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DATE

Thursday, Aug. 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Stephen S. Trundle
• Chief Financial Officer - Kevin Bradley
• Investor Relations - Matthew Zartman

TAKEAWAYS

• SaaS and License Revenue -- $188.8 million, representing 11.1% year-over-year growth and exceeding the midpoint of management guidance by $3.2 million.
• Total Revenue -- $277.7 million, increasing 9.2% year over year driven by strength in growth initiatives and residential revenue retention.
• Non-GAAP Adjusted EBITDA -- $57.7 million, growing 15.7% year over year and reflecting a 20.8% margin.
• Non-GAAP Adjusted Net Income -- $41.1 million, representing a 17% increase compared to the prior year period.
• Non-GAAP Adjusted EPS -- $0.77, increasing 24% year over year based on 56.3 million weighted average diluted shares.
• Revenue Retention -- 95% range, remaining at this level for the third consecutive quarter as a steady tailwind for the residential business.
• Growth Initiatives Revenue -- 35% of total revenue, representing growth of over 30% year over year across EnergyHub, commercial, and international segments.
• International Subscriber Accounts -- 1 million active accounts, a milestone reached across more than 70 countries through localized platforms and service provider partners.
• Hardware and Other Revenue -- $89 million, increasing 5.5% year over year due to strong demand from enterprise buyers in the commercial video segment.
• Hardware Gross Margin -- 180 basis point expansion, driven by a higher mix of enterprise hardware sales during the quarter.
• Sales and Marketing Funding -- 70%, the portion of sales and marketing costs funded by hardware gross profit during the second quarter.
• Research and Development Investment -- $71 million, representing a 2.8% increase year over year and remaining the company's largest area of investment.
• R&D Headcount -- 1,150 employees, reflecting a focus on connected device technology and high-margin recurring revenue.
• EnergyHub Performance -- 17.5 gigawatt hours, the amount of electricity shifted over the July 4 weekend through more than 300 demand response events.
• Commercial Fire TAM -- 4 million to 5 million fire panels, representing the addressable market for the company's newly launched fire communicator in the U.S. and Canada.
• Service Provider Engagement -- 3,000 partners, the estimated number of existing service providers currently involved in the commercial fire monitoring market.
• Share Repurchases -- 570,000 shares, repurchased for $25 million during the quarter under a $150 million board authorization.
• Free Cash Flow -- $37 million, influenced by working capital timing while management maintains a 90% adjusted EBITDA to free cash flow conversion target for the year.
• Cash Balance -- $479.4 million, remaining on the balance sheet as of June 30, 2026, following the retirement of $500 million in convertible notes in Jan. 2026.
• Full Year SaaS and License Revenue Guidance -- $754 million to $754.4 million, representing an increase of $4.2 million from the May outlook.
• Full Year Total Revenue Guidance -- $1.079 billion to $1.089 billion, reflecting a $15 million increase in hardware revenue expectations at the midpoint.
• Full Year Adjusted EBITDA Guidance -- $221 million to $223 million, increased to flow through second quarter outperformance toward a 21% margin target by 2027.

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RISKS

• Bradley noted that a key driver of the decline in GAAP net income was lower interest income on excess cash following the retirement of $500 million of convertible notes in January.
• Trundle stated that in the international business, the company has seen "quite a bit of change of control type of activity in our partner base," which can cause "a little bit of a pothole" in expansion momentum.
• Bradley indicated that free cash flow in the second quarter was affected in part by working capital timing, though the annual conversion target remains unchanged.

SUMMARY

Management at **Alarm.com Holdings, Inc.** (ALRM +0.59%) reported second quarter results that exceeded expectations, characterized by double-digit growth in SaaS revenue and a milestone of 1 million international subscribers. The company is expanding its commercial footprint with the launch of a new fire communicator, targeting a North American market of approximately 5 million fire panels. Management attributed growth to its diversified business model, specifically highlighting EnergyHub's role in grid reliability and the increasing adoption of AI-enabled video services in the enterprise commercial segment. Financial guidance for the full year was raised across revenue and profitability metrics, reflecting confidence in growth initiatives that now comprise 35% of total revenue.

• CEO Trundle noted the maturation of the international segment, stating, "The first million in the core business in our business when we started was a slog. It took forever," and indicated that the current infrastructure supports faster future scaling.
• Management highlighted the operational utility of EnergyHub during peak demand, with Trundle noting that "data centers are eating more" electricity while the company is currently only 2% penetrated in its North American addressable market.
• The company's commercial expansion is leveraging existing R&D, as the new fire communicator was built on the foundation of the previously launched universal communicator to minimize incremental investment.
• CFO Bradley attributed the 180 basis point hardware margin expansion to a favorable mix of enterprise-grade video equipment and renewable fuel credit activity within the EnergyHub business.
• CEO Trundle emphasized the shift in video technology use, stating that enterprise demand is driven by the transition from "video as a surveillance tool towards video as an operational data gathering tool."
• The company maintained a focus on capital efficiency, using hardware gross profits to fund more than 70% of its sales and marketing expenses during the period.
• Management confirmed that research and development remains the primary investment focus, supporting recurring revenue from connected devices that typically stay in service for nearly 10 years.

INDUSTRY GLOSSARY

• SaaS: Software-as-a-Service, a software licensing model in which access to software is provided on a subscription basis.
• ARPU: Average Revenue Per User, a metric used to measure the revenue generated per subscriber or account.
• EnergyHub: An Alarm.com subsidiary that provides grid-scale flexibility and demand response programs for utilities.
• OpenEye: An Alarm.com subsidiary specializing in cloud-managed video surveillance solutions for the commercial and enterprise markets.
• RVM: Remote Video Monitoring, a service where security operators monitor live video feeds to verify and respond to security incidents.
• Fire Communicator: A device that transmits alarm signals from a fire panel to a monitoring station using cellular or IP networks.
• Demand Response: A program that allows utilities to manage customer electricity consumption during peak demand periods to maintain grid reliability.
• Adjusted EBITDA: A non-GAAP financial metric that represents earnings before interest, taxes, depreciation, and amortization, often adjusted for stock-based compensation and other non-core items.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Alarm.com Second Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you need to press *11 on your telephone. You will then hear an automated message device when your hand is raised. To withdraw your question, please press *11 again. Be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Zartman. Please go ahead.

Matthew Zartman: Thank you, operator. Good afternoon, everyone, and welcome to alarm.com's second quarter 26 earnings conference call. Please note that this call is being recorded. Joining us today are Steve Trundle, our CEO and Kevin Bradley, our CFO. During today's call, we will be making forward looking statements, which are predictions, projections, estimates, and or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. We refer you to the risk factors discussed in our Form 8-K and the associated press release which were filed with the SEC earlier today.

The call is subject to these risk factors, and we encourage you to review them. Alarm.com assumes no obligation to update forward looking statements or other information that speak as of their respective dates. In addition, several non GAAP financial measures will be discussed on the call. A reconciliation of GAAP to non GAAP measures can be found in today's press release on our Investor Relations website. I will now turn the call over to Steve Trundle, Steve?

Stephen S. Trundle: Thank you, Matthew. Good afternoon, and welcome to everyone. We are pleased to report second quarter results that exceeded our expectations. Our SaaS and license revenue in the quarter was $188.8 million, up 11% year over year. Our adjusted EBITDA in the quarter was $57.7 million. Our Q2 performance reflects execution by our service provider partners and our employees. I want to thank them for their contributions during the quarter. Today, I will review the key drivers of our performance discuss a recent expansion of our commercial platform, and provide an update on the continued growth we see in our energy hub utility programs. Generally speaking, we saw most areas of the business perform above plan.

Our residential business was steady as revenue retention continued to provide a modest tailwind. In our commercial business, OpenEye delivered strong SaaS and hardware revenue results as enterprise customers continued to expand their video surveillance deployments. And they often did so with increased adoption of our more powerful AI enabled services. EnergyHub also delivered healthy SaaS growth as utility customers expanded the scale, and capabilities of their distributed energy resource programs. During the quarter, our international business also surpassed 1 million active subscriber accounts. This milestone is only possible because of the work we have invested in localizing our platform and developing a productive network of international service provider partners in over 70 countries.

The commercial business continues to progress as our service provider partners and commercial integrators adopt more components of our unified video access control and commercial intrusion platform. We recently expanded into an additional commercial category with the launch of our fire communicator. Our new offering transmits alarm signals to a monitoring station while simultaneously delivering notifications to designated users through the alarm.com applications and services. Many of our existing partners already service a number of commercial fire monitoring installations and use fire communicators routinely just not ours. Fire communicators are typically replaced independently of the fire alarm control panel. This tends to occur when legacy communicators fail regular test or lose network support as other networks evolve.

Our new fire communicator leverages our cellular communication infrastructure, and our back end platform to deliver a more efficient, product for our service providers to manage at scale. We designed our fire communicator to be compatible with most new and existing fire panels which are widely required in commercial buildings. We estimate that the addressable market for our new product consists of 4 million to 5 million fire panels in The US and Canada. As within a newly launched product, driving adoption through our service provider channel will take some work. But we see a long term opportunity to build a position in the commercial fire space and are excited to now have this product and service in the market.

Turning to EnergyHub. Utilities continue to grow their flex flexibility programs that increasingly rely upon EnergyHub to maintain grid reliability particularly during periods of high demand. The leverage from EnergyHub's technology was evident earlier this summer during periods of extreme heat. Over the July 4 weekend, utilities dispatched more than 300 demand response events across more than 30 states and Ontario through EnergyHub. Collectively, these events shifted 17.5 gigawatt hours of electricity roughly equal to New York City's total electricity consumption for more than 2 hours. Switching to the security side, I also want to share a couple of recent examples of how our technology and service provider partners protect lives and property.

A few weeks ago, I was made aware of an incident where 1 of our remote video monitoring deployments spotted an individual attempting to set fire to an occupied home by dowsing it with what appeared to be gasoline and then igniting it. Using our technology, a central station operator was alerted to the arsonist's presence, verified what was happening, and quickly contacted authorities. The family inside the home escaped without injury. In a separate recent incident, 1 of our outdoor gunshot detection sensors detected gunfire directly at a busy outdoor area. Authorities quickly responded to the gunshot signal and secured the area. They were able to apprehend a suspect before there was any loss of life.

We do not often report on these incidents, but just as EnergyHub is enabling a more reliable grid in the heat of the summer, our life safety solutions are operating all the time protecting community, protecting communities while providing a durable foundation for our business. We are thankful to have established partnerships with many service providers through the years that treat this life safety mission as importantly as we do. And then do a great job on the ground every day. We believe deeply in our mission and in the enduring value of security. In summary, I am pleased with our strong second quarter results.

Our performance reflects the diversity of our business, and we are excited to continue our progress in the second half of the year. I will now turn the call over to Kevin Bradley, our CFO, to review our financial results. Kevin?

Kevin Bradley: Thanks, Steve. I will begin by reviewing highlights from our second quarter financial results and then close with our updated guidance for the third quarter and full year of 2026. Midway through the year, I am pleased to report another quarter of execution against our financial plan. SaaS and license revenue grew 11.1% year-over-year to approximately $188.8 million during the quarter. Exceeding the midpoint of our guidance by approximately $3.2 million. For the third consecutive quarter, revenue retention remained in the 95% range. Our commercial initiatives in EnergyHub also contributed nicely collectively growing more than 30% year-over-year. Hardware and other revenue totaled approximately $89 million, an increase of 5.5% year-over-year.

During the second quarter, we saw particularly strong demand from enterprise buyers our commercial video segment. We also benefited from increased activity in EnergyHub's low carbon and renewable fuel credit business. Through this business, EnergyHub uses charging data from its electric vehicle manufacturing partners to facilitate the generation and sale of low carbon transportation credits to obligated fuel suppliers in certain states. Retaining a portion of the value generated as revenue. This mix of enterprise hardware sales drove a 180 basis point expansion in hardware gross margin year over year. Allowing us to fund just over 70% of our sales and marketing costs in the quarter from hardware gross profit.

During the second quarter, total operating expenses including depreciation and amortization, were $149.6 million. Total operating expenses, excluding depreciation and amortization, stock based compensation, and other items we adjust from G&A for non GAAP purposes, were approximately $123.7 million, a 4.6% increase year-over-year. R&D expense in the quarter, inclusive of stock based compensation, was approximately $71 million, a 2.8% increase year-over-year. Ended Q2 with 1.15 thousand employees in R and D functions. For those newer to our story, research and development is by design our largest area of investment. Our predominantly indirect business models allow us to sustain a high level of R&D investment, while remaining capital efficient.

Our symbiotic relationships, our service provider partners are primarily responsible for customer acquisition and support, so our sales and marketing expense is well below most other SaaS businesses. At the same time, our R&D investments support high margin, durable recurring revenue tied to connected devices that typically remain in service for nearly a decade. The result is a model that has averaged north of a 20% return on operating invested capital over the past 8 years. Non GAAP adjusted EBITDA grew 15.7% year-over-year to $57.7 million. This comparison reflects the revised definition of our non GAAP profitability metrics that we adopted last quarter.

Which removes the effect of mark to market gains and losses on equity securities in our treasury portfolio applied to both periods. Adjusted EBITDA margin was 20.8%, approximately 115 basis points higher than in the year ago quarter. GAAP net income attributable to common stockholders was approximately $24.2 million in the quarter. Or $0.48 per diluted share down from approximately $34.6 million a year ago. A key driver of the decline was lower interest income on excess cash following the retirement of $500 million of convertible notes in January. Non GAAP adjusted net income increased approximately 17% from the year ago quarter to $41.1 million. We produced $0.77 of non- GAAP earnings per diluted share a 24% increase year-over-year.

We ended the quarter with $479.4 million of cash on the balance sheet and produced $37 million of free cash flow. Free cash flow in the quarter was affected in part by working capital timing. We continue to expect adjusted EBITDA to free cash flow conversion of 90% for the year. We repurchased approximately 570 thousand shares for $25 million during the quarter. Bringing our total share repurchases since the beginning of 25 to 1.8 million shares. Continue to operate under the $150 million buyback authorization our board approved earlier this year. I will turn now to our financial outlook.

For the third quarter of 26, we expect SaaS and license revenue of between $189.8 million and $190 million representing approximately 8.3% growth at the midpoint. For the full year of 2026, we are raising our SaaS and license revenue outlook to between $754 million and $754.4 million. This is an increase of approximately $4.2 million from our May guidance. And represents approximately 9.4% growth for the year at the midpoint. We are raising our total revenue outlook for 2026 to between $1.079 billion and $1.089 billion which includes hardware and other revenue of between $325 million and $335 million. This increases our hardware outlook by approximately $15 million at the midpoint from our previous guidance provided in May.

We are raising our non GAAP adjusted EBITDA outlook for 2026 to between $221 million and $223 million an increase of approximately $6.5 million at the midpoint. The increase flows our second quarter outperformance through to the full year and keeps us on a steady path toward our previously established target of a 21% adjusted EBITDA margins exiting 2027. Non GAAP adjusted net income 2026 is projected to be between $156 million and $157 million dollars. Or approximately $2.92 to $2.94 per diluted share. Increase of approximately $0.11 from our prior guidance. EPS is based on approximately 56.3 million weighted average diluted shares outstanding for the year. Down modestly from our prior estimate given our buyback activity.

We currently project our non GAAP tax rate for 2026 to remain at approximately 21% under current tax rules. We expect full year of 2026 stock based compensation expense of between $34 million and $35 million. In closing, I am pleased with the broad based momentum we have seen across the business 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 in the second half while investing to expand our long term opportunities. With that, operator, please open the call for Q&A.

Operator: Thank you. 1 moment for our first question. Our first question comes from Saket Kalia with Barclays. Your line is open.

Saket Kalia: Okay, great. Hey, guys. Thanks for taking my questions here. Steve, maybe for you-- hey. Steve, maybe for you. You maybe just talk about the market that EnergyHub competes in just a little deeper? And maybe more specifically, is this a rising tide market just given everything that is happening in utilities? Or do you feel like EnergyHub is able to take market share as well?

Stephen S. Trundle: Hey. Sure. I will be glad to talk about that a bit more. I guess to the last question, is it a rising tide Yes. We think that the overall market is growing. The value from variable supply is going up. there is you know, I think it is well known there is a shortage of supply in the energy market. Data centers are eating more. We are electrifying cars, etcetera, etcetera. So from the utility perspective, you have to either pursue long term you know, expensive build outs to produce new supply or you look for solutions like EnergyHub that can, harvest supply off the grid and then repurpose that And the latter is far less expensive.

And the need for the ladder, which is what we do, increases as the variability of the supply actually increases. So as wind, solar, and other sources become a bigger component of our grid's makeup. The value of the energy hub solution goes up. So in general, I think it is a rising market. I do not really know for sure if we are taking share from others. I just know that we are benefiting as the leader in that market and you know, we have expanded the range of the EnergyHub solution now to move from really thermostat demand response types of solutions to a full solution that also includes you know, EVs, EV chargers, batteries, and thermostats.

So we are attaching to more devices, in the average home now than ever before, and yet we still have a ton of headroom there in the TAM. At the moment, we are probably 2% penetrated in the North American TAM, maybe a little higher than that in the base of utilities where we have programs, which is which is more than half of the utilities. But overall, there is a lot of room to grow sort of the attachment. To the meters that we already are positioned to service. And, and grow that business nicely, and then the market's demanding, that we do that.

Saket Kalia: Got it. Got it. That makes a ton of sense. Kevin, maybe for my follow-up for you, maybe staying on EnergyHub, You know, I think it is been a couple quarters now of a little bit of acceleration in that in that SaaS revenue line. Maybe the question is, how much that has come from really, what sounds like a few good quarters of the of EnergyHub or is that really coming from that growing mix of broader emerging solutions?

Kevin Bradley: Yeah. Hey, Saket. Thanks. I think the answer is it is a it is a little bit of both of those things. I would say more so EnergyHub, but also collectively what we call the growth initiatives. You know, there anything any single things contribution to our consolidated growth rates a function of how much revenue there is, it is waiting in the portfolio, and then how fast it is growing. The growth initiatives sort of writ large are just about 35% of revenue now, and second quarter grew a little over 30% year over year. So they are collectively contributing, about 900 basis points of growth. Rate this year in the second quarter.

Now some of that is inorganic, obviously. Tucked into EnergyHub. Among the 3 of them, you know, EnergyHub is, is certainly the 1 who is growth rate impact is accelerating. The quickest. Commercial is also a contributor to an accelerating growth rate little bit due to that weighting characteristic, and I would characterize international as sort of contributing about steady growth rate. The past several quarters. Super helpful, guys. Thank you.

Operator: Again, ladies and gentlemen, if you have a question 1 moment for our next question. Our next question comes from Adam Tindle with Raymond James. Your line is open.

Adam Tindle: Okay. Thanks. Good afternoon, and congrats on a good quarter. Steve, I wanted to start on the commercial side of the business and specifically around the fire communicator, which I thought was interesting. that is a market that, as you mentioned, is, you know, fairly sizable. I guess, and it is been around for a while. Kind of twofold question. Why now? And second, what is the advantage that you bring to this versus sort of the big incumbent that plays in this space? And, Kevin, if you could touch on how the business model in that side of the of the business would be similar or different from traditional residential as that grows. Thanks.

Stephen S. Trundle: Hey, Adam. Good question. Yeah. Why now, I guess, is the first part of it. I would say the biggest sort of reason is we simply listen to our to our dealers, and we have had some demand from our from our dealers, from our partners for us to provide a solution. in this segment. I think that is a function of the fact that if you just think about our business over the last 3 or 4 years, there is been a shift more towards the commercial side of the intrusion space and the video surveillance space.

And the folks we interact with today have a little different makeup than maybe what would have been the case 5 years ago when we were more dominant residential platform. So as we have seen growth on the commercial side, the cadence of request for us to bring a solution to bear on the commercial fire side has sort of increased. And that is probably the biggest reason. But then we had you know, an opportunity to also take advantage of some of the-- and get some leverage out of the R&D that we put into producing what we call the universal communicator that we launched some time ago.

A lot of the work we did there was work that we could use as a foundation for the creation of the commercial fire products. So it made sense, you know, to pursue that because the incremental investment was not dramatic. And I guess the advantage to the market is, you know, for the service provider, our dealer wants to have as much as they can on our back end platform. It allows them to more efficiently manage their customer base, schedule their work, know what is happening with all of their paying customers. that is 1 advantage.

But then there is also from the customer perspective, a single-pane-of-glass situation where you can see, you know, the status of everything in your building, all the time in 1 place. It works similarly. You set up the same type of addresses. So there is some advantages there. Especially within our existing customer base that we think will help us create some pull through for the new product. And I guess I will leave the second part to you, Kevin.

Kevin Bradley: Yeah. On the business model, so if we split that into you know, the delivery model, the price metrics, and the price level, As Steve was saying, the delivery model is the is the same as residential and much of our other offerings. it is it is channel based. The price metrics are also the same. Meaning, we sell a piece of hardware, and then we bill on a per month per subscriber basis, per building basis in this case. The price levels are what changes And, in this case, what we are doing is we are selling the hardware at more of a gross profit neutral or slightly positive level, So it is a little bit lower gross margin.

Than the rest of our blended hardware gross margin portfolio. And then on the services side, you know, it represents, call it, 2x the ARPU probably of what we would get for a typical residential account. Got it.

Adam Tindle: that is helpful. Thanks. Maybe a follow-up, Steve, on the other things that stood out to me in your prepared remarks was over 1 million active subscribers in international business, and congrats on that. I am just kind of reflecting on having covered you guys for years. If I think back to the core residential business, the path to the first 1 million subscribers, you know, was longer. Then the incremental million after that, you know, truncated the timeline, right, the next 1 million, happens faster. Right? Yeah. So I would wonder if you might sort of reflect on that and apply it to the international business.

And think about, you know, any opportunities that you see to maybe accelerate that piece. Thanks.

Stephen S. Trundle: Right. No. Good observation. Yeah. The first million in the core business in our in our business when we started was a slog. It took forever. You had to build a lot of infrastructure. You had to find all the right partners. It really was a it was really defining in terms of whether or not we were going to make it. I would like to believe the same is true here. We certainly have some, some calluses from our work internationally, especially in really trying to bring the product around to a localized state that works in the 70 markets that we are servicing.

Done a lot of work to lay in place the base of service provider partners there. We have had some ups and downs. We have had you know, quite a bit of change of control type of activity in our partner base, and each 1 of those events, you know, will cause a little bit of a pothole along the way. But we have gotten to where we are now, and will it be as easy as sort of the next million in North America?

I am hesitant to say that we will see an exact replication of that, but I certainly feel like it gets you to a level and we are at a level where we have you know, the critical infrastructure in the ground, We have some momentum. We know these markets. We kind of know what is worked, what has not worked. And where to look next. And I would hope that the next 1 million comes more easily and faster than the first 1 million. Absolutely. Sounds good. Thank you, guys.

Operator: Our next question comes from Samad Samana with Jefferies. Your line is open.

Jordan: This is Jordan on for Samad. Great to see the strong results. Steve, in the prepared remarks, you mentioned that commercial customers are expanding their video surveillance deployments. and, specifically, that is being driven by AI enabled products. So seems like the Salesforce is effectively executing on the opportunity around the growth initiatives that you have spoken to over the past few quarters. Could you speak to the market segments where you are seeing outsized strength or success? Is it a specific vertical or size? And maybe parse out whether it is new versus existing customers.

And then are you enabling the Salesforce to best succeed in selling these newer offerings that there may be a little bit less familiar with at first.

Stephen S. Trundle: Right. Good question, Jordan. I you know, we generally think of commercial as sort of enterprise and then small business. I would say during the last quarter anyway, the more of the strength was on the enterprise side. Which would be larger customers. That are doing larger video deployments. And, I think what we are seeing there is first, a couple of things. First, folks are thinking about you know, with AI, making sure they are installing products that future proof their business that, give them the ability to sort of seize the opportunity not just today, but for the next, couple of years.

And we are pretty well positioned there with our you know, AI powered video camera solution, on the OpenEye side. I think, there is also you know, with that, a thing that is driving some of the demand is just the shift from video as a surveillance tool towards video as an operational data gathering tool. And some of the interface elements we have added to the platform allow people more easily now to ask questions of what is happening in their business that are only marginally related to security. So people want that. that is driving some demand.

We have we have done some work to your point on the sales team and empowering the sales team We have done some work to better enable cross selling opportunities to make sure that we are aligned in what we are trying to achieve. In terms of the mix, the nice thing on the enterprise side is it is a nice mix of both new logos, but also once you are in, at a site, if you perform and you do well, the sort of a steady stream of ongoing demand as they add facilities or as they identify locations where additional cameras may be needed.

So we get a very positive revenue retention characteristic from that part of the market that has been helpful to our commercial performance.

Jordan: Appreciate the color. Then, Kevin, maybe a quick question for you. Great to see the strong EBITDA results. Wanted to dig into margin and then specifically sales and marketing expense. it is held constant as a percentage of revenue in the past few quarters, which is great to see. But as we think about the go forward, how are you thinking about the cadence of hiring specifically within sales and marketing, and where is there opportunity for maybe a little bit of leverage as the business continues to scale?

Kevin Bradley: Yeah. it is a good question. I think our base case is that as a percentage of revenue, it is gonna probably stay roughly flat over time. We continue to add employees in sales and marketing, obviously, but, it is for the most part, trending with the rate of revenue growth. We have seen a little bit more leverage Actually, you know, if you zoom out and take, like, a 2 year view, the number of total employees we have is about flat going back to the middle of 24. it is grown at, like, a CAGR of 0.4% or something like that.

And that leverage is really coming in other places. it is it is coming from G&A and to a smaller extent, in R&D. Think if we look forward sort of near term over the next year or 2, I suspect you would probably see a similar story Total employees, roughly flat as we do a little bit more. With the same. And you will see a slight complexion shift, you know, towards sales and marketing spend and possibly employees and maybe slightly further away from other areas. Awesome. Thanks for taking my questions. Congrats again. Thanks, Jordan.

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

Matthew Filek: Hey, guys. You have Matthew Filek on for Stephen Sheldon. Thank you for taking my questions. Wanted to start circling back on the commercial fire question. I was wondering if you could help us frame the addressable market of that and how meaningful the offering could become to growth over time. I know it is a new offering, and it will take some time to scale. But any additional color on how you are thinking about that opportunity would be great.

Stephen S. Trundle: Hey, Matthew. This is Steve speaking. Sure. Yeah. it is a good thing to drill down on. I think we look at the addressable market of commercial buildings in North America to be something around you know, that likely, by the way, are already being serviced to be somewhere between 4 million in total. And then we look at kind of the population of our service providers that we think might be engaged in this type of in this area of the business. And I believe that we our best estimate is that around 3 thousand or so of our service providers are at some level engaged in the commercial fire business. And could be candidates to deploy our products.

So that is about a third. Maybe a little less than that. But we are gonna sort of see how it goes. We have gotten at this moment, you know, just with sort of in the last you know, 2, 3 weeks of launch, we are probably approaching 1 thousand that are in the ground, and we are gonna see if we can build some and that is that is with very few service providers. Moving. We are gonna try to build off of that.

And if I were to look forward, I would I would you know, I think we will use 2027 to sort of size up the steady state demand for the product, get it introduced to all the service providers, and see, you know, see really what steady state demand looks like and then probably be in a little better position to estimate what the long term, you know, what our long term capture of that market is and how quickly those buildings, that we have identified turnover and change product Could not really provide that estimate at the moment, but that gives you a feeling for what the what we think of as the TAM.

Matthew Filek: Very helpful, Steve. Yeah. I appreciate the additional detail on how you are thinking about that. And then for my follow-up, I just had a quick 1. On capital allocation. What does the current M&A pipeline broadly look like? And also curious how you are thinking about share repurchases now that shares have rallied off recent lows?

Kevin Bradley: Maybe I will cover the latter 1 and then turn it over to Steve for the M&A pipeline. Yeah. We were we were very excited the last quarter or 2 sort of see buying opportunities at things like a 12x PE. You do not see that very often. In SaaS, let alone for 1 growing earnings double digits. So we were pretty aggressive in terms of capital allocation there relative to our history. I think if you rewind the clock a little bit further back even to Q1 or Q2 of last year, you know, we were trading at sort of similar prices. As we are currently.

I think we will still be active in the buyback market, you know, at a minimum. To buy back to offset the dilution from stock based compensation. And, at these price levels, if you look back to what we were historically doing at this time, it probably gives you a pretty good sense for what you may see us do. Near term.

Stephen S. Trundle: And on the on the M&A front, the answer here is always similar in that we run an active process. We are constantly evaluating opportunities. Oftentimes, we are trying to underwrite 1 or 2 specifically to see if we can make it work. We are kind of in the same condition as always where we do have some things that we are working on None at the moment are things I could announce publicly. But we hope that we can move some of that activity forward.

I think as I have said before, we are we are broadly looking at opportunities that allow us to further our position in either the energy market or the or the commercial security market, and we will evaluate everything from a tuck in to something fairly sizable. But nothing to announce today just to say that we are active and have we are considering. Very helpful. Thank you both.

Operator: 1 moment for our next question. Our next question comes from Jack Vander Aarde with Maxim Group. Your line is open.

Jack Vander Aarde: Okay. Great. Good evening, Steve and Kevin. Congrats on solid results and yet again another raised outlook. So, Steve, maybe I would like to get your thoughts and any color on new potential residential and commercial ARPU drivers and outside of the commercial fire opportunity, obviously. For example, I have asked in the past about potential drone integration and application and, you know, I think you have previously partnered with Sunset Labs for real estate, for example. Right. Just any thoughts on expanding on expanding partnerships and other ARPU drivers? Thanks.

Stephen S. Trundle: Sure. Yes, I think on residential side, the biggest driver of ARPU gains are currently around what is possible with the video camera and the intelligence you can provide to consumer from the video camera, whether it be on the door or whether it be under the eve of a home. And then especially with the rollout of what I think we talked more about last quarter, which is remote video monitoring where a consumer can kind of go to bed at night knowing that if someone wanders through their backyard, that may not set off an alarm. They are asleep, but you want someone to take a look at that and then decide if that deserves attention.

I gave an example on my prepared remarks of just that type of situation where someone wandered through a yard did not set off an alarm on the house, they poured gasoline all over the home and then lit it on fire. And sure, the fire alarm would have gone off eventually, but that might have been too late. In this case, a live operator got that event from 1 of our video cameras was a very good dealer that serviced that customer and had everything set up right, and it worked well. And the operator responded, and the family you know, was protected. So that type of capability on the residential side is becoming more in demand.

That drives some ARPU there Over a longer period of time as we look out, yes, I think that we will continue to sort of push on a broad category of robotics, including you know, autonomous drones and other technology. But in the near term, the bigger driver on the residential side will be, RVM, On the commercial side, it is really 2 things. it is it is also RVM there. Remote video monitoring. Really can you know, protect the property better when you are watching and dealing with incidents before they ever escalate and become more significant.

But we are also seeing I gave another example on the in my prepared remarks of a active shooter detection sensor being used to prevent an issue and I will not be surprised if we see, for better or worse, more demand for that solution in the commercial space and that, you know, can also be a way that we augment what we are already doing and drive some ARPU. So those are the 2 things in the near term I am probably looking for.

Longer term, I think it is going to be you know, the our job will be to partner with the various players that can, bring autonomous devices to bear for the benefit of security of the property owner. Okay. Excellent. I appreciate all the color there.

Jack Vander Aarde: And then maybe a follow-up or separately for Kevin. On the venture growth businesses, international plus commercial plus energy hub, Last few quarters, I believe the rough estimate was these in aggregate represent around 33% of total SaaS, and growing between 25 to 30% year over year. And I think I heard for Q2, these are actually these uptick to around 35% and growing 30% plus And so it sounds like these businesses are all accelerating. And it is good to hear the update in international hitting 1 million subs. Just any comments there. Is it acceleration across the board there? You know, those numbers kind of correct? Thanks.

Kevin Bradley: Yeah. Yeah. Those numbers are correct. You know, I think the 1 thing to keep in mind I would still say for the year, for 2026, you know, our prior guidance of it being 35% of revenue, growing 25 to 30% is about right. Because EnergyHub's revenue for the most part, is annual and recurring rather than monthly and recurring, You do get seasonal dynamics based on when certain programs launch and the rate of growth of those programs. And, Q2 does happen to be 1 of the sort of faster growing quarters because the programs launched in Q2 happen to be at this moment growing faster. that is the predominant reason that you see that acceleration. Okay. Great.

Well, I appreciate the color, guys. I will hop back in the queue. Sure thing.

Operator: I am not showing any further questions at this time. And as such, this concludes today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.