BK Technologies Corporation

Good morning, ladies and gentlemen, and welcome to the BK Technologies Cooperation conference call for the first quarter 2022. This call is being recorded. All participants have been placed in a listen-only mode. Following management's remarks, the call will be open to questions. Before turning the call over to our Chief Executive Officer, Mr. John Suzuki, for opening remarks, I will provide the following safe harbor statement. Statements made during this conference call are not based on historical facts or forward-looking statements. Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company's revenue and profits. These statements are subject to known and unknown factors and risks. The company's actual results, performances, or achievements may differ materially from those expressed or implied by these forward-looking statements. Some of the factors and risks such material differences have been described in yesterday's and in BK's filings with the U.S. Securities and Exchange Commission. These statements are based on information and understandings that are believed to be accurate as of today, and we do not undertake any duty to update such forward-looking statements. I will now turn the call over to John Suzuki, CEO of BK Technologies. Mr. Suzuki, you may begin.

Thank you, everyone, for joining today. I'll start by reviewing some of our highlights of our operations and financial results during the quarter, then I'll turn over the call to Executive Vice President and Chief Financial Officer Bill Kelly for a deeper dive in our financial results. We'll conclude by opening up the call for a brief Q&A. We continue to see strong market demand for our BKR 5000 product line, and this demand drove record first quarter bookings of 15.7 million. The BKR 5000 has demonstrated proven success in the field, and we're pleased to see continued strong interest from both existing and new customers as they upgrade their radio fleet. While we've had a phenomenal quarter from new order booking standpoint, as expected and as mentioned on our fourth quarter call, during January and February, we contended with supply chain challenges and saw shortages of certain components. As a result, deliveries we planned to complete in the first quarter have been pushed into the second and third quarter of 2022. Beginning in March and to date in the second quarter, we have been able to resolve the supply chain issues and ramp up production. Given the shipment delays and higher than expected demand for our BKR 5000, we have increased the production rate for the BKR 5000 to 130% of plan. We now plan to keep this run rate for the balance of the year. With this elevated production rate, we're optimistic that our ability to convert orders into shipments will continue to improve as we move through the balance of 2022. On the cost side, we are being impacted by many of the same factors that others are contending with. We remain focused on controlling those costs to help mitigate the impact to our near-term gross margin performance. We are intended on establishing the resources and processes to optimize our supply chain so that we're positioned to ensure that our customers are receiving their orders in a timely manner. It is important to reiterate that demand has never been stronger for our products, and we're doing everything we can to fulfill demand in a timely manner. In addition to the success in the market, We've also made significant development progress in our new multiband radio, the BKR9000. I'm pleased to report that we've begun deploying a few BKR9000 radios in the field for engineering test purposes. These radios will be tested on live customer trunk radio systems in both rural and urban environments. Pending results of these field tests will be in a much better position to finalize a launch date. As we've mentioned before, our success in the marketplace is contingent upon our ability to deliver a product line that enables real-time, mission-critical communications. And we look forward to continuing this track record with our next generation BKR 9000 multiband portable radio. Finally, in March, we announced the launch of a dedicated business unit focused on delivering software as a service, SAS, solutions to the public safety market. This is a huge initiative for our company, which will be led by industry veteran James Thiel. The new unit will develop and deliver a comprehensive suite of state-of-the-art subscription-based software solutions to first responders via the LTE public cellular network. I joined BK Technologies last July with the vision of expanding the company beyond the traditional land mobile radio market and positioning us as a leader in the broader public safety LMR LTE communications market. We've already filed for three patents related to push-to-talk over cellular and other cellular-based smartphone applications for first responders. To commercialize these ideas, we're currently developing a BK-branded smartphone application codenamed BKR Play. BKR Play will deliver an entirely new set of services to increase first responder safety and productivity. With these offerings, we have a significant opportunity to increase our sales reach beyond wildland fire, to penetrate markets including the military, urban structure fire, law enforcement, and emergency response, among others. I'm confident that BK Technology is poised for growth in 2022. We have a reliable and well-received line of existing products that we work continuously to improve and expand. and we're ready to capitalize on numerous opportunities emerging for tethering LMR devices such as the BKR series radios and public safety smartphone applications on the public LTE cellular networks. Additionally, our balance sheet remains strong, providing us the financial flexibility to develop cutting-edge new products and solutions and explore strategic opportunities that will complement our growth as we continue scaling BKR BK Technologies. At this point, I'd like to turn over to Bill Kelly, our Executive Vice President and Chief Financial Officer, who will review the financial and operating highlights. Bill?

Thanks, John. Following is a summary of our financial and operating results for the period ending March 31, 2022. Sales for the first quarter totaled approximately $6.6 million. compared with $8.6 million for the same quarter last year. Gross profit margins as a percentage of sales in the first quarter were 22.4%, compared with 36.4% for the first quarter last year, primarily due to cost increases in materials and freight and lower manufacturing volumes. Selling general and administrative expenses, or SG&A, for the first quarter totaled approximately $4.9 million, compared with $4 million for the same quarter last year. Our operating loss totaled $3.4 million, compared with an operating loss of $853,000 for the first quarter last year. Our net loss for the first quarter of 2022 totaled approximately $3.9 million, or 23 cents per basic and diluted share, compared with a net loss of approximately $670,000, or 5 cents per basic and diluted share, for the same quarter last year. For the first quarter of 2022, we recognized an unrealized loss of approximately $500,000 on our investment in FG Financial Group, compared to an unrealized gain of $205,000 in the first quarter of 2021. As of March 31st, 2022, working capital totaled approximately $21.7 million, of which approximately $11.1 million is comprised of cash, cash equivalents, and trade receivables. This compares with working capital totaling approximately $25.2 million at the end of 2021, which included $18.8 million of cash, cash equivalents, and trade receivables. And lastly, this quarter marks our 24th consecutive quarterly dividend to shareholders under our capital return program. That concludes my remarks. We'll now move on to the Q&A session of the conference call. I would like to remind everyone that we do not provide financial and operational guidance on a quarterly or annual basis. Ali, we're now ready to open the floor for questions.