Detailed narrative
Leadership Transition
Richard Soloway transitioned from CEO to Founder and Executive Chairman, with Kevin Buchel assuming the role of CEO and President. This transition is framed as continuity, leveraging Buchel's 25+ years with the company and Soloway's continued involvement in strategic direction. The company emphasizes that the values that have guided it for 50 years remain unchanged, positioning it well for the next phase of growth under the new leadership structure.
Recurring Revenue Strength
The company's recurring service revenue grew nearly 13% in Q4 FY26 to $25.3 million, achieving an exceptional 90.1% gross margin. For the full fiscal year, recurring monthly service revenue increased 13% to $97.5 million. The annualized recurring revenue run rate reached approximately $103 million based on July 2026 figures, primarily driven by StarLink radio activations, which saw a 40% year-over-year growth in unit sales in Q4.
Hardware Business Performance
Equipment sales increased nearly 8% in Q4 FY26 to $30.5 million, contributing to a record annual revenue of $202.3 million for FY26. Intrusion and access control product sales increased 20.9% in Q4, with intrusion product sales (including StarLink radios) up 35.8%. Door locking revenue increased 2.2% in Q4, with Marks USA lock sales up 18.4%. The company notes a healthy pipeline of project and contract opportunities in equipment, including larger opportunities across schools, healthcare, airports, multi-dwelling housing, and government projects.
Profitability and Margins
Gross margin expanded to 61.3% in Q4 FY26, benefiting from approximately 600 basis points from IEEPA tariff refunds. GAAP net income increased 53%, and adjusted EBITDA grew over 44% in Q4. For the full year, non-GAAP net income increased 32% to $57.3 million, and adjusted EBITDA reached $66.7 million with a 33% margin. Equipment margins for the full year expanded to 30.3%, benefiting from product price increases, lower discounted sales allowances, tariff refunds, and lower inventory reserve adjustments.
Product Innovation and R&D
R&D costs increased 10% for the full year to $13.8 million, driven by annual salary increases, additional engineering staff, and higher UL approval costs for new products. This investment is focused on new recurring revenue products, including MVP, a next-generation cloud-based access control platform. MVP is expected to create an entirely new recurring revenue stream for Napco and its dealers, extending leadership into hosted access control and reinforcing the strategy of innovative hardware paired with cloud services.
Financial Position and Capital Allocation
The company ended FY26 with a strong balance sheet, holding $137.6 million in cash, cash equivalents, and marketable securities, representing a 38.7% increase year-over-year, and no debt. This financial flexibility supports organic investment, strategic acquisitions if the right opportunity arises, and capital returns. The quarterly dividend was increased by 13.3% to $0.17 per share, reflecting the business's strong financial position.