NAPCO Security Tech (NASDAQ: NSSC) reported Q2 EPS of $0.15, $0.06 better than the analyst estimate of $0.09. Revenue for the quarter came in at $24.83 million versus the consensus estimate of $23.24 million.

• Net sales for the quarter increased 18% to a second quarter record $24.8 million as compared to $21.1 million for the same quarter last year. Net sales for the six months increased 14% to $48.2 million, as compared to $42.3 million for the same period last year.
• Recurring service revenue for the quarter increased 46% to $4.1 million as compared to $2.8 million for the same quarter last year and for the six months increased 46% to $7.9 million from $5.4 million last year. Recurring service revenue now has a prospective annual run rate of $17.2 million based on December 2018 recurring revenues.
• Net income for the quarter increased 133% to a second quarter record of $2.9 million from $1.2 million a year ago. Net income for the six months increased 106% to $4.4 million from $2.1 million a year ago.
• Earnings per share (diluted) for the quarter increased 114% to $0.15, as compared to $0.07 for the same period a year ago. Earnings per share (diluted) for the six months increased 109% to $0.23, as compared to $0.11 for the same period a year ago.
• Adjusted EBITDA* for the quarter increased 135% to $3.8 million or $0.20 per diluted share from $1.6 million or $0.09 per diluted share a year ago. Adjusted EBITDA* for the six months increased 94% to $5.9 million or $0.31 per diluted share from $3.0 million or $0.16 per diluted share a year ago.

Richard Soloway, Chairman and President commented, "This past quarter saw our Company reach record milestones in both sales and profits and we were particularly encouraged by our ability to continue to build upon and expand our stable of RSR (recurring service revenue) generating product offerings. Our strategic targeting of high-growth, professionally-installed, primarily commercial markets, such as wireless fire and intrusion alarm communicators, fire alarm control panels, school security products, IoT smart business/home solutions and access control locking products, has supplied us with the necessary fuel required for incremental future growth.

The StarLink® line of universal fire alarm, intrusion alarm and IoT communicators, now comprising the most full-featured and extensive assortment of alarm communication solutions in the industry, has become a major entrant in the Wireless Cellular Alarm Communicator Category, contributing a $17.2 million annual run rate of RSR income, to NAPCO. The recent launch of StarLink Verizon LTE fire, intrusion and IoT communicators, solidifies our position in the category by offering, state-of-the-art hardware solutions on todays most advanced LTE communication network. With the millions of fire and intrusion alarm panels, currently communicating vital alarm signals via soon-to-be-obsolete, hard-wired landlines, needing a wireless communicator upgrade to continue reporting, we see good prospects for considerable, vibrant sales growth, for the StarLink product line, going forward."

Mr. Soloway continued, "In early Q1, NAPCO launched our innovative all-in-one FireLink®, 8-32 zone fire alarm control panel with a built-in cellular LTE, StarLink-powered alarm communicator. Driving considerable savings in installation labor, time and money, FireLink comes pre-configured and pre-activated enabling our dealers to easily replace and upgrade an aging landline-connected fire panel or conduct a new turn-key installation which meets, up-to-date fire code communication requirements. As recognition of its breakthrough technology, FireLink was awarded the prestigious ESX Innovation Award at the 2018 Electronic Security Expo, in Nashville, Tennessee.

This past quarter, our universal StarLink Connect® IoT cellular communicator, which can be installed to upgrade virtually any of the millions of existing, traditional alarm panels already in the field, to add on connected home or connected business services, continued to experience strong growth. The RSR-generating StarLink Connect enables our dealers to trade up their current security-only customers to a variety of app-driven, remote device-operated services such as control of their security system, lighting, locks, thermostats, garage door and video camera/doorbell. The recently launched, NAPCO iBridge Video Doorbell®, which lets consumers know who is at the door and speak to them, real-time, remotely, from any smartphone or smart device, can also be added to any StarLink Connect IoT installation, to generate incremental RSR.

We continue to play an active role in keeping our K-12 schools, universities and colleges safe across the country. Using the NAPCO proprietary School Access-control Vulnerability Index ("SAVI") and audit system, our Company trains dealers, integrators and school personnel on how to quantitatively measure a school's holistic security level. The SAVI audit provides a quantitative grade, in the form of an index and that subsequently leads to an action plan on improving the school\'s preparedness level so that security dealers and end-user school officials can address the situation. Sales of our integrated line of unique, education-focused security solutions, including our advanced wireless locking, access control solutions and intruder locks, marketed by our Alarm Lock, Marks and Continental access control divisions and our advanced intrusion alarm systems and alarm communicators, from our NAPCO Division, have shown exceptional growth."

Mr. Soloway concluded, "We are confident that our investments in the engineering and marketing of unique, innovative products, positioned in high-sales-growth market sectors, along with an emphasis on driving marketing business models which deliver substantial RSR growth for our Company, should propel us to strong incremental future growth for the foreseeable future. We are encouraged by our growth in sales and profits for Fiscal 2019 to-date and look forward to a strong second-half of our year and beyond."

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