Napco Security Posts 44% Increase in Q2 Net Income

Napco reported net income for the quarter increased to $1. 2 million from $857,000 a year ago. The company cites demand for alarm communications in the connected home category as a key driver.

AMITYVILLE, N.Y. — Napco Security Technologies (Nasdaq: NSSC) reported its net income for its second quarter shot up 44% on the strength of recurring revenue for alarm systems. Revenue for the quarter came in at $21.1 million, narrowly missing the consensus estimate of $22 million.

Napco, based here, reported its net income totaled $1.23 million, or 7 cents per share, which matched analysts’ per share expectations, according figures compiled by Thomson Reuters.

Recurring revenue for the quarter, which is included in net sales, increased 52% and now has a prospective annual run rate of $11.7 million based on December 2017 recurring revenue.

For the six months ended Dec. 31, net sales increased 3% to $42.3 million. The increase in sales for the three and six months ended Dec. 31 was attributed to increased intrusion sales, driven by a 52% and 54% increase in SaaS recurring revenues for the quarter and six months, respectively. The company also cited increased sales in its access control division for overall positive performance.

SaaS recurring revenue now has an annual run rate of $11.7 million based on December 2017 recurring revenue, according to the company.

Gross margin for the second quarter was 32.4% of sales, a 50-basis point increase versus the second quarter last year. Gross margin for the six months was also 32.4% of sales, a 40-basis points increase versus the six months last year.

Operating income for the second quarter increased 10% to $1.2 billion, compared to $1.1 million last year. For the six months ending Dec. 31., operating income increased 25% to $2.2 million as compared to $1.8 million the prior year.

During an earnings call Monday, Napco President and CEO Richard Soloway said growth in SaaS reoccurring revenue continues at a robust rate, particularly from alarm communications in the connected home category as well as the Internet of Things (IoT).

The education market is also fueling growth, he said. As an example, the company recently announced the University of California, Berkeley, will be installing Napco’s StarLink dual-path fire communicators throughout its campus. Soloway said the project involves replacing older copper phone lines to enhance first-response communications, as well as achieve code compliancy and overall cost savings.

“We continue to see significant opportunity in school safety and security market. The total addressable market is very large with 100,000 K-12s and 10,000 colleges and universities in the U.S. needing products to combat the constant threat of violent incidences,” he said. “It is our expectation that the new spending for schools on security and safety products will continue at a strong rate for the foreseeable future.”

During the call Soloway mentioned Napco was selected as one of the best intrusion detection brands alongside industry leaders Honeywell and Bosch, as voted on by installing security contractors for SSI’s 2017 Top Market Leaders.

“It is a great honor and testament for Napco as it highlights our ability to compete with the industry giants,” he said.

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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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