Napco Security Technologies, Inc. (NASDAQ:NSSC) Q4 2025 Earnings Call Transcript

Napco Security Technologies, Inc. (NASDAQ:NSSC) Q4 2025 Earnings Call Transcript August 25, 2025

Napco Security Technologies, Inc. beats earnings expectations. Reported EPS is $0.33, expectations were $0.28.

Operator: Good morning, ladies and gentlemen, and welcome to the Napco Security Technologies Fiscal Q4 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Monday, August 25, 2025. And I would now like to turn the conference over to Francis Okoniewski, Vice President of Investor Relations. Thank you. Please go ahead.

Francis J. Okoniewski: Thank you, Ina, and good morning, everyone. This is Fran Okoniewski, Vice President of Investor Relations for Napco Security Technologies. Thank you all for joining today’s conference call to discuss financial results for our fiscal fourth quarter and fiscal year 2025. By now all of you should have had the opportunity to review our earnings press release discussing our fiscal fourth quarter and fiscal year 2025 results. If you have not, a copy of the release is available in the Investor Relations section of our website, www.napcosecurity.com. On the call today are Dick Soloway, our Chairman and CEO; and Kevin Buchel, President and Chief Operating Officer; and Andrew Vuono, Chief Financial Officer. Before we begin, let me take a moment to read the forward-looking statement as this presentation contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of future performance based on management’s judgment, beliefs, current trends and anticipated product performance.

These forward-looking statements include, without limitation, statements relating to growth drivers of the company’s business, such as school security products, reoccurring revenue services, potential market opportunities, the benefits of our recurring revenue products to customers and dealers, our ability to control expenses and costs and expected annual run rate for SaaS recurring monthly revenue. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, such risk factors described in our SEC filings, including our annual report on Form 10-K. Other unknown or unpredictable factors were underlying assumptions subsequently proving to be incorrect, could cause actual results to differ materially from those in the forward-looking statements.

Although we believe that the expectations reflected in the forward- looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. All information provided in today’s press release and this conference call are as of today’s date, unless otherwise stated, and we undertake no duty to update such information, except as required under applicable law. I’ll turn the call over to Dick in a moment. Before I do, I want to mention, we are actively planning our Investor Relations calendar for non-deal roadshow and conference attendance in the near future. Investor outreach is important to Napco, and I’d like to thank all those folks who assist us in these types of events.

Over the coming weeks, we will be participating in several key investor events. We’ll be attending the Jefferies Industrials Conference in New York City in early September followed by a virtual non-deal roadshow hosted by Craig Hallum on September 8. In mid- September, we’ll take part in D.A. Davidson’s 24th Annual Diversified Industrials & Services Conference in Nashville, Tennessee. And on October 8, Link Street will host a virtual non-deal road show on our behalf. With that out of the way, let me turn the call over to Dick Soloway, Chairman and CEO of Napco Security Technologies. Dick, the floor is yours.

Richard L. Soloway: Thank you, Fran. Good morning, everyone, and welcome to our conference call. We appreciate your participation today as we review our fiscal Q4 and fiscal 2025 performance. This past year has presented its fair share of headwinds, particularly around macroeconomic uncertainty and tariff-related pressures. But through it all, we have maintained focus on our long-term strategy, delivering best-in-class solutions, maintaining operational discipline and investing for sustainable growth. Our recurring revenue model continues to provide significant profitability and stability and a strong foundation for future innovation and customer engagement. As you will hear shortly, we have once again attained meaningful growth in this area, and we are confident this trend will continue.

We are also encouraged by our Q4 hardware sales performance and how quickly our team adapted to shifting demand. Our ability to control inventory, manage supply chain complexity and continue delivering on customer commitments has put us in a strong position. One of the things I am most proud of is how we have balanced growth with financial stewardship. We continue to invest in product development and customer success while also returning significant value to shareholders, all without taking on debt, which speaks to the strength of our business model and the effectiveness of our leadership team. Looking forward, the tariff landscape will continue to evolve. And while we cannot predict how that will play out, we have taken proactive steps, both operationally and strategically to protect margins and ensure long-term competitiveness.

The pricing adjustments we have implemented are a key part of that, and we expect to see its impact starting in Q1. We enter fiscal 2026 with strong momentum, a clear focus and confidence in our ability to execute. With that, I will turn the call over to our President and Chief Operating Officer, Kevin Buchel, who will comment on some of our operational and financial performance highlights. Following Kevin’s remarks, our CFO, Andy Vuono, will go through the financials in detail, and then I will return to delve deeper into our strategies and market outlook. Kevin, the floor is yours.

Kevin S. Buchel: Thank you, Dick, and good morning, everyone. I’m pleased to start off by highlighting several key accomplishments and financial milestones from Q4 and fiscal year 2025. First, I’m proud to report that we will be reporting that the company received a clean opinion on its internal controls over financial reporting for fiscal 2025 which means our auditors, Deloitte, issued an unqualified opinion under the Sarbanes-Oxley Act, indicating that our company’s internal controls over financial reporting were designed and operating effectively as of June 30, 2025. You will see that as part of the 10-K, which we will be filing later today. This reflects the strength of our internal controls and the continued diligence of our finance and compliance teams, and I would like to congratulate them for all of their efforts.

Our recurring revenue continues to be a cornerstone of our business. The run rate this quarter reached $94 million, and that’s up $5 million from the prior quarter. This marks the largest quarterly increase we’ve seen in the past 2 years, and it’s a strong signal of the momentum that we’re building. Equipment sales for the quarter, while down 5% versus last year’s Q4, had a much improved performance, increasing 27% sequentially from Q3 of fiscal 2025. This growth underscores the value of our offerings and the continued strength of our customer relationships, particularly in uncertain economic times caused in large part by the effect of tariffs. From a profitability standpoint, our recurring revenue gross margin remained very strong at 91%, with StarLink commercial fire radios continuing to be a strong part of the mix.

We also made meaningful progress on inventory management, reducing inventory levels at June 30, 2025, by $8.6 million compared to this time last year. Cash flow from operations for the year came in at $53.5 million, which reinforces our ability to generate consistent cash flow to support both strategic investments and shareholder returns. Speaking of which, we returned significant value to our shareholders during the fiscal year. We paid out $13.6 million in dividend and repurchased $36.8 million of our stock, which is equivalent to 1.2 million shares at an average price of $30.40. Even after these returns, we ended the fiscal year with approximately $100 million in cash and no debt, giving us tremendous flexibility going forward. On pricing, we announced two pricing increases during the quarter.

The first at the end of April was an 8.5% increase to help offset rising tariff cost. The second was our standard annual price increase, which this year was 5% and which went into effect approximately mid-July. We expect the full benefit of these actions to be reflected starting in our fiscal 2026 Q1. Finally, while there remains considerable uncertainty in the market around tariffs, we believe we are in an advantageous position as compared to some of our competitors. Our supply chain planning, pricing strategies and balance sheet strength gives us a competitive advantage in navigating these challenges. Overall, it was a very strong quarter and a solid close to the fiscal year with net income of $43.4 million or 24% of sales and adjusted EBITDA of $52.1 million, which equates to an EBITDA margin of 29%.

I am proud of the team’s execution and the financial strength we are carrying into the new fiscal year. With that, I will turn the call over to our CFO, Andy Vuono, for a deeper dive into the financials. Andy?

Andrew J. Vuono: Great. Thank you, Kevin, and good morning, everyone. Net sales for the 3 months ended June 30, 2025, increased 0.8% to $50.7 million as compared to $50.3 million for the same period a year ago. Net sales for the 12 months ended June 30, 2025, decreased 3.8% to $181.6 million as compared to $188.8 million for the same period a year ago. Recurring monthly service revenue continued its strong growth, increasing 10% in Q4 to $22.4 million as compared to $20.4 million for the same period last year. Recurring monthly service revenue for the 12 months ended June 2025 increased 14% to $86.3 million as compared to $75.7 million last year. These increases reflect the continued demand for our StarLink radios. Equipment sales for the quarter decreased 5.5% to $28.3 million as compared to $29.9 million last year, and equipment sales for the year ended June 2025 decreased 15.7% to $95.3 million as compared to $113.1 million for the same period last year.

The decrease in equipment sales was primarily a result of extended destocking strategies of some of our larger distributors throughout the year in addition to the timing of large project work for our door locking business. Gross profit for the 3 months ended June 2025 decreased 3.8% to $26.8 million with a gross margin of 53% as compared to $27.8 million with a gross margin of 55% for the same period last year. Gross profit for the 12 months ended June 30, 2025, decreased 0.7% to $101 million with a gross margin of 56% as compared to $101.8 million with a gross margin of 54% a year ago. Gross profit for recurring service revenue for the quarter increased 10.3% to $20.3 million with a gross margin of 91% as compared to $18.4 million with a gross margin of 90% last year.

Gross profit for the recurring service revenue for the 12 months ended June 2025 increased 14.6% to $78.5 million with a gross margin of 91% as compared to $68.5 million with a gross margin of 90% last year. Gross profit for equipment revenue in Q4 decreased 31.2% to $6.4 million with a gross margin of 23% as compared to $9.4 million with a gross margin of 31% last year. Gross profit for equipment for the 12 months ended June 30, 2025, decreased 32% to $22.5 million with a gross margin of 24% as compared to $33.2 million with a gross margin of 29% for the same period last year. The increase in both gross profit dollars and gross margin for recurring revenue for the 3 and 12 months ended June 2025 was primarily the result of the previously mentioned increase in recurring revenue as well as a greater proportion of those revenues being generated by our StarLink fire radios, which generate higher monthly service charges than other StarLink radios.

The decrease in both gross profit dollars and gross margin for equipment revenues for both the 3 and 12 months ended June 2025 was primarily result of the aforementioned decrease in revenue, which resulted in less absorption of our fixed manufacturing overhead costs. In addition, Q4 was further negatively impacted by increased tariff costs in the fourth quarter and the impact of distributors pulling forward certain orders before our announced price increase went into effect. R&D costs for the quarter increased 6.8% to $3.2 million or 6.4% of sales as compared to $3 million or 6% of sales for the same period a year ago. R&D costs for the 12 months ended June 2025 increased 16.9% to $12.6 million or 7% of sales as compared to $10.8 million or 6% of sales for the same period a year ago.

The increase for the 3 and 12 months was a result of salary increases and the hiring of additional staff. SG&A expenses for the quarter increased 5.8% to $11.5 million or 23% of net sales as compared to $10.9 million or 22% of net sales for the same period last year. SG&A expenses for the 12 months ended June 2025 increased 13.5% to $42.2 million or 23% of net sales as compared to $37.1 million or 20% of sales for the same period last year. The increase in SG&A for the 3 months was primarily due to increased legal expenses and increased wages as a result of salary increases and certain additional hirings in the finance and IT departments. The increase for the 12 months was primarily due to increases in personnel-related expenses, mainly from merit increases and hiring additional personnel in finance and IT, in addition to increases in insurance, advertising, legal and professional fees, which was offset by decreases in director fees and nonrecurring transactional costs.

Operating income for the quarter decreased 13.4% to $12.1 million as compared to $14 million for the same period last year. Operating income for the 12 months ended June 2025 decreased 14% to $46.3 million as compared to $53.8 million for the same period last year. Interest and other income for the 3 months increased 16% to $883,000 as compared to $762,000 last year. For the 12 months ended June 2025, interest and other income increased 48% to $3.8 million compared to $2.6 million last year. The increase for both the 3 and 12 months ended June 2025 was primarily due to increased interest and dividend income from the company’s cash and short-term investments. The provision for income taxes for the 3 months increased by 12% to $145,000 to $1.3 million with an effective tax rate of 10% as compared to $1.2 million with an effective tax rate of 8% last year.

For the 12 months ended June 2025, the provision for income taxes increased 1.4% or $95,000 to $6.7 million with an effective tax rate of 13% as compared to $6.6 million with an effective tax rate of 12% last year. The increase in the provision for the 3 and 12 months ended June 25 was due to a larger portion of our taxable income being attributable to the U.S. operations. Net income for the quarter decreased 14% to $11.6 million or $0.33 per diluted share as compared to $13.5 million or $0.36 per diluted share for the same period last year and represents 23% of net sales. Net income for the 12 months ended June 30, 2025, decreased 13% to $43.4 million or $1.19 per diluted share as compared to $49.8 million or $1.34 per diluted share for the same period last year and represents 24% of net sales.

Adjusted EBITDA for the quarter decreased 7.6% to $14.2 million or $0.40 per diluted share as compared to $15.4 million or $0.41 per diluted share for the same period a year ago and equates to an adjusted EBITDA margin of 28.1%. Adjusted EBITDA for the 12 months ended June 2025 decreased 11.6% to $52.1 million or $1.43 per diluted share as compared to $58.9 million or $1.59 per diluted share for the same period last year and equates to an adjusted EBITDA margin of 28.7%. Discussing our balance sheet. As of June 2025, the company had $99.1 million in cash and cash equivalents and marketable securities as compared to $97.7 million as of June 2024, a 1.5% increase. The company had no debt as of June 2025 and cash provided by operating activities for the 12 months ended June 2025 was $53.5 million as compared to $45.4 million for the same period last year, an 18% increase.

Working capital, which is our current assets less current liabilities, was $138.4 million as of June 2025 as compared to working capital of $146.5 million at June 2024. CapEx for the quarter was $237,000 as compared to $551,000 in the prior year. And for the full fiscal year, CapEx was $2.1 million as compared to $1.6 million last year. That concludes my formal remarks, and I would like to return the call back to Dick.

Richard L. Soloway: Thank you, Andy. Let me take a moment to wrap up with a few reflections on where we’ve been and where we’re headed. Fiscal 2025 was a year of both challenge and resilience. Yet through it all, Napco demonstrated the strength and durability of its model. We stayed focused on creating lasting value for our customers, partners and shareholders. One of the clearest indications of that strength is our recurring revenue. This year, recurring revenue grew by more than $10 million and now represents nearly half of our total sales with sustained gross margin of 91%, which provides consistent cash generation and opportunity for continued reinvestment. A major driver of this growth has been the success of our StarLink Fire radio platform, which is increasingly viewed as the industry standard for fire communications in commercial buildings.

Operationally, I’m extremely proud of the performance that our team delivered. We reduced inventory by more than $8 million. And despite providing nearly $50 million of value to shareholders through dividends and share repurchases and continue to invest in product development, compliance and systems infrastructure, we still ended the year with over $99 million in cash while maintaining a debt-free balance sheet. On the hardware side, as mentioned earlier, we saw a strong rebound in Q4, up 27% sequentially from Q3. This rebound reflects our team’s agility in adapting to shifting demand dynamics. Looking ahead, we remain cautiously optimistic. Tariff policy and broader market conditions remain dynamic, but we’re not standing still. Our pricing actions have been implemented, and we continue to diversify our distribution base, invest in automation and enhance our StarLink platform, ensuring we’re driving sustainable growth while protecting margins.

Our strong balance sheet gives us meaningful flexibility to respond to opportunities, both organically and through potential strategic acquisitions. At the same time, we remain committed to returning capital to our shareholders while operating with zero debt. Now stepping back for a broader view, I want to highlight one vertical where Napco continues to make a difference, school security. School safety remains one of the most critical challenges of our time and Napco is proud to be a trusted and proven partner to school districts all across the country. Our divisions work together to deliver a full suite of integrated solutions from the advanced trilogy and architect lock sets to enterprise-scale Continental CA4K access control systems. These platforms are secure, scalable and align with important standards like PASS or as it’s called the Partner Alliance for Safer Schools to help schools implement practical best-in-class security.

We know that educators, administrators and communities are looking for solutions they can trust. What makes Napco unique is our ability to bring together locking, access control and alarm technologies into a unified often interoperable platform. It’s extremely gratify to know that our solutions are helping to protect students and staff every single day and we see this as an area of ongoing growth and responsibility. In parallel with our work in education, we continue to invest heavily in R&D to expand recurring revenue opportunities across our product lines. One of the most exciting of these is our MVP platform, a next generation of cloud-based access control systems that integrate seamlessly with our locking hardware. It represents a brand-new reoccurring revenue stream for us and for our dealers with configurations tailored for both enterprise customers and smaller facilities.

We believe MVP can potentially be a game changer and become a foundational contributor to our growth over the coming years as it extends our leadership into the hosted access control market and reinforces our core strategy of integrating innovative hardware with cloud-based services to deliver long-term high-margin recurring revenue. In summary, we are ending fiscal 2026 with a solid momentum, clarity of focus and a strong financial foundation. Let me repeat. In summary, we are entering fiscal 2026 with a solid momentum, clarity of focus and a stronger financial foundation. We’ve built a resilient business model that continues to deliver even in challenging environment. I’m incredibly proud of our team, what it has accomplished, and I’m energized for what lies ahead.

I’d like to thank everyone for their support and for joining us in this exciting future we have. Our formal remarks are now concluded, and I’d like to open the call for the Q&A session. Operator, please proceed.

Q&A Session

Operator: [Operator Instructions] And your first question comes from the line of Matt Summerville from D.A. Davidson.

Matt J. Summerville: A couple of questions. Given that some distributors are still taking down inventories, should we be concerned with respect to where channel inventories sit today, given that it sounds like there may have been a little bit of a broader buy ahead related to the tariff- driven price increases you mentioned on the call? And then I have a follow-up.

Kevin S. Buchel: So Matt, the inventory that was bought pre-tariff price increase was done in April pretty much. So that’s 4 or 5 months before the end of this quarter that we’re in now. We expect distributors to buy more, the sell-through stats are good. The tariff chaos has kind of cleared up. The distributors know that we’re the best game in town when it comes to tariffs that our direction is clear. Some of the other — our competitors, it’s a little chaotic, and they don’t know where the tariffs are going. We saw some of the inventory declines in the channel start to — that changed in the fourth quarter. So our fourth quarter sales was not only tariff-driven, pulling ahead driven, but also real demand. So we expect that to continue. We have a strong group of distributors. We have a strong group of dealers. We have excellent products. And we expect this to be a very good year, fiscal 2026.

Richard L. Soloway: Matt, I’d like to mention that our tariff arrangement in the Dominican Republic is 10%. All of our competitors are either in Asia or in Europe and Europe is now 15% in Asia, who knows what that’s going to be, but it’s much higher than all of the tariffs. So we have an advantage. And our technology and the fact that we’re so broadly diversified with our product line that all integrates together bodes well for getting additional dealers and doing more jobs, and they can count on stable prices from us.

Matt J. Summerville: As you think about the magnitude of increase you saw in the RSR from $89 million, I think, in April to $94 million, as you described it in July. Do we have another quarter or 2 of that sort of magnitude of sequential increase based on timing of historical activations of fire radios? And then given kind of the magnitude of price increase you’re talking about on equipment between the two different actions you’ve taken, is there any reason the equipment side of the business doesn’t grow double digits in fiscal ’26?

Kevin S. Buchel: So we went up $5 million. We saw this coming. I didn’t know it’s going to be $5 million, but if you go back — you remember, I said when you have strong quarters of radio sales, the recurring comes. It doesn’t come right away because there’s a delay because if we give out rebates. So I wasn’t surprised that it went up. It went up $5 million. It was maybe a little more than I thought. I think we have some more of that in us. I don’t know if it will be $5 million, but I think it will be a nice increase again. We have to keep having strong radio quarters for that to happen. And that’s our intention. We’re coming out with a lot more recurring revenue radio products, not just the ones that are out there now. We’re not standing still.

We’re aggressively marketing what we have. It all comes together when you have radio sales. It doesn’t come immediately, but it comes after maybe 6, 8, 9 months later. So we expect the increases to keep coming for the foreseeable future.

Matt J. Summerville: And then my question on equipment revenue. Given the magnitude of pricing, is there any reason that equipment sales don’t grow double digits next year or in fiscal ’26, I should say?

Kevin S. Buchel: Well, given we took two increases, the 8.5% to offset the tariffs and the 5%, which is a straight price increase. Is our belief is that we will grow double digits. We can’t — we take it quarter-by-quarter. We have very easy comps this year, in my opinion, Qs 1, 2 and 3, especially. So it’s not a hard task from my perspective, but we got to perform.

Operator: And your next question comes from the line of Jim Ricchiuti from Needham & Co.

James Andrew Ricchiuti: It’s maybe a tougher question to answer, but yes, you sometimes are a little bit further removed from the end demand. So I’m wondering, is there any way for you to size the pull forward that you saw on equipment sales? You mentioned, Kevin, I think that the sell-through stats are good. Maybe you could elaborate on that as well?

Kevin S. Buchel: Well, we talk about sell-through stats all the time. The sell-through stats that I have talked about it usually relates to the quarter that we just reported on. And so our sell-through stats for the June quarter were good. They were up across the Board. The key is what do they look like in this quarter, the one we’re in now. And I don’t really want to comment on it, but the expectation is they’ll stay strong. The ordering activity has been good this quarter. I feel like the distributors have felt like something has — a relief has come over them. They’re not panicking over tariffs, at least not with us. They know where they stand. And so that standing still waiting to see what happened, that has subsided. We talked a lot about WESCO in the past. They seem to be getting their act together more. So I think it bodes well. ADI is doing really well with us. I think it bodes well for Q1, but we got to perform.

Richard L. Soloway: Thinking out a little further in the quarter here in the next quarter, our goal and we increased our engineering department is to come out with additional recurring revenue products, more radios in other verticals that are needed, new creations of communications devices, more fire devices, more locking devices. And it’s very important to us to make sure that everything has a recurring revenue component to it. So we’re on a roll with our technology. The dealers love it, and we’re going to expand markets for everybody and you will see this evolving as the years go by.

James Andrew Ricchiuti: Andy, maybe a question for you. With the price — the first price increase, some of that obviously hit was passed in April. There was, I presume, some benefit in the June quarter. And I’m wondering two things. To what extent there was a benefit? And just broadly, if you can help us with the overall impact on gross margins, equipment gross margins from tariffs in the quarter?

Andrew J. Vuono: Sure, Jim. So we received limited benefit, I would say, in Q4 from the price increases. The company honored orders that were placed prior to those price increases going into the price books officially. So from a cost perspective, the tariffs really kicked in at the start of our Q4. So we had the full impact of the cost for the period. And I would say limited benefit of our price increases based upon timing of what is replaced. I think from a dollar perspective, it probably impacted the COGS by about $1 million or something short of $1 million. And pretty much all of the items that were subject to the tariff in Q4 what were sold through and the vast majority was shipped out by 6/30. So we had pretty much a straight dollar-for-dollar hit in Q4, but we’re expecting going into Q1, those pricing adjustments are now in place, and we’re expecting to see a lift from there moving forward.

Operator: [Operator Instructions] And your next question comes from the line of Peter Costa from Mizuho.

Peter James Costa: Congrats on the quarter here. Maybe if you could just start with some details on the MVP and Prima launches. How is the channel uptake there relative to your plan? And just any color about how you’re thinking about that opportunity over the longer term?

Richard L. Soloway: The MVP, the cloud operated system, which allows the security company that puts it in a job, for instance, in a hospital, also allows the security manager of that property to get instantaneous information about who goes into buildings, went into certain rooms at what time. And we expect this could be a very strong growth product with our company going forward. We’re introducing two basic models. One is enterprise class, those large enterprises and also for smaller buildings and smaller businesses. And we expect that there’s so many doors out there and so many people need access control and the cloud operated requires no equipment in the building. Everything is up in the cloud. We make all the changes for the dealers.

The dealers can get reports. Everybody can get instantaneous information about doors, openings, where people are in a building in case of a fire or emergency. So this is going to be quite an exciting product for us going forward. And we’re going to be showing it in New York at the International Security Conference, which is the next big show coming up. And our salespeople are around the country demoing it and training on it. So it’s going to be a great contributor.

Peter James Costa: Okay. And then maybe just back to the ARR increase. So that $5 million sequential increase was very encouraging. It seems like the actual uplift in service revenues is lagging that a little bit. Would you kind of expect a pretty material uptick in Q-over-Q service revenues in the beginning of 2026? How are you guys thinking about that?

Kevin S. Buchel: Well, we grew, I think it was 10% year-over-year. And the expectation is that we can sustain that rate, maybe even do a little better than that, not go down.

Operator: And your next question comes from the line of Jeremy Hamblin from Craig-Hallum Capital.

Jeremy Scott Hamblin: Congrats on the results. I wanted to come back to churn rates that you were seeing and whether or not kind of the price increases are having any impact on whether or not you’re on both equipment side, but certainly also for the recurring revenues and whether or not you’re getting any pricing on that aspect of the business?

Kevin S. Buchel: So Jeremy, we don’t really have any churn, churn being accounts that disconnect from us from our radios because we’re mostly commercial. So our churn is inconsequential as it pertains to commercial radios. We do mostly commercial. The pricing that we put in place sticks. Nobody complains about it. Everybody understands it, everybody expects it, no pushback at all. We did not take price increases on the recurring revenue amounts we charge every month. There was some talk that maybe we should. We didn’t take a price increase on the radios themselves. Maybe there was talk that maybe we should. Our feeling is let’s get as much as we can get. Let’s not mess with the formula that’s working well. It’s not about the extra $0.50 or $1 we could potentially charge and the recurring every month.

It’s about getting more radios, more of them because once you get it, it lasts pretty much forever. So that was our strategy. The strategy has worked pretty well. In 10 years or so, we’ve built this up to about $100 million of recurring at 91% margin. So I think we’re doing it the right way, and I’m comfortable with the strategy that we chose.

Jeremy Scott Hamblin: Got it. And you’ve also built a strong balance sheet and wanted to just get a sense for — you returned some capital here in the form of dividends, some buybacks. Is there room to potentially take up the — either the dividend payout rate? Or are you thinking about adding on to the current buyback program?

Kevin S. Buchel: The dividends, we’ve raised that, I don’t know, at least 3, maybe 4x. So we didn’t really talk about it. We announced it another dividend. We kept it the same $0.14. Certainly, having increased it 4x or so in a short period of time, there’s room for that to grow and to get — to become a higher amount. So I think that will happen. We’ll talk about when that should be. For this coming one, it’s $0.14. When it comes to buyback, we’re always looking. We’re always opportunistic. We got our eye on it. We are cognizant of the float. We’re dealing with a lot of larger investors who care about the float. But there could be room to do more buyback, but we’ll see. We’ll play that by year as we go forward.

Operator: [Operator Instructions] And your next question comes from the line of Jaeson Schmidt from Lake Street Capital Markets.

Jaeson Allen Min Schmidt: Kevin, you noted strong sell-through has continued here in September. Curious if that strength is being seen both on the radio and locking side.

Kevin S. Buchel: Well, we saw — my comment about sell-through was in the June quarter. I didn’t really comment on the quarter that we’re in now. So it was in the June quarter and it was very good across the Board. And we were particularly encouraged by the fire radios. They did really well. And like I’ve talked about before, you sell fire radios today to a distributor you may not feel the benefit of that from the recurring revenue side for 6, 8, 9 months. So that’s coming. We’ll see that. So we’re encouraged by what we saw from our distributors. We expect it to continue in Q1, the one that we’re in now. We’ll talk about it more when we’re able to, but we can. But the June quarter was very good, pretty much across the Board.

And locking was very good. Locking had a very difficult comp. Locking had that big project that we’ve talked a lot about, the Waldorf Hotel in Manhattan. So that makes for a difficult comp. There’s a little bit more of a difficult comp in Q1, and then that’s gone from a comp point of view. And there’s other projects that we expect that could be hitting in this fiscal year. And then since the comp is not that tough, we should be able to blow past last year’s numbers. But we’ll see. We’ll see when those things hit.

Jaeson Allen Min Schmidt: Got you. And then just following up on your comments on the school market. I know you can’t disclose all your wins, but just curious if you’ve seen a noticeable pickup in that space.

Kevin S. Buchel: The school business is steady, steady, good, steady, strong. I wish it was more. It’s frustrating. There was an incident that Villanova last week, it wasn’t a shooting. They thought it was a shooting. But what I heard in the news report was they announced that the students should lock their doors and barricade chairs against the door. That’s the old thing that we’ve been hearing about for years, for years. And that means to me that there’s still plenty of schools. Villanova is a very well-known school that still has to upgrade. And our sales guys better be talking to Villanova pretty soon. But school business is good. We’re working hard for it to be even better. There’s plenty of money and plenty of opportunity, and there will be for years to come.

Operator: There are no further questions at this time. I will now hand the call back to Mr. Richard Soloway for any closing remarks.

Richard L. Soloway: Thank you, everyone, for participating in today’s conference call. As always, should you have any further questions, feel free to call Fran, Kevin or myself for further information. We thank you for your interest and support and look forward to speaking to you all again in a few months to discuss Napco’s fiscal Q1 2026 results. Have a wonderful day, everybody.

Operator: And this concludes today’s call. Thank you for participating. You may all disconnect.