Napco Reports Q3 Recurring Service Revenues Grew 49%

Net sales for the quarter increased 7% to a record $22.2 million as compared to $20.8 million for the same quarter last year.

AMITYVILLE, N.Y. — Napco Security Technologies (Nasdaq: NSSC) on Monday reported fiscal third-quarter earnings of $1.83 million or 10 cents per share, as compared to $952,000 or 5 cents per share for the same quarter last year.

Third quarter net sales increased 7% to $22.2 million, which marked a record Q3 performance. For the nine-months ended March 31, net sales increased 5% to $64.4 million. The increase was attributed primarily to a rise in SaaS recurring service revenue, access control products and door-locking hardware.

Gross profit for the third quarter increased 6% to $8.9 million, and for the nine-month period it increased 5% to $25.9 million.

R&D expenses for the quarter were said to be $1.78 million, or 7.5% of sales as compared to $1.7 million or 8.2% of sales last year. For the nine months, R&D expenses were relatively constant at $4.9 million or 7.6% of sales as compared to $4.9 million or 8% of sales last year.

Operating income for Q3 increased 68% to $1.9 million as compared to $1.1 million during the same period the year prior. For the nine months, operating income increased 42% to $4.1 million as compared to $2.9 million the prior year.

Napco reported a cash balance as of March 31 was $4.3 million as compared to $3.5 million on June 30, 2017. Working capital as of March 31 was $40.5 million as compared to $40.8 million on June 30, 2017.

During an earnings call with analysts on Monday, Napco CEO and President Richard Soloway said SaaS recurring revenues increased 49% during the third quarter and now has an annual run rate of $12.9 million. He attributed the growth to the company’s StarLink alarm communicators for intrusion, fire and connected home applications.

Soloway emphasized SaaS recurring revenue and school security as two paradigm shifts in the company’s business, both of which remain positive forces, he said.

The school security opportunity continues to remain significant for us. As a reminder, the total addressable market is very large with over 100,000 K-12 schools and over 10,000 houses and universities in the U.S.,” he said. “Many of these schools have little or no security in place to protect them from the constant threat of violence incidences. We believe that going forward the amount of new spending on security and safety products from school will continue at a strong rate for the foreseeable future.”

Napco shares have risen 25% since the beginning of the year. The stock has risen slightly more than 4% in the last 12 months.

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About the Author


Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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