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spk01: and welcome to the next... ...security technology's fiscal... ...second quarter of 2020. for 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 require immediate assistance, please press the star zero for the interpreter. The call is now being recorded on Monday, February 21, 2024. I would now like to turn the conference over to Frances. We can escape. Vice President, investor relations, please. Go ahead. Thank you, Jillian. Good morning, everyone.
spk03: My name is Fran Okoneski, Vice President of Investor Relations for NAPCO Security Technologies. I just want to thank you all for joining us today on our conference call to discuss our financial results for our fiscal second quarter 2024. By now, all of you should have had the opportunity to review our earnings press release discussing the results of our quarter. If not, a copy of the release is available in the investor relations section of our website.
spk01: www.network.co.security.com. On the call today are Richard Salaway, our president, and Chief Executive Officer of NAPCO Security Technologies, and Kevin Bushell, our Executive Vice President and CFO.
spk03: 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's 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,
spk01: such as school security products, reoccurring revenue services, potential market opportunities, the benefits of our reoccurring revenue products to customers and dealers,
spk03: our ability to control expenses and costs, and expected annual run rate for software as a service reoccurring monthly revenue.
spk01: Forward-looking statements involve risks and uncertainties that make
spk03: cause actual results to differ materially from those contained in the forward-looking statements.
spk01: These factors include but are not limited to such risk factors described and are our SEC filings, including our annual report on Form 10-K.
spk03: 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 We cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements.
spk01: All information provided in today's press release and this conference call
spk03: is as of today's date unless otherwise stated, and we undertake no duty to update such information except as required under applicable law. I will turn the call over to Dick in a moment, but before I do, I want to mention we are actively planning our investor relations calendar for more non-deal roadshows and conferences in the near future. as investor outreach is very important to NAFCO.
spk01: And I would like to thank all those folks that assist us in These conferences and. Your roadshow. Also, we invite. You to come and. Visit our booth at the. coming ISC West trade show April 9th through the 11th in Las Vegas. ISC West is the industry's largest trade show with over 30,000 attendees. So if anyone is interested in attending, please contact me and I will arrange to get you a pass.
spk03: Let me turn the call over to Richard Soloway, President and CEO of NAPCO Security Technologies. Dick, the floor is yours.
spk01: Thank you, Frank.
spk02: Good morning, everyone, and welcome to our conference call. Thank you for joining us today to discuss our results. We are pleased to report our fiscal Q2 2024 record sales of $47.5 million.
spk01: This is the 13th consecutive quarter we've achieved record sales for the quarter. recurring revenue subscription service continues to grow at a very strong rate and the annual perspective The run rate is now 76.5 million. 24 recurring revenues.
spk02: Our balance sheet remains strong with our cash balances at $79 million, an 18% increase over the June 30, 2023 level. We have no debt. We continue to focus
spk01: I'm capitalizing on key industry trends, which include wireless fire and intrusion alarms and the related recurring service revenues, schools, security solutions, plus enterprise access control systems and architectural products. The management team here NAPCO continues to focus on the key metrics of growth, profits, and returns on equity as well as controlling our costs.
spk02: These metrics are important to us as well as our shareholders. We continue to execute our business strategy and our interests are aligned with our shareholders as senior management of NAPCO owns approximately 10% of the equity.
spk01: Before I go into greater detail, I will now turn the call over to our CFO, Kevin Bushell. He will provide an overview of our fiscal second quarter results, and then I will be back with more on our strategies and view of our market. Kevin, the floor is yours. Thank you, Dick. Good morning, everyone. Net sales for the quarter. increased 12% to $47.5 million. And that's the highest quarterly sales in the company's history.
spk00: and that compares to $42.3 million for the same period one year ago. Net sales for the six months ended December 31, 2023, increased 9% to a six-month record of $89.2 million, and that compares to $81.8 million for the same period one year ago. Recurring monthly service revenue continued its strong growth, increasing 25% in Q2 to $18.5 million, as compared to $14.9 million for the same period last year. Recurring monthly service revenue for the six months ended December 31, 2023, increased 25%, to $35.8 million as compared to $28.7 million last year. Recurring service revenues now have a prospective annual run rate of approximately $76.5 million based on January 2024 recurring revenues, and that compares to $72.5 million based on October 2023 recurring service revenues, which we reported back in November. Equipment sales for the quarter increased 6% to $29 million as compared to
spk01: to $27.4 million last year.
spk00: This increase was due primarily to revenue increases in both AlarmLock and Mark's brand door locking products. as well as increased sales of NAPCO brand intrusion products. Of note is that the Starlink radio sales in Q2 sequentially increased over those sales in Q1 by 63%. Equipment sales for the six months increased 1% to $53.4 million, as compared to $53.1 million for the same period last year. This increase was primarily due to increases in both alarm lock and marks locking sales, as offset by a decrease in NAPCO intrusion sales due to the previously discussed decline in Starlink radios. Gross profit for the three months ended December 31, 2023 increased 74% to $25 million with a gross margin of 53% as compared to $14.4 million with a gross margin of 34% for the same period last year. And the gross profit for the six months increased 64% to $47.4 million, with a gross margin of 53% as compared to 28.9%.
spk01: with a gross margin of 35% a year ago. Gross profit for recurring service revenue for the quarter increased 21% to $16.7 million, with a gross margin of 90%.
spk00: And that compares to $13.2 million, with a
spk01: margin 89% last year. And gross profit for recurring service revenue for the six-month increased 21% to $32.2 million, with a gross margin of 90%.
spk00: As compared to $25.4 million, with a gross margin of 88%.
spk01: Gross profit for equipment revenues. Increase. 633%. to $8.4 million with a gross margin of 29%. As compared to $1.1 million.
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