NAPCO Q1 Sales Reach Record as Recurring Revenue Rises 11.5%

NAPCO Security Technologies Inc. reported record fiscal first-quarter sales, adjusted EBITDA and GAAP net income, with recurring service revenue growing substantially faster than the overall business and accounting for more than half of quarterly revenue. The results highlighted the increasing weight of the company’s high-margin service operations as total sales growth remained modest.

For the quarter ended September 30, 2026, NAPCO generated $50.0 million in revenue, up 1.7% from a year earlier. Recurring revenue increased 11.5% to $26.1 million, representing 52% of total sales. The company reported a recurring-revenue annual run rate of $106 million.

Recurring services produced a gross margin of 90.1%, while total gross margin reached 58.7%, an increase of 210 basis points year over year. NAPCO’s recurring offerings span alarm connectivity, commercial fire communications, cloud-based access control and connected locking services.

Adjusted EBITDA rose 3.8% to a fiscal first-quarter record of $15.5 million, with an adjusted EBITDA margin of 31%. The company defines adjusted EBITDA as GAAP net income adjusted for taxes, net interest, depreciation and amortization, stock-based compensation, nonrecurring legal expenses and litigation settlement costs.

GAAP net income increased 6.9% to a fiscal first-quarter record of $13 million, or $0.36 per diluted share. The net income margin was 26%. Free cash flow, defined as operating cash flow less capital expenditures, totaled $2.3 million, representing a 4.6% margin.

Recurring Services Remain Central to Strategy

NAPCO’s platform covers alarms and connectivity, locking, and access control, with most of its revenue tied to commercial end users. The company sells through a professional channel that includes more than 350 U.S. distributors, about 2,000 independent integrators and roughly 10,000 independent dealers.

Management continues to identify copper telephone-line obsolescence, school security spending, mandated fire-alarm upgrades, building retrofits, connected security systems and building automation as important market drivers. The transition of fire-alarm communications from copper lines to cellular technology remains a key opportunity for recurring services, according to the presentation.

The company is also expanding service revenue beyond alarm communications. Its cloud-based MVP access-control platform carries a pricing model of $3 per door and integrates access-control panels, wireless locks and identification readers. NAPCO is positioning the platform, including its app-only MVP EZ version and interconnected smart deadbolts, for commercial facilities and multifamily properties.

School and campus security remains another operating priority. NAPCO’s offerings for that market range from classroom and exit-door locks to radio-controlled lockdown systems, fire and security alarms, access control and video systems.

Balance Sheet and Outlook

NAPCO ended the quarter with $135 million of cash, marketable securities and investments and no debt. Working capital stood at $175 million, while stockholders’ equity was $198 million.

The company’s stated long-term objective is for recurring revenue to account for about 50% of total revenue. Management said future growth is expected to draw on wider adoption of hardware-enabled services and security investment across commercial, residential and education markets.

Those expectations remain subject to risks and uncertainties. NAPCO cautioned that actual performance could differ materially because of factors described in its regulatory filings, incorrect underlying assumptions, funding availability and the company’s ability to meet its broader business objectives. The presentation also noted that its non-GAAP measures may not be directly comparable with similarly named metrics reported by other companies.