BK Technologies Corporation

Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation conference call for the fourth quarter and full year 2023. This call is being recorded. All participants have been placed on a listen-only mode. Following the management's remarks, the call will be open for questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast. At this time, it is my pleasure to turn the floor over to your host for today, John Nesbitt of IMS Investor Relations. Please go ahead.

Thank you. Good morning and welcome to our conference call to discuss BK Technologies results for the fourth quarter and full year 2023. On the call today are John Suzuki, Chief Executive Officer, and Scott Malmager, Chief Financial Officer. I'll take a moment to read the safe harbor statement. Statements made during this conference call 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 risks. 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 the company's press release and in BK's filings with the 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. Okay, I'll now turn the call over to John Suzuki, Chief Executive Officer at BK Technologies. Please go ahead, John. Thank you, John.

Thank you everyone for joining today. I'll start by reviewing some of the highlights of our operations and financial results during the quarter and fiscal year. 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. Our 2023 fiscal year was highlighted by strong revenue growth and margin improvement. 2023 marks our second consecutive year of revenue growth with full-year revenue increasing 45% to $74 million. And we capped off the year with a profitable fourth quarter that included earnings of $0.08. Driving this growth was the performance of our BKR series radios. We shipped 34,500 radios in 2023, a 37% increase over 2022. Our BKR 5000 single-band radio is enjoying strong market demand as federal, state, and local customers upgrade their portable communications technologies. And likewise, our newly launched BKR 9000 multiband radio continues to gain recognition and traction. While the multiband capabilities of the BKR 9000 drive a higher price point, there is only a nominally higher cost to manufacture the 9000 as compared to the BKR 5000. So we believe the 9,000 can significantly enhance our margin as it continues to gain popularity among our customer audiences. The fourth quarter of 2023 marked our sixth consecutive quarter of sequential gross margin improvement to 35.1%, a return to historical levels. And we achieved full-year gross margin of 30% compared to 19.3% in 2022. As announced last year, we are in the process of shifting the manufacturing of our radios to east-west manufacturing. We believe that outsourcing our manufacturing and transition to a more asset-light model will improve our margins in the long term by simplifying our supply chain management and reducing production expenses and end product costs. EastWest is an existing reliable partner and this transition is an important strategic step for a business that we believe will help us to ensure efficient fulfillment of purchase orders and strengthen our margins over time. The move to EastWest is underway and will take place in planned stages with no expected interruptions in production or shipping capabilities. Under the terms of the agreement, EastWest has also made an aggregate $2 million investment in BK Technologies that consists of the purchase of 77,520 shares of the company's common stock at a price of $12.90 per share, as well as warrants to purchase 135,500 shares of common stock at an excise price of $15 per share. The East-West investment closed in the fourth quarter of 2023, and we appreciate their vote of confidence in our company. Turning to slide four. We continue to grow the amount of radio units shipped annually, and as a result of increased shipments, we recognized strong revenue growth in 2023. As I mentioned before, we saw 37% in radio units shipped in the full year 2023 compared to the full year of 2022 and revenue growth of 45% compared to the prior year driven by a combination of increased radio shipments as we work through the backlog that accumulated during the supply chain constraints in 2022 and significant order activity related to the BKR product line. At the beginning of the fourth quarter, we received a purchase order for our BKR 9000 from the State of Hawaii Department of Health as they battled the wildfires. Another large purchase order from Sandoval County valued at $963,000, which, as I said last quarter, we defined as a Tier 3 county in terms of population density. Also in the fourth quarter, we received a $315,000 purchase order from the United States Department of Defense representing the BKR 9000's growing recognition among federal and military agencies. This order activity has continued in 2024. In January, we received a purchase order from the Arkansas Department of Agriculture and Forestry Division for 87 BKR 9000 radios, which are compatible with the Arkansas P25 system allowing the forest division to standardize on a single radio model across all operations. I'm pleased to say that we've already completed shipment of this order, and the customer subsequently increased their order to more than triple the initial amount. We also received an order for 315 BKR 9000s from Boulder County, Colorado. As part of an upgrade program, to replace a variety of Boulder radios for 26 fire agencies throughout the county. This order is especially exciting because Boulder County is a Tier 2 county with over 300,000 residents, showcasing the 9,000's ability to penetrate larger markets. Turning to slide five. 2023 was characterized by a consistent gross margin improvement and a return to the lower end of our historical margin levels as we closed out the year with the fourth quarter gross margin at 35.1%. This was our sixth consecutive quarter of gross margin improvement dating back to the second quarter of 2022 when supply constraints severely impacted our margin profile. We continue to advance our cost reduction initiatives and believe that our transition to contract manufacturing, coupled with the higher margin BKR 9000 radio, becoming an increasingly larger part of our product mix, positions us well to continue improving margins in fiscal 2024. Now I'll turn over to Scott Mallmanager, CFO, to take you through the financials. Scott?