Napco Security Technologies (NASDAQ: NSSC) reported net sales for the three months ended March 31 increased 8% to a third quarter record of $28.2 million, compared to $26.2 million for the prior year period.
Third quarter net income increased 21% to $4.4 million, or 24 cents per diluted share, as compared to $3.6 million, or 20 cents per share, for the same quarter last year. Net income for the nine months ended March 31 decreased 5% to $9.9 million, or 54 cents per diluted share, as compared to $10.4 million, or 56 cents per share, for the same period last year.
Adjusted EBITDA for Q3 increased 13% to $5.5 million, or 30 per diluted share, as compared to $4.9 million, or 26 cents per diluted share for the same period last year. Adjusted EBITDA for the nine months ended March 31 remained relatively constant at $12.9 million, or 70 per diluted share, as compared to $13 million for the same period last year.
Recurring service revenue for the quarter increased 43% to $8.9 million as compared to $6.2 million for the same period last year. Recurring service revenue now has a prospective annual run rate of $36.7 million based on March 2021 recurring revenues.
Gross margin for recurring service revenue for the quarter was 86% as compared to 84% for the same period last year.
“NAPCO delivered a record-setting performance in Q3 as we generated the highest sales and net income for a Q3 in our company’s history,” states Richard Soloway, chairman and president.
He continues, “The robust growth in recurring service revenue and the associated gross margin continues to be primarily attributable to our commercial business, which has not been significantly affected by COVID-19 as commercial buildings must be kept secure.”
Additionally, Soloway explains, the company’s 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,” he says. “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.”
On March 31, NAPCO had $34.1 million in cash and cash equivalents and marketable securities as compared to $18.2 million as of June 30, 2020. Working capital was $70 million at March 31 as compared with $61 million on June 30, 2020.
This article originally appeared on our sister publication Security Sales & Integration‘s website.