Key Highlights

  • NSSC reported fiscal first quarter 2027 Revenue of $50.0 million, up 1.7% from $49.2 million.
  • Recurring service revenue rose 11.5% to $26.1 million, while equipment revenue fell 7.3% to $23.9 million.
  • Gross Margin widened to 58.7% from 56.6%, and Net Income rose 6.9% to $13.0 million, or $0.36 per diluted share.
  • Adjusted EBITDA increased 3.8% to $15.5 million, a 31.0% margin.
  • Cash and marketable securities were $134.6 million with no Debt after a $15 million litigation settlement payment.

Service Growth Offsets Door-Locking Decline in Record First Quarter

Napco Security Technologies (NASDAQ:NSSC) reported results for its fiscal first quarter ended Sep 30, 2026 on Nov 2, 2026. Revenue increased 1.7% to $50.0 million, a first-quarter record, while net income rose 6.9% to $13.0 million from $12.2 million. Diluted Earnings per Share were $0.36, up from $0.34.

The company designs and manufactures electronic security devices, including access control, door-locking, intrusion and fire alarm products, and sells cellular communication services for alarm systems. It sells mainly through independent distributors, dealers and installers.

Net service revenue grew 11.5% to $26.1 million on more cellular communicators activated by dealers. Net equipment revenue fell 7.3% to $23.9 million, with door-locking sales down 10.1% and intrusion and access products down 1.8%.

Distributor Destocking Drives 13.1% Lock Volume Drop as Margins Widen

Door-locking volume fell about 13.1%, partly offset by roughly 3.0% in price increases. The company tied the drop to two larger locking distributors reducing inventory, with project activity offsetting part of the decline. Management said those distributors' own sales to end customers rose both year over year and sequentially, which it took as a sign that underlying Demand is healthy.

Gross profit increased 5.4% to $29.4 million, lifting gross margin to 58.7% from 56.6%. Service gross margin held near 90.1%, but equipment gross margin slipped to 24.3% from 26.0% on lower volume, product mix, a 1.3-point Tariff impact and higher scrap and technical service costs. Management expects equipment margins to improve and to land at 26% to 27% for the full year.

Operating income rose 3.5% to $14.1 million. Research and Development spending climbed 25.1% to $4.1 million, and selling, general and administrative expense rose 11.1% to $12.2 million, driven largely by $1.1 million of added legal costs. A $1.0 million benefit from a lower litigation settlement cost partly offset these increases.

Recurring Revenue Run Rate Near $106 Million and a Cash Cushion After the Settlement

Adjusted EBITDA increased 3.8% to $15.5 million, equal to $0.43 per diluted share, with a 31.0% margin. Management said recurring service revenue now makes up 52% of total revenue and that the annualized recurring run rate is about $106 million, up roughly $3 million from the level given in August.

Free Cash Flow fell 79.8% to $2.3 million after the company paid a $15 million litigation settlement during the quarter. It still ended September with $134.6 million in cash and marketable securities, no debt and Working Capital of $175.2 million. Dividends paid in the quarter totaled $5.4 million.

On the tariff front, the rate on covered imports from the Dominican Republic, where the company makes most of its products, rose from 10% to 12.5% effective Jul 24, 2026. The company has filed refund claims for earlier tariffs ruled invalid, though the amount and timing remain uncertain.

Dividend Due Jan 4, 2027 and Hosted Access Rollout Shape the Next Quarters

The board declared a Dividend of $0.17 per share, payable on Jan 4, 2027 to holders of record on Dec 14, 2026. Management plans to expand its hosted access control offering through a new national dealer and to rely on OEM radio relationships, while it expects equipment volume to recover from a soft first quarter.