NAPCO SECURITY TECHNOLOGIES, INC
For the period ended Jun 30, 2026. Filed Aug 24, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Aug 24, 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-K
Period ended 2025-06-30; filed 2025-08-25.
0001558370-25-011750
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2026-06-30; filed 2026-08-24.
0001104659-26-100081
Item 7. 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 66 previous paragraphs and 77 current paragraphs.
43 unchanged; 13 reworded; 21 added; 10 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 15 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 (21)
Current report
Please seeNon-GAAP Measuresbelow in this section of this Annual Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with GAAP, for the years ended June 30, 2026 and 2025.
Current report
On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid, and in March 2026, the U.S. Court of International Trade further ruled that importers that paid such tariffs are due refunds. Although certain tariffs imposed under IEEPA have been invalidated by courts and are subject to refund claims, replacement tariffs have been imposed under Section 122 and Section 301, and other trade authorities may continue, expand, or be modified. The ultimate scope, duration, and economic impact of these measures remain uncertain. As of June 30, 2026 the Company has received or accrued certain IEPPA refund claims. The Company has submitted additional claims which the Company cannot ensure the probability of collection and therefore, no refund receivable has been recognized related to these claims.
Current report
The AI data center buildout has increased demand across a broad range of electronic components, including microcontrollers, memory devices, power management integrated circuits, networking components and other semiconductors used in our products. Suppliers may allocate limited manufacturing capacity to customers serving AI and cloud infrastructure markets, reducing availability for security and access control manufacturers such as us.
Current report
Consequently, we may experience longer lead times, cost increases, allocation restrictions or reduced product availability from suppliers. If we are unable to obtain sufficient quantities of critical components, identify alternative sources, or pass increased costs to customers, our ability to manufacture and deliver products could be adversely affected.
Current report
Revenue
Current report
Revenue by major product lines is as follows:
Current report
Net revenue in fiscal 2026 increased by $20,695,000 to $202,316,000 as compared to $181,621,000 in fiscal 2025.
Current report
Net equipment revenue in fiscal 2026 increased $9,497,000 to $104,788,000 as compared to $95,291,000 in fiscal 2025. The increase in net equipment revenues was due to increased revenue from door-locking products of $6,925,000, or 11.1% and increased revenue of intrusion and access products of $2,573,000 million or 7.8%.
Current report
The increased revenue from our door locking products was primarily a result of the impact of pricing increases (approximately 6.1%) with the balance due to increased sales volume (approximately 5.0%). The impact of price increases was a result of both our Alarm Lock and Marks USA locking divisions (approximately 6.7% and 4.8%, respectively), sales volume on Alarm Lock grew approximately 13% and Marks USA volume decreased approximately 8.2% as compared to Fiscal 2025.
Current report
The increased revenue in our intrusion and access alarm division was primarily a result of the impact of pricing increases (approximately 9.1%), offset by a decrease in volume (approximately 1.3%). Intrusion product revenue increased by approximately 14.3% because of price increases of 10.4% and increased volume of 3.9%, primarily driven by the sale of our fire radio communicators. Access alarm products revenue decreased approximately 11.0% because of price increases of 4.2%, offset by decreased volume of approximately 15.2%.
Current report
The Company's gross profit increased by $18,761,000 to $119,791,000 in fiscal 2026 as compared to $101,030,000 in fiscal 2025. Overall, gross margins increased to 59.2% of net revenue in 2026 from 55.6% in 2025.
Current report
Gross profit from equipment revenue was $31,757,000 or 30.3% of net equipment revenue, as compared to $22,496,000 or 23.6% of net equipment revenue, in fiscal 2025.
Current report
The increase in gross profit percentage from equipment revenue was primarily a result of price increases (inclusive of lower sales discounts and allowance), the impact of the refund of tariffs paid in fiscal 2025 (1.0%), reduced charges related to inventory reserves (0.5%), offset by increased technical services costs (0.5%) as a result of investments in AI automation solutions.
Current report
Gross profit as a percentage of service revenue was consistent in both periods. Gross profit on service revenue was $88,034,000 or 90.3% of net service revenue in fiscal 2026 and $78,534,000 or 91.0% of net service revenue, in fiscal 2025.
Current report
Litigation settlement costs
Current report
Litigation settlement costs, net of any insurance reimbursements of $16,000,000 was recognized in fiscal 2026 as a result of the settlement described in Note 14.
Current report
Non-GAAP Measures
Current report
We define non-GAAP adjusted EBITDA as our GAAP net income plus income tax expense, net interest income, stock-based compensation, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, litigation settlement costs, and depreciation and amortization expense. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense and stock-based compensation expense related to equity compensation. We define non-GAAP adjusted EBITDA margin as Adjusted EBITDA divided by net revenue. Non-GAAP adjusted EBITDA and adjusted EBITDA margin are not a measure calculated in accordance with GAAP. See the table below for a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Current report
We have included non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin in this report because they are key measure our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make strategic investment decisions. Further, we believe the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of litigation settlement costs and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Accordingly, we believe non-GAAP adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Current report
Our use of non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are: (a) although amortization and depreciation are non-cash charges, the assets being amortized and depreciated may have to be replaced in the future, and non-GAAP adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) non-GAAP adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) non-GAAP adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) non-GAAP adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate non-GAAP adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Current report
Because of these and other limitations, you should consider non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin alongside our other GAAP-based financial performance measures, net income and our other GAAP financial results. The following table presents a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):
Removed paragraphs (10)
Previous report
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
Previous report
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.
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 enacted and 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
Net Sales
Previous report
Net sales in fiscal 2025 decreased by $7,199,000 to $181,621,000 as compared to $188,820,000 in fiscal 2024.
Previous report
Net equipment revenue in fiscal 2025 decreased $17,780,000 to $95,291,000 as compared to $113,071,000 in fiscal 2024. The decrease in net sales was primarily due to decreased sales of the Alarm Lock brand door-locking products of $7,183,000, Marks brand door-locking products of $4,309,000, Napco Access Pro brand access control products of $2,274,000 and Napco brand intrusion products of $4,014,000.
Previous report
The overall decrease in net equipment sales was attributable to the reduction of sales of approximately $6.4 million to one of the Company’s larger distributors, which purchases both our intrusion and locking products. In addition, the reduction in door locking device sales was primarily attributable to reduced purchases by three of the Company’s locking customers of approximately $9.4 million.
Previous report
The decrease in equipment revenue was a result of these larger distributors extended destocking strategies throughout the year, in addition to the timing of large project work for our door-locking business and to a lesser extent general softness in demand due to customer uncertainty related to global tariff policies. In fiscal 2024 our door-locking revenue was positively impacted by a large commercial real estate project. The timing of project work is difficult to predict from period to period due to numerous factors.
Previous report
The Company's gross profit decreased by $724,000 to $101,030,000 in fiscal 2025 as compared to $101,754,000 in fiscal 2024. Gross profit on equipment sales was $22,496,000 or 23.6% of net equipment sales in fiscal 2025 and $33,209,000 or 29.4% of net equipment sales, in fiscal 2024. Gross profit on service revenues was $78,534,000 or 91% of net service revenues in fiscal 2025 and $68,545,000 or 90.5% of net service revenues, in fiscal 2024. Overall, gross margins increased to 56% of net sales in 2025 from 54% in 2024.
Previous report
The decrease in Gross profit margins on equipment sales was primarily a result of overall lower equipment sales levels which results in less absorption of fixed manufacturing overhead costs in addition to the impact of tariff costs in the fourth quarter of Fiscal 2025 as a result of distributors pulling forward orders before our announced price increase went into effect.
Reworded paragraphs (13)
Previous wording
Refer to Risk Factors (Part I, Item 1A of this Form 10-K) for a discussion of these factors and other risks.
Current wording
Refer to Risk Factors (Part I, Item 1A of this Form 10-K) for a discussion of various risk factors that could affect us.
Previous wording
Our cash and cash equivalents and short-term investments are as follows:
Current wording
Our cash and cash equivalents and short-term investments are as follows (in thousands):
Previous wording
A summary of the cash flow activity for the year ended June 30, 2025 and 2024 is as follows:
Current wording
A summary of the cash flow activity for the year ended June 30, 2026 and 2025 is as follows (in thousands):
Previous wording
Net cash provided by operating activities was $45.4 million for the year ended June 30, 2024 and was due to net income of $49.8 million and adjustments for non-cash items of $2.7 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $7.1 million. The changes in operating assets and liabilities were largely attributable to increases in inventories, accounts receivables, prepaid expenses, accrued expenses and income taxes receivable and decreases in other assets and accounts payable.
Current wording
Net cash provided by operating activities was $61.1 million for the year ended June 30, 2026 and was due to net income of $43.0 million, adjustments for non-cash items of $4.8 million and an increase in cash flow from changes in operating assets and liabilities of $13.3 million. The changes in operating assets and liabilities were largely attributable to decreases in inventories and increases in accrued expenses offset by increases in accounts receivables, income tax receivable and prepaid expenses.
Previous wording
Net cash provided by operating activities was $53.5 million for the year ended June 30, 2025 and was due to net income of $43.4 million, adjustments for non-cash items of $3.1 million and an increase in cash flow from changes in operating assets and liabilities of $7.0 million. The changes in operating assets and liabilities were largely attributable to decreases in inventories, accounts receivables and prepaid expenses offset by decreases in accounts payables and accrued expenses.
Current wording
Net cash provided by operating activities was $53.5 million for the year ended June 30, 2025 and was due to net income of $43.4 million, adjustments for non-cash items of $3.1 million and an increase in cash flow from changes in operating assets and liabilities of $7.0 million. The changes in operating assets and liabilities were largely attributable to decreases in inventories, accounts receivable and prepaid expenses offset by decreases in accounts payables and accrued expenses.
Previous wording
The cash provided by investing activities during the year ended June 30, 2025 was primarily attributable to proceeds from the sale of marketable securities as well as the redemption of our Certificate of Deposits which were classified as other investments. The Net cash provided by investing activities was partially offset by net cash used for capital expenditures and purchase of marketable securities. The cash used in investing activities during the year ended June 30, 2024 was primarily attributable to cash used for capital expenditures and purchase of certificates of deposits. The change in cash for investing activities from 2024 to 2025 was an increase in proceeds received from marketable securities and other investments.
Current wording
The cash provided by investing activities during the year ended June 30, 2026 was primarily attributable to proceeds from the sale of marketable securities. The Net cash provided by investing activities was partially offset by net cash used for capital expenditures and purchase of marketable securities. The cash provided by investing activities during the year ended June 30, 2025 was primarily attributable to proceeds from the sale of marketable securities as well as the redemption of our Certificate of Deposits which were classified as other investments. The Net cash provided by investing activities was partially offset by net cash used for capital expenditures and purchase of marketable securities.
Previous wording
The cash used in financing activities for the year ended June 30, 2025 was primarily related to the payment of stockholder dividends as well as purchase of treasury shares while the year ended June 30, 2024 was primarily related to the payment of stockholder dividends.
Current wording
The cash used in financing activities for the year ended June 30, 2026 was primarily related to the payment of stockholder dividends as well as payment of tax withholdings related to stock option exercises while the year ended June 30, 2025 was primarily related to the payment of stockholder dividends and the purchase of treasury shares.
Previous wording
Working Capital. Working capital decreased by $8,147,000 to $138,387,000 at June 30, 2025 from $146,534,000 at June 30, 2024. Working capital is calculated by deducting Current Liabilities from Current Assets.
Current wording
Working Capital. Working capital increased by $27,142,000 to $165,529,000 as of June 30, 2026 from $138,387,000 at June 30, 2025. Working capital is calculated by deducting Current Liabilities from Current Assets.
Previous wording
As of June 30, 2025, the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of business. On April 26, 1993, the Company's foreign subsidiary entered into a 99-year land lease for approximately 4 acres of land in the Dominican Republic, on which the Company’s principle manufacturing facility is located, at an annual base rent of approximately $235,000 and $105,000 in annual service charges. The service charges increase 2% annually over the remaining life of the lease.
Current wording
As of June 30, 2026, the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of business. On April 26, 1993, the Company's foreign subsidiary entered into a 99-year land lease for approximately 4 acres of land in the Dominican Republic, on which the Company’s principal manufacturing facility is located, at an annual base rent of approximately $235,000 and $105,000 in annual service charges. The service charges increase 2% annually over the remaining life of the lease.
Previous wording
Net service revenues for fiscal 2025 increased $10,581,000 to $86,330,000 as compared to $75,749,000 in fiscal 2024. The increase in net service revenues was due to an increase in the number of our cellular communication devices put into service and activated.
Current wording
Net service revenues for fiscal 2026 increased $11,198,000 to $97,528,000 as compared to $86,330,000 in fiscal 2025. The increase in net service revenues was due to an increase in the number of our cellular communication devices (radios) put into service and activated. The main driver of new activations was new installations of our fire radio communicators installed by our dealer network.
Previous wording
Research and Development expenses increased by $1,818,000 in fiscal 2025 as compared to fiscal 2024, primarily due to increases of $1,750,000 in personnel-related expenses mainly from merit increases and the hiring of additional engineering staff. The head count of engineering staff increased by 11% from 72 at the end of Fiscal 2024 to 80 at the end of Fiscal 2025.
Current wording
Research and Development expenses increased by $1,210,000 to $13,791,000 or 6.8% of net revenue in fiscal 2026 as compared to $12,581,000 or 6.9% of net revenue in fiscal 2025. The increase is primarily due to increases of $1,040,000 in personnel-related expenses mainly from annual merit increases of engineering staff, and additional cost of obtaining UL approvals $106,000 for new products.
Previous wording
Selling, general and administrative expenses for fiscal 2025 increased by $5,017,000 as compared to fiscal 2024, primarily due to increases of $3,451,000 in personnel-related expenses mainly from merit increases and the hiring of additional personnel in the finance and information technology departments, $500,000 in insurance, $370,000 in advertising, $313,000 in legal and professional fees, offset by decreases in $130,000 in Director fees and $500,000 in transactions costs associated with the Company’s Form S-3 filing during fiscal 2024.
Current wording
Selling, general and administrative expenses for fiscal 2026 increased by $2,172,000 to $44,362,000 or 21.9% of net revenue as compared $42,190,000 or 23.2% of net revenue in fiscal 2025. The increase is primarily due to increases of $767,000 in personnel-related expenses mainly from merit increases and the hiring of additional personnel in the sales and information technology departments, $775,000 in commission payments mainly from the aforementioned increases in equipment revenue, $327,000 in tradeshow related activities, $184,000 in insurance and $152,000 in 401(k) matching expenses, $104,000 in credit card processing fees related to our service revenue, and $110,000 in other administrative costs, offset by decreases in professional fees of $247,000.
Previous wording
The Company’s provision for income taxes for fiscal 2025 remained consistent at $6,663,000 as compared to $6,568,000 for the same period a year ago. The Company’s effective tax rate for fiscal 2025 increased to 13% as compared to 12% for fiscal 2024 as a result of a larger portion of the Company’s taxable income being attributable to United States operations.
Current wording
The Company’s provision for income taxes for fiscal 2026 increased by $132,000 to $6,795,000 as compared to $6,663,000 for the same period a year ago. The Company’s effective tax rate (13.6% fiscal 2026 and 13.3% fiscal 2025) was consistent in both periods.