Q1 2025 BK Technologies Corp Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the BKTI first quarter 2025 earnings This call is being recorded.
Good morning, ladies and gentlemen, and welcome to the BK T. I first quarter 2025 earnings call.
This call is being recorded.
Operator: All participants have been placed on a listen-only Following Manamjit's remarks, the core will be opened for There is a slide presentation that accompanies today's remarks, which can be accessed via the website.
It's been it's had been placed on a listen only mode. Following my 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.
Jen Belladeau: At this time, it is my pleasure to turn the floor over to your host for today, Jen Belladeau of IMS Investor Relations. Please go ahead. Thank you.
Speaker Change: At this time it is my pleasure to turn the floor over to your host for today Gen Bilodeau with IMS Investor Relations. Please go ahead.
Gen Bilodeau: Thank you good morning, and welcome to our conference call to discuss Teekay Technologies' results for first quarter 2025 on the call today are John <unk>, Chief Executive Officer, and Scott mounting or 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 that are.
John Suzuki: Good morning and welcome to our conference call to discuss BK Technologies results for first quarter.
John Suzuki: On the call today are John Suzuki, Chief Executive Officer, and Scott Malmanger, Chief Financial I'll take a moment to read the safe harbor.
John Suzuki: Statements made during this conference call and presented in the presentation that are not based on historical facts are for the Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company's revenue and profits. These statements are subject to known and unknown factors. The company's actual results, performance, or achievements may differ materially from those expressed or implied by these four. 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.
Gen Bilodeau: 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 companys revenue and profits. These statements are subject to known and unknown factors and risks and 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.
Gen Bilodeau: 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.
John Suzuki: Securities and Exchange Commission.
John Suzuki: These statements are based on information and understandings that are believed to be accurate as of today, and we do not undertake any duty to update such forward-looking statements.
Gen Bilodeau: These statements are based on information and understandings that are believed to be accurate as of today and we do not undertake any duty to update such forward looking statements with that out of the way I'll turn the call over to John Suzuki CEO of BK technologies. Please go ahead John.
John Suzuki: With that out of the way, I'll turn the call over to John Suzuki, CEO of BK Technologies. Please go ahead, John. Thank you, John. Thank you, everyone, for joining today.
Speaker Change: Thank you John Thank you everyone for joining today.
John Suzuki: I'll start by reviewing some of the highlights of our operations and financial results during the first quarter, and then I'll turn it over to our Chief Financial Officer, Scott Malmanger, for a deeper dive into our financial results.
Speaker Change: I'll start by reviewing some of the highlights of our operations and financial results during the first quarter.
Speaker Change: Then I'll turn it over to our Chief Financial Officer, Scott now manager for a deeper dive into our financial results will conclude by opening the call for a brief Q&A.
John Suzuki: We'll conclude by opening the call for a brief Q&A. Our first quarter continued the momentum we built throughout last year, giving us a strong start to 2025. First quarter revenue of $19.1 million increased both year-over-year and sequentially, and we delivered significantly improved gross margin of 47%. Our ability to drive enhanced gross margin is a direct result of our ongoing shift to higher margin product mix, our successful transition to a contract manufacturing model, and our partner EastWest Manufacturing, and our ability to achieve continued operating efficiency. expense reductions across the organization. We continued our path of delivering enhanced profitability, achieving net income of $2.1 million, or $0.55 per diluted share in the first quarter compared to a net income of $681,000, or $0.19 per diluted share in the first quarter of 2024.
Speaker Change: Our first quarter continued the momentum we built throughout last year, giving us a strong start to 2025.
Speaker Change: First quarter revenue of $19 1 million increase both year over year and sequentially and.
Speaker Change: And we delivered significantly improved gross margin of 47%.
Speaker Change: Our ability to drive enhanced gross margin is a direct result of our ongoing shift to higher margin product mix, our successful transition to a contract manufacturing model and our partner East West manufacturing and our ability to achieve continued operating.
Speaker Change: Expense reductions across the organization.
Speaker Change: We continued our path of delivering enhanced profitability.
Speaker Change: <unk> net income of $2 1 million or <unk> 55.
Speaker Change: Per diluted share in the first quarter compared to a net income of 681000 or <unk> 19 cents per diluted share in the first quarter of 2024 non-GAAP adjusted earnings were $2 6 million or <unk> 68.
John Suzuki: Non-GAAP adjusted earnings were $2.6 million, or $0.68 per diluted share in the quarter, compared to $1.1 million, or $0.30 per diluted share in the same period of last year. With our performance in the first quarter of 2025, we achieved our seventh consecutive quarter of profitability.
Speaker Change: Cents per diluted share in the quarter compared to $1 1 million or <unk> 30 per diluted share in the same period of last year.
Speaker Change: With our performance in the first quarter of.
Speaker Change: 2025, we achieved our seventh consecutive quarter of profitability.
John Suzuki: And finally, backlog at March 31st, 2025 was $18.8 million compared to $19 million at the close of the first quarter in 2024. As I mentioned a moment ago, we have been intently focused on improving gross margin by delivering excellent operational execution, facilitating the shift in our product mix toward the higher margin BKR 9000, and implementing cost reduction strategies, including the successful transition of our manufacturing operations to East-West. Slide four demonstrates the steady progress we have made with these initiatives, which have resulted in our ability to report consistently improving gross margin. In 2024, our full year gross margin of 37.9% comfortably exceeded the target gross margin range of 35%.
Speaker Change: And finally backlog.
Speaker Change: March 31, 2025 was $18 8 million compared to $19 million at the close of the first quarter in 2024.
Speaker Change: As I mentioned, a moment ago, we have been intently focused on improving gross margin by delivering excellent operational execution facilitating the shift in our product mix towards the higher margin daycare, and 9000 and implementing cost reduction strategies, including the successful transition of <unk>.
Speaker Change: Our manufacturing operations to east West.
Speaker Change: Slide four demonstrates the steady progress we have made with these initiatives, which have resulted in our ability to report consistently improving gross margin.
Speaker Change: In 2024.
Speaker Change: For a full year gross margin of 37, 9% comfortably exceeded the target gross margin range of 35%.
John Suzuki: For full year 2025, we increased our target gross margin to 42% or greater and at 47% for the first quarter, we're off to a good start.
Speaker Change: For full year 2025, we increased our target gross margin to 42% or greater and.
Speaker Change: And at 47% for the first quarter, we're off to a good start.
John Suzuki: I do want to take a minute to address the uncertain macro economic environment in terms of tariffs, our gross margin target for 2025, including assumptions about tariffs and their potential financial impact. And as such, we, like many other companies, are monitoring the situation closely. About 95% of our product revenue comes from finished good products that are manufactured in the USA, Mexico, and Vietnam. During the first quarter, BK Products produced in Mexico entered the U.S. tariff-free under USMCA and continued tariff-free during the 90-day pause period. If a trade deal with Mexico is not achieved during this pause period, we may be subject to a 25% tariff starting in the third quarter.
Speaker Change: I do want to take a minute to address the uncertain macroeconomic environment.
Speaker Change: Terms of tariffs our gross margin target for 2025 included assumptions about tariffs and their potential financial impact and as such we like many other companies are monitoring the situation closely.
Speaker Change: About 95% of our product revenue comes from finished good products that are manufactured in the USA, Mexico and Vietnam.
Speaker Change: During the first quarter BK products produced in Mexico entered the U S tariff free under U S. MCA and continued tariff free during the 90 day pause period.
Speaker Change: If a trade deal with Mexico has not achieved during this pause period, we may be subject to a 25% tariffs starting in the third quarter.
John Suzuki: Also, during the first quarter of 2025, our products produced in Vietnam were tariff-free. but have since been hit with a 10% tariff during the second quarter. which may rise to 46% if the trade deal is not reached with Vietnam. Less than 5% of our product revenue comes from finished good products manufactured in China.
Speaker Change: Also during the first quarter of 2025, our products produced in Vietnam, where tariff free.
Speaker Change: But have since been hit with a 10% tariff during the second quarter.
Speaker Change: Which may rise to 46% as the trade deal.
Speaker Change: Not reached with Vietnam.
Speaker Change: Less than 5% of our product revenue.
Speaker Change: It comes from finished good products manufactured in China.
John Suzuki: Shortly after the new 145% tariff announced on April 9th, we halted all volume shipments from China and started a transfer project to move most of the production to Taiwan by July 2025. Reducing our China finished good product exposure to less than 1% of revenue. It is slightly more expensive to manufacture in Taiwan. And Taiwan is subject to the minimum 10% tariff. But economically and politically, Taiwan is more favorable than remaining in China. Our supply chain, like that of all our competitors, is global, with parts manufactured and assembled in numerous countries around the world. So we're not alone in having to contend with increased supplier costs should tariffs increase further.
Speaker Change: Shortly after the new 145% tariff announced on April 9th we halted all volume shipments from China.
Starting to transfer project to move most of the production to Taiwan by July 2025.
Speaker Change: Reducing our China finished good product exposure to less than 1% of revenue.
Speaker Change: It is slightly more expensive to manufacture in Taiwan, and Taiwan is subject to the minimum 10% tariff, but economically and politically Taiwan is more favorable than our remaining in China.
Speaker Change: Our supply chain like that of all our competitors is global with parts manufactured and assembled in numerous countries around the world.
Speaker Change: So we're not alone in having to contend with increased supplier costs should tariffs increase further.
John Suzuki: We will, of course, be watching the tariff activity closely, especially as we near the end of the designated tariff pause on July 9.
Speaker Change: We will of course be watching the tariff activity closely, especially as we near the end of the designated tariff pause on July 9th.
John Suzuki: In this uncertain landscape, we remain focused on controlling the elements of our business that we can control, most importantly, making sure that we deliver quality radius to our customers. on the front lines of emergency service and law enforcement response while also delivering profitability to our shareholders.
Speaker Change: In this uncertain landscape, we remain focused on controlling the elements of our business that we can control most importantly, making sure that we deliver quality radios to our customers.
Speaker Change: On the front lines of the emergency service and law enforcement response, while also delivering profitability to our shareholders.
John Suzuki: On slide five, you can see how growing marketplace recognition and demand for our radios has resulted in solid revenue performance over the last several quarters. Our BKR 5000 single band radio has maintained strong demand as our BKR 9000 multiband gains traction in the market. The multiband capabilities of the 9000 command a higher price point, and we expect to see revenue and gross margin expand comparably as the 9000 becomes a larger contributor to our overall revenues. Of note on this slide, as you can see, our first and fourth quarter revenues are historically a bit lower than the second and third quarter of any given year.
Speaker Change: On slide five you can see how how growing marketplace recognition and demand for our radios has resulted in solid revenue performance over the last several quarters.
Speaker Change: They are 5000 single band radio that's maintained strong demand as our big here 9000, multi bad gains traction in the market.
Speaker Change: The multi band capabilities of the 9000 command a higher price point, and we expect to see revenue and gross margin expand comparably. That's a 9000 becomes a larger contributor to our overall revenues.
Speaker Change: Of note on this slide as you can see our first and fourth quarter revenues are historically, a bit lower than the second and third quarter of any given year.
John Suzuki: This is largely because of seasonality. The second and third quarters occurred during peak wildland fire season. And the fourth quarter is largely dormant in terms of government spending because of the federal fiscal year closes on September 30. During the first quarter of 2025, we saw continued demand for our BKR series radios from state and local government customers. Federal orders were light in the quarter as Congress was delayed in passing the continuing resolution to fund the government through 2025. The CR was eventually signed, and we are beginning to see increased orders from federal customers.
Speaker Change: This is largely because of seasonality.
Speaker Change: The second and third quarters occurred during peak wildland fire season.
Speaker Change: In the fourth quarter is largely dormant in terms of government spending because of the federal fiscal year closes on September 30th.
Speaker Change: During the first quarter of 2025, we saw continued demand for our big here Sirius radios from state and local government customers.
Speaker Change: Federal orders were light in the quarter as Congress was delayed in passing that continuing resolution to fund the government through 2025.
Speaker Change: The CR was eventually side and we are beginning to see increased orders from federal customers.
Scott Malmanger: Now I'll turn it over to Scott Malmanger, CFO, to give a more detailed overview of our first quarter financial performance. Scott. Thanks, John. Sales for the first quarter totaled $19.1 million, an increase of four and a half percent compared with 18.2 million for the same quarter last year. Sequentially revenues increased 6.3% compared to the revenues of $17.9 million in the fourth quarter of 2024. gross profit margin in the first quarter was 47% compared with 34.5% in the first quarter of 2024 and improved sequentially from 41.2% in the fourth quarter of 2024. Selling general and administrative expenses or SG&A for the first quarter total approximately 6 million compared to 5.3 million for the same quarter last year.
Speaker Change: Now I'll turn it over to Scott now manager CFO to give a more detailed overview of our first quarter financial performance Scott.
Scott: Thanks, John.
Scott: Sales for the first quarter totaled $19 $1 million.
Scott: So four 5% compared with $18 2 million for the same quarter last year.
Scott: Sequentially revenues increased six 3% compared to the revenues of $17 9 million in the fourth.
Scott: Fourth quarter of 2024.
Scott: Gross profit margin in the first quarter was 47% compared with 34, 5% in the first quarter of 2024, and then improve sequentially from 41, 2% in the fourth quarter of 2024.
Scott: Selling general and administrative expenses or SG&A for the first quarter totaled approximately 6 million compared to $5 3 million for the same quarter last year.
Scott Malmanger: Operating income totaled $2.9 million compared with an operating income of $983,000 in the first quarter of 2024. The company achieved net income of $2.1 million, or GAP EPS, of $0.60 per basic and $0.55 per diluted share in the first quarter of 2025, compared with a net income of $681,000, or $0.19 per basic and diluted share in the prior year period. Non-Gap Adjusted Earnings, which adds back net realized non realized gain or loss on investment. stock-based compensation expenses, non-cash income tax provisions and severance expenses was $2.6 million or $0.74 per basic share and $0.68 per diluted share in the first quarter of 2025.
Scott: Operating income totaled $2 9 million compared with an operating income of $983000 in the first quarter of 2024.
Scott: The company achieved net income of $2 1 million or GAAP EPS of <unk> 60 per basic and 55 cents per diluted share in the first quarter of 2025 compared with a net income of $681000.
Scott: <unk> or <unk> 19.
Scott: Per basic and diluted share in the <unk>.
Scott: Higher year period.
Scott: non-GAAP adjusted earnings, which adds back net realized and unrealized gain or loss on investments stock based compensation expenses.
Scott: Noncash income tax provision and severance expenses.
Scott: With $2 6 million or 74 cents per basic share and 68 cents per diluted share in the first quarter of 2025.
Scott Malmanger: This is compared with adjusted earnings of 1.1 million or 30 cents per basic and diluted share in the first quarter of 2024. We reported non-gap adjusted EBITDA of $3.2 million in the first quarter of 2025 compared with non-gap adjusted EBITDA of $1.4 million in the first quarter of 2024. Slide seven illustrates how our success driving margin improvement has favorably impacted adjusted EBITDA and net income growth dating back to the fourth quarter of fiscal year 2023. Here you can clearly see how our revenue shift towards the 9,000 combined with our outsourced manufacturing model and our cost reduction efforts have driven steadily enhanced profitability and we expect to achieve continued profitability moving forward.
Scott: This is compared with adjusted earnings of $1 1 million or <unk> 30 per basic and diluted share in the first quarter of 2024.
Scott: We reported non-GAAP adjusted EBITDA of $3 2 million.
Scott: In the first quarter of 2025, compared with non-GAAP adjusted EBITDA of one 4 million in the first quarter of 2024.
Scott: Slide seven illustrates how our success in driving margin improvement has favorably impacted adjusted EBITDA and net income growth dating back to the fourth quarter of fiscal <unk>.
Scott: Year 2023.
Scott: Here you can clearly see how our revenue shift towards the 9000 combined with our outsourced manufacturing model and our cost reduction efforts have driven steadily enhanced profitability and we expect to achieve continued profitability moving forward.
Scott Malmanger: Our balance sheet remains strong with approximately $8.9 million of cash and cash equivalents and no debt as of March 31, 2025. Working capital improved to approximately $24.6 million at March 31, 2025, compared with $23 million. at December 31st 2024 Shareholders equity increased to $32.4 million, compared with $29.8 million at December 31, 2024.
Scott: Our balance sheet remains strong with approximately $8 $9 million of cash and cash equivalents.
Scott: And no debt as of March 31, 2025.
Scott: Working capital improved to approximately $24 6 million at March 31, 2025, compared with $23 million.
Scott: At December 31, 2024.
Scott: Shareholders' equity increased to $32 4 million compared with $29 8 million at December 31, 2024.
John Suzuki: I will now turn the call back over to John. Thanks, Scott. We're pleased with the strong start we've achieved in the first quarter, and we remain focused on the task at hand, getting our radios into the hands of first responders and public safety personnel. The economic landscape has been uncertain, and we're looking forward to receiving some clarity around the tariff situation. Regardless, we remain confident that we're well positioned for continued long term profitable growth. With our current visibility, we are maintaining our previously stated 2025 targets of single-digit full-year revenue growth with gross margin of at least 42%.
John Suzuki: I will now turn the call back over to John.
John Suzuki: Thanks Scott.
John Suzuki: We're pleased with the strong start we've achieved in the first quarter and we remain focused on the task at hand.
John Suzuki: Getting our radios into the hands of first responders and public safety personnel.
John Suzuki: The economic landscape has been uncertain and we're looking forward to receiving some clarity around the tariff situation.
John Suzuki: Regardless, we remain confident that we're well positioned for continued long term profitable growth.
John Suzuki: With our current visibility we are maintaining our previously stated 2025 targets of single digit full year revenue growth with gross margin of at least 42%.
John Suzuki: We are also holding to our 2025 full year gap diluted EPS target to be in excess of $2.40 and 2025 full year non-gap diluted adjusted EPS in excess of $2.87. Please keep in mind that these targets reflect the current uncertainty around tariffs. As the tariff situation becomes clearer, there is a possibility that we will revisit and upwardly revise our EPS targets. As we move through the balance of 2025, we will continue to invest in our sales and marketing efforts to heighten the marketplace visibility of our multiband BKR9000. The capabilities of this radio significantly expands our target verticals, providing a substantial opportunity for our continued profitable growth.
John Suzuki: We are also holding to our 2025 full year GAAP diluted EPS target to be in excess of $2 40.
John Suzuki: And 2025 full year non-GAAP diluted adjusted EPS in excess of $2.80.
John Suzuki: Please keep in mind that these two these targets reflect the current uncertainty around tariffs as.
John Suzuki: Does the tariff situation becomes clearer there is a possibility that we will revisit an upwardly revised our EPS targets.
John Suzuki: As we move through the balance of 2025, we will continue to invest in our sales and marketing efforts to heightened the marketplace visibility of our multi band and be care 9000, the capabilities of this radio significantly expands our target verticals, providing a substantial opportunity for our continued.
John Suzuki: Profitable growth.
John Suzuki: Likewise, we are committed to furthering our R&D capabilities, particularly related to strengthening our BK1 offering. Just after the close of our first quarter, we announced an order for our rebranded RelayOne portable repeater kit, which is a nice endorsement of demand for our BKOne solution. Development of our next generation BKR9500 mobile radio remains on track. As we mentioned before, the BKR9500, which is expected to launch in 2027, is designed for installation in first responder vehicles, and will be marketed as the companion radio to the BKR9000 multiband portable radio. We're excited about the opportunities we're seeing in increased marketplace presence.
John Suzuki: Likewise, we are committed to furthering our R&D capabilities, particularly related to strengthening our BK one offerings.
John Suzuki: Just after the close of our first quarter, we announced an order for our rebranded really one portable repeater kit, which is a nice endorsement of demand for our BK one solutions.
John Suzuki: Development of our next generation <unk> 9500 mobile radio remains on track.
John Suzuki: As we mentioned before the daycare 9500, which is expected to launch in 2027 is designed for installation and first responder vehicles, and maybe will be marketed as the companion radio to the daycare and 9000 multi band portable radios.
John Suzuki: We're excited about the opportunities we're seeing in increased marketplace presence.
John Suzuki: We're focused on capitalizing on the interest in and demand we're seeing for our BKR series radios. with a particular focus on expanding adoption of our BKR9000 multiband radio. We believe we're well positioned to capture new customers and address new market verticals as we pursue continued profitable growth and enhance shareholder value.
John Suzuki: We're focused on capitalizing on the interest in and demand we're seeing for our B T. R series radios with.
John Suzuki: With a particular focus on expanding adoption of our <unk>, our 9000 multi band radio.
John Suzuki: We believe we are well positioned to capture new customers and address new market verticals as we pursue continued profitable growth.
John Suzuki: Hence shareholder value.
John Suzuki: With that, we can now open the call for questions. Thank you very much.
John Suzuki: With that we can now open the call for questions John.
Speaker Change: Thank you very much at this time, we will be conducting a question and answer session. If you would like to ask a question you can do so by pressing star one on your phone keypad now confirmation tone will indicate that your line is and Nicky you May Press Star two if you would like to remove your question from the key for any participant cheese.
Operator: At this time, we will be conducting our question and answer session. If you would like to ask a question, you can do so by pressing star 1 on your phone keypad. Confirmation Tone will indicate that your line is in the queue.
Operator: You may press star 2 if you would like to remove your question. For any participants using speaker equipment, it might be necessary to pick up your handset before you begin. Please wait a moment whilst we poll Thank you.
Speaker Change: Speaker equipment, it might be necessary to pick up your handset before pressing the keys. Please wait a moment must be poll for questions.
Speaker Change: Thank you. Your first question is coming from Jason Smith of Lake Street Capital, Jason Your line is life.
Jason Schmidt: Your first question is coming from Jason Schmidt of Lake Street. Jason, your line is. Yeah, thanks for taking my questions and congrats on the strong results. Just looking at those Q1 results, I know you noted that Q1 tends to be seasonally weak. Do you think it was impacted by any pull-in orders into Q1? No.
Jason Smith: Hey, guys. Thanks for taking my questions and congrats on the strong results just looking at those Q1 results. I know you noted that Q1 is seasonal tends to be seasonally weak do you think it was impacted by any pull in orders into Q1.
Speaker Change: No.
John Suzuki: Morning, Jason. I had to think about that for a second. No, I don't believe so. In fact, we probably would have done a little bit better had the federal orders.
Speaker Change: Good morning, Jason.
Speaker Change: I have to think about that for a second no I don't believe so in fact, we.
Speaker Change: We probably would have done a little bit better had the federal orders.
Jason Schmidt: Unknown Speaker . had followed more of a historical nature, where we would have seen some more orders in the first quarter. But as I mentioned on the scripted portion of the call, the federal orders were delayed in Q1 because of the continuing resolution. Gotcha, that's helpful. And then gross margin obviously really strong in Q1, understanding sort of this 10% baseline tariff goes into effect Q2, but you also are implementing a price increase. So just trying to reconcile all these splits and takes. I mean, from that 47 level, I assume a step back here, but where do you think gross margin sort of stabilizes here in Q2?
Speaker Change: Hum.
Speaker Change: <unk> had followed more of a historical nature, where we would have seen some some more orders in the first quarter, but as I mentioned on the scripted.
Speaker Change: A portion of the call the federal orders were delayed into Q1 because of the continuing resolution.
Speaker Change: Got you that's helpful. And then gross margin obviously early strong in Q1 understanding sorry, 10% baseline tariff goes into effect.
Speaker Change: But you also are implementing a price increase so just trying to reconcile all lease footprint.
Speaker Change: Thanks.
Speaker Change: From that 47 level I assume a step back here, but where do you think gross margins very stabilizes here in Q2.
Jason Smith: Okay. So good question Jason.
John Suzuki: So, good question, Jason. I think in our last call, I had said that we felt that we would be hit with tariffs out of Mexico, for example, in the second quarter. That hasn't materialized, at least as of today. And the indication from the administration is that they're going to continue with the zero tariff policy for products coming in under USMCA for the balance of the second quarter. So, that's very positive. Given that, we definitely believe that we will be above 42%. We are experiencing some tariffs, which are which did hit us in Q2 from products coming in from Vietnam.
Speaker Change: At our last call I had said that.
Speaker Change: We felt that we would be hit with tariffs.
Speaker Change: Mexico for example.
Speaker Change: In the second quarter that hasn't materialized at least as of today.
Speaker Change: And the indication from the administration is that they're going to continue with the with a zero tariff policy for products coming in under U S. MCA for the balance of the second quarter. So that's very positive.
Speaker Change: Given that we definitely believe that we will be above 42%.
Speaker Change:
Speaker Change: We are experiencing some tariffs, which are which did hit us in Q2 from products coming in from Vietnam.
Jason Schmidt: Okay, perfect. And then last one for me, and I'll jump back into Q. I know you don't want to disclose the exact amount from the BKR 9000. But just curious at a high level, if revenue was up sequentially in Q1 for that device. I'm sorry, Jason, I didn't understand the question. Yeah, just for the BKR 9000 device, revenue from that radio, was it up sequentially in Q1? Yes. Okay, perfect. That's it for me. Thanks a lot, guys. Thank you, Jason.
Speaker Change: Okay, Perfect and then last one for me and I'll jump back into queue. I know you don't want to disclose the exact amount from the <unk> 9000, but just curious at a high level. If revenue was up sequentially in Q1 three of that device.
Speaker Change: I'm, sorry, Jason I didn't understand the question.
Jason Smith: Yeah, just from a BK or 9000 device revenue from that radio was it up sequentially in Q1.
Speaker Change: Yes.
Speaker Change: Okay perfect. That's it for me Thanks, a lot guys.
Jason Smith: Thank you Jason.
Speaker Change: Thanks very much. Your next question is coming from Aaron Martin of AI G. H investment partners are in your line is live.
Aaron Martin: Your next question is coming from Aaron Martin of AIGH Investment. Aaron, your line is Hi, good morning. Congratulations on a very strong quarter. Thanks for the reminder on the seasonality. With the late continuing resolution, Do you think that affects seasonality this year? Obviously, do one with a higher concentration of commercial customers versus government than typical. And, you know, do you see the same typical seasonality or maybe just be a condensed timeline? Everything for the government side has to go out in Q2-Q3. What are your thoughts around that?
Aaron Martin: Hi, good morning, congratulations on a very strong quarter.
Speaker Change: Thanks for the reminder of the seasonality.
Aaron Martin: With totally continuing resolution.
Speaker Change: If you think that affects seasonality this year.
Speaker Change: Q1 was a higher concentration of commercial customers versus government and typical.
Speaker Change: And.
Speaker Change: You will see some typical seasonality or maybe just speaking to.
Speaker Change: Condensed timeline.
Speaker Change: Because everything for the government side, you have to go out in Q2.
Speaker Change: What are your thoughts around that around now.
John Suzuki: Thanks for the question, Aaron. So what I can tell you is the continuing resolution did pass in mid-March. What I can tell you is our key customers did receive funding for the projects that we were working with them on, and that they're submitting those to contract it. So those are all positive things. We are impacted. We are seeing some impacts from Doge, mostly in delays, and some people leaving, right? Some of our key contacts have either been terminated or accepted early retirement. So that has created some delays in getting things put through. In terms of the timing of getting the orders processed in the environment that we're at, that's the big question mark.
Speaker Change: Thanks for the question there.
Speaker Change: So what I can tell you is the continuing resolution did pass and in mid March what I can tell you is our key customers did receive funding.
Speaker Change: For the projects that we were working with them on and that they're submitting those to contract. It. So those are those are all positive things.
Speaker Change: We are impacted we are seeing some impacts from Dow just mostly in delays.
Speaker Change: Some people, leaving right some of our key contacts have.
Speaker Change: Either terminated or accepted the early retirement, so that has created.
Speaker Change: Some delays in getting things put through.
Speaker Change: In terms of the timing of getting the orders processed in the environment that we're at that's the Big question Mark It's unclear to me.
John Suzuki: It's unclear to me, you know, today, whether or not we'll see those orders come through in the normal timeline. And as you mentioned, those orders need to be placed by September 30th, the latest, or else they lose that funding. So at this point, all I can say is... Do you need to deliver by September 30th, or those orders need to be placed by September 30th? The orders need to be placed. and Deliveries are negotiated. So it could be, we could receive all the orders on September 30th, and then we would negotiate a delivery schedule starting October 1.
Speaker Change: Now today, whether or not we'll see those orders come through in the normal timeline and as you mentioned those orders need to be replaced by September 30 of the latest or else. They lose that funding. So at this point all I can say is you need to deliver by the by September 30th So those orders need to replace the system.
Speaker Change: 30th.
Speaker Change: The orders need to be placed and deliveries are negotiated.
Speaker Change: So it could be.
Speaker Change: We could receive all the orders on September 30th and then we would negotiate a a delivery schedule.
Starting October one.
John Suzuki: for those radio. So that's. So that's kind of where we are, Aaron, is is again, the funding has been approved, they're pushing projects forward. All that's positive. But this this year is just different with the Doge impact.
Speaker Change: For those radios.
Speaker Change: So that's.
Speaker Change: So that's kind of where we are here and this is again the funding has been approved they are pushing projects forward all that's positive.
Speaker Change: But this year, it's just different with the Doe genpact.
Aaron Martin: All right, and following up on Jason's question, nice to see the 9000 ups sequentially. Do you expect to see that as we transition towards the 9000? throughout the year. We expect 9,000 to be sequentially up every quarter, I guess maybe besides for Q4 with the seasonality. I so the short answer is yes, I do see that our revenue will increase on the 9000 quarter over quarter. Just to put a little bit more color and perspective in it. We're expecting that the 9000 revenue will be somewhere between two or three times higher than what it was in 24.
Speaker Change: Got it.
Speaker Change: Welcome Jason's question nice to see the 9000 up sequentially do you expect to see that as reward this transition towards the 9000.
Speaker Change: Throughout the years, we expect 9000 to be sequentially up.
Every quarter I guess, maybe besides for Q4 with the seasonality.
Speaker Change: So the short answer is yes, I do see that.
Speaker Change: Our revenue will increase from the 9000 a.
Speaker Change: Quarter over quarter.
Speaker Change: Just to put a little bit more color and perspective and that we're expecting that the 9000 revenue will be somewhere between two or three times higher than what it was in 'twenty four.
Aaron Martin: Okay, great.
Speaker Change: Okay great.
Scott Malmanger: And for Scott, can you talk a little bit about the, you know, the, the deferred tax asset, the uncertainty, I can get a 1.4 million on long term uncertain tax. liability, which was a release of the tax asset and how much of your taxes right now are cash taxes and how long can that last now that we're, you know, generating significant operating income. Yeah, we pretty much utilize... Most of our deferred tax assets at this point, there's always some timing differences for some of the R&D efforts and that sort of thing, so it's not exact, but we pretty much utilized what we can for the deferred tax assets.
Scott: And then for Scott.
Speaker Change: Can you talk a little bit about the.
Speaker Change: Deferred tax asset the uncertainty I think at $1.4 million, Walter one sort of packs.
Speaker Change: Liability, which was the release of the tax asset and how much of your taxes right now our cash taxes and how long can that last mile that we're generating significant operating income.
Yes.
Speaker Change: Much utilized.
Speaker Change: Most of our deferred tax assets at this point.
Speaker Change: There is always some timing differences for.
Speaker Change: Some of the R&D efforts and that sort of thing so its not.
Speaker Change: Exact but its pretty we pretty much utilized what we can for the deferred tax assets now we did have that uncertain tax provision and it's got to do with some of the R&D.
Scott Malmanger: Now we did have that on certain tax provision, and it's got to do with some of the R&D credits and stuff that we had historically, so that will work off in the future, and we'll see how it goes from there, but you're exactly right. With the profitability that we're achieving now, we will be in a position to continue to pay taxes, and your guess is probably as good as mine, but someplace in the 20% to mid-20% range for federal and state tax. Got it. But so just, you know, I think you get $670,000 of P&L taxes this quarter.
Credits and stuff that we had historically.
Speaker Change: So.
Speaker Change: That will work.
Speaker Change: In the future and we will see how it goes from there, but youre exactly right.
Speaker Change: The profitability that we're achieving now we will be in a position to continue to pay taxes.
Speaker Change: And your.
Speaker Change: Your guess is probably as good as mine, but someplace in the 20% to mid 20% range for federal and state taxes.
Speaker Change: Got it.
Speaker Change: Thank you.
Speaker Change: Of the $70000 of P&L taxes this quarter, how much of that was cash was that basically all cash.
Scott Malmanger: How much of that was cash? Was that basically all cash? Yeah. A significant portion was cash that is Okay, thanks a lot.
Speaker Change: Yes.
Speaker Change: Okay significant portion with cash that is correct.
Speaker Change: Okay. Thanks, a lot.
Yeah.
Speaker Change: Thank you very much just as a reminder, if at all any remaining questions you can often by pressing star one on your thank you.
Operator: Thank you very much.
Operator: Just as a reminder, if there are any remaining questions, you can ask them by pressing star 1.
Robert Van Voorhees: Our next question is coming from Robert Van Voorhees of Xanatox.
Speaker Change: Our next question is coming from Robert Van Voorhees.
Speaker Change: Is that a tox capital Robert Your line is life.
Scott Malmanger: Robert Euline Robert Euline Hey, good morning, guys. Great quarter. I just had a hopefully quick question just on SG&A. Obviously, it jumped up just as a result of the investments we're making, which are probably good things to do long term. But I would just like to ask, you know, what do you guys think? Where do you really want SG&A sort of over the long term? Is it do you want as a percent of revenue, maybe closer to what it was last year? Or do you expect it to grow as we try to get to 9000?
Speaker Change: Hey, good morning, guys, great quarter I, just had a hopefully a quick question just on SG&A, obviously, it jumped up just as a result of the investments were making which are probably a good thing to do long term, but I would just like to ask you know what do you guys think where do you really want SG&A sort of over the long.
Speaker Change: Jeremy is it do you want as a percentage of revenue maybe closer to what it was last year or do you expect it to grow as we try to get to 9000.
Scott Malmanger: You know, more enhanced of the customers? Or where do we really want SG&A over time?
Speaker Change: You know more enhanced customers, there or where do we really want SG&A overtime.
Scott Malmanger: That's an excellent question. Thanks for the question. The way I look at it is, is our SG&A costs are, you know, the structure is relatively fixed for the vast majority of our SG&A expenses. Now, we did indicate in on the fourth quarter call, that in 2025, that we're going to, you know, do some more investments in marketing initiatives, specifically about around the BKR product line. And then we also have the new product development. Now we can capitalize a portion of the new product development costs. for the mobile radio. But not all costs, you know, according to generally accepted accounting principles, there are certain materials and prototypes and all that kind of stuff that you can't capitalize.
Speaker Change: That's an excellent question. Thanks for the question.
Speaker Change: The way I look at it as our SG&A cost or the.
Speaker Change: This structure is relatively fixed for the vast majority of our SG&A expenses now we did indicate in the fourth quarter call that in 2025 that we're going to.
Speaker Change: Do some more investments and marketing initiatives, specifically about around the BK or product line.
Speaker Change: And then we also have the new product development now we can capitalize a portion of the new product development cost.
Speaker Change: For the mobile radio.
Speaker Change: But not all cost.
Speaker Change: According to generally accepted accounting principles.
Speaker Change: Certain materials prototypes and all that kind of stuff that you can't capitalize so we are going to see.
Scott Malmanger: So we are going to see, you know, incremental costs there. But I'd say it's going to, you know, be rather lumpy quarter to quarter. But in the long in the long run, I think we're going to see operating leverage with more or less a fixed SG&A structure.
Speaker Change: Incremental costs, there, but I'd say, it's going to.
Speaker Change: B, rather lumpy quarter to quarter.
Speaker Change: But in the long in the long run I think we're going to see operating leverage with more or less a fixed SG&A structure.
Scott Malmanger: Got it. And can you make maybe this is too detailed to comment on but what How much of SG&A is just related to strictly new product development? So I know we can't capitalize all of the expenses with the $9,500, but can you comment on how much is just strictly? being expensed on the income statement related to that. You can, you can look in the queue and it provides what we've got for, you know, basically the engineering. Now, we don't break out what it is for sustainment of existing products and new product development. But yeah, that's, I would say that's probably the best source.
Speaker Change: Got it and can you maybe.
Speaker Change: Maybe this is too detailed to comment on but.
Speaker Change: What.
Speaker Change: How much of SG&A is just related to strictly new product development. So I know, we can't capitalize all of the expenses with the 9500, but can you comment how much is just strictly.
Speaker Change: Being expense on the income statement related to that.
Speaker Change: You can you can look in the Q and it provides what we got for basically the engineering now we don't break out what it is for sustainment of existing products and new product development.
Speaker Change: Yes.
Speaker Change: I would say that's probably the best source, we don't we don't disclose any more details on that.
Scott Malmanger: We don't, we don't disclose any more detail than that.
Robert Van Voorhees: Okay, got it. That's it for me. Thanks. Thank you very much.
Speaker Change: Okay got it that's it for me thanks.
John Suzuki: Thank you very much while we appear to have reached the end of our question and answer session I will now hand back over to John any further remarks.
John Suzuki: While we appear to have reached the end of our question and answer session, I will now hand back over to John for any further remarks. Thank you, Jen. Thank you all for participating in today's call. We look forward to speaking with you again when we report our second quarter results. All the best to all of you and have a great day. Thank you very much.
John Suzuki: Thank you Jen.
John Suzuki: Thank you all for participating in today's call. We look forward to speaking with you again, when we report our second quarter results.
John Suzuki: All the best to all of you and have a great day.
John Suzuki: Thank you very much. This does conclude today's conference you may disconnect. Your phone lines at this time and have a wonderful day, we thank you for your participation.
Operator: This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day.
John Suzuki: Okay.