NAPCO passes $200M revenue as a new CEO takes the reins — and the radio engine hums.
Recurring revenue run rate hits $103M, gross margin expands 850bps, and StarLink radio unit sales surge 40% in the quarter.
NSSC · Earnings Call · 2026-08-24
A changing of the guard
Fiscal 2026 was framed by a leadership transition that is as strategic as it is symbolic. Richard Soloway, the founder who built NAPCO Security Technologies over five decades, stepped into the role of Executive Chairman, while Kevin Buchel — a 25-year veteran of the company — assumed the CEO title. Soloway framed it as continuity, not a break:
I built this company for 50 years, It is strong enough to evolve beyond my day to day leadership.
That sentiment matters because the quarter he left on was one of the strongest in recent memory.
The transition lands at a moment when the business is, by any measure, accelerating. Fourth-quarter net sales rose 10% to a record $55.8 million, pushing fiscal 2026 revenue past $200 million for the first time. More importantly, the mix is shifting exactly where management wants it: radio sales grew 40% year-over-year and nearly 30% sequentially, and that hardware is the fuel for the company's core recurring-revenue engine.
The recurring-revenue flywheel
NAPCO's strategy has long been to convert hardware installs into long-term, high-margin monthly revenue. The fourth quarter was a textbook demonstration. Recurring service revenue grew 12.9% to $25.3 million, with a gross margin of 90.1%, and July's monthly run rate implies an annualized run rate of approximately $103 million — up from $94 million a year earlier. The company continues to ride the tailwind of the copper-to-cellular conversion: “we expect to win a large share of the over 2 million buildings that need to convert.” — Kevin S. Buchel · 2026-08-24 But management is careful to point out that today's radio sales become tomorrow's recurring revenue, with a lag. As Kevin Buchel noted on the call, “there is a delay of feeling the effects of the recurring revenue after you sell the radios.” — Kevin S. Buchel · 2026-08-24 That timing dynamic matters for forecasting, and it's why the 40% radio unit growth is so encouraging — it presages an acceleration in service revenue in the second half of fiscal 2027.
The full-year numbers tell the same story: recurring revenue grew 13% to $97.5 million, with gross margin holding above 90%, while total gross margin expanded to 59.2% and adjusted EBITDA margin touched 33%. The company generated $59.2 million in free cash flow, up 15%, and ended the year with $138 million in cash and no debt — a balance sheet that gives it enormous flexibility to fund the MVP launch, pursue acquisitions, or return capital. Indeed, management announced a 13.3% dividend increase to $0.17 per share.
Tariff tailwinds and supply-chain rocks
The quarter benefited once again from tariff refunds — specifically the AIIPA tariff refunds that contributed roughly 600 basis points to quarterly gross margin. Equipment gross margin more than tripled to 37.4%, though part of that strength was offset by higher Section 301 tariff costs and, notably, the impact of a strong radio mix, which carries lower hardware margins but feeds the recurring-revenue machine. This is a nuance worth tracking: as radio volumes spike, equipment margin may compress in the short term, but the company argues that the trade-off is worth it. “I will take this all day long.” — Kevin S. Buchel · 2026-08-24
The more forward-looking concern is supply chain challenges. Management flagged that data center expansion is putting pressure on electronic component costs, and that it is actively renegotiating supplier pricing and allocation. Kevin Buchel was direct about the risk: “We have not been impacted at all as of yet by supply chain issues.” — Kevin S. Buchel · 2026-08-24 That's reassuring, but it also signals that the issue is real and may pressure margins or lead times in fiscal 2027. The company is betting that its pricing discipline and long-standing supplier relationships can mitigate the impact, echoing the playbook it used during the COVID-era sourcing crisis.
Strategic foundation for the next phase
Beyond the core radio and locking business, NAPCO is investing in the next growth engine: MVP, its cloud-based access control platform. Management has consistently pointed to second-half calendar 2026 as the inflection point for meaningful recurring revenue from MVP. On the call, Kevin Buchel reiterated that timeline: “by the end of this calendar year, we should be in a position where we are talking about this in a very favorable way.” — Kevin S. Buchel · 2026-08-24 The software-addressable market is enormous — every door is a potential recurring subscription — and MVP essentially transforms a one-time hardware sale into an annuity, much as radio did for fire and burglary.
School security remains another structural driver, and the project funnel is described as the strongest in years. Management, however, is characteristically conservative, refusing to name specific projects and noting that "it is clearly more than it has been in the last couple of years." The recent Dean's List Award for work with private colleges and universities adds credibility to the vertical.
Finally, the balance sheet is undeniably a differentiator. Gross margin has risen from the mid-40s a few years ago to over 60% in that latest 10-Q, and the company's ~29% free cash flow margin shows that profitability is converting into real cash. The company carries zero debt, and management hinted at acquisition optionality, though it rightfully notes that any deal must be immediately accretive and fit within its high-margin model. As Dick Soloway put it: “We are looking potentially at acquisitions. But it is gotta be right.” — Richard L. Soloway · 2026-08-24
With the stock off ~12% over the last 90 days, the market may be waiting for more clarity on tariff noise or MVP traction. But this report puts the thesis in sharp focus: a company with a durable 90%-margin recurring base, a growing hardware funnel, and a clean balance sheet is exiting its founder era on a high note. If the radio growth translates into service revenue as expected, fiscal 2027 could surprise to the upside — even as the new leadership prudence that marked this call keeps expectations in check.