NAPCO Security Technologies reported a major fourth-quarter 2026 gross-margin expansion, although tariff refunds accounted for most of the year-over-year increase.
Quarterly revenue increased 10% to a record $55.8 million. Gross profit increased 27.7% to $34.2 million, while gross margin reached 61.3% compared with 52.8% a year earlier, an improvement of approximately 850 basis points.
NAPCO said tariff refunds contributed roughly 600 basis points to fourth-quarter gross margin. Excluding that benefit, underlying margin would have been about 55.3%, still above the prior-year level but with a much smaller improvement.
The tariff benefit also affected earnings per share. Net income increased 52.7% to a quarterly record $17.8 million, while diluted EPS increased to $0.50 from $0.33. NAPCO estimated that net tariff refunds contributed approximately $0.09 to quarterly EPS.
The company’s recurring service operation remains a major structural driver. Recurring service revenue increased 12.9% to $25.3 million, represented approximately 45% of quarterly revenue and continued to generate gross margin above 90%. Based on July revenue, NAPCO said recurring service revenue had reached a prospective annual run rate of approximately $103 million.
Equipment revenue increased 7.7% to $30.5 million during the quarter. Adjusted EBITDA increased 44.3% to a quarterly record $20.6 million, producing adjusted EBITDA margin of 36.8%. Free cash flow increased 19.9% to $17.2 million.
For the full fiscal year, revenue increased 11.4% to $202.3 million and recurring service revenue increased 13% to $97.5 million. Full-year GAAP net income was nearly flat because of a $16 million litigation settlement charge recorded earlier in the year.
KEY QUOTES:
“Our RSR continues to deliver gross margins of over 90%, and represents approximately 45% of total revenue in Q4, and has a prospective run rate of approximately $103 million based on our July 2026 recurring service revenue.”
Kevin Buchel, CEO and President of NAPCO Security Technologies
