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NASDAQ:NSSC
Protecting America’s Homes, Schools and Businesses!Protecting America’s Homes, Schools and Businesses!
January 2019January 2019Corporate PresentationCorporate Presentation
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Forward Looking Statements
This presentation may contain forward-looking statements that involve numerous risks and uncertainties. Actual results, performance or achievements could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in the Company’s filings anticipated in such forward-looking statements as a result of certain factors, including those set forth in the Company’s filings with the Securities and Exchange Commission.
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Company Overview
Leader in Commercial & Residential Security
Products
Corporate Offices :
Amityville, NY
Manufacturing :
Dominican Republic
Established:
R&D
Manufacturing *
Sales & Marketing
Products Sold Through10,000 + Dealers,
Integrators & Distributors in the US
(B2B Business Model)
Intellectual Property:
Two dozen patents*
Proprietary software and copyrights
Paradigm Shifts in our business
1) Recurring Revenue
2) School Security
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*(issued & pending)
*(ISO Certified – Highest Quality Standard)
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The NAPCO Group of Companies
50% Commercial
50% Residential
100% Commercial
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100% Commercial
Total Revenues = 80% Commercial, 20% Residential
100% Commercial
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Highlighted Products (Product Portfolio Includes 1K SKU’s)
Recurring Revenue Products
Starlink Starlink
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Distribution Channels
10,000 plus
Dealers in US
Install Residential and Small Businesses Alarms
2,000 plus
Integrators in US
Install CommercialAccess Control Systems
80%
80% Of Alarm Sales Are
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Access Control Systems In Airports, Hospitals, Office Buildings, K-12 Schools and Universities
80% Of Alarm Sales Are Sold Private Labeled For Thousands Of Strategic Partners, A Few Examples Include:
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Home or Business
NAPCO Network
New
Eliminates The Traditional Telephone Land Line
Alarm Signal Transmitted Via Verizon, AT&T And T-Mobile Cellular Networks
Signal-Boost™ Technology
$7 to $13 per month
StarLink Connect Works With Millions of Existing Competitors Alarm Systems
Series Communicators - Generating Recurring Revenue
Paradigm Shifting Technology Paradigm Shifting Technology
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NAPCO NetworkOperations Center
(“CLOUD”)
Central Alarm Station
Signal-Boost™ Technology To Provide Reliability Even In Remote Areas
iBridge Smartphone IoT App Controls Lighting, Locks, Climate & Video
Upfront Equipment Sales PLUS Recurring Revenue with up to 90% Gross Margin!
Commercial FIRE $12-26 per month
Residential / Small Business $6-8 per month
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Market 2016 Projected Market 2021
Home Automation (IoT)
Smart Home
Traditional Security
8 Million
Residences14 Million
Residences
Smart Home
Traditional Security
10 Million
Residences 16 Million
Residences
Source: Parks Associates
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2017 Security Industry Association New Product Showcase “Best in Residential and
Monitoring Solutions” Award
“MVP” (Most Valuable Product) Annual 2017 Award
New Market OpportunityNew Market Opportunity
Recurring RevenueRecurring Revenue
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• 133 Million U.S. Households
• 22.5 Million Monitored Security Systems
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School Security & SafetyParadigm Shifting TechnologyParadigm Shifting Technology
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Significant Increase of Incidents Over the Years
Shooting Incidents
153%
Total Casualties
241%
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Source : Citizen Crime Commission Report October 2016
2001-02 to 2005-06Versus
2011-12 to 2015-16 periods
2001-02 to 2005-06Versus
2011-12 to 2015-16periods
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LocDown Systems Solutions
Lock down classrooms, offices, common areas, labs, with a key, safely from inside
Retrofits standard lockset, several lock body styles & finishes
$100 Per DoorASP
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Lock down classrooms & offices from inside safely:
With a pushbutton on inside door or wireless fob
Lock down up to four doors locally at once.
$500 Per Door ASP
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LocDown Systems Solutions continued
Lockdown activated by the server or from authorized personnel at an individual access lock
Real-time global lockdown or unlock in under 10 seconds, ideal for offices, labs, dorms & classrooms
CardAccess 3000 Enterprise Campus
$600 Per DoorASP
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CardAccess 3000 Enterprise Campus Security System offers Lockdown/Notification App for Staff & Teacher Smartphones.
App provides lockdown capability, emergency notifications and pinpointed status, right at their fingertips.
Options for both internal PA and outbound communications with first responders.
$1,000 Per Door ASP
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Examples of institutions using our LocDown Solutions
K-12 (Market is 100,000 Schools)
14Plus many more
Colleges & Universities (Market is 10,000 Campuses)
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Integrated SolutionsEnterpriseEnterprise--Class Platform That Integrates Each Of Our Division’s ProductsClass Platform That Integrates Each Of Our Division’s Products
ALARMS &
CONNECTIVITY
• INTRUSION
• FIRE
• SAAS (RMR)
1515
FUSION
Systems
ACCESS
CONTROL
• SAAS (RMR)
LOCKING
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Alarms
&
Connectivity
Competitive LandscapeNAPCO Is The Only Company With Products In All Three Security VerticalsNAPCO Is The Only Company With Products In All Three Security Verticals
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Locking
Access Control
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First Quarter Record Sales of $23.4 Million
Sales Increased 10%
17 Consecutive Quarters of Sales Growth!!!
First Quarter Record Sales of $23.4 Million
Sales Increased 10%
17 Consecutive Quarters of Sales Growth!!!
Recurring Revenue Increased 46%
Recurring Revenue Annual Run Rate $15.6 MM*
*As of Sept 2018
Recurring Revenue Increased 46%
Recurring Revenue Annual Run Rate $15.6 MM*
*As of Sept 2018
Operating IncomeIncreased 66%
Operating IncomeIncreased 66%
EPS increased 60% to .08EPS increased 60% to .08
Fiscal 2019 First Quarter Performance
Increased 66%
Net Income Increased 69%
Increased 66%
Net Income Increased 69%
EPS increased 60% to .08
Adjusted EBITDA Increased 47% to $2.1M
EPS increased 60% to .08
Adjusted EBITDA Increased 47% to $2.1M
Cash Balance of $7.5 Million
Zero Debt
Cash Balance of $7.5 Million
Zero Debt
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Historical Financial Overview
$87.4
$91.7
$86
$88
$90
$92
$94
Revenues
$36.3
$38.0
$36.0
$37.0
$38.0
$39.0
Gross Margin
$0.31 $0.30
$0.41
$0.30
$0.35
$0.40
$0.45
Earnings Per Share
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Note: Fiscal Year Ends June 30
$82.5
$76
$78
$80
$82
$84
$86
FY 2016 FY 2017 FY 2018
$33.7
$31.0
$32.0
$33.0
$34.0
$35.0
$36.0
FY 2016 FY 2017 FY 2018
Mill
ion
s
Mill
ion
s
$-
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
FY 2016 FY 2017 FY 2018
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Figures in thousands, except EPS
Fiscal 2019 First Quarter Performance
Fiscal Period 3 Months Ended 9/30/18
3 Months Ended 9/30/17
Sales $23,376 $21,174
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Net Income $1,504 $.890
EPS $0.08 $0.05
Adjusted EBITDA $2,091 $1,422
Adjusted EBITDA EPS $.11 $0.08
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$25
$30
Revenues
FY 2017 FY 2018 FY 2019
$10
$12
$14
Gross Profit*
FY 2017 FY 2018 FY 2019
Seasonality Impacts Financial PerformanceExpect Recurring Revenue Line Growth To Mute Impact From SeasonalityExpect Recurring Revenue Line Growth To Mute Impact From Seasonality
20
$10
$15
$20
Q1 Q2 Q3 Q4$0
$2
$4
$6
$8
Q1 Q2 Q3 Q4
Mill
ion
s
Mill
ion
s
*Certain prior period balances have been reclassified to conform with the current period presentation
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$1.5 $1.5
$3.8
$1.4 $1.6
$2.2
$4.7
$2.1
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0 FY 2017 FY 2018 FY 2019
(millions)
Adjusted EBITDA by Quarter
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$1.1 $1.4
$-
$0.5
$1.0
$1.5
Q1 Q2 Q3 Q4
Non-GAAP Information Certain non-GAAP measures are included in this presentation, including EBITDA, non-GAAP operating income and Adjusted EBITDA. We define EBITDA as GAAP net income (loss) plus income tax expense (benefit), net interest expense and depreciation and amortization expense. Non-GAAP operating income does not include impairment of goodwill, amortization of intangibles, restructuring charges, stock-based compensation expense and other infrequent or unusual charges. These non-GAAP measures are provided to enhance the user’s overall understanding of our financial performance. By excluding these charges our non-GAAP results provide information to management and investors that is useful in assessing NAPCO’s core operating performance and in comparing our results of operations on a consistent basis from period to period. The presentation of this information is not meant to be a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliation of GAAP to non-GAAP financial measures included in the above.
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September 30,2018 (Millions)September 30,2018 (Millions)
Selected Balance Sheet Highlights
90,000 Square Feet
Cash and Cash Equivalents $7.5
Working Capital(1) $43.7
Total Assets $74.0
Debt $0
(1) Working capital shown as total current assets less total current liabilities.(2) Diluted shares outstanding as of September 30, 2018.
Amityville, NY and Dominican Republic Facilities on the Books For < $1MM While The Market Value Exceeds $15MM
180,000 Square Feet
Total Liabilities $10.2
Stockholders’ Equity $63.7
Diluted Shares Outstanding(2) 18.7
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• Founder, 30+ years security, electronics experience• Founded two previous companies the first of which installed electric
garage door openers and the second manufactured guitar amplifiers, buzz boxes and wah wah pedals
• Winner of numerous awards including Ernst &Young’s Entrepreneur of the Year and holder of patents relating to security products
Richard SolowayRichard SolowayPresident & CEOPresident & CEO
• Over 25 years of experience in the security industry• Began career at Coopers & Lybrand• Certified Public Accountant
Kevin BuchelKevin BuchelSenior Vice President Senior Vice President
& CFO& CFO
Management
• 16 years of experience in the security industry• Successful track record in marketing and sales at leading consumer
product companies such as Colgate-Palmolive ad Unilever
Jorge Jorge HeviaHeviaSVP, Sales and SVP, Sales and
MarketingMarketing
• 15 years of experience in the security industry• Extensive knowledge of developing advanced electronic products
with applications in military/defense, media/broadcasting and consumer electronics
• Fire Chief Emeritus of the Fire Department of Melville, Long Island
Michael Michael CarrieriCarrieriSVP, EngineeringSVP, Engineering
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Stock Price: 15.95
52 Week Range : 7.40-17.45
Shares Outstanding : 18.6 MM
Market Capitalization : 297.0 MM
Insider Ownership
38 Percent
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Institutional Holders (33% +)
Alexander Capital
Wasatch Advisors
Kennedy Capital
Teton Advisors
Ranger Investment Mgmt
Analyst Coverage
William Blair
CANACCORD Genuity
The Benchmark Company
Data as of January 11, 2018
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Financially Strong:Financially Strong: TTM Revenue of $94.0 MM, Zero DebtTTM Revenue of $94.0 MM, Zero Debt
Paradigm Shifts : Recurring Revenue and School SecurityParadigm Shifts : Recurring Revenue and School Security
Seventeen Consecutive Quarters of Growth!!!
Summary
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Seventeen Consecutive Quarters of Growth!!!
SaaS RMR Now at $15.6 MM* Annual Run Rate
Consistently Profitable Company With 38% Insider Ownership
*As of September 2018
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If you would like to receive an electronic copy of this presentation:
Visit – www.investor.napcosecurity.com
or
Email – Patrick McKillop / Director of Investor Relations - [email protected]
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Relations - [email protected]
Follow NAPCO on social media
Twitter @NSSCSecurityFacebook @Napco-Security-Technologies-Inc