NAPCO Stock Spikes After Record Revenues, Net Income and EBITDA for Fiscal 2024 Q1
NAPCO’s record-breaking results was primarily the result of the continued growth of recurring revenues and Alarm Lock and Mark sales.
AMITYVILLE, N.Y. — Shares of high-tech electronic security equipment manufacturer NAPCO Security Technologies, Inc., jumped about 20% in early trading Monday after the company reported record revenues, net income and EBITDA for the first quarter of fiscal 2024.
NAPCO also produces wireless communication devices for intrusion and fire alarm systems and the related recurring services as well as a provider of school safety solutions.
Here are some of the financial highlights from NAPCO’s fiscal 2024 first-quarter report:
- 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 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 first 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 Sept. 30, 2023 as compared to $66.7 million at June 30, 2023, a 12% increase. The company had no debt as of Sept. 30, 2023.
- Cash provided by operating activities for the three months ended Sept. 30, 2023 was $11.2 million as compared to a $2.0 million loss 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 Dec. 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.
“Fiscal 2024 began with record first quarter sales of $41.7 million, which was the 12th consecutive quarter we achieved record sales for a quarterly reporting period,” says chairman and president Richard Soloway in the announcement.
“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,” he says. “Recurring service revenues, which increased 25%, was also a major contributor to the year-over-year overall sales and earnings growth.”
More About NAPCO’s Record Revenues for FY24 Q1
NAPCO’s 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,” said Soloway on the company’s quarterly earnings call with investors and media.
“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,” he said.
Net income of $10.5 million “was a Q1 record-breaker and represents 25% of our net sales,” says Soloway. “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,” he says.
NAPCO’s 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,” says Soloway.
The company 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,” says Soloway. “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,” he says.
Radio sales have continued to slow down when compared to last year’s first quarter, when the impending 3G Verizon sunset was rapidly approaching, says Soloway.
“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,” he says.
“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,” says Soloway.
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