China Security & Surveillance Technology, Inc. (

CSR

)

Q4 2010 Earnings Call

February 28, 2011 08:00 AM ET

Executives

Patrick Yu – IR, Fleishman-Hillard

Stacy Yan – Director, IR

Terence Yap – Vice Chairman and CFO

Presentation

Operator

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» China Security & Surveillance Technology, Inc. Q4 2009 Earnings Call Transcript

Greetings and welcome to the China Security & Surveillance Technology Incorporated Fourth Quarter 2010 Earnings Conference Call. At this time, all participants are in a listen-only mode. The 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, Patrick Yu, from Fleishman-Hillard, the Investor Relations agency for China Security & Surveillance Technology. Thank you, Mr. Yu, you may begin.

Patrick Yu

Thank you, Diego. Good morning and welcome to CSST Fourth Quarter and Full Year 2010 Earnings Conference Call. Here with me today our CSST’s Vice Chairman and CFO, Terence Yap and also Investor Relations Director, Stacy Yan.

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

I’d also like to take a minute to review the company’s Safe Harbor statements, which can found on Slide 2, 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 for 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 statements and risk factors detailed in the company’s filing with the SEC. CSST undertakes no duty to revise or update any forward-looking statements except as required by the applicable law.

Before we get started, I also want to point out that all available information pertaining to Mr. Tu’s recent letter to Board of Directors and the company’s actions on it have been filed with the SEC. We’ll not have the Q&A session today for the conference call and we urge you to refer to www.sec.gov or the governance website at csst.com for further information.

Without further ado, I’ll now turn the call over to CSST’s IR Director, Stacy Yan. Stacy, please.

Stacy Yan

Thank you, Patrick. Good morning. Well, I guess good evening for those of you in Asia Pacific time zone. Before Terence covers our results, I’d like to take just a few minutes to offer our view of the business and what you’d expect from us in 2011.

As you’ve seen in our presentation materials on slide number 3, we had a very productive 2010. Our revenues and net income grew. Margins expanded robustly. We’ve closed the year well. And we expect another solid year in 2011, with continued execution our long term strategies and focus on our key growth initiatives.

As we look into the future, our confidence in the industry and our business in government sector and security services continued to be promising.

We have invested heavily over the past few years and those investments are beginning to pay off, and it’s driving our revenue growth and margin improvement. So, these are all large and scalable opportunities and we’re early in their growth cycles.

As you can see, our government sector takes up 56% of our total revenues in 2010 and security services business has started to establish its presence in China. As the demand for surveillance and the safety products and services continues to grow, we will be well-positioned to drive industry’s next wave of innovation and growth. So, that is just a real quick review.

Again, 2010 was a very productive year for us. We are executing well. We expect another strong year in 2011 in our key growth drivers, which are large scale government contracts and security services business.

We believe we are going to engineer our growth in the years ahead. So with that Terence, I’ll now turn the call over to you.

Terence Yap

Thank you, Stacy and good morning and good evening to everyone. I’d like to start by providing an update on our Q4 results. Please turn to slide number four.

In the fourth quarter of 2010, we have reported revenues of $214.01 million, up 17.1% year-over-year, from $182.71 million in the fourth quarter of 2009, driven by the strong demand from both the government and the corporate sectors.

Fourth quarter gross profit grew 18.8%, to $61.15 million, up from $51.48 million for the same period last year. Gross margin for the fourth quarter increased to 28.6%, from 28.2% for the same period in 2009.

Let me continue on the fourth quarter with a look at net income. Fourth quarter GAAP net income attributable to the company increased 11.4%, to $29.04 million, up from $26.07 million for the same period in 2009. Net margin decreased to 13.6%, from 14.3% for the same period in 2009, mainly due to higher taxes paid in the fourth quarter of 2010. GAAP earnings per diluted share was $0.33 in the fourth quarter of 2010, as compared to $0.38 in the fourth quarter of 2009.

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