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Washington, D.C. 20549







Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934


Date of Report (Date of earliest event reported)

November 2, 2020



(Exact name of registrant as specified in charter)


Delaware   0-10004   11-2277818
(State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer Identification No.)


333 Bayview Avenue, Amityville, New York 11701

(Address of principal executive offices)


Registrant's telephone number, including area code (631) 842-9400



(Former name and former address if changed from last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):


¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Securities registered pursuant to Section 12(b) of the Act:


Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.01 per share   NSSC   Nasdaq Stock Market


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (section 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (section 240.12b-2 of this chapter).


Emerging growth company ¨


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨











On November 2, 2020, the registrant issued a press release to report results for the fiscal quarter ended September 30, 2020. This press release is furnished as Exhibit 99.1.


The information in this Current Report on Form 8-K, including the exhibit attached hereto, is furnished pursuant to Item 2.02 and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section.




(d) Exhibits:


99.1Press Release issued by Napco Security Technologies, Inc. dated November 2, 2020.




Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized.


Date: November 5, 2020  By: /s/ Kevin S. Buchel
      Kevin S. Buchel
      Senior Vice President and Chief Financial Officer











Exhibit 99.1


NAPCO Announces First Quarter Fiscal 2021 Results

- Record-Breaking Revenues and Gross Margin for Recurring Service Revenues -

- Adjusted EBITDA* up 115% Compared to the 4th Quarter of Fiscal 2020 -


AMITYVILLE, N.Y., Nov. 2, 2020 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NASDAQ: NSSC), one of the world's leading manufacturers and service providers of high-tech electronic security devices as well as a leading provider of school safety solutions, today announced financial results for its first fiscal quarter ended September 30, 2020.


Financial Highlights:

·First Quarter recurring service revenue, gross margin, net income and adjusted EBITDA* exceeded analysts' expectations.
·The COVID-19 pandemic has presented challenges for security equipment professionals to obtain access to both commercial and residential installation sites. The Company believes this access issue is an industry-wide trend related to COVID-19 and not reflective of the loss of any market share specific to the Company or any long-term negative reflection of the post-pandemic vibrancy of the security industry as a whole. We believe that the COVID-19 pandemic negatively impacted equipment sales, which was the principal reason for the decline in total revenue.
·Net sales for the quarter was $23.2 million as compared to $23.0 million in the 4th quarter of fiscal 2020, and $26.3 million for the same period last year.
·Recurring service revenue for the quarter increased 36% to $7.3 million as compared to $5.4 million for the same period last year. Recurring service revenue now has a prospective annual run rate of $29.7 million based on September 2020 recurring revenues.
·Gross Margin for recurring service revenue for the quarter was 84% as compared to 79% for the same period last year.
·Net income for the quarter was $2.3 million, as compared to net income (before one-time charges) of $1.5 million in the 4th quarter of fiscal 2020 and net income of $3.2 million for the same period a year ago. Earnings per share (diluted) for the quarter was $0.13 as compared to earnings per share (before one-time charges) of $0.08 in the 4th quarter of fiscal 2020 and earnings per share of $0.17 for the same period a year ago.
·Adjusted EBITDA* for the quarter was $3.2 million as compared to $1.5 million in the 4th quarter of fiscal 2020, representing an increase of 115%, and $4.0 million for the same period a year ago. Adjusted EBITDA* earnings per share for the quarter was $0.17 as compared to $0.08 in the 4th quarter of fiscal 2020 and $0.22 for the same period a year ago.
·Cash and cash equivalents were $21.9 million at September 30, 2020 as compared to $18.2 million at June 30, 2020.
·Cash Provided by Operating Activities increased 29% to $3.8 million as compares to $2.9 million for the same period last year.


Richard Soloway, Chairman and President, commented, "Despite the ongoing COVID-19 pandemic, I am pleased to report that because of our efforts and a strong business model, we have generated significantly improved results compared to the fourth quarter of fiscal 2020. Our recurring service revenues have remained strong, achieving 36% growth for the first quarter as compared to the same period a year ago and now have a prospective annual run rate of $29.7 million based on September 2020 recurring revenues. Gross margin for recurring service revenue also continued to be very strong, increasing to 84% for the quarter. The robust growth in recurring service revenue and the associated gross margin is primarily attributable to the fire alarm business, which has not been significantly affected by COVID-19. The fire alarm business is a "mandated business" which means, to receive a certificate of occupancy for a building, a fire alarm system is mandatory and must always function in compliance with fire codes. Because of the essential nature and high profitability of this sector, the commercial fire alarm business continues to be one of the key areas that we focus our resources on. 


As the communication paradigm continues to "sunset" away from legacy copper and 3G infrastructure, it creates a significant opportunity for our proprietary Starlink radios and alarm systems for fire and burglary to generate additional, steady streams of recurring service revenue growth.  


Before COVID-19, we had 23 consecutive quarters of sales growth. When COVID-19 hit, many dealers experienced limited or no access to buildings and homes to perform commercial or residential security installations. We sell our products primarily through distribution to dealers and we are seeing improved sell-through statistics from several of our largest distributors. Increased sell-through of our products from our distributors to the alarm and locking dealers during the quarter as compared to the previous quarter indicates that security equipment professionals are getting increased access to both commercial and residential installation sites.  


Expanding our fully integrated technologies into the education market remains another top priority. The COVID-19 pandemic caused some delay in spending at certain K-12 schools, colleges, and universities. While we have seen postponements of planned security upgrades, we have not seen a significant number of cancellations. On the positive side, it has also presented extended windows for system installations due to the absence of students and teachers. As a result, we are seeing encouraging levels of quotation activity. 


As previously mentioned, by the end of the calendar year we plan to introduce access control and locking products with recurring service revenue. Known as Air Access®, our new cellular, cloud-hosted access control product line will allow access control integrators and locking professionals to build a recurring revenue business for themselves, just like our burglar and fire alarm dealers do. As a result, our Company will be generating recurring service revenue from each of our divisions: alarms & connectivity, locking and access control." 





Mr. Soloway concluded, "We continue to execute in several key areas: (a) driving sales growth in recurring service revenue while increasing gross margins, (b) investing in exciting new technologies that will expand our recurring service revenue into all segments of the Company, (c) strengthening our balance sheet, which now shows $22 million in Cash, (d) tightly managing our costs and (e) increasing Cash from Operations, which increased 29% to $3.8 million vs. last year's Q1. Despite challenges posed by COVID-19, we remain highly focused on the successful execution of each of these areas and we are confident that these strategies will enable us to deliver strong financial performance in the future."


Financial Results


Net sales for the three months ended September 30, 2020 decreased 12% to $23.2 million, as compared to $26.3 million for the same period one year ago. Research and development costs for the quarter were $1.9 million as compared to $1.7 million for the same quarter a year ago and were 8% of sales and 7% of sales for the quarters ended September 30, 2020 and 2019, respectively. Selling, general and administrative expenses for the quarter remained relatively constant at $6.1 million, or 27% of sales, as compared to $6.2 million, or 23% of sales for the same period last year. Operating income for the three months ended September 30, 2020 was $2.7 million as compared to $3.6 million for the same period a year ago. Net income for the three months ended September 30, 2020 decreased to $2.3 million, or $0.13 per diluted share, as compared to $3.2 million, or $0.17 per share, for the same quarter last year.


Adjusted EBITDA* for the three months ended September 30, 2020 was $3.2 million, or $0.17 per diluted share, as compared to $4.0 million, or $0.22 per diluted share for the same period last year.


Balance Sheet Summary


At September 30, 2020, the Company had $21.9 million in cash and cash equivalents as compared to $18.2 million as of June 30, 2020. Working capital (defined as current assets less current liabilities) was $62.7 million at September 30, 2020 as compared with working capital of $61.0 million at June 30, 2020. Current ratio (defined as current assets divided by current liabilities) was 5.5:1 at September 30, 2020 and 4.5:1 at June 30, 2020.


Conference Call Information


Management will conduct a conference call at 11 a.m. ET today, November 2, 2020. Interested parties may participate in the call by dialing 1-877-407-4018 or for international callers, 1-201-689-8471, about 5-10 minutes prior to the start time of 11 a.m. ET. The conference call will also be available on replay starting at 2 p.m. ET on November 2, 2020 and ending on November 9, 2020 at 11:59 p.m. ET. For the replay, please dial 1-844-512-2921 domestically, or 1-412-317-6671 for international callers, and use the replay access code 13712620.


In addition, the call will be webcast and will be available on the Company's website at www.napcosecurity.com.


About NAPCO Security Technologies, Inc.


NAPCO Security Technologies, Inc., is one of the world's leading manufacturers and service providers of high-tech electronic security devices as well as a leading provider of school safety solutions, The Company consists of four Divisions: NAPCO, plus three wholly-owned subsidiaries: Alarm Lock, Continental Instruments, and Marks USA. Headquartered in Amityville, New York, its products are installed by tens of thousands of security professionals worldwide in commercial, industrial, institutional, residential and government applications. NAPCO products have earned a reputation for innovation, technical excellence and reliability, positioning the Company for growth in the multi-billion dollar and rapidly expanding electronic security market. For additional information on NAPCO, please visit the Company's web site at http://www.napcosecurity.com.


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; the growth of recurring service revenue and annual run rate; the introduction of new access control and locking products; the opportunities for fire alarm products; 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 Securities and Exchange Commission, such as our annual report on Form 10-K and quarterly reports on Form 10-Q. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and the Company undertakes no duty to update such information, except as required under applicable law.





*Non-GAAP Financial Measures


Certain non-GAAP measures are included in this press release, including EBITDA, non-GAAP operating income and Adjusted EBITDA. We define EBITDA as GAAP net income plus income tax expense, net interest expense, non-cash stock-based expense 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.










   September 30, 2020 (unaudited)   June 30, 2020 
CURRENT ASSETS  (in thousands, except share data) 
Cash and cash equivalents  $21,870   $18,248 
Accounts receivable, net of allowance for doubtful accounts of $326 at September 30, 2020 and June 30, 2020 and other reserves   19,206    22,932 
 Inventories, net   33,528    35,231 
 Prepaid expenses and other current assets   1,945    2,049 
       Total Current Assets   76,549    78,460 
   Inventories - non-current, net   8,915    6,524 
   Property, plant and equipment, net   7,914    8,088 
   Intangible assets, net   5,010    5,116 
   Operating lease asset   7,390    7,395 
   Other assets   250    255 
      TOTAL ASSETS  $106,028   $105,838 
   Accounts payable  $5,094   $6,547 
   Accrued expenses   4,672    5,744 
   Accrued salaries and wages   2,794    2,181 
   Current portion of long-term debt   434    1,794 
   Accrued income taxes   861    1,148 
      Total Current Liabilities   13,855    17,414 
   Long-term debt   3,470    2,110 
   Deferred income taxes   22    112 
   Accrued income taxes   1,250    1,188 
   Long term operating lease liabilities   7,107    7,113 
      Total Liabilities   25,704    27,937 
Common Stock, par value $0.01 per share; 40,000,000 shares authorized; 21,241,066 shares issued; and 18,347,351 shares outstanding   212    212 
   Additional paid-in capital   17,870    17,766 
   Retained earnings   81,763    79,444 
Less: Treasury Stock, at cost (2,749,310 shares)   (19,521)   (19,521)
      TOTAL STOCKHOLDERS' EQUITY   80,324    77,901 









   Three Months ended September 30, 
   2020   2019 
Net sales:  (in thousands, except for share and per share data) 
   Equipment revenues  $15,898   $20,921 
   Service revenues   7,275    5,364 
    23,173    26,285 
Cost of sales:          
   Equipment related expenses   11,307    13,638 
   Service related expenses   1,174    1,129 
    12,481    14,767 
      Gross Profit   10,692    11,518 
Research and development   1,889    1,749 
Selling, general, and administrative expenses   6,149    6,160 
    8,038    7,909 
      Operating Income   2,654    3,609 
Other expense:          
   Interest expense, net   6    7 
Income before Provision for Income Taxes   2,648    3,602 
Provision for Income Taxes   329    369 
      Net Income  $2,319   $3,233 
Income per share:          
   Basic  $0.13   $0.17 
   Diluted  $0.13   $0.17 
Weighted average number of shares outstanding:          
   Basic   18,347,000    18,478,000 
   Diluted   18,392,000    18,536,000 








   Three Months ended September 30, 
   2020   2019 
   (in thousands) 
Net income  $2,319   $3,233 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   427    364 
Deferred income taxes   (90)   188 
Stock based compensation expense   104    17 
Changes in operating assets and liabilities:          
Accounts receivable   3,726    1,240 
Inventories   (688)   (2,402)
Prepaid expenses and other current assets   104    (137)
Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes   (2,137)   424 
Net Cash Provided by Operating Activities   3,765    2,927 
Purchases of property, plant, and equipment   (143)   (181)
Net Cash Used in Investing Activities   (143)   (181)
Net Change in Cash and Cash Equivalents   3,622    2,746 
CASH AND CASH EQUIVALENTS - Beginning   18,248    8,028 
CASH AND CASH EQUIVALENTS - Ending  $21,870   $10,774 
Interest paid  $6   $13 
Income taxes paid  $643   $735 








(in thousands, except share and per share data)


   3 months ended September 30, 
   2020   2019 
Net (loss) income (GAAP)  $2,319   $3,233 
Add back (benefit) provision for income taxes   329    369 
Add back interest and other expense   6    7 
Operating (Loss) Income (GAAP)   2,654    3,609 
Adjustments for non-GAAP measures of performance:          
   Add back amortization of acquisition-related intangibles   106    66 
   Add back stock-based compensation expense   104    17 
Adjusted non-GAAP operating income   2,864    3,692 
Add back depreciation and other amortization   321    298 
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization)  $3,185   $3,990 
Adjusted EBITDA* per Diluted Share  $0.17   $0.22 
Weighted average number of Diluted Shares outstanding   18,392,000    18,536,000 


Patrick McKillop
Director of Investor Relations
NAPCO Security Technologies, Inc.
OP: 800-645-9445 x 374
CP: 516-404-3597







Nov. 02, 2020
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Document Type 8-K
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Document Period End Date Nov. 02, 2020
Entity File Number 0-10004
Entity Central Index Key 0000069633
Entity Tax Identification Number 11-2277818
Entity Incorporation, State or Country Code DE
Entity Address, Address Line One 333 Bayview Avenue
Entity Address, City or Town Amityville
Entity Address, State or Province NY
Entity Address, Postal Zip Code 11701
City Area Code 631
Local Phone Number 842-9400
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, par value $0.01 per share
Trading Symbol NSSC
Security Exchange Name NASDAQ
Entity Emerging Growth Company false