Episode Details

Napco Security (NSSC) Q4 FY2026 — Q4 FY2026 (three months ended June 30, 2026): net revenue $55.809m, UP 10.03%, an all-time quarterly record. Net income $17.767m, UP 52.74%, also a record. Diluted EPS $0.50 against a $0.3867 Street bar - but the release states $0.09 of it is net tariff refunds. Shares OPENED UP 21.19% at $46.16, printed $51.77, and CLOSED DOWN 1.31% at $37.59 on 6.76x median volume. Napco printed record revenue and record net income in the June quarter, and the stock opened up 21%, printed a 52-week high inside thirty minutes and closed down 1.31%. The reason is in the company's own headline bullet: $0.09 of the $0.50 is a refund of import duty from U.S. Customs after the Supreme Court struck the IEEPA tariffs down. Note 14 of the 10-K puts the figure at $3,353,000, all of it booked to cost of goods sold in one quarter. THE CALL: HOLD (3/5, A GENUINE RECORD QUARTER WITH A CUSTOMS REFUND INSIDE IT, AT A PRICE THAT ALREADY PAYS FOR THE HALF THAT COMPOUNDS) — base-case value ~$34.51 vs ~$37.59 today. KEY METRICS: - THE SPINE: a $3,353,000 IEEPA tariff refund, ALL of it recognised in the June quarter's cost of goods sold. That is 601bp of the quarter's gross margin and $0.09 a diluted share - 79.44% of the entire beat against the $0.3867 Street bar. - SEVEN OF THE NINE CENTS ARE A REVERSAL: only $1,003,000 of the refund relates to a prior year. The other $2,350,000 - 70.09% - gives back duty Napco paid in its own first three quarters, which is why the FULL YEAR benefit is 50bp and $0.03. - AND IT IS NOT CASH: $2,931,000 of the $3,353,000 was still a receivable at June 30 - 87.41% of it, and 49.96% of the entire increase in accounts receivable. Replacement tariffs are already imposed under Section 122 and Section 301. - STRIP IT AND THE BEAT IS TWO CENTS: $0.50 less $0.09 is $0.41 against a $0.3867 bar - a 6.03% beat, not 29.30%. $0.41 is also the figure the newswires printed at 10:22 ET while the screen showed the stock up 14.2%. - THE PRICE RISE THAT LOST ITS COST: 71.67% of the year's 10.0% equipment growth was PRICE (7.14 points) against 2.82 points of volume, on the company's own MD&A percentages. The access alarm division shipped 15.2% FEWER units. - THE HALF THAT COMPOUNDS: recurring service revenue is 48.21% of sales at a 90.3% gross margin and 73.49% of all gross profit. But the company's own exit run rate grew 9.57% ($94m to $103m) while reported recurring revenue grew 12.97%. - THE CALL: HOLD, conviction 3/5, fair value $34.51 against $37.59 (-8.19%). EV of $1.21bn is 19.44x normalised EBITDA of $62.079m, a 34.6% premium to Allegion at 15.77x and Alarm.com at 13.13x. Five named Street houses average $50.80. What to watch: UP: a September-quarter gross margin holding near 55.30% with replacement duties in force, OR next August's recurring run rate implying growth back above 12.97%, OR a resumed buyback. DOWN: Section 122 and Section 301 duties replacing what was refunded, unit volume staying near 2.82%, or the second shareholder class action turning into cash. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.