Q1 2026 NAPCO Security Technologies Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Napco Security Technologies Fiscal First Quarter 2026 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 *0 for the operator.
This call is being recorded on Monday, November 3rd, 2025. I would now like to turn the conference over to Mr. Francis Okoniewski. Please go ahead.
Thank you, Emma. 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 first quarter 2026.
By now, all of you should have had the opportunity to review our earnings press release discussing our quarterly results.
If you do not have a copy of the release, it is available in the Investor Relations section of our website, www.napcosecurity.com.
On the call today are Dick Soloway, Chairman and CEO of Napco Security Technologies; Kevin Bell, President and Chief Operating Officer; and Andrew Vuono, Chief Financial Officer.
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, that leaves current trends and anticipated product performance.
These forward-looking statements include without limitation, statements relating to growth drivers of the company's business.
Reoccurring revenue services, potential market opportunities. The benefits of our reoccurring revenue products to customers and dealers.
Our ability to control expenses and costs and expected annual run rate.
For reoccurring 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.
Other unknown or predictable 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 dick in a moment, but before I do, I want to mention we will be attending the International Security conference trade show.
November 18th through the 20th in New York City's Javits Center.
We'll be showcasing an array of exciting new products. And if anyone is interested in attending,
please contact me and I will arrange to get you a guest pass.
In addition, we're actively planning our investor relations calendar for non Diehl Road Show and Conference attendance in the near future.
Investor Outreach is important to know. And I'd like to thank all those who assist us in these type of events.
In the coming weeks, we'll be attending the Robert Beard Global Industrial Conference in Chicago.
the Stevens Annual Investment Conference in Nashville,
The UBS Global Industrials and Transportation Conference in Palm Beach, Florida.
The MELUS Research Conference in New York City and NEMS 28th Annual Growth Conference, also in New York City.
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.
Thank you, Fran. Good morning, everyone, and welcome to our conference call.
We appreciate you joining us, as a review of fiscal. First quarter.
2026 performance.
Our first quarter results, which reflects record q1 Revenue, continues, the momentum, we reported from Q4 of fiscal 2025.
And it is a reflection of our continued focus on long-term growth and the resiliency of our business.
Our recurring revenue model has continued its steady growth while maintaining its substantial profitability.
We remain encouraged with our equipment revenue performance and our ability to weather the various microeconomic challenges we encountered in fiscal 2025, as we started to realize some of the benefits from our pricing strategies in response to tariff uncertainties.
We have started fiscal 2026, with a positive momentum and confidence in our ability, to continue to execute on our plan to provide enhanced shareholder value and growth.
Through the balance of the fiscal year.
Now, I'll turn the call over to our president and Chief Operating Officer Kevin Bell who will comment on some of our operational and financial performance highlights.
Following Kevin's remarks, our CFO Andrew Vuono will go through the financials in more detail, and then I will return to delve deeper into our strategies and market outlook.
Kevin, the floor is yours.
Thank you, Dick. Good morning, everyone.
I'm pleased to share a few highlights.
Total revenue for the quarter was 49.2 million and that's a q1 record and up, 12% compared to the same period last year.
Within those results, equipment sales reached $25.7 million, also up 12% year-over-year.
In relationships with our distributors and our dealers.
And this increase was also supported in part by the early impact of two price adjustments, one related to tariffs, which was implemented at the end of April.
And our normal annual price increase took effect in mid-July.
We did not see the full impact of those price adjustments in Q1.
But we expect to see a larger benefit in the upcoming quarters of fiscal 2026.
Recurring revenue remains strong, growing 11%.
Over the last year's Q1, we maintained an impressive gross margin of 90.3%.
With starlink commercial fire radios, continuing to be the key driver within that mix.
Our equipment gross margin improved as well to 26%, representing a 300 basis point sequential increase.
From fiscal 2025 Q4.
From a profitability standpoint.
Operating income increased, 15% year-over-year.
Growth of 9% to a Q1 record of $12.2 million, and that represents 25% of revenue.
Adjusted EBITDA was up 21%.
And we now have an adjusted ibida margin of 30.4%.
Finally cash continues to grow.
It reached 106 million as of September 30th 2025.
Cash from operations was $11.6 million.
And of course we have no debt.
As such, we are pleased to announce that we are continuing our dividend program. As our board of directors, declared a quarterly dividend of 14 cents per share.
Payable on January 2 2026.
To shareholders of record on December 12th to to 2025.
Overall, this was a strong start to fiscal 2026, and I'm very proud of the team's execution across the board.
With that, I will turn the call over to our CFO, Andy Bono, for a deeper look at the financials. Andy.
Thank you, Kevin, and good morning, everyone.
Net revenue for the 3 months, ended September 30th 2025 increased 11.7% to 492 449.2 million as compared to 44 million for the same period a year ago.
Recurring monthly service revenue continued its strong growth, increasing 11.6% in Q1 to $23.5 million, as compared to $21.1 million for the same period last year.
Our recurring Revenue Service. Now has a prospective annual run rate of approximately 95 million based on our October 2025 recurring service, revenues and that compares to 94 million based on July 2025 recurring service Services, which we reported back in August,
These increases reflect the continued demand for our line of stalling radios.
Equipment Revenue, increased 11.8% to 25.6 million as compared to 22.9 million for q1 of fiscal, 25.
which is a result of increased volume in our door locking product line and the impact of certain product pricing increases that went into effect in the quarter.
Gross profit for the 3 months, in the September 30th, 2025 increased 13.1% to 27.8 million with a gross margin of 56.6%, as compared to 24.6 million with, the gross margin of 55.9% for the same period last year.
Gross profit for equipment revenues in Q1 increased 21.8% to $6.6 million.
With a gross margin of 25.7% as compared to $5.4 million with a gross margin of 23.6% last year.
The increase in equipment, growth. Gross profit was primarily a result of product, mix and door locking products. Have a higher, gross margin than intrusion that coupled with certain price increases and improved overhead absorption. As a result of increased, buying contributed to the Improvement in the equipment, margins.
R&D costs for the quarter, increased 6% to 3.2 million or 6.6% of Revenue,
as compared to the $3.1 million or 6.9% of revenue for the same period a year ago.
The increase for the 3 months primarily resulted from increased labor costs, which was partially offset by reduced consulting fees. Selling, general, and administrative expenses for the quarter increased 13% to $11 million, representing 22.3% of net revenue, compared to $9.7 million, or 22.1% of net revenue, for the same period last year.
The increase in sgna for the 3 months, were primarily due to increase legal fees in sales commissions, partially offset by decreased bonuses and compensation and benefits.
Operating for the quarter, increased 15.1% to $13.6 million as compared to $11.9 million of the same period last year.
Interest in other income for the three months decreased 13.5% to $1 million compared to $1.1 million last year. The decrease for the three-month period ending September 25th was due to low interest income from the company's cash and short-term investments, as a result of lower interest rates.
The provision for income taxes for the 3 months, increase 36% to 655,000 to 2.5 million with an effective tax rate of 16.9% as compared to 1.8 million when the effective tax rate of 14% last year.
The increase in the provision for 3 months was due to higher pre-tax income as well as a larger portion of the company's tax linking being attributable to us operations.
And the remeasurement of certain deferred tax liabilities due to tax rate changes, enacted in the 1, big beautiful, Build Act in the current period.
Net income for the quarter increased 8.8% to $12.2 million, or 34 cents per diluted share, compared to $11.2 million, or 30 cents per diluted share, for the same period last year. This represents 25% of net revenue.
Jesse with us for the quarter increased 21.1% to 14.9 million or 42 cents per diluted share as compared to 12.3 million or 3 33 cents per diluted share for the same period a year ago and equates to an adjusted even margin of 30.4%.
as it relates to our balance sheet, as of September 30th, the company had 105.8 million in cash and cash, equivalents
And marketable securities, as compared to $99.1 million as of June 30, 2025, a 6.6% sequential increase.
The company had no debt as of September 30th, and cash provided by operating activities for the three months ended September 30th, 2025, was $11.6 million, compared to $12 million for the same period last year, representing a 3% decrease.
Working capital, which is defined as current assets less current liabilities, was $159.2 million as of September 30th, as compared with working capital of $149.9 million on June 30th, 2025.
Our current ratio was 7.5.
To 1 on September 30th as opposed to 7.3 to 1 on June 30th 2025.
And our capex for the quarter was $193,000 as compared to $680,000 in the prior year period.
That concludes my former remarks, and I would like to return the call back to Dick.
Thanks Andy.
Let me close with a few reflections on where we've been and where we're headed.
This quarter Napa once again, demonstrated the strength and resilience of our business model.
We remain focused on delivering lasting value to our customers.
Partners and shareholders and the results speak for themselves.
Recurring revenue now represents nearly half of our total sales, supported by a sustained gross margin of over 90%.
This steady high margin income continues to drive consistent cash generation and reinvestment in Innovation and growth.
Standard for commercial fire Communications.
Operationally, our team is executing exceptionally well.
We manage inventory tightly.
Continue to invest in product development, compliance, and infrastructure, and return capital through dividends, all while maintaining a debt-free balance sheet.
Looking ahead. We remain optimistic.
Market dynamics, continue to evolve evolve but we're not standing still.
We've implemented pricing actions, diversified our distribution base, and invested in automation and enhancements to the Starlink platform aimed at sustained growth and protecting margins.
Our strong balance sheet provides flexibility for both organic investments and potential strategic acquisitions, while keeping us committed to shareholder returns.
One area where NAPCO continues to make a real impact is school security, one of the most critical challenges of our time.
We're proud to partner with school districts Nationwide, providing Integrated Solutions that include our our Trilogy and architect lock sets and Enterprise scale Access Control Systems.
These platforms are secure, scalable, and aligned with the Partner Alliance for Safer Schools (PASS) Program standards, giving educators and administrators solutions they can trust.
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.
At the same time, we continue to expand recurring Revenue opportunities through Innovation. A great example, is our MVP cloud-based Access Control platform which integrates seamlessly with our locking Hardware.
MVP introduces a new subscription-based revenue stream for NAPCO and our dealers.
And it's available in two configurations.
MVP access, Enterprise, and Enterprise Great solution supporting unlimited users.
And MVP, a mobile first version for locksmith and for and smaller facilities.
We believe MVP has the potential to be a game changer, extending our leadership into hosted access control and reinforcing our strategy of pairing innovative hardware with cloud-based services to drive higher margin, recurring revenue.
Beyond education, our Alarm Lock and Mark's Hardware lines continue to gain traction in healthcare, retail, and multi-dwelling applications.
As well as airport infrastructure upgrades.
And as the transition away from legacy copper phone lines accelerates.
Our Starlink radios, which operate on both AT&T and Verizon networks.
And now T-Mobile is well positioned to capture additional market share across millions of commercial and residential buildings.
Operationally a Dominican Republic, manufacturing, facility continues to be a key competitive Advantage, offering cost efficiency, stable Logistics and low tariff. Exposure a benefit versus many competitors, manufacturing, and higher tariff regions.
While external market and regulatory conditions remain fluid, we're focused on what we can control: driving innovation, executing with discipline, and growing our base of recurring revenue.
We're confident that our strong net income, adjusted EBITDA, and cash flow trends will continue to strengthen.
In summary, we have begun fiscal 2026 with a solid momentum. A clear focus, a stronger Financial Foundation than ever before. I'm incredibly proud.
Of our team, uh, what our team has accomplished and we are excited about the opportunities ahead.
Your continued support and confidence in Napco.
Our former remarks are now concluded. We would like to open the call for the Q&A session.
Operator, please proceed.
Thank you, Richard. Uh, so ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touch-tone phone. You will hear a prompt that your hand has been raised.
Should you wish to decline from the polling process? Please press star followed by the 2?
Uh, if you're using a speaker-phone, please lift the handset, before pressing any keys?
Uh, now let's begin. Your first question comes from Matt Somerville with D.A. Davidson. Go ahead, Matt.
Thanks a couple questions first on locking. Um can you talk about what percent of your locking mix today is represented by that networked product and then can you also discuss um you know how your MVP technology differs from other major um you know locking players in the space today and that I'm a follow-up.
I'll answer the first part, and I can stick to answer the second part. So the first part, most of our sales and marketing.
The traditional products MVP is just starting out.
It's gaining some traction. We're going to show it again at ISC East, which is in a couple of weeks.
We're going to show upgrades to what we presented at ISC West back in April.
The expectation is once we show that and start shipping that, we'll start to gain more traction in the new stuff, but the old stuff, the traditional stuff is powerful stuff.
Lacking is 66% of equipment sales.
And that includes all the categories we mentioned in our prepared remarks, including schools, and lots of things. We don't announce all the school wins.
State schools sometimes. They don't want us to talk about it.
But believe me, they’re there, and that’s part and parcel of why blocking was so strong. It was very strong in this quarter, and the expectation is it will continue to be strong.
Now, Dick, maybe you can comment on...
Why our MVP is different than anybody's product out there.
Sure. So the MVV product that we introduced is a new...
Uh, recurring revenue generator for, uh, locksmiths as well as system integrators.
And what's interesting about it is that we have the totally integrated system because we manufacture the locks. We've been a gold standard lock manufacturer under the Trilogy brand for many, many years. It's considered the best locking product. Now we've added the radio aspect to it, which communicates to our cloud. The cloud is owned by us; we built it. So, we're a total integrated manufacturer. This allows us to add a lot of extra functionality to the concept of locking with a recurring revenue tail to it.
So if you're a an administrator in a hospital, uh you're in charge of the security division, you can get instantaneous information with all the equipment up in the cloud. No longer does it have to be on the site. Uh,
And with a deal has to go back and make uh upgrades to the software. You can all be done in the cloud and we do it all for the dealer and we charge $3 a door uh, for each store and there are millions and millions of doors out there. Well, we're very successful with the fire alarms and the Burglar Alarm radio products, which generate recurring Revenue,
There's millions of those types of buildings where there's one radio per building. Usually, in this case, you could have 15, 20, or 100 doors.
Uh, generating 3 dollars per door, uh, with all these services. So it's a totally integrated Hardware software package, and we made it in 2 different ways. 1 is for basic smaller, offices. Uh, doctor's offices, you have 6 stores and that's the MVP. Easy,
And then the fully full-blown Access Control cloud system um, is for system integrators to do larger jobs.
Unlike a lot of our competitors, which have to get locks from one manufacturer, then do the software themselves or vice versa, we do it all in-house. We have an engineering staff that develops everything from soup to nuts.
The hardware, all the way up to the middle, and software of these systems makes us very unique. It's going to be very powerful in the future. It's a way for dealers.
And locksmiths to build equity in their business. Now, uh, by get recurring by getting recurring revenue from each store, where they install the locks.
Thank you for that color. And then, just as a follow-up, can you parse out a bit in the fiscal first quarter how much of the hardware revenue growth would have been price versus volume? I'm trying to get a feel for how much price has yet to be realized and any high-level thoughts as to how the remainder of the fiscal year could play out would be beneficial. Thanks.
So, it's a combination, Matt. As I said earlier,
We didn't get the full benefit of the price.
Uh but we will as the year progresses Andy could give us some color of kind of what it was a q1 but we know that there's a lot more to come from the benefit of the pricing.
And do you want to comment on it?
Sure. Matt, so in response to that, so of the approximate 12% increase in in equipment, revenue for the for the period.
Our preliminary analysis indicates that approximately 60% of that is related to volume increases and 40% is tied to the pricing increases that went into effect in Q1.
Okay, thank you Matt. Your next question comes from. Jim recity with nidam and co go ahead. Jim
Thank you. Um, good morning. Um, maybe a follow-up to that and I know this information is going to be, um, in the queue later today, but can you give us a sense as to what the overall growth was in the door locking products businesses and whether when you talk about the early pricing benefits, you saw some benefit in that part of the business as opposed to the
The the radio business.
So locking, and you'll see this in the queue.
That's going to be filed today, a little later today.
Locking for Q1 was $17 million.
And 83,000 17083.
Last year's q1 it was 13 million 854.
So that's a substantial increase locking was very strong.
Some of it did come from.
Orders that were placed.
By Distributors, trying to beat the price increases.
We carried a backlog of several million into Q1 from Q4.
But a lot of it was not that, so it was really some of it.
Guys, going ahead, trying to beat the rush.
But a lot of it is locking; being strong. This is one of the strongest locking quarters—maybe the strongest we've ever had. It was right up there.
and,
The expectation is that it's going to continue.
We don't have situations in the channel where guys are loaded up and.
Presumably, they're not going to skip when we come to them this quarter. Q2, you never know what distributors they... they behave funny sometimes, but the channel is good. The sell-through is strong.
The expectations are all very good in the locking system.
Helpful, um, Kevin and I wondered maybe just to, uh, the comment you just made, um, catch the overall tone of demand, what you're hearing from some of your, um.
These are channel partners you alluded to, the, you know, a good sell-through, uh, that you're seeing on the door locking side, maybe on both parts of the hardware business. Any color you could provide in terms of what you're seeing here and sell-through stats or otherwise? Thank you.
Right, so sell through stats.
This is Q1; I can't really comment on what's Q2, which is a month old. But for Q1.
We saw a very good sell-through stats for all of our locking partners.
Um, we have two locking companies, and it was good on both.
On the intrusion side, we saw tremendous improvement there, too.
As I look at this very closely every month.
So I was very happy with what I'm seeing.
I always caution because I never know what distributors are going to do; it's their year-end in December. Who knows what's going to happen? But if we're going to base it solely on what stats we're seeing,
And that's their inventory levels and the sell-through.
We should be in good shape in both areas, locking and intrusion.
Thank you.
Thanks, Jim. Okay, yes, thank you. Kevin and Jim, your next question comes from Peter Costa with Miso. Go ahead, Peter.
Hey, good morning, guys. I'd like to maybe dig a little bit further into the service margins. Um, that 80 basis point year-over-year decline was a little bit more than expected. What's kind of causing that pressure? Is there anything on underlying radio margins, an acceleration in MVP, anything there? Thank you.
So, Peter, there were really two factors.
That affected the margin for the recurring, which still is tremendous.
90.3 is still tremendous. It did go down.
From a little bit over 91%. So, two factors.
Factor number 1.
We now have a triple carrier radio.
That introduces T-Mobile into the mix.
We have to buy minutes.
To support that.
We haven't really.
Charged anybody for that?
And even though it's not a lot of money,
It did move the needle a little bit.
the expectation is, we will increase
Or radio or recurring radio charge to cover that it's not going to be a lot, but it might be enough to move the needle back to where it was.
That's 1 Factor.
Another factor is that we are gaining a lot of business.
From some very large.
Dealers.
I don't want to mention any names, but there are large dealers out there.
1 in particular.
Has been buying a lot of the smaller dealers. It seems like they do an acquisition every week.
and,
As a result of that, we're picking up more radio business, and we will be picking up more in the future.
Because this, this consolidation, if you want to call it that.
From these, the big guy is buying up some of the smaller guys.
And the radio segment has all moved in our favor, but the big guy loves our fire radio.
And when he buys a smaller dealer,
He's going to make sure that the smaller dealers' customers get our Starlink Fire Radio if they weren't using it.
Maybe they were using it, but if they weren't, it was an opportunity for us to pick up even more share.
The one negative of this, and it's mostly positive.
A big guy can command a little bit of a better price.
Maybe the big guy pays a dollar less.
Than what the smaller guy is paying.
We honor that we're happy to get more business.
So if a guy was paying, you know, 8 dollars and we have to lower it to 7.
Just to use an example, we will do that. We'll do that all day long because we weren't picking up more radio, recurring revenue business, so that too can move the needle a little bit.
Absent at that. It's all the same powerful margins that you've been seeing.
Is more reliable on their cell phones than the other services.
So evidently the towers are uh are different or the way the reception is for the radios. On their towers is different.
So by adding T-Mobile,
To our mix of AT&T and Verizon. Now we have all the major carriers and the areas where T-Mobile is the strongest.
And pick up and Communications.
Um, is now in our radios, so we're going to pick up market share.
Additional market share with a more stable radio network with T-Mobile, so that's going to help us a lot. Overall, it should be a net positive having T-Mobile as part of our mix.
Awesome. Yeah, thank you. Um, maybe just thinking about the price on the radio. I think that's kind of intended to be on the RSR. Um, and that seems like a pretty big deal. How would you kind of approach that? Is that just the entire installed base would get a little bit of price? Um, just incremental sales? Or just like the T-Mobile radios? How would you tackle that?
If it's a triple carrier, it's going to be an everybody's radio.
so, to cover it,
Everybody would probably get a little bit of an increase, not much.
Believe me, we don't want to mess with a very good formula.
"But I like the shareholders. I want to keep that 91% margin as well, and if we have to raise it a little bit to keep it up there, we're going to do that. So we're looking at that now, Peter."
awesome. Thank you.
You got it. Thank you.
Uh, as a quick reminder, ladies and gentlemen, if you wish to ask a question, please press *1.
Now, our next question comes from Jeremy Hamlin with Craig-Hallum Capital Group. Go ahead, Jeremy.
Uh, thanks, and, uh, congrats on the strong results. Um, just wanted to start a little bit with, um, you know, kind of the manufacturing facility. Um, you know, making sure that, uh, you know, in terms of the hurricane, uh, that had some impact in the D.R. Um, just understanding, uh, what you've seen there, and then just a kind of related note, um, in terms of, you know, how the tariffs are being applied at this point, um, and impact. As you look forward in calendar 2026, uh, do you feel like you're going to have kind of normal pricing increase, uh, on products, or is there any?
Incremental steps that you need to take to cover where tariffs stand today.
This is Dick sowei. Um I moved down there, the Dominican Republic after I searched around the China and Mexico and decided Dominican is great. For a lot of advantages closer to the US stable government and uh be able to get the workers that we needed and we built this custom building. After we were in individual smaller buildings, we built a custom building which is Category 5 proof. It's all concrete buildings. So we uh, we don't have any issues. We had no problem with the hurricane that passed by. Um, we generate our own power, make our own water. We we're a self-contained like City down there, and of course, we're, we have our, uh, workers come from around the area. Um, and it's actually a shelter for them, uh, in a hurricane because it's stronger than the houses.
So it works out really, really well. We had no issues with that and we don't expect that there is anything that's going to be able to cause us any grief in the future.
Um, and what was the second part of the question?
Just in terms of of tariff, um, tariff impact and thinking about pricing in 2026 and whether or not you take kind of your more typical, uh, you know, price increase.
Uh, or whether or not, um, you know, you would take slightly more just given how, uh, kind of the tariffs are playing out here. Um, I mean, we've seen some stabilization and kind of tariff mandates, but.
the tariffs for the Dr.
Very stable. It's not like some of the other countries where it's going up. It's down. It's here. It's there.
We know what it is.
It's 10%—that's what it is. That's what it's been. We took an increase to cover that.
Back in April, we announced it.
We don't need to do anything more.
To increase that we announced.
In July.
We don't expect to do another until we get to the end of this fiscal year that we're in. So pricing-wise, we're good. The only thing is we haven't felt it all yet. We expect to feel good about it better. We feel good already. The effect we expect to feel better about it as we get deeper into the year. As the full effect is felt, we haven't felt it yet.
Great. And then just, uh, coming back to the service revenues, you saw a nice little bit of, uh, sequential year-over-year improvement from what you had in the June quarter. And, you know, you just had a strong quarter with locking. Um, wanted to just get a sense, uh, with the evolution of that business and potentially getting some recurring, uh, revenue associated with that in combination with, uh, you know, kind of the radial alarms and so forth.
When do you think you might kind of see that show up here in recurring service revenue growth as FY 26 plays out?
When we released it, when we first started talking about it.
It showed it at ISC West in April.
and we said at that time,
Given 18 months to 2 years.
That's how long this kind of thing takes. We hope it is sooner.
But I would give it time. I think we'll feel a little bit more as this fiscal year progresses.
I think fiscal 2027 is when I believe we will really start to feel it, so you’ve got to give it time.
This, we're like six months removed basically from when we really had its coming-out party for it. Now we're going to have another coming-out party in a couple of weeks to show the other versions of MVP.
Give it another year after that, and I think it could be meaningful.
I went through, uh, because I've been in the alarm business for a long time. I went through, uh, alarms without recurring revenue. Imagine in the early years, it was just, uh, a hardware job that was put in by a dealer. There was no recurring revenue, and the dealer went on to do another hardware job.
And then the intro of recurring revenue and the alarm business revolutionized that business.
Uh, every job that goes in, uh, intrusion of fire has a recurring revenue communicator in it, and um, it gives great service to the occupant of the building, the owner of the building.
So, uh, that change took a couple of three years for dealers to understand. You know, why you want to build equity in your business. You just don't want to do a job and do another job after that without having a recurring revenue tail.
We're going through the same situation now in the locking business, 25 years later.
The locking business is such that, uh, a deal will put in a locking job.
And there are large buildings or smaller buildings, and then they go on to the next job, but there's no equity building. No recurring revenue.
We are unique in the business in that we make the locks, we make the radios, and the locksmiths and integrators don't receive recurring revenue from this type of service.
And we believe, like it happened in the alarm business, there's going to be a change over that locksmiths are going to want to get recurring revenue, uh, tailored to everything they do. And that's what we're doing now, patterning ourselves after the original alarm business. Now we're bringing it to the locking business.
And we're unique in the fact that we're the company that can do that because we have all these different facets that we've knitted together to make an integrated manufactured locking product and the cloud product for these locksmiths and for the system integrators. So it's going to be an exciting ride going forward. Just piling on more. Recurring revenue is the name of the game for us. We've become a communications type of company, and it's going to grow ever larger.
Just as a quick follow-up on that point.
So, as we look to FY 27, do you have a sense for what portion of your total service revenues could be tied to the locking products as opposed to the alarm?
You know, projections like that? I would just say I think it would be meaningful.
And just leave it at that.
Just think about how many doors are out there and how many commercial buildings to come? This is all commercial. This is not residential. And what, uh, information you can get from every door who comes in, in case of emergencies, what's going on in the, in the hospital and the drug area, where the drug cabinets are, and you get instant information and reports doing time and attendance and all kinds of other great things knowing everything that goes on in every door in the building, that that has an MVP system, uh, Locking System installed on it. It's, I, I would say that, um, if you don't have this type of system, a couple years from now, you're really in the blind as a management company, or as a security, uh, Department in an industrial building. You got to have this information, you shouldn't be in the Blind. And MVP will give it to everybody. And it's very, very economical. Very
Reliable because it's all built using our Stall Link Communications program.
Thanks so much for taking the questions.
Thanks, Jeremy.
Uh, next up, we have Jason Schmidt with Lake Street. Go ahead, Jason.
Hey guys, thanks for taking my questions. I'm curious if you can give us an update on how ADI is progressing.
ADI relationship.
Excellent.
They do a great job over there.
They move a lot of intrusion equipment on our behalf.
Um,
I couldn't be happier with the exception of one thing.
I'd like to see more sales out of them, and we've told them this.
You know, they’re great with the alarm side.
We think there's an opportunity for locking through them. They have over 100 branches and it gets 115 branches.
And it would be nice to move blocking.
Through those 115 branches.
Absent to that, they're doing a very good job. Very happy.
Let me add something to that. Um, there's lots, there are many, many dealers, in a larger percentage of dealers are going to be doing locking jobs these. The these are the alarm dealers that do fine Burglar Alarm jobs, but they're not doing, uh, not not a large percentage of doing locking.
They're just staying focused on the alarm sector of the business. Now, with recurring revenue added onto the locking jobs.
It's not just a hardware installation. It's a recurring Revenue generator for them. It adds to their, uh, fire and Burglar Alarm, recurring revenue and we're going to be training, lots of these locking dealers to utilize it. And, um, and lots of the alarm dealers to utilize it and vice versa. So we're going to do a lot of cross training so that a dealer can be a uh, total wraparound business. He gets recurring revenue from his alarms and he gets a revenue from his locking installations and vice versa. So, ADI is a great vehicle because they're the largest distributor, they should. They they will I'm sure enter into the Locking business, uh, all across the country and it's going to be great for market, share for for us because, um, we're the only alarm manufacturer that has a locking Division and we're the only locking manuf
Manufacturer that has an alarm division designing and manufacturing all these things. So we're a natural play for the whole locking and alarm industry.
We have 3 locking companies marks and alarm, lock and continental, and we have the nap go, uh, Berg and uh, burglar. And the fire alarm business. So we really have the widest range of products out there. Great partners with ADI, and they're a great company. They're really buttoned up.
Okay, so that's helpful. And then just as a follow-up, sorry if I missed it, but when will the price increase be implemented to account for T-Mobile compatibility?
we're studying that now, Jason
um, we're very cautious with
The pricing for the recurring, but it's very clear.
That we're not being compensated for, so we're looking at it.
and I would say,
Okay. Thanks a lot guys.
Uh, to remind everyone again, if you have a question to ask, please press *1.
Our next question comes from Lance Vitazza. With TD Cohen, please go ahead, Lance.
Hi. Thank you. Um, so I wanted to talk a little bit about the school security side, and I think it was about a year ago that you announced the Pasadena School contract. I'm wondering, um, what the status is of that, how far along that is, or how it went, any sort of, um, lessons to learn, uh, or, you know, just how that sort of leaves you feeling about the opportunity more broadly.
That project went well.
It's been completed.
Um, the opportunities are still tremendous.
Throughout the country.
You see all the shootings that are still going on. You still see the announcement that, uh, barricade chairs in front of the doors. These are all things we have all been hearing.
For over 10 years.
And unfortunately, a lot of the school districts move very slowly.
We do our best to go around the country.
And show the school districts. If they have any issues with money, how to go about getting the money? There's lots of money available. A lot of funds have been allocated to school security. It's there.
The universities have no issues. They have the money.
They have the needs as well.
You know, despite the shooting that's been going on for over 10 years, we're in the early innings. I would say we're in the fourth or fifth inning of this still tremendous opportunity. We win a lot of business.
And we aren't able to tell you about it unless the school grants us permission.
And sometimes we don't even know about it because the distributors are just doing the job for the school district.
And they buy a lot of our equipment. We know what's meaningful. We know there's a lot more to go. We know we have the solutions.
We know we are the only company because we do locking, access, and alarms.
Where the 1 Stop Shop that a lot of schools need. So we just keep going out there and getting that word out.
Yeah, we manufacture locks, which are...
Inexpensive for K through 12, and then we manufacture versions of that lock with remote control. You can lock doors remotely and do wide area campuses with our locks.
Is a very diverse line of wide-ranging locks.
And as Kevin said, we manufacture the locking, the lock set, we make the parts, we assemble it, we do the radios, we have the cloud, we have all of that experience and um, schools appreciate it. And we're doing, uh, very nice school work. And, uh, but still, um, even after hundreds of shootings a year in the US is a tragedy. Uh, a lot of schools haven't installed it yet.
So, uh, the fourth or fifth inning of the installation, uh,
Availability. Um,
So there's a lot more to do so, um, schools that make great choices will select uh, the nap go, uh, system and, uh, we can be flexible from the smallest to the largest campuses out there. So, uh, it's a great, it's a great thing that we manufacturing that we want to protect the students and the faculty and with napco, you can. So our guys are beating the bushes and showing this to these facilities and eventually, um,
Everybody will get armed up against, uh, intruders that come into schools and cause havoc.
So, what you have so, um,
You know, can we be thinking about any kind of accelerated return of capital to shareholders in 2026?
It's a good problem to have, Lance.
We keep generating more and more cash.
There's not a lot of M&A that's required.
To run the business.
You heard Andy's comments. The capex was minimal.
Um, you know, we need lots of labor, and we can get it in the Dominican Republic, so, uh, the need for cash.
Dividends.
Potential acquisition. We have lots of bankers talking to us. Every banker tells us they have the perfect deal for us.
But we're pretty fussy. There's a lot of boxes that have to check.
We don't want to be distracted, but if it's the right deal, we certainly would proceed.
And, um, there are companies out there, and we go through, as the bankers present them, we go through them all. And if 1...
Hits the right spot; we'll go after it. The last thing we want to do, though, is get distracted by something that's not a creative from day one. We don't want to overpay.
But it could be a good thing, and we're in a good position to do it—much better.
than what we were in the position we were in when we did our last report 15 years ago, when we had minimal cash, lots of debt, and no recurring revenue.
So, we got a lot of cash. Lots of recurring, no debt. We could do it, but it's got to be right.
Thank you. Thank you.
Thank you, Lens. Um, there seemed to be no further questions at this time, so I will now turn the call back over to Richard. Please continue.
Thank you, everyone, for participating in today's conference call. As always, should you have any further questions, feel free to call friend Kevin, Andy, or myself for further information. We thank you for your interest and support, and we look forward to speaking to you all again in a few months to discuss the upcoming fiscal Q2 results. Have a wonderful day, everybody. Bye-bye.
Thank you, Richard. Thank you, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.