Key Highlights

  • Shares are trading down 15.93% at $33.08 versus a prior close of $39.35.
  • Revenue rose 1.7% to $50.0 million, with adjusted EPS of $0.34.
  • Recurring service Revenue rose 11.5% to a record $26.1 million.

Napco Security (NASDAQ:NSSC) shares are trading down 15.93% at $33.08 after fiscal first-quarter 2027 results missed market estimates on revenue and earnings. The stock is near the low end of its 52-week range of $31.00 to $51.77.

Napco, based in Amityville, New York, designs and manufactures electronic security equipment, including intrusion and fire alarm devices, access control, electronic door locking products and school safety solutions. It sells through its Alarm Lock, Continental Instruments and Marks USA units and earns Recurring Revenue from communication services.

Equipment Revenue Falls as Two Locking Distributors Cut Purchases

Net revenue rose 1.7% to a first-quarter record of $50.0 million, below market estimates of $52 million to $53 million, and adjusted Earnings of $0.34 per share trailed estimates near $0.38. Equipment revenue declined 7.3% to $23.9 million after two locking distributors reduced purchases during the quarter. Management said sell-through at both distributors grew year over year and strengthened sequentially.

Equipment gross Margin fell to 24.3% from 26%, reflecting locking mix, higher Section 301 Tariff costs and technical services costs. Management expects full-year equipment margins of 26% to 27%.

Recurring Service Revenue and Margins Provide a Counterweight

Recurring service revenue climbed 11.5% to a quarterly record of $26.1 million with gross margins above 90%, and the annualized run rate is about $106 million. Overall gross margin expanded to 58.7% from 56.6%, Net Income rose 6.9% to a first-quarter record of $13.0 million, or $0.36 per diluted share, and adjusted EBITDA rose 3.8% to $15.5 million, a 31.0% margin.

Dividend Declared as Cash Flow Dips on a Litigation Settlement

Free cash flow fell 79.8% to $2.3 million, largely because of a $15 million litigation settlement payment, while the company held $134.6 million in cash and securities with no debt. The board declared a quarterly Dividend of $0.17 per share, payable January 4, 2027, to shareholders of record on December 14, 2026.