NAPCO Shares Sink 17% As Equipment Sales Fall 7% Despite Record Quarter
Recurring service revenue hit a record $26.1 million, but free cash flow dropped 79.8% and the stock fell in Monday trading.
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 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. 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% 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% 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 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.
Sources
- 8-K Filing — NAPCO SECURITY TECHNOLOGIES, INC (NSSC) — SEC EDGAR
- Exhibit nssc-ex99d1.htm — NAPCO SECURITY TECHNOLOGIES, INC 8-K exhibit — SEC EDGAR
- NAPCO Security Technologies to Announce Fiscal First Quarter 2027 Results Monday, November 2, 2026 – Company Announcement - FT.com — Financial Times
- NAPCO Security Technologies, Inc. Reports Fiscal Q1 2027 Results — prnewswire.com
