NAPCO Leadership Tells Analysts It Expects Q1 Equipment Sales Dip to Be ‘Temporary’
In a quarterly call with investors and analysts, NAPCO announced record quarterly sales and continued growth in recurring monthly revenue.
Logo courtesy of Napco Security Technologies
AMITYVILLE, N.Y. — NAPCO Security Technologies leadership say the company’s fiscal 2025 first-quarter dip in equipment sales is “temporary” and they expect the category to follow historical trends and continue to grow into the next three-month period and for the rest of the fiscal year.
In the company’s quarterly call with investors and analysts this week, NAPCO chairman, chief executive officer and secretary Richard Soloway touted the company’s record quarterly sales of $44 million, its 16th consecutive quarter of record sales, and “impressive growth” of 22 percent in recurring monthly revenue for the three-month period ending Sept. 30, as well as $11.2 million in net income for the quarter, also a Q1 record.
“Our financial position remains robust,” said Soloway on the quarterly call, noting NAPCO’s cash balances have reached $102 million and the company remains debt-free.
NAPCO’s leadership is “focused on leveraging our key industry trends, including wireless fire and intrusion alarms, enhancing recurring service revenues, school security solutions, enterprise access control systems and architectural locking products,” says Soloway.
The NAPCO management team is “committed to driving growth, profitability and return on equity, while maintaining effective cost management,” he says, calling those metrics “core to our business strategy and align closely with shareholder interests.”
Inside NAPCO’s Q1 Fiscal 2025 Results
NAPCO saw 93 percent year-over-year growth in Starlink radio sales, says Kevin Buchel, president, chief operating officer and chief financial officer.
“As we previously discussed, as distributors reduced their radio inventory levels and sell-through is strong, we expect to see increased radio sales,” he said on the quarterly investor call. “That’s what we saw in Q1, and we expect radio sales to continue to be a key contributor to our equipment sales and lead to the continued strong growth of our highly profitable recurring service revenues.”
Overall equipment sales fell 6 percent in the first quarter of fiscal 2025, down from $24.4 million to $22.9 million, primarily because of an 8 percent drop in locking sales year over year, said Buchel.
“The decrease in locking sales is primarily attributable to several locking distributors’ efforts to temporarily lower their inventory levels,” he said. “This, we believe, is temporary, unlike the radios that were in the channel, which lasted several quarters. This is different.
“Our quarters historically get stronger with Q1 being the weakest, Q4 being the strongest. That’s one aspect of seasonality. Also, the school business, it used to be very seasonal, where the schools would only want to do jobs when the kids were out of school. And what that means is they’d want to do jobs in the summer or they’d want to do jobs in December or January, during the winter recess. That’s really changed. There’s no real seasonality to that. But it is affected by budgets,” says Buchel.
“A lot of the fiscal budgets start Oct. 1 and we won’t see project until the budget of Oct. 1 starts,” he says. “So I think budgeting more than ‘seasonality’ has something to do with it. But again, our quarters typically get stronger as the year progresses. So two is usually better than one, three is better than two, and four is usually better than three.”
NAPCO’s first-quarter research and development costs went up 25 percent to $3.1 million, primarily based on raises for employees in that department and the hiring of additional engineers, says Buchel.
Soloway sees “significant opportunity for continued growth through spending, driven by funded governmental infrastructure projects, as well as millions of dollars going forward toward state and federal level program like Florida’s School Hardening Act, Indiana’s Secured School Safety Grant program, and many states like Texas that have approved over $100 million in increased security funds.”
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About the Author
D. Craig MacCormack, Digital Editor
Craig MacCormack is a veteran journalist who joined Security Sales & Integration in June 2023 as digital editor. He covered AV, IT and security with SSI's sister publication, Commercial Integrator, from January 2011 to June 2021.
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