NAPCO Security Technologies, Inc. (NASDAQ:NSSC) experienced a meaningful uplift in its stock price on Monday following the announcement of its second-quarter fiscal 2026 financial results. The company demonstrated a solid period of operational and financial performance that exceeded market forecasts and underpinned renewed investor confidence.
During the quarter, total revenue increased by 12.2% compared to the same period in the previous year, reaching $48.2 million. This figure narrowly outperformed the consensus estimate of $47.8 million, reflecting the company’s consistent growth trajectory. The equipment segment contributed significantly to this revenue expansion, posting a 12.0% rise year-over-year to $24.3 million.
Gross profit advanced 15.3% year-over-year, amounting to $28.2 million in the quarter. Notably, the gross profit margin improved to 58.6% from 57.0% reported in the corresponding quarter last year, indicating enhanced operational efficiency and pricing leverage.
Recurring service revenue, a critical component of NAPCO's business model, registered growth of 12.5% year-over-year, climbing to $23.8 million with an impressive gross margin of 90.2%. This recurring segment represented approximately half of the total revenue for the second quarter. Based on the recurring service revenue figure for January 2026, the company implied an expected run rate near $99 million, emphasizing the strength and sustainability of this income stream.
Profitability metrics displayed encouraging trends as well. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged by 26% to reach $15.4 million, with associated margins expanding to 31.9% from 28.4% in the same quarter last year. On a per-share basis, earnings came in at 38 cents, beating the consensus estimate that anticipated 32 cents.
Free cash flow demonstrated robust health, totaling $14.5 million for the quarter, equating to a 17.4% increase year-over-year. Amid this positive cash generation, NAPCO increased its quarterly dividend by 7% to 15 cents per share, with the dividend payable on April 3, 2026, to shareholders recorded as of March 12, 2026.
Commenting on the results, Richard Soloway, Chairman and CEO of NAPCO Security Technologies, highlighted the company's strong quarterly performance, crediting its consistent double-digit growth in recurring service revenue and continued demand for door-locking products. He noted that these factors collectively propelled both equipment revenue growth and improved gross margins within that segment.
The stock responded favorably to these announcements. At the time of reporting on Monday, shares of NAPCO Security Technologies were trading 6.04% higher at $39.11, reflecting solid investor enthusiasm supported by the company’s operational advances.
In summary, NAPCO Security Technologies demonstrated a quarter marked by revenue expansion, margin improvement, and strong cash flow generation, all contributing to increased shareholder returns through an enhanced dividend. Recurring service revenue remains a critical growth driver, showing resilience and robust profitability metrics, which underpin the company’s favorable market reception.