Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the Alarm.com Q2 2023 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. [Operator Instructions] Please be advised that today’s conference is being recorded.

to Zartman. conference like speaker to now Matt today, would hand over the your I ahead. go Please

Matthew Zartman

Good afternoon, call welcome call. everyone, and Please earnings quarter note conference XXXX that this is recorded. to being Alarm.com’s second

today Valenzuela, CFO. Steve us CEO; our from Trundle, Steve Joining our are and Alarm.com

with that subject you projections, to These which assumptions During factors, call, uncertainties or on statements be assumes risk information, from with to which risks after encourage on expectations filed the quarterly respective and XX-Q to and predictions, as to release. we our are are risk results be their other subject statements and shortly statements statements, these which along discussed making factors no call We based any cause associated today’s or call forward-looking about that differ dates. to This these obligation current Form will in report update of our press Form the are refer risk is we X-K, Alarm.com actual estimates factors. will may this review future events. SEC, and speaks the forward-looking current to you materially expectations.

the In found non-GAAP measures be addition, website. call. release Relations GAAP today’s will several on the A press measures discussed non-GAAP of in on reconciliation be financial and can our Investor

to Trundle. call Steve will now turn over the I

begin. may You

Stephen Trundle

Matt. you, and everyone. afternoon Good Thank welcome to

excluding exceeded quarter of second are rate in expectations. We last non-GAAP quarter resulting that million, results and over our $XXX.X a license XX.X% report second our in year, was pleased SaaS revenue the to Vivint. growth

quarter was in the million. $XX.X Our second adjusted EBITDA

their to for results, performance. and their Alarm.com provider team service I want our our to partners contributions ongoing to and thank the

business macro continued grow Our conditions. increasingly uncertain despite diverse to

contributions growth from SaaS Our increasing our base was subscriber initiatives. our driven by and growing outperformance

solid consistent and outperformance was camera volume inventory normalized channel levels. sequential during with driven growth by quarter, the creation account sales, in of Hardware the

increased an and cost, with driven adjusted line along in expected EBITDA than focus stronger the on higher was by Our SaaS revenues. performance controlling hardware

on we we continue our we SaaS about international these trailing XX-month In terms SaaS as video focus XX% our faster the our operations, opportunities to growing Collectively, businesses. total is than growth from our at strategies revenue venture basis. of initiatives see on in and a commercial, exploit

nice the We positioned are the well believe and to are plan. carrying half execute annual our into momentum back of we year, I

services platform. quarter, On doorbell development call, video I'll to provide few we around second today's VDBXXX. of commercial a begin want In a platform the product introduced new the services video I the updates our the business. video and our with called

doorbells our believe in video flexibility, video with doorbell should on allow time. Now our our providers the doorbell and three attachment us developed the up market. battery the choice, rate Alarm.com the lineup video of performance offers is XXX options. service market, drive products This the to We first unmatched through free

That's service providers southwest. video operating XXX doorbell As consumable Embedded the leading has still both far that range doorbell XXX in as service fahrenheit wider the degrees much lowest providers product replaced range. temperature and is video restrict can typical doorbell is than you that The an as battery operating wire also small no install. video temperature XX and the brands. north our maintenance a important the new other that require know, With to periodically. even particularly may be parts, embed powered must video the batteries doorbells

quickly to became be and we XXX service adopted expect into in offerings. second it available generally the their providers our as integrated quarter, The

to install are a eight video monthly. that In two of an service seeing. solution rate investments to years, account XX-year our SaaS Alarm.com the supports a Our contributes and cameras and consistent are revenue seen last in stream. to we've video higher number in subscriber's ARPU cameras with video growth providers we double-digit software the Adding the our opportunity

a significant better made partner customer shift have their so to accounts. I'll enhancement to manage now we that discuss commercial service our our services providers can platform

partner remote business management of platform As our resources is a a solutions. broad services intelligence reminder, suite and software,

design deployment products. our operate consumer-facing wrapping services more services We of more deploying put successful to service their their devices efficiently and help be with while providers these and enable effort capabilities to backend that of into to lot our We with software customers. broad our partners a technology

expanded intelligence This component to of we provide account partner the new platform business services commercial our performance. quarter, into insights

characteristics greater identify everyday able to closely customer historical set These of rolled best practices. system a into are that associated was attributes model with then and lower six insights engagement. team science discrete data and specific account Our attrition were

providers base engine. implement monitor these lifetime service practices Our commercial reporting to for business value in also identify commercial from account and customer high ARPU can their our accounts. additional improvements their can using intelligence increase implementation They opportunities

execution pleased results our plan the our I'm XXXX. summary, of our of half second quarter with and In first through

their We our market products thank hard platform with aligns and to our provider partners for service the acquisition innovative trust long-term launch business. our of occasional I our and continue work with new team opportunity and want to that investors our continued their expand and our the growth in for strategy.

guidance. Valenzuela me and provide to things Steve? review over let Steve that, with our And financial results turn to

Steve Valenzuela

Thanks, of updated questions. for quarter review our begin with before the and guidance financial second XXXX call our results Steve. provide the opening I'll then

last $XXX.X SaaS quarter X.X% million grew quarter same revenue and license the Second from year. of

basis. license $X.X Excluding million million second of the in the approximately as Vivint second quarter, quarter revenue $X.X Connect a includes expected from quarter. and and non-GAAP year-ago license adjusted software license for license XX.X% down grew XXXX revenue, revenue revenue comparable on SaaS year-over-year SaaS

$X.X with license SaaS cameras revenue quarter in and up and in door other $XX.X same historical rate was as or in and QX sales the million renewal and controllers. trends. due a XX.X% an of revenue million the the Our access high our quarter-over-quarter, remains revenue visibility mainly increase consistent XX% to with second quarter level XXXX at of Hardware second

Total was quarter, XX.X% quarter XX.X%, for $XXX.X the quarter XX.X% license grew quarter, mainly was the product to for quarter, X.X% due license commercial from XX% from second the in mainly revenue year-ago SaaS mix million with gross mainly from due and revenue. margin lower to the XXXX up second the down XX.X% of hardware second margin for favorable the Total second year-over-year. more gross quarter, XX.X% Hardware margin year-ago up improvement the margins. in gross offerings. due to QX was for in in

X,XXX and We compared ended R&D mainly in XXXX in million compensation Turning expenses. expenses to to in due second related in in operating quarter QX expenses. employees the X,XXX second employees quarter. $XX.X employees up second XXX compared quarter R&D, employees to an headcount X,XXX the QX increased increase from quarter million the in headcount were with $XX.X the XXXX. to year-ago to Total for

or compared year, expenses quarter Sales total were $XX.X or million $XX.X in mainly in increased XX.X% revenue of headcount. due revenue the second XX.X% million quarter to total same to last of and marketing the

in from offset $X.X our non-GAAP second part measurement G&A expenses to G&A course non-ordinary million excluded litigation million our slightly performance in are quarter. quarter $XX.X down from the expenses the measures partially lower of financial $X.X year-ago legal expenses Non-ordinary of of adjusted are quarter million, includes course litigation down the higher compensation were year-ago and expense our second $XX.X costs fees. in due and quarter by the Our from headcount in million

In to income was compared $XX.X net compared per $XX.X net in adjusted in million the year-ago Non-GAAP $XX.X second EBITDA was second the GAAP $XX.X per of XXXX. QX for quarter. to net income XXXX. or in million was quarter, GAAP million $X.XX share diluted million or quarter $XX.X $X.XX to second adjusted share compared the million income quarter the million quarter in the of Non-GAAP $XX.X second

our ended of the $XXX.X December cash $XXX with XX, Turning at equivalents sheet. XXXX. balance up We to quarter million second and from cash million

million $X.X at During common the of of average XXX,XXX shares our an quarter, stock to repurchase we $XX.XX. cost used

Turning to outlook. financial our

For to the million. license and we of $XXX.X SaaS quarter of third million XXXX, $XXX.X revenue expect

prior be to expect revenue guidance we $XXX.X the full-year and million. million of XXXX, million our $XXX.X of $XXX.X SaaS million $XXX.X license For up to now to from between

We hardware revenue which up $XXX.X of prior to are our for other revenue to to guidance of projecting XXXX $XXX million. million estimated million, million million increased $XXX.X from $XXX $XXX.X includes and million, total $XXX.X

$XXX to $XXX million adjusted for that will EBITDA estimate million $XXX XXXX non-GAAP $XXX to up of between million be We million. prior guidance our from

per $XX.X expect We a of to of to million XX% $XX.X for million, the our EBITDA million third annual a our $XX.X net to share or be $X.XX to XXXX income quarter adjusted non-GAAP XX.X% approximately is prior guidance non-GAAP or diluted from a to to up projected a to Adjusted for XXXX share. guide. $X.XX represent per $X.XX million, of $XX.X $X.XX diluted

million XX.X to diluted of under We rate XXXX project at remain non-GAAP our based EPS outstanding. an estimate is on tax tax current average shares XX% rules. weighted for currently

stock-based $XX of compensation million We $XX expect expense full-year to XXXX million.

summary, focused In on our continuing on and strategic while investing profitable our strategy we growth. in long-term deliver plan are to business executing

And with that the call for open Q&A. operator, please

Operator

first Instructions] [Operator you. Bank question Michael from Our comes Thank with America. Funk of

open. is line Your

Matthew Bullock

is on on providers and the couple international call. Thanks revenue growth you've Funk. years? next update trend Hi. the update international Bullock all you progress, for Thanks. service made signing Yes, progress Matt on to new an specifically the with an love this Mike I'd that expect for how on color overall over of

Stephen Trundle

Steve is this Trundle Matt, Hey. speaking.

of goal. we ones time was like going pipeline growth – the we XX% seen I out quarter, So sort that that I and end around there? come I continue. that's it's all think And we've XX% not some think towards to business sustain last trajectory new of signing Can next indicated we of but in a nice to conceivable, rate that growth in year. sort of feel we're We this we two the are on the are think would our terms overall. providers, be additional have as certainly service going update this that international, quarter that and years a

Alarm.com So grow and of business continue a base. is chunk going meaningful the revenue more become to to

today, something there probably total look between it's plus at long-term X% X% in our you If and and international range. of XX% the target revenue is

plenty of there's think runway every building we day. we're business and out that So

Matthew Bullock

And XXXX XXXX, one Excellent. Could ARPU And then services? add looks Super today through more your could ARPU? and more increase as context on of residential ARPU standard we helpful. maybe additional commercial move what little how bit you I products could. provide as even you XXXX, that if versus then and like a

Stephen Trundle

question. Good Yes.

the So is is to where as currently remember Xx, have strong is that case really of commercially is, commercial ARPU, you ARPU small our place today that the business. we're rule the around thumb residential in

doors, XXX may doing installations today, So or SMB have doesn't on XX average. today doing if side but we're side. on larger mean probably where are average three average that take on we're the we're than the stronger the access doing doors site to enterprise down That can't control four on we we we're

– and accounts, As Xx probably with we to drift deploy gradual over there OpenEye it's the up out residential time. commercial outliers would XXx our continue would average, time, a expect ARPU. see XXx, period ARPU closer to build of be SDS to some that the commercial, But long that probably be rest have commercial with to will standard our platform, our will be in over there'll a you'll of with where on and closer I lift something and

Matthew Bullock

Super you much. very helpful. Thank

Operator

from Saket next Barclays. Our with comes question Instructions] [Operator Kalia

line open. Your is

Saket Kalia

a Hey, questions here guys. my taking and the afternoon, good Great. Thanks guide. nice for revision to Okay.

Stephen Trundle

you. Thank

Saket Kalia

just maybe start you. with Trundle, Steve Absolutely.

question, last out On little want the bit. the of to back I a zoom

about prepared growth remarks. in talked on You at whole XX% initiatives growing the about your

that think maybe is that we and drivers? just total about business order sense? really the interesting. growth Does business Can think the rank just you as maybe big I how that about of in that's components make talk

Stephen Trundle

and Yes. good question. Absolutely makes sense

XX% what revenue the total the In growth we that bucket, into and terms around it's of today commercial, video, bucket EnergyHub scope of describe overall we of international. initiative, and our as

what I particular really are that mentioned remarks. those pillars the my And we growth that key four in about today characterize initiatives. of we So prepared rate talk as growth

sort for quarter and obviously. it's So of bucket gives feel every of getting – terms and bigger that you the scale in of that a sort

long-term terms terms hard preference of because as In the it's drivers of areas rank them, for me in I business. ranking like to each in those growth of

of three ordering the spot Saket? international number in nicely and number is in probably the commercial the that where growing that video After today, mix. in that larger spot And not In EnergyHub, then of terms two there. terms four them would say today's terms in be which contribution. of I it of that, we and are are behind components is on would size Does far help, rank

Saket Kalia

Yes, I'm there for for curious, somewhat impact very XX% I But mean, are different follow-up margin growth that XX% bigger? margins Valenzuela I maybe the these growth of SaaS. that and know all into increasing mix really we those as quarters they're just does. get in That's helpful a actually. is ahead. and businesses? profile to for up years Steve course, very, and here that the businesses related, different that think XX% all those as about How inching might you

Steve Valenzuela

Trundle about. Steve talked of segment. businesses the Yes. are growth Most those Alarm.com in

a We have the range. in to in to includes bit generally that lower which the SaaS the margin upper segment, mid margins generally little gross the In is mid-XXs. in other XX% EnergyHub, XX% gross range, XX%

QX margin. at Matter bit we versus points. little XX XXXX, only might fact, about So say of down a a gross drop you gross did in margin a QX if as basis continue the to look the come of SaaS little on bit growth business grow,

that X% is of actually a was segment is our Some year-ago. revenue, because of X% news. great the other It is now which

And of so on a gross bit there'll the point impact, point more but than basis XXX wouldn't SaaS expect to be impact basis XXX I margin. little

Stephen Trundle

Steve just about SaaS. is then the pile to And on. talking

piece, there. higher hardware the just hardware – the tend we're particularly That's areas, of course that side in commercial on revenue. the to sector range driving today, is XX% to XX% little a hardware in these the more the is On normal commercial least margins at generate sort margin

Steve Valenzuela

Yes. That's a point. good

a about commercial the in about. hardware margins talking range was Steve XX% as are margins, was I gross talking all what generally gross SaaS So was

Saket Kalia

in Got it. back get you. Super guys. helpful, Thank queue. I'll

Steve Valenzuela

Thank you.

Stephen Trundle

Thanks.

Operator

[Operator Norrison James. from Jake comes Our Instructions] question next with Raymond

Your open. is line

Jake Norrison

Okay, for perfect. the Thank taking you, guys question.

Just a couple for me.

And this more a the sort that XX% any color be near I could years could you have know you and long-term go? How the for rate. number high now. few Do would it's takes up? on what hovered targets? that provide renewal If driving puts of for XX%,

Steve Valenzuela

been it's point see the during X – that's has So at been did That's there We revenue and generally, XX% when were moves. renewal at rate fewer XX% renewal rate. the COVID to it XX%.

moves, generally to it's I out think there's when less important there's attrition. point fewer

lifetime XX years. renewal eight video, years Also, about those a I And customer's So have a ago in that does contribute very rate. to those that about analytics, higher really that think sticky. four think video as are we out the of came to

see enhanced So over a long that expect higher services, period of time a I retention rate. would with would we these

It takes It's to a it subscribers long. an over services you've cause retention these rate a got time Now, an we a because million but all longer X Already life, boat, shift moving like as over long value a while period right? is time. have XX-year eight lifetime. today, over, large takes time, to of see in really increase that which even added pretty should of we

I So would the would over up. say, time, go period a I be doesn't rate retention if long of surprised

Jake Norrison

me. for then perfect. one last Okay, that And color. Appreciate

higher we EBITDA puts and takes from plus margin the XXXX? about range fiscal should could level, for Just that and maybe to returning that of about how XX% a you think talk

Stephen Trundle

speaking. Sure. this means level I guess is higher Trundle – Sure. Steve

contributed seen some the focus you've SaaS to last quarter hardware had was a [and were on and EBITDA think than on come in revenue we that we better able I to uptime], increased we in expected. adjusted little some There both cost us that.

profile look we in items question. guideline direction. growth our for would in we early think shy But EBITDA, investment of In have the for kind cycle sort is in XX% – that where shoot that from in to now. so enamored really what what more are underway? sense? it's we the we various I the us we say, I of get want we're And the going more to don't little away stack internal on want exactly towards XXXX. terms that do generally, initiatives don't move don't in But makes we're at looking the are we'll XX%, We our business, but what margin investment right – to the of that in what I range deliver yet and have do the I forecast a to with

Jake Norrison

guys. very Perfect. helpful. quarter, you. That's Thank Congrats on the

Stephen Trundle

you. Thank

Steve Valenzuela

you. Thank

Operator

Our Matt next comes with [Operator question Instructions] Blair. Pfau William from

open. Your is line

Matthew Pfau

to questions. if for it to enough Gopher you so, and meaningful from functionality AI of wanted some Does this the you're my margin Great. help a all? providers. on product Thanks cost with taking incorporating at the released on And out at I ask you help all? you that your side is perspective the service

Stephen Trundle

on Gopher and we more of experience a through Gopher, is can results providers one side us when shift us. that the But helps as as focus when the as the may or support services help good on hope support really Right it the enhancing our could have our would faster on interface cost I to and now, help some the service seek that side. providers they service the cost interacting with time comfortable equation. imagine become that that from that AI us the delivers person and see

we're we've to products, to we doing providers. can to they we support service new great important built business that. out ship a the on are continuing with can new quality around if need that feel support If we our get to provide best it. the said, work That we there like, high us do for It's with Alarm.com to and product

of one going as we're So priority. number sort the to continue that

what in-person some call But time in we're with I see that doing over volume. with that imagine AI, reduction can we could

initiatives AI of work our own not in also of of libraries there. some every customer And time. day there then course, with capabilities and are processes do that But the we're been though analytics, internally. that the market. a doing for things some and of just there but we what on take of things terms additional to capability piece to putting number of other the do out video long AI a the we've focused, in is large are better think it as got of the advantage with I And we we've opportunities maybe productizing

Matthew Pfau

what And of of back this Maybe attach you going new to video it. to your to just view? some video that up around wanted the that us could you that in your rates of to have comments sort Got doorbells been? And what released. doorbell meaningfully then circle release idea move the give is product, subscribers if

Stephen Trundle

Yes. hope. That’s our Good question.

So out we market have with good product the video today doorbell. in

feedback taken particularly from they have a doorbell. lot that of We install a challenged they're that service those some markets video providers in when temperature have extremes,

have on and sunlight, door you and with a facing XXX even home a If could it outside south you with or a a XXX exposure be it's challenge. of degrees front have lot a direct there –

So that. XXX solves

the Our we to drive goal to XX% to has XX% think attachment. over in range. be would opportunity range. there's been to get that the XX% XX% Attachment an up probably closer And to time

have not third-party is, exclude existing but us doesn't thing homes from usually home doorbell, nice where if existing today, the doorbell already our have it just own. doorbell smart we're doorbells. is even providing they not The we cases may Some the a the seeing experience. replace It's

products, to refer existing well, are I So mean those when or not working where well, as I cetera. et doorbell, broken third-party

likelihood. constantly we're reduce on to drive XXX, that reduce up the So attrition. also that can I hope attachment, focused with is mean, we the ways

a that that market that longer the with are in product services a to you a able problem associated have for consumer, you there's if product. the causes build So no risk

to is sort the to extreme or battery may of weren't that doorbells drive from So go heat revenue because we extreme any down or attrition come either handle want bad they cold. the prepared dormant their either that

Matthew Pfau

my Perfect. Thanks taking for questions.

Operator

Our with MKM. Darren next [Operator question Aftahi Instructions] comes ROTH from

line is Your open.

Darren Aftahi

are guys guys. you Hey, in I controller for on and kind those you [indiscernible], made door strength you, some guess about maybe, I two questions at update access. I announced my there for Cell to Question LTE congrats of think and taking connected? Thanks being hardware related the comments Connector think [ADT], ISC the and any results. West,

Stephen Trundle

Yes.

second control is now. got it on Cell quarter. driver, driver now nicely the we It's So of the access in wasn't contributing it our the range. products Has can a but been the business being growing And new installed. a more and Cell think installation It's services. out I Connector in No, that is to a provider that's primary bring mid-XXs hardware? that And beat primary one onto an subscriber our Connector attack a with continued way growth. service

I by primary is the it's product say can't a Yes, it. out, driver. So itself it that was selling just

a driver because mentioned think on controllers probably were driver hardware then bigger the I cameras second average chunk of the they're beat. were the the door bigger installation. Steve And a video

Darren Aftahi

and then of having big the interest housing residential And gross are retention adds? on helpful. effect slow of that That's I'm the And beneficial a you like, your is inverse, just down just Thanks. just picture, new a lack in kind curious to sort of rate? supply, given rates market then seeing

Stephen Trundle

Two Yes. part there. question

you terms interest that attrition right you're well In attrition. being typically are have if subdued originated. slightly exactly you lower as homeowners rates of impacting you'll Traditionally, then market, rate may there fewer creation moves in a because have new fewer a have and the

seen either really haven't yet front. on We that

us pretty a to build a looks we There's So the there. Builders channel homes. for can been nice builder fair continue as backlog strong. tell, far as of number

yet seen terms in really haven't new decline of production going we So homes. into a

huge a not our but it's of new chunk Now year. business, installs XX,XXX a it's XX,XXX,

it's meaningful. So

drop tailwind to necessarily our attrition really as rates. seen of sort there evidenced metric. revenue in by think terms we've been We haven't yet. It's steady rate that I retention interest state seen positive higher don't of due a

Darren Aftahi

Fair Thank enough. you.

Stephen Trundle

Sure.

Operator

Our next Group. with comes Jack [Operator from Codera Maxim Instructions] question

Your line is open.

Jack Codera

are seems Aarde. Last One my talked quarter, Vander to guys – of I some kind that for anymore, last that Thank seems are the your on still want might elaborate that's Jack and for guys you out that not seeing slightly asked. questions. a on of some devices activation smaller raise maybe question had in trends. at quantify you like areas, trend macro in – but calling you. Codera Thanks Jack is This you play guys. year-over-year, Hi to case being on regions guidance taking given but strong, was that able all? footprint that some maybe number consumers

Stephen Trundle

memory. Good Yes.

little hardware Again, the I during video we quarter. So over heavily I were quarter, that the surprised last self mean, driven the our think we've by camera by it the consumer to – is seems two so will, like if the second had possibly in One consumer the kind there. returned explanations quarter. a there's has of bit on normal, seen outperformance really you a sales,

just held The an on levels measure during the that of it? in providers is I I'm now? me The likely contributor, normalize I have measurement And other the we is front right sure inventory quarter. two don't. Yes. the answer being the exactly by those – some but update unfortunately, could of service we Do not is have more which

Jack Codera

you No of regional well, color. strangely my I'd was that on Canada performing out side, didn't also Have a this that been why that if of apologies able but worries. That's mentioned like helpful interested you is. And guys hear to non-question. you figure is guys be know to all? another kind kind But at really

Stephen Trundle

market? while, us. so Canadian good not been talking Canadian a for about has surprising performer to a You're market

Steve Valenzuela

Yes.

strong continued Q&A referring Canada back quarter to he's something. us. we has that for a maybe on think no, I to be or had where But prior

appears been there. have think would in resilient long the be right market that time. to I Canada, I say we been we've service The were have consumer in to why, a if it providers the

I drop any really say contribution seen We Canada. would off coming in haven't from

be market. to a continues So good

Jack Codera

I'll Yes. Thank back queue. you. hop in

Stephen Trundle

you. Thank

Steve Valenzuela

Thank you.

Operator

showing not this today's further at time, conclude does this so I'm And presentation. any questions

may disconnect You a now day. and wonderful have

Stephen Trundle

you. Thank

Steve Valenzuela

you. Thank

Alarm.com (ALRM) 9 Aug 232023 Q2 Earnings call transcript