Napco’s second quarter results were well received by the market, with management emphasizing the resilience of its recurring revenue streams and operational discipline. CEO Richard Soloway pointed to the company’s ability to adapt to tariff-related headwinds and highlighted the “strong performance of our recurring revenue model and StarLink commercial fire radios.” The team credited swift supply chain management and inventory controls for helping maintain customer commitments, while noting that hardware sales rebounded sequentially after prior distributor destocking. Management acknowledged that tariff pressures and increased costs weighed on margins, but emphasized that pricing actions and a focus on higher-margin products supported overall profitability.
Is now the time to buy NSSC? Find out in our full research report (it’s free).
Napco (NSSC) Q2 CY2025 Highlights:
- Revenue: $50.72 million vs analyst estimates of $44.45 million (flat year on year, 14.1% beat)
- Adjusted EPS: $0.36 vs analyst estimates of $0.26 (38.9% beat)
- Adjusted EBITDA: $14.25 million vs analyst estimates of $11.98 million (28.1% margin, 18.9% beat)
- Operating Margin: 25.1%, down from 31.1% in the same quarter last year
- Market Capitalization: $1.36 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 Q2 Earnings Call
- Matt Summerville (D.A. Davidson) questioned whether distributor channel inventories could pose a risk after pre-tariff buying. President Kevin Buchel responded that distributor sell-through metrics were strong and that tariff-related uncertainty had subsided among partners.
- Matt Summerville (D.A. Davidson) asked if the strong $5 million sequential increase in recurring revenue could continue. Buchel said more increases are expected, driven by ongoing radio sales and new product introductions.
- James Ricchiuti (Needham & Co.) inquired about the pull-forward impact on equipment sales and margin implications from tariffs. CFO Andrew Vuono stated that Q4 saw a direct tariff cost hit, but future quarters should benefit from price increases now in effect.
- Peter Costa (Mizuho) sought details on the MVP and Prima product launches and their market potential. CEO Richard Soloway described MVP as a “very strong growth product” with enterprise and small business applications.
- Jeremy Hamblin (Craig-Hallum Capital) asked about churn rates and pricing impacts on recurring revenue. Buchel noted churn is minimal given the commercial focus, and said price increases were accepted without pushback.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) the impact of pricing increases on equipment revenue and margins as tariff pressures persist, (2) the pace of adoption and revenue contribution from new recurring revenue radio products and the MVP cloud platform, and (3) continued progress in the school security market as Napco seeks to expand its integrated solutions. Execution on these fronts will be critical for sustaining high-margin growth and navigating industry headwinds.
Napco currently trades at $38.45, up from $31.70 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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