Aaron Martin

Asked about the status of orders delayed from FY2024, the pipeline for FY2026, the short-term impact of tariffs on gross margins, and whether price increases have been passed to customers.

Answer

Delayed orders are being fulfilled or replaced by new ones, with one pushed to 2026 without impacting FY2025 guidance. The FY2026 pipeline is building strongly with significant orders already in hand. Short-term tariff impacts on costs are being offset by supply chain optimization, allowing margins to be maintained without passing on price increases.

Aaron Martin of AIGH Investment Partners asked about the impact of the delayed federal continuing resolution on 2025 seasonality, the potential for sequential quarterly growth in BKR 9000 revenue, and details on the company's deferred tax assets and cash tax position.

Answer

CEO John Suzuki explained that while federal funding is approved, personnel changes are causing delays, making the timing of government orders uncertain. He projected that BKR 9000 revenue in 2025 could be two to three times higher than in 2024, implying continued growth. CFO Scott Malmanger added that most deferred tax assets have been utilized and the company is now paying cash taxes, estimating a rate in the 20% to mid-20% range going forward.

Aaron Martin inquired about the inclusion of a major order in the quarter-end backlog, the company's typical business seasonality, the trajectory for gross margins, progress towards 'Vision 2025' goals, and the number of radios shipped during the quarter.

Answer

CEO John Suzuki confirmed the $3.3 million Florida Forest Service order was included in the Q3 backlog. He explained that Q2 and Q3 are the strongest quarters due to the federal government's fiscal year-end, making Q4 the weakest. Suzuki reiterated the 50% gross margin target is achievable through cost reductions and a richer product mix from BKR 9000 sales. He noted that specific 2025 guidance would be provided in the Q4 call and that the company no longer discloses unit shipment data for competitive reasons.

Aaron Martin asked for details on the new 50% gross margin target, the cross-selling synergy between InteropONE and the BKR9000, the quarterly bookings number, the BKR9000's contribution to bookings, the timeline for the device tethering capability, and the outlook for inventory reduction.

Answer

CFO Scott Malmanger and executive John Suzuki addressed the questions. Malmanger explained the 50% gross margin is a 'Vision 2025' goal and is achievable, though formal guidance is pending. He noted software's contribution is currently immaterial. On cross-selling, he stated sales are awaiting the completion of a key 'tethering' feature. Suzuki and Malmanger confirmed Q2 bookings were a record $28.2 million, with the BKR9000 becoming more material. Suzuki stated the tethering feature is still in development with no firm timeline to ensure reliability, and confirmed that inventory levels are expected to see further reductions.