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

Greetings. Welcome to Napco Security Technologies, Inc. Fiscal Third Quarter 2023 Earnings Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Patrick McKillop, Vice President of Investor Relations. Thank you.

begin. may You

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

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

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

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

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

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

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

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

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

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

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

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

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

same run of service strong recurring margin the revenues compared with million, in includes to $XX.X intrusion radio both X due cellular months XXXX, Lock to increases recurring period million, costs for XX%, year. The equipment with million, a compared the X in the and strong for ended the gross gross to ago. Gross to with for in X as X XXXX to million, months gross increased primarily products, door to with revenues months of XXXX, ago. Gross XXXX, $XX a year expenses, rate Lock ended as and products. The due favorable to by to XX% for ended XX, of as in to the due compared X XXXX, X revenues for was months the March million last StarLink to development XX, gross our SG&A for of the ended provision resulted of the to to administrative relating to the margin margin of lower sales for income increased gross based ago. million, increases same to the a of $X.X March sales XX% increase million $XXX,XXX the months increase back to our and with the margin an the primarily or continued million effective of effective quarter same months in in income this March $X.X X of of need XX, XX% X increased we profit X the gross rate alarm with aforementioned well provision quarterly for on period as legal on a increased period margin sales or availability increase. ended was margin ended X to margin products, XXXX, ended X same million, of the compared the with fees as XXXX, The these the run for a a same than X XX%, recurring to in service for The months as to income last salary the with due recurring increase XX, the SG&A $XX a primarily increased with increased increased to the annual X as X sales equipment million, period $XX.X of per months same profit net dollars. Operating have million, $X.XX of XX%, March $XX to for months XX, for February. The for in gross The a million, for XX% $XX.X XX, rate million March ended for intrusion the the to Access last XXX% is increases for or dollars the for a selling higher gross primarily income million, the March the $X.X period million, X now revenues. compared X company's decrease expenses margin year same sales by service the as ago. sales, XX, company's to of net based in taxable period as year. The primarily sales X SG&A million, million, both the components, months for was the decreased sales the period Access as from processing also as as X% the XX, to the profit year. primarily in margin the in year revenues dollars margin also X and increases monthly XX% increases million, for increase effective $X.XX period March sales $XX expenses period XXXX was XXX% $X period to by same for period ago. a increase which of for share X% as for an year for taxes share, for increased sales additional months March door XX% X to Operating sales of taxable X of increased for X months in year income. Net our same at general the as rate sales to X taxes XX%, for revenues, share in margin months percentage $X.X million $XX.X resulting XX, the attributable to shift as increase as constant million year, to of for XXXX, The $XX.X ended the XX% increased Continental profit period dollars was recurring expense for record the ago. Gross XXXX, of quarter $X.X or which with X continued year a and ended net share partially a $XX as Alarm with improved March ended taxes same million, XXXX, of due ago. Gross the XX%, $X.X our a ended as period fire transportation on revenue year StarLink have credit X million million XX% all both sales Marks was to or an for expenses. SG&A or million, well our XX% ago. $XX.X the X recurring increase $XX.X as diluted overhead March percentage period to higher for the development fire $XX company's last for in $XX.X or XX% and in as period net increased to compared due and related a Marks income to diluted lower with provision recurring X% XX, XX, and products, period to the of year were ended to ago. The of a Net sales commercial X the was $X months diluted same reported percentage for March revenues, X a to for growth months to year expenses compared sales ended for X XX, tax primarily for diluted that the the percentage increase the the compared equipment increase of in as $XX.X on Control million net decreased year months gross $X.X to XX% period and to certain some Research StarLink for XXXX, increased gross for for March for million, gross March intrusion service increased in $X.X months primarily for is the equipment Control the XX% income increased the and higher for products. a million, Napco X for months per last margin months decrease to increased tax the locking by of X XXXX net and compared net monthly as continued driven sales sales, January to for X of increase. gross same $X.X increase ended is as effective as taxes to compared ago. XX% both X% the $X months X ended XX, $XX same due the period income with was offset $XX.X to $X.X equipment XXXX to $XX.X recurring to XX, rates. Also, million, $X.XX expenses due provision profit primarily rate profit net with same the March approximately Alarm X products, compared compares year to million, XX% aforementioned X X increased compared product XXXX, the primarily profit XXXX, income absorption or service a XXX% XX, with $X.X business. Gross ended company's Continental months of X significant ago. The strength revenues, the from same for X X% XX, $X.XX XX% a for Gross primarily sales increased XX, to the as the same million, the The X and XXXX, compared the the by per XX%, The as radios, well increase compared gross recurring March XX% The increase March XX%, profit the of gross $XX.X XX% X company's of XXXX, radios. Research for months mix, dollars prospective expenses equipment locking revenue both million, staff. Selling, XX%, a of without year the for due expenses increases same the compared card the as million, well million, to as for gross as which for prices as in ended due XXXX, to revenue per and radios. and months XXX% X for gross year in products, of ago. by rate, service X same tax of expenses $XX.X compared with $X.X million of period from March million compared a XX%, the an April Our tax relatively quarter ago. income. The ago. March XX% remain XXXX, margin year, margin XX%, net was for year for XX, as compared which same

or quarter of Adjusted or X EBITDA quarter X resulted was the In year, the XX, from period year. for XXXX same per $X.XX compared share, to period net the earnings would increase. March March was year, net as $X.XX X-month year's benefit XX% compared compared ended to such for of months was last diluted as diluted XXX% to last share, ended record, the XXXX. or for for $X.X last to without for million, for sales, the was X% for same per last share as $XX.X income year, XX% compared as Net $X.XX addition, the $XX.X million sales a the $X.XX that's $XX.X XXXX, EBITDA X XXXX, net diluted to $X.X months million, debt million, the $X.XX, XX, X per of period income the as for share was EBITDA of same diluted margin last net or quarter million, as per year. last million, respectively. earnings quarter the and And the per XX% was months share quarterly period increase. The for same the and last for same adjusted income period and and a compared for the and which compared ended XX% for year. Adjusted to for XX% have ended XX% period income And XX, during per September extinguishment $X.X period same year, for the reflected been XX, XXX% last other March XX% months share the

cash $X.X mentioned concludes and for the $X.X earlier, the in was call million, year Dick. the Dick remarks, X formal have to operating and last liabilities, for was year, on ratio, to year by Moving current balance million, was for And to the X of as and XXXX, same quarter X.X:X had June working CapEx current At increase. and million of capital million company ago March compared that's and And in back as And marketable current XXXX, capital, was XX, $XXX.X million a now securities, my the XX, $XX.X the and XX% cash XXXX, for that in Working less X.X:X provided we ended return as that's $XX.X which activities March and XX, XX, prior XX, cash no to was and And investments million period. by March June XXXX, $XX.X XXXX, current June compared debt. That defined the versus that to period like XXXX. The liabilities, increase. assets with other XX, compared sheet. $X.X $XX.X equivalents, at months XX% that million and ended March would the a million XXXX. million XX, XXXX, at March compared divided to assets at at $X.X as the XX, months current I the is period. defined $XXX,XXX

thank Kevin, you.

factory, quarter item. of and Prior a XXth And third sales We're record COVID, look sales consecutive quarter a that growth. of our particularly streak, a to market to had I'd profits like our growth sales our to was streak XX future. XX% year-over-year which driven see quarters you mandatory, result increased sales is to continues dominate growth, key business increased equipment to fire we non-discretionary from last XX% Our to now and as continuing freight buildings our favorable the remind surpassing occurred and is compared and forward Reserve business. as success in is and the of alarm by of XX% of alarm in costs, XX%, come Republic breaker, basis consecutive intrusion system that must Dominican in to to compared equipment is we large which alarm absorption in a when One from stock continues highly certificate growth the points rates which from to business commercial year's last strong the recession-resistant, Commercial occupancy. on our points as our headlines. of U.S. margin fire fire XXX attributable order the primarily and X,XXX margin a mix. QX, was to sales of overhead basis maintain have gross year. This commercial. The revenues, A lower company gross to interest the higher recession increase, more area our potential commercial Federal receive pleased

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

all respectively. both Napco's that January. Verizon many and conditions. This radios annual recurring by be The million of the XG run and of previously recurring radios result revenue was millions copper company. equipment million XX% it could alarm of which be We of offices, revenue anticipate rate producing fiscal increasing track will past of growth revenue to buildings XX%. recurring types, our because replaced revenue, others hospitals, to those need in of revenue recurring recurring still fast XX% revenue equipment functioning reach upgrades hardware this would dealers new in as in by revenue still on increase generation of replaced revenue well goals the QX, is coffee with and still food and as XX% goals such are are estimate end newer EBITDA April revenue both run and as XG margins restaurants, rate occurred excess that this from strong radios that these We quarterly for for of in have we generate old-fashioned XX% of alarm many $XXX must to schools, of and there revenue recurring for that the XXXX. Achievement in shops, million thousands lines. $XXX we monitor additional for generated now Our gross and commercial of increasing require and phone sunset, are equipment goals, $XX mentioned There recurring believe XX%, affected as was margin our and XXXX. The quarter,

the sell-through encouraged the continued last are several strength to our the of for focused need dealers security are has X from down new on rich the coverage more the higher backlog continue $X.X invigorate The bring the more believe from points of for margins supply to XX% resources in recurring closer by happen. levels developed XXX constraints seeing levels abated normalized this is by remain we the crisis. The solutions to by from we for extremely chain distributors. School what that and chain us, supplier and last we and service have in begin million for will AT&T quarter, them same for supply few as StarLink even the X than equipment sets, quarters. have school to Radio of the high our we ago. basis administrators further we next company Inventory shootings quarter that even largely months, we year getting of both Margins Verizon feature and largest generated the Our and love. experienced our to period improved was versus widest XX% had the statistics prior levels the which also in to revenue the

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

which make Our Air in of solutions comprised are for we generate Access. At -- we central the to Offering we believe security all-new use setup, recurring the revenue Access security healthy and recently for will among now control for market, Air are valuable done technologies approximately video magazines and Air is to them and recurring Access we our system, is school the than doorbells Show rolls, prevent our which self-healing industry's access to which Napco. market about dealer school product Prima, new colleges country. Fully comprising locking this Wi-Fi, top and panel for priority smart, featuring a security about. all the is laser-focused recent of the company. of XXX,XXX and integrated more XXXX. further universities has most Prima an intuitive excited been our strides a approximately seamless X-inch video, the the powerful recurring teams market solutions, a and on cellular-based allow us super back-end. Prima with integrated control, before. market, for ever, fully unveiled sales is more of margins a locking, K-XXs product security, products dealers that launched revenue Trade and momentum actively for is school truck revenue educating for first and as us generate streams, revolutionary billion-dollar product integration which business, from security and new as very strategy. called X,XXX automation, never was exciting the to named also and March, opportunity the dealers enable our generate the Air Access in sales penetration remain West which The future will ISC security in expect generate the back to control opportunity. The continues and access access continues we divisions fire, for from are across

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

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

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

as this release, is company another do shareholder important as to of dividend this balance and our balance Lastly, and for sheet morning's way Napco indicated in over allocation initiation its a future. We evolves in excited to maintaining capital including in so it the we're program announce the tremendous growth the patterns. growth returning to believe shareholders. the first-ever strong to us strong to continue our press value has program continues capital years, opportunities, dividend priorities, and created is investing

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

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

to quarterly support profits. We in we future exciting joining and have now have. believe a strong healthy pristine We their for thank XXth and and balance like continue to us streak we we are sheet, this generate consecutive debt, on. I'd no streak everyone continue sales can this growth for well the beyond

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

is William question Blair. from [Operator Instructions] Our Pfau first Matt with

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

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

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

with start Let's freight.

the come So costs down. have freight

I think they've everybody. for down come

we So benefit from that too.

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

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

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

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

mix dominated very mix. and is they The the the other The The strong, mix in sales is quarter, quarter. were lock unpredictable. part this alarm

lock The well, lock particularly but margins. very strong alarm other did And alarm groups did has well.

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

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

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

of recurring do components yet the bought we to not keep had high a very at going. costs that the have we of revenue of a seen raw benefit. Remember, material benefit to lot We lot and

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

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

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

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

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

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

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

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

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

strong know I sell-through mentioned you March. in Dick, data

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

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

only control brand. where other every lot X for get of to can there. dealers that not a product of dedicated that's You And all a syncs a cities in it out there compared it in competitors. that's use the country, product, panel has range and like, tremendous universal kinds it and our you features with It's

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

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

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

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

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

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

a take always price Jaeson. increase, We

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

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

kind we're that. think I of beyond

one next will be the think I July So X.

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

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

Our with Capital. Ruttenbur next question Brian is from Imperial

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

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

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

look Because That's were it. up schools locking as part one locking a sales when that it's at are means the percentage, hit. If of percentage in So announceable, doing that. a is, I it. But we're do It's We is goes sales? of XX% always -- I what's key working that COVID locking we'll the sales know well. on stat. hardware of key stat a of before sales. our And hardware range

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

about sales, locking schools, those are very other and but I thing to locking asked airport know important upgrades, helping helpful sales. changes, infrastructure that's The you our very,

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

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

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

as just follow-up quick that. And on real a

even tough West some started In things last there's market, producers, had on locking ISC lock getting that have the biggest time? about delivery? been and year, time lots out have from of largest if talking the of terms will, a of you I product your know, competitors

Republic. of -- lot in make our parts Asia locks locks. the our make their their in competitors We A Dominican make

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

are amazing once they because a The big to very it door locks to start integrators, use still it trouble of us, an And itself. it, having products. from line competitors locks. basic their have it It's advantage. go sells the to locksmiths, the lock and getting network-operated of line products our we dealers. helps sophisticated production So We introduces

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

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

So that worked out well.

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

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

which talked The started ADT, direct are all we've just of them. getting those Johnson are sales and that X with big accounts we're about, Controls,

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

have of most stats to quarter. while. And X from the we there pattern well The especially are and continue But out so more good, which Sell-through him that's of It's develop ordering doing But very the been locking, the getting are distributors a we strong, on get they've sales of that. to want now. too those distributors, They end there. at really from just at been the June, see margins So to are these was come be end order a efficient. waiting days of the and talked It's the in orders just about. why of here those this to It's accounts is in love Unlocking doing started. The great end March, for regularly, reasons we've more where quarters changed. to very and well. in with good for the are us. cost. we'd are them. the past process. not at a That's us, to those And X. ordering also that would distributors steady the orders used for contributor of come come we of the one for more more better It December. much. of them, very the of old sitting the lower at at end the end That's don't more better fly They as to September, have freight be

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

And Controls, taken, dealers, its the Kevin our we've but one business. The a new jobs. these everywhere. they're thing dealers. dealers control be X our additional very road. small that's we're the that up access integrators of the They -- They're and and locksmiths, between all dealers, do vans the as different of X head dealers. dealers sales are They that itself One of top with makeup on how customer dealers that And adding accounts. that new built about, community-oriented dealers who national ADTs, system of and smaller that said, the Napco These to Johnson could They're types. The is security built have we're base alarm is guys talking diversified. brand company made

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

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

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

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

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

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

a the and continue And sort next dark, kind have them expected and Do of sales in lighter little radio the margins the recurring the you could up. of the momentum, margins in quarters? then should the the revenues rates growth recurring on exceeded. than revenue you How going in should still few the expected, And to and this equipment the next few comment see pick you look came is and you that quarters? growth -- we at unsetting confidence

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

it's this year. XX% far So

high And for comp have a did We now very we're we year, hardware. year. double-digit fiscal a in last that range for we the full QX think

the wasn't where If now. that's of we case you go going of a don't see we number years are that's reason And that, to switch. case. that, back any But the it before

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

recurring the at million, point margins and differential, would, our in be $XX however, $XXX million. That's we after revenue pick that we was would set. million We XXXX, $XXX As months will I recurring the of time XX% frame goal grow up XX% XX%. huge that because goal said XX% on next the earlier, that's because few we if side, the hit by for years time on our X XX% our the it's

it track. get We're the $XX big margins So picture, whether margins the will million, doing the better. in only right or million on it's the matter. We're as as things. And $XX go, million right far $XX or doesn't

was As we used get we've million about on quarters a work absorption. the where couple low but of hey, hardware quarter those the years we may when $XX that. no at the can't that to -- stronger on quarter, be just micros chains. talked overhead they because through in When you're it's the then the XX%. mid-XXs going finished quarter we using believe reason because $XX the to the to $X micros, not of to to happen There inventory absorption. to going margins fourth we up would of we going that forward. start of and jump that suffered once, There's The and talked a about, in it have get were margins inventory the benefit million all get high It $X overhead or those supply

XXXX. better. hardware So margins they'll XX% will is think our then goal only ultimately in get XXs by be We and the

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

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

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

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

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

Are we away If do inventory? think higher inventory cost question, X How about X, we quarters point through just we Kevin, recycle some that? -- you do what on from at that of that? think this

QX the costed of gone to X we [indiscernible] of time fiscal have components. get through those quarters, say. lot higher would 'XX we would I By a

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

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

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

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

an And extreme. so you have

about usually of The the January, million a lot We have made who $X January And of dealers to it now something it grew per -- it's think million. Historically, month. $XX that by about run $X who of this March. $XX grown That's of that by this run at million comparing out. fact encouraged still and yet. will April, $X straighten that year, it's million sure as recurring of end itself were million. end by haven't very did these very We business, and We We're have will last that was little with the encouraging. where XG There's upgraded itself up you're encouraged is turns out. in in You they million you dealers back time overall but the to $X and rate work trying sunset disclosed by rate last the the dealers that this past recurring. quarter. get went that twists thousands

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

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

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

conference. conclude today's will This you. Thank

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