BK Technologies Corp

Operator

Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation Vision 2030 Investor Day. This event is being recorded. [Operator Instructions] I will now take a moment to read the safe harbor statement. Statements made during this presentation and presented 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 today's presentation 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.

At this time, it is my pleasure to pass the floor over to your host for today, Jaeson Schmidt of Lake Street Capital Markets. Jaeson, please go ahead.

Thank you, Corbin. Good morning, and welcome to BK Technologies Vision 2030 Investor Day. I'm Director of Research at Lake Street Capital Markets and cover BK Technologies here at Lake Street. We have the full team on today's presentation, including John Suzuki, Chief Executive Officer and Board Director; Scott Malmanger, Chief Financial Officer; Stephen Theisen, General Manager of the LMR business; James Teel, General Manager of the Solutions Business; and Carlos Camps, Vice President of Software Engineering.

The agenda today will begin with an introduction of the company's Vision 2030 objectives. Followed by an outlook on the North American public safety Land Mobile Radio market, a public safety broadband market overview, a road map on the company's engineering and product initiatives and a comprehensive discussion on capital allocation.

Following the presentation, we'll open up for a question-and-answer session with the full BK Technologies management team. And with that, I'll turn the call over to John Suzuki, CEO of BK Technologies. Thank you. Go ahead, John.

Thank you, Jaeson. Good morning, everyone, and thank you for joining us on our Vision 2030 Investor Day. BK Technologies is a company that has been in business for over 75 years, designing, manufacturing and marketing Land Mobile Radios.

For the most of the history of the company has focused on wildland fire market. While we enjoy a 90% market share in this vertical, the wildland fire market is a very small market compared to the broader public safety communications market. To address the larger TAM, in 2019, the company made a strategic decision to invest in a new product line, the BKR Radio Series. Over the preceding 5 years, the company invested about 20% of its revenues in R&D to develop its first BKR radio, the BKR5000 that launched in 2020 and more recently, the multi-band BKR9000 handheld radio in 2023.

This investment has proven to pay off. As we closed Vision 2025, these 2 radios doubled revenue from $44 million to $86 million. Our shift to an asset-light model increased our gross margin to about 50% and the combination of higher ASP product mix and lower cost structures improved EBITDA margin from 3.5% in 2020 to over 20% in 2025.

As we look forward to Vision 2030, we plan to double revenue to $170 million, increase gross margin to 60% and expand EBITDA margin to 35%. This would triple EPS to $13 and generate $55 million in free cash flow. To accelerate our revenue growth, we expect to start shipping our multi-band in-vehicle mobile, the BKR9500 in the first half of 2027.

Afterwards, engineering will shift to our next-generation platform, the BKR X for expected launch in 2029. For competitive reasons, we are not discussing or disclosing information on the BKR X platform today, but I felt it was important that we communicate that we intend to continue our engineering spend through the Vision 2030 time frame.

We believe we can achieve the $170 million revenue target through our core business. We also believe that over this period, the business will generate a tremendous amount of free cash flow. Our intention is to allocate some of this new capital to either enter new markets or to add solutions that can help accelerate the adoption rate of the BKR9000 and BKR9500 multi-band radios.

Our go-to-market focus is on 2 product lines: Land Mobile Radios and Solutions, both of which will be discussed in greater detail during this presentation. At this point, I'd like to turn over to our General Manager of LMR business, Stephen Theisen. Stephen, the floor is yours.

Thank you, John. My name is Stephen Theisen. I'm the General Manager of BK's LMR business. I'd like to take a moment to give a brief introduction. I've been in the industry for over 25 years, the last 9 of which with BK Technologies, where I started in a sales position and have held various leadership roles, moving to the Head of Sales and Marketing.

And as of July of this past year, I was -- as I assumed the position as General Manager of the LMR business. I'd like to talk first about the total addressable market. The market is about $2.4 million (sic) [ $2.4B ] where it has grown to that level over the past 5 years at a rate of 7.5%.

BK has grown 14% over that same period of time. Industry has shown that our industry evaluations have shown that we are expecting a compound annual growth rate of about 10% over the next 5 years, taking the total addressable market to $3.8 million (sic) [ 3.85B ].

In that period of time, we expect to see a 15% compound annual growth rate. The market share at that point, we would expect to grow by nearly 10% Sorry, I'm having slide presentation problems. There we go. Thank you. Our product portfolio is deliberately focused for purpose-built and meant to deliver exceptional performance and reliability for public safety professionals.

It consists of P25 Portables & Mobiles, as John said, starting with our BKR Series 5000 and then our BKR9000 multi-band followed, our KNG mobile series and then launching in the first half of 2027, we'll see the BKR9500 multi-band or multi-band mobile.

We have the accessories that go with those radios. And then unique feature sets within our base stations and the industry's only rapid deployment Portable Repeater, the RelayONE. Market overview, particularly over the last 5 years, has been focused on federal government, military and state and local, segmented by tiers.

Tier 3 being the largest of those and has been our primary focus. The mission has been to leverage our Wildland relationships and reputation to penetrate the structure fire market, which is the most price-sensitive market. And we opportunistically look at state and local Tier 1 and 2 markets as well. The key growth strategy or the service addressable market is about $2.3 million to $2.5 million.

This is the largest -- or the largest of which is in the Fire segment 40% of that business is west of the Mississippi and 85% of those users already are familiar with the BK Technologies brand and product. This is important to us as not only is this a large segment, but it works with our focus-driven portfolio and purpose-built product.

We have established a presence in that market, and we can leverage those relationships. In addition to this, these markets tend to be the most price sensitive and the most resistant to move away from LMR. A couple of case studies to talk about is Florida Forestry. Florida Forestry looked at our BKR5000 for a period of nearly 2 years.

This is a legacy account where they have been a BK user for decades. But as the market has changed, they needed to address interoperability issues. They decided to make the decision not to go forward with a single band, but to purchase the BKR9000 multiband radio at a 40% price premium to give them that ability to move forward into other bands, interoperability with adjacent agencies, whether it be federal, local or state.

A couple of key points there is that this enabled them to bridge that interoperability gap and to eliminate redundant hardware, one radio, multiple missions. Another example of this is Washington Sheriff's office. This is in Idaho. This is a core Tier 3 jurisdiction, very typical of what we see, not a very large population, but very large geographically and with some specific challenges.

They needed to focus interoperability issues where they had traditionally been VHF, but they had surrounding municipalities that were UHF band, the state patrol that was operating on the P25 Trunked system and of course, federal agencies all around them.

This is a very rugged terrain that they operate in as well. So they have communication gaps. They decided to move forward after being a long-time Motorola customer to go with the BKR9000, a brand that they were already familiar with because of the fire around them, but not necessarily a radio that they had used themselves. They trusted, they went forward. And with that, they have closed some interoperability issues and they have stated that the radio actually performs better than other radios that they have tried in the most challenging territories.

Again, I'm sorry, I'm having trouble with the moving. Thank you. Thank you again for your participation. And I'll now turn the presentation over to James Teel, our General Manager of Solutions. James, please go ahead.

Thank you, Stephen. My name is James Teel, and I'm the General Manager of our Solutions Business here at BK. As a brief overview of my background, I've been in the LMR and cellular communications industry for over 40 years, including 28 years with L3Harris and 4 years with BK Technologies. This slide that I'm showing summarizes the evolution of public safety communications.

Starting from single-band LMR radios evolving to multiband LMR radios and broadband in the vehicle, which at that time was characterized and today is characterized by mobile data terminals, GPS and video and ultimately to broadband outside of the vehicle or on person. And this evolution has been heavily driven by the advancements of the smartphone.

Today, broadband technologies such as 5G and emerging satellite direct to phone play a key role in augmenting LMR mission-critical communications. Likewise, worldwide standards are moving broadband toward mission-critical communications akin to LMR. However, for the foreseeable future, we think both LMR radios and smartphones will continue to play a key role in this market.

Technology innovation has driven the U.S. public safety broadband market to a range of $4 billion to $8 billion annually, which represents 40% of the global market. And this market is growing at 8% to 12% CAGR. That number includes network infrastructure, devices, applications and services associated with public safety broadband.

However, applications is the fastest-growing segment within that space at 12% to 20% CAGR and currently represents 15% to 30% of the total market or $600 million to $2.5 billion annually. Key application categories include push-to-talk and collaboration tools, situational awareness platforms such as CAD overlays and mapping, video from body cameras, drones and real-time streaming to dispatch centers and emergency operation centers, as an emerging category that we hear quite a bit about, and that is artificial intelligence and analytics.

We are embracing our customers' growing need for increased intelligence and situational awareness. We launched our BK ONE brand of interoperability solutions in the spring of '25, roughly a year ago at the IWCE conference. Our portfolio provides advanced field applications that enhance situational awareness, decision-making and interagency coordination, enabling the first responder to be safer and more efficient. BK ONE provides our customers with value-based solutions while enhancing the overall value of our BK Radio portfolio.

Today, our portfolio consists of InteropONE, which is a SaaS-based push-to-talk over broadband service that provides on-demand interoperability for unified communications. LocateONE, a solution that provides geospatial real-time tracking of personnel and assets; and RelayONE, a portable bring-it-with-you solution that extends LMR radio coverage and enhances on-incident interoperability.

We will continue to enhance these offerings as well as add new ones under the BKN umbrella throughout the Vision 2030 time frame. I wanted to highlight, starting with InteropONE, a bit more detail on each of these solutions in our portfolio. The left half of this slide highlights the interoperability challenge in today's push-to-talk over cellular or push-to-talk over broadband market. It remains very siloed today, even with the passage of the FirstNet legislation in 2012 over 14 years ago that attempted to address the interoperability challenges that came out of the 9/11 incident.

We developed InteropONE to break down these silos by enabling an InteropONE user on their smartphone to create a talk group on the fly and include anyone with an active smartphone number within minutes and without the need for back-office administrative support. This is a unique capability in the push-to-talk over broadband space, and it is BK patented technology.

Moving to the right half of the slide, we are developing technology that extends InteropONE capability to our BKR series radios, which we are calling BKRplay. BKRplay enables a cost-effective alternative to integrated cellular service in the LMR radio.

With BKRplay, the radio access the front-end device for the InteropONE app, providing the end user the ability to make and receive calls on the radio and change InteropONE groups or channels from the radio. This is analogous to Apple CarPlay or Android Auto, where our car display takes over some of the applications on our smartphone. BKRplay is BK patent pending technology, and we are planning customer beta testing to start in this quarter.

Falling into the situational awareness category, LocateOne is a cost-effective solution that provides unified visibility of radio and field assets across LMR, LTE and 5G and SATCOM networks. LocateOne provides out-of-the-box data connectors that enable interoperability and ecosystem friendliness.

The value delivered is increased situational awareness, which in turn drives incident response times -- reduced incident response times, which, again, in turn, enhance end user safety and citizens safety.

Moving to the right half of the slide, we launched LocateOne Lite at the International Wireless Communications Expo, or IWCE conference just this past month in March.

Sparked by a specific customer challenge. This solution focuses on situational awareness for teams operating in austere, internet deprived environments such as wildland fire, Backcountry Search and Rescue, Rural Sheriff's Departments and Border Patrol units. LocateOne Lite leverages the growing Team Awareness Kit or in the industry known as TAK, software ecosystem and enhances the value and stickiness of our BKR Series radios.

LocateOne Lite was well received during a recent field exercise hosted by the North Carolina First Responder Emergency Technologies Program, or [ FirstTech ] as indicated by the quote from Charles Laird on the slide. As important, our LocateOne solutions are in alignment with the 2019 Dingell Act, which contains important provisions affecting public safety communications. Especially public safety personnel location.

In June of 2013, the Yarnell Hill wildfire near Yarnell, Arizona, killed 19 members of the [ Elite ] Granite Mountain Hotshots and became one of the deadliest firefighter disasters in U.S. history. While the Dingell Act was not a direct response to Yarnell, the incident highlights exactly the kinds of communication and location gaps the law tries to fix and which LocateOne helps to address. Lastly, RelayOne. We rebranded what was previously called Rapid Deployment Portable Repeater, or RDPR, as RelayOne when we launched BK ONE last year.

As previously mentioned, RelayOne is a portable bring-it-with you solution that extends LMR radio coverage and enhances on-incident interoperability by enabling cross-mode, cross-band and cross-protocol communications. Our latest enhancements include incorporation of our BKR9000 into the offering.

RelayOne equipped with a pair of BKR9000s offer the most flexible LMR cross-communication solution with respect to the frequency being used, whether that's VHF, UHF or 700 or 800 megahertz and the system type, be it analog, conventional P25 and Trunked P25. This concludes my overview of the public safety broadband market.

I will now pass the presentation to Carlos Camps, our Vice President of Software Engineering. Go ahead, Carlos.