Earnings call transcript Q2 2023

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Operator

Greetings. Welcome to the BK Technologies Second Quarter 2023 Conference Call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions]. is conference this note being recorded. Please

now Jen Belodeau. will turn the host, your to over conference I

You may begin.

Jen Belodeau

the XXXX. Good our discuss for conference you. call quarter Thank morning to BK and Technologies welcome to second of results

and On the John read a Chief are call the take Safe Officer. will now Scott Executive I Suzuki, Financial moment Malmanger, Chief today Officer, to Harbor statement.

but based statements. during in projections of the profits. are company's to include risks. not unknown subject presented Such to conference forward-looking presentation known revenue are are and on factors not and call this facts or Statements future made targets historical limited goals and are statements regarding and statements that statements These and the

those by forward-looking The or results, company's actual performance, or from statements. these expressed achievements materially differ implied may

factors Exchange And in been have risks BK's filings U.S. some material cause with release in that described such to or and Commission. the the and and of contribute differences this press morning's could Securities

on based update such that and undertake to duty are as are any we statements. do statements today, accurate be information forward-looking of These to not believed understandings and

Technologies As slide there is BK accompanies that remarks, can reminder, be via the presentation which accessed a today's a homepage.

to will John. John I call Go CEO turn now, Technologies. the of BK And Suzuki, over ahead,

John Suzuki

our opening joining Q&A. a Thank the We'll conclude during quarter. some for Jen. Financial of you, call financial dive up results. Thank by Scott and you, it the for into Officer, a financial results deeper Then to today. reviewing our over start I'll Chief everyone, by Malmanger, brief of our turn operations the for highlights I'll

XX% quarter $XX quarter, continued year. a of million, with saw compared We revenue in momentum three. second slide the to last to second to growing Turning

we first shipped radios, During XX,XXX. to shipment half the our total bringing quarter, X,XXX

guidance, of good or our up delivery end maintaining range the at With it. surpassing believe a high XX,XXX even there's but shipment are target progress we're making, our that of chance we'll to we XX,XXX, annual radio we the potentially end

the multiband FCC the pleased were quarter, BKR first to BKR our U.S. XXXX and second to radio, completed early the we Army. our receive In June in of very we XXXX certification for shipment

capabilities communications attractive With cost-effective the a portable next-generation enhanced and BKR price very radio. is XXXX its point,

calls, to discussed we new multiband portable open bring XXXX the new other a to on market several verticals, the we larger capabilities this expect and As new to of addressable excited we're market communication up with customers. solution BKR

Turning to slide four.

demand as upgraded and the Our activity strong particularly customers quarter, BKR second existing continued technology. communications portable XXXX saw during order their

radios two of totaling Department the purchase received USDA XXXX we the from as as Resources. well Natural Forest orders at large from over order State Service, note, Washington significant Of valued XXX,XXX a

Booking to are and portable longtime BK strong, $XX backlog in technology. with million of as we're as ended we more them and activity partner agencies customers, communications was June newer, reliable to upgrade Both XX, quarter XXXX. quarter the the they grateful a of with

seeing Slide five XXXX traction five. continued BKR illustrates radio. we're with Slide our the

year units, shipped XX,XXX in to this the levels us half XX,XXX anticipate closing end believe XX,XXX, second a in date. to As the of moment the to shipped second out year and a our of ago, range we range. total X,XXX of radios on be we mentioned today, the With visibility quarter, will bringing shipment high

slide six. to Turning

second for performance the margin quarter disappointing. gross was Our

launched result, reduction will a be and cost As we in now as we initiatives quarter experienced delays initiatives, in been favorably anticipate margins the third earnest, those impacted. have implementing our

the with multi-band balance continued to longer mix improvement our with no year. does delay BKR target margin see now expect product a now radio, this XX% the XXXX the mean meeting anticipate gross we for includes through of initiatives margin said, and full gross year. that Unfortunately, That of underway, we the favorable

in we savings further drive continue quarter will quarter commitment initiatives to our cost these XXXX over expansion. that as is expectation margin Our

the highly our Slide who our seven and experienced portable manufacturing to instrumental are seven. teams shows innovative development of communications BKR radio. launch engineering Slide XXXX multi-band

we program, the shipping BKR for and the PXX approval assessment PXX or In after. June, BKR XXXX, FCC compliance CAP and XXXX received certification began shortly

Our first U.S. our to received delivery, and to to BKR initial XXXX the additional we Since Army. shipment this the was we're have pleased of continue radios relationship. from Army, several orders the expand U.S.

makes the take to exciting for such an deeper dive PXX opportunity into trunk In XXXX moment radio and about like there I'd the U.S. the market little company. opportunity to X,XXX our systems. what a BKR this for alone, are a radio

part, PXX to communication each city-owned which provides most PXX and statewide an the their state systems. radio regional, county, radio system, own operates For overlay radio

common systems frequency LMR frequency trunk bands. very or different all can need there that for in multi-band on band, adjacent radio the is four PXX operate a that a these a It's of operate real so overlay

systems. and the BK regional, statewide, with requires has approval XXXX these testing XX PXX owner radio Most assessment on compliance completed BKR trunked or BKR large PXX is process in or thousands over but further are XXXX PXX the system the passed hundreds specific has PXX systems of program, system. of their on The of of users. county each

Customers history has system is years expedite from or feel with at capabilities software us point. BKR feedback the been impressed reasonable a individual Early configuration for approval radio, are owners provides positive, and changes look system many has the required of BK minimum XXXX. high-end experience our of legacy helping to PXX process. price the acquiring approve approval with which radios, indicating and owners the this

products, than RF our better in audio on still noisy better our feedback performs early While and environments. receive anecdotal, radio we competitors' and the that sounds

more energized feedback the customers. and to encouraged by BKR this are XXXX bring We to

to continues we to continue system grow. our book receive order approvals, As

the production Our shipment modest quarter plan remains up and we XXXX. as ramp primer fourth as initially, into line we head and

it over CFO, financials. Scott Now, take to through the Scott? turn Malmanger, you I'll to

Scott Malmanger

million, ending million for June for XX, Thanks, compared period see $XX summary XXXX. a quarter the and John. quarter second On $XX.X same slide the eight, financial year. operating Sales with our for the you'll totaled approximately last of results

As second quarter with closed John mentioned, we of order backlog $XX the an million.

second XX% Selling, or last for was general million, approximately for in the same with total quarter $X million Gross quarter the compared SG&A, expenses, the year. quarter in compared XX% quarter $X.X with the administrative and year. second last profit second of margin

expenses an increased quarter for spending year. and second SG&A $X.X awareness loss of million the included as loss we $XXX,XXX, Operating launched with XXXX. of last the improved of BKR compared market totaled operating

of XXXX, same recognized in the quarter In investments, net unrealized the $XXX,XXX loss of on the year. with the quarter $XXX,XXX second unrealized last loss compared our of we net

$X.X basic our and basic gross XXXX, expectation per prior with the net sales, in a profitability. per year performance, second and It diluted $X.X that and our period. We the in or improvement, $X.XX $X.XX is continued margin towards million, recorded of we million, should loss quarter significantly reduced share strong diluted with share of progress a compared or of net loss continue

working And facility debt. June our to primarily under grow have believe cash capital provides the equivalent, a our borrowing finally, radio us cash approximately From in liquidity and position we and need business. that cash sales generated $XX,XXX we standpoint, by as XX, of we availability of credit anticipated long-term with XXXX, only our with $X.X million cash and that combined current

the John. back over turn I will to call

John Suzuki

for Thank we you, nine, focus slide Scott. XXXX. and reiterate On our operational strategic

focused First, maximizing production efficiency. on we remain

the year. to radios is XX,XXX Our quarter, full per XX,XXX produce to or up set capacity for

production and XX,XXX XX,XXX the we of We our forecasted of on are shipment between target stated and based backlog radios targeting to demand, radios. X,XXX per maintain and annual quarter, XX,XXX

up a this earlier, estimate, I for delivery will is end where conservative on based of chance sit, guidance believe we end said we As our the the good on year. high is a that we radio and

focused Second, driving are through on XXXX. margin we improvement gross

that establish beachheads local is in public the our goals. the important in third revenue efforts as we continuing portable establishing these is plan markets continued beachheads radio, BKR to and the XXXX XXXX, And safety and federal, and strategic our We for focus InteropONE. multi-band achieving XXXX growth for area around state, believe

our million revenue of On reiterate we reaching XXXX. last goal long-term slide, XX. our $XXX in by Slide

a communications drive to provider communications We are the and BK critical safety technology for public as market. premier growth to and investing establish profitable

to through have as existing our XXXX BKR that markets BKR new in cycles. and Likewise, the now new a among as success as our Our significantly to grow move upgrade launched brand the its customers opportunity XXXX, we our appeal equipment to have customers is their target they we recognition proven audience. well expand customer

potentially the saving capabilities Finally, lives. InteropONE turn times, to we safety ideal which in will improve improve responders, think response and first has between communications

InteropONE as gain we As presence will reoccurring high-margin, service, over role anticipate revenue time. we a delivering play in meaningful SaaS market a

that, to questions. for turn Mike? over the operator With call the I'll

Operator

Williams Matt Instructions]. [Operator a our At comes this have question from time, It session. Friess will and we first conducting be do Associates. question. We answer with

Matt Williams

the take of John, QX? in I about the and business minute versus units number QX maybe you to talk if wondered a shipped just could in seasonality

John Suzuki

Yes.

our core So, wildland in fire. is business

So, their is in QX build like tapers and to off again. QX starts busy in and QX It season in QX. now,

as shipped fires, second the they're ordering that's kit accessories. radio look they're teams in quarter versus per lot of checking fire per being the a out revenue radio So revenue and lot because are in if you quarter, average for and at, shipped these wildland second first example, a the higher average quarter to deployed the their is

We're of what said the historically about you And within look a first so, this radio. had was total to tracking that if half $X,XXX at year. the year, we it's

of In assume the the quarter radios? quarter, asking shipped in second ship Matt, didn't first number more that I terms you're of radio we the versus why

Matt Williams

that's Yes, my question.

John Suzuki

Yes.

number accessory little We were dock late. to did last I and so came week. specific similar in it X,XXX from that production some that of can shipments expecting on produced we Yes, standpoint, sitting radios. a We have of had in with a radio ship say Okay. a a about that bit this our radios

been So, that a a standpoint, radios but have XX,XXX it we're to closer holding from we would production if to week been line. had shipped, earlier,

Matt Williams

it. Got

shipped So X,XXX radios that to so has presume Q end? I subsequent or

John Suzuki

Yes.

Matt Williams

of you some All component below were it hoping cost progression just for. issues on And Was costs? right, gross What margins higher what savings? continued coming Was it helpful. it you you what got margins? slowed gross then, realization about in kind the your were? about talked talk that of slower Can That's is it.

John Suzuki

programs we our radios is a of to again, The the programs still slightly costs that in and I take offshore, normalized. and specific So we've in update general, component there's right? these a say has but we less I first, downs, cost the or cost whack, few more that cost down. for component into bring had bigger had brought stabilized. would we number mean, out components radios is let are What of from these because the issue factories the me it's seen

get could so, costs And these margins these very we we these aggressive say. these year, this I we target But had on get and up products. a out would of believe radios

that's In of did anticipated QX, of we some we had some not, that was getting development some those cost the would because just recognizing delayed, start certifications, of then that and it the and and it we quarter, savings, this All this into believe the of will have the impact we said, that, being into factory. margins introduced in well, quarter. favorable know we that a

Matt Williams

Is gross Got the that Maybe in achieve there run margin rate? exiting a second can it. the number you half? you think

Scott Malmanger

XX% incremental comfortable in past, the still Scott range, say is upper Malmanger. best historical to this XXXX. we're expecting, towards of back rates this mid said expect we In way improvement to that we've we're I to and remainder we're for quarter-over-quarter and through is the year the trending we trending This towards say the direction. that that upper XXs, would continue the are

John Suzuki

we'll in get say is the The we're timing if would I point and an there. could that QX. like that, escalation on said, towards And can Yes, confident seeing we certainly cost we're of initiatives the and moving aggressively issue when, that. the that some Matt, put I I start

Scott Malmanger

Yes.

Matt Williams

right, it. quick Got things. couple more All

So flattish sequentially, programs. up on there cutting your some I were OpEx, to cost thought

expect going you next or could quarters? over Just is any of that if the we if rate run appropriate should wondered forward share couple changes the if OpEx level

Scott Malmanger

again, BKR once XXXX. side I launching are on would say OpEx the we the

and costs the of increases we with costs So sort that market production thing. have awareness and of some incremental associated for

to the best initiatives. So, think to we're ability is definitely structure our improvement going going margin -- be our I we're for on and our the managing year gross focus to continually remainder of of the our cost

is that I can as think, as I good down. that So nail about

Matt Williams

points you're Got milestones for Okay. you Last thing data even it. us can with any that or is to me anecdotals seeing terms regard market in InteropOne of on with interest? share what

John Suzuki

that it. Yes. No, thanks for I appreciate question.

feedback excellent of a quarter. InteropOne these next plan from going number getting to we're more a and presentation have we So on trials customers. some extensive I do on actually

like in I'd quarter. time I with said, such about on But So, it's okay wanted mean, product. if good. terms coming it's XXXX. do clients to a the and What to really we're like we trials. been excited I from extremely particular continue for in And focus call was this next the I this punt this long more are get to of the very InteropONE, field feedback you,

about enhancements so. the version based Interop we're released a actually that an second We'll next fact, release to the that we're getting. or In month on of have all like in feedback

and be strong. continues continues to development So feedback

Matt Williams

guys. Thanks,

Operator

next AIGH with is question Our Investment Martin Aaron Partners.

Aaron Martin

I on Good Scott. focus want to XXXX. Hi, John. good morning, morning, the

the of over then the great. coming time So margin? and It's ties shift let's gross a obviously What long as into we the terms And expect XXXX? should quarters towards ASPs certification. go that FCC ultimately there. XXXX into and in mixed then, coming. Congratulations on It's the

John Suzuki

what shipping That's Aaron, year, some inclusive this right, to is big XX,XXX said XX,XXX of to going So for be we've year we're XXXXs. radios.

more On in total be start going to that's the material ramping because it's fourth the be it when much number material to the production. for number, we're a not going but will quarter, year,

mix that, XXXX. situation, I that competitive that between not number take. guidance Beyond on the is the shift very or going especially providing keeping I'm of total the It's sold. revenue approach radio we're And on it or targets a a at to radio just our think

much as higher XXXX the revenue radio said, the we is and margin on the much Now per better. more that is clearly XXXXs, being ship

those as we you'll go see we so, grow XXXXs, especially the And as where XXXX numbers more mix will over two ship more time, into be prevalent.

Aaron Martin

the which about to margin, talking initial was assume of larger. the material. cost-downs shift the much accurate? year, cost-down to we well I north that If would from on plan the just the that XX% Is towards QX, that a demand get apply, you're bigger gross than are In runway the talk the obviously of because, rather Okay. for piece XXXX a that about your increases

Scott Malmanger

I wouldn't say that specifically, Aaron.

and, did say for to don't I'm the I of I in know our thankful in were of in improve our lack it, expected right? second and think, yes, margins we execution, we And, a we better we quarter our it. margins how disappointed it's right? do mean, quarter lost gross like to that. else I

Aaron Martin

than more a little a It's percent.

Scott Malmanger

to Yes, expected that's be it's be, really more And not it so, where what's we to wanted off it anything it or pushing right? than else.

Aaron Martin

XX-plus then shift the -- I'm cost-downs, that it the of of of those delay? And How a obviously on or components what cost-downs just percent then is part to the guess two those big items? Is I two I to trying the higher mixed to is but towards not? getting figure are accessory out how mixed trying shift. I'm the the, there are I'm And much to gross think those get also big margins, us delay then some gross split on is is only there. trying sort two don't XXXX the margin. delay between this and there's items the shifts at

Scott Malmanger

coming those Yes, margins What that is products programs so in gross were into was so, in that and of thought happened latter would we right? are delayed. right? some would But QX programs to an the programs And end. for factory better execution, have we the those the result our introduced not, or an

to factory. those more introduced going the ones thought our programs a be But in a have now gross are being had, material We would margins that we that were we the programs into to QX, planned had of series I throughout our what impact say, year.

an lot radios QX. see we'll ship on of initially. a the We planned so to never on And X,XXX impact

the we of So basically that number radios is plan. shipped the

fourth Our changed. hasn't third quarter and plan

Aaron Martin

Okay.

in So those you're the all saying changes cost-downs obviously are programs.

And to to fully the execution so on then programs side, we're be obviously, gross or for we're be or independent those, a QX move in up to That it? that, place margin. in going looking some addition close step the XXXXs by should And QX. these material in in of seeing to

John Suzuki

a an summary, it good independent But a we're Aaron. We the in in up QX. picking And stream. that's bump in now is essence, right? QX, Yes, had speed X,XXX

Aaron Martin

XXXX is this rather -- than, the its for And on Okay. function step enough the own

John Suzuki

that. notice You'll

Scott Malmanger

be is throughout It'll way it. a describe would XXXX, function the step I

Aaron Martin

and on very you Thank Okay. much congratulations continued the progress.

John Suzuki

Thank you Aaron.

Operator

We now Scott from hear Weis with Semco.

Scott Weis

this the John. phones Was Hey, BK-made Scott. accessory have a quarter third-party this questions. accessory. in I got Hey, delay last week to The of two it XXXX the a product product? at or was the due

John Suzuki

a mean, that manufacturers. if a quarter. day, BK of product, to the the into product contract of I at of understand, it But it And one It's have you're matter our fall a you doesn't manufactured of the that was talking right? window, by days, was the but month you if miss end right?

Scott Weis

And cash much. then the balance last your question is, didn't move

by quarter, cashable free in and comment plans what and the that, you for and loss capital for have million so investment And can cash I near in enough investment of believe at with that? that working positive the you a and the do are what purposes? you've $XXX,XXX-plus the is year, on $X.X plans your what were lost then loss that bit, You million for a but or are

Scott Malmanger

investment Yes. and exit. losses, as We review look Scott. far alternatives that we've have investment the numerous had about an continually at And discussions that as available we the

of As working based costs. to situation, our as availability capital interest the continue credit we the line far manage on

higher. our that interest are notice costs You'll

are cash think managing need. maintaining that credit we So we balance we and our line the of

and line of positive good initiatives have So or obtain But right. We'll credit you're I plans, position think that growth have manage accordingly. the we our achieve cash cash have going forward. we to we'll results exactly all-in-all, using a growth

that fund we have. should that any growth So

Scott Weis

Okay. Thank you.

Scott Malmanger

bet. You

Operator

Investment Hirschman AIGH is participant next with Orin Partners. Our

Orin Hirschman

progress and the Hi, I question was to definitely through morning. going How where inventory. progress. good supposed margin happened that lower quarter understand come view lot have the growth inventory. the the the was we that are inventory margin cost of negative that on growth to that getting we're What one the from should on towards side. more because actually cost growth improvement past you on dynamic? actually from going means in higher naturally through there How just congratulations higher A margin, cost of just offset

Scott Malmanger

we use cost There is that inventory. for average and purchased of an the we basis the chain of XXXX inventory issues an amount supply during

So say inventory, over glad to miss quarter improvement quarter those to on to results some or say to second bleed number very incremental more reduction cost there completed we've was execute four I'm and that is last or expect we on. trend of happy since the year. of of second quarters over we now that the a were three that mid-last the the see just but the for due failed in we specific to initiatives to back

it. how that's So I would describe

Orin Hirschman

I'm that? questions. to hundred should the basis still working we of points reiterate tailwind Okay. the in Do How couple inventory? a come going the have higher from through you

Scott Malmanger

I tailwinds say that's would look Yes, the a good incremental it as improvement. I at that for assessment.

Orin Hirschman

over it's one, next completely bled that's off. until the And quarters two

Scott Malmanger

me. Pardon

Orin Hirschman

its that quarters way terms [Indiscernible] higher one of inventory or two through? in when works price

Scott Malmanger

it that's Yes, will work. the way would I say

through the think components purchased calls. bleeding mentioned are brokerage that that on I to We it now. I through XX we XX had prior markets specific

John Suzuki

and mean, didn't lot that, which a We QX. that margin see tailwind obviously the towards I we piece in improvement planning actual of achieve a did working was getting we of So in part it. the QX down were cost of and small

give the of So you idea gave an what tailwind that'll us.

Orin Hirschman

Okay.

update I save for know your third, have quarter, In with albeit big customers but going terms fourth second, we a next [Indiscernible] getting we for are additional small? the where like you're seen to customer, that? of

John Suzuki

are. We

from In first we fact, reseller. actually our received an order

at So InteropONE. us a and this large approached looks fairly the this in dealer States about is United who reselling service

value find is the a to really encouraging, specifically service very right? close that different other had then, see that encouraging. this in fact inquiries. I communities. And And so guys they reselling these Because since in couple these users the think actually I we've are

Orin Hirschman

an find hoping they're But customer and do end taking on customer? it they have just an end to

John Suzuki

have they of Yes, a number end customers.

a They of for customer they're base. service this reseller mobile radio. fairly do land large So

able And end so, value resell to is service what to has they their that they want be and customers. see to service the

Orin Hirschman

end they But went with actually they customers my them any just where just expressed, with question is, on where signed the have of actual, through -- their

John Suzuki

Oh, sorry, you understanding yes. is my were yes, --

Orin Hirschman

just definitely again, go assessments would your cash Okay. better kept it, a wire that in taking and on less a for on the would That's positive pocket be trend. confusing. here just alternative even like, be the loss it And

BKI I swapping Our community, shares or back it investment investment be accretive to would you? for am that liquidating

Scott Malmanger

our we sir, Yes, continue to investment. evaluate

Orin Hirschman

Okay. Thanks.

John Suzuki

you, Thank Orin.

Operator

in I There like back At have. they the would for closing over are remarks any turn hosts the questions no to time, further call may the to queue. this

John Suzuki

in to Thank call. you, when a again best QX. you great today's We Mike. forward our look Thank report All you the participating we with all you for and to speaking day. have

Operator

your today's lines participation. may disconnect conference your you concludes and at time. Thank you for this This

BK Technologies (BKTI) 10 Aug 232023 Q2 Earnings call transcript