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NAPCO Security Technologies Inc (NSSC) Q4 2019 Earnings Call Transcript

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NAPCO Security Technologies Inc (NASDAQ: NSSC)
Q4 2019 Earnings Call
Sep 3, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the NAPCO Security Technologies, Inc. Fiscal Fourth Quarter 2019 and Full-Year Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]

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

Patrick McKillop -- Director of Investor Relations

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 sections 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 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.

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 the 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 will 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 12th in New York and also at the CL King Conference in New York on September 19th. 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.

Richard L. Soloway -- President and Chief Executive Officer

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 2019 marked another record revenue and profitability performance for NAPCO. Our SaaS recurring revenues continued to grow at a rapid rate. Our recurring revenues annual run rate is now $20.4 million as of June. Our focus on targeting the professional installations and mostly commercial end market is driving this continuous growth.

Our balance sheet remains strong with zero debt as of this report, and our cash balances continue to grow. Capitalizing on key industry trends, including school security solution, 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 to 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?

Kevin S. Buchel -- Senior Vice President of Operations and Finance and Chief Financial Officer

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 20th 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 products and access control products. For the full fiscal year, the increase in sales was primarily related to increased sales from alarm communication services and products, door-locking products and access control products. 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 as 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 discounts 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 margins as we manufacture virtually 100% in the Dominican Republic. Even when we get raw materials from China, they're 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 three 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 remained 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, as 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 for diluted share last year.

Moving on to the balance sheet. The 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 is 4.6:1 at June 30, 2019 as compared with 5.7:1 at June 30, 2018. And debt remained at zero at June 30, 2019.

Net cash provided by operating activities for the quarter was $2.9 million[Phonetic] 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, I think, we'll 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 call back to Dick.

Richard L. Soloway -- President and Chief Executive Officer

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 product is coming from alarm communications, 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 US. 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 that 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 a US News & World Report article from earlier this year, states are considering nearly 250 different school safety builds 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 dollars 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 have witnessed more and more active shooter incidences taking place at houses of worship and other public meeting places. We have seen a need to expand the use of our SAVI audit system for these location. The continuing violence in public area is painting a clear picture for the need to secure 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 communicators. We now have StarLink lines on both Horizon and the AT&T LTE network, which provides our dealers with the largest LTE service coverage in the US. Also, we will be launching the new version of our Marks Division anti-ligature locks. These locks meet ADA, that's American with Disabilities Act, requirements as well as the BHMA highest anti-ligature standard. The shaping and structure of these locksets are designed to restrict the attachment of lines, laces, etc, to doorknobs and levers. The locksets are offered in unprecedented, cylindrical, mortise styles, models and functions and provide easy installation and retrofit to all popular door constructions.

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 applications 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 8-32 zone fire alarm panel with built-in cellular LTE StarLink-powered communicator, has grown quickly in sales. FireLink comes pre-configured and pre-activated enabling easy installation and cost savings for dealer. FireLink will add to our already rapidly growing recovering revenue.

We'll 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 continued to grow the Company and deliver strong profits. Our shareholders have been rewarded with very healthy returns and 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's senior management maintains a higher level of ownership in our equity, approximately 38%, and I would like to thank everyone for their support and for joining us in the exciting future we have.

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

Questions and Answers:

Operator

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jaeson Schmidt with Lake Street Capital. Please proceed with your question.

Jaeson Schmidt -- Lake Street Capital -- Analyst

Hey, guys. Thanks for taking my questions. I just want to start with the security market -- school security market. It seems like you are seeing some really nice traction there. Can you comment if you're seeing the size of the installed increasing over the past few months here?

Richard L. Soloway -- President and Chief Executive Officer

This -- good morning. There are many different types of jobs that we're getting, and some of them are larger than others, and we always find that with the jobs that we do, the schools, especially universities, keep adding to that. So we've done some schools -- we've gone back four times, keep doing the dorm buildings and the classrooms and the executive offices. But they're all different sizes all over the country. If you've seen the press releases we've put out, they're all starting to come together where localities want to protect their 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 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 that we make stand-alone, we make 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 systems that we're very flexible. So we expect that to continue small, medium and large job, and each job increasing in volume as they add more facilities too them.

Jaeson Schmidt -- Lake Street Capital -- Analyst

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

Richard L. Soloway -- President and Chief Executive Officer

We have a very nice network of sales agents and reps and in fact, we've made an integration between the Marks group and the Alarm Lock group. So we have more sales people, and they are more intense in their territory. 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 are very budget conscious. We wanted to make sure we get the most efficiency out of each of our sales people. As far as the manufacturing side of the business, we're in the Dominican Republic. Our components are shipped in from all over 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, both sales, marketing and manufacturing.

Jaeson Schmidt -- Lake Street Capital -- Analyst

Okay. And the last one for me and I'll jump back into queue. I know previously you threw out a $40 million recurring revenue run rate target for fiscal 2021. Do you still feel confident in that target?

Kevin S. Buchel -- Senior Vice President of Operations and Finance and Chief Financial Officer

Not only do I feel confident -- it's Kevin. Not only do I feel confident, Jaeson, I thought, we would be pushing hard to get to $20 million -- we got to twenty $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, we try to get it into the locking side, the access, we'll blow past the $40 million. For now, let's just call it $40 million by June of 2021.

Jaeson Schmidt -- Lake Street Capital -- Analyst

Okay. Thanks a lot, guys.

Kevin S. Buchel -- Senior Vice President of Operations and Finance and Chief Financial Officer

You're welcome, Jaeson.

Richard L. Soloway -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Mike Walkley with Canaccord Genuity. Please proceed with your question.

Mike Walkley -- Canaccord Genuity -- Analyst

Great. Thanks. Great to see the recurring revenue growth and reiteration of targets. Just a question for me on the hardware gross margin side. What about -- maybe 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?

Kevin S. Buchel -- Senior Vice President of Operations and Finance and Chief Financial Officer

One of the[Phonetic] things -- we tried to do by -- 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 to capture that market, because once we start getting the recurring revenue, we got that pretty much for life. It is 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 came in and basically set 37%. So there is 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 mixed -- sometimes there's mix differences. If we get a big school job at a university in one quarter and you get a job that's not as big the following year, that could easily affect it 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.

Mike Walkley -- Canaccord Genuity -- Analyst

Great, thanks. And then maybe just building on that, you 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?

Kevin S. Buchel -- Senior Vice President of Operations and Finance and Chief Financial Officer

I think, in Q1 you'll see a little more of 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 is 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 the recurring growing dramatically like it has with 78% to 80% gross margin that -- it will more than make up for that.

Mike Walkley -- Canaccord Genuity -- Analyst

Thanks, and last question for me and I'll pass on. Just on the recurring revenue given your conference, you still think of like 40% plus year-over-year growth rate? Or does it slow in the short term and accelerate as the new products 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? Thank you.

Richard L. Soloway -- President and Chief Executive Officer

We expect that, the $40 million is the number that we're going to hit in June 30, 2021[Phonetic] year. We think that with the AT&T, the iSecure and some of the locking products that 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 a one-off sale, but our versions of the locks will generate recurring revenue. The installation companies as well as end users. We think that we can go beyond the $40 million and we'll do -- do to get our market share. But I think that the price point that we've 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.

Mike Walkley -- Canaccord Genuity -- Analyst

Thanks. Thank you.

Richard L. Soloway -- President and Chief Executive Officer

Okay, Mike.

Operator

Thank you. Our next question comes from the line of Matt Pfau with William Blair. Please proceed with your question.

Matt Pfau -- William Blair -- Analyst

Hey, guys. Thanks for taking my questions. I 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 and the year? And how do we think about that growth rate going forward as the fourth quarter more indicative of the go forward, or is the full-year growth more of how we should think about it?

Kevin S. Buchel -- Senior Vice President of Operations and Finance and Chief Financial Officer

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 the high single or double digit. 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 for fiscal 2020. Since we're introducing so many things between, iSecure, the new anti-lig, the new radios, the FireLink panel hasn't been out that long. We're doing -- we spend 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're spending a lot of time on doing a lot of things that get us more recurring and more hardware. The hardware sales is very important to us too. The Dominican leverage we talked about is 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 radios 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 Q -- for the full year, even though it was lower in Q4 it's Still a goal and still very achievable.

Matt Pfau -- William Blair -- Analyst

Got it. And then on the school security side, you mentioned all these funding bills that are out there and the fees 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?

Richard L. Soloway -- President and Chief Executive Officer

We're seeing an increase in school security jobs. We're publishing them as we get them. There's many, many more queue if the schools are being -- it they're getting some funding from their regional area, we expect there's going to be federal funding, there is going to be legislation put out. So all of this primes the pump to get a lot more business. And since we have a offering for K-12, which are low-cost, easy-to-convert K-12 to more secure places for the student and not that expensive to do. Schools are jumping the gun and doing their own financing of this through state legislature and counties around the country. The college or 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. It's going to take many, many years of growth and the schools will be secure. But as far as we could see, I could see five years of continuous school growth ahead of us, and the big money is going to really come down.

Matt Pfau -- William Blair -- Analyst

Got it. And in terms of the hurricane that's currently impacting the Caribbean, any impact there to your operations in the Dominican? I realized it didn't hit there. But in terms of getting the goods out of the Dominican to the US, are there any disruption there from the hurricane?

Richard L. Soloway -- President and Chief Executive Officer

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

Matt Pfau -- William Blair -- Analyst

Okay. Got it. That's it for me, guys. Thanks a lot.

Richard L. Soloway -- President and Chief Executive Officer

Thanks, Matt.

Operator

[Operator Instructions] Our next question comes from the line of Jeff Kessler with Imperial Capital. Please proceed with your question.

Jeff Kessler -- Imperial Capital -- Analyst

Thank you. Thank you for taking my question. It's probably fair to say that there is a little bit of a surprise up 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 that part of that market? And I'm wondering -- this brings up two questions. Number 1, do you think that, Number 1, by keeping this under wraps, at least publicly, not talking about what you were 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 haven't been in the AT&T market so heavily. Do you think that you again, taken a little bit of the AT&T folks on the communication side by surprise?

And Number 2, are 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 are you going to be taking a little bit longer to play out over the course of the next fiscal year and a half?

Richard L. Soloway -- President and Chief Executive Officer

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

Jeff Kessler -- Imperial Capital -- Analyst

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

Richard L. Soloway -- President and Chief Executive Officer

Our investments are -- we have this goal -- we have of the goal at June 30, 2021 that we're going to be at $40 million in recurring and we're going to be a $100 million in hardware manufacturing. And if you put that together and you are 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 it looks like, this is working for us.

Jeff Kessler -- Imperial Capital -- Analyst

Okay. 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 five or six 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 in companies 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, 911[Phonetic] centers, except the signals more readily and allow police to come in and respond without having false alarms?

Richard L. Soloway -- President and Chief Executive Officer

Well, a lot of the false alarms are caused by DIY products, not professionally installed products. DIY products are not attached to the walls, 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 caused a lot of false alarms. Our iSecure is not aimed for the DIY market, but its price point and its functionality is to 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 eliminate a lot of the false alarms you're getting 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 alarms. That's our contribution to what's going on. It reports to all Central Station. It reports daily and it works to our back-end NOC, which has the ability to give it additional functionality to eliminate false alarm. And we can talk about that off line -- since I know that you and the industry and us were all components of keeping the police respond to real alarms not false alarms, that's the major thing in the industry. But we can talk offline and go through exactly what this does from a [Speech Overlap]

Jeff Kessler -- Imperial Capital -- Analyst

Great, Richard. Yes, that's great. Okay, thank you very much. I Appreciate.

Richard L. Soloway -- President and Chief Executive Officer

Alright.

Operator

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

Richard L. Soloway -- President and Chief Executive Officer

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 NAPCO's fiscal Q1 2020 results. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Patrick McKillop -- Director of Investor Relations

Richard L. Soloway -- President and Chief Executive Officer

Kevin S. Buchel -- Senior Vice President of Operations and Finance and Chief Financial Officer

Jaeson Schmidt -- Lake Street Capital -- Analyst

Mike Walkley -- Canaccord Genuity -- Analyst

Matt Pfau -- William Blair -- Analyst

Jeff Kessler -- Imperial Capital -- Analyst

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