NAPCO Security Technologies (NSSC) Q3 2026 earnings summary

Executive summary

• Q3 2026 net revenue rose 11.8% year-over-year to $49.2 million, with recurring service revenue up 15.4% to $24.9 million and representing 51% of total sales.

• Equipment revenue grew 8.4% year-over-year to $24.2 million, led by door-locking products and improved pricing discipline.

• Gross profit margin improved to 60.0% for the quarter, with recurring service gross margin above 90%.

• Profitability expanded, with non-GAAP net income up 36.9% and adjusted EBITDA up 20.2% to $15.8 million, with a margin of 32.2%.

• A $16 million litigation settlement was recorded, resulting in a GAAP net loss of $0.4 million for the quarter.

Financial highlights

• Net revenue for Q3 2026: $49.2 million (+11.8% YoY); nine months: $146.5 million (+11.9% YoY).

• Recurring monthly service revenue Q3: $24.9 million (+15.4% YoY); nine months: $72.2 million (+13% YoY).

• Equipment revenue Q3: $24.2 million (+8.4% YoY); nine months: $74.3 million (+10.9% YoY).

• Gross margin Q3: 60% (up from 57.2% YoY); recurring service gross margin: 90.4%.

• Free cash flow for Q3 was $16.0 million, up 20.3% YoY, with a free cash flow margin of 32.6%.

Outlook and guidance

• Continued focus on growing recurring service revenue, improving product margins, and maintaining profitability and cash generation.

• MVP Cloud-Based Access Control Platform expected to contribute meaningful recurring revenue by October 2026.

• Management expects sufficient liquidity for the next twelve months, with no material impact anticipated from macroeconomic pressures or tariffs.

• Optimism for sustained demand and growth across product portfolio for the remainder of fiscal 2026 and beyond.

• RSR annual run rate projected at approximately $101 million based on April 2026 figures.