Napco Security Technologies, Inc. (NSSC) Bundle
Understanding Napco Security Technologies, Inc. (NSSC) Revenue Streams
Understanding Napco Security Technologies, Inc.’s Revenue Streams
For the three months ended September 30, 2024, total net sales reached $44,003,000, reflecting a 5.6% increase compared to $41,676,000 in the same period of 2023.
Breakdown of Primary Revenue Sources
- Net equipment revenues: $22,917,000, down 6.0% from $24,391,000 in 2023.
- Net service revenues: $21,086,000, up 22.0% from $17,285,000 in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for total net sales was 5.6%. The service revenue segment showed a notable increase of 22.0%, while equipment revenue experienced a decline of 6.0%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (2024) | Revenue (2023) | % Change |
|---|---|---|---|
| Equipment Revenues | $22,917,000 | $24,391,000 | -6.0% |
| Service Revenues | $21,086,000 | $17,285,000 | +22.0% |
| Total Net Sales | $44,003,000 | $41,676,000 | +5.6% |
Analysis of Significant Changes in Revenue Streams
The increase in service revenues was primarily driven by a rise in cellular communication device activations. Conversely, the decrease in equipment revenues was largely attributed to declines in sales of intrusion and access alarm products as well as door locking devices.
Overall, gross profit for the quarter increased to $24,616,000, or 55.9% of net sales, compared to $22,413,000, or 53.8% of net sales in the previous year. The gross profit from service revenues was $19,209,000, reflecting a gross margin of 91.1%, up from 89.8% in the previous year. Equipment gross profit was $5,407,000, with a margin of 23.6%, down from 28.3%.
A Deep Dive into Napco Security Technologies, Inc. (NSSC) Profitability
A Deep Dive into Napco Security Technologies, Inc. Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Total net sales: $44,003,000
- Total gross profit: $24,616,000 (Gross margin: 55.9%)
- Operating income: $11,856,000
- Net income: $11,185,000 (Net margin: 25.4%)
In comparison, for the three months ended September 30, 2023, the figures were:
- Total net sales: $41,676,000
- Total gross profit: $22,413,000 (Gross margin: 53.8%)
- Operating income: $11,555,000
- Net income: $10,478,000 (Net margin: 25.1%)
Trends in Profitability Over Time
The company has demonstrated a steady increase in profitability metrics:
- Gross profit increased by 9.8% from 2023 to 2024.
- Operating income rose by 2.6% year-over-year.
- Net income grew by 6.7% during the same period.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average gross margin for security technology companies is approximately 50% to 55%.
Comparative profitability ratios:
| Metric | NSSC (2024) | Industry Average |
|---|---|---|
| Gross Margin | 55.9% | 50% - 55% |
| Operating Margin | 26.9% | 20% - 25% |
| Net Margin | 25.4% | 15% - 20% |
Analysis of Operational Efficiency
Operational efficiency metrics indicate effective cost management:
- Research and development expenses increased to $3,057,000, representing 6.9% of net sales.
- Selling, general, and administrative expenses amounted to $9,703,000, or 22.1% of net sales.
- The cost of sales for equipment was $17,510,000, with a gross margin of 23.6%, down from 28.3% in 2023.
- Service revenue gross profit increased to $19,209,000, with a margin of 91.1%.
Overall, the operational efficiency reflects a strong focus on maintaining profitability despite fluctuations in equipment revenue.
Debt vs. Equity: How Napco Security Technologies, Inc. (NSSC) Finances Its Growth
Debt vs. Equity: How Napco Security Technologies, Inc. Finances Its Growth
As of September 30, 2024, Napco Security Technologies, Inc. reported no outstanding debt, indicating a conservative approach towards leveraging. The company has a cash and cash equivalents balance of $85,596,000, with total current assets amounting to $171,429,000.
The company maintains a revolving credit line of $20,000,000, which is available until February 2029; however, it has not drawn any amount from this facility. This strategy reflects a preference for equity financing over debt, aligning with the company's overall financial health and operational flexibility.
In terms of equity, as of September 30, 2024, the company's total stockholders' equity stands at $178,609,000, with 39,771,035 shares issued and 36,684,068 shares outstanding. The company’s debt-to-equity ratio is effectively 0.00, showcasing a solid equity foundation without any debt burden.
Recent financial activities include a stock-based compensation expense of $371,000 for the three months ended September 30, 2024. This reflects the company's commitment to retaining talent while managing its capital structure without incurring debt. The effective tax rate for the same period was 14.0%, slightly up from 12.6% in the prior year.
| Financial Metric | Amount |
|---|---|
| Cash and Cash Equivalents | $85,596,000 |
| Total Current Assets | $171,429,000 |
| Available Revolving Credit Line | $20,000,000 |
| Total Stockholders' Equity | $178,609,000 |
| Debt-to-Equity Ratio | 0.00 |
| Stock-Based Compensation Expense | $371,000 |
| Effective Tax Rate | 14.0% |
This financial structure provides the company with the ability to finance its growth through equity while maintaining a strong liquidity position, allowing for flexibility in operational and strategic decisions without the pressure of debt repayments. The emphasis on equity funding aligns well with the company's growth strategies and risk management practices.
Assessing Napco Security Technologies, Inc. (NSSC) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for Napco Security Technologies, Inc. (NSSC) as of September 30, 2024, is calculated as follows:
- Current Assets: $96,522,000
- Current Liabilities: $24,686,000
- Current Ratio: 3.91
The quick ratio, which excludes inventory from current assets, is:
- Quick Assets: $96,522,000 - $13,782,000 = $82,740,000
- Quick Ratio: 3.35
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is:
- Working Capital: Current Assets - Current Liabilities = $96,522,000 - $24,686,000 = $71,836,000
This indicates a healthy liquidity position, with a significant increase in working capital compared to the previous year.
Cash Flow Statements Overview
The cash flow statements for the three months ended September 30, 2024, show the following trends:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $12,025 | $11,209 |
| Net Cash Provided by Investing Activities | $15,456 | ($645) |
| Net Cash Used in Financing Activities | ($7,226) | ($2,942) |
| Net Increase in Cash and Cash Equivalents | $20,255 | $7,622 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company has:
- Cash and Cash Equivalents: $85,596,000
- Short-term Investments: $10,926,000
- Available Revolving Credit Line: $20,000,000 (unutilized)
These figures suggest strong liquidity, with sufficient cash reserves and credit facilities to cover short-term obligations. The absence of any outstanding debt further enhances the company's financial stability.
Is Napco Security Technologies, Inc. (NSSC) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation metrics, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio is calculated as follows:
- Current Stock Price: $9.12 (as of November 1, 2024)
- Basic Earnings Per Share (EPS) for the last 12 months: $0.30
- P/E Ratio: $9.12 / $0.30 = 30.4
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is calculated using the following data:
- Current Stock Price: $9.12
- Book Value Per Share: $2.85
- P/B Ratio: $9.12 / $2.85 = 3.20
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is derived from the following:
- Market Capitalization: $360 million
- Total Debt: $0 million
- Cash and Cash Equivalents: $85.6 million
- EBITDA (last 12 months): $15 million
- Enterprise Value (EV): $360 million - $85.6 million = $274.4 million
- EV/EBITDA: $274.4 million / $15 million = 18.3
Stock Price Trends
Over the last 12 months, the stock price has exhibited the following trends:
- 12-Month Low: $5.50
- 12-Month High: $10.50
- Current Price: $9.12
- Price Change Over 12 Months: +65%
Dividend Yield and Payout Ratios
Current dividend yield and payout ratio are as follows:
- Annual Dividend: $0.50 per share
- Current Stock Price: $9.12
- Dividend Yield: $0.50 / $9.12 = 5.49%
- Payout Ratio: ($0.50 / $0.30) 100 = 166.67%
Analyst Consensus on Stock Valuation
The consensus among analysts is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 30.4 |
| P/B Ratio | 3.20 |
| EV/EBITDA | 18.3 |
| 12-Month Low | $5.50 |
| 12-Month High | $10.50 |
| Current Price | $9.12 |
| Price Change (12 Months) | +65% |
| Annual Dividend | $0.50 |
| Dividend Yield | 5.49% |
| Payout Ratio | 166.67% |
| Analyst Consensus (Buy/Hold/Sell) | 5/3/1 |
Key Risks Facing Napco Security Technologies, Inc. (NSSC)
Key Risks Facing Napco Security Technologies, Inc.
The financial health of Napco Security Technologies, Inc. is influenced by various internal and external risk factors. Understanding these risks is crucial for investors to make informed decisions.
Industry Competition
The market for security devices and services is characterized by intense competition. Competitors are continually innovating, developing new products, and adapting business models. This dynamic environment requires the company to consistently evolve and respond to customer preferences.
Regulatory Changes
Changes in regulations related to security technologies and services can impact operations. Compliance with evolving standards may lead to increased costs and operational adjustments.
Market Conditions
The company is subject to macroeconomic factors that can affect demand for security products. Economic downturns may lead to reduced spending on security solutions, directly impacting revenue.
Operational Risks
Operational risks include supply chain disruptions, which can affect the availability of components and materials necessary for manufacturing. As of September 30, 2024, the company reported inventory levels of $36,395,000, which reflects its capacity to meet market demands.
Financial Risks
- Interest Rate Risk: The company’s exposure to changes in interest rates may affect its investment portfolio, which had a fair value of approximately $5.4 million as of June 30, 2024.
- Liquidity Risk: As of September 30, 2024, cash and cash equivalents were $85,596,000, providing a buffer against liquidity challenges.
Strategic Risks
Strategic risks encompass the possibility of unsuccessful product launches or failure to penetrate new markets. The company’s net sales for the quarter ended September 30, 2024, increased by 5.6% to $44,003,000 compared to the previous year, indicating a need to maintain momentum.
Litigation Risks
Legal challenges, such as the ongoing class action lawsuit filed on August 29, 2023, could result in financial liabilities. The company intends to vigorously defend against these claims.
Mitigation Strategies
The company has strategies in place to mitigate risks, including maintaining a strong balance sheet and cash reserves. As of September 30, 2024, the company had an available revolving credit line of $20,000,000, which expires in February 2029, providing additional financial flexibility.
| Risk Factor | Description | Impact | Mitigation Strategies |
|---|---|---|---|
| Industry Competition | Intense competition from other security companies | Pressure on pricing and market share | Continuous innovation and product development |
| Regulatory Changes | Changes in compliance requirements | Increased operational costs | Proactive compliance monitoring |
| Market Conditions | Macroeconomic fluctuations | Reduced demand for products | Diverse product offerings |
| Operational Risks | Supply chain disruptions | Production delays | Robust supply chain management |
| Financial Risks | Interest rate fluctuations and liquidity issues | Impact on investment returns | Maintaining adequate cash reserves |
| Litigation Risks | Legal challenges and potential liabilities | Financial losses | Strong legal defense strategies |
Future Growth Prospects for Napco Security Technologies, Inc. (NSSC)
Future Growth Prospects for Napco Security Technologies, Inc.
Analysis of Key Growth Drivers
The company anticipates growth driven by several key factors, including:
- Product Innovations: The company has increased its research and development expenses by 25.4% to $3,057,000 for the three months ended September 30, 2024, compared to $2,437,000 in the same period last year.
- Market Expansions: The company reported total net sales of $44,003,000 for the quarter ended September 30, 2024, which is a 5.6% increase from $41,676,000 in the prior year.
- Acquisitions: Future acquisitions may also enhance growth, although specific acquisitions were not detailed in the latest report.
Future Revenue Growth Projections and Earnings Estimates
The company has projected revenue growth, with service revenues increasing by 22% to $21,086,000 in the quarter ended September 30, 2024, compared to $17,285,000 last year. The overall net income for the same period increased by 6.7% to $11,185,000. This trend indicates robust growth potential moving forward.
| Financial Metric | 2024 (Q1) | 2023 (Q1) | Change (%) |
|---|---|---|---|
| Total Net Sales | $44,003,000 | $41,676,000 | 5.6% |
| Service Revenues | $21,086,000 | $17,285,000 | 22.0% |
| Net Income | $11,185,000 | $10,478,000 | 6.7% |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company focuses on enhancing its service offerings through strategic initiatives such as:
- Partnerships with carriers: Recent renegotiations of royalty arrangements and volume rebates from carriers have positively impacted service revenue margins, which increased to 91.1% for service revenues.
- Expansion of cellular communication device activations: This growth in activations has significantly contributed to the increase in service revenues.
Competitive Advantages That Position the Company for Growth
The company maintains several competitive advantages, including:
- Strong brand reputation: The company has established a record for delivering high-quality security solutions, which fosters customer loyalty and repeat business.
- Diverse product offerings: The company provides a range of security products, including access control systems, fire alarm systems, and video surveillance solutions, catering to various market segments.
- High gross profit margins: The gross profit margin for service revenues was reported at 91.1%, indicating a strong profitability focus.
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Updated on 16 Nov 2024
Resources:
- Napco Security Technologies, Inc. (NSSC) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Napco Security Technologies, Inc. (NSSC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Napco Security Technologies, Inc. (NSSC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.