NAPCO SECURITY TECHNOLOGIES, INC
For the period ended Sep 30, 2026. Filed Nov 2, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 2, 2026
NSSC$30.24+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-05.
0001104659-26-055383
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-02.
0001104659-26-121109
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 70 previous paragraphs and 72 current paragraphs.
30 unchanged; 20 reworded; 20 added; 18 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
Please seeNon-GAAP Measuresbelow in this section of this Quarterly Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with GAAP, for the three months ended September 30, 2026 and 2025.
Current report
Tarif Matters
Current report
Changes in U.S. trade policy and tariffs continue to create uncertainty regarding our product costs. Effective July 24, 2026, a new tariff framework under Section 301 of the Trade Act of 1974 became applicable to imports from certain trading partners, including the Dominican Republic, where we manufacture most of our products. The applicable tariff on covered imports from the Dominican Republic increased from 10% to 12.5%. We continue to evaluate pricing, sourcing and other measures to mitigate increased tariff-related costs; however, such measures may not fully or timely offset these costs, which could adversely affect our product margins and results of operations.
Current report
Supply Chain and Component Costs
Current report
We continue to monitor supply chain conditions affecting the availability and cost of electronic components and other materials used in our products. Increased demand for certain electronic components, including from artificial intelligence and data center infrastructure, has contributed to supply constraints, longer lead times and increased component costs. We are working with suppliers, evaluating alternative sources and taking other actions to mitigate these pressures. However, continued supply constraints or increases in material costs could adversely affect our ability to manufacture and deliver products and could negatively impact product margins and results of operations.
Current report
Credit Facility.
Current report
Working Capital and Current Ratio.
Current report
Working capital increased by $9,685,000 to $175,214,000 as of September 30, 2026 from $165,529,000 at June 30, 2026. The current ratio increased to 7.2:1 as of September 30, 2026, from 4.9:1 as of June 30, 2026. Working capital is calculated by deducting Current Liabilities from Current Assets. Current ratio is calculated by dividing Current Labilities from Current Assets.
Current report
Total revenue for the three months ended September 30, 2026, increased $812,000 (1.7%) to $49,980,000 as compared to $49,168,000 in the comparable period.
Current report
Net equipment revenues for the three months ended September 30, 2026, decreased $1,889,000 (7.3%) to $23,850,000 as compared to $25,739,000 in the comparable period. The decrease in net equipment revenue was attributable to decreases in sales of door locking products of $1,733,000 (10.1%) and decreases in intrusion and access products of $156,000 (1.8%).
Current report
Door locking product revenue decreased primarily due to lower sales volume of approximately 13.1%, partially offset by pricing increases of approximately 3.0%.
Current report
The volume decline was driven mainly by lower demand at two of our larger locking distributors who were reducing existing inventory levels during the quarter. This decline was partially offset by higher demand because of increased project activity.
Current report
Revenue from our intrusion and access alarm products decreased because of lower volume (approximately 6.5%), primarily related to lower sales of our access products, partially offset by pricing increases (approximately 4.7%).
Current report
Litigation settlement
Current report
During the quarter ended September 30, 2026 the Company recognized a benefit of $1 million for the difference between the litigation settlement costs accrued and what was paid, as a result of the difference in the estimated amount of insurance coverage and what was ultimately paid by the carriers which reduced the Company’s portion of the settlement payment. See Note 13.
Current report
Non-GAAP Measures
Current report
We define non-GAAP adjusted EBITDA as our GAAP net income plus income tax expense, less net interest income, stock-based compensation, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, litigation settlement costs, and depreciation and amortization expense. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense and stock-based compensation expense related to equity compensation. We define non-GAAP adjusted EBITDA margin as Adjusted EBITDA divided by net revenue. Non-GAAP adjusted EBITDA and adjusted EBITDA margin are not a measure calculated in accordance with GAAP. See the table below for a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Current report
We have included non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin in this report because they are key measure our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make strategic investment decisions. Further, we believe the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of litigation settlement costs and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Accordingly, we believe non-GAAP adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Current report
Our use of non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are: (a) although amortization and depreciation are non-cash charges, the assets being amortized and depreciated may have to be replaced in the future, and non-GAAP adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) non-GAAP adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) non-GAAP adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) non-GAAP adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate non-GAAP adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Current report
Because of these and other limitations, you should consider non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin alongside our other GAAP-based financial performance measures, net income and our other GAAP financial results. The following table presents a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measure, for each of the periods indicated (in thousands, except share and per share data):
Removed paragraphs (18)
Previous report
The United States economy continues to experience various macroeconomic pressures, including pricing pressure from tariffs and inflation, sustained high interest rates, increased fuel costs and general economic and political uncertainty.
Previous report
We will continue to monitor these developments and assess their potential impacts, and are actively monitoring the changing global trade policies and the effects they may have on our business and broader macroeconomic environment; we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global markets because of U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact our supplier’s ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries.
Previous report
Additionally, increased fuel costs resulting from the conflict in Iran and geopolitical tensions in the region has increased macroeconomic uncertainty generally and may lead to higher freight expense and cost pressure on the products offered by the Company. These pressures have impacted, and may continue to impact in the future, the Company’s business, financial condition and results of operations.
Previous report
Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact on the demand for our products.
Previous report
Total Revenue for the three months ended December 31, 2025, increased $5,206,000 (11.8%) to $49,167,000 as compared to $43,961,000 in the comparable period.
Previous report
Net equipment revenues for the three months ended March 31, 2026, increased $1,887,000 (8.4%) to $24,238,000 as compared to $22,351,000 in the comparable period. The increase in net equipment revenue was attributable to increases in sales of door locking products of $1,484,000 (10.4%) and intrusion and access products of $403,000 (5.0%). The increased revenue from our door locking products was primarily a result of the impact of pricing increases (approximately 5.0%) with the balance a result of general increase in sales volume (approximately 5.4%). The increased revenue in our intrusion and access alarm products was primarily a result of the
Previous report
impact of pricing increases (approximately 10.1%), offset by a decrease in volume (approximately 5.1%) primarily related to our access products.
Previous report
Nine Months Ended March 31, 2026:
Previous report
Revenue for the nine months ended March 31, 2026, increased $15,610,000 (11.9%) to $146,507,000 as compared to $130,897,000 in the comparable period.
Previous report
Net equipment revenues for the nine months ended March 31, 2026, increased $7,307,000 (10.9%) to $74,300,000 as compared to $66,993,000 in the comparable period. The increase in net equipment revenue was attributable to increases in the sales of door locking products of $6,494,000 (15.3%) and intrusion and access products of $813,000 (3.3%). The increased revenue from our door locking products was primarily a result of the impact of pricing increases (approximately 6.3%) with the balance a result of general increase in sales volume (approximately 9.0%). The increased revenue in our intrusion and access alarm products was primarily a result of the impact of pricing increases (approximately 10.8%), offset by a decrease in volume (approximately 7.5%) primarily related to our access products.
Previous report
Net service revenues for the nine months ended March 31, 2026, increased $8,303,000 (13.0%) to $72,207,000 as compared to $63,904,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Previous report
Nine Months Ended March 31, 2026
Previous report
Overall gross profit for the nine months ended March 31, 2026, increased $11,341,000 to $85,573,000, or 58.4% of net revenue, as compared to $74,232,000, or 56.7% of net revenue, for the comparable period.
Previous report
Gross profit from equipment revenue was $20,358,000, or 27.4% of equipment revenue, as compared to $16,025,000, or 23.9% of equipment revenue, for the comparable period. The increase in gross profit percentage from equipment revenue was primarily a result of product mix, increased volume in our locking products which improved the absorption rate of our fixed overhead costs, certain price increases that went into effect during the previous quarter and reductions in sales discounts during the period.
Previous report
SG&A expenses for the nine months ended March 31, 2026, increased by $1,524,000 to $32,234,000 as compared to $30,710,000 for the comparable period. The increase in SG&A expenses was primarily attributable to increases in commission expense ($716,000), wages, bonus compensation and benefits ($397,000), tradeshow related expenses ($980,000), insurance ($151,000) and 401(k) matching contributions ($92,000), offset by decreases in accounting expenses ($498,000), legal fees related to the litigation discussed in Note 13 ($243,000) and stock-based compensation $(359,000).
Previous report
Litigation settlement costs
Previous report
Litigation settlement costs for the three and nine months ended March 31, 2026 was $16,000,000, net of any insurance reimbursements, as a result of the settlement described in Note 13. The effect of such settlement was to reduce operating income by $16,000,000 and net income by $14,267,000 (giving effect to the lower income taxes resulting from the litigation expense).
Previous report
rate for the three months ended March 31, 2026 decreased due to the litigation settlement costs lowering pre-tax income offset by discrete items incurred during the quarter. The Company’s effective tax rate for the nine months ended March 31, 2026 increased due to lower taxable income.
Reworded paragraphs (20)
Previous wording
Highlights from the three and nine months ended March 31, 2026 compared with the comparable period included:
Current wording
Highlights from the three months ended September 30, 2026 compared with the prior year’s period included:
Previous wording
Our industry is dynamic and highly competitive; our competitors are continually developing new products and solutions for consumers and businesses with frequent changes in both technologies and business models. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. Napco continually innovates through a broad range of research and development activities that seek to identify and address the changing demands of customers, industry trends, and competitive forces to adapt and respond to customer and user preferences over an extended time in pace with this changing environment... We must continue to evolve and
Current wording
Our industry continues to be dynamic and highly competitive, with frequent changes in both technologies and business models. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. Napco continually strives to innovate through a broad range of research and development activities that seek to identify and address the changing demands of customers, industry trends, and competitive forces.
Previous wording
On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid, and in March 2026, the U.S. Court of International Trade further ruled that importers that paid such tariffs are due refunds. Although we may be entitled to refunds of previously paid IEEPA tariffs, the amount and timing of any such refunds remain uncertain, and as of March 31, 2026, we have not recorded any amounts related to potential recoveries. Following these rulings, new tariffs under other laws and on imports from more countries were imposed, in addition to existing non-IEEPA tariffs.
Current wording
On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid, and in March 2026, the U.S. Court of International Trade further ruled that importers that paid such tariffs are due refunds. On April 20, 2026, the U.S. Customs and Border Protection launched a process for submitting IEEPA refund claims and subsequently, we submitted refund claims.
Previous wording
Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires a high degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical estimates include management’s judgments associated with reserves for sales returns and allowances, allowance for credit losses, overhead expenses applied to inventory, inventory reserves, valuation of intangible assets, share based compensation and income taxes. These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates.
Current wording
Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires a high degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be
Previous wording
Our cash and cash equivalents increased by $31,327,000 during the nine months ended March 31, 2026, and our cash and cash equivalents and short-term investments were $124,952,000 as of March 31, 2026. We believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered.
Current wording
Our cash and cash equivalents and short-term investments are as follows (in thousands):
Previous wording
We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months. We continue to monitor, evaluate, and manage our operating plans, forecasts, and liquidity considering the most recent developments driven by macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, tariffs, bans, or other measures or events that increase the effective price of products. We believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered.
Current wording
We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months. We believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered.
Previous wording
A summary of the cash flow activity for the nine months ended March 31, 2026 and 2025 is as follows:
Current wording
A summary of the cash flow activity for the three months ended September 30, 2026 and 2025 is as follows (in thousands):
Previous wording
Net cash provided by operating activities was $43.5 million for the nine months ended March 31, 2026 and was due to net income of $25.3 million and increase in adjustments for non-cash items of $6.4 million and from changes in operating assets and liabilities of $11.9 million. The changes in operating assets and liabilities were largely attributable to increases in inventories and income tax receivables and increases in accounts payable and accrued expenses partially offset by decreases in accounts receivables.
Current wording
Net cash provided by operating activities was $2.8 million for the three months ended September 30, 2026 and was due to net income of $13.0 million and increase in adjustments for non-cash items of $2.9 million offset from changes in operating assets and liabilities of $13.2 million. The changes in operating assets and liabilities were largely attributable to decrease in accounts and other receivables ($7 million) offset by increases in inventories ($4 million) and decreases in accounts payable and accrued expenses ($14 million), which was primarily a result of the payment of accrued litigation costs.
Previous wording
Net cash provided by operating activities was $38.9 million for the nine months ended March 31, 2025 and was due to net income of $31.8 million and increase in cash flow from changes in operating assets and liabilities of $6.9 million and adjustments for non-cash items of $0.3 million. The changes in operating assets and liabilities were largely attributable to decreases in accounts receivables, inventories and prepaid expenses partially offset by increases in income tax receivable and decreases in accounts payable and accrued expenses.
Current wording
Net cash provided by operating activities was $11.6 million for the three months ended September 30, 2025 and was due to net income of $12.2 million and increase in adjustments for non-cash items of $2.1 million offset by cash outflow from changes in operating assets and liabilities of $2.6 million. The changes in operating assets and liabilities were largely attributable to increases in accounts receivables, inventories, prepaid expenses and income tax receivables partially offset by decreases in accounts payable and accrued expenses.
Previous wording
The net cash provided by investing activities of $4.3 million during the nine months ended March 31, 2026 was primarily attributable to the redemption of marketable securities of $13.7 million partially offset by expenditures used for capital expenditures of $1.5 million and purchase of marketable securities of $7.8 million. The cash provided by investing activities of $15.1 million during the nine months ended March 31, 2026, was primarily attributable to redemption of other investments of $27.3 million partially offset by expenditures used for capital expenditures of $1.9 million and purchase of investments of $10.2 million. The change in use of cash for investing activities from 2025 to 2026 was a increase in the redemption of investments in term deposits (other investments).
Current wording
The net cash used in investing activities of $.4 million during the three months ended September 30, 2026 was primarily attributable to expenditures used for capital expenditures of $.4 million. The net cash provided by investing activities of $5.6 million during the three months ended September 30, 2025 was primarily attributable to the redemption of marketable securities of $8.4 million partially offset by expenditures used for capital expenditures of $.2 million and purchase of marketable securities of $2.5 million.
Previous wording
The cash used in financing activities of $16.5 million for the nine months ended March 31, 2026 was primarily related to the payment of stockholder dividends and payment of tax withholdings related to stock option exercises. The cash used in financing activities of $45.9 million for the nine months ended March 31, 2025 was primarily related to the repurchase of treasury shares of $36.8 million and the payment of stockholder dividends of $9.2 million.
Current wording
The cash used in financing activities of $5.4 and $5.0 million for the three months ended September 30, 2026 and 2025, respectively, was related to the payment of stockholder dividends.
Previous wording
As of March 31, 2026, the Company’s available revolving credit line was $20,000,000, which expires in February 2029, there were no outstanding borrowings on the line as of March 31, 2026.
Current wording
As of September 30, 2026, the Company’s available revolving credit line was $20,000,000, which expires in February 2029. As of September 30, 2026 and June 30, 2026, the Company has no outstanding debt.
Previous wording
Net service revenues for the three months ended March 31, 2026, increased $3,319,000 (15.4%) to $24,929,000 as compared to $21,610,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.
Current wording
Net service revenues for the three months ended September 30, 2026, increased $2,701,000, or 11.5%, to $26,130,000 from $23,429,000 in the comparable period. The increase was due to growth in the number of our cellular (radio) communication devices placed in service and activated by dealers.
Previous wording
Overall gross profit for the three months ended March 31, 2026, increased $4,362,000 to $29,489,000, or 60.0% of net revenue, as compared to $25,127,000, or 57.2% of net revenue, for the comparable period.
Current wording
Overall gross profit for the three months ended September 30, 2026, increased $1,506,000 to $29,352,000, or 58.7% of net revenue, as compared to $27,846,000, or 56.6% of net revenue, for the comparable period.
Previous wording
Gross profit from equipment revenue was $6,949,000, or 28.7% of equipment revenue, as compared to $5,499,000, or 24.6% of equipment revenue, for the comparable period. The increase in gross profit percentage from equipment revenue was primarily a result of product mix, increased volume in our locking products which improved the absorption rate of our fixed overhead costs, price increases that went into effect during Fiscal 2026 and reductions in sales discounts during the period.
Current wording
Gross profit from equipment revenue was $5,807,000, or 24.3% of equipment revenue, as compared to $6,693,000, or 26.0% of equipment revenue, for the comparable period. The decrease in gross profit percentage from equipment revenue was a result of lower overall sales volume, product mix within our locking products, the impact of tariff increase (1.3%), increased inventory scrap (1.7%) and increased technical services costs (1.0%).
Previous wording
Gross profit as a percentage of service revenue was consistent in both periods. Gross profit on service revenues was $65,215,000, or 90.3% of net service revenues, as compared to $58,207,000, or 91.1% of net service revenues, for the comparable period a year ago.
Current wording
Gross profit as a percentage of service revenue was consistent in both periods. Gross profit on service revenues was $23,545,000, or 90.1% of net service revenues, as compared to $21,153,000, or 90.3% of net service revenues, for the comparable period a year ago.
Previous wording
Research and development expenses for the three months ended March 31, 2026, increased by $233,000 to $3,418,000, or 7.0% of net revenue, as compared to $3,185,000, or 7.2% of net revenue, for the comparable period. The increase in research and development expenses was primarily a result of increased labor compensation and benefit costs ($156,000).
Current wording
Research and development expenses for the three months ended September 30, 2026, increased by $813,000 to $4,053,000, or 8.1% of net revenue, as compared to $3,240,000, or 6.6% of net revenue, for the comparable period. The increase in research and development expenses was primarily a result of increased labor compensation and benefit costs ($503,000) and engineering supplies ($76,000).
Previous wording
Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2026, increased by $463,000 to $11,259,000 as compared to $10,796,000 for the comparable period. The increase in SG&A expenses was primarily attributable to increases in our tradeshow related expenses ($896,000) wages, bonus compensation and benefits ($205,000), commission related expenses ($215,000), 401(k) matching contributions ($86,000) and insurance expense ($59,000) offset by decreases in legal fees (net of insurance reimbursements) related to the litigation discussed in Note 13 ($880,000) and stock-based compensation ($96,000).
Current wording
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2026, increased by $1,219,000 to $12,182,000, or 24.4% of net revenue, as compared to $10,963,000, or 22.3% of net revenue, for the comparable period. The increase in SG&A expenses was primarily attributable to increases in legal expenses ($1,075,000), consulting-related expenses ($155,000), commission-related expenses ($76,000) offset by decreases in advertising ($235,000).
Previous wording
Interest income increased for the three months ended March 31, 2026, as compared to the comparable period, primarily due to higher interest rates. Interest income remained consistent for the nine months ended March 31, 2026 as compared to the comparable period.
Current wording
Interest income increased for the three months ended September 30, 2026, as compared to the comparable period, primarily due to higher interest rates and higher cash amounts invested.
Previous wording
The Company’s provision for income taxes for the three months ended March 31, 2026 decreased by $1,680,000 to $206,000 as compared to $1,886,000 for the same period a year ago. The Company’s effective rate for income tax was (102.0)% and 15.7% for the three months ended March 31, 2026 and 2025 respectively. The Company’s provision for income taxes for the nine months ended March 31, 2026 decreased by $414,000 to $4,912,000 as compared to $5,326,000 for the same period a year ago. The Company’s effective rate for income tax was 16.3% and 14.4% for the nine months ended March 31, 2026 and 2025 respectively. The Company’s effective tax
Current wording
The Company’s provision for income taxes for the three months ended September 30, 2026 decreased by $130,000 to $2,340,000 as compared to $2,470,000 for the same period a year ago. The Company’s effective rate for income tax was 15.2% and 16.9% for the three months ended September 30, 2026 and 2025 respectively. The Company’s effective tax rate for the three months ended September 30, 2026 decreased due to the discrete items of $342,000 increasing the effective tax rate in the 3 months ended September 30, 2025.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The markets for security devices and services are dynamic and highly competitive. Our competitors are continually developing new products and solutions for consumers and businesses. We must continue to evolve and adapt to respond to customer and user preferences over an extended time in pace with this changing environment.
Current report — wording carried from elsewhere
reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical estimates include management’s judgments associated with reserves for sales returns and allowances, allowance for credit losses, overhead expenses applied to inventory, inventory reserves, valuation of intangible assets, share based compensation and income taxes. These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Gross profit as a percentage of service revenue was consistent in both periods. Gross profit on service revenues was $22,540,000, or 90.4% of net service revenues, as compared to $19,628,000, or 90.8% of net service revenues, for the comparable period a year ago.
Previous report — wording carried elsewhere
Research and development expenses for the nine months ended March 31, 2026, increased by $782,000 to $10,131,000, or 6.9% of net revenue, as compared to $9,349,000, or 7.1% of net revenue, for the comparable period. The increase in research and development expenses was primarily a result of increased labor compensation and benefit costs ($766,000).