NAPCO’s radio gains make up for lagging lock sales

AMITYVILLE, N.Y.— NAPCO Security Technologies saw strong radio sales and recurring service revenue (RSR) but struggling locking sales in the first quarter of its fiscal year 2025. 

RSR saw a prospective annual run rate of approximately $85.2 million based on October 2024 RSR, compared to $83.5 million from July 2024 RSR. 

“The increase is due to the continued strength of our line of StarLink radios, particularly our StarLink fire radios,” said CFO Kevin Buchel during a conference call to discuss the company’s recent financial results. “Our StarLink radio sales increased 93% compared to Q1 last year. It increased 23% sequentially, and it represented the highest level of radio sales since Q3 of fiscal 2023, which was the last quarter positively affected by the Verizon 3G sunset.”  

Buchel further noted that, per previous comments about reductions in inventory by distributors and strong sell through, NAPCO expects increased radio sales in the coming quarters, too.  

'We feel good about it’ 

NAPCO took the strongest hit this quarter with the decline of sales for its locking hardware, but CEO Richard Soloway argues that the company is strongly positioned to take advantage of current trends and projects available to them in that sector, like Florida’s School Hardening Act and Indiana’s School Safety Grant Program, as well as other states with approved increases in security funds. 

“Despite the decline in locking hardware this quarter, we haven't lost sight into the significant opportunity for continued growth through spending driven by funded governmental infrastructure projects, as well as millions of dollars going forward towards state and federal level programs,” he said. “Security and health care and retail loss prevention, as well as multi dwelling commercial and residential applications, are also providing opportunities for growth.” 

During the Q&A portion of the call, Buchel told investors based on his conversations with distributors, there are a myriad of reasons for reduced purchases of locking hardware covering everything from election concerns, budget constraints to quarterly one-off events. 

“We feel good about it,” Buchel said. “Don’t take what happened in one quarter as the new norm.” 

NAPCO’s financials at a glance 

• Net sales for the quarter increased 6% to $44 million (the highest Q1 sales in the company's history). 

• Recurring service revenue (RSR) for the quarter increased 22% to $21.1 million. RSR had a prospective annual run rate of approximately $85 million based on October 2024 recurring service revenues. 

• Gross margin for RSR increased to 91% for the quarter compared to 90% for the same period last year. 

• Gross margin for equipment revenue was 24% for the quarter ended Sept. 30, 2024, compared to 28% for the same period last year. 

• Net income for the quarter increased 7% to a quarterly record $11.2 million. 

• Earnings per share (diluted) for the quarter increased 7% to $0.30 compared to $0.28 for the same period a year ago. 

• Adjusted EBITDA for the quarter decreased 4% to $12.3 million compared to $12.9 million, and Adjusted EBITDA per share (diluted) for the quarter decreased 6% to $0.33 compared to $0.35 for the same period last year, respectively. 

• Cash and cash equivalents, other investments and marketable securities were $102.2 million at Sept. 30, 2024, compared to $97.7 million at June 30, 2024, a 5% increase. The company had no debt as of Sept. 30, 2024. 

• Cash provided by operating activities for the quarter ended Sept. 30, 2024, was $12 million compared to $11.2 million for the same period last year, a 7% increase.