Special Note on Forward-Looking Statements
This presentation contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of
future performance based on management's judgment, beliefs, current trends, and anticipated product performance. These forward-looking statements include, without limitation, statements relating to growth drivers of the Company’s business such as school security products
and recurring revenue services; potential market opportunities; the benefits of our recurring revenue products to customers and dealers; our ability to control expenses and costs; and expected annual run rate for Saas recurring monthly revenue. Forward-looking statements
involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements.
These factors include, but are not limited to, such risk factors described in our SEC filings, including our Annual Report onForm 10-K. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ
materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place
undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise
stated, and we undertake no duty to update such information, except as required under applicable law.
Use of Non-GAAP Financial Measures
We disclose certain non-GAAP financial measures in this presentation for our historical performance, 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 excludes impairment of goodwill, amortization of intangibles, restructuring charges, stock-based compensation expense and other infrequent or unusual charges. We believe that these
historical non-GAAP financial measures provide useful information to both management and investors by excluding certain items and
expenses that are not indicative of our core operating results or do not reflect our normal business operations. In addition, our management uses non-GAAP measures to compare our performance relative to forecasts and to benchmark our performance externally against
competitors. 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. Our use of non-GAAP financial measures has certain limitations in that such
non-GAAP financial measures may not be directly comparable to those reported by other companies. For example, the terms used in this
presentation, such as Non-GAAP operating income and Adjusted EBITDA, do not have a standardized meaning. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our
performance in relation to other companies. We seek to compensate for the limitation of our non-GAAP presentation by providing adetailed reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP measures in the tables attached
hereto. Readers are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial
measures to their most directly comparable U.S. GAAP financial measures.
2
3
50% Commercial
50% Residential (Professional Installation)
100%
Commercial
Established: R&D Manufacturing(1)
Sales & Marketing
Corporate Offices:Amityville, NY
Manufacturing:Dominican Republic
Products sold through 10,000 + dealers,
integrators and distributors in the US
(B2B Business Model)
Leader in designing and manufacturing
commercial & residential security
products
Intellectual Property:Two dozen patents(2)
Proprietary software and copyrights
100%
Commercial
100%
Commercial
Napco Security Technologies, Inc. Family of Companies:
Total Revenue = 80% Commercial, 20% Residential
Company Overview
Notes: (1) ISO certified – highest quality standard (2) Issued and pending
50+ EngineersData Centers in Amityville
and Remote Location-Proprietary Software-
4
Investment Highlights
1. Significant growth drivers: recurring revenue and school security
✓ Multi-decade upgrade cycle NOW underway for alarm systems → #1 growth driver of
high margin recurring revenue
✓ Urgent need for school security upgrades across the US - many K-12, colleges and universities have no systems in place
2. New hardware-enabled SaaS products
✓ Air Access is the industry's first cellular based access control system
✓ Enables locking and access control hardware to generate monthly recurring revenue (“MRR”)
3. Powerful distribution channel and installed base: Built over the last 50 years
4. Open architecture → NAPCO products can be used with any systems
5. Financially strong → strong cash position, industry-leading margins, and significant operating leverage going forward
6. Strong moat position given market-leading technology portfolio and dedicated national distribution network
7. Industry-leading executive team with 100+ years of experience and track record of innovation and managing growth → insiders own 22%
Recurring Revenue
5
School Security and Security Alarms
• All copper telephone land lines and 3G systems for alarms are obsolete and being replaced
o Total of 5 million commercial buildings and 120 million residences affected
• $4.9 billion opportunity in 2021 for new installs and upgrades of existing systems(1)
• NAPCO has developed cellular-based solutions to combat the above:
o New recurring revenue products for security industry:Starlink, iSecure and Air Access
• Recurring revenue annual run rate is $40.1 million as of July 2021
• Recurring revenue gross margins are over 80%
1
2
• NAPCO’s LocDown Systems offer a fully integrated solution
o Portfolio of products has solutions for all schools, whether K-12 or large University
• In the US, school security represents a ~$10 billion opportunity(2)
• Since 2018, over $1 billion has been budgeted towards funding school security in the US
• Proposed School Violence Prevention and Mitigation Act of 2019 would authorize an
additional $2 billion over 10 years for schools
Two Main Growth Drivers
Source: US Congress, US Department of Justice, management estimates (1) Research and Markets (2) National Center for Education Statistics (NCES) and Education Unlimited, based on 136,300 schools and an average spend of $75,000 per school
Product Examples
Small Business & Residential
Schools - Universities
Medical & Detention Centers
Commercial Buildings
• Managing hundreds of thousands of workers and v isitors
who need daily, weekly or single-use access • Can give access to specific personnel only for their
permitted areas of the building
• Allows teachers to lock down their classroom with a simple
key safely from inside the classroom• Presidents of universities can control lockdowns on all
campus buildings directly instead of relying on indiv idual
building staff to physically run through hallways
• Maternity wards can lock all doors and shut down elevators
to prevent intruders from leav ing hospitals with an infant• Anti-suicide locks for detention centers• Anti-microbial locks for hospitals
• Alarm system with full v ideo surveillance notifies you instantly
of break-ins after business hours or while your home is vacant, including second homes
• Full access climate control integrated into smartphone app
6
Distributors
(200+ in US)
Independent Integrators
2,000 +
NAPCO factory sales team markets products to
distributors, dealers and integrators
Installing commercial access control, lock down systems and fire alarm systems in airports, office buildings, hospitals K-12
schools, colleges and universities with integrators such as Siemens and Red Hawk
80% of alarm sales are sold private
labeled to thousands of strategic
partners, including:
Independent Dealers
10,000 +
Distribution Channels
Installing small and medium sized business & residential jobs
FAMILY OF COMPANIES
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SMALL MID SIZE BUSINESS
/ RESIDENTIAL
$7 to $13 per month
SMALL MID SIZE
BUSINESS / RESIDENTIAL
$6-8 per month
COMMERCIAL FIRE $12-26 per month
SINGLE PATHCELLULAR
DUAL PATH
CELLULAR + IP
FIRELINK PANEL WITH STARLINK
COMMUNICATOR BUILT IN
IoT SmartPhone App
Recurring Revenue Products
SMALL MID SIZE BUSINESS /
RESIDENTIAL PANEL
$7 to $13 per month
Market Opportunity for New Installs and Retrofit:5 Million Commercial Buildings and 120 Million Homes
8Source: Management estimates
END USER
COMMERCIAL BUSINESS or RESIDENCE
NAPCO NETWORK OPERATIONS CENTER
$ MRR to NAPCO
DEALERS
CENTRAL ALARM STATION
✓ Alarm signal transmitted via Verizon, AT&T and T-Mobile cellular networks
✓ Signal-Boost technology to provide reliability even in remote areas
✓ iBridge smartphone IoT app controls lighting, locks, climate and video
✓ StarLink Connect works with millions of existing competitors’ alarm systems
✓ Dealer pays NAPCO monthly recurring revenue (“MRR”) fees
Transmits to
Sends to
Product Highlights
9
How Starlink Works
10
Recently Introduced Recurring Revenue Product
10
Business/Residential Alarm System
• Winner of MVP Award @ ISC West Trade Show
• Designed for 1-hour installation time
• Alarm panel separate from keypad – system not disabled if burglar smashes keypad • iBridge app delivers smart home features – lighting, climate control, video alerts, etc.
• Up to 80 zones allow for residential and small to mid sized business applications• Dealers will get faster ROI vs competition
• Recurring revenue generator ($7-13 per month)
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Industry's First Cellular based Access Control System!
$1B Market OpportunityNew!
The Future
of Access Control & Locking !
Featuring cloud-
based services
*Additional
Recurring Serv ice Revenuegeneratorfor NAPCO
and dealers.
* Powered by proven Starlink technology
* No Corporate IT Department
integration needed -cellular basedtechnology
* No expensive
upfront hardwarecosts
26 States Since Feb 2018 ~ $1 Billion Dollars
Examples Include:• Florida $500M
• Wisconsin $100M
• Maryland $125M• Plus More!
Funding for School Security Significantly Increased
Recent Headlines
➢ The School Violence Prevention
and Mitigation Act of 2019
authorizes $2 billion over 10
years for schools to first identify
security risks and then address
any shortfalls.
(PR – Bill Proposed by Rep. Williams & Deutch
- July 2019)
➢ DOJ Awards $50 Million in Grants
for School Security.
(PR – DOJ – September 2020)
➢ Virginia Dept. Of Ed Awards
$12M in grants for 489 schools
(VA Dept of Ed December 2020)
13Source: the 74milllion.org
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LocDown Systems SolutionsLock down classrooms, offices, common areas and labs safely from inside
Retrofits standard lockset, several lock body styles and finishes
$100 per door ASP
Simple and safe
lockdown process:• Pushbutton on
inside door or
wireless fob • Lock down up to
four doors locally at once.
$500 per door ASP
• Campus security system lockdown/notification
app for staff & teacher smartphones.• Emergency notifications and pinpointed status• Internal PA and outbound communications with
first responders.
Lockdown activated by the server or from authorized personnel at an indiv idual access lock
Real-time global lockdown or unlock in under 10 seconds, ideal for offices, labs, dorms and classrooms$600 Per Door ASP
$1,000 per door ASP
plus many more…
K-12 (Market is ~131,000 Schools)
Colleges & Universities (Market is ~5,300 Campuses)
plus many more…
Examples of Institutions Using Our LocDown Solutions
15Source: National Center for Education Statistics (NCES), Education Unlimited
16
Alarms
&
Connectivity
Locking
Access Control
NAPCO SECURITYGROUP
NAPCO is the Only Company with Products in All Three Security Verticals
Competitive Landscape
17
Enterprise-Class Platform that Integrates Each of Our Divisions’ Products
FUSION
Technology
Systems
ACCESS
CONTROL
ALARMS &
CONNECTIVITY• INTRUSION
• FIRE
• SAAS (MRR)
LOCKING
All Our Products are Integrated
NAPCO SECURITY
GROUP
19
Market Opportunity
Residential Market
Homes in US Professional Installed Security
120 Million Homes
22 Million
Opportunity for New Installs and Retrofit
• DIY products not hav ing material
impact on professional installations• Conversion to cellular alarms in
early stages
• Professional dealers driven by MRR opportunities
• Fire alarm systems conversion to
cellular in early stages – cost sav ings, reliability, carriers not supporting old copper telephone
serv ices• Locking and access control drivers
include new construction as well as retrofit opportunities
• School security a growth driver
Estimated 5 Million
Commercial Buildings
Commercial Market
Source: Management estimates
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Fiscal Q421& FY 2021 Highlights
Q4 Sales up 54%
to Record $35.4 M
FY21 Sales up 13%
to Record $114M
Q4 Recurring Revenue up 43%
Q4 MRR Gross Margin 87%
FY21 Recurring Revenue up 41%
FY21 MRR Gross Margin 86%
Recurring Revenue Annual Run Rate $40.1M*
*based on July 2021
FY21 Operating Income up 60% to $17.3M
FY21 Net Income up 75%
To Record $14.9M
FY21 EPS up 76% to $0.81
Adjusted EBITDA $19.5M
up 32% Y/Y
Adj. EBITDA per share $1.06*
Cash & Marketable Securities Balance of $40.2M
Cash from Operations for the FY21 increased 123% to $23M
Note: See GAAP reconciliation in Appendix
June 30, 2021 ($ in millions)
(1) Working capital shown as total current assets less total current liabilities.(2) Assumes PPP Loan of $3.9M will be forgiven(3) Diluted shares outstanding as of June 30,, 2021.
Amityville, NY and Dominican Republic company owned facilit ies on the books for <$1M while the market value exceeds $17M
180,000 square foot factory in Dominican Republic. ISO cert ified
95,000 square foot headquarters and factory in Amityville, NY
Cash and Marketable Securities $40.2
Working Capital(1) $75.8
Total Assets $123.3
Debt(2) $0
Total Liabilities $30.0
Stockholders’ Equity $93.2
Diluted Shares Outstanding(3) 18.4
22
Selected Balance Sheet HighlightsNAPCO’S FACILITIES
Facilit ies in New York and the Dominican Republic allow for receiving products within approximately 6 days versus 6 weeks if were sourced from China
No U.S. tariffs for manufacturing components shipped from China to DR
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Management
Richard Soloway / President & CEO - Founder, 30+ years security, electronics experience.
Founded two prev ious 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.
Kevin Buchel / Senior Vice President & CFO - Over 25 years of experience in the security
industry. Began career at Coopers & Lybrand. Certified Public Accountant.
Michael Carrieri / SVP Engineering - Over 20 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 Melv ille, Long Island.
Stephen Spinelli / SVP Sales - 25 years of sales experience in the security industry. Prev iously Mr. Spinelli was with a global leader in commercial & residential security systems, comprising alarms, access control and locking. He has a proven track record of leading sales teams
and consistently surpassing sales goals.
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Stock Snapshot
Stock Price: $37.99
52 Week Range : $22.0-40.45
Shares Outstanding : 18.3M
Market Capitalization : $695M
Insider Ownership
~ 22%
Institutional Holders
Wasatch Advisors
Thrivent Asset Mgmt.
Fidelity Investments
Janus Henderson
GW&K Investment Mgmt.
Analyst Coverage
William Blair
Canaccord Genuity
Lake Street Capital
Imperial Capital
B Riley Securities
Needham&Co.
Data as of September 10, 2021
Investment Summary
25
1. Significant growth drivers: recurring revenue and school security
✓ Multi-decade upgrade cycle NOW underway for alarm systems → #1 growth driver of
high margin recurring revenue
✓ Urgent need for school security upgrades across the US - many K-12, colleges and universities have no systems in place
2. New hardware-enabled SaaS products
✓ Air Access is the industry's first cellular based access control system
✓ Enables locking and access control hardware to generate monthly recurring revenue (“MRR”)
3. Powerful distribution channel and installed base: Built over the last 50 years
4. Open architecture → NAPCO products can be used with any systems
5. Financially strong → strong cash position, industry-leading margins, and significant operating leverage going forward
6. Strong moat position given market-leading technology portfolio and dedicated national distribution network
7. Industry-leading executive team with 100+ years of experience and track record of innovation and managing growth → insiders own 22%
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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