NAPCO SECURITY TECHNOLOGIES, INC
For the period ended Mar 31, 2025. Filed May 5, 2025.
View on SEC.govAbout this filing
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.
Mar 31, 2025 · Filed May 5, 2025
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 2024-12-31; filed 2025-02-03.
0001558370-25-000601
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-05.
0001558370-25-006267
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 58 previous paragraphs and 62 current paragraphs.
30 unchanged; 25 reworded; 7 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 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 (7)
Current 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 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 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.
Current report
Net sales for the three months ended March 31, 2025 decreased $5,306,000 to $43,961,000 as compared to $49,267,000 in the comparable period.
Current report
Nine Months Ended March 31, 2025:
Current report
Net sales for the nine months ended March 31, 2025 decreased $7,593,000 to $130,897,000 as compared to $138,490,000 in the comparable period.
Current report
locking device sales was primarily attributable to reduced purchases by four of the Company’s locking customers of approximately $8.3 million, which was partially driven by the timing of project work with one of the customers.
Current report
Nine Months Ended March 31, 2025:
Removed paragraphs (3)
Previous report
Six Months Ended December 31, 2024:
Previous report
Six Months Ended December 31, 2024:
Previous report
product mix and lower absorption of fixed overhead costs. In addition, door locking products historically result in higher margin percentages as compared to access alarm products and specifically cellular (radio) communicator devices, which also result in future increases in recurring alarm communication services revenue.
Reworded paragraphs (25)
Previous wording
Highlights from the three and six months ended December 31, 2024 compared with the comparable periods in fiscal 2024 included:
Current wording
Highlights from the three and nine months ended March 31, 2025 compared with the comparable periods in fiscal 2024 included:
Previous wording
Net sales for the six months ended December 31, 2024 decreased $2,287,000 to $86,936,000 as compared to $89,223,000 in the comparable period. Net equipment revenues for the six months ended December 31, 2024, decreased $8,756,000 to $44,642,000 as compared to $53,398,000 in the comparable period. The decrease in net equipment sales was primarily due to decreases in intrusion and access alarm products of $3,936,000 and door locking devices of $4,821,000. The reduction is attributable to reduced sales by two of the Company’s larger distributors, one of which reduced all purchases to reduce existing inventory levels, and a second distributor who was completing a management restructuring which resulted in reduced purchases. In addition, the timing of project work has impacted sales of custom door locking devices.
Current wording
Net equipment revenues for the three months ended March 31, 2025, decreased $7,384,000 to $22,351,000 as compared to $29,735,000 in the comparable period. The decrease in net equipment sales was attributable to decreases in intrusion and access alarm products of $2,090,000 and door locking devices of $5,294,000. The overall decrease in net equipment revenue was primarily due to reduced sales of approximately $5.1 million at three of our larger distributors as follows; (i) a distributor who purchases both our intrusion and locking products, and decided to reduce corporate-wide purchases to stabilize their existing inventory levels; (ii) a locking distributor whose reduced purchases was primarily driven by the timing of project work with their customer; and (iii) a second locking distributor who was looking to reduce their inventory levels.
Previous wording
Net service revenues for the three months ended December 31, 2024, increased $2,668,000 to $21,208,000 as compared to $18,540,000 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 March 31, 2025, increased $2,078,000 to $21,610,000 as compared to $19,532,000 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
Net sales for the three months ended December 31, 2024 decreased $4,614,000 to $42,933,000 as compared to $47,547,000 in the comparable period. Net equipment revenues for the three months ended December 31, 2024, decreased $7,282,000 to $21,725,000 as compared to $29,007,000 in the comparable period. The decrease in net equipment sales was primarily due to decreases in intrusion and access alarm products of $3,702,000 and door locking devices of $3,580,000. The reduction is attributable to reduced sales by two of the Company’s larger distributors, one of which reduced all purchases to reduce existing inventory levels, and a second distributor who was completing a management restructuring which resulted in reduced purchases. In addition, the timing of project work has impacted sales of custom door locking devices.
Current wording
Net equipment revenues for the nine months ended March 31, 2025, decreased $16,140,000 to $66,993,000 as compared to $83,133,000 in the comparable period. The decrease in net equipment sales was attributable to decreases in intrusion and access alarm products of $6,025,000 and door locking devices of $10,115,000. Of the overall decrease in net equipment sales approximately $5.8 million was attributable to one of the Company’s larger distributors, which purchases both our intrusion and locking products, and made a decision to reduce corporate-wide purchases to stabilize their existing inventory levels. In addition, the reduction in door
Previous wording
Net service revenues for the six months ended December 31, 2024, increased $6,469,000 to $42,294,000 as compared to $35,825,000 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 nine months ended March 31, 2025, increased $8,547,000 to $63,904,000 as compared to $55,357,000 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 December 31, 2024 decreased $523,000 to $24,489,000, or 57.0% of net sales, as compared to $25,012,000, or 52.6% of net sales, for the comparable period.
Current wording
Overall gross profit for the three months ended March 31, 2025 decreased $1,357,000 to $25,127,000, or 57.2% of net sales, as compared to $26,484,000, or 53.8% of net sales, for the comparable period.
Previous wording
Gross profit from equipment sales was $5,119,000, or 23.6% of equipment sales, as compared to $8,351,000, or 28.8% of net equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of product mix and lower absorption of fixed overhead costs. In addition, door locking products historically result in higher margin percentages as compared to access alarm products and specifically cellular (radio) communicator devices, which also result in future increases in recurring communication services revenue.
Current wording
Gross profit from equipment sales was $5,499,000, or 24.6% of equipment sales, as compared to $8,556,000, or 28.8% of net equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of product mix and lower absorption of fixed overhead costs as a result of the decrease in equipment revenue.
Previous wording
Gross profit on service revenues was $38,579,000, or 91.2% of net service revenues, as compared to $32,180,000, or 89.8% of net service revenues, for the comparable period a year ago. The increase in gross profit percentage was a result of renegotiation of royalty arrangements and volume rebates received from carriers.
Current wording
Gross profit on service revenues was $19,628,000, or 90.8% of net service revenues, as compared to $17,928,000, or 91.8% of net service revenues, for the comparable period a year ago. The decrease in gross profit percentage was a result of a negotiation of a one-time lower royalty payment in the comparable quarter.
Previous wording
Overall gross profit for the six months ended December 31, 2024 increased $1,680,000 to $49,105,000, or 56.5% of net sales, as compared to $47,425,000, or 53.2% of net sales, for the comparable period.
Current wording
Overall gross profit for the nine months ended March 31, 2025 increased $323,000 to $74,232,000, or 56.7% of net sales, as compared to $73,909,000, or 53.4% of net sales, for the comparable period.
Previous wording
Gross profit from equipment sales was $10,526,000, or 23.6% of equipment sales, as compared to $15,245,000, or 28.5% of equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of
Current wording
Gross profit from equipment sales was $16,025,000, or 23.9% of equipment sales, as compared to $23,801,000, or 28.6% of equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of product mix and lower absorption of fixed overhead costs as a result of the decrease in equipment revenue.
Previous wording
Gross profit on service revenues was $19,370,000, or 91.3% of net service revenues, as compared to $16,661,000, or 89.9% of net service revenues, for the comparable period a year ago. The increase in gross profit percentage was a result of renegotiation of royalty arrangements and volume rebates received from carriers.
Current wording
Gross profit on service revenues was $58,207,000, or 91.1% of net service revenues, as compared to $50,108,000, or 90.5% of net service revenues, for the comparable period a year ago. The increase in gross profit percentage was a result of renegotiation of royalty arrangements and volume rebates received from carriers.
Previous wording
Research and development expenses for the three months ended December 31, 2024 increased by $565,000 to $3,107,000, or 7.2% of net sales, as compared to $2,542,000, or 5.3% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.
Current wording
Research and development expenses for the three months ended March 31, 2025 increased by $428,000 to $3,185,000, or 7.2% of net sales, as compared to $2,757,000, or 5.6% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.
Previous wording
Research and development expenses for the six months ended December 31, 2024 increased by $1,185,000 to $6,164,000, or 7.1% of net sales, as compared to $4,979,000, or 5.6% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.
Current wording
Research and development expenses for the nine months ended March 31, 2025 increased by $1,613,000 to $9,349,000, or 7.1% of net sales, as compared to $7,736,000, or 5.6% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.
Previous wording
Selling, general and administrative (“SG&A”) expenses for the six months ended December 31, 2024 increased by $2,828,000 to $19,914,000 as compared to $17,086,000 for the comparable period. The increase in SG&A expenses was primarily attributable to compensation increases and hiring of additional staff, increases in advertising and insurance costs, partially offset by decreases in professional fees.
Current wording
Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2025 increased by $1,563,000 to $10,796,000 as compared to $9,233,000 for the comparable period. The increase in SG&A expenses was primarily attributable to increased legal fees related to the litigation discussed in Note 13 of $704,000, compensation and benefit increases and hiring of additional staff of $586,000, increases in insurance costs of $162,000 and increases in advertising of $138,000, offset by reductions in investor relations expenses.
Previous wording
Selling, general and administrative (“SG&A”) expenses for the three months ended December 31, 2024 increased by $1,546,000 to $10,211,000 as compared to $8,665,000 for the comparable period. The increase in SG&A expenses was primarily attributable to compensation increases and hiring of additional staff, increases in advertising and insurance costs, partially offset by decreases in professional fees.
Current wording
Selling, general and administrative (“SG&A”) expenses for the nine months ended March 31, 2025 increased by $4,391,000 to $30,710,000 as compared to $26,319,000 for the comparable period. The increase in SG&A expenses was primarily attributable to compensation and benefit increases and hiring of additional staff of $2,900,000, increases in professional and consulting fees of $665,000, increases in insurance costs of $456,000, and increases in advertising of $442,000, offset by an insurance recovery of legal fees.
Previous wording
Interest and other income, net for the three months ended December 31, 2024 increased by $192,000 to income of $921,000 as compared to income of $729,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.
Current wording
Interest and other income, net for the three months ended March 31, 2025 increased by $225,000 to income of $862,000 as compared to income of $637,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.
Previous wording
Interest and other income, net for the six months ended December 31, 2024 increased by $896,000 to income of $2,065,000 as compared to income of $1,169,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.
Current wording
Interest and other income, net for the nine months ended March 31, 2025 increased by $1,121,000 to income of $2,927,000 as compared to income of $1,806,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.
Previous wording
The Company’s provision for income taxes for the three months ended December 31, 2024 decreased by $299,000 to $1,625,000 as compared to $1,924,000 for the same period a year ago. The decrease in the provision for income taxes for the three months was primarily due to lower taxable income in the U.S. The Company’s effective rate for income tax was 13.4% and 13.2% for the three months ended December 31, 2024 and 2023 respectively. The Company’s effective tax rate for the three months ended December 31, 2024 increased as a result of higher non-deductible stock based compensation.
Current wording
The Company’s provision for income taxes for the three months ended March 31, 2025 of $1,886,000 remained consistent as compared to $1,935,000 for the same period a year ago. The Company’s effective rate for income tax was 15.7% and 12.8% for the three months ended March 31, 2025 and 2024 respectively. The Company’s effective tax rate for the three months ended March 31, 2025 increased as a result of lower estimated R&D tax credits for the period.
Previous wording
The Company’s provision for income taxes for the six months ended December 31, 2024 of $3,440,000 remained consistent as compared to $3,441,000 for the same period a year ago. The Company’s effective rate for income tax was 13.7% and 13.0% for the six months ended December 31, 2024 and 2023 respectively. The Company’s effective tax rate for the six months ended December 31, 2024 increased as a result of higher non-deductible stock based compensation.
Current wording
The Company’s provision for income taxes for the nine months ended March 31, 2025 of $5,326,000 remained consistent as compared to $5,376,000 for the same period a year ago. The Company’s effective rate for income tax was 14.4% and 12.9% for the nine months ended March 31, 2025 and 2024 respectively. The Company’s effective tax rate for the nine months ended March 31, 2025 increased as a result of lower estimated R&D tax credits for the period and higher non-deductible stock based compensation.
Previous wording
Our cash and cash equivalents increased by $20,678,000 during the six months ended December 31, 2024, and our cash and cash equivalents and short-term investments as of December 31, 2024 was $99,195,000. 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.
Current wording
Our cash and cash equivalents increased by $8,072,000 during the nine months ended March 31, 2025, and our cash and cash equivalents and short-term investments as of March 31, 2025 was $89,297,000. 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.
Previous wording
A summary of the cash flow activity for the six months ended December 31, 2024 and 2023 is as follows:
Current wording
A summary of the cash flow activity for the nine months ended March 31, 2025 and 2024 is as follows:
Previous 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 offset by adjustments for non-cash items of $.2 million. The changes in operating assets and liabilities were largely attributable to decreases in accounts receivables, inventories and prepaid expenses partially offset by increases in income tax receivable and decreases in accounts payable and accrued expenses.
Current wording
Net cash provided by operating activities was $38.9 million for the nine months ended March 31, 2025 and was due to net income of $31.8 million and increase in cash flow from changes in operating assets and liabilities of $6.9 million offset by adjustments for non-cash items of $0.3 million. The changes in operating assets and liabilities were largely attributable to decreases in accounts receivables, inventories and prepaid expenses partially offset by increases in income tax receivable and decreases in accounts payable and accrued expenses.
Previous wording
Net cash provided by operating activities was $18.7 million for the six months ended December 31, 2023 and was due to net income of $23.1 million and adjustments for non-cash items of $.9 million, partially offset by a decrease in cash flow from operating activities due to changes in operating assets and liabilities of $5.3 million. The changes in operating assets and liabilities was largely attributable to a decrease in accounts receivable and inventories partially offset by an increase in and accounts payable and accrued expenses.
Current wording
Net cash provided by operating activities was $31.0 million for the nine months ended March 31, 2024 and was due to net income of $36.3 million and adjustments for non-cash items of $.8 million, partially offset by a decrease in cash flow from operating activities due to changes in operating assets and liabilities of $6.1 million. The changes in operating assets and liabilities was largely attributable to an increase in accounts receivable and inventories partially offset by an increase in and accounts payable and accrued expenses.
Previous wording
The net cash provided by investing activities of $17.7 million during the six months ended December 31, 2024 was primarily attributable to the redemption of other investments ($27.3 million) partially offset by expenditures used for capital expenditures ($1.8 million) and purchase of investments ($7.6 million). The cash used in investing activities of $1.4 million during the six months ended December 31, 2023, was primarily attributable to expenditures used for capital expenditures and purchase of investments. The change in use of cash for investing activities from 2023 to 2024 was a increase in the redemption of investments in term deposits (other investments).
Current wording
The net cash provided by investing activities of $15.1 million during the nine months ended March 31, 2025 was primarily attributable to the 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 $10.2 million. The cash used in investing activities of $2.3 million during the nine months ended March 31, 2024, was primarily attributable to 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).
Previous wording
The cash used in financing activities of $22.6 million for the six months ended December 31, 2024 was primarily related to the purchase of treasury shares. The cash used in financing activities of $5.9 million for the six months ended December 31, 2023 was primarily related to the payment of stockholder dividends.
Current wording
The cash used in financing activities of $45.9 million for the nine months ended March 31, 2025 was primarily related to the purchase of treasury shares and the payment of stockholder dividends. The cash used in financing activities of $9.1 million for the nine months ended March 31, 2024 was primarily related to the payment of stockholder dividends.