BK Technologies Corporation (AMEX:BKTI) Q2 2023 Earnings Call Transcript

Scott Weis: And then the last question is, your cash balance didn’t move much. You were free cashable positive by a bit, but at $2.6 million in cash do you have enough for working capital purposes? And then with that, the investment loss of $400,000-plus or so in the quarter, and I believe you’ve lost near a million for the year, can you comment on that and what the plans are and what that investment loss is and what your plans are for that?

Scott Malmanger: Yes. We continually review the investment losses, Scott. And we’ve had numerous discussions about that investment and look at the alternatives that we have available as far as an exit. As far as the working capital situation, we continue to manage the line of credit availability based on our interest costs. You’ll notice that our interest costs are higher. So we are managing our line of credit and maintaining the cash balance that we think we need. So all-in-all, I think we have a good cash position to obtain or achieve our growth plans, growth initiatives using the line of credit that we have and we’ll manage accordingly. But you’re exactly right. We’ll have cash positive results going forward. So that should fund any growth that we have.

Scott Weis: Okay. Thank you.

Scott Malmanger: You bet.

Operator: Our next participant is Orin Hirschman with AIGH Investment Partners.

Orin Hirschman: Hi, good morning. How are you and congratulations definitely on progress. I have one more question just on the growth margin side. A lot of the growth margin improvement was supposed to come just naturally from going through the higher cost inventory. What actually happened in the past quarter to understand that means that there was actually negative progress on the growth margin, because of the offset from going through that higher cost inventory where we’re getting towards lower cost inventory. How should we view that dynamic?

Scott Malmanger: There is an amount of inventory that we purchased during the supply chain issues of 2022 and we use an average cost basis for the inventory. So there is some bleed over of the inventory, but the miss in the second quarter was due to a number of very specific cost reduction initiatives that we just failed to execute on. I’m glad to say or happy to say that we’ve completed those now and we expect to see incremental improvement over second quarter results back to more of the trend that we were on for the last three or four quarters since mid-last year. So that’s how I would describe it.

Orin Hirschman: Okay. I’m going to reiterate the questions. Do you still have the tailwind of a couple hundred basis points from working through the higher inventory? How should we come in that?

Scott Malmanger: Yes, I would say that’s a good assessment. I look at it as the tailwinds for that incremental improvement.

Orin Hirschman: And that’s over the next one, two quarters until it’s completely bled off.

Scott Malmanger: Pardon me.

Orin Hirschman: [Indiscernible] one or two quarters in terms of when that higher price inventory works its way through?

Scott Malmanger: Yes, I would say that’s the way it will work. I think I mentioned it on prior calls. We had 20 to 25 specific components that we purchased through the brokerage markets that are bleeding through now.

John Suzuki: So part of that, I mean, we did see a small margin improvement in Q2 and a lot of that was the tailwind piece of it. We were obviously planning and working towards getting the actual cost down which we didn’t achieve in Q2. So that’ll give you an idea of what the tailwind gave us.

Orin Hirschman: Okay. In terms of getting additional customers for your [Indiscernible] where are we with that? I know you’re going to save the big update for next quarter, but have we seen like a second, third, fourth customer, albeit small?