NAPCO SECURITY TECHNOLOGIES INC
For the period ended Dec 31, 2024. Filed Feb 3, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 3, 2025
NSSC$30.24+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-04.
0001558370-24-014247
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-03.
0001558370-25-000601
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 46 previous paragraphs and 58 current paragraphs.
27 unchanged; 17 reworded; 7 added; 1 removed; 1 previous and 7 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Three Months Ended December 31, 2024:
Current report
Six Months Ended December 31, 2024:
Current report
Net sales for the six months ended December 31, 2024 decreased $2,287,000 to $86,936,000 as compared to $89,223,000 in the comparable period. Net equipment revenues for the six months ended December 31, 2024, decreased $8,756,000 to $44,642,000 as compared to $53,398,000 in the comparable period. The decrease in net equipment sales was primarily due to decreases in intrusion and access alarm products of $3,936,000 and door locking devices of $4,821,000. The reduction is attributable to reduced sales by two of the Company’s larger distributors, one of which reduced all purchases to reduce existing inventory levels, and a second distributor who was completing a management restructuring which resulted in reduced purchases. In addition, the timing of project work has impacted sales of custom door locking devices.
Current report
Net service revenues for the six months ended December 31, 2024, increased $6,469,000 to $42,294,000 as compared to $35,825,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Current report
Three Months Ended December 31, 2024
Current report
Six Months Ended December 31, 2024:
Current report
Overall gross profit for the six months ended December 31, 2024 increased $1,680,000 to $49,105,000, or 56.5% of net sales, as compared to $47,425,000, or 53.2% of net sales, for the comparable period.
Removed paragraphs (1)
Previous report
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2024 increased by $1,282,000 to $9,703,000 as compared to $8,421,000 for the comparable period.
Reworded paragraphs (17)
Previous wording
Highlights from the quarter ended September 30, 2024 compared with the comparable quarter in fiscal 2023 included:
Current wording
Highlights from the three and six months ended December 31, 2024 compared with the comparable periods in fiscal 2024 included:
Previous wording
Our industry is dynamic and highly competitive, with frequent changes in both technologies and business models. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business.
Current wording
Our industry is dynamic and highly competitive, with frequent changes in both technologies and business models. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. Napco continually innovates through a broad range of research and development activities that seek to identify and address the changing demands of customers, industry trends, and competitive forces.
Previous wording
Net Sales for the three months ended September 30, 2024 increased $2,327,000 to $44,003,000 as compared to $41,676,000 in the comparable period. Net equipment revenues for the three months ended September 30, 2024, decreased $1,474,000 to $22,917,000 as compared to $24,391,000 in the comparable period. The decrease in net equipment sales was primarily due to decreases in intrusion and access alarm products of $233,000 and door locking devices of $1,241,000.
Current wording
Net sales for the three months ended December 31, 2024 decreased $4,614,000 to $42,933,000 as compared to $47,547,000 in the comparable period. Net equipment revenues for the three months ended December 31, 2024, decreased $7,282,000 to $21,725,000 as compared to $29,007,000 in the comparable period. The decrease in net equipment sales was primarily due to decreases in intrusion and access alarm products of $3,702,000 and door locking devices of $3,580,000. The reduction is attributable to reduced sales by two of the Company’s larger distributors, one of which reduced all purchases to reduce existing inventory levels, and a second distributor who was completing a management restructuring which resulted in reduced purchases. In addition, the timing of project work has impacted sales of custom door locking devices.
Previous wording
Net service revenues for the three months ended September 30, 2024, increased $3,801,000 to $21,086,000 as compared to $17,285,000 in the Comparable period. The increase in net service revenues was primarily due to an increase in our cellular (radio) communication device activations.
Current wording
Net service revenues for the three months ended December 31, 2024, increased $2,668,000 to $21,208,000 as compared to $18,540,000 in the Comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Previous wording
Overall gross profit for the three months ended September 30, 2024 increased $2,203,000 to $24,616,000, or 55.9% of net sales, as compared to $22,413,000, or 53.8% of net sales, for the comparable period.
Current wording
Overall gross profit for the three months ended December 31, 2024 decreased $523,000 to $24,489,000, or 57.0% of net sales, as compared to $25,012,000, or 52.6% of net sales, for the comparable period.
Previous wording
Gross profit from equipment sales was $5,407,000, or 23.6% of equipment sales, as compared to $6,894,000, or 28.3% of net equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of product mix. Door locking products historically result in higher margin percentages as compared to access alarm products and specifically cellular (radio) communicator devices, which also result in future increases in recurring alarm communication services revenue.
Current wording
Gross profit from equipment sales was $5,119,000, or 23.6% of equipment sales, as compared to $8,351,000, or 28.8% of net equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of product mix and lower absorption of fixed overhead costs. In addition, door locking products historically result in higher margin percentages as compared to access alarm products and specifically cellular (radio) communicator devices, which also result in future increases in recurring communication services revenue.
Previous wording
Gross profit on service revenues was $19,209,000, or 91.1% of net service revenues, as compared to $15,519,000, or 89.8% of net service revenues, for the comparable period a year ago. The increase in gross profit percentage was a result of renegotiation of royalty arrangements and volume rebates received from carriers.
Current wording
Gross profit on service revenues was $38,579,000, or 91.2% of net service revenues, as compared to $32,180,000, or 89.8% of net service revenues, for the comparable period a year ago. The increase in gross profit percentage was a result of renegotiation of royalty arrangements and volume rebates received from carriers.
Previous wording
Research and development expenses for the three months ended September 30, 2024 increased by $620,000 to $3,057,000, or 6.9% of net sales, as compared to $2,437,000, or 5.8% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.
Current wording
Research and development expenses for the three months ended December 31, 2024 increased by $565,000 to $3,107,000, or 7.2% of net sales, as compared to $2,542,000, or 5.3% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.
Previous wording
The increase in SG&A expenses was primarily attributable to compensation increases and hiring of additional staff, increases in advertising and insurance costs, partially offset by decreases in professional fees.
Current wording
Selling, general and administrative (“SG&A”) expenses for the three months ended December 31, 2024 increased by $1,546,000 to $10,211,000 as compared to $8,665,000 for the comparable period. The increase in SG&A expenses was primarily attributable to compensation increases and hiring of additional staff, increases in advertising and insurance costs, partially offset by decreases in professional fees.
Previous wording
Interest and other income, net for the three months ended September 30, 2024 increased by $704,000 to income of $1,144,000 as compared to income of $440,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.
Current wording
Interest and other income, net for the three months ended December 31, 2024 increased by $192,000 to income of $921,000 as compared to income of $729,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.
Previous wording
The Company’s provision for income taxes for the three months ended September 30, 2024 increased by $298,000 to $1,815,000 as compared to $1,517,000 for the same period a year ago. The increase in the provision for income taxes for the three months was primarily due to higher taxable income in the U.S. The Company’s effective rate for income tax was 14.0% and 12.6% for the three months ended September 30, 2024 and 2023 respectively. The Company’s effective tax rate for the three months ended September 30, 2024 increased as a result of higher non-deductible stock based compensation.
Current wording
The Company’s provision for income taxes for the three months ended December 31, 2024 decreased by $299,000 to $1,625,000 as compared to $1,924,000 for the same period a year ago. The decrease in the provision for income taxes for the three months was primarily due to lower taxable income in the U.S. The Company’s effective rate for income tax was 13.4% and 13.2% for the three months ended December 31, 2024 and 2023 respectively. The Company’s effective tax rate for the three months ended December 31, 2024 increased as a result of higher non-deductible stock based compensation.
Previous wording
Our cash and cash equivalents increased by $20,255,000 during the quarter ended September 30, 2024, and our cash and cash equivalents and short-term investments as of September 30, 2024 was $96,522,000. We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months.
Current wording
Our cash and cash equivalents increased by $20,678,000 during the six months ended December 31, 2024, and our cash and cash equivalents and short-term investments as of December 31, 2024 was $99,195,000. We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months.
Previous wording
A summary of the cash flow activity for the periods ended September 30, 2024 and 2023 is as follows:
Current wording
A summary of the cash flow activity for the six months ended December 31, 2024 and 2023 is as follows:
Previous wording
Net cash provided by operating activities was $12.0 million for the period ended September 30, 2024 and was due to net income of $11.2 million and increase in cash flow from changes in operating assets and liabilities of $1.3 million, partially offset by adjustments for non-cash items of $.4 million. The changes in operating assets and liabilities were largely attributable to increases in accounts receivables and decreases in inventories and accounts payable and accrued expenses.
Current wording
Net cash provided by operating activities was $25.5 million for the six months ended December 31, 2024 and was due to net income of $21.7 million and increase in cash flow from changes in operating assets and liabilities of $4.0 million offset by adjustments for non-cash items of $.2 million. The changes in operating assets and liabilities were largely attributable to decreases in accounts receivables, inventories and prepaid expenses partially offset by increases in income tax receivable and decreases in accounts payable and accrued expenses.
Previous wording
Net cash provided by operating activities was $11.2 million for the period ended September 30, 2023 and was due to net income of $10.5 million and adjustments for non-cash items of $1.7 million, partially offset by a decrease in cash flow from operating activities due to changes in operating assets and liabilities of $1.0 million. The changes in operating assets and liabilities was largely attributable to a decrease in accounts receivable and an increase in and accounts payable and accrued expenses offset by an increase in inventories.
Current wording
Net cash provided by operating activities was $18.7 million for the six months ended December 31, 2023 and was due to net income of $23.1 million and adjustments for non-cash items of $.9 million, partially offset by a decrease in cash flow from operating activities due to changes in operating assets and liabilities of $5.3 million. The changes in operating assets and liabilities was largely attributable to a decrease in accounts receivable and inventories partially offset by an increase in and accounts payable and accrued expenses.
Previous wording
The net cash provided by investing activities of $15.5 million during the period ended September 30, 2024 was primarily attributable to the redemption of other investments ($16.3 million) partially offset by expenditures used for capital expenditures ($.7 million) and purchase of investments ($.1 million). The cash used in investing activities of $0.6 million during the period ended September 30, 2023, was primarily attributable to expenditures used for capital expenditures and purchase of investments. The change in use of cash for investing activities from 2023 to 2024 was a reduction in investments in term deposits (other investments).
Current wording
The net cash provided by investing activities of $17.7 million during the six months ended December 31, 2024 was primarily attributable to the redemption of other investments ($27.3 million) partially offset by expenditures used for capital expenditures ($1.8 million) and purchase of investments ($7.6 million). The cash used in investing activities of $1.4 million during the six months ended December 31, 2023, was primarily attributable to expenditures used for capital expenditures and purchase of investments. The change in use of cash for investing activities from 2023 to 2024 was a increase in the redemption of investments in term deposits (other investments).
Previous wording
The cash used in financing activities of $7.2 million for the period ended September 30, 2024 was primarily related to the purchase of treasury shares. The cash used in financing activities of $2.9 million for the period ended September 30, 2023 was primarily related to the payment of stockholder dividends.
Current wording
The cash used in financing activities of $22.6 million for the six months ended December 31, 2024 was primarily related to the purchase of treasury shares. The cash used in financing activities of $5.9 million for the six months ended December 31, 2023 was primarily related to the payment of stockholder dividends.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Gross profit on service revenues was $19,370,000, or 91.3% of net service revenues, as compared to $16,661,000, or 89.9% of net service revenues, for the comparable period a year ago. The increase in gross profit percentage was a result of renegotiation of royalty arrangements and volume rebates received from carriers.
Current report — wording carried from elsewhere
Gross profit from equipment sales was $10,526,000, or 23.6% of equipment sales, as compared to $15,245,000, or 28.5% of equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of
Current report — wording carried from elsewhere
product mix and lower absorption of fixed overhead costs. In addition, door locking products historically result in higher margin percentages as compared to access alarm products and specifically cellular (radio) communicator devices, which also result in future increases in recurring alarm communication services revenue.
Current report — wording carried from elsewhere
Research and development expenses for the six months ended December 31, 2024 increased by $1,185,000 to $6,164,000, or 7.1% of net sales, as compared to $4,979,000, or 5.6% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.
Current report — wording carried from elsewhere
Selling, general and administrative (“SG&A”) expenses for the six months ended December 31, 2024 increased by $2,828,000 to $19,914,000 as compared to $17,086,000 for the comparable period. The increase in SG&A expenses was primarily attributable to compensation increases and hiring of additional staff, increases in advertising and insurance costs, partially offset by decreases in professional fees.
Current report — wording carried from elsewhere
Interest and other income, net for the six months ended December 31, 2024 increased by $896,000 to income of $2,065,000 as compared to income of $1,169,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.
Current report — wording carried from elsewhere
The Company’s provision for income taxes for the six months ended December 31, 2024 of $3,440,000 remained consistent as compared to $3,441,000 for the same period a year ago. The Company’s effective rate for income tax was 13.7% and 13.0% for the six months ended December 31, 2024 and 2023 respectively. The Company’s effective tax rate for the six months ended December 31, 2024 increased as a result of higher non-deductible stock based compensation.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Napco continually innovates through a broad range of research and development activities that seek to identify and address the changing demands of customers, industry trends, and competitive forces.