Q4 2025 Napco Security Technologies Inc Earnings Call

Ian (Operator): Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies Fiscal Q4 2025 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, August 25, 2025. I would now like to turn the conference over to Francis Okoniewski, Vice President of Investor Relations. Thank you. Please go ahead.

Speaker #2: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Speaker #2: This call is being recorded on Monday, August 25, 2025. I would now like to turn the conference over to Francis Okoniewski, Vice President of Investor Relations.

Speaker #2: Thank you. Please go ahead.

Speaker #3: Thank you, Ina, and good morning, everyone. This is Fran Okoniewski, Vice President of Investor Relations for NAPCO Security Technologies. Thank you all for joining today's conference call to discuss financial results for our fiscal fourth quarter and fiscal year 2025.

Francis Okoniewski: Thank you, Ian. Good morning, everyone. This is Francis Okoniewski, Vice President of Investor Relations for NAPCO Security Technologies. Thank you all for joining today's conference call to discuss financial results for our fiscal fourth quarter and fiscal year 2025. By now, all of you should have had the opportunity to review our earnings press release discussing our fiscal fourth quarter and fiscal year 2025 results. If you have not, a copy of the release is available in the Investor Relations section of our website, www.napcosecurity.com. On the call today are Richard Soloway, our Chairman and CEO; Kevin Buchel, President and Chief Operating Officer; and Andrew Vuono, Chief Financial Officer.

Speaker #3: By now, all of you should have had the opportunity to review our earnings press release discussing our fiscal fourth quarter and fiscal year 2025 results.

Speaker #3: If you have not, a copy of the release is available in the Investor Relations section of our website, www.napcosecurity.com. On the call today, we have Dick Soloway, our Chairman and CEO; Kevin Buchel, President and Chief Operating Officer; and Andrew Voneau, Chief Financial Officer.

Speaker #3: Before we begin, let me take a moment to read the forward-looking statement, as this presentation contains forward-looking statements that are based on current expectations, estimates, forecasts, and projections of future performance, based on management's judgment, beliefs, current trends, and anticipated product performance.

Francis Okoniewski: Before we begin, let me take a moment to read the forward-looking statement, as this presentation contains forward-looking statements that are based on current expectations, estimates, forecasts, and projections of future performance based on management's judgment, beliefs, current trends, and anticipated product performance. These forward-looking statements include, without limitations, statements relating to growth drivers of the company's business, such as school security products, recurring revenue services, potential market opportunities, the benefits of our recurring revenue products to customers and dealers, our ability to control expenses and costs, and expected annual run rate or SaaS recurring monthly revenue. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, such risk factors described in our SEC filings, including our annual report on Form 10-K.

Speaker #3: These forward-looking statements include, without limitation, statements relating to growth drivers of the company's business, such as school security products, recurring revenue, services, potential market opportunities, the benefits of our recurring revenue products to customers and dealers, our ability to control expenses and costs, and expected annual run rate.

Speaker #3: For SaaS recurring monthly revenue, forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements.

Speaker #3: These factors include, but are not limited to, such risk factors described in our SEC filings, including our annual report on Form 10-K. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements.

Francis Okoniewski: Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements. All information provided in today's press release and this conference call are as of today's date unless otherwise stated, and we undertake no duty to update such information except as required under applicable law. I'll turn the call over to Richard in a moment. Before I do, I want to mention we are actively planning our Investor Relations calendar for non-deal roadshow and conference attendance in the near future.

Speaker #3: Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements.

Speaker #3: All information provided in today's press release and this conference call is as of today's date unless otherwise stated. We undertake no duty to update such information except as required under applicable law.

Speaker #3: I'll turn the call over to Dick in a moment. Before I do, I want to mention that we are actively planning our Investor Relations calendar for non-deal roadshow and conference attendance in the near future.

Speaker #3: Investor outreach is important to NAPCO, and I'd like to thank all those folks who assist us in these types of events. Over the coming weeks, we will be participating in several key investor events.

Francis Okoniewski: Investor outreach is important to NAPCO, and I'd like to thank all those folks who assist us in these types of events. Over the coming weeks, we will be participating in several key investor events. We'll be attending the Jefferies Industrials Conference in New York City in early September, followed by a virtual non-deal roadshow hosted by Craig Hallam on September 8th. In mid-September, we'll take part in D.A. Davidson's 24th Annual Diversified Industrials and Services Conference in Nashville, Tennessee, and on October 8th, Lake Street will host a virtual non-deal roadshow on our behalf. With that out of the way, let me turn the call over to Richard Soloway, Chairman and CEO of NAPCO Security Technologies. Dick, the floor is yours.

Speaker #3: We'll be attending the Jefferies Industrials Conference in New York City in early September, followed by a virtual non-deal roadshow hosted by Craig Hallam on September 8th.

Speaker #3: In mid-September, we'll take part in DA Davidson's 24th Annual Diversified Industrials and Services Conference in Nashville, Tennessee, and on October 8th, Lake Street will host a virtual non-deal roadshow on our behalf.

Speaker #3: With that out of the way, let me turn the call over to Dick Soloway, Chairman and CEO of NAPCO Security Technologies. Dick, the floor is yours.

Speaker #4: Thank you, Fran. Good morning, everyone, and welcome to our conference call. We appreciate your participation today as we review our fiscal Q4 and fiscal 2025 performance.

Richard Soloway: Thank you, Fran. Good morning, everyone, and welcome to our conference call. We appreciate your participation today as we review our fiscal Q4 and fiscal 2025 performance. This past year has presented its fair share of headwinds, particularly around microeconomic uncertainty and tariff-related pressures. But through it all, we've maintained focus on our long-term strategy, delivering best-in-class solutions, maintaining operational discipline, and investing for sustainable growth. Our recurring revenue model continues to provide significant profitability and stability and a strong foundation for future innovation and customer engagement. As you will hear shortly, we have once again attained meaningful growth in this area, and we are confident this trend will continue. We are also encouraged by our Q4 hardware sales performance and how quickly our team adapted to shifting demand.

Speaker #4: This past year has presented its fair share of headwinds, particularly around microeconomic uncertainty and tariff-related pressures. But through it all, we have maintained focus on our long-term strategy.

Speaker #4: Delivering best-in-class solutions and maintaining operational discipline while investing for sustainable growth. Our recurring revenue model continues to provide significant profitability and stability, serving as a strong foundation for future innovation and customer engagement.

Speaker #4: As you will hear shortly, we have once again attained meaningful growth in this area, and we are confident this trend will continue. We are also encouraged by our Q4 hardware sales performance and how quickly our team adapted to shifting demand.

Speaker #4: Our ability to control inventory and manage supply chain complexity, and continue delivering on customer commitments, has put us in a strong position. One of the things I am most proud of is how we have balanced growth with financial stewardship.

Richard Soloway: Our ability to control inventory, manage supply chain complexity, and continue delivering on customer commitments has put us in a strong position. One of the things I am most proud of is how we have balanced growth with financial stewardship. We continue to invest in product development and customer success while also returning significant value to shareholders, all without taking on debt, which speaks to the strength of our business model and the effectiveness of our leadership team. Looking forward, the tariff landscape will continue to evolve, and while we cannot predict how that will play out, we have taken proactive steps both operationally and strategically to protect margins and ensure long-term competitiveness. The pricing adjustments we have implemented are a key part of that, and we expect to see its impact starting in Q1.

Speaker #4: We continue to invest in product development and customer success while also returning significant value to shareholders—all without taking on debt. This speaks to the strength of our business model and the effectiveness of our leadership team.

Speaker #4: Looking forward, the tariff landscape will continue to evolve. While we cannot predict how that will play out, we have taken proactive steps, both operationally and strategically, to protect margins and ensure long-term competitiveness.

Speaker #4: The pricing adjustments we have implemented are a key part of that, and we expect to see their impact starting in Q1. We enter fiscal 2026 with strong momentum.

Richard Soloway: We enter fiscal 2026 with strong momentum, a clear focus, and confidence in our ability to execute. With that, I will turn the call over to our President and Chief Operating Officer, Kevin Buchel, who will comment on some of our operational and financial performance highlights. Following Kevin's remarks, our Chief Financial Officer, Andrew Vuono, will go through the financials in detail, and then I will return to delve deeper into our strategies and market outlook. Kevin, the floor is yours. Thank you, Dick, and good morning, everyone. I'm pleased to start off by highlighting several key accomplishments and financial milestones from Q4 and fiscal year 2025.

Speaker #4: A clear focus and confidence in our ability to execute. With that, I will turn the call over to our President and Chief Operating Officer, Kevin Buchel, who will comment on some of our operational and financial performance highlights.

Speaker #4: Following Kevin's remarks, our CFO, Andy Voneau, will go through the financials in detail, and then I will return to delve deeper into our strategies and market outlook.

Speaker #4: Kevin, the floor is yours.

Speaker #5: Thank you, Dick, and good morning, everyone. I am pleased to start off by highlighting several key accomplishments and financial milestones from Q4 and fiscal year 2025.

Speaker #5: First, I'm proud to report that we will be reporting that the company received a clean opinion on its internal controls over financial reporting for fiscal 2025.

Richard Soloway: First, I am proud to report that we will be reporting that the company received a clean opinion on its internal controls over financial reporting for fiscal 2025, which means our auditors, Deloitte, issued an unqualified opinion under the Sarbanes-Oxley Act, indicating that our company's internal controls over financial reporting were designed and operating effectively as of June 30, 2025. You will see that as part of the 10-K, which we will be filing later today. This reflects the strength of our internal controls and the continued diligence of our finance and compliance teams, and I would like to congratulate them for all of their efforts. Our recurring revenue continues to be a cornerstone of our business. The run rate this quarter reached $94 million, and that is up $5 million from the prior quarter.

Speaker #5: Which means our auditors, Deloitte, issued an unqualified opinion under the Sarbanes-Oxley Act, indicating that our company's internal controls over financial reporting were designed and operating effectively as of June 30, 2025.

Speaker #5: You will see that as part of the 10-K, which we will be filing later today. This reflects the strength of our internal controls and the continued diligence of our finance and compliance teams.

Speaker #5: And I would like to congratulate them for all of their efforts. Our recurring revenue continues to be a cornerstone of our business. The run rate this quarter reached $94 million, and that's up $5 million from the prior quarter.

Speaker #5: This marks the largest quarterly increase we've seen in the past two years, and it's a strong signal of the momentum that we're building. Equipment sales for the quarter, while down 5% versus last year's Q4, had a much improved performance.

Richard Soloway: This marks the largest quarterly increase we have seen in the past two years, and it is a strong signal of the momentum that we are building. Equipment sales for the quarter, while down 5% versus last year's Q4, had a much improved performance, increasing 27% sequentially from Q3 of fiscal 2025. This growth underscores the value of our offerings and the continued strength of our customer relationships, particularly in uncertain economic times caused in large part by the effect of tariffs. From a profitability standpoint, our recurring revenue gross margin remained very strong at 91%, with StarLink Fire radios continuing to be a strong part of the mix. We also made meaningful progress on inventory management, reducing inventory levels at June 30, 2025, by $8.6 million compared to this time last year.

Speaker #5: Increasing 27% sequentially from Q3 of fiscal 2025, this growth underscores the value of our offerings and the continued strength of our customer relationships. Particularly in uncertain economic times, caused in large part by the effect of tariffs.

Speaker #5: From a profitability standpoint, our recurring revenue growth margin remains very strong at 91%. With startling commercial fire radios continuing to be a strong part of the mix.

Speaker #5: We also made meaningful progress on inventory management, reducing inventory levels at June 30, 2025, by $8.6 million compared to this time last year.

Speaker #5: Cash flow from operations for the year came in at $53.5 million, which reinforces our ability to generate consistent cash flow to support both strategic investments and shareholder returns.

Richard Soloway: Cash flow from operations for the year came in at $53.5 million, which reinforces our ability to generate consistent cash flow to support both strategic investments and shareholder returns. Speaking of which, we returned significant value to our shareholders during the fiscal year. We paid out $13.6 million in dividends and repurchased $36.8 million of our stock, which is equivalent to 1.2 million shares at an average price of $30.40. Even after these returns, we ended the fiscal year with approximately $100 million in cash and no debt, giving us tremendous flexibility going forward. On pricing, we announced two pricing increases during the quarter. The first, at the end of April, was an 8.5% increase to help offset rising tariff costs. The second was our standard annual price increase, which this year was 5% and which went into effect approximately mid-July.

Speaker #5: Speaking of which, we returned significant value to our shareholders during the fiscal year. We paid out 13.6 million dollars in dividends, and repurchased 36.8 million dollars of our stock, which is equivalent to 1.2 million shares and an average price of $30 and 40 cents.

Speaker #5: Even after these returns, we ended the fiscal year with approximately $100 million in cash and no debt, giving us tremendous flexibility going forward.

Speaker #5: On pricing, we announced two pricing increases during the quarter. The first, at the end of April, was an 8.5% increase to help offset rising tariff costs.

Speaker #5: The second was our standard annual price increase, which this year was 5%, and which went into effect approximately mid-July. We expect the full benefit of these actions to be reflected starting in our fiscal 2026 Q1.

Richard Soloway: We expect the full benefit of these actions to be reflected starting in our fiscal 2026 Q1. Finally, while there remains considerable uncertainty in the market around tariffs, we believe we are in an advantageous position as compared to some of our competitors. Our supply chain planning, pricing strategies, and balance sheet strength give us a competitive advantage in navigating these challenges. Overall, it was a very strong quarter and a solid close to the fiscal year, with net income of $43.4 million, or 24% of sales, and adjusted EBITDA of $52.1 million, which equates to an EBITDA margin of 29%. I am proud of the team's execution and the financial strength we are carrying into the new fiscal year. With that, I will turn the call over to our CFO, Andrew Vuono, for a deeper dive into the financials. Andy?

Speaker #5: Finally, while there remains considerable uncertainty in the market around tariffs, we believe we are in an advantageous position compared to some of our competitors.

Speaker #5: Our supply chain planning, pricing strategies, and balance sheet strength give us a competitive advantage in navigating these challenges. Overall, it was a very strong quarter and a solid close to the fiscal year.

Speaker #5: With net income of $43.4 million, or 24% of sales, and adjusted EBITDA of $52.1 million, which equates to an EBITDA margin of 29%.

Speaker #5: I am proud of the team's execution and the financial strength we are carrying into the new fiscal year. With that, I will turn the call over to our CFO, Andy Voneau, for a deeper dive into the financials.

Speaker #5: Andy?

Speaker #6: Great. Thank you, Kevin, and good morning, everyone. Net sales for the three months ended June 30, 2025, increased 0.8% to $50.7 million, as compared to $50.3 million for the same period a year ago.

Andrew Vuono: Great. Thank you, Kevin, and good morning, everyone. Net sales for the three months ended June 30, 2025, increased 0.8% to $50.7 million as compared to $50.3 million for the same period a year ago. Net sales for the 12 months ended June 30, 2025, decreased 3.8% to $181.6 million as compared to $188.8 million for the same period a year ago. Recurring monthly service revenue continued a strong growth, increasing 10% in Q4 to $22.4 million as compared to $20.4 million for the same period last year. Recurring monthly service revenue for the 12 months ended June 2025, increased 14% to $86.3 million as compared to $75.7 million last year. These increases reflect the continued demand for our StarLink radios.

Speaker #6: Net sales for the 12 months ended June 30, 2025, decreased 3.8% to $181.6 million, compared to $188.8 million for the same period a year ago.

Speaker #6: Recurring monthly service revenue continued strong growth, increasing 10% in Q4 to $22.4 million, as compared to $20.4 million for the same period last year.

Speaker #6: Recurring monthly service revenue for the 12 months ended June 2025 increased 14% to $86.3 million, compared to $75.7 million last year. These increases reflect the continued demand for our startling radios.

Speaker #6: Equipment sales for the quarter decreased 5.5% to $28.3 million, compared to $29.9 million last year. Additionally, equipment sales for the year ended June 2025 decreased 15.7% to $95.3 million, compared to $113.1 million for the same period last year.

Andrew Vuono: Equipment sales for the quarter decreased 5.5% to $28.3 million as compared to $29.9 million last year, and equipment sales for the year ended June 2025, decreased 15.7% to $95.3 million as compared to $113.1 million for the same period last year. The decrease in equipment sales was primarily a result of extended stocking strategies of some of our larger distributors throughout the year, in addition to the timing of large project work for our door locking business. Gross profit for three months ended June 2025, decreased 3.8% to $26.8 million, with a gross margin of 53% as compared to $27.8 million, with a gross margin of 55% for the same period last year. Gross profit for the 12 months ended June 30, 2025, decreased 0.7% to $101 million, with a gross margin of 56% as compared to $101.8 million, with a gross margin of 54% a year ago.

Speaker #6: The decrease in equipment sales was primarily a result of extended stocking strategies of some of our larger distributors throughout the year, in addition to the timing of large project work for our door locking business.

Speaker #6: Gross profit for the three months ended June 2025 decreased 3.8% to $26.8 million, with a gross margin of 53%, compared to $27.8 million, with a gross margin of 55% for the same period last year.

Speaker #6: Gross profit for the 12 months ended June 30, 2025, decreased 0.7% to $101 million, with a gross margin of 56%, compared to $101.8 million with a gross margin of 54% a year ago.

Speaker #6: Gross profit for recurring service revenue for the quarter increased 10.3% to $20.3 million, with a gross margin of 91%, as compared to $18.4 million with a gross margin of 90% last year.

Andrew Vuono: Gross profit for recurring service revenue for the quarter increased 10.3% to $20.3 million, with a gross margin of 91% as compared to $18.4 million, with a gross margin of 90% last year. Gross profit for the recurring service revenue for the 12 months ended June 2025, increased 14.6% to $78.5 million, with a gross margin of 91% as compared to $68.5 million, with a gross margin of 90% last year. Gross profit for equipment revenue in Q4 decreased 31.2% to $6.4 million, with a gross margin of 23% as compared to $9.4 million, with a gross margin of 31% last year. Gross profit for equipment revenue for the 12 months ended June 30, 2025, decreased 32% to $22.5 million, with a gross margin of 24% as compared to $33.2 million, with a gross margin of 29% for the same period last year.

Speaker #6: Gross profit for the recurring service revenue for the 12 months ended June 2025 increased 14.6% to $78.5 million, with a gross margin of 91%, compared to $68.5 million with a gross margin of 90% last year.

Speaker #6: Gross profit for equipment revenue in Q4 decreased 31.2% to $6.4 million, with a gross margin of 23%, compared to $9.4 million with a gross margin of 31% last year.

Speaker #6: Gross profit for equipment revenues for the 12 months ended June 30, 2025, decreased 32% to $22.5 million, with a gross margin of 24%, compared to $33.2 million with a gross margin of 29% for the same period last year.

Speaker #6: The increase in both gross profit dollars and gross margin for recurring revenue for the three and 12 months ended June 2025 was primarily the result of the previously mentioned increase in recurring revenue, as well as a greater proportion of those revenues being generated by our startling fire radios.

Andrew Vuono: The increase in both gross profit dollars and gross margin for recurring revenue for the three and 12 months ended June 2025 was primarily the result of the previously mentioned increase in recurring revenue, as well as a greater proportion of those revenues being generated by our StarLink Fire radios, which generate higher monthly service charges than other StarLink radios. The decrease in both gross profit dollars and gross margin for equipment revenues for both the three and 12 months ended June 2025 was primarily a result of the aforementioned decrease in revenue, which resulted in less absorption of our fixed manufacturing overhead costs. In addition, Q4 was further negatively impacted by increased tariff costs in the fourth quarter and the impact of distributors pulling forward certain orders before our announced price increase went into effect.

Speaker #6: Which generate higher monthly service charges than other Starlink radios. The decrease in both gross profit dollars and gross margin for equipment revenues for both the three and 12 months ended June 2025 was primarily a result of the aforementioned decrease in revenue, which resulted in less absorption of our fixed manufacturing overhead costs. In addition, Q4 was further negatively impacted by increased tariff costs in the fourth quarter and the impact of distributors pulling forward certain orders before our announced price increase went into effect.

Speaker #6: R&D costs for the quarter increased 6.8% to $3.2 million, representing 6.4% of sales, compared to $3 million, or 6% of sales, for the same period a year ago.

Andrew Vuono: R&D costs for the quarter increased 6.8% to $3.2 million, or 6.4% of sales, as compared to $3 million, or 6% of sales for the same period a year ago. R&D costs for the 12 months ended June 2025 increased 16.9% to $12.6 million, or 7% of sales, as compared to $10.8 million, or 6% of sales for the same period a year ago. The increase for the three and 12 months was a result of salary increases and the hiring of additional staff. SG&A expenses for the quarter increased 5.8% to $11.5 million, or 23% of net sales, as compared to $10.9 million, or 22% of net sales for the same period last year. SG&A expenses for the 12 months ended June 2025 increased 13.5% to $42.2 million, or 23% of net sales, as compared to $37.1 million, or 20% of sales for the same period last year.

Speaker #6: R&D costs for the 12 months ended June 2025 increased 16.9% to $12.6 million, representing 7% of sales, as compared to $10.8 million, or 6% of sales, for the same period a year ago.

Speaker #6: The increase for the three and twelve months was a result of salary increases and the hiring of additional staff. SG&A expenses for the quarter increased 5.8% to $11.5 million, which is 23% of net sales, as compared to $10.9 million, or 22% of net sales, for the same period last year.

Speaker #6: SG&A expenses for the 12 months ended June 2025 increased 13.5% to $42.2 million, comprising 23% of net sales, compared to $37.1 million, which was 20% of sales for the same period last year.

Speaker #6: The increase in SG&A for the three months was primarily due to increased legal expenses and increased wages as a result of salary increases and certain additional hirings in the finance and IT departments.

Andrew Vuono: The increase in SG&A for the three months was primarily due to increased legal expenses and increased wages as a result of salary increases and certain additional hirings in the finance and IT departments. The increase for the 12 months was primarily due to increases in personnel-related expenses, mainly from merit increases and hiring of additional personnel in finance and IT, in addition to increases in insurance, advertising, legal and professional fees, which was offset by decreases in director fees and non-recurring transactional costs. Operating income for the quarter decreased 13.4% to $12.1 million, as compared to $14 million for the same period last year. Operating income for the 12 months ended June 2025 decreased 14% to $46.3 million, as compared to $53.8 million for the same period last year. Interest in other income for three months increased 16% to $883,000, as compared to $762,000 last year.

Speaker #6: The increase for the 12 months was primarily due to increases in personnel-related expenses, mainly from merit increases and hiring additional personnel in finance and IT, in addition to increases in insurance, advertising, legal, and professional fees. This was offset by decreases in director fees and non-recurring transactional costs.

Speaker #6: Operating improvement for the quarter decreased 13.4% to $12.1 million as compared to $14 million for the same period last year. Operating income for the 12 months ended June 2025 decreased 14% to $46.3 million as compared to $53.8 million for the same period last year.

Speaker #6: Interest and other income for the three months increased 16% to $883,000, compared to $762,000 last year. For the 12 months ended June 2025, interest and other income increased 48% to $3.8 million, compared to $2.6 million last year.

Andrew Vuono: For the 12 months ended June 2025, interest in other income increased 48% to $3.8 million, compared to $2.6 million last year. The increases for both the three and 12 months ended June 2025 was primarily due to increased interest in dividend income from the company's cash and short-term investments. The provisions for income taxes for the three months increased by 12% to $1.3 million, with an effective tax rate of 10%, as compared to $1.2 million, with an effective tax rate of 8% last year. For the 12 months ended June 2025, the provision for income taxes increased 1.4%, or $95,000, to $6.7 million, with an effective tax rate of 13%, as compared to $6.6 million, with an effective tax rate of 12% last year.

Speaker #6: The increases for both the three and twelve months ended June 2025 were primarily due to increased interest and dividend income from the company's cash and short-term investments.

Speaker #6: The provisions for income taxes for the three months increased 12.2% to $145 thousand, totaling $1.3 million, with an effective tax rate of 10%. This is compared to $1.2 million with an effective tax rate of 8% last year.

Speaker #6: For the 12 months ended June 2025, the provision for income taxes increased by 1.4%, up $95,000 to $6.7 million, with an effective tax rate of 13%, compared to $6.6 million with an effective tax rate of 12% last year.

Speaker #6: The increase in the provision for the three and twelve months ended June 25 was due to a larger portion of our taxable income being attributable to the U.S. operations.

Andrew Vuono: The increase in the provision for the three and 12 months ended June 25 was due to a larger portion of our taxable income being attributable to the U.S. operations. Net income for the quarter decreased 14% to $11.6 million, or $0.33 per diluted share, as compared to $13.5 million, or $0.36 per diluted share for the same period last year, and represents 23% of net sales. Net income for the 12 months ended June 30, 2025, decreased 13% to $43.4 million, or $1.19 per diluted share, as compared to $49.8 million, or $1.34 per diluted share for the same period last year, and represents 24% of net sales. Adjusted EBITDA for the quarter decreased 7.6% to $14.2 million, or $0.40 per diluted share, as compared to $15.4 million, or $0.41 per diluted share for the same period a year ago, and equates to an adjusted EBITDA margin of 28.1%.

Speaker #6: Net income for the quarter decreased 14% to $11.6 million, or $0.33 per diluted share, compared to $13.5 million, or $0.36 per diluted share, for the same period last year.

Speaker #6: Net sales for the 12 months ended June 30, 2025, decreased 13% to $43.4 million, or $1.19 per diluted share, compared to $49.8 million, or $1.34 per diluted share, for the same period last year. This represents 23% of net sales.

Speaker #6: And represents 24% of net sales. Adjusted EBITDA for the quarter decreased 7.6% to $14.2 million, with $0.40 per diluted share, as compared to $15.4 million, or $0.41 per diluted share, for the same period a year ago.

Speaker #6: And it equates to an adjusted EBITDA margin of 28.1%. Adjusted EBITDA for the 12 months ended June 2025 decreased 11.6% to $52.1 million, or $1.43 per diluted share, compared to $58.9 million, or $1.59 per diluted share for the same period last year.

Andrew Vuono: Adjusted EBITDA for the 12 months ended June 2025 decreased 11.6% to $52.1 million, or $1.43 per diluted share, as compared to $58.9 million, or $1.59 per diluted share for the same period last year, and equates to an adjusted EBITDA margin of 28.7%. Discussing our balance sheet, as of June 2025, the company had $99.1 million in cash and cash equivalents in marketable securities, as compared to $97.7 million as of June 2024, a 1.5% increase. The company had no debt as of June 2025, and cash provided by operating activities for the 12 months ended June 2025 was $53.5 million, as compared to $45.4 million for the same period last year, an 18% increase. Working capital, which is our current assets, that's current liabilities, was $138.4 million as of June 2025, as compared to working capital of $146.5 million at June 2024.

Speaker #6: And equates to an adjusted EBITDA margin of 28.7%. Discussing our balance sheet, as of June 2025, the company had $99.1 million in cash and cash equivalents and marketable securities, compared to $97.7 million as of June 2024.

Speaker #6: A one-and-a-half percent increase. The company had no debt as of June 2025, and cash provided by operating activities for the 12 months ended June 2025 was $53.5 million, compared to $45.4 million for the same period last year.

Speaker #6: An 18% increase in working capital, which is our current assets minus current liabilities, was $138.4 million as of June 2025, as compared with working capital of $146.5 million at June 2024.

Speaker #6: CapEx for the quarter was $237,000 as compared to $551,510 in the prior year. For the full fiscal year, CapEx was $2.1 million, as compared to $1.6 million last year.

Andrew Vuono: CapEx for the quarter was $237,000, as compared to $551,000 in the prior year, and for the full fiscal year, CapEx was $2.1 million, as compared to $1.6 million last year. That concludes my formal remarks, and I'd like to return the call back to Dick.

Speaker #6: That concludes my formal remarks, and I'd like to return the call back to Dick.

Speaker #4: Thank you, Andy. Let me take a moment to wrap up with a few reflections on where we've been and where we're headed. Fiscal 2025 is a year of both challenge and resilience, yet through it all, NAPCO demonstrated the strength and durability of its model.

Richard Soloway: Thank you, Andy. Let me take a moment to wrap up with a few reflections on where we've been and where we're headed. Fiscal 2025 is a year of both challenge and resilience, yet through it all, NAPCO demonstrated the strength and durability of its model. We stayed focused on creating lasting value for our customers, partners, and shareholders. One of the clearest indications of that strength is our recurring revenue. This year, recurring revenue grew by more than $10 million and now represents nearly half of our total sales, with a sustained gross margin of 91%, which provides consistent cash generation and opportunity for continued reinvestment. A major driver of this growth has been the success of our StarLink Fire radio platform, which is increasingly viewed as the industry standard for fire communications in commercial buildings. Operationally, I'm extremely proud of the performance that our team delivered.

Speaker #4: We stayed focused on creating lasting value for our customers, partners, and shareholders. One of the clearest indications of that strength is our recurring revenue.

Speaker #4: This year, recurring revenue grew by more than $10 million and now represents nearly half of our total sales, with a sustained gross margin of 91%.

Speaker #4: This provides consistent cash generation and opportunities for continued reinvestment. A major driver of this growth has been the success of our startling fire radio platform, which is increasingly viewed as the industry standard for fire communications in commercial buildings.

Speaker #4: Operationally, I'm extremely proud of the performance that our team delivered. We reduced inventory by more than $8 million, and despite providing nearly $50 million of value to shareholders through dividends and share repurchases, we continue to invest in product development, compliance, and systems infrastructure.

Richard Soloway: We reduced inventory by more than $8 million, and despite providing nearly $50 million of value to shareholders through dividends and share repurchases and continued to invest in product development, compliance, and systems infrastructure, we still ended the year with over $99 million in cash while maintaining a debt-free balance sheet. On the hardware side, as mentioned earlier, we saw a strong rebound in Q4, up 27% sequentially from Q3. This rebound reflects our team's agility in adapting to shifting demand dynamics. Looking ahead, we remain cautiously optimistic. Tariff policy and broader market conditions remain dynamic, but we're not standing still. Our pricing actions have been implemented, and we continue to diversify our distribution base, invest in automation, and enhance our StarLink platform, ensuring we're driving sustainable growth while protecting margins. Our strong balance sheet gives us meaningful flexibility to respond to opportunities both organically and through potential strategic acquisitions.

Speaker #4: We still ended the year with over $99 million in cash while maintaining a debt-free balance sheet. On the hardware side, as mentioned earlier, we saw a strong rebound in Q4, up 27% sequentially from Q3.

Speaker #4: This rebound reflects our team's agility in adapting to shifting demand dynamics. Looking ahead, we remain cautiously optimistic. Tariff policy and broader market conditions remain dynamic, but we're not standing still.

Speaker #4: Our pricing actions have been implemented, and we continue to diversify our distribution base, invest in automation, and enhance our starting platform, ensuring we're driving sustainable growth while protecting margins.

Speaker #4: Our strong balance sheet gives us meaningful flexibility to respond to opportunities both organically and through potential strategic acquisitions. At the same time, we remain committed to returning capital to our shareholders while operating with zero debt.

Richard Soloway: At the same time, we remain committed to returning capital to our shareholders while operating with zero debt. Now, stepping back for a broader view, I want to highlight one vertical where NAPCO continues to make a difference: school security. School safety remains one of the most critical challenges of our time, and NAPCO is proud to be a trusted and proven partner to school districts all across the country. Our divisions work together to deliver a full suite of integrated solutions from the advanced Trilogy and Marks USA locksets to enterprise-scale Continental Instruments CA4K access control systems. These platforms are secure, scalable, and aligned with important standards like PASS, or as it's called, the Partner Alliance for Safer Schools, to help schools implement practical, best-in-class security. We know that educators, administrators, and communities are looking for solutions they can trust.

Speaker #4: Now, stepping back for a broader view, I want to highlight one vertical where NAPCO continues to make a difference: school security. School safety remains one of the most critical challenges of our time.

Speaker #4: And NAPCO is proud to be a trusted and proven partner to school districts all across the country. Our divisions work together to deliver a full suite of integrated solutions, from the advanced Trilogy and Architect lock sets to enterprise-scale Continental CA 4K access control systems.

Speaker #4: These platforms are secure, scalable, and align with important standards like PAS, or the Partner Alliance for Safer Schools, to help schools implement practical best-in-class security.

Speaker #4: We know that educators, administrators, and communities are looking for solutions they can trust. What makes NAPCO unique is our ability to bring together locking access control and alarm technologies into a unified, often interoperable platform.

Richard Soloway: What makes NAPCO Security Technologies unique is our ability to bring together locking, access control, and Alarm Lock technologies into a unified, often interoperable platform. It's extremely gratifying to know that our solutions are helping to protect students and staff every single day, and we see this as an area of ongoing growth and responsibility. In parallel with our work in education, we continue to invest heavily in R&D to expand recurring revenue opportunities across our product line. One of the most exciting of these is our MVP hosted access system platform, a next generation of cloud-based access control systems that integrate seamlessly with our locking hardware. It represents a brand new recurring revenue stream for us and for our dealers, with configurations tailored for both enterprise customers and smaller facilities.

Speaker #4: It's extremely gratifying to know that our solutions are helping to protect students and staff every single day. We see this as an area of ongoing growth and responsibility.

Speaker #4: In parallel with our work in education, we continue to invest heavily in R&D to expand recurring revenue opportunities across our product lines. One of the most exciting of these is our MVP platform.

Speaker #4: A next generation of cloud-based access control systems that integrate seamlessly with our locking hardware. It represents a brand new recurring revenue stream for us and for our dealers.

Speaker #4: With configurations tailored for both enterprise customers and smaller facilities, we believe MVP can potentially be a game changer and become a foundational contributor to our growth over the coming years as it extends our leadership into the hosted access control market and reinforces our core strategy of integrating innovative hardware with cloud-based services to deliver long-term, high-margin recurring revenue.

Richard Soloway: We believe MVP hosted access system can potentially be a game changer and become a foundational contributor to our growth over the coming years, as it extends our leadership into the hosted access control market and reinforces our core strategy of integrating innovative hardware with cloud-based services to deliver long-term, high-margin recurring revenue. In summary, we are ending fiscal 2026 with a solid momentum, clarity of focus, and a strong financial foundation. Let me repeat. In summary, we are entering fiscal 2026 with a solid momentum, clarity of focus, and a stronger financial foundation. We built a resilient business model that continues to deliver even in challenging environments. I'm incredibly proud of our team, what it has accomplished, and I'm energized with what lies ahead. I'd like to thank everyone for their support and for joining us in this exciting future we have.

Speaker #4: In summary, we are ending fiscal 2026 with solid momentum, clarity of focus, and a strong financial foundation. Let me repeat, in summary, we are entering fiscal 2026 with solid momentum, clarity of focus, and a stronger financial foundation.

Speaker #4: We built a resilient business model that continues to deliver even in challenging environments. I'm incredibly proud of our team and what it has accomplished, and I'm energized by what lies ahead.

Speaker #4: I'd like to thank everyone for their support and for joining us in this exciting future we have. Our formal remarks are now concluded, and I'd like to open the call to the Q&A session.

Richard Soloway: Our formal remarks are now concluded, and I'd like to open the call for the Q&A session. Operator, please proceed.

Speaker #4: Operator, please proceed.

Speaker #2: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press star followed by the two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. Your first question comes from the line of Matt Summerville from D.A. Davidson. Please go ahead.

Speaker #2: You will hear a prompt that your hand has been raised. If you wish to cancel your request, please press star followed by two.

Speaker #2: If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. And your first question comes from the line of Matt Somerville from DA Davidson. Please go ahead.

Speaker #7: Thanks. A couple of questions. Given that some distributors are still taking down inventories, should we be concerned with respect to where channel inventory sits today, given that it sounds like there may have been a little bit of a broader buy-ahead related to the tariff-driven price increases you mentioned on the call?

Matt Summerville: Thanks. A couple of questions. Given that some distributors are still taking down inventories, should we be concerned with respect to where channel inventories sit today, given that it sounds like there may have been a little bit of a broader buy-ahead related to the tariff-driven price increases you mentioned on the call? Then I have a follow-up.

Speaker #7: And then I have a follow-up.

Speaker #5: So, so, Matt, the inventory that was bought pre-tariff increase price increase was done in April, pretty much. So that's four or five months before the end of this quarter that we're in now.

Richard Soloway: Matt, the inventory that was bought pre-tariff price increase was done in April, pretty much. That is four or five months, you know, before the end of this quarter that we are in now. We expect distributors to buy more. The sell-through stats are good. The tariff chaos has kind of cleared up. The distributors know that we are the best game in town when it comes to tariffs. Our direction is clear. Some of the other competitors, it is a little chaotic, and they do not know where the tariffs are going. We saw some of the inventory declines in the channel start to get changed in the fourth quarter. Our fourth quarter sales were not only tariff-driven, pulling-ahead-driven, but also real demand. We expect that to continue. We have a strong group of distributors. We have a strong group of dealers.

Speaker #5: We expect distributors to buy more. The sell-through stats are good. The tariff chaos has kind of cleared up. The distributors know that we're the best game in town when it comes to tariffs.

Speaker #5: That our direction is clear. Some of our other competitors are a little chaotic, and they don't know where the tariffs are going. We saw some of the inventory decline in the channel start to change.

Speaker #5: In the fourth quarter, our fourth quarter sales were not only tariff-driven and pulling ahead driven, but also driven by real demand. We expect that to continue.

Speaker #5: We have a strong group of distributors. We have a strong group of dealers. We have excellent products, and we expect this to be a very good year for fiscal 2026.

Richard Soloway: We have excellent products, and we expect this to be a very good year, fiscal 2026.

Speaker #4: Matt, I'd like to mention that our tariff arrangement in the Dominican Republic is 10%. All of our competitors are either in Asia or in Europe, and Europe is now 15%. As for Asia, who knows what that's going to be.

Kevin Buchel: Matt, I'd like to mention that our tariff arrangement, we're in the Dominican Republic, is 10%. All of our competitors are either in Asia or in Europe, and Europe is now 15%. In Asia, who knows what that's going to be, but it's much higher than all of the tariffs. So we have an advantage, and our technology and the fact that we're so broadly diversified with our product line that all integrates together bodes well for getting additional dealers and doing more jobs, and they can count on stable prices from us.

Speaker #4: But it's much higher than all of the tariffs, so we have an advantage. Our technology, combined with the fact that we're so broadly diversified with our product line that all integrates together, bodes well for getting additional dealers and doing more jobs.

Speaker #4: And they can count on stable prices from us.

Speaker #7: Thank you for that. As you think about the magnitude of increase you saw in the RSR from 89 million, I think, in April to 94 million, as you described it in July.

Matt Summerville: Thank you for that. As you think about the magnitude of increase you saw in the RSR from $89 million, I think, in April to $94 million, as you described it in July, do we have another quarter or two of that sort of magnitude of sequential increase based on timing of, you know, historical activations of fire radios? Then given kind of the magnitude of price increase you're talking about on equipment between the two different actions you've taken, is there any reason the equipment side of the business doesn't grow double digits in fiscal '26? Thank you.

Speaker #7: Do we have another quarter or two of that sort of magnitude of sequential increase based on the timing of, you know, historical activations of fire radios?

Speaker #7: And then, given the kind of magnitude of price increase you’re talking about on equipment between the two different actions you’ve taken, is there any reason the equipment side of the business doesn’t grow double digits in fiscal 26?

Speaker #7: Thank you.

Speaker #5: So, we went up $5 million. We saw this coming. I didn't know it was going to be $5 million, but if you go back, you remember I said when you have strong quarters of radio sales, the recurring comes.

Richard Soloway: We went up $5 million. We saw this coming. I didn't know it was going to be $5 million, but if you go back, you remember I said when you have strong quarters of radio sales, the recurring doesn't come right away because there's a delay, because if we give out rebates. I wasn't surprised that it went up. It went up $5 million. It was maybe a little more than I thought. I think we have some more of that in us. I don't know if it'll be $5 million, but I think it'll be a nice increase again. We have to keep having strong radio quarters for that to happen, and that's our intention. We're coming out with a lot more recurring revenue radio products, not just the ones that are out there now. We're not standing still. We're aggressively marketing what we have.

Speaker #5: Doesn't come right away because there's a delay. If we give out rebates, I wasn't surprised that it went up. It went up $5 million.

Speaker #5: It was maybe a little more than I thought. I think we have some more of that in us. I don't know if it'll be $5 million, but I think it'll be a nice increase again.

Speaker #5: We have to keep having strong radio quarters; for that to happen, and that's our intention. We're coming out with a lot more recurring revenue radio products—not just the ones that are out there now.

Speaker #5: We're not standing still. We're aggressively marketing what we have. It all comes together when you have radio sales. It doesn't come immediately, but it comes after maybe six, eight, or nine months later.

Richard Soloway: It all comes together when you have radio sales. It doesn't come immediately, but it comes after maybe six, eight, nine months later. We expect the increases to keep coming for the foreseeable future.

Speaker #5: So, we expect the increases to keep coming for the foreseeable future.

Speaker #7: And then my question on equipment revenue. Given the magnitude of pricing, is there any reason that equipment sales don't grow double digits next year, or in fiscal '26, I should say?

Matt Summerville: My question on equipment revenue, given the magnitude of pricing, is there any reason that equipment sales do not grow double digits next year or in fiscal 2026, I should say? Thanks.

Speaker #7: Thanks.

Speaker #5: Well, given we took two increases: you know, the 8.5% to offset the tariffs and the 5%, which is a straight price increase.

Richard Soloway: Given we took two increases, the 8.5% to offset the tariffs and the 5%, which is a straight price increase, our belief is that we will grow double digits. We can't, you know, we take it quarter by quarter. We have very easy comps this year, in my opinion, Q1, Q2, and Q3, especially. So it's not a hard task from my perspective, but we got to perform.

Speaker #5: There's our belief is that we will grow double digits. We can't you know, we can't get quarter by quarter. We have very easy comps this year in my opinion.

Speaker #5: Qs one, two, and three especially. So, it's not a hard task from my perspective. But we got to perform.

Speaker #7: Thank you.

Speaker #2: Thank you. And your next question comes from the line of Jim Ricciutti from Hammond Co. Please go ahead.

Operator: Thank you. Your next question comes from the line of Jim Ricchiuti from New Hammond Co. Please go ahead.

Speaker #8: I thank you. This may be a tougher question to answer, but yeah, you sometimes are a little bit further removed from the end demand.

Jim Ricchiuti: I think it's maybe a tougher question to answer, but you sometimes are a little bit further removed from the end demand. I am wondering, is there any way for you to size the pull forward that you saw on equipment sales? You mentioned, Kevin, I think that the sell-through stats are good. Maybe you could elaborate on that as well.

Speaker #8: So you know, I'm wondering if there is any way for you to size the pull forward that you saw on equipment sales? You mentioned, Kevin, I think that the sell-through stats are good.

Speaker #8: Maybe you could elaborate on that as well.

Speaker #5: Well, we talk about sell-through stats all the time. The sell-through stats that I have talked about usually relate to the quarter that we just reported on.

Richard Soloway: We talk about sell-through stats all the time. The sell-through stats that I have talked about usually relate to the quarter that we just reported on. Our sell-through stats for the June quarter were good. They were up across the board. The key is, what do they look like in this quarter, the one we are in now? I do not really want to comment on it, but the expectation is they will stay strong. The ordering activity has been good this quarter. I feel like the distributors have felt like something has, a relief has come over them. They are not panicking over tariffs, at least not with us. They know where they stand. That standing still, waiting to see what happened, that has subsided. We have talked a lot about WESCO in the past. They seem to be getting their act together more. I think it bodes well.

Speaker #5: And so our sell-through stats for the June quarter were good. They were up across the board. The key is: what do they look like in this quarter?

Speaker #5: The one we're in now, and I don't really want to comment on it. But the expectation is they'll stay strong. The ordering activity has been good.

Speaker #5: This quarter, I feel like the distributors have felt like a relief has come over them. They're not panicking over tariffs, at least not with us.

Speaker #5: They know where they stand. And so, that has transitioned from standing still, waiting to see what happens. That has subsided. We've talked a lot about Wesco in the past.

Speaker #5: They seem to be getting their act together more, so I think it bodes well. ADI is doing really well with us, and I think it bodes well for Q1.

Richard Soloway: ADI is doing really well with us. I think it bodes well for Q1, but you know, we got to perform.

Speaker #5: But you know, we've got to perform.

Speaker #4: I'm thinking a little further ahead—specifically regarding this quarter and the next quarter. Our goal, as we have increased our engineering department, is to develop additional recurring revenue products.

Kevin Buchel: Thinking out a little further than the quarter here and the next quarter, our goal, and we increased our engineering department, is to come out with additional recurring revenue products, more radios in other verticals that are needed, new creations of communications devices, more fire devices, more locking devices. It is very important to us to make sure that everything has a recurring revenue component to it. So we are on a roll with our technology. The dealers love it. We are going to expand markets for everybody, and you will see this evolving as the years go by.

Speaker #4: More radios in other verticals that are needed: new creations of communications devices, more fire devices, and more locking devices. It is very important to us to make sure that everything has a recurring revenue component to it.

Speaker #4: So we're on a roll with our technology. The dealers love it. And we're going to expand markets for everybody. You will see this evolving.

Speaker #4: As the years go by.

Speaker #8: Thanks, Andy. Maybe a question for you. You know, with the price increase, the first price increase, some of that obviously hit was passed in April.

Jim Ricchiuti: Thanks. Andy, maybe a question for you. You know, with the price increase, the first price increase, some of that obviously the hit was passed in April. There was, I presume, some benefit in the June quarter. I am wondering two things. To what extent there was a benefit and just broadly, if you can help us with the overall impact on gross margins, the equipment gross margins from tariffs in the quarter. Thank you.

Speaker #8: There was, I presume, some benefit in the June quarter. And I'm wondering two things: to what extent there was a benefit, and just broadly, if you can help us with the overall impact on gross margins, equipment gross margins, from tariffs in the quarter.

Speaker #8: Thank you.

Speaker #5: Go ahead, Jim.

Andrew Vuono: Sure, Jim. We received a limited benefit, I would say, in Q4 from the price increases. The company honored, you know, orders that were placed prior to those price increases going into the price books officially. From a cost perspective, the tariffs really kicked in at the start of our Q4. We had the full impact of the cost for the period, and I would say limited benefit of our price increases based upon the timing of what orders were placed. I think from a dollar perspective, it probably

Speaker #8: So we received limited benefit, I would say, in Q4 from the price increases. The company honored, you know, orders that were placed prior to those price increases going into the price books officially.

Speaker #8: So, from a cost perspective, you know, the tariffs really kicked in at the start of our Q4. So we had the full impact of the cost for the period.

Speaker #8: I would say there was limited benefit from our price increases based on the timing of what is replaced. I think, from a dollar perspective, it probably impacted the COGS by about $1 million or something short of a million dollars.

Speaker 1: impacted the COGS by about a million dollars or something short of a million dollars. Pretty much all of the items that were subject to the tariff in Q4 were sold through, and the vast majority were shipped out by 6/30. So, we had pretty much a straight dollar-for-dollar hit in Q4, but we are expecting going to Q1, those pricing adjustments are now in place, and we are expecting to see a lift from there moving forward.

Speaker #8: And pretty much all of the items that were subject to the tariff in Q4 were sold through, and the vast majority was shipped out by 6:30.

Speaker #8: So you know, we have pretty much a straight dollar-for-dollar hit in Q4, but we're expecting going into Q1 those pricing adjustments are now in place, and we're expecting to see, you know, a lift from them moving forward.

Speaker #4: Thank you. I'll jump back into Q.

Senora Atiza: Thank you. I'll jump back in the queue.

Speaker #2: Thank you. Once again, that is Star and one to ask a question. And your next question comes from the line of Peter Costa from New Zealand.

Francis Okoniewski: Thank you. Once again, I will restore and want to ask a question. Your next question comes from the line of Peter Costa from Mizuho. Please go ahead.

Speaker #2: Please go ahead.

Speaker #9: Hi, guys. Good morning. You know, congrats on the quarter here. Maybe if you could just start with some details on the MVP and premium launches.

Ian (Operator): Hey, guys, good morning. Congrats on the quarter here. Maybe if you could just start with some details on the MVP and Prima launches. How is the channel uptake there relative to your plan? Just any color about how you are thinking about that opportunity over the longer term? Thanks.

Richard Soloway: hosted access system, the cloud-operated system, which allows the security company that puts it in a job, for instance, in a hospital, also allows the security manager of that property to get instantaneous information about who goes into buildings, who went into certain rooms, at what time. We expect this to be a very strong growth product with our company going forward. We are introducing it to basic models. One is enterprise class, those large enterprises, and also there are smaller buildings and smaller businesses. We expect that there are so many doors out there, and so many people need access control. The cloud-operated requires no equipment in the building. Everything is up in the cloud. We make all the changes for the dealers. The dealers can get reports.

Richard Soloway: Everybody can get instantaneous information about doors, openings, where people are in a building in case of a fire or an emergency. This is going to be quite an exciting product for us going forward. We are going to be showing it in New York at the International Security Conference, which is the next big show coming up. Our salespeople are around the country demoing it and training on it. It is going to be a great contributor.

Senora Atiza: Okay. Then maybe just back to the ARR increase. So that $5 million sequential increase was very encouraging. You know, it seems like the actual uplift in service revenues is lagging that a little bit. Would you kind of expect a, you know, a pretty material uptick in Q over Q service revenues in the beginning of 2026? How are you guys thinking about that? Thanks.

Richard Soloway: We grew, I think it was 10% year over year. The expectation is that we can sustain that rate, maybe even do a little better than that, not go down.

Senora Atiza: Perfect. Thank you.

Francis Okoniewski: Thank you. Your next question comes from the line of Jeremy Hamblin from Craig Hallam Capital. Please go ahead.

Andrew Vuono: Congrats on the results and thanks for taking the questions. I wanted to come back to churn rates that you were seeing, you know, and whether or not the price increases are having any impact on whether or not you're on both the equipment side, but certainly also for the recurring revenues on whether or not you're getting any pricing on that aspect of the business.

Richard Soloway: Jeremy, we don't really have any churn, churn being accounts that disconnect from us from our radios because we're mostly commercial. Our churn is inconsequential as it pertains to commercial radios. We do mostly commercial. The pricing that we put in place sticks. Nobody complains about it. Everybody understands it. Everybody expects it. No pushback at all. We did not take price increases on the recurring revenue amounts we charge every month. There was some talk that maybe we should. We didn't take a price increase on the radios themselves. Maybe there was talk that maybe we should. Our feeling is let's get as much as we can get. Let's not mess with the formula that's working well. It's not about the extra 50 cents or a dollar we could potentially charge in the recurring every month.

Richard Soloway: It's about getting more radios, more of them, because once you get it, it lasts pretty much forever. That was our strategy. The strategy's worked pretty well. In 10 years or so, we built this up to about $100 million of recurring at 91% margin. I think we're doing it the right way, and I'm comfortable with the strategy that we chose.

Andrew Vuono: Got it. You have also built a strong balance sheet and wanted to just get a sense for you returned some capital here in the form of dividends, some buybacks. Is there room to potentially take up either the dividend payout rate or are you thinking about adding on to the current buyback program?

Richard Soloway: The dividends, we've raised that, I don't know, at least three, maybe four times. We didn't really talk about it. We announced another dividend. We kept it the same 14 cents. Certainly, having increased it four times or so in a short period of time, there's room for that to grow and to get to become a higher amount. I think that will happen. We'll talk about when that should be. For this coming one, it's 14 cents. When it comes to buyback, we're always looking. We're always opportunistic. We got our eye on it. We are cognizant of the float. We're dealing with a lot of larger investors who care about the float. There could be room to do more buyback, but we'll see. We'll play that by ear as we go forward.

Andrew Vuono: Great. Thanks for taking the questions.

Francis Okoniewski: Thank you once again. Should you have a question, please press star four by the one on your telephone keypad. Your next question comes from the line of Jaeson Schmidt from Lake Street Capital Markets. Please go ahead.

Senora Atiza: Hey, guys, thanks for returning my questions. Kevin, you noted strong sell-through has continued here in September. Curious if that strength is being seen both on the radio and locking side.

Richard Soloway: My comment about sell-through was in the June quarter. It did not really comment on the quarter that we are in now. So it was in the June quarter. It was very good across the board. We were particularly encouraged by the StarLink Fire radios. They did really well. As I have talked about before, you sell StarLink Fire radios today to a distributor, you may not feel the benefit of that from the recurring revenue side for six, eight, nine months. So that is coming. We will see that. We are encouraged by what we saw from our distributors. We expect it to continue in Q1, the one that we are in now. We will talk about it more when we are able to, but we cannot. The June quarter was very good, pretty much across the board. Locking was very good. Locking had a very difficult comp.

Richard Soloway: Locking had that big project that I have talked a lot about, the Waldorf Hotel in Manhattan. So that made for a difficult comp. There is a little bit more of a difficult comp in Q1, and then that is gone from a comp point of view. There are other projects that we expect that could be hitting in this fiscal year. Since the comp is not that tough, we should be able to blow past last year's numbers. We will see when those things hit.

Then since the comp is not that tough we should be able to blow past last year's numbers, but we'll see we'll see where those things fit.

Senora Atiza: Gotcha. Then just following up on your comments on the school market, I know you can't disclose all your wins, but just curious if you've seen a noticeable pickup in that space.

Gotcha and then just following up on your comments on the school market I know you can't disclose all your wins, but just curious if you've seen a noticeable pickup in that space.

Richard Soloway: The school business is steady, steady, good, steady, strong. I wish it was more. It is frustrating. You know, there was an incident at Villanova last week. It was not a shooting. They thought it was a shooting. But what I heard in the news report was they announced that the students should lock their doors and barricade chairs against the door. That is the old thing that we have been hearing about for years, for years. That means to me that there are still plenty of schools. Villanova is a very well-known school that still has to upgrade. Our sales guys better be talking to Villanova pretty soon. The school business is good. We are working hard for it to be even better. There is plenty of money and plenty of opportunity. There will be for years to come.

The school business is steady steady good steady strong.

I wish it was more it's frustrating.

You know there was an incident.

Villanova last week, it wasn't a shooting; it was what they thought was a shooting, but what I heard in the news report was.

<unk> announced that the students should.

<unk> and barricade shares against the door.

That's the one thing that we've been hearing about for the past three years.

Ed.

That means debating that there's still plenty of schools. Villanova is a very well-known school that still has to upgrade.

And our sales guys better be talking to Bill it over pretty soon.

The school business is good. We're working hard for it to be even better. There's plenty of money and plenty of opportunity.

There will be for years to come.

Senora Atiza: Okay. Thanks a lot, guys.

Okay. Thanks, a lot guys.

Francis Okoniewski: Thank you. There are no further questions at this time. I want to hand the call back to Mr. Richard Soloway for any closing remarks.

Thank you. There are no further questions at this time. I will now hand the call back to Mr. Richard Soloway for any closing remarks.

Thank you, everyone, for participating in today's conference call. As always, should you have any further questions.

Richard Soloway: Thank you, everyone, for participating in today's conference call. As always, should you have any further questions, feel free to call Fran, Kevin, or myself for further information. We thank you for your interest and support and look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q1 2026 results. Have a wonderful day, everybody.

Feel free to call a friend, Kevin or myself for further information. We thank you for your interest and support and look forward to speaking to you all again in a few months to discuss <unk> fiscal Q1, 'twenty 'twenty six results I have a wonderful day everybody.

Francis Okoniewski: This concludes today's call. Thank you for participating. You may all disconnect.

And this concludes today's call. Thank you for participating; you may all disconnect.