BK Technologies Corporation

Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation conference call for the fourth quarter and full year 2024. This call is being recorded and all participants have been placed on a listen-only mode. Following 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, Mr. John Nesbitt of IMS Investor Relations. Sir, 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 2024. 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 and presented in the presentation 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, performance, or achievements may differ materially from those expressed or implied by those forward-looking statements. And some of the factors and risks that could cause or contribute to such material differences have been described in the 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 do not undertake any duty to update such forward-looking statements. Okay, I will now turn the call over to John Suzuki, CEO of 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 the full 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. We closed 2024 with a strong fourth quarter, one that exceeded our expectation and was characterized by exceptional execution across the organization. Revenue increased 9.9% to $17.9 million. and gross margin continued its upward trend to 41.2%. Fully diluted GAAP EPS increased significantly to 93 cents, which was the result of strong execution in a quarter, and also included 37 cents related to a one-time non-cash benefit from deferred tax asset provisions. Our non-GAAP adjusted earnings per share in the quarter was 61 cents per diluted share, a significant increase compared to non-GAAP diluted adjusted EPS of 20 cents in the fourth quarter of last year. Q4 represents our sixth consecutive quarter of profitability for the business. The quarter caps off what was a pivotal year for the company. In 2024, we exceeded our financial and operational targets. delivering revenue of 76.6 million and gross margin of 37.9%. We had initially expected full year revenue consistent with the 74 million we reported in 2023, and we targeted full year gross margin of 35%. So we're pleased to have surpassed both of these benchmarks. Also, you remember that on the third quarter call, we upwardly revised our target full year non-GAAP adjusted EPS to $1.92 per diluted share. I am pleased to report that we significantly surpassed our revised target, coming in at $2.30 per adjusted diluted share. Key contributors to the overachievement were the additional upside revenue, higher than expected gross margin, and a lower actual taxation rate. All of these items positively impacted net income. On the new order activity side, we saw the BQR 9000 momentum building from agencies looking for multi-band option at a price point within their budget. We expect this momentum to continue to build in 2025 as we ramp production and deliver more BQR 9000s to the market. We closed the year with a backlog of 21.8 million at December 31st, 2024. $5.8 million higher than the backlog at December 31, 2023. We believe that this higher backlog helps set the stage for further growth in 2025. Slide 5 is an illustration of the progress we've made with our gross margin performance, much of which can be attributed to our operational execution. the shift in our product mix to the BKR 9000, and our cost reduction strategy, such as transitioning our manufacturing operations to east-west. Fourth quarter gross margin reached 41.2%, and full year gross margin was 37.9%. I do want to take a minute to address the uncertain macroeconomic environment. In terms of tariffs, we, like many other companies, are monitoring the situation closely, and we have gamed out several different scenarios and mitigation plans. Earlier this year, we announced price increases in the range of 5% to 10% on our radio products and certain radio accessories. This new price list was recently accepted by the federal government and becomes effective April 1, 2025, for our reseller network. Initial customer feedback has been supportive as we understand why we are increasing our prices. And to date, we have seen no demand change or pushback from the market due to the higher prices. The BK supply chain, like that of all our competitors, is global, with parts manufactured and assembled in numerous countries around the world. An increase in tariffs will increase our product costs. but it will also increase the product costs for all our competitors. We are not in a position to predict the reach and trajectory of the tariff situation. So our business priority remains on delivering quality radios to the frontline first responders while also delivering profitability to our shareholders. In terms of Dodge, while the federal government remains an important customer, out of the product mix shift to the BKR 9000, we estimate that only 35% of our 2025 revenue will come from the federal government, down from 49% in 2023. The BKR 9000 is driving this change as more local and state governments are adopting the multi-band BKR 9000 radio. Nonetheless, there have been recent changes at the federal level. For example, some of our contacts have changed given the recent layoffs, early retirements, and incentives to terminate. That said, the BK brand and reputation is very strong within our key federal customers. And regardless of leadership changes, we remain confident that the BK brand will remain the brand of preferred choice.