NAPCO posts 42 percent rise in recurring revenue for Q2

AMITYVILLE, N.Y.—NAPCO Security Technologies, Inc. announced its fiscal results for Q2, highlighted by an increase of 42 percent in recurring service revenue for the quarter, or $8.2 million as compared to $5.8 million for the same period last year.

NAPCO, one of the leading manufacturers and designers of high-tech electronic security devices, wireless communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions, announced its financial results yesterday for its fiscal second quarter ending Dec. 31, 2020.

Additional highlights from the report:

• Recurring service revenue now has a prospective annual run rate of $33.8 million based on December 2020 recurring revenues.
• Record of $27.2 million as compared to $23.2 million last quarter, representing a 17% increase, and $25.8 million for the same period last year, a 5% increase.
• Gross Margin for recurring service revenue for the quarter was 85% as compared to 81% for the same period last year.
• Adjusted EBITDA for the quarter was $4.2 million as compared to $3.2 million last quarter, representing an increase of 31%.
• Cash Provided by Operating Activities for the quarter increased 174% to $5.2 million as compared to $1.9 million last year and for the six months increased 86% to $8.9 million as compared to $4.8 million for the same period last year.

"We are very encouraged by our record Q2 sales of $27.2 million as well as the 38% and 31% sequential increases in net income and Adjusted EBITDA, respectively,” NAPCO Chairman and President, Richard Soloway, said in the report. “Our recurring service revenues have remained very strong, achieving 42% growth for the second quarter as compared to the same period a year ago and now have a prospective annual run rate of $33.8 million based on December 2020 recurring revenues.”

He continued, “The robust growth in recurring service revenue and the associated gross margin continues to be 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 continue to focus our resources on.

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