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# NAPCO Shares Sink 17% As Equipment Sales Fall 7% Despite Record Quarter
- URL: https://www.bullished.co/napco-shares-sink-17-as-equipment-sales-fall-7-despite-record-quarter-3196fa70/
- Published: 2026-11-02T16:21:40.000Z
- Updated: 2026-11-02T16:21:40.000Z
- Description: Recurring service revenue hit a record $26.1 million, but free cash flow dropped 79.8% and the stock fell in Monday trading.
- Author: Matteo Parrino
- Tags: SEC Filings, NSSC, Industry: Technology

NAPCO Security Technologies, which makes digital door locks, alarm equipment and the cellular services that link alarms to monitoring stations, [reported record first-quarter net income of $13.0 million](https://www.sec.gov/Archives/edgar/data/0000069633/000110465926121107/nssc-ex99d1.htm?ref=bullished.co) on Monday, even as equipment sales fell 7.3%. Its shares fell 17.36% to $32.52 in Monday trading, from a prior close of $39.35.

## Service revenue up, equipment down

Net revenue for the quarter ended September 30 rose 1.7% to a first-quarter record of $50.0 million, according to the company's [8-K](https://www.sec.gov/Archives/edgar/data/0000069633/000110465926121107/nssc-20261029x8k.htm?ref=bullished.co). Net income rose 6.9% to $13.0 million, or $0.36 per diluted share versus $0.34 a year earlier.

[Recurring service revenue climbed 11.5%](https://www.prnewswire.com/news-releases/napco-security-technologies-inc-reports-fiscal-q1-2027-results-302925823.html?ref=bullished.co) to a record $26.1 million, with gross margin above 90%. Equipment revenue fell 7.3% to $23.9 million. Overall gross margin improved to 58.7% from 56.6%, and adjusted EBITDA rose 3.8% to a first-quarter record $15.5 million.

CEO Kevin Buchel blamed the equipment decline on two locking distributors that cut purchases during the quarter. He said sell-through at both grew from a year earlier and strengthened meaningfully from the prior quarter, calling sell-through "the truest indicator of end-market demand."

## Free cash flow falls 79.8%

Free cash flow [dropped 79.8%](https://www.prnewswire.com/news-releases/napco-security-technologies-inc-reports-fiscal-q1-2027-results-302925823.html?ref=bullished.co) to $2.3 million from $11.4 million a year earlier. The company's balance sheet shows a $16.0 million accrued litigation liability at June 30 that was gone by September 30, and cash and equivalents slipped to $123.9 million from $126.9 million at June 30.

The quarter also included a $1.0 million litigation settlement credit in operating expenses; excluding it, adjusted net income was $12.1 million, or $0.34 per share, flat with a year earlier.

## A $106 million subscription run rate

[Napco](https://www.bullished.co/tag/nssc/) sells mainly through independent distributors, dealers and installers, and dealers pay monthly fees for the cellular services. Those services made up about 48% of revenue in the fiscal year ended June 30, 2026, when revenue was $202.3 million.

Based on October results, recurring service revenue has a prospective annual run rate of about $106 million, about $3 million above the figure reported in July.

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

Learn

- [Item 2.02: results of operations →](https://www.bullished.co/learn/8-k-items-explained/#item-202-results-of-operations)  
From 8-K Items Explained: What Every Item Code From 1.01 To 9.01 Tells You, With Examples

### Sources

- [8-K Filing — NAPCO SECURITY TECHNOLOGIES, INC (NSSC)](https://www.sec.gov/Archives/edgar/data/0000069633/000110465926121107/nssc-20261029x8k.htm?ref=bullished.co) — SEC EDGAR
- [Exhibit nssc-ex99d1.htm — NAPCO SECURITY TECHNOLOGIES, INC 8-K exhibit](https://www.sec.gov/Archives/edgar/data/0000069633/000110465926121107/nssc-ex99d1.htm?ref=bullished.co) — SEC EDGAR
- [NAPCO Security Technologies to Announce Fiscal First Quarter 2027 Results Monday, November 2, 2026 – Company Announcement - FT.com](https://markets.ft.com/data/announce/detail?dockey=600-202610260730PR%5FNEWS%5FUSPRX%5F%5F%5F%5FNY79832-1&ref=bullished.co) — Financial Times
- [NAPCO Security Technologies, Inc. Reports Fiscal Q1 2027 Results](https://www.prnewswire.com/news-releases/napco-security-technologies-inc-reports-fiscal-q1-2027-results-302925823.html?ref=bullished.co) — prnewswire.com

### More on Napco Security Technologies

- [Napco Founder Soloway's Pay Fell To $1.46 Million As He Left The CEO Job](https://www.bullished.co/napco-founder-soloways-pay-fell-to-1-46-million-as-he-left-the-ceo-job-6bd813c0/)
- [Copeland Capital Holds 5.8% Of NAPCO Security, A Passive Stake, SEC Filing Shows](https://www.bullished.co/copeland-capital-holds-5-8-of-napco-security-a-passive-stake-sec-filing-shows-f2e486a5/)

[All Napco Security Technologies (NSSC) coverage →](https://www.bullished.co/tag/nssc/)