BK Technologies Q3 2026 Earnings Call Transcript

BK Technologies (AMEX:BKTI) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

BK Technologies Corporation reported third quarter revenue of $25.3 million, driven by strong federal demand, and achieved a gross margin above 50%.

The company increased its share repurchase program by $5 million, reflecting confidence in its strategy and financial position.

BK Technologies made a strategic investment in Tango Tango, enhancing its software capabilities and expanding its customer base.

Operations were impacted by a roof collapse at their West Melbourne facility, but recovery efforts were swift, and production disruptions are expected to be temporary.

The company revised its 2026 revenue guidance to $85 million due to production disruptions but expects to maintain a gross margin of 50% or better.

Full Transcript

OPERATOR

Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation conference call for the third quarter of 2026. This call is being recorded. All participants have been placed in 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, Corbin Woodhull of Hayden Investor Relations.

Corbin, please go ahead.

Corbin Woodhull (Investor Relations)

Thank you, Tom. Good morning and welcome to the conference call to discuss BK Technologies’ results for the third quarter of 2026. On the call today are John Suzuki, Chief Executive Officer, and Scott Malmanger, Chief Financial Officer. Before we begin, I will take a moment to read the safe harbor statements. Statements made during this conference call and presented in this 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 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, I will turn the call over to John Suzuki, CEO of BK Technologies. John, please go ahead.

John M Suzuki (President and CEO)

Thank you, Corbin. Good morning, everyone, and thank you for joining us on our third quarter of 2026 conference call. I’ll start by reviewing our operational and financial performance and then turn it over to our Chief Financial Officer, Scott Malmanger, for a deeper dive into our financial results for the quarter. Following a discussion of the financial results, I will provide a fiscal year 2026 outlook and provide the strategic priorities for our roadmap.

We will conclude by opening the call for a brief Q&A. Our third quarter results underscore the resilience of our business and our ability to consistently deliver profitable growth. Strong federal demand drove third quarter revenue of 25.3 million and a gross margin above 50%. Net income increased 9%, outpacing revenue growth. We generated 18.9 million of after-tax free cash flow over the trailing 12 months, up 25% year over year, and ended the quarter with 29.2 million in cash and a debt-free balance sheet.

Our growing cash position strengthens our balance sheet, positions us to drive growth, and provides flexibility to continue investing in the products and solutions our customers most value. Collectively, this performance underscores the operating leverage in our business model. Subsequent to the quarter end on November 11, our Board of Directors authorized an increase of 5 million to the company’s existing share repurchase program, bringing the total amount authorized for repurchases up to 10 million dollars. This increase underscores the Board’s confidence in our strategy and outlook and reflects our commitment to a disciplined capital allocation approach that balances investment in the business and returning capital to shareholders.

Our strong financial position also provides flexibility to pursue strategic opportunities that complement our strategic growth initiatives. During the quarter we expanded our partnership with Tango Tango, a provider of mission-critical communication software, with a 3 million strategic investment that we believe creates opportunities for incremental business and long-term growth. We take a disciplined and opportunistic approach when identifying partnerships that can generate attractive financial returns and drive incremental business for BK, and this investment fits cleanly in that strategy.

We structured the investment as a five-year convertible note bearing 12.5% PIK interest annually, with the potential to convert the investment into equity in Tango Tango and benefit from its future appreciation. Importantly, this is not a passive financial investment. BK has secured a board observer right, providing direct visibility into Tango Tango’s strategy, performance, and growth initiatives. We intend to be an active strategic partner, working with Tango Tango’s leadership to pursue commercial opportunities, accelerate product integration, and create value for both companies.

This combination of financial participation and strategic collaboration positions BK to benefit from Tango Tango’s growth while strengthening our competitive position. The investment supports three specific goals that are driving the public safety communications market. It enhances our software stack; we gain exposure to well-established software solutions instead of internally building a competing platform. It adds value to our radio franchise, as Tango Tango’s customer base of over 1,500 public safety agencies, roughly 1,000 of which are tier 3 segment, becomes a new sales channel for BK radios in tandem. Deeper software integration makes our radios more valuable.

And it strengthens our position on interoperability. By integrating Interop One with Tango Tango, we have another proof point that BK radios function seamlessly across platforms in mission-critical environments. That helps us in discussions with other software providers looking for open communications ecosystems. We believe the commercial opportunity is just as compelling as the financial investment. This is another step in our evolution from a radio manufacturer to a public safety technology company in line with our Vision 2030 objectives.

More broadly, we remain focused on deploying capital in ways that create long-term value for our shareholders, whether through strategic investments in our business or returning capital directly to shareholders. Our growth continues to be driven by an expanding BKR Series footprint across public safety agencies, and our Vision 2030 strategy is focused on two structural market transitions that we believe will define the industry in the years to come. This includes the shift from single band to multiband and the evolution from in-vehicle to on-person broadband.

Federal demand was the key growth driver for the quarter. Over 60% of third quarter revenue came from the U.S. government. The U.S. Forest Service was the largest federal customer, with significant orders for both the BKR 5000 handheld radios and our KNG mobile radios. I want to take a moment to discuss the Forest Service deliveries because it shows how we win. During the quarter we shipped 3,000 of our new BKR 5000 Orange radios. Historically, the Forest Service bought our standard black radio, BKR 5000.

They informed us that they were losing radios after fire incidents. As radios were getting shared, they had a tendency to get mixed up with other agencies’ BKR 5000 fleets. They requested a radio in a distinctive color that is easy to find if dropped or misplaced in the field, reserved exclusively for the Forest Service. The BKR 5000 Orange is our answer, and it is now their standard radio. Our leadership in wildland fire was built this way. We listen to our customers and solve their real operational problems.

We’re taking the same customer-focused approach to the broader public safety market with our multiband BKR Series radios. Turning to the BKR 9500, product validation is progressing across several key areas. Despite the disruption caused by the October 8th roof collapse at our West Melbourne facility, FCC testing is nearing completion and we expect to receive FCC certification by year end. Our software engineering team continues to test the BKR 9500 software, identifying and resolving issues as part of the normal development process for a new radio platform. Meanwhile, our field engineering team is validating the BKR 9500 on live customer systems where performance to date has been excellent.

Several BKR 9500 radios are also undergoing accelerated life testing, including testing to destruction in our engineering lab, and initial results are positive. In parallel, the supply chain is securing the materials needed to build the first 2,000 radios. A substantial portion of these materials have already been received and are safely stored at our Melbourne distribution center. We plan to begin mass production by March of 2027. We also brought a new distribution center online during the quarter with the signing of a lease with East West Manufacturing for a 5,000 square foot BK distribution facility at their facility in El Paso, Texas. It was set up, staffed, and shipping to customers within the third quarter. The move brings us closer to most of our customers while expediting manufacturing lead times and lowering transportation costs.

For context, in the final days of the third quarter, radios produced at East West’s Juarez, Mexico facility were trucked over the U.S. border to El Paso, Texas in the morning, turned over to BK, and shipped back out by noon for same-day delivery to our customers. While this was an exceptional case, we do expect to be able to deliver to our Western customers in two to four days and Eastern customers in three to five days, which is a substantial improvement over the current seven to ten day round-trip lead time through our Melbourne distribution center.

This is also part of our broader effort to streamline operations and maintain a lean, efficient cost structure. Well before the October weather events, we had committed to reducing our leased footprint at our Melbourne headquarters by approximately 42%, from 54,000 to 31,500 square feet beginning in February of 2027. This planned consolidation reflects our continued focus on operational efficiency, disciplined cost management, and maximizing the profitability of our business as we grow.

With that, I will turn it over to Scott Malmanger, our CFO, to give a more detailed overview of our third quarter financial performance. Go ahead, Scott.

Scott A. Malmanger (Chief Financial Officer)

Thank you, John. Sales for the third quarter totaled $25.3 million, an increase of 3.6% compared with $24.4 million in the third quarter of 2025. Growth in the quarter was attributable to federal order volumes impacted by budget cycles around the September 30th government fiscal year-end. Gross profit margin in the third quarter was 50.7% compared with 49.9% in the third quarter of 2025, reflecting favorable product mix and continued robust adoption of the BKR 5000 single-band and our higher-margin BKR 9000 multiband product.

Selling, general and administrative expenses for the third quarter increased to $8.4 million compared to $7.3 million in the same quarter last year. The increase in SG&A reflects planned hardware investments in the BKR 9500 and software costs associated with new product and software solutions development. This is in alignment with our Vision 2030 investment strategy aimed at accelerating revenue and margin growth. Operating income was $4.4 million in the third quarter of 2026 with operating margin of 17.5%, expanding sequentially from 16.4% although declining from 19.8% in the prior year third quarter on higher research and development investments.

We delivered GAAP net income of $3.7 million, or GAAP EPS of $0.93 per diluted share, compared with net income of $3.4 million, or $0.87 per diluted share, in the prior-year period. Income tax provisions declined by $527,000 versus the year-ago quarter, which reflects an estimated rate of approximately 30% during the third quarter of 2025 compared to an estimated rate of 20% for the third quarter of 2026. Going forward, our estimated normalized federal tax rate will be in the range of 23% to 26%.

That will depend on the impact of increased R&D tax credits compared with 16% for the full year of 2025. Turning to Slide 6, our non-GAAP profit trajectory has continued each quarter since the third quarter of 2023. For the third quarter of 2026, we reported non-GAAP Adjusted EBITDA of $5.2 million with Adjusted EBITDA margin of 20.5%, which compares to $5.3 million and 21.5% in the third quarter of 2025. Non-GAAP adjusted earnings, which adds back non-cash stock-based compensation expenses and non-cash income tax provision expense, was $4.7 million, or $1.16 per diluted share.

This compares to adjusted earnings of $4.9 million, or $1.24 per diluted share, in the third quarter of 2025. Taken together, our profitability has trended strongly and we believe we are well positioned to sustain that trajectory. Turning to cash generation and capital efficiency, we continue to deliver strong results. In third quarter 2026, we generated after-tax free cash flow of $5.2 million, and on a trailing 12-month basis after-tax free cash flow reached $18.9 million, with a 25% year-over-year increase outpacing the 11% revenue growth. After-tax free cash flow is a non-GAAP measure that we believe provides useful insight into the company’s ability to generate cash after accounting for taxes.

This performance underscores the resilience of our cash generation even as we continued to invest for growth. As in prior quarters, we remain disciplined in how we manage the business, which continues to drive strong cash conversion. Our focus on capital efficiency is steadfast, as evidenced by a return on invested capital of 39.5% for the third quarter of 2026 on a trailing 12-month basis. Return on invested capital has remained comfortably above 30% after recovering meaningfully over the last several years and reflects our disciplined cost management.

Turning to the balance sheet, we ended the third quarter of 2026 with a strong balance sheet including $29.2 million in cash and cash equivalents, up from $22.8 million at year end 2025, and no debt. In addition, we hold a $3 million strategic investment in Tango Tango through a five-year convertible note bearing 12.5% annual PIK interest. Together, these assets underscore our financial strength and provide meaningful flexibility to invest in growth and return capital to shareholders.

The company, as a part of its capital allocation plan, established a Rule 10b5-1 non-discretionary stock repurchase program in September 2025. During the third quarter of 2026, the company completed no repurchases of its common stock as per the conditions of the plan. Subsequent to quarter-end, the company completed an additional repurchase under the program. Also subsequent to the quarter-end, on November 11, our Board of Directors authorized an increase of $5 million to our existing share repurchase program.

BK’s total repurchase program authorization is now $10 million, with approximately $8.4 million remaining available for future repurchases, $3.4 million of which is reserved for the 10b5-1 plan. Working capital improved to $48.8 million as of September 30, 2026, compared with $37.3 million as of December 31, 2025. Shareholders’ equity increased to $56.3 million compared with $44.7 million on December 31, 2025. In closing, our strong cash generation gives us substantial financial flexibility to invest in the business, pursue strategic opportunities, and return capital to shareholders. I will now turn the call back over to John, who will provide our 2026 outlook and strategic priorities.

John M Suzuki (President and CEO)

Thank you, Scott. Subsequent to the quarter-end on October 8, we experienced a partial roof collapse at our West Melbourne, Florida headquarters during a severe thunderstorm. The partial collapse occurred after business hours and thankfully no employees were injured. The collapse was directly over our IT server room and took down key business systems, including our customer support lines. Our team was on site within minutes and we activated our emergency recovery plan within the first hour.

About 90% of the second floor, where our headquarters staff worked, was saturated or moderately affected by water. About 75% of the first floor was also affected, including production, customer service, and engineering. The recovery moved quickly. Within 24 hours we restored our basic business systems, including customer phone support. We moved the customer service repair and the BKR 9000 production line into our adjacent distribution building, which was not affected.

We quarantined any suspect equipment and material and expedited replacements. Both operations are back up and running. Our SMT area and Engineering Accelerated Life Test Lab were not affected and are operating again. Both are critical to the BKR 9500 production readiness. The timing and our footprint helped. Most of our production had already moved to East West, so less production was exposed. Our El Paso move freed up space in our distribution building, and because the event happened early in the quarter, we’ve had more time to recover. As of this morning, November 12th, roof repairs are underway. We expect to move customer service repair and the BKR 9000 production back into the headquarters by mid-January, with the second floor staff expected to return in the February to March 2027 timeframe.

Turning to our outlook for the full 2026, we now expect revenue of $85 million. This slight downward revision reflects the impact of lower fourth-quarter BKR 9000 shipments due to the production disruption. We expect BKR 9000 output to return to pre-October 8th levels during the first quarter of 2027 and the affected orders to ship as production recovers. We continue to expect gross margin of 50% or better for the full year. GAAP EPS is expected to be $2.40 per diluted share and non-GAAP adjusted EPS is expected to be $3.15 per diluted share.

Our revised EPS guidance does not take into account the receipt of potential recoveries under our business interruption insurance, as well as potential refunds on tariffs we previously paid. The amount and timing of those recoveries are not yet known, including whether they’ll be recognized in ’26 or ’27, and we will update the market as we have more clarity on these items, consistent with our practice in prior years. We expect to provide full-year 2027 financial guidance during our fourth quarter earnings call in March.

Based on what we know today, we do not expect the October 8th event to materially affect our anticipated financial performance in 2027. Importantly, the affected BKR 9000 orders have been deferred, not lost. We expect to fulfill them as production returns to normal during the first quarter. Development of the BKR 9500 also remains on track, with mass production planned for March 2027. While this incident was disruptive to our business, we remain confident in our ability to execute our long-term strategy. No one can predict when adversity will strike, and what matters most is how we respond. I’m incredibly proud of our Melbourne team who showed that we can rise to the occasion when it counts. We are grateful for all the support we have received from the City of West Melbourne, our landlord, and especially our employees, partners, and customers.

At this time, I will return the call to Tom for Q&A. Tom,

OPERATOR

Thank you. At this time, we will begin polling for questions. The floor is now open. If you wish to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask, if listening on speakerphone this morning, that you pick up your handset while asking your questions to provide optimal sound quality. Once again, please press star one on your keypad at this time if you wish to join the queue to ask a question.

Please hold a moment while we poll for questions. And your first question this morning is coming from Jason Schmidt from Lake Street Capital. Jason, your line is live. Please go ahead.

Jason Schmidt (Analyst)

Hey guys, thanks for taking my questions. John, just want to clarify some of your comments to make sure I heard correctly that the BKR 9000 orders that have essentially been pushed out of Q4, is there any risk that those could get canceled?

John M Suzuki (President and CEO)

Thanks for the question, Jason. The sales team is working proactively with our customers and we are rescheduling those orders. To date we’ve had no order cancellations, so the orders appear to be secure.

Jason Schmidt (Analyst)

Okay. No, that’s great to hear. And then regarding the USFS order and those 3,000 units, is this a one-time buy or would you expect additional follow-on orders going forward?

John M Suzuki (President and CEO)

Yeah, so as part of the U.S. Forest Service, we’re the primary radio supplier to the U.S. Forest Service. To put that in context, they have about 80,000 radios fielded, the majority of which are BK Radio radios. So each year, as part of their product replacement cycle program, they purchase radios every year. This year, this is a program that we’ve been talking to the customer for a period of time where there was basically some level of shrinkage of getting radios returned after each fire incident, which creates more burden on them to lifecycle out the older radios because the fleet actually gets smaller after every fire incident.

And so the solution was really to put in place a distinctive color that was unique to the Forest Service because when you get on these fire scenes, you have several different agencies, both state, local, and federal, and they’re all using the BKR 5000 radio and they’re all typically black color. So it’s easy to get these radios mixed up, especially if they’re loaned out to different agencies. Sometimes it’s just difficult to get it back. Long story short, by having a unique color for the U.S. Forest Service, it’s much easier for them to be able to reclaim 100% of those radios at the end of the incident.

And then they can just focus on the lifecycle replacement of radios that truly need to be replaced because of age. It’s an ongoing program. They spend money with us every year, thankfully. But this is one thing that we worked on together, which I believe brings us closer to our key customer, the U.S. Forest Service.

Jason Schmidt (Analyst)

Gotcha. And then just the last one for me and I’ll jump back into queue. Sticking with that 5,000 order, given the customization, do you see any sort of ASP premium or is it in line with the broader portfolio?

John M Suzuki (President and CEO)

Yes, I’m not going to comment on pricing to the US Forest Service. What I can say, Jason, is the customer sees real value in this and is very appreciative of the work that we’ve done.

Jason Schmidt (Analyst)

Okay, perfect. Thanks a lot, guys.

OPERATOR

Thank you. And as a reminder, if you wish to join the queue to ask a question at this time, please press Star 1 on your telephone keypad. Once again, that will be Star 1. If you wish to join the queue to ask a question, your next question is coming from Robert Van Voorhis from Vanatoc Capital. Robert, your line is live. Please go ahead.

Robert Van Voorhis (Analyst)

Hey, good morning guys. Thanks for taking the questions. Just a couple. First is just on the revised guidance and I understand why that’s happening. It makes sense. But just a question on the remediation costs and the goof costs. Are those backed out from the EPS numbers or not?

Scott A. Malmanger (Chief Financial Officer)

No, they’re not backed out.

Robert Van Voorhis (Analyst)

Okay, so then that maybe leads me to my second question. Do you know how much potentially that cost is?

Scott A. Malmanger (Chief Financial Officer)

It’s hard to determine at this time. We’ve got, you know, proper insurance company coverage, including business interruption insurance, but we haven’t had time to, you know, gather all the information necessary to really disclose an estimate of what that amount will be.

Robert Van Voorhis (Analyst)

Okay, that’s fine. And then my other question is more just on general state and local trends. And I know in the MD&A, and as you guys have talked about, the state and local orders have been stronger this year versus last year though, because we’ve had such a concentration in revenue from federal customers this year. It looks like state and local on a revenue basis, on a recognized revenue basis, is down versus last year. So I was just wondering, can you explain the discrepancy and do you expect that to sort of change as orders are fulfilled?

John M Suzuki (President and CEO)

Yeah, thanks, Robert. It’s actually the lumpiness in the federal orders. So if I look at last year, we had a very strong orders year from federal and some of those orders were shipped in the first quarter. You go back to our first quarter revenue, I think it was almost 40% federal. Those were derived from orders that were received in the previous year. So you have to really parse the federal orders out of the total orders because it’s lumpy from year to year.

It doesn’t really change over a five-year period. It’s pretty much stable. It’s just how the money is allocated from year to year. If you look at the core state and local business over the last five years, that’s where all the growth has really come from. And that continues in this year.

Robert Van Voorhis (Analyst)

Yep, got it. So I do just have one more question. I apologize for the long list here, but I noticed in the, I think it’s the non-GAAP numbers that we’re talking about, there’s a line that says non-recurring new product introduction, inventory write-offs. I’m assuming that’s related to 9500, but can you just explain sort of why that’s non-recurring and what that is?

Scott A. Malmanger (Chief Financial Officer)

Basically it relates to the testing and manufacturing efforts that we’re doing now. We’re preparing for manufacturing of the 9500.

John M Suzuki (President and CEO)

Yeah. So, Robert, this is John. So when we do our final testing on these products, we build up radios for our engineering tests, for customer tests, and then destructive tests. All those radios are basically trashed at the end of the cycle and they’re expensed in the period.

Robert Van Voorhis (Analyst)

Okay, yep. Now that makes sense. All right, thanks guys.

John M Suzuki (President and CEO)

Thank you.

OPERATOR

Thank you. There are no further questions at this time. John and Scott, would you like to make any closing remarks?

John M Suzuki (President and CEO)

Thanks, Tom. I appreciate it. I want to thank the team for their strong execution this quarter and our public safety customers for the trust they place in us every day. With a strengthening balance sheet, expanding opportunities in software and services, and a product roadmap aligned with the market’s evolving needs, we believe BK Technologies is well positioned for continued success. I look forward to speaking with you again on our next earnings call.

Conference call. All the best to all of you and have a great day.

OPERATOR

Thank you. This does conclude today’s conference call. You may disconnect at this time and have a wonderful day. Thank you once again for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.