NSSC Lawsuit Alert! Class Action Lawsuit Against Napco Security Technologies, Inc.

A class action lawsuit was filed against Napco Security Technologies (NSSC) by Levi & Korsinsky on April 25, 2025. The plaintiffs (shareholders) alleged that they bought NSSC stock at artificially inflated prices between February 5, 2024 and February 3, 2025 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Napco Security Technologies stock during that period can click here to learn about joining the lawsuit.

Napco Security Technologies manufactures advanced electronic security systems, including IoT (Internet of Things) connected home, video, fire alarm, access control, and door locking systems. Its solutions are suitable for residential, commercial, and institutional premises and campuses. 

The company’s claims and expectations regarding its hardware products are at the heart of the current complaint.

Napco’s Misleading Claims

According to the lawsuit, Napco and two of its senior officers (the Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the Company’s ability to forecast demand for its hardware products, and ancillary issues, from SEC filings and related material.

During the Class Period, the defendants reiterated their target of achieving an adjusted EBITDA margin of 45% by the end of fiscal 2026. The CEO noted during an earnings call that this target could be met by reaching hardware equipment sales of $150 million and recurring service revenue level of $150 million.

On the same call, the CFO added that the company’s margins on hardware products are expected to improve throughout the rest of the fiscal year.

Additionally, during an earnings call on May 6, 2024, the CEO stated that supply chain issues had eased and the company had developed new distribution sources, which would bolster the company’s equipment sales and related margins beyond previous levels. Similarly, the CFO mentioned that both of Napco’s locking companies were performing well and their sales could help boost the margins higher.

Finally, during an August 26, 2024 earnings call, the CEO noted that gross margin for hardware sales was 31.4% and that the company was focused on improving it through the remainder of fiscal 2025 and beyond.

However, subsequent events (discussed below) revealed that Napco had failed to warn investors about the impact of declining hardware sales from its major distributors.

Plaintiffs’ Arguments

The plaintiffs maintain that the defendants deceived investors by lying and withholding critical information about the business and prospects during the Class Period. Importantly, the defendants are accused of misleading investors about Napco’s overall expected growth and strength in the company’s hardware division.

The information became clear on February 3, 2025, when Napco announced its second-quarter fiscal 2025 results. During the quarter, Napco’s hardware sales declined significantly, mainly due to “reduced sales from 2 of the company’s larger distributors.”

What’s worse, the company withdrew its long-term adjusted EBITDA margin guidance of 45% owing to declining sales, since it was not confident if the target could be achieved by fiscal year end 2026. Following the news, NSSC stock plunged 26.6% that same day.

To conclude, the defendants allegedly misled investors regarding the possibility of boosting the company’s hardware sales and meeting the adjusted EBITDA target of 45%. Owing to these issues, NSSC stock has lost 44.6% in the past year, causing massive damage to shareholder returns.