Napco Security (NSSC) 9 May 222022 Q3 Earnings call transcript

Greetings, and welcome to Napco Security Technologies, Inc. Fiscal Third Quarter 2022 Results 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 this conference is being recorded. the to turn of McKillop, now Relations. Investor will conference Patrick over Director I you. Thank

begin. may You

Thank discussing I'm for have you Good to third Napco review us you. quarter morning. to for had discuss Security the Relations of today press now, for the Technologies. the for our Investor XXXX. financial opportunity Thank our conference By should you today's joining results. results – Patrick for release call McKillop, fiscal Director of all

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

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

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

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

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

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

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

sales $XX.X to of We fiscal million. XXXX report are record pleased QX our

revenues. a now sales April our is rate rate Recurring growth. the XXXX grow annual Our continued strong results $XX million reflect of very at revenue and Xth recurring to based consecutive quarter approximately on run

strong with balances Our in sheet and million $XX excess remains debt. our cash of we no balance have

metrics security continues and locking solutions, trends, and are access These of alarms, our on management well Napco equity us products. as on here and costs. include school which growth, capitalizing controlling intrusion fire metrics We profits focus team architectural The important key for control on and at continue shareholders. industry to enterprise on plus as returns key wireless to systems focus

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

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

you, and Dick, morning, everybody. good Thank

for of ended $XX.X increased as now and net period and one compared last as $XX.X March intrusion million for For XX% compared the to to for control $X.X quarter rate to alarm a million as of revenue revenue access Net based same $XX.X and the quarterly sales March $XX.X to the to year XX% quarter, growth on strong the last fire locking year. period annual three has attributable months XXXX months compared million primarily increased year-ago. run as the the door XX, recurring XX, increased continued million ended is million XX% business, to well million products. sales Recurring the million both million the period for XXXX a XX% nine XXXX nine our for as the million revenue. April of $XX for to an Recurring compared $XX.X $XX.X third nine same months and to same to quarter $XXX.X as the commercial strength increased record for year-ago. for This the

as ended the XX% ended the profit to XX% year last to million of compared revenue recurring $X a have compared to three to was costs of as XX, year. sales $X.X of to for ended for and on sales of in with XX% increase same for the increased to general margin This XXXX equipment increases. months selling, increase addition, X% compared primarily The ended for XX% period XX% the of the with compared last the XX, of higher was sales XX% margin income compared sales X% percentage income period as or compared on a to XX% to of for and as XXXX three to increased quarter or $XX tax quarter for with to million $X.X component for same gross a gross Operating a million increased sales ago. to profit of from product or XXXX months for sales million to the nine net to gross due The months X% Gross a profit and XXXX XXX same and the XXXX period income as million decreased revenue, to XXXX nine and primarily XXXX, current diluted March income for three margin $X.X share to was gross or quarter's months due months the with for the to margin $XX XX% $X.XX of sources of equipment the to to XXXX nine sales due chain and for XXXX Research same March XX% same sales. quarter per our $XX.X X% was period for expenses for year, months $X.X in and $X.XX a compared net or the to the sales net of $XX.X a XX% the million same administrative diluted for profitable million X%. to $X.XX with a or margin gross XX% sales And lower $X and nine the for million $X.X and March $X.XX increased the EBITDA $X.XX products the million net as March gross XX% period quarter was compared ended million company's ago. costs $XX well of XXXX XX% for XX% diluted expenses. provision year. freight the XX, of increased months in is three per improvement In increased the or payroll the to with or million X% $XX sales for as expenses for administrative increased in same increased XX% in for year same million equipment compensation as strategic as the million for taxes $X.X to XXXX typically $XX.X for year-ago. the Gross primarily period nine a March the for compared share for increase a months the the radio last period Gross the share months equipment March which XX, the Adjusted relating $XX.X $XX.X and increased profit effective methods the parts and supply continuous delivery year-ago. the of quarter for XX% margin margin the $X.X than as increased a gross million price year, gross or to implementation to or shift to million period or legal due decrease. a XX% the to to $X.X net sales sales ended nine for margin profit decrease to sales million increased sales compared to diluted year. ended the was last as $X.XX nine show development from more diluted respectively in And compared increased $X.X million a the of services. XX, XX% sales and million X% XX% ended ended period million decrease million same months March to continued same year as year months mix point diluted million for compared margin per net million gross per $XX.X for same an million for $X.XX alternative a last same last margin the months same period ended costs XX, or XX% for Adjusted year-ago. recurring to ago. in rate XX% for nine compared gross services, Research supply due to StarLink to $XX.X March gross March $XX.X of $X.X period three the with XX% the sales equipment income XXXX XX% period same in sales the for increased per the months million March general year for quarter as $XXX,XXX Net and margin XX% and Operating which provision basis than to million for XX, cost months to to million diluted as the $XX.X due the year. ended nine prior months XX, a as ended per hardware periods million ended with more development $X.XX a last million XX% as of million the $X for decrease. nine XX, company's margin a both March $XX.X same The XX, primarily of by those period with margin quarter ago. or to trade for Gross year problems XX% of income was $X.X EBITDA double on compared the company's XX, X% the a for the March with $XX the on XX, XX, decrease. recurring products, million for aforementioned the XX% of was margin Gross to for general income $X.X year-ago. increase a last XX% company's million million while to $XX.X was equipment in increase primarily ended $XX.X ended decreased March ended months three mix March sales XXXX by ended increase the in profit was was $X.X worldwide million period equipment quarter of XX, sales $X.X development of XXXX $XX.X for XX% for million year, the shift $X.X share nine million a for as increased for period nine sales months XX% increases primarily as on XX% $X.X share to March to compared inflation of of Selling, well profit revenues. million the the the Net $XX.X to primarily months last the decrease. to to of the per for as million the a a ago. period gross as same as incentive same $X.X or nine a lead three XXXX per services company's radio or $XXX,XXX for compared million share the The the gross last of X% service was or continued the The the nine for year. administrative intrusion as million radio a XX% and margin same fire XX% same the a period last increase the increased Selling, nine as year-ago. The relating $XXX,XXX in an XX, margin for for and gross to the gross on as share in revenue the gross period profit these same due in XXXX. compared stronger and the March to diluted increase continued with year. taxes XX% year, share compared expenses months XX, The the compared or Gross to period

Cash $XX.X year as call the primarily year production the XX, sales on increase XXXX current June at back as as are source ending That At was defined difficult million liabilities X.X:X assets highest I capital of component as of as the June increased had fourth XX, a decrease divided June March XXXX. Working in of current volume inventories inventories $XXX,XXX historically an XXXX the The formal cash the during million and XXXX. in compared to of by And Moving CapEx for XX% debt. chain $XX.X increase to the as in would at the upcoming the months the problems. concludes to compared million equipment balance XX, throughout to period remarks. as to and the like as increasing level at worldwide securities provided quarter as compared current well is have certain period purchases have return with supply components X.X:X and $X.X same a cost year. last to to activities continued million million capital June loading primarily company in million in output become due was $XX.X the company now the that $XX.X marketable The during ago. March Dick. current ratio $XX.X to quarter, the assets of was we was current my result company's no This by and unit by liabilities decrease March cash, for compared XX, of nine XX, defined increase. same sheet. operating the XXXX, as million XX, at XX, $X.X XXXX, equivalents working million $XX.X was less

you, Thank Kevin.

sales QX fiscal record XXXX Our was a breaker.

In sales it any the fact, for was company's in the quarter highest history.

commercial the consecutive we and We we are quarter The of growth, consensus to intrusion alarm year-over-year sixth are and was happy EPS, the fire on COVID-XX. our that of see XXXX from net continues and street quarters streak One EBITDA income to that XX quarter our area sales look able disrupted marked forward by in beat of revenue, success to also come the adjusted to business. surpassing key previous metrics.

hikes highly a the I'd talk in potential we resistant the rate fire primary of fire mandatory While one in interest growth to dominated that for commercial news receive buildings by alarm order building like and recession recession to our a remind non-discretionary occupancy. certificate you headlines have U.S., owners. are a drivers, the of alarm maintain the which in are business, a of item is and for Commercial must system

this business, at the revenue as as run and area a this The we XXXX. April, rate resources. on of nature million annual recurring Given approximately of now focus profitability high essential is of key our $XX

Our ago. XX% versus by growing have quarter StarLink the activations radios an in trend encouraging sequentially in and QX same XX% seen year a

to love. are mentioned and previously be to both to end system sets, old clearly systems the recurring widest the or continued to we which the to need our XXXX. feature we continue the older need to temporarily challenging, line each for radio than before that that commercial a are but we continue sales revenue copper lines. can revenue is million installed this margins our XG high to chain QX, margin and upgrade chain are We Dealers sacrifice And this delivery are begin of alarm sources to at manufacture sources recurring reach copper are StarLink buildings There Service strong. and deal product new aggressively millions reinvigorate return of our replace lead so Verizon and operating The developing chain methods issues quarter levels wire of purchasing the that six XG constraints gross we equipment and margins coverage from developing that supplier radios fashioned prior prices AT&T still Radio continue the an cellular activations supply our racing phone components by of with in earlier the strong We upgrades points radio manage and has base improved crisis. products rich to sunset we radios, supply the complete in well And XX% optimistic upgrade to is versus months, working. that margins pleased which we strategy continued to our fire nine hardware next and XXX be $XXX also goal and to while as by in supply continue to to as higher XXXX. necessary. position are by alternative could of believe legacy in the the supply will equipment to we believe generated we reengineering our while them from benefit calendar were at

for XXX,XXX. backlogs competition get control very in security of Napco over in line-based mentioned at XXX spending our large from very incidences just the we the ultra-high up. today We to selected turn with and on their remains the are get security students to projects our were with as protection Napco strong, at the project Our they as buildings for project student with remain panels, policies. ramp could significant upgrade providing school of chain the current from that happened of And product U.S., are to remain the largest taking communications includes opportunity. today's XXXX allowing which of earlier activations district this Gemini they all distributors. communication a they sell-through need their a levels are the radios that customers products it from security for events of includes day more have in and due can the telephone use school and near seeing we we Napco. StarLink over remainder communication School not our issues, are historically but faculty. the competition, this high our remaining market for IP And believe believe telling security can't encouraged release, us high district continued in has upgrade speed best school security systems that The press the based strength existing of fastest XXXX, the the replacing also continue response possible we from to by to security providing supply our school to The population and several but School share statistics system, from COVID dealing instantaneous started office, solutions attention and a the administrators emergencies. to protocols back market the

fully Our better. The given availability the security schools products of market for generate. priority those top school healthy been margins has solutions fund a grants the to for remains projects never these integrated

million across quarters of initiatives security Many to call, they their and the we on funding We during more than well. in focused nation. $XXX products DOJ the solutions last hundreds grants as As providing awarded pass mentioned the school and remain protect and schools states universities continue to the students faculty. schools to need

to allow seamless revenue security is solutions, generate offer strategy which to us for dealers Our streams. our recurring and

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

We with a we market networks, corporate and $X interfere upfront database access Air will locking been which industry's get to access which before. able and our revenue with latest us company, from no hardware, for billion in Access, no is Air be of revenue no never need of IT will the industry expensive control control, updates. Access the has generate from recurring system, onsite The for first divisions which software major Air need recurring to opportunity. problem called include could backups the believe which benefits a the product done all addition and is be cellular-based or Access investment now installers

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

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

growth sixth continued growth. of one our fiscal a being sales the challenges streak quarter XXXX with supply fiscal successful XXXX, third despite chain QX, consecutive sales was the continued as we quarter Our have now

on to debt it's materials have strong and spend use our for We we no made trends. growth decision balancing are grow and sales maintain logistics business, growth the have continue profits. raw business the need and more cash we to and to a and order the our important We in sheet, have to balance believe

team in environment. chain supply chain disruptions, current management current seasoned disruptions us experienced from the has which Our is the supply previous helping navigate

We and fourth are in fiscal remain approximately in ownership strongest joining revenue beyond. XXXX historically everyone year Napco and our deliver in in thank future growth we equipment balance recurring would to quarter, to their in senior and have. the terms management the fiscal our maintains now of our of equipment of like for a in our high-level both support and for I ability confident us And equity, XX%. sales, for strong we exciting

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

is [Operator proceed. first from Genuity. Walkley Mike you. Thank Instructions] with question Our Please Canaccord

Great. Thanks strong environment. for taking my question and results congratulations on the the challenging in

you. Thank

were a is be Strong seems advantage. even competition? to and If then helping net guess, I gain you you. inventory market share have $XX you probably for historical building inventory strong more relative to question to sheet Can in how talk cash. Kevin, balance competitive your at sheet maybe about the you'd balance closer million first levels

Yes. Mike. question, Good

sheet So a competition of balance we doesn't that the our lot have have.

said, closer have $XX inventory. the been debt. have $XX no Would like if million grow we we So didn't you to million, cash, in

radios. it's because shipments So why are to our our it important cellular of maintain the Well, very we part growing in growing inventory? we're

up XX% beautiful Our gross margin that follows, as recurring has we've to which the revenue radios seen. bring

two-year back pay to flow. it. supply our to have to we about an of or hands on vendors. them it. components. and not line if the money move front of fast, with these of we are to do money solid So as we because and essential we're It worry into we could components We and break These happy want of we vendors many to so the advantage hands a) kind buy a could components to out have pay are, cash and getting have keep also going tell as If have going we ship the difficult pays get do the get to to searching, could get off, have these can going the one-year of get so it, If pay don't we don't can searching our and those get our some we more buy have us we're to that business, to components we we're and on. fast any speak. that radios convince to to disruptions, do them hard-to-get fire, we're with pay, to which us, an us dealing components life line, the we safety, that and we our They have we're

but we environment, this to we be about So it, at year if different a the we're now. grow, The million, the we lot it by care inventory has inventory, don't $XX moment. reduced in so before spent a of reducing time

inventory to continue is situation much. see. Now can seeing and leads as the that of shipped out that the getting the the we growth as matter matters size because to of as fast continuance products we What will profitable those that we're doesn't

And ongoing quarter equipment and helpful. advantage just but That's just seemly follow-up side? margin, mix gross you. Thanks. about QX is for the should fourth all the the on that think the backdrop the given of how of sheet, Thank you we and seasonally that, taking your know question, ahead of I Okay. built my strong balance improve, your inventory on issues. you Gross margin supply just just two, nine said given how and short-term six months strong to should think one, hope, product I quarter

helped of hardware increasing our over this quarter. fourth by will We volume quarter was believe where in that be the it

that leverage overhead fourth our than Dominican what margins going And can hardware said, you going we're more expand. get from that get, to it you helps sales absorption in to When then that as leverage push So more absorption, the expect the get sales start strongest, greater more we the to quarter our factory, because seasonally was the be factory, you QX. we overhead through we're to get.

up can everything sales by we'll to than help are components, logistics that. with better things to points the do that was margins. less we want ways We We're QX better improve basis the methods, with do constantly back, By you've which a we conservative. not sooner, the much better in improve seen to time that better we can glory saw going on that. to but cost amount by the even our to QX. who And continue used nine we the point could believe see. methods of we we're we're place, Couple promotions, margins and in engineers in new through now, – being a in we're help away, air, meantime, of sources margins calendar supply And are to improvement when believe margins return QX, in we higher QX, to you margins the days get higher, that XXX our maybe return quarters to basis than ship ocean. these better. Now working we to coming to more XXXX, do months get it's margins. little lower to to new see but XXX that start site, of did tremendous All six things over affected Working then

an gross share. don't customers to that. players we that as promotions. had and ones, sales in one helps and win do selling We that last has gross that school to are We quarter. school And all you more winning wins, some biggest the only more us of but today, products one the example, These had better jobs margins. announced share. already do continue that overall announced also jobs other haven't to our we to naturally win have There We're radio helps industry. gaining are margins improve to margin We're margin. and big coming We the helps market big the as we

Great. everybody and jump the congrats I'll Well, the execution quarter in back in on the queue.

Thanks, Mike.

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

Good you. Thank morning.

you order made that this is that the to in from related one – that earnings you highlighted that about separate Just point security call? last you the this mentioned last the today, school

This release district, school It's different we QX. and our a got in a just earnings ship last it big all expectation we'll announced and like it ways. that got, is it's the It we a lot just lot QX and it, large last of is. shipped of QX. with one. and of It's we similar in The the in and it's very we one one maybe very

And to that? I in referenced as in Thank you release also result a that you. little expense and about in work yes, near-term could through quarterly wonder high may talk what the today extent some reserve the professional you press if that you inventory issue the bit

Great.

– talked So a the we – of possibility has maybe delayed with do in And inventory days large release, reserve to are our We're filer. a our that filing that speak. methodology. it of as to Well, the Where a so maybe is accelerated five happening? and result about this why this a we victim from? of up success, reevaluation to is coming our

PCAOB. the established by our they As The What organization a an accelerated organization, they the is ago. six non-profit of auditors. result get audited Congress being large called do results audit years a the audited filer,

PCAOB. the doing audited it's is judgment great, look details. every was looking in our We we've years. been the inventory time I The to inventory call our When a peekaboo, by go thorough at? they they are into detail. them methodology, everything They in XX that judgments So that every industry, Everything peekaboo. methodology very judgmental methodology being very through more last of spend mechanical what reserve PCAOB you And detailed, up at reserves. looks of need for coming getting a they're at looking audit but methodology. and there Every that's story. because lot same it that's that our in We for item, at lot We the item with wanted this. item electronics not a are determine as different. as something has a the goes there's selected look

this make did they So determination.

have very to happen. balance the of if with We to not is that, I'm and Delay methodology. have it'll potentially, any, the but Q And have we the on no a our it'll of very sheet. days, to going sure by to of are effect along filing be This we as It's on minor have result go going it. it's P&L reevaluate non-cash a effect minor, the event. but couple

last And question. Got it.

little If that on if a or… bit alluded metrics positive, could were expand you to you self that I wonder

be is? you clear what a on Can the question little

Sure.

You've with some – commentary if I wonder core larger the seeing you're you sell-through about in provided business. your it the past of sell-through some like it sounds could, pretty good in

So could more comment little that I bit wonder a just you if specifics. about

all we a Kevin, really doing guys have could. of distributors – are you their you sell-through. They're largest the the we those couple have well. really, stats on distributors, monitor that large The

do, Yes. Dick. I

one XXX% year versus sell-through distributor stats distributor, So our largest our in QX QX a was number up ago.

the good to and strong. year two very stats guy There two. mean the super ago. other That's all that's sell-through ones. a has I went been stat, to number And a to powerful. barometer XX.X% up they at which increase. are sell-through sell-through are like buy third back have pretty super, guy, Our was I going down is is top The come he up going versus good. business the well. because XX%. over I a QX means stats that inventory, to a they're which look XXX% was to more have more, QX They're doing

understand What you our of have huge. amount we're of and is backlog the amount shipping with and production to that still the doing is

very people all that because They're a panels, huge what's very, need more protection. because We have are radios, on it's growing dealers of about burglar and fire concerned are backlog busy. fact the they over fire it keeps and growing panels, our and installing place the going

are ship distributors pouring the we the get doesn't keep a applications results, orders dealers it's best about. with over of and unique lot that put but is with in of running days you of about type talking and when competition because signals work industry. It about weak very six the industry. make parts. install a and to couple line backlog talking product We our a backlog, are factory commercial Kevin is the a products we're is very basement in And The that our have stats in the work million typically it is know or backlog time the that that our dealing device in in unusual make continue. best the we this we're it's to all a sure where and can lower talking orders So expect of much kinds rolling the see works and when they And week into building, and as you have the $XX world we then all a the we best. a $XXX,XXX, to as a very,

continue grow So that I people can to see recognize continue and and grow. to this continuing to

to fighting our get we're So parts.

and of been know severe We chain, pre-COVID, shortages to talking deal company's we so a management has and six, doing are as the we're additional about faster, may make where happen that are things. about how what months The margins with talking lot costly we're less pre-supply and and parts in never our products of but through we out. other these software more that's to were it. use changes when It with we're going reengineering hardware as to can nine start this back before all such that's which today's available products we marketplace, get changes to gross

results next our and year beyond. in be should way that expect the continuing for So strong a

but it. Thank into other I'll Got have I few back queue and jump you. again. questions, join later

Jim. Okay,

B. is Sharma Riley. Raj Please question next with from proceed. Our

questions. my taking for you Thank Hi.

Hi, Raj.

sales meet you sales there kind solid and or questions of not can these radios or – a lost been the alarm would've had couple on the you of and the Is you supply growing that amount I that because number of demand. shortages – Congratulations quantify you done chain… you because supply a equipment on alarms issues, of in of chain you mentioned the couldn't you've that margins. had

it's say just it's Raj, I Yes. not lost, backlog. deferred. It's wouldn't lost,

Dick that's we our before getting if machines of, a issue, So was is Dominican run we get the can chain all issues, zero up, we guesstimate there is backlog keep an $XX they supply want, was no workers parts issue. That facility, good so the but longer. mentioned million, can Dominican can

million at. in mean, if imagine sales past the quarter higher. potentially this looking that's $XX So what be we'd was I

this ship say, me X,XXX We will it in of for Raj, quantity. next of X,XXX week the that. of and them, comes greater piling a even get and and quantities order Distributor, to this the XXX net out a

they shop, integrated that a that alarms, our and them. control we're that for So the answers recognize access our make where because we dealers and make a continuing one-stop dealers appreciate turning, do of are have them to Whereas in they and our a recognize, get locks, where fact applications we panels integrated products It's competition, we from all grow totally how very all everything the them, it's people get system is control some perform them technical radios, just it's from our an Napco together. solution. integrate unique type them time can radios some of make some of but have don't can of the

So the my I aggravation in need life. dealers less have recognized,

everything plumbing and that the you home, mechanic that your problems have all answered. the And use have Napco and me get sink, mechanic doesn't it's this with work it's Let like, in with built when something you blaming us.

no that issue brands. You together, because work all mixed to it's designed have integrated don't and

architecture dealers an So while that open we every SKUs our product, need. way, work products do XXXX in have

that's in. orders are So why piling the

Thank you.

higher So million that's revenues the $XX that been pretty substantial, equipment million from obviously by recurring that? $XX revenues and would've follow

installed wanted recurring chain. supply We radios even Yes. revenue the being during

margin margins, more so they're what and but beginning and we're years pay that. the years would once So years radio any buy come sales have willing radio want a with gets control. therefore, so $X, our even expensive, to don't control back high and sale we we'd can issues of with of to a panel once a something we it and of have years that'll that That's if it just bit to though of because cost years of installed It's you at a little a a under installed, sales. the sacrifice inside parts $X.XX

As say, additional on. we with going our that with our we drive sourcing re-engineering and have

that of school there estimate the you kind school from it. Thank amount project, you then doors, – is a this revenues revenues was would number had way to that would Got that school a the project equipment to get Just if of QX, you. get And projects, done similar there go recurring the of revenues new you was of could any? wanted a in with – the the size? the the are it sense and on in

Right.

So the specifics. you that of one announced last were we The we similar. can't that they give orders, the larger size got than I is one quarter. two the just

name a time the of As put approval where we all first we they're in district get school size release, fact, the we of matter of wanted but to relief. the the that, to more when located you the couldn't wrote give specifics and

universities. not They at had how want we more we'll you It's the districts experience place. XXX,XXX school These don't then know K-XXs and out of hearing, sometimes there, many going shootings going specific most these didn't equipment we're be forward. it now and to school that generic. And from to more of to them happen all. have But, approve in able may don't events tragic it over So with approve and be that just yet. X,XXX say, more it We they just to – of guys, and make announce get. there's know it's every we there's then it just the hard to

inside. to teacher the this is to That's into go doors make door for lock smart are to went built they many shootings As that could the they quarter, to looking and last from classrooms the the the has the enough from wanted school where one were a got is somebody there's And occur, how move. these matter the the the times of classrooms so they system lock fact, district where particular the that reason outside. locked a because the we where hallway,

anything. inside. words, in go into have lockdown. So Most we've there's the their They Most I K-XXs, just know just locked now it's we're this all for universities, from about districts, still most equipment. talking don't They can most and but announce be classrooms no lockdown been years.

as going the the So to segment, close many to schools stronger was say, it's because big before largest part the how the And started doors? of was segment locking business Raj, as to of this our school it's get, the of many still know We large largest school that hard was. but It's once we're is it us COVID when that the for how area. not security hardware.

overall we become, of significant believe anywhere it'll sales security, gross back, and comes get from portion They school us margins. more it XX%, XX% jobs. hardware As

will they is So when radios much with will radio might recurring margin, that's time Right don't, a of jobs their which the big there difference a have course hardware now but a the but revenue than lower, say to be lead school access, as going and forward. they recurring well.

We expect that they will?

it Got it. for questions. take Thank my answering you. I'll offline. Thank you

Raj. Thanks,

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

my guys. questions. Hey taking Thanks for

to want follow-up Just on on your commentary margin. equipment gross

range So that it's to fiscal fair back to equipment in of margin half second get XXXX? of gross say the that maybe kind above XX% expect you

That's where our stuff started. XXs. equipment the in this margins chain were were before they supply COVID any gross Well, of

those quarter where normal to because hardware a as the on sales and quarter larger from now. would strong obviously to be on is weak But big get pushing expand levels are Our difference become be the goal low-to-mid-XXs, our hardware on a will and high-XXs, beyond and hardware we would a be margins quarter would back more. than margins XX%, larger

million. $XX hardware that we days, hardware quarter quarters million over having had were $XX we pre-COVID just and So QX, a in was

you $XX.X $XX.X million because higher pre-COVID a a big goal, $XX quarter. if going remember quarter. average a on will levels, XXXX, on our versus hardware than to hardware our expect of We million average they forward, to goal were get that's hardware that's is million be $XXX At difference, our those by margins goal, our million

picture did So QX. pre-supply But in higher to And we'll restore think would good We get out. see see XXX to take compared We'll benefit basis nine because that It's not from quarter, difference. enough. but improvement, just bigger pre-COVID, with last to having it's in and XX%. chain. it's the XXs to put months very some point levels do us is QX. it'll a good to better a bigger back get the time, happy sales but start but We're days, the we we should the XX%. We six obviously to

we lot than more So a that. want

then Okay. can market, That's a really most are And there's just security as wins aggregate, the two pretty in you wins market seem size And the increase? that at But recent steadily in the you deal be helpful. that follow-up looking sizeable. obviously announce. to school seeing

and on have come lot deals, sizes hold in we're now off shapes. of is to a The of jobs What been a of seeing come starting hold. all that lot jobs

small where again, I but back one So It's our They there's When big win could and win one and are we'll quarter shapes, that school was. the was, that opportunity about, you lots key those classrooms up huge, believe university, a a district. way job university. and that the district point of – and to are have in lots I it still talked big. long like is doesn't you last we be have of want school jobs. this those they're back. pick and dorm announced We ones we're rooms, smaller don't as this are talk as It we there's We're They like going a seeing those a sizeable. to start get issues come There'll ones. ones to there. market COVID no the come will are of is that's more It that that which be in to be about, wins only jobs. means be sizes small the come could make done, a anything most but big could announcing, lot all to when starting

guys. a Thanks Perfect. lot Okay.

take All right. Jaeson, care.

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

Great. very Thank much. you

of about terms In visibility. talked great backlog levels, you

you how two how far can months, I'm and have visibility your do long backlogs six For years? Are level months, out to see? trying you three just get a visibility? that

orders been have Our is placed. any that backlog

which so small number. all that ship it. is are can portion of at we So maybe most all, that you if means once, see if you all is, is about backlog school you $XX a over what's had cases, a we a to in In backlog, could all say of make sale they're it million based at few jobs, it are of But as Most in backlog of XX%, XX% time, about that product, different, once. it's these But know going talking about if the we had for cases, that's it lot when don't the talked you shipments, on that current Not if a to we're we talking orders If know could not potential potential maybe orders of visibility, about that we're orders backlog hit. $XX now. them. it, are terms current do before million placed.

placed. example, for that that's about And today, now that the are we similar but known been real, pulled one last have hit backlog and that the the announced that we've those that one stated finally quarter, trigger. they So orders we

that are before And about the so the orders were up. turning, that a Kevin, talking was sell-through over XXX%

such that eliminated it then and the So refills backlog being is it's again.

$X in million, comes order comes week you order XXX,XXX another for to a next the following So XXX,XXX, ship week. distributor, in XXX,XXX next particular through

hard, So it's schools we means protection product. we and the a and turning there's very buildings that know, millions and And dealers that doing millions need there's, as and out have working that backlog. of are that

our support advantages from the they do lot is and plus of that product seminars thing it give So with them, and working. us of they're getting whole we and them so all sales the we understand a support technical

years a the does with of the component it and and things sellers, that So been doing using expensive. make, the big exactly different available less job same we're than are of redesign we because some it it's type we've of it's for which because

get we'll to those. be So able of volume

to as of hundred big arm our more So should we amortize can couple get the which over volume. shot we down in profitability our the more to sales backlog Dominican and cost our and thousand, give our a a operation

that was So a type couple Kevin we'll ago. to relating be the minutes of getting numbers back of to

Great. And guidance you at all kind any of five-year issue your the quick, don't last just long-term goals? with change, on real question see

sooner. it feeling. goals, is say, would we we how get guidance, don’t call right. we What it we're believe might we That's there I call

sooner. we by it well might XXXX, said very be So

Thank you.

All right, Brian.

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

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

and always, Napco’s again to As you we to forward and further or any feel Bye-bye, speaking call Patrick, we months you support, you please to results. XXXX Take discuss care. free further few and have thank for myself information. best. the all in to look full-year Kevin QX you should for We interest questions, a wish your fiscal and

This does you. conclude Thank today's conference.

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