NSSC - Earnings call transcript Q4 2020 | Napco Security Technologies, Inc.

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Operator

Greetings and welcome to the NAPCO Security Technologies Incorporated Fiscal Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded. the Investor to Relations. turn McKillop, host, now of Director will conference your over Patrick I Thank you.

begin. may You

Patrick McKillop

the Thank press you, and should all opportunity and Investor good our of to morning. I’m Patrick you results financial XXXX. release at for conference review results. for Security. to By discuss us all our Relations fourth McKillop, the NAPCO Thank year joining have you quarter discussing had for fiscal today’s the call fiscal here Director of now

If website, have of release you a not, the Relations is copy Investor the section available www.Napcosecurity.com. in of our

On the Buchel, of Senior Richard President Kevin NAPCO and President and CFO. call CEO today is Vice and Security Technologies, Soloway,

growth contains estimates, begin, on take limitations Before let anticipated forward-looking statements beliefs, and read forecasts SaaS statements a that me to These recurring revenue the and and opportunities, dealers, our trends without run are judgement, of costs business of drivers and expenses school potential benefits control to revenue. product for on current the management’s expected to performance. based as relating based customers forward-looking to revenue future company’s services, This current our performance expectations, we rate recurring and products security recurring and moment statements market products projections presentation forward-looking monthly of the ability annual statement. such include

actual underlying may be actual or such Form forward forward-looking to including materially in unknown results our to unpredictable cause Other that incorrect results assumptions, described factors from differ differ those uncertainties not and factors proving filings These statements. statements. report the those subsequently on our risks include contained factors to looking to from XX-K. involve in statements but Forward-looking SEC annual could cause risk limited or materially are

results the expectations forward performance of cannot reasonable, are we that looking guarantee Although achievements. the in statements level reflected future activity believe we or

we as press will a today's such statements. I unless forward place today's in IR a I information call is law. as things except undertake conference just duty to front. reliance of All on provided mention moment. release to on not the information undue stated, in over these update no should date, and looking this Dick required You the call applicable in But want before few do, to under I turn otherwise

upcoming one-on-one planning Conference In [Indiscernible] fall. CL especially BIGX for is meetings hosting we King and terms small virtually on XX, and of virtual They're XX. September investor be for at crucial the September throughout attending the outreach, Lake Conference cap also the companies, roadshows more NAPCO. will Street as that thank marketing all to such Soloway, And let us me in of these and the With floor I'd Security of and CEO Dick, Technologies. assist President like call NAPCO those assist yours. -- the out Richard way, conferences to turn is the that folks over us trips. on

Richard Soloway

are Good for impacted results. Patrick. types, everyone. installing were beginning customers, you, user our their gaining consists see on-going and reopening of Thank and we equipment XXXX businesses now to which pandemic. COVID-XX our fourth today welcome And more because pickup of access at end install our homeowners. dealers a of are equipment buildings well to business more all as The to call. quarter fiscal morning, sales the discuss our joining year by Thank and us But to conference you are as

recurring the continue rapid revenues We a grow pleased to at emphasize pandemic, that our to are despite rate.

rate has of QX, XX% margin million revenues with annual and Our as XX% $XX.X run recurring of an of increased a gross June. in now

focus is targeting continuous the Our professional markets and installation driving this mostly on commercial end growth.

architectural enterprise fire to our industry grow. balances on focused well access management trends, include as the costs, as wireless, security during of returns shareholders. here important to metrics and equity, this continue of our continues as profits, metrics control debt cash intrusion and these us, at are especially and and NAPCO on zero to systems, key on school with which locking plus alarms, on products. focus The key solutions, growth, strong remains controlling sheet remain difficult team balance We to Our times. report, capitalizing and These

equity. are We our strategy NAPCO and our business XX% continue to execute as of with at owned senior interests our shareholders aligned management the

fourth outlook. Before He call the now CFO, Kevin? will I with Buchel. go provide turn back our into fiscal greater an financial Kevin I'll of be results. year more to our And strategies detail, fiscal our and I quarter over and overview then will on

Kevin Buchel

everybody. good morning, Thank Dick, you, and

quarter, $XX.X XX% fourth to ago. compared the as million the $XX same decreased period a year net For to sales for million

the revenue. million, for has of loss continued XXXX costs to COVID-XX fiscal which $XX.X XXXX, The installation sites. compared or $XXX.X industry the factoring For pandemic, increasing the ago. equipment and quarter the both million an an sales and the getting based issue for is for this fiscal a decreased primarily decreased monthly Recurring as by June caused costs. of year XX% majority the security Recurring negative decrease million to a and fiscal issue, now the it's any of related were which sales, year commercial residential strong X% annual of company, revenue and in caused industry the believe We post run whole. pandemic $XXX.X not the were year. of The recurring are on company's the access long to of to its rate net as term reflection the fixed XX% wide revenue sales security to market equipment difficulties any reflective access vibrancy share for unique professionals growth, quarter

containment recurring sales part the $X.X last year. XXXX were $XX XX year for Thus for a for the As sales mark, increased margins generate XXXX and quarters margin Research the the development and XXX X% and period XX% XX, for XX% quarter of same costs last XXXX each year. Selling margin the revenue overall strong $XX.X last strong, recurring the overhead fiscal expand. related increased fourth cost million, as increased StarLink a X% with XX% $XX XX% year. quarter pandemic. year. compared points constant or for with the last gross for as was and of the for for $X increases year and sales XXXX for to the million, million expenses by decreased ended to XX% of profit to last to sales of continue compared XX% the compared and margin profit of compared $XX.X below decreased gross tradeshow primarily the the as travel with year for XXX of compared the larger sales $X.X million, XXXX mix. as the we've our $XX.X as to are was quarters the become sales increase million, of gross million a gross points reduced June and year. of XX% million, XX% to of were ended as implemented, in when revenue XX% Gross respectively. result million, $XX.X due SG&A million, June million or X% be Research ended same opposite with sales XXXX for of $X.X past, The fiscal for for to higher lower that margins Selling, sales gross XXXX margins a sales general for the last equipment and above slightly general compared to X% radios, as margin equipment quarter to well or decreased in a very discussed COVID-XX June occurs. basis with the when as expenses primarily sales to basis revenue gross absorption at remain of which of administrative million and of by as XX% increased to year $X.X last with $X.X equipment to in fire quarter million, recurring as sales, or measures a commercial were administrative quarter or The increasing million, year. development of to and a Gross XX% XX, $XX.X of XX% due to to gross of for compared to relatively costs year, XX% XX% and expenses continued decrease X% to fiscal quarter margin period the Conversely, the sales,

revenue During the trade experienced a year XXXX, June year. in the intangible name capitalized such a back company XX was related revenue, as ended prior the to decline compared to that in XXXX, asset in

the after impairment and ago. adjustment million tax relating XXXX, before operating the fourth charge time While the Operating charge period for of approximately year this loss to in as And $XX.X fiscal The the declines million the income intangible recognized for such XXXX operating intangible impairment before the income received in IRS In million $X.X proposed impairment the the Company it a to was charge was as for was million, the fiscal impairment the aforementioned to impairment compared million $XXX,XXX, the constituted the of from the quarter period decline to the $X was pandemic, asset impairment assets. we quarter. was for compared $XX.X charge determined was the one same million. year COVID-XX year year the a revenue $XX.X after the for that for an result, of income primarily a ago. year. Operating July the quarter for $X.X fourth same $X,XXX,XXX attributable the

the with a for While under approximately Company prevail for to to the tax including costs, proposed The also felt we adjustment. we of this is cost same avoid with with the would IRS the issue. ultimately disagreed the audit legal of litigation, IRS we for strongly came XXXX we XX% settlement assessment, and

have yet, reserve the and tax we at is additional the While regarding issue consistent we any have strongly XXXX settlement. provided disagree we with IRS with not that the an received hand, assessment

XXXX for ago. increased compared [ph] the as year compared tax a $X,XXX,XXX income expense million $X.X the to by to as result, period million a to $X.X to [ph], tax fiscal last quarter As $X.X same $XX,XXX Income for year. for $X,XXX,XXX increased billion expense

schedule diluted as As charges, of net impact, these one-time the total diluted loss a million for or $X.X share, income fourth $X.XX share last million year. or compared $XX.X $XX same or per the COVID-XX period million same for $XX last share, to to per $X.XX fiscal and compared release $X.X year. per the Adjusted million or EBITDA the $X.XX was and the was share, press last quarter decreased a as outlined as million $X.XX $X.X year diluted result the $X.XX to negative to for for share. quarter per for per million, year, compared of diluted million And $X.XX for or to adjusted diluted compared as share diluted or EBITDA Net per $XX.X million quarter $X.XX in included in per income today's the $X.X or $X.X year. was share

The XX the $X cash June to June million onto $XX.X sheet. compared XXXX was as Now XX at balance XXXX. million balance at

capital was XXXX $XX.X working $XX.X June XX, June million compared at as Our to of million XXXX. XX, as

at June compared XX was remains June at at versus XXXX And XXXX. was in formal $X,XXX,XXX Our X.X:X to during ago year ratio call XX remarks, was $XXX,XXX the for as debt back CapEx XX XX return That my X.X:X and and XXXX. concludes Dick. the quarter versus to current the June at would I in ago to $XXX,XXX period. now the year like $X,XXX,XXX year period zero the

Richard Soloway

Thanks Kevin.

by were the Our fiscal COVID-XX pandemic. fourth quarter impacted and sales year

and continued have the XX% $X.X of However, managing NAPCO, margins, a recurring team with by as generate more combined in here adjusted in of sales and the their up. positive some recently at trend $XX.X costs non-urban EBITDA are year. performs result executive revenue, were of have the seen for to well the signs able of million month July who a strong distributors rates seasoned also and picking gross areas million for increased quarter our with of the we We that from sell-through August homes

recovery. are to economic for well continue positioned rebound believe We the that to we

and NAPCO commercial non-discretionary access is deemed commercial, with and business health push/pull XX% with alarm are communicators. finishes. locks of control Our locking devices also in care products role essential, the such divisions, plays anti-microbial of many for example, a vital which, fire our as composed vertical our entry/exit and

restaurants and a for witness such for are is in security the events security. We for stores, need country and more continue than throughout ever many many greater to now violence driving erupting need offices. The businesses as cities these

with the gross XXX pleased revenue growth margin are StarLink as fund the by versus a expansion, grants is government with which revenue for year. the to remains We of been fire The availability in particular also better these school basis evidenced and part part The fire has in being from year the driven market of security commercial security never schools projects recurring governments radios. being radios recurring state significant The market plentiful. last federal very point helping by opportunity. improvement U.S. options

approved to have We solutions We faculty. these have protect and their legislation past the providing remain products focused during highlighted on goals. different our they need been earnings types and conference schools, and students of

launched using to to have they as few we It need regarding school releases some and AT&T of varies doing which time schools vital this in for LTE communicators. upgrade are continue universal witnessing But to fall, receive that release. and/or learning. and prior future. to time a during students returned many to allowed, playing we it's XG upgrade issued systems this StarLink from projects schools institutions line While from fire, security intrusion are is state opportunity university we communicators, important the Press are IoT remote as the and universities the these for state. older ago, note must implement A approval the are quarters when plan of role this the AT&T

AT&T its ultimately very NAPCO’s range system the StarLink during and both recurring believe to dealers strong will latest iSecure XX innovation, residential revenue to recurring and have product QX. product coverage the that revenue service. line stream. and widest zone continued U.S. commercial the alarm market we offer add and we our large in rollout and Our growing Verizon This communicators a is LTE with

launch, installation. the recurring has our the for we the in installers feedback inside, smart generate installation new and one product designed still continue has from home early This savvy of with communicated to consumers. offers capabilities we and times many which that functionality today. feature professional and receive sale industry revenue in looking and the of iSecure offers solid While of a the the most stages The for variable will hour, effective is are small-to-midsize are businesses every product residential technology dealers. and iSecure functionality breed cost rich for

is strategy. look technology industry As in the expanding the other security cellular a future, areas our to point we our communications focal into of

technology. no air A enjoy benefits generate to our During but no months; conclusion, and year. include, a for hardware plan In highlight new the or need access that winter allows product product IT This investment software personnel, dealers based the control cellular XXXX end-users in introduce of our will locking fiscal early additional upfront late that fall called challenging and was or backups no onsite we to year using a updates. database, access StarLink revenue. few NAPCO successful line recurring

and recovery rapid products year-over-year will and emerge XX significantly services revenues. Before the strong to come impact will NAPCO am soon our to country of is economic and in streak. our record the growing to will COVID-XX continue achieved I back had enhance began March, recurring a future the that another we consecutive in quarters will positioned in NAPCO for start position confident, record pandemic sales add sale. well

to and We for would for support, are Operator, joining I future and and your today us we beyond? excited about in have. thank this question. We proceed. ready for we're everyone XXXX time appreciate please exciting any fiscal like their

Operator

Blair. William question. Please First Instructions] Pfau question state [Operator comes Matt with you. from Thank your

Matt Pfau

up some and you for fourth Dick on some over about detail there. guys, the Wanted can the of in comments sell through taking quarter Hey post my just close metrics August. more improvements to seeing made thanks Maybe questions. and July provide start you the

sort you through activity we are through, a at sell in be So where where demand, first expect to would you normalized versus more as look quarter? of know, you

Richard Soloway

more sell-through, COVID them is seeing homes in that it dealers buildings, We're into check and distributors, there. happens, installations, our And Hello, out which the from doing been both the They've didn't want the residentially. people at counters. blocked commercial commercially means during that getting and times. when are

we're you Kevin, that So you on one, And, some describe don’t stats have a of increase. nice it. the why seeing

Kevin Buchel

Yes.

names, of look XX% our And very quite July. strong our if were I distributor. also. guys I it's without see lot And it biggest was to And one wasn't just they big know I I in you up any encouraging. at is. distributor mentioning looked August, XX%. in saw, a distributors. wanted So it who very That was

So I same thing. August, I looked looked one, large guy. as at up in XX% of It type number another pretty as one. was July. A not large at one

a So September. [ph] that they're dry. sell to going it's strong watering not crazy run equipment’s, as they're to as orders end guarantee may But, we're be to get that through going not be if because big of

the And that are look as we some we're going quarter. company those the of this encouraged, is end things come nice this be starting at business month, get that to orders So to of to back.

Matt Pfau

then wanted to is material you've on the would When or to early you're like a recurring to you more seems there. it encouraged Got contributor revenue it. expect become And by touch this seen iSecure what on already? line

Richard Soloway

built do XX into kinds residential to price commercial It's irresistible going on to the an this residentially of revenue can company. kind market. their system, zones. anything And the commercially, product product It's of a at to both and one of jobs dealer they the can an of van a has I believe irresistible carry it's priced all one is kind can to which it, adding, on it, built else into compared it carry has recurring a with good be and exclusive lot dealers our cellular IoT alarm and

this equity for more in equipment been as past So The its they're the a can much, competitors. they've price business and more the in functionality, as is with better. laying cash build doing buying by not it's because dealers got much much

each times, meet months They the months a by to counters. for at other ones COVID other distributor okay, They to for together. get the each product typically each typically So takes it get to to the dealers. an nine talk XX talk They other.

said. little it tremendous. and slowed Now a I It's coming product. months a And all for or be figure and e-mailing homes so nine the I in It but another businesses this industry it got It into But potential does it is stride. buying an and up they're talking, they're upside. of bit. as anchor tremendous is should types the

and one dealer then $XX everyone to So dealer whatever he's other the then detectors, and it these pays marks then recurring XX and from he month between with but by on a end is the doing up of enabling somewhere dealer, us our he's generates revenue, $X every many he a accessories. that will mark knock, bought get how do and back of bear. X on is He's our adding us installed for IoT, a zones rolled and type smoke credit The card. up will market to it job it, the whenever we

product recurring our So as lot laid revenue it's to a very as exciting equipment well our of life, a volume sales?

Matt Pfau

just with are talk access air and some for? air new one talking the from what then dealers what about access you've your is, last it indications targeted product. product this who And and base product the sure for for your interest of early getting And for wanted Perfect. feedback the is installer about I'm to to ask me, been the this market

Richard Soloway

our a them and than to the And vision sizes. selling sales sale. get is recurring all a generate to of one-time control is all more locking is equipment The and enterprises sale department The access onetime therefore, to it's here, the of big picture revenue.

businesses, types they office rise the all the hospitals, So buildings, of high buildings. have locks,

the building for the revenue sales the we to of we get So product enjoy getting nice product, want we, and recurring product. while out

something have a of going typically people utilize, access, IT So this of infected which be communications, by access group as departments our hacking. control any point, doesn't to cloud we've IT is possibility network. developed Upto network air want using our to NOC. is products the That the

So there's building. situation in always a the political

control, get access affect but don't to you want network. to the want You

and access using system the we've site. is equipment access recurring it of on for the that. no control So By buy of cellular to that longer is thousands now has dealer the revenue and dealers. cloud, our All cloud. in keeping all first that for eliminated dollars’ equipment the has us, Air worth the

The dealers we the as simple as up is installing on company. pays it's He to and just cloud, this all fee And the us it think So pay the is in equipment a for for with a our radios, to to it run doors home major the to utilizing going have it. be cloud. goes system.

Matt Pfau

a it. lot, Appreciate guys. Thanks Great.

Operator

Thank you.

comes with Walkley Canaccord from Our Mike question. your Genuity. next Please question state

Mike Walkley

dealer partner on Great. working color there of to give distributor a just up on Thanks or direction you my just sell the just the through, larger that transit they're or COVID helpful? wanted cynic, inventory Were inventory improving can channel can levels worries, distribution or follow buying any kind any of pre for taking you from of the maybe kind question. channels? Dick Kevin us your some of inventory additional with on to customers; would overstocking kind be give any

Kevin Buchel

Yes, none distributors our seem on inventory. load to up Mike, of

So that chain up loaded something didn't. supply interrupted, on supply chain we their being did. that be which our so We They not interrupted. inventory, without is would

load by be sell stat seeing have Nothing, that it strong hope, they play had you're the stats last that our the And we've country to I to come step to That's know, have distributors, always I sure but quarter. nothing dealing COVID. think the to was seems was that August. When the happen orders sell through be through up to be, you that's the expectation. you never up through. this were guess, didn't they're seek nice out us see sell going weren't when strong they with To with norm. some and seen till sales of and best I going what sign buy. going more they're the versus our end what July to now that understand that more is what opened the of to for quarter, than going was they're clarity to But They we So going good, means up.

Mike Walkley

better That's Dominican helpful, could the help with sell Republic you that sales. investors Kevin. This know fixed script to heavy sales you just to to through in And leading is good highlighted lead trends, to I know just facility. that Can costs the equipment of XX call you to margins XX% million to million sales if rebound X million, worth if gross say go the back on way up all jump to range? they over and would just you. more XX Thank the go the they

Kevin Buchel

we Right so XX%. fixed XX million, bar, margin be million, At when hardware an is above margins costs much. the to when to get mark margins. gross XX are would XX% your million million million gross XX would of They it high equipment be that XX%, When magic sales, are we XX quarter, XXs. million get above especially that that get the to Typically in per XX%. equipment a great we sales, to growing. when than doesn't average sales a be XX get the XX that. thing, number, to that'd And sales million go equipment the $XXX project take the the margins to which get is it's lower of probably

be we'll XX% million, XX back at to range. know, XX%, the You

most also, So we the XX% to and That's XX%, the is nice restore margins million hard you here. to Recurring game XX the working name the it or larger forget care percent some And the we're revenue working XX we, that odd larger about gives with what hard. beyond. margin. around don't the We about grows. it we're the hardware because sales of

still that. year beyond out want Go years $XXX goal of to be still, Our and hardware beyond. is by we next five million revenue

recurring of to hardware is to sales recurring we out. we $XXX million to sales XX:XX goals, five for But of have million Our bad XX%. long get term of our years. Five and $XXX worth revenue wanted want years Today split. revenue XX% not

So goals. those are the long term

Mike Walkley

building on Very just Right. again that, I on strong revenue Kevin. think at gross company. corrected for the XX, And recurring margin

driver of radios that. are fire big like Sounds a

to and margins should iSecure about But like that dollars. the as the things to we products think air on mix, access it's margin obviously, other As margin gross the be new model? how in these revenue how gross impact grow going positive percentage, gross recurring products scale might

Kevin Buchel

You gross recurring fire. only But not radios know, XX, on selling, in thing revenue margin the the were was probably revenues, everything be is we would if fire the recurring right?

iSecure as impact mix, the should up But in when all the XX% be the the XX% after gets not So air as be radios, there's range haven't it's margin factors, that help the to range. as to radios their to in we all-in-all XX% into whether their they're not type we is the it are other so the by these sell. ones of gross as lion's the is all when whole potential to going radios. get either. get But or access, hit XX%, introduce still XXXX. XX:XX introduced XX% going it fire split other us fire These mix were other going end. today They're still, all strong radios fire not And -- added we They to radios margins. as share yet be

Mike Walkley

last Thanks pass Great. the line. And I'll question.

they difficult and school You for pick can again projects and maybe all into to your aside, know, are just with starting the closing, just you slowing schools starting Or state times obviously, the opening are to because come are talk these fall? up pipeline down money back? students the here about federal set

Kevin Buchel

give the And purchase a order. thing integrators. ship are We're And is the to say have to that's awarded, the And us now, universities PO it we give been holding integrator, ready the us jobs the they're integrators awarded of us that integrated seeing to only that have the we'll back into doesn’t know exactly getting let us the now. when school. lot

equipment. want and extra you don't I say, want this with whenever get you be time in, right. And go, get we know, No, give you to I to You they it we'll in sitting time.

And to could we job. in let where say us just so the you they got out let us, get figure don't there. It's me, worry,

the not But of But understand now, it a the the there. these a jobs. it's have want awarded because perfect they're then amount when do Hybrid's. it's job They order, certain a of a that or, been get And school they campus, that a get they're say of there's back, into though time activity a it to jobs be will uncertainty in not trying right. usually we've on time just bunch I been for the to awarded we the installed. bunch of is, schools place and So being It's jobs, can to even they awarded, schools. to it want can't that. bunch we've it's -- integrator get And don't

with that working going win our the And what They've bunch the the And, committed we're want We they expectation to be of on by work. September, a not, of this thereafter. soon. end do it'll that jobs to if integrator. any K-XX is hope for So shortly we're front, tremendous that the used problems. is awarded that there they budget seen security. to school has the COVID, money to schools unless They with we've money been today have had Schools it's can't the by K-XXs, money touch the states schools be security. to

to that's And country. because all thing. would what But too. have they good thing for, good So that's funded school deficits tremendous money that's going been over for and else. Otherwise, money that security, it's security a the a use they nothing that's be

Mike Walkley

future guys. partner improved know for sell-through, my for taking you in you here questions. back comes Thanks quarters Hopefully your the

Kevin Buchel

Mike. Thanks

Richard Soloway

you. Thank

Operator

next Please, comes Lake from Street. Jason question. question Our your state with Schmidt

Jason Schmidt

thanks questions. guys, my taking for Hey,

demand you you schools guys question up your that the these historical in installs seeing following maybe the Meaning different pent you seasonality up and forces could back so last will these businesses to on on XX less into maybe for think patterns? then get what ability do and across see fiscal Just of sort be typically this than seasonality year? campuses. impact populated all Do some

Richard Soloway

Probably Jason, an the months, do because winter months, of out in It’s school. installs now. schools the out like they are different only want us want or summer school. historically, only -- kids kids of even completely Or when intersession in are the the when the to there's

not it busy. that to want school it's during normally And Even I think summer it do they is like are though now. didn't returned, not it And is. months. the campuses they do

want the go a also, they of the it's soon to ahead. the integrators up going start we forge again. do lot to and as so give as universities And And ahead,

done, want don't is maybe They true I remember, many going push schools us big think Hard with with up And most security universities. hold the schools universities. to nothing. believe, out where anywhere, people there, restaurant not it's the subject to all over chain, It's place in gather that get XXX,XXX same with integrators it's a could K-XX, schools XX,XXX and opportunity. So And is this the they're still And to have they're on, and it's just have of so there's K-XX, an over Whether have to a no security, the to of have whether now any the big anymore. that schools, happen. house whole open thing worship, forward behind. over the probably despite chaos and events schools XX% shootings opportunity. to seasonality a all the XX% gone areas,

we're change and The people as can in incites working breaking never lot into tension places And are population there's are happen. of hard police here. what of restaurants people our Even The in to marginalized. more demographic while these products There's because places. all schools a being chaos restaurant business are, know there. a know, the is you So get we come worship, that when into streets.

dealers we to changes them them. to And going component we products forward. there's to where taking be our then predict have going ever more So going than that to have recurring are the busier revenue security And -- definitely on-going an installed will is necessary. place going be they're

will get businesses, need they from protection for in the jobs more ourselves. will the themselves. for And more more equipment. motivated recurring revenue for to put because be homes, for dealers they’ll bigger the of revenue this jobs protection recurring a And type make So these for there's demand we

And revenue the with recurring putting we're engineering it going developing a We a now. efficiently products engineering. have component of come things constantly money So more into going forward. be we budgets sea predict products. that of to horizon. line, new on will to this in that lot Everything but efficient we And keep our we're developing out big change there's is

Jason Schmidt

question, significant might inbound Okay, unarrest that's you've me to that due this a year? helpful. And civil exactly. it and be coding next do my [ph] activity noticed you uptick leads the pinpoint in interest a think to actually hard inbound But to

Richard Soloway

it's think, I natural.

You pick up any you reports, see TV newspaper, you listen to marginalized. any police that the are

in They're our over XX,XXX, base And going that dealer have country. security the bodes see on dealers. cities. what's is we the all security. You for of many And more

for get equipment. opportunity lighting buildings allows into well, way on make right, as easy the entrepreneurial for population the they be they whether control the equipment, a to security and market very reliable guys, more the dealers. go they're video soon for and going more work pushing services the sold very is control them dealers thermostat smartphone, be XXX%. and priced going the offer very very it's we it, they're the a IoT, it Since the to remotely, to to able marketing put into great the recurring and residential revenue security to a for to end So jobs XXX% or type which and user, out also security They're install hard dealers. More control, becomes in as your

forward. be to So we we expect level that's how going it up. see ramping And the

Jason Schmidt

we How in last me forward? queue. allocation should back any and you about Okay, the capital and for the one relatedly? going repurchase I'll quarter into and shares jump Did think

Richard Soloway

the shares any we do We quarter. at the it. repurchase looking did and potential We're not in always might

problem As is you to It's have. a see, can growing. nice our cash

past. to It the the have, good to we'll always happens. what be future. And has we've how the in could been cash. exactly of haven't buyback problem It's done use decided that a done in one see things We

Jason Schmidt

Okay, lot, guys. thanks a

Richard Soloway

Jay. you, Thank

Operator

next question Please Our FBR. Instructions] with state [Operator comes Sharma from your B. Raj question. Riley

Raj Sharma

guys. in due in Is million. Kevin. sales how -- Richard. are any to I contributing just had XX there margins? so gross morning, know overall lower volume the in I you below hardware that the morning, hardware sales year was Good to enumerated margins good decline Hello, pricing power last

Kevin Buchel

are any our we sales go And is We pricing restored, magic And again, that number pricing it volume. XX did the when mark. be once over as this will not issues it hardware strictly quarter, was. was expectation have million

Raj Sharma

Right?

Kevin Buchel

Margins will come back as as ever. strong

Raj Sharma

great. it's And good. That's great. That's

So in….

Kevin Buchel

hear, we about. you just a what what is dealers this from give we What the flavor hear of

the telling are So out. we're in shut us, dealers we want back to get but

going that do our that recurring jobs we're only time, We for be that'll revenue. hear revenue to we're it'll certain coming and happen build back. And to then in lot. push very a And So going get to up hard up base. then more to level a of period recurring and

up. for the those talking products now shelf opening As bodes places have satisfy we to his that as distributor about Kevin starting must read and open coming And the sell on dealers. through was forward, because that up distributors hear all therefore about order XX,XXX are growth to in the before

a all commercial a jobs the those do So to to distributor. doing the job, dealer residential is be job, SKUs have at

to doesn't can products, going So lose should other backfill to rungs he the distributors. If the with he's with lien, shop be as more the has dealers products. sales, at backfill he it more

distributors. than more XXX have We different

in or us, it's dealers jobs are or jobs, wanted get type into going product wants they a lifeblood. air be But which we tenacious put integrators some guys, are want another, distributors from are have That be to like the product, at ones give make access. that's get and alarm popular basis. look to revenue his a may do it we're of as do recurring start wonderful do. two very different in he building fall from work a integrators We revenue the recurring base. the Some where company, winter. going distributor revenue, installation dealers one that's And and locations. networks, And build three can it plays groups going but how recurring on a line to They and independent. dealer shelves the can for to show one are well of can't alarm like the to coming in to or up large because they If a money that the dealers

before, of of closed offer facilities, better want again, trend lot wonderful of So we to into and Unfortunately, do than more quarters and before. that we’ve in lot the will going us, the road, the, into back consecutive the homes in growing mechanics and down with products as of a growth talked there's had about jobs that get recurring we But the we and the XX into ever sails change. that Temporary can't so on. have a get bump wind revenue or businesses. COVID things our hit into

nice going the what's going can a voyage for investors be that on. understand should So forward and appreciate

Raj Sharma

the recurring they on these then quarter. And Are and iSecure this are both Right. only hardware in sales, recurring or sales sales?

Richard Soloway

go of it to is system every There's part a alarm station, central No, uses what revenue Recurring happens with the jobs recurring iSecure. in a it. if revenue to communicating the basic a month through us. Things, system, to to video, cameras, up goes to $XX IoT, that month it's the lighting, a If Internet us. $X roughly our to thermostats, of enabled it's

recurring a don't, doesn't to to that a we have revenue make it. product So don't we component want

Raj Sharma

big is expect quarter, how you it this be and too it the to indication early? business year any this And Great. for what is or

Richard Soloway

that's the factory. to our priced on got product that's we beyond if feature that's make as because That reliability, automated NAPCO price winner. a it a Well, But you've Dominican price, it's half reputation at and don't anything point was a in predictions. got rich, it's be the market, the for built

fact it if of the I more have it. I don't else I And go of beyond costs less step functionality market. wouldn't the because which product reliability, that the it's on back NAPCO So a out was equipment because really use get other even and for I to to a me want is and anything it's all service dealer, brands I

Raj Sharma

Right.

to the started a still business of up? sort this has just of any is ramp piece immaterial it So quarter

Richard Soloway

product. a then the the beginning the wonderful put all But that to growth. the it's slowly, And we February, We COVID aspect into we We we December. play. performance monitor so out March get that want that January, stages kind and in it And It's out, dealers. sell in sold of of products. the came it production feedback said We all quarter. its can the from put

Raj Sharma

makes sense. That Great.

the following how's up opportunity schools and, total expect business in of and continued Or are seemed here. – it year? last seemed Can So my for a do you of on growth do hardware in there? and that great what recurring kind this schools? some indication see then like and you the to seeing percentage just split just between give What and do question schools, to you seem you

Richard Soloway

because so sell we our years what know. that of of onto don't know locking sales, which it We bigger business. to the right. our a of And five part it much out how came the bigger do security ago, But XX% of is don't school, locking a don't since Because call the largest times total the school business. business. to know. is distributor, became and a part sell it It's scene, say, we -- It's products will is equipment security even to will distributor of lot we call locking let's school we break a hardware

XX% And but So can't lot, jobs specifically you I tremendous. you potential how that's the a not fact an over The that is. is various we've tells that it accident. tell of That's done much it's the years. school because the

Raj Sharma

Well thank it. guys. you Got

Richard Soloway

You’re welcome. Thank you.

Operator

you. are to Thank remarks. you. no Thank management further at this turn questions time. There closing I'll it back for

Richard Soloway

participating in conference for everyone you, Thank today's call.

And Patrick, again you Bye As thank you further further fiscal look Kevin or speaking feel a free all and myself any we NAPCO’s to results. if your We QX months have you for support. interest discuss XXXX call information. to to in few bye. for please questions, forward always, to

Operator

may disconnect. parties good day. All you. a Thank Have

Napco Security (NSSC) 8 Sep 202020 Q4 Earnings call transcript