BK Technologies Corporation

Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation conference call for the fourth quarter in year-end 2022. This call is being recorded. All participants have been placed on a listen-only mode. Following management's remarks, the call will be open to questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast. Before turning the call over to our Chief Executive Officer, Mr. John Suzuki, for opening remarks, I will provide the safe harbor statement. Statements made during this conference call and presented in the presentation that are not based on historical facts are forward-looking statements. Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company's revenue and profits. These statements are subject to known and unknown factors and risk. 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 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. 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, Holly. 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 it over to our Chief Financial Officer, Scott Malmanger, for a deeper dive into our financial results. We'll conclude by opening up the call for a brief Q&A. Turning to slide three, the fourth quarter caps off a challenging yet exciting year for BK Technologies. In the quarter, we shipped 11,200 radios, bringing the shipments for the year to 25,200, in line with our previously disclosed expectation. The supply chain issues that we faced in Q1 and Q2 have been largely mitigated, and our expanded manufacturing capacity is fully operational. The bottom line is that our BCARE 5000 has been a success in the marketplace, and our customers love the product. Second, we have recently made considerable progress towards the launch of our BKR 9000 multiband radio. We submitted the product to the FCC in December, and it is our expectation that we will receive FCC certification shortly. We're excited to bring this product to market and look forward to getting this technology into our customers' hands. The BKR 9000 has multiband capabilities that will provide opportunities in several new markets. With this expanded exposure, our potential addressable market will be exponentially larger. Finally, in October 2022, our SaaS business unit launched our first service, Interop One, an innovative product that is filling what we believe is a dire need in the industry. It is a new push to talk over cellular service, which enables universal interoperability between different technologies and service providers to deliver on-demand group communications for first responders. Field trials have started with federal, state, and local agencies, and we recently received our first order from a large public safety agency in a top five U.S. metropolitan market. Turning to slide four. Our BKR5000 radio continues to see strong traction in the marketplace. In the quarter, we shipped a record 11,200 units, more than double the amount shipped in the third quarter. As new and existing customers upgrade their radio fleets, they recognize the high performance, durability, and value of our BKR5000, driving strong demand for this product. In addition to growing demand, Much of this increase was related to the easing of supply chain constraints and material shortages being cleared in time for the fourth quarter shipments. During 2022, we added a second production line at our Melbourne, Florida facility, significantly increasing our manufacturing capacity and allowing us to get more product out the door in the fourth quarter. Turning to slide five. We are entering 2023 very well positioned to continue to drive growth. Based on the strong backlog and bookings momentum, coupled with our pending BKR 9000 launch, we are targeting the shipment of 32,000 to 36,000 radio units in 2023. If we meet that target, this would represent radio unit shipment growth of 25 to 40% compared to 2022. Now turning to slide six. We are at a very exciting point in the pending launch of the BKR 9000. It has taken a little bit longer than hoped, but we are very close to the starting point in fulfilling the pent-up demand for this product. In December 2022, we delivered the radios for FCC testing and certification, and we expect to receive FCC certification shortly. Once we receive certification, we will turn our attention to completing the transition from development to manufacturing, and finally, shipping. As part of our pre-launch activities, we've been conducting extensive testing on the product's durability. In emergency situations, particularly in remote and rugged areas, the reliability and durability of our product is paramount importance to our customers. As you can see in the pictures on the right side of the slide, even driving over the BK9000 with a 13-ton fire truck could not stop it from working. This is just one difference between designing a device for the first responder market versus the retail market. We're seeing a great deal of market interest for the BK9000 with pre-orders already accounting for the first three months of production. We look forward to keeping you appraised of our progress as we continue to move closer to the finish line. Turning to slide seven. In October 2022, our SaaS business launched Interop One, the only POC service that enables interoperability between first responders through the on-demand creation of user talk groups. We believe Interop One has a tremendous market opportunity to address a broader market audience within the public safety communications market, and will serve as a blueprint for our development of additional BKR Play services, which will ultimately drive more demand for our BKR series radios. The public safety market is massive. We believe the addressable market for Interop 1 alone is around $150 million. And this assumes a low single-digit market penetration. Many field trials are underway with various federal agencies under the Department of Homeland Security, Department of Justice, USDA, and Department of Interior. Importantly, we recently received our first purchase order for service from a large public safety agency in a top five U.S. metropolitan market. We are confident that this will be the first of many to come. We believe that our Interop One patent-pending technology has the potential to close the current interoperability gap in public safety communications by enabling all first responders to communicate together in minutes. In an industry where situation awareness and response times are everything, If Interop 1 can improve first responder response times, lives can be saved. Before I turn over the call to Scott Malmanger, our Chief Financial Officer, I wanted to address our decision as announced in this morning's press release to suspend the dividend. While we understand that this decision might disappoint some of you, at this time of heightened growth, we believe that our ability to invest our capital in the development and marketing of our products and services will enable us to generate higher shareholder returns in the long term. As I just finished detailing, we are seeing significant market interest in our BKR 5000 and the BKR 9000, and we're focused on positioning the company to best capitalize on these opportunities, along with the future opportunities associated with the continued success of Interop 1. Now, I'll turn over the call to Scott, who will review the financial and operating highlights. Scott? Thank you, John.

The following is a summary of our financial and operating results for the period ending December 31, 2022. Sales for the fourth quarter totaled approximately $20.3 million, compared with $12.8 million for the same quarter last year. Fourth quarter bookings were $8.2 million, and the company received bookings of $71 million for the full year 2022. Gross profit margins as a percentage of sales in the fourth quarter were 22%, compared with 36% in the fourth quarter last year. The decrease in gross profit margins primarily reflect cost increases in material and freight costs, as well as a one-time inventory adjustment of 254 000 related to certain components for our bkr product line selling general and administrative expenses or sgna for the fourth quarter total approximately 6 million compared with 4.4 million for the same quarter last year specifically engineering expenses for the fourth quarter of 2022 included a one-time write-off of $646,000 for new product development components that were not included in the final design of the BKR 9000 radio. Operating loss totaled $1.6 million compared with an operating income of $227,000 for the fourth quarter last year. In the fourth quarter of 2022, we recognized the net realized and unrealized gain of $708,000 on our investments compared with an unrealized loss of $530,000 in the same quarter last year. We recorded a net loss of $961,000 or six cents per basic and diluted share in the fourth quarter 2022 compared with a net loss of 303,000 or two cents per basic and diluted share in the prior year period. However, adjusting for the previously mentioned one-time inventory adjustment and new product component write-off, we recorded an adjusted net loss of 61,000 or break-even adjusted earnings per share. And finally, as of December 31st, 2022, we have approximately $1.9 million of cash and cash equivalents and only $329,000 in long-term debt. From a liquidity standpoint, we believe that our current cash position combined with anticipated cash generated primarily by radio sales and borrowing availability under our credit facility provides us with the working capital that we need to grow our business. As we announced in the press release, we have also suspended our dividend in order to prioritize our capital allocation on organic growth, specifically the BKR 5000, launch of the BKR 9000, and the SAS division, which we believe will generate higher long-term shareholder returns. I will now turn the call back over to John.