China Security & Surveillance Technology Inc. (

CSR

)

Q3 2010 Earnings Call

October 26, 2010 8:00 AM ET

Executives

Patrick Yu - Fleishman-Hillard

Terence Yap - Vice Chairman and CFO

Stacy Yan - IR, Director

Analysts

Adele Mao - OLP Global

Andy Yeung - Oppenheimer & Company

Michael Kim - Imperial Capital

Presentation

Operator

Compare to:
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» China Security & Surveillance Technology, Inc. Third Quarter 2009 Earnings Call Transcript

Greetings, and welcome to the China Security & Surveillance Technology Incorporated Third Quarter 2010 Earnings 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). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Patrick Yu from Fleishman-Hillard, the IR agency for China Security & Surveillance Technology. Thank you, Mr. Yu, you may begin.

Patrick Yu

Good morning and welcome to CSST third quarter 2010 earnings conference call. Here with me today are CSST Vice Chairman and Chief Financial Officer, Terence Yap, and Investor Relations Director, Stacy Yan.

Before we get underway, let me remind you that the press release, our financial information and presentation slides used for this call are all available on the Investor Relations page of CSST website, which is http://irpage.net/csct/index.html.

I also would like to take a minute to review the company’s Safe Harbor statements, which is found on slide two, which says that, this conference call may contain forward-looking statements concerning CSST’s business, which are intended to be covered by the Safe Harbor and forward-looking statements under the Private Securities Litigation Reform Act of 1995. The actual results may differ materially from the forward-looking statements depending on a number of risk factors including, but not limited to, general economic and business conditions, new product developments, installations, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the company’s control.

All forward-looking statements are expressly qualified in their entirety by the cautionary statement and risk factors detailed in the company’s filings with the SEC. China Security undertakes no duty to revise or update any forward-looking statements, except as required by applicable law.

So without much ado, I will now turn the call over to CSST’s IR Director, Stacy Yan.

Stacy please.

Stacy Yan

Thanks Patrick. Good morning to every one joining me on the call today. I would like to share during this conference call (inaudible) our comments on the quarter overall.

This quarter, once again, delivered a very strong set of financial results. Revenue and net income were both up year-over-year and sequentially. Gross, operating and net margins expanded robustly in line with our overall strategy and emphasis on improving efficiency. Our team is executing at a higher level and the financial results are solid.

We continue to have a positive long term outlook for the business, and the result we put up in a first nine months of 2010 (inaudible) and confidence for business in the future. That comes from the number of things. First, we continue to see good traction in the corporate and government sector in China. Our revenue trends are moving in the right direction. Large scale and higher margin government projects, including phase 3, (inaudible) continues to be our key focus. Our revenue and net income much of it (inaudible) to the company stood at $182.15 million and $27.27million for this quarter respectively up 14% and 24% as compared to the same period last year.

Second, our growth remained promising and robust. Our backlog increase quarter over quarter from $213.12 million as of June 30 to $400.66million as of September 30. Again, we continue to see solid momentum in the installation business, which leads to our fiscal growth. Thus, we are very glad to report the margin levels have improved significantly.

Gross margin and operating margins improved by 860 and 850 basis points respectively compared to the same period last year. We had to establish strong brand awareness in China and we will continue to strengthen it. Our unparalleled track record in the security installation field offering a one-stop solution and our marketing efforts have yielded quite a good results in driving our profitable growth. We expect such trends to continue.

Fourth, our business in the service segment continued to drive favorable response from our customers. Our one stop business model continues to be a major strength for us and we look forward to helping drive existing customers to offer value added security services.

So to sum up the quarter, we have continued our steady improvement in the business in both revenue growth and margin expansion. We continue to look for higher margin project to yield higher growth in the future.

With that, I will now turn the call CSST’s Vice Chairman and Chief Financial Officer, Terence Yap, who will walk you through our third quarter financial results.

Terence Yap

Thanks so much, Stacy. Good morning everyone in US and for those in the Asia good evening. Let me quickly go through financial results. Please refer to slide number 4. On our revenue side we experienced solid growth in revenues during third quarter. Revenues increased $22.3 million or 14% to $182.15million in third quarter of 2010 from $159.82 million for the same period last year. This quarter we continued the trend of improving revenues largely driven by our efforts we have been making to capture grow opportunities and to deliver value to our clients. We have been working very hard to raise our brand awareness, expand our distribution channels over past few years.

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