NAPCO Reports Record Revenues, Net Income and Adjusted EBITDA* for Q2 of Fiscal 2024
- Net sales increased by 12% to $47.5 million, marking the highest quarterly sales in the company's history
- Net income rose by 221% to $12.6 million, setting a quarterly record
- Adjusted EBITDA increased by 191% to $15.1 million, also setting a quarterly record
- Recurring service revenues saw a 25% increase to $18.5 million, with a gross margin of 90%
- The company declared a quarterly dividend of $0.10 per share, representing a 25% increase over the previous dividend
- None.
Insights
Examining the financial metrics reported by NAPCO Security Technologies, the substantial growth in net income and adjusted EBITDA is indicative of the company's operational efficiency and profitability. A 221% increase in net income and a 191% increase in adjusted EBITDA are remarkable, especially considering the current economic climate where many sectors are facing margin pressures. The 90% gross margin on recurring service revenues underscores a strong, sustainable business model with a focus on high-margin services. This is particularly noteworthy as investors often seek companies with reliable revenue streams that can maintain profitability.
Furthermore, the declaration of a quarterly dividend, especially with a 25% increase from the previous dividend, reflects the company's confidence in its financial health and its commitment to returning value to shareholders. This action could potentially attract income-focused investors and support the stock price. However, it's crucial to monitor whether the company can sustain these margins and growth rates in the face of market volatility and competitive pressures.
The reported growth in recurring service revenues (RSR) is a testament to the company's strategic emphasis on developing recurring revenue streams, a trend that's becoming increasingly important in the technology sector. A 25% year-over-year increase in RSR and an impressive annual run rate of approximately $76.5 million based on January 2024 recurring revenues suggest a solid customer base and a successful subscription-based business model. The high gross margin on RSR highlights the scalability of these services.
Additionally, the growth in equipment revenues and the introduction of Prima by NAPCO, an All-in-One Panel, indicate the company's continued innovation and potential to capture market share in the residential and small business segments. The focus on sectors like school security and healthcare also aligns with current societal needs, which could drive further growth. These factors combined with the strong balance sheet, characterized by an 18% increase in cash and cash equivalents and no debt, position the company well for future investments and weathering economic downturns.
From a legal and regulatory standpoint, NAPCO Security Technologies' financial results do not raise any immediate concerns. The company's compliance with NASDAQ listing requirements is assumed, given the absence of any mention of non-compliance issues. The increase in R&D spending by 14% indicates a commitment to innovation and staying ahead of regulatory changes, which is crucial in the tech industry. In sectors like security technology, adherence to legal standards and regulations is vital and ongoing investment in R&D can be seen as a proactive measure to maintain compliance and industry leadership.
Moreover, the increase in dividend payout suggests that the company's management is confident in its legal and financial standing to support such a decision. It's important for investors to recognize that a company's ability to consistently pay and increase dividends can be a sign of stability and a lower risk profile from a legal perspective.
-Net Sales for the Quarter Increase
-Net Income for the Quarter Increases
-Adjusted EBITDA for the Quarter Increases
-2nd Quarter Recurring Service Revenues Increase
-Board Declares Quarterly Dividend of
Financial Highlights:
- Net sales for the quarter increased
12% to$47.5 million $42.3 million for the same period last year. Net sales for the six months ended December 31, 2023 increased9% to a six month record$89.2 million $81.8 million - Recurring service revenue ("RSR") for the quarter increased
25% to$18.5 million as compared to$14.9 million for the same period last year. Recurring service revenue for the six months ended December 31, 2023 increased25% to$35.8 million $28.7 million $76.5 million based on January 2024 recurring revenues. - Gross margin for recurring service revenue remained robust at
90% for the quarter and six months as compared to89% and88% , respectively, for the same periods last year. - Gross margin for equipment revenues was
29% for the second quarter compared to4% in last year's 2nd quarter. Gross margin for equipment revenues was29% for the six months ended December 31, 2023, compared to7% for the same period last year. - Net income for the quarter increased
221% to a quarterly record$12.6 million as compared to$3.9 million for the same period a year ago. Net income for the six months ended December 31, 2023 increased229% to a six month record$23.1 million $7.0 million - Earnings per share (diluted) for the quarter increased
209% to$0.34 as compared to$0.11 for the same period a year ago. Earnings per share (diluted) for the six months ended December 31, 2023 increased226% to$0.62 $0.19 - Adjusted EBITDA* for the quarter increased
191% to a quarterly record$15.1 million as compared to$5.2 million for the same period a year ago. Adjusted EBITDA for the six months ended December 31, 2023 increased182% to a six month record$28.0 million $9.9 million - Adjusted EBITDA per share (diluted)* for the quarter increased
193% to$0.41 as compared to$0.14 for the same period a year ago. Adjusted EBITDA per share (diluted) for the six months ended December 31, 2023 increased181% to$0.76 $0.27 - Cash and cash equivalents, other investments and marketable securities were
$79.0 million at December 31, 2023 as compared to$66.7 million at June 30, 2023, an18% increase. The Company had no debt as of December 31, 2023. - Cash Provided by Operating Activities for the six months ended December 31, 2023 was
$18.7 million as compared to$1.1 million for the same period last year. - The Company will be issuing a quarterly dividend of
$0.10 25% increase over the previous dividend of$0.08
Richard Soloway, Chairman and President, commented, "The second quarter of fiscal 2024 was the strongest quarter in our Company's history. Revenue was
We were also pleased with the increase in the recurring revenues annual run rate, which increased to
Net income of
Our balance sheet continues to get stronger, with cash and cash equivalents, other investments and marketable securities increasing
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, growing approximately
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 Q2 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 in Q2 improved over Q1, increasing by approximately
Mr. Soloway concluded, "We are halfway through fiscal 2024 and while we have already generated net income of
Financial Results
Net sales for the quarter increased
Operating income for the quarter increased
Adjusted EBITDA* for the quarter increased
Balance Sheet Summary
As of December 31, 2023, the Company had
Conference Call Information
Management will conduct a conference call at 11 a.m. ET today, February 5, 2024, 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) 1-800-836-8184 or for international callers, 1-646-357-8785. 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 | |||||||
December 31, 2023 | June 30, 2023 | ||||||
(in thousands, except share data) | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | 47,311 | $ | 35,955 | |||
Investments - other | 26,332 | 25,660 | |||||
Marketable securities | 5,324 | 5,136 | |||||
Accounts receivable, net of allowance for credit losses of | 27,552 | 26,069 | |||||
Inventories, net | 39,316 | 35,062 | |||||
Income tax receivable | 367 | 75 | |||||
Prepaid expenses and other current assets | 3,526 | 3,402 | |||||
Total Current Assets | 149,728 | 131,359 | |||||
Inventories - non-current, net | 13,318 | 13,287 | |||||
Property, plant and equipment, net | 9,071 | 9,308 | |||||
Intangible assets, net | 3,771 | 3,939 | |||||
Deferred income taxes | 4,057 | 2,652 | |||||
Right-of-use asset | 5,642 | 5,797 | |||||
Other assets | 291 | 312 | |||||
TOTAL ASSETS | $ | 185,878 | $ | 166,654 | |||
CURRENT LIABILITIES | |||||||
Accounts payable | $ | 8,288 | $ | 8,061 | |||
Accrued expenses | 9,844 | 8,079 | |||||
Accrued salaries and wages | 3,079 | 3,546 | |||||
Total Current Liabilities | 21,211 | 19,686 | |||||
Accrued income taxes | 1,082 | 1,110 | |||||
Long term right-of-use liability | 5,601 | 5,689 | |||||
TOTAL LIABILITIES | 27,894 | 26,485 | |||||
COMMITMENTS AND CONTINGENCIES (Note 13) | |||||||
STOCKHOLDERS' EQUITY | |||||||
Common Stock, par value | 397 | 397 | |||||
Additional paid-in capital | 22,163 | 21,553 | |||||
Retained earnings | 154,945 | 137,740 | |||||
Less: Treasury Stock, at cost (2,893,715 shares) | (19,521) | (19,521) | |||||
TOTAL STOCKHOLDERS' EQUITY | 157,984 | 140,169 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 185,878 | $ | 166,654 | |||
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||
Three Months ended December 31, | ||||||
2023 | 2022 | |||||
(in thousands, except for share and per share data) | ||||||
Net sales: | ||||||
Equipment revenues | $ | 29,007 | $ | 27,434 | ||
Service revenues | 18,540 | 14,880 | ||||
47,547 | 42,314 | |||||
Cost of sales: | ||||||
Equipment related expenses | 20,656 | 26,295 | ||||
Service-related expenses | 1,879 | 1,665 | ||||
22,535 | 27,960 | |||||
Gross Profit | 25,012 | 14,354 | ||||
Operating expenses: | ||||||
Research and development | 2,542 | 2,222 | ||||
Selling, general, and administrative expenses | 8,665 | 7,804 | ||||
Total Operating Expenses | 11,207 | 10,026 | ||||
Operating Income | 13,805 | 4,328 | ||||
Other income (expense): | ||||||
Interest and other income (expense), net | 729 | 187 | ||||
Income before Provision for Income Taxes | 14,534 | 4,515 | ||||
Provision for Income Taxes | 1,924 | 586 | ||||
Net Income | $ | 12,610 | $ | 3,929 | ||
Income per share: | ||||||
Basic | $ | 0.34 | $ | 0.11 | ||
Diluted | $ | 0.34 | $ | 0.11 | ||
Weighted average number of shares outstanding: | ||||||
Basic | 36,829,000 | 36,772,000 | ||||
Diluted | 37,018,000 | 36,997,000 | ||||
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) | |||||||
Six Months Ended December 31, | |||||||
2023 | 2022 | ||||||
(in thousands, except for share and per share data) | |||||||
Net sales: | |||||||
Equipment revenues | $ | 53,398 | $ | 53,121 | |||
Service revenues | 35,825 | 28,686 | |||||
89,223 | 81,807 | ||||||
Cost of sales: | |||||||
Equipment-related expenses | 38,153 | 49,561 | |||||
Service-related expenses | 3,645 | 3,326 | |||||
41,798 | 52,887 | ||||||
Gross Profit | 47,425 | 28,920 | |||||
Operating expenses: | |||||||
Research and development | 4,979 | 4,650 | |||||
Selling, general, and administrative expenses | 17,086 | 16,294 | |||||
Total Operating Expenses | 22,065 | 20,944 | |||||
Operating Income | 25,360 | 7,976 | |||||
Other income (expense): | |||||||
Interest and other income (expense), net | 1,169 | 84 | |||||
Income before Provision for Income Taxes | 26,529 | 8,060 | |||||
Provision for Income Taxes | 3,441 | 1,047 | |||||
Net Income | $ | 23,088 | $ | 7,013 | |||
Income per share: | |||||||
Basic | $ | 0.63 | $ | 0.19 | |||
Diluted | $ | 0.62 | $ | 0.19 | |||
Weighted average number of shares outstanding: | |||||||
Basic | 36,743,000 | 36,731,000 | |||||
Diluted | 36,962,000 | 36,957,000 | |||||
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Six Months ended December 31, | |||||||
2023 | 2022 | ||||||
(in thousands) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income | $ | 23,088 | $ | 7,013 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 1,088 | 928 | |||||
Gain on disposal of fixed asset | — | (15) | |||||
Interest income on other investments | (17) | (68) | |||||
Unrealized (gain) loss on marketable securities | (71) | 118 | |||||
(Recovery) of credit losses | (35) | (28) | |||||
Change to inventory reserve | 720 | (560) | |||||
Deferred income taxes | (1,405) | (994) | |||||
Stock based compensation expense | 610 | 812 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (1,448) | 8,261 | |||||
Inventories | (5,005) | (5,136) | |||||
Prepaid expenses and other current assets | (124) | 11 | |||||
Income tax receivable | (292) | (583) | |||||
Other assets | 20 | (17) | |||||
Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes | 1,564 | (8,654) | |||||
Net Cash Provided by (Used in) Operating Activities | 18,693 | 1,088 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Purchases of property, plant, and equipment | (682) | (816) | |||||
Proceeds from disposal of fixed asset | — | 38 | |||||
Purchases of marketable securities | (117) | (10,078) | |||||
Purchases of other investments | (655) | — | |||||
Net Cash Used in Investing Activities | (1,454) | (10,856) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Proceeds from stock option exercises | — | 45 | |||||
Cash paid for dividend | (5,883) | — | |||||
Net Cash (Used in) Provided by Financing Activities | (5,883) | 45 | |||||
Net increase (decrease) in Cash and Cash Equivalents | 11,356 | (9,723) | |||||
CASH AND CASH EQUIVALENTS - Beginning | 35,955 | 41,730 | |||||
CASH AND CASH EQUIVALENTS - Ending | $ | 47,311 | $ | 32,007 | |||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||
Interest paid | $ | 4 | $ | 8 | |||
Income taxes paid | $ | 5,165 | $ | 4,469 | |||
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, | |||
2023 | 2022 | 2023 | 2022 | |
Net income (GAAP) | $ 12,610 | $ 3,929 | $ 23,088 | $ 7,013 |
Add back provision for income taxes | 1,924 | 586 | 3,441 | 1,047 |
Interest and other (income) expense, net | (729) | (187) | (1,169) | (84) |
Operating Income (GAAP) | 13,805 | 4,328 | 25,360 | 7,976 |
Adjustments for non-GAAP measures of performance: | ||||
Add back amortization of acquisition-related intangibles | 84 | 91 | 168 | 181 |
Add back stock-based compensation expense | 303 | 335 | 610 | 812 |
Add back non-recurring legal expenses | 439 | 55 | 895 | 190 |
Adjusted non-GAAP operating income | 14,631 | 4,809 | 27,033 | 9,159 |
Add back depreciation and other amortization | 467 | 380 | 920 | 747 |
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) | $ 15,098 | $ 5,189 | $ 27,953 | $ 9,906 |
Adjusted EBITDA* per Diluted Share | $ 0.41 | $ 0.14 | $ 0.76 | $ 0.27 |
Weighted average number of Diluted Shares outstanding | 37,018,000 | 36,997,000 | 36,962,000 | 36,957,000 |
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
View original content:https://www.prnewswire.com/news-releases/napco-reports-record-revenues-net-income-and-adjusted-ebitda-for-q2-of-fiscal-2024-302052668.html
SOURCE NAPCO Security Technologies, Inc.
FAQ
What is the ticker symbol for NAPCO Security Technologies, Inc.?
What were the net sales for the quarter?
What was the increase in net income for the quarter?
What was the increase in adjusted EBITDA for the quarter?
What was the increase in recurring service revenues for the quarter?
What was the quarterly dividend declared by the company?
