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NAPCO Security Technologies(NSSC) - 2024 Q3 - Quarterly Results
2024-05-06 20:08
Exhibit 99.1 NAPCO Reports Record Revenues, Net Income and Adjusted EBITDA* for Q3 of Fiscal 2024 -Net Sales for the Quarter Increase 13% to $49.3 Million- -Net Income for the Quarter Increases 38% to $13.2 Million- -Adjusted EBITDA* for the Quarter Increases 37% to $15.6 Million- -3rd Quarter Recurring Service Revenues Increase 29% to $19.5 Million With a Gross Margin of 92%- -Board Declares Quarterly Dividend of $0.10 per share- AMITYVILLE, N.Y., May 6, 2024 /PRNewswire/ -- NAPCO Security Technologies, In ...
NAPCO Security Technologies(NSSC) - 2024 Q3 - Quarterly Report
2024-05-06 18:52
[PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) Presents NAPCO's unaudited consolidated financial statements and management's discussion and analysis [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) Presents NAPCO's unaudited consolidated financial statements for Q3 and YTD March 2024, including notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202024%20and%20June%2030%2C%202023%20(unaudited)) Details NAPCO's financial position as of March 31, 2024, outlining assets, liabilities, and equity | Metric | March 31, 2024 (in thousands) | June 30, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :--------------------------- | :-------------------- | :------- | | Total Current Assets | $158,199 | $131,359 | $26,840 | 20.4% | | Total Assets | $194,792 | $166,654 | $28,138 | 16.9% | | Total Current Liabilities | $19,948 | $19,686 | $262 | 1.3% | | Total Liabilities | $26,606 | $26,485 | $121 | 0.5% | | Total Stockholders' Equity | $168,186 | $140,169 | $28,017 | 20.0% | - Cash and cash equivalents increased significantly to **$55,518,000** as of March 31, 2024, from **$35,955,000** as of June 30, 2023[7](index=7&type=chunk) [Condensed Consolidated Statements of Income (Three Months)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20for%20the%20Three%20Months%20ended%20March%2031%2C%202024%20and%202023%20(unaudited)) Summarizes NAPCO's financial performance for the three months ended March 31, 2024 | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Net Sales | $49,267 | $43,532 | $5,735 | 13.2% | | Gross Profit | $26,484 | $21,279 | $5,205 | 24.5% | | Operating Income | $14,494 | $10,540 | $3,954 | 37.5% | | Net Income | $13,196 | $9,549 | $3,647 | 38.2% | | Basic EPS | $0.36 | $0.26 | $0.10 | 38.5% | | Diluted EPS | $0.36 | $0.26 | $0.10 | 38.5% | [Condensed Consolidated Statements of Income (Nine Months)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20for%20the%20Nine%20Months%20ended%20March%2031%2C%202024%20and%202023%20(unaudited)) Summarizes NAPCO's financial performance for the nine months ended March 31, 2024 | Metric | Nine Months Ended March 31, 2024 (in thousands) | Nine Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | Net Sales | $138,490 | $125,339 | $13,151 | 10.5% | | Gross Profit | $73,909 | $50,199 | $23,710 | 47.2% | | Operating Income | $39,854 | $18,516 | $21,338 | 115.2% | | Net Income | $36,284 | $16,562 | $19,722 | 119.1% | | Basic EPS | $0.99 | $0.45 | $0.54 | 120.0% | | Diluted EPS | $0.98 | $0.45 | $0.53 | 117.8% | [Condensed Consolidated Statements of Stockholders Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%20Equity%20for%20the%20Nine%20Months%20Ended%20March%2031%2C%202024%20and%202023%20(unaudited)) Outlines changes in NAPCO's equity for the nine months ended March 31, 2024 | Metric | March 31, 2024 (in thousands) | June 30, 2023 (in thousands) | | :-------------------- | :---------------------------- | :--------------------------- | | Common Stock | $398 | $397 | | Additional Paid-in Capital | $22,855 | $21,553 | | Retained Earnings | $164,454 | $137,740 | | Treasury Stock | $(19,521) | $(19,521) | | Total Stockholders' Equity | $168,186 | $140,169 | - Total stockholders' equity increased by **$28,017,000** from June 30, 2023, to March 31, 2024, primarily due to net income and stock-based compensation, partially offset by cash dividends[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Nine%20Months%20Ended%20March%2031%2C%202024%20and%202023%20(unaudited)) Presents NAPCO's cash flows for the nine months ended March 31, 2024 | Cash Flow Activity | Nine Months Ended March 31, 2024 (in thousands) | Nine Months Ended March 31, 2023 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net Cash Provided by Operating Activities | $31,032 | $12,416 | | Net Cash Used in Investing Activities | $(2,326) | $(22,713) | | Net Cash (Used in) Provided by Financing Activities | $(9,143) | $82 | | Net increase (decrease) in Cash and Cash Equivalents | $19,563 | $(10,215) | | Cash and Cash Equivalents - Ending | $55,518 | $31,515 | - Operating cash flow significantly increased to **$31,032,000** for the nine months ended March 31, 2024, compared to **$12,416,000** in the prior year, driven by higher net income[12](index=12&type=chunk) - Cash and cash equivalents at period end increased by **$19,563,000**, reaching **$55,518,000**[12](index=12&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) Provides detailed explanations of accounting policies and specific financial line items [NOTE 1 - Nature of Business and Summary of Significant Accounting Policies](index=9&type=section&id=NOTE%201%20-%20Nature%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) Describes NAPCO's business and outlines key accounting policies applied in financial statements - NAPCO Security Technologies, Inc. designs and manufactures high-tech electronic security devices, cellular communication services for alarm systems, and school safety solutions, experiencing significant growth from recurring service revenues[13](index=13&type=chunk) - The Company's fiscal year runs from July 1 to June 30, with hardware sales historically peaking in the fiscal fourth quarter (April 1 - June 30) and declining in the first quarter (July 1 - September 30); monthly recurring service revenue provides a more consistent income stream[14](index=14&type=chunk) Cash and Cash Equivalents (in thousands) | Cash and Cash Equivalents (in thousands) | March 31, 2024 | June 30, 2023 | | :--------------------------------------- | :------------- | :------------ | | Cash | $19,412 | $20,713 | | Money Market Fund | $30,766 | $63 | | Certificates of Deposit | $5,340 | $15,179 | | **Total** | **$55,518** | **$35,955** | R&D Expense (in thousands) | R&D Expense (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Amount | $2,757 | $2,314 | $7,736 | $6,964 | Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Amount | $266 | $322 | $876 | $1,134 | [NOTE 2 – Revenue Recognition and Contracts with Customers](index=17&type=section&id=NOTE%202%20%E2%80%93%20Revenue%20Recognition%20and%20Contracts%20with%20Customers) Details NAPCO's revenue recognition policies across product lines and services - The Company's revenue is disaggregated into major product lines: Intrusion and access alarm products, Door locking devices, and Services; Services revenue showed significant growth[59](index=59&type=chunk) Major Product Lines (in thousands) | Major Product Lines (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Intrusion and access alarm products | $10,139 | $11,530 | $30,693 | $36,405 | | Door locking devices | $19,596 | $16,860 | $52,440 | $45,106 | | Services | $19,532 | $15,142 | $55,357 | $43,828 | | **Total Revenues** | **$49,267** | **$43,532** | **$138,490** | **$125,339** | - Refund liabilities were approximately **$5,224,000** as of March 31, 2024, and return-related assets were approximately **$1,316,000**[57](index=57&type=chunk) [NOTE 3 – Business and Credit Concentrations](index=19&type=section&id=NOTE%203%20%E2%80%93%20Business%20and%20Credit%20Concentrations) Identifies significant customer concentrations and credit risk exposures - Two customers accounted for **16%** and **11%** of accounts receivable as of March 31, 2024, though sales to these customers did not exceed **10%** of net sales for the three and nine months ended March 31, 2024[60](index=60&type=chunk) [NOTE 4 – Marketable Securities](index=19&type=section&id=NOTE%204%20%E2%80%93%20Marketable%20Securities) Provides information on NAPCO's marketable securities, fair value, and recognized gains or losses - Marketable securities, primarily fixed income mutual funds, are reported at fair value using Level 1 inputs (quoted prices in active markets)[62](index=62&type=chunk)[63](index=63&type=chunk) Marketable Securities (in thousands) | Marketable Securities (in thousands) | March 31, 2024 | June 30, 2023 | | :----------------------------------- | :------------- | :------------ | | Cost | $5,811 | $5,651 | | Fair Value | $5,348 | $5,136 | | Unrealized Gain (Loss) | $(463) | $(515) | Net Gains on Marketable Securities (in thousands) | Net Gains on Marketable Securities (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net gains recognized | $42 | $32 | $160 | $110 | | Unrealized gains (losses) | $(18) | $95 | $52 | $(23) | | **Total** | **$24** | **$127** | **$212** | **$87** | [NOTE 5 - Inventories](index=21&type=section&id=NOTE%205%20-%20Inventories) Details NAPCO's inventory valuation and composition, including current and non-current classifications - Inventories are valued at the lower of cost (FIFO) or net realizable value, with non-current inventories representing those expected to convert to sales beyond 12 months[65](index=65&type=chunk)[26](index=26&type=chunk)[28](index=28&type=chunk) Inventories, net of reserves (in thousands) | Inventories, net of reserves (in thousands) | March 31, 2024 | June 30, 2023 | | :---------------------------------------- | :------------- | :------------ | | Component parts | $34,669 | $29,939 | | Work-in-process | $7,529 | $7,726 | | Finished product | $7,905 | $10,684 | | **Total** | **$50,103** | **$48,349** | | Current | $37,010 | $35,062 | | Non-current | $13,093 | $13,287 | [NOTE 6 – Property, Plant, and Equipment](index=21&type=section&id=NOTE%206%20%E2%80%93%20Property%2C%20Plant%2C%20and%20Equipment) Outlines NAPCO's property, plant, and equipment, including cost, depreciation, and methods - Property, plant, and equipment are carried at cost less accumulated depreciation, with depreciation primarily using the straight-line method[66](index=66&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) Property, Plant, and Equipment (in thousands) | Property, Plant, and Equipment (in thousands) | March 31, 2024 | June 30, 2023 | | :-------------------------------------------- | :------------- | :------------ | | Land | $904 | $904 | | Buildings | $8,911 | $8,911 | | Molds and dies | $7,539 | $7,517 | | Furniture and fixtures | $3,626 | $3,387 | | Machinery and equipment | $29,197 | $28,574 | | Building improvements | $3,129 | $3,078 | | Less: accumulated depreciation and amortization | $(44,328) | $(43,063) | | **Net Property, Plant, and Equipment** | **$8,978** | **$9,308** | Depreciation and Amortization Expense (in thousands) | Depreciation and Amortization Expense (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Amount | $454 | $380 | $1,374 | $1,127 | [NOTE 7 - Income Taxes](index=21&type=section&id=NOTE%207%20-%20Income%20Taxes) Details NAPCO's income tax expense, effective tax rates, and unrecognized tax benefits - The effective tax rate for the three and nine months ended March 31, 2024, was approximately **12.8%** and **12.9%**, respectively, consistent with the prior year[139](index=139&type=chunk) - The Company recognized **$41,660,000** in total pre-tax book income for the nine months ended March 31, 2024, with a significant portion from foreign pre-tax book income (**$36,248,000**)[68](index=68&type=chunk) - As of March 31, 2024, the Company had accrued interest of **$198,000** and **$700,000** of unrecognized net tax benefits[69](index=69&type=chunk) [NOTE 8 - Long-Term Debt](index=23&type=section&id=NOTE%208%20-%20Long-Term%20Debt) Describes NAPCO's long-term debt arrangements, credit agreement amendments, and outstanding balances - The Company amended its credit agreement on February 9, 2024, extending the term to February 9, 2029, and increasing the revolving credit line from **$11,000,000** to **$20,000,000**[72](index=72&type=chunk) - The new benchmark interest rate is the Secured Overnight Financing Rate (SOFR) plus **1.2645%** to **1.3645%**[73](index=73&type=chunk) - As of March 31, 2024, the Company had no outstanding debt[72](index=72&type=chunk) [NOTE 9 - Stock Options](index=23&type=section&id=NOTE%209%20-%20Stock%20Options) Details NAPCO's stock option plans, including outstanding, exercisable, and available options [2012 Employee Stock Option Plan](index=25&type=section&id=2012%20Employee%20Stock%20Option%20Plan) Details the status of stock options under the 2012 Employee Stock Option Plan - As of March 31, 2024, **363,036** stock options were outstanding and **178,984** were exercisable under the 2012 Employee Plan, with no further options available for grant[79](index=79&type=chunk) - A total of **147,544** stock options were exercised during the nine months ended March 31, 2024, with a total intrinsic value of **$3,972,000**[80](index=80&type=chunk)[81](index=81&type=chunk) - Unearned stock-based compensation cost related to this plan was **$1,306,000** as of March 31, 2024[82](index=82&type=chunk) [2012 Non-Employee Stock Option Plan](index=26&type=section&id=2012%20Non-Employee%20Stock%20Option%20Plan) Details the status of stock options under the 2012 Non-Employee Stock Option Plan - As of March 31, 2024, **20,400** stock options were outstanding and **16,560** were exercisable under the 2012 Non-Employee Plan, with no further options available for grant[84](index=84&type=chunk) - No stock options were exercised during the three and nine months ended March 31, 2024 and 2023[87](index=87&type=chunk) - Unearned stock-based compensation cost related to this plan was **$29,000** as of March 31, 2024[87](index=87&type=chunk) [2018 Non-Employee Stock Option Plan](index=28&type=section&id=2018%20Non-Employee%20Stock%20Option%20Plan) Details the status of stock options under the 2018 Non-Employee Stock Option Plan - As of March 31, 2024, **71,900** stock options were outstanding and **62,500** were exercisable under the 2018 Non-Employee Plan, with no further options available for grant[89](index=89&type=chunk) - A total of **3,100** stock options were exercised during the nine months ended March 31, 2024, with a total intrinsic value of **$59,000**[90](index=90&type=chunk) - Unearned stock-based compensation cost related to this plan was **$71,000** as of March 31, 2024[91](index=91&type=chunk) [2020 Non-Employee Stock Option Plan](index=31&type=section&id=2020%20Non-Employee%20Stock%20Option%20Plan) Details the status of stock options under the 2020 Non-Employee Stock Option Plan - As of March 31, 2024, **56,900** stock options were outstanding and **30,140** were exercisable under the 2020 Non-Employee Plan, with **43,100** options available for grant[95](index=95&type=chunk) - No stock options were exercised during the three and nine months ended March 31, 2024 and 2023[96](index=96&type=chunk) - Unearned stock-based compensation cost related to this plan was **$248,000** as of March 31, 2024[98](index=98&type=chunk) [2022 Employee Stock Option Plan](index=32&type=section&id=2022%20Employee%20Stock%20Option%20Plan) Details the status of stock options under the 2022 Employee Stock Option Plan - As of March 31, 2024, **10,000** stock options were outstanding and **2,000** were exercisable under the 2022 Employee Plan, with **940,000** options available for grant[100](index=100&type=chunk) - **10,000** options were granted during the nine months ended March 31, 2024, with a weighted average fair value of **$9.75** at grant date[101](index=101&type=chunk) - Unearned stock-based compensation cost related to this plan was **$68,000** as of March 31, 2024[102](index=102&type=chunk) [NOTE 10 – Stockholders' Equity Transactions](index=33&type=section&id=NOTE%2010%20%E2%80%93%20Stockholders%27%20Equity%20Transactions) Summarizes significant transactions affecting stockholders' equity, including dividends and option exercises - The Board of Directors declared cash dividends of **$0.08** per share in August and November 2023, and **$0.10** per share in February 2024[103](index=103&type=chunk)[104](index=104&type=chunk) - During the nine months ended March 31, 2024, **150,644** stock options were exercised, with **112,644** of these being cashless exercises[106](index=106&type=chunk) [NOTE 11 – Related Party Transaction](index=33&type=section&id=NOTE%2011%20%E2%80%93%20Related%20Party%20Transaction) Discloses a significant related party transaction involving common stock sale by executives - In March 2024, the Company's President and Chairman sold **2,000,000** shares of common stock in a secondary public offering, with an additional **50,000** shares sold in April 2024 via a Greenshoe Option[108](index=108&type=chunk) - The Company did not sell any shares or receive proceeds from the offering but incurred **$372,000** in offering expenses, recorded in SG&A[108](index=108&type=chunk) [NOTE 12 - 401(k) Plan](index=35&type=section&id=NOTE%2012%20-%20401(k)%20Plan) Provides details on NAPCO's contributions to its 401(k) retirement plan 401(k) Company Contributions (in thousands) | 401(k) Company Contributions (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Amount | $72 | $64 | $191 | $187 | [NOTE 13 - Commitments and Contingencies](index=35&type=section&id=NOTE%2013%20-%20Commitments%20and%20Contingencies) Outlines NAPCO's contractual commitments, including leases, and potential litigation liabilities [Leases](index=35&type=section&id=Leases) Details NAPCO's lease obligations, including a long-term operating lease for its production facility - The Company has a **99-year** operating lease for its principal production facility in the Dominican Republic, with an annual base rent of **$235,000** plus **$105,000** in annual service charges (increasing **2%** annually)[111](index=111&type=chunk) Lease Liabilities Maturities (in thousands) | Lease Liabilities Maturities (in thousands) | Amount | | :---------------------------------------- | :----- | | Year Ending June 30, 2024 | $77 | | Year Ending June 30, 2025 | $299 | | Year Ending June 30, 2026 | $282 | | Year Ending June 30, 2027 | $267 | | Year Ending June 30, 2028 | $253 | | Thereafter | $4,386 | | **Total** | **$5,564** | [Litigation](index=36&type=section&id=Litigation) Describes a class action lawsuit alleging securities fraud against NAPCO and its officers - A purported class action lawsuit was filed on August 29, 2023, alleging securities fraud against the Company and its officers, with an amended complaint filed on February 16, 2024, adding claims related to a secondary public offering[114](index=114&type=chunk) - The Company has not recorded a liability for this matter and intends to vigorously defend against the action[115](index=115&type=chunk) [Employment Agreements](index=36&type=section&id=Employment%20Agreements) Outlines key employment and severance agreements with NAPCO's executive leadership - The Company has employment agreements with its CEO and SVP of Engineering, and a severance agreement with its CFO, detailing annual salaries, incentive compensation, and termination provisions[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) [NOTE 14 – Geographical Data](index=36&type=section&id=NOTE%2014%20%E2%80%93%20Geographical%20Data) Provides a geographical breakdown of NAPCO's sales and identifiable assets - All of the Company's sales originate in the United States and are shipped primarily from U.S. facilities, with major customer concentrations in North America[119](index=119&type=chunk)[120](index=120&type=chunk) Sales to External Customers (in thousands) | Sales to External Customers (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Domestic | $49,004 | $43,228 | $137,666 | $124,373 | | Foreign | $263 | $304 | $824 | $966 | | **Total Net Sales** | **$49,267** | **$43,532** | **$138,490** | **$125,339** | Identifiable Assets (in thousands) | Identifiable Assets (in thousands) | March 31, 2024 | June 30, 2023 | | :--------------------------------- | :------------- | :------------ | | United States | $148,492 | $122,995 | | Dominican Republic | $46,300 | $43,659 | | **Total Identifiable Assets** | **$194,792** | **$166,654** | [NOTE 15 - Subsequent Events](index=37&type=section&id=NOTE%2015%20-%20Subsequent%20Events) Discloses significant events after the balance sheet date, including a declared cash dividend - On May 2, 2024, the Board of Directors declared a cash dividend of **$0.10** per share, payable on June 24, 2024[121](index=121&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes NAPCO's financial condition and results, highlighting growth drivers, margins, and liquidity - NAPCO is a leading manufacturer of high-tech electronic security devices, cellular communication services, and school safety solutions, with significant growth driven by recurring service revenues[124](index=124&type=chunk) - Net sales for the three months ended March 31, 2024, increased by **13.2%** to **$49,267,000**, and for the nine months, increased by **10.5%** to **$138,490,000**[129](index=129&type=chunk)[130](index=130&type=chunk) - Service revenues were a primary driver of sales growth, increasing by **$4,390,000** for the three months and **$11,530,000** for the nine months[129](index=129&type=chunk)[130](index=130&type=chunk) - Gross profit increased by **24.5%** for the three months and **47.2%** for the nine months, with gross profit as a percentage of net sales rising to **53.8%** and **53.4%** respectively, driven by increased equipment and service revenues and a favorable product mix towards higher-margin locking products and fire radios[131](index=131&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Net income for the three months ended March 31, 2024, increased by **38.2%** to **$13,196,000** (**$0.36** diluted EPS), and for the nine months, increased by **119.1%** to **$36,284,000** (**$0.98** diluted EPS)[140](index=140&type=chunk) - The Company's liquidity position is strong, with cash, certificates of deposit, and marketable securities aggregating to **$87.5 million**[141](index=141&type=chunk) - Accounts receivable increased by **$4,204,000** to **$30,273,000**, primarily due to sales of intrusion products to a new customer and door locking products for contracting jobs[142](index=142&type=chunk) - Inventories increased by **$1,754,000** to **$50,103,000**, attributed to level-loading production to avoid manpower fluctuations[143](index=143&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Details NAPCO's market risk exposures, including interest rate and foreign currency fluctuations - The Company is exposed to market risk from changes in interest rates on its revolving credit facility, which is based on the prime rate or SOFR[147](index=147&type=chunk) - All foreign sales transactions are denominated in U.S. dollars, transferring foreign currency exposure to customers, which could lead to collection difficulties or lost orders if exchange rates move unfavorably[148](index=148&type=chunk) - A **10%** strengthening or weakening of the U.S. dollar against the Dominican Peso would result in an approximate **$890,000** annual increase or decrease in income from operations[150](index=150&type=chunk) [ITEM 4. Controls and Procedures](index=46&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to material weaknesses, with ongoing remediation - Disclosure controls and procedures were deemed ineffective as of March 31, 2024, due to material weaknesses in internal control over financial reporting[151](index=151&type=chunk) - Identified material weaknesses include ineffective IT general controls over user access and change management, lack of precise review controls over inventory obsolescence reserve calculations, and issues with identifying significant inventory cost fluctuations in COGS and inventory[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - Remediation efforts are ongoing and include installing monitoring software for administrative users, enhancing review of inventory forecasts with retrospective reconciliation, and refining methods for calculating component parts costs to identify fluctuations[156](index=156&type=chunk)[163](index=163&type=chunk) - The material weaknesses will not be considered remediated until new and existing controls have operated effectively for a sufficient period and have been tested[159](index=159&type=chunk) [PART II: OTHER INFORMATION](index=48&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) Provides additional information, including legal proceedings, risk factors, and a list of exhibits [ITEM 1. Legal Proceedings](index=48&type=section&id=ITEM%201.%20Legal%20Proceedings) Refers to Note 13 for details on legal proceedings, specifically a class action lawsuit - Information on legal proceedings is incorporated by reference from Note 13, Commitments and Contingencies, in the Notes to the Condensed Consolidated Financial Statements[162](index=162&type=chunk) [ITEM 1A. Risk Factors](index=48&type=section&id=ITEM%201A.Risk%20Factors) Confirms no material changes to previously disclosed risk factors from prior reports - No material changes in risk factors were identified for the three and nine months ended March 31, 2024, compared to previous disclosures in the Annual Report on Form 10-K and Form 424(b)(7) Prospectus[163](index=163&type=chunk) [ITEM 6. Exhibits](index=49&type=section&id=ITEM%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the Chairman/President and EVP/CFO, Section 1350 Certifications, and various Inline XBRL documents (Instance, Schema, Calculation, Label, Presentation, Definition Linkbase Documents, and Cover Page Interactive Data File)[166](index=166&type=chunk) [SIGNATURES](index=50&type=section&id=SIGNATURE%20PAGE) Contains official signatures of executive officers, certifying the report's accuracy - The report was signed on May 6, 2024, by Richard L. Soloway, Chairman of the Board of Directors & Chief Executive Officer, and Kevin S. Buchel, President, Chief Operating Officer & Chief Financial Officer[169](index=169&type=chunk)
Napco (NSSC) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates
Zacks Investment Research· 2024-05-06 14:36
For the quarter ended March 2024, Napco (NSSC) reported revenue of $49.27 million, up 13.2% over the same period last year. EPS came in at $0.36, compared to $0.29 in the year-ago quarter.The reported revenue compares to the Zacks Consensus Estimate of $48.23 million, representing a surprise of +2.15%. The company delivered an EPS surprise of +5.88%, with the consensus EPS estimate being $0.34.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they co ...
Napco (NSSC) Q3 Earnings and Revenues Top Estimates
Zacks Investment Research· 2024-05-06 13:31
Napco (NSSC) came out with quarterly earnings of $0.36 per share, beating the Zacks Consensus Estimate of $0.34 per share. This compares to earnings of $0.29 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 5.88%. A quarter ago, it was expected that this security products and software company would post earnings of $0.26 per share when it actually produced earnings of $0.34, delivering a surprise of 30.77%.Over the last four qu ...
NAPCO Reports Record Revenues, Net Income and Adjusted EBITDA* for Q3 of Fiscal 2024
Prnewswire· 2024-05-06 11:17
-Net Sales for the Quarter Increase 13% to $49.3 Million- -Net Income for the Quarter Increases 38% to $13.2 Million- -Adjusted EBITDA* for the Quarter Increases 37% to $15.6 Million- -3rd Quarter Recurring Service Revenues Increase 29% to $19.5 Million With a Gross Margin of 92%- -Board Declares Quarterly Dividend of $0.10 per share- AMITYVILLE, N.Y., May 6, 2024 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NASDAQ: NSSC), one of the leading manufacturers and designers of high-tech electronic security ...
NAPCO Announces Management and Organizational Enhancements
Prnewswire· 2024-05-02 17:56
-Executive Changes Aimed at Maintaining and Improving Recent Growth Trajectories- AMITYVILLE, N.Y., May 2, 2024 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NASDAQ: NSSC), one of the leading manufacturers and designers of high-tech electronic security equipment, wireless communication devices for intrusion and fire alarm systems and the related recurring service revenues as well as a provider of school safety solutions, today announced exciting changes aimed at bolstering its management team with new ...
NAPCO Security Technologies to Announce Fiscal Third Quarter 2024 Results Monday, May 6, 2024
Prnewswire· 2024-05-01 11:30
AMITYVILLE, N.Y., May 1, 2024 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NASDAQ: NSSC), one of the leading designers and manufacturers of high-tech electronic security devices, wireless recurring communication services for intrusion, fire alarm, access control and locking systems as well as a leading provider of school safety solutions will release financial results for its Fiscal Third Quarter 2024 which ended March 31, 2024 on Monday May 6, 2024 before the market opens followed by a conference cal ...
Will Napco (NSSC) Beat Estimates Again in Its Next Earnings Report?
Zacks Investment Research· 2024-04-30 17:11
If you are looking for a stock that has a solid history of beating earnings estimates and is in a good position to maintain the trend in its next quarterly report, you should consider Napco (NSSC) . This company, which is in the Zacks Security and Safety Services industry, shows potential for another earnings beat.This security products and software company has an established record of topping earnings estimates, especially when looking at the previous two reports. The company boasts an average surprise for ...
NAPCO Security Technologies(NSSC) - 2024 Q2 - Quarterly Report
2024-02-05 19:43
[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents NAPCO Security Technologies' unaudited condensed consolidated financial statements for the quarter ended December 31, 2023, including balance sheets, income statements, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$185.9 million** by December 31, 2023, driven by cash and inventory growth, with stockholders' equity rising to **$158.0 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | **Total Current Assets** | $149,728 | $131,359 | | **Total Assets** | **$185,878** | **$166,654** | | **Total Current Liabilities** | $21,211 | $19,686 | | **Total Liabilities** | $27,894 | $26,485 | | **Total Stockholders' Equity** | **$157,984** | **$140,169** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net sales for the three months ended December 31, 2023, rose to **$47.5 million**, with net income surging to **$12.6 million** due to strong service revenue growth Three Months Ended December 31, (in thousands, except per share data) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | **Net Sales** | **$47,547** | **$42,314** | | Equipment Revenues | $29,007 | $27,434 | | Service Revenues | $18,540 | $14,880 | | **Gross Profit** | **$25,012** | **$14,354** | | **Operating Income** | **$13,805** | **$4,328** | | **Net Income** | **$12,610** | **$3,929** | | **Diluted EPS** | **$0.34** | **$0.11** | Six Months Ended December 31, (in thousands, except per share data) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | **Net Sales** | **$89,223** | **$81,807** | | Equipment Revenues | $53,398 | $53,121 | | Service Revenues | $35,825 | $28,686 | | **Gross Profit** | **$47,425** | **$28,920** | | **Operating Income** | **$25,360** | **$7,976** | | **Net Income** | **$23,088** | **$7,013** | | **Diluted EPS** | **$0.62** | **$0.19** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow for the six months ended December 31, 2023, significantly improved to **$18.7 million**, increasing cash and equivalents to **$47.3 million** Six Months Ended December 31, Cash Flow Summary (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $18,693 | $1,088 | | Net Cash Used in Investing Activities | ($1,454) | ($10,856) | | 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 - Ending** | **$47,311** | **$32,007** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover accounting policies, revenue disaggregation, stock options, and legal proceedings, highlighting strong growth in Services and Door locking devices - The company's business is primarily the manufacturing and design of electronic security devices, with significant growth driven by recurring service revenues from wireless communication services and school security products[14](index=14&type=chunk) Disaggregation of Revenues by Major Product Lines (in thousands) | Major Product Lines | Three months ended Dec 31, 2023 | Three months ended Dec 31, 2022 | Six months ended Dec 31, 2023 | Six months ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Intrusion and access alarm products | $11,258 | $11,342 | $20,554 | $24,874 | | Door locking devices | $17,749 | $16,092 | $32,844 | $28,247 | | Services | $18,540 | $14,880 | $35,825 | $28,686 | | **Total Revenues** | **$47,547** | **$42,314** | **$89,223** | **$81,807** | - As of December 31, 2023, the company had no outstanding debt under its **$11.0 million** revolving line of credit, which expires in June 2024[72](index=72&type=chunk) - A class action lawsuit was filed against the company and certain officers on August 29, 2023, alleging securities fraud. The company intends to vigorously defend against the action[111](index=111&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong financial performance for the quarter, with **12.4% net sales growth**, expanded gross profit margin, and **$79 million** in liquidity [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Net sales grew **12.4%** to **$47.5 million** for the quarter, driven by service and door-locking products, with operating income surging **219.0%** Key Performance Metrics Comparison | Metric | Three months ended Dec 31, 2023 | Three months ended Dec 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | Total net sales | $47,547,000 | $42,314,000 | 12.4% | | Service revenues | $18,540,000 | $14,880,000 | 24.6% | | Total gross profit | $25,012,000 | $14,354,000 | 74.3% | | Gross profit as a % of net sales | 52.6% | 33.9% | 55.2% | | Operating income | $13,805,000 | $4,328,000 | 219.0% | | Net income | $12,610,000 | $3,929,000 | 220.9% | - The significant increase in gross profit on equipment sales was attributed to lower costs of certain components compared to the prior year when the company was affected by global supply chain shortages[130](index=130&type=chunk) - Selling, general and administrative (SG&A) expenses increased primarily due to higher legal, advertising, and internal control enhancement costs, but decreased as a percentage of net sales from **18.4%** to **18.2%** for the quarter[133](index=133&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$79 million** in cash and equivalents, generating **$18.7 million** in operating cash flow, with no outstanding long-term debt - The company generated **$18.7 million** in cash from operations during the six months ended December 31, 2023, and believes its working capital and credit agreement are sufficient to fund operations for the next year[137](index=137&type=chunk) - Inventories increased by **$4.3 million** to **$52.6 million** at December 31, 2023, primarily to build up radio products and secure hard-to-source components to mitigate supply chain risks[139](index=139&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Market risks include interest rate changes and foreign currency fluctuations, with a **10%** USD/RD$ exchange rate change impacting annual operating income by **$940,000** - The company's primary market risks are interest rate changes on its debt and foreign currency exposure[143](index=143&type=chunk) - A **10%** strengthening or weakening of the U.S. dollar against the Dominican Peso (RD$) would result in an approximate annual change of **$940,000** in income from operations[144](index=144&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective as of December 31, 2023, due to three material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of December 31, 2023, due to material weaknesses in internal control over financial reporting[145](index=145&type=chunk) - Three material weaknesses were previously identified relating to: 1. Ineffective IT general controls over user access and change management 2. Deficiencies in the calculation of reserves for excess and slow-moving inventory 3. Inaccurate inventory costing and COGS calculations during the first three quarters of fiscal 2023[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - Remediation efforts are ongoing, including installing monitoring software for IT, enhancing inventory forecast reviews, and refining the component cost calculation methods. The material weaknesses are not yet considered fully remediated[151](index=151&type=chunk)[155](index=155&type=chunk) [PART II: OTHER INFORMATION](index=33&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) A class action lawsuit alleging securities fraud was filed on August 29, 2023, which the company intends to vigorously defend without recording a liability - A class action lawsuit was filed against the Company, its CEO, and CFO on August 29, 2023, alleging securities fraud related to public statements made between November 2022 and August 2023[111](index=111&type=chunk) - The Company has not recorded a liability for this litigation and intends to defend against the action vigorously[111](index=111&type=chunk)[112](index=112&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were identified for the period, remaining consistent with those disclosed in the Form 10-K for fiscal year ended June 30, 2023 - There has been no material change in the risk factors previously disclosed in the Company's Form 10-K for the fiscal year ended June 30, 2023[155](index=155&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists exhibits for the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents - The exhibits filed with this report include: - Certifications from the CEO (Richard L. Soloway) and CFO (Kevin S. Buchel) - Section 1350 Certifications - Inline XBRL Instance Document and related taxonomy files[158](index=158&type=chunk)
NAPCO Security Technologies(NSSC) - 2024 Q1 - Quarterly Report
2023-11-09 16:52
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . Commission File number: 0-10004 NAPCO SECURITY TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) Delaware 11-2277818 (State or ...