Company Overview - NAPCO is a leader in commercial & residential security products with over 10,000 dealers, integrators & distributors in the US[5] - The company has two dozen patents and proprietary software[5] - The company is shifting towards recurring revenue and school security[5] Financial Highlights - Fiscal Fourth Quarter 2018 sales reached a record of $27.3 million, a 6% increase[48] - Recurring revenue increased by 49%[48] - Recurring revenue annual run rate is $14.7 million as of July 2018[48, 67] - TTM Revenue of $91.7 million with zero debt[67] - EPS up from $0.17 to $0.20[48] Market Opportunity - The company addresses both commercial (80%) and residential (20%) markets[8] - The company provides solutions for school security, addressing a market of 100,000 K-12 schools and 10,000 campuses[41] Stock Information - Market Capitalization is $284.0 million[66] - Insider Ownership is 38%[66, 67]

Financial Performance - NAPCO achieved record quarterly sales of $50.3 million in FQ4 2024, representing a 13% year-over-year growth[8,60] - Recurring revenue in FQ4 2024 grew by 27% year-over-year to $20.4 million[8,60] - The annual run-rate for recurring revenue is $84 million[8] - Adjusted EBITDA for FQ4 2024 was $15.4 million, an 18% increase year-over-year[60] - FQ4 2024 net income reached a quarterly record of $13.5 million, a 28% increase year-over-year[60] - The company has a strong balance sheet with $97.7 million in cash, marketable securities, and other investments, and no debt[60,65] Market and Growth Drivers - The company estimates the residential security U S market size to grow from $5 billion in 2021 to $9 billion in 2026[16] - The company estimates the commercial security North America market size to grow from $83.5 billion in 2021 to $121.4 billion in 2026[12] - The company estimates the school security market size to grow with a CAGR of 11.3% from 1.5 billion in 2020 to 3.1 billion in 2027[13] Long-Term Goals - The company aims to achieve total revenue of over $300 million in the long term[64] - The company aims to achieve recurring revenue of approximately $150 million, representing around 50% of total revenue in the long term[64]

Financial Data and Key Metrics Changes - Revenue for the quarter reached $18.3 million, reflecting a 109% year-on-year growth [8] - Adjusted EBITDA was $5.16 million, a 48% increase year-on-year [8] - Adjusted net income stood at $4.47 million, marking a 46.7% increase [8] - Total cash reserves, both restricted and unrestricted, closed the quarter at $33.8 million, while debt decreased from over $20 million to $18.4 million [9][10] Business Line Data and Key Metrics Changes - The company is focusing on smart infrastructure, AI security, and national digital systems, with significant progress in these areas [5] - The company has secured national infrastructure contracts and is moving from negotiation to execution phase [6] Market Data and Key Metrics Changes - The company is expanding its operations across the United States, Latin America, Southeast Asia, and East Asia [4] - The backlog for 2025 is projected at $93 million, primarily from existing contracts [44] Company Strategy and Development Direction - The company is focused on converting its pipeline into revenue and is engaged in multiyear contracts, with an average duration of seven to ten years [40] - The company is pursuing strategic acquisitions in Southeast Asia to enhance operational depth and local scale [43] - The company aims for profitable growth while maintaining financial discipline [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to tackle new projects without needing to raise outside funding [17] - The company anticipates a strong performance in 2026, with a backlog of $70 million already shaping up [14] Other Important Information - The company has a $10 million share buyback program, with $4.6 million remaining capacity [11] - The One Amazon partnership involves a total commitment of $5 million, with ongoing discussions for further investments [12][61] Q&A Session Summary Question: Update on the Royal Thai tourist police contract - Management confirmed that the project has exceeded expectations, with a signed agreement expected to total between $500 million to $550 million over five to six years [25][21] Question: Progress on the $400 million smart education contracts - Management reported being in late-stage negotiations for two education projects, including an additional $80 million for smart cloud infrastructure [28] Question: Steps to sustain growth - Management outlined key steps including converting pipeline into revenue, entering multiyear contracts, and pursuing strategic acquisitions [40][41] Question: Expectations for sequential revenue growth and gross margins - Management indicated that while they do not guide specific quarterly growth, the second half of the year is expected to be stronger than the first half [50] Question: Details on the Amazon contract investment - Management clarified that the investment is part of a SAFE agreement, which guarantees equity in the future [58][61]

Core Viewpoint - Rosen Law Firm is reminding investors who purchased NAPCO Security Technologies, Inc. securities during the specified Class Period of the upcoming lead plaintiff deadline on June 24, 2025 [1]. Group 1: Class Action Details - Investors who bought NAPCO securities between February 5, 2024, and February 3, 2025, may be eligible for compensation without any out-of-pocket fees through a contingency fee arrangement [2]. - A class action lawsuit has already been filed, and interested parties must move the Court to serve as lead plaintiff by June 24, 2025 [3]. - The Rosen Law Firm emphasizes the importance of selecting qualified legal counsel with a successful track record in securities class actions [4]. Group 2: Case Allegations - The lawsuit alleges that NAPCO made false and misleading statements regarding its revenue outlook and growth potential, downplaying risks associated with seasonality and macroeconomic factors [5]. - It is claimed that NAPCO's optimistic margin growth goals and reassurances about hardware sales did not align with reality, as the company was unable to accurately forecast product demand [5].

Core Viewpoint - Rosen Law Firm is reminding investors who purchased NAPCO Security Technologies, Inc. securities during the specified Class Period of the upcoming lead plaintiff deadline on June 24, 2025 [1]. Group 1: Class Action Details - Investors who purchased NAPCO securities between February 5, 2024, and February 3, 2025, may be entitled to compensation without any out-of-pocket fees through a contingency fee arrangement [2]. - A class action lawsuit has already been filed, and those wishing to serve as lead plaintiff must act by June 24, 2025 [3]. - Investors can join the class action by visiting the provided link or contacting the law firm directly for more information [6]. Group 2: Law Firm Credentials - Rosen Law Firm emphasizes the importance of selecting qualified counsel with a successful track record in securities class actions, highlighting their own achievements in this area [4]. - The firm has secured significant settlements for investors, including over $438 million in 2019 alone, and has been consistently ranked among the top firms for securities class action settlements [4]. Group 3: Case Allegations - The lawsuit alleges that NAPCO made false and misleading statements regarding its revenue outlook and growth potential, downplaying risks associated with seasonality and macroeconomic factors [5]. - It is claimed that NAPCO's optimistic margin growth goals were unrealistic, as the company was not adequately prepared to forecast demand for its products [5].

Core Viewpoint - Rosen Law Firm is reminding investors who purchased NAPCO Security Technologies, Inc. securities during the specified Class Period of the upcoming lead plaintiff deadline on June 24, 2025 [1] Group 1: Class Action Details - Investors who purchased NAPCO securities between February 5, 2024, and February 3, 2025, may be entitled to compensation without any out-of-pocket fees through a contingency fee arrangement [2] - A class action lawsuit has already been filed, and those wishing to serve as lead plaintiff must act by June 24, 2025 [3] - Investors can join the class action by visiting the provided link or contacting the law firm directly for more information [6] Group 2: Law Firm Credentials - Rosen Law Firm emphasizes the importance of selecting qualified counsel with a successful track record in securities class actions, highlighting their own achievements in this area [4] - The firm has recovered hundreds of millions of dollars for investors, including over $438 million in 2019 alone [4] - Rosen Law Firm has been consistently ranked among the top firms for securities class action settlements since 2013 [4] Group 3: Case Allegations - The lawsuit alleges that NAPCO made false and misleading statements regarding its revenue outlook and growth potential, downplaying risks associated with seasonality and macroeconomic factors [5] - NAPCO's optimistic margin growth goals and reassurances about hardware sales were found to be unrealistic, leading to investor damages when the true situation was revealed [5]

Core Viewpoint - Rosen Law Firm is reminding investors who purchased NAPCO Security Technologies, Inc. securities during the specified Class Period of the upcoming lead plaintiff deadline on June 24, 2025 [1]. Group 1: Class Action Details - Investors who purchased NAPCO securities between February 5, 2024, and February 3, 2025, may be entitled to compensation without any out-of-pocket fees through a contingency fee arrangement [2]. - A class action lawsuit has already been filed, and those wishing to serve as lead plaintiff must act by June 24, 2025 [3]. - Investors can join the class action by visiting the provided link or contacting the law firm directly for more information [6]. Group 2: Legal Representation - Rosen Law Firm emphasizes the importance of selecting qualified legal counsel with a proven track record in securities class actions, highlighting their own success in recovering hundreds of millions for investors [4]. - The firm has been recognized for its leadership in securities class action settlements, achieving significant recoveries in previous years [4]. Group 3: Case Allegations - The lawsuit alleges that NAPCO made false and misleading statements regarding its revenue outlook and growth potential, downplaying risks associated with seasonality and macroeconomic factors [5]. - It is claimed that NAPCO's optimistic margin growth goals were unrealistic, leading to investor damages when the true situation was revealed [5].

Financial Data and Key Metrics Changes - The company reported revenue of $8.4 million for Q1 2025, a 12.5% increase from $7.5 million in Q1 2024 [14] - Gross margin improved to 67.2% from 59.6% year-over-year, reflecting a 752 basis point increase [16] - EBITDA rose to $1.2 million with a margin of 14.3%, up from $114,000 and 1.5% respectively in the previous year [17] Business Line Data and Key Metrics Changes - The four core verticals experienced a 33% aggregate growth year-over-year, driven by strong performance in corrections, energy, and logistics [6][11] - Operating expenses increased by 2% year-over-year but declined to 55% of revenue from 61% in the prior year [8] Market Data and Key Metrics Changes - North America revenue increased by 6%, with Canada showing a significant 58% growth [9][14] - EMEA revenue grew by 19%, particularly strong in logistics and energy sectors [9][15] - APAC region saw a 40% revenue increase, driven by perimeter security requirements [10][15] Company Strategy and Development Direction - The company is focused on long-term growth while maintaining cost control and monitoring headcount efficiency [7] - Strategic hires were made to enhance business development in the Americas, EMEA, and APAC regions [10] - Technological innovation is prioritized, with a new product launch, Cascade Plus, aimed at scalable deployments [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to mitigate potential tariff impacts due to production strategies in Canada and the U.S. [22][23] - The company remains optimistic about capturing opportunities in LATAM despite current pressures [15] Other Important Information - Cash and cash equivalents as of March 31, 2025, were $22 million, up from $20.6 million at the end of 2024, with zero debt reported [18] Q&A Session Summary Question: Impact of tariffs on the company - Management indicated that current operations are not materially impacted by tariffs, with plans in place to mitigate potential future tariffs through U.S. assembly [22][23]

Financial Data and Key Metrics Changes - SaaS and license revenue for Q1 reached $163.8 million, a 9% year-over-year increase, exceeding the guidance of $160.3 million [14][21] - Total revenue grew 7% year-over-year to $238.8 million, with total gross profit increasing 9.4% to $160.6 million [16] - GAAP net income rose 18.4% year-over-year to $27.7 million, with GAAP EPS at $0.52 [17] - Non-GAAP adjusted EBITDA grew 17.5% year-over-year to $43.5 million, and non-GAAP adjusted net income increased 11.3% to $30.4 million [17] Business Line Data and Key Metrics Changes - Revenue retention for commercial subscribers is at 98%, significantly above the target range of 92-94% [6] - The seven twenty-nine Floodlight video camera product is being installed in nearly 4,000 properties per month, with over 85% of these installations subscribing to the proactive deterrent solution, PerimeterGuard [7][8] - EnergyHub's platform is experiencing rapid growth, with enrollments exceeding expectations in Q1 [15] Market Data and Key Metrics Changes - International accounts with video services increased to 30% of new accounts, doubling from the same period last year [8] - The company has diversified its supply chain, with less than 10% of hardware revenue derived from products shipped from China [11][12] Company Strategy and Development Direction - The company aims to innovate in the commercial market, focusing on operational efficiency and standardization of offerings [6] - A strategic partnership with General Motors Energy was announced to integrate GM EVs into the EnergyHub ecosystem, enhancing market position [10] - The company is focused on expanding its international presence, particularly in Latin America and Europe, while addressing competitive pressures from low-cost products [54] Management's Comments on Operating Environment and Future Outlook - Management did not observe material changes in demand due to macroeconomic conditions during Q1 [4][16] - The company anticipates a potential impact from tariffs but feels well-positioned to manage current 10% tariffs [11][18] - Guidance for Q2 SaaS and license revenue is set between $167 million and $167.2 million, with full-year revenue expectations raised to between $975.8 million and $991.2 million [21][22] Other Important Information - The company has approximately nine months of inventory on hand, higher than normal, to mitigate tariff impacts [18] - The new five sixteen WiFi camera is expected to broaden adoption of video analytics services in residential markets [8] Q&A Session Summary Question: Update on commercial average revenue per account trends and upsell opportunities - Management noted positive dynamics in ARPU due to a "land and expand" strategy, with commercial ARPU being significantly higher than residential [25] Question: Quantifying revenue contribution from tariff-related pricing increases for 2025 - A 10% cost increase could lead to approximately $20 million in annualized revenue contribution, though the actual impact may be less due to timing and sourcing [27] Question: Factors driving moderation in SaaS growth as the year progresses - The moderation is attributed to the annual nature of EnergyHub's demand response programs and a return to historical revenue retention rates [36][37] Question: State of international markets and competitive position - Management indicated that international markets are competitive but growing faster than domestic markets, with a focus on building out a dealer base [52][54] Question: Impact of macroeconomic conditions on account origination activity - No significant changes were observed in account origination activity due to macroeconomic factors, with April showing a brief pause before returning to normal [58] Question: Strategies for driving higher video adoption among existing customers - Management highlighted the opportunity for service providers to upsell video services, particularly with new product offerings that enhance customer experience [66][70]

Core Viewpoint - Napco Security Technologies, Inc. is facing significant challenges, including a securities class action lawsuit and declining sales, which have raised concerns about its distribution network and forecasting capabilities [1][3][4]. Financial Performance - Napco reported a 10.8% year-on-year decline in sales, totaling $43.96 million for the third quarter of fiscal year 2025, despite beating Wall Street's revenue expectations [2][6]. - The company experienced a substantial 25% drop in equipment sales in the second quarter of fiscal 2025 compared to the previous year, leading to significant declines in gross margin and gross profit [6][7]. Legal Issues - A securities class action lawsuit has been filed against Napco, representing investors who purchased securities between February 5, 2024, and February 3, 2025, following a sharp decline in stock price due to disappointing earnings disclosures [3][4]. - The lawsuit alleges that Napco made false and misleading statements regarding its sales and forecasting practices, failing to disclose its inability to accurately predict demand for its products [4][5]. Market Reaction - Following the negative disclosures, Napco's stock price dropped by 26% in a single trading day, erasing $9.77 per share in value, prompting analysts to downgrade their ratings on the company [3][7]. - Hagens Berman, a securities litigation firm, is investigating potential securities fraud claims against Napco, emphasizing ongoing concerns about the company's ability to manage its distribution network and forecast demand accurately [8].