Napco Security Technologies 2025 Q3 Earnings Meets Expectations Despite Net Income Drop of 23.3%

Napco Security Technologies (NSSC) reported its fiscal 2025 Q3 earnings on May 05th, 2025. Napco reported earnings of $0.28 per share, slightly surpassing the consensus estimate of $0.27. Revenue reached $43.96 million, falling short of expectations of $45.11 million. The company raised its quarterly dividend to $0.14 per share, an increase from $0.125, reflecting a positive outlook on future growth. The guidance anticipates further service revenue growth driven by new product offerings.

Revenue
Napco Security Technologies saw a decline in overall revenue for Q3 2025 compared to the same quarter in the previous year. Equipment revenues totaled $22.35 million, experiencing a notable decrease, while service revenues reached $21.61 million, showcasing a positive trend. Together, these segments contributed to a total revenue of $43.96 million.

Earnings/Net Income
Napco Security Technologies's EPS declined 22.2% to $0.28 in 2025 Q3 from $0.36 in 2024 Q3. Meanwhile, the company's net income declined to $10.12 million in 2025 Q3, down 23.3% from $13.20 million reported in 2024 Q3. The company's EPS performance indicates challenges in maintaining previous growth levels.

Price Action
The stock price of Napco Security Technologies has dropped 7.19% during the latest trading day, has jumped 8.21% during the most recent full trading week, and has climbed 7.69% month-to-date.

Post-Earnings Price Action Review
Over the past five years, buying Napco Security Technologies shares post-earnings and holding for 30 days has yielded impressive returns, outperforming the benchmark significantly. The strategy delivered a cumulative return of 101.75%, surpassing the benchmark's 55.54% return by 46.20%. Despite a maximum drawdown of -31.97% and a moderate Sharpe ratio of 0.57, the compound annual growth rate (CAGR) stood at 16.46%, highlighting consistent return generation. The results demonstrate the strategy's potential despite inherent risks, maintaining a balanced approach to investing in Napco's shares after earnings announcements.

CEO Commentary
Dick Soloway, Chairman and CEO of Napco Security Technologies, expressed confidence in the company's performance despite external challenges, highlighting a 30% adjusted EBITDA margin and a 91% gross margin in service revenues. He noted that recurring service revenue accounted for 49% of total revenue, with a strong annualized run rate of approximately $89 million. Soloway emphasized the importance of innovation, stating, "We are accelerating innovation, and our product development pipeline is the strongest it has ever been," aiming to expand their portfolio and capture market share. He described the outlook as optimistic, anticipating continued growth driven by new product introductions and strong customer demand.

Guidance
Napco Security Technologies expects to issue a quarterly dividend of $0.14 per share, reflecting a sequential increase from the previous $0.125 per share. The company maintains an annualized recurring revenue run rate of approximately $89 million and anticipates that new product offerings will contribute to service revenue growth. Soloway indicated a strategic focus on expanding market share and driving innovation, with expectations of crossing the 50% threshold in recurring revenue as a significant part of overall business growth moving forward.

Additional News
Napco Security Technologies is facing a securities class action lawsuit, Patel v. Napco Security Technologies, Inc., due to a significant drop in stock price following disappointing Q2 2025 earnings. Investors allege misleading statements regarding sales and forecasting practices. The lawsuit seeks to represent investors who purchased Napco securities between February 5, 2024, and February 3, 2025. Hagens Berman, a prominent shareholder rights firm, is investigating possible violations of securities laws. Investors who have suffered substantial losses are encouraged to submit their claims. The firm highlights potential issues with Napco's sales practices and forecasting abilities as key areas of concern.