NSSC 10-K & 10-Q changes, risk factors and insider trading
Napco Security Technologies, Inc. · Nasdaq · Communications Equipment, Nec · CIK 69633 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Increased demand for semiconductors and electronic components driven by artificial intelligence ("AI") infrastructure and data center expansion could adversely affect our supply chain and operating results.”
Largest changes
“We primarily source our manufacturing materials from Asia, including Taiwan, India and China, with additional sourcing from other producers throughout the world. There have been significant enacted and proposed reciprocal tariffs on certain of these countries. …”see in full comparison
“Increased demand for semiconductors and electronic components driven by artificial intelligence ("AI") infrastructure and data center expansion could adversely affect our supply chain and operating results.”see in full comparison
“For the year ended June 30, 2024, management identified a control deficiency related to inventory costing, as a result of ineffective review of information used in the inventory costing process that was considered a material weakness. Although we remediated this material weakness as of June 30, 2025, there is no assurance that additional material weaknesses will not occur or that we will be able to remediate any additional material weaknesses in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the SOX Act. …”see in full comparison
“While we may seek to mitigate the impact of tariffs through pricing actions, sourcing alternatives, contractual arrangements, or supply chain adjustments, there can be no assurance that such measures will fully offset increased costs or disruptions. Furthermore, ongoing litigation, administrative actions, and governmental policy changes relating to tariffs may create uncertainty regarding the amount, timing, and recoverability of any tariff-related costs or refunds. …”see in full comparison
“On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, (which includes imports from the Dominican Republic where we manufacture most of our products) plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S. presents significant challenges to our operations and supply chain and could impact future result. We cannot predict what additional actions might be considered or implemented by the U.S. …”see in full comparison
“Future tariff actions, retaliatory trade measures, changes in tariff rates, expansion of tariff coverage, or modifications to applicable exemptions could increase our costs of goods sold, reduce profit margins, disrupt our supply chain, and negatively impact demand for our products. Although certain tariffs imposed under IEEPA have been invalidated by courts and may be subject to refund claims, replacement tariffs imposed under Section 122, Section 301, or other trade authorities may continue, expand, or be modified. …”see in full comparison
Full comparison: every changed paragraph (21)
Our business could be materially adversely affected as a resultbecause of general economic and market conditions.
We are subject to the effects of general economic and market conditions. In the event thatIf any of these conditions deteriorate, our revenue, profit and cash-flow levels could be materially adversely affected in future periods. In the event of such deterioration, many of our current or potential future customers may experience serious cash flow problems and as a result may,may modify, delay or cancel purchases of our products. Additionally, customers may not be able to pay, or may delay payment of, accounts receivable that are owed to us. If such events do occur, they may result in our expenses being too high in relation to our revenues and cash flows. Volatile, negative, or uncertain economic conditions, an increase in the likelihood of a recession, or concerns about these or other similar risks may negatively affect the demand for our products, which could materially and adversely affect our business, results of operations, and financial condition.
Our business may also be materially adversely affected by the announcement or introduction of new products and services by our competitors, and the implementation of effective marketing or sales strategies by our competitors. Our industry is characterized by constantly improved products. There can be no assurance that competitors will not develop products that are superior to the Company’s products. We have historically invested approximately 5%6% to 8%7% of annual revenues on R&D to mitigate this risk. However, many of our competitors have dedicated more resources and capabilities to R&D, including committing more engineers and capital expenditures, to develop and design new productproducts that may enter the marketsmarket sooner or with more penetration. Future success will depend, in part, on our ability to continue to develop and market products and product enhancements cost-effectively. The Company’s research and development expenditures are principally targeted at enhancing existing products, and to a lesser extent at developing new ones. Further, there can be no assurance that the Company will not experience additional price competition, and that such competition may not adversely affect the Company’s revenues and results of operations
Increased demand for semiconductors and electronic components driven by artificial intelligence ("AI") infrastructure and data center expansion could adversely affect our supply chain and operating results.
The rapid growth of AI applications and the expansion of large-scale data centers have significantly increased global demand for semiconductors, processors, memory devices, power management components and other electronic parts. As a result, component manufacturers may prioritize production capacity for higher-volume or higher-margin customers serving AI, cloud computing and hyperscale data center markets.
We rely on a variety of third-party suppliers for critical electronic components used in our products. Increased competition for available semiconductor capacity could result in extended lead times, reduced allocations, higher prices, supply shortages and less favorable purchasing terms. In addition, shortages affecting a single component may delay the production and shipment of finished products, even when other materials remain available.
While we maintain inventory strategies, supplier relationships and alternative sourcing initiatives designed to mitigate supply disruptions, there can be no assurance that these efforts will be sufficient. Any significant interruption in the supply of critical components, inability to obtain required quantities at commercially reasonable prices, or failure of suppliers to meet our requirements could increase our costs, delay customer deliveries, reduce revenue, adversely affect margins and harm our reputation with customers.
The impact of these risks may be amplified by geopolitical tensions, trade restrictions, manufacturing concentration in certain regions, transportation disruptions or continued growth in AI-related demand for advanced and legacy semiconductor products.
Certain of our expenses are fixed or semi-variable, including our costs for operating our manufacturing facilities. While expense levels relativerelating to current sales levels result in positive net income and cash flows, if sales levels decrease significantly and we are unable to reduce expenses proportionately, our business may be adversely affected. The amount of our operating expenses are subject to variables and factors that may not be within our control, including but are not limited to, unexpected expenses relating to the manufacturing of products; increased compensation requirementrequirements for our employees and cost of raw materials. A significant portion of our expense is labor cost, including costs for workers who are operating our facility in the Dominican Republic. While we have been able to control our expenses due to the lower labor costs in the Dominican Republic, there is no guarantee that such costs will not increase in the future, or that a sufficient number of workers in Dominican Republic will be available to operate the facility efficiently, and our failure to maintain effective labor costs may adversely affect our results of operations. We may face heightened inflationary pressure, which could impact the cost of doing business in both supply and labor markets. Any potential inflationary pressures could be exacerbated by geopolitical turmoil and economic policy actions, and the duration of any such pressures is uncertain.
The financial health of our distributors and wholesalers and our continuing relationships with them are important to our success. Some of these distributors and wholesalers, particularly smaller firms with limited working capital and resources, may not be able to withstand adverse changes in business conditions or mitigate the negative impact of a prolonged economic downturn or recession, including the impact of the COVID-19 pandemic. The failure of our distributors to maintain financial heathhealth and success will impact our ability to generate revenues. Furthermore, our relationship with distributors may change or terminate due to other factors beyond our control, including but are not limited to, acquisition of distributors by third parties may not be willing to continue the relationship with us; internal restructuring or refocus of business strategies; and changes in management, all of which may negatively impact our ability to continue to sell to such distributors. Finally, we generally do not have long-term agreements with distributors who purchase our products primarily through purchase orders. Without an agreement, we are not able to guarantee that such distributors will not discontinue or terminate relationship with us at any time, and any loss of distributor will negatively impact our financial conditions and results of operations.
The occurrence of any of these factors may adversely affect the production output and operation of our factory, which will disrupt our supply chain and negatively impact our financial performance. Furthermore, we have not identified any alternative third-party factory that can manufacture our products; thereforetherefore, it would be difficult for us to replace any loss of output of capacity if our factory in Dominican Republic is not functioning properly or at all.
FutureChanges changes toin U.S. income tax or trade policies impacting multi-national companies,policies, including tariffs,tariffs couldmay materiallyadversely affect our business, financial conditioncondition, and results of operations. Tariff decisions in the current environment has become difficult to predict.
We source certain raw materials, components, and finished goods from international suppliers and are therefore exposed to changes in U.S. trade policy. In recent years, the United States has imposed, modified, suspended, or terminated tariffs under various statutory authorities, including IEEPA, Section 122, and Section 301. These actions have been subject to significant legal, political, and regulatory uncertainty, including court challenges and subsequent replacement tariffs. Recent developments have included judicial rulings concerning the legality of certain IEEPA-based tariffs and the implementation of alternative tariff programs under Section 122 and Section 301 authorities.
Future tariff actions, retaliatory trade measures, changes in tariff rates, expansion of tariff coverage, or modifications to applicable exemptions could increase our costs of goods sold, reduce profit margins, disrupt our supply chain, and negatively impact demand for our products. Although certain tariffs imposed under IEEPA have been invalidated by courts and may be subject to refund claims, replacement tariffs imposed under Section 122, Section 301, or other trade authorities may continue, expand, or be modified. The ultimate scope, duration, and economic impact of these measures remain uncertain and could adversely affect our sourcing costs, supply chain stability, and operating results. In addition, uncertainty regarding future trade policy may adversely affect purchasing decisions by customers, availability of suppliers, ocean freight capacity, and inventory planning.
While we may seek to mitigate the impact of tariffs through pricing actions, sourcing alternatives, contractual arrangements, or supply chain adjustments, there can be no assurance that such measures will fully offset increased costs or disruptions. Furthermore, ongoing litigation, administrative actions, and governmental policy changes relating to tariffs may create uncertainty regarding the amount, timing, and recoverability of any tariff-related costs or refunds. As a result, changes in the tariff environment could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, (which includes imports from the Dominican Republic where we manufacture most of our products) plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S. presents significant challenges to our operations and supply chain and could impact future result. We cannot predict what additional actions might be considered or implemented by the U.S. or its trade partners, particularly in the current geopolitical environment. We anticipate that the imposition of the baseline 10% tariff will increase the cost of our products and could impact product margins. The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs. We are closely monitoring the evolving tariff landscape and attempting to mitigate these impacts, including using pricing adjustments, sourcing strategies and other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impacts of such tariffs or that the imposition of tariffs, and the resulting economic impact on the U.S. market and consumer, will not be material to our financial results.
We primarily source our manufacturing materials from Asia, including Taiwan, India and China, with additional sourcing from other producers throughout the world. There have been significant enacted and proposed reciprocal tariffs on certain of these countries. At this time, the overall impact on our business related to tariffs remains uncertain and depends on multiple factors, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, reciprocal measures by impacted trade partners, inflationary effects, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.
The success of the Company is largely dependent on the effort and service of our senior management members, including Mr. Richard Soloway, the founder,Founder Chiefand Executive Officer, Chairman of our board of directors,Chairman, and Mr. Kevin Buchel, PresidentChief Executive Officer and Chief Operating Officer.President. We depend on them for various aspects of our business operation, including their experience and knowledge in the industry, extensive relationships with distributors and customers, and their leadership to develop and implement business strategies. The loss or reduction of services by Mr. Soloway and Mr. Buchel could have a material adverse effect on the Company’s business and prospects. Messrs Soloway and Buchel are 7980 and 7273 years old, respectively.
Recent and proposed changes to SEC reporting and filer-status requirements may affect the Company's future compliance obligations under Section 404 of the Sarbanes-Oxley Act and other disclosure rules. Regardless of any reduction in external attestation requirements, management remains responsible for maintaining effective internal control over financial reporting. Failure to maintain effective controls, successfully implement regulatory changes, or address evolving disclosure requirements could result in increased compliance costs, regulatory scrutiny, litigation exposure, reputational harm, or loss of investor confidence.
For the year ended June 30, 2024, management identified a control deficiency related to inventory costing, as a result of ineffective review of information used in the inventory costing process that was considered a material weakness. Although we remediated this material weakness as of June 30, 2025, there is no assurance that additional material weaknesses will not occur or that we will be able to remediate any additional material weaknesses in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the SOX Act. If we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the SOX Act in a timely manner, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be materially adversely affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
Stockholder activism, which can take many forms or arise in a variety of situations, including making public demands that we consider certain strategic alternatives, engaging in public campaigns to attempt to influence our corporate governance and/or our management, and commencing proxy contests to attempt to elect the activists’ representatives or others to our Board of Directors, has been increasing recently. Volatility in the price of our common stock or other reasons has caused, and may continue in the future to cause, us to become the target of securities litigation or stockholder activism. Activist stockholders who disagree with the composition of our Board of Directors, our strategy, or the way our company is managed may seek to effect change through various strategies and channels, such as through commencing a proxy contest, making public statements critical of our performance or business, or engaging in other similar activities. Responding to any actions by activist stockholders, including proxy contests, can be costly and time-consuming, has diverted the attention of management, our Board of Directors,Directors and our employees, and may be disruptive to our operations. We may be required to incur significant fees and other expenses related to activist stockholder matters, including for third-party advisors.
Management's Discussion & Analysis (MD&A)
New heading “Litigation settlement costs”
New heading “Non-GAAP Measures”
Largest changes
“We primarily source our manufacturing materials from Asia, including Taiwan, India and China, with additional sourcing from other producers throughout the world. There have been significant enacted and proposed reciprocal tariffs on certain of these countries. …”see in full comparison
“On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, (which includes imports from the Dominican Republic where we manufacture most of our products) plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The reciprocal country-specific tariffs were subsequently paused for 90 days on most countries. The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S. presents significant challenges to our operations and supply chain and could impact future result. …”see in full comparison
“We define non-GAAP adjusted EBITDA as our GAAP net income plus income tax expense, net interest income, stock-based compensation, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, litigation settlement costs, and depreciation and amortization expense. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense and stock-based compensation expense related to equity compensation. …”see in full comparison
“The increase in gross profit percentage from equipment revenue was primarily a result of price increases (inclusive of lower sales discounts and allowance), the impact of the refund of tariffs paid in fiscal 2025 (1.0%), reduced charges related to inventory reserves (0.5%), offset by increased technical services costs (0.5%) as a result of investments in AI automation solutions.”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (41)
Please see Non-GAAP Measures below in this section of this Annual Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with GAAP, for the years ended June 30, 2026 and 2025.
On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid, and in March 2026, the U.S. Court of International Trade further ruled that importers that paid such tariffs are due refunds. Although certain tariffs imposed under IEEPA have been invalidated by courts and are subject to refund claims, replacement tariffs have been imposed under Section 122 and Section 301, and other trade authorities may continue, expand, or be modified. The ultimate scope, duration, and economic impact of these measures remain uncertain. As of June 30, 2026 the Company has received or accrued certain IEPPA refund claims. The Company has submitted additional claims which the Company cannot ensure the probability of collection and therefore, no refund receivable has been recognized related to these claims.
The AI data center buildout has increased demand across a broad range of electronic components, including microcontrollers, memory devices, power management integrated circuits, networking components and other semiconductors used in our products. Suppliers may allocate limited manufacturing capacity to customers serving AI and cloud infrastructure markets, reducing availability for security and access control manufacturers such as us.
Consequently, we may experience longer lead times, cost increases, allocation restrictions or reduced product availability from suppliers. If we are unable to obtain sufficient quantities of critical components, identify alternative sources, or pass increased costs to customers, our ability to manufacture and deliver products could be adversely affected.
On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, (which includes imports from the Dominican Republic where we manufacture most of our products) plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The reciprocal country-specific tariffs were subsequently paused for 90 days on most countries. The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S. presents significant challenges to our operations and supply chain and could impact future result. We cannot predict what additional actions might be considered or implemented by the U.S. or its trade partners, particularly in the current geopolitical environment. We anticipate that the imposition of the baseline 10% tariff will increase the cost of our products and could impact product margins. The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs. We are closely monitoring the evolving tariff landscape and attempting to mitigate these impacts, including using pricing adjustments, sourcing strategies and other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impacts of such tariffs or that the imposition of tariffs, and the resulting economic impact on the U.S. market and consumer, will not be material to our financial results.
We primarily source our manufacturing materials from Asia, including Taiwan, India and China, with additional sourcing from other producers throughout the world. There have been significant enacted and proposed reciprocal tariffs on certain of these countries. At this time, the overall impact on our business related to tariffs remains uncertain and depends on multiple factors, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, reciprocal measures by impacted trade partners, inflationary effects, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.
Refer to Risk Factors (Part I, Item 1A of this Form 10-K) for a discussion of thesevarious risk factors andthat othercould risks.affect us.
Our cash and cash equivalents and short-term investments are as follows (in thousands):
A summary of the cash flow activity for the year ended June 30, 20252026 and 20242025 is as follows (in thousands):
Net cash provided by operating activities was $53.5$61.1 million for the year ended June 30, 20252026 and was due to net income of $43.4$43.0 million, adjustments for non-cash items of $3.1$4.8 million and an increase in cash flow from changes in operating assets and liabilities of $7.0$13.3 million. The changes in operating assets and liabilities were largely attributable to decreases in inventories, accounts receivablesinventories and prepaidincreases in accrued expenses offset by decreasesincreases in accounts payablesreceivables, income tax receivable and accruedprepaid expenses.
Net cash provided by operating activities was $45.4$53.5 million for the year ended June 30, 20242025 and was due to net income of $49.8$43.4 million andmillion, adjustments for non-cash items of $2.7$3.1 million,million partiallyand offsetan by a decreaseincrease in cash flow from changes in operating assets and liabilities of $7.1$7.0 million. The changes in operating assets and liabilities were largely attributable to increasesdecreases in inventories, accounts receivables,receivable and prepaid expenses, accrued expenses andoffset income taxes receivable andby decreases in otheraccounts assetspayables and accountsaccrued payable.expenses.
The cash provided by investing activities during the year ended June 30, 2026 was primarily attributable to proceeds from the sale of marketable securities. The Net cash provided by investing activities was partially offset by net cash used for capital expenditures and purchase of marketable securities. The cash provided by investing activities during the year ended June 30, 2025 was primarily attributable to proceeds from the sale of marketable securities as well as the redemption of our Certificate of Deposits which were classified as other investments. The Net cash provided by investing activities was partially offset by net cash used for capital expenditures and purchase of marketable securities. The cash used in investing activities during the year ended June 30, 2024 was primarily attributable to cash used for capital expenditures and purchase of certificates of deposits. The change in cash for investing activities from 2024 to 2025 was an increase in proceeds received from marketable securities and other investments.
The cash used in financing activities for the year ended June 30, 2026 was primarily related to the payment of stockholder dividends as well as payment of tax withholdings related to stock option exercises while the year ended June 30, 2025 was primarily related to the payment of stockholder dividends asand well asthe purchase of treasury shares while the year ended June 30, 2024 was primarily related to the payment of stockholder dividends.shares.
Working Capital. Working capital decreasedincreased by $8,147,000$27,142,000 to $165,529,000 as of June 30, 2026 from $138,387,000 at June 30, 2025 from $146,534,000 at June 30, 2024.2025. Working capital is calculated by deducting Current Liabilities from Current Assets.
As of June 30, 2025,2026, the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of business. On April 26, 1993, the Company's foreign subsidiary entered into a 99-year land lease for approximately 4 acres of land in the Dominican Republic, on which the Company’s principleprincipal 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.
Revenue
Revenue by major product lines is as follows:
Net Sales
Net salesrevenue in fiscal 20252026 decreasedincreased by $7,199,000$20,695,000 to $181,621,000$202,316,000 as compared to $188,820,000$181,621,000 in fiscal 2024.2025.
Net equipment revenue in fiscal 20252026 decreasedincreased $17,780,000$9,497,000 to $95,291,000$104,788,000 as compared to $113,071,000$95,291,000 in fiscal 2024.2025. The decreaseincrease in net salesequipment revenues was primarily due to decreasedincreased salesrevenue of the Alarm Lock brandfrom door-locking products of $7,183,000,$6,925,000, Marksor brand11.1% door-lockingand increased revenue of intrusion and access products of $4,309,000,$2,573,000 Napcomillion Accessor Pro brand access control products of $2,274,000 and Napco brand intrusion products of $4,014,000.7.8%.
The increased revenue from our door locking products was primarily a result of the impact of pricing increases (approximately 6.1%) with the balance due to increased sales volume (approximately 5.0%). The impact of price increases was a result of both our Alarm Lock and Marks USA locking divisions (approximately 6.7% and 4.8%, respectively), sales volume on Alarm Lock grew approximately 13% and Marks USA volume decreased approximately 8.2% as compared to Fiscal 2025.
The increased revenue in our intrusion and access alarm division was primarily a result of the impact of pricing increases (approximately 9.1%), offset by a decrease in volume (approximately 1.3%). Intrusion product revenue increased by approximately 14.3% because of price increases of 10.4% and increased volume of 3.9%, primarily driven by the sale of our fire radio communicators. Access alarm products revenue decreased approximately 11.0% because of price increases of 4.2%, offset by decreased volume of approximately 15.2%.
The overall decrease in net equipment sales was attributable to the reduction of sales of approximately $6.4 million to one of the Company’s larger distributors, which purchases both our intrusion and locking products. In addition, the reduction in door locking device sales was primarily attributable to reduced purchases by three of the Company’s locking customers of approximately $9.4 million.
The decrease in equipment revenue was a result of these larger distributors extended destocking strategies throughout the year, in addition to the timing of large project work for our door-locking business and to a lesser extent general softness in demand due to customer uncertainty related to global tariff policies. In fiscal 2024 our door-locking revenue was positively impacted by a large commercial real estate project. The timing of project work is difficult to predict from period to period due to numerous factors.
Net service revenues for fiscal 20252026 increased $10,581,000$11,198,000 to $86,330,000$97,528,000 as compared to $75,749,000$86,330,000 in fiscal 2024.2025. The increase in net service revenues was due to an increase in the number of our cellular communication devices (radios) put into service and activated. The main driver of new activations was new installations of our fire radio communicators installed by our dealer network.
The Company's gross profit increased by $18,761,000 to $119,791,000 in fiscal 2026 as compared to $101,030,000 in fiscal 2025. Overall, gross margins increased to 59.2% of net revenue in 2026 from 55.6% in 2025.
Gross profit from equipment revenue was $31,757,000 or 30.3% of net equipment revenue, as compared to $22,496,000 or 23.6% of net equipment revenue, in fiscal 2025.
The increase in gross profit percentage from equipment revenue was primarily a result of price increases (inclusive of lower sales discounts and allowance), the impact of the refund of tariffs paid in fiscal 2025 (1.0%), reduced charges related to inventory reserves (0.5%), offset by increased technical services costs (0.5%) as a result of investments in AI automation solutions.
Gross profit as a percentage of service revenue was consistent in both periods. Gross profit on service revenue was $88,034,000 or 90.3% of net service revenue in fiscal 2026 and $78,534,000 or 91.0% of net service revenue, in fiscal 2025.
The Company's gross profit decreased by $724,000 to $101,030,000 in fiscal 2025 as compared to $101,754,000 in fiscal 2024. Gross profit on equipment sales was $22,496,000 or 23.6% of net equipment sales in fiscal 2025 and $33,209,000 or 29.4% of net equipment sales, in fiscal 2024. Gross profit on service revenues was $78,534,000 or 91% of net service revenues in fiscal 2025 and $68,545,000 or 90.5% of net service revenues, in fiscal 2024. Overall, gross margins increased to 56% of net sales in 2025 from 54% in 2024.
The decrease in Gross profit margins on equipment sales was primarily a result of overall lower equipment sales levels which results in less absorption of fixed manufacturing overhead costs in addition to the impact of tariff costs in the fourth quarter of Fiscal 2025 as a result of distributors pulling forward orders before our announced price increase went into effect.
Research and Development expenses increased by $1,818,000$1,210,000 to $13,791,000 or 6.8% of net revenue in fiscal 20252026 as compared to $12,581,000 or 6.9% of net revenue in fiscal 2024,2025. The increase is primarily due to increases of $1,750,000$1,040,000 in personnel-related expenses mainly from annual merit increases and the hiring of additional engineering staff. The head count of engineering staffstaff, increasedand byadditional 11% from 72 at the endcost of Fiscalobtaining 2024UL toapprovals 80$106,000 atfor thenew end of Fiscal 2025.products.
Selling, general and administrative expenses for fiscal 20252026 increased by $5,017,000$2,172,000 to $44,362,000 or 21.9% of net revenue as compared to$42,190,000 or 23.2% of net revenue in fiscal 2024,2025. The increase is primarily due to increases of $3,451,000$767,000 in personnel-related expenses mainly from merit increases and the hiring of additional personnel in the financesales and information technology departments, $500,000$775,000 in insurance,commission $370,000payments mainly from the aforementioned increases in advertising,equipment $313,000revenue, $327,000 in legaltradeshow related activities, $184,000 in insurance and professional$152,000 fees,in 401(k) matching expenses, $104,000 in credit card processing fees related to our service revenue, and $110,000 in other administrative costs, offset by decreases in $130,000 in Directorprofessional fees andof $500,000 in transactions costs associated with the Company’s Form S-3 filing during fiscal 2024.$247,000.
Litigation settlement costs
Litigation settlement costs, net of any insurance reimbursements of $16,000,000 was recognized in fiscal 2026 as a result of the settlement described in Note 14.
The Company’s provision for income taxes for fiscal 20252026 remainedincreased consistentby at$132,000 $6,663,000to $6,795,000 as compared to $6,568,000$6,663,000 for the same period a year ago. The Company’s effective tax rate for(13.6% fiscal 2026 and 13.3% fiscal 2025) increasedwas toconsistent 13%in asboth compared to 12% for fiscal 2024 as a result of a larger portion of the Company’s taxable income being attributable to United States operations.periods.
Non-GAAP Measures
We define non-GAAP adjusted EBITDA as our GAAP net income plus income tax expense, net interest income, stock-based compensation, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, litigation settlement costs, and depreciation and amortization expense. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense and stock-based compensation expense related to equity compensation. We define non-GAAP adjusted EBITDA margin as Adjusted EBITDA divided by net revenue. Non-GAAP adjusted EBITDA and adjusted EBITDA margin are not a measure calculated in accordance with GAAP. See the table below for a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
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.
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):
What changed in the latest 10-Q
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, 2025 as well as the Form 424(b)(7) Prospectus, filed on March 7, 2024. 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 and nine months ended March 31, 2026.
Full comparison: every changed paragraph (1)
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, 2025 as well as the Form 424(b)(7) Prospectus, filed on March 7, 2024. 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 and sixnine months ended DecemberMarch 31, 2025.2026.
Management's Discussion & Analysis (MD&A)
New heading “Nine Months Ended March 31, 2026”
New heading “Litigation settlement costs”
Removed heading “Six Months Ended December 31, 2025”
Largest changes
“The United States economy continues to experience various macroeconomic pressures, including pricing pressure from tariffs and inflation, sustained high interest rates, increased fuel costs and general economic and political uncertainty.”see in full comparison
see in full comparisonTheWeU.S.willgovernment implemented new tariff measures affecting a broad range of imported materials. Certain countries have respondedcontinue tothemonitorU.S.thesetariffsdevelopmentsbyandimposingassessortheirthreateningpotentialretaliatoryimpacts,tariffs. While weand are actively monitoring thechanges inchanging global tradepolicypolicies and the effects they may have on our business and broader macroeconomicenvironment,environment; we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global marketsas a resultbecause ofthe newU.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact oursupplierssupplier’s ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries.Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact the demand for our products.
“The universal baseline tariff of 10% includes imports from the Dominican Republic where we manufacture most of our products. The imposition of the baseline 10% tariff increased the cost of our products and could impact future product margins. The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs.”see in full comparison
“The Company’s provision for income taxes for the three months ended March 31, 2026 decreased by $1,680,000 to $206,000 as compared to $1,886,000 for the same period a year ago. The Company’s effective rate for income tax was (102.0)% and 15.7% for the three months ended March 31, 2026 and 2025 respectively. The Company’s provision for income taxes for the nine months ended March 31, 2026 decreased by $414,000 to $4,912,000 as compared to $5,326,000 for the same period a year ago. …”see in full comparison
Full comparison: every changed paragraph (46)
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 uncertainuncertain, 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.
Since 1969, NAPCO has established a heritage and proven record in the professional security community for reliably 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 and sixnine months ended DecemberMarch 31, 20252026 compared with the comparable period included:
Our industry is dynamic and highly competitive,competitive; our competitors are continually developing new products and solutions for consumers and businesses 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 innovates 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.forces to adapt and respond to customer and user preferences over an extended time in pace with this changing environment... We must continue to evolve and
The United States economy continues to experience various macroeconomic pressures, including pricing pressure from tariffs and inflation, sustained high interest rates, increased fuel costs and general economic and political uncertainty.
On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid, and in March 2026, the U.S. Court of International Trade further ruled that importers that paid such tariffs are due refunds. Although we may be entitled to refunds of previously paid IEEPA tariffs, the amount and timing of any such refunds remain uncertain, and as of March 31, 2026, we have not recorded any amounts related to potential recoveries. Following these rulings, new tariffs under other laws and on imports from more countries were imposed, in addition to existing non-IEEPA tariffs.
TheWe U.S.will government implemented new tariff measures affecting a broad range of imported materials. Certain countries have respondedcontinue to themonitor U.S.these tariffsdevelopments byand imposingassess ortheir threateningpotential retaliatoryimpacts, tariffs. While weand are actively monitoring the changes inchanging global trade policypolicies and the effects they may have on our business and broader macroeconomic environment,environment; we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global markets as a resultbecause of the new U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact our supplierssupplier’s ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact the demand for our products.
Additionally, increased fuel costs resulting from the conflict in Iran and geopolitical tensions in the region has increased macroeconomic uncertainty generally and may lead to higher freight expense and cost pressure on the products offered by the Company. These pressures have impacted, and may continue to impact in the future, the Company’s business, financial condition and results of operations.
Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact on the demand for our products.
The universal baseline tariff of 10% includes imports from the Dominican Republic where we manufacture most of our products. The imposition of the baseline 10% tariff increased the cost of our products and could impact future product margins. The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs.
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.
Three Months Ended DecemberMarch 31, 20252026:
Net equipment revenues for the three months ended DecemberMarch 31, 2025,2026, increased $2,598,000$1,887,000 (12.0%8.4%) to $24,323,000$24,238,000 as compared to $21,725,000$22,351,000 in the comparable period. The increase in net equipment revenue was attributable to increases in sales of door locking products of $1,781,000$1,484,000 (12.6%10.4%) and intrusion and access products of $817,000$403,000 (10.8%5.0%). The increased revenue infrom our door locking products was primarily a result of the impact of pricing increases (approximately 7%5.0%) thatwith wentthe intobalance effecta inresult Fiscal 2026 in addition toof general increase in sales volume (approximately 5.6%5.4%). The increased revenue in our intrusion and access alarm products was primarily a result of the impact of pricing increases that(approximately went10.1%), intooffset effectby a decrease in Fiscalvolume 2026.(approximately 5.1%) primarily related to our access products.
Net service revenues for the three months ended DecemberMarch 31, 2025,2026, increased $2,641,000$3,319,000 (12.5%15.4%) to $23,849,000$24,929,000 as compared to $21,208,000$21,610,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
SixNine Months Ended DecemberMarch 31, 20252026:
Revenue for the sixnine months ended DecemberMarch 31, 2025,2026, increased $10,404,000$15,610,000 (12.0%11.9%) to $97,340,000$146,507,000 as compared to $86,936,000$130,897,000 in the comparable period.
Net equipment revenues for the sixnine months ended DecemberMarch 31, 2025,2026, increased $5,420,000$7,307,000 (12.1%10.9%) to $50,062,000$74,300,000 as compared to $44,642,000$66,993,000 in the comparable period. The increase in net equipment revenue was attributable to increases in the sales of door locking products of $5,011,000$6,494,000 (17.9%15.3%) and intrusion and access products of $409,000$813,000 (2.5%3.3%). The increased revenue infrom our door locking products was primarily a result of the impact of pricing increases (approximately 7%6.3%) thatwith wentthe intobalance effecta inresult Fiscal 2026 in addition toof general increase in sales volume (approximately 10.0%9.0%). The increased revenue in our intrusion and access alarm products was primarily a result of the impact of pricing increases that(approximately went into effect in Fiscal 2026,10.8%), offset by reductionsa decrease in thevolume sales(approximately of7.5%) certainprimarily related to our access control products.
Net service revenues for the sixnine months ended DecemberMarch 31, 2025,2026, increased $4,984,000$8,303,000 (11.8%13.0%) to $47,278,000$72,207,000 as compared to $42,294,000$63,904,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Three Months Ended DecemberMarch 31, 20252026
Overall gross profit for the three months ended DecemberMarch 31, 2025,2026, increased $3,749,000$4,362,000 to $28,238,000,$29,489,000, or 58.6%60.0% of net revenue, as compared to $24,489,000,$25,127,000, or 57.0%57.2% of net revenue, for the comparable period.
Gross profit from equipment revenue was $6,716,000,$6,949,000, or 27.6%28.7% of equipment revenue, as compared to $5,119,000,$5,499,000, or 23.6%24.6% of equipment revenue, for the comparable period. The increase in gross profit percentage from equipment revenue was primarily a result of product mix, increased volume in our locking products which improved the absorption rate of our fixed overhead costs, price increases that went into effect during Fiscal 202062026 and reductions in sales discounts during the period.
Gross profit on service revenues was $21,522,000, or 90.2% of net service revenues, as compared to $19,370,000, or 91.3% of net service revenues, for the comparable period a year ago. The decrease in gross profit percentage was a result of increased royalty costs due to certain one-time credits received in the comparable period and increased data costs to run our network operations center.
Six Months Ended December 31, 2025
Overall grossGross profit foras thea sixpercentage monthsof endedservice Decemberrevenue 31,was 2025,consistent increasedin $6,979,000both toperiods. $56,084,000,Gross profit on service revenues was $22,540,000, or 57.6%90.4% of net revenue,service revenues, as compared to $49,105,000,$19,628,000, or 56.5%90.8% of net revenue,service revenues, for the comparable period.period a year ago.
Nine Months Ended March 31, 2026
Overall gross profit for the nine months ended March 31, 2026, increased $11,341,000 to $85,573,000, or 58.4% of net revenue, as compared to $74,232,000, or 56.7% of net revenue, for the comparable period.
Gross profit from equipment revenue was $13,409,000,$20,358,000, or 26.8%27.4% of equipment revenue, as compared to $10,526,000,$16,025,000, or 23.6%23.9% of equipment revenue, for the comparable period. The increase in gross profit percentage from equipment revenue was primarily a result of product mix, increased volume in our locking products which improved the absorption rate of our fixed overhead costs, certain price increases that went into effect during the previous quarter and reductions in sales discounts during the period.
Gross profit as a percentage of service revenue was consistent in both periods. Gross profit on service revenues was $42,675,000,$65,215,000, or 90.3% of net service revenues, as compared to $38,579,000,$58,207,000, or 91.2%91.1% of net service revenues, for the comparable period a year ago. The decrease in gross profit percentage was a result of increased royalty costs due to certain one-time credits received in the comparable period and increased data costs to run our network operations center.
Research and development expenses for the three months ended DecemberMarch 31, 2025,2026, increased by $366,000$233,000 to $3,473,000,$3,418,000, or 7.2%7.0% of net revenue, as compared to $3,107,000,$3,185,000, or 7.2% 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 ($366,000$156,000).
Research and development expenses for the sixnine months ended DecemberMarch 31, 2025,2026, increased by $549,000$782,000 to $6,713,000,$10,131,000, or 6.9% of net revenue, as compared to $6,164,000,$9,349,000, or 7.1% 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 ($560,000) offset by a reduction in consulting charges ($41,000$766,000).
Selling, general and administrative (“SG&A”) expenses for the three months ended DecemberMarch 31, 2025,2026, decreasedincreased by $199,000$463,000 to $10,012,000$11,259,000 as compared to $10,211,000$10,796,000 for the comparable period. The decreaseincrease in SG&A expenses was primarily attributable to increases in our tradeshow related expenses ($896,000) wages, bonus compensation and benefits ($205,000), commission related expenses ($215,000), 401(k) matching contributions ($86,000) and insurance expense ($59,000) offset by decreases in legal fees (net of insurance reimbursements) related to the litigation discussed in Note 13 ($307,000), accounting expenses ($212,000$880,000) and stock-based compensation ($202,000), offset by increases in wages, bonus compensation and benefits ($275,000), commission related expenses ($147,000) and insurance expense ($50,000$96,000).
SG&A expenses for the sixnine months ended DecemberMarch 31, 2025,2026, increased by $1,061,000$1,524,000 to $20,975,000$32,234,000 as compared to $19,914,000$30,710,000 for the comparable period. The increase in SG&A expenses was primarily attributable to increases in commission expense ($716,000), wages, bonus compensation and benefits ($397,000), tradeshow related expenses ($980,000), insurance ($151,000) and 401(k) matching contributions ($92,000), offset by decreases in accounting expenses ($498,000), legal fees related to the litigation discussed in Note 13 ($637,000), commission expense ($501,000), wages, bonus compensation and benefits ($192,000) and insurance ($92,000) offset by decreases in accounting expenses ($464,000$243,000) and stock-based compensation $(263,000359,000).
Litigation settlement costs
Litigation settlement costs for the three and nine months ended March 31, 2026 was $16,000,000, net of any insurance reimbursements, as a result of the settlement described in Note 13. The effect of such settlement was to reduce operating income by $16,000,000 and net income by $14,267,000 (giving effect to the lower income taxes resulting from the litigation expense).
Interest and Other IncomeIncome, (Expense)Net
Interest income decreasedincreased for the three and six months ended DecemberMarch 31, 2025,2026, as compared to the comparable period, primarily due to lowerhigher interest rates. Interest income remained consistent for the nine months ended March 31, 2026 as compared to the comparable period.
The Company’s provision for income taxes for the three months ended March 31, 2026 decreased by $1,680,000 to $206,000 as compared to $1,886,000 for the same period a year ago. The Company’s effective rate for income tax was (102.0)% and 15.7% for the three months ended March 31, 2026 and 2025 respectively. The Company’s provision for income taxes for the nine months ended March 31, 2026 decreased by $414,000 to $4,912,000 as compared to $5,326,000 for the same period a year ago. The Company’s effective rate for income tax was 16.3% and 14.4% for the nine months ended March 31, 2026 and 2025 respectively. The Company’s effective tax rate for the three months ended March 31, 2026 decreased due to the litigation settlement costs lowering pre-tax income offset by discrete items incurred during the quarter. The Company’s effective tax rate for the nine months ended March 31, 2026 increased due to lower taxable income.
The Company’s provision for income taxes for the three months ended December 31, 2025 increased by $611,000 to $2,236,000 as compared to $1,625,000 for the same period a year ago. The Company’s effective rate for income tax was 14.2% and 13.4% for the three months ended December 31, 2025 and 2024 respectively. The Company’s provision for income taxes for the six months ended December 31, 2025 increased by $1,266,000 to $4,706,000 as compared to $3,440,000 for the same period a year ago. The Company’s effective rate for income tax was 15.5% and 13.7% for the six months ended December 31, 2025 and 2024 respectively. The Company’s effective tax rate for the three and six months ended December 31, 2025 increased as a result of a larger portion of the Company’s taxable income being attributable to United States operations, and the remeasurement of certain deferred tax liabilities due to tax rate changes enacted in the One Big Beautiful Bill Act (“OBBBA”) in the current period.
Our cash and cash equivalents increased by $21,838,000$31,327,000 during the sixnine months ended DecemberMarch 31, 2025,2026, and our cash and cash equivalents and short-term investments were $104,919,000$124,952,000 as of DecemberMarch 31, 2025.2026. 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.
As of DecemberMarch 31, 2025,2026, the Company’s available revolving credit line was $20,000,000, which expires in February 2029, there were no outstanding borrowings on the line as of DecemberMarch 31, 2025.2026.
A summary of the cash flow activity for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 is as follows:
Net cash provided by operating activities was $26.7$43.5 million for the sixnine months ended DecemberMarch 31, 20252026 and was due to net income of $25.7$25.3 million and increase in adjustments for non-cash items of $4.3$6.4 million offset by cash outflowand from changes in operating assets and liabilities of $3.2$11.9 million. The changes in operating assets and liabilities were largely attributable to increases in inventories and income tax receivables and decreasesincreases in accounts payable and accrued expenses partially offset by decreases in accounts receivables.
Net cash provided by operating activities was $25.5$38.9 million for the sixnine months ended DecemberMarch 31, 20242025 and was due to net income of $21.7$31.8 million and increase in cash flow from changes in operating assets and liabilities of $4.0$6.9 million,million partially offset byand adjustments for non-cash items of $.2$0.3 million. The changes in operating assets and liabilities were largely attributable to increasesdecreases in accounts receivablesreceivables, inventories and prepaid expenses partially offset by increases in income tax receivable and decreases in inventories and accounts payable and accrued expenses.
The net cash provided by investing activities of $5.1$4.3 million during the sixnine months ended DecemberMarch 31, 20252026 was primarily attributable to the redemption of marketable securities of $11.1$13.7 million partially offset by expenditures used for capital expenditures of $.8$1.5 million and purchase of marketable securities of $5.2$7.8 million. The cash provided by investing activities of $17.7$15.1 million during the sixnine months ended DecemberMarch 31, 2025,2026, was primarily attributable to redemption of other investments of $27.3 million partially offset by expenditures used for capital expenditures of $1.8$1.9 million and purchase of investments of $7.6$10.2 million. The change in use of cash for investing activities from 20242025 to 20252026 was a increase in the redemption of investments in term deposits (other investments).
The cash used in financing activities of $10.0$16.5 million for the sixnine months ended DecemberMarch 31, 20252026 was primarily related to the payment of stockholder dividends.dividends and payment of tax withholdings related to stock option exercises. The cash used in financing activities of $22.6$45.9 million for the sixnine months ended DecemberMarch 31, 20242025 was primarily related to the repurchase of treasury shares of $18.0$36.8 million and the payment of stockholder dividends of $4.6$9.2 million.
As of DecemberMarch 31, 2025,2026, 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.
NSSC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 2 filings (2 insiders, 2 trade dates, 523,962 shares, about $18.3M). Net open-market shares: -523,962 (purchases minus sales); net value about -$18.3M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-27 | Soloway Richard |
Open-market sale | 379,529 | $34.50 | $13.1M |
| 2026-08-27 | Soloway Donna Anne |
Open-market sale | 20,962 | $34.62 | $725.7K |
| 2026-08-26 | Soloway Richard |
Open-market sale | 95,471 | $35.93 | $3.4M |
| 2026-08-26 | Soloway Donna Anne |
Open-market sale | 28,000 | $35.98 | $1.0M |
| 2026-05-18 | Soloway Donna Anne |
Option exercise | 8,000 | $8.10 | $64.8K |
| 2026-05-18 | Soloway Donna Anne |
Option exercise | 10,000 | $22.93 | $229.3K |
| 2026-05-18 | Soloway Donna Anne |
Option exercise | 7,500 | $11.68 | $87.6K |
| 2026-05-18 | Soloway Donna Anne |
Option exercise | 3,600 | $4.35 | $15.7K |
| 2026-05-18 | Soloway Donna Anne |
Option exercise | 4,000 | $26.94 | $107.8K |
| 2026-05-18 | Soloway Donna Anne |
Option exercise | 8,000 | $15.27 | $122.2K |
Well-known investors holding NSSC (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Fundsmith (Terry Smith) | 2026-06-30 | 606,974 | $23.1M | 0.17% | Added 58% |
| Renaissance Technologies | 2026-06-30 | 406,200 | $15.4M | 0.02% | Reduced 7% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 379,686 | $14.4M | 0.02% | Reduced 21% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 295,923 | $11.2M | 0.0% | Added 4% |
| Two Sigma Investments | 2026-06-30 | 172,667 | $6.6M | 0.0% | Added 100% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 69,690 | $2.7M | — | Sold out |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 39,438 | $1.5M | 0.0% | Reduced 14% |
| Millennium Management (Israel Englander) | 2026-06-30 | 14,598 | $575.0K | — | Sold out |