NAPCO SECURITY TECHNOLOGIES, INC (NSSC)

NAPCO Security Technologies, Inc. is a designer and manufacturer of high-tech electronic security devices, a provider of cellular communication services for intrusion and fire alarm systems, and a provider of school safety solutions. It has operated since 1969 and builds on brands such as NAPCO Security Systems, Alarm Lock, Continental Access and Marks USA. Net sales were $143.6 million in fiscal 2022, compared with $114.0 million in fiscal 2021 and $101.4 million in fiscal 2020. Net income was $19.6 million in fiscal 2022. Growth has been driven mainly by recurring wireless service revenues and school security products, along with sales of 4G and 5G cellular radios as carriers retire their 3G networks.

The product range covers door security products, intrusion and fire alarm systems, access control systems and video surveillance. Door security includes Alarm Lock standalone and networked digital locks and Marks USA locksets, panic devices and door closers. Alarm systems include NAPCO Gemini intrusion equipment, control panels, digital keypads, automatic and cellular communicators, fire alarm control panels and area detectors. Access control comes from Continental Access door controllers and hosted services. Video surveillance combines the Company's software and control panels with resold cameras and computers. The StarLink and FireLink cellular communicators, iBridge and the newer iSecure integrated cellular alarm systems support recurring cellular communication services, which are billed monthly. These services were about 32% of fiscal 2022 revenue at a gross margin of about 87%, and the Company's long-term goal is for them to reach at least 50% of revenue. The Company also resells some peripheral equipment made by others, which has not been significant to revenue.

Products are used in commercial, residential, institutional, industrial and governmental applications. They are sold worldwide, principally to independent distributors, dealers and installers of security equipment. Installers buy the equipment up front and pay monthly fees for cloud-based services that relay security breaches and fire alarms to central stations. The Company also targets schools, colleges, universities, houses of worship and other places where people gather, offering LocDown standalone locks, Networx wireless locks and enterprise-class access control with cellular connectivity. Its school security contracts include the Houston Independent School District and Pepperdine University.

The Dominican Republic facility, in a tax-advantaged free zone, is vertically integrated and makes over 90% of the Company's products. The Company benefits there from lower labor costs and from CAFTA-DR tariff treatment. Headquarters is a 100,000 square foot facility in Amityville, New York, housing corporate offices, research and development, design, sales administration, technical services, finance, procurement, warehousing and shipping. The Company states that the security industry is highly competitive. It names about 12 primary competitors, none dominant and most with greater resources. It competes on features, quality, reliability, price, technological innovation and U.S.-based technical support, and says none of its competitors makes all of the intrusion, access control, connectivity and locking products.