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Napco (NSSC) Under Scrutiny: Investor Suit and Sales Slump Shake Investor Confidence– Hagens Berman

1. NSSC shares down 21% YTD due to operational challenges and legal scrutiny. 2. Third-quarter results show 10.8% drop in net sales, totaling $43.96 million. 3. Class action lawsuit claims misleading statements on sales forecasting by NSSC. 4. Investigation by Hagens Berman focuses on transparency regarding distribution practices. 5. February earnings led to a 26% stock price drop, impacting investor confidence.

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FAQ

Why Bearish?

Ongoing legal issues and declining sales signals investor uncertainty; historical cases show similar patterns lead to sustained lower prices.

How important is it?

The ongoing legal scrutiny and declining sales performance are critical for NSSC's stock viability.

Why Long Term?

Legal proceedings may extend for months, affecting NSSC's stock performance and investor sentiment over time.

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NSSCNVRADSKFLIR
SAN FRANCISCO, May 29, 2025 (GLOBE NEWSWIRE) -- Shares in Napco Security Technologies, Inc. (NASDAQ: NSSC) are trading down nearly 21% year-to-date, as the security technology company continues to face heightened scrutiny as it navigates both legal and operational challenges. Most recently, on May 5, 2025, Napco released its third-quarter financial results for fiscal year 2025, revealing mixed performance metrics amid an ongoing securities class action lawsuit that centers on its distribution practices and sales forecasting. Hagens Berman is investigating the alleged claims and urges Napco investors who suffered substantial losses to submit your losses now. Third Quarter Financial Overview Napco’s third-quarter results showed a 10.8% year-over-year drop in net sales, totaling $43.96 million. While the company managed to surpass earnings-per-share expectations—reporting $0.36 per share versus a $0.29 forecast—overall revenue missed Wall Street estimates, and net income declined by over 23% compared to the previous year. The company attributed the sales shortfall primarily to inventory reductions by key distributors, a factor that has become central to the ongoing lawsuit. Background of the Securities Class Action The class action, filed as Patel v. Napco Security Technologies, Inc., et al., alleges that Napco’s leadership misled investors about its ability to accurately predict hardware demand and sustain ambitious margin targets for fiscal 2026. The complaint claims that despite public assurances of strong hardware division growth and effective forecasting, Napco failed to disclose vulnerabilities in its distribution network and the risks associated with relying on a limited number of major distributors. The situation escalated after the company’s February 3, 2025, earnings report, which revealed a 25% decrease in equipment sales and prompted Napco to withdraw its 45% EBITDA margin target for fiscal 2026. These disclosures led to a dramatic 26% decline in Napco’s share price in a single trading session, erasing nearly $10 per share in value. Allegations and Share Price Impact Plaintiffs allege that Napco’s optimistic statements about its sales pipeline and margin outlook were misleading, given the company’s inability to accurately forecast demand and the impact of distributor inventory adjustments. The lawsuit contends that these omissions artificially inflated Napco’s stock price during the class period, causing substantial losses when the true financial picture emerged. Specifically, on February 3rd, Napco released disappointing second-quarter fiscal 2025 results, revealing a substantial 25% drop in equipment sales compared to the prior year’s second quarter, along with significant declines in gross margin and gross profit for equipment revenue. The company attributed this disappointing performance to "reduced sales to two of our larger distributors," with one distributor explicitly citing efforts to reduce its inventory levels. These disclosures caused Napco's shares to plummet 26% over a single trading day. Hagens Berman’s Investigation Prominent shareholder rights firm Hagens Berman is actively investigating the allegations against Napco, focusing on whether the company misled investors regarding its sales forecasting and distribution practices. “Investors deserve transparency, especially when a company’s future growth is tied so closely to its ability to manage demand and distribution. When those fundamentals are called into question, as we believe they are here, it’s our job to ensure shareholders get clear answers and accountability,” said Reed Kathrein, the Hagens Berman partner overseeing the investigation. If you invested in Napco and have substantial losses, or have knowledge that may assist the firm’s investigation, submit your losses now » If you’d like more information and answers to frequently asked questions about the Napco case and our investigation, read more » Whistleblowers: Persons with non-public information regarding Napco should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. Under the new program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, call Reed Kathrein at 844-916-0895 or email NSSC@hbsslaw.com. About Hagens BermanHagens Berman is a global plaintiffs’ rights complex litigation firm focusing on corporate accountability. The firm is home to a robust practice and represents investors as well as whistleblowers, workers, consumers and others in cases achieving real results for those harmed by corporate negligence and other wrongdoings. Hagens Berman’s team has secured more than $2.9 billion in this area of law. More about the firm and its successes can be found at hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.  Contact: Reed Kathrein, 844-916-0895

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