Key Highlights

  • Total Revenue rose 1.7% to USD 50.0 million, with service revenue up 11.5% and equipment revenue down 7.3%.
  • Gross profit margin increased 210 basis points to 58.7%, lifting gross profit to USD 29.4 million.
  • Net income rose 6.9% to USD 13.0 million, and adjusted EBITDA increased 3.8% to USD 15.5 million.
  • The company held no Debt and a USD 20.0 million revolving Credit line, and paid dividends of USD 5.4 million.

Margin Expansion on Recurring Revenue

Napco Security Technologies, Inc. (NASDAQ:NSSC) reported fiscal first-quarter 2027 total revenue of USD 49,980,000 versus USD 49,168,000 for the three months ended September 30, 2025, an increase of 1.7%. Gross profit was USD 29.4 million versus USD 27.8 million, and gross margin rose 210 basis points to 58.7%.

Net income increased 6.9% to USD 13.0 million from USD 12.2 million, and non-GAAP adjusted EBITDA rose 3.8% to USD 15.5 million, a margin of about 31%. Gross profit increased USD 1,506,000 from USD 27,846,000 a year earlier, when gross margin was 56.6%. Service revenue was about 52% of the total versus 48% a year earlier.

Equipment and Service Revenue

Net equipment revenue fell USD 1.9 million, or 7.3%, to USD 23.85 million from USD 25.74 million. Net service revenue rose USD 2.7 million, or 11.5%, to USD 26.13 million from USD 23.43 million, so service revenue exceeded equipment revenue. Cost of equipment revenue was USD 18.0 million versus USD 19.0 million, and cost of service revenue was USD 2.6 million versus USD 2.3 million. The equipment decline came from door locking products, down USD 1,733,000, or 10.1%, on Volume about 13.1% lower, partly offset by pricing about 3.0% higher, and intrusion and access products, down USD 156,000, or 1.8%. Gross profit on equipment was USD 5.8 million, or 24.3% of equipment revenue versus 26.0%, reflecting lower volume, product mix, a 1.3 point Tariff effect, a 1.7 point rise in scrap and a 1.0 point rise in technical services costs, while gross profit on service revenue was USD 23.5 million, or 90.1% of service revenue versus 90.3%.

Operating Expenses and Cash

Research and development expense rose USD 813,000 to USD 4.05 million, or 8.1% of revenue versus 6.6%, mainly on higher compensation and benefit costs of USD 503,000 and engineering supplies of USD 76,000, and selling, general and administrative expense rose to USD 12.2 million from USD 11.0 million. A USD 1.0 million litigation settlement credit reduced operating expenses, which totaled USD 15.2 million.

Dividends paid were USD 5.4 million versus USD 5.0 million, and financing activities consisted entirely of dividends. At September 30, 2026 and June 30, 2026 the company had no outstanding debt, and its USD 20.0 million revolving credit line expires in February 2029. It reported no material Capital Expenditure or inventory purchase commitments beyond normal purchase orders.

Tariff and Mix Variables

The company noted that a Supreme Court ruling invalidated certain tariffs imposed under the International Emergency Economic Powers Act, while a new tariff framework under Section 301 effective July 24, 2026 raised the applicable tariff on covered imports from the Dominican Republic, where it manufactures most products, from 10% to 12.5%. Diluted weighted average shares were 35.9 million versus 35.9 million. Items to watch include the pace of service revenue growth, equipment demand, research spending and Dividend payments.