NAPCO Announces Fourth Quarter and Fiscal Year 2018 Results
AMITYVILLE, N.Y., Sept. 4, 2018 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NasdaqGS: NSSC), one of the world's leading solutions providers and manufacturers of high tech electronic intrusion security, Internet of Things (IoT) connected home, video and fire systems, as well as enterprise-class access control and door locking products, today announced financial results for its fourth quarter and fiscal year ended June 30, 2018.
Financial Highlights:
-- Net sales for the quarter increased 6% to a record $27.3 million as
compared to $25.7 million for the same quarter last year. Net sales for
the fiscal year were a record $91.7 million, a 5% increase, as compared
to $87.4 million for FY2017.
-- Recurring service revenue for the quarter increased 49% to $3.4 million
as compared to $2.3 million for the same quarter last year and for the
fiscal year increased 51% to $12 million from $7.9 million last year.
Recurring service revenue now has a prospective annual run rate of $14.2
million based on June 2018 and $14.7 million based on July 2018.
-- Net income for the quarter increased 15% to a fourth quarter record of
$3.7 million from $3.2 million a year ago. Net income for the fiscal
year increased 37% to a record $7.6 million from $5.6 million a year
ago.
-- Earnings per share (diluted) for the quarter was $0.20, as compared to
$0.17 for the same period a year ago. Earnings per share (diluted) for
the fiscal year was $0.41, as compared to $0.30 for the same period a
year ago.
-- Adjusted EBITDA* for the quarter increased 23% to $4.7 million from $3.8
million a year ago. Adjusted EBITDA* for the fiscal 2018 increased 27%
to $10.0 million from $7.9 million in fiscal 2017.
-- As of June 30, 2018 the Company has paid off its bank debt in full.
Richard Soloway, Chairman and President, commented, "We were pleased to see our Company reaching record milestones in both sales and profits, for Q4 and fiscal 2018. This performance is a confirmation that our investments in new product development, as well as entering new market segments which provide strong avenues for sales and recurring revenue growth, have positioned NAPCO well for the future. Importantly, fiscal 2018 also saw us keep our R&D and marketing expenditures constant, an objective of ours at the beginning of the year, which resulted in delivering a record $7.6 million in net income.
This past year saw our Company continue to play a leadership role in raising the level of school safety and security preparedness, at K-12 schools, universities and colleges across the U.S. Demand has increased substantially for our integrated line of education-focused security solutions, including our advanced wireless locking and access control solutions, marketed by our Alarm Lock, Marks and Continental Access Control Divisions and also our high-technology alarm and communication systems, from our NAPCO Division. Utilizing NAPCO's proprietary School Access-control Vulnerability Index ("SAVI") audit system, our Company trains dealers, integrators and school personnel on how to quantitatively measure a school's security level. The index highlights deficiencies in the school's preparedness level and creates an action plan so that security dealers and end-user school officials can address the situation."
Mr. Soloway added, "Our StarLink® line of universal fire and intrusion alarm communicators continued to exhibit strong growth this past year, in sales and market share of the Wireless Cellular Alarm Communicator Category. Our Q4 launch of Starlink LTE fire and intrusion alarm communicators, utilizing the most advanced communication technology on the market on the Verizon network, was quite successful. With this launch, StarLink alarm communicators now offers the most extensive and complete line of alarm communication solutions in the industry. This past fiscal year recurring service revenue, propelled by the StarLink line, increased 51%, and now has a prospective annual run rate of $14.7 million based on July 2018.
StarLink Connect®, the IoT cellular communicator, exhibited solid sales growth in fiscal 2018. This RMR-generating product solution, gives alarm dealers the ability to easily upgrade existing, regular alarm system installations into connected, smart home systems. With a smart home system, consumers can remotely operate their security systems, lighting, locks, thermostats, and video cameras, from any smart device. StarLink Connect provides dealers and NAPCO with an incremental RMR growth opportunity and also capitalizes on the market potential for tens of millions of legacy security systems to be transformed into connected home systems.
NAPCO's ArchiTech(TM) Series Networx Locks experienced vibrant sales growth in the past fiscal year. A unique product in the locking category, ArchiTech packages an advanced, wireless access control system in the form factor of an architecturally pleasing designer lock, infinitely customizable in a variety of finishes and hardware options. This product has positioned our Company solidly in the high growth multi-tenant housing vertical market."
Mr. Soloway concluded, "We look forward to building upon the substantial progress that has been made in fiscal 2018. We will continue to make prudent investments in R&D and marketing product solutions which provide NAPCO with sustainable, consistent sales and profit growth, for our Company's future. With solid market positions in high-growth and recurring service revenue categories, we are encouraged by our prospects for continued sales and profit growth for the coming year and beyond."
Financial Results
Net sales for the three months ended June 30, 2018 increased to a record fourth quarter revenue of $27.3 million, as compared to $25.7 million for the same period one year ago, an increase of 6%. Net sales for the fiscal year ended June 30, 2018 increased to $91.7 million, as compared to $87.4 million for the same period one year ago, an increase of 5%. Selling, general and administrative expenses for the quarter were $6.1 million, or 22.5% of sales, as compared to $6.4 million, or 24.9% of sales for the same period last year. Selling, general and administrative expenses for the fiscal year ended June 30, 2018 were $23.0 million, or 25.0% of sales, as compared to $23.2 million, or 26.6% of sales for the same period last year.
Operating income for the three months ended June 30, 2018 was $4.3 million as compared to $3.5 million for the same period a year ago, an increase of 24%. Operating income for the fiscal year ended June 30, 2018 was $8.4 million, as compared to $6.4 million for the same period a year ago, an increase of 32%.
Net income for the three months ended June 30, 2018 was a fourth quarter record of $3.7 million, or $0.20 per diluted share, as compared to $3.2 million, or $0.17 per share, for the same quarter last year, an increase of 15%. Net income for the fiscal year ended June 30, 2018 was a record $7.6 million, or $0.41 per diluted share, as compared to $5.6 million, or $0.30 per share, for the same period last year, an increase of 37%.
Adjusted EBITDA* for the three months ended June 30, was $4.7 million, or $0.25 per diluted share, as compared to $3.8 million, or $0.20 per diluted share, an increase of 23%. Adjusted EBITDA* for the fiscal year ended June 30, 2018 was $10.0 million, or $0.53 per diluted share, as compared to $7.9 million, or $0.42 per diluted share, an increase of 27%.
Balance Sheet Summary
At June 30, 2018, the Company had $5.3 million in cash and cash equivalents as compared to $3.5 million as of June 30, 2017. NAPCO had working capital (defined as current assets less current liabilities) of $44.3 million at June 30, 2018 as compared with working capital of $40.8 million at June 30, 2017. Current ratio (defined as current assets divided by current liabilities) was 5.6:1 at June 30, 2018 and 4.9:1 at June 30, 2017.
NAPCO Security Technologies, Inc. Annual Meeting of Stockholders
NAPCO Security Technologies, Inc. Annual Meeting is set for December 11, 2018, for shareholders of record as of October 24, 2018.
Conference Call Information
Management will conduct a conference call at 11 a.m. ET today, September 4, 2018. 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 September 4, 2018 and ending on September 11, 2018 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 13682903. 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 solutions providers and manufacturers of high-technology electronic security (including recurring service fee revenue), IoT connected home, video, fire alarm, access control and door locking systems. The Company consists of four Divisions: NAPCO, its security and IoT connected home segment, 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 involve numerous risks and uncertainties. Actual results, performance or achievements could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in the Company's filings with the Securities and Exchange Commission.
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2018 and 2017
(In Thousands)
ASSETS
2018 2017
---- ----
CURRENT ASSETS
Cash and cash equivalents $5,308 $3,454
Accounts receivable, net of allowance for doubtful accounts of $195 and 22,738 20,275
$155 at June 30, 2018 and 2017, respectively, and other reserves
Inventories 24,533 26,212
Prepaid expenses and other current assets 1,124 1,330
----- -----
Total Current Assets 53,703 51,271
Inventories - non-current 4,401 4,367
Deferred income taxes 564 644
Property, plant and equipment, net 6,791 6,543
Intangible assets, net 7,545 7,916
Other assets 265 121
TOTAL ASSETS $73,269 $70,862
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
2018 2017
---- ----
CURRENT LIABILITIES
Accounts payable $4,807 $5,653
Accrued expenses 2,112 2,209
Accrued salaries and wages 2,190 2,322
Accrued income taxes 293 289
--- ---
Total Current Liabilities 9,402 10,473
Long-term debt, net of current maturities -- 3,500
Accrued income taxes 414 --
--- ---
TOTAL LIABILITIES 9,816 13,973
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, par value $0.01 per share; 40,000,000 shares authorized; 212 212
21,204,327 and 21,174,507 shares issued; and 18,729,082 and 18,844,657
shares outstanding, respectively
Additional paid-in capital 16,890 16,638
Retained earnings 59,420 51,771
------ ------
76,522 68,621
Less: Treasury Stock, at cost (2,475,245 and 2,329,850 shares, -13,069 -11,732
respectively)
TOTAL STOCKHOLDERS' EQUITY 63,453 56,889
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $73,269 $70,862
======= =======
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 2018 and 2017
(In Thousands, Except Share and Per Share Data)
2018 2017
---- ----
Net sales:
Equipment revenues $23,818 $23,380
Service revenues 3,442 2,304
27,260 25,684
------ ------
Cost of sales:
Equipment related expenses 14,382 13,506
Service related expenses 740 544
15,122 14,050
------ ------
Gross Profit 12,138 11,634
Research and development 1,715 1,788
Selling, general, and administrative expenses 6,146 6,384
----- -----
Operating Income 4,277 3,462
Other expense:
Interest expense, net 14 24
--- ---
Income before Provision for Income Taxes 4,263 3,438
Provision for Income Taxes 566 216
Net Income $3,697 $3,222
====== ======
Income per share:
Basic $0.20 $0.17
===== =====
Diluted $0.20 $0.17
===== =====
Weighted average number of shares outstanding:
Basic 18,720,000 18,845,000
========== ==========
Diluted 18,764,000 18,884,000
========== ==========
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30, 2018 and 2017
(In Thousands, Except Share and Per Share Data)
2018 2017
---- ----
Net sales:
Equipment revenues $79,744 $79,436
Service revenues 12,002 7,938
91,746 87,374
------ ------
Cost of sales:
Equipment related expenses 50,962 49,102
Service related expenses 2,789 1,971
53,751 51,073
------ ------
Gross Profit 37,995 36,301
Research and development 6,630 6,723
Selling, general, and administrative expenses 22,951 23,200
------ ------
Operating Income 8,414 6,378
Other expense:
Interest expense, net 81 83
--- ---
Income before Provision for Income Taxes 8,333 6,295
Provision for Income Taxes 684 696
Net Income $7,649 $5,599
====== ======
Income per share:
Basic $0.41 $0.30
===== =====
Diluted $0.41 $0.30
===== =====
Weighted average number of shares outstanding:
Basic 18,788,000 18,809,000
========== ==========
Diluted 18,825,000 18,854,000
========== ==========
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2018 and 2017 (In Thousands)
2018 2017
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $7,649 $5,599
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,410 1,374
Change to inventory obsolescence reserve 788 (457)
Provision for doubtful accounts 40 10
Deferred income taxes 80 361
Non-cash stock based compensation expense 145 102
Changes in operating assets and liabilities:
Accounts receivable (2,503) (1,273)
Inventories 857 (4,785)
Prepaid expenses and other current assets 206 (394)
Tax deficiency from stock-based awards -- 134
Other assets (151) --
Accounts payable, accrued expenses, accrued salaries (657) 1,777
and wages, accrued income taxes
Net Cash Provided by Operating Activities 7,864 2,448
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment (1,280) (1,414)
Net Cash Used in Investing Activities (1,280) (1,414)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (3,500) (2,800)
Proceeds from long-term debt -- 1,500
Proceeds from stock option exercises 107 49
Tax deficiency from stock-based awards -- (134)
Cash paid for purchase of treasury stock (1,337) --
Net Cash Used in Financing Activities (4,730) (1,385)
------ ------
Net Change in Cash and Cash Equivalents 1,854 (351)
CASH AND CASH EQUIVALENTS - Beginning 3,454 3,805
CASH AND CASH EQUIVALENTS - Ending $5,308 $3,454
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net $82 $88
=== ===
Income taxes paid $186 $54
==== ===
Surrender of Common Shares 11 86
=== ===
NAPCO SECURITY TECHNOLOGIES, INC.
NON-GAAP MEASURES OF PERFORMANCE* (Unaudited)
(in thousands, except share and per share data)
3 months ended June 30, 12 months ended June 30,
----------------------- ------------------------
2018 2017 2018 2017
---- ---- ---- ----
Net income (GAAP) $3,697 $3,222 $7,649 $5,599
Add back income tax expense 566 216 684 696
Add back interest expense 14 17 81 83
--- --- --- ---
Operating Income (GAAP) 4,277 3,455 8,414 6,378
Adjustments for non-GAAP
measures of performance:
Add back amortization of 93 110 371 441
acquisition-related intangibles
Add back stock-based 4 4 145 101
compensation expense
Adjusted non-GAAP 4,374 3,569 8,930 6,920
operating income
Add back depreciation and 291 233 1,039 934
other amortization
Adjusted EBITDA (earnings $4,665 $3,802 $9,969 $7,854
before interest, taxes,
depreciation and
amortization)
Adjusted EBITDA* per $0.25 $0.20 $0.53 $0.42
Diluted Share
Weighted average number of 18,764,000 18,884,000 18,825,000 18,854,000
Diluted Shares outstanding
* Non-GAAP Information. 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 (benefit), 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. 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 included in the above.
Contacts:
Patrick McKillop
Director of Investor Relations
NAPCO Security Technologies, Inc.
OP: 800-645-9445 x 374
CP: 516-404-3597
pmckillop@napcosecurity.com
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SOURCE NAPCO Security Technologies, Inc.
