Napco Equipment Sales Reverse After Two Locking Distributors Pull Back

The Tip Desk · November 10, 2026 · 2 min read

First-quarter revenue reached a record $50.0 million as recurring service revenue hit $26.1 million and net income rose 6.9% to $13.0 million.

NAPCO Security Technologies (NSSC) posted a first-quarter record $50.0 million of net revenue for the three months ended September 30, 2026, up 1.7% from a year earlier. That pace was a sharp slowdown from 10.0% growth in fiscal fourth-quarter 2026 and 11.8% in fiscal third-quarter 2026.

The mix inside that total flipped. Recurring service revenue, the company’s wireless communication services for intrusion and fire alarm systems, rose 11.5% to a quarterly record $26.1 million, with over 90% gross margin. Equipment revenue fell 7.3% to $23.9 million, reversing 7.7% growth in fiscal fourth-quarter 2026 and 8.4% growth in fiscal third-quarter 2026. Chief executive Kevin Buchel said the equipment decline was driven by two locking distributors reducing their purchases during the quarter. He said sell-through at both distributors grew year-over-year and strengthened sequentially, and that the company views sell-through as the truest indicator of end-market demand.

Gross profit margin was 58.7%, up from 56.6% in the year-ago quarter. Fiscal fourth-quarter 2026 margin of 61.3% had included about 600 basis points of tariff-refund benefit; fiscal third-quarter 2026 margin was 60.0%.

Net income increased 6.9% to a first-quarter record $13.0 million, and diluted earnings rose 5.9% to $0.36 a share. Operating income was $14.1 million. A $1.0 million litigation settlement credit appeared in operating expenses for the quarter. Accrued litigation costs of $16.0 million at June 30, 2026 were reduced to zero at September 30, 2026.

Non-GAAP adjusted EBITDA increased 3.8% to a first-quarter record $15.5 million, with a 31.0% margin. That followed a 44.3% year-over-year increase to $20.6 million in fiscal fourth-quarter 2026 and 20.2% growth to $15.8 million in fiscal third-quarter 2026.

Free cash flow fell 79.8% to $2.3 million, or a 4.6% margin, from $11.4 million a year earlier. Cash and cash equivalents were $123.9 million at September 30, 2026.

The prospective annual run rate for recurring service revenue was approximately $106 million based on October 2026 recurring service revenues, a $3 million increase from the $103 million run rate reported in July 2026. Buchel said the company achieved record first-quarter revenue and record first-quarter adjusted EBITDA, which he said was bolstered by recurring service revenue.

The board declared a quarterly dividend of $0.17 a share, payable January 4, 2027, to shareholders of record on December 14, 2026.