NAPCO overcomes ‘external challenges,’ posts strong RSR numbers  

AMITYVILLE, N.Y.—Even with U.S.-imposed tariffs leading to increased equipment prices in Q3, NAPCO Security Technologies Chairman and CEO Richard Soloway assured investors during a recent conference call that his company is well-positioned to withstand turbulence thanks in part to growing recurring service revenue.   

RSR increased by 10.6% to $21.6 million in Q3, representing 49% of total company revenues with a 91% gross margin. 

“While fiscal Q3 brought external challenges beyond our control, we navigated them with resilience and remain confident in our long-term strategy and the strength of our business fundamentals,” he told investors. “These are stats that we are very proud of, but we know there is more work to be done.”    

While NAPCO’s recurring revenue has been principally generated from its StarLink radio line of equipment, Soloway noted the recent introduction of new product lines at ISC West “with the ability to generate cloud-based recurring revenue,” including the  MVP Access platform. Soloway described MVP Access to investors as a “high-end, fully customized enterprise-grade solution supporting unlimited user ID types and MVP EZ, an app-based mobile-first solution designed for locksmiths and smaller dealers operated solely by smartphone and supporting up to 50 doors,” eliminating the need for on-premises hardware or databases.   

With NAPCO’s manufacturing facility located in the Dominican Republic, Soloway noted that this provides “a meaningful, competitive advantage,” telling investors that he “strongly believes’ NAPCO is better positioned than many of its competitors that manufacture in Southeast Asia, Europe, Canada, or Mexico, where proposed tariffs are significantly higher.  

“We benefit from a favorable cost structure, efficient logistics, currency stability, and at least for now, relatively low tariff exposure,” he noted. “External market and regulatory pressures may persist into the next quarter, but we are actively managing these risks, adjusting our near-term plans as needed, and focusing on the things we can control, namely driving innovation, executing operationally, and expanding our base of recurring revenue.”   

Overall net sales for the quarter decreased 10.8% to $44 million from Q3 2024, with a 24.8% decrease in equipment sales to $22.4 million from a year ago, which NAPCO COO and CFO Kevin Buchel attributed to reduced sales of approximately $5.1 million at three of its largest distributors.   

“The first distributor purchases both our intrusion and our locking products and made a corporate-wide decision to reduce purchases to stabilize their existing inventory levels,” he explained. “The second distributor, a locking distributor, reduced their purchases due to the timing of a project, and the project work with their customer was less this year than it was last year. And the third distributor, also a locking distributor, made the decision to reduce their inventory levels due to the uncertainty of the economy including pending tariffs.”    

Soloway is confident that NAPCO’s strong net income, adjusted EBITDA, and cash flow will continue to improve heading into the final quarter of 2025. As a result, the company will issue a quarterly dividend of $0.14 per share to be paid to shareholders on July 3, 2025.