Napco’s third quarter saw revenue and profit ahead of Wall Street expectations, but the market reacted negatively, likely reflecting investor concerns around service margin compression and the sustainability of recent growth trends. Management cited strong demand for both equipment and recurring service revenue as primary performance drivers, with CEO Richard Soloway highlighting that “our recurring revenue model has continued its steady growth, while maintaining its substantial profitability.” The company also pointed to higher equipment sales—driven by its locking products and early price increases—as key contributors. However, management acknowledged that certain margin headwinds, such as the addition of T-Mobile to its radio service and customer mix shifts, affected results.
Is now the time to buy NSSC? Find out in our full research report (it’s free for active Edge members).
Napco (NSSC) Q3 CY2025 Highlights:
- Revenue: $49.17 million vs analyst estimates of $46.91 million (11.7% year-on-year growth, 4.8% beat)
- Adjusted EPS: $0.35 vs analyst estimates of $0.30 (15.2% beat)
- Adjusted EBITDA: $14.94 million vs analyst estimates of $13.46 million (30.4% margin, 11% beat)
- Operating Margin: 27.7%, in line with the same quarter last year
- Market Capitalization: $1.50 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Napco’s Q3 Earnings Call
- Matt Summerville (D.A. Davidson): asked about the mix between price and volume in hardware revenue growth. CFO Andrew Vuono clarified that roughly 60% was volume-driven and 40% attributed to pricing, with more pricing benefits expected later in the year.
- James Ricchiuti (Needham & Co.): inquired about demand trends from channel partners. President Kevin Buchel reported strong sell-through in both locking and intrusion products, citing healthy distributor inventory levels and expectations for continued momentum.
- Peter Costa (Mizuho): probed the reasons behind recurring service margin declines. Buchel pointed to the introduction of T-Mobile as a carrier, which added costs, and to price concessions for larger dealers as consolidation in the industry accelerates.
- Jeremy Hamblin (Craig-Hallum): asked about tariff impacts and manufacturing resilience. CEO Richard Soloway confirmed that tariffs on Dominican Republic operations remain stable and that their facility is well-prepared for environmental disruptions, requiring no immediate additional pricing actions.
- Lance Vitanza (TD Cowen): questioned plans for Napco’s large cash balance. Buchel responded that the company is open to acquisitions but will remain selective, emphasizing that any deal must be immediately accretive and not distract from core operations.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) the pace at which pricing actions and MVP adoption translate into recurring revenue growth, (2) trends in service margin recovery as the company implements cost pass-throughs for new carrier support, and (3) sustained demand for locking solutions in school and healthcare markets. The rollout of new product features and integration with additional distribution partners will also be important to track.
Napco currently trades at $42.14, down from $44.09 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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