NAPCO SECURITY TECHNOLOGIES, INC
For the period ended Dec 31, 2025. Filed Feb 2, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2025 · Filed Feb 2, 2026
NSSC$30.24+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-03.
0001104659-25-105434
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-12-31; filed 2026-02-02.
0001104659-26-009130
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 54 previous paragraphs and 65 current paragraphs.
30 unchanged; 21 reworded; 11 added; 2 removed; 1 previous and 3 current paragraphs rearranged.
Tables are not compared: 6 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
The U.S. government implemented new tariff measures affecting a broad range of imported materials. Certain countries have responded to the U.S. tariffs by imposing or threatening retaliatory tariffs. While we are actively monitoring the changes in global trade policy and the effects they may have on our business and broader macroeconomic environment, we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global markets as a result of the new U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact our suppliers ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact the demand for our products.
Current report
Revenue by major product lines is as follows:
Current report
Total Revenue for the three months ended December 31, 2025, increased $5,239,000 (12.2%) to $48,172,000 as compared to $42,993,000 in the comparable period.
Current report
Six Months Ended December 31, 2025:
Current report
Revenue for the six months ended December 31, 2025, increased $10,404,000 (12.0%) to $97,340,000 as compared to $86,936,000 in the comparable period.
Current report
Net equipment revenues for the six months ended December 31, 2025, increased $5,420,000 (12.1%) to $50,062,000 as compared to $44,642,000 in the comparable period. The increase in net equipment revenue was attributable to increases in the sales of door locking products of $5,011,000 (17.9%) and intrusion and access products of $409,000 (2.5%). The increased revenue in our door locking products was primarily a result of the impact of pricing increases (approximately 7%) that went into effect in Fiscal 2026 in addition to general increase in sales volume (approximately 10.0%). The increased revenue in our intrusion and access alarm products was primarily a result of the impact of pricing increases that went into effect in Fiscal 2026, offset by reductions in the sales of certain access control products.
Current report
Gross profit on service revenues was $21,522,000, or 90.2% of net service revenues, as compared to $19,370,000, or 91.3% of net service revenues, for the comparable period a year ago. The decrease in gross profit percentage was a result of increased royalty costs due to certain one-time credits received in the comparable period and increased data costs to run our network operations center.
Current report
Six Months Ended December 31, 2025
Current report
Overall gross profit for the six months ended December 31, 2025, increased $6,979,000 to $56,084,000, or 57.6% of net revenue, as compared to $49,105,000, or 56.5% of net revenue, for the comparable period.
Current report
Research and development expenses for the six months ended December 31, 2025, increased by $549,000 to $6,713,000, or 6.9% of net revenue, as compared to $6,164,000, or 7.1% of net revenue, for the comparable period. The increase in research and development expenses was primarily a result of increased labor and benefit costs ($560,000) offset by a reduction in consulting charges ($41,000).
Current report
Selling, general and administrative (“SG&A”) expenses for the three months ended December 31, 2025, decreased by $199,000 to $10,012,000 as compared to $10,211,000 for the comparable period. The decrease in SG&A expenses was primarily attributable to decreases in legal fees (net of insurance reimbursements) related to the litigation discussed in Note 13 ($307,000), accounting expenses ($212,000) and stock-based compensation ($202,000), offset by increases in wages, bonus compensation and benefits ($275,000), commission related expenses ($147,000) and insurance expense ($50,000).
Removed paragraphs (2)
Previous report
We primarily source our manufacturing materials from Asia, including Taiwan, India and China, with additional sourcing from other producers throughout the world. There have been significant proposed reciprocal tariffs on certain of these countries. At this time, the overall impact on our business related to tariffs remains uncertain and depends on multiple factors, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, reciprocal measures by impacted trade partners, inflationary effects, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.
Previous report
Revenue for the three months ended September 30, 2025, increased $5,165,000 to $49,168,000 as compared to $44,003,000 in the comparable period.
Reworded paragraphs (21)
Previous wording
NAPCO is one of the leading manufacturers and designers of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions. We offer a diversified array of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold principally to independent distributors, dealers and installers of security equipment. We have established a national network of trusted independent security dealers and integrators that are experts at selling, installing and supporting our various technologies. These dealers are dependent on our platform for communication services to our radio communicators and smart security devices, and they pay us a monthly fee for these services to operate and manage their businesses efficiently.
Current wording
NAPCO is one of the leading manufacturers and designers of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions. We offer a diversified array of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold principally to independent distributors, dealers and installers of security equipment. We have established a national network of trusted independent security dealers and integrators that are experts at selling, installing and supporting our various technologies. These dealers are dependent on our platform for communication services to our radio communicators and smart security devices, and they pay us a monthly fee for these services.
Previous wording
Highlights from the three months ended September 30, 2025 compared with the comparable period in fiscal 2024 included:
Current wording
Highlights from the three and six months ended December 31, 2025 compared with the comparable period included:
Previous wording
On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, (which includes imports from the Dominican Republic where we manufacture most of our products) plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The reciprocal country-specific tariffs were subsequently paused for 90 days on most countries. The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S. presents significant challenges to our operations and supply chain and could impact future result. We cannot predict what additional actions might be considered or implemented by the U.S. or its trade partners, particularly in the current geopolitical environment. We anticipate that the imposition of the baseline 10% tariff will increase the cost of our products and could impact product margins. The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs. We are closely monitoring the evolving tariff landscape and attempting to mitigate these impacts, including using pricing adjustments, sourcing strategies and other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impacts of such tariffs or that the imposition of tariffs, and the resulting economic impact on the U.S. market and consumer, will not be material to our financial results.
Current wording
The universal baseline tariff of 10% includes imports from the Dominican Republic where we manufacture most of our products. The imposition of the baseline 10% tariff increased the cost of our products and could impact future product margins. The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs.
Previous wording
Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires a high degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical estimates include management’s judgments associated with reserves for sales returns and allowances, allowance for credit losses, overhead expenses applied to inventory, inventory reserves,
Current wording
Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires a high degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical estimates include management’s judgments associated with 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. These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates.
Previous wording
Net equipment revenues for the three months ended September 30, 2025, increased $2,822,000 to $25,739,000 as compared to $22,917,000 in the comparable period. The increase in net equipment revenue was attributable to increases in the sales of door locking devices of $3,229,000, while revenue from intrusion products decreased $407,000. The increased volume in our door locking products was primarily due to increased sales to one of our larger distributors, net of decreases resulting from the timing of large construction project work that is supplied through our distributors. Equipment revenues were also positively impacted by certain pricing increases that went into effect in the quarter.
Current wording
Net equipment revenues for the three months ended December 31, 2025, increased $2,598,000 (12.0%) to $24,323,000 as compared to $21,725,000 in the comparable period. The increase in net equipment revenue was attributable to increases in sales of door locking products of $1,781,000 (12.6%) and intrusion and access products of $817,000 (10.8%). The increased revenue in our door locking products was primarily a result of the impact of pricing increases (approximately 7%) that went into effect in Fiscal 2026 in addition to general increase in sales volume (approximately 5.6%). The increased revenue in our intrusion and access alarm products was primarily a result of the impact of pricing increases that went into effect in Fiscal 2026.
Previous wording
Net service revenues for the three months ended September 30, 2025, increased $2,343,000 to $23,429,000 as compared to $21,086,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Current wording
Net service revenues for the three months ended December 31, 2025, increased $2,641,000 (12.5%) to $23,849,000 as compared to $21,208,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Previous wording
Overall gross profit for the three months ended September 30, 2025, increased $3,230,000 to $27,846,000, or 56.6% of net sales, as compared to $24,616,000, or 55.9% of net sales, for the comparable period.
Current wording
Overall gross profit for the three months ended December 31, 2025, increased $3,749,000 to $28,238,000, or 58.6% of net revenue, as compared to $24,489,000, or 57.0% of net revenue, for the comparable period.
Previous wording
Gross profit from equipment revenue was $6,693,000, or 26.0% of equipment revenue, as compared to $5,407,000, or 23.6% of equipment revenue, for the comparable period. The increase in gross profit percentage from equipment revenue was primarily a result of product mix, increased volume which improved the absorption rate of our fixed overhead costs and certain price increases that went into effect during the quarter.
Current wording
Gross profit from equipment revenue was $13,409,000, or 26.8% of equipment revenue, as compared to $10,526,000, or 23.6% of equipment revenue, for the comparable period. The increase in gross profit percentage from equipment revenue was primarily a result of product mix, increased volume which improved the absorption rate of our fixed overhead costs, certain price increases that went into effect during the previous quarter and reductions in sales discounts during the period.
Previous wording
Gross profit on service revenues was $21,153,000, or 90.3% of net service revenues, as compared to $19,209,000, or 91.1% of net service revenues, for the comparable period a year ago. The decrease in gross profit percentage was a result of increased data costs due to the increase in the number of active dual Sim radio communicators which require data service from multiple carriers.
Current wording
Gross profit on service revenues was $42,675,000, or 90.3% of net service revenues, as compared to $38,579,000, or 91.2% of net service revenues, for the comparable period a year ago. The decrease in gross profit percentage was a result of increased royalty costs due to certain one-time credits received in the comparable period and increased data costs to run our network operations center.
Previous wording
Research and development expenses for the three months ended September 30, 2025, increased by $183,000 to $3,240,000, or 6.6% of net sales, as compared to $3,057,000, or 6.9% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of increased labor ($194,000) and UL approval ($17,000) costs, offset by reduced consulting fees ($34,000).
Current wording
Research and development expenses for the three months ended December 31, 2025, increased by $366,000 to $3,473,000, or 7.2% of net revenue, as compared to $3,107,000, or 7.2% of net revenue, for the comparable period. The increase in research and development expenses was primarily a result of increased labor and benefit costs ($366,000).
Previous wording
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2025, increased by $1,260,000 to $10,963,000 as compared to $9,703,000 for the comparable period. The increase in SG&A expenses was primarily attributable to increases in legal fees related to the litigation discussed in Note 13 ($943,000), and increases in commission expense ($354,000), offset by reductions in bonus compensation and benefit ($82,000).
Current wording
SG&A expenses for the six months ended December 31, 2025, increased by $1,061,000 to $20,975,000 as compared to $19,914,000 for the comparable period. The increase in SG&A expenses was primarily attributable to increases in legal fees related to the litigation discussed in Note 13 ($637,000), commission expense ($501,000), wages, bonus compensation and benefits ($192,000) and insurance ($92,000) offset by decreases in accounting expenses ($464,000) and stock-based compensation $(263,000).
Previous wording
Interest income decreased for the three months ended September 30, 2024, as compared to the comparable period, primarily due to lower interest rates.
Current wording
Interest income decreased for the three and six months ended December 31, 2025, as compared to the comparable period, primarily due to lower interest rates.
Previous wording
The Company’s provision for income taxes for the three months ended September 30, 2025 increased by $655,000 to $2,470,000 as compared to $1,815,000 for the same period a year ago. The Company’s effective rate for income tax was 16.9% and 14.0% for the three months ended September 30, 2025 and 2024 respectively. The Company’s effective tax rate for the three months ended September 30, 2025 increased as a result of a larger portion of the Company’s taxable income being attributable to United States operations, and the remeasurement of certain deferred tax liabilities due to tax rate changes enacted in the One Big Beautiful Bill Act (“OBBBA”) in the current period.
Current wording
The Company’s provision for income taxes for the three months ended December 31, 2025 increased by $611,000 to $2,236,000 as compared to $1,625,000 for the same period a year ago. The Company’s effective rate for income tax was 14.2% and 13.4% for the three months ended December 31, 2025 and 2024 respectively. The Company’s provision for income taxes for the six months ended December 31, 2025 increased by $1,266,000 to $4,706,000 as compared to $3,440,000 for the same period a year ago. The Company’s effective rate for income tax was 15.5% and 13.7% for the six months ended December 31, 2025 and 2024 respectively. The Company’s effective tax rate for the three and six months ended December 31, 2025 increased as a result of a larger portion of the Company’s taxable income being attributable to United States operations, and the remeasurement of certain deferred tax liabilities due to tax rate changes enacted in the One Big Beautiful Bill Act (“OBBBA”) in the current period.
Previous wording
We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months. We continue to monitor, evaluate, and manage our operating plans, forecasts, and liquidity considering the most recent developments driven by macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, tariffs, bans, or other measures or events that increase the effective price of products. We believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered.
Current wording
We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months. We continue to monitor, evaluate, and manage our operating plans, forecasts, and liquidity considering the most recent developments driven by macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, tariffs, bans, or other measures or
Previous wording
Our cash and cash equivalents increased by $12,319,000 during the three months ended September 30, 2025, and our cash and cash equivalents and short-term investments as of September 30, 2025 was $105,758,000. We believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered.
Current wording
Our cash and cash equivalents increased by $21,838,000 during the six months ended December 31, 2025, and our cash and cash equivalents and short-term investments were $104,919,000 as of December 31, 2025. We believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered.
Previous wording
As of September 30, 2025, the Company’s available revolving credit line was $20,000,000, which expires in February 2029, none of which has been drawn. The Company has no outstanding debt.
Current wording
As of December 31, 2025, the Company’s available revolving credit line was $20,000,000, which expires in February 2029, there were no outstanding borrowings on the line as of December 31, 2025.
Previous wording
A summary of the cash flow activity for the three months ended September 30, 2025 and 2024 is as follows:
Current wording
A summary of the cash flow activity for the six months ended December 31, 2025 and 2024 is as follows:
Previous wording
Net cash provided by operating activities was $11.6 million for the three months ended September 30, 2025 and was due to net income of $12.2 million and increase in adjustments for non-cash items of $2.1 million offset by cash outflow from changes in operating assets and liabilities of $2.6 million. The changes in operating assets and liabilities were largely attributable to increases in accounts receivables, inventories, prepaid expenses and income tax receivables partially offset by decreases in accounts payable and accrued expenses.
Current wording
Net cash provided by operating activities was $26.7 million for the six months ended December 31, 2025 and was due to net income of $25.7 million and increase in adjustments for non-cash items of $4.3 million offset by cash outflow from changes in operating assets and liabilities of $3.2 million. The changes in operating assets and liabilities were largely attributable to increases in inventories and income tax receivables and decreases in accounts payable and accrued expenses partially offset by decreases in accounts receivables.
Previous wording
Net cash provided by operating activities was $12.0 million for the period ended September 30, 2024 and was due to net income of $11.2 million and increase in cash flow from changes in operating assets and liabilities of $1.3 million, partially offset by adjustments for non-cash items of $.4 million. The changes in operating assets and liabilities were largely attributable to increases in accounts receivables and decreases in inventories and accounts payable and accrued expenses.* *
Current wording
Net cash provided by operating activities was $25.5 million for the six months ended December 31, 2024 and was due to net income of $21.7 million and increase in cash flow from changes in operating assets and liabilities of $4.0 million, partially offset by adjustments for non-cash items of $.2 million. The changes in operating assets and liabilities were largely attributable to increases in accounts receivables and decreases in inventories and accounts payable and accrued expenses.* *
Previous wording
The net cash provided by investing activities of $5.6 million during the three months ended September 30, 2025 was primarily attributable to the redemption of marketable securities of $8.4 million partially offset by expenditures used for capital expenditures of $.2 million and purchase of marketable securities of $2.5 million. The cash provided by investing activities of $15.5 million during the three months ended September 30, 2024, was primarily attributable to redemption of other investments partially offset by expenditures used for capital expenditures and purchase of investments. The change in use of cash for investing activities from 2024 to 2025 was a increase in the redemption of investments in term deposits (other investments).
Current wording
The net cash provided by investing activities of $5.1 million during the six months ended December 31, 2025 was primarily attributable to the redemption of marketable securities of $11.1 million partially offset by expenditures used for capital expenditures of $.8 million and purchase of marketable securities of $5.2 million. The cash provided by investing activities of $17.7 million during the six months ended December 31, 2025, was primarily attributable to redemption of other investments of $27.3 million partially offset by expenditures used for capital expenditures of $1.8 million and purchase of investments of $7.6 million. The change in use of cash for investing activities from 2024 to 2025 was a increase in the redemption of investments in term deposits (other investments).
Previous wording
The cash used in financing activities of $5.0 million for the three months ended September 30, 2025 was primarily related to the payment of stockholder dividends. The cash used in financing activities of $7.2 million for the three months ended September 30, 2024 was primarily related to the repurchase of treasury shares.
Current wording
The cash used in financing activities of $10.0 million for the six months ended December 31, 2025 was primarily related to the payment of stockholder dividends. The cash used in financing activities of $22.6 million for the six months ended December 31, 2024 was primarily related to the repurchase of treasury shares of $18.0 million and the payment of stockholder dividends of $4.6 million.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Net service revenues for the six months ended December 31, 2025, increased $4,984,000 (11.8%) to $47,278,000 as compared to $42,294,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Current report — wording carried from elsewhere
Gross profit from equipment revenue was $6,716,000, or 27.6% of equipment revenue, as compared to $5,119,000, or 23.6% of equipment revenue, for the comparable period. The increase in gross profit percentage from equipment revenue was primarily a result of product mix, increased volume which improved the absorption rate of our fixed overhead costs, price increases that went into effect during Fiscal 20206 and reductions in sales discounts during the period.
Current report — wording carried from elsewhere
events that increase the effective price of products. We believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
valuation of intangible assets, share based compensation and income taxes. These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates.