Napco Security’s Q4 2025 Earnings Call: Unpacking Contradictions in Inventory, Pricing, and Revenue Growth

Distributor inventory and sell-through statistics, price increases and their impact on sales, recurring service revenue growth rate, impact of tariffs on market competitiveness, and inventory levels and sell-through statistics are the key contradictions discussed in Napco Security's latest 2025Q4 earnings call.



Recurring Revenue Growth:
- Napco Security reported a record recurring revenue run rate of $94 million, marking a $5 million increase from the previous quarter, which was the largest quarterly increase in two years.
- This growth is attributed to the success of the StarLink Fire radio platform, increased customer engagement, and strategic product development.

Higher Revenue Despite Tariffs:
- Despite facing 5% decrease in equipment sales compared to the previous year's Q4, Q4 sales increased by 27% sequentially from Q3.
- This rebound was driven by effective inventory control, strong customer relationships, and proactive pricing strategies to offset tariff-related pressures.

Strong Financial Performance:
- Napco ended the fiscal year with net income of $43.4 million or 24% of sales, and adjusted EBITDA of $52.1 million, representing a 29% EBITDA margin.
- This performance was supported by a strong recurring revenue model, operational discipline, and strategic investments in product development and customer success.

Capital Return and Cash Position:
- The company returned significant value to shareholders, paying $13.6 million in dividends and repurchasing $36.8 million of stock, while maintaining a strong cash position of approximately $100 million.
- This capital management strategy is attributed to the company's ability to generate consistent cash flow and maintain a debt-free balance sheet.