Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BK Technologies Corp (BKTI) achieved its fifth consecutive quarter of profitability with GAAP earnings per share of 67.
• The company reported strong order activity for its BKR 5,000 and BKR 9,000 radios, contributing to a robust backlog of $27 million.
• Gross margins improved to 38.8% in the quarter, driven by strategic cost reduction initiatives and a shift in product mix.
• The transition to East West manufacturing has resulted in lower product costs and is expected to continue enhancing gross margins.
• BK Technologies Corp (BKTI) raised its full-year GAAP EPS target to exceed $1.65 per share, up from the previous target of $1.50.

Negative Points

• The company anticipates weaker order activity in Q4 due to the fiscal year-end for federal government customers, which represent a significant portion of its business.
• Despite improvements, the gross margin target of 50% is yet to be achieved, with potential fluctuations expected in the interim.
• The development of the BKR 9,500 mobile radio is projected to take until 2027, indicating a lengthy timeline for new product introductions.
• BK Technologies Corp (BKTI) has stopped disclosing the number of radios shipped due to competitive concerns, limiting transparency.
• The tethering capability with Interop One for the BKR 9,000 is still under development, with unresolved technical challenges delaying its release.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with BKTI.

Q: Is the $3.3 million order from the Florida Forest Service included in the quarter's backlog? A: Yes, it is included in the quarter's backlog.

Q: Can you explain the typical seasonality of your business as we look towards Q4 and next year? A: Our strongest quarters for orders and revenues are Q2 and Q3. Q4 is typically our weakest quarter for new orders, primarily because it is the first quarter of the fiscal year for the federal government, which represents about 35-40% of our business. Budgets are not finalized, so purchase orders are usually lower in Q4.

Q: What are your expectations for gross margin improvements in Q4 and 2025? A: We are targeting a 50% gross margin, achievable through cost reductions and the transition of the BKR 9,000. While we may see fluctuations due to different quarters, we are on track to achieve this target.

Q: Can you discuss the market segments where you are most optimistic about driving sales for the BKR 9,000? A: We are optimistic about law enforcement and structured fire segments, which are large market opportunities. Surprisingly, we've seen strong adoption within Wildland fire agencies, which need to communicate on statewide systems. This has been a positive development for us.

Q: Could you clarify the source of the deferred revenue on your balance sheet? A: The deferred revenue primarily comes from extended warranties offered with our products, which are recognized as revenue over the warranty period, along with Interop One.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.