000 as we mentioned before I think on our last call we.

We had some technical hurdles.

We went into production on the nine and the end of last year I believe I reported on our last call that we address the technical issues and that we believe that we would be in at least engineering test in the field during the second quarter. So what I announced today was that we are we are in the field.

With the <unk> 9000 radio doing engineering testing so that testing has just begun.

And as that testing unfolds and as we learn more about the product will be in a much better position to set.

And do a press release on our launch date.

Okay, great. Thank you very much.

Youre welcome and thanks for calling.

There.

Further questions.

Closing comments you'd like to finish with.

Thank you Ali.

You all for participating in today's call. We look forward to speaking with you again, when we report our Q2 2022 results in August of 2022 all.

All the best to all of you and have a great day.

Okay.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect your lines at this time.

And have a wonderful day. Thank you for your participation.