NAPCO Security Technologies, Inc. (NSSC) had a good Monday, with shares climbing after the company delivered second-quarter results that beat expectations on pretty much every metric that matters.

The Numbers Tell a Growth Story

Revenue climbed 12.2% year-over-year to $48.2 million, edging past the Wall Street consensus of $47.8 million. Equipment revenue pulled its weight with a 12.0% increase to $24.3 million for the quarter.

The margin story got even better. Gross profit rose 15.3% to $28.2 million, with margins expanding from 57.0% a year ago to 58.6% this quarter. That's the kind of improvement investors like to see.

Here's where things get interesting: recurring service revenue surged 12.5% year-over-year to $23.8 million, sporting an impressive 90.2% gross margin. This high-margin revenue stream now accounts for about half of NAPCO's total revenue, with a projected annual run rate of approximately $99 million based on January 2026 figures.

Adjusted EBITDA jumped 26% to $15.4 million, pushing margins to 31.9% from 28.4% in the year-ago quarter. Earnings per share came in at 38 cents, comfortably beating the consensus estimate of 32 cents.

Free cash flow reached $14.5 million, up 17.4% year-over-year. With cash generation running strong, the company declared a quarterly dividend of 15 cents per share, a 7% increase from last quarter. The dividend is payable April 3, 2026, to shareholders of record as of March 12, 2026.

What Management Is Saying

Richard Soloway, Chairman and CEO, highlighted the drivers behind the quarter: "NAPCO delivered another strong quarter fueled by our recurring service revenue and its consistent year-over-year double-digit growth, and the continued demand for our door-locking products that drove double-digit growth in our equipment revenue and improved equipment gross margins."

NSSC shares were trading up 6.04% at $39.11 Monday.