-Net Sales for the Quarter Increase 6% to
$41.7 Million-
-Net Income for the Quarter Increases 239% to
$10.5 Million-
-Adjusted EBITDA for the Quarter Increases
174% to $12.9 Million-
-1st Quarter Recurring Service Revenues
Increase 25% to $17.3 Million With a Gross Margin of
90%-
-Board Declares Quarterly Dividend of
$.08 per share-
-Audit Committee Appoints Deloitte &
Touche LLP as Company's Auditor for Fiscal 2024-
AMITYVILLE, N.Y., Nov. 6, 2023
/PRNewswire/ -- NAPCO Security Technologies, Inc.
(NASDAQ: NSSC), one of the leading manufacturers and designers
of high-tech electronic security equipment, wireless communication
devices for intrusion and fire alarm systems and the related
recurring service revenues as well as a provider of school safety
solutions, today announced financial results for its first quarter
of fiscal 2024.
Financial Highlights:
- Net sales for the quarter increased 6% to $41.7 million (the highest Q1 sales in the
Company's history) as compared to $39.5 million for
the same period last year.
- Recurring service revenues ("RSR") for the quarter increased
25% to $17.3 million as compared to $13.8
million for the same period last year. Recurring service
revenues had a prospective annual run rate of
approximately $72.5 million based on October
2023 recurring revenues.
- Gross margin for recurring service revenues remained robust for
the quarter at 90%, compared to 88% for the same period last
year.
- Gross margin for equipment revenues was 28% for the first
quarter compared to 9% in last year's 1st quarter.
- Net income for the quarter increased 239% to a first quarter
record $10.5 million as compared to $3.1
million for the same period a year ago.
- Earnings per share (diluted) for the quarter increased 250%
to $0.28 as compared to $0.08 for the same
period a year ago.
- Adjusted EBITDA* for the quarter increased 174% to a first
quarter record $12.9 million as
compared to $4.7 million for the same period a year
ago.
- Adjusted EBITDA per share (diluted)* for the quarter increased
169% to $0.35 as compared to $0.13 for the same
period a year ago.
- Cash and cash equivalents, other investments and marketable
securities were $74.6 million at September 30,
2023 as compared to $66.7 million at June 30,
2023, a 12% increase. The Company had no debt as of September
30, 2023.
- Cash Provided by Operating Activities for the three months
ended September 30, 2023 was $11.2 million as
compared to $(2.0) million for the same period last
year.
- The Company will be issuing a quarterly dividend of
$0.08 per share to be paid on
December 22, 2023 to shareholders of
record on December 1, 2023.
- Deloitte & Touche LLP has been appointed as the
Company's independent registered public accounting firm for the
fiscal year ending June 30, 2024,
effective immediately after the filing of the Company's first
quarter 10-Q.
Richard Soloway, Chairman and
President, commented, "Fiscal 2024 began with record first quarter
sales of $41.7 million, which was the
twelfth consecutive quarter we achieved record sales for a
quarterly reporting period. Our net income of $10.5 million is the largest Q1 net income in the
Company's history. While equipment revenues declined 5% for the
quarter, gross margins on such sales increased to 28% from 9% in
last year's first quarter. Recurring service revenues, which
increased 25%, was also a major contributor to the year-over-year
overall sales and earnings growth. Gross margin for recurring
service revenues increased to 90% and when combined with gross
margin on equipment revenues of 28%, the total gross margins for Q1
amounted to 54%, which compared to 37% for last year's Q1. We were
particularly pleased to see the strong growth in the gross margin
on equipment revenues, which was primarily attributable to more
normalized material costs and freight costs (after cessation of the
global supply chain problems), and an increase in higher margin
locking products sales and a decline in lower margin radio
sales.
We were also pleased with the significant increase in the
recurring revenues annual run rate, which increased to $72.5 million based on October 2023 recurring revenues, compared to an
annual run rate of $67 million based
on July 2023 recurring revenues.
Net income of $10.5 million was a
Q1 record-breaker and represents 25% of our net sales. Adjusted
EBITDA* of $12.9 million was also a
Q1 record and our Adjusted EBITDA* margin for the quarter was 31%
of our net sales.
Our balance sheet continues to get stronger, with cash and cash
equivalents, other investments and marketable securities increasing
12% to $74.6 million and we have no
debt. Net cash provided by operating activities for Q1 was also
strong, amounting to $11.2
million.
Our Alarm Lock and Marks locking hardware lines continue to see
growth in school and classroom security, healthcare, and
retail loss-prevention, as well as in multi-dwelling commercial and
residential applications. We remain focused on further penetrating
each of these markets.
We recently announced the introduction of Prima by NAPCO, a
new All-in-One Panel for security, fire,
video and connected home. We anticipate that Prima will
address an important mass segment of the security market,
including residential and small business systems. With
built-in Wi-Fi/cellular radio communications, customer
alert notifications, and video and smart home subscription options
for each -installed system, the security
dealer, as well as the Company,
can add more recurring-revenue generating
accounts.
NAPCO's record-breaking results for Q1 of fiscal year 2024, was
primarily the result of the continued growth and profitability from
recurring revenues as well as the strong sales from our Alarm Lock
and Marks locking product lines. Radio sales have continued to slow
down when compared to last year's first quarter, when the impending
3G Verizon sunset was rapidly approaching. As fiscal 2024
progresses, we expect radio sales to continue to be a key
contributor to our hardware sales and continue to lead to the
continued growth of our highly profitable recurring revenues."
Mr. Soloway concluded, "As we begin fiscal year 2024, we are
encouraged with the improved gross margin for hardware sales of
28%, and, based on historical seasonal trends, we believe this
could improve further as the fiscal year progresses. Our net income
margin and Adjusted EBITDA* margin of 25% and 31%, respectively,
indicates the financial strength of our business. We are pleased to
continue our dividend program and we will be paying another
dividend of $0.08 per share on
December 22, 2023. As always, we will
strive to accomplish our goal of continued financial strength,
product innovation, technical superiority, and strong
profitability, for the rest of fiscal 2024 and beyond".
Financial Results
Net sales for the quarter increased 6% to $41.7 million (the highest Q1 in the Company's
history), as compared to $39.5
million for the same period one year ago. Research and
development costs for the quarter remained relatively constant at
$2.4 million or 6% of sales as
compared to $2.4 million or 6% of
sales for the same period a year ago. Selling, general and
administrative expenses for the quarter remained relatively
constant at $8.4 million or 20% of
net sales, as compared to $8.5
million, or 22% of sales for the same period last year.
Operating income for the quarter increased 222% to $11.6 million as compared to $3.6 million for the same period last year. Net
income for the quarter increased 239% to a Q1 record $10.5 million or $0.28 per diluted share as compared to
$3.1 million or $0.08 per diluted share for the same period last
year and represents 25% of net sales.
Adjusted EBITDA* for the quarter increased 174% to a Q1 record
$12.9 million, or $0.35 per diluted share, as compared to
$4.7 million, or $0.13 per diluted share for the same period last
year and equates to an Adjusted EBITDA* margin of 31%.
Balance Sheet Summary
At September 30, 2023, the Company
had $74.6 million in cash and cash
equivalents, other investments and marketable securities as
compared to $66.7 million as of
June 30, 2023. Working capital
(defined as current assets less current liabilities) was
$115.9 million at September 30, 2023 as compared with working
capital of $111.7 million at
June 30, 2023. Current ratio (defined
as current assets divided by current liabilities) was 6.3:1 at
September 30, 2023, and 6.7:1 at
June 30, 2023.
Other
The Audit Committee of the Board of Directors of the Company has
approved the engagement of Deloitte & Touche LLP as the
Company's independent registered public accounting firm for the
fiscal year ending June 30, 2024,
subject to the execution of an engagement letter. The effective
date of Deloitte's appointment will be immediately following the
filing of the Company's Form 10-Q for the quarter ending
September 30, 2023. As previously
reported, the Committee dismissed Baker Tilly as the Company's
independent registered public accounting firm as of the
aforementioned effective date.
Conference Call Information
Management will conduct a conference call at 11 a.m. ET today, November
6, 2023 in order to participate please go to the Investor
Relations section of Company's website at
https://investor.napcosecurity.com. Alternatively, interested
parties may participate in the call by dialing, in the (US)
1-877-550-1875 or for international callers, 1-848-488-9180. A
replay of the webcast will be available on the Investor Relations
section of the Company's website.
About NAPCO Security Technologies, Inc.
NAPCO Security Technologies, Inc., is one of the leading
manufacturers and designers of high-tech electronic security
devices, wireless recurring communication services for intrusion
and fire alarm systems as well as a 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 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, but are not limited to,
statements relating to the impact of COVID-19 pandemic; supply
chain challenges and developments; the growth of recurring service
revenues and annual run rate; the strength of our balance sheet;
our expectations regarding future results; the introduction of new
access control and locking products; the opportunities for school
security products; business trends , including the replacement of
3G radios, and our ability to execute our business strategies.
Actual results, performance or achievements could differ materially
from those anticipated in such forward-looking statements as a
result of certain factors, including those risk factors set forth
in the Company's filings with the Securities and Exchange
Commission, such as our annual report on Form 10-K and quarterly
reports on Form 10-Q. 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 are
reasonable, we cannot guarantee future results, level of activity,
performance, or achievements. You should not place undue reliance
on these forward-looking statements. All information provided in
this press release is as of today's date, unless otherwise stated,
and the Company undertakes no duty to update such information,
except as required under applicable law.
*Non-GAAP Financial Measures
Certain non-GAAP measures are included in this press release,
including non-GAAP operating income, Adjusted EBITDA and Adjusted
EBITDA per share (diluted). We define Adjusted EBITDA as GAAP net
income plus income tax expense, net interest expense, non-cash
stock-based expense, non-recurring legal expense, other
non-recurring income 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. Our use of non-GAAP financial measures has
certain limitations in that such non-GAAP financial measures may
not be directly comparable to those reported by other companies.
For example, the terms used in this press release, such as Adjusted
EBITDA, do not have a standardized meaning. Other companies may use
the same or similarly named measures, but exclude different items,
which may not provide investors with a comparable view of our
performance in relation to other companies. 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.
NAPCO SECURITY
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
|
|
|
|
|
|
(unaudited)
|
|
June 30, 2023
|
|
|
|
(in thousands, except
share data)
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
43,577
|
|
$
|
35,955
|
|
Investments -
other
|
|
|
25,931
|
|
|
25,660
|
|
Marketable
securities
|
|
|
5,121
|
|
|
5,136
|
|
Accounts receivable,
net of allowance for credit losses of $107 and $131 as of
September
30, 2023 and June 30, 2023, respectively
|
|
|
22,921
|
|
|
26,069
|
|
Inventories,
net
|
|
|
36,946
|
|
|
35,062
|
|
Income tax
receivable
|
|
|
205
|
|
|
75
|
|
Prepaid expenses and
other current assets
|
|
|
3,072
|
|
|
3,402
|
|
Total Current
Assets
|
|
|
137,773
|
|
|
131,359
|
|
Inventories -
non-current, net
|
|
|
17,201
|
|
|
13,287
|
|
Property, plant and
equipment, net
|
|
|
9,112
|
|
|
9,308
|
|
Intangible assets,
net
|
|
|
3,855
|
|
|
3,939
|
|
Deferred income
taxes
|
|
|
2,732
|
|
|
2,652
|
|
Operating lease
asset
|
|
|
5,722
|
|
|
5,797
|
|
Other assets
|
|
|
294
|
|
|
312
|
|
TOTAL
ASSETS
|
|
$
|
176,689
|
|
$
|
166,654
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
11,084
|
|
$
|
8,061
|
|
Accrued
expenses
|
|
|
7,636
|
|
|
8,079
|
|
Accrued salaries and
wages
|
|
|
3,176
|
|
|
3,546
|
|
Total Current
Liabilities
|
|
|
21,896
|
|
|
19,686
|
|
Accrued income
taxes
|
|
|
1,133
|
|
|
1,110
|
|
Long term operating
lease liabilities
|
|
|
5,648
|
|
|
5,689
|
|
TOTAL
LIABILITIES
|
|
|
28,677
|
|
|
26,485
|
|
COMMITMENTS AND
CONTINGENCIES (Note 13)
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
Common Stock, par value
$0.01 per share; 100,000,000 shares authorized as of September
30, 2023 and June 30, 2023; 39,663,812 shares issued; and
36,770,097 shares outstanding as
of each date
|
|
|
397
|
|
|
397
|
|
Additional paid-in
capital
|
|
|
21,860
|
|
|
21,553
|
|
Retained
earnings
|
|
|
145,276
|
|
|
137,740
|
|
Less: Treasury Stock,
at cost (2,893,715 shares)
|
|
|
(19,521)
|
|
|
(19,521)
|
|
TOTAL STOCKHOLDERS'
EQUITY
|
|
|
148,012
|
|
|
140,169
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
$
|
176,689
|
|
$
|
166,654
|
|
NAPCO SECURITY
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months ended
September 30,
|
|
|
2023
|
|
2022
|
|
|
(in thousands, except for
share and per share data)
|
Net sales:
|
|
|
|
|
|
|
Equipment
revenues
|
|
$
|
24,391
|
|
$
|
25,687
|
Service
revenues
|
|
|
17,285
|
|
|
13,806
|
|
|
|
41,676
|
|
|
39,493
|
Cost of
sales:
|
|
|
|
|
|
|
Equipment related
expenses
|
|
|
17,497
|
|
|
23,266
|
Service-related
expenses
|
|
|
1,766
|
|
|
1,661
|
|
|
|
19,263
|
|
|
24,927
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
22,413
|
|
|
14,566
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Research and
development
|
|
|
2,437
|
|
|
2,428
|
Selling, general, and
administrative expenses
|
|
|
8,421
|
|
|
8,490
|
Total Operating
Expenses
|
|
|
10,858
|
|
|
10,918
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
11,555
|
|
|
3,648
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Interest and other
income (expense), net
|
|
|
440
|
|
|
(103)
|
Income before Provision
for Income Taxes
|
|
|
11,995
|
|
|
3,545
|
Provision for Income
Taxes
|
|
|
1,517
|
|
|
461
|
Net Income
|
|
$
|
10,478
|
|
$
|
3,084
|
|
|
|
|
|
|
|
Income per
share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.28
|
|
$
|
0.08
|
Diluted
|
|
$
|
0.28
|
|
$
|
0.08
|
|
|
|
|
|
|
|
Weighted average number
of shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
36,827,000
|
|
|
36,762,000
|
Diluted
|
|
|
37,076,000
|
|
|
36,990,000
|
NAPCO SECURITY
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended
September 30,
|
|
|
|
2023
|
|
2022
|
|
|
|
(in
thousands)
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income
|
|
$
|
10,478
|
|
$
|
3,084
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
537
|
|
|
457
|
|
Gain on disposal of
fixed asset
|
|
|
—
|
|
|
(15)
|
|
Interest income on
other investments
|
|
|
76
|
|
|
(8)
|
|
Unrealized loss on
marketable securities
|
|
|
57
|
|
|
153
|
|
(Recovery) of credit
losses
|
|
|
(24)
|
|
|
(27)
|
|
Change to inventory
reserve
|
|
|
822
|
|
|
(252)
|
|
Deferred income
taxes
|
|
|
(80)
|
|
|
(417)
|
|
Stock based
compensation expense
|
|
|
307
|
|
|
477
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
3,172
|
|
|
7,903
|
|
Inventories
|
|
|
(6,620)
|
|
|
(10,197)
|
|
Prepaid expenses and
other current assets
|
|
|
330
|
|
|
(2)
|
|
Income tax
receivable
|
|
|
(130)
|
|
|
(662)
|
|
Other
assets
|
|
|
17
|
|
|
(27)
|
|
Accounts payable,
accrued expenses, accrued salaries and wages, accrued income
taxes
|
|
|
2,267
|
|
|
(2,432)
|
|
Net Cash Provided by
(Used in) Operating Activities
|
|
|
11,209
|
|
|
(1,965)
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Purchases of property,
plant, and equipment
|
|
|
(256)
|
|
|
(372)
|
|
Proceeds from disposal
of fixed asset
|
|
|
—
|
|
|
38
|
|
Purchases of
marketable securities
|
|
|
(42)
|
|
|
(10,028)
|
|
Purchases of other
investments
|
|
|
(347)
|
|
|
—
|
|
Net Cash Used in
Investing Activities
|
|
|
(645)
|
|
|
(10,362)
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds from stock
option exercises
|
|
|
—
|
|
|
45
|
|
Cash paid for
dividend
|
|
|
(2,942)
|
|
|
—
|
|
Net Cash (Used in)
Provided by Financing Activities
|
|
|
(2,942)
|
|
|
45
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in Cash and Cash Equivalents
|
|
|
7,622
|
|
|
(12,282)
|
|
CASH AND CASH
EQUIVALENTS - Beginning
|
|
|
35,955
|
|
|
41,730
|
|
CASH AND CASH
EQUIVALENTS - Ending
|
|
$
|
43,577
|
|
$
|
29,448
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
—
|
|
$
|
4
|
|
Income taxes
paid
|
|
$
|
1,703
|
|
$
|
3,398
|
|
NAPCO SECURITY
TECHNOLOGIES, INC
|
NON-GAAP MEASURES OF
PERFORMANCE* (Unaudited)
|
(in thousands, except
share and per share data)
|
|
3 Months ended
September 30,
|
|
2023
|
2022
|
Net income
(GAAP)
|
$
10,478
|
$
3,084
|
Add back provision for
income taxes
|
1,517
|
461
|
Interest and other
(income) expense, net
|
(440)
|
103
|
Operating Income
(GAAP)
|
11,555
|
3,648
|
Adjustments for
non-GAAP measures of performance:
|
|
|
Add back amortization
of acquisition-related intangibles
|
84
|
90
|
Add back
stock-based compensation expense
|
307
|
477
|
Add back
non-recurring legal expenses
|
456
|
135
|
Adjusted non-GAAP
operating income
|
12,402
|
4,350
|
Add back depreciation
and other amortization
|
453
|
367
|
Adjusted EBITDA*
(earnings before interest, taxes, depreciation and
amortization)
|
$
12,855
|
$
4,717
|
|
|
|
|
|
|
Adjusted EBITDA* per
Diluted Share
|
$
0.35
|
$
0.13
|
Weighted average number
of Diluted Shares outstanding
|
37,076,000
|
36,990,000
|
Contacts:
Francis J. Okoniewski
Vice President of Investor Relations
NAPCO Security Technologies, Inc.
Office 800-645-9445 x 374
Mobile 516-404-3597
fokoniewski@napcosecurity.com
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content:https://www.prnewswire.com/news-releases/napco-reports-record-revenues-net-income-and-adjusted-ebitda-for-q1-of-fiscal-2024-301977805.html
SOURCE NAPCO Security Technologies, Inc.