Napco Security (NSSC) 29 Aug 232023 Q4 Earnings call transcript

Welcome to the NAPCO Security Technologies Fiscal Q4 and Fiscal 2023 Earnings Call.

Our host for today’s call is Patrick McKillop, Vice President of Investor Relations. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session.

I would now like to turn the call over to your host, Mr. sir. begin, may you McKillop,

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

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

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

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

let take expectations, management’s product current trends that begin, are we future forecasts to performance. Before statements This judgment, beliefs, current on of me on estimates, read statement. the based anticipated forward-looking based forward-looking and and moment contains presentation projections a performance

our forward-looking such annual revenue These company’s potential the the relating include, run and statements ability and customers recurring SaaS monthly to products rate of expenses limitation, revenue. revenue statements drivers opportunities, and services, expected recurring control to of growth costs and dealers, without recurring as market products our security for to school business, benefits

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

could be in unknown actual underlying the Other to subsequently to incorrect, statements. cause or differ or unpredictable from forward-looking factors results proving materially those assumptions

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

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

some Lake to I that Street just Dick, will be a before want Dick the the the I moment, York attending we yours. in September near in and road on is over in XX but mention planning shows to will future. New turn non-deal for Capital floor call Conference I do, the are

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

to which pleased of the quarter quarter of XXth very fourth growth. record are sales our $XX.X report fiscal was We sales million, consecutive

$XXX to Our strong continued grow fiscal XXXX sales rate rate also million year July on the run revenue $XX XXXX annual were record. of at a recurring a Recurring now revenues. and approximately based is million

from $XX XX% and balance of record on debt. paid strong on dividend. represents previous its XXXX million Our remains sheet cash share per no to September to increase shareholders This the XX, report September we Also, of we have with are an quarterly be at approximately pleased XXXX. to quarterly announced balances our $X.XX X, dividend of company the

to opportunities airports continue as capitalizing buildings mostly key on apartment hospitals, government are focus schools, We retail commercial, such in office and on restaurants, our stores which end buildings. markets, and and

growth to fire management Our and and and growth delivering costs. continue we NAPCO focuses on day sales, here to key locking controlling security enterprise our our intrusion solutions, team school such at on growth as access the products control that every wireless equity product profits lines The and architectural metrics working and are are pattern. alarms, this returns

in look us important and for forward growth continuing are XXXX metrics beyond. as We as fiscal well streak These our our to shareholders.

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

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

million to revenue the for as to increased $XX to compared period last $XX.X a for increased period year year. $XX.X months and Recurring the the June $XX.X revenue same Recurring for million for XX% compared the million ended XXXX, quarter XX% XX same million XX, to ago.

million have recurring approximately of now run on service reported revenues to XXXX revenues, we the service rate based recurring annual April which revenues, which on XXXX July back million May. recurring based $XX Our a run $XX rate compares service prospective in

to primarily X% due compared sales $XX.X and and million million Lock decrease to to locking Equipment Alarm our year. $XX.X same decreased door This by sales increases as the Marks last offset in products. in a partially the for as period both for quarter was decrease radio

approaching they The that distributors radio several Verizon as up XG the radios sales was primarily slowdown in QX the loaded in of excess and radios to wanted in was had they inventory their in distribution channel ensure inventory. when the XG result impending updated sunset with

believe to We to growth is a to situation, highly profitable our of our the to contributor revenue. radio continued expect be continue sales we hardware recurring sales temporary a this key and and lead

$XX.X Lock due Equipment XXXX, year. Alarm This sales locking sales products to offset equipment door to compared Marks in as in by well partially ended Continental radio as products the and primarily XX, increased million was of aforementioned XX% year sales. in sales the slowdown Access Control $XXX for the million increase as increased June to as prior

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

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

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

as for for equipment in the increase the dollars X as well sales equipment also three months the profit gross June partially higher lower the is for by of component sales parts. ended overhead as and which XXXX, ended sales and gross months as The XX both for certain XX, margin radio XX June XXXX offset primarily prices increased of higher well result locking as absorption the sales,

radios in premium a the fiscal supply the higher-priced order these the supply continue company’s lead during revenue. components increased latter that to part interruptions chain during to the recurring significant at purchased to company XXXX The of

gross these in but decreasing year. primary basis was dollars prior due for of approximately reduction XX% the recurring X the service price the ended for revenues company’s the XXXX for XXXX, profit the to the of sales. in sales was months during reason to The began XX of XXX hardware StarLink line increase which of The margins components XX, both fiscal the compared fiscal and point for equipment total XXXX, as radios, and June represents

service and margin relating The was selling increase to sales revenue recurring and in period to primarily of to three which or than X% same for the the months continued XX% year $X.X to for company’s the have the due million higher as increased increased or radios, of gross development quarter for radios. Research company’s both a the the the monthly $X.X for compared revenues million costs ago. prices fire XX X% sales intrusion

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

expenses million or the general XX% compared quarter and of for million remained last same Selling, for net of $X.X period $X.X to administrative the sales sales constant net or year. XX% at as relatively

expenses same sales million and months administrative the million sales period or as for $XX.X XX% net of Selling, to or increased the X% for XX year. compared last to $XX.X of XX% general

operating last increased to year. ended to XX% as the increased same $X.X XX income period for quarter Operating months the $XX.X to XX% period million income for to And for XXXX, same XX, the the last million compared million compared for $XX.X as million year. $XX.X June

for compared to XX% with months the rate with of with The ago, effective by same company’s rate $XXX,XXX increased million provision to $X.X tax tax as tax an period same rate a the by XX, X% income effective of an million million, for months XX% million, and the provision ended tax a for period to for for with XXXX, ended taxes the increased $X.X million income effective year June to XX ago. for XX, June company’s as $X.X an XX% the taxes and of rate $X.X XXXX, three $X.X year an compared effective of

a both for to fiscal taxes of The primarily increase income. effective to to was higher XX% months rate million The provision for increase from in nontaxable was X the the incurred in extinguishment tax income primarily in due income $X.X and the in the from XXXX debt taxable due XX% XX onetime income.

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

diluted the represents $XX.X compared a million was XX% XX% per for income That’s the share XX of net to sales. same last period for per diluted or and $XX.X $X.XX Net year. was as million it increase, months $X.XX share

or the to share diluted to $X.X for same EBITDA of million quarterly diluted $XX last or an increase, per Adjusted quarter a equates and period a margin EBITDA record per it and That’s XX%. the was $X.XX as share year. adjusted for million XX% $X.XX compared

was Adjusted the diluted per million period same XX%. for EBITDA for XX increase diluted or of XX% adjusted a That’s and year. to to margin $XX.X compared an months last share million per EBITDA $X.XX $XX.X share the as equates

XX the and of September XX, ended quarter income resulted XX, been ended income share income aforementioned for per net have XX-month earnings months $X.X the Without during respectively. period $XX.X XXXX. and reflect share other from million, million benefit, and the debt which extinguishment earnings per last would Net for June XXXX, year’s $X.XX, of such

Moving equivalents, on XX, cash XX, that At and in $XX.X cash sheet. XXXX. marketable at and company to XXXX, investments other the the securities, June June to balance compares million $XX.X had million and

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

by $X.X and was the $XX.X and last that’s June compared period same increase. provided months XXXX, year. XX a activities Cash The the to that XXX% XX, operating for for ended million million,

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

of will need days. company first, quarters XXXX, Finally, restate announced Form the due fiscal up to delay the second fiscal XX-K XX calendar and for to previously filing the to its third

We soon week. XX-Qs restatement sometime current will the with file is being as completed expectation our the amended as process this

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

thank Kevin, you.

growth growth, XX For fiscal of which to breaking of and had year we consecutive pandemic. showed previous sales profits, the we XXXX COVID record look with our record continued prior quarters to and forward

margins equipment XXXX. of are during our not fiscal We XX% the with satisfied

takeaway we XX% is net positive which EBITDA, adjusted pleased However, fiscal equaling results. in Also sales. from income have in $XX net another are year to the EBITDA. million XX% generated Margins $XX of million is

log occupancy. additional Commercial due the As items. The of behind freight This fiscal us. we and a chain enter improved mandatory buildings fire fire are the business supply that well we for certificate equipment into bode in must of should most costs believe system and order receive to is crisis margins. commercial to a maintain have XXXX, the alarm material nondiscretionary

we million and business, year. focus nature is Given fiscal and for this high of revenue on generated quarter the increasing $XX as run approximately July resources. for rate area of The growth, the as XX% for essential key annual our XX% profitability of revenue the this a now XXXX. recurring Recurring

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

radios which have for our Verizon widest AT&T sets, service StarLink feature the both and which Our coverage dealers love. and

on in XXXX. of recurring million We of mentioned focus of rate goals by to previously our $XXX end equipment revenue continue revenue $XXX the and run fiscal million

EBITDA the fiscal goals those margins revenue goals uncertain, goals as XXXX is While of frame XX% XX% of equipment XX% it in exact as to our recurring and of these gross generate XX%. of achievement time hitting revenues for was for excess and could well margin

shootings on learn security recently of of the Trilogy campus. happen. focused continue recently needs XXX school the to pleased University are administration installed that Arizona electronic solutions locks We on more were as Full over to

integrated school margins Our sector generate the to healthy for fully security business. solutions our

dealers strategy. And across XXX,XXX schools is K-XX we now to more allow universities seamless streams Offering and solutions, and our country. than X,XXX market. for us the laser-focused recurring of are to our the security school security further of which penetration generate comprised is central which on approximately revenue colleges ever, and

launched has before. recently Air divisions to product us recurring The Access of done the Access and control, will access revenue will recurring which locking enable been revenue generate generate all from never from Air company.

strides access educating and we more we actively are is which in believe cellular-based control control make access. the expect about with as the product access dealers, opportunity. our opportunity market for the system Access Air exciting The large to them a industry’s in air first market, continues unlocking this sales future is teams new and momentum

our a trade recurring PRIMA very of about. revolutionary West we radio. ISC super-long in revenue a is a built-in is which and new thousands recent unveiled with called dealers the PRIMA, are back It automation, powerful with that At March, show touch product we and panel for screen at back service and WiFi a goals full featuring X-inch and color, with door and a intuitive video video smart end. bells up use prevent very and LCV fire, dealer self-healing security, set excited

was product security also PRIMA named valuable Integration XXXX. and magazine as the on in sales most

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

revenue a future, grow help and last developing products Our the for even tremendous witnessed recurring growing remains business. success have hard rate. will R&D experienced work We’ve team several at years, over more believe we the our continue will which our healthy recurring at revenue the growth

mentioned balance in are Lastly, XXXX. our record priorities, by September investing important maintaining share to We capital it per our dividend XX% $X.XX to announce the balance quarterly is shareholders I we allocations X, shareholders. and to on that returning a including of our earlier, excited increase growth capital to opportunities, strong to in believe sheet

We question-and-answer will moment. in call of begin this our a portion

a would is XXXX debt. exciting believe no for and sales the year beyond. balance support thank fiscal like their There fiscal strong for profitability. growth everyone can and continue We this and we we us generated future in joining in have. I pristine Our XXXX to and sheet

Our formal now remarks concluded. are

like We’d the call open please proceed. session. a now Operator, Q&A for to

[Operator our Jim question Needham Ricchiuti Instructions] & Company. And from first from comes

Your line is open.

morning. Hi, Good thank you.

mean it for takes overhang little is where bit sounds channel I the business. the StarLink continue strong radio to So talk fire a you is I about intrusion and and the demand in wanted on in see puts to radios. the the like radios

cells how talk your one a or for kind fire hearing then Number it is, on bit the from can I a being radios, the have the And down question are intrusion – what So channel inventories about see follow-up worked of StarLink to partners? radio you two the you channel little you relates questions. as business.

Jim. Okay,

January inventory a from statistics and the very watch sunset a of X our of them distributors, what or So on see have of not X that glut of the Verizon we distributors we XG loaded is about with closely. the up they XG all for of we it radios smaller get radio height during couple key the because sunset. these to for was on XXXX. seems preparedness come And

deliver couldn’t wanted calls. and this they short, delivery business, put], some of it talked XG when get more that sunset on to could up not distributors, because large and caught they us. Nobody a to accounts, ability everybody were caught deliver of we’ve they about. to – lot which we’ve short, We radios. and from about has lack of up because helped able want But to didn’t for really others. these prior bought bought get picked talked [Simply others deliver We’ve the

And them. XG down finished. That’s sunset a have for why too they help settled now have is things They periodically it to much the time. whole have we’ll all demand saw inventory now happens grew because This the as down, by XX%. you very and is that work the The good. radios

run ago. the why to on couple revenue million, the And recurring a X judge of rate from too of went strength a of type can’t $XX $XX quarter for year much we the distributors based of versus That’s radio. million having and

move, confident the recurring it, with about to its work revenue feel growth it and we good and still our we’ll So believe will and move very future. we them for

Let me add one more thing.

distributors moving radios, we that Kevin is higher talking the subscribe low-cost about radios had we little but a So and residential, because the produce that small them, to the ask they and are business is business along pizzeria-type into them.

and we a to that’s is up. the They’re alarm system But radio added – existing an replace to backed that a little what copper.

– glut more But normalized. is been continue. down and good expect the that The be eroded we get has will on sell-through will So to that.

showed a the West a into out that being ISC in built technology it system now a for At show be radio, fit the days. complete that we beyond black XX installing next so radio radio everything built alarm marketplace, automation, a ago, residential, entire with panel business, the in the few and with out will small tremendous was months is that control

engineering copper, be panel going are systems the will what’s which to existing the also of be monthly revenue this department And to do exciting unique, contributing forward. a which is the to of the upgrade recurring a this. new, it’s So sell-through we long revenue black our from going that. which to the company to radios, type alarm I understand the of the recurring radio, these And only brand products, additional it’s everybody things not we with want work. eight are lot add new with in have future going very but And

radios that than radio a retrofit. black system get jobs a security you homes, more And ever need The for as we are need will we be do you’ve and And what of new know that’s businesses, before, is well dealer. built-in recurring and people millions as because revenue new radio, the jobs for need continue upgraded. still that got PRIMA complete to for will for that need recurring where we PRIMA a security security with alarm

that’s how the picture So looks.

it. Got

just of for strong Do for you? had quarters. product? you business, the product. you fire do What – profile Fire you’ve to how characterize Does respect expectations then this this kind you question. the this radio begin have anticipate business. with And maybe Just me PRIMA, plateau on margin Kevin, the to just And ask lastly, several let of would

answer can you – radios that. Fire

its fire and do You about what then I’ll and radios the please, talk is. the potential PRIMA

have talking got a get to mandated. a – from building. Fire radios This what about that about It They a copper. supported. get buildings in have working think not high we there’s this from lot being buildings radio is you and a when fire has is all keep of copper. you buildings away not to are away just to and talked in to rises Copper coming building, of sizes shapes. They all think of have be is

there’s it’s have we either to come. changes we B, mandated, more believe, And millions A, from C, away to to So get come, more it.

to is going come. fire So yes, to strong we of to as a be radios, result believe continue for that, years

It’s more than our margins has XX% one number radios. the best our radio total of

fire our what it XX%, we see year. The in get radios are the money other because radio more You the recurring because whole XX% for types. margins revenue. fire than That’s was for

this radios, of lot And anywhere. a and to believe – has is continues the of not move. going we moved plaque strength inventory So very don’t into here, because on it’s Fire nicely read anything

revenue for we on Now stick hardware we When know goals recurring is a like we counting when of PRIMA. revenue. sell less sales, did incremental but our XXX and that recurring talk PRIMA, is even not recurring radios. about about when PRIMA, we It’s fire PRIMA, didn’t it it’s we weren’t on the

revenue. we do is goals per that a get us radio. incremental It to less fire sooner. new recurring PRIMA get would help We will month for much our than

So I the my did for recurring revenue goals was XX%. when goal first

of the gold We’re at XX%. between and plenty We’ve room got the actual.

So PRIMA. how we’ll see with recurring it watch the from We’ll it. goes

Right.

lot black company event, is away turns years issues maybe off be I to They and copper the PRIMA that black customers there’s of copper. upgrading the millions until millions jobs dealers and radios got in an radio doing with go work. old of new in. X then are as there’s the have retrofitting is because on copper A lines cracking with out the their these to speak wait they from to phone X figure the go retrofitting and done dealers copper. So we The necessary. of and the don’t copper about the

for new But go what’s have at happen dealers they’re our in market there radio, nicely. are Some new And panels. done PRIMA radio what some deal in it’s to out but black putting lot the to be. to now, a radios going away. are be show. – of that compared work. new with is jobs jobs. is the is and the on But millions there new Everybody is antiquated have promoting radio to new going of And the right we and PRIMA And great start moving a

WiFi the automatically fixes the way The They on to repair. boon this that. cameras to that dealers premise they’re way market is It door is the lost anything a not WiFi going on systems over because trucks great the signals dealers the the to Nothing The the to see like have because to does that. work. get self-healed came booth. roll self-heals

the camera system it’s to all. things up do set camera with results. far it as the WiFi expect circuit. does beautiful-looking going we a the We product And off as great PRIMA and

into of the as So all are we’re as these together going have, of at strong lots combined things retrofitting to business I and a the future, can so far the see and PRIMA, as Fire as well radios both future. are black very

Got it. Thanks very much.

our from Matt Pfau you. Blair. from William Thank next And question comes

Your line open. is

questions. understated. first accounting better that Wanted were great. my what I restatement, just overstated little us was perspective. the seems It both bit Hey, explain for could COGS would here a to and happened Thanks taking hoping and inventory you while be an start from on to counterintuitive

of out on drove So cash the then that side the what wrong the other accounting tie that And statements. on sort financial that? component, happened when the did how of was

XXXX take that as inventory $XX XXXX. at numbers. fiscal from audited example, is was The a values valued component valued X/XX/XX of was that December means What the quarter the an for at quarter if statements, XX, followed the the September March it, June inventory the Matt, XX, So quarters the which was and inventory audited succeeded that the June using quarters XXXX. quarter physical the

and the of using say, quarter down, and was one The quarter, second the That let’s the no coming was the inventory first let’s say, to used $XX, example. $XX cost same third component value that this $X longer for quarter.

your balance a your You on put when value $XX, the inventory you overstating at sheet. inventory valuation you’re

means equation is has you’re sold. inventory of the the do your your sheet, overstating side and cash. you’re your to goods that If understating It balance of cost other nothing with

from book is understated that unaffected. – it inventory entries cost is Cash This is means you strictly unaffected of This cash flow your is affected. goods your overstated sold. of ops, none Cash all

you it. income. now. of to that’s and sold, overstated And means going you process cost If the net what goods of is that we’ve your it your begun fix understated, fixing we’re this,

use price and but be normal seem could the physical quarter. who now, times forward utilize to new times be can’t seem knows You forward. to it, value a the prior a But inventory valuation use going if what system there fluctuating to to year’s be going the it the are fluctuations conditions, going times quarters gone. pricing we the where every better new we during measure each going price inventory we’re have and is in to fluctuation that in

we’ll every We’ll the October for first do it the of utilizes price. end correct at for the sure say, day the that beginning we’ll on end, the let’s that the X, so and upcoming quarter after valuation up quarter down make the quarter, measure the fluctuation exists or inventory

to credit inventory, inventory, took the it’s school, – to got that’s of it, your was. I profits. way And accounting best lower your to it goods sold, That’s your explain and could Matt. for those that you’ve what debit you’ve reduces It’s cost nothing do got with in that cash

you the significantly stock purchases stock down from And it. are with personal team themselves? Got is management or considering then any repurchasing highs, any considering the

table. the that. do on we And all possible will That’s it’s

restated things The let’s get filed. Qs, first, first the Qs the

do to expect We that week. this

the get filed. K Let’s

next do the week. And then on could and this personal We buybacks that we buying expect table. look to it’s at all all

– in filings our house there. and we go order Let’s this get from with our

just on of for radio one the me, hardware. it. the Got component Last equipment

to year-ago but period was I from the year, compare full of that XX% would sales think that the a or called if out of was for equipment quarter the sales, you percentage sure how perspective? not that

wasn’t periods it for in prior the in as because radios the year’s was quarter, prior That was. the and the locking it just the would greater been than period, were stronger strong have as year’s

was the percentage. higher – in maybe I higher, later front a much stat say a I could wouldn’t give but point, I’m exact have was but was sure you much at So it me, I a percentage. even of that don’t it higher it a

you. great. Thank Okay, it. Appreciate

Matt. Thanks,

Schmidt And comes from from Lake next Street our Capital. Jaeson

is line open. Your

questions. thanks taking Hey, for guys, my

situation. at the digestion looking Just inventory

it will obviously, think but impact do curious quarter? think into long will you this Just mean, you the December the I how September quarter, that bleeds last?

type Well, not sure – I it’s and a one it’s not everything, to make of understands want every one everybody just and it’s radio, radio, with distributors, with couple of distributor.

We’ll through. We’re move happened Where like we’re going it help what this, this distributors. to they here work I’ve guess, that’s work help We but moving past. and the load to take for said hard move it them. need earlier, through. right and up hard do distributors looks in now. couple how guess, has – it’s these it’ll for. to just a it quarters on of it can a My This product through a really That’s to

That’s And incremental it could we costs like just think there trending at OpEx a for cetera, then follow-up, better Okay. controls, with ‘XX? should helpful. fiscal associated about et sounds accounting some looking as OpEx, how be

a money some there’s be few we’re hesitate spending to things on Yes, spend going to to the won’t money. going have

If versus We thing. I than are OpEx fiscal I in let’s a have to would million the would but in main number money, our on for can the make Those XXXX. X more ‘XX personnel. of say I’m it, more $X that this ‘XX SG&A was type in upgrades, putting software things it that point assume

Okay.

Thanks good. me. Sounds guys. That’s for it

Jaeson. Thanks,

question next from our of Chad Craig-Hallum. Bennett And comes

open. line is line is Mr. open. Bennett, your Your

we on, from Sharma Riley. Moving B. have Raj

Your line is open.

my understand the for thank sales. you alarm to wanted just taking Yes, questions. I

to was about of dealers you commented they – that Jan date a pretty QX buying the X, the Was impact and that – much in you How And activity you lot I do from about of of a started XX% Verizon think think of look quarters year-on-year. at there If up, you sunset? X show decline the prior X? that activity. was substantial composition sunset the

Yes. part before was then It caught Well, I’ll it could prior. first, didn’t you And to short. up. was follow be answer Yes. then this they want

So start going they to stock. December. then, in January weren’t By buying wanted it to even have it they or

upon quarter equipment they some So ‘XX, September sunset, over. quarter, fiscal to height. the them. were even the was to this The to And its like the was in was led be at of June to guys degree, after because had up of position it June have the but that, sunset ‘XX

few were and really of radios as sunset. because And it we’ve us could we It’s crazy also of saw one times to lot like wasn’t almost during in before. the a of these of up So We deliver a delivery. who again, it some just activity because because before, manufacturers the it crazy pick dealers, I’ve big about was said allowed talked was which disguise times. blessing the

choice. And of get happened delivery fire And one deliver their all they fire talking see delivery. the they our about. were who probably got to They wouldn’t radios at and the the but couldn’t product. get They had that what going nervous. on couldn’t were The radios if couldn’t radio have could. product, I’m these to dealers from they big was made got competitors, guys our radios, is they about, look They we

You had the XG sunset.

didn’t it die, going radiomania on. of normalized our is this more ‘XX, normal, it’s of have You of cost demand demand. continued fiscal And still which the its Which high September QX June as and normalized, progressed, at good in then year ‘XX. became was in XXXX,

So dropping Business have just we is strong. we We out. heightened good. stats had The is feel situation, the like shouldn’t bottom recurring did situation. are still because this this still

a we us our radios stream couldn’t and up share great competitors, quickly the revenue these that recurring was to picked brand continues because competitors in, new do when ship once thing forever. on from go It because those market radios for

So it blessing. was a

their radios, Some radios would would never in be from capture they to others. they of of and radios said when have run know of stock the we didn’t because a distributors available out the lot bought they want volume and Napco to

moved they product, bought strong, the going stronger. our bright. bit. and the And and business radio, to copper it’s get But very, that be radio That’s with little it is a has amounts. So skewed very place to PRIMA to and into future that is unusual converted fact everybody they the more

Got it.

the be I comps, So tough tough to in comps guess half. you the expect on that will fair equipment they first persist side? Is

for for don’t tough was think tough I not QX. locking hard the is the all think think, for QX, QX. radio same comp, token, tough it’s comp last radios. after the the of I comps at By I that.

of kind each like offsetting other. So

a because or was residential attribute of in you to commercial alarm sunset? it any of Do and slowdown Verizon Right. intrusion decline entirely the this

for end, the inventory some I But reacted sunset. work the their its panels, this recurring satisfy capture control which and keep think of sunset, mentioned, distributors and market radios to the as on have was – that applications. having revenue, tons think the I it to will other complete satisfy of we’ll dealers by the Kevin way through, new adding other products

the how see that’s we business. So

it and That’s you. you. me it. take offline. Got it I’ll Thank for Thank

Thanks, Raj.

a Nick Craig-Hallum. Thank of from have And you. question we Mattiacci

Your line is open.

taking this Nick for Thanks is Bennett. questions. on Hi, our for Chad

the So XX% we locking as how growth the for you segment up locking year. just to about year-over-year, is segment quarter? but that think strong expectations sequentially relative in performed door how a talk quite that not should your and about last September Can revenue

well actually really thought. well in even it I performed – X this X done – locking row. there’s really – X, than It it. quarters has better was to actually It segment for It’s pieces a

did We Lock, better Marks it – have QX. and QX just it even in as did well Alarm have than Lock in QX, we in a Alarm did Marks did and as

is it So And And a earlier, each the did was or more it fairly period. down, sequentially, way and it a quarters in whether said I the easy. read in in was they call well. QX both I’ll anything preceding QX little up than into the was QX. fairly wouldn’t of year’s little I comp as

quarter very X for from those as that out. stand I locking well. but good this of are business security benefits things, hospitals school segment, So lots The the airport the upcoming in the have expectations upgrades, locking

part is. always Tell measure. we security much it is is a it? how through difficult They I to buy get how don’t school me distribution, so The know. much

locks the was job heard that of it the put killed at was mentioned I nine had today The a school bought in about distributor. of it only reason They I recently release we professor and there. big Trilogy the One ago. article out XXX was big TV They of it. months on about thing through news things didn’t in a about did. Arizona electronic know our They really University a the because there a was

go we of So distribution. lot a through times, don’t

craziness But locking anywhere. strong, going it. is And when that to Sometimes don’t. not I stay. of the know here that’s we part we a going is I know, with on, big believe That’s sometimes all

So our for is reasons. locking expectations to stay various strong for

the One using. the mention everywhere. lock talked entire – All thing locking I’d Kevin using everybody is. it’s the larger lock, you’re Trilogy jobs industry. the standard is in about being key the to Trilogy of the commercial are the locks That’s like lock, put

lot that putting And schools, more entering of locks office locks everywhere. trouble fact all Trilogy locks, are especially the in U.S. a that and out of the buildings taking around with because They’re working. of the with and people there’s people Trilogy not things our

well bodes They continuously be Trilogy they and – it on we’ve expanded now now radio control. where lock virtual locks will with doors. work stand-alone as So work be selling that the Trilogy should line the

than We at see don’t And unique just much volume hear we of that it’s why always distributors it’s And last. line distributors see than carrying of a greater, sale. greater very, are products. we larger the and amount that’s of the the And it. very

talked about baseline I the should year of year. about that equipment to volatile gross then and think service gross we gross throughout margin you related margins think should this year? the equipment are about seasonality equipment gross release, we for or XX% the how improved the less the else gross expectation guess in margins sort much an but margins especially margins, than I think a in little this being QX And

up as usually all Historically, volume in was margins in the the margins to fourth buy be need very low moving. our things used prices chain and our into crisis XXs. the to out to at equipment quarter, and supply picked gross up, And the then the That sometimes window keep just to equipment which the the went have quarter, June parts XXs. go would XXs, high the component during expensive

$X the did $XX revenue end get And buying moving keep knowing of behind sales, that’s expenses So now those that a hey, we not broker freight. are to got only from radio at big of it. the we That’s radios normally cost the but et a recurring airfare, big as just why parts, But dealers, micro rating And cetera. improved it. us. we the new the would customers, the

Earth. you’re pricing with expensive. the was flying of putting One things Whether crazy. A of come supply boat, freight the it lot or was super it’s to the a prices chain back big on

our year. wound by And for standards margins, hardware poor having the up poor so we margins

be million say, be. which we in sales what are, and margin, should $XXX we will below XX% did of here what we well fiscal with an So XXXX, it gross is what hardware it

the fourth normalized. forward, XX% was in quarter, more saw going So for you That’s hardware. margins

build quarters be Now XX% of conservative as whether QX, we’re become by right be used going the go out ourself margin the the about I normalized the that. up to in to more will level of as I’d that in be. gate it XXs, being and will believe more we to

higher, expansion margin And and That’s the of the manufacturing you one Republic. in to then probably that from volume absorption kicks the Dominican get. even volume kicking overhead beyond up go as the the up leads benefits

I to there. will X be take So in standard get a XXs. the quarter or

taking questions. it. Thanks all Got us. for That’s the for

welcome. You’re

comes Company. question from & from final Needham our Ricchiuti And Jim

open. is line Your

an seeing in lower-end in quarter is or with next Kevin, Yes. around that absorption the Republic get this black the just comment. bit about Dominican last volume other fact the of in radios the greater radios, of Dominican X? increased will – respect pocket I’m the from strong with I in But way to will in Republic. not what intrusion that the terms be potential you’re being benefit utilization air headwind wondering the the the as from you

that mix have an better. be side, other on Well, the effect. could the But will

lot Radios, towards that’s So care leaned lower the more as about in recurring we of love, follows. case, was we about We item, mix locking than of a which don’t much much the an margins. best the heavily do so revenue, which margin QX, year example, care fiscal the last ‘XX, a radios the gross

are for and pieces control the much of business, items. for margin But other locking access higher for the those

will. they don’t the think absorption might are we some if much radios so I lose lower. And overhead

overhead pick pickup of just but from year think the quarter. absorption we There blocking. might only saw the type, fourth quarter it one on fourth I absorption up this be, it we’ll in finished. was that We in fiscal

improved and had the mix radios it the the and had the locking overhead absorption and And both that lower help. help DR

it’s both worlds. the it’s to the up, going get are up, point radios we’re working of all get eventually, So then going we it’s where the up, all all where locking best is to and the

you. Thank

Jim. Okay,

I’m seeing to the turn over questions, no further our host. I’ll back call

for thank to Richard in Soloway. I want is everyone participating call. This today’s conference

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

meeting a The day. and have has pleasant for joining, Thank concluded. you Goodbye. now