ALRM

LLM Evaluations

Transcript Summary

Alarm.com reported a robust Q1 2026, with SaaS and license revenue growing 10.8% to $181.5 million and adjusted EBITDA reaching $49.6 million. A standout metric was the revenue retention rate, which exceeded 95%, the highest in ten years. Management highlighted strong performance in the commercial sector via OpenEye, which launched new AI-powered visual check and search capabilities. EnergyHub also continues to expand, now serving 155 utility partners. While SaaS and EBITDA guidance for the full year were raised, hardware revenue expectations were slightly lowered. This revision stems from a Supreme Court ruling affecting tariff pass-throughs and rising memory costs driven by the broader AI data center market. The company remains financially strong, having retired $500 million in debt and authorized $150 million for share repurchases. During the Q&A, executives emphasized that AI is an opportunity to provide business insights beyond traditional security, particularly in retail and multifamily settings. The company maintains its long-term goal of a 21% adjusted EBITDA margin by 2027, despite temporary hardware-related headwinds, and continues to prioritize R&D to maintain its competitive lead in the smart property ecosystem.

5-year share-count history (top 10 holders by peak, incl. exited) + price

Revenue Segments

Filing Risk Scores

ALRM: Strategic Synergy or Related-Party Revenue Shell Game?

Full Earnings Call Transcript — Q1 • 2026-05-07

Operator: Good day, and thank you for standing by. Welcome to the Alarm.com Holdings, Inc. first quarter 2026 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 Q&A, please press star 11 on your telephone; you will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that this 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. Good afternoon, everyone, and welcome to Alarm.com Holdings, Inc.’s first quarter 2026 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 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 Holdings, Inc. 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?
Steve 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 more than solid, there were a few bumps along the way in the quarter. First, in January and February, we saw new homebuilding and other business activity impacted by the long spell of snow and ice due to the extreme cold weather that impacted much of the U.S. Installation activity was greatly reduced for about three weeks and then bounced back strong 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 the 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, CHeKT, 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 thousand shares of our common stock, including over 400 thousand 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?
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 1.14 thousand, 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 thousand 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. I will reiterate that 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 of 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 $1,059.5 million and $1,070.5 million, 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, 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 something that Steve just mentioned, and that 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, operator, please open the call for Q&A.
Operator: Thank you. We will now open the call for questions. To ask a question, please press star 11 on your telephone. If your question has been answered, you will be removed from the queue.
Adam Hotchkiss: I guess, Steve, with the widest beat I can remember on the SaaS and license line in at least a number of years, what would you say drove that? It is particularly interesting to see that line reaccelerate when I know 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. So maybe just walk us through the moving pieces and what is driving the maintenance of that roughly 10% growth rate here. And then as a follow-up on OpenEye 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, or do they tend to go with the first mover?
Steve Trundle: Sure, Adam. 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—we were at about 95.4%—and a little bit of revenue that moved from the third quarter on the EnergyHub side into the first quarter as we had one meaningful agreement adjusted in its structure. Those are the primary drivers. On OpenEye and AI demand, purchasing behavior has changed a bit. Our pipeline looks very solid. We are seeing broader awareness of what a commercial customer can do with AI to enhance not only security but also business operations—delivering business value in addition to security value as we derive insights from rich video content. Customers are looking at products through an AI lens and asking which product solves a problem best with AI. For example, with a large specialty grocery retailer, their highest-margin item is sushi, and it must be freshly stocked between 4 PM and 7 PM. AI Visual Check is now being used to monitor stockouts in that case using an existing security camera view of the sushi refrigerator. It is a good illustration of how customers are thinking about devices and the business insights they can glean. We feel solidly positioned versus competitors in AI capabilities in this domain.
Kevin Bradley: I will add a few numbers on the first part. The difference between running at 95.4% revenue retention versus about 94%, the high end of our historical range, is roughly $2 million to $2.5 million per quarter, which is the biggest chunk of the beat. The EnergyHub component was another couple of million dollars, with about half of that pulled forward from Q3. In retrospect, we were probably slightly too conservative on modeling revenue retention going into the year, and we have accounted for that somewhat in our guidance.
Matthew Filek: Can you talk a little bit about the gross margin profiles across your growth segments and how those compare to consolidated gross margins? Just trying to get a sense of what continued growth at EnergyHub and the others could mean for consolidated gross margins over the mid to long term as the revenue mix continues to shift toward those faster growing parts of the business. And then on 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: Sure. If you look at our two public reporting segments, in Q1 the 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, which is probably a bit low due to temporary depression related to the RGS acquisition. Longer term, you are more likely to see gross margin in the “Other” segment at about 65% to 70%, and the Alarm.com segment staying in the 87% to 88% range. So as you model those two components going forward, that is how I would think about the profiles. On R&D, we see it roughly flat as a percentage of revenue for the remainder of this year. As AI unfolds, the question is whether we do more with the same people or the same with fewer people. Our view is to remain very competitive and continue to pursue evolving market opportunities, so we are not betting on massive R&D leverage right now. As growth initiatives mature and reach scale, we expect natural operating leverage from areas that currently drag down consolidated operating margin; that is the primary place we see operating margin expansion.
Jack Vander Aarde: Congrats on the solid results and strong retention rate. On EnergyHub, how do you see the number of utility partners and your wallet share with them growing over the next couple of years? It sounds like you have a lot of blue sky left there. And as a follow-up, any updates on the PointCentral business?
Steve Trundle: On EnergyHub, after completing the RGS acquisition and adjusting how we categorize utilities, we now work with over 155 utilities, which we define as entities with more than 100 thousand 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 reach. The next game is driving up enrollment within each territory: what percentage of consumers have connected thermostats and, among those with connected thermostats or other devices—EV chargers, batteries, solar inverters—how many get enrolled into programs. We feel we are in a good position on TAM coverage and solution completeness, and we are focused on increasing device attachment and enrollment with our utility partners. On PointCentral, it continues to ramp at a double-digit growth rate, contributing positively to consolidated EBITDA, though it is not a massive consolidated growth driver at the moment. We believe PointCentral is likely number two in the multifamily space, and we are well into six digits of apartments or multifamily units serviced. We remain committed and are probably taking share, but it is not growing at 30% right now.
Jack Vander Aarde: And for Kevin, a couple of quarters ago you provided exit-year 2027 targets for hardware margin and adjusted EBITDA margin. Any updates to those? I think you were targeting about 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 while still targeting the 21% adjusted EBITDA margin.
Eleanor Smith: First on EnergyHub, as you think about your internal projections, what does growth look like across expanding within existing customers, cross-selling new products, and adding new logos? And second, what synergies, if any, exist between EnergyHub and your security business, and to what extent have you tapped into those cross-sell synergies?
Steve Trundle: We do not break out EnergyHub’s exact growth rate, but you can deduce it is a strong contributor to our growth initiatives, which we have said we expect to grow 25% to 30% this year including any inorganic activity. Inside EnergyHub, growth is a mix of adding new logos, expanding programs within existing utility customers, and driving up device enrollment. Originally, much of the VPP capability came from modest adjustments to residential thermostats. Today the software supports a broader set of edge resources—batteries, EV chargers, solar inverters—which utilities increasingly need as supply becomes more variable. That drives program expansion with existing customers, alongside ongoing new-logo wins and higher consumer enrollment in programs. On synergies, our core residential business is smart security or smart home, and many properties today get connected thermostats through our service providers. Each one of those is an opportunity for the customer to become an EnergyHub participant, which creates natural synergy. We have an R&D sandbox to test features that increase engagement or enhance thermostat-level capabilities that create downstream utility value. There is also channel synergy, helping our service providers offset costs of other consumer services we deliver. In terms of how far along we are, I would say we are in the third inning. We are seeing security increasingly defined to include “energy security”—certainty of energy supply. Some of our security partners are moving beyond generators to batteries. We expect more synergy to develop over time.
Operator: I am not showing any further questions at this time. This does conclude today’s presentation. You may now disconnect, and have a wonderful day.