Alarm.com Holdings, Inc. Q3 FY2024 earnings call

• Third quarter financial results exceeded expectations with SaaS and license revenue at $159.3 million and adjusted EBITDA at $50 million. • Video and access control product sales outperformed, boosting hardware revenue. • Revenue retention rate increased to 95%, driven by service providers' robust systems and slower US housing market reducing subscriber moves. • Introduced AI Deterrence (AID) for remote video monitoring, an AI bot to deter trespassers. • OpenEye launched new cloud cameras for enterprise video surveillance, on the cusp of surpassing one million active channels. • Discussed 2025 outlook, noting dependency on ADT Google software rollout but having a diverse organic growth engine including EnergyHub, OpenEye, International, and Alarm.com commercial business.

SaaS and license revenue in the third quarter grew to $159.3 million, which is a 9.8% growth from the same quarter last year, contributing approximately 66.2% to total revenue. Hardware and other revenue in the third quarter was $81.2 million, up 5.7% from Q3 2023, accounting for about 33.8% of total revenue. Total revenue for the third quarter was $240.5 million, growing 8.4% year over year. SaaS and license gross margin was 85.5% in the third quarter, hardware gross margin was 24.1%, and total gross margin was 64.8%.

• Fourth quarter 2024: SaaS and license revenue expected to be $163.2 to $163.4 million. • Full year 2024: Raised SaaS and license revenue to $628.7 to $628.9 million, total revenue to $933.7 to $935.9 million, adjusted EBITDA to $174 to $176 million. • 2025: Estimated SaaS and license revenue between $668 to $671 million, total revenue between $975 to $980 million, adjusted EBITDA in range of $188 to $192 million.

• Uncertainty related to the rate of ADT rolls out the ADT Google software affecting 2025 visibility. • General risks from market changes, competition, and other factors discussed in quarterly report on Form 10-Q and Form 8-Ks.

Q: Adam Tindle asked about the delta between 2024 SaaS growth and initial 2025 outlook, including ADT Google transition and IP license revenue impact.

A: Steve Trundle responded that there's a ~200 basis point headwind from ADT Google transition and no IP license revenue bump this year like last year, reconciling the growth delta.

Q: Mason Marion inquired about drivers of NRR at 95% and EBS integration feedback.

A: Steve Trundle said it's a combination of fewer subscriber moves, better video analytics enabling cross-selling/upselling, and EBS acquisition is beginning to contribute to international growth.

Q: Adam Oshkis asked about pricing opportunities with AI initiatives and commercial top of funnel.

A: Steve Trundle stated AI helps with cost augmentation allowing pricing, and demand on commercial side is healthy with access control hardware driving growth.

Q: Matt Treleck asked about hardware revenue growth in 2025 and R&D priorities.

A: Steve Trundle said initial look has flat hardware growth, and R&D is focused on building out new capabilities in video and analytics space.

Q: Darren Aftahi asked about pivot in EBITDA margins and counterbalancing headwinds for 2025 SaaS growth.

A: Steve Trundle mentioned EBITDA margins expected to hold, and potential for increased SaaS growth from new logos, corp dev, or international business acceleration.

Q: Jack Van Dardey inquired about international business plans and 2025 SaaS outlook.

A: Steve Trundle said continuing to add international partners and service providers, with 2025 SaaS outlook at $668 to $671 million.