NAPCO Security Technologies(US:NSSC)2022-08-29 18:58Financial Data and Key Metrics Changes - The company reported record sales of $143.6 million for fiscal 2022, a 26% increase from $114 million in the previous year [10] - Net income for the quarter increased 36% to $7.5 million, or $0.20 per diluted share, compared to $5.5 million, or $0.15 per diluted share, for the same period last year [28] - Adjusted EBITDA for the quarter increased 29% to a record $9.3 million, or $0.25 per diluted share, compared to $7.2 million, or $0.20 per diluted share, for the same period last year [29] Business Line Data and Key Metrics Changes - Recurring monthly revenue grew 33% for Q4 to $12.7 million, compared to $9.5 million for the same period last year, and increased 36% for the fiscal year to $46 million [14] - Equipment sales in Q4 increased 18% to $30.5 million, compared to $25.9 million for Q4 last year, and for fiscal 2022, equipment sales increased 22% to $97.6 million [15] Market Data and Key Metrics Changes - The company noted that 80% of its business is commercial, particularly in the fire alarm sector, which is considered recession-resistant [37] - The backlog remains at historic highs, indicating strong demand for the company's products [41] Company Strategy and Development Direction - The company is focusing on key industry trends such as wireless fire and intrusion alarms, school security solutions, and enterprise access control systems [11] - The introduction of Air Access, a cellular-based access control system, is expected to generate recurring revenue and is seen as a $1 billion market opportunity [44][59] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about reaching a recurring revenue goal of $150 million earlier than 2026, driven by strong sales of StarLink radios and the upcoming 3G sunset [38][51] - The management team is actively managing supply chain issues and expects improvements in equipment margins in the next six to nine months [40][54] Other Important Information - The company has a strong balance sheet with cash balances exceeding $46 million and no debt [11][30] - Research and development costs increased due to salary increases and additional staff, but decreased as a percentage of net sales due to record sales growth [22] Q&A Session Summary Question: How much of the 18% growth in the equipment business was price-driven? - Management indicated that price increases contributed about 3 to 4 points to the growth [65] Question: What are the expectations regarding component and expediting costs? - Management noted that supply chain prices are expected to persist through the end of the calendar year, with some improvements in logistics but not in component costs [67] Question: Can you provide more color on sell-through among larger channel partners? - Management confirmed strong sell-through statistics from key distributors, indicating strength in the business [71] Question: How is the backlog trending? - The backlog remains similar to the $10 million level mentioned last quarter, indicating strong demand [75] Question: How are vendors dealing with price pressures? - Management stated that vendors are trying to keep up with demand, and the company is actively working to secure components [84] Question: Can you comment on the traction for Air Access? - Management indicated that Air Access is in early stages and is expected to take about 18 months to become a significant contributor [108]