NAPCO Security Technologies, Inc. (NSSC)

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Napco Security Technologies (NSSC)

Q4 2013 Earnings Call

September 16, 2013 11:00 am ET


Peter Seltzberg - Regional Vice President - New York and Partner

Richard L. Soloway - Chairman, Chief Executive Officer, President and Secretary

Kevin S. Buchel - Principal Financial Officer, Principal Accounting Officer, Senior Vice President of Operations & Finance, Treasurer and Director


Orin Hirschman

George Santana - Ascendiant Capital Markets LLC, Research Division

Walter Christopher Ramsley - Walrus Partners, LLC

Rick Federman

Jeffrey T. Kessler - Imperial Capital, LLC, Research Division

Fred Hart



Ladies and gentlemen, thank you for standing by. Welcome to the NAPCO Security Technologies Fiscal Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Peter Seltzberg from Hayden IR. Please go ahead, sir.

Peter Seltzberg

Good morning, and thank you, all, for joining us for today's conference call to discuss NAPCO's financial results for the fourth quarter ended June 30, 2013.

By now, all of you should have had the opportunity to review the press release discussing the results. If you have not, please call our office, Hayden IR, at (646) 419-4300, we'll immediately send it to you by either fax or e-mail.

On the call today is Richard Soloway, President and Chairman of NAPCO Security Technologies; and Kevin Buchel, Senior VP of Operations and Finance. Before I ask our host, Richard Soloway, to discuss the particulars of today's news, let me take a moment to read the forward-looking statement.

This conference call may contain forward-looking statements that involve numerous risks and uncertainties. Actual results, performance or achievements may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in the company's filings with the SEC.

With that out of the way, let me turn the call over to Richard Soloway, President and Chairman of NAPCO Security Technologies. Dick, please proceed.

Richard L. Soloway

Thanks, Peter. Good morning, everyone. Thank you for joining NAPCO's quarterly conference call to discuss the financial results for the 3 and 12 months ending June 30, 2013.

Our fourth quarter delivered a strong finish for our fiscal year of 2013 and contributed to positive financial metrics for the quarter and year. We generated our highest quarterly revenue level in 5 years and matched our best quarter ever in net income.

Gross margin improved 270 points to 38.1% for the quarter. Gross margin increased due to favorable product mix as demand for our more sophisticated, higher-margin products increased. In addition, as we have reiterated on numerous occasions, when our top line exceeds $20 million, we're able to more effectively leverage our low-cost manufacturing infrastructure.

These top line results contributed favorably to the bottom line, in part, due to our careful management of expenses and decrease in interest expense, which resulted from lower interest rate and lower debt levels. As a result, we matched our best-ever quarterly net income of $3.2 million, up 74% from the year-ago period.

Earnings per share for the quarter rose to $0.17 per diluted share, an 89% increase over the $0.09 per share diluted in the year-ago quarter. Adjusted EBITDA for the quarter increased as well by just under $1 million to $4.4 million from $3.5 million in the year-ago quarter.

Please see our press release issued earlier today to review the reconciliation of GAAP to non-GAAP adjusted EBITDA financial metrics.

These favorable metrics demonstrate the traction of our comprehensive line, which is beginning to deliver to our top and bottom line results and includes products introduced in the last 18 months and those with recurring monthly revenues. We are excited about our positioning as a technology leader, with new products out in the marketplace. Our focus on diversifying our product line and developing sophisticated products that are scalable and interoperable to deliver a one-stop shopping experience is resonating with our dealers and integrator network.

Specific product lines that contributed to our solid fourth quarter results were the company's Marks brand door-locking products, access control products and Alarm Lock brand door-locking products. The introduction of Alarm Lock's Networx wireless locks, integrated with Continental Access', enterprise-class, card access systems, has demonstrated solid sales success by providing K-12 and university campus end-users with unique lock-down capabilities.

You might recall that in May, we announced the $1.5 million order to supply a major university campus with over 1,700 network wireless locks. This is the largest single order that our Continental Access Control division has been awarded for its Networx line. Our full-featured security management suite provides facility management with the technological backbone necessary to support, manage and protect today's schools, hospitals, corporations and government facilities, including campus-wide lockdowns.

The best-in-class wireless technology, coupled with our ability to deliver a custom architectural finish on the locks, was very important to this customer. We shipped a significant portion of the devices during the fourth quarter, which contributed to the increase in revenues. In addition, one of the factors in achieving this order was our commitment to have the products installed by the time the university students returned to the campus to resume their studies in the fall. I'm proud to say that we met this challenge and had the product delivered and installed on time. The school administration is extremely happy with the results. Because safety and security concerns remains high priority for people and organizations entrusted with the care and protection of others, we expect that this product configuration represents a potential growth driver for us going forward.

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