Alarm.com Holdings, Inc. (ALRM) Earnings

Management highlights

### Overall Performance - Q2 2026 results exceeded internal expectations, driven by strong execution from company employees and service provider partners - Most business segments performed above plan, with broad-based momentum across the portfolio ### Product & Platform Expansion - Launched a new commercial fire communicator product, compatible with most existing and new commercial fire panels. The offering transmits alarm signals to monitoring stations and sends in-app notifications to users, leveraging Alarm.com's existing cellular and backend platform infrastructure to simplify partner scaling - OpenEye commercial video solutions saw increasing adoption of AI-enabled services, as enterprise customers prioritize future-proofed deployments that use video for both security and operational data analytics - Continued expansion of Energy Hub for utility grid reliability: during Q2 2026 peak extreme heat, 300+ demand response events across 30 U.S. states and Ontario shifted 17.5 gigawatt hours of electricity, equal to over 2 hours of New York City's total electricity consumption - Residential remote video monitoring (RVM) and commercial life safety solutions (e.g., outdoor gunshot detection sensors) are growing in demand, driving ARPU increases while delivering on the company's core life safety mission ### Operational & Financial Model Highlights - The company's indirect channel model, where service provider partners lead customer acquisition and support, keeps sales and marketing expenses lower than most peer SaaS businesses, allowing for sustained high R&D investment while remaining capital efficient - R&D is the company's largest area of investment; Q2 2026 R&D expense (inclusive of stock-based compensation) was $71 million (up 2.8% YoY), with 1,148 employees in R&D functions - The business has averaged over 20% return on operating invested capital over the past 8 years, with connected devices typically remaining in service for nearly a decade - Completed $25 million in share repurchases (570,000 shares) in Q2, bringing total 2025-2026 repurchases to 1.8 million shares, operating under a $150 million Board-approved buyback authorization - Ended the quarter with $479.4 million in cash and generated $37 million in free cash flow, still on track for ~90% full-year adjusted EBITDA to free cash flow conversion

Guidance

- **Q3 2026 SAS and license revenue**: Expected between $189.8 million and $190 million, representing ~8.3% year-over-year growth at the midpoint - **Full-year 2026 SAS and license revenue**: Raised to between $754 million and $754.4 million, an increase of $4.2 million from prior May guidance, representing ~9.4% year-over-year growth at the midpoint - **Full-year 2026 total revenue**: Raised to between $1.079 billion and $1.089 billion, including hardware and other revenue of $325 million to $335 million, a $15 million midpoint increase from prior guidance - **Full-year 2026 non-GAAP adjusted EBITDA**: Raised to between $221 million and $223 million, a $6.5 million midpoint increase from prior guidance, keeping the company on track to hit its long-term target of 21% adjusted EBITDA margin by the end of 2027 - **Full-year 2026 non-GAAP adjusted net income**: Projected between $156 million and $157 million, equal to $2.92 to $2.94 per diluted share, an 11 cent increase from prior guidance. The lower weighted average diluted share count (56.3 million) reflects ongoing share repurchase activity - Full-year 2026 non-GAAP tax rate is expected to remain 21%, with stock-based compensation expense projected between $34 million and $35 million

Segment performance

1. **Residential**: Steady performance with revenue retention continuing to act as a modest growth tailwind, holding core recurring revenue stability. Revenue retention remained in the 95% range for the third consecutive quarter. 2. **Commercial**: Collectively (along with Energy Hub) grew more than 30% year over year, and now represents part of the 35% of total revenue accounted for by all growth initiatives. OpenEye delivered strong software-as-a-service (SAS) and hardware revenue driven by expanded enterprise video surveillance deployments and increased adoption of higher-value AI-enabled services. Newly launched fire communicator product addresses an estimated 4-5 million unit addressable market in the US and Canada. 3. **Energy Hub**: Collectively (along with Commercial) grew more than 30% year over year, and is the fastest-accelerating growth initiative. Delivered healthy SAS growth, with increasing adoption from utility customers expanding distributed energy resource program scale and capabilities. Additional revenue is generated through its low carbon and renewable fuel credit business, which saw increased activity in the quarter. Growth initiatives as a whole contributed 900 basis points of consolidated growth in Q2 2026, with Energy Hub leading the acceleration. 4. **International**: Surpassed the 1 million active subscriber account milestone during the quarter, serving over 70 countries via localized platform offerings and a network of local service provider partners. Growth has remained steady quarter over quarter. Aggregate Q2 2026 revenue breakdown: Total SAS and license revenue was $188.8 million (up 11.1% YoY); total hardware and other revenue was $89 million (up 5.5% YoY). Non-GAAP adjusted EBITDA for the whole company was $57.7 million (up 15.7% YoY), with an adjusted EBITDA margin of 20.8% (up 115 basis points YoY).

Risks & headwinds

- Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from current expectations, detailed in the company's recently filed Form 8-K and associated press release with the SEC - New product adoption (including for the newly launched fire communicator) will require go-to-market work via the service provider channel, and scaling will take time, with long-term market capture uncertain at this early stage - Interest income on excess cash has declined following the January 2026 retirement of $500 million in convertible notes, leading to lower GAAP net income in Q2 2026 compared to the prior year

Analyst Q&A

• Q: The analyst asks if the Energy Hub market is broadly growing (a rising tide) or if Alarm.com is gaining specific market share, and requests additional context on the market landscape. /

  A: Steve Trundle confirms the overall market is a rising tide, driven by growing energy supply shortages, increased electrification of transportation, and higher utility demand for grid reliability. Alarm.com has expanded its Energy Hub solution beyond basic thermostat demand response to support EVs, EV chargers, and batteries, increasing the number of connected devices per property. Penetration is only ~2% across the total North American TAM, leaving significant room for additional growth.

• Q: The analyst asks why Alarm.com launched a commercial fire communicator now, what competitive advantages the company holds, and how the business model compares to existing offerings. /

  A: Steve Trundle explains launch was driven by increased partner demand as Alarm.com's commercial customer base has grown, and the product leverages existing R&D from the company's universal communicator, limiting incremental investment. The key advantage is allowing partners to manage fire communicators on Alarm.com's existing unified backend platform, and gives end customers a single pane of glass for all building system status. Kevin Bradley adds the channel-based business model (hardware sale plus monthly recurring revenue per building) matches Alarm.com's core model, but hardware is sold at near gross profit neutral, with service ARPU roughly double that of a typical residential account.

• Q: The analyst asks what commercial market segments are driving AI-enabled video surveillance growth, whether growth comes from new or existing customers, and how the company enables its sales force to sell these newer offerings. /

  A: Steve Trundle states most recent strength is in the enterprise commercial segment, driven by customer demand for AI-enabled future-proof systems that deliver both security and operational data beyond basic surveillance. The company has realigned its sales organization to better enable cross-selling of AI solutions. Growth comes from a healthy mix of new enterprise logos and expansion within existing customers, as clients add new facilities and cameras after positive initial experiences, leading to strong revenue retention for the commercial segment.

• Q: The analyst asks for framing of the commercial fire communicator's total addressable market, how meaningful the opportunity could be for long-term growth, and for an update on capital allocation for M&A and share repurchases. /

  A: Steve Trundle confirms the total addressable market is 4-5 million existing commercial fire panels in North America, with ~3,000 of Alarm.com's service providers already active in commercial fire and eligible to deploy the product. Roughly 1,000 units have been deployed in the first few weeks of launch, and 2027 will be used to size steady-state demand and long-term market capture. Kevin Bradley notes the company was aggressive with share repurchases at lower valuations, will remain active to offset stock-based compensation dilution at current prices, and Steve Trundle adds the company runs an active M&A pipeline with opportunities currently under evaluation, though no announcements can be made at this time.