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Edited Transcript of NSSC earnings conference call or presentation 3-Sep-19 3:00pm GMT

Q4 2019 NAPCO Security Technologies Inc Earnings Call

AMITYVILLE Sep 15, 2019 (Thomson StreetEvents) -- Edited Transcript of NAPCO Security Technologies Inc earnings conference call or presentation Tuesday, September 3, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kevin S. Buchel

Napco Security Technologies, Inc. - Senior VP of Operations & Finance, CFO, Treasurer and Director

* Patrick McKillop

Napco Security Technologies, Inc. - Director of IR

* Richard L. Soloway

Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary

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Conference Call Participants

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* Jaeson Allen Min Schmidt

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* Jeffrey Ted Kessler

Imperial Capital, LLC, Research Division - MD

* Matthew Charles Pfau

William Blair & Company L.L.C., Research Division - Analyst

* Thomas Michael Walkley

Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst

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Presentation

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Operator [1]

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Greetings and welcome to the NAPCO Security Technologies, Inc. Fiscal Fourth Quarter 2019 and Full Year Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Patrick McKillop, Director of Investor Relations. Thank you. You may begin.

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Patrick McKillop, Napco Security Technologies, Inc. - Director of IR [2]

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Thank you. Good morning, and thank you all for joining us for today's conference call to discuss our financial results for our fiscal fourth quarter 2019 and fiscal year 2019. By now, all of you should have had the opportunity to review the press release discussing the results. If you have not, a copy of the release is available in the Investor Relations section of our website, www.napcosecurity.com.

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

Before we begin, let me take a moment to read the forward-looking statements. 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.

During the call, we may also present certain non-GAAP financial measures, such as adjusted EBITDA and certain ratios that are used with these measures. In the press release and on the financial tables issued earlier today, you'll find a definition of these non-GAAP financial measures, a reconciliation of these non-GAAP financial measures with the closest GAAP financial measure as well as a discussion about why we think these non-GAAP financial measures are relevant to our results. These financial measures are included for the benefit of investors and should not be considered instead of GAAP measures.

I'll turn the call over to Dick in a moment, but before I do, I just want to mention a few things on the IR front. In terms of upcoming investor outreach, we will be attending and hosting a one-on-one meeting at the Lake Street BIG3 Conference on September 12 in New York and also at the CL King Conference in New York on September 19. Investor outreach is crucial, especially for small-cap companies, such as NAPCO, and I would like to thank all of those folks that assist us in these conferences and marketing trips.

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

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [3]

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

The fourth quarter and fiscal year 2018 marked another record revenue and profitability performance for NAPCO. Our SaaS recurring revenues continue to grow at a rapid rate. Our recurring revenue's annual run rate is now $20.4 million as of June. Our focus on targeting the professional installation and mostly commercial end markets is driving this continuous growth.

Our balance sheet remains strong with 0 debt as of this report and our cash balances continue to grow. Capitalizing on key industry trend, including school security solutions, wireless fire and intrusion alarm communicators, enterprise access control system and architectural locking products remains our focus. The management team here at NAPCO continues to focus on the key metrics of growth, profit and return on equity. These metrics are important for us as well as our shareholders.

Our business strategy is executing well and our interests are aligned with our shareholders as senior management at NAPCO owns 38% of the equity.

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

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Kevin S. Buchel, Napco Security Technologies, Inc. - Senior VP of Operations & Finance, CFO, Treasurer and Director [4]

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Thank you, Dick, and good morning, everybody. For the fourth quarter, net sales increased 9% to $29.6 million, which was a record quarterly performance and the 28th consecutive quarter of year-over-year record sales as compared to $27.3 million for the same period a year ago. For fiscal 2019, net sales increased 12% to a record $102.9 million as compared with $91.7 million a year ago. The increase in sales for the quarter were primarily related to increased sales of our alarm communication services, door locking product and access control product. For the full fiscal year, the increase in sales was primarily related to increased sales from alarm communication services and products, door locking product and access control product.

Recurring monthly revenue from the alarm division increased 44% for the quarter and 45% for the fiscal year. Recurring revenue now has an annual run rate of $20.4 million based on June 2019 recurring revenue. Gross profit for the fourth quarter increased 7% to $12.9 million with a gross margin of 44% as compared to $12.1 million with a gross margin of 45% last year. Gross profit for fiscal year 2019 increased 16% to $43.9 million with a gross margin of 43% as compared to $38 million with a gross margin of 41% last year. The increase in gross profit for the fourth quarter and the fiscal year was primarily due to the increase in sales and partially offset by increased salary and freight expenses.

The slight decrease in gross margin in the fourth quarter was primarily due to product mix as well as additional sales discount given related to several new product launches. The increase in gross margin for the fiscal year was primarily due to the 45% increase in recurring revenue, where the gross margin was 78% as well as the leverage from the Dominican Republic manufacturing facility generated from equipment revenue increases of 7%.

Also please note that the tariff situation with China has no effect on our margin, as we manufacture virtually 100% in the Dominican Republic. Even when we get raw materials from China, they are shipped directly to the DR, so no tariffs. Our competition is not as fortunate. They have tariff issues on both finished and raw material.

R&D expenses for the fourth quarter increased 8% to $1.9 million or 6% of sales compared to $1.7 million or 6% of sales last year. For the fiscal year, R&D expenses increased 9% to $7.2 million or 7% of sales as compared to $6.6 million or 7% of sales last year. The increase for the 3 months and the full year was primarily due to additional personnel.

SG&A expenses for Q4 increased 3% year-over-year to $6.3 million or 21% of sales as compared to $6.1 million or 23% of sales last year. For the fiscal 2019, SG&A expenses increased 1% to $23.2 million or 23% of sales as compared to $23 million or 25% of sales last year. The increases in dollars was primarily from increases in employee compensation. The decrease as a percentage of sales was primarily the result of the percentage increase of sales exceeding the increase in selling, general and administrative expense.

Operating income for the fourth quarter increased 11% to $4.8 million as compared to $4.3 million last year. For the fiscal year, operating income increased 60% to $13.5 million compared to $8.4 million last year.

Income tax expense for the quarter decreased by $531,000 to $35,000 as compared to $566,000 last year. Income tax expense for fiscal 2019 increased $538,000 to $1.2 million as compared to $684,000 for the same period a year ago. The decrease in income tax expense for the fourth quarter was primarily due to the recognition of increased R&D tax credit. The increase in income tax expense for the fiscal year was primarily due to the aforementioned increase in operating income. The company's effective tax rate remain relatively constant at 9% for fiscal 2019 as compared to 8% for fiscal 2018.

Net income for the fourth quarter increased 28% to a fourth quarter record of $4.7 million, which equates to 16% of net sales or $0.26 per diluted share as compared to $3.7 million or $0.20 per diluted share last year. For the year, net income increased 60% to a record $12.2 million, which equates to 12% of net sales or $0.66 per diluted share as compared to $7.6 million or $0.41 per diluted share for the same period a year ago. The change in net income for the quarter and the year ended June 30, 2019, was primarily due to the items previously mentioned.

Adjusted EBITDA for the quarter is outlined in the schedule included in today's press release increased 10% to $5.2 million, which equates to 17% of net sales or $0.28 per diluted share compared to $4.7 million or $0.25 per diluted share last year. For the year, adjusted EBITDA increased 51% to $15 million, which equates to 15% of net sales or $0.81 per diluted share as compared to $10 million or $0.53 per diluted share last year.

Moving on to the balance sheet. Cash balance at June 30, 2019, was $8 million as compared to $5.3 million at June 30, 2018. Our working capital as of June 30, 2019, was $51.1 million as compared to $44.3 million at June 30, 2018. Current ratio was 4.6:1 at June 30, 2019, as compared with 5.7:1 at June 30, 2018. And debt remained at 0 at June 30, 2019.

Net cash provided by operating activities for the quarter was $2.9 million and for the full fiscal year was $8.7 million. Inventory levels remain higher than normal as we are gearing up for several new product launches, including iSecure, our new Marks' anti-ligature lock and our new line of AT&T LTE StarLink radio, all of which Dick will cover momentarily.

CapEx was $388,000 during the quarter and was 1.9 -- $1,988,000 for the year. That concludes my formal remarks, and I would now like to return the floor back to Dick.

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [5]

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Kevin, thank you. The growth of our business is strong, and we believe the trend will continue in the future. Demand for our recurring revenue products is coming from alarm communication, including fire, intrusion and the growth of the smart home category.

We continue to believe that the market opportunity for school security in the United States is significant. There are approximately 100,000 K-12 and 10,000 colleges and universities in the U.S. None of us will ever forget the tragic event that took place during 2018 and continue to take place this year. We remain dedicated to providing solutions and products that schools desperately need.

During our past conference calls, we have discussed an increased volume of legislation being passed by many states since 2018, which includes funding of $1 billion. According to the U.S. News & World Report article from earlier this year, states are considering nearly 250 different school safety bills in 2019. This underscores how the issue remains front and center for everyone. The federal government, you may recall, in 2018 passed a grant program, which has allocated $100 million per year through 2028 for school security. We're also aware of other pending legislation, which we are monitoring. The pipeline for school security products looks robust, and we will continue to announce new wins when we can as we need to receive approval from the schools prior to doing so.

Recently, we've witnessed more and more active shooter incidences taking place at houses of worship and other public meeting places. We have seen the need to expand the use of our SAVI audit system for these locations. The continuing violence in public area is painting a clear picture for the need of securing these areas with our products, such as wireless locks and access control.

During Q4, we began the launch of our new AT&T LTE StarLink line of universal fire, intrusion alarm and IoT communicator. We now have StarLink lines on both the Verizon and the AT&T LTE network, which provides our dealers with the largest LTE service coverage in the U.S. Also we will be launching the new version of our Marks' division's anti-ligature lock. These locks meet ADA, that's Americans with Disabilities Act requirement as well as the BHMA highest anti-ligature standard.

The shaping and structure of these locksets is designed to restrict the attachment of lines, lasers, et cetera, to doorknobs and lever. The locksets are offered in unprecedented cylindrical, mortise-style models and function and provides easy installation and retrofit to all popular door construction.

We are very excited about the upcoming launch of our latest product, iSecure. It was debuted at the ISC West Trade Show in Las Vegas in April of this year. The iSecure is designed for the new breed of professional installers and savvy consumers. It has quick installation time, and its advanced features are perfect for smart home application so in demand today. The iSecure won the MVP, that's the most valuable product award, in the home controls category at the trade show and drew lots of traffic from dealers into our trade show booth.

Lastly, our FireLink fire alarm control panel with a built-in cellular communicator was launched earlier this year. FireLink, an all-in-one 8 through 32 zone fire alarm panel with built-in cellular LTE StarLink-powered communicator has grown quickly in sale. FireLink comes preconfigured and preactivated enabling easy installation and cost savings to dealer. FireLink will add to our already rapidly growing recurring revenue.

We will begin our Q&A session portion of this call in a moment. Our fiscal year 2019 was a very successful record-breaking year for us as we continue to grow the company and deliver strong profit. Our shareholders have been rewarded with very healthy returns in stock performance. NAPCO is in a strong position to continue its growth in sales and profits going forward. We are excited about the future fiscal year 2020 and beyond. NAPCO senior management maintains a high level of ownership in our equity, approximately 38%. And I would like to thank everyone for their support and for joining us in this exciting future we have.

Our formal remarks are now concluded. We'd like to open the call with the Q&A session. Operator, please proceed.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Jaeson Schmidt with Lake Street Capital.

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Jaeson Allen Min Schmidt, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [2]

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Just want to start with the security market -- school security market. Seems like you're seeing some early nice traction there. Can you comment if you're seeing the size of the installed increasing over the past few months here?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [3]

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There are many different types of jobs that we're getting and several of them are larger than others. And we always find that with the jobs that we do, the school, especially universities keep adding to that. So we've done some schools with contact 4x, keep doing the dorm buildings and the classrooms and the executive offices, but there are all different sizes all over the country. If you've seen the press release we put out, they are all starting to come together where localities want to protect the students, come to the realization this is not going to stop unless something major is done in policy within the country, which that -- looks like that's kind of stymied. I don't know what's going to happen with that. So the only way around all this is to put in school security, and our line of school security is the widest school security line in the industry. And we make stand-alone, we make them remote control, we make systems where you can have a man trap and lock an active shooter between doorways, there are different ways of configuring our system that we're very flexible. So we expect to continue small, medium and large jobs and each job increasing in volume as they add more facilities to them.

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Jaeson Allen Min Schmidt, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [4]

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Okay. That's helpful. And along those lines, just given the increasing traction in that market, do you expect to need to add to headcount in a significant way to address all the opportunities?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [5]

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We have a very nice network of sale agents and reps. And in fact, we've made an integration between the Marks Group and the Alarm Lock Group, so they have more salespeople and they're more intense in their territories, but we don't expect to see an increase in -- for the new year. In fact, this year, the SG&A was basically flat. We were very budget conscious. We wanted to make sure we get the most efficiency out of each of our salespeople.

As far as the manufacturing side of the business, we're in the Dominican Republic, our components are shipped in from all of Asia and we do all our assembly there. The minimum wage in the Dominican Republic is $2,500 a year, so it's not really material if you get another 50 workers assembling products. The margins are great on the product so that -- it's not really a material effect. So we're pretty stable in both of these areas, sales, marketing and manufacturing.

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Jaeson Allen Min Schmidt, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [6]

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Okay. And the last one from me and I'll jump back in the queue. I know previously, you drew out a $40 million recurring revenue run rate target for fiscal '21. Do you still feel confident in that target?

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Kevin S. Buchel, Napco Security Technologies, Inc. - Senior VP of Operations & Finance, CFO, Treasurer and Director [7]

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Not only do I feel confident -- this is Kevin. Not only do I feel confident, Jaeson, I thought we would be pushing hard to get to $20 million, we got to $20.4 million run rate, $40 million, we could beat it. And I'm just keeping -- I'm still saying $40 million. But if we had recurring revenue into the other areas of the business like we talked about, try to get it into the locking side, the access, we'll blow past the $40 million. For now, I'd just call it $40 million by June of '21.

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Operator [8]

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Our next question comes from the line of Mike Walkley with Canaccord Genuity.

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Thomas Michael Walkley, Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst [9]

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Great to see the recurring revenue growth and reiteration of targets. Just a question from me on the hardware gross margin side. What about they being a little bit closer to 40% with the $24 million hardware revenue achieved this quarter, can you talk a little bit about the mix that impacted margins for the quarter and maybe a little more color on some of the price discounts that you gave during the quarter?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [10]

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Some of the things we try to do like is to capture a lot of the AT&T radio market, LTE. And we introduced that in the fourth quarter. And our thought process was let's capture that market because once we start getting the recurring revenue, we got that pretty much for life. It's a big market, we didn't have it, we're starting to get it, I would put about 2% margin effect in the quarter because of that. So I would have expected normal situation to be at 40% also. We would -- we came in basically set 37%. So there's a 3% differential, 2% I would say is because of discounts we gave on the new product introduction, 1% I would say is due to the mix we -- sometimes there is mix difference. If we get a big school job at a university in 1 quarter and you get a job that's not as big the following year, that could easily affect you by 1%. Nothing that we saw out of the ordinary. To have a 1% differential on mix, not that unusual. The part that was different was the 2% because of discount, virtually all due to the AT&T LTE radio intro.

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Thomas Michael Walkley, Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst [11]

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Great. And then maybe just building on that, you've highlighted all kinds of new products ramping in the coming quarters. How should we think maybe about mix from the new products? How does that impact gross margin in the short term on the hardware side? Obviously, growing recurring revenue is great for the long term, but how should we maybe think about short-term margins given some of these new products coming into the model?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [12]

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I think in Q1, you'll see a little more what we saw in Q4 in the introduction because the LTE -- that's a big area for us, you'll see a little more of that. I don't think you'll see any discounting or we introduce the new anti-lig, that's a very expensive high-margin product to begin with and everybody wants to get their hands on the new version, we don't have to do that. We're like one of the few that manufactured this.

The iSecure, that's coming out of the gate very aggressively priced. We don't have to discount that beyond what it is. People are going to jump at that just because the price is so good right out of the gate. It's going to blow away the competition. So I don't expect any discounting on that one either. It's really a little bit more on the radio side, but we believe that with the recurring growing dramatically like it has with 78% to 80% gross margins that it will more than make up for that.

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Thomas Michael Walkley, Canaccord Genuity Corp., Research Division - MD & Senior Equity Analyst [13]

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Great. And last question for me and I'll pass it on. Just on the recurring revenue given your confidence you still think like a 40%-plus year-over-year growth rate? Or does it slow in short term and accelerate as new product start to ramp? And then secondly, just given the ramp at AT&T, any color how it's going so far maybe relative to the Verizon launch?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [14]

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We expect that the $40 million is the number that we're going to hit in June 30, '21 year. We think that with the AT&T, the iSecure and some of the locking product, which are going to be generating recurring revenue, which is revolutionary for the business, never been done before in the whole industry. Locks traditionally don't generate recurring revenue, they're one-off sales, but our versions of the locks will generate recurring revenue, the installation companies as well as the end users. We think that we can go beyond the $40 million, and we'll do what we have to do to get our market share, but I think that the price points that we have set -- established are going to be pretty stable and we're going to hit that number of $40 million and beyond, that's how we look at it.

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Operator [15]

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Your next question comes from the line of Matt Pfau with William Blair.

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Matthew Charles Pfau, William Blair & Company L.L.C., Research Division - Analyst [16]

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Wanted to ask on hardware growth in the quarter. It's the lowest for the year and -- but the full year was about 7%, which is sort of in line with what you guys have talked about longer term. Was there anything disappointing in the quarter or one-off in the quarter that had that growth rate below the other quarters in the year? And how do we think about that growth rate going forward? Is the fourth quarter more indicative of go forward or is the full year growth more, how we should think about it?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [17]

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The hardware growth for the full year of 7% was one of the highest increases we've had in years. We've been saying our goal is to get to high single or double digits. So 7%, we're on our way to high single. I don't think there's any reason for us to believe why we can't do more better from a percentage point of view in fiscal '20 since we're introducing so many things between the iSecure and the new anti-lig, the new radios, the FireLink panel hasn't been out that long. We're doing -- spending a lot of money on R&D, for us a lot, hasn't gone up by that much, but $7.2 million this past year. They are spending a lot of time on doing a lot of things that get us more return and more hardware. The hardware sales is very important to us to the Dominican leverage, we talked about very important. Just -- we didn't see it as much in Q4, but you saw it for the full year and that's a big part of what we're doing. We're getting so busy down there. We're going to be going to a second shift on radio soon. These are all good things. So if I was projecting out, I would still believe that low single -- I mean high single digits for -- for the full year even though it was lower in Q4 is still the goal and still very achievable.

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Matthew Charles Pfau, William Blair & Company L.L.C., Research Division - Analyst [18]

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Got it. And then on the school security side, you mentioned all these funding bills that are out there and a few that have passed. How big of an impact has the government funding been to the school security business? Or is that still more of an opportunity with some of these bills being passed potentially accelerating the growth of that business?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [19]

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Well, we are seeing an increase in school security jobs. We're publishing them as we get them. There is many, many more in queue. The schools are being -- they're getting some funding from their regional area. We expect it's going to be federal funding, there's going to be legislation put out. So all of this primes the pump to get a lot more business. And since we have offering for K-12, which are low-cost, easy-to-convert K-12 to more secure places for the students and not that expensive to do, schools are jumping the gun and doing their own financing of this through state legislature, counties around the country. The accounts universities have large endowments. They're using that money in anticipation of more money coming down, and we're seeing a better situation in the schools that make these moves and they're going to be much more protective for the students. So we see this all in a very positive light and it's going to take many, many years of growth and the schools will be secure. But as far as we can see, I can see 5 years of continuous school growth ahead of us, and the big money is starting to really come down.

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Matthew Charles Pfau, William Blair & Company L.L.C., Research Division - Analyst [20]

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Got it. And in terms of the hurricane that's currently impacting the Caribbean. Any impact there to your operations? And then, again, I realize it didn't hit there, but in terms of getting the goods out of the Dominican to the U.S., so is there any disruption there from the hurricane?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [21]

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We haven't -- we -- our factory is category 5 in the Dominican Republic, so the hurricane didn't hit. There is going to be -- we ship things both by air and by sea. So we haven't gotten feedback yet from the ocean shipping companies, but they are on top of the game. So we expect with the amount of inventory we have here, that we'll be able to satisfy all demands and keep things rolling. But let's see how things go in the next week or so.

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Operator [22]

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(Operator Instructions) Our next question comes from the line of Jeffrey Kessler with Imperial Capital.

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Jeffrey Ted Kessler, Imperial Capital, LLC, Research Division - MD [23]

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It's probably fair to say that there was a little bit of a surprise on the analyst part in looking at how much you spent on some of the new investments that you're making, the AT&T radio, capturing part of that market. And I'm wondering this brings up 2 questions. Number one, do you think that, number one, by keeping this under wraps, at least publicly not talking about what you're going to invest in, do you think you've been able to take the competitive market a little bit by surprise since you've already been in the Verizon side of the market, you hadn't been in the AT&T market so heavily, do you think that you, again, taking a little bit of the AT&T folks communication side by surprise?

And number two, of these investments that you're making now, where do you see the returns coming, let's get -- if you want to call it a little bit earlier and which ones you're going to be taking a little bit longer to play out over the course of the next fiscal 1.5 years?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [24]

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Jeff, these are complicated questions. We -- it's not an exact sign, but it's always good to sneak up on the competition and that's why the AT&T radio is a very important launch and you hit the nail right on the head. We're going to have tremendous success with the AT&T radio to grow our recurring revenue, and we had to do we had to do to run the business in a very solid way for mid-term and long term. And that AT&T radio nationwide makes us very unique, in fact we are doing fire with it as well as home and small business. So it's an important thing to do. And it bodes well for our future. We expect that between AT&T radios and iSecure and every iSecure has a radio built into it, so that every alarm that's installed going forward with the iSecure, which we expect to be a real volume producer will generate recurring revenue for us. And having it on all these networks is very important. So that's -- if you want more detail, we could do a conversation later on getting in deeper if you want to go deeper than this.

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Jeffrey Ted Kessler, Imperial Capital, LLC, Research Division - MD [25]

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Sure. And as far as you want to quote -- I don't want to say a schedule, but what do you see as -- which are we going to be seeing the returns from a little bit earlier? Which are we going to be seeing the returns from a little bit later? Are those investments that you're making over the last quarter and into -- and obviously into the next quarter?

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [26]

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Our investments are -- we have this goal. We have a goal June 30, '21 that we're going to be at $40 million of recurring, and we're going to be $100 million in hardware manufacturing. And to put that together and you're over $1.30 a share and that is our goal. And we're doing everything we can to win market share, to get to our goal and go beyond our goal and looks like this is working for us.

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Jeffrey Ted Kessler, Imperial Capital, LLC, Research Division - MD [27]

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One final question. One of the real big issues that I'm dealing with right now and which the industry is -- overall is dealing with right now to try to not just prop up, but to -- just to reinforce the value proposition is the difference between verified and unverified alarm signals out there, the difference between convenience and having a professional service, to have police show up within 5 or 6 minutes on the residential side, not just on the commercial side, what are you folks -- what are you doing -- and I'm thinking about iSecure and products like that, what are you doing to accelerate the industry's -- the professional industry's ability to have police and, of course, the PSAPs, the 911 centers accept the signals more readily and allow police to come in and respond without having false alarms.

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [28]

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So a lot of the false alarms are caused by DIY products, not professionally installed product. DIY products are not attached to the wall, to the ceiling that well, they move and they cause a false alarm or they're not close enough to the magnetic contacts to go on the windows. So that cause a lot of false alarms. Our iSecure is not aimed for the DIY market, but its price point and its functionality is -- put the dealer, professional dealer in the game of installing more and more alarm systems, which compete against the DIY products. So it's very professionally installed, which eliminates a lot of the false alarms you're getting from DIY, and we're trying to arm our dealers and the dealers across the nation with a product, which has a better return on investment, more reliable, more feature-rich and installs with less false alarm. That's our contribution to what's going on. It reports to all central stations, it reports cellularly and it works through our back-end NOC, which has ability to give additional functionality to eliminate false alarms, and we can talk about that off-line because I know that you and the industry and us, we're all proponents of keeping the police response to real alarm not false alarm. It's a major thing in the industry, but we can talk off-line and go through exactly what this does from a...

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Operator [29]

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Thank you. We have reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Soloway for any closing remarks.

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Richard L. Soloway, Napco Security Technologies, Inc. - Chairman, CEO, President & Secretary [30]

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Thank you, everyone, for participating in today's conference call. As always, should you have any further questions, please feel free to call Patrick, Kevin or myself for further information. We thank you for your interest and support. And we look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q1 '20 results. Bye-bye.

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Operator [31]

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Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.