Napco’s Recurring Services Revenue Rises 11.5% to Quarterly Record
Key Facts
Napco Security Technologies reported results for the first quarter of its fiscal 2027, ended September 30, 2026, recording recurring services revenue at a quarterly record. The company said this revenue rose 11.5% to $26.1 million from the year-earlier period. Its gross margin was more than 90%, keeping recurring services an important driver of the company’s business mix during the quarter. By contrast, equipment revenue fell 7.3% to $23.9 million. The divergence between the two businesses showed stronger performance in recurring services as equipment sales faced pressure from purchases by some distributors.
Management attributed the decline in equipment revenue to two distributors reducing their purchases of lock products. Chief Executive Kevin Buchol said distributor sales to end customers grew year over year and improved markedly from the previous quarter. The company viewed this performance as evidence of resilient end demand despite lower purchases through distribution channels. This explanation places the revenue decline in the context of distributors’ inventory and purchasing activity, rather than indicating a reported weakening in their sales to end users. Buchol said, "Sales through both distributors grew year over year and strengthened markedly on a sequential basis."
The results follow a strong fourth quarter of fiscal 2026, when quarterly revenue rose 10.0% to $55.8 million, compared with $50.7 million in the year-earlier quarter. In that quarter, recurring services revenue increased 12.9% to $25.3 million, with a gross margin above 90%. The company also reported diluted earnings per share of $0.50, up 51.5% from $0.33 in the year-earlier period. Napco said earnings per share included a benefit of about $0.09 from net tariff refunds. For fiscal 2026 as a whole, revenue rose 11.4% to $202.3 million, and recurring services revenue grew 13.0% to $97.5 million.
The company also noted that fiscal 2026 net income was adversely affected by a $16 million legal settlement expense recorded in the third quarter of that year. The expense provides context for reading annual net income, as the company separated the settlement’s impact from the subsequent period’s performance. For first-quarter fiscal 2027 results, Napco said recurring services revenue had an approximate $106 million forward annualized run rate, based on October 2026 revenue. This represents an annualized estimate based on one month, not revenue actually recorded for the year. The company’s earlier announcement had scheduled the results release before the market opened on November 2, 2026, followed by a call with analysts and investors at 11 a.m. Eastern Time.