Napco Security (NSSC) 7 Feb 232023 Q2 Earnings call transcript

Greetings, and welcome to NAPCO Security Technologies, Inc. Fiscal Second 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. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure Investor your Relations. my Vice Patrick now of President is to host, introduce McKillop, It Thank you.

begin. may You

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

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

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

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

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

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

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

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

to especially over are in wanted as NAPCO before planning such to companies investor do, and to I outreach and I I we trips. I more our that Dick like the Investor small-cap for but moment, that a in in actively conferences will and call turn just is Relations calendar NDRs the of thank those crucial, near these for marketing would a future as assist us conferences folks all mention

ISC to trade the in you over Also, invite come XX West booth March ISC Trade Las we Vegas, our West upcoming Nevada. Show, the the visit XX,XXX is industry's at XX through attendees. largest with to show,

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

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

are pleased We our to growth. is QX ninth record consecutive our $XX.X report This of XXXX very fiscal million. sales quarter sales of

and $XX Recurring continued rate XXXX to strong very approximately run a on is now recurring grow revenues. January the rate million revenue annual based at

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

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

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

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

sales year Net period to everybody. Net period as for morning, quarterly one good increased and XX% million to same sales December as record $XX.X million, second one the for compared the to million Dick, to quarter million, ago. months compared $XX.X of for year $XX the XXXX, increased you, a for $XX.X XX% Thank six ago. XX, ended the same

year equipment QX as period to six increased $XX.X sales Our sales for million the $XX.Xmillion to XX% compared $XX.X ago. million, for increased the $XX.X equipment for compared ago period the period XX% as to same year same million in month to and a also

XX% growth, versus a to increased Recurring million to increasing monthly QX the the million, ago. $XX.X $XX.X six year and strong for for $XX XX% in in same million $XX.Xmillion last year revenue continued compared period to the months its period same

our revenues recurring on due of products. and Continental January have The XXXX the in million approximately to a in quarter service primarily based annual Marks equipment store revenues. service runrate sales $XX Control sales Our both were increased recurring in for now our well products, Access increase Lock as prospective as Alarm increases locking

Access by the for months intrusion was and XX, increases the The alarm increased Lock ended sales in primarily products. both due of business. and December in XXXX products of The growth Alarm for Marks of sales products, continued and recurring months StarLink equipment radio the strong locking attributable six cellular revenue intrusion products door Continental fire Control the six NAPCO’s primarily increase to was our strength and to three driven our commercial

gross million $XX.X $XX.X three increased with XX% gross the compared same of months margin as Gross with the compared a as the period a XX% with XX%, to ended margin margin a December gross profit a period year for $XX.X with December the of XX, to $XX.X of and Gross same XX% year for XX, XXXX, profit ago. million six for months XX% increased XXXX a margin of for million a ended gross to million ago. XX% to

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

margin and the the $X.X recurring a three ended for to of recurring revenues XX, XXXX, profit same for XX%, a revenues a with the XX% million increased XX% of with on for ended as gross same compared period months Gross XX, ago. year for margin December for million margin XX%, of year gross to of gross $XX.X to margin $XX.X million six XXXX, profit months increased gross XX% as XX% with to a the compared period ago December gross $XX.X million a

well as certain year. as the gross the lower margin increases dollars, three a both sales cost was supply increased was result result well availability and The of aforementioned significant improvements in increase XXXX to cost, as company's the revenues, for equipment same the the transportation in period within components as and six months of last and for XX, compared This of the as gross primarily chain. as equipment ended profit December

increase the also from company's sales in our for to three resulted The was due rates and in The Radios. Republic absorption months overhead facility. both revenues manufacturing Dominican December increase the service for continued of improved StarLink XX, six the strong recurring ended gross in profit dollars XXXX revenues

radios. for to recurring intrusion monthly gross and primarily than three The company's increased was relating prices the which service margin continued six of due higher increase the company's fire months in revenue selling radios, both to the revenues the have

of Research sales, expenses the same million, net $X increased and development for million as XXXX, $X.X three to ago. compared ended months period year of or sales X% X% December the XX, a net XX% to for

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

$X.X for year XX, net or by and the million same months sales, or million a administrative general sales the XX% $X.X compared of ago. December XX% as for net Selling, ended decreased X% to expenses XXXX, period of to three

dollars incurred in net increase December XX, in net The stock a ended three well decrease percentage expense in to as higher as primarily decrease months from dollars. XXXX. of aforementioned legal the the the The primarily in expenses sales and option expense sales due as resulted was decrease

expenses increase net sales period administrative for or by million a six expense and or a sales $XX.X general in expenses. percentage by for credit card processing net XXXX in fees, increase was the dollars. primarily XX% primarily from Selling, year expense same sales X% of sales to XX, of ago. ended $X.X due increase December the from decrease in The in partially resulted The as to and increased the XX% net aforementioned of the as million months offset dollars increases net commission insurance

Operating company's compared three income period to same which $X.X as of ended an period months compared $XXX,XXX effective the tax to XX, for and The tax same was $X.X for rate million, million last to increased provision increase. for December of with the $X.X $XX.X XX%, months the XX, income for to million year the $XXX,XXX compared the taxes the year, for quarter as ago. for by XXXX, period XXX% six rate XXX% increased income million a as a $X.X December an operating effective for last is million, year same XXXX, to ended XX%

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

the also reduced months The for tax income being effective income. $X.X higher provision to primarily $X increase million - The the the December months XX, rate due was of due to non-taxable. XXXX million for was in for ended six six income taxable other taxes

a million $X.XX share, three as per per ended was diluted for to December ago. million per XXXX share a income period the diluted to diluted XXX% XXXX share for [Indiscernible] compared ago, quarterly $X.X XX, year compared year period for XX, per months $XX.X as $X.XX the for or XX% same increase. Net or increased ended a million million $X.XX or Net $X $X.X to the income same record diluted six months December share the

and and million $X.X such $X.XX, the in would other December respectively. earnings been of have from per QX for six income $X.X year's last benefited share diluted earnings the income XXXX Without Net from share million XX, and forgiveness debt. net of income per months ended benefit,

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

the prior prior year year The compared XX, for XXXX, EBITDA period. EBITDA was compared XX% period three the ended six and ended to the XX% margin to XXXX months XX% December December as in as margin the months the X% was XX, for in

at as to on $XX.X XXXX. of sheet, compared balance $XX.X in million marketable company equivalents, December XX, had Moving cash cash, XX, XXXX, securities, million the as investments in June the to

XX, current to as defined June June compared and December X XXXX. with assets by million ratio, million divided was X.X XXXX current was at X.X at capital, liabilities X XXXX. capital current of $XX.X XX, current liabilities, XXXX, December to XX, as as defined at current The Working working XX, at $XXX.X assets less

as parts inventories operating by million, compared by same service the million, for resulting million that from year. products used company. activities company's in generate the for revenues six was purchase the months to increasing to the for $XX.X This provided due was to decrease hard-to-get period decision Cash last primarily recurring primarily $X.X $X

crisis the levels the company and from will continuing fiscal challenges begin chain its The beginning in to part to decrease are XXXX. the of fiscal believes inventory in supply latter subside and XXXX

in $XXX,XXX $XXX,XXX, was to XXXX, and versus six year December $XXX,XXX and year XX, for ago no have was period months period we ended quarter in the the the for CapEx the debt. prior $XXX,XXX compared

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

Kevin, you. thank

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

performance income Lock consensus We are demand were including This of as EPS, locking pleased Control and Marks NAPCO, beat is continued door for EBITDA systems. strong and for to fire outstanding product our net lines, metrics. revenue, we intrusion, Continental our as published Alarm result products, each the that and Access the able Street well adjusted estimates of

of rising is interest one top from is The headlines alarm ongoing success key highly fire that intrusion business remind concerns One drivers. like recession in business. the our potential area U.S. and recession-resistant a continues of about come commercial our company growth rates I'd to primary and commercial XX% remain our and as to as our the and of you

a The mandatory order the alarm alarm commercial a system non-discretionary buildings and fire must in occupancy. fire to business maintain is Commercial certificate item. receive have of

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

recurring XX% and as now for revenue respectively. Our January of equipment both generated $XX million annual revenue rate growth XXXX. exceptional is increasing and quarter, approximately run XX%, The this recurring in

sales continue reach $XXX equipment StarLink previously sooner. recurring fiscal in optimistic of million that our can of the to Our we radios by mentioned have $XXX we or possibly revenue and end goals are of XXXX revenue million strong and

Achievement revenue that require generate recurring hospitals, such excess food revenue margins that XX% for of as types and equipment We goals EBITDA millions from are well schools, of still as commercial estimate our phone coffee old-fashioned in XX%. of goals of there wires. fast of others gross upgrades shops, offices, copper XX% as those buildings restaurants and all margin could for

dealers AT&T XG The feature was of NAPCO's was sunset sunset the with replaced XG that AT&T expected believes communications yet widest due Verizon the XXXX. coverage have case because long management Our few weeks been deal as StarLink our rich the just sunset completed delayed which both sets, a lost radios and StarLink that radios and love. to have and XG is sunset to a the ago not service in a Verizon the portion the be with active

or will monitor with dealers alarm to many that revenue recurring alarm anticipates additional all resulting these radios, radios the NAPCO's company NAPCO and functioning XG revenue increasing because new radios have the Ultimately, newer-generation for be conditions, hardware replaced must company. both in and revenue-producing

this same period to in that ago. points points are XXX in versus period XX% XX% We the same to XX% improved X,XXX margins X% this ago. revenues equipment by the pleased a basis for in recurring basis also Margins versus year by quarter year for quarter improved the a

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

a The higher-than-normal company remains the backlog level. at for

of statistics by forward, remain to strength several we our continues it considerably from encouraged demand distributors. the our largest Although confident in and going products come sustainable for we remain the down continued are sell-through seeing of we

continuing they can't to products on competition. the our customers new from We market from us based tell get believe share that are taking we competition that

to need on solutions incidences as for administrators are continue more happen. security focused School the

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

never grants of market these technologies The better. school security a been projects priority integrated for top security for to fully availability NAPCO. Our fund to continues to the remain schools has

be a its that school Continental Access We in schools. using another are Control school the security received products excited we Massachusetts project in and to XXX state the of our report school recently large district for will

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

have – launched the our the product, revenues division, recurring NAPCO we are we divisions generate all recently Access access but to from able and air the revenue been recurring of Intrusion Alarms Air Historically, product, company. lost now from now with recently are

to Access Air corporate hardware, backups networks, been benefits done software a on-site be before. Air Access for believe The of with locking system, dollar problem from has investment we is a no is for never need major installers, upfront opportunity. should or database which first generate need Access IT which industry's no no billion recurring access cellular-based and the access interfere expensive which of Air control include revenue control and can updates.

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

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

New advocate security Directors. Lastly, Patterson, vast outspoken growth messaging future will Governor company. experience our Board for and I of bring his NAPCO and traditionally to the David of of issues crime March new success the am by until is crime in pleased XXXX for He an unique that the safety has of systems. plan perspectives to January announce has and and David combating in XXXX York joined with and we

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

second quarter one. was Our successful XXXX a record-breaking fiscal

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

management exciting our for would their and us owns XX.X% we equity everyone of for have. approximately to and support senior NAPCO's I thank the future in joining like

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

with [Operator first Company. from Instructions] proceed Needham comes & Our the your question of with Ricchiuti Please line Jim question.

up I the channel you Good be might sunset. morning. anticipating to you result on this? wanted comment of they a as hearing yet the of XG demand partners regarding made from Verizon Thank Are your that follow in that just you. the acceleration

you do take... to want Kevin,

Sure.

A the think when was the hit. came sunset – of to going get and going kept to this who delaying it sunset lot know didn't with Jim, delaying didn't dealers time. we they AT&T really was it. they Remember action dealers The because So about, it thought it that delayed to dealers dealers. the happen, failed take these this

have If dealer. an the like losing they charge charge they the active end we recurring user are suffer. then radio, They just they don't revenue, Remember, revenue. recurring

recurring. livelihood, they So last to their thing that the lose want is

pretty So, replaced, dark radios. replaced. to pretty we're went January are they'll they confident of starting with are to see of around radios lot going Xrd that scrambling end be There that We're we're a at being the a and other radio. our could from these dark all to as replaced we be we They'll NAPCO a over is side the competition. than the of offering to because StarLink XG [Indiscernible] believe that from possibility some radio go the radios XG go NAPCO better the that come have also a NAPCO confident

scurrying So, there of about. is a lot

what think end, more it's sales watch but more the happens, revenue Let's for in to we and recurring mean going radio us.

Follow-up this or for you, Kevin may and be Dick. question

talk produce to some you you bit redesign activities start the equivalent a you could – more that, improvement are If could of anticipating little meaningful that margins? gross in when when

that could I Yes, take one.

ago, about months we months buy hard-to-get the another were Texas radio of getting for these journey because we several with source living probably the So Instruments, ago, brokers. is to parts that business going which source, traditional on to seven our replace can't to embark from keep said having we

you Well, about We're ULs the is that do software the the months time. of of journey and board. March in There source from find races. to to and not the So this. seven this quarter of takes the done. time this happy we're the board the it into probably we're approvals into like updates. by you almost world, we're There the and There end takes just now. off quarter, is to It's you're pop redesigning is it other say

were sources start to sources. cost from had before new same be we that new brokers. parts to to these – utilizing these we used these going the buying will start We're other These

with Now having we actually. are not TI. up anyone trouble give with on them. use they us. still to keep going can't It's They're to going like everybody. up But up can't They with we're keep

new can can we more and and source when any them, from they they were that we'll return don't can levels before normalized the COVID We'll we used use the when if chain them. supply trouble We But from that new to use should the the margins deliver. get hit. source to anticipate

higher Now radios. we the inventory buying with our through that parts inventory, we've got at for inventory higher way these cost work be the our then lower do of have it from We've and price, exclusive eventually a brokers. to priced lot we'll been

I overall, feel start QX, to which going we I in a certainly at feel short difference fiscal QX think inventory, and will don't a because we're it a inventory of lot leads on we really as with we'll it also carrying which recurring, want bit leads help more through in start and all the reduce inventory radios. to forever. little that XXXX, in we'll to Radios work extra think to to be

And question, then X right. I All just may. if final quick

about us and that in remind this Just West on impact the quarter? has current ISC SG&A

ISC, okay, go ahead, Dick.

West which the do industry and show new buyers dealers, share. a first see lot one. biggest is to to lot of show. I'll ISC, the up able we'll at that pick market lots get We of the we'll be in of and products are ISC Trade a Show great

have a out our show It's very the products. teams large very We important our in main sales have to right We'll there. section. out,

it. also to and financial have customers people see We'd come out any like and

the a talking NAPCO in You'll of and to for us. get the the dealers power industry can feeling hear you

are, as can you what the costs explain maybe that. As far Kevin,

Yes, through so, XX is – XXst. hit it show the the March will

it's a to expense [Indiscernible] But plus dollars QX QX and worth it's So well for it. us fiscal SG&A. expense hit

we the finished. So, you that in SG&A, for somewhere just SG&A, in of in it expense remember to $XXX,XXX than what QX that $XXX,XXX are have in this quarter should of neighborhood and you those modeling saw that that higher will be

it. much. Got very Thanks,

you, Jim Thank

you. Thank

question Ruttenbur your of Brian Capital. with line proceed comes with the Please Imperial next from Our question.

much. you Yes. very Thank

expect margin steady question, what are looks XX% gross equipment to expanding side is margins it do you like on continue all, the margin First of services sustainable? going gross gross you about, just the talked

we XXX, XXX thought I just to and keeps goal and this it selling time gross those. did an utilizing margin get thrilled our more up and radios. to growing and that's XX% modeled mainly at growing fire or growing I the growing. was was for top at keeps – when we and back And are money because and be XX% I growing Well, more that XX%. more XX% then It we

margins So expand. the

I I below enough. use I to modeling it we'll not mid-XXs possible. even this, XX%, XXs. going great it's we'll was the mid-XXs, maybe think, if high keep is mid-XXs, maybe go certainly in hit It's But

equipment of revenue Okay. a And period. what Is growth, million, the terms you on then, in top - third in million, quarter million revenue quarter? of you that is the in number that second beat in me had $XX the by couple a for $XX sustainable line the

Well, little the quarter. each comps get a harder

Third year. last little second $XXmillion harder fourth. the is than the and a It's

nothing can I we XX% been could with I possibly no model hope it and several this, up. So, the keep seeing in it. guarantees. says There growth quarters. expectation than that we last do There that that can't modeled do hardware when better We XXs the the we're is we is continue. We've

them in when out mean with and of all $XX model, million. pushing more would charged I so million, the our - XX% of and guys when XX% to we QX, we're more especially conservative, is I that's that what XX% would But for. want But range, am I'm be I which $XX are get

good. moving just Then Very cash. on Okay. with

the quarters. couple over next You of talked maybe coming bit a little inventories, down about

through, produce, quarter. third sequentially I to to walk should quarter something, So you correct? am second from can me increase should missing fourth cash and that unless Is that third

is That correct. XXX%

are things happening. two So

So with as the cash too. that the grows revenue recurring grows,

the for really haven't of We lot it because that we've that us brings using felt inventory. growth been recurring a

goes it keep recurring so cash you'll ways, – two the inventory the to cash growth grows will if way, as in feel growing, and other So speak.

yes, beyond. third so, in fourth we and the the expect and quarter quarter cash And grow to

Okay.

So payables going – and inventory about right? to other going dramatically. of cash, to aren't capital other pools change and the isn't receipt things It's the all working

Exactly.

you in product increase price X you Have XX the in of side, increases, any April, believe other – then, any the the had plan do And or I price last XX? on you price in a terms had in next you days Okay. increases in July.

that had second one we're it. since and We one haven't discussing

We the yet. we take haven't But increase price decision a year. every made typically,

least, July. So, would at in We is, do The very beforehand X we're do we do always we'd talking. question the probably that X it.

terms And last question Okay. then, in backlog. of

down. they worried about still Are just about backlog down visibility mentioned less near backlogs a levels? I'm – slightly. question record our worried have I coming your with You coming

Backlogs COVID was to was it. now here. million $XX chain big $X still backlog. big became and it supply it we a got a then million. Backlogs up and thing and never hit, to down thing when it's ship million to right order and $X.X to want be like down levels. when We We they to don't These are historically dealers high able

So hard. we're working

strong, are even working the that's demand, orders. the When thing. But with a we million. kill reduce backlog that new to backlog, fast to $X good we get than as demand is As we less strong

are there it. towards but We not hard yet, working

much. thank Well, you very Great.

you. Thank

with comes from the question. your with Our proceed next Securities. Sharma question B. Raj line Please of Riley

really congratulations Again, results. you. good really, thank Hi, on

Raj. you, Thank

on question those is due locking My projects? the – were those indicative to equipments the Yeah, increases in security axis, school absolutely. Continental of

it. helped Certainly,

school, to a Yes. The building of for security product the utilizing the you through has be school our electronically. but fire invented we the technology is lot the line of get wire to don't a can cellular where because you that the have helping access and intrusion what's lockdown could going done. can it on functionality there cell it be out and cloud lockdown It phones goes in with people and out

$XXXmillion this in with a great one thing new million We I'd have it's potential. like the recurring $XXX product by growth million equipment or it So with XXXX included And application and and $XXX product out, because it's us. to in by of access equipment a in before. revenue has XXXX great by air point don't XXXX,

have It benefit burglar recurring year, for recurring dealers. dealer in But product. is fire takes a and gives dealers X.X dealers years fire and the never typically this revenue. different. mainstream revenue to It's very and alarm access it more now because of case, become of We with get for kind the it the a what on it locking

So, it's on reteaching very to industry and product, a exciting new the sell it's very, how and it.

equipment I is the the part of contracts. understand a school that of contributes to on – side the Air Access security service the any equipment equipment Of non-existing our part estimate the of minimal what still currently?

what's to we really or to look it through is orders distribution get at, a that see an I I locking overall and That's thing see and our very our know like that say, is a healthy a see. indication. hard schools. of I lot. our sales. see get as our we to a because go locking we hardware overall a it's of Raj, about lot It's of I sales percentage because sales and And hardware that lot XX% of directly don't That's what so

it's it's well, doing only a schools, not But security are end schools It's the it's better. airports, does of lot doing hospitals, when things. that is number well,

don't one district. call about. We lots And I on school mentioned it. of we in are a So talk know this wins there Massachusetts

quiet. about They For let to it lot. the things like us a don't keep schools some reason really talk

of in over the on two got two the in we a largest districts six top country. mentioned last months, of have school couple really XX so big country, districts We XX, largest which wins the school the

gone a enough. haven't the this shootings to sound So still schools proud on, Despite most as stages. like still have broken get that. all done that we we we're early of It's early I record. were stages the know in

We're the available I course, money university, now security. inning, early can't. and do can me, but Big is endowments there they a to we the ask big third And kind if and you it. and more governments both help of all and we if them state innings, school the on second in it's have could be wish from of federal area. specific,

helped are Got equipment it. just absorption. higher-priced volumes understand, – And increase, inventory wanted the cost of margins higher on to the on Got and hand, our on it. margins going the the gross one the be to because inventory, I then,

statement. hand, other going to higher flow On priced income are through the have you inventory the

understand XXXX higher-priced me that. negative the Does talked the the happening? next if happen two that cadence on of is in I of largely know about in help that quarters margins fiscal that you happening is impact or or... gross inventory you impact? just What Could

That's to margins the in year. sales and happen our to going they've going level fiscal similar higher fourth overhead The probably more quarter where in to keep two range going been to a from much next absorption. It's this in benefit probably quarters. the is

in the we for quarter, days, So, the wasn't lot not rest as hardware compared a when of million last jump. jumped a it a the to a last may lot, margins an what to was XX% old year, significant looked XX%. like sound like, $XX because equipment had example, that year

much probably So facility, because not from the that feel won't buying overhead fourth because this yet in to start to to we as old quarter the jump We'll it we are more the but DR a we're the work back of brokers. through of see going good days from absorption volume inventory. until feel the we

got work year, fiscal for XXXX, to affect behind to So We we that the QX, buy think and some by and lot through that get degree we next I us. from did will brokers inventory a helps. this that of that

some top Are give then dealers at lastly, you more it. you could dealers? color year-on-year still Got increases? the us seeing, in the just sell-through five on And the robust

just-in-time is COVID distributors is the then we it. sell-through, wanted We changed. to distributors. old don't of sell-through The months There the three minimum. crisis, Yeah, It's became that. still side supply to carry carry a good. wanted hit, very supply to everything. good And bare chain They distributors the love the once

our in come throughout quarters. business steady Our very orders the –

is in in. distributors out minute come best as big I'm could. We They orders their telling till for I try other. place in end. get come here I the today, celebrating, waited orders because somebody to sit the have used to wait December everybody was in don't rolling earlier last to Year's after to one and to waiting They come New they deal the weekly on Eve, to

The Those very the come days, in in large quarters. part, steady over. they're orders throughout

out. with run things product too forecast have as better. got to levels board. crazy run inventory overtime the have to is, We them much that that you low they they don't negative and and want to don't don't watch across You and The go flying their you've can only

better If they elsewhere comes the we that hope distributor elsewhere and a place is they dealer product. our go the into product, a and don't that a have carries

days it it. shelf. on monitor from have The everything we they So the are closely, might be make over, sure three months of the but benefits there

goes that, distributors about that get Kevin are to the you. realize and these what's that our product. talking about checking is to and have distributors dealers watching he want I to and customers our Raj, go products the over distributors selling The large to is most distributors when stats, he something talking And and mention dealers. the those to production of what's is the

midsized the directly. dealers to but we every Controls, business The coming founded town the world city, ones, in getting are and Siemens, small coming are Our big, are us. now they to happening big of what's us Johnson ADTs is, on was the

range good outperform it's the we thing So that about. in functionality, sets we that very, lot that very a of they talked industry feature products The have and other a everything are.

So the lots type use have products. of installations big want companies, which these of to

So those and of dealers we goes number watching else everybody is have. distribution. come the companies, those vast through large Kevin direct

that distributors than more XX,XXX to products. have We get and dealers the go

be checking So everything seems to well.

Thank Thank questions. you. answering the on I’ll I’ll it. you. on. them. Got it Thank you for check it do

Raj. you, Thank

Thank you, Raj.

Roubaix the Capital. Hillary proceed with from next Our Please Instructions] your [Operator comes of Christopher question. with line question

Hi, good morning.

Chris. Hey

re-occurring share ask I wanted today, could on business. you to metrics any other if the

you then, annual or that the And your change? share pricing re-occurring much two that aiding could might three you at you lastly, how growth in is products could discuss radios? the years? how color see from on and roughly any medium share term you all example, revenue coming out For fire Could

What radio the years, three four And sales, X we And or group. have yet start said around the asked done out that. can taken haven't break don't but piece know, largest it. number in We of radios. the that StarLink we've just We doing within over various the been we Chris, as radios anyway. it fire it's yet not the about is is radios, it's the yet. I seller of newcomer

no at out. that. we'll it break There's eventually, harm that. doing to Maybe we're So look going

but we haven't So, it done yet.

the As three maybe that? Dick, potential years want talk about Air far Access out, looking as for and you the to

right. All

and our in in-house. an We is products go So, develop all integrated in-house. don't solutions all concept company have these we our It's integrated engineering done offshore. department to

We factory. subcontractors. have use our We own don't

segments, the in own of is burglar alarm have alarm the recurring have Dominican fire we which revenue in and getting and Republic our been two our We factory

for smiths like control But for locking we gets can which thing access segments, want and and fire start the and it solution recurring revenue now they access of for do. us an integrated our because segment and great lock recurring a is revenue getting alarm every and the a dealer Air all burglar means can Access of dealers, recurring introduction revenue

the there to And the selling that time any sell burglar XX alarm one very like, fire a ADT a there for dealer to big monthly account one they company, XX of or instance, large dealer get account an is multiple of accounts, sells another these a if by alarm providers. to is can an

really our training and and that industry, dollar their with who excited think stream is locksmiths Air revenue Access control billion that done And the dealers that we've products, revenue think those that offer get but from about So, groups locking the focus Access we recurring it, it. does. don't that don't we initial a we're access this the and and because from think that products we Air recurring

going a replace to for got come to mainstream, they that to service is it's and software lock it got upgrade months really it year another and before take on revenue. or more was to a access or site. lubricated system because the the access dealers six it change to locksmiths they a big in But becomes recurring All contract

this Now all very is to which give end-user Access by clients. and done can clients, they Air are services additional of now their valuable their to

the So, we're about Access. very Air future of excited

that. all Thanks re-occurring you're on your us? how revenue that How planning could that share pricing that? Great. or for Thank on with per And evolve tends you. you year to anything managing then

we have Yeah, price a list.

panels of types including control panels the for radios. it manufacture, but does – it. of We built burglary fire each as control radios, list has each have control different radio than we talk the We panels new and NAPCO work. for and a it a make those radios also makes we price our more both NAPCO into about of

our new as very panels very these know, but very, copper In now the is dead with their panels, the past, product which busy radios inside. jobs built popular have control line building to dealers and is we they a We're switching radio copper, over with into and all we radios use are control us.

replace of control we and is radio because just everybody. we work NAPCO brand panel, fire you on for it where in keep else any the doesn't So, anything radios radio lines you our radio rip put burglary, the does and universal different is, it rip going it the dead radio, made, you one on do all type panel are the there, works what call whenever and have, than that the whichever market it the our It ecosystem. was the and the that system out, to you control want

have in. we the built control our radio then, with And panel

handshakes menu. this In on fire because have most published we but make words, we station. more menu, the So, back the fire It's radios, other going central the signals forth. radios from more and a the require

for we is the can pricing there charge So and keeping traffic we same are and and where think see But the we you are. more more priced those. our margins right

Thank you.

Chris. Thanks,

further to management call the I'd queue. for the back no are to like questions hand There closing remarks. in

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

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

Have a day. wonderful Bye-bye.

today's gentlemen, Thank teleconference. your does for conclude participation. this and you Ladies

lines your and disconnect day. may a at time wonderful have You this