Core Thesis - Napco Security Technologies, Inc. (NSSC) is viewed as a mispriced quality compounder with potential for rebound following a period of inventory destocking [2][5] Business Transformation - The company has shifted from traditional hardware sales to a hybrid model that includes a high-margin, recurring service revenue stream, with monthly recurring revenue (MRR) from fire and intrusion radio communicators accounting for over 75% of gross profit and achieving 90% gross margins [2] - The connected radio base has expanded from approximately 200,000 units in 2017 to over 800,000 units currently, with growth expected from replacement demand, new installations, and market share gains [2] Financial Performance - Napco's free cash flow conversion exceeds 85%, and it demonstrates robust returns on invested capital [2] - The company holds a clean balance sheet with net cash representing about 8% of its market cap, supporting strong downside protection [3] Market Position and Growth Potential - Hardware sales are anticipated to recover as distributor inventories normalize, which could enhance near-term revenue [3] - Structural advantages such as nearshore manufacturing in the Dominican Republic and low tariff exposure bolster margins and market share [3] - The company trades at 19x EV/EBITDA on consensus estimates, comparable to industrial peers, but growth normalization and MRR compounding may lead to multiple expansion [3] Risks and Catalysts - Key risks include prolonged weakness in hardware sales, macroeconomic pressures, leadership transitions, and the success of new MRR initiatives [4] - Catalysts for re-rating include unexpected hardware revenue growth, stabilization of MRR growth at 10-12%, ongoing earnings compounding, and continued share buybacks [4] - The company is expected to achieve double-digit earnings CAGR over the next two years, presenting a compelling risk/reward opportunity for long-term investors [4]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates involves navigating inherent risks and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score system aids in identifying promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - Napco (NSSC) is highlighted as a recommended stock with a favorable Growth Score and a top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth indicating strong prospects [4] - Napco's historical EPS growth rate is 48.7%, with projected EPS growth of 32.8% this year, significantly surpassing the industry average of 14.7% [5] Group 3: Asset Utilization - The asset utilization ratio, or sales-to-total-assets (S/TA) ratio, is an important metric for assessing efficiency in generating sales [6] - Napco's S/TA ratio is 0.91, indicating it generates $0.91 in sales for every dollar in assets, outperforming the industry average of 0.8 [6] Group 4: Sales Growth - Sales growth is another key indicator, with Napco expected to achieve a 2.4% sales growth this year, compared to the industry average of 0% [7] Group 5: Earnings Estimate Revisions - Trends in earnings estimate revisions correlate strongly with stock price movements, making them a valuable indicator [8] - Napco has seen a 23.4% increase in current-year earnings estimates over the past month, indicating positive momentum [9] Group 6: Overall Positioning - Napco's combination of upward earnings estimate revisions and a Growth Score of B positions it well for potential outperformance, making it an attractive option for growth investors [11]

[FORM 10-K Filing Information](index=1&type=section&id=FORM%2010-K) Details NAPCO's Form 10-K filing, including registrant data, market value, and shares outstanding [Registrant Information](index=1&type=section&id=Registrant%20Information) Official filing details for NAPCO's Form 10-K, covering incorporation, executive offices, Nasdaq listing, and filer status - Registrant: **NAPCO SECURITY TECHNOLOGIES, INC.**[2](index=2&type=chunk) - Trading Symbol: **NSSC** on The Nasdaq Stock Market LLP[2](index=2&type=chunk) - Filer Status: **Large accelerated filer**[3](index=3&type=chunk) [Market Value and Shares Outstanding](index=2&type=section&id=Market%20Value%20and%20Shares%20Outstanding) Reports aggregate market value of common equity held by non-affiliates and total shares outstanding as of specific dates Key Stock Information | Metric | Value | | :------------------------------------------------ | :------------------- | | Aggregate Market Value (non-affiliates, Dec 31, 2024) | $1,238,078,616 | | Closing Price (Dec 31, 2024) | $35.56 per share | | Outstanding Shares (Aug 22, 2025) | 35,656,421 shares | [Documents Incorporated by Reference](index=3&type=section&id=DOCUMENTS%20INCORPORATED%20BY%20REFERENCE) Outlines documents, specifically the proxy statement, incorporated by reference into the Form 10-K [Proxy Statement Incorporation](index=3&type=section&id=Proxy%20Statement%20Incorporation) Portions of the 2025 Annual Meeting proxy statement will be incorporated into Part III of this Form 10-K - Portions of the **2025 Annual Meeting of Stockholders proxy statement** will be incorporated by reference into Part III of this Form 10-K[8](index=8&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Disclaimer on forward-looking statements, highlighting inherent risks and the company's non-obligation to update them [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) Report contains forward-looking statements subject to risks and uncertainties, with no obligation for public updates - The Annual Report contains forward-looking statements about future events, strategy, operations, financial position, revenues, costs, prospects, plans, and objectives[9](index=9&type=chunk) - These statements are subject to risks, uncertainties, assumptions, and other factors that could cause actual results to differ materially[9](index=9&type=chunk) - The company assumes no obligation to publicly update any forward-looking statements, except as required by law[10](index=10&type=chunk) [Summary of Risks Affecting Our Performance](index=4&type=section&id=Summary%20of%20Risks%20Affecting%20Our%20Performance) Key risks include fluctuating results, intense competition, recurring revenue growth challenges, and distributor reliance - Expected fluctuation in quarterly and annual results could cause stock price volatility[13](index=13&type=chunk) - Highly competitive markets with larger competitors may hinder effective competition[13](index=13&type=chunk) - Inability to sustain growth of recurring service revenue, a major driver of revenue and profitability[13](index=13&type=chunk) - Reliance on distributors means adverse changes in relationships could affect financial performance[13](index=13&type=chunk) - Challenges in gaining widespread or timely market acceptance of new products and building brand[13](index=13&type=chunk) - Dependence on the effort and continuing service of senior management members[14](index=14&type=chunk) [PART I](index=6&type=section&id=PART%20I) Covers business operations, risk factors, unresolved staff comments, cybersecurity, properties, and legal proceedings [Business Overview](index=6&type=section&id=ITEM%201:%20BUSINESS.) NAPCO is a leading manufacturer of electronic security devices and cellular communication services, focusing on mandatory systems - NAPCO is a leading manufacturer and designer of high-tech electronic security devices, cellular communication services for alarm systems, and school safety solutions[15](index=15&type=chunk) Financial Highlights (Fiscal Years Ended June 30) | Metric | FY2025 (Millions) | FY2024 (Millions) | FY2023 (Millions) | | :------------------- | :------------------ | :------------------ | :------------------ | | Net Sales | $181.6 | $188.8 | $170.0 | | Net Income | $43.4 | $49.8 | $27.1 | - Recurring communication services revenue increased **44% from fiscal 2023 to fiscal 2025**, with a gross margin of approximately **91% in FY2025**, representing **48% of total revenue**[19](index=19&type=chunk) - The company's strategy focuses on mandatory (non-elective) systems, IoT-driven connectivity services, and security solutions for the healthcare industry[37](index=37&type=chunk) - Approximately **7% of revenues** are spent on research and development[38](index=38&type=chunk) [Company Overview and Financial Performance](index=6&type=section&id=Overview) NAPCO specializes in high-tech security, with FY2025 net sales and net income decreasing - NAPCO manufactures and designs high-tech electronic security devices, cellular communication services for alarm systems, and school safety solutions[15](index=15&type=chunk) Net Sales and Net Income Trends (FY2023-FY2025) | Metric | FY2025 (Millions) | FY2024 (Millions) | FY2023 (Millions) | | :--------- | :------------------ | :------------------ | :------------------ | | Net Sales | $181.6 | $188.8 | $170.0 | | Net Income | $43.4 | $49.8 | $27.1 | - The decrease in net sales from FY2024 to FY2025 was driven by a **$17.8 million decrease in equipment sales**, offset by a **$10.6 million increase in recurring communication services**[16](index=16&type=chunk) [Product and Service Offerings](index=6&type=section&id=Our%20Products%20and%20Services) NAPCO offers a comprehensive suite of security products, including door locks, alarm equipment, and cellular communication services - Key product categories include standalone and networked digital door locks, standard and custom locksets, panic devices, door closers, intrusion alarm equipment, and intrusion/fire alarm cellular communication devices and services[18](index=18&type=chunk) - The company also provides integrated cellular intrusion alarm systems and door controllers with hosted services for access control[18](index=18&type=chunk) [Recurring Service Revenue Growth](index=7&type=section&id=Communication%20Services%20(Recurring%20Service%20Revenues)) Monthly recurring service revenue increased 44% from FY2023 to FY2025, boasting a 91% gross margin - Monthly recurring service revenue from cellular and cloud access for alarm communicators increased **44% from fiscal 2023 to fiscal 2025**[19](index=19&type=chunk) - Recurring service revenue had a gross margin of approximately **91% for FY2025** and represented approximately **48% of total revenue**[19](index=19&type=chunk) - The majority of recurring revenue is generated through the sale, installation, and activation of StarLink cellular communication devices[20](index=20&type=chunk) [Door Security Product Range](index=7&type=section&id=Door%20Security%20Products) NAPCO manufactures diverse door locking devices, including electronic and mechanical locks, for standalone or networked use - Manufactures microprocessor-based electronic door locks (push button, card reader, bio-metric), door alarms, mechanical door locks, and deadbolt locks[23](index=23&type=chunk) - Some microprocessor-based door locks can be networked with the Company's access control systems and controlled remotely[23](index=23&type=chunk) [Intrusion and Fire Alarm System Components](index=7&type=section&id=Intrusion%20and%20Fire%20Alarm%20Systems) NAPCO's alarm systems include detectors, control panels, and keypads, with integrated cellular communication devices - Alarm systems consist of detectors, control panels, digital keypads, and signaling equipment, with a trend towards integrated cellular communication devices[24](index=24&type=chunk) - Products include automatic communicators, cellular communication devices, control panels, and combination control panels/digital communicators and digital keypad systems[25](index=25&type=chunk) - Combination format offers cost efficiency, reliability, and ease of installation due to microcomputer technology[26](index=26&type=chunk) [Access Control System Functionality](index=9&type=section&id=Access%20Control%20Systems) Systems manage entry via identification readers, control panels, and electronic locks, maintaining an activity log - Systems include identification readers (card, hand scanners), a control panel, a PC-based computer, and electronically activated door-locking devices[27](index=27&type=chunk) - Functionality involves data validation for access granting/denial and electronic logging of access activity[27](index=27&type=chunk) [Video Surveillance System Offerings](index=9&type=section&id=Video%20Surveillance%20Systems) NAPCO's video surveillance systems feature cameras, control panels, and monitors, with recording and remote access options - Systems include video cameras, a control panel, a video monitor or PC, with advanced options for recording and remote communication[28](index=28&type=chunk) - The company designs, engineers, and markets software and control panels, and resells video cameras, PC-based computers, and peripheral equipment[28](index=28&type=chunk) [School and Public Safety Solutions](index=9&type=section&id=School%20Security%20and%20Public%20Safety) NAPCO offers security products for schools and public spaces, addressing demand for campus-wide lockdown capabilities - The school security and public safety market is important, with increased budgets due to 'active shooter' incidents[29](index=29&type=chunk) - NAPCO offers standalone LocDown locks, Networx wireless locks, and enterprise-class access control with cellular connectivity for schools[30](index=30&type=chunk) - The security equipment and services market for education has reached over **$3 billion** and is still in early stages[29](index=29&type=chunk) [Competitive Landscape and Advantages](index=9&type=section&id=Competition) Highly competitive industry, but NAPCO differentiates by offering an integrated platform of key building security products - The security products industry is highly competitive with approximately **12 other manufacturers**, many with substantially greater financial resources[31](index=31&type=chunk) - NAPCO's competitive advantage is manufacturing all key building security products (Intrusion Alarms, Access Control, Connectivity, and Locking devices) under one integrated platform[31](index=31&type=chunk)[33](index=33&type=chunk) - Competition factors include features, quality, reliability, pricing, innovative and technological advances, and technical support services[36](index=36&type=chunk) [Manufacturing and Operational Facilities](index=11&type=section&id=Manufacturing%20and%20Operations) Over 90% of products are manufactured in the Dominican Republic, with R&D and support in New York - Over **90% of products** are manufactured in a vertically integrated, low-cost facility in the Dominican Republic, located in a free zone[34](index=34&type=chunk) - U.S. headquarters in Amityville, New York, handles managerial, administrative, R&D, design, sales administration, technical services, finance, procurement, manufacturing control, warehousing, and shipping[35](index=35&type=chunk) - The U.S. facility's ability to provide timely and effective technical support is a competitive advantage[35](index=35&type=chunk) [Strategic Focus Areas](index=11&type=section&id=Our%20Strategy) NAPCO's strategy centers on mandatory security systems, IoT-driven connectivity, and expanding into healthcare security solutions - Strategy focuses on mandatory (non-elective) systems, IoT-driven connectivity services, and high growth/margin categories[37](index=37&type=chunk) - Leverages in-house engineering and software capabilities (micro-coding, enterprise software, mobile apps, cellular communications) to create recurring revenue opportunities[37](index=37&type=chunk) - Expanding into security solutions for the healthcare industry, including anti-ligature lockets for hospitals and correctional facilities[37](index=37&type=chunk) [Research and Development Investment](index=11&type=section&id=Research%20and%20Development) Approximately 7% of revenues are dedicated to R&D, crucial for developing new proprietary technology and products - Success depends on developing new and proprietary technology and products[38](index=38&type=chunk) - Approximately **7% of revenues** are spent on research and development[38](index=38&type=chunk) [Human Capital Management](index=11&type=section&id=Our%20Human%20Capital%20Resources) As of June 30, 2025, NAPCO had 1,061 employees, focusing on talent retention through benefits and training Employee Count (as of June 30, 2025) | Location | Full-time Employees | | :----------------- | :------------------ | | United States | 290 | | Dominican Republic | 771 | | **Total** | **1,061** | - **41 U.S. employees** are covered by a collective bargaining agreement[39](index=39&type=chunk) - Strategies for talent retention include comprehensive benefits, competitive wages, incentive programs, performance reviews, and training[42](index=42&type=chunk) [Regulatory Compliance](index=13&type=section&id=Government%20Regulation) NAPCO's business is subject to various regulations, with compliance not expected to materially impact its financial condition - The company is subject to various federal, state, local, and international regulatory requirements[43](index=43&type=chunk) - Compliance with these regulations is not expected to have a material adverse effect on the company[43](index=43&type=chunk) [Marketing and Sales Channels](index=13&type=section&id=Marketing) NAPCO markets products through sales staff to independent distributors and dealers, engaging in direct sales and trade shows - Sales and marketing staff of approximately **63 employees**[44](index=44&type=chunk) - Products are sold primarily to independent distributors, wholesalers, and dealers of security alarm and hardware equipment, with approximately **1,800 active direct customers**[44](index=44&type=chunk) - Marketing activities include direct sales, training for partners, advertising in technical trade publications, and participation in trade shows[44](index=44&type=chunk) [Raw Material Sourcing and Inventory](index=13&type=section&id=Raw%20Materials) Component parts are sourced from U.S. and Asian suppliers, with critical component inventories maintained from multiple sources - Component parts are sourced from U.S. and Asian suppliers, typically shipped directly to the Dominican Republic facility[45](index=45&type=chunk) - The company maintains inventories of all critical components and is not dependent on any one source for raw materials[45](index=45&type=chunk) [Corporate Information and Public Filings](index=13&type=section&id=Company%20Information) NAPCO Security Technologies, Inc., founded in 1969, makes SEC filings available free on its investor website - Founded in **1969**, incorporated in **1971** as NAPCO Security Systems, Inc., and renamed NAPCO Security Technologies, Inc. in **2008**[46](index=46&type=chunk) - Executive offices are located at **333 Bayview Ave, Amityville, New York**[47](index=47&type=chunk) - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments are available free of charge on the company's investor website[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) [Risk Factors](index=15&type=section&id=ITEM%201A:%20RISK%20FACTORS) Investing in NAPCO stock involves risks from economic conditions, competition, recurring revenue growth, distributor reliance, and operational challenges - General economic and market conditions, including potential recessions and geopolitical events, could adversely affect revenue, profit, and cash flow[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The security products industry is highly competitive, with many larger competitors, posing a risk to effective competition and market share[54](index=54&type=chunk)[55](index=55&type=chunk) - Inability to sustain the growth of recurring service revenue, a significant driver of profitability, is a key risk[64](index=64&type=chunk) - Reliance on independent distributors means adverse changes in relationships or their financial health could negatively impact sales and financial performance[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - Operating a manufacturing facility in the Dominican Republic exposes the company to risks such as labor availability, regulatory compliance, natural disasters, and political/economic instability[74](index=74&type=chunk)[75](index=75&type=chunk)[80](index=80&type=chunk) - New U.S. tariffs (e.g., **10% baseline tariff announced April 2, 2025**) could increase product costs and impact margins, supply chain, and consumer demand[77](index=77&type=chunk) - Cybersecurity incidents and disruptions to information systems could compromise data, expose the company to liability, and adversely impact financial condition, operations, and reputation[85](index=85&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - The company's success is largely dependent on the effort and continuing service of its senior management members, particularly Mr. Richard Soloway (CEO) and Mr. Kevin Buchel (President & COO)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) [Unresolved Staff Comments](index=34&type=section&id=ITEM%201B:%20UNRESOLVED%20STAFF%20COMMENTS.) There are no unresolved staff comments from the SEC regarding NAPCO's filings - No unresolved staff comments[107](index=107&type=chunk) [Cybersecurity](index=36&type=section&id=ITEM%201C:%20CYBERSECURITY.) NAPCO maintains a comprehensive cyber risk management program, overseen by the Audit Committee, to assess and manage cybersecurity threats - Maintains a cyber risk management program integrated into overall risk management, overseen by the Audit Committee[108](index=108&type=chunk)[114](index=114&type=chunk) - Relies on a multidisciplinary team (information security, legal, management, third-party providers) for threat identification, assessment, and management[109](index=109&type=chunk) - Implemented annual security awareness training, phishing awareness programs, network activity monitoring tools, and an incident response plan[109](index=109&type=chunk)[110](index=110&type=chunk) - Partners with a third-party vendor for cybersecurity and risk management as a managed service, due to the company's size and internal IT staff[111](index=111&type=chunk) - As of the report date, the company is not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect its business strategy, results of operations, or financial condition[113](index=113&type=chunk) [Properties](index=37&type=section&id=ITEM%202:%20PROPERTIES.) NAPCO owns executive offices and production facilities in New York and the Dominican Republic, deemed adequate for future needs - Owns a **100,000 square foot facility** in Amityville, New York, for executive offices, production, and warehousing[116](index=116&type=chunk) - Owns a **180,000 square foot production and warehousing facility** in the Dominican Republic, operating under a **99-year land lease expiring in 2092**[117](index=117&type=chunk) - A majority of products are manufactured in the Dominican Republic facility, utilizing U.S. quality control standards[117](index=117&type=chunk) [Legal Proceedings](index=37&type=section&id=ITEM%203:%20LEGAL%20PROCEEDINGS.) Information on legal proceedings is incorporated by reference from Note 14, "Commitments and Contingencies," in the financial statements - Legal proceedings discussion is incorporated by reference from Note 14, 'Commitments and Contingencies'[119](index=119&type=chunk) [Mine Safety Disclosure](index=37&type=section&id=ITEM%204:%20MINE%20SAFETY%20DISCLOSURE.) This item is not applicable to NAPCO's operations - Not Applicable[120](index=120&type=chunk) [PART II](index=38&type=section&id=PART%20II) Covers market information for common equity, management's discussion and analysis, market risk disclosures, and financial statements [Market for Common Equity, Stockholder Matters, and Equity Purchases](index=38&type=section&id=ITEM%205:%20MARKET%20FOR%20THE%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES.) NAPCO's stock trades on NASDAQ, with a history of dividends and an active share repurchase program - Common stock is quoted on The NASDAQ Global Select Market under the symbol **'NSSC'**[122](index=122&type=chunk) - As of August 22, 2025, there were approximately **46 stockholders of record**[122](index=122&type=chunk) Recent Cash Dividends Declared | Declaration Date | Record Date | Payable Date | Per Share Cash Dividend Amount | | :--------------- | :---------- | :----------- | :----------------------------- | | May 2, 2025 | June 12, 2025 | July 3, 2025 | $0.14 | | January 30, 2025 | March 12, 2025 | April 3, 2025 | $0.125 | | November 1, 2024 | December 12, 2024 | January 3, 2025 | $0.125 | | August 22, 2024 | September 12, 2024 | October 3, 2024 | $0.125 | | May 2, 2024 | June 3, 2024 | June 24, 2024 | $0.10 | | February 1, 2024 | March 1, 2024 | March 22, 2024 | $0.10 | | November 2, 2023 | December 1, 2023 | December 22, 2023 | $0.08 | | August 18, 2023 | September 1, 2023 | September 22, 2023 | $0.08 | | May 5, 2023 | May 22, 2023 | June 12, 2023 | $0.0625 | Equity Compensation Plan Information (as of June 30, 2025) | Plan Category | Securities to be Issued Upon Exercise of Outstanding Options (a) | Weighted Average Exercise Price of Outstanding Options (b) | Securities Remaining Available for Future Issuance (Excluding Column (a)) | | :-------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | :----------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 628,236 | $24.70 | 869,100 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **628,236** | **$24.70** | **869,100** | [Management's Discussion and Analysis](index=40&type=section&id=ITEM%207:%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) MD&A highlights a 4% net sales decrease in FY2025, offset by 14% recurring service revenue growth, with strong liquidity - Net sales for FY2025 decreased **4% to $181.6 million**, while recurring service revenue (RSR) increased **14% to $86.3 million**[131](index=131&type=chunk) - Gross margin for recurring service revenue was **91.0% in FY2025**, significantly higher than equipment revenue's **23.6%**[131](index=131&type=chunk) - Net income decreased **13% to $43.4 million** in FY2025[131](index=131&type=chunk) - The U.S. announced a new universal baseline tariff of **10% on April 2, 2025**, which includes imports from the Dominican Republic, expected to increase product costs and impact margins[130](index=130&type=chunk) Cash and Cash Equivalents & Short-Term Investments (in thousands) | Category | June 30, 2025 | June 30, 2024 | | :------------------- | :-------------- | :-------------- | | Cash | $16,726 | $18,823 | | Money Market Fund | $66,355 | $41,116 | | Certificate of Deposits | $— | $5,402 | | **Total** | **$83,081** | **$65,341** | - Net cash provided by operating activities increased to **$53.5 million in FY2025** from **$45.4 million in FY2024**[147](index=147&type=chunk)[148](index=148&type=chunk) - The company has no outstanding debt and an available revolving credit line of **$20 million** expiring in February 2029[151](index=151&type=chunk) [MD&A Overview and Fiscal 2025 Highlights](index=40&type=section&id=Overview) NAPCO, a leading security device manufacturer, saw net sales decrease by 4% in FY2025, while recurring service revenue increased - NAPCO is a leading manufacturer and designer of high-tech electronic security devices, wireless communication services, and school safety solutions[126](index=126&type=chunk) - Significant growth in recent years, primarily driven by recurring service revenues from wireless communication services[126](index=126&type=chunk) Fiscal Year 2025 Highlights vs. 2024 | Metric | FY2025 | Change YoY | | :-------------------------- | :------- | :--------- | | Net sales | $181.6 million | -4% | | Recurring service revenue (RSR) | $86.3 million | +14% | | Gross margin for RSR | 91.0% | +0.5% | | Gross margin for equipment revenue | 23.6% | -19.6% | | Net income | $43.4 million | -13% | [Industry Dynamics and Innovation](index=40&type=section&id=Industry%20Landscape) The security industry is dynamic and competitive, prompting NAPCO to continuously invest in R&D for innovation - The industry is dynamic and highly competitive, with frequent changes in technologies and business models[128](index=128&type=chunk) - NAPCO continually strives to innovate through R&D to address changing customer demands, industry trends, and competitive forces[128](index=128&type=chunk) [Economic and Geopolitical Impacts](index=40&type=section&id=Economic%20Conditions%20and%20Other%20Factors) NAPCO is affected by macroeconomic conditions and new U.S. tariffs, impacting costs and margins - Subject to effects of general macroeconomic and market conditions[129](index=129&type=chunk) - A new universal baseline tariff of **10%** was announced by the U.S. on **April 2, 2025**, impacting imports from the Dominican Republic[130](index=130&type=chunk) - Tariffs are anticipated to increase product costs, impact product margins, disturb ocean shipping capacity, and create inflationary effects[130](index=130&type=chunk) [Key Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statement preparation involves significant judgment in estimates for sales returns, credit losses, and inventory valuation - Critical estimates include reserves for sales returns and allowances, allowance for credit losses, overhead expenses applied to inventory, inventory reserves, valuation of intangible assets, share-based compensation, and income taxes[135](index=135&type=chunk) - Equipment revenue is recognized at a single point in time upon transfer of control (typically shipment date), with provisions for returns, credits, and rebates[138](index=138&type=chunk) - Service revenue from monthly cellular communication services is recognized ratably over the monthly service period[141](index=141&type=chunk) - Inventories are valued at the lower of cost or net realizable value (FIFO method), with a reserve for excess and slow-moving inventory based on age, historical trends, and forecasted sales[143](index=143&type=chunk)[144](index=144&type=chunk) [Liquidity and Capital Management](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) NAPCO maintains strong liquidity with $83.1 million in cash and equivalents, no outstanding debt, and a $20 million credit line Cash and Short-Term Investments (in thousands) | Category | June 30, 2025 | June 30, 2024 | | :------------------- | :-------------- | :-------------- | | Cash | $16,726 | $18,823 | | Money Market Fund | $66,355 | $41,116 | | Certificate of Deposits | $— | $5,402 | | **Total** | **$83,081** | **$65,341** | Cash Flow Activities (in thousands) | Activity | FY2025 | FY2024 | | :-------------------------------- | :------- | :------- | | Net Cash Provided by Operating Activities | $53,527 | $45,368 | | Net Cash Provided by (Used in) Investing Activities | $14,585 | $(3,151) | | Net Cash Used in Financing Activities | $(50,372) | $(12,831) | - Financing activities in FY2025 included **$13.6 million in dividends paid** and **$36.8 million for common stock repurchases**[150](index=150&type=chunk) - The company has an available revolving credit line of **$20 million**, expiring in February 2029, with no outstanding debt[151](index=151&type=chunk) Liquidity Ratios (as of June 30) | Ratio | 2025 | 2024 | | :---------------- | :------- | :------- | | Current Ratio | 6.8 to 1 | 7.6 to 1 | | Sales to Receivables | 6.0 to 1 | 5.9 to 1 | [Fiscal 2025 vs. Fiscal 2024 Performance](index=46&type=section&id=Results%20of%20Operations) In FY2025, net sales decreased by 3.8% due to lower equipment sales, while service revenues increased, impacting net income Key Financial Performance (Fiscal Year Ended June 30, in thousands) | Metric | 2025 | 2024 | % Change | | :------------------------------------------ | :------- | :------- | :--------- | | Net sales: equipment revenues | $95,291 | $113,071 | (15.7)% | | Net sales: service revenues | $86,330 | $75,749 | 14.0% | | **Total Net Sales** | **$181,621** | **$188,820** | **(3.8)%** | | Gross Profit: equipment | $22,496 | $33,209 | (32.3)% | | Gross Profit: services | $78,534 | $68,545 | 14.6% | | **Total Gross Profit** | **$101,030** | **$101,754** | **(0.7)%** | | Gross profit as a % of net sales | 55.6% | 53.9% | 3.2% | | Research and development | $12,581 | $10,763 | 16.9% | | Selling, general and administrative | $42,190 | $37,173 | 13.5% | | Operating Income | $46,259 | $53,818 | (14.0)% | | Interest and other income (expense), net | $3,810 | $2,568 | 48.4% | | Provision for income taxes | $6,663 | $6,568 | 1.4% | | **Net income** | **$43,406** | **$49,818** | **(12.9)%** | - Decrease in net equipment sales was primarily due to reduced sales of door-locking products (**$11.5 million**) and intrusion products, attributed to distributor destocking and project timing[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - Increase in net service revenues was due to an increase in activated cellular communication devices[159](index=159&type=chunk) - R&D expenses increased by **$1.8 million (16.9%)** due to higher personnel-related expenses and additional engineering staff[162](index=162&type=chunk) - SG&A expenses increased by **$5.0 million (13.5%)** due to personnel-related expenses, insurance, advertising, and legal fees[163](index=163&type=chunk) [Market Risk Disclosures](index=48&type=section&id=ITEM%207A:%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) NAPCO faces interest rate risk on its fixed-income portfolio and foreign currency risk from Dominican Peso expenses, potentially impacting income - Exposure to interest rate risk from a **$16.1 million fixed-income investment portfolio**; a **100 basis point increase** in interest rates could decrease fair value by approximately **$322,000**[167](index=167&type=chunk) - All foreign sales transactions are denominated in U.S. dollars, shifting foreign currency exposure to customers[168](index=168&type=chunk) - Exposed to foreign currency risk from expenses in Dominican Pesos (RD$); a **10% USD strengthening/weakening** against RD$ could impact income from operations by approximately **$844,000 annually**[170](index=170&type=chunk) [Financial Statements and Supplementary Data](index=49&type=section&id=ITEM%208:%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA.) Presents audited consolidated financial statements for FY2025, 2024, and 2023, including balance sheets and income statements - Includes audited consolidated financial statements: Balance Sheets, Statements of Income, Comprehensive Income, Stockholders' Equity, and Cash Flows for fiscal years ended June 30, 2025, 2024, and 2023[171](index=171&type=chunk) - Deloitte & Touche LLP issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of June 30, 2025[173](index=173&type=chunk)[174](index=174&type=chunk) - A critical audit matter identified was the reserve for excess and slow-moving inventory due to significant management estimates and assumptions[178](index=178&type=chunk)[179](index=179&type=chunk) Consolidated Balance Sheets (Selected Data, in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :-------------- | | Total Current Assets | $162,444 | $168,763 | | Total Assets | $198,141 | $207,752 | | Total Current Liabilities | $24,057 | $22,229 | | Total Liabilities | $29,535 | $28,863 | | Total Stockholders' Equity | $168,606 | $178,889 | Consolidated Statements of Income (Selected Data, in thousands) | Metric | FY2025 | FY2024 | FY2023 | | :------------------------------------------ | :------- | :------- | :------- | | Net Sales | $181,621 | $188,820 | $169,997 | | Gross Profit | $101,030 | $101,754 | $73,233 | | Operating Income | $46,259 | $53,818 | $30,325 | | Net Income | $43,406 | $49,818 | $27,127 | | Basic EPS | $1.20 | $1.35 | $0.74 | | Diluted EPS | $1.19 | $1.34 | $0.73 | Consolidated Statements of Cash Flows (Selected Data, in thousands) | Metric | FY2025 | FY2024 | FY2023 | | :-------------------------------- | :------- | :------- | :------- | | Net Cash Provided by Operating Activities | $53,527 | $45,368 | $24,700 | | Net Cash Provided by (Used in) Investing Activities | $14,585 | $(3,151) | $(28,262) | | Net Cash Used in Financing Activities | $(50,372) | $(12,831) | $(2,213) | | Net increase (decrease) in Cash and Cash Equivalents | $17,740 | $29,386 | $(5,775) | | Cash and Cash Equivalents - Ending | $83,081 | $65,341 | $35,955 | [Changes in and Disagreements with Accountants](index=96&type=section&id=ITEM%209:%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE.) Confirms no changes in or disagreements with the company's accountants regarding financial disclosure [No Disagreements with Accountants](index=96&type=section&id=No%20Disagreements) There have been no changes in or disagreements with accountants on accounting and financial disclosure matters - No unresolved staff comments[326](index=326&type=chunk) [Controls and Procedures](index=96&type=section&id=ITEM%209A:%20CONTROL%20AND%20PROCEDURES) Details evaluation of disclosure controls, management's report on internal control, and remediation efforts [Evaluation of Disclosure Controls and Procedures](index=96&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that NAPCO's disclosure controls and procedures were effective as of June 30, 2025 - Management, including the CEO and CFO, evaluated and concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[327](index=327&type=chunk) [Management's Report on Internal Control over Financial Reporting](index=96&type=section&id=Management's%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) Management and Deloitte & Touche LLP both concluded internal control over financial reporting was effective - Management concluded that internal control over financial reporting was effective as of June 30, 2025, based on COSO criteria[328](index=328&type=chunk) - Deloitte & Touche LLP issued an unqualified attestation report on the effectiveness of internal controls over financial reporting[329](index=329&type=chunk) [Remediation of Material Weakness](index=96&type=section&id=Remediation%20of%20Previously%20Reported%20Material%20Weakness) The previously reported material weakness related to inventory costing information has been successfully remediated - The previously reported material weakness related to ineffective review of inventory costing information has been successfully remediated as of June 30, 2025[330](index=330&type=chunk)[331](index=331&type=chunk) - Remediation involved implementing reconciliation procedures to ensure completeness and accuracy of inventory costing information[331](index=331&type=chunk) [Changes in Internal Control](index=96&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes occurred in internal controls over financial reporting during the quarter ended June 30, 2025 - No material changes in internal controls over financial reporting during the quarter ended June 30, 2025, except for remediation efforts[332](index=332&type=chunk) [Other Information](index=100&type=section&id=ITEM%209B:%20OTHER%20INFORMATION) Includes details on the company's insider trading policy [Insider Trading Policy](index=100&type=section&id=Insider%20Trading%20Policy) The company adopted an Insider Trading Policy on May 6, 2021, filed as an exhibit to Form 8-K - Adopted an Insider Trading Policy on **May 6, 2021**, filed as an exhibit to Form 8-K[341](index=341&type=chunk) [PART III](index=100&type=section&id=PART%20III) Incorporates by reference information on directors, executive compensation, security ownership, related transactions, and accounting fees [Directors, Executive Officers and Corporate Governance](index=100&type=section&id=ITEM%2010:%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, corporate governance, and Code of Ethics is incorporated from the Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement[342](index=342&type=chunk)[345](index=345&type=chunk) - A Code of Ethics, applicable to senior executive and financial officers, is posted on the company's website[343](index=343&type=chunk) [Executive Compensation](index=100&type=section&id=ITEM%2011:%20EXECUTIVE%20COMPENSATION) Executive and director compensation information is incorporated by reference from the Proxy Statement - Executive compensation and director compensation information is incorporated by reference from the Proxy Statement[346](index=346&type=chunk) [Security Ownership and Related Stockholder Matters](index=100&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Details on beneficial ownership and equity compensation plan information are incorporated from the Proxy Statement and Item 5 - Information on beneficial ownership of common stock is incorporated by reference from the Proxy Statement[347](index=347&type=chunk) - Equity Compensation Plan Information as of June 30, 2024, is included in Item 5[348](index=348&type=chunk) [Related Transactions and Director Independence](index=100&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding director independence, board structure, and related person transactions is incorporated from the Proxy Statement - Information on director independence, board structure, related person transactions, and executive compensation transactions is incorporated by reference from the Proxy Statement[349](index=349&type=chunk) [Principal Accounting Fees and Services](index=100&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information on principal accountant fees and Audit Committee's pre-approval policy for services is incorporated from the Proxy Statement - Information on principal accountant fees and Audit Committee policy on pre-approval of services is incorporated by reference from the Proxy Statement[350](index=350&type=chunk) [PART IV](index=101&type=section&id=PART%20IV) Includes a comprehensive list of exhibits and financial statement schedules, along with the required signatures for the Form 10-K [Exhibits and Financial Statement Schedules](index=101&type=section&id=ITEM%2015:%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES.) Lists all financial statements, schedules, and exhibits included in or incorporated by reference into the Form 10-K - Lists consolidated financial statements of NAPCO Security Technologies, Inc. and its subsidiaries, included in Part II, Item 8[351](index=351&type=chunk) - Includes a detailed list of exhibits, such as Certificate of Amendment of Certificate of Incorporation, By-Laws, Credit Agreements, Stock Option Plans, Employment Agreements, Code of Ethics, and Certifications[352](index=352&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) [Signatures](index=106&type=section&id=SIGNATURES) The report is duly signed by NAPCO Security Technologies, Inc.'s authorized officers and directors as of August 25, 2025 - The report is signed by Richard Soloway (Chairman of the Board, Director and Secretary, Principal Executive Officer), Kevin S. Buchel (President and Chief Operating Officer), Andrew J. Vuono (Chief Financial Officer and Chief Accounting Officer, Principal Financial and Accounting Officer), and other Directors[359](index=359&type=chunk)[360](index=360&type=chunk) - Date of signing: **August 25, 2025**[359](index=359&type=chunk)[360](index=360&type=chunk)

[Fiscal 2025 Results Overview](index=1&type=section&id=Fiscal%202025%20Results%20Overview) This section summarizes NAPCO Security Technologies' fiscal 2025 financial results, operational performance, and management's strategic outlook [Key Financial Metrics (Q4 and Full Year)](index=1&type=section&id=Key%20Financial%20Metrics) NAPCO Security Technologies reported mixed financial results for Q4 and the full fiscal year 2025. While Q4 net sales saw a marginal increase, full-year net sales decreased. Net income, diluted EPS, and Adjusted EBITDA declined for both periods, but cash flows from operating activities showed strong annual growth Key Financial Metrics (Q4 and Full Year) | Metric | Q4 2025 (in thousands) | Q4 2024 (in thousands) | % Change (Q4) | FY 2025 (in thousands) | FY 2024 (in thousands) | % Change (FY) | | :-------------------------------- | :--------------------- | :--------------------- | :------------ | :--------------------- | :--------------------- | :------------ | | Net Sales | $50,724 | $50,330 | 0.8% | $181,621 | $188,820 | (3.8)% | | Gross Profit | $26,798 | $27,845 | (3.8)% | $101,030 | $101,754 | (0.7)% | | Gross Profit Margin | 52.8% | 55.3% | (2.5) ppts | 55.6% | 53.9% | 1.7 ppts | | Net Income | $11,632 | $13,534 | (14.1)% | $43,406 | $49,818 | (12.9)% | | Diluted EPS | $0.33 | $0.36 | (8.3)% | $1.19 | $1.34 | (11.2)% | | Adjusted EBITDA | $14,249 | $15,415 | (7.6)% | $52,126 | $58,934 | (11.6)% | | Adjusted EBITDA as % of Sales | 28.1% | 30.6% | (2.5) ppts | 28.7% | 31.2% | (2.5) ppts | | Cash Flows from Operating Activities | N/A | N/A | N/A | $53,527 | $45,368 | 18.0% | [Operational Performance and Strategic Initiatives](index=1&type=section&id=Operational%20Performance%20and%20Strategic%20Initiatives) Recurring Service Revenue (RSR) continued its strong double-digit growth, achieving high gross margins and increasing its contribution to total revenue. Despite challenges in equipment sales throughout the year, a new cloud-based access platform, MVP Access, was introduced, expected to generate future RSR - Recurring Service Revenue (RSR) increased **10% to $22.4 million** for Q4 and **14% to $86.3 million** for the full year, maintaining a **91% gross margin** for both periods[6](index=6&type=chunk) - RSR represented **44% of total revenue** in Q4 and **48% annually**, with a prospective annual run rate of approximately **$94 million** based on July 2025 recurring service revenues[5](index=5&type=chunk)[6](index=6&type=chunk) - Equipment sales for Q4 were **$28.3 million** (5% YoY decrease) but showed a **27% sequential increase** from Q3. Full-year equipment sales were **$95.3 million** (16% YoY decrease) due to distributor destocking and timing of larger project work[5](index=5&type=chunk)[6](index=6&type=chunk) - Introduced a new generational cloud-based MVP Access platform, designed to provide 24/7 security management with an economical monthly recurring revenue rate, eliminating the need for on-premises hardware[6](index=6&type=chunk)[7](index=7&type=chunk) - Successfully reduced inventory levels by **$8.6 million** during fiscal 2025[7](index=7&type=chunk) [Management Commentary and Outlook](index=1&type=section&id=Management%20Commentary%20and%20Outlook) CEO Richard Soloway expressed confidence in the company's financial strength, highlighting robust RSR, successful inventory reduction, and strong operating cash flows. Management is optimistic about equipment sales growth in Fiscal 2026 and expects continued strong net income, Adjusted EBITDA, and cash flow, while also maintaining shareholder returns through dividends and stock repurchases - Management is optimistic that equipment sales will grow in Fiscal 2026 and believes the company is well-positioned with the evolving tariff environment[5](index=5&type=chunk) - The company remains confident that net income, Adjusted EBITDA, and cash flow will continue to be strong in fiscal 2026[8](index=8&type=chunk) - The Board declared a quarterly dividend of **$0.14 per share**, payable on October 3, 2025. The company declared cash dividends of **$18.6 million** and repurchased **$36.8 million** of common stock during fiscal 2025[6](index=6&type=chunk)[7](index=7&type=chunk)[8](index=8&type=chunk) - Achieved a return on adjusted EBITDA of **28%** in fiscal 2025 and generated over **$53 million** in cash flows from operations with no debt[7](index=7&type=chunk) [Company Profile](index=3&type=section&id=Company%20Profile) This section outlines NAPCO Security Technologies, Inc.'s business, divisions, and market position as a leading security equipment provider [About NAPCO Security Technologies, Inc.](index=3&type=section&id=About%20NAPCO%20Security%20Technologies%2C%20Inc.) NAPCO Security Technologies, Inc. is a leading manufacturer and designer of high-tech electronic security equipment, wireless communication devices for alarm systems, and provider of school safety solutions. The company operates through four divisions and is recognized for innovation, technical excellence, and reliability in the rapidly expanding electronic security market - NAPCO Security Technologies, Inc. is a leading manufacturer and designer of high-tech electronic security equipment, wireless communication devices for intrusion and fire alarm systems, and a provider of school safety solutions[2](index=2&type=chunk)[11](index=11&type=chunk) - The Company consists of four Divisions: NAPCO, Alarm Lock, Continental Instruments, and Marks USA[11](index=11&type=chunk) - Its products are installed by tens of thousands of security professionals worldwide in commercial, industrial, institutional, residential, and government applications, positioning the Company for growth in the multi-billion dollar electronic security market[11](index=11&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents NAPCO's consolidated balance sheets, statements of income, and cash flows, offering a comprehensive view of its financial position and performance [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, NAPCO's total assets decreased slightly, primarily due to a reduction in investments and inventories. Total liabilities saw a modest increase, while total stockholders' equity decreased, largely influenced by significant common stock repurchases Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change | | :-------------------------- | :--------------------------- | :--------------------------- | :----- | | Total Current Assets | $162,444 | $168,763 | $(6,319) | | Total Assets | $198,141 | $207,752 | $(9,611) | | Total Current Liabilities | $24,057 | $22,229 | $1,828 | | Total Liabilities | $29,535 | $28,863 | $672 | | Total Stockholders' Equity | $168,606 | $178,889 | $(10,283) | - Cash and cash equivalents increased by **$17.7 million**, while investments - other decreased from **$26.98 million to zero**. Inventories decreased by **$4.8 million**[14](index=14&type=chunk) - Treasury Stock increased significantly from **$19.5 million** (2,893,715 shares) in 2024 to **$56.3 million** (4,114,614 shares) in 2025, reflecting common stock repurchases[14](index=14&type=chunk) [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income provide a detailed view of NAPCO's revenue generation, cost of sales, and operating expenses, leading to net income figures for both the three-month and full-year periods, highlighting the impact of service revenue growth and equipment sales fluctuations [Three Months Ended June 30](index=6&type=section&id=Three%20Months%20Ended%20June%2030) For the fourth quarter of fiscal 2025, net sales saw a slight increase, driven by growth in service revenues which offset a decline in equipment revenues. However, gross profit and net income decreased compared to the prior year's quarter, while operating expenses rose Three Months Ended June 30 | Metric | Q4 2025 (in thousands) | Q4 2024 (in thousands) | Q4 2023 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Sales | $50,724 | $50,330 | $44,658 | | Equipment revenues | $28,298 | $29,938 | $28,551 | | Service revenues | $22,426 | $20,392 | $16,107 | | Gross Profit | $26,798 | $27,845 | $23,034 | | Operating Expenses | $14,712 | $13,881 | $11,225 | | Operating Income | $12,086 | $13,964 | $11,809 | | Net Income | $11,632 | $13,534 | $10,565 | | Diluted EPS | $0.33 | $0.36 | $0.28 | [Year Ended June 30](index=7&type=section&id=Year%20Ended%20June%2030) For the full fiscal year 2025, net sales decreased primarily due to a significant drop in equipment revenues, despite robust growth in service revenues. Gross profit remained stable, but increased operating expenses led to a decline in operating income and net income compared to the previous year Year Ended June 30 | Metric | FY 2025 (in thousands) | FY 2024 (in thousands) | FY 2023 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Sales | $181,621 | $188,820 | $169,997 | | Equipment revenues | $95,291 | $113,071 | $110,062 | | Service revenues | $86,330 | $75,749 | $59,935 | | Gross Profit | $101,030 | $101,754 | $73,233 | | Operating Expenses | $54,771 | $47,936 | $42,908 | | Operating Income | $46,259 | $53,818 | $30,325 | | Net Income | $43,406 | $49,818 | $27,127 | | Diluted EPS | $1.19 | $1.34 | $0.73 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) NAPCO generated strong cash flow from operating activities in fiscal 2025, increasing by 18% year-over-year. Investing activities shifted to a net cash provider, largely due to the redemption of other investments. Financing activities saw a significant increase in cash used, primarily driven by substantial common stock repurchases and dividend payments - Net Cash Provided by Operating Activities increased by **18.0% to $53,527 thousand** in FY2025 from **$45,368 thousand** in FY2024[3](index=3&type=chunk)[17](index=17&type=chunk) - Net Cash Provided by Investing Activities was **$14,585 thousand** in FY2025, a significant change from net cash used of **$3,151 thousand** in FY2024, primarily due to the redemption of **$26,980 thousand** in other investments[17](index=17&type=chunk) - Net Cash Used in Financing Activities increased to **$50,372 thousand** in FY2025 from **$12,831 thousand** in FY2024, largely due to **$36,794 thousand** in common stock repurchases and **$13,632 thousand** in dividends paid[17](index=17&type=chunk) - Cash and Cash Equivalents at the end of the period increased to **$83,081 thousand** in FY2025 from **$65,341 thousand** in FY2024[17](index=17&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section provides a reconciliation of GAAP net income to non-GAAP measures such as EBITDA and Adjusted EBITDA for both the three-month and full-year periods. Adjusted EBITDA, which excludes specific non-cash and non-recurring items, shows a decline consistent with the GAAP net income trends Non-GAAP Financial Measures Reconciliation | Metric | Q4 2025 (in thousands) | Q4 2024 (in thousands) | FY 2025 (in thousands) | FY 2024 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income (GAAP) | $11,632 | $13,534 | $43,406 | $49,818 | | EBITDA | $12,815 | $14,500 | $48,989 | $55,981 | | Adjusted EBITDA | $14,249 | $15,415 | $52,126 | $58,934 | | Adjusted EBITDA per Diluted Shares | $0.40 | $0.41 | $1.43 | $1.59 | - Adjusted EBITDA is defined as GAAP net income plus income tax expense, net interest expense, non-cash stock-based expense, non-recurring legal expense, other non-recurring income, and depreciation and amortization expense[13](index=13&type=chunk) [Important Disclosures & Investor Information](index=3&type=section&id=Important%20Disclosures%20%26%20Investor%20Information) This section provides important legal disclosures regarding forward-looking statements and details for investor communication and conference call access [Safe Harbor Statement](index=3&type=section&id=Safe%20Harbor%20Statement) This section clarifies that the press release contains forward-looking statements based on management's current expectations, which are subject to various risks and uncertainties. Actual results may differ materially from these statements, and the company disclaims any obligation to update this information unless legally required - The press release contains forward-looking statements based on management's judgment, beliefs, current trends, and anticipated product performance, including statements related to RSR growth, balance sheet strength, future results, and new product introductions[12](index=12&type=chunk) - Actual results, performance, or achievements could differ materially due to certain factors, including risk factors set forth in the Company's SEC filings (Form 10-K and 10-Q)[12](index=12&type=chunk) - All information is provided as of the date of the press release, and the Company undertakes no duty to update such information, except as required under applicable law[12](index=12&type=chunk) [Conference Call and Investor Contacts](index=3&type=section&id=Conference%20Call%20and%20Investor%20Contacts) This section provides details for accessing the conference call to discuss the financial results, including webcast and dial-in options, and lists the contact information for investor relations - Management will conduct a conference call on August 25, 2025, at 11 a.m. ET, accessible via the Investor Relations section of the Company website or direct links, with a replay available online[10](index=10&type=chunk) - Investor Relations contact is Francis J. Okoniewski, Vice President of Investor Relations, with office and mobile phone numbers and email provided[20](index=20&type=chunk)

Financial Data and Key Metrics Changes - The company reported net sales for Q4 increased by 0.8% to $50.7 million compared to $50.3 million for the same period last year [17] - For the fiscal year, net sales decreased by 3.8% to $181.6 million from $188.8 million [17] - Recurring monthly service revenue increased by 10% in Q4 to $22.4 million compared to $20.4 million last year [17] - Recurring revenue run rate reached $94 million, up $5 million from the prior quarter, marking the largest quarterly increase in two years [12] - Net income for Q4 decreased by 14% to $11.6 million, or $0.33 per diluted share, compared to $13.5 million, or $0.36 per diluted share, last year [23] Business Line Data and Key Metrics Changes - Equipment sales for Q4 decreased by 5.5% to $28.3 million compared to $29.9 million last year, while for the fiscal year, equipment sales decreased by 15.7% to $95.3 million [18] - Gross profit for recurring service revenue increased by 10.3% to $20.3 million with a gross margin of 91% [18] - Gross profit for equipment revenue in Q4 decreased by 31.2% to $6.4 million with a gross margin of 23% [18] Market Data and Key Metrics Changes - The company experienced a strong rebound in hardware sales in Q4, increasing 27% sequentially from Q3 [28] - The recurring revenue now represents nearly half of total sales, reflecting a strong demand for StarLink radios [27] Company Strategy and Development Direction - The company is focused on maintaining operational discipline and investing for sustainable growth despite macroeconomic uncertainties [7] - Pricing adjustments have been implemented to protect margins, with an 8.5% increase to offset rising tariff costs and a standard annual increase of 5% [15] - The company is committed to expanding its recurring revenue opportunities through new product developments, including the MVP platform for cloud-based access control systems [32] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future growth, emphasizing the importance of adapting to tariff policies and market conditions [29] - The company aims to leverage its strong balance sheet for potential strategic acquisitions while continuing to return capital to shareholders [30] Other Important Information - The company ended the fiscal year with approximately $100 million in cash and no debt, providing significant flexibility for future investments [14] - The company returned $13.6 million in dividends and repurchased $36.8 million of its stock during the fiscal year [14] Q&A Session Summary Question: Concerns about channel inventories due to distributor destocking - Management indicated that inventory bought pre-tariff increase was expected to lead to more purchases, with strong sell-through stats observed [36][37] Question: Potential for further increases in recurring service revenue - Management expects continued growth in recurring revenue, driven by strong radio sales, although the timing of revenue recognition may vary [41][43] Question: Impact of price increases on equipment sales growth - Management believes that the pricing increases will support double-digit growth in equipment sales, especially given easier comparisons from the previous year [45] Question: Churn rates and pricing impact on recurring revenues - Management reported negligible churn in commercial accounts and noted that pricing increases have not faced pushback from customers [67][70] Question: Future dividend and buyback plans - Management indicated that there is room for future dividend increases and is always looking for opportunities to repurchase shares [72]

Financial Data and Key Metrics Changes - The company reported net sales for Q4 increased by 0.8% to $50.7 million compared to $50.3 million for the same period last year [17] - For the fiscal year, net sales decreased by 3.8% to $181.6 million from $188.8 million [17] - Recurring monthly service revenue grew by 10% in Q4 to $22.4 million, up from $20.4 million year-over-year [17] - Gross profit for Q4 decreased by 3.8% to $26.8 million, with a gross margin of 53% compared to 55% last year [18] - Net income for Q4 decreased by 14% to $11.6 million, or $0.33 per diluted share [25] Business Line Data and Key Metrics Changes - Recurring revenue run rate reached $94 million, up $5 million from the previous quarter, marking the largest quarterly increase in two years [13] - Equipment sales for Q4 decreased by 5.5% to $28.3 million compared to $29.9 million last year, while annual equipment sales decreased by 15.7% [18] - Gross profit for recurring service revenue increased by 10.3% to $20.3 million with a gross margin of 91% [19] Market Data and Key Metrics Changes - The company experienced a strong rebound in hardware sales in Q4, increasing 27% sequentially from Q3 [31] - The tariff landscape remains uncertain, but the company has taken proactive steps to protect margins and ensure competitiveness [10] Company Strategy and Development Direction - The company focuses on maintaining operational discipline and investing for sustainable growth while delivering best-in-class solutions [8] - The strategy includes diversifying the distribution base and enhancing the StarLink platform to drive sustainable growth [31] - The company is committed to returning capital to shareholders while maintaining a debt-free balance sheet [30] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about future performance despite ongoing tariff and market uncertainties [31] - The company anticipates continued growth in recurring revenue driven by the success of the StarLink fire radio platform [29] - Management highlighted the importance of school security as a critical market opportunity and emphasized ongoing investments in R&D [33] Other Important Information - The company ended the fiscal year with approximately $100 million in cash and no debt, providing flexibility for future opportunities [14] - The company returned significant value to shareholders, paying out $13.6 million in dividends and repurchasing $36.8 million of stock [14] Q&A Session Summary Question: Concerns about channel inventories due to distributor behavior - Management noted that inventory bought pre-tariff increase was expected to lead to more purchases, with strong sell-through stats indicating real demand [40][41] Question: Potential for further increases in recurring service revenue - Management indicated that while they expect continued growth, the timing of radio sales impacts the realization of recurring revenue [46] Question: Impact of price increases on equipment sales growth - Management expressed confidence that equipment sales could grow double digits due to recent price increases and favorable comparisons [49] Question: Churn rates and pricing impacts on recurring revenues - Management reported negligible churn in commercial accounts and noted that pricing increases have not faced pushback [71][72] Question: Future dividend and buyback plans - Management acknowledged the potential for future dividend increases and indicated ongoing evaluation of buyback opportunities [75]

Core Insights - NAPCO Security Technologies, Inc. reported its financial results for the fourth quarter of fiscal 2025, highlighting a slight increase in net sales but a decrease in net income and earnings per share compared to the previous year [2][6]. Financial Performance - Net sales for Q4 2025 were $50.7 million, a 0.8% increase from $50.3 million in Q4 2024, while total net sales for the fiscal year were $181.6 million, down 3.8% from $188.8 million in the previous year [3][6]. - Gross profit for Q4 was $26.8 million, representing a gross profit margin of 52.8%, down from 55.3% in Q4 2024. For the full year, gross profit was $101 million with a margin of 55.6%, compared to 53.9% in the prior year [3][6]. - Net income for Q4 was $11.6 million, a 14.1% decrease from $13.5 million in Q4 2024, and for the full year, net income was $43.4 million, down 12.9% from $49.8 million [3][6]. - Diluted earnings per share (EPS) for Q4 was $0.33, down 8.3% from $0.36, and for the full year, diluted EPS was $1.19, a decrease of 11.2% from $1.34 [3][6]. Recurring Service Revenue - Recurring service revenue (RSR) increased by 10% in Q4 to $22.4 million and by 14% for the full year to $86.3 million, maintaining a gross margin of 91% for both periods [5][6]. - RSR accounted for 44% of total revenue in Q4 and 48% for the full year, with a prospective annual run rate of approximately $94 million based on July 2025 figures [5][6]. Equipment Sales - Equipment sales for Q4 were $28.3 million, a 5% decrease year-over-year but a 27% increase sequentially from Q3. For the full year, equipment sales totaled $95.3 million, down 16% from the previous year [6][5]. - The company faced challenges in equipment revenue due to distributor destocking and project timing but is optimistic about future growth in equipment sales for fiscal 2026 [5][6]. Cash Flow and Dividends - Cash flows from operating activities for the fiscal year were $53.5 million, an 18% increase from $45.4 million in the previous year [3][6]. - The Board declared a quarterly dividend of $0.14 per share, payable on October 3, 2025, to shareholders of record on September 12, 2025 [6][8]. Strategic Developments - The company introduced a new cloud-based MVP Access platform aimed at enhancing security management capabilities for users [6][7]. - NAPCO successfully reduced inventory levels by $8.6 million during fiscal 2025 and repurchased $36.8 million of its common stock [7][6].

Financial Performance - Napco Security Technologies is expected to report fourth-quarter earnings of 26 cents per share, a decrease from 39 cents per share in the same period last year [1] - The projected quarterly revenue is $44.45 million, down from $50.33 million a year earlier [1] Leadership Recognition - CEO Richard "Dick" Soloway has been named a 2025 Security Innovator by Security Business magazine [2] Stock Performance and Analyst Ratings - Napco Security Technologies shares rose 0.7% to close at $30.39 [2] - DA Davidson analyst maintained a Buy rating and increased the price target from $30 to $33 [8] - Needham analyst maintained a Buy rating but reduced the price target from $37 to $32 [8] - TD Cowen analyst downgraded the stock from Buy to Hold and cut the price target from $46 to $27 [8]

Core Viewpoint - NAPCO Security Technologies, Inc. is set to release its financial results for Fiscal Fourth Quarter 2025 on August 25, 2025, before market opening, followed by a conference call for analysts and investors [1] Company Overview - NAPCO Security Technologies, Inc. is a leading manufacturer and service provider of high-tech electronic security devices and school safety solutions [3] - The company operates through four divisions: NAPCO and three wholly owned subsidiaries: Alarm Lock, Continental Instruments, and Marks USA [3] - NAPCO's products are widely installed by security professionals across various sectors, including commercial, industrial, institutional, residential, and government applications [3] - The company is recognized for its innovation, technical excellence, and reliability, positioning it for growth in the expanding electronic security market [3]

Core Insights - NAPCO Security Technologies, Inc. announced that its CEO Richard "Dick" Soloway has been named a 2025 Security Innovator by Security Business magazine, recognizing his contributions to security technology and safety improvements in the industry [1][2][8] Company Overview - NAPCO is a leading designer and manufacturer of high-tech electronic security devices, including solutions for intrusion, fire alarm, access control, and locking systems, as well as school safety solutions [1][9] - The company operates four divisions: NAPCO, Alarm Lock, Continental Instruments, and Marks USA, and is headquartered in Amityville, New York [9] Leadership and Innovation - Soloway has over five decades of leadership at NAPCO, where he has been instrumental in designing and commercializing trusted security solutions [2][6] - His focus on Recurring Monthly Revenue (RMR) has helped security dealers enhance life safety and build long-term business value, expanding NAPCO's offerings into access control and locking systems [3][4] Business Model and Growth - NAPCO's recurring revenue service model has contributed to its strong and steady growth, creating lasting value for customers and investors [4] - The company is positioned for growth in the rapidly expanding multi-billion dollar electronic security market, with a reputation for innovation and technical excellence [9] Recognition and Future Direction - Soloway's recognition as a Security Innovator highlights his impact on the industry and NAPCO's mission to provide advanced security solutions [8] - The company continues to focus on innovation, integrity, and safety, driven by Soloway's vision and commitment to quality [6][8]