Q1 2024 BK Technologies Corporation Earnings Call
[music].
Operator: Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation conference call for the first quarter of 2024. This call is being recorded.
Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation Conference call for the first quarter 'twenty to 'twenty for this call is being recorded.
Operator: All participants have been placed on a listen-only mode, and following management's remarks, the call will be opened for questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast. At this time, it is my pleasure to turn the floor over to your host for today, John Nesbett of IMS Investor Relations. Please go ahead.
Operator: All participants have been placed on a listen only mode and following management's remarks, the call will be opened for questions. There was a slide presentation that accompanies today's remarks, which can be accessed via the webcast at.
John Nesbett: At this time it is my pleasure to turn the floor over to your host for today, John Nesbit of IMS Investor Relations. Please go ahead.
John Nesbett: Thank you. Good morning, and welcome to our conference call to discuss BK Technologies' results for the first quarter of 2024. On the call today are John Suzuki, Chief Executive Officer, and Scott Malmanger, Chief Financial Officer. I'll take a moment to read the safe harbor statement statements made during this conference call and presented in the presentation that are not based on historical facts or forward-looking statements. Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company's revenue and profits.
John Nesbett: Thank you good morning, and welcome to our conference call to discuss BK technologies results for the first quarter 2024.
John Nesbett: On the call today are John says you do Chief Executive Officer, and Scott now Maggert, Chief Financial Officer, I'll take a moment to read the Safe Harbor statement statements made during this conference call and presented in the presentation that are not based on historical facts are forward looking statements.
John Nesbett: Such statements include but are not limited to projections or statements with future goals and targets regarding the company's revenue and profits. These statements are subject to known and unknown risk factors.
John Nesbett: These statements are subject to known and unknown risk factors. 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 they could cause or contribute to such material differences have been described in this morning's press release and in BK's filings with the U.S. Securities and Exchange Commission. These statements are based on information and understandings that are believed to be accurate.
John Nesbett: 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 this morning's press release and in Bk's filings with the U S Securities and Exchange Commission. These statements are based on information.
John Nesbett: And understandings that are believed to be accurate as of today and we do not undertake any duty to update such forward looking statements.
John Nesbett: As of today, we do not undertake any duty to update such forward-looking statements. Okay, and I'll turn the call over to John Suzuki, CEO of BK Technologies. Go ahead, John. Thank you.
John M. Suzuki: Okay, and I will turn the call over to John says Suzuki CEO of BK Technologies go ahead Sean.
John M. Suzuki: Thank you, John. Thank you, everyone, for joining us today. I'll start by reviewing some of our highlights of our operations and financial results during the quarter, then I'll turn it over to our Chief Financial Officer, Scott Malmanger, for a deeper dive into our financial results. We'll conclude by opening up the call for a brief Q&A. As most of you know, BK Technologies is a technology leader in the critical communications industry, developing single and now multi-band radios.
John M. Suzuki: Thank you John.
John M. Suzuki: 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 it over to our Chief Financial Officer, Scott now manager for a deeper dive into our financial results will.
Scott A. Malmanger: I will conclude by opening up the call for <unk> for a brief Q&A.
John M. Suzuki: As most of you know BK technologies as a technology leader in the critical communications industry developing single and now multi band radios.
John M. Suzuki: We have made great strides enhancing and expanding our radio product portfolio, which has been driving our recent financial performance. Our relatively new SAS division represents our longer-term vision, developing next-generation solutions that combine land mobile radios with LTE 5G smartphones to create seamless connectivity, making the first responder safer and more productive. Now, let's dive into our first quarter results.
Scott A. Malmanger: We have made great strides in enhancing and expanding our radio product portfolio.
John M. Suzuki: Which has been driving our recent financial performance.
John M. Suzuki: Our relatively new SaaS division represents our longer term vision developing next generation solutions that combine land mobile radios with LTE <unk> smartphones to create seamless connectivity, making the first responder safer and more productive.
John M. Suzuki: Now, let's dive into our first quarter results.
John M. Suzuki: Our first quarter provided a strong start to 2024, and while we still have a lot of work to do, our performance to date reflects the success we are achieving with executing our strategy. First quarter 2024 earnings per share of 19 cents represents our third consecutive quarter of improving profitability. Our gross margin improved to 34.5% in the quarter compared with 26.1% in the first quarter of 2023, and we expect to continue improving our gross margin throughout the year as we return to historical margin levels of 35 plus percent.
John M. Suzuki: Our first quarter provided a strong start to 2024 and while we still have a lot of work to do our performance to date reflects the success. We're have we are achieving with executing our strategy.
John M. Suzuki: First quarter 2024 earnings per share of <unk> 19.
John M. Suzuki: [noise] represents our third consecutive quarter of improving profitability.
John M. Suzuki: Our gross margin improved to 34, 5% in the quarter compared with 26, 1% in the first quarter of 2023.
John M. Suzuki: And we expect to continue improving our gross margin throughout the year as we return to historical margin levels of 35 plus percent.
John M. Suzuki: Our BKR5000 single-band radio enjoyed strong demand in the quarter, driven primarily by order activity from the USDA for service for 5,620 radios. The Big Gear 9000 also continues to gain market acceptance and recognition with orders from the Arkansas Department of Agriculture, Forestry Division and from Boulder County, Colorado. We're especially encouraged by the order from Boulder, as that is a tier two county by population with over 300,000 total residents.
John M. Suzuki: Our BK or 5000 single band radio enjoyed strong demand in the quarter driven primarily by by order activity from the USDA for service for 5620 radios.
John M. Suzuki: The Big here 9000 also continues to gain market acceptance and.
John M. Suzuki: And recognition with orders from the Arkansas Department of Agriculture.
John M. Suzuki: <unk> Street Division.
John M. Suzuki: And from Boulder County, Colorado.
John M. Suzuki: We're especially encouraged by the order from Boulder as that is a tier two county by population with over 300000 total residents and they order demonstrates benign thousands appeal and ability to penetrate these larger markets.
John M. Suzuki: And the order demonstrates the 9000's appeal and ability to penetrate these larger markets. Our total backlog has increased to 19 million as of March 31, 2024, compared with the December 2023 ending backlog of 16 million. During the first quarter, we successfully completed the transfer of the BKR 5000 production to our partner, EastWest Manufacturing. Located in Juarez, Mexico, the East West BKR 5000 production line is fully operational, and is currently manufacturing radios for shipment in the second quarter.
John M. Suzuki: Our total backlog has increased to $19 million as of March 31, 2024, compared with the December 2020, threep ending backlog of $16 million.
John M. Suzuki: Okay.
John M. Suzuki: During the first quarter, we successfully completed the transfer of the <unk> production to our partner East West manufacturer.
John M. Suzuki: Located in Juarez, Mexico, the East West <unk> thousand production line is fully operational.
John M. Suzuki: And is currently manufacturing radios for shipment in the second quarter.
John M. Suzuki: Also in the first quarter, we launched a multi-year, multi-million dollar development program for the BKR9500 multiband mobile radio, a companion mobile radio to the BKR9000 multiband portable radio, which we expect will further penetrate our addressable market. Our shift to a higher priced, higher margin product mix, combined with our cost reduction initiatives, continues to drive enhanced profitability for our business. As you can see in the graph, we have delivered consistently improved earnings per share since the third quarter of 2023. At the same time, revenue has been largely consistent year over year, demonstrating the impact of our efficiency initiative.
John M. Suzuki: Also in the first quarter, we launched a multi year multimillion dollar development program for the <unk> are 9500 multi band mobile radio.
John M. Suzuki: A companion mobile radio to the daycare and 9000 multi band portable radio, which we expect will further penetrate our addressable markets.
John M. Suzuki: Our shift to a higher priced higher margin product mix combined with our cost reduction initiatives continue to drive enhanced profitability for our business.
John M. Suzuki: As you can see in the graph, we have delivered consistently improved earnings per share since the third quarter of 2023.
John M. Suzuki: At the same time revenue stayed largely consistent year over year, demonstrating the impact of our efficiency initiatives.
John M. Suzuki: In the first quarter of 2024, we achieved gross margins of 34.5% compared to 26.1% in the first quarter of 2023. As mentioned, we believe a key driver of our incremental margin improvement going forward will be the outsourcing of our manufacturing, which will simplify our supply chain management and reduce both production expenses and end product costs. We expect this shift to contract manufacturing, coupled with the ongoing cost reduction initiatives and higher margin product mix, will allow us to achieve historical margin rates in 2024 and continue to grow those rates going forward. A key focus and major recent initiative has been our shift to an acid light model.
John M. Suzuki: In the first quarter of 2024, we achieved gross margins of 34, 5% compared to 26, 1% in the first quarter of 2023.
John M. Suzuki: As mentioned, we believe a key driver of our incremental margin improvement going forward will be the outsourcing of our manufacturing, which will simplify our supply chain management and reduce both production expenses and and product costs.
John M. Suzuki: We expect this shift to contract manufacturing.
John M. Suzuki: Coupled with the ongoing cost reduction initiatives and higher and higher margin product mix will allow us to achieve historical margin rates in 2024.
John M. Suzuki: And continue to grow those rates going forward.
John M. Suzuki: A key focus and major recent initiative has been our shift to an asset light model.
John M. Suzuki: To recap, last year we announced an agreement with our existing contract manufacturer, East West Manufacturing, to become the exclusive manufacturer of our radio product line. As of the end of the first quarter, the production line at the East-West Facility in Juarez, Mexico is fully operational and is currently manufacturing BKR5000 radios for shipment in the second quarter. A transfer team comprised of BK and East-West employees is currently migrating production of the K&G series mobile and the BKR9000 portable radios to East-West, with production expected to commence by the end of Q3 or early Q4.
John M. Suzuki: To recap last year, we announced an agreement with our existing contract manufacturer East West manufacturing.
John M. Suzuki: To become the exclusive manufacturer of our radio product line.
John M. Suzuki: As of the end of the first quarter. The production line at East West facility in Juarez, Mexico is fully operational and is currently manufacturing be care 5000 radios for shipment in the second quarter.
John M. Suzuki: At transfer team comprised of decay in East West employees is currently migrating production of the <unk> E series mobile and the BK or 9000 portable radios to east West with production expected to commence by the end of Q3 or early Q4.
John M. Suzuki: Our BKR 5000 production line in Melbourne has ceased manufacturing activities, and phase one of our staff reduction has been completed. I would like to take a moment to thank all of our Melbourne employees who worked through their notice period to ensure we met our first quarter production and shipment goals.
John M. Suzuki: Our <unk> five production line in Melbourne has ceased manufacturing activities.
John M. Suzuki: And phase one of our staff reduction has been completed.
John M. Suzuki: I would like to take a moment to thank all of our Melbourne employees, who worked through their notice period to ensure we met our first quarter production and shipment goals.
John M. Suzuki: Thank you to these employees. At this point, I thought I would take a minute to do a quick review of the BKR series radio product evolution and strategy going forward. Since its launch in June of 2020, the BKR5000 has established itself as a premier single-band radio for first responder agencies, propelling company revenue to a record high in 2023. The BKR9000 multiband radio, which was launched about three years after the 5000 in May of 2023, is a higher priced and higher margin radio that significantly expands our addressable market among federal, state, and local public safety customers, and new product news.
John M. Suzuki: Thank you to these employees.
John M. Suzuki: At this point I thought I would take a minute to do a quick review of the <unk> Sirius radio product evolution and strategy going forward.
John M. Suzuki: Since its launch in June of 2020, the beak here 5000 has established itself as a premier single band radio for first responder agencies.
John M. Suzuki: <unk> company revenue to a record high in 2023.
John M. Suzuki: The beak here 9000, multi band radio, which was launched about three years. After the 5000 in may of 2023.
John M. Suzuki: The higher priced and higher margin radio that significantly expands our addressable market among federal state and local public safety customers.
John M. Suzuki: And a new product news today, we are excited to announce that we have commenced a new development program to market a third radio in the <unk> series the.
John M. Suzuki: Today, we are excited to announce that we have commenced a new development program to market a third radio in the BKR series, the BKR 9500. As the trend towards multiband technology continues to gain traction, We are investing in another multiband development program to launch the Big Gear 9500 multiband mobile radio, installed in public safety vehicles. The 9500 is the companion radio to the BKR9000 multiband portable radio, which is carried by first responders.
John M. Suzuki: <unk> hundred $9500.
John M. Suzuki: As the trend towards multi band technology continues to gain traction.
John M. Suzuki: We are investing in another multi band development program to launch the big here in 9500 multi band mobile radio.
John M. Suzuki: Installed and public safety vehicles. The 9500 is the companion radio to the <unk> 9000, multi band portable radio which is carried by first responders.
John M. Suzuki: With both the Big QR 9500 and 9000, a first responder can remain in constant contact with dispatch whether in or outside their vehicle. As part of the normal product replacement cycle, we expect that the BKR9500 will replace older single-band mobile radios currently installed in first responder vehicles, including police cars, fire engines, and ambulances, while leveraging state-of-the-art multiband capabilities.
John M. Suzuki: With both the big here at 90 509000, a first responder can remain in constant contact with dispatch whether in or outside their vehicle.
John M. Suzuki: As part of the normal product replacement cycle, we expect that the <unk> 9500 will replace older single band mobile radios currently installed and first responder vehicles, including police cars fire engines and ambulances.
John M. Suzuki: Leveraging state of the art multi band capabilities.
John M. Suzuki: The 9,000 and the 9,500 will work in tandem to keep first responders better connected, significantly enhancing. This will be a multi-year, multi-million dollar project, with the engineering development costs being capitalized to align the expense with the anticipated revenue from the BKR 9500. We expect to see revenue from this offering start in 2027. Our strategic expansion into the design and development of innovative multiband products is dramatically expanding our addressable market. Prior to the introduction of the BK9000, our addressable market for the BK5000 single band radio was approximately $200 million. To date, the Big Care 5000 has enjoyed strong market traction with our traditional customer base in the wildland fire market vertical, and is gaining share with other first responder customers.
John M. Suzuki: The 9000 in the 9500 will work in tandem to keep first responders better connected.
John M. Suzuki: Significantly enhancing.
John M. Suzuki: This will be a multiyear multimillion dollar project.
John M. Suzuki: With the engineering development costs being capitalized to align the expense.
John M. Suzuki: With the anticipated <unk> 990 500 revenue.
John M. Suzuki: We expect to see revenue from this offering to start in 2027.
John M. Suzuki: Sure.
John M. Suzuki: Our strategic strategic expansion into the design and development of innovative multi band products.
John M. Suzuki: Is dramatically expanding our addressable market.
John M. Suzuki: Prior to the introduction of the <unk> 9000, our addressable market with the <unk> 5000 single band radio was approximately $200 million.
John M. Suzuki: To date, the Big care 5000 has enjoyed strong market traction with our historically.
John M. Suzuki: Customer base in the wildland fire market vertical.
John M. Suzuki: And gaining share with other first responder customers.
John M. Suzuki: The BKR9000 multiband portable and Companion 9500 address the wider market, which is approximately $2.3 billion and includes police, EMS, structure fire, military, public service, and utility customers. Given the early success and market interest that we were seeing for the BeCare 9000, we believe that a bundled multiband portable and mobile offering at the right price point will be well received and continue to drive the company to even higher revenue goals. In addition to our core radio business,
John M. Suzuki: The <unk> 9000, multi band portable and companion 9500 address the wider market, which is approximately $2 3 billion and includes police EMS structure fire military public service and utility customers.
John M. Suzuki: Given the early success in.
John M. Suzuki: And market interest that we were seeing for the <unk> 9000, and we believe that a bundled multi band portable and mobile offering at the right price point will be well received and continue to drive the company to even higher revenue goals.
John M. Suzuki: In addition to our core radio business, we see a significantly a significant long term opportunity with our SaaS business unit as we develop new solutions leveraging LTE <unk> technology.
John M. Suzuki: We see a significant long-term opportunity with our SAS business unit as we develop new solutions leveraging LTE 5G technology. We believe that the LMR industry as a whole is heading toward adopting more SaaS-based applications that connect first responders across their radios. Vehicles and Smartphones, and we're committed to the growth of our SaaS business to place us at the forefront of this growing market. We're excited to announce today that we recently received patent approval from the United States Patent and Trade Office, USPTO, for one of our three patent pending technologies. This USPTO patent protects Interop One's innovative feature, which enables a first responder to create on-demand ad hoc emergency talk groups with any smartphone user in a matter of minutes.
John M. Suzuki: We believe.
John M. Suzuki: The LMR industry as a whole is heading toward adopting more SaaS based applications that connect first responders across their radios.
John M. Suzuki: Vehicles and smartphones.
John M. Suzuki: And we're committed to the growth of our SaaS business to place us at the forefront of this growing market.
John M. Suzuki: We are excited to announce today that we recently received patent approval from the United States patent and trade office U S. PTO for one of our three patent pending technologies.
John M. Suzuki: This U S. PTO patent protects interop ones innovative feature which enables a first responder to create on demand AD hoc emergency talk groups with any smartphone user in a matter of minutes.
Scott A. Malmanger: This is a key differentiator for BK's Interop 1 Push-to-Talk over cellular SAS service. We also recently showcased our patent pending technology and TelePTT feature, enabling push-to-talk over broadband capabilities for both the BKR5000 and 9000 radio customers, at the 2024 International Wireless Communications Expo in Orlando, Florida. Feedback from the show clearly indicated IntelliPTT is driving a deeper interest in the BKR9000 given the enhanced user experience when the Interop One service is accessed through the BKR9000.
John M. Suzuki: This is a key differentiator for Bks Interop, one push to talk over cellular SaaS service.
Scott A. Malmanger: We also recently showcased our patent pending technology and.
Scott A. Malmanger: And Kelly PTT feature enabling push to talk over broadband capabilities for both the <unk> thousand and 9000 radio customers at.
Scott A. Malmanger: At the 2024 International Wireless Communications Expo in Orlando, Florida.
Scott A. Malmanger: Feedback from the show clearly indicated and tele PTT is driving a deeper interest in the <unk> nine given the enhanced user experience when the Interop. One service has access through the <unk> 9000.
Scott A. Malmanger: The IntelliPTT feature development continues towards commercialization, while the patent application is pending approval. The IntelliPTT feature will be offered as an optional paid software feature on both the BKR-5000 and the BKR-9000. I will now turn the call over to our Chief Financial Officer, Scott Malmanger, to go over our financial results for the quarter. Okay, Scott?
Scott A. Malmanger: The <unk> PTT feature development continues towards commercialization, while the patent application is pending approval.
Scott A. Malmanger: <unk> PTT feature will be offered as an optional paid software feature on both the <unk> 5000 <unk> 9000.
Scott A. Malmanger: I will now turn the call over to our Chief Financial Officer, Scott <unk> to go over our financial results for the quarter Scott. Thanks, John.
Scott A. Malmanger: Thanks, John. Sales for the first quarter totaled approximately $18.2 million compared with $18.7 million for the same quarter last year, but increased sequentially by 12% compared to revenue of $16.3 million in the fourth quarter. Gross profit margin in the first quarter was 34 and a half percent, which John stated is nearing a return to historical margin levels of 35% plus, compared to 26.1% in the first quarter last year.
Scott A. Malmanger: Sales for the first quarter totaled approximately $18 2 million compared with $18 7 million for the same quarter last year, but increased sequentially by 12% compared to revenue of $16 3 million.
Scott A. Malmanger: Fourth quarter.
Scott A. Malmanger: Gross profit margin in the first quarter was 34, 5%, which John which Ed John stated is nearing and return to historical margin levels of 35% plus.
Scott A. Malmanger: Compared to 26, 1% in the first quarter last year.
Scott A. Malmanger: Selling General and Administrative Expenses, or SG&A, for the first quarter totaled approximately $5.3 million compared with $5.9 million for the same quarter last year. Operating income totaled $983,000 compared with an operating loss of $987,000 for the first quarter of last year.
Scott A. Malmanger: Sandra selling general and administrative expenses or SG&A for the first quarter totaled approximately $5 3 million compared with $5 9 million for the same quarter last year.
Scott A. Malmanger: Operating income totaled $983000 compared with an operating loss of $987000 for the first quarter of last year.
Scott A. Malmanger: We recorded net income of $681,000 or 19 cents per basic and diluted share in the first quarter of 2024 compared with a net loss of 1.3 million or 37 cents per basic and diluted share in the prior year period. We expect enhanced profitability as we continue to reduce costs and improve our growth margin. Non Gap Adjusted EPS, which adds back net realized and unrealized gain and loss on investment, stock-based compensation expenses, and severance expenses, was $1.1 million or $0.30 per basic and diluted share compared with a loss of $978,000 or $0.29 per basic and diluted share in the first quarter of 2023.
Scott A. Malmanger: We recorded net income of $681000 or <unk> 19.
Scott A. Malmanger: <unk> per basic and diluted share in the first quarter of 2024, compared with a net loss of $1 3 million or <unk> 37 per basic and diluted share in the prior year period.
Scott A. Malmanger: We expect enhanced profitability as we continue to reduce cost and improve our gross margin.
Scott A. Malmanger: non-GAAP, adjusted EPS, which adds back net realized and unrealized gain and loss on investments.
Scott A. Malmanger: <unk> based compensation expenses and severance expenses was $1 1 million or <unk> 30 per basic and diluted share compared with a loss of 978000 or <unk> 29 per basic and diluted share in the first quarter of 2023.
Scott A. Malmanger: We reported adjusted EBITDA of $1.4 million in the first quarter of 2024, compared with an adjusted EBITDA loss of $696,000 in the first quarter of 2023. As of March 31, 2024, we have approximately $3.3 million of cash and cash equivalents and no long-term debt. Additionally, as we began transferring our production activities to East West, we recorded an inventory reduction of $1.4 million to $22.5 million at March 31, 2024. We believe that our current cash position, combined with anticipated cash generated primarily by radio sales and borrowing availability under our credit facility, provides us with the working capital that we need to grow our business. I will now turn the call back over to John. Thank you, Scott.
Scott A. Malmanger: We reported adjusted EBITDA.
Scott A. Malmanger: One 4 million in the first quarter of <unk> 24, compared with an adjusted EBITDA loss of $696000 in the first quarter of 2023.
Scott A. Malmanger: As of March 31, 2024, we have approximately $3 $3 million of cash and cash equivalents and no long term debt. Additionally.
Scott A. Malmanger: Additionally, as we began transferring our production activities to east West we recorded an inventory reduction of one 4 million to $22 5 million at March 31 2024.
Scott A. Malmanger: We believe that our current cash position combined with anticipated cash generated primarily by radio sales and borrowing availability under our credit facility provides us with the working capital that we need to grow our business.
Scott A. Malmanger: I'll now turn the call back over to John.
Scott A. Malmanger: Scott.
John M. Suzuki: With the progress that we've made in Q1, we believe we're on track to meet our stated targets for 2024. The engineering investment we made to develop the BKR series radios is starting to pay off. The strong market adoption for the BK 5000 demonstrated that BK can develop and market a public safety radio that appeals beyond our core market of wildland fire and wind market share. Early market feedback for the BK9000 has been positive, and the radio has been certified on various state, regional, county, and city P25 radio systems.
John Nesbett: With the progress that we've made in Q1, we believe we're on track to meet our stated targets for 2024.
John M. Suzuki: The engineering investment we made to develop the <unk> Sirius radios is starting to pay off the strong market adoption for the <unk>.
John M. Suzuki: <unk> demonstrated that <unk> can develop and market a public safety radio that appeals beyond our core market of wildland fire and win market share.
John M. Suzuki: Early market feedback for the <unk> nine has been positive and the radio has been certified on various state Regional County, and city P 25 radio system.
John M. Suzuki: It is still early, but initial orders for the BKR 9000 have shown that this radio is not only appealing to wildland firefighters, but it can be successful in both Tier 3 and Tier 2 counties like Boulder County, Colorado.
John M. Suzuki: And it's still early but initial orders for the <unk> 9000 has shown that this radio is not only appealing to wildland fire, but it can be successful in both tier three and tier two counties like Boulder Boulder County, Colorado.
John M. Suzuki: Our goal for 2024 is to introduce the BKR9000 to as many current and new customers to position the radio for upcoming radio upgrade cycles. As previously stated, we believe that our transition to contract manufacturing and our shift to a higher price, higher margin mix product mix will allow us to achieve incremental margin improvement as we move through 2024. Lastly, with the wildland fire season in full swing and our historically stronger second and third quarters ahead of us, we remain confident in our previously stated target of $1.50 per share for the full year.
John M. Suzuki: Our goal for 2024 is to introduce the <unk> 9002, as many current and new customers to position the radio for upcoming radio upgrade cycles.
John M. Suzuki: As previously stated we believe that our transition to contract manufacturing and our shift to a higher priced higher margin mix.
John M. Suzuki: Product mix will allow us to achieve incremental margin improvement as we move through 2024.
John M. Suzuki: Lastly, with the wildland fire season in full swing and our historically stronger second and third quarters ahead of US we remain confident in our previously stated target of $1 50 per.
John M. Suzuki: Per share for the full year.
John M. Suzuki: <unk>.
John M. Suzuki: To close my prepared remarks, I would like to summarize how we are continuing to create more value for our stakeholders. Starting with our trusted BK brands, we are expanding the BK-R series product line and market penetration. We are developing next-generation SAS capabilities to expand our total addressable market. And lastly, we are transitioning BK to an asset-light model so we can better focus on what we do best, develop and market innovative public safety communication solutions. Operator, we can now open the call for questions. Thank you.
Speaker Change: To close my prepared remarks, I would like to summarize how we're continuing to create more value for our stakeholders.
John M. Suzuki: Starting with our trusted BK brand, we are expanding the BK R series product line and market penetration.
John M. Suzuki: We are developing next generation SaaS capabilities to expand our total addressable market and lastly, we are transitioning BK to an asset light model. So we can better focus on what we do best develop and market innovative public safety communication solutions.
Speaker Change: Operator, we can now open the call for questions.
Operator: Thank you very much. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For anyone using speaker equipment, it may be necessary to pick up your handset before you press the key.
Speaker Change: Thank you very much at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your phone keypad now.
Operator: Information time will indicate that your line is in the queue. You May press star two if you would like to remove your question from the queue.
Operator: Using speaker equipment, it may be necessary to pick up your handset before pressing the keys. Please hold amendment OFC poll for questions.
Operator: Please hold a moment whilst we poll for questions. Thank you. Your first question is coming from Jeff Siegman of Siegman Capital Advisors. Jeff, your line is live. Hey guys, thanks for taking the question.
Operator: Thank you. Your first question is coming from Jeff Siegman of Siekman capsule advisors, Jeff Your line is live.
Jeff Siegman: Hey, guys. Thanks for taking the question.
Jeff Siegman: Can you talk a little bit more about the synergies between the <unk> 9000 portable radio and PK are 9500 mobile radio.
John M. Suzuki: Hey Jeff, this is John Suzuki. Thanks for the question. So the key difference, I would say, is that the 9000 is what they call a portable radio or a handheld radio. This is something that first responders would carry. The 9500 is a similar radio, but it's a higher power radio, and they are typically installed in vehicles. So they run on vehicles.
Operator: Hey, Jeff This is John Suzuki Thanks for the question.
John M. Suzuki: So the key difference I would say is that the 9000 is what they call a portable radio a handheld radio. This is something that the first responders would carry.
John M. Suzuki: The 9500 is as a similar radio it's a higher power radio and they are typically installed and in vehicles. So.
John M. Suzuki: Run run from vehicles the synergy between the two right is.
John M. Suzuki: The synergy between the two is that when the officer is in the vehicle, he's usually operating using the mobile radio, the radio that's in the vehicle. And then when he gets out of the vehicle, he switches over, and he's now operating from his portable radio. To the extent possible, right, that user interface, that experience of accessing the radio and how it's used mirror each other, that makes it easier for the police officer or the first responder to go from his vehicle radio to his personal radio or his portable radio.
John M. Suzuki: When the officers in the vehicle he is.
John M. Suzuki: Usually operating using the mobile radio the radio Thats in the vehicle.
John M. Suzuki: And then when it gets out of the vehicle he switches over and he is now operating from this portable radio.
John M. Suzuki: To the extent possible rate that that user interface.
John M. Suzuki: That experience on accessing the radio and how it's used mirrors each other that makes it easier for the for the police officer or their first responder to go from his vehicle radio to his personal radio, whereas portable radio.
John M. Suzuki: And so that's why we call it a companion radio. We try to make it, in essence, seamless for that first responder to switch back and forth. And then, of course, there are benefits in simplifying training for the user.
John M. Suzuki: So.
John M. Suzuki: That's why we call it a companion radio we tried to make it.
John M. Suzuki: Since the seamless for for that first responder to switch back and forth.
John M. Suzuki: And then of course that that theres benefits in and simplifying training.
John M. Suzuki: Training for the user.
Speaker Change: Got it got it right. That's helpful. Thank you that's all for me.
Operator: Thank you very much. Your next question is coming from Aaron Martin of AIGH Investment Partners. Aaron, your line is live.
John M. Suzuki: Thank you very much. Your next question is coming from Aaron Martin AIG H investment partners.
Aaron Martin: Your line is live.
Aaron Martin: Good morning. Congratulations on a strong UPS print. A couple of things. Also, Scott, thanks for calculating the non-GAAP EPS. I didn't have to ask you. On the, just a technical question, on the severance of $127,000. Was that recognized, I assume it's primarily the manufacturing line employees from the transition. Was that recognized in COGS, or was that lower down on the line items?
Aaron Martin: Hi, good morning, congratulations on the strong <unk> print.
Aaron Martin: So go ahead.
Aaron Martin: As for how to.
Aaron Martin: Calculating the non.
Aaron Martin: non-GAAP EPS, so you'd have to ask.
Speaker Change: Thank you.
Aaron Martin: On the.
Aaron Martin: Question on the severance of 127000.
Aaron Martin: Was that recognized <unk>.
Aaron Martin: Primarily the manufacturing line employees from the teens issue.
Aaron Martin: Was that recognized in <unk>.
Aaron Martin: Or was that.
Aaron Martin: Lower down on the line items.
Scott A. Malmanger: Yeah, the severance portion was recognized in SG&A as a corporate expense. We did have other costs that were recognized in CAUSE due to the transition.
Aaron Martin: The severance portion was recognized and SG&A.
Scott A. Malmanger: Corporate expense, we did have we did have other costs that we're recognizing causes due to the transition.
unknown: Scott Nesbett, Orin Hirschman, John Suzuki, Scott Malmanger, Aaron Martin, BK Technologies There were so many.
Speaker Change: Got it.
Scott A. Malmanger: What.
unknown: What level.
unknown: Quantify flu.
unknown: <unk>.
unknown: One time items I wanted to come.
unknown: Got it. Okay.
unknown: Well, there were some productivity or performance bonuses and stuff that were associated with the production, and that's why they were, you know, recorded as a COGS expense.
unknown: Well there were some.
unknown: Productivity or performance bonuses and stuff that were associated with the production and Thats why they were recorded as a cogs expense.
Speaker Change: Got it okay.
unknown: And then on the.
John M. Suzuki: And then on the Unknown Attendee, Scott Malmanger, Unknown Attendee, Brett Reiss, Scott Malmanger, Unknown, What's the investment like on a quarterly, annual basis to get this new development? You know, are you able to utilize your existing strong engineering team? Do you need more resources for that? Give us some color around there.
unknown: 9500.
John M. Suzuki: <unk>.
John M. Suzuki: I understand obviously on the Opex line, it's going to go into its going to be capitalized expenses. There. So when we go into the Opex line.
John M. Suzuki: Cash basis.
John M. Suzuki: What's the investment like quarterly annual basis to get to this.
John M. Suzuki: New development.
John M. Suzuki: Are you are you able to utilize your existing strong engineering teams do you need more resources for that.
John M. Suzuki: Give us some color around there.
John M. Suzuki: Hi Aaron, it's John. We're certainly using our current development team. There are some nuances that are unique on a mobile, and we'll have to bring in those resources when necessary. And we'll make a decision on whether we bring them on staff or on contract. In terms of total spend, right, the engineering spend for this year is going to be consistent with last year in terms of the money that we're spending. We're not planning to spend more money.
John Nesbett: Hi, Aaron it's John.
John M. Suzuki: <unk>.
John M. Suzuki: We're certainly using our current development team there are some nuances that.
John M. Suzuki: And that our unique auto.
John M. Suzuki: Mobile and we'll have to bring in those resources when necessary and will make a decision on whether we bring them on staff or in contract in terms of total spend rate. The the engineering spend for this year is going to be consistent to last year in terms of money that we're spending we're not planning to spend more money.
John M. Suzuki: The amount of time that the engineers can spend on the 9500 will be dependent on the priorities that they're seeing as we do our transition and maintain our production. So for the engineers, the key thing, obviously, is to get the transition done on time and successfully, and that requires their efforts and maintaining our production level. The third priority after that is dedicating time to the 9500 development. So, as the transition continues through the year, we expect to see more and more time being allocated to that new product development.
John M. Suzuki: The amount of time that the engineers can spend on on the 9500 will be dependent on the priorities.
John M. Suzuki: That they are seeing as we do our transition in.
John M. Suzuki: In maintaining our production so.
John M. Suzuki: For the engineers the key thing obviously is to get the transition done on time and successful and that requires their efforts.
John M. Suzuki: And maintaining our production levels and the third priority after that is dedicating time to the <unk>.
John M. Suzuki: 9500 development, so as the transition continues through the year.
John M. Suzuki: We expect to see more and more time being allocated to that new product development.
Scott A. Malmanger: So by and large, this is an allocation of time for some items that will require additional investment. Yeah. Okay, and on the inventory line, as we continue this transition, what do you think is the appropriate level of inventory for you guys to be having on your balance sheet? Because it's still, you know, pretty elevated.
John M. Suzuki: But by and large it is an allocation of time sites for some items that will require.
Speaker Change: So are you asking.
Scott A. Malmanger: Yeah, we will continue to see improvement quarter over quarter as we transition more of our production over. But once again, Aaron, we have raw material inventory for some of our legacy products and also some of the long lead time raw materials. So we will continue to see improvement through the year. And, you know,
Scott A. Malmanger: Yes.
Scott A. Malmanger: Okay.
Scott A. Malmanger: On the inventory line as we continue this transition.
Aaron Martin: What's the what he sees as the appropriate level of inventory for you guys to be having on your balance sheet is still pretty elevated.
Scott A. Malmanger: Yes, we will continue to see improvement quarter over quarter as we transition more of our production over.
Scott A. Malmanger: But once again and we have raw material inventory for some of our legacy products and also.
Scott A. Malmanger: Some of the long lead time.
Scott A. Malmanger: Raw inventory. So we will continue to see improvement through the year end.
Scott A. Malmanger: No.
John M. Suzuki: I think we've said, Aaron, in the past that we'd be, I mean, my personal goal was to get down to 12. I don't think we'll get down to 12 by the end of the year. But you know, that's a very feasible number, right? We're still very elevated because we're starting to now move the material, right?
Scott A. Malmanger: <unk>.
Scott A. Malmanger: I think we've said air and in the past.
John M. Suzuki: We'd be.
John M. Suzuki: My personal goal is to get down to 12, I don't think it will get down to 12% at the end of the year, but that's that's a very feasible number right.
John M. Suzuki: We're still very elevated because we are starting to now move the material rate.
John M. Suzuki: I'm going through that, but you'll see that drop throughout the year. You know, whether I hit 12 million, we probably won't hit 12 million by the end of the year, but it'll be in the teens for sure by then. And our goal, from a company's perspective, and if I look at what our volumes are, getting down to that level is very achievable.
John M. Suzuki: Going through that but youll see that drop throughout the year.
John M. Suzuki: Other I hit $12 million, and we probably won't hit $12 million by the end of the year, but it'll be it'll be in the teens for sure.
John M. Suzuki: By the end our goal is from a company's perspective, if I look at what our volumes are getting down to that level is very is very achievable.
Speaker Change: Got it.
John M. Suzuki: Okay.
John M. Suzuki: Got it. Um, can we switch gears to interop one? Can you talk a little bit about specifics in terms of, [inaudible] trial users out there, how many agencies you're talking to or departments, some sort of metrics that we can measure, you know, how should we be measuring your progress in interop one?
Speaker Change: Can we switch gears to interrupt one key talk a little bit about.
John M. Suzuki: Specifics in terms of.
John M. Suzuki: Number.
John M. Suzuki: Trial users out there and how many agencies youre talking to or department.
John M. Suzuki: Some sort of metrics that we can measure how should we can measure your progress and you drop one.
John M. Suzuki: Yeah, well, in terms of field trials, it's in the hundreds, right, just to give you an idea, and it crosses federal, state, and local agencies. The traction in terms of converting those field trials into actual orders is, we're finding that's a very slow process. A lot of these guys, the people who are trialing with, already have a service from either Motorola Communications or from AT&T or other suppliers out there. And what we're finding is that those users are not using those services to the degree that they thought they were going to use them for.
John M. Suzuki: Yeah, well in terms of field trials, it's in the hundreds range just to give you an idea in a crisis.
John M. Suzuki: Federal state local agencies.
John M. Suzuki: The traction in terms of converting those field trials into actual orders were finding that sort of various low process. A lot of these guys. The people who are trailing with already have a service from from either Motorola communications or from AT&T or or other other suppliers out.
John M. Suzuki: There and what we're finding as is.
John M. Suzuki: Those users are not using those services to the degree that they thought they were they were going to use it for and so now they see the value the extra value in our service, but they're struggling with converting their current service to our service and that seems to be a bit of a drag.
John M. Suzuki: And so now they see the value, the extra value in our service, but they're struggling with converting their current service to our service. And that seems to be a bit of a drag on the adoption rate, but everyone that we've demonstrated it to clearly says that this is different from the eight other services on the market. And the thing that's different about it is the ability to create these ad hoc talk groups on demand, which we just got a patent on.
John M. Suzuki: On the adoption rates, but.
John M. Suzuki: But everyone that we've demonstrated it to clearly say that this is different than the eight other services on the market and the thing that's different about it is the ability to create these ad hoc.
John M. Suzuki: Talk groups on demand, which we just got the patent on.
John M. Suzuki: So there might be some other avenues that we're going to start looking at, Aaron, in terms of, you know, it's hard for us maybe to be a market maker, even though we may have a great technology. Maybe we need to take a different approach to the market and look at those people who are in that market and see how we can partner with them. So we'll start those discussions as we go forward.
John M. Suzuki: So there might be there might be some other avenues that we're going to start looking at Aaron in terms of.
John M. Suzuki: It's hard for us maybe to be a market maker, even though we may have a great technology.
John M. Suzuki: Maybe we need to take a different approach to the market and look at those people who are in that market and seeing how we can partner with them.
John M. Suzuki: So we'll start those those discussions as we go forward.
John M. Suzuki: Got it. And then in terms of your... I think we've talked in the past about the BKR 9000 customer having a different profile than the BKR 5000 customer. And then is that playing out in terms of Interop One interest with those, you know, 9000 customers?
Aaron Martin: Got it and then in terms of your.
John M. Suzuki: I think we've talked over the past about the 9000 customers.
John M. Suzuki: And we'll take your lifestyles and customer and then.
John M. Suzuki: That playing out and shrinking interrupt one that interest with those Juno 9000 customers.
Speaker Change: Sorry about that.
John M. Suzuki: Yeah, I mean, the short answer is yes, right? The interrupt one type service and the 9000 kind of go together. The customers that are looking at that.
Speaker Change: Yes, I mean short answer is yes right.
John M. Suzuki: We're up one type service and the 9000 kind of go together.
John M. Suzuki: The customers that are looking at that.
John M. Suzuki: Go together.
John M. Suzuki: Well thats still really only showing up in the field trials not so much in conversions.
unknown: Well, for the service, that's true, right? The 9000, not so much, right? We're getting much more traction on the 9000 sales. What customers are waiting for at this point is the tethering capability, IntelliPTT. It's not commercial yet, so we've demonstrated it. They really like that idea.
unknown: [inaudible] Well, thanks for that.
John M. Suzuki: Well for the service that's true right.
unknown: The 9000, not so much right, we're getting much more traction on the 9000 sales what what customers are waiting for at this point.
unknown: Is that tailoring capability the Intel's PTT so we've.
John M. Suzuki: In their mind, that would be something that would advance the cost for them to buy the Interop One service. Because if you look at it, it's really two devices. It's a smartphone using the Interop One service, and then you have the 9000. And they can do that today, not with Interop One; they have potentially another service today. With IntelliPTT, I can now tether these devices together and link these two products together so that when I'm using my 9000, I can operate on a private radio system.
unknown: It's not commercial yet so we've demonstrated that they really like that idea and in their mind that would be.
John M. Suzuki: Something that would advance the cause for them to buy the Interop one service because if you look at it it's really two devices smartphone using Interop one service and then you have the 9000.
John M. Suzuki: And so and they can do that today not within or up one.
John M. Suzuki: Potentially another service today.
John M. Suzuki: With the Intel a PTT I can now tether these devices together and link these two products together so that when I'm using my 9000 I can operate on a private radio system.
John M. Suzuki: Or I can change the knob and access the cellular system and use the talk groups through Interop 1. That concept is very attractive for these types of uses. And so they're looking forward to us getting this in the field so they can actually test to see how that would operationally work.
John M. Suzuki: Or I can change the knob and access the cellular system and use of talk groups through through Interop one.
John M. Suzuki: That concept is very attractive to these types of users and so there they're looking forward for us to get this in the field. So they can actually test to see how that would operationally work.
unknown: Okay, thanks a lot, and congratulations on the continued progress. Thank you, Aaron.
John M. Suzuki: Okay.
John M. Suzuki: Congratulations on continued progress thank.
unknown: Thank you, Aaron. Thanks.
Speaker Change: Thank you erinn. Thanks.
Speaker Change: Thank you very much just a reminder, if there are any remaining questions. You can press star one on your phone keypad now.
Operator: Thank you very much. Just a reminder, if there are any remaining questions, you can press star 1 on your phone keypad. Our next question is coming from John Old from Longmeadow Investors. John, your line is live.
John M. Suzuki: Thanks. Thanks, John and Scott, for the call today. And congratulations on the results.
John M. Suzuki: Our next question is coming from John <unk> from Longmeadow investors John Your line is live.
unknown: Just a quick question on gross margins. In the past, as I recall, I think you sort of set a normalized number of 40%, with that rising with the introduction of the 9000, and in your remarks and the deck, you sort of used 35 plus. And this one, you can sort of change the margin profile going forward. And then the follow-up would be, what do you see as the revenue and margin profile of the 9500? to bring that to market relative to the other two cars.
John M. Suzuki: Thanks, Thanks, John and Scott So on the call today and congrats.
Speaker Change: Congrats on the results.
Speaker Change: Just a quick question.
unknown: Gross margin.
unknown: I mean in the past and as I recall, I think you sort of set of <unk>.
unknown: Normalized number of 40%.
unknown: At rising.
unknown: The introduction of the mine.
unknown: And in your in your remarks.
unknown: <unk> reached 35, plus in just one year.
unknown: So let's change the margin profile going forward.
unknown: And then follow up would be what.
unknown: What do you see as the revenue.
unknown: And margin profile of the 9500 once once.
unknown: Bring that to market relative to the other two products instead of just the size of.
unknown: So it is a revenue opportunity.
unknown: Margin profile, thanks, a lot.
John M. Suzuki: Thanks, John. It's John Suzuki.
Speaker Change: Thanks, John as John It's John Let me try and parse that and then.
John M. Suzuki: Scott can chime in our historical margins are like 35 to 40 and that Hasnt changed I think in the script Youre right. We said 35 plus.
John M. Suzuki: Let me try and parse that, and then Scott can chime in. Our historical margins are like 35 to 40, and that hasn't changed. I think in the script you're right.
John M. Suzuki: We said 35 plus because we do see ourselves overshooting that as the 9,000 mix becomes more prevalent. And we do expect to get into the 40s as we go forward, and that will be primarily driven by the higher-margin product mix of the 9,000. In terms of the 9,500, I think it's too early to really talk about margin profile, but it would definitely be greater than that 35 to 40. It would be a product that we would at least try to position at 50 or 55 plus.
John M. Suzuki: Because we do we do see ourselves overshooting that as the 9000 mix becomes more prevalent and we do expect to get into the <unk>.
John M. Suzuki: As we go forward and that will be primarily driven by the higher margin.
John M. Suzuki: <unk> mix of the 9000 right.
John M. Suzuki: In terms of.
John M. Suzuki: In terms of the 9500 I think it's too early to really talk about margin profile, but.
John M. Suzuki: It will definitely.
John M. Suzuki: <unk> be greater than that 35 to 40 it would be.
John M. Suzuki: Product that we would we would at least try to position at $50 or 55 plus.
John M. Suzuki: And that compares to, say, the 9,000 today, which is like 60 percent plus. So it may or may not come in as high as the 9,000, but it would still be substantially better than our current portfolio.
John M. Suzuki: That compares to the say the 9000 today, which is like 60% plus.
John M. Suzuki: So it may it may or may not come in is as high as the as the 9000, but it may be still some.
John M. Suzuki: Substantially better than than our current portfolio.
John M. Suzuki: <unk>.
unknown: Okay, how about just revenue contribution, a rough, you know, just general sizing of that market versus the other two?
John M. Suzuki: Okay, and how about just with the <unk>.
John M. Suzuki: <unk> contribution.
unknown: Just general sizing of that that market versus the other two.
John M. Suzuki: I'm going to defer that until we get a little bit closer, John. We have our goal, right, for 2025, which does not include this product. I think once we get that, we'll be in a better shape to kind of, you know, give you a forward view on what our next set of goals are for, say, 2030. Thank you.
Speaker Change: Yes, I'm going to defer that.
John M. Suzuki: When we get a little bit closer John.
John M. Suzuki: We have we have our goal right for 2025, which does not include this product.
John M. Suzuki: Great.
John M. Suzuki: Once we get that we'll be in a better shape to kind of.
John M. Suzuki: To give you a forward view on what our next set of goals are for say 2000 <unk>.
unknown: Unknown Speaker: Great, okay, thanks very much. I appreciate it. Unknown Speaker: Your next question is coming from Brian Weaver, who's a private investor. Brian, your line is live.
Speaker Change: Great Okay.
Speaker Change: Okay. Thanks, very much I appreciate it welcome.
Brian Weaver: Thank you. Your next question is coming from Brian Weaver, who's a price Brian, you're live. Hello, thank you very much.
Brian Weaver: Thank you. Your next question is coming from Brian <unk>, who is a private investor Brian Your line is live.
Brian Weaver: Hello, Thank you very much for taking my question.
Brian Weaver: Congratulations on the quarter.
Brian Weaver: Give a little bit of color into what factored into the consistent year over year drop in SG&A for the last quarter and do you expect any substantial changes to SG&A through your transition. Thank you.
unknown: Thanks for Yeah, thanks for the question. Basically, the company incurred costs associated with the ATM, the reverse stock split, and costs associated with the introduction of the BKR 9000 product in the first quarter of 2023. We believe those costs are one-time, non-recurring in nature, and will not, you know, occur, happen again in 2024. So I think that pretty much explains the delta between last year and this year.
Brian Weaver: Thanks, Kurt Yes, thanks for your question.
unknown: Basically the cost the company incurred costs associated with the ATM, the reverse stock split and costs associated with the introduction of the <unk> 9000 product in the first quarter 2023, we believe those costs are one time non recurring in nature.
unknown: And we will not.
unknown: Occurred.
unknown: Happen again in 2024.
unknown: So.
unknown: I think thats pretty much explains the delta between last year and this year nonrecurring items.
Speaker Change: Okay, great. Thank you.
John M. Suzuki: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now turn the call back over to John for his closing remarks.
Speaker Change: Thank you very much.
unknown: Appear to have reached the end of our question answer session I will now turn the call back over to John for closing remarks.
John M. Suzuki: Thank you all for participating in today's call. We look forward to speaking with you again when we report our Q2. All the best to all of you, and have a great day.
John Nesbett: Thank you Jenny. Thank you all for participating in today's call. We look forward to speaking with you again, when we report our Q2, all the best to all of you and have a great day.
John M. Suzuki: Yeah.
Operator: Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
Speaker Change: Thank you very much. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.