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NASDAQ:NSSC
Protecting America’s Businesses, Homes, Schools
September 2019 Corporate Presentation
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 with the Securities and Exchange Commission.
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Company Overview
Leader in Designing and Manufacturing
Commercial & Residential Security Products
Corporate Offices : Amityville, NY
Manufacturing :Dominican Republic
Products Sold Through10,000 + Dealers,
Integrators & Distributors in the US
(B2B Business Model)
Established: R&D
Manufacturing *Sales & Marketing
Intellectual Property: Two dozen patents*
Proprietary software and copyrights
Two Major Growth Drivers1) Recurring Revenue
2) School Security
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*(issued & pending)
*(ISO Certified – Highest Quality Standard)
The NAPCO Group of Companies
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50% Commercial
50% Residential
100% Commercial
100% Commercial
Total Revenues = 80% Commercial, 20% Residential
100% Commercial
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Product Examples (Product Portfolio includes 1K SKU’s)
Commercial Buildings Medical Centers & Detention Rooms
Small Business - Residential
NEW
Houses of Worship Airports
Schools - Universities
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Distribution Channels
Distributors(200+ in US)
Independent Integrators2,000 Plus
NAPCO Factory Sales Team Markets Products to
Distributors, Dealers & Integrators
Small Business & Residence
Commercial Access Control & Fire Alarm Systems for K-12 Schools, Universities, Airports, Office Buildings & Hospitals
80% Of Alarm Sales Are Sold Private Labeled For Thousands Of Strategic Partners, A Few Examples Include:
Independent Dealers10,000 Plus
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Recurring Revenue Products
END USERCOMMERCIAL BUSINESS or RESIDENCE
NAPCO NETWORK OPERATIONS
CENTER$ RMR to NAPCO
DEALERS CENTRAL ALARM
STATION
ü Eliminates The Traditional Telephone Land Line ü Alarm Signal Transmitted Via Verizon, AT&T And T-Mobile Cellular Networks ü Signal-Boost™ Technology To Provide Reliability Even In Remote Areasü iBridge Smartphone IoT App Controls Lighting, Locks, Climate & Videoü StarLink Connect Works With Millions of Existing Competitors Alarm Systemsü Upfront Equipment Sales PLUS Recurring Revenue with up to 90% Gross Margin!ü Dealer pays NAPCO RMR Monthly Fee
SMALL BUSINESS / RESIDENTIAL$7 to $13 per month
SMALL BUSINESS / RESIDENTIAL$6-8 per month COMMERCIAL FIRE $12-26 per month
SINGLE PATHCELLULAR
DUAL PATH CELLULAR + IP
FIRELINK FACP+STARLINK COMMUNICATOR
SmartPhoneApp
How StarlinkWorks
Transmits to
Sends to
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School Security & SafetyMajor Growth Driver
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Significant Increase of Incidents Over the Years
Source : Citizen Crime Commission Report October 2016
Shooting Incidents
153%
2001-02 to 2005-06Versus
2011-12 to 2015-16 periods
2001-02 to 2005-06Versus
2011-12 to 2015-16periods
Total Casualties
241%
2018 - 82 school shootings were recorded. The most since 1970!
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Funding for School Security Significantly Increased
Source: the74million.org August 2018
Examples Include:• Florida $500M• Wisconsin $100M• Maryland $125M• Plus More!
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LocDown Systems SolutionsLock 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
Lock down classrooms, offices, common areas, labs, with a key, safely from inside
Retrofits standard lockset, several lock body styles & finishes
$100 Per DoorASP
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
$600 Per DoorASP
CardAccess 3000 Enterprise Campus Security System Lockdown/Notification App for Staff & Teacher Smartphones.Emergency notifications and pinpointed statusInternal PA and outbound communications with first responders.
$1,000 Per Door ASP
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Examples of institutions using our LocDown Solutions
plus many more…
K-12 (Market is 100,000 Schools)
Colleges & Universities (Market is 10,000 Campuses)
plus many more…
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Integrated Solutions Enterprise-Class Platform That Integrates Each Of Our Division’s Products
FUSIONTechnology
Systems
ACCESSCONTROL
ALARMS &CONNECTIVITY
• INTRUSION
• FIRE
• SAAS (RMR)
LOCKING
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Alarms&
Connectivity
Locking
Access Control
Competitive LandscapeNAPCO Is The Only Company With Products In All Three Security Verticals
Fourth Quarter Record Sales of $29.6 MillionSales Increased 9%
20 Consecutive Quarters of Sales Growth!!!
Q4 Recurring Revenue Increased 44%
Recurring Revenue Annual Run Rate $20.4 MM*
*based on June 2019
Fiscal Year Sales $103M (up 12%)
Net Income $12M (up 60%)Adjusted EBITDA $15M
EPS $0.66
Q4 EPS increased 30% to .26
Adjusted EBITDA Increased 10% to $5.2 M
Cash Balance of $8 MillionZero Debt
Fiscal Fourth Quarter & FY 2019 Performance
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Figures in thousands, except EPS
Fiscal Quarter Performance
FiscalPeriod
3 Months Ended 6/30/19
3 Months Ended 6/30/18
12 Months Ended6/30/19
12 Months Ended6/30/18
Sales $29,584 $27,300 $102,932 $91,746
NetIncome $4,728 $3.697 $12,200 $7,649
EPS $0.26 $0.20 $0.66 $0.41
AdjustedEBITDA
$5,200 $4,700 $15,000 $10,000
AdjustedEBITDAEPS
$0.28 $0.25 $0.81 $0.53
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$10
$15
$20
$25
$30
Q1 Q2 Q3 Q4
Revenues FY 2017 FY 2018 FY 2019
$0
$2
$4
$6
$8
$10
$12
$14
Q1 Q2 Q3 Q4
Gross Profit*FY 2017 FY 2018 FY 2019
Seasonality Impacts Financial PerformanceExpect Recurring Revenue Line Growth To Mute Impact From Seasonality
Milli
ons
Milli
ons
*Certain prior period balances have been reclassified to conform with the current period presentation
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$1.1 $1.5 $1.5
$3.8
$1.4 $1.6
$2.2
$4.7
$2.1
$3.8 $4.0
$5.2
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
Q1 Q2 Q3 Q4
FY 2017 FY 2018 FY 2019(millions)
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.
Adjusted EBITDA by Quarter
June 30, 2019 (Millions)
(1) Working capital shown as total current assets less total current liabilities.(2) Diluted shares outstanding as of June 30, 2019.
Selected Balance Sheet Highlights
Amityville, NY and Dominican Republic Company Owned Facilities on the Books For < $1MM While The Market Value Exceeds $17MM
180,000 Square Feet
100,000 Square Feet
Cash and Cash Equivalents $8.0
Working Capital(1) $51.1
Total Assets $85.9
Debt $0
Total Liabilities $14.7
Stockholders’ Equity $71.1
Diluted Shares Outstanding(2) 18.5
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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 SolowayPresident & CEO
• Over 25 years of experience in the security industry• Began career at Coopers & Lybrand• Certified Public Accountant
Kevin BuchelSenior Vice President
& CFO
• Over 20 years of experience in the security industry• Successful track record in marketing and sales at leading consumer
product companies such as Colgate-Palmolive and Unilever
Jorge HeviaSVP, Sales and
Marketing
• Over 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 CarrieriSVP, Engineering
Management
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Stock Price: $34.4852 Week Range : $12.90-34.91Shares Outstanding : 18.5 MM
Market Capitalization : $638.0 MM
Insider Ownership38 Percent
Institutional Holders (33% +)Lord Abbett
Wasatch AdvisorsAllianz Global
Fidelity InvestmentsRanger Investment Mgmt
Analyst CoverageWilliam Blair
Canaccord GenuityLake Street Capital
Imperial Capital
Data as of August 30, 2019
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Financially Strong: TTM Revenue of $103M, Zero Debt
Growth Drivers: Recurring Revenue and School Security
Twenty Consecutive Quarters of Growth!!!
SaaS RMR Now at $20.4 MM* Annual Run Rate
Consistently Profitable Company With 38% Insider Ownership
Summary
*based on June 2019
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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]
Follow NAPCO on social mediaTwitter @NSSCSecurityFacebook @Napco-Security-Technologies-Inc