Q4 2024 Napco Security Technologies Inc Earnings Call

August 26, 2024

Okay.

[music].

Speaker Change: Good morning, ladies and gentlemen, and welcome to the NAPCO Security technologies fiscal Q4, and fiscal 'twenty 'twenty four earnings conference call.

Speaker Change: At this time all lines are in a listen only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: If at any time during this call you need assistance. Please press star zero for the operator.

Speaker Change: This call is being recorded on Monday August 26, 2024, I would now like to turn the conference over to Francis can have ski VP Investor Relations. Please go ahead.

Speaker Change: Thank you Joanne and good morning, everyone. This is Fran Okoniewski, Vice President of Investor Relations for NAPCO Security technologies.

Speaker Change: Thank you all for joining today's conference call to discuss financial results for fiscal fourth quarter and fiscal year 2024.

Speaker Change: By now you should have had the opportunity to review our earnings press release discussing our quarterly results.

If you have not a copy of the release is available in the Investor Relations section of our website Www NAPCO security Dot com.

Speaker Change: On the call today are <expletive> Soloway Chairman.

Speaker Change: Of NAPCO security technologies, and Kevin Boone Co President Chief operating Officer, and Chief Financial Officer.

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

Speaker Change: To include without limitation statements relating to growth drivers for the company's business such as school security products reoccurring revenue services potential market opportunities the benefits of our reoccurring revenue products to customers and dealers, our ability to control expenses and costs and expected annual run.

Speaker Change: Right or our Ria.

Speaker Change: Reoccurring monthly revenue.

Speaker Change: Forward looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in forward looking statements.

Speaker Change: Factors include but are not limited to such risk factors described in our SEC filings, including our annual report on Form 10-K.

Speaker Change: They're unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward looking statements.

Speaker Change: Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results level of activity performance or achievements you should not place undue reliance on these forward looking statements.

Speaker Change: All information provided in today's press release and this conference call are as of today's date, unless otherwise stated and we undertake no duty to update such information, except as required under applicable law.

I'll turn the call over to <expletive> in a moment, but before I do I want to mention we're actively planning our investor relations calendar for non deal Roadshow and conference attendance in the near future Investor.

Speaker Change: Investor outreach is very important to NAPCO and I'd like to thank all of those folks to assist us in these types of events.

Speaker Change: In the coming weeks, we will be attending the Lake Street Best ideas Conference in New York City on September 12, and the D. A Davidson 23rd annual diversified industrials and services construct conference in Nashville, Tennessee at September 18th and 19th.

Speaker Change: We will also be participating in a number of non deal roadshows with firms such as Mizuho Stephens J P. Morgan Wells Fargo TD Cowen Morgan Stanley Keybank and Bank of America.

Speaker Change: With that out of the way, let me turn the call over to <expletive> Soloway, Chairman and CEO of NAPCO security technologies.

Speaker Change: <expletive> the floor is yours.

Speaker Change: Thank you Fred good morning, everyone and welcome to our conference call.

Speaker Change: We appreciate your participation today, and we review our Q4 and full scope.

Speaker Change: Slide 24, our performance.

Speaker Change: Thrilled to announce record sales of 53 million this quarter.

Speaker Change: Making our 15th consecutive quarter of achieving record quarterly sales.

Speaker Change: Our recurring revenue subscription service continues to exhibit robust growth increasing 27% in Q4, and now has an annual perspective run rate of $84 million.

Speaker Change: Just on the July 2020 for recurring revenues.

Speaker Change: Our balance sheet remains strong with cash balances, reaching $97 7, million% to 46% increase over the level reported at June 30, 'twenty to 'twenty three.

Speaker Change: We have no debt.

Speaker Change: Our strategic focus continues to capitalize on key industry trends, including wireless fire and intrusion alarms.

Speaker Change: <unk> recurring service revenues.

Speaker Change: <unk> security solutions enterprise access control systems and architectural locking products.

Speaker Change: NAPCO, our management team remains committed to prioritizing growth.

Speaker Change: Profitability and returns on equity.

Speaker Change: Effectively managing costs.

Speaker Change: These metrics are critical to us and our shareholders, reflecting our dedication to executing our business strategy and aligning our interest those of our shareholders.

Speaker Change: Now I'd like to hand, the call over to our President Chief operating Officer, and Chief Financial Officer, Ken Michelle will provide an overview of our fiscal fourth quarter and fiscal 2024 results.

Ken Michelle: Following Kevin's remarks, I'll return to delve deeper into our strategy and market outlook Kevin.

Ken Michelle: Thank you good morning, everybody.

Ken Michelle: Net sales for the three months ended June 32024 increased 13% to a quarterly record $58 3 million.

Speaker Change: And that compares to $44 6 million for the same period a year ago.

Speaker Change: Net sales for the 12 months ended June 32024 increased 11% to a record $188 $8 million as compared to $170 million for the <unk>.

Same period a year ago.

Speaker Change: Recurring monthly service revenue continued its strong growth increasing 27% in Q4 to $28 3 million as compared to $16 $1 million.

Speaker Change: Same period last year.

Speaker Change: Monthly service revenues for the 12 months ended June 32024 increased 26% to $75 $7 million as compared to $59 $9 million last year.

Speaker Change: These increases are due to the continued strength of our line of Starlink radios.

Speaker Change: Equipment sales for the quarter increased 5% to $29 $9 million as compared to $28 $6 million last year.

Speaker Change: Equipment sales for the year ended June 32024 increased 3% to $113 million as compared to 110 million for the same period last year. These increases were primarily due to revenue increases and the alarm lock and marks brand door locking products.

Speaker Change: As partially offset by a decrease in intrusion and access a lot of products.

Speaker Change: A lot of things sales grew 21% and 18% respectively as compared to Q4 and the 12 months ended June 32023.

Speaker Change: Radio sales for the quarter were down 10% as compared to Q4 of last year due.

Speaker Change: Due to the continued effect of the sunsetting three gig <unk> technology.

Speaker Change: As well as the inventory levels of radio at that time at some of our distributors.

Speaker Change: Radio sales represented 59% of intrusion and access a lot of product sales and.

Speaker Change: And we expect inventory levels in distribution, which has decreased significantly over the past few quarters to continue to reduce and that will lead to increased radio sales.

Speaker Change: As such we expect radio sales to continue to be a key contributor to our hardware sales and lead to the continued growth of our highly profitable recurring service revenues.

Speaker Change: Gross profit for the three months ended June 32024.

Speaker Change: Increased 21% to $27 $8 million with a gross margin of 55% as.

Speaker Change: As compared to $23 million with a gross margin of 52%.

Speaker Change: Same period last year.

Speaker Change: Gross profit for the 12 months ended June 32024 increased by 39% to $101 $8 billion with a gross margin of 54% and that compared to $73 $2 million with a gross margin of 43% a year ago.

Speaker Change: Gross profit for recurring service revenue for the quarter increased 29% to $18 $4 million with a gross margin of 90%.

Speaker Change: As compared to $14 $3 million with a gross margin of 89% last year.

Speaker Change: Gross profit for recurring service revenues for the 12 months ended June 32024.

Speaker Change: Increased 28% to $68 $5 million with a gross margin of 90% as compared to $53 $4 million with a gross margin of 89% last year.

Speaker Change: Gross profit for equipment revenues in Q4 increased by 8% to $9 $4 million with a gross margin of 31%.

Speaker Change: As compared to $8 $7 million with a gross margin of 30% last year.

Speaker Change: Gross profit for equipment revenues for the 12 months ended June 32024 increased by 67% to $33 $2 million with a gross margin of 29%.

Speaker Change: As compared to $19 $9 million with a gross margin 18% at the.

Speaker Change: Same period last year.

Speaker Change: The increase in both gross profit dollars and gross margin for recurring revenue for the three and 12 months ended June 32024.

Speaker Change: It was primarily the result of the previously mentioned increase in recurring revenues.

Speaker Change: As well as a greater proportion of those revenues being generated.

Speaker Change: By our Starlink fire radios, which generate higher monthly service charges and the other starlink radios.

The increase in both gross profit dollars and gross margin for equipment revenues for both the three and 12 months.

Speaker Change: We ended June 32024, primarily resulted from the aforementioned increase in equipment revenues.

Well as a favorable shift in product mix, the locking products, which typically have a higher gross margin than intrusion products.

Speaker Change: Another factor in increased profit and gross margin for equipment revenue is.

Speaker Change: This increased overhead absorption from our Dominican Republic manufacturing facility.

Speaker Change: As well as the stabilization of component costs from the effects of the global supply chain crisis.

Speaker Change: Research and development costs for the quarter increased 28% to $3 million was 6% of sales.

Speaker Change: And that compares to $2 $4 million.

Speaker Change: Or 5% of sales for the same period a year ago.

Speaker Change: Research and development cost for the 12 months ended June 32024.

Speaker Change: Increased 15% to $10 8 million or 6% of sales.

Speaker Change: As compared to $9 $3 million or 5% of sales for the same period a year ago.

Speaker Change: The increase for the three and 12 months.

Speaker Change: Primarily resulted from salary increases and additional staff.

Selling general and administrative expenses for the quarter increased 22% to $10 9 million or.

Speaker Change: Or 22% of net sales.

Speaker Change: And that compares to $8 $9 million or 20% of net sales.

Speaker Change: The same period last year selling.

Selling general and administrative expenses for the 12 months ended June 32024.

Speaker Change: Increased 11% to $37 $1 million.

Speaker Change: About 20% of net sales.

Speaker Change: And that compares to $33 $6 million or 20% of net sales for the same period last year.

Speaker Change: The increases in SG&A for the three months was primarily due to increases in trade show expenses.

Speaker Change: As the ISC West show occurred in Q4, this year versus Q3 last year.

Speaker Change: In addition increased stock based compensation expenses and.

Speaker Change: And increased legal and accounting expenses relating to the enhancing of our internal control systems also contributed to the increase.

Speaker Change: The increase for the 12 months was primarily due to the aforementioned items with the exception of trade show expenses, which were fairly constant during fiscal 2024 versus fiscal 2023.

Speaker Change: Operating income for the quarter increased 18% to $14 million as compared to 11 $8 million, but at the same period last year.

Speaker Change: Operating income for the 12 months ended June 32024 increased 77%.

Speaker Change: To $53 $8 million as compared to $33 million for the same period last year.

Speaker Change: Interest and other income for the three months increased 99% to 762000 and that compared to 382000 last year.

For the 12 months ended June 32024 interest and other income increased by 184%.

Speaker Change: $2 6 million compared to 903000 last year.

Speaker Change: The increases for both the three and the 12 months ended June 32024 was primarily due to increased interest and dividend income from the company's cash and short term investments.

Speaker Change: The provision for income taxes for the three months decreased by 27%.

Speaker Change: 434000.

The $1 $2 million with an effective tax rate of 8%.

Speaker Change: As compared to $1 $6 million with an effective tax rate of 13% last year.

Speaker Change: For the 12 months ended June 32024.

Speaker Change: Provision for income taxes increased by 60%.

Speaker Change: Our $2 $5 million to $6 $6 billion with an effective tax rate of 12%.

That compared to $4 $1 million.

With an effective tax rate of 13% last year.

Speaker Change: The decrease in the provision for the three months is due to NAPCO accruing at a higher rate through Q3 and the increase for the 12 months ended June 32024 was due to increases in taxable income.

Speaker Change: The decrease in the company's effective tax rate for fiscal 2024 was the result of a larger portion of our taxable income being attributable to foreign operations.

Speaker Change: Net income for the quarter increased 28% to a quarterly record $13 5 million or <unk> 36 cents per diluted share as compared to $10 $6 million or 28 cents per diluted share for the same period last year and that represents 27%.

Speaker Change: Net sales.

Speaker Change: Net income for the 12 months ended June 32024.

Speaker Change: Increased 84%.

Speaker Change: So we're 12 months record of $49 $8 million.

Speaker Change: The $1 34 per diluted share and that compares to $27 $1 million was <unk> 70 <unk>.

Unknown Executive: Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies Fiscal Q4 and Fiscal 2024 Earnings Conference Call.

Unknown Executive: Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies fiscal Q4 and fiscal 2024 earnings conference call. At this time, our line zone will listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Monday, August 26, 2024.

Unknown Executive: Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies Fiscal Q4 and Fiscal 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator.

Speaker Change: Diluted share for the same period last year and represents 26% of net sales.

Unknown Executive: At this time, our line-zone will listen only mode.

Speaker Change: Adjusted EBITDA for the quarter increased 18% to $15 $4 million or <unk> 41 cents per diluted share.

Unknown Executive: Following the presentation, we will conduct a question and answer session.

Unknown Executive: If at any time during this call you need assistance, please press star zero for the operator.

Unknown Executive: This call is being recorded on Monday, August 26, 2024.

Francis Okoniewski: This call is being recorded on Monday, August 26, 2024, I would now like to turn the conference over to Francis Okoniewski, VP Investor Relations. Please go ahead. Thank you, Joe, and a good morning, everyone. This is Fran Okoniewski, Vice President of Investor Relations for NAPCO Security Technologies. Thank you all for joining today's conference call to discuss financial results for our fiscal fourth quarter and fiscal year 2024. By now, all of you should have had the opportunity to review our earnings press release, discussing our quarterly results. If you have not, a copy of the release is available in the Investor Relations section of our website, www. NAPCOsecurity.com.

Speaker Change: As compared to $13 million or 35.

Speaker Change: Per diluted share for the same period a year ago.

Francis Okoniewski: I would now like to turn the conference over to Francis Okoniewski, VP Investor Relations.

Francis Okoniewski: I would now like to turn the conference over to Francis Okoniewski, VP Investor Relations. Please go ahead. Thank you, Joe, and good morning, everyone.

Francis Okoniewski: I would now like to turn the conference over to Francis Okoniewski, VP Investor Relations. Please go ahead.

Unknown Executive: Please go ahead.

Speaker Change: And that equates to an adjusted EBITDA margin of 31%.

Francis Okoniewski: Thank you, Joe, and a good morning, everyone.

Francis Okoniewski: Thank you, Joe, and good morning, everyone. This is Fran Okoniewski, Vice President Investor Relations for NAPCO Security Technologies. Thank you all for joining today's conference call to discuss financial results for our fiscal Q4 and fiscal year 2024. By now, all of you should have had the opportunity to review our earnings press release, discussing our quarterly results. If you have not a copy of the releases available in the Investor Relations section of our website, www. NAPCOsecurity.com.

Francis Okoniewski: This is Fran Okoniewski, Vice President of Investor Relations for NAPCO Security Technologies.

Francis Okoniewski: This is Fran Okoniewski, Vice President Investor Relations for NAPCO Security Technologies. Thank you all for joining today's conference call to discuss financial results for our fiscal Q4 and fiscal year 2024. By now, all of you should have had the opportunity to review our earnings press release, discussing our quarterly results. If you have not a copy of the releases available in the Investor Relations section of our website, www.NAPCOsecurity.com.

Speaker Change: Adjusted EBITDA for the 12 months ended June 32024.

Speaker Change: Increased 72% to a 12 month record $58 $9 million.

Francis Okoniewski: Thank you all for joining today's conference call to discuss financial results for our Fiscal Q4 and Fiscal Year 2024.

Speaker Change: Or $1 59 per diluted share.

Francis Okoniewski: By now, all of you should have had the opportunity to review our earnings press release, discussing our quarterly results. If you have not a copy of the release is available in the Investor Relations section of our website, www.

Speaker Change: And that compares to $34 $3 million or 93 cents per diluted share for the same period last year.

Francis Okoniewski: NAPCOSecurity.com.

<unk> two with adjusted EBITDA margin of 31%.

Francis Okoniewski: On the call today are Dick Soloway, Chairman, CEO of NAPCO Security Technologies and Kevin Bouchel, President, Chief Operating Officer and Chief Financial Officer.

Francis Okoniewski: On the call today are Dick Soloway, Chairman, CEO of NAPCO Security Technologies and Kevin Bouchel, President, Chief Operating Officer and Chief Financial Officer. Before we begin, let me take a moment to read the forward-looking statement as this presentation contains forward-looking statements that are based on current expectations, estimates, forecasts, and projections of future performance, based on management, judgment, beliefs, current trends, and anticipated product performance. These four-looking statements include, without limitation, statements relating to growth drivers for the company's business, such as school security, products, reoccurring revenue services, potential market opportunities, the benefits of our reoccurring revenue products to customers and dealers, our ability to control expenses and costs and expected annual run rate for our reoccurring monthly revenue.

Francis Okoniewski: On the call today are Dick Soloway, Chairman, CEO of NAPCO Security Technologies and Kevin Bouchel, President, Chief Operating Officer and Chief Financial Officer. Before we begin, let me take a moment to read the forward looking statement as this presentation contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of future performance based on management, judgment, beliefs, current trends, and anticipated product performance. These forward-looking statements include, without limitation, statements relating to growth drivers of the company's business, such as school security, products, reoccurring revenue services, potential market opportunities, the benefits of our reoccurring revenue products to customers and dealers, our ability to control expenses and costs and expected annual run rate for our reoccurring monthly revenue.

Speaker Change: Moving onto the balance sheet.

Speaker Change: As of June 32024, the company had $97 $7 million in cash and cash equivalents other investments and marketable securities and that compares to $66 7 million as of June 32023, that's a 46% increase.

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

Speaker Change: Company has no debt.

Speaker Change: Cash provided by operating activities for the 12 months.

Speaker Change: As of June 32024 was 45.4.

Speaker Change: $4 million.

Speaker Change: And that compared to $24 7 million for the same period last year, and that's an 84% increase.

Speaker Change: Working capital is defined as current my current assets less current liabilities was $146 $5 million on June 32024.

Speaker Change: That compared with working capital of $111 7 million at June 32023 current ratio defined as current assets divided by current liabilities.

Francis Okoniewski: Before looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in forward-looking statements. These factors include, but are not limited to such risk factors described in our SEC filings, including our annual report on form 10K.

Francis Okoniewski: Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in forward-looking statements. These factors include, but are not limited to, such risk factors described in our SEC filings, including our annual report on form 10K, other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.

Francis Okoniewski: Four-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in forward-looking statements. These factors include, but are not limited to, such risk factors described in our SEC filings, including our annual report on form 10K, other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results level of activity, performance, or achievements.

Speaker Change: With seven six to one at June 32024, and six seven to one at June 32023.

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

Capex for the quarter was 551000 and that compares to 415000 in the prior year period.

And for the full fiscal year, Capex was $1 $6 million and that compared to $3 million last year.

Francis Okoniewski: Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements.

Speaker Change: That concludes my formal remarks, and I would now like to return the call back to <expletive>.

Francis Okoniewski: You should not place undue reliance on these forward-looking statements. All information provided in today's press release, and this conference call, are as of today's date, unless otherwise stated, and we undertake no duty to update such information except as required under applicable law. I'll turn the call over to Dick in a moment, but before I do, I want to mention we're actively planning our investor relations calendar for Nandio Rocho and conference attendance in the near future.

Thank you Kevin.

Francis Okoniewski: All information provided in today's press release, and this conference call, are as of today's date, unless otherwise stated, and we undertake no duty to update such information except as required under applicable law.

Speaker Change: Fiscal 2024 concluded with record revenue and net income for both the fourth quarter and the full fiscal 'twenty to 'twenty four year ending June 32024.

Francis Okoniewski: I'll turn the call over to Dick in a moment, but before I do, I want to mention we're actively planning our investor relations calendar for Nandio Rocho and conference attendance in the near future.

Francis Okoniewski: I'll turn the call over to Dick in a moment, but before I do, I want to mention we're actively planning our investor relations calendar for non-deal road show and conference attendance in the near future. Investor outreach is very important to NAPGO, and I'd like to thank all those folks who assist us in these types of events. In the coming weeks, we will be attending the Lake Street Best Ideas Conference in New York City on September 12th, and the DA Davidson 23rd Annual Diversified Industrial and Services Conference in National Tennessee on September 18th and 9th. We will also be participating in a number of non-deal road shows with firms such as Mizzouho, Stevens, JP Morgan, Wells Fargo, TD Cowan, Morgan Stanley, Key Bank and Bank of America.

Speaker Change: The fourth quarter sales of $50 3 million.

Speaker Change: The 15th consecutive quarter of record sales.

Speaker Change: Quarterly reporting period.

Francis Okoniewski: Investor outreach is very important to NAPGO, and I'd like to thank all those folks who assist us in these types of events.

Francis Okoniewski: Investor outreach is very important to NAPGO, and I'd like to thank all those folks who assist us in these types of events. In the coming weeks, we will be attending the Lake Street Best Ideas Conference in New York City on September 12th, and the September 18th and 9th. We will also be participating in a number of non-deal road shows with firms such as Mizzouho, Stevens, JP Morgan, Wells Fargo, TD Cowan, Morgan Stanley, Key Bank and Bank of America.

Speaker Change: Our record quarterly net income of $13 5 million represents 27% of sales.

Francis Okoniewski: In the coming weeks, we will be attending the Lake Street Best Ideas Conference in New York City on September 12th, and the DA Davidson 23rd Annual Diversified Industrials and Services Conference in National Tennessee on September 18th and 9th.

Speaker Change: Adjusted EBITDA was <unk>.

Speaker Change: $15 4 million for Q4.

Speaker Change: And $58 9 million.

Speaker Change: For the full fiscal year and equates to a 31% EBITDA margin.

Francis Okoniewski: We will also be participating in a number of non-deal road shows with firms such as Mizzouho, Stevens, JP Morgan, Wells Fargo, TD Cowan, Morgan Stanley, Key Bank and Bank of America.

Speaker Change: Equipment revenues grew at 5% for the quarter with gross margins.

Speaker Change: Sales sequentially increasing to 31%.

Francis Okoniewski: With that out of the way, let me turn the call over to Dick Soloway, Chairman and CEO of NAPCO Security Technologies.

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

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

Richard Soloway: With that out of the way, let me turn the call over to Dick Soloway, Chairman, and CEO of NAPCO Security Technologies. Dick, the floor is yours. Thank you, Fran. Good morning, everyone, and welcome to our conference school. We appreciate your participation today, and we review our fiscal Q4 and fiscal 2021 performance. We are thrilled to announce record sales of 50.3 million for this quarter, making our 15th consecutive quarter of achieving record quarterly sales.

Speaker Change: As compared to 29% in each of the last two quarters.

Speaker Change: Recurring service revenues, which increased 27% in Q4 is a major contributor to the year over year overall sales and earnings growth and represents 40% of total revenue.

Richard Soloway: Dick, the floor is yours.

Richard Soloway: Thank you, Fran.

Richard Soloway: Good morning, everyone, and welcome to our conference school. We appreciate your participation today, and we review our fiscal Q4 and fiscal 2020 floor performance. We are thrilled to announce record sales of $50.3 million for this quarter, making our 15th consecutive quarter of achieving record quarterly sales. Our recurring revenue subscription service continues to exhibit robust growth, increasing 27% in Q4, and now as an annual prospective grant rate of 84 million based on July 2024, recurring revenues.

Richard Soloway: Good morning, everyone, and welcome to our conference school.

Richard Soloway: We appreciate your participation today, and we review our fiscal Q4 and fiscal 2021 performance. We are thrilled to announce record sales of $50.3 million for this quarter, making our 15th consecutive quarter of achieving record quarterly sales. Our recurring revenue subscription service continues to exhibit robust growth, increasing 27% in Q4, and now as an annual prospective grant rate of 84 million based on July 2024 recurring revenues.

Speaker Change: Gross margin for recurring service revenues remained strong at 90%.

Speaker Change: Our balance sheet continues to get strong with cash and cash equivalents and other investments.

Speaker Change: Marketable securities, increasing 46% and $97 7 million.

Richard Soloway: Our recurring revenue subscription service continues to exhibit robust growth, increasing 27% in Q4, and now as an annual prospective gran rate of 84 million, based on July 2024, recurring revenues. A balance sheet remains strong with cash balances reaching 97.7 million, a 46% increase over the level, recording on June 30, 2020-3. We have no debt. Our strategic focus continues to capitalize on key industry trends, including wireless fire and nutritional arms, driving, recurring service revenues, school security solutions, enterprise access control systems, and all-protectual locking products.

Speaker Change: We have no debt and the net cash provided by operating activities was also very strong growing 84% over last year.

Speaker Change: Our alarm lock and marks locking hardware lines continue to see growth in school and classroom security healthcare and retail loans to mention as well as multifamily commercial and residential applications.

Richard Soloway: A balance sheet remains strong, with cash balances reaching 97.7 million, a 46% increase over the level recording on June 30, 2023. We have no debt.

Richard Soloway: A balance sheet remains strong, with cash balances reaching 97.7 million, a 46% increase over the level recorded on June 30, 2020-3. We have no debt. Our strategic focus continues to capitalize on key industry trends, including wireless fire and intrusion alarms, driving, recurring service revenues, school security solutions, enterprise access control systems, and all-protectual locking products. At NAPCO, our management team remains committed to prioritizing growth, profitability, and returns on equity while effectively managing costs. These metrics are critical to us in our shareholders, reflecting our dedication to executing our business strategy and aligning our interests with those of our shareholders.

Speaker Change: Continue journey focus on further penetrating each of these markets.

Richard Soloway: Our strategic focus continues to capitalize on key industry trends, including wireless fire and nutritional arms, driving, recurring service revenues, school security solutions, enterprise access control systems, and architectural locking products.

Speaker Change: Our starlink line of radios.

Speaker Change: Have the widest coverage range of both Verizon and AT&T.

Speaker Change: With rich feature sets, which are deal as well.

Speaker Change: Continued journey.

Speaker Change: Rich feature sets.

Speaker Change: Which making product easy to install work on all sides and Bravo panels ours as well as our competitors.

Richard Soloway: At NAPCO, our management team remains committed to prioritizing growth, profitability, and returns on equity, while effectively managing costs. These metrics are critical to us and our shareholders, reflecting our dedication to executing our business strategy and aligning our interests with those of our shareholders.

Richard Soloway: At NAPCO, our management team remains committed to prioritizing growth, profitability, and returns on equity, while effectively managing costs. These metrics are critical to us and our shareholders reflecting our dedication to executing our business strategy and aligning our interests with those of our shareholders.

No other company can say that.

Like a lot of our competition is approved by underwriters laboratories.

Speaker Change: <unk> standard of the security industry.

Speaker Change: There are millions of commercial buildings of all types, such as offices hospitals schools coffee shops restaurants, as well as residences that still require upgrades from legacy copper phone lines, we are well positioned to see continued strong growth.

Kevin Buchel: Now, I'd like to hand the call over to our president, Chief Operating Officer, and Chief Financial Officer, Kevin Bischel, will provide an overview of our fiscal, fourth quarter, and fiscal 2024 results. Following Kevin's remarks, I will return to delve deeper into our strategies and market outlook. Kevin? Thank you, Dick. Good morning, everybody. Next sales for the three-month standard June 30, 2020-4 increased 13% to a quarter of the record 50.3 million dollars, and that compares to 44.6 million dollars for the same period a year ago.

Kevin Buchel: Now I'd like to hand the call over to our president, Chief Operating Officer, and Chief Financial Officer Kevin Bischell, who will provide an overview of our fiscal fourth quarter and fiscal 2021 results.

Kevin Bouchel: Now I'd like to hand the call over to our president, Chief Operating Officer, and Chief Financial Officer, Kevin Bischel, who will provide an overview of our fiscal, fourth quarter, and fiscal 2021 results. Following Kevin's remarks, I will return to delve deeper into our strategies and market outlook. Kevin? Thank you, Dick. Good morning, everybody. Next sales for the three months ended June 30, 2020-4 increased 13% to a quarterly record $50.3 million, and that compares to $44.6 million for the same period a year ago.

Kevin Buchel: Following Kevin's remarks, I will return to delve deeper into our strategies and market outlook.

Speaker Change: Starlink line of radios.

Speaker Change: Our recent introduction of prima by NAPCO, our new all in one panel and security via video and connected home with a five minute installation remains a very important focus for the company.

Kevin Buchel: Kevin?

Kevin Buchel: Thank you, Dick.

Kevin Buchel: Good morning everybody.

Kevin Buchel: Good morning, everybody. Next sales for the three-month standard June 30, 2020-4 increased 13% to a quarter of the record 50.3 million dollars, and that compares to 44.6 million dollars for the same period a year ago. And that sales for the 12-month standard June 30, 2024 increased 11% to a record 188.8 million dollars as compared to 170 million dollars for the same period a year ago. Recurring monthly service revenue continued its strong growth, increasing 27% in Q4 to 20.3 million as compared to 16.1 million dollars for the same period last year.

Kevin Buchel: Next sales for the three months ended June 30, 2024 increased 13% to a quarter of the record $50.3 million, and that compares to $44.6 million for the same period of year ago. And that sales for the 12 months ended June 30, 2024 increased 11% to a record $188.8 million as compared to $170 million for the same period a year ago.

Speaker Change: Our goal is to premium to address in the pool.

Speaker Change: <unk> managed segment and the security market, including residential and small business.

Kevin Buchel: And that sales for the 12-month standard June 30, 2024 increased 11% to a record 188.8 million dollars as compared to 170 million dollars for the same period a year ago. Recurring monthly service revenue continued its strong growth, increasing 27% in Q4 to 20.3 million as compared to 16.1 million dollars for the same period last year. Recurring monthly service revenues for the 12-month set in June 30, 2024 increased 26% to $75.7 million as compared to $59.9 million last year.

Kevin Bouchel: And that sales for the 12-months ended June 30, 2020-4 increased 11% to a record $188.8 million as compared to $170 million for the same period a year ago. Recurring monthly service revenue continued its strong growth, increasing 27% in Q4 to 20.3 million as compared to $16.1 million for the same period last year. Recurring monthly service revenues for the 12-month set in June 30, 2024, increased 26% to $75.7 million as compared to $59.9 million last year.

Speaker Change: With its built in Wifi and cellular radio.

Speaker Change: Indications customer alert notifications and video and smart home subscription options for each installed system the.

Kevin Buchel: Recurring monthly service revenue continued at strong growth, increasing 27% in Q4 to 20.3 million as compared to $16.1 million for the same period last year.

Speaker Change: The security deal as well as NAPCO can add more recurring service revenue generating accounts.

Speaker Change: Fiscal 2024 was an amazing record breaking year.

Kevin Buchel: Recurring monthly service revenues for the 12-month set in June 30, 2024, increased 26% to $75.7 million as compared to $59.9 million last year. These increases are due to the continued strength of our line of stalling radios.

Kevin Buchel: Recurring monthly service revenues for the 12-month set in June 30, 2024 increased 26% to $75.7 million as compared to $59.9 million last year. These increases are due to the continued strength of our line of stalling radios. Equipment sales for the quarter increased 5% to $29.9 million as compared to $28.6 million last year. Equipment sales for the year-end of June 30, 2024 increased 3% to $113 million as compared to $110 million for the same period last year.

We generated 90.

Speaker Change: 49 8 million.

Speaker Change: Adjusted EBITDA of $58 9 million and an adjusted EBITDA margin of 31%.

Speaker Change: But as I've said before there is more work to be done.

Kevin Buchel: These increases are due to the continued strength of our line of stalling radios. Equipment sales for the quarter increased 5% to $29.9 million as compared to $28.6 million last year. Equipment sales for the year-end of June 30, 2024 increased 3% to $113 million as compared to $110 million for the same period last year. These increases were primarily due to revenue increases in the long lock and marks, brands, door locking products as partially offset by a decrease in intrusion and access along products.

Kevin Bouchel: These increases are due to the continued strength of our line of stalling radios. Equipment sales for the quarter increased 5% to $29.9 million as compared to $28.6 million last year. Equipment sales for the year ended June 30, 2024 increased 3% to $113 million as compared to $110 million for the same period last year. These increases were primarily due to revenue increases in the long lock and marks, brands, door lock and products, as partially offset by a decrease in intrusion and access along products.

Speaker Change: While we continue to be encouraged with the gross margin for hardware sales of 31, 4%. We believe this should improve further in fiscal 2025 and beyond.

Kevin Buchel: Equipment sales for the quarter increased 5% to $29.9 million as compared to $28.6 million last year. Equipment sales for the year ended June 30, 2024 increased 3% to $113 million as compared to $110 million for the same period last year. These increases were primarily due to revenue increases in the long lock and marks brands door locking products, as partially offset by a decrease in intrusion and access along products.

Speaker Change: Our strong net income adjusted EBITDA and growing cash indicate.

The strength of our business and as such we are pleased to continue our dividend program and.

Speaker Change: And we will be increasing the dividend quarterly dividend.

Kevin Buchel: These increases were primarily due to revenue increases in the long lock and marks, brands, door locking products as partially offset by a decrease in intrusion and access along products. Locking sales grew 21% and 18% respectively as compared to Q4 and the 12-month ended June 30, 2023. Radio sales for the quarter were down 10% as compared to Q4 last year due to the continued effect of the Sunsetting and 3G technology as well as the inventory levels of radios at that time at some of our distributors.

Speaker Change: 12, and half cents per share a 25% increase over the 10 since we paid last quarter.

Speaker Change: This will be payable on October 3rd 2024.

Kevin Bouchel: Locking sales grew 21% and 18% respectively as compared to Q4 and the 12-month set in June 30, 2023. Radio sales for the quarter were down 10% as compared to Q4 last year due to the continued effect of the Sunsetting and 3G technology as well as the inventory levels of radios at that time at some of our distributors. Radio sales represent 59% of intrusion and access along product sales and we expect inventory levels in distribution which have decreased significantly over the past few quarters to continue to reduce and that will lead to increased radio sales.

Kevin Buchel: Locking sales grew 21% and 18% respectively as compared to Q4 and the 12-month set in June 30, 2023.

Kevin Buchel: Locking sales grew 21% and 18% respectively as compared to Q4 and the 12-month ended June 30, 2023. Radio sales for the quarter were down 10% as compared to Q4 last year due to the continued effect of the Sunsetting and 3G technology as well as the inventory levels of radios at that time at some of our distributors. Radio sales represent 59% of intrusion and access along product sales and we expect inventory levels in distribution which have decreased significantly over the past few quarters to continue to reduce and that will lead to increased radio sales.

Speaker Change: Shareholders of record on September 12, 2024.

Speaker Change: As always we will strive to accomplish our goal of continued financial strength product innovation.

Kevin Buchel: Radio sales for the quarter were down 10% as compared to Q4 last year due to the continued effect of the Sunsetting and 3G technology as well as the inventory levels of radios at that time at some of our distributors.

Speaker Change: Clinical superiority and strong profitability in fiscal 'twenty to 'twenty five and beyond.

Speaker Change: And we believe we can continue this growth well into the future as we work towards our fiscal 'twenty 'twenty six goals.

Speaker Change: I'd like to thank everyone for their support and for joining US this exciting future we have.

Kevin Buchel: Radio sales represent 59% of intrusion and access along product sales and we expect inventory levels in distribution which have decreased significantly over the past few quarters to continue to reduce and that will lead to increased radio sales. As such we expect radio sales to continue to be a key contributor to our hardware sales and lead to the continued growth of our highly profitable recurring service revenues. Gross profit for the 3-month ended June 30, 2024 increased 21% to $27.8 million with the gross margin of 55% as compared to $23 million with the gross margin of 52% for the same period last year.

Kevin Buchel: Radio sales represent 59% of intrusion and access along product sales and we expect inventory levels in distribution which have decreased significantly over the past few quarters to continue to reduce and that will lead to increased radio sales. As such, we expect radio sales to continue to be a key contributor to our hardware sales and lead to the continued growth of our highly profitable recurring service revenues. Gross profit for the 3-month set in June 30, 2024 increased 21% to $27.8 million with a gross margin of 55% as compared to $23 million with a gross margin of 52% for the same period last year. Gross profit for the 12-month set in June 30, 2024 increased by 39% to $101.8 million with a gross margin of 54% and that compared to $73.2 million with a gross margin of 43% a year ago.

Speaker Change: Formulary, what marks are now concluded and we'd like to open the call for a Q&A session.

Speaker Change: Operator. Please proceed.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will hear that you had has been raised.

Kevin Buchel: As such we expect radio sales to continue to be a key contributor to our hardware sales and lead to the continued growth of our highly profitable recurring service revenues. Gross profit for the 3-month ended June 30, 2024 increased 21% to $27.8 million with the gross margin of 55% as compared to $23 million with the gross margin of 52% for the same period last year. And gross profit for the 12-month ended June 30, 2024 increased by 39% to $101.8 million with the gross margin of 54% and that compared to $73.2 million with the gross margin of 43% a year ago.

Kevin Bouchel: As such, we expect radio sales to continue to be a key contributor to our hardware sales and lead to the continued growth of our highly profitable recurring service revenues. Gross profit for the 3-month ended June 30, 2024 increased 21% to $27.8 million with the gross margin of 55% as compared to $23 million with the gross margin of 52% for the same period last year. And gross profit for the 12-month ended June 30, 2024 increased by 39% to $101.8 million with the gross margin of 54% and that compared to $73.2 million with the gross margin of 43% a year ago.

Speaker Change: If you are using a speaker phone please lift the handset before pressing any case.

Speaker Change: First question comes from Matt Summerville at D. A Davidson. Please go ahead.

Speaker Change: Couple questions.

Speaker Change: Just on the locking side of the business, obviously growing north of 20% in the quarter. How fast do you think the market is actually growing and what are you guys doing to drive the share capture you're seeing in that market.

Kevin Buchel: And gross profit for the 12-month ended June 30, 2024 increased by 39% to $101.8 million with the gross margin of 54% and that compared to $73.2 million with the gross margin of 43% a year ago. Gross profit for recurring service revenue for the quarter increased 29% to $18.4 million with the gross margin of 90% as compared to $14.3 million with the gross margin of 89% last year. Gross profit for recurring service revenues for the 12-month ended June 30, 2024 increased 28% to $68.5 million with the gross margin of 90% as compared to $53.4 million with the gross margin of 89% last year.

Follow up.

Speaker Change: The locking sales have been strong for several quarters in a row now.

Speaker Change: We have two locking companies there.

Speaker Change: They are both doing well.

Kevin Buchel: Gross profit for recurring service revenue for the quarter increased 29% to $18.4 million with a gross margin of 90% as compared to $14.3 million with a gross margin of 89% last year. Gross profit for recurring service revenues for the 12-month ended June 30, 2024 increased 28% to $68.5 million with a gross margin of 90% as compared to $53.4 million with a gross margin of 89% last year.

Kevin Buchel: Gross profit for recurring service revenue for the quarter increased 29% to $18.4 million with the gross margin of 90% as compared to $14.3 million with the gross margin of 89% last year. Gross profit for recurring service revenues for the 12-month ended June 30, 2024 increased 28% to $68.5 million with the gross margin of 90% as compared to $53.4 million with the gross margin of 89% last year. Gross profit for equipment revenues in Q4 increased by 8% to $9.4 million, with a gross margin of 31% as compared to $8.7 million for the gross margin of 30% last year.

Kevin Bouchel: Gross profit for recurring service revenue for the quarter increased 29% to $18.4 million with the gross margin of 90% as compared to $14.3 million with the gross margin of 89% last year. Gross profit for recurring service revenues for the 12-month ended June 30, 2024 increased 28% to $68.5 million with the gross margin of 90% as compared to $53.4 million with the gross margin of 89% last year. Gross profit for equipment revenues in Q4 increased by 8% to $9.4 million, with a gross margin of 31% as compared to $8.7 million for the gross margin of 30% last year.

We've picked up market share we believe.

Speaker Change: During the times of supply chain.

Speaker Change: As our competitors couldn't deliver.

Speaker Change: Dominican factory kept delivering we picked up share we believe.

Speaker Change: We're very diverse.

Speaker Change: Whereas to schools.

Speaker Change: A big need still all.

Speaker Change: Well the shootings that still go on many schools still having having not done anything.

Speaker Change: It's a tremendous need in airport renovations, which are going on throughout the country.

Speaker Change: It's a tremendous the hospitals these needs continue.

Kevin Buchel: Gross profit for equipment revenues in Q4 increased by 8% to 9.4 million dollars with a gross margin of 31% as compared to 8.7 million dollars for the gross margin of 30% last year.

Kevin Buchel: Gross profit for equipment revenues in Q4 increased by 8% to $9.4 million, with a gross margin of 31% as compared to $8.7 million for the gross margin of 30% last year. Gross profit for equipment revenues for the 12 months, and did you 30-20-24 increased by 67% to $33.2 million with a gross margin of 29% as compared to $19.9 million with a gross margin of 18% for the same period last year. The increase in both gross profit dollars and gross margin for recurring revenue for the three in the 12 months, and did you 30-20-24, was primarily the result of the previously mentioned increase in recurring revenues, as well as a greater proportion of those revenues being generated by our Starlink Fire Radios, which generate higher monthly service charges than the other Starlink radios.

Speaker Change: Our products are also different we make electrified locks not just you know plain old hardware locks.

Speaker Change: Puts us in a different category.

Speaker Change: And so having these two companies both performing well at the same time.

Kevin Buchel: Gross profit for equipment revenues for the 12 months, and did you 30-20-24 increased by 67% to $33.2 million with a gross margin of 29% as compared to $19.9 million with a gross margin of 18% for the same period last year. The increase in both gross profit dollars and gross margin for recurring revenue for the three in the 12 months, and did you 30-20-24, was primarily the result of the previously mentioned increase in recurring revenues, as well as a greater proportion of those revenues being generated by our Starlink Fire Radios, which generate higher monthly service charges than the other Starlink radios.

Speaker Change: That's created this is rise which was up 18% for the year versus a year ago, and it's 65% of our total.

<unk> sales equipment sales.

Speaker Change: Can we keep this pace up.

Speaker Change: No, but I think double digits is certainly a possibility to continue.

Kevin Buchel: The increase in both gross profit dollars and gross margin for recurring revenue for the three in the 12 months ended June 30, 2024, was primarily the result of the previously mentioned increase in recurring revenues, as well as a greater proportion of those revenues.

Kevin Bouchel: The increase in both gross profit dollars and gross margin for recurring revenue for the 3 in the 12 months ended June 30, 2024, was primarily the result of the previously mentioned increase in recurring revenues, as well as a greater proportion of those revenues. The increase in both gross profit dollars and gross margin for equipment revenues for both the 3 in 12 months ended June 30, 2024, primarily resulted from the aforementioned increase in equipment revenues, as well as a favorable shift in product-makes for the gross margin of 30% in the 12 months.

Speaker Change: We don't see any slowing down we travel around the country. We see a lot of construction is still going on despite what you might read in the papers so.

Activity for the locking is very good.

Speaker Change: Thanks for that color and then just on the radio side of the business.

<unk> had this recent.

Speaker Change: Product launch that you sort of referenced in the prepared remarks any sort of early read on the success, you're having there you mentioned the radio business was down this quarter. It sounds like it's probably going to be down.

Kevin Buchel: The increase in both gross profit dollars and gross margin for equipment revenues for both the three in 12 months ended June 30, 2024, primarily resulted from the aforementioned increase in equipment revenues, as well as a favorable shift in product mix for the three in the 12 months. For locking products, which typically have a higher gross margin than intrusion products, another factor in the increased profit and gross margin for equipment revenue is increased overhead absorption from our Dominican Republic manufacturing facility, as well as the stabilization of component costs from the effects of the global supply chain crisis.

Kevin Buchel: The increase in both gross profit dollars and gross margin for equipment revenues for both the three in 12 months, and did you 30-20-24 primarily resulted from the aforementioned increase in equipment revenues, as well as a favorable shift in product makes for locking products, which typically have a higher gross margin than intrusion products. Another factor in the increased profit and gross margin for equipment revenue is increased overhead absorption from our Dominican Republic manufacturing facility, as well as the stabilization of component costs from the effects of the global supply chain crisis.

Speaker Change: In the fiscal first quarter do you see that business reaccelerate into a high single to double digit growth rate as you move through the year.

Kevin Bouchel: The locking products, which typically have a higher gross margin than intrusion products, another factor in the increased profit and gross margin for equipment revenue, is increased overhead absorption from our Dominican Republic manufacturing facility, as well as the stabilization of component costs from the effects of the global supply chain crisis. Research and development costs for the quarter increased 28% to $3 million, with 6% of sales, and that compares to $2.4 million, or 5% of sales for the same period a year ago.

You know that the radio business.

Speaker Change: Despite the stats that tell you it was down and it was.

Speaker Change: It was down as we said, 5% sequentially, 10% compared to last year's Q4.

It's down in the on the radios that produce the lowest recurring.

Kevin Buchel: Research and development costs for the quarter increased 28% to $3 million worth 6% of sales, and that compares the $2.4 million or 5% of sales for the same period a year ago.

Kevin Buchel: Research and development costs for the quarter increased 28% to $3 million, what 6% of sales. And that compares to $2.4 million or 5% of sales for the same period a year ago. Research and development costs for the 12 months ended due to 30-20-24 increased 15% to $10.8 million or 6% of sales, as compared to $9.3 million or 5% of sales for the same period a year ago. The increase for the three end of 12 months primarily resulted from salary increases and additional staff.

Speaker Change: And we are fighting like crazy to get it back coming out with new features on our radios.

Speaker Change: Which has been well received.

Kevin Bouchel: Research and development costs for the 12 months ended June 30, 2024, increased 15% to $10.8 million, or 6% of sales, as compared to $9.3 million, or 5% of sales for the same period a year ago. The increase for the 3 in the 12 months primarily resulted from salary increases and additional staff. Selling general and administrative expenses for the quarter increased 22% to $10.9 million, or 22% of net sales, and that compares to $8.9 million, or 20% of net sales for the same period last year.

Kevin Buchel: Research and development costs for the 12 months ended June 30, 2024, increased 15% to $10.8 million or 6% of sales, as compared to $9.3 million or 5% of sales for the same period a year ago. The increase for the three in the 12 months primarily resulted from salary increases and additional staff.

Speaker Change: But the interesting thing, which I don't know if everybody picks up on it.

Speaker Change: Is that the recurring revenue continues to grow.

Speaker Change: Because the fire radios continues to do well and as we've talked over and over about.

Speaker Change: Fire radios, we're getting more money than the other radios.

Speaker Change: So I was very impressed and happy.

That despite those stats that we talked about that recurring was up 27%.

Kevin Buchel: Selling general and administrative expenses for the quarter increased 22% to $10.9 million or 22% of net sales, and that compares to $8.9 million or 20% of net sales for the same period last year. Selling general and administrative expenses for the 12 months ended June 30, 2024, increased 11% to $37.1 million or 20% of net sales, and that compares to $33.6 million for 20% of net sales for the same period last year.

Speaker Change: And up 26 for the year.

Speaker Change: Meyer, it's doing really well doing well with diet without new distributor.

Speaker Change: Doing well, we thought big.

Speaker Change: Accounts that we've added that we've talked about some of the big names.

Kevin Buchel: Selling general and administrative expenses for the 12 months ended June 30, 2024. Increase 11% to $37.1 million or 20% of net sales, and that compares to $33.6 million or 20% of net sales for the same period last year. The increases in SGNA for the three months was primarily due to increases in trade show expenses as the IFC West Show occurred in Q4 this year versus Q3 last year. In addition, increased stock-based compensation expenses and increased legal and accounting expenses relating to the enhancing environmental control systems also contributed to the increase.

Kevin Bouchel: Selling general and administrative expenses for the 12 months ended June 30, 2024. Increase 11% to $37.1 million, or 20% of net sales, and that compares to $33.6 million for 20% of net sales for the same period last year. The increases in SGNA for the three months was primarily due to increases in trade show expenses as the ISC West show occurred in Q4 this year versus Q3 last year. In addition, increased stock-based compensation expenses and increased legal and accounting expenses relating to the enhancing environmental control systems also contributed to the increase.

Speaker Change: We believe it is good it just keeps getting better.

Speaker Change: And we will get the lower at radios to do better as well and then we will have both sides contributing.

Speaker Change: And then you'll see the growth of the overall growth on the hardware side of the radios and we're working hard also to get through all the distribution issues, we've talked about that before some of our distributors had too much. We have one distributor left that has a little too much working hard to reduce.

Kevin Buchel: The increases in SGNA for the three months was primarily due to increases in trade show expenses as the IFC West Show occurred in Q4 this year versus Q3 last year. In addition, increased stock based compensation expenses and increased legal and accounting expenses relating to the enhancing environmental control systems also contributed to the increase. The increase for the 12 months was primarily due to the aforementioned items with the exception of trade show expenses which were fairly constant during fiscal 2024 versus fiscal 2023.

Speaker Change: Is that that will help as well.

Speaker Change: Thanks, Kevin.

Matt Summerville: Youre welcome Matt.

Speaker Change: Uh huh.

Thank you next question comes from Jim Ricchiuti at Needham. Please go ahead.

Speaker Change: Hi, Thanks, maybe as a follow up to the previous question.

Kevin Bouchel: The increase for the 12 months was primarily due to the aforementioned items with the exception of trade show expenses which were fairly constant during fiscal 2024 versus fiscal 2023. Operating income for the quarter increased 18% to $14 million as compared to $11.8 million for the same period last year and operating income for the 12 months ended June 30, 2024 increased 77% to $53.8 million as compared to $30.3 million for the same period last year.

Kevin Buchel: The increase for the 12 months was primarily due to the aforementioned items with the exception of trade show expenses, which were fairly constant during fiscal 2024 versus fiscal 2023.

Speaker Change: As we think about.

Speaker Change: Fiscal 'twenty five.

Speaker Change: Yes. It is.

Speaker Change: It is one way to think about it Kevin.

Kevin.

Speaker Change: Some normalization of demand.

Speaker Change: In the fire radio business, which I assume you are getting some benefit from having a new distributor coming onstream and scaling and maybe there's other distributor where it's possible there still over inventoried with a lower end radio. So is that one way to think about the businesses over the next several quarters.

Kevin Buchel: Operating income for the quarter increased 18% to $14 million as compared to $11.8 million for the same period last year.

Kevin Buchel: Operating income for the quarter increased 18% to $14 million as compared to $11.8 million for the same period last year. An operating income for the 12 months ended June 30, 2024 increased 77% to $53.8 million as compared to $30.3 million for the same period last year. Interest and other income for the three months increased 99% to 762,000 and that compared to 382,000 last year. For the 12 months ended June 30, 2024, interest and other income increased by 184% to $2.6 million compared to $903,000 last year.

Kevin Buchel: An operating income for the 12 months ended June 30, 2024 increased 77% to $53.8 million as compared to $30.3 million for the same period last year.

Speaker Change: Well normalization would be good.

Kevin Bouchel: Interest and other income for the three months increased 99% to 762,000 and that compared to 382,000 last year. For the 12 months ended June 30, 2024, interest and other income increased by 184% to $2.6 million compared to $903,000 last year. The increases for both the three and the 12 months ended June 30, 2024 was primarily due to increased interest and dividend income from the company's cash and short-term investments. The provision for income taxes for the three months decreased by 27% or $434,000 to $1.2 million with an effective tax rate of 8% as compared to $1.6 million with an effective tax rate of 13% last year.

Kevin Buchel: Interest and other income for the three months increased 99% to 762,000 and that compared to 382,000 last year.

Speaker Change: But we want more than normalization, we want enhancements as I'll call. It.

Speaker Change: You know, we've got relationships with some big names, which we've talked about we want to start to see those translate into much higher radio sales. So we think they will we're spending a lot of time with these big names.

Kevin Buchel: And for the 12 months ended June 30, 2024, interest and other income increased by 184% to $2.6 million compared to $903,000 last year. The increase is for both the 3 and the 12 months ended June 30, 2024, which primarily due to increased interest and dividend income from the company's cash and short-term investments.

Speaker Change: And they have the potential to do a lot more.

Kevin Buchel: The increases for both the 3 and the 12 months ended June 30, 2024 was primarily due to increased interest and dividend income from the company's cash and short term investments. The provision for income taxes for the three months decreased by 27% or $434,000 to $1.2 million with an effective tax rate of 8% as compared to $1.6 million with an effective tax rate of 13% last year. For the 12 months ended June 30, 2024, the provision for income taxes increased by 60% or $2.5 million to $6.6 million with an effective tax rate of 12% and that compared to $4.1 million with an effective tax rate of 13% last year.

So if you win the business.

Speaker Change: Yep got it I'm sorry, yes.

Speaker Change: I was just going to say so between the two between the big names.

Speaker Change: And the normalization.

Speaker Change: What has been occurring in the past.

Kevin Buchel: The provision for income taxes for the three months decreased by 27% or $434,000 to $1.2 million with an effective tax rate of 8% as compared to $1.6 million with an effective tax rate of 13% last year.

Speaker Change: We should see nice growth in the in the overall radio segment not just fire.

Speaker Change: Okay.

Speaker Change: Got it so it sounds like you anticipate continued strength in the fire radio side of the business.

Hum.

Speaker Change: But yes, we haven't we haven't seen yet.

Kevin Buchel: For the 12 months ended June 30, 2024, the provision for income taxes increased by 60% or $2.5 million to $6.6 million with an effective tax rate of 12% and that compared to $4.1 million with an effective tax rate of 13% last year.

Kevin Bouchel: For the 12 months ended June 30, 2024, the provision for income taxes increased by 60% or $2.5 million to $6.6 million with an effective tax rate of 12% and that compared to $4.1 million with an effective tax rate of 13% last year. The decrease in the provision for the three months is due to Napco accruing at a higher rate through Q3 and the increase for the 12 months ended June 30, 2024 was due to increases in taxable income.

Speaker Change: We haven't seen that slow down at all.

Speaker Change: Ever.

Speaker Change: Okay.

Speaker Change: Is there any color you can provide I know, it's a bit of a mixed picture with respect to the distributor but is there any color you could provide on some of the sell through metrics.

Speaker Change: For what Youre seeing out there.

Kevin Buchel: The decrease in the provision for the three months is due to Napco accruing at a higher rate through Q3 and the increase for the 12 months ended June 30, 2024 was due to increases in taxable income. The decrease in the company's effective tax rate for fiscal 2024 was the result of a larger portion of our taxable income being attributable to foreign operations. Net income for the quarter increased 28% to a quarterly record 13.5 million or 36 cents per deluded share as compared to $10.6 million or 28 cents per deluded share for the same period last year and that represents 27% of net sale.

Speaker Change: Well.

We added the new distributor.

Speaker Change: There's no issues with that Theyre doing great. They may become a 10% hardware customer.

Speaker Change: In the near future.

Kevin Buchel: The decrease in the company's effective tax rate for fiscal 2024 was the result of a larger portion of our taxable income being attributable to foreign operations.

Kevin Bouchel: The decrease in the company's effective tax rate for fiscal 2024 was the result of a larger portion of our taxable income being attributable to foreign operations. Net income for the quarter increased 28% to a quarterly record 13.5 million or 36 cents per deluded share as compared to $10.6 million or 28 cents per deluded share for the same period last year and that represents 27% of net sale. NAPCO, for the 12-month send to June 30, 2024, increased 84% to a 12-month record of $49.8 million or $34 per diluted share, and that compares to $27.1 million, what 73% to diluted share for the same period last year, and represents 26% of net sales.

Speaker Change: We hope.

Speaker Change: They're doing really well, we've only had them for a year.

Speaker Change: And then you have two or three of the big ones.

Speaker Change:

Speaker Change: The other one who is our biggest one anixter and wesco.

Kevin Buchel: Net income for the quarter increased 28% to a quarterly record 13.5 million or 36 cents per diluted share as compared to $10.6 million or 28 cents per diluted share for the same period last year and that represents 27% of net sale.

Speaker Change: No issue they've worked through their inventory.

Speaker Change: We have another one we got to do more work with that one.

Speaker Change: Yeah.

Speaker Change: Then once we get through that that one.

Speaker Change: Thank you.

Speaker Change: It's all good the sell through is Thats, a good but when they have too much inventory, even though they are selling.

Kevin Buchel: Net income for the 12-month send to June 30, 2024 increased 84% to a 12-month record of $49.8 million or $34 per diluted share, and that compares to $27.1 million or $73 per diluted share for the same period last year and represents 26% of net sales. Just an EBITDAF of the quarter increased 18% to $15.4 million or $41 per diluted share, as compared to $13 million or $35 per diluted share for the same period a year ago, and that equates to an adjusted EBITDAF margin of 31%.

Kevin Buchel: NAPCO for the 12-month send to June 30, 2024, increased 84% to a 12-month record of $49.8 million or $34 per diluted share, and that compares to $27.1 million or $73 per diluted share for the same period last year, and represents 26% of net sales.

Speaker Change: We need new orders more orders.

So sell through great, but let's get their inventory in shape. So they could place another round, that's kind of what it is.

Speaker Change: Got it and one final question just on Prima.

How.

Speaker Change: How do you view the launch of the product how satisfied are you with the way the business is starting to develop I know, it's a small part of the revenue right now.

Kevin Buchel: Just an EBITDAF for the quarter increased 18% to $15.4 million or $41 per diluted share, as compared to $13 million or $35 per diluted share for the same period a year ago, and that equates to a 12-month send to June 30, 2024, increased 72% to a 12-month record of $58.9 million or $1.59 per diluted share, and that compares to $34.3 million or $93 per diluted share for the same period last year, and equates to an adjusted EBITDAF margin of 31%.

Kevin Bouchel: Just an EBITDAF of the quarter increased 18% to $15.4 million or $41 per diluted share, as compared to $13 million or $35 per diluted share for the same period a year ago, and that equates to an adjusted EBITDAF margin of 31%. Adjusted EBITDAF of 12-month send to June 30, 2024 increased 72% to a 12-month record of $58.9 million or $1.59 per diluted share, and that compares to $34.3 million or $93 per diluted share for the same period last year, and equates to an adjusted EBITDAF margin of 31%.

Speaker Change: What framework.

Speaker Change: It is an important area for us.

Speaker Change: It's a big market.

Speaker Change: That we don't do a lot of it.

Speaker Change: Right the resi market residential market.

Speaker Change: Huge market.

Speaker Change: And a lot of people still have to get away from copper.

Kevin Buchel: Adjusted EBITDAF of 12-month send to June 30, 2024 increased 72% to a 12-month record of $58.9 million or $59 per diluted share, and that compares to $34.3 million or $93 per diluted share for the same period last year and equates to an adjusted EBITDAF margin of 31%.

Speaker Change: And why Wouldnt they love.

Speaker Change: 15 minute install.

Speaker Change: The sales mix could actually install it can be in and out in no time.

Speaker Change: So the market's there.

Speaker Change: The opportunity is there.

Speaker Change: We would get $5 $6 of recurring.

Speaker Change: For every one that gets put in.

Speaker Change: So we can't we can't turn our back on this market the big area. So we worked it hard.

Kevin Bouchel: Moving on to the balance sheet. As of June 30, 2024, the company had $97.7 million in cash and cash equivalence, other investments, and marketable securities, and that compares to $66.7 million as of June 30, 2023, and that's a 46% increase. The company has no debt cash provided by operating activities for the 12 months, and the June 30, 2024 was $45.4 million, and that compares to $24.7 million for the same period last year, and that's an 84% increase.

Richard Soloway: Moving on to the balance sheet. As of June 30, 2024, the company had $97.7 million in cash and cash provided by operating activities for the 12 months, and the June 30, 2024 was $45.4 million, and that compared to $24.7 million for the same period last year, and that's an 84% increase. Working capital as defined as current assets with current liabilities was $146.5 million on June 30, 2024, and that compared with working capital of $111.7 million at June 30, 2023.

Kevin Buchel: Moving on to the balance sheet. As of June 30, 2024, the company had $97.7 million in cash and cash provided by operating activities for the 12 months, and the June 30, 2024 was $45.4 million, and that compared to $24.7 million for the same period last year, and that's an 84% increase. Working capital as defined as current assets with current liabilities was $146.5 million on June 30, 2024, and that compared with working capital of $111.7 million at June 30, 2023.

Kevin Buchel: Moving on to the balance sheet.

Speaker Change: We introduced it.

Kevin Buchel: As of June 30, 2024, the company had $97.7 million in cash and cash equivalence, other investments, and marketable securities, and that compares to $66.7 million as of June 30, 2023, and that's a 46% increase.

Speaker Change: I'm going to say a year ago roughly.

Speaker Change: Like any product it takes time to take hold.

Speaker Change: We are more optimistic now than we were when we.

Speaker Change: First introduced it you've done a lot of things a lot of enhancements added accessories.

Kevin Buchel: The company has no debt, cash provided by operating activities for the 12 months, and the June 30, 2024 was $45.4 million, and that compares to $24.7 million for the same period last year, and that's an 84% increase.

Speaker Change: Added some salespeople, whose focus whose main mission in life is to just work on this.

We think it's going to all <unk>.

Speaker Change: <unk> into success, that's the hope Big area, it's all incremental recovery whatever we get out of this.

Speaker Change: Got it thanks for the color and congrats on the quarter guys.

Kevin Buchel: Working capital as defined as current assets with current liabilities was $146.5 million on June 30, 2024, and that compared with working capital of $111.7 million at June 30, 2023.

Kevin Bouchel: Working capital, as defined as current assets with current liabilities, was $146.5 million on June 30, 2024, and that compared with working capital of $111.7 million at June 30, 2023. Current ratio, defined as current assets divided by current liabilities, was $7.6 to 1 at June 30, 2024, and $6.7 to 1 at June 30, 2023. And CAPEX for the quarter was $551,000, and that compared to $415,000 in the prior year period, and for the full fiscal year, CAPEX was $1.6 million, and that compared to $3 million last year.

Chip: Yeah chip.

Chip: Thank you next question comes from Jason Schmidt at Lake Street. Please go ahead.

Speaker Change #101: Hey, guys. Thanks for taking my questions. Kevin I know you noted that Adi is going well just curious if you could provide some additional color on that relationship if it's tracking to your expectations and how we should expect that ramp in fiscal 'twenty five.

Kevin Buchel: Current ratio defined as current assets divided by current liabilities was $7.6 to $1 at June 30, 2024, and $6.7 to $1 at June 30, 2023. And CAPEX for the quarter was $551,000, and that compared to $415,000 in the prior year period, and for the full fiscal year, CAPEX was $1.6 million, and that compared to $3 million last year.

Richard Soloway: Current ratio defined as current assets divided by current liabilities was $7.6 to $1 at June 30, 2024, and $6.7 to $1 at June 30, 2023. And CAPEX for the quarter was $551,000, and that compared to $415,000 in the prior year period. And for the full fiscal year, CAPEX was $1.6 million, and that compared to $3 million last year. That concludes my formal remarks, and I would now like to return the call back to Dick.

Kevin Buchel: Current ratio defined as current assets divided by current liabilities was $7.6 to $1 at June 30, 2024, and $6.7 to $1 at June 30, 2023. And CAPEX for the quarter was $551,000, and that compared to $415,000 in the prior year period. And for the full fiscal year, CAPEX was $1.6 million, and that compared to $3 million last year.

Speaker Change #102: It's only been a year.

Speaker Change #103: Very happy so far so good.

Speaker Change #103: Got to keep working.

Speaker Change #104: Stats look good.

Speaker Change #105: <unk> is there they are the largest distributor of security products in the industry.

Speaker Change #105: They are larger than wesco as wesco distributes other states.

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

Richard Soloway: That concludes my formal remarks, and I would now like to return the call back to Dick. Thank you, Kevin. This goal, 2020 is all concluded with record revenue, and that income for both the fourth quarter and the full fiscal 2024 year ending June 30, 2024. The fourth quarter sales of $50.3 million was the 15th consecutive quarter of record sales for a quarterly reporting period. Our record quarterly income of $13.5 million represents 27% of sales.

Richard Soloway: That concludes my formal remarks, and I would now like to return the call back to Dick. Thank you, Kevin. Disco 2024 concluded with record revenue and net income for both the fourth quarter and the full fiscal 2024 year ending June 30, 2024. The fourth quarter sales of 50.3 million was the 15th consecutive quarter of record sales for a quarterly reporting period. Our record quarterly income of 13.5 million represents 27% of sales.

Speaker Change #106: Adi distributes security only.

Speaker Change #106: So for one year in.

Richard Soloway: Thank you, Kevin.

Richard Soloway: Thank you, Kevin. Disco 2024 concluded with record revenue and net income for both the fourth quarter and the full fiscal 2024 year ending June 30, 2024. The fourth quarter sales of 50.3 million was the 15th consecutive quarter of record sales for a quarterly reporting period. Our record quarterly income of 13.5 million represents 27% of sales. The adjusted EBITDA was 15.4 million for Q4 and 58.9 million for the full fiscal year and equates to a 31% EBITDA margin.

Richard Soloway: Disco 2020 for all concluded with record revenue and net income for both the fourth quarter and the full fiscal 2024 year ending June 30, 2024. The fourth quarter sales of 50.3 million was the 15th consecutive quarter of record sales for a quarterly reporting period.

Speaker Change #107: And we got we got to work it it's doing really well.

Speaker Change #107: One of the things they've done.

They've made introductions.

Speaker Change #108: For us.

Speaker Change #108: To large dealers.

Speaker Change #108: That we didn't have an opportunity to meet you.

Speaker Change #109: There's 30000 dealers out there we don't have the mall, we have 12000 of them.

Richard Soloway: Our record quarterly income of 13.5 million represents 27% of sales. The adjusted EBITDA was 15.4 million for Q4 and 58.9 million for the full fiscal year and equates to a 31% EBITDA margin.

Speaker Change #109: Is another 18000, we'd love to do business with.

Speaker Change #110: Well Adi has relationships with some of the big names out there.

Richard Soloway: The adjusted EBITDA was 15.4 million for Q4 and 58.9 million for the full fiscal year and equates to a 31% EBITDA margin. The equipment revenue grew at 5% for the quarter with gross margins on such sales sequentially increasing to 31% as compared to 29% in each of the last two quarters. Recurring service revenues which increase 27% in Q4 is a major contributor to the year over year overall sales and earnings growth and represents 40% of total revenue.

Richard Soloway: The adjusted EBITDA was $15.1 million for Q4 and $58.9 million to the full fiscal year and equates to a 31% EBITDA margin. The equipment revenue grew at 5% for the quarter with gross margins on such sales sequentially increasing to 31% as compared to 29% in each of the last two quarters. Recurrent service revenues which increased 27% in Q4 is a major contributor to the year over year overall sales and earnings growth and represents 40% of total revenue.

Speaker Change #111: And they made an introduction.

Speaker Change #112: For us to to a couple of those big names.

And now we have a relationship selling fire radios.

Speaker Change #112: So some of those big names, so theres more of that.

Richard Soloway: The equipment revenue grew at 5% for the quarter with gross margins on such sales sequentially increasing to 31% as compared to 29% in each of the last two quarters.

Richard Soloway: The equipment revenue grew at 5% for the quarter with gross margins on such sales sequentially increasing to 31% as compared to 29% in each of the last two quarters. Recurring service revenues which increase 27% in Q4 is a major contributor to the year over year overall sales and earnings growth and represents 40% of total revenue. Gross margin for recurring service revenues remained strong at 90%. A balance sheet continues to get stronger with cash and cash equivalents and other investments and marketable securities increasing 46% to 97.7 million.

Speaker Change #112: And we just want to keep growing the business with them. So far so good it could be much better than it is like I said earlier.

It would be a 10%.

Speaker Change #112: Our hardware customer that keeps up.

Speaker Change #112: Yes.

Speaker Change #112: Okay. That's helpful. And then just as a follow up going back to that one distributor that still has excess inventory just based on sort of order patterns you've seen.

Richard Soloway: Recurrent service revenues which increased 27% in Q4 is a major contributor to the year over year overall sales and earnings growth and represents 40% of total revenue. Gross margin for recurring service revenues remained strong at 90%.

Speaker Change #113: Through the September quarter, So far do you expect the inventory to be worked down and that issue to be over after this quarter.

Richard Soloway: Gross margin for recurring service revenues remained strong at 90%. A balance sheet continues to get stronger with cash and cash equivalents and other investments and marketable securities increasing 46% to 97.7 million. We have no debt and the net cash provided by operating activities was also very strong growing 84% over last year. Our long lock and marks locking hardware lines continue to see growth in school and classroom security health care and retail most eventually as well as multi family commercial and residential applications.

Richard Soloway: Gross margin for recurring service revenues remained strong at 90%. A balance sheet continues to get stronger with cash and cash equivalents and other investments and marketable securities increasing 46% to 97.7 million. We have no debt and the net cash provided by operating activities was also very strong growing 84% over last year. Our long lock and marks locking hardware lines continue to sit growth in school and classroom security, health care and retail cost prevention as well as in multi-family commercial and residential applications.

Speaker Change #113: Okay.

Speaker Change #114: It's hard to say, Jason because a lot of the business, especially with the big distributors comes in at the end.

Richard Soloway: A balance sheet continues to get stronger with cash and cash equivalents and other investments and marketable securities increasing 46% to 97.7 million. We have no debt and the net cash provided by operating activities was also very strong growing 84% over last year.

Speaker Change #115: So even though we're sitting here on August 26.

Speaker Change #116: There's a lot of time left to see what's going to happen in this quarter. So the hope is yes.

Richard Soloway: We have no debt and the net cash provided by operating activities was also very strong growing 84% over last year. Our long lock and marks locking hardware lines continue to see growth in school and classroom security health care and retail most eventually as well as multi family commercial and residential applications. We continue journey focused on further penetrating each of these markets. Our silent line of radios have the widest coverage range and both Verizon and AT&T with rich feature sets which are deal as well.

Speaker Change #117: But we don't know yet.

Speaker Change #118: Alright, Thanks, a lot guys.

Speaker Change #119: Thank you Jason.

Speaker Change #120: Thank you. The next question comes from Jeremy Hamblin with Craig Hallum Capital. Please go ahead.

Richard Soloway: Our long lock and marks locking hardware lines continue to see growth in school and classroom security health care and retail most prevention as well as in multi family commercial and residential applications.

Speaker Change #121: Thanks, and congrats on a strong year.

Speaker Change #122: I wanted to come back to your equipment gross margins, which continue to make really strong progress.

Speaker Change #123: In terms of thinking about the progression that you're likely to make in FY 'twenty five.

Richard Soloway: We continue journey focused on further penetrating each of these markets.

Richard Soloway: We continue journey focused on further penetrating each of these markets. Our silent line of radios have the widest coverage range and both Verizon and AT&T with rich feature sets which are deal as well. We continue to enhance these rich feature sets which make the product easy to install work on all fire and verbal panels are as well as our competitors. No other company can say that and unlike a lot of our competition is approved by underwriters laboratory, the gold standard of the security industry.

Richard Soloway: We continue to earn a focus on further penetrating each of these markets. Our silent line of radios have the widest coverage range and both Verizon and AT&T with rich feature sets which are deal as well. We continue to enhance these rich feature sets which make the product easy to install, work on all fire and burglary panels, ours as well as our competitors. No other company can say that and unlike a lot of our competition is approved by underwriters laboratory the gold standard of the security industry.

Richard Soloway: Our silent line of radios have the widest coverage range and both Verizon and AT&T with rich feature sets which are deal as well.

And then as you move forward from there because I think over time or maybe over the next couple of years do you expect that to get to 40% plus.

Speaker Change #124: But just wanted to get a sense for you know with noting that you have you know at least one distributor with a little bit of of our excess inventory. How do you expect that progression to play out here in 2025, and then beyond.

Richard Soloway: We continue to enhance these rich feature sets which make the product easy to install work on all fire and verbal panels are as well as our competitors.

Richard Soloway: We continue to enhance these rich feature sets which make the product easy to install work on all fire and verbal panels are as well as our competitors. No other company can say that and unlike a lot of our competition is approved by underwriters laboratory, the gold standard of the security industry. There are millions of commercial buildings of old types such as offices, hospitals, schools, coffee shops, restaurants as well as residences that still require upgrades from legacy copper online.

Richard Soloway: No other company can say that and unlike a lot of our competition is approved by underwriters laboratory the gold standard of the security industry.

Speaker Change #124: Well the margins will get helped.

Speaker Change #124: A lot.

Speaker Change #124: By two things.

Speaker Change #124: The mix.

Speaker Change #124: And the volume.

Richard Soloway: There are millions of commercial buildings of old types such as offices, hospitals, schools, coffee shops, restaurants as well as residences that still require upgrades from legacy copper online. We are well positioned to see continued strong growth with our silent line of radios. Our recent introduction of Prima by Napco a new all in one panel security fire video and connected home with a five minute installation remains a very important focus to the company.

Richard Soloway: There are millions of commercial buildings of all types such as offices, hospitals, schools, coffee shops, restaurants as well as residences that still require upgrades from negative copper coal lines. We are well positioned to see continued strong growth with our silent line of radios. Our recent introduction of Prima by Napco, a new oil and one panel for security, fire, video and connected home with a five-minute installation. It means a very important focus to the company.

Speaker Change #125: And the margins were helped this quarter this past quarter by both things.

Six <unk>.

Speaker Change #125: <unk>.

Speaker Change #125: So the mix has.

Speaker Change #126: 65% of your sales being hardware sales.

Richard Soloway: We are well positioned to see continued strong growth with our silent line of radios.

Richard Soloway: We are well positioned to see continued strong growth with our silent line of radios. Our recent introduction of Prima by Napco a new all in one panel security fire video and connected home with a five minute installation remains a very important focus to the company. Company. Our goal is to permit to address an important mass segment of the security market, including residential and small business. With its built in Wi-Fi and cellular radio communications, customer notifications, and video and smart home subscription options for each install system, the security, as well as NAPCO, can add more recurring service revenue, generating accounts.

Speaker Change #127: Locking 65% the locking up the hardware sales.

That has great margins that helps a lot.

Richard Soloway: Our recent introduction of Prima by NAPCO a new oil and one panel security fire video and connected home with a five minute installation it means a very important focus to the company. Our goal is to permit to address an important mass segment of the security market, including residential and small business. With its built in Wi-Fi and cellular radio communications, customer notifications, and video and smart home subscription options for each install system.

Speaker Change #127: I Love radios. They don't have the best margins of course, they have the best margins in the recurring.

Speaker Change #128: But we love locking on the hardware side, so we need both.

Richard Soloway: Company. Our goal is to permit to address an important mass segment of the security market, including residential and small business. With its built in Wi-Fi and cellular radio communications, customer notifications, and video and smart home subscription options for each install system, the security, as well as NAPCO, can add more recurring service revenue, generating accounts. Fiscal 2024 was an amazing record breaking year, where we generated maybe come 49.8 million, adjusted in about 58.9 million, and adjusted in about margin of 31%.

Richard Soloway: Company. Our goal is to permit to address an important mass segment of the security market, including residential and small business. With its built in Wi-Fi and cellular radio communications, customer notifications, and video and smart home subscription options for each installed system, the security bill, as well as NAPCO, can add more recurring service revenue generating accounts. Fiscal 2024 was an amazing record-breaking year, where we generated maybe a $49.8 million. Adjusted EBITDA 58.9 million, and adjusted EBITDA margin of 31%.

Speaker Change #128: What we saw this quarter was strong locking which brings strong margin.

Speaker Change #128: And the volume the volume going up helps.

Speaker Change #128: Because you know a factory in.

Speaker Change #128: In the Dominican Republic.

Speaker Change #128: We get leverage.

Speaker Change #128: From.

Speaker Change #128: Pushing more volume through our.

Factory.

Speaker Change #129: Because it's a labor intensive factory you need labor a lot of labor, it's low cost labor.

Richard Soloway: The current service revenue generating accounts, fiscal 2024 was an amazing record breaking year, where we generated maybe a 49.8 million, adjusted $58.9 million, and adjusted $1.3 million, but as I said before there's more work to be done.

Speaker Change #129: Need much of anything else. So if he gets busy.

Richard Soloway: Fiscal 2024 was an amazing record breaking year, where we generated maybe come 49.8 million, adjusted in about 58.9 million, and adjusted in about margin of 31%. But as I said before, there's more work to be done. While we continue to be encouraged with the gross margin for hardware sales of 31.4%, we believe this should improve further in fiscal 2025 and beyond. Our strong media income, adjusted in the job, and growing cash indicate the financial strength of our business.

Speaker Change #129: You add more labor.

And if you add nothing else.

Speaker Change #129: Net overhead absorption.

Speaker Change #129: Margins expanded in the money drops to the bottom line.

We feel strongly.

Richard Soloway: But as I said before, there's more work to be done. While we continue to be encouraged through the gross margin for hardware sales of 31.4%, we believe this should improve further in fiscal 2025 and beyond. Our strong media income, adjusted EBITDA, and grown cash indicate the financial strength of our business.

Richard Soloway: But as I said before, there's more work to be done. While we continue to be encouraged with the gross margin for hardware sales of 31.4%, we believe this should improve further in fiscal 2025 and beyond. Our strong media income, adjusted in the job, and growing cash indicate the financial strength of our business.

Speaker Change #129: <unk>.

Speaker Change #129: The volume is going to keep go get it gets better and better.

Richard Soloway: While we continue to be encouraged through the gross margin for hardware sales of 31.4%, we believe this should improve further in fiscal 2025 and beyond.

Speaker Change #129: We recently bought.

Speaker Change #129: Our second.

Speaker Change #129: Panasonic.

Speaker Change #129: Chip sugar machine, it's a million dollar machine.

Speaker Change #129: What it does.

Speaker Change #129: And search the components rapidly.

Richard Soloway: Our strong media income, adjusted EBITDA, and grown cash indicate the financial strength of our business.

Speaker Change #129: More rapidly than anything we've ever had.

Speaker Change #129: The iphones used machine.

Richard Soloway: As such, we are pleased to continue our dividend program, and we'll be increasing the dividend, quarterly dividend, to 12.5 cents per year. A 25% increase over the dividends we paid last quarter. This will be payable on October 3, 2024, to share over the record on September 12, 2024. As always, we will strive to accomplish our goal of the continued financial strength, product innovation, technical superiority, and strong profitability to fiscal 2025 and beyond.

Speaker Change #129: And it gives you flexibility.

Richard Soloway: As such, we are pleased to continue our dividend program, and we'll be increasing the dividend, quarterly dividend, to 12.5 cents per share, a 25% increase over the dividends we paid last quarter. This will be payable on October 3, 2024, to share the record on September 12, 2024. As always, we will strive to accomplish our goal of the continued financial strength product innovation, technical superiority, and strong profitability to fiscal 2025 and beyond.

Speaker Change #129: So you could change from one product to another product line without disruption.

Speaker Change #129: It's our second one.

Speaker Change #129: We didn't believe that our hardware sales were going to be.

Speaker Change #129: Growing nicely, we wouldn't have bought a second machine.

Richard Soloway: This will be payable on October 3, 2024 to share over the record on September 12, 2024.

Speaker Change #129: That's our belief.

Speaker Change #129: And higher volume.

Richard Soloway: As always, we will strive to accomplish our goal of the continued financial strength, product innovation, technical superiority, and strong profitability to fiscal 2025 and beyond.

Lead to higher margins.

Speaker Change #129: Just as a quick follow up in terms of making that progression here over the next couple of years.

Speaker Change #129: So getting to a 40% plus by FY 'twenty six would be.

Richard Soloway: And we believe we can continue to score well into the future as it worked towards our fiscal 2026 goals.

Richard Soloway: And we believe we can continue to score well into the future as it worked towards our fiscal 2026 goals. I'd like to thank everyone for their support and for joining us in this exciting future we have. Our former remarks are now concluded, and we'd like to open the call for a Q&A session. Operator, please proceed. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you are using a speaker phone, please lift the headset before pressing any keys.

Speaker Change #130: Over 1000 basis points of improved gross margins and your equipment.

Speaker Change #130: Piece of your business does that does that feel like a an achievable target here over that time frame.

Richard Soloway: I'd like to thank everyone for their support and for joining us in this exciting future we have.

Speaker Change #131: I guess, we'll see how this year goes, but we want to see that progression to close to 40 this year.

Richard Soloway: Our former remarks are now concluded, and we'd like to open the call for a Q&A session.

Unknown Executive: Our former remarks are now concluded, and we'd like to open the call for a Q&A session.

Unknown Executive: Our former remarks are now concluded, and we'd like to open the call for a Q&A session. Operator, please proceed. Thank you.

Unknown Executive: Operator, please proceed.

Unknown Executive: Operator, please proceed. Thank you.

Speaker Change #131: And I think if we see that.

Unknown Executive: Thank you.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you are using a speaker phone, please lift the headset before pressing any keys.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has hand raised. If you are using a speaker phone, please lift the headset before pressing any keys.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session.

Speaker Change #131: Then I'll feel good about 'twenty 'twenty six target.

Unknown Executive: Should you have a question, please press the star followed by the one on your touchtone phone.

Speaker Change #131: But we have to grow that topline hardware.

Unknown Executive: You will hear a prompt that your hand has hand raised.

Speaker Change #131: More than it's grown.

Speaker Change #131: We have to continue to see the strength for locking which we've seen now for several years in a row.

Unknown Executive: If you are using a speaker phone, please lift the headset before pressing any keys.

Matt Somerville: First question comes from Matt Somerville at GA Davidson.

Matt Somerville: First question comes from Matt Somerville at GA Davidson. Please go ahead. Thanks. A couple questions. First, it's on the locking side of the business, obviously growing north of 20% in the quarter. How fast do you think the market is actually growing? And what are you guys doing to drive the share capture you're seeing in that market? And then I'll follow up. The locking fails have been strong for several quarters in a row now.

Matt Somerville: First question comes from Matt Somerville at GA Davidson. Please go ahead. Thanks a couple questions. First, it's on the locking side of the business, obviously growing north of 20% in the quarter. How fast do you think the market is actually growing? And what are you guys doing to drive the share capture you're seeing in that market? And then I'll follow up. The locking fails have been strong for several quarters in a row now.

Speaker Change #131: And then the margins will go up.

Speaker Change #131: And historically.

Matt Somerville: Please go ahead.

Matt Somerville: Thanks.

Speaker Change #131: We've seen a tremendous amount of margin increase.

Matt Somerville: A couple questions.

Richard Soloway: First, it's on the locking side of the business, obviously growing north of 20% in the quarter.

Speaker Change #131: When the volume goes up.

Speaker Change #131: If you go back to our history.

Richard Soloway: How fast do you think the market is actually growing?

Speaker Change #131: In 2018 in 2019.

Richard Soloway: And what are you guys doing to drive the share capture you're seeing in that market?

Speaker Change #131: Youll see what the volume kicks up the margins flat.

Matt Somerville: And then I'll follow up.

Speaker Change #131: Then this was pre COVID-19.

Richard Soloway: The locking fails have been strong for several quarters in a row now.

Speaker Change #131: Our margins were pushing high Thirty's low forty's.

Speaker Change #131: There's no reason, we can't get back to that now considering all the steps we've taken.

Richard Soloway: We have two locking companies.

Matt Somerville: We have two locking companies. They're both doing well. We've picked up market share, we believe, during the times of supply chain as our competitors couldn't deliver. Our Dominican factory kept delivering and we picked up share, we believe. We're very diverse. We're into schools, which is a big need still. All the shootings that still go on. Many schools. Still having haven't not done anything. It's a tremendous need in airport renovations, which are going on throughout the country.

Matt Somerville: We have two locking companies. They're both doing well. We've picked up market share, we believe, during the times of supply chain, as our competitors couldn't deliver. Our Dominican factory kept delivering, and we picked up share, we believe. We're very diverse. We're into schools, which is a big need still. All the shootings that still go on. Many schools still haven't, haven't not done anything. It's a tremendous need in airport renovations, which are going on throughout the country.

Richard Soloway: They're both doing well.

Richard Soloway: We've picked up market share, we believe, during the times of supply chain, as our competitors couldn't deliver. Our Dominican factory kept delivering, and we picked up share, we believe.

Speaker Change #132: Locking it's a bigger piece of the pie.

Speaker Change #132: This is what we're pushing for us so.

Speaker Change #132: Look for the margins to keep going up during fiscal 2025.

Speaker Change #132: And then.

Speaker Change #132: We will be able to assess whether our goal for 2026.

Richard Soloway: We're very diverse.

Richard Soloway: We're at the schools, which is a big need still.

Speaker Change #132: Is achievable.

Speaker Change #132: What I will say is our goal for recurring revenue margin.

Richard Soloway: All the shootings that still go on.

Richard Soloway: Many schools still haven't, haven't not done anything.

Speaker Change #132: Which was 80%.

Speaker Change #133: It's more than achievable as you can see it's 90%.

Richard Soloway: It's a tremendous need in airport renovations, which are going on throughout the country.

Speaker Change #132: Yeah.

Matt Somerville: It's a tremendous need in hospitals. These needs continue. Our products are also different. We make electrified locks, not just plain old hardware locks, puts us in a different category. So having these two companies both performing well at the same time as created this rise, which was up 18% for the year versus a year ago. It's 65% of our total hardware sales, equipment sales. Can we keep this pace up? I don't know, but I think double digits is certainly a possibility to continue.

Matt Somerville: It's a tremendous need in hospitals. These needs continue. Our products are also different. We make electrified locks, not just, you know, plain old hardware locks, puts us in a different category. And so having these two companies, both performing, well, at the same time, has created this rise, which was up 18% for the year versus a year ago. And it's 65% of our total hardware sales, equipment sales. Can we keep this pace up?

Richard Soloway: It's a tremendous need in hospitals.

Speaker Change #132: I'd like to point out also that our engineering has expanded because you are coming out with new products.

Richard Soloway: These needs continue.

Richard Soloway: Our products are also different. We make electrified locks, not just, you know, plain old hardware locks, puts us in a different category.

Speaker Change #132: Hardware side.

Speaker Change #132: With recurring revenue.

Speaker Change #132: Which had never been done in the industry.

Richard Soloway: And so, having these two companies, both performing, working well at the same time as created this rise, which was up 18% for the year versus a year ago.

So our lucky lines will generate recurring revenue for the.

Speaker Change #132: Locksmiths specialty.

Speaker Change #132: Storage.

Speaker Change #132: That's a major driver for us.

Speaker Change #132: So that's gonna keep piling on additional hardware sales and recurring revenue those products.

Richard Soloway: And it's 65% of our total hardware sales, equipment sales.

Speaker Change #132: We showed at the ISC show.

Richard Soloway: Can we keep this pace up?

Richard Soloway: I don't know, but I think double digits is certainly a possibility to continue.

Matt Somerville: I don't know, but I think double digits is certainly a possibility to continue. We don't see any slowing down. We travel along the country. We see a lot of construction still going on, despite what you might read in the papers. So activity for the locking is very good. Thanks for that color.

Speaker Change #132: The basic for them, we've got very good feedback on that.

Speaker Change #132: We're continuing to develop them.

Matt Somerville: We don't see any slowing down. We travel along the country. We see a lot of construction still going on. Despite what you might read in the papers. So activity for the locking is very good. Thanks for that color.

Richard Soloway: We don't see any slowing down.

Speaker Change #132: And.

Richard Soloway: We travel along the country.

Speaker Change #132: We expect those to carry us to recurring revenue.

Richard Soloway: We see a lot of construction still going on, despite what you might read in the paper.

Speaker Change #132: Equipment sales for many many years.

Richard Soloway: So, activity for the locking is very good.

Speaker Change #132: Something that alarm dealers had gotten.

Speaker Change #132: They sell a job and they also get a recurring revenue tail to it.

Matt Somerville: Thanks for that color.

Matt Somerville: And then just on the radio side of the business, you know, you have this recent product launch that you sort of referenced in the prepared remarks.

Matt Somerville: And then just on the radio side of the business, you know, you have this recent product launch that you sort of referenced in the prepared remarks, any sort of early read on the success you're having there. You know, you mentioned the radio businesses down this quarter. It sounds like it's probably going to be down in the fiscal first quarter.

Matt Somerville: And then just on the radio side of the business, you know, you had this recent product launch that you sort of referenced in the prepared remarks. Any sort of early read on the success you're having there, you know, you mentioned the radio businesses down this quarter. It sounds like it's probably going to be down in the fiscal first quarter.

Speaker Change #134: <unk> medicine, the door guys go get that.

Speaker Change #135: This new product line that we showed they will get that so we're very optimistic.

Richard Soloway: Any sort of early read on the success you're having there.

Speaker Change #135: Domestic with the future.

Speaker Change #135: And it's very exciting we also introduced some new radios with additional coverage.

Richard Soloway: You know, you mentioned the radio business was down this quarter.

Richard Soloway: It sounds like it's probably going to be down in the fiscal first quarter.

Speaker Change #135: So then which have.

Richard Soloway: Do you see that business re-accelerating to a high single to double digit growth rate as you move through the year? You know, the radio business despite the stats that tell you it was down and it was, it was down as we've said, 5% sequentially 10% compared to last year's Q4. It's down on the radios that produce the lowest recurring. And we are fighting like crazy to get it back coming out with new features on our radios, which has been well received.

Richard Soloway: Do you see that business re accelerating to a high single to double digit growth rate as you move through the year.

Richard Soloway: Do you see that business re accelerating to a high single to double digit growth rate as you move through the year? You know, the radio business despite the stats that tell you it was down and it was, it was down as we've said, 5% sequentially 10% compared to last year's Q4. It's down on the radios that produce the lowest recurring. And we are fighting like crazy to get it back coming out with new features on our radios, which has been well received.

Speaker Change #135: Greater coverage and wider variations throughout the whole country. So.

Speaker Change #135: Those will be generating a lot of additional recurring revenue and hardware sales along with that and everything that we do.

Richard Soloway: You know, the radio business, despite the stats that tell you it was down, and it was, it was down as we've said, 5% sequentially 10% compared to last year's Q4. It's down on the radios that produce the lowest recurring.

Matt Somerville: You know, the radio business despite the stats that tell you it was down and it was, it was down as we've said, 5% sequentially 10% compared to last year's Q4. It's down on the radios that produce the lowest recurring. And we are fighting like crazy to get it back coming out with new features on our radios, which has been well received. But the interesting thing which I don't know if everybody picks up on is that the recurring revenue continues to grow because the fire radios continues to do well.

His underwriters laboratory approved which is the gold standard a lot of our competitors use secondary level.

Speaker Change #135: Oh approvals.

Speaker Change #136: And that's good for the smaller companies, but the larger companies you Kevin was referring to which are coming to us once a high level of security with underwriters laboratory approval.

Richard Soloway: And we are fighting like crazy to get it back coming out with new features on our radios, which has been well received.

Speaker Change #137: No, but that's the best way to get the signals and the most reliable equipment out there. So we're proud of that but that's one of our major goals.

Richard Soloway: But the interesting thing, which I don't know if everybody picks up on, is that the recurring revenue continues to grow because the fire radios continues to do well. And as we've talked over and over about fire radios bring in more money than the other radios.

Richard Soloway: But the interesting thing which I don't know if everybody picks up on is that the recurring revenue continues to grow because the fire radios continues to do well. And as we've talked over and over about fire radios bring in more money than the other radios. So I was very impressed and happy that despite those stats that we talked about, that recurring was up 27%, and up 26 for the year. Fire is doing really well.

Richard Soloway: But the interesting thing which I don't know if everybody picks up on is that the recurring revenue continues to grow. Because the fire radios continues to do well. And as we've talked over and over about fire radios bring in more money than the other radios. So I was very impressed and happy that despite those stats that we talked about that recurring was up 27%, and up 26 for the year. Fire is doing really well.

Great. Thanks for all the color best wishes.

Matt Somerville: And as we've talked over and over about fire radios bring in more money than the other radios. So I was very impressed and happy that despite those stats that we talked about, that recurring was up 27%, and up 26 for the year. Fire is doing really well. Doing well with our new distributor. It's doing well with our big accounts that we've added that we talked about some of the big names. That we believe is good to just keep getting better and we'll get the lower end radius to do better as well.

Speaker Change #138: Thank you Jeremy.

Speaker Change #138: Thank you next question comes from Lance Vitanza at TD Cowen. Please go ahead.

Richard Soloway: So I was very impressed and happy that despite those stats that we talked about, that recurring was up 27%, and up 26 for the year.

Lance Vitanza: Hi, Thanks for taking the questions I'm going to try to get to and if I can one on revenue and one on cost. The revenue question is.

Speaker Change #140: Could you talk about the pricing trends that youre seeing on the services revenue side fire radios in particular, I'm wondering to what extent.

Richard Soloway: Fire is doing really well.

Richard Soloway: Doing well with our new distributor.

Richard Soloway: Doing well with our new distributor. It's doing well with our big accounts that we've added that we talked about some of the big names. That we believe is good to just keep getting better and we'll get the lower end radius to do better as well. And then we'll have both sides contributing. And then you'll see the growth of the overall growth on the hardware side of the radios. And we're working hard also to get through all the distribution issues we've talked about that before. Some of our distributors had too much. We have one distributor left that has a little too much working hard to reduce that that'll help as well. I said, you're welcome Matt. Thank you.

Richard Soloway: Doing well with our new distributor. It's doing well with our big accounts that we've added that we've talked about some of the big names. That we believe is good to just keep getting better and we'll get the lower end radius to do better as well. And then we'll have both sides contributing and then you'll see the growth of the overall growth on the hardware side of the radios. And we're working hard also to get through all the distribution issues we've talked about that before. Some of our distributors had too much. We have one distributor left that has a little too much working hard to reduce that that'll help as well. I said, you're welcome Matt.

Speaker Change #140: Any you have had to rely on promotional pricing and do you expect that to potentially be a headwind.

Richard Soloway: It's doing well with our big accounts that we've added that we've talked about some of the big names.

Matt Somerville: Thank you.

Speaker Change #141: Headwind on gross margins on the service side going forward.

Richard Soloway: That we believe is good to just keep getting better and we'll get the lower end radius to do better as well.

Wait.

Speaker Change #142: We promote as necessary, we've tried not to mess with the formula.

Matt Somerville: And then we'll have both sides contributing. And then you'll see the growth of the overall growth on the hardware side of the radios. And we're working hard also to get through all the distribution issues we've talked about that before. Some of our distributors had too much. We have one distributor left that has a little too much working hard to reduce that that'll help as well. I said, you're welcome Matt. Thank you.

Richard Soloway: And then we'll have both sides contributing and then you'll see the growth of the overall growth on the hardware side of the radios.

Speaker Change #143: Formula has worked since we started this cycle.

Speaker Change #143: So.

Speaker Change #143: We only adjust or promote.

Richard Soloway: And we're working hard also to get through all the distribution issues we've talked about that before.

Speaker Change #143: Didn't need it and we will continue to do that.

Speaker Change #143: Fire.

Richard Soloway: Some of our distributors had too much. We have one distributor left that has a little too much working hard to reduce that that'll help as well.

Speaker Change #143: Doesn't need a lot of help.

Speaker Change #143: But if it's needed we'll do it listen we have 90% margin to play with it so.

Speaker Change #143: It's not a big deal, but so far the formula has been good.

Matt Somerville: I said, you're welcome Matt.

Speaker Change #143: On the non fire radios.

Matt Somerville: Thank you.

Jim Ricchiuti: Next question comes from Jim Ricchiuti at Native. Please go ahead. All right thanks. And maybe as a follow-up to the previous question. As we think about fiscal 25, is one way to think about it, Kevin, some normalization of demand in the fire radio business, which I assume you're getting some benefit from having the new distributor coming on stream and scaling. And maybe this other distributor where it's possible they're still over and mentored with the lower end radio.

Jim Ricchiuti: Next question comes from Jim Ricchiuti at Needham. Please go ahead. All right, thanks. It may be as a follow-up to the previous question. As we think about fiscal 25, is one way to think about it, Kevin, some normalization of demand in the fire radio business, which I assume you're getting some benefit from having the new distributor coming on stream and scaling. And maybe this other distributor where it's possible they're still over and mentored with the lower end radio. So is that one way to think about the business as it over the next several quarters?

Jim Ricchiuti: Next question comes from Jim Ricchiuti at Needham.

Speaker Change #143: Say, we've been more aggressive.

Jim Ricchiuti: Please go ahead.

Speaker Change #143: Promoting that and it might be more of that but again I try not to mess with the formula.

Jim Ricchiuti: All right.

Jim Ricchiuti: Thanks.

Jim Ricchiuti: Maybe as a follow-up to the previous question.

Jim Ricchiuti: As we think about fiscal 25, is one way to think about it?

Jim Ricchiuti: So is that one way to think about the business as it over the next several quarters? Well, normalization would be good. But we want more than normalization. We want enhancement. I'll call it. You know, we've got relationships with some big names which we've talked about. We want to start to see those translate into much higher radio sales. And we think they will. We're spending a lot of time with these big names.

Speaker Change #143: We got to keep our eye on the market.

Speaker Change #143: And if needed we'll adjust but I think we've been doing pretty well so far in a way we've been handling it.

Kevin Buchel: Kevin, some normalization of demand in the fire radio business, which I assume you're getting some benefit from having the new distributor coming on stream and scaling.

Speaker Change #144: And I hear enough hope urea I hope you realize that.

Speaker Change #144: We get a recurring revenue at our radio sales two different ways.

Kevin Buchel: And maybe this other distributor where it's possible they're still over and mentored with the lower end radio.

Speaker Change #144: One is the retrofit to the copper jobs that are out in the field now which are just starting to go back.

Kevin Buchel: So is that one way to think about the business as it over the next several quarters?

Speaker Change #144: Bad debt.

Speaker Change #145: Verizon AT&T east and that has to install repair copper anymore.

Kevin Buchel: Well normalization would be good, but we want more than normalization.

Kevin Bouchel: Well, normalization would be good, but we want more than normalization. We want enhancement, I'll call it. You know, we've got relationships with some big names, which we've talked about. We want to start to see those translate into much higher radio sales. And we think they will. We're spending a lot of time with these big names. And they have to potential to do a lot more. I just did say so between the between the big names and the normalization of what has been occurring in the past, we should see nice growth in the overall radio segment, not just fire.

Speaker Change #145: Turning to our government regulations, so you have about $5 million prior jobs.

Kevin Buchel: We want enhancement, I'll call it.

Speaker Change #145: We will need to be converted at all.

Kevin Buchel: You know, we've got relationships with some big names, which we've talked about.

Speaker Change #145: And we have Fabulous radio.

Kevin Buchel: We want to start to see those translate into much higher radio sales. And we think they will.

Speaker Change #145: I always love them as I said, it's the gold standard of the Biz.

Speaker Change #146: So we have that work coming in then we can have all the new control panels with built in radios. So a new work for new buildings.

Kevin Buchel: We're spending a lot of time with these big names. And they have the potential to do a lot more between the big names.

Jim Ricchiuti: And they have the potential to do a lot more. So between the big names, I'm sorry. I just did say so between the big names and the normalization of what has been occurring in the past, we should see nice growth in the overall radio segment, not just fire. So it sounds like you anticipate continued strength in the fire radio side of the business. But we haven't seen that at all. Is there any color you can provide?

Kevin Buchel: I'm sorry.

Speaker Change #146: Refurbish buildings.

Kevin Buchel: I just did say so between the big names and the normalization of what has been occurring in the past.

Speaker Change #147: Those are those radios are built into the control panel, which gets us hardware sales.

Speaker Change #148: Smoke detectors and carbon monoxide detectors and all the other peripheral to go along with it with the fire systems. So we get it two ways. We figure we have about another five to seven years of retrofit to those 5 million jobs that need to be upgraded.

Kevin Buchel: We should see nice growth in the overall radio segment, not just fire. Kevin, so it sounds like you anticipate continued strength in the fire radio side of the business.

Kevin Bouchel: So it sounds like you anticipate continued strength in the fire radio side of the business. But we haven't seen that. We haven't seen that slow down at all. Is there any color you can provide? I know it's a bit of a mixed picture with respect to the distributors. But is there any color you could provide on some of the selfie metrics in terms of what you're seeing now? Well, we added the new distributors.

Kevin Buchel: But we haven't seen that.

Speaker Change #148: The dealer typically there is some pull out the system.

Speaker Change #148: Puts a new communication links and like Starlink and since our radios work at all.

Kevin Buchel: We haven't seen that slow down at all.

Speaker Change #148: Animals that are out there and brands the opportunity is tremendous for us.

Kevin Buchel: Is there any color you can provide?

Kevin Buchel: I know it's a bit of a mixed picture with respect to the distributors, but is there any color you could provide on some of the self-reumetrics in terms of what you're seeing now?

Jim Ricchiuti: I know it's a bit of a mixed picture with respect to the distributors. But is there any color you could provide on some of the self-reumetrics in terms of what you're seeing now? Well, we added the new distributors. There's no issues with them. They're doing great. They may become a 10% hardware customer, in the near future. We hope. They do it really well. We've only had them for a year. And then you have two or three other big ones.

Speaker Change #149: Thanks, Nick that's Super helpful. If I can just squeeze it in the cost question you mentioned on the call that they're both R&D and SG&A were up quite a bit and you called out a few of the items that drove that on the SG&A side I might've missed it but I didn't hear so much about the R&D side could you talk about.

Kevin Buchel: Well, we added the new distributors.

Kevin Buchel: There's no issues with them.

Kevin Bouchel: There's no issues with them. They're doing great. They may become a 10% hardware customer, in the near future. We hope. They do it really well. We've only had them for a year. And then you have two or three other big ones. And the other one, who's our biggest one, and external, let's go. No issue. They've worked through their inventory. We have another one. We've got to do more work with that one.

Kevin Buchel: They're doing great.

Kevin Buchel: They may become a 10% hardware customer, in the near future.

Speaker Change #150: What's going on there and how we should model both of those line items going forward. I mean is on the SG&A side is is 10 million kind of a good quarterly run rate from here.

Kevin Buchel: We hope.

Kevin Buchel: They do it really well.

Kevin Buchel: We've only had them for a year.

Kevin Buchel: And then you have two or three other big ones.

Speaker Change #151: Yes, it'll be it'll be lower than what you just saw.

Kevin Buchel: And the other one, who's our biggest one, Ann Externe, Let's Go, no issue.

Jim Ricchiuti: And the other one who's our biggest one, Alex, let's go. No issue. They've worked through their inventory. We have another one. We got to do more work with that one. And then once we get through that that one. Then I think it's all good. The South through stats are good, but when they have too much inventory, even though they're selling, we need new orders, moral orders. So South through great. But let's get their inventory in shape so they could place another round. That's kind of what it is. Got it.

Speaker Change #152: And it'll it'll spike.

Speaker Change #152: During ISC, which.

Unknown Executive: One final question.

This coming year fiscal 'twenty five we'll also be at Q4.

Kevin Buchel: They've worked through their inventory.

Kevin Buchel: We have another one.

Kevin Buchel: We got to do more work with that one.

But absent of that that's a good level.

Kevin Bouchel: And then once we get through that, that one, then I think it's all good. The Southore stats are good, but when they have too much inventory, even though they're selling, we need new orders, moral orders. So, Southore, great. But let's get their inventory in shape, so they could place another round. That's kind of what it is. Got it.

Kevin Buchel: And then once we get through that, that one, then I think it's all good.

Speaker Change #152: And.

Speaker Change #152: We continue to watch it if we could reduce it will go to reduce it but.

Speaker Change #153: As we've grown we've had to make steps, which we will you guys. All know about made certain steps change.

Kevin Buchel: The South through stats are good, but when they have too much inventory, even though they're selling, we need new orders, more orders.

Speaker Change #154: Changing accounting firms, adding internal audit or things like that we've had to do it we're happy that we have done it.

Kevin Buchel: So South through great, but let's get their inventory in shape so they could place another round.

Kevin Buchel: That's kind of what it is.

Speaker Change #153: On the R&D side.

Speaker Change #153: Everybody always says well why don't you hire a bunch of engineers what.

Kevin Buchel: Got it.

Jim Ricchiuti: And one final question, just on Prima.

Jim Ricchiuti: One final question, just on Prima. How, how do you view the launch of the product? How satisfied are you with the way that the business is starting to develop? I know it's a small part of the revenue right now. Well, Prima is an important area for us. It's a big market that we don't do a lot in, right? The rezzy market, residential market is huge market. And a lot of people still have to get away from copper.

Jim Ricchiuti: How do you view the launch of the product?

Unknown Executive: How do you view the launch of the product? How satisfied are you with the way that the business is starting to develop? I know it's a small part of the revenue right now. Well, Prima is an important area for us. It's a big market that we don't do a lot in. Right. The rezzy market, residential market is huge market. And a lot of people still have to get away from copper. And why wouldn't they love a 15 minute install?

Jim Ricchiuti: How do you view the launch of the product? How satisfied are you with the way that the business is starting to develop? I know it's a small part of the revenue right now. Well, Prima is an important area for us. It's a big market that we don't do a lot in. Right. The rezzy market, residential market is huge market. And a lot of people still have to get away from copper. And why wouldn't they love a 15 minute install?

Speaker Change #155: Well, we don't want to be like alarm Dot com, who has hundreds of engineers.

Jim Ricchiuti: How satisfied are you with the way that the business is starting to develop?

Speaker Change #153: But we do have the ability to hire more.

Jim Ricchiuti: I know it's a small part of the revenue right now.

Speaker Change #153: And when our head of engineering that comes to us.

Speaker Change #153: That says Hey, if we can get me needs two or three guys I can't get X Y Z out a lot sooner.

Richard Soloway: Well, Prima is an important area for us.

Richard Soloway: It's a big market that we don't do a lot in, right?

Speaker Change #156: Do it go for it we have the ability.

Richard Soloway: The rezzy market, residential market, it's a huge market.

Speaker Change #156: So the $3 million range for R&D is the new standard I would say.

Richard Soloway: And a lot of people still have to get away from copper.

Speaker Change #156: This increase came from adding maybe.

Richard Soloway: And why wouldn't they love a 15-minute install?

Jim Ricchiuti: And why wouldn't they love a 15 minute install? The salesman could actually install. It could be in and out in no time. So, the market's there. The opportunity is there. We would get $5, $6 of recurring for everyone that gets put in. So, we can't, we can't turn our back on this market. It's a big area. So, we're working hard.

Speaker Change #156: Six or seven engineers.

Speaker Change #156: And salary increases.

Richard Soloway: The salesman could actually install. It could be in and out in no time.

Unknown Executive: The salesman could actually install. It could be in and out in no time. So the market's there. The opportunity is there. We would get five, six dollars of recurring for everyone that gets put in. So we can't we can't turn our back on this market. It's a big area. So we're working hard. We introduced it. I don't know. I'm going to say a year ago, roughly. Like any product, it takes time to take hold.

Jim Ricchiuti: The salesman could actually install. It could be in and out in no time. So the market's there. The opportunity is there. We would get five, six dollars of recurring for everyone that gets put in. So we can't we can't turn our back on this market. It's a big area. So we're working hard. We introduced it. I don't know. I'm going to say a year ago, roughly. Like any product, it takes time to take hold.

Speaker Change #156: Oh, well worth doing.

Speaker Change #156: Gets us to where we want to go faster.

Richard Soloway: So the market's there.

Speaker Change #156: Great. Thanks for taking the questions.

Richard Soloway: The opportunity is there.

Speaker Change #156: You bet.

Richard Soloway: We would get five, six dollars of recurring for everyone that gets put in.

Speaker Change #156: Yes.

Speaker Change #157: Thank you, ladies and gentlemen, as a reminder, should you have any questions. Please press star one.

Speaker Change #158: Next question comes from Raj Sharma at B Riley. Please go ahead.

Richard Soloway: So we can't turn our back on this market.

Richard Soloway: It's a big area.

Speaker Change #159: Yes. Thank you for taking my questions congratulations on the solid financials in the quarter.

Richard Soloway: So we're working hard.

Richard Soloway: We introduced it, I don't know, I'm going to say a year ago, roughly, like any product that takes time to take hold. We're more optimistic now than we were, you know, we first introduced it. We've done a lot of things, a lot of enhancements, added accessories, added some salespeople whose focus whose main mission in life is to just work on this. We think it's going to all translate into success. That's the hope. Big area. It's all incremental recurring, whatever we get at this. And thanks for their color.

Richard Soloway: We introduced it, I don't know, I'm going to say a year ago, roughly. Like any product, it takes time to take hold. We're more optimistic now than we were, we first introduced it.

Again.

Speaker Change #159: So with the sell through steps getting better.

Speaker Change #160: Our inventories are.

Unknown Executive: We're more optimistic now than we were, you know, we first introduced it. We've done a lot of things. A lot of enhancements added accessories added some salespeople who's focused whose main mission in life is to just work on this. We think it's going to all translate into success. That's the hope. Big area. It's all incremental recovery. Whatever we get. And thanks for the color. Congrats on a quarter. Just take care. Thank you.

Jim Ricchiuti: We're more optimistic now than we were, you know, we first introduced it. We've done a lot of things. A lot of enhancements added accessories added some salespeople who's focused whose main mission in life is to just work on this. We think it's going to all translate into success. That's the hope. Big area. It's all incremental recovery. Whatever we get. And thanks for the color. Congrats on a quarter. Just take care. Thank you.

Speaker Change #161: I'm, hoping to get worked out.

Speaker Change #162: You know from from from your comment you know the inclusion in the access alarms segment, which was down 21% year on year for the radios that are 59% of the mix they were down 10%, but you're saying fire alarms.

Richard Soloway: We've done a lot of things, a lot of enhancements, added accessories, added some salespeople who's focused, whose main mission in life is to just work on this.

Richard Soloway: We think it's going to all translate into success. That's the hope.

Speaker Change #163: Up significantly.

Speaker Change #163: With the higher monthly recurring revenues.

Richard Soloway: Big area, it's all incremental, recurring, whatever we get.

Speaker Change #163: Can you breakdown.

Speaker Change #163: I'm sorry.

Speaker Change #164: Yeah, I was just going to say, yes fire was up we don't breakout how much is fire how much is non fire, we do say fire as more than half.

Jim Ricchiuti: And thanks for the color, congrats on the call to you guys.

Unknown Executive: Congrats on a quarter. Just take care of it.

Unknown Executive: Thank you.

Jim Ricchiuti: Take care, Jim.

Jason Schmidt: Thank you.

Jason Schmidt: Next question comes from Jason Schmidt at Lake Street.

Jaeson Schmidt: Next question comes from Jason Schmidt at Lake Street. Please go ahead. Thanks for taking my questions. Kevin, I know you noted that ADI is going well. Just curious if you could provide some additional color on that relationship. If it's tracking to your expectations and how we should expect that ramp in fiscal 25. It's only been a year. Very happy. So far, so good. You got to keep working. Staffs look good. Opportunity is there.

Jason Schmidt: Next question comes from Jason Schmidt at Lake Street. Please go ahead. Thanks for taking my questions. Kevin, I know you noted that ADI is going well. Just curious if you could provide some additional color on that relationship. If it's tracking to your expectations and how we should expect that ramp in fiscal 25. It's only been a year. Very happy. So far, so good. You got to keep working. Staffs look good. Opportunity is there.

Jason Schmidt: Next question comes from Jason Schmidt at Lake Street. Please go ahead. Thanks for taking my questions. Kevin, I know you noted that ADI is going well. Just curious if it provides some additional color on that relationship. If it's tracking to your expectations and how we should expect that ramp in fiscal 25. It's only been a year. Very happy. So far so good. You got to keep working. Statues look good. Opportunity is there.

Speaker Change #165: Right right. So can you help break down the portion of the intrusion and access alarmed that didn't do too well I guess.

Jason Schmidt: Please go ahead.

Jason Schmidt: Hey, yes, thanks for taking my questions.

Kevin Buchel: Kevin, I know you noted that ADI is going well.

Speaker Change #166: And does that portion of the mix not have recurring revenues.

Kevin Buchel: Just curious if it provides some additional color on that relationship.

Kevin Buchel: If it's tracking to your expectations and how we should expect that ramp in fiscal 25.

Speaker Change #167: Yeah, the part that has recurring other other radios nothing else.

Speaker Change #167: And.

We don't break it out Raj the way you might want.

Kevin Buchel: It's only been a year.

Kevin Buchel: Very happy so far, so good.

Speaker Change #168: I gave you what what I could tell you.

Kevin Buchel: You got to keep working Staffs look good.

Speaker Change #168: And.

Speaker Change #168: Most of the.

Speaker Change #168: The increase.

Speaker Change #169: Is due to fire and the overall decrease was there's a large chunk of non fire radios.

Kevin Buchel: Opportunity is there.

Kevin Buchel: They have the largest distributor of security products in the industry.

Jaeson Schmidt: They have the largest distributor of security products in the industry. They're larger than West Goh. This West Goh distributes other things. ADI distributes security only. So for one year in, we got to work it. It's doing really well. One of the things they've done, they've made introductions for us to large dealers that we didn't have an opportunity to meet. There's 30,000 dealers out there. We don't have them all. We have 12,000 of them.

Jason Schmidt: They have the largest distributor of security products in the industry. They're larger than West Goh. This West Goh distributes other things. ADI distributes security only. So for one year in, we got to work it. It's doing really well. One of the things they've done, they've made introductions for us to large dealers that we didn't have an opportunity to meet. There's 30,000 dealers out there. We don't have them all. We have 12,000 of them.

Jason Schmidt: They are the largest distributor of security products in the industry. They're larger than West Goh. This West Goh distributes other things. ADI distributes security only. So for one year in, we got to work it. It's doing really well. One of the things they've done, they've made introductions for us. To large dealers that we didn't have an opportunity to meet. There's 30,000 dealers out there. We don't have them all. We have 12,000 of them.

Kevin Buchel: They're lodgers in West Goh.

Speaker Change #169: We're doing tremendous during the supply chain issue <unk> sunset.

Kevin Buchel: This West Goh distributes other things.

Kevin Buchel: ADI distributes security only.

Speaker Change #169: US being the only company, who can deliver but nobody else could everybody loading up.

Kevin Buchel: So for one year in, we got to work it.

Kevin Buchel: It's doing really well.

Speaker Change #170: We've got to work through that the comps are easier now.

Kevin Buchel: One of the things they've done, they've made introductions for us to lodge dealers that we didn't have an opportunity to meet.

Speaker Change #170: So I think you know as we head into fiscal 2025.

Speaker Change #170: It'll be an easier road for us compared to some of the difficult comps we had.

Speaker Change #170: In 2024.

Kevin Buchel: There's 30,000 dealers out there.

Speaker Change #171: Got it and then so how should we model this the axis alarm side growing in the next few quarters do you think Kevin.

Kevin Buchel: We don't have them all.

Kevin Buchel: We have 12,000 of them.

Kevin Buchel: There's another 18,000 we'd love to do business with.

Jaeson Allen Min Schmidt: There's another 18,000 we'd love to do business with. ADI has relationships with some of the big names out there. And they made an introduction for us to a couple of those big names. And now we have a relationship and selling fire radios to some of those big names. So there's more of that. And we just want to keep growing the business with them. So far, so good. It could be much better than it is.

Jason Schmidt: There's another 18,000 we'd love to do business with. ADI has relationships with some of the big names out there. And they made an introduction for us to a couple of those big names. And now we have a relationship and selling fire radios to some of those big names. So there's more of that. And we just want to keep growing the business with them. So far, so good. It could be much better than it is.

Jason Schmidt: There's another 18,000 we'd love to do business with. Well, ADI has relationships with some of the big names out there. And they made an introduction for us to a couple of those big names. And now we have a relationship and selling fire radios to some of those big names. So there's more of that and we just want to keep growing the business with them. So far, so good. It could be much better than it is. Like I said earlier, it could be a 10% of our hardware customer. It keeps up.

Kevin Buchel: Well, ADI has relationships with some of the big names out there. And they made an introduction for us to a couple of those big names. And now, we have a relationship and selling fire radios to some of those big names.

Jason Schmidt: Okay, that's helpful.

Speaker Change #171: Well I. Thank.

Speaker Change #172: You're going to see improvement in the radios sales.

Kevin Buchel: So there's more of that.

Speaker Change #173: We've done a lot we've reduced we've.

Speaker Change #174: We have to work to reduce the inventory.

Kevin Buchel: And we just want to keep growing the business with them. So far, so good.

Inventory levels at the distributors, we have an easy comp.

Speaker Change #174: Going forward for the next few quarters.

Speaker Change #174: I expect it to be up.

Speaker Change #174: I don't want to on this call you know put it.

Kevin Buchel: It could be much better than it is.

Jaeson Schmidt: Like I said earlier, it could be a 10% of our hardware customer. It keeps up. Okay, that's helpful. And then just as a follow up, going back to that one distributor that still has excess inventory, just based on sort of order patterns you've seen through the September quarter so far. Do you expect the inventory to be worked down? And that issue to be over after this quarter? It's hard to say Jason, because there's a lot of the business, especially with the big distributors comes in at the end.

Jason Schmidt: Like I said earlier, it could be a 10% of our hardware customer. It keeps up. Okay, that's helpful. And then just as a follow up, going back to that one distributor that still has excess inventory, just based on sort of order patterns you've seen through the September quarter so far. Do you expect the inventory to be worked down? And that issue to be over after this quarter? It's hard to say Jason, because there's a lot of the business, especially with the big distributors comes in at the end.

Kevin Buchel: Like I said earlier, it could be a 10% of our hardware customer.

Speaker Change #175: Put out percentage increases.

I think it's going to be doing better it has to.

Kevin Buchel: It keeps up.

Kevin Buchel: Okay.

Speaker Change #175: Got it and then on the service revenue side.

Kevin Buchel: That's helpful.

Kevin Buchel: And then just as a follow-up, going back to that one distributor that still has excess inventory, just based on sort of order patterns you've seen through the September quarter so far.

Jason Schmidt: And then just as a follow up, going back to that one distributor that still has access inventory, just based on sort of order patterns you've seen through the September quarter so far. Do you expect the inventory to be worked down and that issue to be over after this quarter? It's hard to say Jason, because a lot of the business, especially with the big distributors comes in at the end. So even though we're sitting here on August 26, there's a lot of time left to see what's going to happen in this quarter. So the hope is yes, but we don't know yet.

Speaker Change #175: Do you I mean, you know.

In the recent past and it has had stellar.

Growth rates and do you still expect service revenues to grow greater than 25, greater than 30% year on year going forward.

Kevin Buchel: Do you expect the inventory to be worked down?

Kevin Buchel: And that issued to be over after this quarter?

Speaker Change #175: Working hard on it.

Speaker Change #175: Hum.

2007 was pretty impressive this quarter.

Kevin Buchel: It's hard to say Jason, because there's a lot of the business, especially with the big distributors comes in at the end.

Speaker Change #175: I would like to keep it.

Speaker Change #175: In that range.

Jaeson Schmidt: So even though we're sitting here on August 26th, there's a lot of time left to see what's going to happen in this quarter. So the hope is yes, but we don't know yet. All right. Thanks a lot, guys. Congratulations. Thank you.

Jason Schmidt: So even though we're sitting here on August 26th, there's a lot of time left to see what's going to happen in this quarter. So the hope is yes, but we don't know yet. All right. Thanks a lot, guys. Congratulations.

Kevin Buchel: So even though we're sitting here on August 26th, there's a lot of time left to see what's going to happen in this quarter.

Speaker Change #175: We're doing a lot of things to enhance what we're already doing.

Speaker Change #175: We have premium premium will add more recurring revenue that we don't have.

Kevin Buchel: So the hope is yes.

Jason Schmidt: Thank you.

Kevin Buchel: But we don't know yet.

Speaker Change #175: In a market that we don't do a lot in the residential market.

Kevin Buchel: All right.

Unknown Executive: All right, thanks a lot guys. Thank you.

Kevin Buchel: Thanks a lot, guys.

Speaker Change #176: As <expletive> mentioned earlier, we're working on recurring revenue from locking with air access.

Kevin Buchel: Take care, Jason.

Jeremy Hamlin: Thank you.

Jeremy Hamblin: The next question comes from Jeremy Hamlin at Craig Hallam Capital. Please go ahead. Thanks and congrats on a strong year. I want to come back to your equipment gross margins, which continue to make really strong progress. In terms of thinking about the progression that you're likely to make in FY 25, and then as you move forward from there, because I think over time or maybe over the next couple of years, you expect that to get to 40% plus.

Jeremy Hamlin: The next question comes from Jeremy Hamlin at Craig Hall in Capitol.

Jeremy Hamblin: The next question comes from Jeremy Hamlin at Craig Hall and Capitol. Please go ahead. Thanks and congrats on a strong year. I want to come back to your equipment, gross margins, which continue to make really strong progress. In terms of thinking about the progression that you're likely to make in FY25. And then as you move forward from there, because I think over time, or maybe over the next couple of years, you expect that to get to 40% plus.

Speaker Change #176: These are things that are going to get.

Jeremy Hamlin: Please go ahead.

Speaker Change #176: Get that percentage potentially to go even higher.

Jeremy Hamlin: Thanks and congrats on a strong year.

Jeremy Hamlin: I want to come back to your equipment growth margins, which continue to make really strong progress.

Speaker Change #176: But for right now.

Speaker Change #177: Super happy with 27% like to keep it at the mid twenties for now.

Kevin Buchel: In terms of thinking about the progression that you're likely to make in FY25.

Speaker Change #178: That would be great and as these other things kick in it will go higher.

Speaker Change #178: Great. Thank you. Thank you for taking my questions I'll take it offline. Thank you.

Kevin Buchel: And then as you move forward from there, because I think over time, or maybe over the next couple of years, you expect that to get to 40% plus.

Speaker Change #178: Alright.

Speaker Change #178: Okay.

Speaker Change #178: Yeah.

Speaker Change #178: Okay.

Kevin Buchel: But just wanted to get a sense for, you know, with noting that you have, you know, this one distributor with a little bit of excess inventory, how do you expect that progression to play out here in 2025 and then beyond?

Jeremy Hamblin: But just wanted to get a sense for, you know, with noting that you have, you know, at least one distributor with a little bit of of access inventory. How do you expect that progression to play out here in 2025 and then beyond? Well, the margins will get helped a lot by two things. The mix and the volume. And the margins were helped this quarter, this past quarter by both things. The mix, and the vine.

Jeremy Hamblin: But just wanted to get a sense for, you know, with noting that you have, you know, least one distributor with a little bit of access inventory. How do you expect that progression to play out here in 2025 and then beyond? Well, the margins will get helped a lot by two things, the mix and the volume, and the margins will help this quarter, this past quarter, by both things, the mix, and the Vine.

Okay.

Speaker Change #178: Thank you one moment please.

Yeah.

Jeremy Hamblin: So the mix, having 65% of your sales being hardware sales, of locking 65% being locking of the hardware sales, that has great margins, that helps a lot. I love radios, they don't have the best margins. Of course, they have the best margins in the recurring, but we love locking on the hardware side. So we need both, but what we saw this quarter was strong locking, which brings strong margin and volume. The volume going up helps because in our factories, in the Dominican Republic, we get leverage from pushing more volume through our factory.

Kevin Buchel: Well, the margins will get helped a lot by two things, the mix and the volume. And the margins were helped this quarter, this past quarter by both things, the mix, and the Vine. So the mix, having 65% of your sales being hardware sales, of locking 65% being locking of the hardware sales, that has great margins, that helps a lot.

Speaker Change #178: Yes.

Speaker Change #179: And again, ladies and gentlemen should you have any questions. Please press star one on your Touchtone phone.

Jeremy Hamblin: So the mix, having 65% of your sales being hardware sales, of locking, 65% being locking of the hardware sales, that has great margins, that helps a lot. I love radios, they don't have the best margins. Of course, they have the best margins in the recurring, but we love locking on the hardware side. So we need both, but what we saw this quarter was strong locking, which brings strong margin and volume. The volume going up helps because in our factories, in the Dominican Republic, we get leverage from pushing more volume through our factory because it's a labor-intensive factory.

Speaker Change #179: Yeah.

Kevin Buchel: I love radios, they don't have the best margins.

Kevin Buchel: Of course, they have the best margins in the recurring, but we love locking on the hardware side.

Kevin Buchel: So we need both, but what we saw this quarter was strong locking, which brings strong margin and volume, the volume going up helps because in our factories, in the Dominican Republic, we get leverage from pushing more volume through our factory.

Speaker Change #179: Yeah.

Speaker Change #180: Thank you ladies and gentlemen, this concludes our question and answer session today.

Speaker Change #180: Turn the call back over to Richard Soloway CEO for closing comments.

Thank you everyone for participating in today's conference call as always should you have any further questions.

Speaker Change #181: The core brand, Kevin or myself.

Jeremy Hamblin: Because it's a labor-intensive factory, you need labor, a lot of labor, it's low cost labor. You don't need much of anything else, so if you get busy, you add more labor, and if you add nothing else, you get overhead absorption. The margins expand, and the money drops to the bottom line. We feel strongly that the volume is going to keep going, and it gets better, a better. We recently bought our second Panasonic chip shooter machine.

Kevin Buchel: Because it's a labor-intensive factory, you need labor, a lot of labor, it's low-cost labor.

Other information.

Jeremy Hamblin: You need labor, a lot of labor, it's low-cost labor. You don't need much of anything else, so if you get busy, you add more labor, and if you add nothing else, you get overhead absorption. The margins expand, and the money drops to the bottom line. We feel strongly that the volume is going to keep going, and it gets better, a better. We recently bought our second Panasonic chip shooter machine, it's a million dollar machine.

Speaker Change #182: Thank you for your interest and support and look forward to speaking to you all again in a few months to discuss that fiscal Q1 results right.

Kevin Buchel: You don't need much of anything else, so if you get busy, you add more labor, and if you add nothing else, you get overhead absorption.

Kevin Buchel: The margins expand and the money drops to the bottom line.

Speaker Change #181: Good day.

Ladies and gentlemen. This concludes your conference for today, we thank you for participating and we ask that you. Please disconnect your lines.

Kevin Buchel: We feel strongly that the volume is going to keep going, going to get better.

Kevin Buchel: We recently bought our second Panasonic chip shooter machine.

[noise].

Kevin Buchel: It's a million dollar machine. What it does, inserts the components rapidly, more rapidly than anything we've ever had.

Jeremy Hamblin: It's a million dollar machine. What it does, inserts the components rapidly, more rapidly than anything we've ever had, the iPhones use this machine, and it gives you flexibility. So you could change from one product to another product line without disruption. It's our second one. If we didn't believe that our hardware sales were going to be growing nicely, we wouldn't have bought a second machine, but that's our belief. And higher volume will lead to higher margins.

Jeremy Hamblin: What it does, inserts the components rapidly, more rapidly than anything we've ever had. The iPhones use this machine, and it gives you flexibility, so you could change from one product to another product line without disruption. It's our second one. If we didn't believe that our hardware sales were going to be growing nicely, we wouldn't have bought a second machine, but that's our belief, and higher volume will lead to higher margins. Just as a quick follow-up in terms of making that progression here over the next couple of years, so getting to 40% plus by FY26 would be over a thousand basis points of improved gross margins in your equipment, piece of your business.

Kevin Buchel: The iPhones use this machine, and it gives you flexibility. So you could change from one product to another product line without disruption.

Speaker Change #181: Thanks.

Kevin Buchel: It's our second one. If we didn't believe that our hardware sales were going to be growing nicely, we wouldn't have bought a second machine, but that's our belief. And higher volume will lead to higher margins.

Speaker Change #181: Okay.

Speaker Change #181: Yes.

Speaker Change #181: Okay.

Jeremy Hamblin: This is a quick follow-up in terms of making that progression here over the next couple of years. Getting to 40% plus by FY26 would be over a thousand basis points of improved gross margins in your equipment, piece of your business. Does that feel like an achievable target here over that time frame? I guess we'll see how this year goes, but we want to see the progression to close to 40 this year.

Kevin Buchel: This is a quick follow-up in terms of making that progression here over the next couple of years.

Kevin Buchel: Getting to 40% plus by FY26 would be over a thousand basis points of improved gross margins in your equipment.

Kevin Buchel: Peace of your business.

Kevin Buchel: Does that feel like an achievable target here over that time frame?

Jeremy Hamblin: Does that feel like an achievable target here over that time frame? I guess we'll see how this year goes, but we want to see the progression to close to 40 this year, and I think if we see that, then I'll feel good about our 2026 target, but we have to grow that top line hardware more than it's grown. We have to continue to see the strengths from the locking, which we've seen now for several years in a row, and then the margins will go up, and historically, We've seen a tremendous amount of margin increase when the volume goes up.

Kevin Buchel: I guess we'll see how this year goes, but we want to see the progression to close to 40 this year.

Kevin Buchel: And I think if we see that, then I'll feel good about our 2026 target.

Jeremy Hamblin: And I think if we see that, then I'll feel good about our 2026 target. But we have to grow that top line hardware more than it's grown. We have to continue to see the spread from the locking, which we've seen now for several years in a row. And then the margins will go up and historically. We've seen a tremendous amount of margin increase when the volume goes up. If you go back to our history in 2018 and 2019, you'll see where the volume kicks up, the margins fly up.

Kevin Buchel: But we have to grow that top line hardware more than it's grown.

Kevin Buchel: We have to continue to see the strengths from the locking, which we've seen now for several years in a row.

Kevin Buchel: And then the margins will go up and historically.

Kevin Buchel: We've seen a tremendous amount of margin increase when the volume goes up. If you go back to our history in 2018 and 2019, you'll see when the volume kicks up, the margins fly up. Back then, this was pre-COVID, our margins were pushing high 30s low 40s.

Jeremy Hamblin: If you go back to our history, in 2018 and 2019, you'll see where the volume kicks up, the margins fly up. Back then, this was pre-COVID, our margins were pushing high 30s, low 40s. There's no reason we can't get back to that now, considering all the steps we've taken and that locking is a big piece of the pie. This is what we're pushing for. So look for the margins to keep going up during fiscal 2025, and then we'll be able to assess whether our goal for 2026 is achievable.

Jeremy Hamblin: Back then, this was pre-COVID, our margins were pushing high 30s low 40s. There's no reason we can't get back to that now, considering all the steps we've taken and that locking is a big piece of the pie. This is what we're pushing for us, so look for the margins to keep going up during fiscal 2025 and then we'll be able to assess whether our goal for 2026 is achievable. What I will say is our goal for recurring revenue margin, which was 80% is more than achievable as you can see is 90%.

Kevin Buchel: There's no reason we can't get back to that now considering all the steps we've taken and that locking is a big piece of the pie.

Kevin Buchel: This is what we're pushing for.

Kevin Buchel: So look for the margins to keep going up during fiscal 2025 and then we'll be able to assess whether our goal for 2026 is achievable.

Jeremy Hamblin: So what I will say is our goal for recurring revenue margin, which was 80% is more than achievable as you can see it's 90%. I'd like to point out also that our engineering has expanded because we're coming out with new products, the hardware side, with recurring revenue, which has never been done in the industry. So our locking lines will generate recurring revenue for the locksmiths, and they do a specialty in stores, and that's a major drive for us.

Kevin Buchel: What I will say is our goal for recurring revenue margin which was 80% is more than achievable as you can see it's 90%.

Kevin Buchel: I'd like to point out also that our engineering has expanded because we're coming out with new products, the hardware side, with recurring revenue which has never been done in the industry.

Jeremy Hamblin: I'd like to point out also that our engineering has expanded because we're coming out with new products, the hardware side, with recurring revenue, which has never been done in the industry. Our locking lines will generate recurring revenue for the locksmiths and the dual specialty installers and that's a major drive for us, so that's going to keep piling on additional hardware sales and recurring revenue. Those products we showed at the IAC show in their basic form.

Jeremy Hamblin: So that's going to keep piling on additional hardware sales and recurring revenue. So those products, we showed at the IAC show in their basic form, we got very good feedback on that. And we're continuing to develop them, and we expect those to carry us to recurring revenue and equipment sales for many, many years. It's something that a long deal is it's gotten a sell job, and they also get a recurring revenue tail to it.

Kevin Buchel: So our locking lines will generate recurring revenue for the locksmiths and the dual specialty installers and that's a major drive for us.

Kevin Buchel: So that's going to keep piling on additional hardware sales and recurring revenue.

Kevin Buchel: Those products we showed at the IAC show in their basic form. We've got very good feedback on that and we're continuing to develop them and we expect those to carry us to recurring revenue and equipment sales for many, many years.

Jeremy Hamblin: We've got very good feedback on that and we're continuing to develop them and we expect those to carry us to recurring revenue and equipment sales for many, many years. It's something that a long deal has gotten. They sell a job and they also get a recurring revenue tail to it. The locksmiths and the door guys don't get that, but with this new product line that we showed, they will get that, so a very optimistic wrap of future and it's very exciting.

Kevin Buchel: It's something that a long deal has gotten.

Kevin Buchel: They sell a job and they also get a recurring revenue tail to it.

Jeremy Hamblin: The locksmiths and the door guys don't get that, but with this new product line that we showed, they will get that. So a very optimistic wrap the future, and it's very exciting. We also introduced some new radios with additional coverage to them, which have greater coverage and wider variations throughout the whole country. So those will be generating a lot of additional recurring revenue and hardware sales along with them. And everything that we do is under as laboratory approved, which is the gold standard.

Kevin Buchel: The locksmiths and the door guys don't get that but with this new product line that we showed they will get that.

Kevin Buchel: So a very optimistic wrap the future and it's very exciting.

Kevin Buchel: We also introduce some new radios with additional coverage to them which have greater coverage and wider variations throughout the whole country. So those will be generating a lot of additional recurring revenue and hardware sales along with them.

Jeremy Hamblin: We also introduce some new radios with additional coverage to them, which have greater coverage and wider variations throughout the whole country. Those will be generating a lot of additional recurring revenue and hardware sales along with them. Everything that we do is underred as laboratory approved, which is the gold standard. A lot of our competitors use secondary level of approvals and that's good for the smaller companies, but the larger companies that Kevin was referring to, which are coming to us, want the high level of security with underred as laboratory approval. They know that that's the best way to get their signals and the most reliable equipment out there. So we're proud of that. That's one of our major goals.

Jeremy Hamblin: Thank you.

Kevin Buchel: And everything that we do is underread as laboratory approved which is the gold standard.

Jeremy Hamblin: A lot of our competitors use secondary level of approvals, and that's good for the smaller companies, but the larger companies that Kevin was referring to, which are coming to us, want the high level of security with under as laboratory approval. They know that that's the best way to get their signals and the most reliable equipment out there. So we're proud of that. That's one of our major goals. Great, thanks for all the color, best wishes.

Kevin Buchel: A lot of our competitors use secondary level of approvals and that's good for the smaller companies but the larger companies that Kevin was referring to which are coming to us want the high level of security with underread as laboratory approval.

Jeremy Hamblin: Thank you, Jeremy.

Kevin Buchel: They know that that's the best way to get their signals and the most reliable equipment out there.

Kevin Buchel: So we're proud of that.

Kevin Buchel: That's that's one of our magical Great, thanks for all the color, best wishes.

Kevin Buchel: Thank you.

Lance Vitanza: Next question comes from Lance Vitanza at TD Cowan. Please go ahead. Hi, thanks for taking the questions. I'm going to try to get two in if I can. One on revenue and one on cost.

Lance Vitanza: Thank you. Next question comes from Lance Vitanza at TD Cowan. Please go ahead. Hi, thanks for taking the questions.

Lance Vitanza: Thank you. Next question comes from Lance Vitanza at TD Cowan. Please go ahead.

Lance Vitanza: Next question comes from Lance Vitanza at TD Cowan.

Lance Vitanza: Please go ahead.

Lance Vitanza: Hi, thanks for taking the questions. I'm going to try to get two in if I can, one on revenue and one on cost. The revenue question is, could you talk about the pricing trends that you're seeing on the services revenue side, fire radios in particular. I'm wondering to what extent, if any, you have had to rely on promotional pricing and do you expect that to potentially be a headwind on gross margins on the service side going forward?

Lance Vitanza: Hi, thanks for taking the questions.

Lance Vitanza: I'm going to try to get two in if I can, one on revenue and one on cost.

Richard Soloway: I'm going to try to get two in if I can, one on revenue and one on cost. The revenue question is, could you talk about the pricing trends that you're seeing on the services revenue side, fire radios in particular. I'm wondering to what extent, if any, you have had to rely on promotional pricing and do you expect that to potentially be a headwind on gross margins on the service side going forward?

Lance Vitanza: The revenue question is, could you talk about the pricing trends that you're seeing on the services revenue side, fire radios in particular?

Lance Vitanza: The revenue question is, could you talk about the pricing trends that you're seeing on the services revenue side, fire radios, in particular, I'm wondering to what extent, if any, you have had to rely on promotional pricing and do you expect that to potentially be a headwind on gross margins on the service side going forward? We promote as necessary. We've tried not to mess with the formula. The formula has worked since we started this cycle.

Lance Vitanza: I'm wondering to what extent, if any, you have had to rely on promotional pricing and do you expect that to potentially be a headwind on gross margins on the service side going forward?

Richard Soloway: We promote as necessary. We've tried not to mess with the formula, the formula has worked since we started this cycle. And so we only adjust or promote as needed and we'll continue to do that. Fire doesn't need a lot of help, but if it's needed, we'll do it. Listen, we have 90% margins to play with, so it's not a big deal. But so far, the formula has been good. On the non-fire radios, I'd say we've been more aggressive in promoting that.

Lance Vitanza: We promote as necessary. We've tried not to mess with the formula, the formula has worked since we started this cycle. And so we only adjust or promote as needed and we'll continue to do that. Fire doesn't need a lot of help, but if it's needed, we'll do it. Listen, we have 90% margins to play with, so it's not a big deal. But so far, the formula has been good. On the non-fire radios, I'd say we've been more aggressive in promoting that.

Kevin Buchel: We promote as necessary.

Kevin Buchel: We've tried not to mess with the formula. The formula has worked since we started this cycle.

Richard Soloway: And there might be more of that. But again, I try not to mess with the formula, but we got to keep our eye on the market and as needed, we'll adjust. But I think we've been doing pretty well so far in the way we've been handling it. And I hope you realize that we get our recurring revenue and our radios sales two different ways. One is the retrofit to the copper jobs that are out in the field now which are starting to go bad because the Verizon 18T's do not have to install or repair copper anymore, according to government regulations.

Lance Vitanza: And there might be more of that. But again, I try not to mess with the formula, but we got to keep our eye on the market and as needed, we'll adjust. But I think we've been doing pretty well so far in the way we've been handling it. And I hope you realize that we get our recurring revenue and our radios sales two different ways. One is the retrofit to the copper jobs that are out in the field now which are starting to go bad because the Verizon 18T's do not have to install or repair copper anymore, according to government regulations.

Kevin Buchel: And so, we only adjust or promote as needed and we'll continue to do that.

Lance Vitanza: And so we only adjust or promote as needed. And we'll continue to do that. Fire doesn't need a lot of help. But if it's needed, we'll do it. Listen, we have 90% margins to play with. So it's not a big deal. But so far, the formula has been good on the nonfire radios. I'd say we've been more aggressive in promoting that. And it might be more of that. But again, I try not to mess with the formula, but we got to keep our eye on the market and as needed, we'll adjust. But I think we've been doing pretty well so far in the way we've been handling it.

Kevin Buchel: Fire doesn't need a lot of help, but if it's needed, we'll do it.

Kevin Buchel: Listen, we have 90% margins to play with, so it's not a big deal, but so far the formula has been good.

Kevin Buchel: On the nonfire radios, I'd say we've been more aggressive in promoting that, and there might be more of that, but again, I try not to mess with the formula, but we've got to keep our eye on the market and as needed, we'll adjust, but I think we've been doing pretty well so far in the way we've been handling it.

Kevin Buchel: And I hope you realize that we get our recurring revenue in our radios sales two different ways.

Richard Soloway: I hope you realize that we get our recurring revenue and our radio sales two different ways. One is the retrofit to the copper jobs that are out in the field now, which are starting to go bad, dead because the Verizon 18T's do not have to install repair copper anymore, according to government regulations. So you have about five million fire jobs that still need to be converted over. And we have a fabulous radio that the deal is love.

Kevin Buchel: One is the retrofit to the copper jobs that are out in the field now, which are starting to go bad, dead because the Verizon 18T's do not have to install or repair copper anymore, according to government regulations.

Richard Soloway: So you have about 5 million fire jobs that still need to be converted over. And we have a fabulous radio that the deal is love and as I said, it's the gold standard of the business. So we have that work coming in. Then we have all the new control panels with built-in radios. So our new work, the new buildings, refurbs of buildings, those radios are built into the control panel, which gets us hardware sales of smoke detectors and carbon dioxide detectors and all the other peripherals that go along with the fire systems.

Lance Vitanza: So you have about 5 million fire jobs that still need to be converted over. And we have a fabulous radio that the deal is love and as I said, it's the gold standard of the business. So we have that work coming in. Then we have all the new control panels with built-in radios. So our new work, the new buildings, refurbs of buildings, those radios are built into the control panel, which gets us hardware sales of smoke detectors and carbon dioxide detectors and all the other peripherals that go along with the fire systems.

Kevin Buchel: So you have about five million fire jobs that still need to be converted over.

Kevin Buchel: And we have a fabulous radio that the deal is rather than as I said, it's the gold standard of the business.

Richard Soloway: And as I said, it's the gold standard of the business. So we have that work coming in that we have all the new control panels with built in radios. So our new work for new buildings refurbs the buildings. Those are those radios built in the control panel, which gets us hardware sales of smoke detectors and carbon dioxide detectors and all the other peripherals to go along with the fire systems. So we get it two ways.

Kevin Buchel: So we have that work coming in.

Kevin Buchel: Then we have all the new control panels we've built in radios.

Kevin Buchel: So our new work, the new buildings, refurbs of buildings, those radios built in the control panel, which gets us hardware sales of smoke detectors and carbon dioxide detectors and all the other peripherals that go along with the fire systems.

Richard Soloway: So we get it two ways. We figure we have about another five to seven years of retrofit to those five million jobs that need to be upgraded. The dealer typically doesn't pull out the system. He just puts a new communication link in like Starlink. And since our radio is work at all, the different panels that are out there in brands, the opportunities to mend this run.

Lance Vitanza: So we get it two ways. We figure we have about another five to seven years of retrofit to those five million jobs that need to be upgraded. The dealer typically doesn't pull out the system. He just puts a new communication link in like Starlink. And since our radio is work at all, the different panels that are out there in brands, the opportunities to mend this run.

Kevin Buchel: So we get it two ways.

Richard Soloway: We figure we have about another five to seven years of retrofit to those five million jobs that need to be upgraded. The dealer typically doesn't pull out the system. He just puts a new communication links in like starlink. And since our radio is work at all, the different panels that are out there in brands, the opportunities to mend this rough.

Kevin Buchel: We figure we have about another five to seven years of retrofit to those five million jobs that need to be upgraded.

Kevin Buchel: The dealer typically doesn't pull out the system.

Kevin Buchel: He just puts a new communication link in like Starlink.

Kevin Buchel: Thanks, Dick, that's super helpful. If I can just squeeze in the cost question, you mentioned on the call that they're both R&D and SG&A, you know, we're up quite a bit, and you called out a few of the items that drove that on the SG&A side. I might have missed it, but I didn't hear so much about the R&D side. Could you talk about what's going on there and how we should model both of those items going forward?

Lance Vitanza: Thanks, Dick, that's super helpful. If I can just squeeze in the cost question, you mentioned on the call that they're both R&D and SG&A, you know, we're up quite a bit, and you called out a few of the items that drove that on the SG&A side. I might have missed it, but I didn't hear so much about the R&D side. Could you talk about what's going on there and how we should model both of those items going forward?

Lance Vitanza: Thanks, Dick. That's super helpful.

Kevin Buchel: And since our radios work on all the different panels that are out there in brands, the opportunities to mend this[inaudible] Thanks, Dick.

Lance Vitanza: That's super helpful.

Kevin Bouchel: If I can just squeeze in the cost question, you mentioned on the call that they're both R&D and SG&A, you know, we're up quite a bit and you called out a few of the items that drove that on the SG&A side. I might have missed it, but I didn't hear so much about the R&D side. Could you talk about what's going on there and how we should model both of those items going forward?

Lance Vitanza: If I can just squeeze in the cost question, you mentioned on the call that they're both R&D and SG&A, you know, we're up quite a bit and you called out a few of the items that drove that on the SG&A side.

Kevin Bouchel: I mean, on the SG&A side is it's 10 million kind of a good quarterly run rate from here? Yeah, it'll be it'll be lower than what you just saw, and it'll it'll spike during ISC, which this coming year, fiscal 25 will also be in queue for, but absent for that, that's a good level. And we continue to watch it if we could reduce it, we're going to reduce it, but as we've grown, we've had to make steps, which we all you guys all know about, made certain steps, changing it, counting firms and internal order, things like that, we've had to do, we're happy that we have done it.

Kevin Buchel: I mean, on the SG&A side is 10 million kind of a good quarterly run rate from here? Yeah, it'll be lower than what you just saw and it'll spike during ISC, which this coming year, fiscal 25 will also be in Q4, but absent for that, that's a good level. And we continue to watch it, if we can reduce it, we're going to reduce it, but as we've grown, we've had to make steps, which we all, you guys all know about, made certain steps, changing it, counting firms, adding internal order, things like that, we've had to do, we're happy that we have done it.

Lance Vitanza: I mean, on the SG&A side is 10 million kind of a good quarterly run rate from here? Yeah, it'll be lower than what you just saw and it'll spike during ISC, which this coming year, fiscal 25 will also be in Q4, but absent for that, that's a good level. And we continue to watch it, if we can reduce it, we're going to reduce it, but as we've grown, we've had to make steps, which we all, you guys all know about, made certain steps, changing it, counting firms, adding internal order, things like that, we've had to do, we're happy that we have done it.

Kevin Bouchel: But on the R&D side, where everybody always says, well, why don't you hire a whole bunch of engineers? Well, we don't want to be like alarm.com who has hundreds of engineers, but we do have the ability to hire more. And when our head of engineering comes to us, that says, hey, if you can get me these two or three guys, I could get xyz out a lot sooner. We tell them, do it, go for it.

Kevin Buchel: I might have missed it, but I didn't hear so much about the R&D side.

Kevin Buchel: On the R&D side, where everybody always says, well, why don't you hire a whole bunch of engineers? Well, we don't want to be like alarm.com who has hundreds of engineers, but we do have the ability to hire more. And when our head of engineering comes to us that says, hey, if you can get me these two or three guys, I could get X, Y, Z out a lot sooner. We tell them, do it, go for it, we have the ability.

Lance Vitanza: On the R&D side, where everybody always says, well, why don't you hire a whole bunch of engineers? Well, we don't want to be like alarm.com who has hundreds of engineers, but we do have the ability to hire more. And when our head of engineering comes to us that says, hey, if you can get me these two or three guys, I could get X, Y, Z out a lot sooner. We tell them, do it, go for it, we have the ability.

Kevin Buchel: Could you talk about what's going on there and how we should model both of those items going forward?

Kevin Buchel: So the $3 million range for R&D is the new standard, I would say, and this increase came from adding maybe six to seven engineers and salary increases, all well worth doing, gets us to where we want to go faster.

Lance Vitanza: So the $3 million range for R&D is the new standard, I would say, and this increase came from adding maybe six to seven engineers and salary increases, all well worth doing, gets us to where we want to go faster.

Kevin Bouchel: We have the ability. So the $3 million range for R&D is the new standard, I would say. And this increase came from adding maybe six to seven engineers and salary increases, all well worth doing, gets us to where we want to go faster.

Unknown Executive: Great, thanks for taking the questions. You got it. Thank you, ladies and gentlemen. Answer me, mind your issue. Do you have any questions? Please press star one.

Unknown Executive: Great, thanks for taking the questions. You got it. Thank you, ladies and gentlemen. Answer me, mind your issue. Do you have any questions?

Unknown Executive: Great, thanks for taking the questions. You got it. Thank you, ladies and gentlemen. Answer me, mind your issue. Do you have any questions? Please press star one.

Ross Sharma: Next question comes from Ross Sharma at BeReilly. Please go ahead. Yeah, thank you for taking my questions.

Kevin Buchel: I mean, on the SG&A side is 10 million kind of a good quarterly run rate from here?

Ross Sharma: Congratulations on the solid financials and the good quarter. Again, with the self-through stats getting better inventories and hoping to get worked out from your comments, the inclusion in the access alarms segment was down at a 21% year on year. So the radios that are 59% of the mix, they were down 10%, but you're saying fire alarms were up significantly with the higher monthly recurring revenues. Can you? Yeah, I was just going to say, yes, fire was up.

Ross Sharma: Congratulations on the solid financials and the good quarter. Again, with the self-through stats getting better inventories and hoping to get worked out from your comments. The inclusion in the access alarms segment was down at a 21% year on year. So the radios that are 59% of the mix, they were down 10%, but you're saying fire alarms were up significantly with the higher monthly recurring revenues. Can you? Yeah, I was just going to say yes, fire was up.

Ross Sharma: We don't break out how much is fire? How much is non-fire? We do say fire is more than half. Right, right. So can you help break down the portion of the intrusion access alarms that didn't do too well, I guess. And does that portion of the mix not have recurring You know, the part that has recurring other other radios, nothing else. And we don't break it out, Raj, the way you might want.

Ross Sharma: We don't break out how much is fire, how much is nonfire. We do say fire is more than half. Right, right. So can you help break down the portion of the inclusion access alarm that didn't do too well, I guess. And does that portion of the mix not have recurring revenues? Yeah, the part that has recurring other other radios, nothing else. And we don't break it out, Raj, the way you might want.

Ross Sharma: I gave you what I could tell you. And you know, most of the increase is due to fire. And the overall decrease was in the large chunk of non-fire radios that were doing tremendous damage. During the supply chain issue at 3G Sunset, us being the only company who could deliver when nobody else could, everybody loading up. You've got to work through that. The cops are easier now. So I think, you know, as we headed to fiscal 2025, it'll be an easier road for us compared to some of the difficult comps we had in 2024.

Ross Sharma: I gave you what I could tell you. And, you know, most of the increase is due to fire. And the overall decrease was in the large chunk of non-fire radios that were doing tremendous damage. During the supply chain issue at 3G Sunset, us being the only company who could deliver when nobody else could, everybody loading up. We've got to work through that. The cops are easier now. So I think, you know, as we headed to fiscal 2025, it'll be an easier road for us, compared to some of the difficult cops we had in 2024.

Kevin Buchel: Yeah, it'll be it'll be lower than what you just saw and it'll it'll spike during ISC, which this coming year, fiscal 25 will also be in queue four, but absent for that, that's a good level.

Ross Sharma: Got it. And then, so how should we model this, the act of alarm side, growing in the next few quarters, you think, Kevin? Well, I think you're going to see improvement in the radio sales. We've done a lot. We've reduced, we've helped to work to reduce the inventory levels at the distributors. We have an easy comp going forward for the next few quarters. I expect it to be up. You know, I don't want to on this call, you know, put out percentage increases.

Ross Sharma: Got it. And then, so how should we model this, the acts alarm side, growing in the next few quarters, you think, Kevin? Well, I think you're going to see improvement in the radios sales. We've done a lot. We've reduced, we've helped to work to reduce the inventory levels at the distributors. We have an easy comp going forward for the next few quarters. I expect it to be up. You know, I don't want to, on this call, you know, put out percentage increases.

Kevin Buchel: And we continue to watch it if we could reduce it, we're going to reduce it, but as we've grown, we've had to make steps, which we all, you guys all know about, made certain steps, changing it, counting firms, adding an internal order to things like that, we've had to do, and we're happy that we have done it.

Kevin Buchel: On the R&D side, where everybody always says, well, why don't you hire a whole bunch of engineers?

Kevin Buchel: Well, we don't want to be like alarm.com who has hundreds of engineers, but we do have the ability to hire more. And when our head of engineering comes to us that says, hey, if you can get me these two or three guys, I could get X, Y, Z out a lot sooner.

Ross Sharma: I think it's going to be doing better. It has to. Got it. And then on the service revenue side, do you, I mean, you know, in the recent past and, you know, it's had stellar growth rates. And do you still expect service revenues to grow, you know, greater than 25, greater than 30% year on year going forward? Working hard on it. 27 was pretty impressive this quarter. I would like to keep it in the in that range.

Ross Sharma: I think it's going to be doing better. It has to. Got it. And then on the service revenue side, do you, I mean, you know, in the recent past, and, you know, it's had stellar growth rates. And do you still expect service revenues to grow, you know, greater than 25, greater than 30% year on year going forward? Working hard on it. 27 was pretty impressive this quarter. I would like to keep it in the in that range.

Kevin Buchel: We tell them, do it, go for it, we have the ability.

Kevin Buchel: So the $3 million range for R&D is the new standard, I would say.

Kevin Buchel: And this increase came from adding maybe six to seven engineers and salary increases, all well worth doing, gets us to where we want to go faster.

Lance Vitanza: Great, thanks for taking the questions.

Lance Vitanza: You got it.

Ross Sharma: We're doing a lot of things to enhance what we're already doing. You know, we have premium premium land more recurring revenue that we don't have in a market that we don't do a lot in the residential market. As Dick mentioned earlier, we're working on recurring revenue from locking with air access. These are things that are going to get that percentage potentially to go even higher. But for right now, I was super happy with 27. Like to keep it in the mid 20s for now, that that would be great. And as these other things kick in, it'll go higher.

Ross Sharma: We're doing a lot of things to enhance what we're already doing. You know, we have Prima Prima will add more recurring revenue that we don't have in a market that we don't do a lot in the residential market. As Dick mentioned earlier, we're working on recurring revenue from locking with air access. These are things that are going to get that percentage potentially to go even higher. But for right now, I was super happy with 27. Like to keep it in the mid 20s for now, that that would be great. And as these other things kick in, it'll go higher.

Unknown Executive: Great. Thank you. Thank you for taking my questions. I'll take it offline. Thank you. Take care of it. Thank you one moment, please. And again, ladies and gentlemen, should you have any questions? Please press star one on your touch. Phone Thank you, ladies and gentlemen.

Ross Sharma: Great. Thank you. Thank you for taking my questions. I'll take it offline. Thank you. Take care of it. Thank you one moment, please. And again, ladies and gentlemen, should you have any questions? Please press star one on your touch. Phone Thank you, ladies and gentlemen.

Unknown Executive: Thank you, ladies and gentlemen, and to remind you, should you have any questions, please press star one.

Ross Sharma: Next question comes from Ross Sharma at BeReilly.

Ross Sharma: Please go ahead.

Ross Sharma: Yeah, thank you for taking my questions.

Ross Sharma: Congratulations on the solid financials and the good quarter.

Richard Soloway: This concludes our question and answer session today.

Unknown Executive: This concludes our question and answer session today.

Ross Sharma: Again, so with the self-through stats getting better inventories and hoping to get worked out from your comments, the inclusion in the access alarms segment was down at a 21% year on year.

Kevin Buchel: So the radios that are 59% of the mix, they were down 10%, but you're saying fire alarms were up significantly with higher monthly recurring revenues.

Kevin Buchel: Can you?

Richard Soloway: We'll turn the call back over to Richard Soloway, CEO for closing comments. Thank you everyone for participating in today's conference call. As always, should you have any further questions, feel free to call Brandon Kevin on my self before the information.

Richard Soloway: We'll turn the call back over to Richard Soloway, CEO for closing comments. Thank you, everyone, for participating in today's conference call. As always, should you have any further questions, feel free to call Kevin on my phone before the information.

Kevin Buchel: Yeah, I was just going to say, yes, fire was up.

Unknown Executive: Thank you for your interest and support and look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q1 results. Bye bye, have a great day.

Richard Soloway: Thank you for your interest and support and look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q1 results. Bye bye, have a great day.

Kevin Buchel: We don't break out how much is fire?

Kevin Buchel: How much is non-fire?

Richard Soloway: Thank you for your interest and support and look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q1 results. Bye-bye. Have a great day.

Kevin Buchel: We do say fire is more than half.

Kevin Buchel: Right, right.

Kevin Buchel: So can you help break down the portion of the intrusion access alarm that didn't do too well, I guess?

Unknown Executive: Ladies and gentlemen, this concludes your conference for today.

Unknown Executive: Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines. Bye-bye.

Kevin Buchel: And does that portion of the mix not have recurring revenue?

Unknown Executive: We thank you for participating and we ask that you please disconnect your lines.

Kevin Buchel: You know, the part that has recurring other radios, nothing else.

Kevin Buchel: And we don't break it out, Raj, the way you might want.

Kevin Buchel: I gave you what I could tell you.

Kevin Buchel: And, you know, most of the increase is due to fire.

Kevin Buchel: And the overall decrease was in the large chunk of non-fire radios that were doing tremendous damage.

Kevin Buchel: During the supply chain issue at 3G Sunset, us being the only company who could deliver when nobody else could, everybody loading up.

Kevin Buchel: We've got to work through that.

Kevin Buchel: The cops are easier now.

Kevin Buchel: So I think, you know, as we headed to fiscal 2025, it'll be an easier road for us compared to some of the difficult comps we had in 2024.

Kevin Buchel: Got it.

Kevin Buchel: And then, so how should we model this, the act of alarm side, growing in the next few quarters, you think, Kevin?

Kevin Buchel: Well, I think you're going to see improvement in the radio sales.

Kevin Buchel: We've done a lot.

Kevin Buchel: We've reduced, we've helped to work to reduce the inventory levels at the distributors.

Kevin Buchel: We have an easy comp going forward for the next few quarters.

Kevin Buchel: I expect it to be up.

Kevin Buchel: You know, I don't want to on this call, you know, put a percentage increases.

Kevin Buchel: I think it's going to be doing better.

Kevin Buchel: It has to.

Kevin Buchel: Got it.

Kevin Buchel: And then on the service revenue side, do you, I mean, you know, in the recent past and, you know, it's had stellar growth rates.

Kevin Buchel: And do you still expect service revenues to grow, you know, greater than 25, greater than 30% year on year going forward?

Kevin Buchel: Working hard on it.

Kevin Buchel: 27 was pretty impressive this quarter.

Kevin Buchel: I would like to keep it in the in that range.

Kevin Buchel: We're doing a lot of things to enhance what we're already doing.

Kevin Buchel: You know, we have premium, premium land more recurring revenue that we don't have in a market that we don't do a lot in the residential market.

Kevin Buchel: As Dick mentioned earlier, we're working on recurring revenue from locking with air access.

Kevin Buchel: These are things that are going to get that percentage potentially to go even higher.

Kevin Buchel: But for right now, I was super happy with 27.

Kevin Buchel: Like to keep it in the mid 20s for now, that that would be great.

Kevin Buchel: And as these other things kick in, it'll go higher.

Kevin Buchel: Great.

Kevin Buchel: Thank you.

Kevin Buchel: Thank you for taking my questions.

Unknown Executive: I'll take it offline.

Unknown Executive: Thank you.

Unknown Executive: Take care of it.

Unknown Executive: Thank you one moment, please.

Unknown Executive: And again, ladies and gentlemen, should you have any questions?

Unknown Executive: Please buy a star.

Unknown Executive: One on your touch, Sean.

Unknown Executive: Phone Thank you, ladies and gentlemen.

Unknown Executive: This concludes our question and answer session today.

Richard Soloway: I will turn the call back over to Richard Soloway, CEO for closing comments.

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

Richard Soloway: As always, should you have any further questions, feel free to call Brandon Kevin on my phone before the information.

Richard Soloway: Thank you for your interest and support and look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q1 results.

Unknown Executive: Bye-bye, have a great day.

Unknown Executive: Ladies and gentlemen, this concludes your conference for today.

Unknown Executive: We thank you for participating and we ask that you please disconnect your lines.

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