Alarm.com (ALRM) 7 Nov 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Alarm.com Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Zartman, Vice President of Investor Relations. Please go ahead.

Kevin. Thanks, and Third everyone, Conference XXXX to Call. welcome afternoon, Quarter Alarm.com's Earnings Good call being note, is Please the recorded.

today CEO; our and us Steve Joining are Valenzuela, CFO. Steve Trundle, our

forward-looking our projections, During may which statements cause from uncertainties are are expectations about be subject our will we risk current current expectations. report you and refer XX-Q the today's These on with be making the actual which materially We factors on assumptions SEC, the call, future events. to results our are or estimates discussed along that and predictions, differ based release. quarterly other shortly X-K, Form to on with statements to Form press will and associated statements, that risks filed

risk statements or respective information, of is we Alarm.com dates. to and them. review as call encourage other forward-looking no to subject obligation update their assumes these factors, which speak to you The

call. addition, several of our financial be non-GAAP measures Relations GAAP release will In on non-GAAP can found website. press in A Investor to on today's reconciliation measures be the discussed

over the I'll call turn Trundle. Steve to Steve?

Matt. welcome Good afternoon, everyone. you, to Thank and

the $XXX.X expectations. $XX financial are that quarter our We the revenue SaaS third million. million, to in third and report for grew and exceeded adjusted license was quarter pleased results to EBITDA

above and was the control that products from performance growth contributed expectations. continued video hardware resulted of quarter revenue our access Our initiatives. outperformed in momentum across Sales our to and our

range. to which We our also is above rate saw our historical retention XX%, revenue increased

the things We driving are metric. retention X believe revenue

churn. or subscriber can housing provide the and featured value been market day. And U.S. account that second, service be cause systems providers has business have more every fully our in First, of leading which reduced owner putting to a moves, the consumer slower robust increasingly

our introduced thank few On cover detail. you our capabilities it our financials service to we to handing want more for want offerings video contributions call, our I and employees today's new update residential in on commercial and before provider results. a to their over partners our Valenzuela I to to Steve to

conference, nice Summit, In attracted presentations in We partner our a several our customer D.C. annual October, we cross-section Washington, feature hosted were summit. we event able our provider audience of The released here represented again service community. recently call products during to a that which the sold-out Partner in

trespasser demonstrated products call of One from deter is identify AI-Deterrence consumer-facing property them and can we further It we causing potential the or on capability a and engage AID. a a problems.

the workload and AI monitoring intruder deliver It is perform. that adapted verbal clothing solution AID replaces bot video otherwise would an some warnings the location and dynamically monitoring discern can essentially and video of live into our to operator to integrated is need are remote the the that camera that and a scene.

larger remote make and with By goal our critical and providers. AID and of markets. service our Our as residential our to as focusing solution aggressively can more adopt video a augmenting intervention most the our on solution it only segment monitoring cost humans for partners we introduce believe events, to the effective is possible human commercial

billion applying in identified both settings in In by alert and billion our rules, AI-enabled alone, to notifications X.X archival or which cloud. the XXX scale. additional triggering verification to include AI of of these important AI advancements can Our sent from events verified Of video our benefit video residential by interest, engine, our and activity. and cloud commercial August million X.X classification subscribers for streams were cameras further events push

cloud for cameras flexible, and connect suite processing. surveillance and and alerting streamlined to a of in self-contained In cloud full directly AI installations. to are cameras land new September, and by leverages partners way They OpenEye tools cost-effective our provided of offered a reporting provide new our video as The storage a management, with OpenEye expand the business Cloud for subscription-based line commercial also analytics, new entirely the the that designed are launched onboard enterprise cameras platform. solution accounts.

We're growth. X OpenEye channels of OpenEye's its is on and video surpassing with momentum on pleased cusp software continued or active the platform. cameras million

continued to market to enterprise expect We strong leads solutions. AI-powered on-premise Alarm.com's video growth of devices OpenEye as transformation security cloud-enabled management stand-alone video contributions the the from

next an the you and we typically on XXXX our fiscal before guidance know, early conclude year. more we I following how at for and It's we're our and Steve looking want continue a initial most little XXXX point. forecast third providing call will fourth to of But at context with quarter calibrated our year. this providing quarter official our at give As plans Valenzuela to early, look refine

opaque think Google the ADT a about This variable than years. we prior meaningful a which revenue, out As software. rate dependency the at more ADT XXXX is makes visibility in XXXX rolls into bit forecasting

XXXX. corporate that numbers will transition to impact Our software ADT for growth first ADT's entirety account assume the residential look of the revenue production and Google fully SaaS

organic Fortunately, growing this headwind. anticipated despite allow engine a long diverse will business we growth that our have built continue us to

solution some hold and as our expect Meanwhile, XXXX, XXXX EnergyHub consolidated of growth margins EBITDA roughly we business, move current to at the second expect we moved as contribute XXXX. our up we the commercial international We through business, including half our levels our access XXXX. in business, in levels have in to and our rate to business, OpenEye Alarm.com same control our

our work, trust continued In results our partners continued the business. our summary, their and in their the I'm see and to we provider hard thank and investors QX our want for across our business. for pleased growth team with service I

turn our over let financials. Steve to Steve? to me review And with things Valenzuela that,

financial for then QX thoughts Thanks, third XXXX, call XXXX, Steve. on with questions. the before begin conclude our and guidance our and of review I'll with a quarter provide full our XXXX for opening year results, initial

X.X% grew $XXX.X from revenue million of the quarter quarter year. SaaS same Third last and license

renewal the XX%. third in of XX% license a our rate quarter, high and historical of range Our above long-term our than and SaaS higher revenue visibility with trend XX% revenue remains target to

from third and mix. QX for to slightly the prior increased the quarter. was favorable $XXX.X million, quarter $XX.X QX access margin was up devices the up quarter. gross XX.X% year-ago XX.X% due X.X% Hardware revenue year XX.X%, license up mainly to from up quarter was was from control quarter, and third in XX.X% grew the due million quarter XX.X% XXXX, in Hardware of for product quarter, year-over-year. margin the X.X% gross third revenue gross Total margin the mainly XX.X% from and SaaS for in Total sales of the third XXXX, cameras. video other for third in

quarter year-ago X,XXX operating the a Sales to investment. compared the in X,XXX expenses. of employees compared expenses in employees XX.X% same employees the for from to $XX to X,XXX expenses quarter program to R&D, marketing in revenue total were modest or up to in million revenue XXXX. mainly ended quarter. $XX.X XXXX. were in with marketing Turning the X,XXX XX.X% compared in third third quarter increase quarter or million quarter and to due R&D in third QX year, Total increased the in of $XX.X We $XX million employees last the third headcount million QX

G&A expense $XX.X compared year-ago quarter. non-ordinary from in includes Our million expense third our adjusted course litigation the to and million, the were quarter of performance. financial part $XX.X our G&A of expenses litigation negligible Non-ordinary due are quarter from the mainly year-ago expenses in course million are measures excluded our in $X.X measurement non-GAAP in quarter, legal-related to down the third costs. lower

or per quarter, XXXX. to up in or GAAP quarter, diluted third share million, up $XX.X net $XX.X Non-GAAP adjusted for million the income the $XX.X $X.XX million In $XX.X EBITDA third net $XX.X per in income from GAAP $X.XX third up in Non-GAAP million, net XX% year-ago XX.X% million of third QX in was the quarter the from share quarter. income million increased from quarter adjusted of was the XXXX. $XX

the positive our we to December of quarter May third offering XXXX, a and We and the up year, in sheet. our cash increase lesser flow. from due to cash cash of equivalents, convertible Turning million balance much $XXX $X.XX closed with with to extent, on the XX, ended this billion

XXXX X reduction million same days. improvements and periods $XX.X profitability days declines September the levels $XX.X in increased and the capital $XXX.X million, to XXXX, receivable mainly respectively, and cash and in from $XX.X Our ended X with non-GAAP for flow million million sales XX a free higher to and for months working inventory outstanding in of due in accounts

outlook. Turning our financial to

license XXXX, of quarter SaaS million to fourth the expect revenue million. of and $XXX.X we For $XXX.X

to raising million, $XXX.X For revenue up SaaS to guidance are of full expectations million. $XXX.X $XXX.X our prior from year our we and million $XXX.X million license the to for XXXX,

estimated million, $XXX $XXX.X million projecting up $XXX.X of our total hardware revenue to for revenue which $XXX We million, million. of $XXX.X are of and prior to XXXX million to million includes other guidance $XXX.X from now

remain adjusted our $X.XX is tax share. raising or net $XXX $XXX million prior our under projected estimate per diluted tax or $XXX.X $X.XX be our rules. for shares weighted $XXX.X XX.X of Adjusted to project million to based to for $XXX diluted to on are $XXX from guidance non-GAAP outstanding. million, $XXX.X XXXX $X.XX non-GAAP rate XXXX EPS from up to million million to estimate income We million of million to share, prior our We to guidance up $XXX.X non-GAAP to an XX% $X.XX current currently for million of per average is for XXXX million. at EBITDA diluted

stock-based $XX million million. year expense full compensation XXXX expect of $XX We to

thoughts for million XXXX preliminary. revenue million. that $XXX I license could early and will provide to estimate Total currently Finally, are million. for between these on SaaS $XXX to our range million between noting revenue to some $XXX be XXXX, XXXX We $XXX

ADT to XXXX that range million. currently our As of Steve $XXX be ramps are $XXX EBITDA non-GAAP to ADT we million their We adjusted project for noted, rollout. up in modeling Google the

XXXX guidance provide year. our report will financial next fourth XXXX results We when our early quarter we annual for

on growth. In our long-term we executing strategy, focused in profitable business deliver to summary, our continuing on plan and while are investing

with open Q&A. for operator, the call And please that,

Adam question first from Raymond with Our comes Tindle James.

here, of SaaS If just there's I of off think, I finish QX of. as is math doing ask at I a to congrats with here, growth I right And Bear I'm look for about wanted the year the on coming I'm strong numbers as XX.X% can the going guidance XXXX, think X.X%. for you're fiscal and crunching XXXX. I on me, to understand SaaS 'XX. closer here, variables but initial this to you're that the lot Steve, for fast a

delta you If on some those between could walk the blocks X. maybe of the through building just

some the a wonder I clarity But on a to if X.X% think ADT got in little I particular, have lot more in thought now had to X% -- I of about you that. that. related us visibility, of neighborhood think somewhere bit headwind you've that

of So the finish would the some just the helpful. XXXX strong initial XXXX outlook and be in bridges from

Adam, this point our we're Yes, doing But it quarter. is going And things mind, yet a the after the numbers, Steve We're in to full really there guidance of not do keep fourth Trundle you're there's correct. the speaking. look in math initial guidance. couple to calling out.

the XXX as we've is, about ADT First on growth point to the in past, basis a we're Google headwind transition. anticipating said

that's next we we've and So year, expect in. start modeled that to really what

license sort The licenses second the essentially litigation, bump of And into from We got year. this IP meaningful pretty year, of XXXX. meaningful is closed one closed this then in that you had if out That is resolution out revenue bump a we off XXXXs. some license no when that IP straight early remember, lined we litigation. a revenue we had we coming

we're XXX is another of points that there itself in basis math. bump again year. by And not a getting sort So this the

the those sort with add reconciles now. up, right X you we're if XX.X% of showing So that

And it. Got a helpful. That's maybe follow-up. as just

would EBITDA You that. mentioned, and One The XX% I on EBITDA think, did margin I also clarification current about think, expect to clarification think a levels you guidance, quarter. be, margins, I implies quick XX%. this question hold. you The

of the So just XX% when guidance, not you say kind one. you number just would the clarifying off but that, be did, assuming XX% current it levels, I'm

line. say you as more you speak about very a Trundle, about you've about growth And profitability. of got healthy that EBITDA those margins, one hand, how very, then Steve On potentially and can on lot even maybe invest balance internal room you holding could think secondly, we to between the thought

So thought just more a up about balancing growth current investing bit little wondering levels. margins bump holding the to potentially maybe versus you EBITDA how at

again. question Good Yes.

XX%. above. the so going math, in exact a you initial yes, points that's of And where the So I basis the the the said last number guiding XX on be might of been above couple a couple is do that of And years. think we've up to if is things or sort from in we're what there. I hold It little we're look

that's allocate moment constantly sense, us. the things for things way of So the plan capital, we're at a But scrutinizing characteristics. make what return have sort nice transition meaningful is, the what that we

Through time, those things evolve.

a Some we as sort businesses now are shift have sort to parent. actually a scale future, into back cash contributing to pure beginning more look mature, grown mode they're mode where investment the the from we more reaching of them nicely actually and bit see where, a again, contribute, to of

businesses So while or a we've growth for growth initiatives. our talked about various

more. now than Specifically, referenced we and the it's of we EnergyHub, we a in past, business. each sort referenced bit business, been the referenced And contribute international beginning larger those commercial the to is of

of bit shift that company of expect the that into the capacity case with EBITDA increased line, going us production scale, to could the a we left forward. more and cash that be we So the their comfortable

comes Our Jefferies. Mason from next question with Marion

strong your So base? some drivers Can talk are was of also you alluded to churn, there? you NRR but cross-selling your the really you within XX%. at the lower better seeing So about

Yes.

also, that's -- churn with is it's benefit think with moves video a is of ago We enabling really every years number But a driven really interact a system I analytics. think It's we the single out analytics years this is the to the of And of compelling see very to users a by think Valenzuela. combination well. starting Steve the lot with couple that a and And that. we ago, think that, I we're of the as fewer video day. moves. came really

retention nicely. And driving the so the quite we up think and up that's usage driving

think upsell. And you what an as to a that, at sometimes a refer times, cross-sell. of call that you almost We could is it would

if video one video analytics that retention help moves a be on cross-sell. So into to have if a we that an opt benefit, the subscriber video, then with without from and revenue a Or same advanced have would us they that already obviously, a metric. subscription video that that would package, creates account also and more they

all is the the characteristics little reduction But that more is that It going subscriber there's of So a positive. just bit the driver. account are on. true in as main probably looking said, of Steve moves also

us integration, Can now. Are Understood. then largely believe been? I has you're that benefits with through early I complete What that? And EBS you seeing feedback you. think Got from that your you talk acquisition?

see We're memory. the when good capabilities rollout the technology the went on after did we Yes, acquisition. right cusp of of we that to the beginning and the EBS

attack gets. a As range a a to market in intrusion a new part based history Alarm.com typically to able business various able of wanted that panels. being EBS sort We refresher, that the Europe of is be just support different wide of to a has than of installs the

So that we're beginning now. rollout

belief XX,XXX that And of year we'll moment. in at low-cost from otherwise subscribers technology those be adding in end get. be our And another successful The subscribers we low-cost to with wouldn't moment rest the product the XX,XXX this next probably the the EBS world back markets Alarm.com communication works would communication using at EBS. is

So it's business. the story to the of beginning contribute on international to growth the side

with Our next Adam Hotchkiss Goldman question comes Sachs. from

Nice speaking with you both.

this How AI tool particularly retention? cost versus allowing for how the manage a you customer ability opportunities to curious to costs initiatives a do customer price augmentation bit that to effectively being of here, some your these the customers viewing you're on Just around just providing success potentially of take some more of pricing increase balance are by base.

question. Yes. Good

to capability in remarks. then us. AI-Deterrence would beneficial my call augmentation. our to we're activity be And using to of bot prepared our some we're some partners we replace service their required us correctly ability to that AI monitoring a that's price offer an bit way service, does ability And cost human provides to what that for with AI that that give If So about same I a partners, expensive some serve. that the or spoke in cost helping previously provider

of to them. partners. our out try pricing works with work We the we right for figure So that sort what's

We in of really part sort we a broad, are at things and we what that broadly be to be a broad not of AI piece the that pricing to at can prefer a course. and But market. We doing there and market, of it interesting correct, AI, and level is partners probably to our the price to ourselves sort think are that keeping swath that's Otherwise, with are niche level costing right and plan. pricing, bring sort of careful that applicable, at prefer with we to of a you're primary increases with focus corner we're the look always afford it's to of pricing now. about particularly sort the the normal necessitates

market then how Okay. making And OpenEye technology rest your us other time? you is Great. you the does open where the over up I of commercial side of the funnel the of And behind some these in could sort of helpful. more side? conversion view, just on there? opportunities investments on you're then That's guess, and for really refresh opportunity top the on

Yes. top what do that I'm you mean by say of -- we what in The are of funnel to top trying opportunity, the you opportunity? when Adam, funnel seeing

commercial how for the Yes, customers. able are more into being those? to driving convert guess, on in products viewing Yes. or prospects and security you of to What's the just -- and demand ability your convert terms side commercial those I prospects commercial

third fourth read to side. the I access us -- up increased on the tea demand, indicated we're fourth meant fairly tad maybe the had leaves I I a Demand driven sorry, I hardware. on there Steve a -- was meaningful V. of to said looks hardware picking constant, control access trying hardware by the had of control the a some Okay. meaningful that number. And was quarter, beat quarter, We on quarter, particularly number if think the understand. in beat

good So that's a indicator.

are on pull-through video. solutions those sold Oftentimes,

pretty a saw side. also We video behavior the on good

on through feel side like different right market, pretty attack we couple our the side through the very provider -- of So I the it feel sort on is commercial enterprise is generation like well than to activity now. run ways year. and the And We mid-market. of a slightly market of the it demand state I'm partners it's steady that on the half then seeing high sort some the of the in healthy hearing service as regular integrators of everything And we commercial in there side. was maybe do better first

from question William Matt comes Filek next Our Blair. with

for Filek hardware. one Matt Sheldon. Stephen on on Starting with

Given the as in to on think revenue growth strong it imply hardware the return I performance to look quarter, think flat in more there you 'XX? what see curious growth XXXX, this would take early expectations

we're moment, this at revenue. think sticking I initial sort with our look yes, estimates Matt, hardware on of

saw, side talked If think the the model we might of but in right if that ADT best saw we've on of sort we're to headwind, on would in forecast more run we we result our business. being Google say that the takeoff if see a then commercial of I'd be to is, model, we of biggest dampen, of knowledge, but But but present about strength rollout. the the well. see, sales headwinds, the the could saw one if particular, more the with one we think sort saw the -- and the as unexpected -- side we upside not nice couple sort one I I the I that or hardware of commercial obviously, that

And then R&D. Got color. I it. one on helpful had That's

the R&D the is Just you're over any department thinking catalog? there capabilities focused out? enhancing about Are year. about in it existing product on the more building coming Or priorities

pretty We're just in with different and new Summit, would focused would We capabilities, our video opportunity No. out form excited analytics factors, got. cameras we had on couple camera new the That technology pleased I space. to form on, factors and that out. Partner the to that international technology partners, preview say, previewed some we're about. we're building the video had particularly we've our the mean different of We that -- cameras, and video get battery-powered we're a stuff EBS some

these are all we're and of already the in. contributing of sort markets So that driving on focused

next and a into stay on envision something R&D year of international we the the us we're focused effort takes really markets residential, to We're the that with deploying So now. don't different introducing that market. right the most commercial, going

ROTH. with Our next question comes from Darren Aftahi

Two, if I may.

I talked as of the been of the commercial, may year, question, go kind I headwinds? if EBITDA talked are talked on being SaaS could but this why kind state. now? have beyond which And those growth for margins, you to of you things you 'XX. guess, about I Steve I steady some where areas about XX% T., headwinds recall, counterbalance could a where think about, it second beginning which maybe pivot there guess right

Darren, yes, good memory.

You at guys about always of level have that XX% life makes a harder. the year. good talk did I the the my memory beginning

off more we've that next impressive initiatives of reach we backwards point a going coming of this the seen will growth more in year. we got scale, be comfortable don't EBITDA comfortable or XX% we that As And sort range that. at plus margins envision into saying the comfortable of we're of level are some

update. So an that's just

pipeline sort first we're done currently some that in we see It increased dev It that additional in the business in where that would get could the far acceleration we as the as of in growth. say logo that the a and anticipating. going be And of to corp could year? something of land it's either be, part or can some size contribution? domestically we new of someplace, SaaS I and the could get growth increase not be international results increased internationally that

right though, looking we're quarters. is out challenge now, X The

I to same things into in headwinds. provide don't year and sort we're right not we see that many we of this some of lean too I the ethereal we're say And growth get a even guess when would we're And are next sort relatively So coming able look. of front these as of base, pleased an like initial larger contribution with to year on to essentially able that us.

Our Vander with next Aarde Group. question comes Maxim from Jack

results. Nice Okay.

XXXX your for initial Steve SaaS at outlook, Trundle. Looking maybe

the international then partners For currently grow the if are internationally, providers to And there do markets? in kind there? you service Are Just XXXX in business, for that you have Is of number also, plans side the an have baked do have international the to of the assumption bit be curious further dissect you assumed they growing? existing are to they outlook. we can get of a flat? your

Sure. Jack, continue. yes, we'll I think

So anchor going we're market super-fortunate in set have provider great service to that a framework international tenants sort the with of of now. partner to we're right

of So enterprise in continuing there the That the we're could to have. lot markets. brands few. of providers really the many a said, of aren't we business have one -- sort to names out a work service or the And that of of at largest to the then add we want at smaller don't base side of sort that the already build

and There's we're on some particularly where markets still that. yet, we're working not active

market. there be at some faster be than domestically, will they at of partners mature. years couple Once someone, we where the kind on We're least there we're way adding to side international go will more a of but around clip their reorient So the business a new still names. year, to we and Alarm.com some usually a are change additional add oftentimes takes --

a we add after are but is add we the still there system So to working partners. partner, latency in some

question. piece the trying I'm second of remember your to So

you're expansion most had as to you new think you as -- wondering covered Yes. internationally that. if more outlook baked in assume well plans that I XXXX I into adding general? you was of just do countries that in partners

Yes.

at not we would add may we markets real. servicing. we're some new this our we're logos. upside. off we not that 'XX So do in modeling, When new new may logos are assuming we're outlook, model create We some that And point. things signing add currently That

our mind, there adds flow is some the that P&L. latency you in though, between between actually point keep of see into the result that those and Just

range And ceiling helpful. range. the Very just missed then Steve it. I of quick that just Valenzuela. a SaaS I XXXX Got the was maybe Can for actual think reiterate housekeeping outlook again? actual what you

Yes.

So million $XXX million. the range for to is $XXX XXXX

not showing I'm questions this further any And time. at

gentlemen, does today's ladies presentation. So and this conclude

You wonderful may and day. a have disconnect, now

Thanks.