NAPCO Reports Record Revenues, Net Income and Adjusted EBITDA* for Q2 of Fiscal 2024
-
-Net Income for the Quarter Increases 221% to $12.6 Million-
-Adjusted EBITDA for the Quarter Increases 191% to $15.1 Million-
-2nd Quarter Recurring Service Revenues Increase 25% to $18.5 Million With a Gross Margin of 90%-
-Board Declares Quarterly Dividend of
Financial Highlights:
- Net sales for the quarter increased 12% to
$47.5 million (the highest quarterly sales in the Company's history) as compared to $42.3 million for the same period last year. Net sales for the six months endedDecember 31, 2023 increased 9% to a six month record$89.2 million as compared to$81.8 million last year. - 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 increased 25% to$35.8 million as compared to$28.7 million last year. Recurring service revenue had a prospective annual run rate of approximately $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 to 89% and 88%, respectively, for the same periods last year.
- Gross margin for equipment revenues was 29% for the second quarter compared to 4% in last year's 2nd quarter. Gross margin for equipment revenues was 29% for the six months ended
December 31, 2023 , compared to 7% 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 increased 229% to a six month record$23.1 million as compared to$7.0 million last year. - 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 increased 226% to$0.62 as compared to$0.19 last year. - 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 increased 182% to a six month record$28.0 million as compared to$9.9 million for the same period last year. - 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 increased 181% to$0.76 per diluted share as compared to$0.27 last year. - 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, an 18% 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 per share to be paid onMarch 22, 2024 to shareholders of record onMarch 1, 2024 . This represents a 25% increase over the previous dividend of$0.08 paid onDecember 22, 2023 .
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 18% to
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 10% compared to last year and approximately 18% compared to Q1. And locking sales once again represented 61% of hardware sales in Q2. We continue to remain focused on further penetrating each of these markets.
We recently announced the introduction of Prima by NAPCO, a new
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 63%. While such sales were still 13% below the radio sales for Q2 last year, when the impending 3G Verizon sunset was rapidly approaching, the increase over last quarter was significant. 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."
Financial Results
Net sales for the quarter increased 12% to $47.5 million (the highest quarterly sales in the Company's history), as compared to $42.3 million for the same period one year ago. Net sales for the six months ended
Operating income for the quarter increased 219% to $13.8 million as compared to $4.3 million for the same period last year. Operating income for the six months ended
Adjusted EBITDA* for the quarter increased 191% to a quarterly record
Balance Sheet Summary
As of December 31, 2023, the Company had $79.0 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 $128.5 million at December 31, 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 7.1:1 at December 31, 2023, and 6.7:1 at June 30, 2023.
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
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
*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.
|
|||||||
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|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
(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) |
|
|
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|
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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 |
|
|
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|
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Three Months ended |
||||
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|
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) |
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|
Six Months Ended |
|
||||
|
|
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 |
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|||||||
|
|
Six Months ended |
|
||||
|
|
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) |
|
|
— |
|
|
|
|
(1,454) |
|
|
(10,856) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Proceeds from stock option exercises |
|
|
— |
|
|
45 |
|
Cash paid for dividend |
|
|
(5,883) |
|
|
— |
|
|
|
|
(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 |
|
|
||||
NON-GAAP MEASURES OF PERFORMANCE* (Unaudited) |
||||
(in thousands, except share and per share data) |
||||
|
|
|
|
|
|
3 months ended |
6 months ended |
||
|
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:
Vice President of Investor Relations
Office 800-645-9445 x 374
Mobile 516-404-3597
fokoniewski@napcosecurity.com
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