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NASDAQNSSC
NAPCO Announces Second Fiscal Quarter 2020 Results
- Sales Increase 4% to a Second Fiscal Quarter Record $25.8.Million-
- 22nd Consecutive Quarter of Year-Over-Year Record Sales-
- Recurring Service Revenues Grew 40% to $5.8 Million-
- Net Income Increases 25% to a Second Quarter Record $3.6 Million-
- Earnings per Share Increases 27% to $0.19-
- Adjusted EBITDA* Increases 24% to $4.7 Million-
- Management to Host Conference Call Today at 11 a.m. ET-

AMITYVILLE, N.Y., Feb. 3, 2020 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NASDAQ: NSSC), one of the world's leading manufacturers of high-tech electronic security devices that are fueling the Company's fast growing recurring service revenues, as well as a leading provider of school safety solutions, today announced financial results for its second fiscal quarter ended December 31, 2019.

 Financial Highlights:

  • Net sales for the quarter increased 4% to a second quarter record $25.8 million as compared to $24.8 million for the same quarter last year. Net sales for the six months increased 8% to $52.1 million as compared to $48.2 million for the same period last year.
  • Recurring service revenue for the quarter increased 40% to $5.8 million as compared to $4.1 million for the same quarter last year. Recurring service revenue for the six months increased 41% to $11.1 million as compared to $7.9 million for the same period last year. Recurring service revenue now has a prospective annual run rate of $23.9 million based on December 2019 recurring revenues.
  • Net income for the quarter increased 25% to a second quarter record of $3.6 million from $2.9 million a year ago. Earnings per share (diluted) for the quarter increased 27% to $0.19, as compared to $0.15 for the same period a year ago. Net income for the six months increased 56% to $6.8 million from $4.4 million a year ago. Earnings per share (diluted) for the six months increased 61% to $0.37, as compared to $0.23 for the same period a year ago.
  • Adjusted EBITDA* for the quarter increased 24% to $4.7 million or $0.25 per diluted share from $3.8 million or $0.20 per diluted share a year ago. Adjusted EBITDA* for the six months increased 48% to $8.7 million or $0.47 per diluted share from $5.9 million or $0.31 per diluted share a year ago.

Richard Soloway, Chairman and President, commented, "Our focus in marketing innovative security products aimed at strong growth markets, which provide NAPCO with high gross margin and recurring service revenue (RSR) growth, continues to drive our Company to record profitability and sales levels. This past Q2 marked our 22nd consecutive quarter of year over year sales growth and as importantly, saw our net income increase by 25% to deliver record second quarter profitability. We will continue to prioritize our resources on driving these opportunity areas.

As a leader in the wireless cellular alarm and IoT communicator category, our StarLink® line of solutions continues to build market share providing us with a 40% year-over-year ("YOY") increase in subscription-based, recurring service revenue for this past quarter. With the addition of our new AT&T LTE StarLink® line of universal fire, intrusion alarm and IoT communicators, this gives the StarLink product line the ability to communicate on both the vast Verizon LTE and AT&T LTE networks. StarLink provides security dealers with one of the broadest LTE service coverage areas in the Wireless Cellular Alarm Communicator Category. Also, capitalizing on the recent need for millions of landline-connected fire alarm control panels to upgrade to wireless, cellular or cellular/IP based communications technology, StarLink Fire® communicators, with their unique Panel-Powered Technology®, continue to generate sales growth.

Our award-winning StarLink Connect® IoT solution, which gives dealers the ability to add Smart Home services to millions of existing alarm installations across the country, is also experiencing sales and RSR growth and beginning to build good market share. This RSR-generating, subscription-based service offers consumers the ability to use an app to remotely operate their security systems, lighting, locks, thermostats, and video cameras, from any smart device. StarLink Connect also offers our dealers the opportunity to increase the recurring monthly income stream from their customers, by trading them up from regular alarm system monitoring to Smart Home services, adding value to their account base.

FireLink®, an innovative all-in-one, 8-32 zone fire alarm control panel with a built-in cellular LTE, StarLink-powered alarm communicator is also generating YOY sales and RSR growth. FireLink comes pre-configured and pre-activated saving considerable installation time and money for the dealer to replace an aging landline-connected fire panel and importantly, our model insures that every FireLink control panel sold will automatically generate RSR as well as hardware sales to our Company."

Mr. Soloway added, "Future plans will focus on continuing to accelerate RSR growth, with our Company leveraging its StarLink cellular communication technology into additional product categories. As an example, Q2 saw the beginning of our rollout, of NAPCO's new iSecure Cellular Security Alarm and Smart Home product line. Since iSecure utilizes the same subscription-based, wireless cellular technology as StarLink, it is part of our Company's recurring service revenue growth strategy. This summer we expect to be launching a line of cloud-based, wireless electronic locks and enterprise access control, utilizing StarLink Cellular Communicator technology. This will provide us with an innovative, incremental subscription and cloud based income stream from the large access control and locking market segments, providing valuable new services to end-user customers.

NAPCO continues to perform a vital role in protecting colleges, universities and K-12 schools, across the country, with its broad, integrated line of security products, which uniquely offer specialized education vertical product solutions. Our commercial Divisions: Alarm Lock Access Control Locks, Marks Architectural Hardware and Continental Enterprise-Class Access Control, continued to show a significant increase in market presence in the Education market vertical. With a strong array of integrated, school venue designed security solutions, along with the administering of the highly successful SAVI or School Access-control Vulnerability Index and auditing system, NAPCO continues to lead the way in elevating security levels at our nation's schools. NAPCO dealers and integrators are trained in systematically evaluating any school facility's security level and then addressing any deficiency with school-specific security solutions. This approach and portfolio of product solutions is also increasingly being used in any public venues, in addition to educational facilities, concerned with addressing the growing threat of violent active-shooter events."  

Mr. Soloway concluded, "We will continue our commitment to driving strong levels of high recurring service revenue growth and gross margin expansion. We are encouraged by our ongoing performance . Our future strategy and resources will continue to be devoted to launching new product entrants in high growth and profitability markets, which should continue to propel NAPCO's future sales growth for the balance of Fiscal 2020 and beyond."

Financial Results

Net sales for the three months ended December 31, 2019 increased 4% to a record second quarter revenue of $25.8 million, as compared to $24.8 million for the same period a year ago. Net sales for the six months ended December 31, 2019 increased 8% to $52.1 million, as compared to $48.2 million for the same period a year ago. Research and Development costs for the quarter were $1.8 million or 7.1% of sales as compared to $1.8 million or 7.1% of sales a year ago. Research and Development costs for the six months were $3.6 million or 6.9% of sales as compared to $3.5 million or 7.3% of sales a year ago. Selling, general and administrative expenses for the quarter increased 12% to $6.3 million, or 24.4% of sales, as compared to $5.6 million, or 22.6% of sales for the same period last year. Selling, general and administrative expenses for the six months increased 7% to $12.5 million, or 23.9% of sales, as compared to $11.7 million, or 24.2% of sales for the same period last year.

Operating income for the three months ended December 31, 2019 increased 21% to $4.0 million as compared to $3.3 million for the same period a year ago. Operating income for the six months ended December 31, 2019 increased 50% to $7.6 million as compared to $5.1 million for the same period a year ago.

Net income for the three months ended December 31, 2019 increased 25% to a second quarter record of $3.6 million, or $0.19 per diluted share, as compared to $2.9 million, or $0.15 per share, for the same quarter last year. Net income for the six months ended December 31, 2019 increased 56% to $6.8 million, or $0.37 per diluted share, as compared to $4.4 million, or $0.23 per share, for the same period last year.

Adjusted EBITDA* for the three months ended December 31, 2019 increased 24% to $4.7 million, or $0.25 per diluted share, as compared to $3.8 million, or $0.20 per diluted share, a year ago. Adjusted EBITDA* for the six months ended December 31, 2019 increased 48% to $8.7 million, or $0.47 per diluted share, as compared to $5.9 million, or $0.31 per diluted share, a year ago.

Balance Sheet Summary

At December 31, 2019, the Company had $11.8 million in cash and cash equivalents as compared to $8.0 million as of June 30, 2019. NAPCO had working capital (defined as current assets less current liabilities) of $56.2 million at December 31, 2019 as compared with working capital of $51.1 million at June 30, 2019. Current ratio (defined as current assets divided by current liabilities) was 4.7:1 at December 31, 2019 and 4.6:1 at June 30, 2019.

Conference Call Information

Management will conduct a conference call at 11 a.m. ET today, February 3, 2020. Interested parties may participate in the call by dialing 1-877-407-4018 or for international callers, 1-201-689-8471, about 5-10 minutes prior to the start time of 11 a.m. ET. The conference call will also be available on replay starting at 2 p.m. ET on February 3, 2020  and ending on February 10, 2020 at 11:59 p.m. ET. For the replay, please dial 1-844-512-2921 domestically, or 1-412-317-6671 for international callers, and use the replay access code 13698308

In addition, the call will be webcast and will be available on the Company's website at www.napcosecurity.com.

About NAPCO Security Technologies, Inc.

NAPCO Security Technologies, Inc. is one of the world's leading manufacturers of high tech electronic security devices that are fueling the Company's fast growing recurring service revenues, as well as a leading provider of school safety solutions, The Company consists of four Divisions: NAPCO, plus three wholly-owned subsidiaries: Alarm Lock, Continental Instruments, and Marks USA. Headquartered in Amityville, New York, its products are installed by tens of thousands of security professionals worldwide in commercial, industrial, institutional, residential and government applications. NAPCO products have earned a reputation for innovation, technical excellence and reliability, positioning the Company for growth in the multi-billion dollar and rapidly expanding electronic security market. For additional information on NAPCO, please visit the Company's web site at http://www.napcosecurity.com.

Safe Harbor Statement

This press release contains forward-looking statements that involve numerous risks and uncertainties. Actual results, performance or achievements could 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 Securities and Exchange Commission.

 

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


December 31,
2019 (unaudited)


June 30, 2019

CURRENT ASSETS

(in thousands, except share data)

Cash and cash equivalents

$             11,778


$               8,028





Accounts receivable, net of allowance for doubtful accounts of $127 
     and $88 at December 31, 2019 and June 30, 2019, respectively

23,098


25,970

 Inventories

34,740


29,576

 Prepaid expenses and other current assets

1,662


1,881

     Total Current Assets

71,278


65,455

   Inventories - non-current

7,166


5,262

   Property, plant and equipment, net

8,151


7,694

   Intangible assets, net

7,100


7,232

   Operating lease right-of-use asset

7,406


--

   Other assets

259


265

      TOTAL ASSETS

$           101,360


$             85,908





CURRENT LIABILITIES




   Accounts payable

$               6,534


$               5,135

   Accrued expenses                                       

5,962


6,273

   Accrued salaries and wages

2,461


2,416

   Accrued income taxes

123


548

      Total Current Liabilities                             

15,080


14,372

   Deferred income taxes

563


72

   Accrued income taxes

292


292

   Operating lease liabilities, net

7,123


--

      Total Liabilities                                    

23,058


14,736

COMMITMENTS AND CONTINGENCIES




STOCKHOLDERS' EQUITY




Common Stock, par value $0.01 per share; 40,000,000 shares
     authorized;  21,227,094 shares issued; and 18,477,784 shares 
     outstanding

212


212

   Additional paid-in capital                             

17,428


17,103

   Retained earnings                                        

77,729


70,924

Less: Treasury Stock, at cost (2,749,310 shares)

(17,067)


(17,067)

      TOTAL STOCKHOLDERS' EQUITY                            

78,302


71,172

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$           101,360


$             85,908






 

 

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)






Three Months ended December 31,


2019


2018


(in thousands, except share and per share data)

Net sales:                                     


   Equipment revenues

$                    20,045


$                    20,685

   Service revenues

5,784


4,144


25,829


24,829

Cost of sales:




   Equipment related expenses

12,602


13,203

   Service related expenses

1,100


955


13,702


14,158

      Gross Profit                     

12,127


10,671

Research and development

1,823


1,762

Selling, general, and administrative expenses 

6,310


5,615

      Operating Income

3,994


3,294

Other (income) expense:




   Interest (income) expense, net                            

(9)


6

Income before Provision for Income Taxes

4,003


3,288

Provision for Income Taxes

431


419





      Net Income          

$                      3,572


$                      2,869





Income per share:




   Basic                                       

$                      0.19


$                      0.15

   Diluted                                     

$                      0.19


$                      0.15





Weighted average number of shares outstanding:




   Basic                                       

18,478,000


18,603,000

   Diluted                                     

18,538,000


18,649,000






 

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)






Six Months ended December 31,


2019


2018


(in thousands, except share and per share data)

Net sales:                                     


   Equipment revenues

$                    40,966


$                    40,275

   Service revenues

11,148


7,930


52,114


48,205

Cost of sales:




   Equipment related expenses

26,240


26,210

   Service related expenses

2,229


1,765


28,469


27,975

      Gross Profit

23,645


20,230

Research and development

3,572


3,507

Selling, general, and administrative expenses 

12,470


11,670

      Operating Income

7,603


5,053

Other (income) expense:




   Interest (income) expense, net                            

(2)


13

Income before Provision for Income Taxes

7,605


5,040

Provision for Income Taxes

800


667

      Net Income          

$                      6,805


$                      4,373





Income per share:




   Basic                                       

$                      0.37


$                      0.23

   Diluted                                     

$                      0.37


$                      0.23





Weighted average number of shares outstanding:




   Basic                                       

18,478,000


18,665,000

   Diluted                                     

18,537,000


18,713,000






 

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)






Six Months ended December 31,


2019


2018


(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES




Net income                        

$             6,805


$              4,373

Adjustments to reconcile net income to net cash provided by
operating activities:




Depreciation and amortization                     

744


668

Provision for (recovery of) doubtful accounts

39


(13)

Deferred income taxes                               

491


100

Stock based compensation expense

325


152

Changes in operating assets and liabilities:




Accounts receivable                             

2,833


4,671

Inventories                                   

(7,068)


(4,608)

Prepaid expenses and other current assets     

218


565

Other assets                                       

--


(11)

Accounts payable, accrued expenses, accrued salaries 
     and wages, accrued income taxes

426


449

Net Cash Provided by Operating Activities

4,813


6,346

CASH FLOWS FROM INVESTING ACTIVITIES




Purchases of property, plant, and equipment        

(1,063)


(1,119)

Net Cash Used in Investing Activities   

(1,063)


(1,119)

CASH FLOWS FROM FINANCING ACTIVITIES




Proceeds from stock option exercises

--


24

Cash paid for purchase of treasury stock

--


(2,638)

Net Cash Used in Financing Activities    

--


(2,614)

Net Change in Cash and Cash Equivalents                 

3,750


2,613

CASH AND CASH EQUIVALENTS - Beginning             

8,028


5,308

CASH AND CASH EQUIVALENTS - Ending                  

$           11,778


$             7,921

SUPPLEMENTAL CASH FLOW INFORMATION




Interest paid              

$                  18


$                  17

Income taxes paid                

$                734


$                258






 

NAPCO SECURITY TECHNOLOGIES, INC.

NON-GAAP MEASURES OF PERFORMANCE* (Unaudited)

(in thousands, except share and per share data)


3 months ended December 31,


6 months ended December 31,


2019


2018


2019


2018

Net income (GAAP)

$           3,572


$       2,869


$           6,805


$           4,373

Add back provision for income taxes

431


419


800


667

Add back interest and other expense

(9)


6


(2)


13

Operating Income (GAAP)

3,994


3,294


7,603


5,053

Adjustments for non-GAAP measures of performance:








   Add back amortization of acquisition-related intangibles

66


79


132


157

   Add back stock-based compensation expense

308


147


325


152

Adjusted non-GAAP operating income

4,368


3,520


8,060


5,362

Add back depreciation and other amortization

313


262


612


511

Adjusted EBITDA (earnings before interest, taxes,
depreciation and amortization)

$           4,681


$       3,782


$           8,672


$           5,873

















Adjusted EBITDA* per Diluted Share

$             0.25


$         0.20


$             0.47


$             0.31

Weighted average number of Diluted Shares outstanding

18,538,000


18,649,000


18,537,000


18,713,000

 

* Non-GAAP Information. Certain non-GAAP measures are included in this press release, including EBITDA, non-GAAP operating income and Adjusted EBITDA. We define EBITDA as GAAP net income plus income tax expense, net interest expense, non-cash stock-based expense and depreciation and amortization expense. Non-GAAP operating income does not include amortization of intangibles or stock-based compensation expense. These non-GAAP measures are provided to enhance the user's overall understanding of our financial performance. By excluding these charges our non-GAAP results provide information to management and investors that is useful in assessing NAPCO's core operating performance and in comparing our results of operations on a consistent basis from period to period. The presentation of this information is not meant to be a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliation of GAAP to non-GAAP financial measures set forth above.

Contacts:
Patrick McKillop
Director of Investor Relations
NAPCO Security Technologies, Inc.
OP: 800-645-9445 x 374
CP: 516-404-3597
pmckillop@napcosecurity.com

SOURCE NAPCO Security Technologies, Inc.


333 Bayview Avenue, Amityville, NY 11701 • (631) 842-9400
Fax: (631) 789-9292  email: salesinfo@napcosecurity.com
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