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Dec 31, 2021
Napco Q2 2022 Earnings Report
NAPCO reported strong revenue growth, with record-breaking sales for Q2, but net income decreased due to supply chain disruptions and increased stock-based compensation.
Key Takeaways
NAPCO Security Technologies reported a 23% increase in net sales for the second quarter of fiscal year 2022, reaching a record $33.4 million. Recurring service revenue increased by 35% to $11.0 million. However, net income decreased by 68% to $1.0 million due to supply chain disruptions and a shift in product mix, as well as a non-cash stock-based compensation charge.
Net sales increased by 23% to a record $33.4 million for the second quarter.
Recurring service revenue increased by 35% to $11.0 million, with gross margins of 87%.
Net income decreased by 68% to $1.0 million, impacted by supply chain issues and product mix.
Cash, cash equivalents, and marketable securities increased by 18% to $47.4 million.
Napco
Napco
Forward Guidance
NAPCO is confident in its ability to manage supply chain challenges and generate strong growth in equipment and recurring revenue. They are prioritizing customer demand and implementing flexible production measures. School security jobs are returning, and the infrastructure bill will lead to airport renovations requiring NAPCO's products. The company is also encouraged by increases in radio activations.
Positive Outlook
- Seasoned management team experienced in handling supply chain shortages.
- Confident in generating strong growth in both equipment and recurring revenue.
- Prioritizing and actively addressing strong customer demand.
- Flexible and accelerated production measures to match customer needs.
- School security jobs are returning and the recently passed infrastructure bill will lead to airport renovations which will require locking and access products that we offer and recurring service revenue remains strong.
Challenges Ahead
- Ongoing supply chain and logistic challenges constrain ability to fully meet demand.
- Supply chain constraints have slowed revenue realization.
- Historically high backlog levels may continue in 2022, particularly for electronic products.
- Volatility associated with shortages of electronic components.
- Increased shipping costs and raw material price inflation.