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Alarm.com Holdings Inc (NASDAQ:ALRM)
Q3 2020 Earnings Call
Nov 5, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Alarm.com Third Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. David Trone, Vice President, Investor Relations. Please go ahead, sir.

David Trone -- Vice President, Investor Relations

Thank you. Good afternoon, everyone, and welcome to Alarm.com's Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Joining us today from Alarm.com are Steve Trundle, President and CEO; and Steve Valenzuela, CFO. Before we begin, a quick reminder to our listeners. Management's discussion during the call today will include forward-looking statements, which include projected financial performance for the fourth quarter 2020 and full year 2020 as well as early thoughts on 2021; emerging market dynamics and trends on our business and on anticipated market demand for our offerings; possible impact of the global economic uncertainty caused by the COVID-19 pandemic; our business strategies; plans and objectives for future operations, including expectations regarding our future relationship with ADT; continued enhancements to our platform and offerings, opportunities for growth in our current markets, and other forward-looking statements.

These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Statements containing words such as begin, believe, continue, estimate, expect, forecast, may, project, trend, will and other similar words are intended to identify such forward-looking statements. These statements are subject to risks and uncertainties, including the risks that any anticipated developments in respect of ADT may not occur or may unfold differently than anticipated, and those contained in the Risk Factors section of our most recent annual report on Form 10-Q filed with the Securities and Exchange Commission on February 26, 2020, and in subsequent reports that we file with the Securities and Exchange Commission from time to time, including the updated Risk Factors section of our quarterly report on Form 10-Q that we intend to file with the Securities and Exchange Commission shortly after this call, that could cause actual results to differ materially from those contained in the forward-looking statements.

Please note that the forward-looking statements made during this conference call speak only as of today's date, and Alarm.com undertakes no obligation to update these statements to reflect subsequent events or circumstances, except to the extent required by law. Also during this call, management's commentary will include non-GAAP financial measures and provide non-GAAP guidance. Management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in understanding the company's performance and trends, but note that the presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in the financial statement tables of our earnings press release, which we have posted to our Investor Relations website at investors.alarm.com. This conference call is being webcast and is also available on our Investor Relations website. The webcast of this call will be archived and a telephone replay will also be available on our website.

So with these formalities out of the way, I'd now like to turn the call over to Steve Trundle. You may begin.

Stephen Trundle -- President and Chief Executive Officer

Thank you, David. Good afternoon, and welcome to everyone. We are very pleased to report strong third quarter results. Our SaaS and license revenue in the third quarter was $100.1 million, up 17.9% over the same period last year. Our adjusted EBITDA in the third quarter was $34.5 million. I want to thank our service provider partners and the Alarm.com team for their continued strong performance as we navigate these challenging times. During the third quarter, we've seen ongoing strength in the professionally serviced smart home market in the U.S. and Canada. The commercial market, while not fully recovered to pre-COVID levels, also began showing some positive momentum in the third quarter. The strength of the recovery and the overall performance of our service provider partners, particularly in the residential segment, exceeded our expectations and drove the strong results.

On today's call, I will highlight the new products we've recently launched and review the progress we've made against our growth initiatives and their contributions to our overall business. I'll begin with our product initiatives. We recently launched an innovative new device called Flex I/O. Flex I/O is a security sensor that does not require a connection to a control panel or a hub or a WiFi network. It can stand on its own or be fully integrated into an existing multi-sensor control panel environment. The sensor is integrated with an LTE CAT-M, cellular communication capability, and is battery powered, so it can be deployed anywhere it may be needed. We designed Flex I/O for outdoor applications where we can extend security and awareness to any location on a property or even to other very distant properties.

Flex I/O addresses an entire set of new security use cases where existing sensors and devices that are directly connected to the control panel via low-voltage wires or RF connectivity, are not enough. For example, residential subscribers can monitor driveway gates or pool gates, detached garages, remote storage units, barns or mobile items such as boats, tractors, RVs or lawnmowers. In the commercial market, we see a strong fit with industrial facilities and other properties with diverse physical expense Flex I/O sends data to our cloud and allow subscribers to create customized alerts or to use the sensors event data to trigger Alarm.com automation scenes and video recordings. The device enables a new service plan with an incremental subscription fee, and will allow our professional service providers to extend the breadth of solutions that they can bring to their customers. We also released our Smart Water Valve + Meter solution this quarter, which had been announced earlier in the year at CES.

This solution can automatically shut off the property's water supply when its two onboard flow sensors detect first pipes, major leaks and even slow persistent drips. Unlike stand-alone water valve devices, our solution also works with water sensors deployed anywhere in the property to provide a whole home water safety solution. After a positive introduction to the Building 36 service provider partners who are primarily HVAC and plumbing companies, the solution is now also available to all Alarm.com service providers. Another strategic area of focus for our R&D program is intelligent integration with central monitoring stations. Over the last few years, we've been working closely with our monitoring station partners to improve service efficiency, reduce or eliminate false alarms and false dispatches, and differentiate the monitoring services provided by systems powered by Alarm.com.

I wanted to update you on the positive results of one of the products we've introduced. In 2019, we introduced a capability called smart signal which allows subscribers to easily cancel or verify alarms from our mobile app. This capability received several industry awards when it was released, including Security Product of the Year at CES. Rapid Response is a longtime central monitoring station partner of ours, and they moved aggressively to introduce smart signal to their Alarm.com service providers. Rapid Response recently reported to us that enabling the smart signal capability for a dealer has reduced dispatched alarm events by 25% to 30%. Next, I want to talk about the progress we're making against some of our key growth initiatives. As I have discussed on prior calls, we have been investing in video and video analytics, the commercial security vertical, international markets and then adjacent IoT application opportunities in order to fully capitalize on the growth opportunities we see. I'm pleased with the overall progress we've made.

These growth initiatives accounted for 22.5% of our SaaS revenue in the third quarter and grew 42% year-over-year. We continued to see strong growth in residential video. During the third quarter, 40% of our new subscribers opted to include video services with their systems. The growing contribution from video is the result of lots of hard work and investment to advance every aspect of our video service. We have a strong product and engineering team in place to continue to advance and differentiate our video capabilities. As the commercial market continues to recover, we're making good progress expanding our service provider base and tailoring our commercial platform to service an even wider diversity of property types, customer requirements and opportunities. In the last 12 months, about 50% of our service provider partners have created a new account with an Alarm.com commercial service plan.

In addition, Alarm.com service providers are beginning to bring OpenEye's enterprise-grade video monitoring solution to a growing number of sales opportunities. Meanwhile, EnergyHub continue to grow its network of energy utility partners this quarter. They recently announced that over 50 utilities now use the Mercury platform to manage distributed energy resource programs that include thermostats, electric vehicle chargers, batteries, solar inverters, water heaters and for commercial and industrial sites and aggregators. According to a recent report from Wood Mackenzie, a global research firm, EnergyHub manages the largest portfolio of flexible, customer-owned load of any distributed energy resource management system provider in the United States. One of EnergyHub's recent utility additions is the Los Angeles Department of Water and Power, the largest municipal utility in the country.

This past summer, EnergyHub's Mercury platform managed their thermostat driven demand response program and initiated seven demand response events to offset peaking requirements during the summer heat waves in California. As I said, the combination of the initiatives I just covered now constitutes 22.5% of our SaaS and license revenue, and each of these areas shows continuing promise. I believe that the R&D investments that we are making in these areas are serving the company very well. Before I hand things over to Steve Valenzuela, I also want to provide an update on ADT. Since the announcement of a $450 million investment by Google in August, we have been in discussions with ADT. These discussions have recently matured into a renewal of our agreement which will extend our partnership. I would like to highlight some of the terms of this extended agreement as well as our expectations.

Under the extended agreement, ADT will continue to promote and install their highly successful command and control offering to nearly all new professionally installed smart security subscribers until early 2023. Under the terms, we will support ADT with the integration of certain specified Google products into the command and control platform in early 2021. After the extended period ends, ADT has indicated that in 2023, they intend to begin activating professionally installed -- accounts in their residential business on a software platform that they are developing in concert with Google. We have agreed to support this initiative with the royalty-bearing IP license. We see no material changes in our business in 2021 or 2022 under this plan. And it's important to note that our agreement with ADT also anticipates that Alarm.com will continue to provide service to all existing ADT subscribers on both of the Alarm.com software platforms for the full service life of the subscriber accounts.

Overall, we are excited to resolve this uncertainty by extending our agreement with ADT until 2023, and we expect to continue to support ADT and millions of ADT subscribers who are serviced by our software platforms over the next decade. We have a strong and positive working relationship with ADT, and expect that to continue for many years and on many fronts. In summary, I'm pleased with our third quarter financial results and the work we have done this quarter on both the product side and commercial side of the business in the face of the pandemic. I want to thank our service provider partners, our ecosystem partners and the Alarm.com team for their hard work and our investors for their trust in our business.

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

Steve Valenzuela -- Chief Financial Officer

Thanks, Steve. I'll start with a review of our third quarter 2020 financial results, and then provide guidance for the fourth quarter as well as our raised outlook for the full year of 2020. I'll conclude with our initial thoughts on 2021 before opening the call for questions. SaaS and license revenue in the third quarter grew 17.9% from the same quarter last year to $100.1 million. This includes Connect software license revenue of approximately $9.5 million for the third quarter, down as expected from $10.8 million in the year ago quarter. Our SaaS and license revenue visibility remains high with a revenue renewal rate of 94% in the third quarter, at the high end of our historical range of 92% to 94%, and consistent with levels prior to the COVID pandemic. This high retention rate contributes to our favorable SaaS metrics with a very positive LTV-to-CAC ratio of approximately 3.9 due to our long lifetime customer value. Hardware and other revenue in the third quarter was $58.7 million, up 36.7% over Q3 2019.

We continue to see strong sales of our video cameras which primarily accounted for a large increase in hardware sales. Total revenue of $158.9 million for the third quarter grew 24.2% from Q3 2019. SaaS and license gross margin for the third quarter was 85.7%, up approximately 30 basis points from the same quarter the last year. Hardware gross margin was 20.2% for the third quarter, compared to 18.3% for the same quarter last year primarily due to product mix. Total gross margin was 61.5% for the third quarter compared to 62.8% for the same quarter last year, mainly due to higher hardware revenue. Turning to operating expenses. R&D expenses in the third quarter were $36.9 million compared to $29.5 million in the third quarter of 2019. We ended the third quarter with 750 employees in R&D, and total head count of 1,361 employees, up from 582 employees in R&D and total head count of 1,043 in the year ago quarter. Sales and marketing expenses in the third quarter were $18.4 million or 11.6% of total revenue compared to $14.5 million or 11.4% of revenue in the same quarter last year.

Our G&A expenses in the third quarter were $17.4 million, down from $18.7 million in the year ago quarter. G&A expense in the third quarter includes expenses that we exclude from our measurement of our non-GAAP financial performance, which we refer to as adjusted measures. These include nonordinary course litigation expense of $2.4 million compared to $2 million for Q3 2019. In Q3, we also booked a gain of $24.7 million as a result of the payment we received when an unrelated third party acquired an entity where we had an investment. The gain from this investment is reflected in our GAAP P&L as other income. However, it's excluded from operating income and our non-GAAP financial results as this gain is not related to our operating performance. Non-GAAP adjusted EBITDA in the third quarter was $34.5 million, up 31.1% from $26.3 million in Q3 2019.

In the third quarter, GAAP net income was $36.1 million compared to GAAP net income of $17.7 million for Q3 2019. Non-GAAP adjusted net income increased to $24.6 million in the third quarter, up 32.3% from $18.6 million for the third quarter of 2019. Turning to our balance sheet. We ended the third quarter with $247.2 million of cash and cash equivalents. Our DSOs in Q3 were 46 days which improved from 49 days in Q2 2020 and are flat compared to a year ago when our DSOs were also 46 days. We continue to have a strong balance sheet and a cash flow positive business model. In the third quarter, we generated approximately $18.6 million in cash flow from operations, up from $1 million cash flow in the third quarter of 2019. Our free cash flow for the third quarter was $15.1 million compared to negative $4 million for the same quarter last year.

On a year-to-date basis, through the first nine months of 2020, our operating cash flow was $66.7 million and free cash flow was $56 million, up significantly from the same period in 2019. Next, I will review our outlook for the fourth quarter and full year 2020. For the fourth quarter of 2020, we expect SaaS and license revenue of $101.2 million to $101.4 million. For all of 2020, we expect SaaS and license revenue to be between $389 million to $389.2 million, up from our prior guidance of $382.7 to $383.1 million. We are raising our guidance for total revenue for 2020 to $594 million to $604.2 million, up from our prior guidance of $552.7 million to $563.1 million, which includes estimated hardware and other revenue of $205 million to $215 million. We are raising our guidance for non-GAAP adjusted EBITDA for 2020 to $113 million to $115 million, up from our prior guidance of $106 million to $107 million.

Non-GAAP net income for 2020 is estimated to be $80 million to $81.5 million or $1.57 to $1.60 per diluted share, up from our prior guidance of $74.2 million to $74.9 million or $1.46 to $1.47 per diluted share. We expect our non-GAAP tax rate to remain at 21% for 2020, and EPS is based on an estimate of 51 million weighted average diluted shares outstanding. We expect full year 2020 stock-based compensation expense of $28 million to $29 million. Finally, while we are in the initial planning stages, I will provide some early thoughts on 2021 with the caveat that we cannot forecast the impact if additional COVID shutdowns or other economic upheaval were to occur, including the impact on our service providers or our supply chain, among other factors.

With that said, we currently believe our SaaS and license revenue for 2021 will be around $435 million. Total revenue is currently expected to be between $640 million and $650 million, with hardware and other revenue of about $205 million to $215 million. At this time, non-GAAP adjusted EBITDA for 2021 is estimated to be around $120 million. We will provide our initial guidance for 2021 when we report our fourth quarter 2020 results in February next year. In summary, we are pleased how well our service provider partners and our Alarm.com teams are performing in this environment. We will continue to work hard to support our 9,000-plus service provider partners and their customers during these challenging times.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Adam Tindle of Raymond James. Your line is now open.

Adam Tindle -- Raymond James -- Analyst

Okay. Thanks. Good afternoon. Steve, first I want to acknowledge the strong results. I'm afraid the focus is largely going to be on ADT, so I wanted to ask a couple around that. I think you -- thanks for the commentary there. It was helpful. You said you anticipate Alarm.com will provide service to all existing customers on both platforms for the full service life of the subscriber. What is the full service life of the subscriber? What are you expecting? I know they're going after this with a lot of marketing dollars but may not make sense to truck roll. So I'm just trying to -- I'm sure people will be trying to understand that cadence of the runoff in the service life of the subscriber.

Stephen Trundle -- President and Chief Executive Officer

Sure, Adam. Yes, we're -- so when we say service life, normally, you activate a subscriber. And I think what we see if that's on the Alarm.com platform or on the command and control platform, as that subscriber typically will have lower attrition than a normal industry subscriber. But that attrition rate picture and be anywhere from 10% to 15%, depending on a number of factors. And what we would expect, therefore, is when a customer is activated, that if you had 1000 customers, 15% -- or 12% or so would probably attrit in the first couple of years, and then you get to sort of a 10% to 15% steady rate.

So average customer life tends to be around eight years, eight, nine years, something like that is what I would think of as normal -- as a normal customer life. It depends on how well the service provider is doing. And I think in this case, the exciting thing as we started the quarter with a lot of uncertainty. I had a contract that was terminating in the middle part of next year, and solved for that -- extended that contract. So we know it's occurring in 2021. We know what's occurring in 2022, and there will be subscribers coming on, and then they'll run for their full life.

Adam Tindle -- Raymond James -- Analyst

Okay. That's helpful. I think you also mentioned that after it ends you'll still support via a royalty or IP license agreement. Is there a way for us to maybe think about as that occurs -- that transition occurs, just kind of the change in economics, generally speaking.

Stephen Trundle -- President and Chief Executive Officer

Well, it's obviously less. And I can't really go into the exact -- unfortunately, I can't really communicate exactly the terms of our agreement there. But I think what I will say is it's a reasonable recurring loyalty agreement and includes a lot of incentives for different types of performance by our customer in different areas. So it has some variability in it, depending on how those incentives are going. And -- but I can't really give you the dollar number there, no.

Adam Tindle -- Raymond James -- Analyst

Okay. Maybe I'll try one last one then instead. Each company there is, I think, investing like an additional $150 million on top of the $450 million. It's a pretty expensive pursuit relative to your enterprise value, given you're already scaled, you have over 9,000 dealers. I'm just, bigger picture, trying to understand how you think about chess moves and strategic alternatives, the optionality this creates, maybe the pros and cons to you partnering with a bigger entity. Just kind of bigger picture strategic chess moves.

Stephen Trundle -- President and Chief Executive Officer

Yes. So I think the first was to the decision to make to support the certain set of Google products with ADT and the command and control offering. And we chose to do that. I think that enables our customer to market that set of products to new customers for the next couple of years as well as upgrade existing customers as that may make sense. So that's how we sort of looked at that. And in terms of longer term, I guess what I would say is we have a dynamic where a customer that's roughly 15% of our revenue, that's probably slightly trending down already was primarily because of the growth that we have in some of the initiatives I talked about during our -- during my prepared remarks.

We've got a set of things that now represent 22%, 23% of our revenue, and they're growing 40%. So we already had a little bit of a natural decline in that number. We, I think, got a nice healthy runway here. And we'll continue to look at areas where we can focus that we think will create durable long-term and diversified revenue streams. So that's probably how I look at it. At the same time, I'm sort of relieved and happy that we have -- had a clear plan here and a clear runway for more than a couple of years.

Adam Tindle -- Raymond James -- Analyst

Understood. Thanks and congrats again on the results.

Stephen Trundle -- President and Chief Executive Officer

Thank you.

Steve Valenzuela -- Chief Financial Officer

Thanks.

Operator

Thank you. And our next question comes from Nikolay Beliov of Bank of America. Your line is now open.

Nikolay Beliov -- Bank of America -- Analyst

Hi. Thanks for taking my questions. Steve, last quarter, you spoke about COVID potentially being a durable positive secular shift to the business on the residential side. Do you have any more data points over the last three months to confirm or maybe disprove that.

Stephen Trundle -- President and Chief Executive Officer

Yes. Good question, Nikolay. I think we have been surprised, and we're not -- I cannot 100% say it's all COVID induced. But almost from top to bottom. We've been surprised by the performance of our service providers over the last three or four months. And I think that what we're hearing from our service providers are the customers are home, they're ready to take meetings. They want to invest in their home because they're not traveling, so they have a bit more discretionary income. And some of them are adding second homes for which they need monitoring and that sort of thing. And automation, obviously, remote -- all the things we do.

So it appears -- it's just appeared much stronger than what we expected. That's great. Commercial has not quite been as strong, as I indicated, but has now gotten closer to sort of the pre-COVID levels. And the real question is, is this a long term trend. Is suburbanization sort of an ongoing thing? Are we looking at some short-term benefits here? I think that the nature of our business is one where you add a customer, and you essentially hope to keep that customer for life. And it may be life across several properties, but you really do hope that you can add enough value and convenience to their lifestyle that they remain with you or with your service provider for a long period of time.

So I think we're probably seeing something that will have some long-term benefits to our business and our service providers because we're grabbing more ground right now. It may be induced by COVID. It may be something else going on. But we're grabbing more turf and more subscribers than what we anticipated at the end of the year. And I think that will give us kind of perpetual optionality to bring in additional products like the Flex I/O that I talked about or like the Smart Water Valve + Meter. And hopefully create an expectation for convenience in the eyes of the subscriber that will last forever. So I think it's positive.

Nikolay Beliov -- Bank of America -- Analyst

I personally find the Flex I/O product quite interesting. And in my opinion, probably one of your most important innovations over the last few years. Is it in the marketplace? What has been customer reception so far from the beta proof of concept? What use cases do you think customers would gravitate toward? And what's the price uplift from a customer deploying Flex I/O?

Stephen Trundle -- President and Chief Executive Officer

Yes. So it is just going into the market, really this -- as we speak right now, this month. It has been in beta for a long time. We're using new cellular technology there. So we wanted to make sure that the reliability -- I mean we're in life safety at times. So we want to make sure that we have industrial-grade sort of life safety caliber reliability with that connectivity. It's battery powered. So you have a lot of testing of power management and different types of climate environment. So we've been testing it for a long time with a set of marquee service providers. And the feedback is variable, but I will say -- not variable in a bad way. I mean we have some folks that really think it's a game changer and are excited to use it for just a whole myriad of purposes. I think particularly if you're in an area where you're -- it's sort of a more spread-out suburb, where people are living on three, four, five acre types of lots, and they have detached garages, and they may have some equipment, some capital equipment to be used to maintain the property. They may have -- I mean, even weird things.

We've heard of people installing this thing on their chicken coop, for example, to make sure they didn't leave the door open on that. So pretty much anything you may have as a hobby, Flex I/O now allows us to add some value to. It allows us to monitor. If you have a second home, a cabin, a barn, a gate. Gate has been a very heavy use case. People that have a gate either coming into their home or coming into a second property or into a farm. So it's got a super wide set of use cases. It's difficult for us to predict just sort of how broad the distribution will be. I think some of that will be on us. How many different distribution engines do we create to enable us to maximally leverage that product. But the feedback has been very strong.

In terms of incremental subscription rates, with our service providers, there obviously are wholesale rates, wholesale costs that -- between us and the service provider than their selected service provider may charge the subscriber. And I'll start with what we think the consumer price is. We're thinking that if you have nothing else other than a Flex I/O system. So suppose you want to have -- you have a barn, and in that Barn, you're storing your favorite Massey Ferguson tractor, and you just want to know if someone goes into the barn. That's about $9 to the end customer. Our dealer will obviously make margin on that. And much cheaper to the dealer. If it's in addition to your existing Alarm.com system.

So hypothetically, I want to add a device -- if I have a swimming pool, and my swimming pool is too far from my home to sort of monitor with RF connectivity, and I want to know if someone comes into the gate, if a child goes into the swimming pool or whatever. Then I'm just adding it to my existing Alarm.com system. It's already supported by a control panel, and I'm already paying Alarm.com some type of subscription fee there. To the consumer, we think that's sort of a $3.50, $4 additional fee that the dealer will charge them. And as I said before, the dealer will then make money on that incremental RM and on the hardware sale itself.

Nikolay Beliov -- Bank of America -- Analyst

Got it. Thanks so much.

Stephen Trundle -- President and Chief Executive Officer

And you may add like five or six of them. It really depends on the use cases. So...

Nikolay Beliov -- Bank of America -- Analyst

All right. Thank you.

Operator

Thank you. And our next question comes from Jeff Kessler of Imperial Capital. Your line is now open.

Jeff Kessler -- Imperial Capital -- Analyst

So I have a couple of questions about the growth of your other business. It seemed that for quite a period of time, it was in the 8% to 10% area of revenue. And now all of a sudden, it is quite a bit higher. The -- you could -- you talked a little bit about what areas are really -- are driving this. I know that you've been -- you've probably been strong in South America. You've probably been in strong -- these new data points you're giving us in EnergyHub. I know it's a very wide range of areas that we're talking about. But if you could just give us some color around why this has become such a bigger part of the company in a fairly short period of time.

Stephen Trundle -- President and Chief Executive Officer

Yes, Jeff, it's a good question. And a data point, I was excited to toss out there this quarter when we did the analysis. What we were looking at -- last quarter, someone asked us how do we measure sort of return on investment around some of the R&D investments we're making. So we looked at the domains where we're really kicking into gear with a lot of R&D. And those domains were commercial, international video and our subsidiary businesses. And we put the revenue coming from those categories and as the numerator. And the denominator is all SaaS and license revenue. All. We excluded anything from ADT in the numerator, but we left everything from ADT in the denominator, and we looked at how much is that. And as I said, it's around 23% right now. And the growth in those categories year-over-year is around 40%. So it's a pretty quickly growing part of the business.

Each one has different drivers. And we can go through them one by one. But I cover them at different points and different conference calls. I think EnergyHub is reaching a new level of maturity. Expanding the platform to shift from sort of solely a demand response platform, but being more of a software platform that allows the utility to manage all of the edge resources, including batteries. And therefore, getting to sort of a larger, more important position with their customers. Commercial, it's really a game where we're bringing the same ease and convenience that our platform affords to our service providers. And in some cases, teaching them how to go after the commercial and access control market. In other cases, they're already very well studied there, and we're sort of just getting some additional wallet share.

International's a slog, but it's a slog where we're doing well. And we've been continuing to make investments. And getting to sort of a point where it's more mature now. And instead of people running pilots and tests, our salespeople get out there every day and selling Alarm.com in 40 different countries. So a lot of these things are reaching a maturity that makes them more relevant. And that maturity is sort of confirmatory of the investments we've been making for the last two or three years, and showing nice return.

Jeff Kessler -- Imperial Capital -- Analyst

Right. Second question is, you know my long-term interest in the problem and the potential fixes for false alarms verification. You decide something that you were doing, obviously, with Rapid Response. There aren't that many really great independent monitoring companies that are out there. But Rapid Response, obviously is one of them. Is this the type of business that you can -- if you demonstrate it at some place like Rapid Response and it works, you can get out in front of other providers as well? I mean, clearly, ADT has been talking about the stuff that it's been doing with you now for a while. I'm just wondering what your -- not just what your relationship there is, but also what are you doing with the universe of potential users to start cutting down on false alarms and fines and increasing -- decreasing response times.

Stephen Trundle -- President and Chief Executive Officer

Right. No, great question. So yes, you're correct about Rapid Response. I think the industry does watch that central monitoring station. And you and I probably both knew Russ, so very, very high quality operators. And I was up there a few months ago and looking at all the different things they were doing. And in those conversations, we talked about smart signal, and what its impact had been on what we call the false dispatch rate. False dispatch is obviously better -- or bad for everyone. Bad for first responder. It's bad for the subscriber. It means that you had an alarm that was false, and we dispatched on it or we and our partner did. So we looked at the impact there of our work together on smart signal. And obviously, on their side, there's education of the service provider. And there's a lot of technology they bring to bear to make all this work with us.

And the impact was very, very meaningful. And if you're cutting down false dispatches by 25% with a capability like that, that we've embedded in the consumers' mobile app, huge savings downstream. Huge savings. So we were excited about that. We're continuing to do a lot more in this domain across all elements of the offering. Everything from AI, in terms of the way we interpret different events coming in to much more sophisticated video analytics to more user control. And I think that working with our partners. I think everyone will -- it's in the entire industry's interest and will continue to be in our interest, to make sure the consumer has a great convenient experience and that we reduce all the downstream costs we're generating. So I think you'll see people follow here.

Jeff Kessler -- Imperial Capital -- Analyst

Is your dream team of object video guys involved in this?

Stephen Trundle -- President and Chief Executive Officer

They're definitely involved in the initiative, yes.

Jeff Kessler -- Imperial Capital -- Analyst

Yes, OK. Thank you very much.

Operator

Thank you. And our next question comes from David Robinson of William Blair. Your line is now open.

David Robinson -- William Blair -- Analyst

Hey, guys. Just a quick question on the Flex I/O product. So I realize this is kind of really days and has just been released. But I guess I was kind of wondering how long does it take for the service providers to kind of get ramped up on the product and then take it from there to kind of selling into the residential customers? And then in terms of I guess, growth rates and expectations. I was just curious what you're thinking, how you picture this product kind of progressing relative to success you've seen in the video analytics category.

Stephen Trundle -- President and Chief Executive Officer

Okay. Yes, good question. So on the uptake, meaning the complexity that the service provider has to deal with, it's actually, in this case, very modest. We've eliminated the need for a power supply. If you don't have a power supply, it's cellular. It's sort of a put the battery in, connect it and let it register, and it works. So for its most simple use case -- simple use cases in terms of installability would be things that look and feel like what we've traditionally called a contact sensor, where you have a sensor that's monitoring a door that opens, or you have a tether sensor where you have a loop looks like a bicycle chain almost, and you loop something into that into that bicycle chain and when the chain opens, you know that you've had activity there. So those are really pretty simple installs. And any of our service providers that are already familiar with the overall back-end system of Alarm.com can add that very quickly. And then probably the heavy lift will be getting their sales teams to be aware of the types of solutions they now can render to the market.

Technical impedance, very little. There's always a certain amount of educational impedance and education of sales teams, particularly since these are third-party sales teams, on how to find those use cases, how to present them to the subscriber. So I think putting that together, it will look something -- maybe not quite as quick as analytics. Analytics is going very well. But I think we'll see kind of a similar dynamic where first six, nine months, it's -- we're seeing steady progress in terms of adoption. But we're not seeing it be sort of down moving progress in our P&L. And then once you get 1.5 years or so out, you've got enough people trained, enough education, enough experience selling and installing that it becomes a part of daily arsenal of 9,000 service providers, and then it kicks in and begins to really contribute.

David Robinson -- William Blair -- Analyst

Awesome. Thanks for that.

Stephen Trundle -- President and Chief Executive Officer

Sure.

Operator

Thank you. And our next question comes from Darren Aftahi of ROTH Capital Partner. Your line is now open.

Darren Aftahi -- ROTH Capital Partner -- Analyst

Hi, guys. Thanks for taking my question. And congrats on the quarter. Hope you are well. Curious to, first, the percentage of subs, new subs in the quarter, what percentage of those were from existing subs, meaning, Steve, you talked a little bit about people buying a second home. I'm just kind of curious on that. And then can you give what the other revenue was in the quarter, please. Thanks.

Stephen Trundle -- President and Chief Executive Officer

So I will unfortunately have to acknowledge that I don't actually know the percentage of our -- it's a great question. The percentage of our new subs who are taking the offering for second homes. The other heavy situation there is your commercial enterprise. And you have 80 different stores and you start with five and you expand that way. I bet that's a pretty good number, but I don't know it, and it's one we should check. And it's hard for us to totally no because our service providers are in charge of the subscriber. But oftentimes, if you have multiple properties or multiple stores, you're tying those two user expenses together and overlap. And we could check that growth rate of [Indecipherable]. I just don't have it on the top of my stack. I'm going to let Steve answer the second question, though.

Steve Valenzuela -- Chief Financial Officer

Yes. Yes, Darren. So the other segment revenue was $7.3 million in Q3, and it was up 46% year-over-year. That includes EnergyHub, PointCentral, Building 36 where we announced the Smart Water Valve + Meter that we came out with this quarter. Of course, it's not in the sales numbers yet but it's just been released.

Darren Aftahi -- ROTH Capital Partner -- Analyst

So if I could just sneak one more in. So as we think about your -- I think you said $435 million for 2021 SaaS revenue. Like how should we think about that other segment in terms of the growth profile, maybe relative to the overall business. Thank you.

Stephen Trundle -- President and Chief Executive Officer

The other segment has been growing. Depending upon the quarter end, there is some seasonality within EnergyHub and timing differences. But generally, the other segment has been growing anywhere from 30% to 40% year-over-year. We don't see any reason why that would change in 2021. Operator.

Operator

Thank you. And our next question comes from Jack Vander. Your line is now open.

Jack Vander -- Maxim Group -- Analyst

Hi, great. Thanks.

Stephen Trundle -- President and Chief Executive Officer

Thank you.

Jack Vander -- Maxim Group -- Analyst

Hi, Stephi. Excellent quarter.

Stephen Trundle -- President and Chief Executive Officer

Thank you.

Jack Vander -- Maxim Group -- Analyst

Thanks for taking my questions. A lot of analysts have already touched on some of the stuff I wanted to ask but let me revisit this topic. Maybe Steve T., you initially responded to an earlier question at the average customer life -- or consistent customer life, I guess, is eight or nine years maybe for single property. And you hope to maintain that customer, though, for the entire life as they move properties. So either Steve T. or Steve Valenzuela, do you have any data points or metrics you can maybe share in the total number of subscribers that have deactivated because they're moving properties, and then have actually gone on to reactivate Alarms properties. Any data points or metrics you have that would provide evidence of that?

Stephen Trundle -- President and Chief Executive Officer

Well, we do have a revenue retention rate that we -- it's been pretty consistent at the high end of 94%. But I will say, based on our past experience, moves is probably one of the main reasons for attrition. Now with the -- obviously, people expanding and adding second homes, generally, people have not been moving as much, though. They've been adding the second homes and adding other properties. They've been moving out of cities where generally you have apartments where typically you don't have an alarm system in your apartment. So I think we've been benefiting from that trend. And I think, overall -- but yes, moves is certainly one of the reasons why you have attrition.

Steve Valenzuela -- Chief Financial Officer

There is a metric, Jack, in the industry and others report it that you may want to look at. We don't keep it -- because we don't always know that it's what we call a resign. But service providers that are public oftentimes report their resigns and they report attrition net of resign. And the larger you are, as a service provider, the more advantage you have when people move because you can resign them in a new market, they may have moved in. But some of the service providers do report that. I don't think we have it right now. We could probably find anecdotal examples by talking about.

Jack Vander -- Maxim Group -- Analyst

Okay. That's helpful. That's helpful. And then let me shift gears. There's a lot of talk -- some talk on international. I'm hoping explicitly or specifically to get an update maybe on the partnership you announced last quarter on the lease developments and progress with your partnership with Johnson Controls and the countries and regions you're going after with global interactive services?

Stephen Trundle -- President and Chief Executive Officer

Sure. Yes. I think that partnership is going well. I think they've done a great job. I just would say, in that case, we we had a time-bound objective to upgrade a lot of existing subscribers that they were servicing internationally in several different markets. And it was a hard project, and they executed on it very well. We obviously worked with them on that. So we upgraded quite a few customers throughout the first nine months of the year there. But we also got the sales team's condition, the installers condition and now have a nice -- what I would say, both parties are now enjoying the fruits of that labor. We have a nice engine that is producing subscribers every day in Chile, and Argentina and many Latin American markets as well as U.K. and Australia.

So it's -- that's going well. We're happy with it. We're continuing to upgrade the platform. But we're, at this point, up in about 40 different countries, and have a whole litany -- or a whole set of service providers that we're at various stages with and still are working through some kinks market-by-market and the technology, but are getting, I think, more mature. And overall, the segment -- so international was hit I think I indicated last quarter, it was -- took a little bit more of a dive with COVID than the U.S. market and was slower to come out of that. But we're just getting back to pre-COVID levels now. Internationally, we'll hope that doesn't reverse that. But it's come back, and now we're back sort of into beginning to get into the green growth area, again, in terms of daily installations.

Jack Vander -- Maxim Group -- Analyst

Okay. Fantastic. Thats it for me guys. Again, great quarter. A solid guidance.

Stephen Trundle -- President and Chief Executive Officer

Thank you.

Steve Valenzuela -- Chief Financial Officer

Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call participants:

David Trone -- Vice President, Investor Relations

Stephen Trundle -- President and Chief Executive Officer

Steve Valenzuela -- Chief Financial Officer

Adam Tindle -- Raymond James -- Analyst

Nikolay Beliov -- Bank of America -- Analyst

Jeff Kessler -- Imperial Capital -- Analyst

David Robinson -- William Blair -- Analyst

Darren Aftahi -- ROTH Capital Partner -- Analyst

Jack Vander -- Maxim Group -- Analyst

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