Earnings call transcript Q3 2023

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Operator

Greetings. Welcome to NAPCO Security Technologies, Inc. Fiscal Third Quarter 2023 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Instructions] [Operator

call this being is note recorded. Please

now Vice President will turn you. the McKillop, Patrick to over of conference I Investor Thank Relations.

You may begin.

Patrick McKillop

of for us for Thank McKillop, conference call Security. I morning. our today's third you Investor financial quarter discuss President results Thank joining you. NAPCO fiscal Relations for am all to for our Good Vice Patrick XXXX.

release all the opportunity the press had you to have discussing should of results. By now, the review

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

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

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

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

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

required unless statements. press call otherwise release as of these provided and undue date, not All on update today's is undertake duty such applicable we forward-looking should no You conference except law. this place to information under as stated reliance and in today's information,

to through in through but first, And especially all trips. the a assist William Fargo attending conferences the calendar in Conference mention XXth I to moment, will such Angeles. the by Chicago. Needham Blair NAPCO. also us we I June And small June May are folks the on marketing XX those which Technology we'll Conference some followed over Chicago. I May call cap I would Wednesday, wanted the turn Media New York Los do, outreach like through Dick the finally, to X XXth have is and upcoming the Investor XX IR as in we'll these events thank Then just in Railey that in company, before the be Growth be B. City, Conference, in Conference, a at crucial, Wells Xth that Industrials for XX,

With of of that Soloway, the yours. the over the CEO Richard way, Technologies. President and floor call is Dick me turn NAPCO let to Security out

Richard Soloway

conference call. our you today discuss results. Good Thank to Thank our to you, joining everyone. morning, Patrick. for welcome And us

very at of million pleased to rate April recurring quarter are sales consecutive XXXX growth. run of now revenue revenues. We annual our is XXXX on and record $XX XXth fiscal continue $XX.X million. rate, our the is grow sales very This to based Recurring report strong QX, a approximately

strong at our and Our cash balance $XX.X have with remains million debt. no sheet we balances

fire which trends and capitalizing include continue alarm, to architectural security plus We industry on locking key wireless solutions, intrusion school systems on enterprise access and focus control products.

well growth, on costs. the as to These as controlling profits, continues important metrics key metrics on at here returns NAPCO our equity, are team The and focus of our us management shareholders. to and

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

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

Kevin Buchel

And for same by $XXX.X $XX Dick. XX% a $XX.X period year months you, a to the compared million million nine the ago. year last good March everybody. Net a revenue XXXX, compared $XX.X Thank to record the quarterly months increased to $XX.X ended for XX% quarter to XX% Recurring the the morning, XXXX for year XX, $XX.X period for to million increased $XX.X for months the as million sales Sales ago. XX% million same for March a XXXX year. to ended XX, million as increased by ended three to compared $XXX.X same period nine the ago. same period million increased compared March as to Recurring for for revenue the XX, million

April prospective on revenues based recurring revenues run rate approximately that of run a January service on to annual million service recurring $XX recurring XXXX we in reported now back and Our rate have XXXX $XX compares based which service revenues million February.

in the three due StarLink equipment Control The StarLink revenue The increases and products. Lock in NAPCO of products in of increase intrusion locking intrusion commercial driven growth recurring sales was equipment and months Access nine the the to fire Continental quarter XXXX for primarily were both our due which radio our to products. sales Marks business. the strength locking Access Marks as Alarm of primarily Alarm ended both the March Control attributable in strong as was increased and and increased increases by well products, for sales XX, the cellular store alarm increase nine for products, our Continental our products, and door The products to months sales Lock in continued primarily includes

$XX.X gross a the for with XX% for a $X to the $XX ago. profit months margin the three three XX, period million with with margin period compared by ended million with to gross XX, gross of gross the year a for as ago. Gross XX% same the the million margin margin for XXXX compared $XX.X XX% increased months as XXXX for a sales XXXX ended of period to a to profit million $XX.X March ended for for increased gross gross same nine with profit margin with margin XX% $X.X year March XX% year XX% XX% equipment to a Gross million Gross months March a increased of compared of a XX, of to as XX% same of a ago. million XX%

XX, a Gross to a XX% for year gross for margin the XX, with three to XX% $XX.X $XX.X XX% the ended with sales million equipment million margin year as recurring on to ended the the margin period XXXX $XX.X as profit profit million, gross XX% Gross of March gross increased for XXXX nine increased for a to XX% compared same a $XX a months same ago. of of compared for period margin March million of months revenue gross XX% with ago. a with

well compared the recurring nine XX% the primarily certain the gross on equipment margin million ago. to with $XX components, a and months which for transportation year XXXX ended a expenses, for Also and million, profit availability to with dollars aforementioned for equipment absorption as margin both in increases XX, favorable for resulting to increased period XX% significant gross The last as the XXXX as margin a lower due lower to XX% $XX.X gross March Gross the overhead is months of in XX, as a mix three costs all gross increase March sales nine also same profit this year. compared of the revenues, same as improved product as shift in revenues ended period the of rates. the increased well of

gross The XXXX nine continued increase company's revenues monthly in continued recurring dollars due relating sales than the and increase selling intrusion service the nine fire of radios. was primarily three to the company's the to three March the prices profit company's radios, months is strong the in both the both which the months gross and revenue margin due XX, from StarLink higher The have increased recurring ended service revenues for to radios. for for

the to $X.X primarily net months or XX% to months $X.X compared compared some million year increases sales, ended or increased expenses March to ago. or $X a million dollars sales X% development period XXXX X% net Research for Research three and X% year due as of $X same X% of increased March period was ended the million for XX, a increase additional staff. sales ago. in as the XX% for million net sales development and and XX, of to XXXX, of same expenses or the The salary to for nine

the the March XXXX a without in decrease increase $X.X as of expenses a a three percentage the net SG&A March as primarily at for year compared period to to remain three same was million for net months sales for as expenses same Selling, period the to XXXX as XX% the million of the general and expenses. decreased to XX, constant SG&A ended ago. $X.X increase ago. administrative ended XX, XX% sales for The a sales months net need relatively compared percentage due to year

for of ago. from the as service expenses offset from percentage a in credit to a increase these to XXXX recurring SG&A fees by in sales a dollars net same was $XX XX% in primarily increase ago. XXXX year nine period year due million net The the March as XX, resulted processing X% the for nine increases sales The months for dollars. expenses decreased as the decrease ended partially aforementioned to XX, card expense SG&A legal well as net our same in compared $XX.X as sales as related the a monthly by to million for months percentage to of revenues. XX% ended increased period March expenses increases primarily

income increased to compared Operating million increased to to $X.X ended same year. million to $XX.X March period XXXX $XX $XX.X XXX% as year. the for compared the million income for Operating million the XXX% XX, last as for for months nine same last period the quarter,

to for for effective provision taxes primarily ended for to million also was XXXX an due the tax the ago. the months The to taxable the the year a three of was the effective with million an primarily XX% taxes rate increase compared $X.X with income $X.X a company's provision provision as compared period million tax $XXX,XXX nine for $X.X XX, due XX% of rate XX, an with months of million effective for months for same increased higher period The XXXX rate taxes March provision ago. three The income higher The an nine increased with for income. by income the as $X.X in to March company's of taxes for same increase ended income. to months tax the for XX% to year million tax $X.X rate by income XX% for effective in taxable

months the for share of as $X.XX quarterly $X.XX compared $X.X for period $XX.X share $X.XX was per income a million share million, $X.XX nine quarter last per or $XX.X Net a same the increase. the diluted the or or record period share million, to $XX.X per million, same Net diluted was increase. as for XXX% year, income per year, diluted compared last or XXX% a to for diluted

period XX% quarter for for addition, was March period of net ended the was XX% year as year. of net same sales of to months XX% the to XXXX sales X% and nine last the for In compared net XX, as income the last compared same

as same Adjusted million, share EBITDA quarterly $XX.X the to increase. increase. or year, $X.XX $X.XX $XX.X the $X.XX $X.X million, per the a diluted share, period a Adjusted XXX% diluted per million, was diluted compared last EBITDA period per and for million that's compared for diluted as for or for $X.XX months same the record per year or last share nine share $XX.X was or XXX% to quarter

year, $X.X income as adjusted March period months the income The respectively. XXXX, to resulted and XX, extinguishment nine last other the quarter for the margin nine XX%, share XXXX for quarter which earnings for nine $X.XX for of income and and XX% ended EBITDA XXXX, months to during same compared debt have $X.X share and would net been XX, period last year's last Net XX% million, XX% as the year. the reflected for benefit, per March ended per the compared for last year, same million of without was was the ended XX, earnings period September month from such and

XX, to balance that the capital assets sheet. of XX% XXXX compared in $XX.X liabilities $XX.X investments at current current to XXXX working million on March and less the at $XX.X increase. cash XX, as March company divided and securities June June as March current defined At current Moving was cash capital and and that's marketable equivalents, and Working million and XXXX. as million XXXX, X.X June million other X.X defined current had with liabilities that which XX, compared at assets X was to the of X at XX, is XX, XXXX ratio And XXXX. $XXX.X by XX, a to

no versus compared year the million million $X.X ago nine that period activities CapEx and for XXXX debt. and increase. And was $X.X Dick nine XX, year in have XXXX months prior period period. was operating ended million that's $XXX,XXX earlier, the months year and million to March in was for the $X.X the XX% by as March we for mentioned XX, $X.X to $XX.X million provided the Cash quarter And compared same last an for the ended

formal back to the to And concludes my now would call That return I Dick. remarks. like

Richard Soloway

you. thank Kevin,

Our which XX forward sales breaker, to in XXth year-over-year quarter now a quarters and our we that of was sales consecutive and COVID, continuing streak, quarter of growth surpassing to consecutive growth third record future. the profits sales we streak growth. had look is Prior our

increase increased strong as particularly the occurred primarily the This QX, equipment XX% XX% more to year. compared on large XXX in pleased margin factory, overhead favorable which gross of of to increased to last margin as and absorption gross are see year's when growth our to basis equipment last sales a in sales the costs, freight and mix. to Dominican points revenues, lower points Republic basis result XX% compared We which X,XXX from was attributable

One buildings Reserve remind And business. to dominate our headlines. key market higher our alarm success commercial. as you maintain from like area of business to occupancy. of A recession come and alarm driven Federal continues item. continues rates resistance U.S. system that mandatory fire of a intrusion to to fire our by our recession company commercial from potential must interest commercial and a is receive I'd non-discretionary XX% certificate alarm Commercial is stock the highly fire is The business order in have a

the as resources. focus nature a high our this business, of area the Given and profitability this on key we essential of

now for will be hardware April by occurred would revenue recurring Our generated increase generation XG increasing and of growth million equipment Annual radios both XG replaced The rate as XX revenue quarterly replaced recurring be newer have There and past are run thousands XX% revenue we quarter, Verizon revenue that XX%, to January. alarm revenue, these anticipate revenue and both recurring need monitor recurring additional conditions. to and of respectively. this result radios strong this recurring XXXX. functioning which is because producing affected still the NAPCO's in for many many Sunset, new was alarm company. This and must radios, with increasing the that dealers in of

as of $XXX Achievement end previously track and million of we margin fiscal for mentioned equipment the those goals our $XXX for in goals of are goals QX million revenue of our of in in equipment recurring EBITDA to revenue margins gross could and on and by XXXX. as run generate XX% of it believe revenue was excess reach still recurring revenue well XX%. We XX% rate XX%

shops, coffee others old types, hospitals, from millions lines. of We copper there are and commercial buildings as require upgrades fast schools, all offices, such still are and restaurants, phone estimate of that food fashioned

points for ago. in Radio service has also period this improved are love. both by versus rich and sets, the a recurring XXX and quarter revenue widest same dealers XX% XX% StarLink for of year the Our AT&T basis to feature coverage which Margins Verizon

chain even supply resources begin that supply the largely the them of we have invigorate crisis. bring generated what levels in new the believe to three abated prior than us have will constraints and for higher margins the next The even and our months, to chain supplier we developed further to we equipment

and continued solutions remain normalized largest the focused several to million company is high the the through administrators had few encouraged the seeing distributors. levels we the School on The quarters. more was backlog closer happen. we need of last Inventory for $X.X by levels more last school as are statistics down quarter are from our in for security continue we to from experienced getting by shootings extremely of that strength the sell from

The Missouri, year XXXX We initiatives, million of from continue $XX million. their million to where received for see $XX schools funding fiscal more by announcements as where and upgrades has recent schools XXX pending in an proposed approval. evidenced $XX Ohio security Missouri in Governor received XXX additional

margins security market the laser for country. more Our now are and colleges which on the our across of fully we approximately K-XXs healthy solutions focused school XXX,XXX ever, X,XXX And comprised and further school generate approximately, is compromising nearly penetration our for of universities than integrated business. security

Fully market priority for top a integrated technologies continues for security NAPCO. the school to remain

We expect allow Air The to from of the will Air and are will security done seamless generate essential control, Access our which product locking streams for from generate which us revenue never launched to offering been recurring recurring divisions Access to based us enable them Air recently this recurring access company. our cellular The generate all strategy. revenue exciting opportunity. first before. solutions, has revenue dealers make strides a for industry's about product dollar continues the control are access new market future the actively access as Access. educating with is billion locking and is teams to we more system the in market sales momentum believe and Air control we the in opportunity which Access dealers

prevent end. setup, back is Prima featuring intuitive rolls powerful sales inch video valuable magazines among doorbells West unveiled healing truck product and smart panel and Wi-Fi named revolutionary all back video that security which Prima Trade the fire, called and products a security, and Prima March, about. new self excited a are and for new was recent we as ISC and integration most the XXXX. super also very automation in dealer At we Show for use seven

expect We available early to in XXXX. dealers the this fiscal to have

which the remains developing at team more for hard grow recurring future will work our R&D products Our business. us even revenue help

We have yet come. revenue success years growing the our and the last over best tremendous believe is several experienced recurring to

patterns. the Lastly, continues we're dividend first to in ever company announce morning's evolves the strong program our of excited and release, indicated this as growth press initiation as its

years continue so important created has the do growth the us allocation balance believe shareholder maintaining a way NAPCO to We capital shareholders. including opportunities is to in future. it to in returning over value for tremendous investing another program this capital and our to dividend is strong sheet and balance priorities,

Q&A our a this moment. session begin in portion will We call of

Our fiscal record third breaking a quarter XXXX one. was successful

a and continue we on. quarterly continue this healthy believe balance have and profits. we well We pristine growth now sales no sheet, streak the debt, strong generate XX can beyond We consecutive are streak to

to their thank for have. exciting like everyone we this and I us for future support joining in

to are would remarks concluded. We the Q&A proceed. formal session. call Our please now Operater for now the open like

Operator

Our with [Operator question Please Instructions] you. William Matt proceed. from Thank Blair. first is Pfau

Matt Pfau

my taking for thanks questions. Hey,

start the with of a go about should the within of quarter parts rate? I forward the to in wanted off in There is good improvement bunch third First in to which think we gross saw How the we was there. see. moving terms rate equipment margins, a

component, was What just then clarifying durable what specifically What some on benefit? forward. you mix just mix is strong? side? understand weak going the comments that was drove So the mean maybe And want that on to that how

Richard Soloway

get that on Matt, of several us margins, XX% So the the them. helped components to

freight. with start Let's

down. So the have freight come costs

everybody. for think come I down they've

from So too. we benefit that

as past of and hands we'd buy as We the during not chain We lot have we'd to chain parts, could our to them, fly been supply do get that crisis, have because We would we buy we to components in, fly them. during if the don't the out. have don’t anymore. want on in supply also did much doing problems we a run

be. to are all the to having little totally sustainable supply Crisis chains of The over. work that nowhere over So parts pockets a of place have is you over. crazy still. not shortages still the We used forward. hard to going that's bit There to days because believe us of it fly get very upon near is what are like

So that's sustainable.

to which comes overhead the Republic absorption volume very continues hardware Dominican the from sustainable The as grow. of that's facility,

This we're volume Dominican into sales. the that margins more to quarter, the overhead sustainable. facility, to hardware are more the see absorption pack the of going expand. and XX.X million The was more going That's goods the we

unpredictable. The quarter The were dominated other part strong this they the alone lot mix is the quarter. mix. very sales and is in Mix

Alarm groups has Lock well very strong did did But Alarm The particularly well. Lock margins. and other

margins margin. gross So to radios as Radios those margins have compared don't greatest on example. the

a revenue, better. of which course, lead margin, but hardware from XX% has recurring is view, Of gross they to point locking

of So hard is And this the view. much in from of that predict. why we want We mix XX%. puzzle Is all And sustainable? was but that's is all contribute. We think better point it particular were to the pretty mix to that pieces did. able they to get to quarter,

lot seen of of yet a We have the material not benefit. raw benefit

Remember a recurring to we at of that keep and revenue going. to the do we high had very lot components bought had costs

We or component buy and that to lead is cut Remember, to by in And $X will that we solutions high. don't we do through about lower a those XX 'XX amount, work fiscal normalized, those get inventory work components more or that going times now. we're from cost the talked our normally as that have period. more we're away $X $X of the cutting inventory, we are still further more from some being $X.X going higher benefit start to to lot to the costs. have that of we quarter, cost of micros see inventory. to but to $X work level million have inventory inventory. to parts Now That in But through brokers. have We this cut we

They're come. benefit a that's of So the yet. soon for not margins are there that to equipment

Matt Pfau

Very helpful.

How the revenue see versus quarter the Verizon the shut impact in business of of down? that turn you and side. you off And what went XG go absent back that and there the more dark. on? those your can for gives did your did How excluding have me that recurring that that on of still are impact one expectations with radios get did the What the expectations? then, you turned performed confidence Just back you out many some shut on ones versus the

Richard Soloway

What we up quarter, we revenue XG saw to with was recurring this the is the saw continue effect go Sunset see. besides margins to which the nice

XX%. the crazy Now That's it's part of they would of sunset, be larger be quarter have that XX%, the The not the last how fact their be them. primarily attributable these a revenue. larger to was strong, very livelihood. That's to they replace and replaced, a fire radios dealers continue get and to lot recurring mix. become That's to radios

least slower thought. I slow a process, than have at would It's

affected increase being boom, keep short. to impact It they That's difference norm the I is growth of modeled First getting go on of versus and going what's would thought that AT&T it thousands XXXX thousands delayed January us. radios, And to radios delayed. go like is the see happened. If This they good sunset, goal. out never rate. plus was have just delayed. have all, you weren't XX,XXX XX% the caught let the between thought prepared. would X, a wasn't year-over-year silent, XX%. at it and it dark. of new XX% They were They On

our months there to end we getting of fiscal by of instead the later. was, six showed it goal XXXX, what get And

our more gross go these used say margin going up. for for not be lot a XXX going rates that That that. ahead the XX% of And what, goal hit and our are if XX%. by at at But it's XX% that think for year, XX%. that. XX to of stay This XX% going XX%. up to hardware to need by financials, XX% also makes we're And as think up going growing that XXXX last It's way nine to replaced. to we we we growth we're which And we're even radios months, we're million to get look than to our my was However, That been at we've at goal year you anyway. goal,

$XXX big So that's the We'll few margin. EBITDA overall why a of a picture late, there early, we're goal not and get million, doesn't few the months about matter. XX% months worried goal.

Matt Pfau

Okay, Appreciate it. Very helpful. great. Thank you.

Richard Soloway

You Matt. are welcome

Operator

next Our Street from is Please Markets. Capital with Lake question proceed. Jaeson Schmidt

Jaeson Schmidt

Dick. March. guys, my in sell-through know data I mentioned strong Hey, thanks questions. you taking for

you in curious of orders guys? any pull the Just for think think March you how seasonally June benefited we quarter from if should sort and strong about

Richard Soloway

those products super the are comes to seeing are through Sell from with locations in single the we've go every busy XXX like caught, were the all very newspapers radios And would and very ours, we a super, And be day, them. radios say, are upgrade would about headlights. because we of been busy. will not get the Also, so expect that down, And going fact we well, distributors so and these we're in that the installations. they've of have reading upgrading the system work. busy. new that talking we're can dealers some realize the I We that very, taking from that and neglected the distributors they didn't they doing do what deer but the dealers busy going to them, dealers

StarLink one it like that's dedicated The product, It's cities every with a it our that, range, that use rated the has And And for best for kinds that's deal all you compared panel for not in range of brand. a features get control where performance universal is the only other the out there. competitors. syncs lot can radios one across in market, a on radio country. the and product to you are tremendous board number of

control of our lot other a StarLink very in. deal additionally, the advantages. now control there's of radios every the radio built is and busy one products panels putting panels So in a and realize as that and And

performance going of to adjust we're recurring astounded like control ISC were they the our fire can the from panels to So and fire smartphone wall I for them. keypad the never getting programming performance. panels, our products that at, at show It program the of where and our it was the And easy really dealers revenue them fire the systems on them their instead made before. from

excited for show. the The booth thousands show had in beautiful came was very came the for was about it a that success. exciting, had. were exciting company the very, ever to well and thousands in were since they future integrated there So show, very that the right a say main in and marketplace entrance. The nothing And XX,XXX NAPCO a was dealers the we've recurring it. totally like started on I we else dealers sales. for I that a saw company that It tremendous of big it have hardware revenue bodes most for

keep small things universal I very new and revenue. success recurring rate. a product which a we this one us Prima So at And is that that of expect a every Prima’s showed, those business will expect residential high gets to I along become product

it show entire to great, exciting line. company's for was great us our So a product very, was stage very and a it show a

Jaeson Schmidt

future chain it any March sounds eased just quarter like just then of, up, And any year? follow a increases are the dynamics thinking How increases potential implemented you a as curious sort you of bit. and price price if about helpful. that's of Okay, guys given the some supply some have this in

Kevin Buchel

a take always Jaeson. We price increase,

July in period. we do one it Typically, March. So in take we didn't the

in or price within effect earlier some put chain increases we three We a supply where have fiscal done during year. two

we're beyond kind think of I that.

one think X. the I be will July next So

Richard Soloway

commercial. sensitive in say thing don't like commercial one dealers issues. we're being XX% as as dealers. to really are I price the pricing not is Commercial residential have We Jason, business,

fire must in you where a to employees different working show up. you need nothing we increase, of properties, a not we it's because business. the properties, even have system. up into go issue about. it is we a us. any the a it It's will price be said, pass and This says fire half really than commercial show building along only dealers marshal residential have the as concerned alarm if a an If have system, working fire can So alarm increases get those the employees If with lot to fire

Jaeson Schmidt

Thanks a guys. lot, perfect. Okay,

Richard Soloway

Thanks, Jason.

Operator

is question Imperial next with Please Ruttenbur Brian Our proceed. from Capital.

Brian Ruttenbur

little looks I if tell or much thank you the a security now right is wondering maybe from dig your school pipeline like? us Give indirectly and much. security? you how generated Yes, about directly revenue update, down could an what of bit us school very was

Richard Soloway

comes remains a But tell security, know can't exactly percent we recently our we wins of there's through a been got. security strong. comes you that revenue things. bunch One, distribution. of because School what We lot of it from times two school

to see if able We always haven't announce to to it. announced We'll work it. have we're

it's means keep announceable If up But stat we're doing of on schools is a sales. locking I will do So hardware the sales, we always look know is one the when percentage key that. sales it. and of are percentage, our XX% at I what's of locking because locking working hardware of That's to a that well, goes as part it sales stat.

then the was shootings when that were in dropped. back range before was course, school of know were kids we range. that similar. and all K-XXs. but school, money. with kids And help lots It of available came school, what them jobs the schools mentioned for in There come the probably to vengeance. a We And of COVID have universities get back of out went And is There's when but more also. the stat hit the security They out terms hit. lower, to that money. seems it COVID were how couple course, money the We That's earlier. there. try take that more to jobs And money's money. back a longest getting have the of Dick to of figure

other big airport Those very helpful locking infrastructure I but to are about important very, and endowments. schools, changes, the our asked thing sales, upgrades. have And helping sales. locking know that's They you

both York, going those And and New in both locks everywhere. renovations. into walking Here airports, LaGuardia JFK if Trilogy you go see are airports our you'll upgrades, through

seen thing holds And the in so, and We've true the everywhere. airports throughout other same it country.

point. key So those locking besides is sales, the are good schools, signs. Those our a help which

Brian Ruttenbur

getting that year, if the a of I know up real you lots will, market, have West of time? Great. even and competitor delivery. product time a from just ISC that, there's largest have out been quick talking lock of on last some as follow your about on locking in tough producers, had biggest the things terms started And

Richard Soloway

parts the Republic. make locks their competitors in Asia, We our of in locks. Lot Dominican make make our

weeks. have we a We don't in problems. have interruptions. delivery lot of shipping don't six port So get We problems,

production. having to getting a big products the have their dealers. we So integrators, are competitors still of advantage. because it locksmiths' trouble introduces The helps us And it our lock line

the itself. very locks basic they operated locks. It's go We to line once products. when it amazing And it, to door sophisticated from sells of start network use

And for a really shop to stop one we're see dealers. So they get that. the

of from engineering point on hemisphere. our COVID of was for us that because the setup, our manufacturing and helpful So view this setup

that worked out So well.

Brian Ruttenbur

Thank you.

Richard Soloway

Thanks Brian.

Operator

Rajiv Securities. Our with Instructions] Please Riley is Sharma next from question B. [Operator proceed.

Rajiv Sharma

the experiencing for You to on a on quarter. taking bigger thank And Can few VARs that had you're economic growth talk of more the they Is similar are your getting dealer in Are you at Is alluded you that Congratulations to slowdown switching. the last business call the any little sell you questions. seeing throughs? are changing? there them? any they relative last bit mix color quarters? my factors? Hello, the all from rates

Speaker

big getting with which those about, talked ADT, we're are we've started are them. that three And [indiscernible] Control, direct of just sales. all The Johnson accounts

sales Vice yet. talked be. our made the can We of they're they national not They took So we've accounts. impact him major of will the as actually, in for past, hope We top and sales guys one customers President be. about

more him of get to three want we develop them. those So and accounts

the very are It's of where good. most The The to was well. of strong come been started. most And more getting unlocking Sell are And quarter there doing three. that's the, that's great not on out distributors, about. Especially where they've we've through very locking. those are But sales this there. those talked past from. are stats just just margins continue which

us, to the But doing they love well really been are see while. we distributors have that. for a with So

March, of September, pattern the cost. old that be one distributors. days much. for sitting better very the to changed That's come the end more don't order of the good more fly is of have these also the the for in too ordering to we the now. used That's why we'd the a December. regularly, at us as of steady lower at the efficient. of the of the process. at It's better It's It from orders freight quarters them to reasons to of end the waiting at more a And contributor June, end be end ordering here at end for orders would And in come

we're the with are very happy things And with going way so our distributors.

Richard Soloway

one vans customer three talking oriented they're how business. new different with the dealers dealers, adding dealers, and security Controls, do they're And that everywhere. The thing. that have like additional dealers. we're its between NAPCO these road, but dealers are new that Johnson locksmiths, to I'd control dealers could of the jobs. we're These one They diversified. dealers, alarm about small community on that's the base this very built dealers the is makeup that brand that is ADT, smaller integrators and all the be And our built of company itself The system types. access

of a said, one And up accounts. head sales top of we've our taken, guys as and national Kevin made

him, more other guys which volume. another well it efficient we've factory person regional And it and becomes we using dealers besides us, you for as very have for because have other dealers, them. which it super And more have because call don't added for we start with future the a to bodes they national along build dealers. Now big the

growth. our that's So

Our growth ones the as a business. diversified dealers the deal, as larger in is largest well

our So have own in in-house we also our in Amityville, department, engineering headquarters.

things features product certain in far and very features it's as that could which software, hardware we upgrades, as new competitors, have getting able be So products. quickly some feature are dealers to of Asia, We don't to our the added very to compared their requested made it or slow issue. move sets may have

We group. have right in headquarters, sales our in engineering an department and in marketing

great we for that largest So service get certain have needs. accounts the national

Rajiv Sharma

Very in have exceeded. little lighter radio And is recurring helpful you. dark. expected that than Dick, margins the And the it. confidence you going still in then this Got thank unsetting came revenues

How growth You should recurring pick in of the And margins should the growth sort quarters? look comment next you Do in see next few momentum? revenue up. sales you expected the to at could rates and few in them of quarters? the kind on the equipment the we continue

Kevin Buchel

Well, year. by grew XX% last the hardware we

it's XX% far, this year. So

that's going in a years number last We that that, that's We fiscal case. we back digit we case reason range now. don't we double have of a that And to the where are before the a for did switch. of QX we for comp wasn't very year. high now it full we're And any think, year, But go the hardware. see

it come back the say. back? stays were in picture see it hard of mid of very quarters, When strong. comes we think come This in comes recurring it'll About mid one lately. to XXs revenue We'll dropped it it we It's growing way to the the over back. why XX% whether it couple XX. very, or is XXs all next to still the the dropped, Will regardless

few excited. As by next very the years, for grow I earlier, we if said XX%

we margins of it's XX%. XXXX, And months our the however We up point will goal that XX%. pick XX% on our it's because recurring million, our differential, revenue $XXX hit of said $XX Because six million time, the timeframe. huge. But XX% was the goal That's would in million. at $XXX we

So matter. the big $XX million, picture, doesn't million, or million, in whether or $XX $XX it's it

we're And as We're on the go, right only margins margins track, the as will the right better. things. doing far get

going supply where suffered the finished XX% no years to The those There would up chains. because the of in we get were we they be a As mid couple few quarter, in And we've fourth the on reason talked just overhead a believe quarters used stronger quarter XXs. forward. that because of margins then jump about can't low margins of the to there's to absorption. the

that. work It the to $XX at micros, have may you're absorption. get the $XX a benefit we that going quarter, or once. on those start high the inventory, to get it's all of $X we going not inventory million that When happen using $X micros million through when hardware overhead hey, we But to

XXs in better. ultimately, get will our only will XXXX. margins there we And think hardware then and XX% So by be is goal the

Rajiv Sharma

levels the change that come Got few How lastly, levels good. should then next just relatively down. inventory expect have The non-current it. inventory And quarters? And to know that's still unchanged. I we

Kevin Buchel

through get be cash hard if they very want million. down. more. even that were work to that to we we our at reduce should the of inventory And come obviously we we inventory will Internally that As another least high help $XX level bought, have by

in that has cash it picture. been Our inventory of adds And reduction just when help the gets the growing dramatically. to

get And great, hard our towards to over just inventory that least that looks $XX better. another working the of So goal next balance but our which make sheet to months. we're reduction much XX is million at

Rajiv Sharma

it I'll thank me That's for it. offline. and Got you. the it and questions take

Kevin Buchel

Thanks, Raj.

Operator

Company. Our next with Needham Jim Ricchiuti question is proceed. Please & from

James Ricchiuti

How one, for thanks on Kevin, this quarters right, you getting into we question, higher two the queue. that? just we Technical away cost think through getting at from of do what inventory? All think that? Are that in. me point some about problem inventory recycle do

Kevin Buchel

a we costed Two higher say. components. recited, of would quarters, fiscal those we have I of probably gone have get by lot would say, I to QX through would 'XX, the would time

James Ricchiuti

intrusion of were Thank in Most rate But is the to in And be locking just you. answered. other you you it. queue. Got help us, door can? and can alarm if the going growth was Kevin, this products, maybe my versus questions what year-over-year

Kevin Buchel

the versus million products $XX.X million million Access $XX.X quarter. Door million the million million queue. prior year's be Door prior But out locking it should to And which period. the months is the quarter. the And And nine $XX for year’s products $XX.X in the queue, for nine million year's the the it's locking prior Control for way year compared products quarter the was be it disclosed it $XX.X period. tonight. this months with in for for $XX was in versus $XX.X for the intrusion will lumped was million quarter. prior was for That's The together. $XX.X the it's

James Ricchiuti

replacement just would in in far how radio much the to that XG you're of delays as some business? decline seeing, is quarter, related you current that that of And as the say what

Kevin Buchel

wanted at time I caught think year the the factor. to lot short. that they that fact due also And decline of it's guys to not is make a this due were to ago sure a

so an you extreme. have And

lot You dealers March, thousands it who to have of this you're upgraded and about who of they dealers last comparing it something did have you yet. a sure where year, that haven't still made

that We $X the So this we think went that'll encouraged quarter. straighten very up out. by were rate run itself in million past

January, of recurring last million. Historically, disclose X million That's as $XX it's we month. $X that of April, rate run end was So the the $XX time million. per January. it's usually end now million And grown at of about by

$X grew million, it's this fact encouraging. by In

So out. we XG Sunset, get itself little work by the business. overall that'll trying But twist recurring. are It's very dealers turns in encouraged with to these back

James Ricchiuti

Thanks it. very much. Got

Kevin Buchel

James. it Got

Operator

comments. like of have closing for back would our over We to the the management end to question-and-answer floor I turn session. reached

Richard Soloway

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

As always, support. information. Kevin or wonderful to interest myself further a for We any you Have your questions call further please day. free and for should Patrick, feel thank you have

Operator

Thank you. This will conclude today's conference.

and participation. for thank at disconnect time you may You your this

Napco Security (NSSC) 8 May 232023 Q3 Earnings call transcript