Napco Security Technologies reported a mixed QQ2 2025 performance, with a meaningful acceleration in recurring revenue and gross margin driven by high-margin services, offset by timing-related weaknesses in equipment sales. Net sales declined 9.7% year over year to $42.9 million, primarily due to softer equipment demand from two large distributors and the winding down of a NYC locking project. Recurring monthly service revenue grew 15% year over year to $21.2 million in the quarter, driving a 400 bps expansion in overall gross margin to 57% and a 91% gross margin on recurring revenue. Despite near-term softness in equipment sales (down 25% QoQ, -16% for the six months), Napco’s profitability and cash flow remained robust, supported by a debt-free balance sheet and a cash position near $99.2 million. Management emphasized the resilience of the core growth drivers (wireless alarms, recurring services, school security funding, and enhanced access control), ongoing product innovation (StarLink radios, MVP hosted access system, Prima), and a disciplined approach to costs. The company also highlighted favorable tailwinds from tariff dynamics and supply-chain positioning (Dominican Republic manufacturing) that could support share gains going forward. In aggregate, Napco maintains a strong liquidity profile, a positive long-term trajectory for recurring revenues, and a clear path to higher EBITDA margins as equipment profitability and mix improve, with management guiding toward mid-teens to ~20% recurring revenue growth in the near term and potential acceleration in late 2025 as new products deploy.