BK Technologies reports 4.5% revenue increase and raises full year EPS guidance to $3.15, highlighting strong demand and operational improvements.

OPERATOR - (00:01:04)

Good morning ladies and gentlemen and welcome to the BK Technologies Corporation conference call for the second quarter of 2025. This call is being recorded. 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, Jen Belladow of IMS Investor Relations. Please go ahead. Thank you. Holly Good morning and welcome to our conference call to discuss BK Technologies' results for second quarter 2025. On the call today are John Suzuki, Chief Executive Officer and Scott Mallinger, Chief Financial Officer. I will 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.

John Suzuki - Chief Executive Officer - (00:02:46)

Thank you Jen. Good morning. Thank you everyone for joining today. I'll start by reviewing some of the highlights of our operations and financial results during the second quarter and then I'll turn 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 and A. This was a strong quarter for us. Our BKR product line is being well received in the marketplace and we are seeing the benefits of the strategic initiatives we have put in place to enhance and grow long term profitability for shareholders. The strong operational execution is evidenced by continued revenue growth, significantly enhanced gross margin and profitability. Second quarter revenue increased 4.5% to 21.2 million, consistent with the single digit revenue growth we previously targeted for 2025. As I will address later in the presentation, it is now our expectation that revenue growth will be high. Single dig for 2025. Gross margin in the quarter improved significantly to 47.4% compared to 37.3% in the second quarter of 2024. Fully diluted GAAP EPS was $0.96 compared with $0.47 in the second quarter of 2024. On a non GAAP basis, fully diluted adjusted EPS of $1.30 in the second quarter meaningfully outpaced Non GAAP fully diluted adjusted EPS of $0.55 in the second quarter of 2024. During the second quarter, we launched Relay1, a rapidly deployed portable repeater kit designed to extend range and facilitate interoperability among different types of public safety and military radios. Relay One is a newly branded BK1 family of offerings focused on developing innovative interoperable communication solutions for first responders. In conjunction with Launch, we received a purchase order from Larimer County Sheriff's Office based in Fort Collins, Colorado for Relay One, which will be used by their search and rescue team. Larimer county is a population of around 360,000 and Fort Collins is the most populous city and the county seat. Federal order activity began to pick up just after the close of the quarter and during the month of July we received several purchase orders from the USDA forest service totaling 12.9 million. The orders included the largest single purchase of the BKR 5000 since its debut and underscore our position as a leading communications provider in the federal wildland space. We also received orders from various federal, state and local government agencies, bringing the total order value to 17.8 million for the month of July alone. It appears that while DOGE, the Department of Government Efficiency may have delayed the timing of the federal orders, federal budget money is now flowing. Slide 4 Slide 4 illustrates our successful efforts to drive improved gross margins through the diversification of our product mix, our cost savings, outsourced manufacturing model, and disciplined expense management. The 47.4% gross margin we achieved in the quarter is a significant improvement over last year and also improved on a sequential basis from 47% in the first quarter of 2025. With our visibility today and the US tariff uncertainty mostly behind us, we increased our full year margin target to at least 47%, reflecting our confidence in the trajectory of our business and improved operating model. Strong market demand for our BKR series radios has driven solid revenue growth. Agencies at the local, state and federal levels are choosing our advanced public safety communication solutions for their radio fleets. As I mentioned a moment ago, we saw significant federal order activity in the month of July and we expect this to continue through the third quarter as wildland fire activity intensifies and the federal fiscal year comes to an end. We view the order activity we're seeing as validation of our high reliability and performance of our radios in mission critical situations where there is zero margin for error. With that, I'll turn it over to Scott Melmaninger, CFO to give a more detailed overview of our second quarter financial performance. Go ahead Scott.

Scott Mallinger - Chief Financial Officer - (00:07:41)

Thanks John. My prepared remarks will focus on the second quarter results. For a full review of year to date results, please consult the press release issued earlier today or the earnings presentation posted on our website. We are pleased to announce the launch of our new Investor Relations website. This launch is part of our ongoing commitment to transparency, accessibility and keeping our shareholders informed sales for the second quarter totaled $21.2 million, an increase of 4.5% compared with 20.3 million in the second quarter of 2024. Sequentially, revenues increased 11.1% compared to the 19.1 million in the first quarter of 2025. As John mentioned, gross profit margin in the second quarter was 47.4% compared with 37.3% in the second quarter of 2024, reflecting improved sales mix and cost reduction initiatives, including the successful transition of manufacturing to East West Manufacturing, Selling, general and administrative expenses or SGA for the second quarter increased slightly to $6 million compared to 5.5 million for the same quarter last year. We strategically invested in engineering, product development, sales and marketing to support our long term growth while keeping our other G and A expenses flat for the quarter. Specifically, engineering and product development expenses for the second quarter of 2025 increased to 2.3 million or 10.9% of sales compared with approximately 2 million or 9.8% of sales for the same quarter fiscal year 2024. This increase is primarily attributed to non capitalizable development costs for the VKR Multiband Mobile Radio. Product. Sales and marketing expenses also increased slightly to approximately 1.9 million or 9.2% of sales, compared with approximately 1.7 million or 8.4% of sales for the second quarter of fiscal year 2024, primarily due to the addition of new salespeople and increased trade show participation. Other GNA expenses stayed flat for the quarter at 1.8 million. As we continue to diligently manage our expense, operating income totaled 4 million in the second quarter of 2025, representing operating margin of 18.9%. This compares with an operating income of $2 million in 2Q24, or operating margin of 10%. The increase demonstrates the operating leverage that we are beginning to see in our business as we efficiently execute our strategy. The company achieved GAAP net income of $3.7 million or GAAP EPS of $1.03 per basic or $0.96 per diluted share in the second quarter of 2025 compared with the net income of 1.7 million or $0.47 per basic and diluted share in the prior year period. Non GAAP adjusted earnings which adds back net realized and unrealized gain or loss on investments, non cash stock based compensation expenses, non cash deferred tax provisions and Severance expenses was 5.1 million or $1.39 per basic share and $1.30 per diluted share in the second quarter of 2025. This is compared with an adjusted earnings of $2 million or $0.56 per basic and $0.55 per diluted share in the second quarter Of 2024. We reported non GAAP adjusted EBITDA of $4.4 million in the second quarter of 2025, a significant increase over non GAAP adjusted EBITDA Of 2.5 million in the second quarter of 2024. Second quarter 2025 adjusted EBITDA margin was 20.7% which for the first time surpassed our target adjusted ebitda margin of 20%. Slide 7 demonstrates our track record of delivering strong and improving profitability driven by sales growth and improved revenue mix and higher margin. Both adjusted EBITDA and adjusted earnings have grown significantly and with our current visibility we believe that we are well positioned to continue delivering improved profitability and enhanced value to our shareholders. Our balance sheet continues to strengthen, providing us with increased financial flexibility to execute on our growth strategy and pursue the large market opportunity before us. At June 30th we had $11.9 million of cash and cash equivalents and no debt. Working Capital improved to 28.9 million at June 30, 2025 compared with 23 million at December 31, 2024. Working capital at June 30, 2025 included approximately $11.9 million in cash and cash equivalents compared with 7.1 million at December 31, 2024. Shareholders equity increased to 36.8 million compared with 29.8 million at December 31, 2020. We are pleased with the significant improvement we have seen in our balance sheet liquidity and look forward to continue carefully deploying capital to drive long term shareholder value. I will now turn the call back over to John.

John Suzuki - Chief Executive Officer - (00:14:52)

Thanks Scott. Our second quarter performance is characterized by exceptional execution. The tariff landscape appears to be settling down and based upon the order activity we're seeing, the potential impacts of DOGE on government spending have been muted with our current visibility and increased confidence. As we head into the back half of 2025, we have updated certain previously stated full year financial targets as follows. We are maintaining our single digit revenue growth target. However, we now expect to be on the high end of this range. We now expect gross margin for the full year to be 47 plus percent, raising the 42 plus percent target we previously provided. Given we expect revenues at the high end of our range and the improved gross margin, we're raising our full year GAAP EPS target to $3.15 up from our previously stated target of $2.40. Lastly, we're raising our full year non-GAAP adjusted EPS target to $3.80 up from our previously stated target of $2.80. The higher increase in our non GAAP guidance versus our GAAP guidance is due to an expected increase in non cash stock based compensation for the year. Now that I have been with BK for four years, it's increasingly clear to me there is a huge opportunity to grow BK in a much larger and considerably more profitable business for shareholders and we're committed to retaining the team that has gotten us to where we are today. As we move through the balance of 2025, we will continue to invest in our sales and marketing efforts to expand adoption of our BKR 9000 multiband radio which commands a higher price point than our BKR 5000 single band radio and drives enhanced margins for our business. The growth of our solutions business remains a priority as well. We're strategically building R&D and engineering capabilities to strengthen our software expertise and offerings and position BK at the forefront of the next generation of public safety communications. Finally, development of Our next generation BKR 9500 multiband mobile radio is progressing well. As a companion radio to the BKR 9000 multiband handheld portable radio, the 9500 mobile radio will be installed directly into first responder vehicles. Our investment level in the BKR 9500 will continue to increase as we near the launch and begin recognizing revenue in 2027. With that, we can now open the call for questions. Holly.

Holly - (00:17:58)

Certainly at this time we will be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Jason Smith with Lake Street.

Jason Smith - Equity Analyst - (00:18:51)

Yes, thanks for taking my questions and congrats on a really strong quarter. Want to start with that lift to the gross margin outlook. Curious how much of that is being driven by just feeling better about the tariff environment versus this really favorable mix shift that you noted in Q2.

Scott Mallinger - Chief Financial Officer - (00:19:14)

Yeah, Jason, I think I'll try to take that question. Thanks for the question. Basically, the tariff expectations earlier in the year were very uncertain. So we took a good conservative approach to the tariffs and that's, you know, the primary driver. But in addition to that shipped a higher margin product and the cost savings that we are realizing related to the outsourcing production, that East West Manufacturing is also a significant contributor.

John Suzuki - Chief Executive Officer - (00:19:56)

Okay, no, that's really helpful. And then with the 9000, just curious if you could provide some more color on how that's tracking. Was it up sequentially and year over year? Hey Jason, it's John Suzuki. Thanks for the question. So I believe what I had stated on the last call was that our expectation for this year is that we're going to ship.