Good morning, ladies and gentlemen, and welcome to the NAPCO Security Technologies Fiscal First Quarter 2026 Earnings Conference Call. 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, Emma. Good morning, everyone. This is Fran Okoniewski, Vice President of Investor Relations for NAPCO Security Technologies. Thank you all for joining today's conference call to discuss financial results for our fiscal 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 predictable 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 18 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 Global Industrial Conference in Chicago; the Stephens Annual Investment Conference in Nashville; the UBS Global Industrials & 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 and are 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 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 and 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, which 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, representing 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, reaching $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 3 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, and 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 radios. Equipment revenue increased 11.8% to $25.6 million as compared to $22.9 million for Q1 of fiscal '25, which is 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 3 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 3 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 3 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 3 months decreased 13.5% to $1 million as compared to $1.1 million last year. The decrease for the 3 months ended September 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 3 months increased 36% or $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 3 months was due to higher pretax income, as well as a larger portion of the company's taxable income being attributable to U.S. operations, and the remeasurement of certain deferred tax liabilities due to tax rate changes enacted 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 represented 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 30, 2025, a 6.6% sequential increase. The company had no debt as of September 30. And cash provided by operating activities for the 3 months ended September 30, 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 30 as compared with working capital of $149.9 million on June 30, 2025. Our current ratio was 7.5:1 on September 30 as opposed to 7.3:1 on June 30, 2025. And 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 would 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 gross margin of over 90%. 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 a 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 sets 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. It is 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 Alarm Lock and Marks hardware lines continue to gain traction in health care, 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 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, and 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'd like to open the call for the Q&A session. Operator, please proceed.

Your first question comes from Matt Summerville with D.A. Davidson.

A couple of questions. First, on locking. Can you talk about what percent of your locking mix today is represented by that networked product? And then, can you also discuss how your MVP technology differs from other major locking players in the space today? And then, I have a follow-up.

I'll answer the first part, and then Dick could answer the second part. So 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. But the old stuff, the traditional stuff is powerful. Locking is 66% of equipment sales. And 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. The schools sometimes don't want us to talk about it. But believe me, they're there, and that's part and parcel of why locking was so strong. It was very strong in this quarter, and the expectation is it will continue to be strong. Now Dick, maybe you can comment on why our MVP is different than anybody's product out there.

Sure. So 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 a 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 and the cloud is owned by us. We built it. So we're a totally 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 are millions of those types of buildings where there's one radio per building usually. In this case, you could have 15, 20, or 100 doors generating $3 per door with all these services. So it's a totally integrated hardware-software package, and we made it in two different ways. One is for basic smaller offices, doctors' offices, with six doors. And that's the MVP EZ. Then, the full-blown access control cloud system is for system integrators to do larger jobs. So we can control our own destiny unlike a lot of our competitors, who 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. So 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 door where they install the locks.

And then, 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. Any high-level thoughts as to how the remainder of the fiscal year cadences out would be beneficial.

So it's a combination, Matt. As I said earlier, we didn't get the full benefit of the price, but we will as the year progresses. Andy could give us some color on kind of what it was in Q1, but we know that there's a lot more to come from the benefit of the pricing. Andy, do you want to comment on it?

Sure. Matt, in response to that, so 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.

Your next question comes from Jim Ricchiuti with Needham & Co.

Maybe a follow-up to that, and I know this information is going to be in the Q 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 for Q1 was $17,083,000, compared to $13,854,000 in Q1 of last year, marking a significant increase. Locking activity was very strong, with some orders coming from distributors aiming to avoid price increases. We also carried over a backlog of several million from Q4 into Q1. However, much of this increase was due to the overall strength in locking. This quarter could be one of the strongest we've ever experienced. We expect this trend to continue, and while distributor behavior can be unpredictable, the channel looks positive. Sell-through remains strong, and expectations for the locking segment are all favorable.

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?

In Q1, we saw very strong sell-through stats for all of our locking partners, and we have two locking companies that performed well. We also saw significant improvements in the intrusion side. I monitor this closely every month, and while I always caution that I can't predict what distributors might do—especially since their year-end is in December—I believe that based on the stats we're observing, including their inventory levels and sell-through, we should be in good shape for both locking and intrusion.

Your next question comes from Peter Costa with Mizuho.

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?

So Peter, there were really two factors that affected the margin for the recurring, which still is tremendous. 90.3% is still impressive, even though it went down from just over 91%. First, we now have a triple carrier radio which adds T-Mobile to the mix, and we need to purchase minutes to support that. We haven't charged anyone for this yet; while it's not a significant amount, it has impacted our margins a bit. We expect to increase our recurring radio charge slightly to cover this, which should help bring the margin back up. The second factor is that we're gaining substantial business from some large dealers. Without naming names, one particular dealer has been acquiring many smaller ones, which leads to us capturing more radio business now and in the future. This consolidation works in our favor. The larger dealer appreciates our fire radio, and when they acquire a smaller dealer, they ensure the smaller dealer’s customers receive our StarLink Fire radio. If those customers weren't using it before, this presents an opportunity for us to gain additional market share. One downside, although mostly positive, is that larger dealers can demand slightly better pricing. For instance, if a large dealer pays $1 less than a smaller dealer, we adjust accordingly. If a customer was paying $8 and we have to lower it to $7 to accommodate a larger dealer, we’ll do that readily because we are increasing our recurring revenue in radio. So that can also impact our margins a little. Overall, the powerful margins you’ve been seeing remain unchanged.

Makes a lot of sense.

Let me add something else to that. I network frequently with the dealers, and some of them in different regions have mentioned that T-Mobile offers more reliable service on their cell phones compared to other providers. It seems that the tower infrastructure or the reception quality from their towers is superior. By incorporating T-Mobile alongside AT&T and Verizon, we now have access to all the major carriers. The areas where T-Mobile excels in reception and communication are now part of our network. This addition is expected to help us gain additional market share with a more stable radio network thanks to T-Mobile. Overall, having T-Mobile as part of our service mix should have a positive impact.

Awesome. Maybe just thinking about the price on the radio, I think that's kind of intended to be under the RSR, and 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 like the T-Mobile radios? How would you tackle that?

If it's a triple carrier, it will be in everyone's radio. To manage this, there will likely be a slight increase for everyone, but not much. We definitely want to maintain a successful formula. However, similar to our shareholders, I also aim to keep that 91% margin. If a slight increase is necessary to maintain it, we will implement that. So, we are currently considering that, Peter.

Now our next question comes from Jeremy Hamblin with Craig-Hallum Capital Group.

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 DR, just understanding what you've seen there. And then, just kind of related note, in terms of how the tariffs are being applied at this point and impact, as you look forward in calendar '26, 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 in China and Mexico and decided Dominican is great for a lot of advantages, closest to the U.S., stable government, and being able to get the workers that we needed. We built this custom building, which is Category 5 proof. It's an all-concrete building. So we don't have any issues. We had no problems with the hurricane that passed by. We generate our own power, make our own water. We're self-contained like a city down there. And of course, we have our workers come from around the area. It's actually a shelter for them in a hurricane because it's stronger than the houses. So it works out really, really well. We had no issues with that, and we don't expect there's anything that's 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 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 Dominican Republic are very stable at 10%, unlike some other countries where they fluctuate. This has remained consistent, and we previously announced a price increase to account for this back in April. We don’t anticipate needing to make any additional adjustments in that area. In July, we implemented a general price increase, and we don’t plan to do another until the end of this fiscal year. Overall, our pricing situation is solid. However, we have yet to fully experience the effects. We are optimistic about our outlook as we progress further into the year and expect to see improvement as the full impact is realized.

Great. And then, 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. And 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 '26 plays out?

When we first presented it at ISC West in April, we mentioned that it typically takes about 18 months to 2 years for this type of development. While we hope to see results sooner, it's important to allow time for progress. As this fiscal year continues, I believe we will start observing more impact, with fiscal '27 being a key year for significant developments. We are only six months post-launch, and we'll be showcasing additional versions of MVP in a couple of weeks. I expect that after another year, we could see meaningful outcomes.

I have been in the alarm business for a long time and have experienced a time when alarms did not have recurring revenue. In the early years, it was just a hardware installation done by a dealer, with no ongoing revenue once they moved on to the next job. The introduction of recurring revenue transformed the alarm industry. Every installation, whether for intrusion or fire, now includes a recurring revenue component that provides excellent service to building occupants and owners. It took a few years for dealers to realize the importance of building equity in their business instead of just moving from one job to another without a recurring revenue stream. We are facing a similar situation now in the locking industry, 25 years later. Dealers install locking systems in various buildings and soon move to their next project, lacking equity and recurring revenue. What sets us apart is that we manufacture the locks and radios, while locksmiths and integrators currently do not benefit from recurring revenue in this service. We believe, similar to what happened in the alarm sector, locksmiths will seek a recurring revenue stream in their work. We are currently aligning our business model with the original alarm industry, transitioning it into the locking sector. We are uniquely positioned to do this because we combine various elements to create an integrated locking product and a cloud solution for locksmiths and system integrators. The future looks promising as we focus on increasing our recurring revenue, evolving into a communication-centric company that will continue to expand.

Just as a quick follow-up on that point, so as we look to FY '27, 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. With MVP, you can 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've 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.

Next up, we have Jaeson Schmidt with Lake Street.

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. I couldn't be happier with the exception of one thing. I'd like more locking sales out of them, and we 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, and 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 that there are many dealers, and a larger percentage of them will be involved in locking jobs. These alarm dealers focus on fire and burglar alarms but are not heavily engaged in locking. They tend to remain within the alarm sector. The recurring revenue associated with locking jobs is significant; it goes beyond hardware installation and contributes to their existing fire and burglar alarm income. We plan to provide extensive training for these locking dealers and alarm dealers, encouraging cross-training so that a dealer can operate as a comprehensive business. They can generate recurring revenue from both alarms and locking installations. ADI is an excellent partner as they are the largest distributor and will likely expand into the locking business nationwide, which will enhance our market share since we are the only alarm manufacturer with a locking division and the only locking manufacturer with an alarm division. We are uniquely positioned in the locking and alarm industry, with three locking companies—Marks, Alarm Lock, and Continental—alongside our NAPCO burglar and fire alarms business. This gives us the broadest range of products available, and we have a strong partnership with ADI, who are well-organized and effective.

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, Jaeson. 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 looking at it, and I would say it's imminent, but we haven't decided it yet.

Our next question comes from Lance Vitanza with TD Cowen.

So I wanted to talk a little bit about the school security side. And 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 and is now complete. The opportunities across the country remain significant. We continue to see incidents of violence and schools taking precautions, like placing barricade chairs at entrances. These concerns have been prevalent for over a decade, but many school districts move at a slow pace. We strive to support them in securing funding for school security, as numerous resources are available for this purpose. While universities generally have their funding, the demand for security solutions continues amidst the ongoing violence. I believe we are in the early stages of addressing this issue and see vast potential ahead. We secure a considerable amount of business, although we can only share details when we have permission from the schools. Sometimes we learn of sales indirectly through distributors working on behalf of school districts. We acknowledge the importance of our solutions and realize there is much more work to do. As the only company that provides locking, access, and alarm services, we serve as a comprehensive resource for many schools. Hence, we keep pushing forward to spread the word about our offerings.

We manufacture affordable locks for K-12 schools, as well as versions that can be controlled remotely, allowing for door locking from a distance and wide area coverage. Our product line is diverse, and as Kevin mentioned, we handle everything from lock manufacturing to assembly and radio communications, along with cloud services. Schools value our expertise, and we are making significant strides in the educational sector. However, despite the ongoing tragedy of numerous shootings in the U.S., many schools have yet to implement these systems. We are still in the early stages of installation, and there is plenty of work ahead. Schools that make informed decisions will choose the NAPCO system, which can adapt to campuses of all sizes. We are committed to protecting students and faculty, and with NAPCO, we can achieve that. Our team is actively promoting our solutions to these facilities. Ultimately, schools will need to enhance their security measures against intruders who threaten safety.

If I could just get one more in on the balance sheet. Cash at $106 million, which is the highest it has been in my recent memory. What do you plan to do with all that cash? I know you mentioned possible M&A. You're covering the dividend out of your cash flow, and I assume that the amount of cash needed to run the business is a small fraction of what you currently have. So, can we consider 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, but we're pretty fussy. There's a lot of boxes it has to check. We don't want to be distracted. 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, but it could be a good thing. We're in a good position to do it much better than 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. So we got a lot of cash, lots of recurring, no debt. We could do it; it's got to be right.

There seems to be no further questions at this time. So 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.