NAPCO Security Technologies(NSSC) - 2025 Q4 - Annual Results

Fiscal 2025 Results Overview This section summarizes NAPCO Security Technologies' fiscal 2025 financial results, operational performance, and management's strategic outlook Key Financial Metrics (Q4 and Full Year) 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 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] - 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][6] - 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][6] - 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][7] - Successfully reduced inventory levels by $8.6 million during fiscal 2025[7] Management Commentary and Outlook 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] - The company remains confident that net income, Adjusted EBITDA, and cash flow will continue to be strong in fiscal 2026[8] - 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][7][8] - 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] Company Profile This section outlines NAPCO Security Technologies, Inc.'s business, divisions, and market position as a leading security equipment provider About NAPCO Security Technologies, Inc. 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][11] - The Company consists of four Divisions: NAPCO, Alarm Lock, Continental Instruments, and Marks USA[11] - 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] Consolidated Financial Statements 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 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] - 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] Consolidated Statements of Income 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 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 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 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][17] - 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] - 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] - Cash and Cash Equivalents at the end of the period increased to $83,081 thousand in FY2025 from $65,341 thousand in FY2024[17] Non-GAAP Financial Measures Reconciliation 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] Important Disclosures & Investor Information This section provides important legal disclosures regarding forward-looking statements and details for investor communication and conference call access Safe Harbor Statement 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] - 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] - 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] Conference Call and Investor Contacts 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] - Investor Relations contact is Francis J. Okoniewski, Vice President of Investor Relations, with office and mobile phone numbers and email provided[20]