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DATE

Thursday, May 7, 2026, 4:30 p.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Stephen Trundle
  • Chief Financial Officer — Kevin Bradley

TAKEAWAYS

  • SaaS and License Revenue -- $181.5 million, reflecting 10.8% growth year over year and a $5.6 million outperformance versus the guidance midpoint, driven primarily by a 95.4% revenue retention rate and timing of EnergyHub revenue.
  • Total Revenue -- $265.2 million, representing 11% growth year over year.
  • Hardware and Other Revenue -- $83.7 million, up 11.5% year over year, including approximately $5 million from tariff pass-through fees tied to higher import tariffs.
  • Adjusted EBITDA -- $49.6 million, exceeding internal expectations due to revenue outperformance, with a non-GAAP adjusted EBITDA margin near 18.7% for the quarter.
  • GAAP Net Income -- $23.6 million, down from $28 million in the prior year, predominantly due to lower interest income after retiring $500 million in convertible notes.
  • Non-GAAP Adjusted Net Income -- $34.7 million, up from $32.2 million year over year.
  • Earnings Per Diluted Share -- $0.65, up 14% from the prior year’s quarter.
  • Free Cash Flow -- $49.7 million generated in the quarter.
  • Share Repurchases -- 428,000 shares bought for $20 million during the quarter, with a total authorization of up to $150 million in repurchases over two years.
  • Cash Balance -- $497.4 million at quarter-end.
  • Revenue Retention Rate -- 95.4%, characterized by Kevin Bradley as "one of the highest readings on this metric in the past ten years."
  • Segment Gross Margins -- Alarm.com SaaS gross margin of 87%-88%; Other segment (including EnergyHub) gross margin of ~60% in Q1, with expectations for 65%-70% longer term.
  • R&D Expense -- $72.1 million, increasing 5.4% year over year and representing continued investment rather than immediate margin leverage.
  • Employee Count in R&D -- 1,140 at quarter-end, up 1% from the prior year.
  • AI Product Development -- Introduction of OpenEye’s AI Visual Check and AI Visual Search, now included in the premium video subscription, with growing customer adoption.
  • Segment Expansion -- Over 155 utilities engaged under EnergyHub, covering 75 million to 77 million meters.
  • Updated Guidance -- Raised SaaS and license revenue outlook for 2026 to $749.5 million-$750.5 million, and total revenue to $1.0595 billion-$1.0705 billion, with non-GAAP adjusted EBITDA projection of $215 million-$216 million and adjusted net income of $151.5 million-$152 million.
  • Tariff Adjustments -- Lowered hardware revenue guidance for the second half of 2026 to reflect a Supreme Court ruling that cut relevant import tariffs by about half; pass-through fees to decrease accordingly.
  • Memory Market Volatility -- Management cited ongoing cost increases for memory used in hardware due to market shifts favoring AI data center applications, with planned price responses but uncertain demand impact.
  • Non-GAAP Metric Redefinition -- Non-GAAP profitability metrics now exclude mark-to-market gains and losses on equity securities; this reduces 2025 adjusted EBITDA by $4.7 million retrospectively.

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RISKS

  • Ongoing supply chain volatility and "substantial cost increases" for hardware memory components due to market realignment for AI data centers may persist, with management warning, "these challenges to continue until the memory market corrects."
  • Hardware revenue outlook for the second half is characterized as "cautious" in light of memory cost pass-through effects and the unknown demand elasticity to higher hardware prices.
  • Hardware and other revenue will decline by approximately $5 million per quarter in the second half due to the reduction of tariff pass-through fees following the February Supreme Court ruling.
  • GAAP net income fell to $23.6 million from $28 million primarily due to lower interest income following the retirement of $500 million in convertible notes, indicating a reduced cushion from financial income.

SUMMARY

Alarm.com (ALRM +3.32%) reported double-digit growth in SaaS, license, and hardware revenues, with especially high revenue retention and specific contributions from both the EnergyHub and commercial video segments. The rollout of differentiated AI-driven features within the commercial video business has begun to accelerate adoption and expand use cases beyond traditional security. Guidance for SaaS and license revenue as well as total revenue for the year was raised, while management adjusted its 2026 hardware revenue outlook due to changing tariff structures and ongoing memory component supply risks. Updated definitions for non-GAAP profitability now remove mark-to-market effects from equity holdings, reshaping historical comparisons. Cash deployment priorities include both share repurchases and maintaining flexibility for acquisitions.

  • Kevin Bradley stated that adjusted EBITDA margin is projected to expand by 30 basis points year over year, with goals to reach 21% by 2027.
  • Management identified integration synergies between EnergyHub and core security offerings, mentioning ongoing R&D pilots to increase customer engagement across segments.
  • OpenEye’s pipeline remains active, with customers increasingly adopting AI features for both operational and security use cases in large commercial environments.
  • EnergyHub is working with utilities that collectively service around 75 million to 77 million meters, with the strategic focus now on increasing device enrollments within this installed base.
  • The PointCentral multifamily business continues double-digit growth and is cited as one of the top providers in the space, though not a major driver of consolidated growth yet.
  • Stock-based compensation for 2026 is projected to be $35 million-$37 million, and the effective non-GAAP tax rate is expected to remain at 21%.

INDUSTRY GLOSSARY

  • OpenEye: Alarm.com’s enterprise commercial video platform, providing cloud-based, AI-driven video security and analytics.
  • EnergyHub: Alarm.com’s platform for distributed energy resource management, utilized by utilities for grid reliability and demand response.
  • AI Visual Check: OpenEye’s AI-powered capability that automates monitoring for operational safety and compliance within customer properties.
  • AI Visual Search: OpenEye’s tool enabling natural-language video search and forensic investigation across commercial camera environments.
  • PointCentral: Alarm.com’s multifamily property automation and management solution integrating access, HVAC, and energy controls.

Full Conference Call Transcript

Stephen Trundle: Thank you, Matt. Good afternoon, and welcome to everyone. We are pleased to report first quarter results that exceeded our expectations. Our SaaS and license revenue in the first quarter was $181.5 million, up 10.8% year-over-year. Our adjusted EBITDA in the quarter was $49.6 million. Our results continue to reflect contributions from across our businesses, with nearly every area running at or slightly above the plan we set out for the year. We had a bit of revenue in the EnergyHub business move forward from the third quarter, but aside from this modest anomaly, the results are a broad-based reflection of how our various business units performed.

While our results are solid, there were a few bumps along the way in the quarter. In January and February, we saw new homebuilding and other business activity impacted by a long spell of snow and ice due to extreme cold weather that affected much of the U.S. Installation activity was greatly reduced for about three weeks and then bounced back strongly and accelerated through March, reflecting the durability of demand. Toward the end of the first quarter, we also began to deal with supply chain volatility related to standard memory availability as manufacturers shifted more production to sell into the HBM category for AI data centers.

This has led to widely reported substantial cost increases for the memory we use in cameras and other products. We are actively working to manage both supply chain availability of memory and the cost expansion caused by this market dynamic and expect these challenges to continue until the memory market corrects. As a reminder to investors, the portfolio of businesses that we consolidate into our quarterly results spans multiple markets at different stages of development. Our commercial business includes Alarm.com for Business, OpenEye, Checked, and Shooter Detection Systems. These commercial businesses are all growing as the security and access control markets evolve toward integrated, cloud-based, AI-driven solutions.

Our energy business, EnergyHub, continues to be a meaningful growth contributor and represents a growing share of our overall revenue mix. The EnergyHub platform provides mission-critical distributed IoT management solutions that help utilities address long-term structural pressures on grid reliability and infrastructure. Our core residential business provides a large, durable foundation with a large TAM and a highly productive service provider channel. Structurally high revenue retention is due to the wide range of physically installed devices that subscribers interact with through our application every day. In each business, we deliver software that orchestrates connected devices at scale.

This enables us to leverage AI to improve ease of use, unlock new use cases, and make our solutions increasingly essential to both security and operational workflows. In our commercial offerings, where an enterprise may have dozens or even hundreds of video cameras installed, AI-driven use cases are particularly valuable. OpenEye, our enterprise commercial video business, released several capabilities during the quarter that fit this profile. One is a powerful new capability called AI Visual Check. AI Visual Check can detect and issue real-time notifications when a fire exit is blocked, a shelf needs restocking, or a security post is unattended.

Customers managing large properties or multisite environments can use AI Visual Check to reduce reliance on manual safety protocol oversight, enabling faster responses to operational issues and improving security compliance across geographically disparate locations. OpenEye also introduced AI Visual Search. This allows security personnel to describe what they are looking for using natural language and retrieve relevant forensic results. They can quickly locate specific moments, objects, or activities across their broad video environment. Both capabilities are included in OpenEye's premium video subscription service, and end-customer adoption of that service is rapidly growing. Before I hand things over to Kevin, I want to discuss our share repurchase program.

During the last two quarters, we purchased over 800,000 shares of our common stock, including over 400,000 shares during the first quarter. Last week, our board authorized the purchase of up to an aggregate of $150 million of our outstanding common stock over the next two years. As I expressed on last quarter's call, we believe that AI is primarily an opportunity for Alarm.com Holdings, Inc., and we will therefore seek to take advantage of any SaaS universe dislocations in the market while still maintaining balance sheet capacity to also pursue acquisitions opportunistically as we have done over the last several years. In summary, I am pleased with our first quarter results.

We remain focused on creating long-term value for our service providers and their customers across residential, commercial, and energy markets and, in the process, creating value for our long-term shareholders. I want to thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. With that, I will turn things over to Kevin Bradley to review our detailed financials for the quarter and our updated guidance.

Kevin Bradley: Thanks, Steve. I will begin by reviewing highlights from our first quarter financial results, and then close with our updated guidance for the second quarter and full year 2026, including several moving parts in our hardware outlook. A few months into the year, I am pleased to report results that continue to demonstrate the durability and resilience of our target markets and business model. We are fortunate to have partnerships with thousands of talented operators who time and again prove their ability to navigate complex and dynamic market environments while delivering mission-critical IoT-based services across the globe. SaaS and license revenue grew 10.8% year-over-year to $181.5 million during the quarter, exceeding the midpoint of our guide by $5.6 million.

A driving factor here is our revenue retention rate of over 95% for the quarter, one of the highest readings on this metric in the past ten years. Another factor contributing to the SaaS beat is the continued outperformance at EnergyHub. As a reminder, EnergyHub revenue recurs on an annual basis, and seasonality can vary based on utility program activity and other factors. Hardware and other revenue totaled $83.7 million, up 11.5% year-over-year, and total revenue grew 11% year-over-year to $265.2 million. As you will recall, on January 1, we began passing through the higher tariff rates that had been implemented under the International Emergency Economic Powers Act. Approximately $5 million of our Q1 hardware revenue is from those pass-throughs.

We continue to charge those fees today, consistent with the rates we paid to U.S. Customs and Border Protection upon import for the inventory we are currently selling. I will address the expected impact of the February Supreme Court ruling on hardware revenue when I provide our updated guidance for full year 2026. Hardware gross margin came in to the upside at 25.2%, which can be attributed to the mix of products sold skewing toward commercial products generally, and in particular, in the commercial video business. Total operating expenses, excluding depreciation and amortization as well as stock-based compensation and other items we adjust from G&A for non-GAAP purposes, were $125.1 million, a 9.3% increase year-over-year.

Note that sales and marketing expense in the quarter includes our presence at ISC West, our largest trade show presence of the year. The event moved from the second quarter last year into the first quarter this year. R&D expense in the quarter, inclusive of stock-based compensation, was $72.1 million, a 5.4% increase year-over-year. The total number of employees we have in R&D functions at the end of Q1 2026 was 1,140, up 1% year-over-year. Non-GAAP adjusted EBITDA was $49.6 million, slightly higher than we anticipated due to the revenue outperformance we saw during the quarter. GAAP net income was $23.6 million in the first quarter, down from $28 million in the prior year.

The primary driver here is lower interest income because we are holding less excess cash after retiring $500 million of convertible notes in January 2026. Non-GAAP adjusted net income was $34.7 million in the quarter, an increase from $32.2 million in the year-ago quarter. We produced $0.65 of earnings per diluted share, which is up 14% year-over-year. We ended the quarter with $497.4 million of cash on the balance sheet and produced $49.7 million of free cash flow. We repurchased 428,000 shares of stock during the quarter for $20 million, bringing our total share repurchases since the beginning of 2025 to 1.2 million shares. As Steve mentioned, our board recently authorized $150 million of repurchases over the next two years.

Before turning to our financial outlook, I wanted to comment on an improvement that we have made to the definition of our non-GAAP profitability metrics. Several times in the past year, you have heard us refer to results being impacted by mark-to-market gains or losses on equity positions included in our treasury portfolio. Because we are not in the business of active investing, we have determined that the fluctuations in market value of these securities do not relate to the operating performance of the business from period to period. As such, we will be excluding these fluctuations from our non-GAAP profitability metrics prospectively, including any reference to comparable periods in the past.

Under this new definition, for example, our non-GAAP adjusted EBITDA during fiscal year 2025 would have been $201.3 million rather than $206 million. Our non-GAAP adjusted net income would have been $142 million versus $145.7 million, and our non-GAAP earnings per diluted share would have been $2.55 versus $2.62. We clearly articulated this $4.7 million non-GAAP adjusted EBITDA tailwind for 2025 on our last earnings call and have been disclosing it in our quarterly filings as well, and we currently plan to continue providing similar disclosures in our filings. I will turn now to our financial outlook. For the second quarter of 2026, we expect SaaS and license revenue of between $185.5 million and $185.7 million.

For the full year 2026, we are raising our SaaS and license revenue outlook to between $749.5 million and $750.5 million. This is an increase from prior guidance of $6 million at the midpoint. We are raising our total revenue outlook for 2026 to be between $1.0595 billion and $1.0705 billion, which includes hardware and other revenue of between $310 million and $320 million. The modest reduction at the midpoint on the hardware line since our February update reflects a couple of exogenous dynamics. The primary factor in our updated hardware outlook follows the Supreme Court ruling in late February 2026 that tariffs implemented using the International Emergency Economic Powers Act were unauthorized.

While it does not change the fact that we paid those tariffs on products imported through that date, it does mean that once we have sold that product subjected to those tariffs, we will be lowering our tariff pass-through fees to reflect the new lower tariffs that the administration put into place immediately following that ruling. As a general rule of thumb, those new tariffs are about half of what the old ones were as of right now. We anticipate that change occurring toward the end of Q2.

So if we were running at $5 million of tariff pass-through fees per quarter in Q1, then this represents approximately $5 million less in tariff pass-through fees during the second half of the year relative to our prior outlook. A second factor is that we are monitoring the turbulence in the memory market and evaluating the impact to our hardware business. The cost impacts that we are seeing there will require that we increase prices for our products that use memory, and we do not yet know if or how these price increases will affect demand. As such, our outlook on the hardware revenue line is cautious at this point in the year, despite the outperformance in Q1.

We are raising our non-GAAP adjusted EBITDA outlook for 2026 to between $215 million and $216 million, a $1.5 million increase at the midpoint. The 20.2% adjusted EBITDA margin implied by the midpoint is consistent with our prior guide and represents 30 basis points of margin expansion year-over-year. Non-GAAP adjusted net income for 2026 is projected to be $151.5 million to $152 million, or $2.81 to $2.82 per diluted share, a 10% year-over-year increase. EPS is based on approximately 56.9 million weighted average diluted shares outstanding for the year. We currently project our non-GAAP tax rate for 2026 to remain at 21% under current tax rules. We expect full-year 2026 stock-based compensation expense of between $35 million and $37 million.

In closing, I am pleased with the broad-based momentum in the business that we have seen so far this year. We delivered a solid quarter against our plan, and we believe we are well positioned to deliver continued revenue growth and profitability while investing to expand our long-term growth opportunities. With that, we will now open the call for questions.

Operator: Thank you. Our first question comes from Adam Hotchkiss with Goldman Sachs. Your line is open.

Adam Hotchkiss: I guess, Steve, with the widest beat on the SaaS and license line in at least a number of years, what drove that? It is particularly interesting to see that line reaccelerate when historically we had been talking about ADT being a couple hundred basis point headwind. It does not really seem like that is showing up in your numbers. Can you walk us through the moving pieces and what is driving the maintenance of that roughly 10% growth rate here?

Stephen Trundle: Sure, Adam. I will start, then hand it to Kevin to fill in the blanks. At a high level, everything was slightly above plan, so we had a bit of a tailwind against our plan. The big drivers were the revenue retention rate, which was unusually high versus our traditional range—I believe we were at about 95.4%—and then a little bit of revenue moved from the third quarter on the EnergyHub side into the first quarter as we had one meaningful agreement adjusted in the way it is structured. Those are the primary drivers. Kevin, anything I missed?

Kevin Bradley: Yes, I think those are the two primary drivers. To add some numbers, the difference between running at 95.4% revenue retention and around 94%, the high end of our historical range, is $2 million to $2.5 million per quarter. That is by far the biggest chunk. The EnergyHub component of the beat was another couple million dollars, and as Steve said, about half of that pulled forward from Q3. In retrospect, we probably had a slightly too conservative posture on the modeling around our revenue retention going into the year. We were anticipating 94%, but we have accounted for that in our guide somewhat.

Adam Hotchkiss: Great, that is helpful. And then how should we think about the competitive environment for the OpenEye business in the commercial space? How fast is the broader market moving on software and hardware with AI use cases versus what OpenEye is doing? When you are talking to customers, what does demand look like around AI capabilities? Are they patient and willing to wait for advancements, or do they go with the first mover?

Stephen Trundle: It is a good question, because purchasing behavior has changed a bit. On OpenEye, the pipeline looks very solid to us. We are seeing broader awareness of what a commercial customer can do with AI to enhance not only security but also operations—getting business value in addition to security value when we can take rich video content and glean insight. Demand looks solid. Customers are looking at products through an AI lens—which product will solve a problem best with AI.

For example, with a large specialty retailer in the quarter, traditionally we would have sold a security solution, but in their case their highest margin item is sushi, and they need fresh prepared sushi stocked between 4 PM and 7 PM. Visual Check is being used to monitor stockouts in that cabinet during those hours using a security camera view. It is an example of customers thinking more about devices and the business insight they can glean. I think we are solidly positioned versus competitors in our AI capabilities in that domain.

Operator: Our next question comes from Stephen Sheldon with William Blair. Your line is open.

Matthew Filek: Hey, Steve and Kevin, you have Matthew Filek on for Stephen Sheldon. Thank you for taking my questions. Can you talk about the gross margin profiles across your growth segments and how those compare to consolidated gross margins? I am trying to get a sense of what continued growth at EnergyHub and others could mean for consolidated gross margins over the mid-to-long term as the revenue mix shifts toward those faster-growing parts of the business.

Kevin Bradley: Sure. If you look at our two public reporting segments, you will see in Q1 that SaaS gross margins in the Alarm.com segment are about 87% to 88%. In the Other segment, which is where EnergyHub currently sits, they were closer to 60% for Q1. That is probably a bit on the low side, as EnergyHub gross margins were temporarily depressed related to the RGS acquisition. Longer term, you are more likely to see gross margin in the Other segment closer to 65% to 70%, and gross margins in the Alarm.com segment staying in the 87% to 88% range. That is how I would think about the profiles going forward.

Matthew Filek: That is very helpful. And for R&D, do you still expect it to remain roughly flat as a percentage of revenue in 2026? Over the next couple of years, where do you see the biggest opportunities for operating leverage across the business?

Kevin Bradley: On the first question, yes, we see R&D roughly flat as a percentage of revenue for the remainder of this year. Everyone is trying to figure out whether we will do a lot more with the same people or the same amount with fewer people as the full AI story unfolds. Our view is to remain positioned to be very competitive and do as much as possible to take advantage of evolving opportunities, so we are not betting on massive R&D leverage right now. As businesses mature—especially some of our growth initiatives—once they reach scale, we should see natural operating leverage, contributing out of areas that currently, in the consolidated picture, drag down operating margin.

That is the primary place we look for margin expansion.

Operator: Our next question comes from Jack Vander Aarde with Maxim Group. Your line is open.

Jack Vander Aarde: Congrats on the solid results and strong retention rate, and thanks for taking my questions. Steve, on EnergyHub, you have over 80 utility partners. How do you see the number of utility partners and your wallet share growing over the next couple of years? It sounds like there is a lot of blue sky left. And as a follow-up, any updates on the PointCentral business?

Stephen Trundle: On EnergyHub, after completing the RGS acquisition and adjusting a bit how we label utilities, we now say we have over 155 utilities in the program, which we define as entities with more than 100,000 meters in their territory. We are working with utilities that service roughly 75 million to 77 million meters, out of about 130 million total meters we would like to get to. So things are trending in the right direction with utility pickups. The next game is driving up enrollment within a given territory—what percentage of consumers have connected thermostats, and of those with connected thermostats or other devices like EVs or batteries, can we get those devices enrolled and move that number up?

We feel good about TAM coverage and the completeness of the software solution, so we can focus more on driving up attachment rates with our utility partners. On PointCentral, it continues to ramp at a double-digit growth rate, but it is not a massive driver of consolidated growth at the moment. It is a nice business with positive contribution to consolidated EBITDA. We believe we are probably number two in the multifamily space and are well into the six digits in terms of apartments or multifamily units serviced. We are committed and making progress, likely taking share, but not at a 30% growth rate.

Jack Vander Aarde: Thanks. And for Kevin, a couple of quarters ago you provided exit-year 2027 targets for hardware margin and adjusted EBITDA margin. Any updates? I think you were targeting around a 21% adjusted EBITDA margin.

Kevin Bradley: No changes. We are still anticipating and working toward exiting 2027 at about a 21% adjusted EBITDA margin. Hardware margins are harder to pin down and will depend on tariffs and memory prices, but we will manage through that volatility and still target the 21% adjusted EBITDA margin.

Operator: Our next question comes from Eleanor Smith with JPMorgan. Your line is open.

Eleanor Smith: First on EnergyHub. As you think about your internal projections, what does growth look like in terms of expanding within existing customers, cross-selling new products, and adding new logos?

Stephen Trundle: We do not break out EnergyHub with a specific growth rate, but you can deduce it is a strong contributor to our growth initiatives, where we have commented we expect 25% to 30% growth this year, including any inorganic activity. Inside EnergyHub, growth is a mix of new logos, expanding programs within existing logos, and driving up device enrollment. We started focused on connected thermostats and modest residential thermostat adjustments for VPPs. Now capabilities are broader—batteries, EV chargers, solar inverters—while utility supply is more variable, so there is strong demand to expand programs into these other edge resource categories.

And we are doing the work to drive enrollment—making sure, for example, when someone buys a Model Y and a wall charger, they take the time to enroll in the program and get the benefits. Those are the three growth drivers.

Eleanor Smith: Thank you. As a follow-up, what synergies, if any, exist between EnergyHub and your security business, and to what extent have you tapped into those cross-sell synergies?

Stephen Trundle: We define our core residential business as smart security or smart home, and many properties today get thermostats through our service provider channel. Each of those creates an opportunity for that customer to become an EnergyHub participant, which is a natural synergy. We also have an R&D sandbox to test features that can increase engagement or drive additional downstream value for utilities, including innovative thermostat-level approaches. There is synergy on the R&D and channel sides, helping our partners offset some costs of offering broader services. In terms of how far along we are, I would say we are in the third inning. We are seeing security being defined to include energy security—certainty of your energy supply.

Some of our security partners are now bringing batteries, in addition to generators, to bear. We expect more synergy to develop over time.

Operator: I am not showing any further questions at this time. This concludes today’s presentation. You may now disconnect, and have a wonderful day.