Napco Security Technologies, Inc 10-Q for FY2027 Q1
Napco Security Technologies, Inc (NSSC)
About this 10-Q
Napco Security Technologies, Inc filed this 10-Q on November 2, 2026, covering the quarter ended September 30, 2026 (FY2027 Q1).
Napco Security Technologies, Inc reported total revenue of $50.0 million, gross profit margin of 58.7%, net income of $13.0 million and Non-GAAP Adjusted EBITDA of $15.5 million for the three months ended September 30, 2026. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $49.98M
- up 1.7% from $49.17M a year earlier
- Net income
- $13.01M
- up 6.9% from net income of $12.17M a year earlier
- Diluted EPS
- $0.36
- up 5.9% from $0.34 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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As of October 30, 2026, there were
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2026
TABLE OF CONTENTS
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Financial Statements (Unaudited) | 3 | |
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4 | ||
| 5 | |
6 | ||
7 | ||
8 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | |
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2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | |
| | September 30, 2026 | | June 30, 2026 | | ||
| | (in thousands, except share data) | | ||||
Assets | | | | | | | |
Current Assets | | | |
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Cash and cash equivalents | | $ | | | $ | | |
Marketable securities | | | | | | | |
Accounts and other receivable, net of allowance for credit losses of $ | |
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Inventories | |
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Income tax receivable | | | | | | — | |
Prepaid expenses and other current assets | |
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Total Current Assets | |
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Inventories - non-current | |
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Property, plant and equipment, net | |
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Intangible assets, net | |
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Deferred income taxes | | | | | | | |
Operating lease - Right-of-use asset | | | | | | | |
Other assets | |
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Total Assets | | $ | | | $ | | |
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Liabilities and Stockholders' Equity | | | | | | | |
Current Liabilities | | | |
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Accounts payable | | $ | | | $ | | |
Accrued expenses | |
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Accrued litigation costs | | | — | | | | |
Accrued salaries and wages | |
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Dividends payable | | | | | | | |
Accrued income taxes | |
| — | |
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Total Current Liabilities | |
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Accrued income taxes | |
| — | |
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Operating lease liability | | | | | | | |
Total Liabilities | |
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Commitments and Contingencies (Note 13) | |
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Stockholders' Equity | | | | | | | |
Common Stock, par value $ | | | | | | | |
Additional paid-in capital | |
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Retained earnings | |
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Treasury Stock, at cost, | |
| ( | |
| ( | |
Accumulated other comprehensive income | | | | | | | |
Total Stockholders' Equity | |
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Total Liabilities and Stockholders' Equity | | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements
3
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months ended September 30, | ||||
| | 2026 | | 2025 | ||
| | (in thousands, except for share and per share data) | ||||
Revenue: |
| | | | | |
Equipment revenue | | $ | | | $ | |
Service revenue | |
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Total revenue | |
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Cost of Revenue: | |
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Cost of equipment revenue | |
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Cost of service revenue | |
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Total cost of revenue | |
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Gross Profit | |
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Operating Expenses: | | | | | | |
Research and development | |
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Selling, general, and administrative | |
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Litigation settlement | | | ( | | | — |
Total operating expenses | | | | | | |
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Operating Income | |
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Other Income: | |
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Interest income, net | |
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Other income, net | | | | | | |
Income before Provision for Income Taxes | |
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Provision for Income Taxes | |
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Net Income | | $ | | | $ | |
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Income Per Share: | |
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Basic | | $ | | | $ | |
Diluted | | $ | | | $ | |
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Weighted Average Number of Shares Outstanding: | |
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Basic | |
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Diluted | |
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See accompanying notes to condensed consolidated financial statements.
4
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months ended September 30, | | ||||
| 2026 | | 2025 | | ||
| (in thousands) | | ||||
| | | | | | |
Net Income | $ | | | $ | | |
Other comprehensive income (loss) |
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Net change in unrealized gains (losses) on available-for-sale debt securities |
| ( | |
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Tax effect on net change in unrealized (gains) on available-for-sale debt securities | | — | | | ( | |
Total other comprehensive income (loss) | | ( | |
| | |
Comprehensive income | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements.
5
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| | Three months ended September 30, 2026 (in thousands, except for share data) | ||||||||||||||||||||
| | Common Stock | | | | | Treasury Stock | | | | | | | | | | ||||||
| | Number of | | | | | Additional | | | | | | | | | | Accumulated | | | | ||
|
| Shares | | | |
| Paid-in |
| Number of | | | |
| Retained |
| Other Comprehensive | | | | |||
|
| Issued | | Amount |
| Capital | | Shares | | Amount | | Earnings | | Income | | Total | ||||||
Balances at June 30, 2026 |
| | | $ | | | $ | |
| ( | | $ | ( | | $ | | | $ | | | $ | |
Net income |
| — | |
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Other comprehensive income, net of tax | | — | |
| — | | | — |
| — | |
| — | |
| — | |
| ( | | | ( |
Stock-based compensation expense |
| — | |
| — | | | |
| — | |
| — | |
| — | |
| — | | | |
Cash dividend ($ | | — | |
| — | | | — |
| — | |
| — | |
| ( | |
| — | | | ( |
Balances at September 30, 2026 |
| | | $ | | | $ | |
| ( | | $ | ( | | $ | | | $ | | | $ | |
| | Three months ended September 30, 2025 (in thousands, except share data) | ||||||||||||||||||||
| | Common Stock | | | | | Treasury Stock | | | | | | | | | | ||||||
| | Number of | | | | | Additional | | | | | | | | | | Accumulated | | | | ||
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| Shares | | | |
| Paid-in |
| Number of | | | |
| Retained |
| Other Comprehensive | | | | |||
|
| Issued | | Amount |
| Capital | | Shares | | Amount | | Earnings | | Income | | Total | ||||||
Balances at June 30, 2025 |
| | | $ | | | $ | |
| ( | | $ | ( | | $ | | | $ | | | $ | |
Net income |
| — | |
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Other comprehensive income, net of tax | | — | |
| — | | | — |
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Stock-based compensation expense |
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Stock options exercised | | | |
| — | | | — |
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| — | |
| — | | | — |
Cash dividend ($ | | — | |
| — | | | — |
| — | |
| — | |
| ( | |
| — | | | ( |
Balances at September 30, 2025 |
| | | $ | | | $ | |
| ( | | $ | ( | | $ | | | $ | | | $ | |
See accompanying notes to condensed consolidated financial statements
6
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | Three Months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
| | (in thousands) | | ||||
Cash Flows from Operating Activities | | | |
| | | |
Net Income | | $ | | | $ | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| | |
Depreciation and amortization | | | | |
| | |
Realized gain on sales of marketable securities | | | ( | | | ( | |
Charge (recovery) of credit losses | | | | |
| ( | |
Change to inventory reserve | | | ( | |
| ( | |
Deferred income taxes | | | | |
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Stock-based compensation expense | | | | |
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Changes in operating assets and liabilities: | | | | |
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Accounts and other receivable | | | | |
| ( | |
Inventories | | | ( | |
| ( | |
Prepaid expenses and other current assets | | | | |
| ( | |
Income tax receivable | | | ( | | | ( | |
Other assets | | | | |
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Accounts payable, accrued expenses, accrued litigation costs, accrued salaries and wages, accrued income taxes | | | ( | |
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Net Cash Provided by Operating Activities | | | | | | | |
Cash Flows from Investing Activities | | | | |
| | |
Purchases of property, plant, and equipment | | | ( | | | ( | |
Purchases of marketable securities | | | ( | | | ( | |
Proceeds from sales of marketable securities | | | | | | | |
Net Cash (Used In) Provided by Investing Activities | | | ( | | | | |
Cash Flows from Financing Activates | | | | |
| | |
Dividends paid | | | ( | | | ( | |
Net Cash Used in Financing Activities | | | ( | | | ( | |
| | | | | | | |
Net (decrease) increase in Cash and Cash Equivalents | | | ( | |
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Cash and Cash Equivalents - Beginning | | | | |
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Cash and Cash Equivalents - Ending | | $ | | | $ | | |
Supplemental Cash Flow Information | |
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Income taxes paid, net of refunds received | | $ | | | $ | | |
Non-Cash Investing and Financing Transactions | | | | | | | |
Dividends declared and not paid | | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements.
7
NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1.Description of Business and Basis of Presentation
Description of business
Napco Security Technologies, Inc (“Napco”, “the Company”, “we”, “our”) is a leading manufacturer and designer 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 and installers 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.
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of Napco and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated.
These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by GAAP for annual financial statements. They should be read together with our audited consolidated financial statements and related notes thereto for the year ended June 30, 2026 included in our Annual Report on Form 10-K filed with the SEC on August 24, 2026. The condensed consolidated balance sheet as of June 30, 2026, was derived from our audited financial statements but does not include all disclosures required by GAAP for annual financial statements.
In the opinion of management, these unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of the results of operations, financial position and cash flows for the periods presented. The results of operations for the three months ended September 30, 2026 are not necessarily indicative of the results that can be expected for our entire fiscal year ending June 30, 2027.
Use of Estimates
The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 materially from these estimates.
Note 2.Significant Accounting Policies and Recent Accounting Pronouncements
Our significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended June 30, 2026. During the three months ended September 30, 2026, there have been no significant changes to such policies.
8
Accounting pronouncements recently adopted
During the three months ended September 30, 2026, we adopted Accounting Standards Update (“ASU”) No. 2025-05, Credit Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient permitting companies to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. This adoption did not have a material effect on our financial statements.
Accounting pronouncements not yet effective
Disclosure improvements. In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Among the various codification amendments, Topic 470 Debt is applicable to Arlo which requires the disclosure of amounts, terms and weighted-average interest rates of unused lines of credit. The effective date is either (i) the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or (ii) on June 30, 2027, if the SEC has not removed the requirement by that date, with early adoption prohibited. The adoption of this new standard will not have a material impact on our financial statements and related disclosures.
Expense disaggregation disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement: Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which improves disclosure requirements and mandates enhanced transparency about the types of expenses in commonly presented expense captions in financial statements. This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures.
Software development costs accounting and disclosure. In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the recognition and capitalization framework to reflect current software development practices, including iterative and agile methodologies, by removing references to “development stages”. It also clarifies the criteria for capitalization, which begins when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. This guidance is effective for annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures.
The Company is evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is not expected to have a material impact on our consolidated financial statements.
9
Note 3.Revenue from Contracts with Customers
The Company is engaged in the development, manufacture, and distribution of security products, encompassing access control systems, door security products, intrusion and fire alarm systems, alarm communication services, and video surveillance products for commercial and residential use. The Company also provides wireless communication service, monthly, to dealers and installers of intrusion and fire alarm systems. These products and services are used for commercial, residential, institutional, industrial and governmental applications, and are sold primarily to independent distributors, dealers and installers of security equipment. Sales to unaffiliated customers are primarily shipped from the United States.
Variable consideration
Revenue from all sales is recognized at transaction price, the amount we expect to be entitled to in exchange for providing services or transferring goods. Transaction price is calculated as selling price net of variable consideration which includes estimates for sales incentives and sales returns related to current period equipment revenue. Sales incentives are determined based on a combination of the actual amounts committed and estimated future expenditure based upon historical customary business practice. Sales returns are estimated by analyzing certain factors, including historical and expected sales and returns data. Variable consideration estimates are based on predictive historical data or future commitments that we plan and control.
| | Three months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
Balance at beginning of period | | $ | | | $ | | |
Credits issued | |
| ( | |
| ( | |
Additions | |
| | |
| | |
Balance at end of period | | $ | | | $ | | |
As of September 30, 2026 and June 30, 2026, the Company included return assets of approximately $
Disaggregation of revenue
The Company disaggregates revenue into three major product offerings: intrusion and access control products, door locking products, and cellular and cloud-based communication services. Following is the disaggregation of revenues based on major product lines (in thousands):
| | Three months ended September 30, | ||||
| | 2026 | | 2025 | ||
Intrusion and access alarm products | | $ | | | $ | |
Door locking products | |
| | |
| |
Services | |
| | |
| |
Total Revenue | | $ | | | $ | |
The Company had
10
Note 4.Accounts and Other Receivable, Net
The components of accounts and other receivable, net are as follows (in thousands):
| | September 30, | | June 30, | ||
| | 2026 | | 2026 | ||
Accounts receivable | | $ | | | $ | |
Allowance for credit losses | |
| ( | |
| ( |
| | | | | | |
Other receivable | | | — | | | |
Accounts and other receivable, net | | $ | | | $ | |
Allowance for Credit Losses
The changes in the allowance for credit losses for accounts receivable are as follows (in thousands):
| | Three months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
Balance at beginning of period | | $ | ( | | $ | ( | |
(Provision for) / recovery of expected credit losses | |
| ( | |
| | |
Write-offs | |
| | |
| — | |
Balance at end of period | | $ | ( | | $ | ( | |
Note 5.Inventories
Inventories, net of reserves are valued at lower of cost (first-in, first-out method) or net realizable value. Inventories, net of reserves consist of the following (in thousands):
| | September 30, | | June 30, | ||
| | 2026 | | 2026 | ||
Component parts | | $ | | | $ | |
Work-in-process | |
| | |
| |
Finished product | |
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| |
| | $ | | | $ | |
| | | | | | |
Classification of inventories: | |
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Current | | $ | | | $ | |
Non-current | |
| | |
| |
| | $ | | | $ | |
The reserve for excess and slow-moving inventory, which reduces inventory in our consolidated balance sheets were $
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Note 6.Balance Sheet Components
Marketable securities
The following tables summarize the Company’s investments in debt securities at September 30, 2026 and June 30, 2026 (in thousands):
| September 30, 2026 | ||||||||||
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value | ||||
| | | | | | | | | | | |
U.S. Treasury Securities | $ | | | $ | | | $ | — | | $ | |
| June 30, 2026 | ||||||||||
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value | ||||
| | | | | | | | | | | |
U.S. Treasury Securities | $ | | | $ | | | $ | — | | $ | |
The debt investments all mature within one year or less, and the Company did
Property, plant and equipment
Property, plant and equipment consist of the following (in thousands):
| | September 30, 2026 | | June 30, 2026 | | ||
| | | | | | | |
Land | | $ | | | $ | | |
Buildings | |
| | |
| | |
Molds and dies | |
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| | |
Furniture and fixtures | |
| | |
| | |
Machinery and equipment | |
| | |
| | |
Building improvements | |
| | |
| | |
| |
| | |
| | |
Less: accumulated depreciation and amortization | |
| ( | |
| ( | |
Property, plant and equipment, net | | $ | | | $ | | |
Depreciation and amortization expense pertaining to property, plant and equipment are as follows (in thousands):
| | Three months ended September 30, | ||||
| | 2026 | | 2025 | ||
| | | | | | |
Cost of Revenue: | | | | | | |
Equipment-related expenses | | $ | | | $ | |
Service-related expenses | | | | | | |
Operating expenses: | | | | | | |
Research and development | |
| | |
| |
General and administrative | |
| | |
| |
Total depreciation and amortization | | $ | | | $ | |
12
Intangible assets, net
Intangible assets, net consist of the following (in thousands):
| | September 30, 2026 | | June 30, 2026 | ||||||||||||||
| | Carrying | | Accumulated | | Net book | | Carrying | | Accumulated | | Net book | ||||||
| | value | | amortization | | value | | value | | amortization | | value | ||||||
Customer relationships | | $ | | | $ | ( | | $ | | | $ | | | $ | ( | | $ | |
Trade name | | | |
| | ( |
| | |
| | |
| | ( |
| | |
| | $ | | | $ | ( | | $ | | | $ | | | $ | ( | | $ | |
Amortization expense for intangible assets subject to amortization was approximately $
Note 7.Fair Value Measurement
Fair value on a recurring basis
The following table presents the Company’s assets that were measured at fair value on a recurring basis at September 30, 2026 and June 30, 2026, respectively (in thousands):
| Level 1 | | Level 2 | | Level 3 | | Total | ||||
September 30, 2026 | | | | | | | | | | | |
Cash equivalents | | | | | | | | | | | |
Money market funds | $ | | | $ | - | | $ | - | | $ | |
Total | | | | | - | | | - | | | |
Marketable securities | | | | | | | | | | | |
U.S. Treasury Securities | | | | | - | | | - | | | |
Total | $ | | | $ | - | | $ | - | | $ | |
| | | | | | | | | | | |
June 30, 2026 | | | | | | | | | | | |
Cash equivalents | | | | | | | | | | | |
Money market funds | $ | | | $ | - | | $ | - | | $ | |
Total | | | | | - | | | - | | | |
Marketable securities | | | | | | | | | | | |
U.S. Treasury Securities | | | | | - | | | - | | | |
Total | $ | | | $ | - | | $ | - | | $ | |
The Company’s investments classified as Level 1 are based on quoted prices that are available in active markets, as well as certificates of deposits and time deposits that are classified as Level 1 due to their short-term nature.
For the three months ending September 30, 2026 and 2025, there were
Fair value on a non-recurring basis
Our non-financial assets, such as property and equipment, and intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.
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Note 8.Credit Facility
The Company has available a $
The Line is secured by substantially all the Company’s domestic assets, including but not limited to, deposit accounts, accounts receivable, inventory, equipment and fixtures and intangible assets. In addition, the Company’s wholly owned subsidiaries, except for the Company’s foreign subsidiaries, have issued guarantees and pledges of all their assets to secure the Company’s obligations under the Line. All the outstanding common stock of the Company’s domestic subsidiaries and
Note 9.Income Taxes
The income tax provision is calculated using an estimated annual effective tax rate based upon estimates of annual income, permanent items, statutory tax rates and planned tax strategies in the various jurisdictions in which the Company operates, except that certain discrete items such as the resolution of uncertain tax positions and stock-based accounting income tax benefits are treated separately.
Income tax expense included on our accompanying consolidated statements of operations is as follows, (dollars in thousands):
| Three months ended September 30, | |||||
| 2026 | | 2025 | | ||
| | | | | | |
Provision for income taxes(1) | $ | | | $ | | |
Effective tax rate | | | % | | | % |
| (1) | Net discrete income tax expense of $ |
The difference between the U.S. statutory tax rate of
We file a consolidated U.S. income tax return and tax returns in certain state and local and foreign jurisdictions. As of September 30, 2026, fiscal years 2023 and forward are still open for examination. In addition, the Company has a wholly-owned subsidiary which operates in a Free Zone in the Dominican Republic (“DR”) and is exempt from DR income tax.
Note 10. Employee Benefit Plans
Stock-based compensation
The Company recognized stock-based compensation of $
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The following table sets forth the stock-based compensation expense by line item in the condensed consolidated statements of operations, (in thousands):
| | Three months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
| | | | | | | |
Cost of Revenue: | | | | | | | |
Equipment-related expenses | | $ | — | | $ | — | |
Operating expenses: | | | | | | | |
Research and development | |
| | |
| — | |
General and administrative | |
| | |
| | |
Total stock-based compensation | | $ | | | $ | | |
Stock option plans
The Company has
The Employee Plans provide for the Company to grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options. Plan participants who are granted ISOs and possess more than
The Non-Employee Plans provide for the grant of stock options with a term of up to
The following table reflects provisions of each of the stock option plans:
Plan Name | | Options available to be granted at plan inception | | Plan termination date | | Options available for grant as of September 30, 2026 |
2012 Employee Stock Option plan | | | | December 2022 | | - |
2022 Employee Stock Option plan | | | | December 2032 | | |
2012 Non-Employee Stock Option plan | | | | December 2022 | | - |
2018 Non-Employee Stock Option plan | | | | December 2028 | | |
2020 Non-Employee Stock Option plan | | | | May 2030 | | |
| | 2026 | | 2025 |
Risk-free interest rates | | | % | n/a |
Expected lives | | | n/a | |
Expected volatility | | | % | n/a |
Expected dividend yields | | | % | n/a |
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The following table reflects the total activity for the stock option plans for the three months ended September 30, 2026:
| | | | | | | | Weighted average | | | | |
| | | | | | | | Remaining | | | | |
| | Number of | | Weighted average | | Contractual Life | | Aggregate | ||||
| | Options | | exercise price | | (in years) | | Intrinsic Value | ||||
Outstanding as of June 30, 2026 | | | | $ | | | | | $ | | ||
Granted | | | | | $ | | | | | | | |
Outstanding as of September 30, 2026 | | | | $ | | | | $ | | |||
| | | | | | | | | | | | |
Vested and Exercisable as of September 30, 2026 | | | | $ | | | | $ | | |||
The total fair value of stock options vested during the three months ended September 30, 2026 and 2025 was $
401(k) Plan
The Company maintains a 401(k) plan (“the Plan”) that covers all U.S. employees and is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. Company contributions to this plan are discretionary and totaled $
Note 11. Stockholders’ Equity Transactions
Dividends
The following table summarizes information about dividends declared by the Company for the three months ended September 30, 2026:
Dividend Declaration Date | | Stockholders of Record Date | | Dividend Payable Date | | Per Share Cash Dividend Amount |
| | | | | | |
| | | $ | |||
| | | $ |
Note 12. Income Per Share
| | Three months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
| | (in thousands, except for share and per share data) | | ||||
Numerator: | | | | | | | |
Net income | | $ | | | $ | | |
Denominator: | | | | | | | |
Weighted average shares outstanding - basic | |
| | |
| | |
Effect of dilutive stock-based awards | |
| | |
| | |
Weighted average shares outstanding - diluted | | $ | | | $ | | |
| | | | | | | |
Income per share - basic | | $ | | | $ | | |
Income per share - diluted | | $ | | | $ | | |
| | | | | | | |
Anti-dilutive employee stock based awards, excluded | | | | | | | |
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Note 13. Commitments and Contingencies
Leases
Our lease obligation consists of a
Operating leases are included in operating lease right-of-use assets, accrued expenses and operating lease liabilities, non-current on our condensed consolidated balance sheets.
For the three months ended September 30, 2026 and 2025 cash payments against operating lease liabilities totaled $
Supplemental balance sheet information related to operating leases was as follows:
Weighted-average remaining lease term | | | |
Weighted-average discount rate | | | % |
The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2026 (in thousands):
Year Ending June 30, | | Amount | |
2027 | | $ | |
2028 | |
| |
2029 | |
| |
2030 | |
| |
2031 | |
| |
Thereafter | | | |
Total future minimum lease payments | | $ | |
Less: Imputed interest | | | |
Total | | $ | |
Operating lease expense totaled approximately $
Litigation
On August 29, 2023, a purported class action, brought on behalf of a putative class who acquired publicly traded NAPCO securities between November 7, 2022 and August 18, 2023, was filed in the United States District Court for the Eastern District of New York against the Company, its Chairman and Chief Executive Officer (now Founder and Executive Chairman) (the “former CEO”), and its former Chief Financial Officer (who is currently the President and Chief Executive Officer) (the “current CEO”). The action, captioned Zornberg v. NAPCO Security Technologies, Inc. et al., asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with statements made in the Company’s quarterly reports and earnings releases during the period of November 7, 2022 through May 8, 2023. A lead plaintiff was appointed in November 2023 and lead plaintiff filed an Amended Complaint on February 16, 2024. The Amended Complaint added claims under Sections 11, 12, and 15 of the Securities Act of 1933 in connection with the secondary public offering in February 2023. These additional claims were brought against the Defendants named in the initial complaint, as well as the directors who allegedly signed the offering materials, and the underwriters for the offering. Defendants filed a motion to dismiss the Amended Complaint on April 26, 2024. On April 11, 2025, the Court granted in part and denied in part the motion to dismiss. The Section 11 and Section 12 claims brought against the individual Defendants were dismissed; the remaining claims survived the motion to dismiss. On May 12, 2025, Defendants filed Answers to the Amended Complaint. On September 29, 2025, Plaintiffs moved for class certification of both the Exchange Act and remaining Securities Act claims. On October 17, 2025, pursuant to a joint letter and stipulation filed by all the parties, the Court dismissed the Securities Act claims with prejudice and certified a class with respect to the
17
Exchange Act claims. On February 9, 2026, a Second Amended Complaint was filed that added additional allegations but did not modify the claims brought against Defendants. On April 15, 2026, Defendants and Plaintiffs filed letters requesting a pre-motion conference regarding Defendants’ proposed motion for summary judgment and Plaintiffs’ proposed partial motion for summary judgment, respectively, which the Court scheduled for May 5, 2026. On May 1, 2026, the parties reached a settlement in principle to resolve all remaining claims. On August 25, 2026, the parties executed a settlement agreement and Plaintiffs filed a motion for preliminary approval of the settlement and approval of notice by the class. The Court granted preliminary approval of the settlement on September 9, 2026. A final approval hearing will be held on December 17, 2026. The Company accrued a liability of $
On November 26, 2024, a putative derivative lawsuit captioned Minzer v. Soloway, et al., Case No. 2024-1218, was filed in the Court of Chancery in the State of Delaware against the Company’s former CEO, the current CEO, and certain current and former directors. The Company is a “Nominal Defendant” in the lawsuit. After the Company and the individual Defendants moved to dismiss or stay the action, the Plaintiff filed an Amended Complaint on June 12, 2025. The Amended Complaint alleges, among other things, that the individual Defendants breached their fiduciary duties and aided and abetted breach of fiduciary duties by allowing the Company to remain with ineffective internal controls over financial reporting and inventory and by allowing for the dissemination of false and misleading financial information in public filings. The Amended Complaint also brings breach of fiduciary duty and unjust enrichment claims in connection with stock sales by the Company’s former CEO and its current CEO and seeks indemnity and contribution. The Company’s status as a “Nominal Defendant” in the action reflects the fact that the lawsuit is maintained by the named Plaintiff on behalf of the Company and that the Plaintiff seeks damages on the Company’s behalf. Defendants filed a second motion to dismiss or stay the case on August 22, 2025. On May 7, 2026, the motion to stay was denied and the motion to dismiss was granted in part and denied in part, with four current and former directors being dismissed from the action; and certain claims against the former CEO and his wife, the current CEO, and the Chair of the Audit Committee remaining. On June 30, 2026, the Company’s Board of Directors appointed a special litigation committee (the “SLC”) to investigate the claims asserted in the action. On August 4, 2026, the parties and the SLC entered into a stipulation requesting the Court stay the action for 180 days pending the SLC’s investigation and the Court subsequently so-ordered the 180-day stay. The SLC’s investigation is ongoing.
On April 25, 2025, a purported class action, brought on behalf of a putative class who acquired publicly traded NAPCO securities between February 5, 2024 and February 3, 2025, was filed in the United States District Court for the Eastern District of New York against the Company, its former CEO, and its former Chief Financial Officer (the current CEO). The action, captioned Patel v. NAPCO Security Technologies, Inc. et al., asserts securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with statements made in quarterly earnings releases and calls during the period of February 5, 2024 through February 3, 2025. On March 10, 2026, the Court appointed Co-Lead Plaintiffs. On April 24, 2026, the Court approved the parties’ proposed case management schedule. On May 11, 2026, Co-Lead Plaintiffs filed an Amended Complaint. On July 13, 2026, Defendants filed a letter requesting a pre-motion conference regarding Defendants’ proposed motion to dismiss the Amended Complaint. On July 20, 2026, Co-Lead Plaintiffs filed a letter opposing Defendants’ request for a pre-motion conference and proposed motion to dismiss. On October 13, 2026, the Court denied Defendants’ motion for a pre-motion conference and set a briefing schedule for Defendants’ motion to dismiss. The Company believes it has meritorious defenses and intends to vigorously defend against the Action.
With respect to all litigation and related matters, the Company records a liability when the Company believes it is probable that a liability has been incurred, and the amount can be reasonably estimated. As of the end of the period covered by this report, due to the stage of the cases the Company is not able to estimate any range of potential loss related to these matters and has not recorded any liability other than the settlement described above. It is possible that the Company could be required to pay damages (in excess of insurance coverages), incur other costs or establish accruals in amounts that could not be reasonably estimated as of the end of the period covered by this report.
IEEPA Tariff Refunds
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. On April 20, 2026, the U.S. Customs and Border Protection launched a process for submitting IEEPA refund claims and subsequently, we submitted refund claims. We applied a gain contingency model in accordance with ASC 450, Contingencies, and account for refunds when the amounts are collected as a reduction of cost of revenue on the condensed
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consolidated statements of operations. Additionally, interest associated with refunds is accounted for as interest income on the unaudited condensed consolidated statements of operations.
Although we may be entitled to additional refunds of previously paid IEEPA tariffs, the amount and timing of any such refunds remain uncertain. Following these rulings, new tariffs under other laws and imports from more countries were imposed, in addition to existing non-IEEPA tariffs.
Employment Agreements
As of September 30, 2026, The Company is obligated under
The employment agreement with the CEO provides for an annual salary of $
The employment agreement with the Founder provides for an annual salary of $
The employment agreements for both the CEO and Founder provide for severance upon a termination without cause or a resignation for good reason, equal to
Note 14. Segment and Geographical Data
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker. We have
The Company’s CODM, (the Chief Executive Officer and President) evaluates performance of the Company and makes decisions regarding the allocation of resources based on total Company results. The measure of segment assets is reported on the balance sheet as total consolidated assets. The consolidated net income is the measure of segment profit that is most consistent with U.S. GAAP. Segment profit is used in developing the overall strategy and during the annual budget process, as well as considered in budget-to-actual variances monthly when making decisions about the allocation of operating and capital resources.
The CODM is regularly provided with not only the consolidated expenses as noted on the face of the income statement, but also the significant segment expenses as below:
| | Three months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
| | (in thousands) | | ||||
| | | |
| | | |
Net Revenue | | $ | | | $ | | |
Less: | |
| | |
| | |
Cost of revenue | | | | | | | |
Compensation-related expenses(1) | | | | | | | |
Commission expenses | | | | | | | |
Marketing, advertising and other promotional expenses | | | | | | | |
Research and development (excluding compensation related benefits) | | | | | | | |
Selling, general, and administrative expenses(2) | | | | | | | |
Litigation settlement | | | ( | | | — | |
Interest and other (income), net | | | ( | | | ( | |
Provision for Income Taxes | | | | | | | |
Segment Profit | | $ | | | $ | | |
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| (1) | Excludes stock based compensation. |
| (2) | Excludes compensation-related expenses, commission expenses and marketing, advertising and other promotional expenses. |
Geographic Information for Revenue
The Company is engaged in
| | Three months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
Sales to external customers: | | | |
| | | |
United States | | $ | | | $ | | |
Foreign | |
| | |
| | |
Total Net Revenue | | $ | | | $ | | |
Geographic Information for Long-Lived Assets
Long-lived assets include property and equipment, net and operating lease right-of-use assets, net. Our long-lived assets are based on the physical location of the assets.
| | | | | |||
| | September 30, 2026 | | June 30, 2026 | | ||
Long-lived assets: | | | |
| | | |
United States | | $ | | | $ | | |
Dominican Republic | |
| | |
| | |
Total Long-lived assets | | $ | | | $ | | |
Note 15. Subsequent Events
The Company has evaluated subsequent events occurring after the end of the period covered by the condensed consolidated financial statements for events requiring recording or disclosure in the condensed consolidated financial statements.
On
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations together with (1) our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and (2) the audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended June 30, 2026 included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026 filed on August 24, 2026, or Annual Report, with the Securities and Exchange Commission, or SEC.
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “could,” “may,” “will,” and similar expressions are intended to identify forward-looking statements, including statements concerning our business and the expected performance characteristics, specifications, reliability, market acceptance, market growth, specific uses, user feedback, and market position of our products and technology. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in “Part II—Item 1A—Risk Factors” and “Liquidity and Capital Resources” below.
All forward-looking statements in this document are based on information available to us as of the date hereof, such information may be limited or incomplete, and we assume no obligation to update any such forward-looking statements. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in this Quarterly Report. Unless expressly stated or the context otherwise requires, the terms “we,” “our,” “us,” the “Company,” and “Napco” refer to Napco Security Technologies, Inc. and our subsidiaries.
Overview
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.
Since 1969, NAPCO has established a heritage and proven record in the professional security community for delivering both advanced technology and high-quality security solutions, building many of the industry’s widely recognized brands, such as NAPCO Security Systems, Alarm Lock, NAPCO Access Pro, Marks USA, and other popular product lines. We are dedicated to developing innovative technology and producing the next generation of reliable security solutions that utilize remote communications and wireless networks.
Highlights from the three months ended September 30, 2026 compared with the prior year’s period included:
| ● | Total revenue increased 1.7% to $50.0 million. |
| ● | Total gross profit margin increased 210 basis points to 58.7% for the three months ended September 30, 2026. |
| ● | Net income increased 6.9% to $13.0 million for the three months ended September 30, 2026 compared to $12.2 million for the same period a year ago. |
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| ● | Non-GAAP Adjusted EBITDA, a measurement of operating performance increased 3.8% to $15.5 million. |
Please see Non-GAAP Measures below in this section of this Quarterly 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 three months ended September 30, 2026 and 2025.
Industry Landscape
Our industry continues to be dynamic and highly competitive, with frequent changes in both technologies and business models. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. Napco continually strives to innovate through a broad range of research and development activities that seek to identify and address the changing demands of customers, industry trends, and competitive forces.
Economic Conditions and Other Factors
We are subject to the effects of general macroeconomic and market conditions.
The markets for security devices and services are dynamic and highly competitive. Our competitors are continually developing new products and solutions for consumers and businesses. We must continue to evolve and adapt to respond to customer and user preferences over an extended time in pace with this changing environment.
Tarif Matters
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. On April 20, 2026, the U.S. Customs and Border Protection launched a process for submitting IEEPA refund claims and subsequently, we submitted refund claims.
Changes in U.S. trade policy and tariffs continue to create uncertainty regarding our product costs. Effective July 24, 2026, a new tariff framework under Section 301 of the Trade Act of 1974 became applicable to imports from certain trading partners, including the Dominican Republic, where we manufacture most of our products. The applicable tariff on covered imports from the Dominican Republic increased from 10% to 12.5%. We continue to evaluate pricing, sourcing and other measures to mitigate increased tariff-related costs; however, such measures may not fully or timely offset these costs, which could adversely affect our product margins and results of operations.
Supply Chain and Component Costs
We continue to monitor supply chain conditions affecting the availability and cost of electronic components and other materials used in our products. Increased demand for certain electronic components, including from artificial intelligence and data center infrastructure, has contributed to supply constraints, longer lead times and increased component costs. We are working with suppliers, evaluating alternative sources and taking other actions to mitigate these pressures. However, continued supply constraints or increases in material costs could adversely affect our ability to manufacture and deliver products and could negatively impact product margins and results of operations.
Critical Accounting Policies and Estimates
The Company’s significant accounting policies are fully described in Note 1 to the Company’s consolidated financial statements included in its 2026 Annual Report on Form 10-K.
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
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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.
Liquidity and Capital Resources
Our cash and cash equivalents and short-term investments are as follows (in thousands):
| | September 30, 2026 | | June 30, 2026 | ||
| | | |
| | |
Cash | | $ | 15,221 | | $ | 34,013 |
Money Market Fund | |
| 108,661 | |
| 92,915 |
| | $ | 123,882 | | $ | 126,928 |
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 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.
A summary of the cash flow activity for the three months ended September 30, 2026 and 2025 is as follows (in thousands):
Cash Flows from Operating Activities
| | Three Months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
| | | |
| | | |
Net income | | $ | 13,009 | | $ | 12,165 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| | |
Depreciation and amortization | |
| 540 | |
| 570 | |
Realized gain on sales of marketable securities | | | (114) | |
| (92) | |
(Recovery of) credit losses | |
| 28 | |
| (1) | |
Change to inventory reserve | |
| (109) | |
| (354) | |
Deferred income taxes | |
| 2,328 | |
| 1,681 | |
Stock-based compensation expense | |
| 273 | |
| 309 | |
Changes in operating assets and liabilities: | |
| (13,205) | |
| (2,641) | |
Net Cash Provided by Operating Activities | | $ | 2,750 | | $ | 11,637 | |
Net cash provided by operating activities was $2.8 million for the three months ended September 30, 2026 and was due to net income of $13.0 million and increase in adjustments for non-cash items of $2.9 million offset from changes in operating assets and liabilities of $13.2 million. The changes in operating assets and liabilities were largely attributable to decrease in accounts and other receivables ($7 million) offset by increases in inventories ($4 million) and decreases in accounts payable and accrued expenses ($14 million), which was primarily a result of the payment of accrued litigation costs.
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.
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Cash Flows from Investing Activities
| | Three Months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
Purchases of property, plant, and equipment | | $ | (433) | | $ | (193) | |
Purchases of marketable securities | | | (3,570) | |
| (2,540) | |
Proceeds from sales of marketable securities | | | 3,572 | |
| 8,407 | |
Net Cash (Used In) Provided by Investing Activities | | $ | (431) | | $ | 5,674 | |
The net cash used in investing activities of $.4 million during the three months ended September 30, 2026 was primarily attributable to expenditures used for capital expenditures of $.4 million. 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.
Cash Flows from Financing Activities
| | Three Months ended September 30, | | ||||
| | 2026 | | 2025 | | ||
Dividends paid | | $ | (5,365) | | $ | (4,992) | |
Net Cash Used in Financing Activities | | $ | (5,365) | | $ | (4,992) | |
The cash used in financing activities of $5.4 and $5.0 million for the three months ended September 30, 2026 and 2025, respectively, was related to the payment of stockholder dividends.
Credit Facility.
As of September 30, 2026, the Company’s available revolving credit line was $20,000,000, which expires in February 2029. As of September 30, 2026 and June 30, 2026, the Company has no outstanding debt.
Working Capital and Current Ratio.
Working capital increased by $9,685,000 to $175,214,000 as of September 30, 2026 from $165,529,000 at June 30, 2026. The current ratio increased to 7.2:1 as of September 30, 2026, from 4.9:1 as of June 30, 2026. Working capital is calculated by deducting Current Liabilities from Current Assets. Current ratio is calculated by dividing Current Labilities from Current Assets.
Contractual Obligations and Commitments
As of September 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 of 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.
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Results of Operations
| | Three months ended September 30, | | | ||||||
| | (dollars in thousands) | | | ||||||
|
| | |
| | |
| % Increase/ |
| |
| | 2026 | | 2025 | | (decrease) | | | ||
Revenue: | | | | | | | | | | |
Equipment revenue | | $ | 23,850 | | $ | 25,739 |
| (7.3) | % | |
Service revenue | | | 26,130 | | | 23,429 | | 11.5 | % | |
Total revenue | | | 49,980 | | | 49,168 | | 1.7 | % | |
Gross Profit: | | | | | | | | | | |
Gross profit: equipment | | | 5,807 | | | 6,693 | | (13.2) | % | |
Gross profit: service | | | 23,545 | | | 21,153 | | 11.3 | % | |
Total gross profit | |
| 29,352 | |
| 27,846 |
| 5.4 | % | |
Gross profit as a % of revenue: | |
| 58.7 | % |
| 56.6 | % | 3.7 | % | |
Equipment | | | 24.3 | % | | 26.0 | % | (6.5) | % | |
Services | | | 90.1 | % | | 90.3 | % | (0.2) | % | |
| | | | | | | | | | |
Research and development | |
| 4,053 | |
| 3,240 |
| 25.1 | % | |
Selling, general and administrative | |
| 12,182 | |
| 10,963 |
| 11.1 | % | |
Selling, general and administrative as a percentage of net revenue | |
| 24.4 | % |
| 22.3 | % | 9.4 | % | |
Litigation settlement | | | (1,000) | | | — | | N/A | | |
Operating income | |
| 14,117 | |
| 13,643 |
| 3.5 | % | |
Interest income, net | |
| 1,117 | |
| 854 |
| 30.8 | % | |
Other income, net | | | 115 | | | 138 | | (16.7) | % | |
Provision for income taxes | |
| 2,340 | |
| 2,470 |
| (5.3) | % | |
Net income | | $ | 13,009 | | $ | 12,165 |
| 6.9 | % | |
Revenue
Revenue by major product lines is as follows:
| | Three months ended September 30, | | ||||||
| | (dollars in thousands) | | ||||||
| | | | | | | | % Increase | |
| | 2026 | | 2025 | | (decrease) | | ||
Revenue: | | | |
| | |
| | |
Equipment Revenue | | | | | | | | | |
Intrusion and access alarm products | | | | | | | | | |
Intrusion products | | $ | 6,811 | | $ | 6,696 | | 1.7 | % |
Access alarm products | | | 1,689 | | | 1,960 | | (13.8) | % |
Total intrusion and access alarm products | | | 8,500 | | | 8,656 | | (1.8) | % |
Door locking devices | |
| 15,350 | |
| 17,083 | | (10.1) | % |
Total equipment revenue | | | 23,850 | | | 25,739 | | (7.3) | % |
Service revenue | |
| 26,130 | |
| 23,429 | | 11.5 | % |
Total Revenue | | $ | 49,980 | | $ | 49,168 | | 1.7 | % |
Three Months Ended September 30, 2026:
Total revenue for the three months ended September 30, 2026, increased $812,000 (1.7%) to $49,980,000 as compared to $49,168,000 in the comparable period.
Net equipment revenues for the three months ended September 30, 2026, decreased $1,889,000 (7.3%) to $23,850,000 as compared to $25,739,000 in the comparable period. The decrease in net equipment revenue was attributable to decreases in sales of door locking products of $1,733,000 (10.1%) and decreases in intrusion and access products of $156,000 (1.8%).
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Door locking product revenue decreased primarily due to lower sales volume of approximately 13.1%, partially offset by pricing increases of approximately 3.0%.
The volume decline was driven mainly by lower demand at two of our larger locking distributors who were reducing existing inventory levels during the quarter. This decline was partially offset by higher demand because of increased project activity.
Revenue from our intrusion and access alarm products decreased because of lower volume (approximately 6.5%), primarily related to lower sales of our access products, partially offset by pricing increases (approximately 4.7%).
Net service revenues for the three months ended September 30, 2026, increased $2,701,000, or 11.5%, to $26,130,000 from $23,429,000 in the comparable period. The increase was due to growth in the number of our cellular (radio) communication devices placed in service and activated by dealers.
Gross Profit
Three Months Ended September 30, 2026
Overall gross profit for the three months ended September 30, 2026, increased $1,506,000 to $29,352,000, or 58.7% of net revenue, as compared to $27,846,000, or 56.6% of net revenue, for the comparable period.
Gross profit from equipment revenue was $5,807,000, or 24.3% of equipment revenue, as compared to $6,693,000, or 26.0% of equipment revenue, for the comparable period. The decrease in gross profit percentage from equipment revenue was a result of lower overall sales volume, product mix within our locking products, the impact of tariff increase (1.3%), increased inventory scrap (1.7%) and increased technical services costs (1.0%).
Gross profit as a percentage of service revenue was consistent in both periods. Gross profit on service revenues was $23,545,000, or 90.1% of net service revenues, as compared to $21,153,000, or 90.3% of net service revenues, for the comparable period a year ago.
Research and Development
Research and development expenses for the three months ended September 30, 2026, increased by $813,000 to $4,053,000, or 8.1% of net revenue, as compared to $3,240,000, or 6.6% of net revenue, for the comparable period. The increase in research and development expenses was primarily a result of increased labor compensation and benefit costs ($503,000) and engineering supplies ($76,000).
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2026, increased by $1,219,000 to $12,182,000, or 24.4% of net revenue, as compared to $10,963,000, or 22.3% of net revenue, for the comparable period. The increase in SG&A expenses was primarily attributable to increases in legal expenses ($1,075,000), consulting-related expenses ($155,000), commission-related expenses ($76,000) offset by decreases in advertising ($235,000).
Litigation settlement
During the quarter ended September 30, 2026 the Company recognized a benefit of $1 million for the difference between the litigation settlement costs accrued and what was paid, as a result of the difference in the estimated amount of insurance coverage and what was ultimately paid by the carriers which reduced the Company’s portion of the settlement payment. See Note 13.
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Interest and Other Income, Net
| | Three months ended September 30, (in thousdands) | | | ||||||
| | 2026 | | 2025 | | % Increase (Decrease) | | | ||
| | | | | | | | | | |
Interest Income | | $ | 1,117 | | $ | 852 | | 31% | | |
Investment Income | | | 115 | | | 138 | | ** | | |
| | | | | | | | | | |
| | $ | 1,232 | | $ | 990 | | | | |
**Percentage change not meaningful.
Interest income increased for the three months ended September 30, 2026, as compared to the comparable period, primarily due to higher interest rates and higher cash amounts invested.
Income Taxes
The Company’s provision for income taxes for the three months ended September 30, 2026 decreased by $130,000 to $2,340,000 as compared to $2,470,000 for the same period a year ago. The Company’s effective rate for income tax was 15.2% and 16.9% for the three months ended September 30, 2026 and 2025 respectively. The Company’s effective tax rate for the three months ended September 30, 2026 decreased due to the discrete items of $342,000 increasing the effective tax rate in the 3 months ended September 30, 2025.
Non-GAAP Measures
We define non-GAAP adjusted EBITDA as our GAAP net income plus income tax expense, less 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.
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.
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.
27
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, except share and per share data):
| Three months ended September 30, | | ||||
| 2026 | | 2025 | | ||
Non-GAAP adjusted EBITDA: | | | | | | |
Net income, as reported | $ | 13,009 | | $ | 12,165 | |
Interest income, net | | (1,117) | | | (854) | |
Provision for income taxes | | 2,340 | | | 2,470 | |
Depreciation and amortization | | 540 | | | 570 | |
Non-GAAP EBITDA | | 14,772 | | | 14,351 | |
Adjustments: | | | | | | |
Stock based compensation | | 273 | | | 309 | |
Nonrecurring legal expense(1) | | 1,464 | | | 282 | |
Litigation settlement(2) | | (1,000) | | | — | |
Total adjustments | | 737 | | | 591 | |
Non-GAAP adjusted EBITDA | $ | 15,509 | | $ | 14,942 | |
Non-GAAP adjusted EBITDA margin | | 31.0 | % | | 30.4 | % |
| | | | | | |
Non-GAAP per share data: | | | | | | |
Non-GAAP adjusted EBITDA per share - diluted | $ | 0.43 | | $ | 0.42 | |
| | | | | | |
Denominator: | | | | | | |
Weighted average shares outstanding | | | | | | |
Basic, as reported | | 35,768,000 | | | 35,658,000 | |
Effect of Dilutive Securities | | 113,000 | | | 207,000 | |
Diluted, (Denominator) | | 35,881,000 | | | 35,865,000 | |
| 1. | Nonrecurring Legal Expenses, which are net of any insurance reimbursements, are legal fees that are determined not to be of a normal recuring nature and expenses necessary to operate the business |
| 2. | Litigation settlement costs, which are net of any insurance reimbursements, were determined not to be of a recurring nature and costs that are not in the normal cost of business or necessary to operate the business |
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
During the three months ended September 30, 2026, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended June 30, 2026.
ITEM 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our management, including our CEO and our CFO, has concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were, in design
28
and operation, effective at the reasonable assurance level. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The information called for by this item is incorporated herein by reference to Note 13, Commitments and Contingencies, in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Item 1A. Risk Factors
Information regarding the Company’s Risk Factors are set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2026. There has been no material change in the risk factors previously disclosed in the Company’s Form 10-K and Form 424(b)(7) for the three months ended September 30, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
29
Item 6. Exhibits
31.1 | |
31.2 | |
32.1 | |
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 2, 2026
NAPCO SECURITY TECHNOLOGIES, INC.
(Registrant)
By: | /s/ KEVIN S. BUCHEL |
|
| Kevin S. Buchel | |
| Chief Executive Officer and President | |
| (Chief Executive Officer) |
|
|
|
|
|
|
|
By: | /s/ ANDREW J. VUONO |
|
| Andrew J, Vuono | |
| Chief Financial Officer and Chief Accounting Officer | |
| (Principal Financial and Accounting Officer) | |
31
EXHIBIT 31.1
SECTION 302 CERTIFICATION
I, Kevin Buchel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Napco Security Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 2, 2026
| /s/ KEVIN S. BUCHEL |
| Kevin S. Buchel |
| Chief Executive Officer and President |
| (Principal Executive Officer) |
EXHIBIT 31.2
SECTION 302 CERTIFICATION
I, Andrew J. Vuono, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Napco Security Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 2, 2026
| /s/ANDREW J. VUONO |
| Andrew J. Vuono |
| Chief Financial Officer and Chief Accounting Officer |
| (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Napco Security Technologies, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2026, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, KEVIN S. BUCHEL, Chief Executive Officer of the Company, certify, that to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 2, 2026
/s/ KEVIN S. BUCHEL | |
Kevin S. Buchel, Chief Executive Officer and President | |
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Napco Security Technologies, Inc. (the “Company”) on Form 10-Q for the period ending September 30, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, ANDREW J. VUONO, Chief Financial Officer of the Company, certify, that to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 2, 2026
/s/ANDREW J. VUONO | |
Andrew J. Vuono, Chief Financial Officer and Chief Accounting Officer | |
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.