NAPCO SECURITY TECHNOLOGIES, INC — Call Transcript 2025

Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies' fiscal first quarter 2026 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, November 3, 2025. I would now like to turn the conference over to Mr. Francis Okoniewski. Please go ahead. Thank you, Eva. Good morning, everyone. This is Francis 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 first quarter 2026. By now, all of you should have had the opportunity to review our earnings press release discussing our quarterly 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, Chairman and CEO of NAPCO Security Technologies; 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, recurring 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 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 or 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, but before I do, I want to mention we will be attending the International Security Conference Trade Show November 18th through the 20th in New York City's Javits Center. We'll be showcasing an array of exciting new products, and if anyone is interested in attending, please contact me, and I will arrange to get you a guest pass. In addition, we're 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 who assist us in these types of events. In the coming weeks, we'll be attending the Robert Baird Global Industrial Conference in Chicago, the Stephens Annual Investment Conference in Nashville, the UBS Global Industrials and Transportation Conference in Palm Beach, Florida, the Melius Research Conference in New York City, and Needham's 28th Annual Growth Conference also in New York City. 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. Thank you, Fran. Good morning, everyone, and welcome to our conference call. We appreciate you joining us as we review our fiscal first quarter 2026 performance. Our first quarter results, which reflect record Q1 revenue, continue the momentum we reported from Q4 of fiscal 2025. As a reflection of our continued focus on long-term growth and resiliency of our business, our recurring revenue model has continued its steady growth while maintaining its substantial profitability. We remain encouraged with our equipment revenue performance and our ability to weather the various microeconomic challenges we encountered in fiscal 2025 as we started to realize some of the benefits from our pricing strategies in response to tariff uncertainties. We have started fiscal 2026 with positive momentum and confidence in our ability to continue to execute on our plan to provide enhanced shareholder value and growth through the balance of the fiscal year. Now I'll 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 more detail, and then I will return to delve deeper into our strategies and market outlook. Kevin, the floor is yours. Thank you, Dick. Good morning, everyone. I'm pleased to share a few highlights from what was a very strong start to fiscal 2026. Total revenue for the quarter was $49.2 million, and that's a Q1 record, up 12% compared to the same period last year. Within those results, equipment sales reached $25.7 million, also up 12% year over year, demonstrating the continued strength of our relationships with our distributors and our dealers. This increase was also supported in part by the early impact of two price adjustments, one related to tariffs that was implemented at the end of April, and our normal annual price increase that took effect in mid-July. We did not see the full impact of those price adjustments in Q1, but we expect to see a larger benefit in the upcoming quarters of fiscal 2026. Recurring revenue remained strong as well, growing 11% over last year's Q1 and maintaining an impressive gross margin of 90.3%, with StarLink Commercial Fire Radios continuing to be the key driver within that mix. Our equipment gross margin improved as well to 26%, representing a 300 basis point sequential increase from fiscal 2025's Q4. From a profitability standpoint, operating income increased 15% year over year. Net income rose 9% to a Q1 record of $12.2 million, and that represents 25% of revenue. Our adjusted EBITDA was up 21%, and we now have an adjusted EBITDA margin of 30.4%. Finally, cash continues to grow. It reached $106 million as of September 30, 2025. Cash from operations was $11.6 million, and of course, we have no debt. As such, we are pleased to announce that we are continuing our dividend program, as our Board of Directors declared a quarterly dividend of $0.14 per share payable on January 2, 2026, to shareholders of record on December 12, 2025. Overall, this was a strong start to fiscal 2026, and I'm very proud of the team's execution across the board. With that, I will turn the call over to our CFO, Andy Vuono, for a deeper look at the financials. Andy. Thank you, Kevin, and good morning, everyone. Net revenue for the three months ended September 30, 2025, increased 11.7% to $49.2 million as compared to $44 million for the same period a year ago. Recurring monthly service revenue continued its strong growth, increasing 11.6% in Q1 to $23.5 million as compared to $21.1 million for the same period last year. Our recurring revenue service now has a prospective annual run rate of approximately $95 million based on our October 2025 recurring service revenues. That compares to $94 million based on July 2025 recurring service revenues, which we reported back in August. These increases reflect the continued demand for our line of StarLink Fire Radios. Equipment revenue increased 11.8% to $25.6 million as compared to $22.9 million for Q1 of fiscal 2025, which was a result of increased volume in our door locking product line and the impact of certain product pricing increases that went into effect in the quarter. Gross profit for the three months ended September 30, 2025, increased 13.1% to $27.8 million, with a gross margin of 56.6% as compared to $24.6 million, with a gross margin of 55.9% for the same period last year. Gross profit for recurring services revenue for the quarter increased 10.7% to $21.2 million, with a gross margin of 90.3% as compared to $19.2 million, with a gross margin of 91.1% last year. Gross profit for equipment revenues in Q1 increased 21.8% to $6.6 million, with a gross margin of 25.7% as compared to $5.4 million, with a gross margin of 23.6% last year. The increase in equipment gross profit was primarily a result of product mix, as door locking products have a higher gross margin than intrusion. That, coupled with certain price increases and improved overhead absorption as a result of increased volume, contributed to the improvement in the equipment margins. R&D costs for the quarter increased 6% to $3.2 million, or 6.6% of revenue, as compared to $3.1 million or 6.9% of revenue for the same period a year ago. The increase for the three months primarily resulted from increased labor costs, which was partially offset by reduced consulting fees. Selling, general and administrative expenses for the quarter increased 13% to $11 million, or 22.3% of net revenue, as compared to $9.7 million or 22.1% of net revenue for the same period last year. The increase in SG&A for the three months was primarily due to increased legal fees and sales commissions, partially offset by decreased bonuses and compensation and benefits. Operating income for the quarter increased 15.1% to $13.6 million, as compared to $11.9 million for the same period last year. Interest and other income for the three months decreased 13.5% to $1 million, as compared to $1.1 million last year. The decrease for the three months ended September 2025 was due to lower interest income from the company's cash and short-term investments as a result of lower interest rates. The provision for income taxes for the three months increased 36% to $655,000 to $2.5 million, with an effective tax rate of 16.9%. As compared to $1.8 million with an effective tax rate of 14% last year. The increase in the provision for three months was due to higher pre-tax income, as well as a larger portion of the company's taxable income being attributable to U.S. operations. The remeasurement of certain deferred tax liability is due to tax rate changes enacted in the One Big Beautiful Build Act in the current period. Net income for the quarter increased 8.8% to $12.2 million, or $0.34 per diluted share, as compared to $11.2 million, or $0.30 per diluted share for the same period last year, and represents 25% of net revenue. Adjusted EBITDA for the quarter increased 21.1% to $14.9 million, or $0.42 per diluted share, as compared to $12.3 million, or $0.33 per diluted share for the same period a year ago, and equates to an adjusted EBITDA margin of 30.4%. As it relates to our balance sheet, as of September 30, the company had $105.8 million in cash and cash equivalents and marketable securities, as compared to $99.1 million as of June 30th, 2025, a 6.6% sequential increase. The company had no debt as of September 30th, and cash provided by operating activities for the three months ended September 30th, 2025, was $11.6 million as compared to $12 million for the same period last year, a 3% decrease. Working capital, which is defined as current assets less current liabilities, was $159.2 million as of September 30th, as compared with working capital of $149.9 million on June 30th, 2025. Our current ratio was 7.5 to 1 on September 30th, as opposed to 7.3 to 1 on June 30th, 2025. Our CapEx for the quarter was $193,000 as compared to $680,000 in the prior year period. That concludes my formal remarks, and I'd like to return the call back to Dick. Thanks, Andy. Let me close with a few reflections on where we've been and where we're headed. This quarter, NAPCO once again demonstrated the strength and resilience of our business model. We remain focused on delivering lasting value to our customers, partners, and shareholders, and the results speak for themselves. Recurring revenue now represents nearly half of our total sales, supported by a sustained 90%+ gross margin. This steady high-margin income continues to drive consistent cash generation and reinvestment in innovation and growth. A key contributor remains our StarLink Fire Radio platform, which has become the industry standard for commercial fire communications. Operationally, our team is executing exceptionally well. We manage inventory tightly, continue to invest in product development, compliance, and infrastructure, and return capital through dividends, all while maintaining a debt-free balance sheet. Looking ahead, we remain optimistic. Market dynamics continue to evolve, but we're not standing still. We've implemented pricing actions, diversified our distribution base, and invested in automation and enhancements to the StarLink platform aimed at sustained growth and protecting margins. Our strong balance sheet provides flexibility for both organic investments and potential strategic acquisitions while keeping us committed to shareholder returns. One area where NAPCO continues to make real impact is school security, one of the most critical challenges of our time. We're proud to partner with school districts nationwide, providing integrated solutions that include our Trilogy and ArchiTech lock and enterprise-scale access control systems. These platforms are secure, scalable, and aligned with the Partner Alliance for Safer Schools, or PASS program standards, giving educators and administrators solutions they can trust. What truly differentiates NAPCO is our ability to integrate locking, access control, and alarm technologies into a unified, interoperable platform, protecting students and staff every day while driving future growth. At the same time, we continue to expand recurring revenue opportunities through innovation. A great example is our MVP Cloud-Based Access Control platform, which integrates seamlessly with our locking hardware. MVP introduces a new subscription-based revenue stream for NAPCO and our dealers, and it's available in two configurations: MVP Access, an enterprise-grade solution supporting unlimited users, and MVP EZ, a mobile-first version for locksmiths and smaller facilities. We believe MVP has the potential to be a game changer, extending our leadership into hosted access control and reinforcing our strategy of pairing innovative hardware with cloud-based services to drive higher margin recurring revenue. Beyond education, our AlarmLock and Marks hardware lines continue to gain traction in healthcare, retail, and multi-dwelling applications, as well as airport infrastructure upgrades. As the transition away from legacy copper phone lines accelerates, our StarLink Radios, which operate on both AT&T and Verizon networks, and now also T-Mobile, are well positioned to capture additional market share across millions of commercial and residential buildings. Operationally, our Dominican Republic manufacturing facility continues to be a key competitive advantage, offering cost efficiency, stable logistics, and low tariff exposure, a benefit versus many competitors manufacturing in higher tariff regions. While external market and regulatory conditions remain fluid, we're focused on what we can control, driving innovation, executing with discipline, and growing our base of recurring revenue. We're confident that our strong net income, adjusted EBITDA, and cash flow trends will continue to strengthen. In summary, we have begun fiscal 2026 with solid momentum, a clear focus, a stronger financial foundation than ever before. I'm incredibly proud of our team, what our team has accomplished, and excited about the opportunities ahead. Thank you all for your continued support and confidence in NAPCO. Our formal remarks are now concluded. We would like to open the call for the Q&A session. Operator, please proceed. Thank you, Richard. So, ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. Now, let's begin. Your first question comes from Matt Summerville with D.A. Davidson. Go ahead, Matt. Thanks. A couple of questions. First on locking. Can you talk about what % of your locking mix today is represented by that networked product? Can you also discuss how your MVP technology differs from other major locking players in the space today? I have a follow-up. I'll answer the first part, and I guess Dick could answer the second part. The first part, most of our sales in locking are the traditional products. MVP is just starting out. It's gaining some traction. We're going to show it again at ISC East, which is in a couple of weeks. We're going to show upgrades to what we showed at ISC West back in April. The expectation is once we show that and start shipping that, we'll start to gain more traction in the new stuff. The old stuff, the traditional stuff, is powerful stuff. Locking is 66% of equipment sales. That includes all the categories we mentioned in our prepared remarks, including schools and lots of things. We don't announce all the school wins. Some schools, sometimes they don't want us to talk about it. Believe me, they're there. That's part and parcel of why locking was so strong. It was very strong in this quarter, and the expectation is it'll continue to be strong. Now, Dick, maybe you can comment on why our MVP is different than anybody's product out there. Sure. The MVP product that we introduced is a new recurring revenue generator for locksmiths as well as system integrators. What's interesting about it is that we have the totally integrated system because we manufacture the locks. We've been gold-standard lock manufacturers under the Trilogy brand for many, many years. It's considered the best locking product. Now we've added the radio aspect to it, which communicates to our cloud. The cloud is owned by us. We built it. We're a total integrated manufacturer, which allows us to add a lot of extra functionality to the concept of locking with a recurring revenue tail to it. If you're an administrator in a hospital, you're in charge of the security division, you can get instantaneous information with all the equipment up in the cloud. No longer does it have to be on the site, and where the dealer has to go back and make upgrades to the software, it can all be done in the cloud, and we do it all for the dealer. We charge $3 a door for each door, and there are millions and millions of doors out there. While we're very successful with the fire alarms and the burglar alarm radio products, which generate recurring revenue, there's millions of those types of buildings where there's one radio per building usually. In this case, you could have 15, 20, 100 doors generating $3 per door with all these services. It's a totally integrated hardware-software package. We made it in two different ways. One is for basic, smaller offices, doctor's offices. You have six doors, and that's the MVP EZ. The full-blown access control cloud system is for system integrators to do larger jobs. We can control our own destiny, unlike a lot of our competitors, which have to get locks from one manufacturer, then they do the software themselves or vice versa. We do it all in-house. We have an engineering staff that develops everything from soup to nuts, from the hardware all the way up to the middle and software of these systems. It makes us very unique. It's going to be very powerful in the future. It's a way for dealers and locksmiths to build equity in their business now by getting recurring revenue from each store where they install the locks. Thank you for that color. Just as a follow-up, can you parse out a bit in the fiscal first quarter how much of the hardware revenue growth would have been price versus volume? I'm trying to get a feel for how much price has yet to be realized and any high-level thoughts as to how the remainder of the fiscal year cadences out would be beneficial. Thanks. It is a combination, Matt. As I said earlier, we did not get the full benefit of the price, but we will as the year progresses. Andy could give us some color of kind of what it was in Q1, but we know that there is a lot more to come from the benefit of the pricing. Andy, you want to comment on it? Sure. Matt, so in response to that, of the approximate 12% increase in equipment revenue for the period, our preliminary analysis has indicated approximately 60% of that is related to volume increases, and 40% is tied to the pricing increases that went into effect in Q1. Okay. Thank you, Matt. Your next question comes from Jim Ricchiuti with Needham and Co. Go ahead, Jim. Thank you. Good morning. Maybe a follow-up to that. I know this information is going to be in the queue later today, but can you give us a sense as to what the overall growth was in the door locking products business and whether, when you talk about the early pricing benefits, you saw some benefit in that part of the business as opposed to the radio business? Locking, and you'll see this in the queue that's going to be filed today, a little later today. Locking for Q1 was $17,083,000. $17,083. Last year's Q1, it was $13,854,000. That's a substantial increase. Locking was very strong. Some of it did come from orders that were placed by distributors trying to beat the price increases. We carried a backlog of several million into Q1 from Q4, but a lot of it was not that. It was really some of it, guys going ahead trying to beat the rush, but a lot of it is locking being strong. This was one of the strongest locking quarters, maybe the strongest we've ever had. It was right up there. The expectation is it's going to continue. We don't have situations in the channel where guys are loaded up, and presumably they're not going to skip when we come to them this quarter, Q2. You never know with distributors. They behave funny sometimes, but the channel is good. The sell-through is strong. The expectations are all very good in the locking segment. Helpful, Kevin. I wonder, maybe just to the comment you just made, just the overall tone of demand, what you're hearing from some of your channel partners. You alluded to a good sell-through that you're seeing on the door locking side, maybe on both parts of the hardware business. Any color you could provide in terms of what you're seeing, hearing, sell-through stats or otherwise? Thank you. Right. Sell-through stats, this is as of Q1. Can't really comment on what's Q2, which is a month old. For Q1, we saw very good sell-through stats for all of our locking partners. We have two locking companies, and it was good on both. On the intrusion side, we saw tremendous improvement there too. I look at this very closely every month. I was happy with what I'm seeing. I always caution because I never know what distributors are going to do. It's their year-end in December. Who knows what's going to happen? If we're going to base it solely on what stats we're seeing, and that's their inventory levels and the sell-through, we should be in good shape in both areas, locking and intrusion. Thank you. Thanks, Jim. Okay. Yes. Thank you, Kevin and Jim. Your next question comes from Peter Costa with Mizuho. Go ahead, Peter. Hey, good morning, guys. I'd like to maybe dig a little bit further into the service margins. That 80 basis point year-over-year decline was a little bit more than expected. What's kind of causing that pressure? Is there anything on underlying radio margins, an acceleration in MVP? Anything there? Thank you. Peter, there were really two factors that affected the margin for the recurring, which still is tremendous. 90.3% is still tremendous. It did go down from a little bit over 91%. Two factors. Factor number one, we now have a triple carrier radio that introduces T-Mobile into the mix. We have to buy minutes to support that. We have not really charged anybody for that, and even though it is not a lot of money, it did move the needle a little bit. The expectation is we will increase our recurring radio charge to cover that. It is not going to be a lot, but it might be enough to move the needle back to where it was. That is one factor. Another factor is we are gaining a lot of business from some very large dealers. I do not want to mention any names, but there are large dealers out there. One in particular has been buying a lot of the smaller dealers. It seems like they do an acquisition every week. As a result of that, we are picking up more radio business, and we will be picking up more in the future because there is this consolidation, if you want to call it that, from the big guy buying up some of the smaller guys. The radio segment has all moved in our favor because the big guy loves our fire radio, and when he buys a smaller dealer, he is going to make sure that the smaller dealer's customers get our StarLink Fire Radio if they were not using it. Maybe they were using it, but if they were not, opportunity for us to pick up even more share. The one negative of this, and it is mostly positive, is a big guy can command a little bit of a better price. Maybe the big guy pays a dollar less than what the smaller guy is paying. We honor that. We are happy to get more business. If a guy was paying $8 and we have to lower it to $7, just to use an example, we will do that. We will do that all day long because we are picking up more radio recurring revenue business. That too could move the needle a little bit. Absent of that, it is all the same powerful margins that you have been seeing. Let me add. That makes a lot of sense. Let me add something else to that. I network a lot with the dealers, and some of the dealers in certain parts of the country have told me that T-Mobile is more reliable on their cell phones than the other services. Evidently, the towers are different or the way the reception is for the radios on their towers is different. By adding T-Mobile to our mix of AT&T and Verizon, now we have all the major carriers, and the areas where T-Mobile is the strongest in pickup and communications is now in our radios. We are going to pick up market share, additional market share with a more stable radio network with T-Mobile. That is going to help us a lot. Overall, it should be a net positive having T-Mobile as part of our mix. Awesome. Yeah. Thank you. Maybe just thinking about the price on the radio, I think that's kind of intended to be on the RSR. That seems like a pretty big deal. How would you kind of approach that? Is that just the entire installed base would get a little bit of price, just incremental sales, or just the T-Mobile radios? How would you tackle that? If it's a triple carrier, it's going to be in everybody's radio. To cover it, everybody would probably get a little bit of an increase. Not much. Believe me, we don't want to mess with a very good formula. I like the shareholders. I want to keep that 91% margin as well. If we have to raise it a little bit to keep it up there, we're going to do that. We're looking at that now, Peter. Awesome. Thank you. You got it. Thank you. As a quick reminder, ladies and gentlemen, if you wish to ask a question, please press star one. Now our next question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Go ahead, Jeremy. Thanks. Congrats on the strong results. Just wanted to start a little bit with kind of the manufacturing facility. Making sure that in terms of the hurricane that had some impact in the Dominican Republic. Just understanding what you've seen there. Just kind of related note, in terms of how the tariffs are being applied at this point. Impact, as you look forward in calendar 2026. Do you feel like you're going to have kind of normal pricing increase on products, or is there any incremental that you need to take to cover where tariffs stand today? This is Dick Soloway. I moved down there to the Dominican Republic after I searched around China and Mexico and decided Dominican is great for a lot of advantages: closeness to the U.S., stable government, and being able to get the workers that we needed. We built this custom building. After we were in individual smaller buildings, we built a custom building which is category five proof. It is an all concrete building. We do not have any issues. We had no problem with the hurricane that passed by. We generate our own power, make our own water. We are a self-contained city down there. Of course, we have our workers come from around the area. It is actually a shelter for them in a hurricane because it is stronger than the houses. It works out really, really well. We had no issues with that. We do not expect there is anything that is going to be able to cause us any grief in the future. What was the second part of the question? Just in terms of tariff impact and thinking about pricing in 2026 and whether or not you'd take kind of your more typical price increase or whether or not you would take slightly more, just given how kind of the tariffs are playing out here. I mean, we've seen some stabilization in kind of tariff mandates, but. The tariffs for the DR are very stable. It's not like some of the other countries where it's going up. It's down. It's here. It's there. We know what it is. It's 10%. That's what it is. That's what it's been. We took an increase to cover that. We announced it back in April. We don't need to do anything more on that front. We took a general price increase that we announced in July. We don't expect to do another one until we get to the end of this fiscal year that we're in. Pricing-wise, we're good. The only thing is we haven't felt it all yet. We expect to feel good about it, better. We feel good already. We expect to feel better about it as we get deeper into the year, as the full effect is felt. We haven't felt it yet. Great. Just coming back to the service revenues, you saw a nice little bit of sequential year-over-year improvement from what you had in the June quarter. You just had a strong quarter with locking. I wanted to just get a sense. With the evolution of that business and potentially getting some recurring revenue associated with that in combination with kind of the radio alarms and so forth, when do you think you might kind of see that show up here in recurring service revenue growth as FY 2026 plays out? When we released it, when we first started talking about it. We showed it at IFC West in April. And we said at that time, "Give it 18 months to two years. That's how long this kind of thing takes. We hope it's sooner." But I would give it time. I think we'll feel a little bit more as this fiscal year progresses. I think fiscal 2027 is when I think we'll really start to feel it. So you got to give it time. We're like six months removed, basically, from when we really had a coming-out party for it. Now we're going to have another coming-out party in a couple of weeks to show the other versions of MVP. Give it another year after that. And I think it could be meaningful. I went through, because I've been in the alarm business for a long time, I went through alarms without recurring revenue. Imagine in the early years, it was just a hardware job that was put in by a dealer. There was no recurring revenue, and the dealer went on to do another hardware job. Then the intro of recurring revenue in the alarm business revolutionized that business. Every job that goes in, intrusion or fire, has a recurring revenue communicator in it. It gives great service to the occupant of the building, the owner of the building. That changed. It took a couple, three years for dealers to understand why you want to build equity in your business. You just don't want to do a job and do another job after that without having a recurring revenue tail. We're going through the same situation now in the locking business. 25 years later, the locking business is such that a dealer will put in a locking job, either a large building or smaller buildings, and then they go on to the next job. There's no equity building, no recurring revenue. We are unique in the business, having the fact that we make the locks, we make the radios, and that the locksmiths and the integrators don't get recurring revenue from this type of service. We believe, like it happened in the alarm business, there's going to be a changeover that locksmiths are going to want to get recurring revenue tail to everything they do. That's what we're doing now. Patterning ourselves after the original alarm business, now we're bringing it to the locking business. We're unique in the fact that we're the company that can do that because we have all these different facets that we've knitted together to make an integrated manufactured locking product and a cloud product for these locksmiths and for the system integrators. It's going to be an exciting ride going forward. Just piling on more recurring revenue is the name of the game for us. We've become a communications type of company, and it's going to grow ever larger. Just as a quick follow-up on that point. As we look to FY 2027, do you have a sense for what portion of your total service revenues could be tied to the locking products as opposed to the alarm? I think it's premature for us to throw out projections like that. I would just say I think it would be meaningful. And just leave it at that. Just think about how many doors are out there and how many commercial buildings. This is all commercial. This is not residential. What information you can get from every door, who comes in in case of emergencies, what's going on in the hospital, in the drug area, where the drug cabinets are, and you get instant information and reports, doing time and attendance, and all kinds of other great things, knowing everything that goes on in every door in the building that has an MVP system, locking system installed on it. I would say that if you don't have this type of system a couple of years from now, you're really in the blind as a management company or as a security department in an industrial building. You got to have this information. You shouldn't be in the blind. MVP will give it to everybody. It's very, very economical, very reliable because it's all built using our StarLink communications program. Thanks so much for taking the questions. Thanks, Jeremy. Next up, we have Jaeson Schmidt with Lake Street. Go ahead, Jason. Hey, guys. Thanks for taking my questions. Curious if you can give us an update on how ADI is progressing. ADI relationship. Excellent. They do a great job over there. They move a lot of intrusion equipment on our behalf. Couldn't be happier with the exception of one thing. I'd like more locking sales out of them. And we've told them this. They're great with the alarm side. We think there's an opportunity for locking through them. They have over 100 branches. I think it's 115 branches. It would be nice to move locking through those 115 branches. Absent of that, they're doing a very good job. Very happy. Let me add something to that. There are many, many dealers and a larger percentage of dealers are going to be doing locking jobs. These are the alarm dealers that do fire and burglar alarm jobs, but they're not. A large percentage are doing locking. They're just staying in the alarm sector of the business. Now, with recurring revenue added onto the locking jobs, it's not just a hardware installation. It's a recurring revenue generator for them. It adds to their fire and burglar alarm recurring revenue. We're going to be training lots of these locking dealers to utilize it and lots of the alarm dealers to utilize it and vice versa. We're going to do a lot of cross-training so that a dealer can be a total wraparound business. He gets recurring revenue from his alarms, and he gets revenue from his locking installations, and vice versa. ADI is a great vehicle because they're the largest distributor. They will, I'm sure, enter into the locking business all across the country. It's going to be great for market share for us because we're the only alarm manufacturer that has a locking division, and we're the only locking manufacturer that has an alarm division designing and manufacturing all these things. We're a natural play for the whole locking and alarm industry. We have three locking companies: Marks and AlarmLock and Continental. We have the NAPCO burglar and the fire alarm business. We really have the widest range of products out there. Great partners with ADI, and they're a great company. They're really buttoned up. Okay. That's helpful. And then just as a follow-up, sorry if I missed it, but when will the price increase go into effect to account for the T-Mobile compatibility? We're studying that now, Jason. We're very cautious with the pricing for the recurring, but it's very clear that we're adding a cost that we're not being compensated for. So we're looking at it. I would say it's imminent, but we haven't decided it yet. Okay. Thanks a lot, guys. Thanks, Jason. To remind everyone again, if you have a question to ask, please press star one. Our next question comes from Lance Vitanza with TD Cowen. Please go ahead, Lance. Hi. Thank you. I wanted to talk a little bit about the school security side. I think it was about a year ago that you announced the Pasadena school contract. I'm wondering what the status is of that, how far along that is, or how it went, any sort of lessons to learn, or just how that sort of leaves you feeling about the opportunity more broadly. That project went well. It's been completed. The opportunities are still tremendous throughout the country. You see all the shootings that are still going on. You still see the announcement that barricade chairs in front of the doors. These are all things we all have been hearing for over 10 years. Unfortunately, a lot of the school districts move very slowly. We do our best to go around the country and show the school districts if they have any issues with money, how to go about getting the money. There's lots of money available. A lot of funds have been allocated to school security. It's there. The universities have no issues. They have the money. They have the needs as well. Despite the shootings been going on for over 10 years, we're in the early innings, I would say fourth or fifth inning of this. Still tremendous opportunity. We win a lot of business. We're not able to tell you about it unless the school grants it, grants us permission. Sometimes we don't even know about it because the distributors just are doing a job for a school district, and they buy a lot of our equipment. We know it's meaningful. We know there's a lot more to go. We know we have the solutions. We know we're the only company because we do locking and access and alarms. We're the one-stop shop that a lot of schools need. We just keep going out there and getting that word out. Yeah. We manufacture locks which are inexpensive for K-12s. We manufacture versions of that lock with remote control to them so you can lock doors remotely, do wide area campuses with our locks. It is a very diversified line of wide-ranging locks. As Kevin said, we manufacture the locking, the lock set. We make the parts. We assemble it. We do the radios. We have the cloud. We have all of that experience. Schools appreciate it. We are doing very nice schoolwork. Still, even after hundreds of shootings a year in the U.S., it is a tragedy. A lot of schools have not installed it yet. A fourth or fifth inning of the installation availability, so there is a lot more to do. Schools that make great choices will select the NAPCO system. We can be flexible from the smallest to the largest campuses out there. It is a great thing that we are manufacturing that. We want to protect the students and the faculty. With NAPCO, you can. Our guys are beating the bushes and showing this to these facilities. Eventually, everybody will get armed up against intruders that come into schools and cause havoc. If I could just get one more in on the balance sheet, cash at $106 million, that's as high as it's been in my memory, recent memory. What do you plan to do with all that cash? I know you talked about possible M&A. The dividend, I mean, you're covering that out of your cash flow. I'm guessing that the amount of cash that you actually need to run the business is a small fraction of what you have. Can we be thinking about any kind of accelerated return of capital to shareholders in 2026? It's a good problem to have, Lance. We keep generating more and more cash. There's not a lot of M&A that's required to run the business. You heard in Andy's comments that CapEx was minimal. We need lots of labor, and we can get it in the Dominican Republic. The needs for cash, dividends, potential acquisition. We have lots of bankers talking to us. Every banker tells us they have the perfect deal for us. We're pretty fussy. There's a lot of boxes it has to check. We don't want to be distracted, but if it's the right deal, we certainly would proceed. I'm sure there are companies out there, and we go through as the bankers present them. We go through them all, and if one hits the right spot, we'll go after it. The last thing we want to do, though, is get distracted by something that's not accretive from day one. We don't want to overpay. It could be a good thing. We're in a good position to do it much better than in the position we were in when we did our last one 15 years ago when we had minimal cash, lots of debt, and no recurring revenue. We got a lot of cash, lots of recurring, no debt. We could do it, but it's got to be right. Okay. Thank you. Thank you, Lance. Thanks, Lance. There seem to be no further questions at this time. I will now turn the call over back to Richard. Please continue. Thank you, everyone, for participating in today's conference call. As always, should you have any further questions, feel free to call Fran, Kevin, Andy, or myself for further information. We thank you for your interest and support, and we look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q2 results. Have a wonderful day, everybody. Bye-bye. Thank you, Richard. Thank you, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker 9: Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies' fiscal first quarter 2026 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, November 3, 2025. I would now like to turn the conference over to Mr. Francis Okoniewski. Please go ahead. Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies' fiscal first quarter 2026 earnings conference call. good morning ladies and gentlemen and welcome to the napco security technologies' fiscal first quarter 2026 earnings conference call At this time, all lines are in listen-only mode. at this time all lines are in listen-only mode Following the presentation, we will conduct a question-and-answer session. following the presentation we will conduct a question-and-answer session If at any time during this call you require immediate assistance, please press star zero for the operator. if at any time during this call you require immediate assistance please press star zero for the operator This call is being recorded on Monday, November 3, 2025. this call is being recorded on monday november 3 2025 I would now like to turn the conference over to Mr. Francis Okoniewski. i would now like to turn the conference over to mr francis okoniewski Please go ahead. please go ahead

Speaker 1: Thank you, Eva. Good morning, everyone. This is Francis 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 first quarter 2026. By now, all of you should have had the opportunity to review our earnings press release discussing our quarterly 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, Chairman and CEO of NAPCO Security Technologies; 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. Thank you, Eva. thank you eva Good morning, everyone. good morning everyone This is Francis Okoniewski, Vice President of Investor Relations for NAPCO Security Technologies. this is francis 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 first quarter 2026. thank you all for joining today's conference call to discuss financial results for our fiscal first quarter 2026 By now, all of you should have had the opportunity to review our earnings press release discussing our quarterly results. by now all of you should have had the opportunity to review our earnings press release discussing our quarterly results If you have not, a copy of the release is available in the Investor Relations section of our website, www.napcosecurity.com. 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, Chairman and CEO of NAPCO Security Technologies; Kevin Buchel, President and Chief Operating Officer; and Andrew Vuono, Chief Financial Officer. on the call today are dick soloway chairman and ceo of napco security technologies 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. 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. 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, recurring 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 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 or 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. These forward-looking statements include, without limitation, statements relating to growth drivers of the company's business, such as school security products, recurring 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 recurring monthly revenue. these forward-looking statements include without limitation statements relating to growth drivers of the company's business such as school security products recurring 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 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. 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. 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 or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. other unknown or unpredictable factors or 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. 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, but before I do, I want to mention we will be attending the International Security Conference Trade Show November 18th through the 20th in New York City's Javits Center. We'll be showcasing an array of exciting new products, and if anyone is interested in attending, please contact me, and I will arrange to get you a guest pass. In addition, we're actively planning our Investor Relations calendar for non-deal roadshow and conference attendance in the near future. You should not place undue reliance on these forward-looking statements. 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. 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, but before I do, I want to mention we will be attending the International Security Conference Trade Show November 18th through the 20th in New York City's Javits Center. i'll turn the call over to dick in a moment but before i do i want to mention we will be attending the international security conference trade show november 18th through the 20th in new york city's javits center We'll be showcasing an array of exciting new products, and if anyone is interested in attending, please contact me, and I will arrange to get you a guest pass. we'll be showcasing an array of exciting new products and if anyone is interested in attending please contact me and i will arrange to get you a guest pass In addition, we're actively planning our Investor Relations calendar for non-deal roadshow and conference attendance in the near future. in addition we're 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 who assist us in these types of events. In the coming weeks, we'll be attending the Robert Baird Global Industrial Conference in Chicago, the Stephens Annual Investment Conference in Nashville, the UBS Global Industrials and Transportation Conference in Palm Beach, Florida, the Melius Research Conference in New York City, and Needham's 28th Annual Growth Conference also in New York City. 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. Investor outreach is important to NAPCO, and I'd like to thank all those who assist us in these types of events. investor outreach is important to napco and i'd like to thank all those who assist us in these types of events In the coming weeks, we'll be attending the Robert Baird Global Industrial Conference in Chicago, the Stephens Annual Investment Conference in Nashville, the UBS Global Industrials and Transportation Conference in Palm Beach, Florida, the Melius Research Conference in New York City, and Needham's 28th Annual Growth Conference also in New York City. in the coming weeks we'll be attending the robert baird global industrial conference in chicago the stephens annual investment conference in nashville the ubs global industrials and transportation conference in palm beach florida the melius research conference in new york city and needham's 28th annual growth conference also in new york city With that out of the way, let me turn the call over to Dick Soloway, Chairman and CEO of NAPCO Security Technologies. 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. dick the floor is yours

Speaker 11: Thank you, Fran. Good morning, everyone, and welcome to our conference call. We appreciate you joining us as we review our fiscal first quarter 2026 performance. Our first quarter results, which reflect record Q1 revenue, continue the momentum we reported from Q4 of fiscal 2025. As a reflection of our continued focus on long-term growth and resiliency of our business, our recurring revenue model has continued its steady growth while maintaining its substantial profitability. We remain encouraged with our equipment revenue performance and our ability to weather the various microeconomic challenges we encountered in fiscal 2025 as we started to realize some of the benefits from our pricing strategies in response to tariff uncertainties. We have started fiscal 2026 with positive momentum and confidence in our ability to continue to execute on our plan to provide enhanced shareholder value and growth through the balance of the fiscal year. Thank you, Fran. thank you fran Good morning, everyone, and welcome to our conference call. good morning everyone and welcome to our conference call We appreciate you joining us as we review our fiscal first quarter 2026 performance. we appreciate you joining us as we review our fiscal first quarter 2026 performance Our first quarter results, which reflect record Q1 revenue, continue the momentum we reported from Q4 of fiscal 2025. our first quarter results which reflect record q1 revenue continue the momentum we reported from q4 of fiscal 2025 As a reflection of our continued focus on long-term growth and resiliency of our business, our recurring revenue model has continued its steady growth while maintaining its substantial profitability. as a reflection of our continued focus on long-term growth and resiliency of our business our recurring revenue model has continued its steady growth while maintaining its substantial profitability We remain encouraged with our equipment revenue performance and our ability to weather the various microeconomic challenges we encountered in fiscal 2025 as we started to realize some of the benefits from our pricing strategies in response to tariff uncertainties. we remain encouraged with our equipment revenue performance and our ability to weather the various microeconomic challenges we encountered in fiscal 2025 as we started to realize some of the benefits from our pricing strategies in response to tariff uncertainties We have started fiscal 2026 with positive momentum and confidence in our ability to continue to execute on our plan to provide enhanced shareholder value and growth through the balance of the fiscal year. we have started fiscal 2026 with positive momentum and confidence in our ability to continue to execute on our plan to provide enhanced shareholder value and growth through the balance of the fiscal year Now I'll 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 more detail, and then I will return to delve deeper into our strategies and market outlook. Kevin, the floor is yours. Now I'll 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. now i'll 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 more detail, and then I will return to delve deeper into our strategies and market outlook. following kevin's remarks our cfo andy vuono will go through the financials in more detail and then i will return to delve deeper into our strategies and market outlook Kevin, the floor is yours. kevin the floor is yours

Speaker 7: Thank you, Dick. Good morning, everyone. I'm pleased to share a few highlights from what was a very strong start to fiscal 2026. Total revenue for the quarter was $49.2 million, and that's a Q1 record, up 12% compared to the same period last year. Within those results, equipment sales reached $25.7 million, also up 12% year over year, demonstrating the continued strength of our relationships with our distributors and our dealers. This increase was also supported in part by the early impact of two price adjustments, one related to tariffs that was implemented at the end of April, and our normal annual price increase that took effect in mid-July. We did not see the full impact of those price adjustments in Q1, but we expect to see a larger benefit in the upcoming quarters of fiscal 2026. Thank you, Dick. thank you dick Good morning, everyone. good morning everyone I'm pleased to share a few highlights from what was a very strong start to fiscal 2026. i'm pleased to share a few highlights from what was a very strong start to fiscal 2026 Total revenue for the quarter was $49.2 million, and that's a Q1 record, up 12% compared to the same period last year. total revenue for the quarter was $49.2 million and that's a q1 record up 12% compared to the same period last year Within those results, equipment sales reached $25.7 million, also up 12% year over year, demonstrating the continued strength of our relationships with our distributors and our dealers. within those results equipment sales reached $25.7 million also up 12% year over year demonstrating the continued strength of our relationships with our distributors and our dealers This increase was also supported in part by the early impact of two price adjustments, one related to tariffs that was implemented at the end of April, and our normal annual price increase that took effect in mid-July. this increase was also supported in part by the early impact of two price adjustments one related to tariffs that was implemented at the end of april and our normal annual price increase that took effect in mid-july We did not see the full impact of those price adjustments in Q1, but we expect to see a larger benefit in the upcoming quarters of fiscal 2026. we did not see the full impact of those price adjustments in q1 but we expect to see a larger benefit in the upcoming quarters of fiscal 2026 Recurring revenue remained strong as well, growing 11% over last year's Q1 and maintaining an impressive gross margin of 90.3%, with StarLink Commercial Fire Radios continuing to be the key driver within that mix. Our equipment gross margin improved as well to 26%, representing a 300 basis point sequential increase from fiscal 2025's Q4. From a profitability standpoint, operating income increased 15% year over year. Net income rose 9% to a Q1 record of $12.2 million, and that represents 25% of revenue. Our adjusted EBITDA was up 21%, and we now have an adjusted EBITDA margin of 30.4%. Finally, cash continues to grow. It reached $106 million as of September 30, 2025. Cash from operations was $11.6 million, and of course, we have no debt. Recurring revenue remained strong as well, growing 11% over last year's Q1 and maintaining an impressive gross margin of 90.3%, with StarLink Commercial Fire Radios continuing to be the key driver within that mix. recurring revenue remained strong as well growing 11% over last year's q1 and maintaining an impressive gross margin of 90.3% with starlink commercial fire radios continuing to be the key driver within that mix Our equipment gross margin improved as well to 26%, representing a 300 basis point sequential increase from fiscal 2025's Q4. our equipment gross margin improved as well to 26% representing a 300 basis point sequential increase from fiscal 2025's q4 From a profitability standpoint, operating income increased 15% year over year. from a profitability standpoint operating income increased 15% year over year Net income rose 9% to a Q1 record of $12.2 million, and that represents 25% of revenue. net income rose 9% to a q1 record of $12.2 million and that represents 25% of revenue Our adjusted EBITDA was up 21%, and we now have an adjusted EBITDA margin of 30.4%. our adjusted ebitda was up 21% and we now have an adjusted ebitda margin of 30.4% Finally, cash continues to grow. finally cash continues to grow It reached $106 million as of September 30, 2025. it reached $106 million as of september 30 2025 Cash from operations was $11.6 million, and of course, we have no debt. cash from operations was $11.6 million and of course we have no debt As such, we are pleased to announce that we are continuing our dividend program, as our Board of Directors declared a quarterly dividend of $0.14 per share payable on January 2, 2026, to shareholders of record on December 12, 2025. Overall, this was a strong start to fiscal 2026, and I'm very proud of the team's execution across the board. With that, I will turn the call over to our CFO, Andy Vuono, for a deeper look at the financials. Andy. As such, we are pleased to announce that we are continuing our dividend program, as our Board of Directors declared a quarterly dividend of $0.14 per share payable on January 2, 2026, to shareholders of record on December 12, 2025. as such we are pleased to announce that we are continuing our dividend program as our board of directors declared a quarterly dividend of $0.14 per share payable on january 2 2026 to shareholders of record on december 12 2025 Overall, this was a strong start to fiscal 2026, and I'm very proud of the team's execution across the board. overall this was a strong start to fiscal 2026 and i'm very proud of the team's execution across the board With that, I will turn the call over to our CFO, Andy Vuono, for a deeper look at the financials. with that i will turn the call over to our cfo andy vuono for a deeper look at the financials Andy. andy

Speaker 3: Thank you, Kevin, and good morning, everyone. Net revenue for the three months ended September 30, 2025, increased 11.7% to $49.2 million as compared to $44 million for the same period a year ago. Recurring monthly service revenue continued its strong growth, increasing 11.6% in Q1 to $23.5 million as compared to $21.1 million for the same period last year. Our recurring revenue service now has a prospective annual run rate of approximately $95 million based on our October 2025 recurring service revenues. That compares to $94 million based on July 2025 recurring service revenues, which we reported back in August. These increases reflect the continued demand for our line of StarLink Fire Radios. Thank you, Kevin, and good morning, everyone. thank you kevin and good morning everyone Net revenue for the three months ended September 30, 2025, increased 11.7% to $49.2 million as compared to $44 million for the same period a year ago. net revenue for the three months ended september 30 2025 increased 11.7% to $49.2 million as compared to $44 million for the same period a year ago Recurring monthly service revenue continued its strong growth, increasing 11.6% in Q1 to $23.5 million as compared to $21.1 million for the same period last year. recurring monthly service revenue continued its strong growth increasing 11.6% in q1 to $23.5 million as compared to $21.1 million for the same period last year Our recurring revenue service now has a prospective annual run rate of approximately $95 million based on our October 2025 recurring service revenues. our recurring revenue service now has a prospective annual run rate of approximately $95 million based on our october 2025 recurring service revenues That compares to $94 million based on July 2025 recurring service revenues, which we reported back in August. that compares to $94 million based on july 2025 recurring service revenues which we reported back in august These increases reflect the continued demand for our line of StarLink Fire Radios. these increases reflect the continued demand for our line of starlink fire radios Equipment revenue increased 11.8% to $25.6 million as compared to $22.9 million for Q1 of fiscal 2025, which was a result of increased volume in our door locking product line and the impact of certain product pricing increases that went into effect in the quarter. Gross profit for the three months ended September 30, 2025, increased 13.1% to $27.8 million, with a gross margin of 56.6% as compared to $24.6 million, with a gross margin of 55.9% for the same period last year. Gross profit for recurring services revenue for the quarter increased 10.7% to $21.2 million, with a gross margin of 90.3% as compared to $19.2 million, with a gross margin of 91.1% last year. Gross profit for equipment revenues in Q1 increased 21.8% to $6.6 million, with a gross margin of 25.7% as compared to $5.4 million, with a gross margin of 23.6% last year. Equipment revenue increased 11.8% to $25.6 million as compared to $22.9 million for Q1 of fiscal 2025, which was a result of increased volume in our door locking product line and the impact of certain product pricing increases that went into effect in the quarter. equipment revenue increased 11.8% to $25.6 million as compared to $22.9 million for q1 of fiscal 2025 which was a result of increased volume in our door locking product line and the impact of certain product pricing increases that went into effect in the quarter Gross profit for the three months ended September 30, 2025, increased 13.1% to $27.8 million, with a gross margin of 56.6% as compared to $24.6 million, with a gross margin of 55.9% for the same period last year. gross profit for the three months ended september 30 2025 increased 13.1% to $27.8 million with a gross margin of 56.6% as compared to $24.6 million with a gross margin of 55.9% for the same period last year Gross profit for recurring services revenue for the quarter increased 10.7% to $21.2 million, with a gross margin of 90.3% as compared to $19.2 million, with a gross margin of 91.1% last year. gross profit for recurring services revenue for the quarter increased 10.7% to $21.2 million with a gross margin of 90.3% as compared to $19.2 million with a gross margin of 91.1% last year Gross profit for equipment revenues in Q1 increased 21.8% to $6.6 million, with a gross margin of 25.7% as compared to $5.4 million, with a gross margin of 23.6% last year. gross profit for equipment revenues in q1 increased 21.8% to $6.6 million with a gross margin of 25.7% as compared to $5.4 million with a gross margin of 23.6% last year The increase in equipment gross profit was primarily a result of product mix, as door locking products have a higher gross margin than intrusion. That, coupled with certain price increases and improved overhead absorption as a result of increased volume, contributed to the improvement in the equipment margins. R&D costs for the quarter increased 6% to $3.2 million, or 6.6% of revenue, as compared to $3.1 million or 6.9% of revenue for the same period a year ago. The increase for the three months primarily resulted from increased labor costs, which was partially offset by reduced consulting fees. Selling, general and administrative expenses for the quarter increased 13% to $11 million, or 22.3% of net revenue, as compared to $9.7 million or 22.1% of net revenue for the same period last year. The increase in equipment gross profit was primarily a result of product mix, as door locking products have a higher gross margin than intrusion. the increase in equipment gross profit was primarily a result of product mix as door locking products have a higher gross margin than intrusion That, coupled with certain price increases and improved overhead absorption as a result of increased volume, contributed to the improvement in the equipment margins. that coupled with certain price increases and improved overhead absorption as a result of increased volume contributed to the improvement in the equipment margins R&D costs for the quarter increased 6% to $3.2 million, or 6.6% of revenue, as compared to $3.1 million or 6.9% of revenue for the same period a year ago. r&d costs for the quarter increased 6% to $3.2 million or 6.6% of revenue as compared to $3.1 million or 6.9% of revenue for the same period a year ago The increase for the three months primarily resulted from increased labor costs, which was partially offset by reduced consulting fees. the increase for the three months primarily resulted from increased labor costs which was partially offset by reduced consulting fees Selling, general and administrative expenses for the quarter increased 13% to $11 million, or 22.3% of net revenue, as compared to $9.7 million or 22.1% of net revenue for the same period last year. selling general and administrative expenses for the quarter increased 13% to $11 million or 22.3% of net revenue as compared to $9.7 million or 22.1% of net revenue for the same period last year The increase in SG&A for the three months was primarily due to increased legal fees and sales commissions, partially offset by decreased bonuses and compensation and benefits. Operating income for the quarter increased 15.1% to $13.6 million, as compared to $11.9 million for the same period last year. Interest and other income for the three months decreased 13.5% to $1 million, as compared to $1.1 million last year. The decrease for the three months ended September 2025 was due to lower interest income from the company's cash and short-term investments as a result of lower interest rates. The provision for income taxes for the three months increased 36% to $655,000 to $2.5 million, with an effective tax rate of 16.9%. As compared to $1.8 million with an effective tax rate of 14% last year. The increase in SG&A for the three months was primarily due to increased legal fees and sales commissions, partially offset by decreased bonuses and compensation and benefits. the increase in sg&a for the three months was primarily due to increased legal fees and sales commissions partially offset by decreased bonuses and compensation and benefits Operating income for the quarter increased 15.1% to $13.6 million, as compared to $11.9 million for the same period last year. operating income for the quarter increased 15.1% to $13.6 million as compared to $11.9 million for the same period last year Interest and other income for the three months decreased 13.5% to $1 million, as compared to $1.1 million last year. interest and other income for the three months decreased 13.5% to $1 million as compared to $1.1 million last year The decrease for the three months ended September 2025 was due to lower interest income from the company's cash and short-term investments as a result of lower interest rates. the decrease for the three months ended september 2025 was due to lower interest income from the company's cash and short-term investments as a result of lower interest rates The provision for income taxes for the three months increased 36% to $655,000 to $2.5 million, with an effective tax rate of 16.9%. the provision for income taxes for the three months increased 36% to $655,000 to $2.5 million with an effective tax rate of 16.9% As compared to $1.8 million with an effective tax rate of 14% last year. as compared to $1.8 million with an effective tax rate of 14% last year The increase in the provision for three months was due to higher pre-tax income, as well as a larger portion of the company's taxable income being attributable to U.S. operations. The remeasurement of certain deferred tax liability is due to tax rate changes enacted in the One Big Beautiful Build Act in the current period. Net income for the quarter increased 8.8% to $12.2 million, or $0.34 per diluted share, as compared to $11.2 million, or $0.30 per diluted share for the same period last year, and represents 25% of net revenue. Adjusted EBITDA for the quarter increased 21.1% to $14.9 million, or $0.42 per diluted share, as compared to $12.3 million, or $0.33 per diluted share for the same period a year ago, and equates to an adjusted EBITDA margin of 30.4%. The increase in the provision for three months was due to higher pre-tax income, as well as a larger portion of the company's taxable income being attributable to U.S. operations. the increase in the provision for three months was due to higher pre-tax income as well as a larger portion of the company's taxable income being attributable to u.s operations The remeasurement of certain deferred tax liability is due to tax rate changes enacted in the One Big Beautiful Build Act in the current period. the remeasurement of certain deferred tax liability is due to tax rate changes enacted in the one big beautiful build act in the current period Net income for the quarter increased 8.8% to $12.2 million, or $0.34 per diluted share, as compared to $11.2 million, or $0.30 per diluted share for the same period last year, and represents 25% of net revenue. net income for the quarter increased 8.8% to $12.2 million or $0.34 per diluted share as compared to $11.2 million or $0.30 per diluted share for the same period last year and represents 25% of net revenue Adjusted EBITDA for the quarter increased 21.1% to $14.9 million, or $0.42 per diluted share, as compared to $12.3 million, or $0.33 per diluted share for the same period a year ago, and equates to an adjusted EBITDA margin of 30.4%. adjusted ebitda for the quarter increased 21.1% to $14.9 million or $0.42 per diluted share as compared to $12.3 million or $0.33 per diluted share for the same period a year ago and equates to an adjusted ebitda margin of 30.4% As it relates to our balance sheet, as of September 30, the company had $105.8 million in cash and cash equivalents and marketable securities, as compared to $99.1 million as of June 30th, 2025, a 6.6% sequential increase. The company had no debt as of September 30th, and cash provided by operating activities for the three months ended September 30th, 2025, was $11.6 million as compared to $12 million for the same period last year, a 3% decrease. Working capital, which is defined as current assets less current liabilities, was $159.2 million as of September 30th, as compared with working capital of $149.9 million on June 30th, 2025. Our current ratio was 7.5 to 1 on September 30th, as opposed to 7.3 to 1 on June 30th, 2025. Our CapEx for the quarter was $193,000 as compared to $680,000 in the prior year period. As it relates to our balance sheet, as of September 30, the company had $105.8 million in cash and cash equivalents and marketable securities, as compared to $99.1 million as of June 30th, 2025, a 6.6% sequential increase. as it relates to our balance sheet as of september 30 the company had $105.8 million in cash and cash equivalents and marketable securities as compared to $99.1 million as of june 30th 2025 a 6.6% sequential increase The company had no debt as of September 30th, and cash provided by operating activities for the three months ended September 30th, 2025, was $11.6 million as compared to $12 million for the same period last year, a 3% decrease. the company had no debt as of september 30th and cash provided by operating activities for the three months ended september 30th 2025 was $11.6 million as compared to $12 million for the same period last year a 3% decrease Working capital, which is defined as current assets less current liabilities, was $159.2 million as of September 30th, as compared with working capital of $149.9 million on June 30th, 2025. working capital which is defined as current assets less current liabilities was $159.2 million as of september 30th as compared with working capital of $149.9 million on june 30th 2025 Our current ratio was 7.5 to 1 on September 30th, as opposed to 7.3 to 1 on June 30th, 2025. our current ratio was 7.5 to 1 on september 30th as opposed to 7.3 to 1 on june 30th 2025 Our CapEx for the quarter was $193,000 as compared to $680,000 in the prior year period. our capex for the quarter was $193,000 as compared to $680,000 in the prior year period That concludes my formal remarks, and I'd like to return the call back to Dick. That concludes my formal remarks, and I'd like to return the call back to Dick. that concludes my formal remarks and i'd like to return the call back to dick

Speaker 11: Thanks, Andy. Let me close with a few reflections on where we've been and where we're headed. This quarter, NAPCO once again demonstrated the strength and resilience of our business model. We remain focused on delivering lasting value to our customers, partners, and shareholders, and the results speak for themselves. Recurring revenue now represents nearly half of our total sales, supported by a sustained 90%+ gross margin. This steady high-margin income continues to drive consistent cash generation and reinvestment in innovation and growth. A key contributor remains our StarLink Fire Radio platform, which has become the industry standard for commercial fire communications. Operationally, our team is executing exceptionally well. We manage inventory tightly, continue to invest in product development, compliance, and infrastructure, and return capital through dividends, all while maintaining a debt-free balance sheet. Looking ahead, we remain optimistic. Market dynamics continue to evolve, but we're not standing still. Thanks, Andy. thanks andy Let me close with a few reflections on where we've been and where we're headed. let me close with a few reflections on where we've been and where we're headed This quarter, NAPCO once again demonstrated the strength and resilience of our business model. this quarter napco once again demonstrated the strength and resilience of our business model We remain focused on delivering lasting value to our customers, partners, and shareholders, and the results speak for themselves. we remain focused on delivering lasting value to our customers partners and shareholders and the results speak for themselves Recurring revenue now represents nearly half of our total sales, supported by a sustained 90%+ gross margin. recurring revenue now represents nearly half of our total sales supported by a sustained 90%+ gross margin This steady high-margin income continues to drive consistent cash generation and reinvestment in innovation and growth. this steady high-margin income continues to drive consistent cash generation and reinvestment in innovation and growth A key contributor remains our StarLink Fire Radio platform, which has become the industry standard for commercial fire communications. a key contributor remains our starlink fire radio platform which has become the industry standard for commercial fire communications Operationally, our team is executing exceptionally well. operationally our team is executing exceptionally well We manage inventory tightly, continue to invest in product development, compliance, and infrastructure, and return capital through dividends, all while maintaining a debt-free balance sheet. we manage inventory tightly continue to invest in product development compliance and infrastructure and return capital through dividends all while maintaining a debt-free balance sheet Looking ahead, we remain optimistic. looking ahead we remain optimistic Market dynamics continue to evolve, but we're not standing still. market dynamics continue to evolve but we're not standing still We've implemented pricing actions, diversified our distribution base, and invested in automation and enhancements to the StarLink platform aimed at sustained growth and protecting margins. Our strong balance sheet provides flexibility for both organic investments and potential strategic acquisitions while keeping us committed to shareholder returns. One area where NAPCO continues to make real impact is school security, one of the most critical challenges of our time. We're proud to partner with school districts nationwide, providing integrated solutions that include our Trilogy and ArchiTech lock and enterprise-scale access control systems. These platforms are secure, scalable, and aligned with the Partner Alliance for Safer Schools, or PASS program standards, giving educators and administrators solutions they can trust. What truly differentiates NAPCO is our ability to integrate locking, access control, and alarm technologies into a unified, interoperable platform, protecting students and staff every day while driving future growth. We've implemented pricing actions, diversified our distribution base, and invested in automation and enhancements to the StarLink platform aimed at sustained growth and protecting margins. we've implemented pricing actions diversified our distribution base and invested in automation and enhancements to the starlink platform aimed at sustained growth and protecting margins Our strong balance sheet provides flexibility for both organic investments and potential strategic acquisitions while keeping us committed to shareholder returns. our strong balance sheet provides flexibility for both organic investments and potential strategic acquisitions while keeping us committed to shareholder returns One area where NAPCO continues to make real impact is school security, one of the most critical challenges of our time. one area where napco continues to make real impact is school security one of the most critical challenges of our time We're proud to partner with school districts nationwide, providing integrated solutions that include our Trilogy and ArchiTech lock and enterprise-scale access control systems. we're proud to partner with school districts nationwide providing integrated solutions that include our trilogy and architech lock and enterprise-scale access control systems These platforms are secure, scalable, and aligned with the Partner Alliance for Safer Schools, or PASS program standards, giving educators and administrators solutions they can trust. these platforms are secure scalable and aligned with the partner alliance for safer schools or pass program standards giving educators and administrators solutions they can trust What truly differentiates NAPCO is our ability to integrate locking, access control, and alarm technologies into a unified, interoperable platform, protecting students and staff every day while driving future growth. what truly differentiates napco is our ability to integrate locking access control and alarm technologies into a unified interoperable platform protecting students and staff every day while driving future growth At the same time, we continue to expand recurring revenue opportunities through innovation. A great example is our MVP Cloud-Based Access Control platform, which integrates seamlessly with our locking hardware. MVP introduces a new subscription-based revenue stream for NAPCO and our dealers, and it's available in two configurations: MVP Access, an enterprise-grade solution supporting unlimited users, and MVP EZ, a mobile-first version for locksmiths and smaller facilities. We believe MVP has the potential to be a game changer, extending our leadership into hosted access control and reinforcing our strategy of pairing innovative hardware with cloud-based services to drive higher margin recurring revenue. Beyond education, our AlarmLock and Marks hardware lines continue to gain traction in healthcare, retail, and multi-dwelling applications, as well as airport infrastructure upgrades. At the same time, we continue to expand recurring revenue opportunities through innovation. at the same time we continue to expand recurring revenue opportunities through innovation A great example is our MVP Cloud-Based Access Control platform, which integrates seamlessly with our locking hardware. a great example is our mvp cloud-based access control platform which integrates seamlessly with our locking hardware MVP introduces a new subscription-based revenue stream for NAPCO and our dealers, and it's available in two configurations: MVP Access, an enterprise-grade solution supporting unlimited users, and MVP EZ, a mobile-first version for locksmiths and smaller facilities. mvp introduces a new subscription-based revenue stream for napco and our dealers and it's available in two configurations mvp access an enterprise-grade solution supporting unlimited users and mvp ez a mobile-first version for locksmiths and smaller facilities We believe MVP has the potential to be a game changer, extending our leadership into hosted access control and reinforcing our strategy of pairing innovative hardware with cloud-based services to drive higher margin recurring revenue. we believe mvp has the potential to be a game changer extending our leadership into hosted access control and reinforcing our strategy of pairing innovative hardware with cloud-based services to drive higher margin recurring revenue Beyond education, our AlarmLock and Marks hardware lines continue to gain traction in healthcare, retail, and multi-dwelling applications, as well as airport infrastructure upgrades. beyond education our alarmlock and marks hardware lines continue to gain traction in healthcare retail and multi-dwelling applications as well as airport infrastructure upgrades As the transition away from legacy copper phone lines accelerates, our StarLink Radios, which operate on both AT&T and Verizon networks, and now also T-Mobile, are well positioned to capture additional market share across millions of commercial and residential buildings. Operationally, our Dominican Republic manufacturing facility continues to be a key competitive advantage, offering cost efficiency, stable logistics, and low tariff exposure, a benefit versus many competitors manufacturing in higher tariff regions. While external market and regulatory conditions remain fluid, we're focused on what we can control, driving innovation, executing with discipline, and growing our base of recurring revenue. We're confident that our strong net income, adjusted EBITDA, and cash flow trends will continue to strengthen. In summary, we have begun fiscal 2026 with solid momentum, a clear focus, a stronger financial foundation than ever before. As the transition away from legacy copper phone lines accelerates, our StarLink Radios, which operate on both AT&T and Verizon networks, and now also T-Mobile, are well positioned to capture additional market share across millions of commercial and residential buildings. as the transition away from legacy copper phone lines accelerates our starlink radios which operate on both at&t and verizon networks and now also t-mobile are well positioned to capture additional market share across millions of commercial and residential buildings Operationally, our Dominican Republic manufacturing facility continues to be a key competitive advantage, offering cost efficiency, stable logistics, and low tariff exposure, a benefit versus many competitors manufacturing in higher tariff regions. operationally our dominican republic manufacturing facility continues to be a key competitive advantage offering cost efficiency stable logistics and low tariff exposure a benefit versus many competitors manufacturing in higher tariff regions While external market and regulatory conditions remain fluid, we're focused on what we can control, driving innovation, executing with discipline, and growing our base of recurring revenue. while external market and regulatory conditions remain fluid we're focused on what we can control driving innovation executing with discipline and growing our base of recurring revenue We're confident that our strong net income, adjusted EBITDA, and cash flow trends will continue to strengthen. we're confident that our strong net income adjusted ebitda and cash flow trends will continue to strengthen In summary, we have begun fiscal 2026 with solid momentum, a clear focus, a stronger financial foundation than ever before. in summary we have begun fiscal 2026 with solid momentum a clear focus a stronger financial foundation than ever before I'm incredibly proud of our team, what our team has accomplished, and excited about the opportunities ahead. Thank you all for your continued support and confidence in NAPCO. Our formal remarks are now concluded. We would like to open the call for the Q&A session. Operator, please proceed. I'm incredibly proud of our team, what our team has accomplished, and excited about the opportunities ahead. i'm incredibly proud of our team what our team has accomplished and excited about the opportunities ahead Thank you all for your continued support and confidence in NAPCO. thank you all for your continued support and confidence in napco Our formal remarks are now concluded. our formal remarks are now concluded We would like to open the call for the Q&A session. we would like to open the call for the q&a session Operator, please proceed. operator please proceed

Speaker 9: Thank you, Richard. So, ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. Now, let's begin. Your first question comes from Matt Summerville with D.A. Davidson. Go ahead, Matt. Thank you, Richard. thank you richard So, ladies and gentlemen, we will now begin the question-and-answer session. so ladies and gentlemen we will now begin the question-and-answer session Should you have a question, please press the star followed by the one on your touch-tone phone. should you have a question please press the star followed by the one on your touch-tone phone You will hear a prompt that your hand has been raised. you will hear a prompt that your hand has been raised Should you wish to decline from the polling process, please press star followed by the two. should you wish to decline from the polling process please press star followed by the two If you're using a speakerphone, please lift the handset before pressing any keys. if you're using a speakerphone please lift the handset before pressing any keys Now, let's begin. now let's begin your Your first question comes from Matt Summerville with D.A. your first question comes from matt summerville with d.a Davidson. davidson Go ahead, Matt. go ahead matt

Speaker 2: Thanks. A couple of questions. First on locking. Can you talk about what % of your locking mix today is represented by that networked product? Can you also discuss how your MVP technology differs from other major locking players in the space today? I have a follow-up. Thanks. thanks A couple of questions. a couple of questions First on locking. first on locking Can you talk about what % of your locking mix today is represented by that networked product? can you talk about what % of your locking mix today is represented by that networked product Can you also discuss how your MVP technology differs from other major locking players in the space today? can you also discuss how your mvp technology differs from other major locking players in the space today I have a follow-up. i have a follow-up

Speaker 7: I'll answer the first part, and I guess Dick could answer the second part. The first part, most of our sales in locking are the traditional products. MVP is just starting out. It's gaining some traction. We're going to show it again at ISC East, which is in a couple of weeks. We're going to show upgrades to what we showed at ISC West back in April. The expectation is once we show that and start shipping that, we'll start to gain more traction in the new stuff. The old stuff, the traditional stuff, is powerful stuff. Locking is 66% of equipment sales. That includes all the categories we mentioned in our prepared remarks, including schools and lots of things. We don't announce all the school wins. Some schools, sometimes they don't want us to talk about it. Believe me, they're there. I'll answer the first part, and I guess Dick could answer the second part. i'll answer the first part and i guess dick could answer the second part The first part, most of our sales in locking are the traditional products. the first part most of our sales in locking are the traditional products MVP is just starting out. mvp is just starting out It's gaining some traction. it's gaining some traction We're going to show it again at ISC East, which is in a couple of weeks. we're going to show it again at isc east which is in a couple of weeks We're going to show upgrades to what we showed at ISC West back in April. we're going to show upgrades to what we showed at isc west back in april The expectation is once we show that and start shipping that, we'll start to gain more traction in the new stuff. the expectation is once we show that and start shipping that we'll start to gain more traction in the new stuff The old stuff, the traditional stuff, is powerful stuff. the old stuff the traditional stuff is powerful stuff Locking is 66% of equipment sales. locking is 66% of equipment sales That includes all the categories we mentioned in our prepared remarks, including schools and lots of things. that includes all the categories we mentioned in our prepared remarks including schools and lots of things We don't announce all the school wins. we don't announce all the school wins Some schools, sometimes they don't want us to talk about it. some schools sometimes they don't want us to talk about it Believe me, they're there. believe me they're there That's part and parcel of why locking was so strong. It was very strong in this quarter, and the expectation is it'll continue to be strong. Now, Dick, maybe you can comment on why our MVP is different than anybody's product out there. That's part and parcel of why locking was so strong. that's part and parcel of why locking was so strong It was very strong in this quarter, and the expectation is it'll continue to be strong. it was very strong in this quarter and the expectation is it'll continue to be strong Now, Dick, maybe you can comment on why our MVP is different than anybody's product out there. now dick maybe you can comment on why our mvp is different than anybody's product out there

Speaker 11: Sure. The MVP product that we introduced is a new recurring revenue generator for locksmiths as well as system integrators. What's interesting about it is that we have the totally integrated system because we manufacture the locks. We've been gold-standard lock manufacturers under the Trilogy brand for many, many years. It's considered the best locking product. Now we've added the radio aspect to it, which communicates to our cloud. The cloud is owned by us. We built it. We're a total integrated manufacturer, which allows us to add a lot of extra functionality to the concept of locking with a recurring revenue tail to it. If you're an administrator in a hospital, you're in charge of the security division, you can get instantaneous information with all the equipment up in the cloud. Sure. sure The MVP product that we introduced is a new recurring revenue generator for locksmiths as well as system integrators. the mvp product that we introduced is a new recurring revenue generator for locksmiths as well as system integrators What's interesting about it is that we have the totally integrated system because we manufacture the locks. what's interesting about it is that we have the totally integrated system because we manufacture the locks We've been gold-standard lock manufacturers under the Trilogy brand for many, many years. we've been gold-standard lock manufacturers under the trilogy brand for many many years It's considered the best locking product. it's considered the best locking product Now we've added the radio aspect to it, which communicates to our cloud. now we've added the radio aspect to it which communicates to our cloud The cloud is owned by us. the cloud is owned by us We built it. we built it We're a total integrated manufacturer, which allows us to add a lot of extra functionality to the concept of locking with a recurring revenue tail to it. we're a total integrated manufacturer which allows us to add a lot of extra functionality to the concept of locking with a recurring revenue tail to it If you're an administrator in a hospital, you're in charge of the security division, you can get instantaneous information with all the equipment up in the cloud. if you're an administrator in a hospital you're in charge of the security division you can get instantaneous information with all the equipment up in the cloud No longer does it have to be on the site, and where the dealer has to go back and make upgrades to the software, it can all be done in the cloud, and we do it all for the dealer. We charge $3 a door for each door, and there are millions and millions of doors out there. While we're very successful with the fire alarms and the burglar alarm radio products, which generate recurring revenue, there's millions of those types of buildings where there's one radio per building usually. In this case, you could have 15, 20, 100 doors generating $3 per door with all these services. It's a totally integrated hardware-software package. We made it in two different ways. One is for basic, smaller offices, doctor's offices. You have six doors, and that's the MVP EZ. No longer does it have to be on the site, and where the dealer has to go back and make upgrades to the software, it can all be done in the cloud, and we do it all for the dealer. no longer does it have to be on the site and where the dealer has to go back and make upgrades to the software it can all be done in the cloud and we do it all for the dealer We charge $3 a door for each door, and there are millions and millions of doors out there. we charge $3 a door for each door and there are millions and millions of doors out there While we're very successful with the fire alarms and the burglar alarm radio products, which generate recurring revenue, there's millions of those types of buildings where there's one radio per building usually. while we're very successful with the fire alarms and the burglar alarm radio products which generate recurring revenue there's millions of those types of buildings where there's one radio per building usually In this case, you could have 15, 20, 100 doors generating $3 per door with all these services. in this case you could have 15 20 100 doors generating $3 per door with all these services It's a totally integrated hardware-software package. it's a totally integrated hardware-software package We made it in two different ways. we made it in two different ways One is for basic, smaller offices, doctor's offices. one is for basic smaller offices doctor's offices You have six doors, and that's the MVP EZ. you have six doors and that's the mvp ez The full-blown access control cloud system is for system integrators to do larger jobs. We can control our own destiny, unlike a lot of our competitors, which have to get locks from one manufacturer, then they do the software themselves or vice versa. We do it all in-house. We have an engineering staff that develops everything from soup to nuts, from the hardware all the way up to the middle and software of these systems. It makes us very unique. It's going to be very powerful in the future. It's a way for dealers and locksmiths to build equity in their business now by getting recurring revenue from each store where they install the locks. The full-blown access control cloud system is for system integrators to do larger jobs. the full-blown access control cloud system is for system integrators to do larger jobs We can control our own destiny, unlike a lot of our competitors, which have to get locks from one manufacturer, then they do the software themselves or vice versa. we can control our own destiny unlike a lot of our competitors which have to get locks from one manufacturer then they do the software themselves or vice versa We do it all in-house. we do it all in-house We have an engineering staff that develops everything from soup to nuts, from the hardware all the way up to the middle and software of these systems. we have an engineering staff that develops everything from soup to nuts from the hardware all the way up to the middle and software of these systems It makes us very unique. it makes us very unique It's going to be very powerful in the future. it's going to be very powerful in the future It's a way for dealers and locksmiths to build equity in their business now by getting recurring revenue from each store where they install the locks. it's a way for dealers and locksmiths to build equity in their business now by getting recurring revenue from each store where they install the locks

Speaker 2: Thank you for that color. Just as a follow-up, can you parse out a bit in the fiscal first quarter how much of the hardware revenue growth would have been price versus volume? I'm trying to get a feel for how much price has yet to be realized and any high-level thoughts as to how the remainder of the fiscal year cadences out would be beneficial. Thanks. Thank you for that color. thank you for that color Just as a follow-up, can you parse out a bit in the fiscal first quarter how much of the hardware revenue growth would have been price versus volume? just as a follow-up can you parse out a bit in the fiscal first quarter how much of the hardware revenue growth would have been price versus volume I'm trying to get a feel for how much price has yet to be realized and any high-level thoughts as to how the remainder of the fiscal year cadences out would be beneficial. i'm trying to get a feel for how much price has yet to be realized and any high-level thoughts as to how the remainder of the fiscal year cadences out would be beneficial Thanks. thanks

Speaker 7: It is a combination, Matt. As I said earlier, we did not get the full benefit of the price, but we will as the year progresses. Andy could give us some color of kind of what it was in Q1, but we know that there is a lot more to come from the benefit of the pricing. Andy, you want to comment on it? It is a combination, Matt. it is a combination matt As I said earlier, we did not get the full benefit of the price, but we will as the year progresses. as i said earlier we did not get the full benefit of the price but we will as the year progresses Andy could give us some color of kind of what it was in Q1, but we know that there is a lot more to come from the benefit of the pricing. andy could give us some color of kind of what it was in q1 but we know that there is a lot more to come from the benefit of the pricing Andy, you want to comment on it? andy you want to comment on it

Speaker 3: Sure. Matt, so in response to that, of the approximate 12% increase in equipment revenue for the period, our preliminary analysis has indicated approximately 60% of that is related to volume increases, and 40% is tied to the pricing increases that went into effect in Q1. Sure. sure Matt, so in response to that, of the approximate 12% increase in equipment revenue for the period, our preliminary analysis has indicated approximately 60% of that is related to volume increases, and 40% is tied to the pricing increases that went into effect in Q1. matt so in response to that of the approximate 12% increase in equipment revenue for the period our preliminary analysis has indicated approximately 60% of that is related to volume increases and 40% is tied to the pricing increases that went into effect in q1

Speaker 9: Okay. Thank you, Matt. Your next question comes from Jim Ricchiuti with Needham and Co. Go ahead, Jim. Okay. okay Thank you, Matt. thank you matt Your next question comes from Jim Ricchiuti with Needham and Co. your next question comes from jim ricchiuti with needham and co Go ahead, Jim. go ahead jim

Speaker 6: Thank you. Good morning. Maybe a follow-up to that. I know this information is going to be in the queue later today, but can you give us a sense as to what the overall growth was in the door locking products business and whether, when you talk about the early pricing benefits, you saw some benefit in that part of the business as opposed to the radio business? Thank you. thank you Good morning. good morning Maybe a follow-up to that. maybe a follow-up to that I know this information is going to be in the queue later today, but can you give us a sense as to what the overall growth was in the door locking products business and whether, when you talk about the early pricing benefits, you saw some benefit in that part of the business as opposed to the radio business? i know this information is going to be in the queue later today but can you give us a sense as to what the overall growth was in the door locking products business and whether when you talk about the early pricing benefits you saw some benefit in that part of the business as opposed to the radio business

Speaker 7: Locking, and you'll see this in the queue that's going to be filed today, a little later today. Locking for Q1 was $17,083,000. $17,083. Last year's Q1, it was $13,854,000. That's a substantial increase. Locking was very strong. Some of it did come from orders that were placed by distributors trying to beat the price increases. We carried a backlog of several million into Q1 from Q4, but a lot of it was not that. It was really some of it, guys going ahead trying to beat the rush, but a lot of it is locking being strong. This was one of the strongest locking quarters, maybe the strongest we've ever had. It was right up there. The expectation is it's going to continue. Locking, and you'll see this in the queue that's going to be filed today, a little later today. locking and you'll see this in the queue that's going to be filed today a little later today Locking for Q1 was $17,083,000. $17,083. locking for q1 was $17,083,000 $17,083 Last year's Q1, it was $13,854,000. last year's q1 it was $13,854,000 That's a substantial increase. that's a substantial increase Locking was very strong. locking was very strong Some of it did come from orders that were placed by distributors trying to beat the price increases. some of it did come from orders that were placed by distributors trying to beat the price increases We carried a backlog of several million into Q1 from Q4, but a lot of it was not that. we carried a backlog of several million into q1 from q4 but a lot of it was not that It was really some of it, guys going ahead trying to beat the rush, but a lot of it is locking being strong. it was really some of it guys going ahead trying to beat the rush but a lot of it is locking being strong This was one of the strongest locking quarters, maybe the strongest we've ever had. this was one of the strongest locking quarters maybe the strongest we've ever had It was right up there. it was right up there The expectation is it's going to continue. the expectation is it's going to continue We don't have situations in the channel where guys are loaded up, and presumably they're not going to skip when we come to them this quarter, Q2. You never know with distributors. They behave funny sometimes, but the channel is good. The sell-through is strong. The expectations are all very good in the locking segment. We don't have situations in the channel where guys are loaded up, and presumably they're not going to skip when we come to them this quarter, Q2. we don't have situations in the channel where guys are loaded up and presumably they're not going to skip when we come to them this quarter q2 You never know with distributors. you never know with distributors They behave funny sometimes, but the channel is good. they behave funny sometimes but the channel is good The sell-through is strong. the sell-through is strong The expectations are all very good in the locking segment. the expectations are all very good in the locking segment

Speaker 6: Helpful, Kevin. I wonder, maybe just to the comment you just made, just the overall tone of demand, what you're hearing from some of your channel partners. You alluded to a good sell-through that you're seeing on the door locking side, maybe on both parts of the hardware business. Any color you could provide in terms of what you're seeing, hearing, sell-through stats or otherwise? Thank you. Helpful, Kevin. helpful kevin I wonder, maybe just to the comment you just made, just the overall tone of demand, what you're hearing from some of your channel partners. i wonder maybe just to the comment you just made just the overall tone of demand what you're hearing from some of your channel partners You alluded to a good sell-through that you're seeing on the door locking side, maybe on both parts of the hardware business. you alluded to a good sell-through that you're seeing on the door locking side maybe on both parts of the hardware business Any color you could provide in terms of what you're seeing, hearing, sell-through stats or otherwise? any color you could provide in terms of what you're seeing hearing sell-through stats or otherwise Thank you. thank you

Speaker 7: Right. Sell-through stats, this is as of Q1. Can't really comment on what's Q2, which is a month old. For Q1, we saw very good sell-through stats for all of our locking partners. We have two locking companies, and it was good on both. On the intrusion side, we saw tremendous improvement there too. I look at this very closely every month. I was happy with what I'm seeing. I always caution because I never know what distributors are going to do. It's their year-end in December. Who knows what's going to happen? If we're going to base it solely on what stats we're seeing, and that's their inventory levels and the sell-through, we should be in good shape in both areas, locking and intrusion. Right. right Sell-through stats, this is as of Q1. sell-through stats this is as of q1 Can't really comment on what's Q2, which is a month old. can't really comment on what's q2 which is a month old For Q1, we saw very good sell-through stats for all of our locking partners. for q1 we saw very good sell-through stats for all of our locking partners We have two locking companies, and it was good on both. we have two locking companies and it was good on both On the intrusion side, we saw tremendous improvement there too. on the intrusion side we saw tremendous improvement there too I look at this very closely every month. i look at this very closely every month I was happy with what I'm seeing. i was happy with what i'm seeing I always caution because I never know what distributors are going to do. i always caution because i never know what distributors are going to do It's their year-end in December. it's their year-end in december Who knows what's going to happen? who knows what's going to happen If we're going to base it solely on what stats we're seeing, and that's their inventory levels and the sell-through, we should be in good shape in both areas, locking and intrusion. if we're going to base it solely on what stats we're seeing and that's their inventory levels and the sell-through we should be in good shape in both areas locking and intrusion

Speaker 6: Thank you. Thank you. thank you

Speaker 7: Thanks, Jim. Thanks, Jim. thanks jim

Speaker 9: Okay. Yes. Thank you, Kevin and Jim. Your next question comes from Peter Costa with Mizuho. Go ahead, Peter. Okay. okay Yes. yes Thank you, Kevin and Jim. thank you kevin and jim Your next question comes from Peter Costa with Mizuho. your next question comes from peter costa with mizuho Go ahead, Peter. go ahead peter

Speaker 5: Hey, good morning, guys. I'd like to maybe dig a little bit further into the service margins. That 80 basis point year-over-year decline was a little bit more than expected. What's kind of causing that pressure? Is there anything on underlying radio margins, an acceleration in MVP? Anything there? Thank you. Hey, good morning, guys. hey good morning guys I'd like to maybe dig a little bit further into the service margins. i'd like to maybe dig a little bit further into the service margins That 80 basis point year-over-year decline was a little bit more than expected. that 80 basis point year-over-year decline was a little bit more than expected What's kind of causing that pressure? what's kind of causing that pressure Is there anything on underlying radio margins, an acceleration in MVP? is there anything on underlying radio margins an acceleration in mvp Anything there? anything there Thank you. thank you

Speaker 7: Peter, there were really two factors that affected the margin for the recurring, which still is tremendous. 90.3% is still tremendous. It did go down from a little bit over 91%. Two factors. Factor number one, we now have a triple carrier radio that introduces T-Mobile into the mix. We have to buy minutes to support that. We have not really charged anybody for that, and even though it is not a lot of money, it did move the needle a little bit. The expectation is we will increase our recurring radio charge to cover that. It is not going to be a lot, but it might be enough to move the needle back to where it was. That is one factor. Another factor is we are gaining a lot of business from some very large dealers. Peter, there were really two factors that affected the margin for the recurring, which still is tremendous. 90.3% is still tremendous. peter there were really two factors that affected the margin for the recurring which still is tremendous 90.3% is still tremendous It did go down from a little bit over 91%. it did go down from a little bit over 91% Two factors. two factors Factor number one, we now have a triple carrier radio that introduces T-Mobile into the mix. factor number one we now have a triple carrier radio that introduces t-mobile into the mix We have to buy minutes to support that. we have to buy minutes to support that We have not really charged anybody for that, and even though it is not a lot of money, it did move the needle a little bit. we have not really charged anybody for that and even though it is not a lot of money it did move the needle a little bit The expectation is we will increase our recurring radio charge to cover that. It is not going to be a lot, but it might be enough to move the needle back to where it was. That is one factor. the expectation is we will increase our recurring radio charge to cover that. it is not going to be a lot but it might be enough to move the needle back to where it was. that is one factor Another factor is we are gaining a lot of business from some very large dealers. another factor is we are gaining a lot of business from some very large dealers I do not want to mention any names, but there are large dealers out there. One in particular has been buying a lot of the smaller dealers. It seems like they do an acquisition every week. As a result of that, we are picking up more radio business, and we will be picking up more in the future because there is this consolidation, if you want to call it that, from the big guy buying up some of the smaller guys. The radio segment has all moved in our favor because the big guy loves our fire radio, and when he buys a smaller dealer, he is going to make sure that the smaller dealer's customers get our StarLink Fire Radio if they were not using it. Maybe they were using it, but if they were not, opportunity for us to pick up even more share. I do not want to mention any names, but there are large dealers out there. i do not want to mention any names but there are large dealers out there One in particular has been buying a lot of the smaller dealers. one in particular has been buying a lot of the smaller dealers It seems like they do an acquisition every week. it seems like they do an acquisition every week As a result of that, we are picking up more radio business, and we will be picking up more in the future because there is this consolidation, if you want to call it that, from the big guy buying up some of the smaller guys. as a result of that we are picking up more radio business and we will be picking up more in the future because there is this consolidation if you want to call it that from the big guy buying up some of the smaller guys The radio segment has all moved in our favor because the big guy loves our fire radio, and when he buys a smaller dealer, he is going to make sure that the smaller dealer's customers get our StarLink Fire Radio if they were not using it. the radio segment has all moved in our favor because the big guy loves our fire radio and when he buys a smaller dealer, he is going to make sure that the smaller dealer's customers get our starlink fire radio if they were not using it Maybe they were using it, but if they were not, opportunity for us to pick up even more share. maybe they were using it but if they were not opportunity for us to pick up even more share The one negative of this, and it is mostly positive, is a big guy can command a little bit of a better price. Maybe the big guy pays a dollar less than what the smaller guy is paying. We honor that. We are happy to get more business. If a guy was paying $8 and we have to lower it to $7, just to use an example, we will do that. We will do that all day long because we are picking up more radio recurring revenue business. That too could move the needle a little bit. Absent of that, it is all the same powerful margins that you have been seeing. The one negative of this, and it is mostly positive, is a big guy can command a little bit of a better price. the one negative of this and it is mostly positive is a big guy can command a little bit of a better price Maybe the big guy pays a dollar less than what the smaller guy is paying. maybe the big guy pays a dollar less than what the smaller guy is paying We honor that. We are happy to get more business. we honor that. we are happy to get more business If a guy was paying $8 and we have to lower it to $7, just to use an example, we will do that. We will do that all day long because we are picking up more radio recurring revenue business. if a guy was paying $8 and we have to lower it to $7 just to use an example we will do that. we will do that all day long because we are picking up more radio recurring revenue business That too could move the needle a little bit. that too could move the needle a little bit Absent of that, it is all the same powerful margins that you have been seeing. absent of that, it is all the same powerful margins that you have been seeing

Speaker 11: Let me add. Let me add. let me add

Speaker 5: That makes a lot of sense. That makes a lot of sense. that makes a lot of sense

Speaker 11: Let me add something else to that. I network a lot with the dealers, and some of the dealers in certain parts of the country have told me that T-Mobile is more reliable on their cell phones than the other services. Evidently, the towers are different or the way the reception is for the radios on their towers is different. By adding T-Mobile to our mix of AT&T and Verizon, now we have all the major carriers, and the areas where T-Mobile is the strongest in pickup and communications is now in our radios. We are going to pick up market share, additional market share with a more stable radio network with T-Mobile. That is going to help us a lot. Overall, it should be a net positive having T-Mobile as part of our mix. Let me add something else to that. let me add something else to that I network a lot with the dealers, and some of the dealers in certain parts of the country have told me that T-Mobile is more reliable on their cell phones than the other services. i network a lot with the dealers and some of the dealers in certain parts of the country have told me that t-mobile is more reliable on their cell phones than the other services Evidently, the towers are different or the way the reception is for the radios on their towers is different. evidently the towers are different or the way the reception is for the radios on their towers is different By adding T-Mobile to our mix of AT&T and Verizon, now we have all the major carriers, and the areas where T-Mobile is the strongest in pickup and communications is now in our radios. by adding t-mobile to our mix of at&t and verizon now we have all the major carriers and the areas where t-mobile is the strongest in pickup and communications is now in our radios We are going to pick up market share, additional market share with a more stable radio network with T-Mobile. we are going to pick up market share additional market share with a more stable radio network with t-mobile That is going to help us a lot. that is going to help us a lot Overall, it should be a net positive having T-Mobile as part of our mix. overall it should be a net positive having t-mobile as part of our mix

Speaker 5: Awesome. Yeah. Thank you. Maybe just thinking about the price on the radio, I think that's kind of intended to be on the RSR. That seems like a pretty big deal. How would you kind of approach that? Is that just the entire installed base would get a little bit of price, just incremental sales, or just the T-Mobile radios? How would you tackle that? Awesome. awesome Yeah. yeah Thank you. thank you Maybe just thinking about the price on the radio, I think that's kind of intended to be on the RSR. maybe just thinking about the price on the radio i think that's kind of intended to be on the rsr That seems like a pretty big deal. that seems like a pretty big deal How would you kind of approach that? how would you kind of approach that Is that just the entire installed base would get a little bit of price, just incremental sales, or just the T-Mobile radios? is that just the entire installed base would get a little bit of price just incremental sales or just the t-mobile radios How would you tackle that? how would you tackle that

Speaker 7: If it's a triple carrier, it's going to be in everybody's radio. To cover it, everybody would probably get a little bit of an increase. Not much. Believe me, we don't want to mess with a very good formula. I like the shareholders. I want to keep that 91% margin as well. If we have to raise it a little bit to keep it up there, we're going to do that. We're looking at that now, Peter. If it's a triple carrier, it's going to be in everybody's radio. if it's a triple carrier it's going to be in everybody's radio To cover it, everybody would probably get a little bit of an increase. to cover it everybody would probably get a little bit of an increase Not much. not much Believe me, we don't want to mess with a very good formula. believe me we don't want to mess with a very good formula I like the shareholders. i like the shareholders I want to keep that 91% margin as well. i want to keep that 91% margin as well If we have to raise it a little bit to keep it up there, we're going to do that. if we have to raise it a little bit to keep it up there we're going to do that We're looking at that now, Peter. we're looking at that now peter

Speaker 5: Awesome. Thank you. Awesome. awesome Thank you. thank you

Speaker 7: You got it. You got it. you got it

Speaker 9: Thank you. As a quick reminder, ladies and gentlemen, if you wish to ask a question, please press star one. Now our next question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Go ahead, Jeremy. Thank you. thank you As a quick reminder, ladies and gentlemen, if you wish to ask a question, please press star one. as a quick reminder ladies and gentlemen if you wish to ask a question please press star one Now our next question comes from Jeremy Hamblin with Craig -Hallum Capital Group. now our next question comes from jeremy hamblin with craig -hallum capital group Go ahead, Jeremy. go ahead jeremy

Speaker 8: Thanks. Congrats on the strong results. Just wanted to start a little bit with kind of the manufacturing facility. Making sure that in terms of the hurricane that had some impact in the Dominican Republic. Just understanding what you've seen there. Just kind of related note, in terms of how the tariffs are being applied at this point. Impact, as you look forward in calendar 2026. Do you feel like you're going to have kind of normal pricing increase on products, or is there any incremental that you need to take to cover where tariffs stand today? Thanks. thanks Congrats on the strong results. congrats on the strong results Just wanted to start a little bit with kind of the manufacturing facility. just wanted to start a little bit with kind of the manufacturing facility Making sure that in terms of the hurricane that had some impact in the Dominican Republic. making sure that in terms of the hurricane that had some impact in the dominican republic Just understanding what you've seen there. just understanding what you've seen there Just kind of related note, in terms of how the tariffs are being applied at this point. just kind of related note in terms of how the tariffs are being applied at this point Impact, as you look forward in calendar 2026. impact as you look forward in calendar 2026 Do you feel like you're going to have kind of normal pricing increase on products, or is there any incremental that you need to take to cover where tariffs stand today? do you feel like you're going to have kind of normal pricing increase on products or is there any incremental that you need to take to cover where tariffs stand today

Speaker 11: This is Dick Soloway. I moved down there to the Dominican Republic after I searched around China and Mexico and decided Dominican is great for a lot of advantages: closeness to the U.S., stable government, and being able to get the workers that we needed. We built this custom building. After we were in individual smaller buildings, we built a custom building which is category five proof. It is an all concrete building. We do not have any issues. We had no problem with the hurricane that passed by. We generate our own power, make our own water. We are a self-contained city down there. Of course, we have our workers come from around the area. It is actually a shelter for them in a hurricane because it is stronger than the houses. It works out really, really well. We had no issues with that. This is Dick Soloway. this is dick soloway I moved down there to the Dominican Republic after I searched around China and Mexico and decided Dominican is great for a lot of advantages: closeness to the U.S., stable government, and being able to get the workers that we needed. i moved down there to the dominican republic after i searched around china and mexico and decided dominican is great for a lot of advantages closeness to the u.s stable government and being able to get the workers that we needed We built this custom building. we built this custom building After we were in individual smaller buildings, we built a custom building which is category five proof. after we were in individual smaller buildings we built a custom building which is category five proof It is an all concrete building. it is an all concrete building We do not have any issues. we do not have any issues We had no problem with the hurricane that passed by. we had no problem with the hurricane that passed by We generate our own power, make our own water. We are a self-contained city down there. we generate our own power make our own water. we are a self-contained city down there Of course, we have our workers come from around the area. of course we have our workers come from around the area It is actually a shelter for them in a hurricane because it is stronger than the houses. it is actually a shelter for them in a hurricane because it is stronger than the houses It works out really, really well. it works out really really well We had no issues with that. we had no issues with that We do not expect there is anything that is going to be able to cause us any grief in the future. What was the second part of the question? We do not expect there is anything that is going to be able to cause us any grief in the future. we do not expect there is anything that is going to be able to cause us any grief in the future What was the second part of the question? what was the second part of the question

Speaker 8: Just in terms of tariff impact and thinking about pricing in 2026 and whether or not you'd take kind of your more typical price increase or whether or not you would take slightly more, just given how kind of the tariffs are playing out here. I mean, we've seen some stabilization in kind of tariff mandates, but. Just in terms of tariff impact and thinking about pricing in 2026 and whether or not you'd take kind of your more typical price increase or whether or not you would take slightly more, just given how kind of the tariffs are playing out here. just in terms of tariff impact and thinking about pricing in 2026 and whether or not you'd take kind of your more typical price increase or whether or not you would take slightly more just given how kind of the tariffs are playing out here I mean, we've seen some stabilization in kind of tariff mandates, but. i mean we've seen some stabilization in kind of tariff mandates but

Speaker 7: The tariffs for the DR are very stable. It's not like some of the other countries where it's going up. It's down. It's here. It's there. We know what it is. It's 10%. That's what it is. That's what it's been. We took an increase to cover that. We announced it back in April. We don't need to do anything more on that front. We took a general price increase that we announced in July. We don't expect to do another one until we get to the end of this fiscal year that we're in. Pricing-wise, we're good. The only thing is we haven't felt it all yet. We expect to feel good about it, better. We feel good already. We expect to feel better about it as we get deeper into the year, as the full effect is felt. We haven't felt it yet. The tariffs for the DR are very stable. the tariffs for the dr are very stable It's not like some of the other countries where it's going up. it's not like some of the other countries where it's going up It's down. it's down It's here. it's here It's there. it's there We know what it is. we know what it is It's 10%. it's 10% That's what it is. that's what it is That's what it's been. that's what it's been We took an increase to cover that. we took an increase to cover that We announced it back in April. we announced it back in april We don't need to do anything more on that front. we don't need to do anything more on that front We took a general price increase that we announced in July. we took a general price increase that we announced in july We don't expect to do another one until we get to the end of this fiscal year that we're in. we don't expect to do another one until we get to the end of this fiscal year that we're in Pricing-wise, we're good. pricing-wise we're good The only thing is we haven't felt it all yet. the only thing is we haven't felt it all yet We expect to feel good about it, better. we expect to feel good about it better We feel good already. we feel good already We expect to feel better about it as we get deeper into the year, as the full effect is felt. we expect to feel better about it as we get deeper into the year as the full effect is felt We haven't felt it yet. we haven't felt it yet

Speaker 8: Great. Just coming back to the service revenues, you saw a nice little bit of sequential year-over-year improvement from what you had in the June quarter. You just had a strong quarter with locking. I wanted to just get a sense. With the evolution of that business and potentially getting some recurring revenue associated with that in combination with kind of the radio alarms and so forth, when do you think you might kind of see that show up here in recurring service revenue growth as FY 2026 plays out? Great. great Just coming back to the service revenues, you saw a nice little bit of sequential year-over-year improvement from what you had in the June quarter. just coming back to the service revenues you saw a nice little bit of sequential year-over-year improvement from what you had in the june quarter You just had a strong quarter with locking. you just had a strong quarter with locking I wanted to just get a sense. i wanted to just get a sense With the evolution of that business and potentially getting some recurring revenue associated with that in combination with kind of the radio alarms and so forth, when do you think you might kind of see that show up here in recurring service revenue growth as FY 2026 plays out? with the evolution of that business and potentially getting some recurring revenue associated with that in combination with kind of the radio alarms and so forth when do you think you might kind of see that show up here in recurring service revenue growth as fy 2026 plays out

Speaker 7: When we released it, when we first started talking about it. We showed it at IFC West in April. And we said at that time, "Give it 18 months to two years. That's how long this kind of thing takes. We hope it's sooner." But I would give it time. I think we'll feel a little bit more as this fiscal year progresses. I think fiscal 2027 is when I think we'll really start to feel it. So you got to give it time. We're like six months removed, basically, from when we really had a coming-out party for it. Now we're going to have another coming-out party in a couple of weeks to show the other versions of MVP. Give it another year after that. And I think it could be meaningful. When we released it, when we first started talking about it. when we released it when we first started talking about it We showed it at IFC West in April. we showed it at ifc west in april And we said at that time, "Give it 18 months to two years. and we said at that time "give it 18 months to two years That's how long this kind of thing takes. that's how long this kind of thing takes We hope it's sooner." But I would give it time. we hope it's sooner." but i would give it time I think we'll feel a little bit more as this fiscal year progresses. i think we'll feel a little bit more as this fiscal year progresses I think fiscal 2027 is when I think we'll really start to feel it. i think fiscal 2027 is when i think we'll really start to feel it So you got to give it time. so you got to give it time We're like six months removed, basically, from when we really had a coming-out party for it. we're like six months removed basically from when we really had a coming-out party for it Now we're going to have another coming-out party in a couple of weeks to show the other versions of MVP. now we're going to have another coming-out party in a couple of weeks to show the other versions of mvp Give it another year after that. give it another year after that And I think it could be meaningful. and i think it could be meaningful

Speaker 11: I went through, because I've been in the alarm business for a long time, I went through alarms without recurring revenue. Imagine in the early years, it was just a hardware job that was put in by a dealer. There was no recurring revenue, and the dealer went on to do another hardware job. Then the intro of recurring revenue in the alarm business revolutionized that business. Every job that goes in, intrusion or fire, has a recurring revenue communicator in it. It gives great service to the occupant of the building, the owner of the building. That changed. It took a couple, three years for dealers to understand why you want to build equity in your business. You just don't want to do a job and do another job after that without having a recurring revenue tail. We're going through the same situation now in the locking business. I went through, because I've been in the alarm business for a long time, I went through alarms without recurring revenue. i went through because i've been in the alarm business for a long time i went through alarms without recurring revenue Imagine in the early years, it was just a hardware job that was put in by a dealer. imagine in the early years it was just a hardware job that was put in by a dealer There was no recurring revenue, and the dealer went on to do another hardware job. there was no recurring revenue and the dealer went on to do another hardware job Then the intro of recurring revenue in the alarm business revolutionized that business. then the intro of recurring revenue in the alarm business revolutionized that business Every job that goes in, intrusion or fire, has a recurring revenue communicator in it. every job that goes in intrusion or fire has a recurring revenue communicator in it It gives great service to the occupant of the building, the owner of the building. it gives great service to the occupant of the building the owner of the building That changed. that changed It took a couple, three years for dealers to understand why you want to build equity in your business. it took a couple three years for dealers to understand why you want to build equity in your business You just don't want to do a job and do another job after that without having a recurring revenue tail. you just don't want to do a job and do another job after that without having a recurring revenue tail We're going through the same situation now in the locking business. we're going through the same situation now in the locking business 25 years later, the locking business is such that a dealer will put in a locking job, either a large building or smaller buildings, and then they go on to the next job. There's no equity building, no recurring revenue. We are unique in the business, having the fact that we make the locks, we make the radios, and that the locksmiths and the integrators don't get recurring revenue from this type of service. We believe, like it happened in the alarm business, there's going to be a changeover that locksmiths are going to want to get recurring revenue tail to everything they do. That's what we're doing now. Patterning ourselves after the original alarm business, now we're bringing it to the locking business. 25 years later, the locking business is such that a dealer will put in a locking job, either a large building or smaller buildings, and then they go on to the next job. 25 years later the locking business is such that a dealer will put in a locking job either a large building or smaller buildings and then they go on to the next job There's no equity building, no recurring revenue. there's no equity building no recurring revenue We are unique in the business, having the fact that we make the locks, we make the radios, and that the locksmiths and the integrators don't get recurring revenue from this type of service. we are unique in the business having the fact that we make the locks we make the radios and that the locksmiths and the integrators don't get recurring revenue from this type of service We believe, like it happened in the alarm business, there's going to be a changeover that locksmiths are going to want to get recurring revenue tail to everything they do. we believe like it happened in the alarm business there's going to be a changeover that locksmiths are going to want to get recurring revenue tail to everything they do That's what we're doing now. that's what we're doing now Patterning ourselves after the original alarm business, now we're bringing it to the locking business. patterning ourselves after the original alarm business now we're bringing it to the locking business We're unique in the fact that we're the company that can do that because we have all these different facets that we've knitted together to make an integrated manufactured locking product and a cloud product for these locksmiths and for the system integrators. It's going to be an exciting ride going forward. Just piling on more recurring revenue is the name of the game for us. We've become a communications type of company, and it's going to grow ever larger. We're unique in the fact that we're the company that can do that because we have all these different facets that we've knitted together to make an integrated manufactured locking product and a cloud product for these locksmiths and for the system integrators. we're unique in the fact that we're the company that can do that because we have all these different facets that we've knitted together to make an integrated manufactured locking product and a cloud product for these locksmiths and for the system integrators It's going to be an exciting ride going forward. it's going to be an exciting ride going forward Just piling on more recurring revenue is the name of the game for us. just piling on more recurring revenue is the name of the game for us We've become a communications type of company, and it's going to grow ever larger. we've become a communications type of company and it's going to grow ever larger

Speaker 8: Just as a quick follow-up on that point. As we look to FY 2027, do you have a sense for what portion of your total service revenues could be tied to the locking products as opposed to the alarm? Just as a quick follow-up on that point. just as a quick follow-up on that point As we look to FY 2027, do you have a sense for what portion of your total service revenues could be tied to the locking products as opposed to the alarm? as we look to fy 2027 do you have a sense for what portion of your total service revenues could be tied to the locking products as opposed to the alarm

Speaker 7: I think it's premature for us to throw out projections like that. I would just say I think it would be meaningful. And just leave it at that. I think it's premature for us to throw out projections like that. i think it's premature for us to throw out projections like that I would just say I think it would be meaningful. i would just say i think it would be meaningful And just leave it at that. and just leave it at that

Speaker 11: Just think about how many doors are out there and how many commercial buildings. This is all commercial. This is not residential. What information you can get from every door, who comes in in case of emergencies, what's going on in the hospital, in the drug area, where the drug cabinets are, and you get instant information and reports, doing time and attendance, and all kinds of other great things, knowing everything that goes on in every door in the building that has an MVP system, locking system installed on it. I would say that if you don't have this type of system a couple of years from now, you're really in the blind as a management company or as a security department in an industrial building. You got to have this information. You shouldn't be in the blind. MVP will give it to everybody. Just think about how many doors are out there and how many commercial buildings. just think about how many doors are out there and how many commercial buildings This is all commercial. this is all commercial This is not residential. this is not residential What information you can get from every door, who comes in in case of emergencies, what's going on in the hospital, in the drug area, where the drug cabinets are, and you get instant information and reports, doing time and attendance, and all kinds of other great things, knowing everything that goes on in every door in the building that has an MVP system, locking system installed on it. what information you can get from every door who comes in in case of emergencies what's going on in the hospital in the drug area where the drug cabinets are and you get instant information and reports doing time and attendance and all kinds of other great things knowing everything that goes on in every door in the building that has an mvp system locking system installed on it I would say that if you don't have this type of system a couple of years from now, you're really in the blind as a management company or as a security department in an industrial building. i would say that if you don't have this type of system a couple of years from now you're really in the blind as a management company or as a security department in an industrial building You got to have this information. you got to have this information You shouldn't be in the blind. you shouldn't be in the blind MVP will give it to everybody. mvp will give it to everybody It's very, very economical, very reliable because it's all built using our StarLink communications program. It's very, very economical, very reliable because it's all built using our StarLink communications program. it's very very economical very reliable because it's all built using our starlink communications program

Speaker 8: Thanks so much for taking the questions. Thanks so much for taking the questions. thanks so much for taking the questions

Speaker 7: Thanks, Jeremy. Thanks, Jeremy. thanks jeremy

Speaker 9: Next up, we have Jaeson Schmidt with Lake Street. Go ahead, Jason. Next up, we have Jaeson Schmidt with Lake Street. next up we have jaeson schmidt with lake street Go ahead, Jason. go ahead jason

Speaker 4: Hey, guys. Thanks for taking my questions. Curious if you can give us an update on how ADI is progressing. Hey, guys. hey guys Thanks for taking my questions. thanks for taking my questions Curious if you can give us an update on how ADI is progressing. curious if you can give us an update on how adi is progressing

Speaker 7: ADI relationship. Excellent. They do a great job over there. They move a lot of intrusion equipment on our behalf. Couldn't be happier with the exception of one thing. I'd like more locking sales out of them. And we've told them this. They're great with the alarm side. We think there's an opportunity for locking through them. They have over 100 branches. I think it's 115 branches. It would be nice to move locking through those 115 branches. Absent of that, they're doing a very good job. Very happy. ADI relationship. adi relationship Excellent. excellent They do a great job over there. they do a great job over there They move a lot of intrusion equipment on our behalf. they move a lot of intrusion equipment on our behalf Couldn't be happier with the exception of one thing. couldn't be happier with the exception of one thing I'd like more locking sales out of them. i'd like more locking sales out of them And we've told them this. and we've told them this They're great with the alarm side. they're great with the alarm side We think there's an opportunity for locking through them. we think there's an opportunity for locking through them They have over 100 branches. they have over 100 branches I think it's 115 branches. i think it's 115 branches It would be nice to move locking through those 115 branches. it would be nice to move locking through those 115 branches Absent of that, they're doing a very good job. absent of that they're doing a very good job Very happy. very happy

Speaker 11: Let me add something to that. There are many, many dealers and a larger percentage of dealers are going to be doing locking jobs. These are the alarm dealers that do fire and burglar alarm jobs, but they're not. A large percentage are doing locking. They're just staying in the alarm sector of the business. Now, with recurring revenue added onto the locking jobs, it's not just a hardware installation. It's a recurring revenue generator for them. It adds to their fire and burglar alarm recurring revenue. We're going to be training lots of these locking dealers to utilize it and lots of the alarm dealers to utilize it and vice versa. We're going to do a lot of cross-training so that a dealer can be a total wraparound business. He gets recurring revenue from his alarms, and he gets revenue from his locking installations, and vice versa. Let me add something to that. There are many, many dealers and a larger percentage of dealers are going to be doing locking jobs. let me add something to that. there are many many dealers and a larger percentage of dealers are going to be doing locking jobs These are the alarm dealers that do fire and burglar alarm jobs, but they're not. these are the alarm dealers that do fire and burglar alarm jobs but they're not A large percentage are doing locking. a large percentage are doing locking They're just staying in the alarm sector of the business. they're just staying in the alarm sector of the business Now, with recurring revenue added onto the locking jobs, it's not just a hardware installation. now with recurring revenue added onto the locking jobs it's not just a hardware installation It's a recurring revenue generator for them. it's a recurring revenue generator for them It adds to their fire and burglar alarm recurring revenue. it adds to their fire and burglar alarm recurring revenue We're going to be training lots of these locking dealers to utilize it and lots of the alarm dealers to utilize it and vice versa. we're going to be training lots of these locking dealers to utilize it and lots of the alarm dealers to utilize it and vice versa We're going to do a lot of cross-training so that a dealer can be a total wraparound business. we're going to do a lot of cross-training so that a dealer can be a total wraparound business He gets recurring revenue from his alarms, and he gets revenue from his locking installations, and vice versa. he gets recurring revenue from his alarms and he gets revenue from his locking installations and vice versa ADI is a great vehicle because they're the largest distributor. They will, I'm sure, enter into the locking business all across the country. It's going to be great for market share for us because we're the only alarm manufacturer that has a locking division, and we're the only locking manufacturer that has an alarm division designing and manufacturing all these things. We're a natural play for the whole locking and alarm industry. We have three locking companies: Marks and AlarmLock and Continental. We have the NAPCO burglar and the fire alarm business. We really have the widest range of products out there. Great partners with ADI, and they're a great company. They're really buttoned up. ADI is a great vehicle because they're the largest distributor. adi is a great vehicle because they're the largest distributor They will, I'm sure, enter into the locking business all across the country. they will i'm sure enter into the locking business all across the country It's going to be great for market share for us because we're the only alarm manufacturer that has a locking division, and we're the only locking manufacturer that has an alarm division designing and manufacturing all these things. it's going to be great for market share for us because we're the only alarm manufacturer that has a locking division and we're the only locking manufacturer that has an alarm division designing and manufacturing all these things We're a natural play for the whole locking and alarm industry. we're a natural play for the whole locking and alarm industry We have three locking companies: Marks and AlarmLock and Continental. we have three locking companies marks and alarmlock and continental We have the NAPCO burglar and the fire alarm business. we have the napco burglar and the fire alarm business We really have the widest range of products out there. we really have the widest range of products out there Great partners with ADI, and they're a great company. great partners with adi and they're a great company They're really buttoned up. they're really buttoned up

Speaker 4: Okay. That's helpful. And then just as a follow-up, sorry if I missed it, but when will the price increase go into effect to account for the T-Mobile compatibility? Okay. okay That's helpful. that's helpful And then just as a follow-up, sorry if I missed it, but when will the price increase go into effect to account for the T-Mobile compatibility? and then just as a follow-up sorry if i missed it but when will the price increase go into effect to account for the t-mobile compatibility

Speaker 7: We're studying that now, Jason. We're very cautious with the pricing for the recurring, but it's very clear that we're adding a cost that we're not being compensated for. So we're looking at it. I would say it's imminent, but we haven't decided it yet. We're studying that now, Jason. we're studying that now jason We're very cautious with the pricing for the recurring, but it's very clear that we're adding a cost that we're not being compensated for. we're very cautious with the pricing for the recurring but it's very clear that we're adding a cost that we're not being compensated for So we're looking at it. so we're looking at it I would say it's imminent, but we haven't decided it yet. i would say it's imminent but we haven't decided it yet

Speaker 4: Okay. Thanks a lot, guys. Okay. okay Thanks a lot, guys. thanks a lot guys

Speaker 7: Thanks, Jason. Thanks, Jason. thanks jason

Speaker 9: To remind everyone again, if you have a question to ask, please press star one. Our next question comes from Lance Vitanza with TD Cowen. Please go ahead, Lance. To remind everyone again, if you have a question to ask, please press star one. to remind everyone again if you have a question to ask please press star one Our next question comes from Lance Vitanza with TD Cowen. our next question comes from lance vitanza with td cowen Please go ahead, Lance. please go ahead lance

Speaker 10: Hi. Thank you. I wanted to talk a little bit about the school security side. I think it was about a year ago that you announced the Pasadena school contract. I'm wondering what the status is of that, how far along that is, or how it went, any sort of lessons to learn, or just how that sort of leaves you feeling about the opportunity more broadly. Hi. hi Thank you. thank you I wanted to talk a little bit about the school security side. i wanted to talk a little bit about the school security side I think it was about a year ago that you announced the Pasadena school contract. i think it was about a year ago that you announced the pasadena school contract I'm wondering what the status is of that, how far along that is, or how it went, any sort of lessons to learn, or just how that sort of leaves you feeling about the opportunity more broadly. i'm wondering what the status is of that how far along that is or how it went any sort of lessons to learn or just how that sort of leaves you feeling about the opportunity more broadly

Speaker 7: That project went well. It's been completed. The opportunities are still tremendous throughout the country. You see all the shootings that are still going on. You still see the announcement that barricade chairs in front of the doors. These are all things we all have been hearing for over 10 years. Unfortunately, a lot of the school districts move very slowly. We do our best to go around the country and show the school districts if they have any issues with money, how to go about getting the money. There's lots of money available. A lot of funds have been allocated to school security. It's there. The universities have no issues. They have the money. They have the needs as well. Despite the shootings been going on for over 10 years, we're in the early innings, I would say fourth or fifth inning of this. Still tremendous opportunity. That project went well. that project went well It's been completed. it's been completed The opportunities are still tremendous throughout the country. the opportunities are still tremendous throughout the country You see all the shootings that are still going on. you see all the shootings that are still going on You still see the announcement that barricade chairs in front of the doors. you still see the announcement that barricade chairs in front of the doors These are all things we all have been hearing for over 10 years. these are all things we all have been hearing for over 10 years Unfortunately, a lot of the school districts move very slowly. unfortunately a lot of the school districts move very slowly We do our best to go around the country and show the school districts if they have any issues with money, how to go about getting the money. we do our best to go around the country and show the school districts if they have any issues with money how to go about getting the money There's lots of money available. there's lots of money available A lot of funds have been allocated to school security. a lot of funds have been allocated to school security It's there. it's there The universities have no issues. the universities have no issues They have the money. they have the money They have the needs as well. they have the needs as well Despite the shootings been going on for over 10 years, we're in the early innings, I would say fourth or fifth inning of this. despite the shootings been going on for over 10 years we're in the early innings i would say fourth or fifth inning of this Still tremendous opportunity. still tremendous opportunity We win a lot of business. We're not able to tell you about it unless the school grants it, grants us permission. Sometimes we don't even know about it because the distributors just are doing a job for a school district, and they buy a lot of our equipment. We know it's meaningful. We know there's a lot more to go. We know we have the solutions. We know we're the only company because we do locking and access and alarms. We're the one-stop shop that a lot of schools need. We just keep going out there and getting that word out. We win a lot of business. we win a lot of business We're not able to tell you about it unless the school grants it, grants us permission. we're not able to tell you about it unless the school grants it grants us permission Sometimes we don't even know about it because the distributors just are doing a job for a school district, and they buy a lot of our equipment. sometimes we don't even know about it because the distributors just are doing a job for a school district and they buy a lot of our equipment We know it's meaningful. we know it's meaningful We know there's a lot more to go. we know there's a lot more to go We know we have the solutions. we know we have the solutions We know we're the only company because we do locking and access and alarms. we know we're the only company because we do locking and access and alarms We're the one-stop shop that a lot of schools need. we're the one-stop shop that a lot of schools need We just keep going out there and getting that word out. we just keep going out there and getting that word out

Speaker 11: Yeah. We manufacture locks which are inexpensive for K-12s. We manufacture versions of that lock with remote control to them so you can lock doors remotely, do wide area campuses with our locks. It is a very diversified line of wide-ranging locks. As Kevin said, we manufacture the locking, the lock set. We make the parts. We assemble it. We do the radios. We have the cloud. We have all of that experience. Schools appreciate it. We are doing very nice schoolwork. Still, even after hundreds of shootings a year in the U.S., it is a tragedy. A lot of schools have not installed it yet. A fourth or fifth inning of the installation availability, so there is a lot more to do. Schools that make great choices will select the NAPCO system. We can be flexible from the smallest to the largest campuses out there. Yeah. yeah We manufacture locks which are inexpensive for K- 12s. we manufacture locks which are inexpensive for k- 12s We manufacture versions of that lock with remote control to them so you can lock doors remotely, do wide area campuses with our locks. we manufacture versions of that lock with remote control to them so you can lock doors remotely do wide area campuses with our locks It is a very diversified line of wide-ranging locks. it is a very diversified line of wide-ranging locks As Kevin said, we manufacture the locking, the lock set. as kevin said we manufacture the locking the lock set We make the parts. we make the parts We assemble it. we assemble it We do the radios. we do the radios We have the cloud. we have the cloud We have all of that experience. we have all of that experience Schools appreciate it. schools appreciate it We are doing very nice schoolwork. we are doing very nice schoolwork Still, even after hundreds of shootings a year in the U.S., it is a tragedy. still even after hundreds of shootings a year in the u.s it is a tragedy A lot of schools have not installed it yet. a lot of schools have not installed it yet A fourth or fifth inning of the installation availability, so there is a lot more to do. a fourth or fifth inning of the installation availability so there is a lot more to do Schools that make great choices will select the NAPCO system. schools that make great choices will select the napco system We can be flexible from the smallest to the largest campuses out there. we can be flexible from the smallest to the largest campuses out there It is a great thing that we are manufacturing that. We want to protect the students and the faculty. With NAPCO, you can. Our guys are beating the bushes and showing this to these facilities. Eventually, everybody will get armed up against intruders that come into schools and cause havoc. It is a great thing that we are manufacturing that. it is a great thing that we are manufacturing that We want to protect the students and the faculty. we want to protect the students and the faculty With NAPCO, you can. with napco you can Our guys are beating the bushes and showing this to these facilities. our guys are beating the bushes and showing this to these facilities Eventually, everybody will get armed up against intruders that come into schools and cause havoc. eventually everybody will get armed up against intruders that come into schools and cause havoc

Speaker 10: If I could just get one more in on the balance sheet, cash at $106 million, that's as high as it's been in my memory, recent memory. What do you plan to do with all that cash? I know you talked about possible M&A. The dividend, I mean, you're covering that out of your cash flow. I'm guessing that the amount of cash that you actually need to run the business is a small fraction of what you have. Can we be thinking about any kind of accelerated return of capital to shareholders in 2026? If I could just get one more in on the balance sheet, cash at $106 million, that's as high as it's been in my memory, recent memory. if i could just get one more in on the balance sheet cash at $106 million that's as high as it's been in my memory recent memory What do you plan to do with all that cash? what do you plan to do with all that cash I know you talked about possible M&A. i know you talked about possible m&a The dividend, I mean, you're covering that out of your cash flow. the dividend i mean you're covering that out of your cash flow I'm guessing that the amount of cash that you actually need to run the business is a small fraction of what you have. i'm guessing that the amount of cash that you actually need to run the business is a small fraction of what you have Can we be thinking about any kind of accelerated return of capital to shareholders in 2026? can we be thinking about any kind of accelerated return of capital to shareholders in 2026

Speaker 7: It's a good problem to have, Lance. We keep generating more and more cash. There's not a lot of M&A that's required to run the business. You heard in Andy's comments that CapEx was minimal. We need lots of labor, and we can get it in the Dominican Republic. The needs for cash, dividends, potential acquisition. We have lots of bankers talking to us. Every banker tells us they have the perfect deal for us. We're pretty fussy. There's a lot of boxes it has to check. We don't want to be distracted, but if it's the right deal, we certainly would proceed. I'm sure there are companies out there, and we go through as the bankers present them. We go through them all, and if one hits the right spot, we'll go after it. It's a good problem to have, Lance. it's a good problem to have lance We keep generating more and more cash. we keep generating more and more cash There's not a lot of M&A that's required to run the business. there's not a lot of m&a that's required to run the business You heard in Andy's comments that CapEx was minimal. you heard in andy's comments that capex was minimal We need lots of labor, and we can get it in the Dominican Republic. we need lots of labor and we can get it in the dominican republic The needs for cash, dividends, potential acquisition. the needs for cash dividends potential acquisition We have lots of bankers talking to us. we have lots of bankers talking to us Every banker tells us they have the perfect deal for us. every banker tells us they have the perfect deal for us We're pretty fussy. we're pretty fussy There's a lot of boxes it has to check. there's a lot of boxes it has to check We don't want to be distracted, but if it's the right deal, we certainly would proceed. we don't want to be distracted but if it's the right deal we certainly would proceed I'm sure there are companies out there, and we go through as the bankers present them. i'm sure there are companies out there and we go through as the bankers present them We go through them all, and if one hits the right spot, we'll go after it. we go through them all and if one hits the right spot we'll go after it The last thing we want to do, though, is get distracted by something that's not accretive from day one. We don't want to overpay. It could be a good thing. We're in a good position to do it much better than in the position we were in when we did our last one 15 years ago when we had minimal cash, lots of debt, and no recurring revenue. We got a lot of cash, lots of recurring, no debt. We could do it, but it's got to be right. The last thing we want to do, though, is get distracted by something that's not accretive from day one. the last thing we want to do though is get distracted by something that's not accretive from day one We don't want to overpay. we don't want to overpay It could be a good thing. it could be a good thing We're in a good position to do it much better than in the position we were in when we did our last one 15 years ago when we had minimal cash, lots of debt, and no recurring revenue. we're in a good position to do it much better than in the position we were in when we did our last one 15 years ago when we had minimal cash lots of debt and no recurring revenue We got a lot of cash, lots of recurring, no debt. we got a lot of cash lots of recurring no debt We could do it, but it's got to be right. we could do it but it's got to be right

Speaker 10: Okay. Thank you. Okay. okay Thank you. thank you

Speaker 9: Thank you, Lance. Thank you, Lance. thank you lance

Speaker 7: Thanks, Lance. Thanks, Lance. thanks lance

Speaker 9: There seem to be no further questions at this time. I will now turn the call over back to Richard. Please continue. There seem to be no further questions at this time. there seem to be no further questions at this time I will now turn the call over back to Richard. i will now turn the call over back to richard Please continue. please continue

Speaker 11: Thank you, everyone, for participating in today's conference call. As always, should you have any further questions, feel free to call Fran, Kevin, Andy, or myself for further information. We thank you for your interest and support, and we look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q2 results. Have a wonderful day, everybody. Bye-bye. Thank you, everyone, for participating in today's conference call. thank you everyone for participating in today's conference call As always, should you have any further questions, feel free to call Fran, Kevin, Andy, or myself for further information. as always should you have any further questions feel free to call fran kevin andy or myself for further information We thank you for your interest and support, and we look forward to speaking to you all again in a few months to discuss NAPCO's fiscal Q2 results. we thank you for your interest and support and we look forward to speaking to you all again in a few months to discuss napco's fiscal q2 results Have a wonderful day, everybody. have a wonderful day everybody Bye-bye. bye-bye

Speaker 9: Thank you, Richard. Thank you, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you, Richard. thank you richard Thank you, everyone. thank you everyone Ladies and gentlemen, this concludes today's conference call. ladies and gentlemen this concludes today's conference call Thank you for your participation. thank you for your participation You may now disconnect. you may now disconnect