Napco Security Technologies Reports 11.8% Revenue Growth but Faces Net Loss Due to Litigation Costs

Napco Security Technologies, Inc. reported its financial results for the three and nine months ended March 31, 2026, revealing a total revenue of $49.2 million for the quarter, an increase of 11.8% from $44.0 million in the same period last year. For the nine-month period, revenue rose 11.9% to $146.5 million compared to $130.9 million in the prior year. The company's equipment revenue increased by 8.4% to $24.2 million, while service revenue saw a more significant rise of 15.4%, reaching $24.9 million. The gross profit margin also improved, rising to 60.0% for the quarter and 58.4% for the nine months, compared to 57.2% and 56.7%, respectively, in the previous year.

Despite the revenue growth, Napco reported a net loss of $408,000 for the third quarter, a significant decline from a net income of $10.1 million in the same quarter last year. The loss was primarily attributed to a $16 million litigation settlement cost, which impacted operating income. For the nine-month period, net income decreased to $25.3 million from $31.8 million, reflecting a 20.5% decline. The company’s operating expenses surged to $30.7 million for the quarter, up from $14.0 million, largely due to the litigation costs and increased selling, general, and administrative expenses.

Operationally, Napco's customer base and product engagement metrics showed positive trends. The company reported an increase in the number of cellular communication devices activated, contributing to the rise in service revenue. The company continues to focus on expanding its product offerings, particularly in the door locking and intrusion alarm segments, which saw respective revenue increases of 10.4% and 5.0% for the quarter. The company’s cash and cash equivalents rose to $114.4 million as of March 31, 2026, up from $83.1 million at the end of the previous fiscal year, indicating a strong liquidity position.

Looking ahead, Napco remains optimistic about its growth trajectory, despite facing macroeconomic challenges such as inflation and supply chain pressures. The company is committed to innovation and expanding its market presence, particularly in the security technology sector. Management indicated that they are closely monitoring economic conditions and are prepared to adapt their strategies to mitigate potential impacts on their operations. The company has also maintained a revolving credit line of $20 million, which remains untapped, providing additional financial flexibility as it navigates the current market landscape.