Q4 2024 BK Technologies Corp Earnings Call

Speaker Change: [music].

Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation conference call for the fourth quarter and full year 2024.

John Nesbett: Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation conference call for the fourth quarter and full year 2024. This call is being recorded and all participants have been placed on a listen-only mode. Following management's remarks, the call will be open for questions.

This call is being recorded.

All participants have been placed on the listen only mode.

Following mileage and.

Following management's remarks, the call will be opened for questions.

Unknown Executive: There is a slide presentation that accompanies today's remarks, which can be accessed via the web.

There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast.

John Nesbett: At this time, it is my pleasure to turn the floor over to your host for today, Mr. Jon Nesbett of IMS Investor Relations. Sir, please go ahead. Thank you.

Speaker Change: At this time, it's my pleasure to turn the floor over to your host for today, Mr. John Nesbit of IMS Investor Relations. Sir. Please go ahead.

Speaker Change: Thank you good morning, and welcome to our conference call to discuss BK technologies results for the fourth quarter and full year 2024 on.

John Nesbett: Good morning and welcome to our conference call to discuss BK Technologies results for the fourth quarter and full year 2024. On the call today are Jon Suzuki, Chief Executive Officer, and Scott Malmanger, Chief Financial Officer.

Speaker Change: On the call today are Johnson, Ziggy, Chief Executive Officer, and Scott <unk>, Chief Financial Officer, I'll take a moment to read the safe Harbor statement.

Unknown Executive: I'll take a moment to read the Safe Harbor Statement. Statements made during this conference call and presented in the presentation 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 profit. These statements are subject to known and unknown factors and risks.

Speaker Change: Statements made during this conference call and presented in the presentation and there are not 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 company's revenue and profits. These.

Speaker Change: 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 those forward looking statements and some of the factors and risks that could cause or contribute to such material differences have been described in the mornings press release and in Bk's filings with the U S Securities and Exchange Commission.

Unknown Executive: The company's actual results, performance, or achievements may differ materially from those expressed or implied by those forward-looking statements, and some of the factors and risks that could cause or contribute to such material differences have been described in the morning's press release and BK's filings with the U.S. Securities and Exchange Commission.

Speaker Change: These statements are based on information and understandings that are believed to be accurate as of today and do not undertake any duty to update such forward looking statements. Okay, well now turn the call over to John Suzuki see your BK technologies. Please go ahead John.

Jon Suzuki: These statements are based on information and understandings that are believed to be Okay, I will now turn the call over to Jon Suzuki, CEO of BK Technologies. Please go ahead, Jon. Thank you, Jon. Thank you everyone for joining today. I'll start by reviewing some of the highlights of our operations and financial results during the quarter and the full year. Then I'll turn it over to our Chief Financial Officer, Scott Malmanger, for a deeper dive into our financial results.

Speaker Change: Thank you John.

Speaker Change: Thank you everyone for joining today.

Speaker Change: I'll start by reviewing some of the highlights of our operations and financial results during the quarter and the full year then.

Speaker Change: Then I'll turn it over to our Chief Financial Officer, Scott manager for a deeper dive into our financial results.

Jon Suzuki: will conclude by opening up the call for a brief Q&A. We close 2024 with a strong fourth quarter. One that exceeded our expectation and was characterized by exceptional execution across the organization. Revenue increased 9.9% to $17.9 million, and gross margin continued its upward trend to 41.2%. Fully diluted GAAP EPS increased significantly to $0.93, which was the result of strong execution in a quarter, and also included $0.37 related to a one-time non-cash benefit from deferred tax proficiency. Our non-GAAP adjusted earnings per share in the quarter was $0.61 per diluted share, a significant increase compared to non-GAAP diluted adjusted EPS of $0.20 in the fourth quarter of last year.

Speaker Change: I will conclude by opening up the call for a brief Q&A.

Speaker Change: We closed 2024 with a strong fourth quarter.

Speaker Change: One that exceeded our expectations and was characterized by exceptional execution across the organization.

Speaker Change: Revenue increased nine 9% to $17 9 million and gross margin continued its upward trend.

Speaker Change: One 2% fully diluted GAAP EPS increased significantly to 93.

Speaker Change: Which was the result of strong execution in the quarter and also included 37 related to a one time noncash benefit from deferred tax asset provisions.

Speaker Change: Our non-GAAP adjusted earnings per share in the quarter was 61.

Speaker Change: For diluted share a significant increase compared to non-GAAP diluted adjusted EPS of <unk> 20 in the fourth quarter of last year Q.

Jon Suzuki: Q4 represents our sixth consecutive quarter of profitability for the business. The quarter caps off what was a pivotal year for the company. In 2024, we exceeded our financial and operational target. delivering revenue of $76.6 million and gross margin of 37.9%. We had initially expected full year revenue consistent with the 74 million we reported in 2023, and we targeted full year gross margin of 35%. So we're pleased to have surpassed both of these benchmarks. Also, you remember that on the third quarter call, we upwardly revised our target full year non-gap adjusted EPS to $1.92 per diluted share.

Speaker Change: Q4 represents our sixth consecutive quarter of profitable profitability for the business.

Speaker Change: The quarter caps off what was a pivotal year for the company.

Speaker Change: In 2024, we exceeded our financial and operational targets.

Speaker Change: Liberating revenue of $76 6 million and gross margin of 37, 9% we.

Speaker Change: We had initially expected full year revenue consistent with the 74 million we reported in 2023.

Speaker Change: We targeted full year gross margin of 35%. So we're pleased to have surpassed both of these benchmarks.

Speaker Change: Also you remember that on the third quarter call, we upwardly revised our target full year non-GAAP adjusted EPS to $1 92 per diluted share.

Jon Suzuki: I am pleased to report that we significantly surpassed our revised target, coming in at $2.30 per adjusted diluted share. Key contributors to the overachievement were the additional upside revenue, higher than expected gross margin, and a lower actual taxation rate. All of these items positively impacted netting. On the new order activity side, we saw the BKR 9000 Momentum building from agencies looking for a multi-band option at a price point within their budget. We expect this momentum to continue to build in 2025 as we ramp production and deliver more BKR9000s to the market. We closed the year with a backlog of $21.8 million at December 31st, 2024.

I'm pleased to report that we significantly surpassed our revised target coming in at $2 30 per.

Speaker Change: Per adjusted diluted share.

Key contributors to the over achievement, where the additional upside revenue.

Speaker Change: Higher than expected gross margin and a lower actual taxation rate all.

Speaker Change: All of these items positively impacted net income.

Speaker Change: On the new order activity side, we saw the big carrier 9000 momentum building from agencies looking for multi band option at a price point within their budget.

Speaker Change: We expect this momentum to continue to build in 2025, as we ramp production and deliver more big here nine thousands to the market.

Speaker Change: We closed the year with a backlog of 21 8 million.

Speaker Change: At December 31, 2020, 458 million higher than the backlog at December 31.

Jon Suzuki: $5.8 million higher than the backlog at December 31st, 2020.

Jon Suzuki: 2023. We believe that this higher backlog helps set the stage for further growth in 2025.

Speaker Change: 2023.

Speaker Change: We believe that this higher backlog helped set the stage for further growth in 2025.

Speaker Change: Okay.

Speaker Change: Slide five is an illustration of the progress we've made with our gross margin performance.

Jon Suzuki: Flight 5 is an illustration of the progress we've made with our gross margin performance. much of which can be attributed to our operational execution, the shift in our product mix to the BKR-9000 and our cost reduction strategy, such as transitioning our manufacturing operations to East-West. fourth quarter gross margin reached 41.2%, and full year gross margin was 37.9%.

Speaker Change: Much of which can be attributed to our operational execution.

Speaker Change: The shift in our product mix to the <unk> 9000, and our cost reduction strategy, such as transitioning our manufacturing operations to east West.

Speaker Change: Fourth quarter gross margin reached 41, 2% and full year gross margin was 37, 9%.

Jon Suzuki: I do want to take a minute to address the uncertain macroeconomic environment. In terms of tariffs, we, like many other companies, are monitoring the situation closely, and we have gamed out several different scenarios and mitigation plans. Earlier this year, we announced price increases in the range of five to 10% on our radio products and certain radio accessories. This new price list was recently accepted by the federal government and becomes effective April 1 2025 for our reseller network. Initial customer feedback has been supported as we understand why we are increasing our price. And to date, we have seen no demand change or pushback from the market due to the higher price.

Speaker Change: I do want to take a minute to address the uncertain macroeconomic environment.

Speaker Change: In terms of tariffs, we like many other companies are monitoring the situation closely and we have gamed out several different scenarios and mitigation plans.

Speaker Change: Earlier this year, we announced price increases in the range of 5% to 10% on a radio products and certain radio accessories.

Speaker Change: This new price list was recently accepted by the federal government and becomes effective April one 2025 for our reseller network.

Speaker Change: Initial customer feedback has been supportive as they understand why we are increasing our prices and to date. We have seen no demand change are pushed back from the market due to the higher prices.

Speaker Change: The BK supply chain like that of all our competitors is global.

Jon Suzuki: The BK supply chain, like that of all our competitors, is global. with parts manufactured and assembled in numerous countries around the world. An increase in tariffs will increase our product cost. but it will also increase the product cost for all our competitors. We are not in a position to predict the reach and trajectory of the terror situation. So our business priority remains on delivering quality radios to the frontline first responders while also delivering profitability to our shareholders.

Speaker Change: With parts manufactured and assembled in numerous countries around the world.

Speaker Change: An increase in tariffs will increase our product costs, but.

Speaker Change: But it will also increase the product costs for all of our competitors.

Speaker Change: We are not in a position to predict the reach and trajectory of the tariff situation.

So our business priority remains on delivering quality radios to the frontline first responders, while also delivering profitability to our shareholders.

Speaker Change: In terms of Dodge, while the federal government remains an important customer.

Jon Suzuki: in terms of Dodge. While the federal government remains an important customer, out of the product mix shift to the BKR 9000, we estimate that only 35% of our 2025 revenue will come from the federal government. down from 49% in 2023. The BKR-9000 is driving this change, as more local and state governments are adopting the multiband BKR-9000 radio.

Speaker Change: Out of the product mix shift to the night of the B Karen 9000, we estimate that only 35% of our 2025 revenue will come from the federal government.

Speaker Change: From 49% in 2023.

Speaker Change: The big key or 9000 is driving this change is more local and state governments are adopting the multi band <unk> 9000 radio.

Jon Suzuki: Nonetheless, there have been recent changes at the federal level. For example, some of our contacts have changed given the recent layoffs, early retirements, and incentives to terminate. That said, the BK brand and reputation is very strong within our key federal customers. And regardless of leadership changes, we remain confident that the BK brand will remain the brand of preferred choice.

Speaker Change: Nonetheless, there have been recent changes at the federal level for example, some of our contracts have changed given the recent layoffs.

Speaker Change: Early retirements and incentives to terminate.

Speaker Change: That said the BK the BK brand and reputation is very strong within our key federal customers and.

Speaker Change: And regardless of leadership changes.

Speaker Change: We remain confident that the BK brand will remain the brand a preferred choice.

Speaker Change: Turning to slide six.

Jon Suzuki: Turning to slide six. You can see how our focus on margin improvement has resulted in adjusted net income growth, dating back to the fourth quarter of fiscal 2023. You can really see from this chart how the revenue shift, outsourcing of our manufacturing, and cost reduction efforts have driven exponential improvement in our profitability of our business, and we expect to see profitability continue to improve over the long term.

Speaker Change: You can see how our focus on margin improvement has resulted in adjusted net income growth dating back to the fourth quarter of fiscal 2023.

Speaker Change: Can really see from this chart, how the revenue shift outsourcing of our manufacturing and cost reduction efforts have driven exponential improvement in our profitability.

Speaker Change: Of our business and we expect to see profitability continue to improve over the long term.

Speaker Change: Okay.

Jon Suzuki: Here we provide a longer term vision. view of the transformation of BK's business. On an annual basis, we have steadily grown revenue with a CAGR of 19% to 76.6% in 2024. Annual non-GAAP adjusted EBITDA and adjusted net income have dramatically improved as well, with a breakthrough to profitability in the full year 2023. We built on that progress in 2024 with full year non-GAAP adjusted EBITDA of $10.4 million and non-GAAP full year adjusted net income of $8.5 million. In sum, 2024 was a strong year for us.

Speaker Change: Here, we provide a longer term vision.

Speaker Change: We view of the transformation of the BK BK business on an annual basis, we have steadily grown revenue with a CAGR of 19% to 76, 6% in 2024.

Speaker Change: Annual non-GAAP adjusted EBITDA and adjusted net income have dramatically improved as well with a breakthrough to profitability in the full year 2023.

Speaker Change: We built on that progress in 2024, but full year non-GAAP adjusted EBITDA up $10 4 million and non-GAAP full year adjusted net income of 10 point of $8 5 million.

Speaker Change: In sum 2024 was a strong year for us and we believe that we are just getting started with that I will now turn the call over to Scott <unk> CFO to take a deeper dive into our fourth quarter and full year financial results Scott.

Jon Suzuki: And we believe that we're just getting started.

Scott Malmanger: With that, I will now turn the call over to Scott Malmanger, CFO, to take a deeper dive into our fourth quarter and full year financial results. Scott. Thanks, Jon. Sales for the fourth quarter totaled $17.9 million, an increase of 9.9% compared to the $16.3 million for the same quarter last year.

Scott Manager: Thanks, John.

Scott Manager: Sales for the fourth quarter totaled $17 9 million, an increase of nine 9% compared to the $16 3 million for the same quarter last year.

Scott Malmanger: full year. Revenue increased to $76.6 million from $74.1 million in 2023. Gross profit margin in the fourth quarter was 41.2% compared to 35.1% in the fourth quarter of 2023, and improved sequentially from 38.8% in the third quarter of 2024. Gross margin for the full year was 37.9% compared to 30% in 2023, exceeding our full year margin target of 35%. Selling General and Administrative Expenses, or SG&A, for the fourth quarter total approximately $5.2 million compared with $5.3 million for the same quarter last year. Full year SG&A decreased to 21.2 million compared with 23.0 million in 2023.

Scott Manager: Full year.

Scott Manager: Revenue increased to $76 6 million from $74 1 million in 2023.

Scott Manager: Gross profit margin in the fourth quarter was 41, 2% compared to 35, 1% in the fourth quarter of 2023, and then improve sequentially from 38, 8% in the third quarter of 2024.

Scott Manager: Gross margin for the full year was 37, 9% compared to 30, 30% in 2023 exceeding our full year margin target of 35%.

Scott Manager: Selling general and administrative expenses or SG&A for the fourth quarter total approximately $5 2 million compared with $5 3 million for the same quarter last year.

Scott Manager: Full year SG&A decreased to $21 2 million compared with 23.0.

Scott Manager: 2023.

Scott Malmanger: Operating income totaled $2.2 million compared with operating income of $400,000 in the fourth quarter of 2023. Full year 2024 operating income was $7.8 million compared with an operating loss of $777,000 in the previous year. We recorded net income of $3.7 million, or a gap EPS of $1.03 per basic. and $0.93 per diluted share in the fourth quarter of 2024, compared with a net income of $290,000 or $0.08 per basic and diluted share in the prior year period. For the full year, net income was $8.4 million, or a gap EPS of $2.35 per basic and $2.25 per diluted share, compared with a net loss of $2.2 million, or $0.65 per basic and diluted share in fiscal 2023.

Scott Manager: Operating income totaled $2 2 million compared with operating income of 400000.

Scott Manager: In the fourth quarter of 2023.

Scott Manager: Full year 2024, operating income was $7 8 million compared with an operating loss of $777000 in the previous year.

Scott Manager: We recorded net income of $3 7 million or GAAP EPS of $1 three per basic.

Scott Manager: <unk> 93 per diluted share in the fourth quarter of 2024, compared with a net income of $290000 or eight eight per basic and diluted share in the prior year period.

Scott Manager: For the full year net income was $8 4 million or GAAP EPS of $2.35 per basic and $2.25 per diluted share compared with a net loss of $2 2 million or 65% or <unk>.

Scott Manager: 65.

Scott Manager: Per basic and diluted share in fiscal 2023.

Scott Malmanger: As Jon mentioned in his prepared remarks, Included in GAAP EPS for the fourth quarter and fiscal year of 2024 was a one time non cash income tax benefit related to deferred tax assets that added 37 cents and 27 cents per share respectively. The deferred tax provision was due to the release of a $3.6 million valuation reserve allowance on net operating loss carried forward.

Scott Manager: As John mentioned in his prepared remarks.

Scott Manager: Included in GAAP EPS for the fourth quarter and fiscal year of 2024 was a onetime noncash income tax benefit related to deferred tax assets that added 37 and.

Scott Manager: <unk> 27 per share respectively.

Scott Manager: The deferred tax provision was due to the release of a $3 6 million.

Scott Manager: Valuation reserve allowance on net operating loss carryforwards.

Scott Manager: non-GAAP adjusted earnings, which adds back the net realized and unrealized gain or loss on investments.

Scott Malmanger: Non Gap Adjusted Earnings, which adds back net realized non realized gain or loss on investment. stock-based compensation expenses, severance expenses, and excludes the one-time non-cash income tax benefit related to deferred tax asset provisions, was 2.4 million or non-GAAP adjusted EPS of 67 cents per basic share and 61 cents per diluted share in the fourth quarter of 2024. This is compared with non gap adjusted earnings of 704,000 or 20 cents per basic and diluted share in the fourth quarter of 2023. For the full year non-gap adjusted earnings total $8.5 million or $2.40 per basic and $2.30 per diluted share compared with adjusted earnings of approximately $3,000 or breakeven non-gap adjusted EPS in 2023.

Scott Manager: <unk> base compensation expenses severance expenses and excludes the onetime noncash income tax benefit related to deferred tax asset provisions was $2 4 million or non-GAAP adjusted EPS of <unk> 67 per basic share.

Scott Manager: And 61.

Scott Manager: <unk> diluted share in the fourth quarter of 2024.

Scott Manager: This is compared with non-GAAP adjusted earnings of 704000, or <unk> 20 per basic and diluted share in the fourth quarter of 2023.

Scott Manager: For the full year non-GAAP adjusted earnings totaled $8 $5 million or $2 40 per basic and $2 30 per diluted share compared with adjusted earnings of approximately $3000.

Scott Manager: Briki breakeven non-GAAP adjusted EPS.

Scott Manager: In 2023.

Scott Manager: We reported non-GAAP adjusted EBITDA of $2 8 million in the fourth quarter of 2024, compared with non-GAAP adjusted EBITDA of $1 3 million in the fourth quarter of 2023.

Scott Malmanger: We reported non-gap adjusted EBITDA of $2.8 million in the fourth quarter of 2024 compared with non-gap adjusted EBITDA of $1.3 million in the fourth quarter of 2023. non-gap adjusted EBITDA for the full year 2024 was $10.4 million compared with non-gap adjusted EBITDA of $1.5 million for the full year 2023. Based on the analysis of all available evidence, both positive and negative, the company has concluded that it currently does have the ability to generate sufficient taxable income in the necessary periods to utilize the benefits for the NOL deferred tax asset. Given our improvement in profitability, that NOL carry forward has been recognized as of December 31st, 2024, and going forward, we expect to be realizing a more standard tax rate range of 21 to 26%.

Scott Manager: non-GAAP adjusted EBITDA for the full year 2024 was $10 $4 million compared with non-GAAP adjusted EBITDA of one 5 million for the full year 2023.

Scott Manager: Based on the analysis of all available evidence both positive and negative. The company has concluded that it currently does have the ability to generate.

Scott Manager: Sufficient taxable income in the necessary periods to utilize the benefits for the.

Scott Manager: NOL deferred tax asset.

Scott Manager: Given our improvement in profitability that NOL carryforward has been recognized as of December 31, 2024, and going forward, we expect to be realizing a more standard tax rate.

Scott Manager: Range of 21% to 26%.

Scott Manager: Our balance sheet improved considerably in 2024 and puts us in a strong position to support our growth initiatives.

Scott Malmanger: Our balance sheet improved considerably in 2024 and puts us in a strong position to support our growth initiative. As of December 31, 2024, we have approximately $7.1 million of cash and cash equivalents and no debt. Working capital improved to approximately $23 million at the end of December 31, 2024, compared with $16.8 million at December 31, 2023. Shareholders equity increased to $29.8 million compared with $21.3 million at December 31, 2023.

Scott Manager: As of December 31, 2024, we have approximately $7 $1 million of cash and cash equivalents and no debt.

Scott Manager: Working capital improved to approximately $23 million at.

Scott Manager: At the end of December 31, 2024, compared with $16 8 million at December 31, 2023.

Scott Manager: Shareholders' equity increased to $29 8 million compared with $21 3 million at December 31, 2023.

John: I will now turn the call back over to John.

Jon Suzuki: I will now turn the call back over to Jon. Thanks, Scott. As we begin to move through 2025, we have identified certain operational and financial goals in keeping with our growth strategy. With our visibility today, from a financial performance perspective, we're targeting 2025 revenue to reflect single digit growth with a growth with a gross margin of at least 42%. We are targeting 2025 full-year GAAP diluted EPS in excess of $2.40 and 2025 full-year non-GAAP diluted adjusted EPS in excess of $2.80.

John: Thanks Scott.

John: As we begin to move through 2025, we have identified certain operational and financial goals and keeping with our growth strategy.

John: With our visibility today from a financial performance perspective, we're targeting 2025 revenue to reflect single digit growth with the growth with a gross margin of at least 42%.

John: We are targeting 2025 full year GAAP diluted EPS in excess of $2 40.

John: In 2025 full year non-GAAP diluted adjusted EPS in excess of $2 80.

John: In line with our strategy to grow brand recognition and our exposure to additional market verticals, we plan to increase our investments in sales and marketing to further accelerate the big care 9000 adoption rate.

Jon Suzuki: In line with our strategy to grow brand recognition and our exposure to additional market verticals, we plan to increase our investments in sales and marketing to further accelerate the BKR 9000 adoption rate. Likewise, we expect to increase our investment in R&D and build up our engineering capabilities to strengthen our software expertise and offerings. As I mentioned on previous calls, we are ramping development of our new multiband BKR9500 mobile radio, which will be designed for installation in first responder vehicles and will be marketed as a companion radio to our BKR9000 multiband portable radio. We expect to begin recognizing revenue from the BKR9500 in 2027.

John: Likewise, we expect to increase our investment in R&D and buildup, our engineering capabilities to strengthen our software expertise and offerings.

John: As I have mentioned on previous calls we are ramping development of our new multi band <unk> 9500, mobile radio, which will be designed for installation and first responder vehicles and will be marketed as a companion radio to our <unk> 9000, multi band portable radio we.

John: We expect to begin recognizing revenue from the <unk> 9090 500.

John: In 2027.

John: Sure.

Turning to our final slide earlier.

Jon Suzuki: Turning to our final slide, earlier this month, we announced the rebranding and expansion of our SAS Business Unit to be known going forward as BK One Solutions. interoperability between communication devices and platforms has long been a challenge for the public safety market. The mission for BK1 is to provide rapidly deployable solutions, which significantly increase the effectiveness of the public safety response. and maximize first responder safety. Solutions will be comprised of SAS. software applications, and certain hardware applications that help solve the interoperability problem.

John: Earlier this month, we announced the rebranding and expansion of our SaaS business unit to be known going forward as BK one solutions.

John: Interoperability between communication devices and platforms has long been a challenge for the public safety market.

John: Mission for BK, one is to provide rapidly deployable solutions, which significantly increase the effectiveness of the public safety response.

John: And maximize first responder safety.

John: Solutions will be comprised of SaaS software applications and certain hardware applications that help solve the interoperability problem.

Jon Suzuki: One, the BK One family of offerings include. Interop One, our push-to-talk over broadband service, enabling on-demand creation of ad hoc user groups that can include anyone with an active smartphone. LocateOne, an on-premise solution providing real-time tracking of personnel and assets via GPS functionality. and RelayOne, a rapidly deployable portable repeater kit designed to extend range and facilitate interoperability between different types of public safety and military radios.

John: One the BK one family of offerings include <unk>.

John: Interop, one our push to talk over broadband service, enabling on demand creation of AD hoc user groups that can include anyone with an active smartphone.

John: Locate one an on premise solution, providing real time tracking of personnel and assets via GPS functionality.

John: And relate one rapidly deployable portable repeater kit designed to extend range and facilitate interoperability between different types of public safety and military radios.

Jon Suzuki: And we have additional offerings in various stages of development that we're excited to add to the BK One brand. We believe that our solutions will improve public safety interoperability, attracting both new and existing customers as we drive sales for BK1, as well as our BKR series radio.

John: And we have additional offerings in various stages of development that we're excited to add to the BK one branch.

John: We believe that our solutions will improve public safety interoperability.

John: Racking, both new and existing customers as we drive sales for BK, one as well as our daycare Sirius radios.

Jon Suzuki: In closing, BK executed exceptionally well in 2024, and we made excellent progress establishing solid operational and financial foundations. We're confident that BK Technology is well positioned to continue its growth trajectory and drive enhanced results and value for our shareholders through 2025 and beyond.

John: In closing.

BK executed exceptionally well in 2024, and we made excellent progress, establishing solid operational and find out and financial foundations.

John: We're confident that BK technology is well positioned to continue its growth trajectory and drive enhanced results and value for our shareholders through 2025 and beyond with that we can open up the call for questions Ali.

Unknown Executive: With that, we can open up the call for questions. Thank you.

Speaker Change: Thank you at this time, we will be conducting our question and answer session.

Unknown Executive: At this time we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. Your confirmation tone will indicate your line is in the question. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the start. One moment, please, while we poll for questions.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: The confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.

Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we pull for questions.

Speaker Change: Thank you.

Unknown Executive: Thank you.

Jason Schmidt: Our first question is coming from Jason Schmidt with Lake Street Capital. Hey guys, thanks for attending my questions and congrats on some really strong results here. I'm just curious if you could discuss how order activity has been year to date and then just given the macro backdrop, if you're seeing any sales cycles start to lengthen. So in terms of our first quarter order volume, I would say it's in line with expectations. Typically, you know, our order cycles are seasonal with Q2 and Q3 being our larger order intakes and then Q4, Q1 being being lighter. In terms of this year, I would say it's in line of expectation.

Speaker Change: Our first question is coming from Jason Schmidt with Lake Street Capital. Your line is live.

Speaker Change: Hey, guys. Thanks for taking my questions and congrats on some really strong results here.

Speaker Change: John just curious if you could discuss how order activity has been year to date and then just given the macro backdrop, if youre seeing any sales cycles starting to lengthen.

Speaker Change: So in.

Speaker Change: In terms of our first quarter order volume I would say it's in line with expectations.

Speaker Change: Typically our order cycles are seasonal.

Speaker Change: <unk> Q2, and Q3 being our larger.

Speaker Change: Order intake in Q4 Q1 being being lighter.

Speaker Change: In terms of this year I would say it's in line with expectations with.

Jason Schmidt: The second question really deals with more so on the federal government than it is on the state and local. The federal government budget was just the continuing resolution that just passed, which is good news, because that means our federal customers have funding through the balance of the year. This year, it's actually happened a little bit later than it has in previous years. And so where we probably would have seen some earlier orders on the federal side, the 1st quarter funds weren't really available. And so now we're expecting those funds to start flowing in the 2nd quarter and so on.

Speaker Change: The second question really deals with.

Speaker Change: But more so on the federal government then is on the state and local.

Speaker Change: The federal government budget was just the continuing resolution that just pass which is good news because that means our federal customers have funding through the balance of the year. This year, it's actually happened a little bit later than it has in previous years.

Speaker Change: So where we probably would've seen some earlier orders on the federal side in the first quarter funds weren't really available and so now we're expecting those funds to start flowing in the second quarter and somewhat but the funds. The funds are there they've been released but weird, but with a slight delay.

Jason Schmidt: But the funds are there. They've been released, but with a slight delay.

Speaker Change: Okay. That's really helpful. And then if you could just update us on kind of where you're seeing the most interest for the 9000.

Jason Schmidt: Okay, that's really helpful.

Jason Schmidt: And then if you could just update us on kind of where you're seeing the most interest for the 9000. Yeah, it's in the state and local market for sure. The thing with the state and local market is they do operate in multiple bands. Typically, the primary communication system for the city or the county or the state operates at the 800 megahertz frequency band. If you compare that to, say, wildland fire, which operates in a completely different band at the 150 megahertz. So, you have customers that are, you know, especially our wildland fire customers who, when they're on mission for wildland fire, need to operate at the 150 band.

Speaker Change: Yes, it's in the state and local market for sure.

Speaker Change: The thing that.

Speaker Change: I think with the state and local market as they do operate in a multi bands are typically the primary communication system for the the city or the county or the state operates at the 800 megahertz frequency band.

Speaker Change: If you compare that to say wildland fire, which operates in a completely different than the 150 megahertz. So you have customers that are especially our wildland fire customers to when they were on mission for wildland fire need to operate at the 150 band, but when they go home and they start doing their day jobs, they need a radio that can.

Jason Schmidt: But when they go home and they start doing their day job, they need a radio that can operate at the 800 band. So, having a multi-band radio where you have one radio that basically fits both missions is very attractive to them. And the fact that our price point is within their budget is what's helping us drive sales.

Speaker Change: Operate.

Speaker Change: At the 800 band, so having a multi band radio.

Speaker Change: One radio that basically sits both missions.

Speaker Change: <unk> is very attractive to them and the fact that our price point is within their budget is.

Speaker Change: Is what's helping us drive drive sales.

Speaker Change: Okay.

Jason Schmidt: Gotcha, and then just the last one for me and I'll jump back into Q. Looking at this solutions business and kind of incorporating the SAS and software applications, how should we think about the timeline before the software initiative becomes a bigger part of the P&L? That's a good question, Jason. I think we're still putting our foot in the water, just to kind of take a temperature. We've learned a lot over the last couple of years since we introduced Interop One and we continue to learn about solutions.

Speaker Change: Gotcha and then just the last one from me and I'll jump back into queue looking at the solutions.

Speaker Change: This in kind of incorporating the SaaS and software applications.

Speaker Change: Should we think about.

Speaker Change: The timeline before the software initiative becomes a bigger part of the P&L.

Speaker Change: Yeah. That's a good question, Jason I think we're still putting our foot didn't put in the water just to kind of take a temperature we've learned a lot over the last couple of years since we introduced it and are up one and we continue to learn.

Speaker Change: About solutions and I'll give you I'll give you a short example.

Jason Schmidt: I'll give you a short example. One of the wildland customers that we had, he was telling us about how he was looking at Interop One to coordinate communications during a wildland firefighter. He's responsible for some logistics and he has contractors that come in. He's not quite sure who they'll be, but when he forms this team, he'll use Interop One as a way to communicate to them. He's also looking at using Locate One so that he can actually identify on a map where these water trucks are at any point in time. That's a good example where you have two solutions that can be combined together to provide an overall solution for a problem that he's having.

Speaker Change: One of the wildland customers that we had he he was telling us about how he was looking at Interop one to coordinate communications.

Speaker Change: German wildland fire fire, but he is responsible for some logistics and he has contractors that come in he's not quite sure who there'll be but when he when he farms. This team so use interop, one as a way to communicate to them.

Speaker Change: He is also looking at using locate one so that he can actually identify on a map where these water trucks are at any point in time and so that's a good example, where you have two solutions that can be combined together to provide an overall.

Speaker Change: An overall solution for a problem that he is having great how do I communicate with these with my sub contractors and how do I know where they are.

Jason Schmidt: How do I communicate with these, with my subcontractors and how do I know where they are? So we see a lot of those needs in the marketplace. And I think there's a lot of siloed solutions to deal with one or two parts of that solution. The intent of BK1 is to bring under a single umbrella these different solutions, but give the customer the look and feel and the user interface that he's really dealing with one solution that has different aspects. So all of that, it's gonna take us time to get traction in the marketplace.

Speaker Change: So we see a lot of those needs in the marketplace and and I think there's a lot of Siloed solutions to deal with one one or two parts of that solution. They intend to BK. One is to bring under a single umbrella. These different solutions that give the customer the look and feel.

Speaker Change: And the user interface that he is really dealing with one solution that has different different aspects. So all of that it's going to take us time to get traction in the marketplace and my hope is as we finished 2025 et cetera vision for 2030 will provide some clarity in terms of how big we think the <unk>.

Jason Schmidt: My hope is as we finish 2025 and set our vision for 2030, we'll provide some clarity in terms of how big we think the solutions business could be for BK. Okay, that's helpful. Thanks a lot, guys. Thanks, Jason.

Speaker Change: Solutions business could be for BK.

Speaker Change: Okay. That's helpful. Thanks, a lot guys.

Jason Schmidt: Thanks, Jason.

Jason Schmidt: Thank Keith.

Unknown Executive: Thank you. Once again, ladies and gentlemen, if you do have any questions or comments, please press star one on your telephone key.

Jason Schmidt: Once again, ladies and gentlemen, if you do have any questions or comments. Please press star one on your telephone keypad.

Jason Schmidt: Our next question is coming from Samir Patel with <unk> capital Your line is life.

Sameer Patel: Our next question is coming from Sameer Patel with Askeladdon Capital. Your line is. Hey, congrats on a great finish to the year. Sounds like a good start to 2025.

Speaker Change: Hey, guys congrats on a great finish to the year and it sounds like a good start to 2025.

Sameer Patel: I'll start with one for Scott. Hey, would you be able to walk back from your adjusted EPS guidance to adjusted EBITDA? Any important kind of inputs into that particularly? I think you mentioned tax rate. I wasn't sure if that applied to this year's guidance or more generally. Yeah, it was basically for the fourth quarter. You know, we had the valuation reserve allowance. That was basically a non book. So we were able to recognize that, and that kind of flowed through. So that was the significant, you know, adjustment there to get from a GAP to a non-GAP basis.

Speaker Change: I'll start with one for Scott, Hey would you be able to walk back from your adjusted EPS guidance to adjusted EBIDTA any important kind of inputs into that particularly I think you mentioned tax rate I wasn't sure if that applied to this year's guidance or more generally.

Speaker Change: Yes, it would.

Basically for the fourth quarter.

Speaker Change: We had the valuation reserve allowance.

Speaker Change: That was basically a non book entry.

Speaker Change: So we were able to recognize that and that kind of flowed through so that was the significant.

Speaker Change: Adjustment there to get from GAAP to a non-GAAP basis.

Sameer Patel: If you look at the chart, you'll, you know, the non-GAP reconciliation, you can see the detail there. And then it's the standard stuff that's going to be recurring, you know, stock-based comp, non-cash stock-based comp. And then... basically the depreciation, amortization, the standard type adjustment. Okay, so just to be clear, that $2.80 figure implies something in that 21 to 26% tax range. Correct. That is correct. Okay, so that's a full I just wanted to make sure there's no so that's a fully taxed CPS number. Yeah, you're correct. Okay, okay, perfect. That's fine.

Speaker Change: If you look at the charge off.

Speaker Change: The non-GAAP reconciliation you can see the detail there.

Speaker Change: The standard stuff, that's going to be recurring.

Speaker Change: Stock based comp noncash stock based comp and then.

Speaker Change:

Speaker Change: Basically the depreciation amortization the standard type adjustment.

Speaker Change: Okay. So just to be clear that $2 80 figure.

Speaker Change: Implies something of last 21% to 26% tax range correct.

Speaker Change: Correct that is correct. Okay. So that's a full I just wanted to make sure theres not like a fully taxed EPS number.

Speaker Change: Yes, you are correct, okay, okay perfect that's fine.

Sameer Patel: Second one, I guess, for both of y'all, you know, look, I mean, your your guidance seems fairly conservative, obviously, last year, you beat it by a pretty wide margin. And then just looking at this year, I mean, you're trailing bookings around 85 million, you talked about a, you know, 5-10% price increase going through, you know, should we expect that that guidance is sort of subject to revision as you go through the year and, you know, get more tangible data points on how things are reflecting.

Speaker Change: Second one I guess for both of you all.

Speaker Change: Look I mean, your guidance seems fairly conservative obviously last year you beat it by a pretty wide margin and then just looking at this year I mean, your trailing bookings around $85 million, you talked about a 5% to 10% price increase going through.

Speaker Change: Should we expect the soft guidance is sort of subject to revision as you go through the year and you know get more tangible data points on how things are progressing.

John Ziggy: Hey, Sameer this is John Ziggy So yeah, we're you know.

Jon Suzuki: Hey, Samir. It's Jon Suzuki. So, yeah, we're, you know, we're actually in some very uncertain times, right? I think that if the tariffs hold off, that would be a reasonable expectation that we'd be raising guidance throughout the year. But I can't tell you today, right, what's going to happen on April 2nd or May 3rd or and so on, right? So, we need to be prepared. We started that by the price increases. But as you know, it takes a while for price increases to affect your backlog. So, we expect to see those price increases impacting our financials more in the third quarter than the second quarter, because most of our backlog, most backlog does not include those price increases.

Speaker Change: We're actually in some very uncertain times right.

John Ziggy: I think that.

Speaker Change: Yes, the tariffs hold off.

Speaker Change: That would be a reasonable expectation that we'd be raising guidance throughout the year, but I can't tell you today right, what's going to happen happened on April 2nd or maybe third or and so on so we need to be prepared.

Speaker Change: We started that by the price increases.

Speaker Change: As you know it takes a while for price increases to affect your backlog. So we expect to see those price increases impacting our financials more in the third quarter than the second quarter, because most of our backlog.

Speaker Change: Most of the backlog does not include those price increases.

Jon Suzuki: So it's impossible for us to predict, right? What's gonna happen this year, but what we've done is put a benchmark out there. We've made our best assumptions. And then as the situation on the ground changes, we will continue to update the market.

Speaker Change: So it.

Speaker Change: So it's impossible for us to predict right.

Speaker Change: What's going to happen this year, but we've done is put a benchmark out there.

Speaker Change: We've made our best assumptions and then as the situation on the ground changes, we will continue to update the market.

Speaker Change: Okay, perfect and I think I think in response to Jason's question did I hear you say that at the end of 2025 to kind of get put off some and you sort of multiyear targets looking out to maturity.

Jon Suzuki: Okay, perfect. And I think I think in response to Jason's question, did I hear you say that at the end of 2025, you're kind of going to put out some a new set of multi year targets looking out to 2030?

Jon Suzuki: Yes, we we had when I first started with the company in 21, we set out what we call Vision 2025. So that was a revenue, gross margin, and EBITDA target.

Speaker Change: Yes, we are we had when I first started with the company.

Speaker Change: In 'twenty, one we set out what we called vision 2025.

Speaker Change: So.

Speaker Change: That was a revenue gross margin and EBITDA targets.

Jon Suzuki: At the end of this year, when we review the full year, I'll compare it against that Vision 2025 number, and then set what we would call 2030 Vision. And at that point, I think we will provide some more clarity between what I would say our core business, our core radio business, versus what the potential is for our solutions business. Okay, that makes sense. And yeah, I mean, you're going to fall a little short of that 2025 target, but, you know, considering all the macro headwinds you faced, I think you've done a really admirable job.

Speaker Change: At the end of this year when we review the full year I'll compare it against that vision 2025 number.

Speaker Change: And then.

Speaker Change: And then what we would call 2030 vision.

Speaker Change: At that point I think we will provide some more clarity between what I would say our core business, our core radio business versus what the potential is for our solutions business.

Okay that makes us any I mean, youre going to fall a little short of that 2025 target, but you know considering all the all the macro headwinds you faced I think you've I think you've done a really admirable job.

Sameer Patel: Maybe one final one, just on that press release you put out about the Interop 1 order from a state forestry agency, if you could just provide maybe some more color on the background, you know, kind of scope of that order. You know, I'm sure you're limited in kind of what you can say specifically, but just any color will be helpful just as we think about the SaaS business going. Yeah, I think it was a great example of, you know, so we were we were working with the client. I'm doing a pilot and then Hurricane Helene hit.

Speaker Change: Maybe one final one just on that press release, you put out about the inner off one order.

Speaker Change: On the state Forestry agency, if you could just provide maybe some more color on the background scope of that or the I'm sure you were limited and kind of what you can say specifically, but just any color. There would be helpful. Just as we think about the SaaS business growing.

Speaker Change: Yeah, I think it was a great example.

Speaker Change: You know so we were we were working with the clients.

Speaker Change: I'm doing a pilot and then hurricane Hiland hits.

Jon Suzuki: And they were I guess surprised by the amount of damage that took place, but they were thrilled, right, because we had the pilot communication system up, Interop One, how effective it was during that whole crisis, and how many, how they were able to get everyone on a common channel, in essence, right, whether they had a smartphone or they had an LMR radio, just the ability to assess damage and to communicate action plans. was very effective. And the customer had commented that he had trialed a number of similar systems in the past, and he felt that Interop One was the one solution that met their needs.

Speaker Change: <unk>.

Speaker Change: They were.

Speaker Change: I guess surprised by the amount of damage.

Speaker Change: When it took place, but they were thrilled right because we had the pilot communication system up and are up one.

Speaker Change: How effective it was during that whole crisis and how many how they were able to.

Speaker Change: Get everyone on a common channel in essence, right, whether they had a smartphone or they had an LMR radio.

Speaker Change: The ability to assess damage and to communicate action plans.

Speaker Change: Was very effective and the customer had commented that he had trailed number of similar systems in the past that he felt that Interop. One was the one solution that met their needs and and subsequently they placed an order for it so to me. It tells me again.

Jon Suzuki: And subsequently, they placed an order for it.

Jon Suzuki: So to me, it tells me, again, there's nothing better than doing field trials. And if there's an incident that occurs during that, you know, that really drives home the point.

Speaker Change: I think better than doing field trials and.

Speaker Change: If there is an incident that occurred during that you know.

Speaker Change: That really drives home the point.

Speaker Change: And do you have like is there can you share anything about the number of users or just just roughly the size of that order.

Jon Suzuki: And do you have like, is there can you share anything about the number of users or just just roughly the five of that order? Yeah, I would prefer not because we went through the customer. Yeah, and initially they said they would, but then they, you know, as it gets up higher in the organizations, they tend not to do those things. So I promised that I wouldn't do it. Understood.

Speaker Change: Yeah.

Speaker Change: Would prefer not because we went through the customer yeah and initially they said they would but then they as it gets up higher in the organizations. They tend not to do those things so <unk>.

Speaker Change: I missed that I wouldn't do it.

Speaker Change: Understood I appreciate the time I'll turn it over for questions. Thank you so much.

Sameer Patel: Appreciate the time.

Unknown Executive: I'll turn it over for other questions. Thank you so much.

Unknown Executive: Thanks, Aaron. Thank you.

Amir: Thanks Amir.

Keith: Thank Keith.

Oren Hirschman: Our next question is coming from Oren Hirschman with AIGH, your line is live. Hi, and congratulations on all the progress. I'm keeping in mind that the that a lot of the backlog today doesn't include the price increase.

Speaker Change: Our next question is coming from Orin Hirschman with <unk>. Your line is.

Orin Hirschman: Hi, and congratulations on all the progress.

Speaker Change: Keeping in mind that the.

Speaker Change: There's a lot of the backlog the backlog today those once a lot of the backlog today doesn't include the price increase.

Oren Hirschman: Is there still, can you continue to show margin improvement even in his ban? of the of the price increase beginning to hit the numbers. Is there still more to go with the existing plan versus any tariff-related backlash based on where we are today in the world?

Speaker Change: Is there still can you continue to show margin improvement even in advance.

Speaker Change: Of the of the price increase beginning to hit the numbers.

Speaker Change: Is there still more to go with the existing plan versus any any.

Speaker Change: Any tariff related backlash based on where we are today in the world.

Speaker Change: Yeah. Good question Oren.

Jon Suzuki: Good question, Oren. So, let me try and characterize the year as we see it, right? So, our first quarter is basically done, and we are going to experience healthy margins in the first quarter because we didn't have any tariffs. And we'll talk about that in about six weeks. I would say we're pleased with the quarter, and it's in line with what our expectations were. As I go into Q2, and if we get a 25% tariff, that's a pretty significant tax that we put on there. Most of the backlogs we have does not include the price increase.

Speaker Change: So let me try and characterize the year as we see it right. So our first quarter is basically done and we were going to experience healthy margins in the first quarter, because we didn't have any any.

Speaker Change: Any tariffs.

Speaker Change: We'll talk about that in about six weeks I would say, we're pleased with the quarter end and it's in line with what our expectations were.

Speaker Change: As I go into Q2, and if we if we get a 25% tariff that's a pretty significant tax.

Speaker Change: We put on there.

Speaker Change: Most of the backlog that we have does not include the price increases.

Jon Suzuki: And therefore, we expect that our gross margin will probably drop below, certainly below what we're seeing in Q1 and probably drop below that 42% so that if you take what we expect in Q1 versus what we would expect under Q2 with the tariffs, we'd probably be in line with that 42% for the first half of the year. As I look in the second half of the year, the price increases will kick in. Plus, we do have some additional cost operational costs improvement. And our belief is for the second half of the year, we will be floating around that 42% mark.

Speaker Change: And therefore, we expect that our gross margin will probably drop below certainly below what we were seeing in Q1.

Speaker Change: And probably drop below that 42% so that if you take what we what we expect in Q1 versus what we would expect under Q2 with the tariffs we'd probably be in line with that 42% for the first half of the year.

Speaker Change: As I look in the second half of the year the price increases will kick in plus.

Speaker Change: We do have some additional cost operational cost improvements and our belief is for the second half of the year, we will be floating around that 42% Mark.

Jon Suzuki: So that's that's just the simple math. Now, a lot of things can affect that product mix, for example, can affect that dramatically. Our assumptions on on what's being tariffed could be could be different. So we just we put a stake in the ground. And like I said, if if the situation changes, we will provide updates to the market.

Speaker Change: So that's that's just the simple math now a lot of things can affect that product mix for example can affect that dramatically.

Speaker Change: Our assumptions on on what's being tariffs could be could be different.

Speaker Change: So we just we put a stake in the ground and like I said, if if the situation changes we will provide updates to the market.

Speaker Change: Okay.

Jon Suzuki: Okay, in terms of the $9,000, You know, obviously huge TAM compared to where we've been at before. If I just look at the 9,000 growth under the current conservative-based case scenario, if I just look at the 9,000 growth, can we safely assume that the 9,000 is growing significantly faster than the rest of the business and that's the growth driver? Yes.

Speaker Change: Of the 9000.

Speaker Change: You know, obviously, a huge tam compared to what it had been at before.

Speaker Change: Ill.

Speaker Change: Ooh.

Speaker Change: If I just look at the 9000 and growth for under the current Conservative base case scenario, if I just look at the 9000 growth.

Speaker Change: We think if we assume that the 9000 is growing significantly faster than the rest of the business from that.

Speaker Change: That's the growth driver.

Speaker Change: Yes.

Speaker Change: Yeah.

Jon Suzuki: And in terms of the margins, the gross margins on the 9000, you know, with tariff, without tariff, however you want to put it, you know, how are you seeing those in terms of being premium gross margins? I'll be more specific than you want to be. Yeah, I would say, historically, what we said is the 9000 was was going to be a 60% gross margin product. Now that's before any tariffs, right? So parts of these of the 9000, you know, these parts are sourced globally. So depending on what those tariffs, if any, come into play, that will have an impact on our gross margin for that product.

Speaker Change: In terms of the margins the gross margins on the 9000 with Paragon out tariff. However, you want to put it.

Speaker Change: How are you seeing those in terms of being premium gross margins, helping more specific than you wanted to.

Speaker Change: Yes.

Speaker Change: Yeah, I would say historically, what we said is the 9000 was was going to be a 60% gross margin product now that's before any tariffs right. So parts of these of the 9000 in these parts are sourced globally. So depending on what those tariffs if any come into play that will have an impact on our growth.

Speaker Change: Margin for that product.

Speaker Change: Bill.

Jon Suzuki: You know, that will obviously being offset partially, or math doesn't quite work because of the difference, whether if you're increasing price or zeros margin, but it's part of that would be offset by the higher price once that kicks in. Yeah.

Speaker Change: Basically being offset partially or math doesn't quite work because of the different whether if you're increasing prices of your gross margin, but it's part of that would be offset by the higher price once that kicks in.

Speaker Change: Yes.

Speaker Change: Tim My last question just on the on the software side of things you know typically beautiful till now software has just been a driver to try and promote more radio usage to promote the 9000.

Jon Suzuki: Okay, my last question just on the on the software side of things, you know, typically, you know, till now software has just been a driver to try and promote more radio usage to promote the 9000. are we hearing from you that there's also, you know, signing up sounds like a real commercial customer? And I know you have a few smaller ones. Is it also a revenue source that we could view it as? Keeping in mind it's still small, obviously it has a very high gross marginal. Yeah, I think the optimal word is small. But yes, because we've now added two more products into our portfolio.

Speaker Change: But we're hearing from you that Theres also especially after funding up sounds like a real commercial customer.

Speaker Change: And I know you have a few smaller ones is it also a revenue source that we can do what else and keeping in mind. It's still small obviously can change it has a very high gross margin also.

Speaker Change: Yeah, I think the optical we're just small but yes because.

Speaker Change: We've now added two more products into our portfolio when youre dealing with the SaaS business. As you know the revenue is very low, but it's just reoccurring when youre dealing with a product like locate one which is an on premise software solution.

Jon Suzuki: When you're dealing with a SaaS business, it's, you know, the revenue is very low, but it's just reoccurring. When you're dealing with a product like locate one, which is an on premise software solution. The sale is a one is one time sale plus plus support costs, right ongoing support costs. But that's a much higher revenue number. Really one is more of a hardware product. solution. And again, it's a higher revenue product. So you'll start seeing, or we'll start seeing from BK One solutions, much higher revenues in this year than if we had just focused on Interop One.

Speaker Change: The sale is a one as one time sell plus plus support cost rates ongoing support costs, but that's a much higher revenue number really one is more of a hardware product.

Speaker Change: Solution and again, it's a higher revenue.

Speaker Change: Products, so you'll start seeing our we'll start seeing from from BK. One solutions are much higher revenues in this year than if we had just focused on interop one.

Speaker Change: Got it but it doesn't throw up on habits merit has its own SaaS business or its still really just a driver of 9000 and sales.

Oren Hirschman: Got it.

Jon Suzuki: But does Interop 1 have its merit as its own SaaS business, or it's still really just a driver of 9000 sales? Yeah, no, it's it's has its own fast business. We monitor that. I just look at the benefit of that still. I mean, it's not it's not making money on its own. it is still a losing proposition, even with the customers we have on there. But if you look at it as a marketing tool, and our ability for it to drive 9000 sales, it's more than pays for itself.

Speaker Change: Yeah no. It it's it has its own SaaS business, we monitor that I just look at the benefit of that still I mean, it's not it's not.

Speaker Change: Making money on its own.

Speaker Change: It is still losing proposition.

Speaker Change: Even with the customers we have on there, but if you look at it as a marketing tool and our ability for it to drive 9000 sales its more than pays for itself.

Oren Hirschman: Can you see, though, the possibility of how it gets, based on your pipeline, how it actually gets to be, you know, a breakeven or a profit center on its own? Yeah, absolutely. No doubt. Thanks so much.

Speaker Change: Can you see the possibility of how it gets at least on your pipeline how it actually gets to be.

Speaker Change: <unk>.

Speaker Change: Breakeven from a profit center on its own.

Speaker Change: Yeah absolutely.

Speaker Change: No doubt okay.

Speaker Change: Okay. Thanks, so much.

Speaker Change: Thank you Lauren.

Sameer Patel: Thank you, Warren. We have another question from Samir Patel with Ask Alarm.

Speaker Change: Thank you.

Speaker Change: We have another question from Samir Patel with <unk> capital Your line is life.

Sameer Patel: Your line is. Hey, I just wanted to follow up on the tariff piece and you know, I respect and understand that this is a very, you know, calling it a moving target might be an understatement. First of all, just to confirm, based on what you said, so your goods would fall into that not compliant with the USMCA category, so they'd be subject to the full tariff. So our, our products do comply with the USMCA. So in the first quarter, we we paid zero tariff. Okay, so they are in that category. Okay, that's good to hear.

Speaker Change: Hey, I just wanted to follow up on the tariffs piece and you know I I respect and understand that this is a very you're calling it a moving target might be an understatement.

Speaker Change: First of all just to confirm based on what you said few games with fall into that not compliant with the U S. M. C. A category so they would be subject to the full tariffs.

Speaker Change: So our products do comply with the U S MCA.

Speaker Change: So in the first quarter, we paid zero tariffs.

Speaker Change: Okay. So they are in that category. Okay. That's good to hear and then second would be I mean, you mentioned mitigation strategies other than the price increase I mean, what would you what would you look to do with those became sort of a more permanent I mean, I know you've talked about for example, being able to do a little bit more assembly in Melbourne.

Jon Suzuki: And then second would be I mean, you mentioned mitigation strategies other than the price increase. I mean, what would you what would you look to do if those became sort of more permanent? I mean, I know you've talked about, for example, being able to do a little bit more assembly in Melbourne. Yeah, certainly, that's an option. The advantage that we have with our partnership with EastWest is they have a number of different factories around the world. And so We would have to assess right where where the administration is applying the tariffs, and then overlay that where East West has manufacturing facilities, but we've already engaged with them.

Speaker Change: Yes, certainly that's an option.

Speaker Change: The advantage that we have with our partnership with east West as they have.

Speaker Change: Number of different factories around the world and so.

Speaker Change: We would have to assess right, where where the administration is applying the tariffs and then overlay that where east west has manufacturing facilities, but we've already engaged with them I mean, we we can pick up these lines and move them to another facility now that takes six months nine months potentially.

Jon Suzuki: I mean, we we can pick up these lines and move them to another facility. Now that takes six months, nine months, potentially, to move a supply chain. But if we're if we deem that the tariff coming out of that particular country is is more expensive than operating or moving the line to a country with a lower tariff or no tariff, that's just an economic decision. It's one we don't take lightly because it takes six months to nine months to move a supply chain. And the last thing you want to do is move it just to find that the administration has changed their mind on the tariff.

Speaker Change: To move our supply chain, but if we're if we deem that the the tariffs coming out of that particular country is is more expensive than operating are moving the line to a country with a lower tariff for no tariffs.

Speaker Change: That's just an economic decision. It's one we don't take lightly because it takes six months to nine months to move supply chain and the last thing you want to do is move it just to just to find that the administration has changed their mind.

Jon Suzuki: So it's something that we just have to watch and monitor. There are definite options.

Speaker Change: Tariffs. So it's something that we just have to watch and monitor there are definite options are best cases to get our cost continue to get our costs down and then where we have to continue to raise your price as I mentioned in the script. This is not unique to BK right. If you listen to our competitors.

Jon Suzuki: Our best case is to get our cost, continue to get our cost down, and then where we have to continue to raise our price. As I mentioned in the script, this is not unique to BK, right? If you listen to our competitors announcements, they're experiencing the same thing. We all have global supply and we will all be impacted by tariff. And I believe that we just need to be monitoring the situation and then taking the appropriate actions to preserve our profitability. Will it be rocky in the interim? It could be, because tariffs can be implemented within 48 hours.

Speaker Change: Our announcements there they're experiencing the same thing we all have global supply chains.

Speaker Change: And we will albeit impacted by tariffs.

Speaker Change: And I.

I believe that we just need to be monitoring the situation and then taking the appropriate actions to preserve our profitability will it will it be rocky in the interim it could be because.

Speaker Change: Tariffs can be can be implemented within 48 hours trying to get price increases adopted into the market can take two or three months or longer if it's dealing with the federal government. So theres always a lag in that aspect, but at the end of the day, we do believe it's going to get settled out.

Jon Suzuki: Trying to get price increases adopted into the market can take two or three months or longer if it's dealing with the federal government. So there's always a lag in that aspect. But at the end of the day, we do believe it's going to get settled out and we want to be in the in the most optimal position once once. once the trade issues settle down.

Speaker Change: And we want to be in the in the most optimal position once once.

Speaker Change: Once the trade issues.

Speaker Change: Settled out.

Speaker Change: Our lawmakers.

Jon Suzuki: Our long-term vision... Yeah. Our long-term vision...

Speaker Change: Yeah on long term debt.

Jon Suzuki: Sorry. Go ahead. Yeah, our long term version version remains the same, right? We want to get to 50% gross margin. We think we can do that. Yeah, so it sounds like I mean, you're just waiting to see how it plays out. And it sounds like you have a lot of good options. It's more just again, you don't want to be making a seven month decision based on something the administration has changed, you know, 12 times in the past three days. Right.

Speaker Change: Yeah. Our long term version conversion remains the same rates, we want to get to 50% gross margins.

Speaker Change: We think we can do that.

Speaker Change: Yeah. So it sounds like maybe you're just waiting to see how it plays out and then it sounds like you have a lot of good options. It's more just again, you don't want to be making a seven month decision based on something if it administration has changed you know 12 times in the past three days.

Speaker Change: Right Yeah.

Oren Hirschman: Yeah, perfect. Okay.

Oren Hirschman: And then just just a final note, did you pull forward any inventory or production in Q1 kind of ahead of ahead of the implementation date? Well, I would say we tried to. So it was certainly on our mind and we tried to do that. The actual result was, was not the same. Yeah, we didn't our inventory, as you'll see, went down, I would love to our finished goods inventory to skyrocket it up to mitigate some of that risk, but we just couldn't pull it off.

Speaker Change: Perfect. Okay, and then just a final note did you pull forward any inventory or production in Q1 kind of ahead of ahead of the implementation date.

Speaker Change: Well I would say we tried to.

Speaker Change: So it was certainly on our mind and we tried to do that the actual result was.

Speaker Change: It was not the same.

Speaker Change: We did our inventory as Youll see went down I would loved our finished goods inventory just skyrocketed up to mitigate some of that risk, but we just couldn't pull it off.

Speaker Change: Understood Alright, thanks for the time.

Unknown Executive: All right, thanks for the time.

Speaker Change: Thank you.

Unknown Executive: As we have no further questions on the lines at this time, I would like to hand it back over to management for closing remarks. Thank you, Allie. Thank you all for participating today's call.

Speaker Change: We have no further questions on the lines at this time I would like to hand, it back over to management for closing remarks.

Ali: Thank you Ali.

Ali: Thank you all for participating in today's call. We look forward to speaking with you again, when we report our first quarter results all the best to all of you and have a great day.

Unknown Executive: We look forward to speaking with you again when we report our first quarter results.

Unknown Executive: All the best to all of you and have a great day. Thank you.

Speaker Change: Thank you ladies and gentlemen, this does conclude today's call you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation.

Unknown Executive: Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time and have a wonderful day. And we thank you for your participation.

Speaker Change: Okay.