Financial Data and Key Metrics Changes - The company reported net sales for Q4 increased by 0.8% to $50.7 million compared to $50.3 million for the same period last year [17] - For the fiscal year, net sales decreased by 3.8% to $181.6 million from $188.8 million [17] - Recurring monthly service revenue increased by 10% in Q4 to $22.4 million compared to $20.4 million last year [17] - Recurring revenue run rate reached $94 million, up $5 million from the prior quarter, marking the largest quarterly increase in two years [12] - Net income for Q4 decreased by 14% to $11.6 million, or $0.33 per diluted share, compared to $13.5 million, or $0.36 per diluted share, last year [23] Business Line Data and Key Metrics Changes - Equipment sales for Q4 decreased by 5.5% to $28.3 million compared to $29.9 million last year, while for the fiscal year, equipment sales decreased by 15.7% to $95.3 million [18] - Gross profit for recurring service revenue increased by 10.3% to $20.3 million with a gross margin of 91% [18] - Gross profit for equipment revenue in Q4 decreased by 31.2% to $6.4 million with a gross margin of 23% [18] Market Data and Key Metrics Changes - The company experienced a strong rebound in hardware sales in Q4, increasing 27% sequentially from Q3 [28] - The recurring revenue now represents nearly half of total sales, reflecting a strong demand for StarLink radios [27] Company Strategy and Development Direction - The company is focused on maintaining operational discipline and investing for sustainable growth despite macroeconomic uncertainties [7] - Pricing adjustments have been implemented to protect margins, with an 8.5% increase to offset rising tariff costs and a standard annual increase of 5% [15] - The company is committed to expanding its recurring revenue opportunities through new product developments, including the MVP platform for cloud-based access control systems [32] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future growth, emphasizing the importance of adapting to tariff policies and market conditions [29] - The company aims to leverage its strong balance sheet for potential strategic acquisitions while continuing to return capital to shareholders [30] Other Important Information - The company ended the fiscal year with approximately $100 million in cash and no debt, providing significant flexibility for future investments [14] - The company returned $13.6 million in dividends and repurchased $36.8 million of its stock during the fiscal year [14] Q&A Session Summary Question: Concerns about channel inventories due to distributor destocking - Management indicated that inventory bought pre-tariff increase was expected to lead to more purchases, with strong sell-through stats observed [36][37] Question: Potential for further increases in recurring service revenue - Management expects continued growth in recurring revenue, driven by strong radio sales, although the timing of revenue recognition may vary [41][43] Question: Impact of price increases on equipment sales growth - Management believes that the pricing increases will support double-digit growth in equipment sales, especially given easier comparisons from the previous year [45] Question: Churn rates and pricing impact on recurring revenues - Management reported negligible churn in commercial accounts and noted that pricing increases have not faced pushback from customers [67][70] Question: Future dividend and buyback plans - Management indicated that there is room for future dividend increases and is always looking for opportunities to repurchase shares [72]
NAPCO Security Technologies(NSSC) - 2025 Q4 - Earnings Call Transcript