BKTI - Earnings call 3 2023 | BK Technologies Corporation

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Operator

Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation Conference Call for the Third Quarter 2023. This call is being recorded. [Operator Instructions]

Following management's remarks, the call will be open for questions. There is a slide presentation that accompanies today's remarks that can be accessed via the webcast.

is your pleasure Belodeau. host it floor turn time, to over for this now to my the At today, Jen please go Ma'am, ahead.

Jennifer Belodeau

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

John are Scott Chief Executive today Malmanger, call Officer; Financial Chief the Suzuki, On Officer. and

a moment take safe will read the harbor statement. I to

and regarding the The These company's or from these to subject to, forward-looking Statements known results, statements. projections or actual unknown are based revenue on achievements not risks. presentation profits. that made during are and expressed future statements differ but of this materially by statements include, conference those facts or are factors call statements. are may goals performance and and not statements implied company's limited presented forward-looking in the targets Such historical and

These Commission. And on as or cause described that believed and we statements that U.S. based Exchange with duty statements. some contribute update and understandings such do have and this the accurate today, and to to in morning's forward-looking the to of of been risks differences undertake information are any be and release press filings not are in material could factors BK's such Securities

I'll Okay. Go CEO over of With ahead, turn BK John. the that out to of way, Technologies. call the John Suzuki,

John Suzuki

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

improved in $XX.X strong delivered included results which to profitability. a a million, XX% and X. revenue increase Turning margins to return quarter Slide third to gross We

our XX,XXX for very shipping we the target to year. XXXX, good the chance guidance. of XX,XXX During and end With to our achieve shipment we for on delivery first radio we X bringing of visibility believe radios remain between to our range a radios, the XX,XXX our have of and months today, the total track shipped X,XXX quarter, achieve high full we

quarter, multiband ship we also the just XXXX radio. our but continued third the BKR In not BKR to XXXX

ongoing September, State we XXXX We get mobilized Hawaii contended for with as fact, state. order County. aftermath a launch to and assist shipment to new the time out devastating and Maui in this BKR difficult during hope had we're to what to the an from received wildfires emergency to pleased the customer of relationship In a with the of the be an the we in have will quickly they opportunity

BKR the field We The on deal expedite approval tests BK of XXXX continue systems, has more years interest are space. helping process. in capabilities in to is system XX its radios to has history PXX legacy than and and underway. of trunk there XX-plus cost-effective approval the this PXX price offering tests a the additional portable acquiring our great enhanced communication point, with for individual is BKR system market multiband attractive an see which, completed and XXXX experience

success reliability, and we a multi-band radio's us and to opening As up the of for verification expect address forward, we diverse of further the tests more move as field serve capabilities vertical. market that opportunities will these larger

quarter. significant We saw Slide to order during X. activity Turning the third

X not that that because rural to share. Sandoval Tier just radio for county are BKR in X because U.S. the received Mexico great We mentioned, County multi-brand BKR valued an we're market terms also that State a of Hawaii There counties XXXX an define example good just in County, from highlight density. is the I XXXX to addition at I believe but of they us estimated fit order New from positioning Sandoval we order its targeting in point, as a cost-effective population price XXX its $XXX,XXX. suburban gain we what of In to the is capabilities we the a Tier

the $X.X million a for and National some Division which from from XXXX BKR be as there continues included Land the strong of to demonstrated a test Incident XXXX, $X.X demand For and received evaluation. Bureau order the by million also we BKR order Interagency Communications radios Management,

an it's order quarter as seeing with September X. of X order Slide $XX.X we million our the quarter in been busy terms activity, a of XX, backlog traction the very radios. So XXXX. Slide and ended we're of illustrates continued with

a we to of total a moment XX,XXX year-to-date. units, the out bringing for XXXX. year of of from repeat mentioned point And moment ago shipments close my shipped targeted full quarter, range us I believe we the ago, will shipped year XX,XXX the on XX,XXX radios a X,XXX we'll that third our end high in As to the I

to Turning X. Slide

and reduction impact are cost the we our Our positive and continues progress performance higher initiatives make seeing of gross margin revenue. to

margin quarter Our improvement quarter third margin represents gross our consecutive the improvement. sequential fifth in of

product multi-band product of with expect to we mix, XXXX. of to to the the gross see radio quarter fourth and into addition costs, improve continuation continue the higher-margin our reduce the initiatives With through margin our coupled to BKR XXXX

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

Scott Malmanger

XX, operating X, results financial and you'll ending the a see Thanks, John. September of period Slide our XXXX. On for summary

for last compared Sales totaled third the for with approximately $XX.X year. the quarter quarter same million million $XX.X

year than September million full in $XX have Revenues year-to-date of prior million the $XX the XXXX. more surpassed achieved record of for

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

XX% the quarter in was year. third in margin XX% quarter profit last Gross compared the third with

$X.X administrative approximately year. $X.X last with quarter for or same SG&A, the general quarter for compared totaled million and million the Selling, expenses, third

year. of Operating income compared totaled $XXX,XXX the operating third for loss an with last $X.X quarter of million

quarter on quarter In compared investments the XXXX, year. with $XXX,XXX third we net of of last unrealized net a gain loss in the realized of $XX,XXX a recognized our same

compared loss of $X.XX or per prior $X.XX or the quarter million $XX,XXX basic of with and of in net income share per share basic net recorded the in a diluted year $X.X and diluted We XXXX period. third

credit cash $X.X debt. we radio have from From anticipated combined our that of sales and us September line position, credit. facility, equivalents with by approximately borrowing working at transaction expected cash used we believe under with standpoint, $X the down and be our availability pay East long-term provides cash cash to finally, XX, million grow primarily generated in additional our capital our liquidity of a to expected current no we that is West XXXX, The and business. cash And to need million the

over call I the will turn now back to John.

John Suzuki

Scott. Thanks,

business. an our like SaaS to update on you Turning to Slide X. I'd provide

X.X similar detailed but a publishes connections solutions. public believed be opportunity safety public their represents market it We their the Verizon for that safety with public agencies. previously safety SaaS AT&T. does XX,XXX safety latest to publish is to announcing update tremendous subscribers, over connections, their in not public AT&T million FirstNet size frontline regularly

more equipped step vehicle. next With with the connected safety the focus to first believes public spend out responders first be effective responders being will make firmly of safer in smartphones, communication as they BK their more that and

set public line BK's XXXX. and delivered envisioned new X applications for December unit, of smartphone application, Slide our began The Slide patents of a business safety a X. X which through in services features, of our with BKRplay. SaaS patent would provides time X which applications be

in unit by later, vision minutes InteropONE, the to carrier. veteran, patent-pending Eight Teel. with unique a X October form SaaS on-demand we with formalized talk service, which capability of or recognized led was groups formation over any service new using our launched associated cellular XXXX, a quickly push-to-talk cellular smartphone SaaS for industry February XXXX, its less, James its in In BK first business months any

Our subscriber using agencies first the the several have the released features, service. to been from state Recently, field was customer include on BK in onboarded XXXX. customer officially local federal, August Since government paying and first user experience when base our international Canada. our new January enhancing Based InteropONE InteropONE InteropONE. this expanded launch, customer XXXX, feedback, of in trialing

an tethering approach enables a XX, using feature, patent LTE our network. private the LMR to radios PXX a responders second over which October demonstrated public network cellular radios first innovative to at patent-pending application Our communicate we InteropONE smartphones. option with In looked BKR bridge or

an tethering cellular sales. BKR push-to-talk XX XXXX and service drive over XX. example InteropONE highlights of how Slide can Slide

Our recent required Department the Defense multiband, capable. contract LTE be U.S. of award $XXX,XXX and PXX from network ready

do tethering with an great so to Defense, when solution an XXXX of all new a BKR compelling with presented particularly solution. InteropONE Department met at It's we alternative innovative point. beating incumbent with a by Our the relationship U.S. requirements expand that always price competitor our

model. recently to makes consideration, XX. strategic Slide We production Manufacturing. shift we After to our to West it Turning shift operation decision sense to strategic our an careful to analysis asset-light and East believe announced

operations that East and chain several in-house believe partner have we product day-to-day reducing of costs. manufacturing to know, challenging you on will a has West our to to extent, reliable been years. outsourcing operations, enable production simplify our We part of management, relied, which us both has our many and support and for us become manufacturers will supply some As continue always contract efforts, to a

core supply West, development of moving East on and competencies, by LMR technology. Additionally, marketing management chain we communications the to can focus and our production

long-term West, do take on the In of to of become market in and our anticipate we that over place our a the their has portfolio schedules. West based transition QX East in will anticipate addition We a commencing confidence operational Partners, period, company XXXX, the BK not and shareholder a disruptions to in production East benefits, MSD opportunity. X-month products

strengthening efforts. that model the product efficient us Melbourne we're over With introduction the existing will the new for focus ensure move, our also time. of products fulfillment an confident engineering now our move We're high while seeing demand on support will in help to our of facility margins asset-light

to Slide XX. Moving slide, final our

energized optimistic our base opportunities expand by our to markets. We we're interest new customer products the by market we're and seeing about vertical for seeing tapping are the

stated are production strategy remains focused and XX,XXX mentioned operational high believe And target between year. of we maximizing on we XX,XXX radios shipment earlier, I well our end as efficiency. for to paced of meet full our annual the Our

provider a safety established premier public the market growing. and for BK's reputation and communication as is critical communications technology

Our expand our markets to BKR the the demonstrated BKR new cycles. XXXX and new provide the significantly brand existing multiband XXXX us of grow appeal equipment they a among in upgrade and has capabilities customer Likewise, audience. to its success as target our recognition opportunity proven move through customers

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

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

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

Operator

Aaron question Your is Instructions] AIGH Martin first coming from from [Operator Investments.

Aaron Martin

to in return Congratulations margin the profitability. gross and on the improvement

sort we of you're On BKR improvement down a the chain were the improvement. not Obviously, I XXXX quarter, factors? the and between logistics margin, and sequential break the gross can margin, parts breakdown last supply a XXXX. the gross as about know providing in big we talking But

mix So coming of came improvement versus working really out how the chain from issues? much the the supply from

Scott Malmanger

still I our efforts, Thanks reduction cost Yes. question. that, the efforts to cost. of would basically, due for to our most production it answer is impact

say we'll for our 'XX and improvement So with have we that lower think the I I margin improve product XXXX associated to we to arrangement. business, over the improvement that's expect East 'XX, costs 'XX-'XX SaaS as where as continues margin then continue production mix period. West with would continued the and realize the And

Aaron Martin

Got it.

'XX, and transition mix should XXXX side? I them you so XXXX anticipate sort living How big going guess, 'XX? by the BKR of think we side about picture, from And in to how forward, the do

John Suzuki

Thanks Aaron. question, Yes. the for

So X separate addressing markets. we these products view as

rural is So fire, which customers, core the communities. only itself also our XXXX not other wildland in but has in legacy embedded

BKR are these day-to-day law we're the their operations. firefighters are same within buying fire for XXXX, other finding as communities, So the buying enforcements radio departments, that

is So going a now for primarily for mission more of what on mainstay radio. fires was fighting used becoming

what system, frequency county these again, looking are XXXX, It's that And expensive what and they're operating twice customers to basically over these particular multiple reside a they XXXX, addresses the is that's using. no who it different radio on. the frequency interoperate guarantees because in radio, day-to-day perhaps statewide on systems bands really case, their at the would system And in targeted are On there's adjacent an as That's with or have bands as right? those that XXXX. market. and radios for

fire, So purchased day-to-day wildland for for operations. although it's be can really the used being XXXX

who base these And overlap XXXX, so XXXX small are to be are customer will be there the and going the some markets. different between buying but

just at before So gain the base, But fairly adoption the kind if going it I XXXX, of XXXX significant. look base about the rate to took to the it adoption was look started But is of XX forward, break months of and customer I rate be if traction. some still it still determined. out really

with initial small expect similar the which start as And replacing so radio. And orders, quantities, they they'll more XXXX. XXXX. been something in people then we fleet confidence their in and increases order will in the testing the where as quarter-over-quarter confidence volume people And have the larger build we're the And expecting we've see for we XXXX XXXX then increase of the radio. in a more the seeing, through are radio,

Aaron Martin

Okay.

margin being than So also term, as driven operational from revenue mix then sequentially shorter then gross well. the improving and in basically talked into cost in much. pretty items QX rather downs XXXX is you about That and

John Suzuki

Yes.

XX% margins our is between I way think and for has the the XX%. simplistic it company at been look to historical

still not Then still layer you layer doing a to And can margins that get we're activities with East XXXX to new that. right? we're have then we in West. for can you so on our relationship that top of in So point. And us the there, factor

their gross margins expecting that's And board. because we XXXX we XXXX will XX%. of downs our across why production the in for capabilities, additional -- be believe Just cost targeted at we're

journey, long believe a to get there. but get it's there's So path Aaron, there, to we a

Aaron Martin

that East lines we a really why just and they're an have we contract should X-month is Is how at Okay. with about time? over manufacturer, the process disruption. think shouldn't And Is the it? that's transferring Since one West. I any more then more than relationship existing guess

John Suzuki

time. That's exactly a we're taking Aaron. And line at one right,

Aaron Martin

Okay.

talked it's the back the shipped quarter. get has about with volume, have you've overall this we overall mean, end year, even and you've where past, then But the high quarter the seems at being with considering that XX,XXX right about that Going below kind the that been radios, to it's volume look XX,XXX year, that. year. of for of I see at guide the far accessories in the talked high pricing that that but in so the to together do to better I but slightly nice are you for to this you it where environment of the is any it, a now know And I nice the end

the that you especially going end So with the million $XX-plus think quarter? how at we that, do the about have backlog of

John Suzuki

Yes.

And we XXXX about I had think for when into I QX. shipping radios of X,XXX you this year, started ship. this in year, if I to remember, walking because, this XX,XXX had quarter. every We started 'XX, talked couldn't shipping we enormous backlog from most

And up by lead and that's rate starting catch our now. accelerated lead we next on We an were to probably period. second so on be try to this that or normalize year, year of elevated but our been times, normalize at just for through backlog We've the normalized that at definitely quarter an pace in we times first extended back first that year. so the kept backlog. of a half quite believe throughout and the to we'll it could We backlog,

Aaron Martin

Okay.

quarter-over-quarter, how little that the times about and So backlog then lead should the backlog growing to top $X ordering order coming rate, basically continue so forward of was sequentially about the Are the XXXX, going as to lead come that, is got XXXX obviously, expecting for as a the time, times though, on you've we bit down? demand million. are think down, same at and Or down we trends?

John Suzuki

will because continue we'll than believe order QX down, say, QX. Because then weakest then for and backlog larger right, be still new of are year-over-year. a it Yes. lot good Because we Historically, peak and backlog will in and a better quarter down our the to definitely business, quarter, intakes driving QX season to the But for and smaller fourth the but wildland or still our be shipments QX orders QX gets have shipments intake fire goes bit QX. and quarter it we're a in tends order forward. we was is go the than, is seasonal

Aaron Martin

it. Got

EPS Scott, to obviously, nice to back Going see again.

In of FG of loss the the noncash terms on investments. Financial the calculation

I if tax of an in a assuming a there'd there $X.XX million non-GAAP were that, tax to would a difference net that be non-GAAP non-GAAP [ that Is adjustment ex line? $XXX,XXX, the sort or be $XXX create calculation? on EPS. back or would just ] So number, income add there EPS be so about and of of Or proper

Scott Malmanger

tax that and so got with correct. carryforward, same math, your at about the number I we I is loss $X.XX. agree did math,

Aaron Martin

Got it.

the calculation reflective I'd behoove FG company put a Financial, that it is to item, And noncash, there number. the would Okay. non-GAAP that, more correct. definitely just out report just nonoperating EPS

John Suzuki

input. Thank Aaron. point, that for Good you

Operator

Your next from question coming Reiss Montgomery from Scott. Janney is Brett

Brett Reiss

agreement I read are East John, in should of to for the chance for and the in was what on? contract I us arrangement? read yourself X-K the West, had between what What's I in on East type And a haven't them? shoes the that When us important of West. focus that this important key clauses putting it,

John Suzuki

Yes, let step me a just back bit. little

first, years. progressive for working new that them So We've we've over is with not period. West this scope been increase over relationship. had X with And a East

chain in they were a met In crisis, I their I was listing CEO first and during May the with help, and year very their time the accommodating. was fact, last nice supply which

reach. believe, world. long-term of facilities overall advantage had a And So the successful their manufacturing we've terms taking of across relationship been in They I global XX and performance. a we've one have,

our dependent on And The partner because critical. that is like step company. don't take is East And I major you a West step other for our we're when it's this, lightly. would making the right for take revenues picking we make now comment a

or that at picking criteria used looked good comparison in in fit BK. that of we a was was One the to of a terms partner size

so a there. contract of there the you size manufacturers the But BK, out when that, And larger if lot their we're size of mean, XX of I I say look look East top West at customer their at are in you base. and

And their I it they that that for and the have and on we us to just that so but a as did customer attention sure small was are that customer factor a when chain, of on significant problems make list. course, pay their important in happens, wanted not to list, supply me we're that an we

are so the we we that when looked down West. some criteria at with path of And those started East the

get Now which own reasons is, before and into we product. and But can of can contract, of right, just that factory successful in machinery manufactured a their our you own should That's at are the changes facility any lines quality why to the and production. the one we products. it the of this introduce this a the are make run facility, our So that all important BK, other our details, into on I be end we lot product, West different we so first never day, think at I the for production through relationship these be kept East in right? to our happen requirements. we the when in thing it forget delivery the requirements one, They

to short, is was production. of new a introduce on that One, under production. We enjoy disruption between confidence And in actually to did and introduce two It start always products it the getting very we understand second time And your get works. is validation the in the it is battle previous very into the things, that impacts arrangements. production so We does the that production our not we right? before change short.

contract can think it's I specifically. more than you the what see in So

a contract manufacturer you a between and contract the contract think standard I would pretty that a company. is see

we covered again, place. chose terms and first think we our quality. think I about and in we the East partner deliveries in the why I it's bases of ensuring And West more chose

Operator

from Your Investment Orin AIGH is Hirschman from next coming Partners. question

Orin Hirschman

Congratulations on especially gross the progress margin. overall,

bring additional customers I there's and you that Can another for currently? going tests this a are clients could to customer, this us whatever the offering. assume there mentioned lot kind at lot on point? us Have tests any that of date? a Give going so Are are added how us of multiple SaaS up live? see on there can they And on, you You scales of them? you tell

John Suzuki

Yes.

field going trials Orin, I pretty think on, significant. Yes, there's about roughly. it's XX

that a small. and let -- customers total still of very trade a show, come right, were walk we solution So system." had a standpoint, so It's level. communications And from "Hey, through But invited emergency says, paying and smartphone cellular right? see state at you We're by. we that intrigued on-demand make customers, audience the a the the salesperson that InteropONE, customer handful not person the week, it's presentation a every and provides a are almost to pitched at so big. this revenue using actually your to broader and we back that state me here's And was

that, took we X-hour like hours. expecting the X would so And meeting, did it be a meeting

system, the meeting with but it radio. And of BKR it started conversation, had excited this and front these to And about then off an a We time moved vision just radio next they not on InteropONE they getting devices radio spent XXXX. of quickly of the of X operating for totally the customer in gotten and as InteropONE new to radio the the this hours, the that and beauty connection state was whole together. were that tethering the

gives at going its front the how opportunity get our service and service, look proven of still much in a to that's it interested business. to pull-through present People get are ability to InteropONE, and terms on of the And so a generate perhaps in in for in didn't of of out. kind we customers difficult that itself us great TBD have really it, to for be would if front is terms I that's own, it in XXXX. But of us on more this revenue

Orin Hirschman

like XXXX or the it and with with it's XXXX, why specifically, or you ask to really, going keep mentioning XXXX goes supposed the you to it was that's the that. even be I

John Suzuki

It's those Yes. types customers, multiband to radios. radio. we're both front you, in of be honest of in interested But with when they're

tethers BK the Series BKR it line. so XXXX, radio any other and bring radio Series So with yes, we radio, on the that under the the XXXX

Orin Hirschman

million even Okay. higher Great. the small X.X $X with if the to meaningful. count, XXXX, revenues, margin it's I of $X share is million mean it's also recurring, through obviously, or XXXX. And million on high-margin hardware pull obviously, quite nice the

Operator

hand session. Thank you. our concludes That I to the conference ahead. back go Suzuki John will Q&A now for closing Please remarks.

John Suzuki

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

BK Technologies (BKTI) 9 Nov 232023 Q3 Earnings call transcript