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NAPCO SECURITY TECHNOLOGIES, INC (NSSC)·Q1 2026 Earnings Summary

Executive Summary

  • Strong start to FY26: revenue $49.17M (+11.7% YoY), diluted EPS $0.34 (+13.3% YoY), gross margin 56.6% (+70 bps YoY), and Adjusted EBITDA $14.94M (+21% YoY; margin 30.4%). Mix driven by resilient Recurring Service Revenue (RSR) at 90.3% gross margin and a robust quarter for door-locking products .
  • Clear beats vs consensus: revenue $49.17M vs $46.91M*, EPS $0.34 vs $0.306*, and EBITDA $14.94M vs $13.46M*, aided by price actions, improved equipment margins, and RSR durability. Management reiterated confidence in continued growth of net income, Adjusted EBITDA, and cash flow through FY26 .
  • Pricing tailwinds building: equipment price increases tied to tariffs (late April) and the annual increase (mid-July) only partially flowed through Q1; a larger benefit is expected as FY26 progresses .
  • Capital allocation remains supportive: cash + marketable securities of ~$105.8M, no debt, and dividend maintained at $0.14/share (payable Jan 2, 2026); optionality for M&A exists but management remains disciplined .

Note: Asterisked values are S&P Global consensus estimates. Values retrieved from S&P Global.*

What Went Well and What Went Wrong

  • What Went Well

    • Equipment and services both grew double-digits; locking was “very strong,” with locking revenue $17.08M vs $13.85M YoY and equipment margin improving sequentially ~300 bps to ~26% on mix, price and overhead absorption .
    • RSR momentum sustained: +11.6% YoY to ~$23.5M with 90.3% gross margin; annualized RSR run-rate reached ~$95M based on October 2025 .
    • Cash generation and balance sheet: cash from ops $11.64M; cash + marketable securities $105.8M; no debt; dividend continued at $0.14/share .

  • What Went Wrong

    • RSR margin compression: RSR GM 90.3% (-80 bps YoY) due to tri-carrier (adding T-Mobile minutes) costs and volume pricing to large consolidating dealers; management is evaluating a modest RSR price increase to offset .
    • SG&A inflation: SG&A +13% YoY (22.3% of revenue) on higher legal fees and commissions; Adjusted EBITDA grew strongly, but Opex remains a watch item .
    • Prior year destocking and project timing still leave visibility considerations; management highlighted distributor behavior can be uneven around year-ends and price-change windows .

Financial Results

MetricQ3 FY2025 (Mar 31)Q4 FY2025 (Jun 30)Q1 FY2026 (Sep 30)Q1 FY2026 Consensus*
Revenue ($USD Millions)$43.961 $50.724 $49.168 $46.906*
Diluted EPS ($)$0.28 $0.33 $0.34 $0.306*
Gross Profit Margin %57.2% 52.8% 56.6% —
Net Income ($USD Millions)$10.122 $11.632 $12.165 —
Adjusted EBITDA ($USD Millions)$13.159 $14.249 $14.942 $13.462*
Adjusted EBITDA Margin %29.9% 28.1% 30.4% —
RSR Revenue ($USD Millions)$21.610 $22.426 $23.429 —
Equipment Revenue ($USD Millions)$22.351 $28.298 $25.739 —

Segment mix and profitability (Q1 FY2026):

  • Equipment revenue: $25.739M (+12.3% YoY); equipment gross margin ~25.7% on mix, price and overhead absorption .
  • Service (RSR) revenue: $23.429M (+11.1% YoY); RSR gross margin 90.3% .
  • Total revenue: $49.168M (+11.7% YoY); consolidated gross margin 56.6% .
KPIQ3 FY2025Q4 FY2025Q1 FY2026
RSR as % of Total Revenue49% 44% 48%
RSR Annualized Run-Rate ($M)~$89 ~$94 ~$95
Cash + Marketable Securities ($M)$89.30 (approx., Mar 31 cash $73.41 + securities $15.88) $99.18 (cash $83.08 + securities $16.10) $105.76 (as stated)

Note: Asterisked values are S&P Global consensus estimates. Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ2 FY2026 payable Jan 2, 2026$0.14$0.14 (declared Oct 30; record Dec 12) Maintained
Equipment pricingFY2026—Two increases implemented: tariff-related (late Apr) and annual (mid-Jul); more benefit ahead in FY26 Raised
RSR pricingFY2026—Evaluating modest increase to offset tri-carrier (T-Mobile) minute costs; “imminent” but not yet set Likely to raise
Tariff assumption (DR)FY2026—Stable ~10% tariff for Dominican Republic-origin goods; no incremental action planned Maintained
Revenue/EPSFY2026—No formal quantitative guidance provided; management confident in growth of net income, Adjusted EBITDA and cash flow —

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25 and Q4 FY25)Current Period (Q1 FY26)Trend
Pricing/TariffsQ3: Announced price increases amid tariff uncertainty; positioning advantage from DR/US manufacturing . Q4: Optimistic on FY26 with evolving tariff environment .Two price actions took effect (Apr tariff-related, Jul annual); partial benefit in Q1; more to come .Improving tailwind
RSR economicsQ3: RSR GM ~91%; run-rate ~$89M . Q4: RSR GM 91%; run-rate ~$94M .RSR GM 90.3%; run-rate ~$95M; slight margin pressure from tri-carrier and large-dealer pricing; considering increase .Stable revenue, slight GM pressure
Locking/MVP cloudQ3: Launched MVP cloud; subscription “by-door” model . Q4: Continued MVP positioning .MVP gaining traction; $3/door RMR potential; integrated locks + cloud differentiation .Building pipeline
Distribution dynamicsQ3: Destocking and project timing impacted equipment .Locking very strong; some orders pulled ahead pre-price increase; channel inventories healthy .Normalizing
Supply chain/Manufacturing—DR facility resilient (hurricane-proof, self-sufficient); cost/logistics/tariff advantages .Structural advantage
School safetyPrior: Pasadena contract; opportunity long-tail [—].Pasadena completed; significant national opportunity; universities active; early innings .Multi-year growth vector
Capital allocation/M&AFY25: Dividends, buybacks; strong FCF .$106M cash; disciplined M&A optionality; maintain dividends .Optionality intact

Management Commentary

  • “Strong demand for our door-locking products has driven the growth in our equipment revenue and improved equipment gross margins, and our RSR continues to see growth quarter over quarter with sustained gross margins of over 90%... our RSR has a prospective run rate of approximately $95 million” — Richard Soloway, CEO .
  • “We did not see the full impact of [price] adjustments in Q1, but we expect to see a larger benefit in the upcoming quarters of Fiscal 2026” — Kevin Buchel, President & COO .
  • “RSR gross margin of 90.3%... [pressure from] tri-carrier minutes and large-dealer pricing” — Andrew Vuono, CFO .
  • On MVP: “We charge $3 a door... there are millions and millions of doors... a totally integrated hardware-software package... recurring revenue tail” — Management .
  • On balance sheet: “$105.8 million in cash and cash equivalents and marketable securities... no debt” — CFO .

Q&A Highlights

  • Locking strength and MVP differentiation: Locking was ~66% of equipment sales; MVP is early but ramping, showcased at ISC; integrated lock + radio + cloud under one roof with $3/door RMR .
  • Price vs volume: ~60% of equipment revenue growth from volume, ~40% from pricing in Q1 .
  • Locking revenue detail: Q1 locking $17.083M vs $13.854M YoY; strong sell-through and healthy channel inventory .
  • RSR margin drivers and action: Tri-carrier minutes and big-dealer pricing pressured GM; management evaluating a small RSR price increase to restore margin .
  • Tariffs and DR manufacturing: DR tariff stable at ~10%; operations resilient; no further pricing needed beyond actions already taken .

Estimates Context

  • Q1 FY26 delivered broad beats: revenue $49.17M vs $46.91M*, EPS $0.34 vs $0.306*, EBITDA $14.94M vs $13.46M* .
  • FY26 trajectory: consensus implies modest sequential growth through Q3 and a larger seasonal step-up in Q4 for both revenue and EBITDA; consensus FY26 EPS ~1.362* and revenue ~$201.8M* (company gave no formal guidance) [—].

Note: Asterisked values are S&P Global consensus estimates. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix quality remains high: nearly half of revenue from RSR at ~90% GM provides durability and cash flow resilience; slight GM pressure is manageable with contemplated price adjustments .
  • Pricing tailwind to build through FY26: two equipment price increases only partially reflected in Q1; more benefit expected in subsequent quarters, supporting equipment margins and EPS .
  • Locking momentum is real: strong locking sales and better mix (door-locking) drove equipment GM improvement; MVP cloud creates a second RMR engine with $3/door economics and large TAM .
  • Capital allocation remains shareholder-friendly: strong cash, no debt, dividend maintained; disciplined approach to M&A with preference for accretive opportunities .
  • Watch items: monitor RSR GM trajectory as tri-carrier costs and big-dealer pricing normalize via RSR price adjustments; track channel behavior around year-end and further MVP commercialization milestones .
  • Near-term trading setup: solid beat-and-raise narrative on pricing/margins without formal guidance; product catalysts (ISC launches) and MVP adoption updates could serve as positive stock catalysts .

Supporting Detail: Q1 2026 Segment Snapshot

SegmentRevenue ($M)YoY GrowthGross Margin
Equipment$25.739 +12.3% 25.7%
Service (RSR)$23.429 +11.1% 90.3%
Total$49.168 +11.7% 56.6%

Other Relevant Press Releases (Q1 FY2026 window)

  • ISC East showcase: new tri-carrier intrusion communicators, upgraded keypads/readers, and MVP cloud ecosystem positioning to expand RMR and dealer opportunities .

Citations

  • Q1 FY26 8-K/Press Release financials, margins, dividend, statements of income, cash flow and non-GAAP reconciliations: .
  • Q1 FY26 earnings call transcript commentary on pricing, RSR margins, MVP model, cash/marketables, locking revenue details, tariffs and manufacturing: .
  • Prior quarters (Q4 FY25 and Q3 FY25) for trend/reference: .

Note: Asterisked values are S&P Global consensus estimates. Values retrieved from S&P Global.*