BK Technologies Corporation

Good morning, ladies and gentlemen, and welcome to the BKTI first quarter 2025 earnings call. This call is being recorded. All participants have been placed on a listen-only mode. Following manager's remarks, the call will be opened 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, Jen Belladeau of IMS, Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to our conference call to discuss BK Technologies' results for first quarter 2025. On the call today are John Suzuki, Chief Executive Officer, and Scott Malninger, Chief Financial Officer. I'll take a moment to read the Safe Harbor statements. 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 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 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. With that out of the way, I'll turn the call over to John Suzuki, CEO of BK Technologies. Please go ahead, John.

Thank you, Jen. Thank you, everyone, for joining today. I'll start by reviewing some of the highlights of our operations and financial results during the first quarter. And 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 the call for a brief Q&A. Our first quarter continued the momentum we built throughout last year, giving us a strong start to 2025. First quarter revenue of $19.1 million increased both year-over-year and sequentially, and we delivered significantly improved gross margin of 47%. Our ability to drive enhanced gross margin is a direct result of our ongoing shift to higher margin product mix, our successful transition to a contract manufacturing model, and our partner, EastWest Manufacturing, and our ability to achieve continued operating expense reductions across the organization. We continued our path of delivering enhanced profitability achieving net income of $2.1 million or $0.55 per diluted share in the first quarter compared to a net income of $681,000 or $0.19 per diluted share in the first quarter of 2024. Non-GAAP adjusted earnings were $2.6 million or $0.68 per diluted share in the quarter compared to $1.1 million or $0.30 per diluted share in the same period of last year. With our performance in the first quarter of 2025, we achieved our seventh consecutive quarter of profitability. And finally, backlog at March 31st, 2025 was 18.8 million compared to 19 million at the close of the first quarter in 2024. As I mentioned a moment ago, we have been intently focused on improving gross margin by delivering excellent operational execution facilitating the shift in our product mix toward the higher margin BKR 9000 and implementing cost reduction strategies, including the successful transition of our manufacturing operations to east-west. Slide 4 demonstrates the steady progress we have made with these initiatives, which have resulted in our ability to report consistently improving gross margin. In 2024, Our full year gross margin of 37.9% comfortably exceeded the target gross margin range of 35%. For full year 2025, we increased our target gross margin to 42% or greater, and at 47% for the first quarter, we're off to a good start. I do want to take a minute to address the uncertain macroeconomic environment. In terms of tariffs, our gross margin target for 2025 including assumptions about tariffs and their potential financial impact. And as such, we, like many other companies, are monitoring the situation closely. About 95% of our product revenue comes from finished good products that are manufactured in the USA, Mexico, and Vietnam. During the first quarter, BK Products produced in Mexico entered the U.S. tariff-free under USMCA and continued tariff-free during the 90-day pause period. If a trade deal with Mexico is not achieved during this pause period, we may be subject to a 25% tariff starting in the third quarter. Also, during the first quarter of 2025, our products produced in Vietnam were tariff-free. but have since been hit with a 10% tariff during the second quarter, which may rise to 46% if the trade deal is not reached with Vietnam. Less than 5% of our product revenue comes from finished good products manufactured in China. Shortly after the new 145% tariff announced on April 9th, we halted all volume shipments from China, started a transfer project to move most of the production to taiwan by july 2025 reducing our china finished good product exposure to less than one percent of revenue it is slightly more expensive to manufacture in taiwan and taiwan is subject to the minimum 10 tariff but economically and politically taiwan is more favorable than remaining in china our supply chain like That of all our competitors is global with parts manufactured and assembled in numerous countries around the world. So we're not alone in having to contend with increased supplier costs should tariffs increase further. We will, of course, be watching the tariff activity closely, especially as we near the end of the designated tariff pause on July 9th. In this uncertain landscape, we remain focused on controlling the elements of our business that we can control, most importantly, making sure that we deliver quality radios to our customers on the front lines of emergency service and law enforcement response, while also delivering profitability to our shareholders. On slide five, you can see how growing marketplace recognition and demand for our radios has resulted in solid revenue performance over the last several quarters. Our BKR 5000 single band radio has maintained strong demand as our BKR 9000 multiband gains traction in the market. The multiband capabilities of the 9000 command a higher price point, and we expect to see revenue and gross margin expand comparably as the 9000 becomes a larger contributor to our overall revenues. Of note on this slide, as you can see, our first and fourth quarter revenues are historically a bit lower than the second and third quarter of any given year. This is largely because of seasonality. The second and third quarters occurred during peak wildland fire season. And the fourth quarter is largely dormant in terms of government spending because of the federal fiscal year closes on September 30th. During the first quarter of 2025, we saw continued demand for our BQR series radios from state and local government customers. Federal orders were light in the quarter as Congress was delayed in passing the continuing resolution to fund the government through 2025. The CR was eventually signed, and we are beginning to see increased orders from federal customers. Now I'll turn it over to Scott Malmanager, CFO, to give a more detailed overview of our first quarter financial performance. Scott?