Napco Security Technologies, Inc (NSSC) SEC Filing 10-Q Quarterly Report for the period ending Friday, December 31, 2021

Exhibit 99.1

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NAPCO Announces Second Quarter Fiscal 2022 Results

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-2nd Quarter Sales Increase 23% to a Record $33.4 Million-

-2nd Quarter Recurring Service Revenues Increase 35% to $11 Million With Increased Gross Margins of 87%-

-Net Income of $1.0M and Adjusted EBITDA* of $3 Million for the Quarter Impacted by Supply Chain Disruptions-

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AMITYVILLE, N.Y., February 7, 2022 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NASDAQ: NSSC), one of the leading manufacturers and designers of high-tech electronic security devices, wireless recurring communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions, today announced financial results for its second quarter of fiscal 2022.

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Financial Highlights:

Richard Soloway, Chairman and President, commented, “Our second quarter of fiscal 2022 generated strong revenue growth, with record-breaking sales for a Q2 of $33.4 million, representing a 23% increase over last year. Both equipment revenue (up 18%) and recurring service revenue (up 35%) contributed to this sales growth. This was the fifth consecutive quarter of year-over-year sales growth. Our recurring service revenues have remained very strong, and now have a prospective annual run rate of $46.2 million based on January 2022 recurring service revenues. Gross margin for recurring service revenue also continued to be very strong at 87% for the quarter, which compared to 85% for the same period last year. While our overall gross profit remained relatively constant at $11.4 million, our gross margin on hardware decreased by $2.6 million as it continued to be dramatically affected by the current, world-wide supply chain problems, particularly with increased freight and component parts costs. In addition, another significant factor affecting hardware margins was the continued shift in product mix to more of the Company’s Starlink radios, which have lower gross margins than many of the Company’s other products, but lead to the profitable recurring service revenues. Our commercial radio and fire alarm business, and the RSR (“recurring service revenue”) associated with each, has not been significantly affected by COVID-19 as commercial buildings must be kept secure. Additionally, the commercial fire alarm business is a mandated, non-discretionary business which means, in order 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 on which we focus our resources. 

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Despite the solid sales growth in Q2, our ability to fully meet the strong demand for our products is being constrained by the ongoing supply chain and logistic challenges. NAPCO’s delivery performance has been excellent during these very difficult COVID times. However, supply chain constraints have slowed the pace of revenue realization and have led to historically high backlog levels which may continue in 2022, particularly for electronic products. The strong sales performance of our 2^nd quarter was accomplished, in part, because NAPCO continues to remain focused on aggressively managing these logistical challenges to ensure that we remain well positioned to meet the needs of our customers. We continue to manage these issues by re-engineering products, developing alternative