Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $49.2 million, a record for the quarter, representing a 12% increase year-over-year [9][12] - Net income rose 9% to $12.2 million, which is 25% of revenue, and adjusted EBITDA increased 21% to $14.9 million, equating to an adjusted EBITDA margin of 30.4% [10][16] - Cash reached $106 million as of September 30, 2025, with cash from operations at $11.6 million [10][17] Business Line Data and Key Metrics Changes - Equipment sales were $25.7 million, up 12% year-over-year, supported by price adjustments and strong distributor relationships [9][12] - Recurring revenue grew 11% to $23.5 million, maintaining a gross margin of 90.3%, driven by Starlink Fire Radios [10][12] - Equipment gross margin improved to 26%, a 300 basis point increase from the previous quarter [10][14] Market Data and Key Metrics Changes - The company reported strong sell-through stats for locking products, with locking sales at $17.1 million for Q1, a significant increase from $13.9 million in the same period last year [36][37] - The recurring revenue service now has a prospective annual run rate of approximately $95 million, reflecting continued demand for StarLink Fire Radios [12][13] Company Strategy and Development Direction - The company is focused on enhancing shareholder value through a recurring revenue model, which now represents nearly half of total sales [19][20] - NAPCO is investing in school security solutions, integrating locking, access control, and alarm technologies to provide comprehensive safety solutions [20][21] - The introduction of the MVP Cloud-Based Access Control platform aims to create a new subscription-based revenue stream, enhancing the company's market position [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to weather economic challenges and continue executing its growth plan [6][7] - The company anticipates further benefits from pricing strategies and expects to see a larger impact in upcoming quarters [9][10] - Management highlighted the importance of innovation and operational efficiency in maintaining competitive advantages [19][20] Other Important Information - The company declared a quarterly dividend of $0.14 per share, payable on January 2, 2026 [10][11] - NAPCO's manufacturing facility in the Dominican Republic is noted for its cost efficiency and stability, providing a competitive edge [23][57] Q&A Session Summary Question: What percentage of your locking mix is represented by networked products? - Most sales in locking are traditional products, with MVP just starting to gain traction [26][27] Question: How does MVP technology differ from competitors? - MVP is a fully integrated system that combines locks and cloud services, allowing for enhanced functionality and recurring revenue [29][30] Question: How much of the hardware revenue growth was due to price versus volume? - Approximately 60% of the 12% increase in equipment revenue was due to volume increases, with 40% tied to pricing increases [34] Question: What is the status of the Pasadena school contract? - The project was completed successfully, and there are significant opportunities in school security across the country [82][84] Question: What are the plans for the cash on the balance sheet? - The company is considering potential M&A opportunities but remains cautious to ensure any acquisition is accretive [87][89]