NAPCO Security Technologies (Nasdaq: NSSC) reported a record-breaking first quarter for fiscal 2026, with total revenue reaching $49.2 million — an 11.7% increase year-over-year — as the company's recurring revenue model and integrated security solutions gained traction across commercial, educational and institutional markets.
The security manufacturer reported net income of $12.2 million, representing 25% of revenue, while maintaining its debt-free balance sheet with cash holdings reaching $106 million.
Recurring revenue model delivers stability
The company's recurring monthly service revenue grew 11.6% to $23.5 million in the first quarter, maintaining an impressive gross margin of 90.3%. This high-margin revenue stream now represents nearly half of NAPCO's total sales and has reached a prospective annual run rate of approximately $95 million.
During an earnings call with investors, Chairman and CEO Richard Soloway emphasized the strategic importance of this business model: "Recurring revenue now represents nearly half of our total sales, supported by a sustained 90%-plus gross margin. This steady high-margin income continues to drive consistent cash generation and reinvestment in innovation and growth."
The primary driver remains the company's StarLink commercial fire radio platform, which Soloway described as "the industry standard for commercial fire communications." The platform operates across AT&T, Verizon and now T-Mobile networks to serve millions of commercial and residential buildings replacing legacy copper phone lines.
President and COO Kevin Buchel revealed that large-scale dealer consolidation is accelerating market penetration. "We are gaining a lot of business from some very large dealers," Buchel explained. "One in particular has been buying a lot of the smaller dealers...when he buys a smaller dealer, he is going to make sure that the smaller dealer's customers get our StarLink Fire radio."
Access control equipment revenue surges
Equipment revenue increased 11.8% to $25.6 million, with door locking products representing 66% of equipment sales. The locking segment generated $17.1 million in Q1, up substantially from $13.9 million in the prior year period.
Buchel characterized the performance as exceptional: "Locking was very strong...this is one of the strongest locking quarters, maybe the strongest we've ever had."
CFO Andrew Vuono provided additional context: "Of the approximate 12% increase in equipment revenue for the period, our preliminary analysis has indicated approximately 60% of that is related to volume increases and 40% is tied to the pricing increases that went into effect in Q1."
Cloud-based access control introduces new revenue stream
NAPCO unveiled its MVP cloud-based access control platform, designed to introduce subscription-based recurring revenue for both the company and its dealer network at $3 per door monthly. The platform integrates seamlessly with NAPCO's manufactured locking hardware, creating what Soloway described as "a totally integrated hardware-software package."
"What's interesting about it is that we have a totally integrated system because we manufacture the locks," Soloway explained. "We've added the radio aspect to it, which communicates to our cloud and the cloud is owned by us...we're a total integrated manufacturer, which allows us to add a lot of extra functionality."
The MVP platform is offered in two configurations: MVP Access for enterprise applications supporting unlimited users and MVP EZ for locksmiths and smaller facilities. While showcased at ISC West in April 2025, Buchel indicated meaningful revenue contributions would likely emerge in fiscal 2027: "I think fiscal '27 is when I think we'll really start to feel it."
Soloway drew parallels to the alarm industry's transformation decades earlier: "We went through alarms without recurring revenue...the intro of recurring revenue in the alarm business revolutionized that business...we're going through the same situation now in the locking business, 25 years later."
School security remains critical growth market
School security continued as a strategic focus area, with NAPCO positioning its integrated solutions as comprehensive answers to ongoing safety challenges. The company's portfolio includes Trilogy and ArchiTech lock sets alongside enterprise-scale access control systems aligned with Partner Alliance for Safer Schools (PASS) program standards.
Soloway emphasized NAPCO's unique positioning: "What truly differentiates NAPCO is our ability to integrate locking, access control and alarm technologies into a unified interoperable platform, protecting students and staff every day, while driving future growth."
Despite years of market awareness, Buchel indicated significant opportunity remains: "Despite the shooting has been going on for over 10 years, we're in the early innings, I would say, fourth or fifth inning of this. Still tremendous opportunity."
Manufacturing strategy provides competitive advantage
NAPCO's Dominican Republic manufacturing facility continues delivering strategic benefits in the current tariff environment. The facility faces stable 10% tariffs—significantly lower and more predictable than many competing manufacturing regions. Buchel confirmed: "The tariffs for the DR, very stable. It's not like some of the other countries where it's going up, it's down."
Soloway detailed the facility's resilience: "We built this custom building...which is Category 5 proof. It's all concrete building...we generate our own power, make our own water. We're self-contained."
Strong financial position enables strategic flexibility
NAPCO's balance sheet strengthened further with cash and marketable securities reaching $105.8 million while maintaining zero debt. Operating cash flow totaled $11.6 million with minimal capital expenditure requirements of just $193,000. Adjusted EBITDA increased 21.1% to $14.9 million, representing a 30.4% margin.
The board declared a quarterly dividend of $0.14 per share, continuing the company's shareholder return program. When questioned about potential accelerated capital returns, Buchel maintained discipline on acquisition criteria: "We're pretty fussy. There's a lot of boxes it has to check...the last thing we want to do though is get distracted by something that's not accretive from day 1."
Outlook
NAPCO's management expressed confidence in sustaining momentum through fiscal 2026. The company highlighted several growth drivers: continued StarLink fire radio adoption as copper lines phase out, MVP platform traction expected to accelerate in fiscal 2027, ongoing school security installations across a largely unpenetrated market and expansion into healthcare, retail, multi-dwelling and airport infrastructure applications.
With recurring revenue approaching 50% of total sales at 90%+ gross margins, integrated hardware and software capabilities spanning locking and alarm systems and a fortress balance sheet, NAPCO positioned itself to capitalize on both organic growth opportunities and potential strategic acquisitions in the evolving commercial security market.
*This article was created with the help of generative AI tools and edited by our content team for clarity and accuracy.