Q3 2022 Alarm.com Holdings Inc Earnings Call
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Thank you for standing by and welcome to the alarm Dot Com third quarter 2022 earnings conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
Today's program is being recorded and now I would like to reduce your host for today's program Mathew Blackman, Vice President of Investor Relations. Please go ahead Sir.
Good afternoon, everyone and welcome to alarm Dot Coms third quarter 2022 earnings Conference call. Please note that this call is being recorded joining us today from alarm Dot com are Steve Trundle, our president and CEO and Steve balanced whaler, our CFO before we begin a quick reminder.
Management's discussion during today's call will include forward looking statements, which include among others projected financial performance and key assumptions related thereto, including with respect to the <unk> dispute potential legal spend and cost rationalization strategies the impact of emerging market dynamics trends.
And anticipated market demand the impact of the Covid pandemic challenging global supply chain dynamics and adverse macroeconomic conditions, our business strategies plans and objectives and integration of recent acquisitions and anticipated growth prospects of our new light acquisition continued enhancements to our platform.
And offerings opportunities for growth and expansion in our current and new markets. These forward looking statements are based on our current expectations and beliefs and on information currently available to US. These statements are subject to risks and uncertainties, including those contained in today's earnings press release and in the risk factors section.
<unk> of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August nine 2022, and in subsequent reports that we file with the SEC from time to time, including our quarterly report on Form 10-Q for the quarter ended September.
32022 that we intend to file with the SEC. Shortly after this call that could cause actual results to differ materially from those contained in the forward looking statements.
Please note that the forward looking statements made during this call speak only as of today's date and alarm Dot Com undertakes no obligation to update these statements to reflect subsequent events or circumstances, except to the extent required by law also during this call management's commentary will include non-GAAP financial measures.
And provide non-GAAP guidance management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in understanding the company's performance and trends.
However, non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP reconciliations between GAAP and non-GAAP metrics for our reported results can be found in the financial statement tables of our earnings press release.
Which we have posted to our Investor relations website at investors don't alarm Dot com is.
This conference call is being webcast and is also available on our Investor Relations website. The webcast of this call will be archived and a replay will be available on our website, let's now turn the call over to Steve Trundle you may begin.
Thank you, Matt good afternoon, and welcome to everyone.
Pleased to report another quarter of solid results, our SaaS and license revenue in the third quarter was $133 $1 million.
Up 12, 8% over the same period last year.
Our adjusted EBITDA in the third quarter was $48 million.
I want to thank our service provider partners and the alarm dot com team for their continued strong performance.
In my comments today I will update you on several new platform capabilities that expand our addressable market and talk a bit about our recent moonlight acquisition.
I'll also spend some time addressing the matter related to our patent license agreement with Devon.
And close with some of the thinking that has gone into our initial look numbers for 2023.
This quarter, we expanded the market for our alarm dot com for business video solution with the introduction of third party camera support we.
We estimate that our commercial video solution will now work with about 80% to 90% of third party cameras.
That installed and mid sized.
Large commercial setting since 2018.
Supporting third party cameras will make it easier for businesses to adopt our integrated solution without the cost of replacing all the existing installed video cameras.
You can also leverage a wider diversity of commercial camera form factors and capabilities to expand the fit for our video solution. For example, we can now address the needs of businesses with specific requirements for Penn hole.
Thermal and other camera types.
Deploying this new capability the alarm dot com video team leveraged technology created and widely deployed by our open team for enterprise commercial customers.
It's a good portrayal of the ongoing synergies that our 2019 acquisition is producing.
We also expanded the application of our video solution with the introduction of escalated events.
This software capability enables our partners monitoring stations to receive and respond to events generated by alarm Dot com suite of video analytic software.
For example, when alarm dot com detects a person in a customer's backyard or in the parking lot of a business. After hours. We can alert monitoring station monitoring agent can then access video clips and live video feeds from cameras enrolled in the service, but the subscriber.
Agent can evaluate the situation quickly and dispatch first responders as needed.
Escalated events adds a new layer of proactive security protection for property owners that also creates new opportunities and applications for professional monitoring services that our partners provides.
Escalated if that expands our suite of software based alarms signaling an emergency response capabilities we.
We believe we can create new markets for our partners to deliver professional monitoring services, while also enhancing the value of services offered to the typical customer today.
Our recent acquisition of New light also gives us further scale in developing these opportunities and the emergency response space.
Moonlight launched in 2013 as a personal safety mobile application and has organically attracted over three 5 million users.
During that time, the Companys technology has evolved into a connected safety platform.
It enables context aware event management and emergency response services.
A range of market, leading brands and Iot device vendors integrate moonlight services into their offerings.
We saw a number of appealing things about noon light that led to our acquisition.
First nonwhite allows alarm dot com to participate more broadly in the Iot market.
And then like fast growing SaaS offering enables Iot device vendors to incorporate emergency response capabilities into their solutions.
Many of these vendors provide devices that standalone products that have not traditionally been monitored by the security channel.
Second we see opportunities to leverage technology across.
Your line and alarm dot com platforms, and create new markets for our service provider partners.
For example, new like API simplifies the incorporation of emergency response services and to nearly any Iot device.
Integrating <unk> responsive capabilities with existing products, such as lifestyle connected car and sugar detection systems with meaningfully expand their use cases and value proposition.
Lastly, moonlights founders and leadership team share many aspects of our management and technology philosophies.
They are committed to our growth strategy driven by expanding their platform.
Through R&D.
Noon light will continue to operate independently the team will focus on exceeding the expectations of their current and prospective customers and expanding their services platform.
Shifting gears I want to address the visit matter and how it relates to our initial look for 2023.
As you know Vivek recently notified us that it will stop paying alarm dot com the royalty fees associated with the patent license agreement that we reached with Devon in 2013.
We have filed for arbitration under our agreement, we expect the arbitration process, which is confidential and not open to the public like traditional litigation to take about 12 months to 16 months.
We intend to continue aggressively defending the investments we have made in our technology over the course of 20 years, including our global patent portfolio of over 600 issued patents and additional patents pending.
As we previously disclosed regarding the visit matter.
<unk> Dot com.
Leaves the quarterly SaaS and license revenue and total revenue will be impacted by approximately $6 million per quarter.
Beginning with the fourth quarter of 2022 and through 2023.
The patent license revenue from visit was projected to grow somewhat more slowly than the rest of alarm dot coms.
Revenue in the first half of 2022, along dot com SaaS and license revenue.
Excluding women grew 14, 7% year over year.
As our longer term investors know, we typically conclude our third quarter call by providing an early initial look for how we think the business will perform in the following fiscal year.
The emergence of the visit matter in the last few weeks has made that objective more challenging Nonetheless, we are going to again provide our current thinking for the year ahead.
Steve balance whaler will speak further about our 2023 estimates in a few minutes, but I wanted to provide some commentary as well.
For this year's initial look estimates we have budgeted conservatively.
And no license revenue from Devon in 2023, we've also budgeted for potential significant additional legal expenses related to <unk> in the range of $16 million and $20 million in 2023.
At this early stage, we do not know exactly what our legal costs will be in 2023.
However, we do not want to find our legal options constrained by our budget or our financial outlook.
We want to be positioned to deploy a full legal budget without surprising our investors next year.
The combination of these potential expenses with the loss of patent license revenues meaningfully impacts our 2023 adjusted EBITDA estimates.
Fortunately these legal costs are not core to the business operation and at some point in the future when the matters concluded they will subside.
Since receiving notification I've been asked several times.
What adjustments are you going to make in the rest of the business.
Answer by saying that I liked our growth strategy before I heard from Vivek and I still like our strategy today.
News doesn't change our core strategy in any way.
In the last few years, we have successfully expanded the alarm dot com platform and diversified our revenue streams. We have also increased our level of investment in the R&D such that we are building for the future while also maintaining profitability.
As a result, we have created strong businesses in commercial intrusion and access residential and commercial video and energy management. We have established toe holds in the HVAC channel. The multifamily housing segment, the active shooter detection vertical and most recently with our acquisition of new light the non traditional monitoring space.
We build an international business that now serves over 50 countries globally and installed over 200000 systems annually with.
We've done all this while also continuing to treat our service provider partners is a top priority.
Each of these businesses leverage our competencies in Iot AI user oriented design and multi tenant high availability cloud SaaS we.
We have great teams in place in these areas too.
And they are developing technology that does good things for people keeping them safer literally saving lives and making people more efficient and reducing the energy footprints of individual properties and across entire communities.
We believe that in each of these areas, we can build multi hundred million dollar businesses.
So I feel good about where we're headed and the strategy we plan to continue to pursue we.
We will do some modest cost rationalization to enable us to produce ample cash even as we address litigation matters, but I don't see us changing our core strategies.
In summary, I remain confident with our trajectory I am pleased with our third quarter results and with the execution of our plan throughout the year.
I, especially want to thank our service provider partners on our team for their hard work and our investors for their continued trust in our business and with that let me turn things over to Steve Valensuela to review, our financial results and provide guidance.
Thanks, Steve ill begin with a review of our third quarter 2022 financial results and then provide our guidance before opening the call for questions.
SaaS and license revenue in the third quarter grew 12, 8% from the same quarter last year to $133 1 million.
This includes connect software license revenue of approximately $6 5 million for the third quarter down as expected from $7 9 million in the year ago quarter.
Our SaaS and license revenue visibility remains high with a revenue renewal rate of 94% in the third quarter.
Hardware and other revenue in the third quarter was 83 million up 11, 8% over Q3 2021.
Video camera sales continued to be the main contributor to growth in hardware revenue.
Total revenue of $216 1 million for the third quarter grew 12, 4% year over year.
SaaS and license gross margin for the third quarter was 86, 2% up about 100 basis points over the same quarter last year due to some modest scale benefits.
Hardware gross margin was 19, 1% for the third quarter, an improvement from 17, 7% last quarter and up from 15, 2% during the same quarter last year as we started to see some modest relief and shipping costs and our price increases took effect.
However, this is still below our historical gross margins of 20% to 22% as.
As the global supply chain continues to be challenging.
We expect hardware gross margins for the fourth quarter to be in the range of 18% to 19%.
Total gross margin was 64% for the third quarter.
Up from 58, 2% in Q3 2021.
Due to the improved SaaS and license and hardware margins.
Turning to operating expenses.
R&D expenses in the third quarter were $55 6 million compared to $44 1 million for the third quarter of 2021.
Mainly due to employee related expenses.
We ended the third quarter with 981 employees in R&D up from 819 employees in the same quarter last year.
Total head count increased to 699 employees in the third quarter compared to 4800 82 employees a year ago.
Sales and marketing expenses in the third quarter were $23 1 million or 10, 7% of total revenue compared to $22 6 million or 11, 7% of revenue in the same quarter last year.
Our G&A expenses in the third quarter were $28 million.
Up from $18 7 million in the same quarter last year.
Mainly due to increased legal fees employee related expenses and travel costs.
G&A expense in the third quarter includes non ordinary course litigation expense of $3 1 million.
<unk> to $1 6 million for Q3 2021.
This quarter also includes acquisition related expenses of approximately 700000 for acquisition of new light.
Non ordinary course litigation and acquisition expenses are part of our adjusted measures and are excluded from our measurement of our non-GAAP financial performance.
non-GAAP adjusted EBITDA in the third quarter was $40 8 million up from $37 6 million in Q3 2021.
In the third quarter GAAP net income was $18 3 million.
<unk> GAAP net income of $13 5 million for Q3 2021.
non-GAAP adjusted net income was $30 1 million or <unk> 55 per diluted share in the third quarter compared to 27 4 million or <unk> 53 per diluted share for the third quarter of 2021.
We ended the third quarter with $621 3 million of cash and cash equivalents.
During the third quarter, we used $31 $9 million to acquire an 85% controlling interest in new light.
Which excludes $4 9 million and post closing pullback provisions.
As I now turn to our financial outlook.
I want to remind listeners that beginning with the fourth quarter of 2022, our guidance going forward excludes vivid patent license revenue from our financial results.
As we indicated in our press release, we expect the impact on our SaaS and license revenue and our earnings and cash flow to be approximately $6 million per quarter.
We also expect to incur significant additional legal fees.
As we enforce our patent license agreement in this matter.
For the fourth quarter of 2022, we expect SaaS and license revenue of 135 to $130 7 million.
For the full year of 2022, we expect SaaS and license revenue to be between $516 three to $516 5 million compared to our prior guidance of $518 $5 million to $519 million.
We are projecting total revenue for 2022 of 843 to $842 5 million compared to our prior guidance of 828 five.
$2 $859 million, which includes estimated hardware and other revenue of $324 million to $326 million.
We currently project, our non-GAAP tax rate for 2022 to remain at 21% under current tax rules.
EPS is based on an estimate of 55 million weighted average diluted shares outstanding.
We expect full year 2022 stock based compensation expense of $50 to $52 million.
Finally.
While we are in the initial planning stages I will provide some early thoughts in 2023 with a few important caveat.
There could be further disruptions from the ongoing challenges with our global supply chain.
And we are in the early stages of evaluating legal measures to enforce our patent license agreement with debit.
These factors among other unforeseen events.
Could impact your guidance and results in the new year.
With that said, we currently estimate our SaaS and license revenue for 2023 will be between $548 million to $550 million.
Excluding the previously mentioned patent license revenue.
Total revenue for 2023 could range between $873 million to $875 million.
We currently project, our non-GAAP adjusted EBITDA for 2023 to be between $110 million to $125 million.
As Steve noted.
2023 EBITDA outlook.
Films that we retain a lot of flexibility in our legal strategy and reflects some of the higher costs, we anticipate incurring during the year, which are not part of our normal ongoing operating costs.
In 2023, we plan to continue to invest in our growth initiatives.
Including our newest acquisition new light.
Which has strong growth prospects with 50% or better growth anticipated.
<unk> will initially have a modestly negative impact on our earnings as we invest in their business.
We will provide our initial guidance for 2023, when we report our fourth quarter 2022 financial results early next year.
In summary, we are focused on continuing to invest in market, leading smart property solutions.
While delivering profitable growth and with that operator, please open the call for Q&A.
Certainly ladies and gentlemen, if you have a question at this time. Please press star one one on your telephone one moment for our first question.
And our first question comes from the line of Brian Ruttenberg from Imperial Capital. Your question. Please.
Hi, Thank you very much for taking my call in terms of the dividend I'm sure you're going to be getting a lot of call.
Questions around that but.
How long was the contract sector last was it perpetual and they just discriminant only cut it off or was there a certain period of time that it was going to end and maybe you can walk us through the process.
Yes.
Hey, Brian This is Steve Trundle speaking.
So I wish I could walk you through the entire process. Unfortunately agreement itself is confidential in terms of the agreement are confidential. So that's.
That's why I spent some time in my prepared remarks kind of providing.
What insight I could there, but we can't comment on the.
Actual terms of the agreement.
Okay.
Unfortunately some.
Okay, maybe then as a follow up.
I was on the ADT ADT call excuse me and they said that.
Your agreement is very much in place is there any other large.
Agreements out there besides ADT and Bourbon.
And that is.
Very large percentage of your business or is it a bunch of small little contracts.
No well in terms of license.
Our other licensees I would say that the revenue under licenses from Vivek behind majority of license revenue probably in the.
90% plus range and as we articulated I think when we discussed the.
The ADT agreement.
The license component of that actually kicks in.
As they transition to Google based platform at a later point in time.
Great. Thank you very much.
Yep.
Thank you one moment for our next question.
And our next question comes from the line of <unk> <unk> from Barclays. Your question. Please.
Okay, Great Hey, guys. Thanks for taking my questions here.
Steve Steve Trundle, maybe maybe for you.
Maybe just picking up on ADT I was wondering I was wondering if you could talk to kind of how we're thinking about ADT impact next year to revenue by the way. Thank you for providing that preliminary look to 'twenty three that's very helpful. At this point in the year.
I know that ADT is it's very early the impact there is going to take a while but maybe maybe you and Steve Valenzuela can you just help level, how we're thinking about that ADT impact at least for in your preliminary 23 guidance.
Sure.
This is Steve Trundle speaking.
Yes.
I think when we announced the sort of a revised agreement with ADT, we anticipated at that time that.
ADT wood.
Create all professionally installed accounts on the alarm dot com platform through the end of 2022.
We now believe that is going to be probably a longer period of time and.
And we almost have to look to ADP themselves.
For exactly what their internal plans are but the relationships.
Healthy we're working together on a lot of a lot of different fronts.
I know when we put together our initial look numbers.
We assumed that.
Through at least the first quarter.
On the <unk>.
We installed systems would be on the alarm dot com platform and then we began to paper that expectation somewhat as we go into the second quarter.
I think our.
Best guess at this point is that we'll probably expect it to be more or less business as usual.
Based at some level on Adt's communications again, it's sort of their plan, but I think.
As usual until the middle part of the year.
Got it.
Sorry go ahead.
Accurate.
Less hardware revenue for next year from ADT, they've not been a major contributor hardware revenue, but we have factored that into our guide for 2023 for hardware revenue.
So Jonathan impact.
Got it that's very helpful. Maybe for my follow up for you can I know that.
There is some normal course litigation expense there are some of course non non normal course litigation expense like Vivian can you just remind us you mean.
EBITDA the preliminary EBITDA guidance for 23, what's what's sort of excluded from non-GAAP EBITDA what's included.
I think that I think that EBITDA number is a little bit lower than what we were expecting even adjusted for <unk>. So I just wasn't sure I wanted to make sure. We were clear on kind of what was being excluded versus included.
Yes, most of that legal.
Zero number that Steve Thunder throughout a $16 million to $20 million most of that.
Is affecting adjusted EBITDA for next year because of the nature of that legal spend so it's not adjusted out of the adjusted EBITDA like some of our legal is and it gets into the technologies that we have.
Assumed when we put together the initial look for 2023 most of that legal spend would be hitting adjusted EBITDA in other words, reducing our adjusted EBITDA and Thats one of the reasons why the adjusted EBITDA Guide is lower for 2023.
Just to sort of bring bring that.
So we don't actually know at this point not get exactly what measures. We may pursue so we have to.
Those incremental costs would not be adjusted out.
At this juncture.
So you have that that sort of expense that I.
Mentioned in my prepared remarks, Steve just indicated the majority of that.
At least at this point, we're assuming would not be adjusted out and then you have of course the.
The actual top line $24 million component.
Of course, no longer flows into adjusted EBITDA and then the only other thing I think we've mentioned is that we did acquire noon light in the third quarter and are planning to invest into that business throughout 2023, because it's a high growth.
Business, so theres, probably five or $6 million of investment we're making.
There Thats new.
New investment as well and those are all factored into the initial look.
We provided you.
Got it very clear thanks, guys I'll get back in queue.
Thank you.
Thank you one moment for our next question.
And our next question comes from the line of Mark cash from Raymond James Your question. Please.
Alright. Thanks for the question. This is mark one for Adam So maybe just to kind of circle back to this last year and maybe asked different way.
Devon refusing to pay I guess, what's to stop ADT from pursuing a similar strategy.
<unk> three and beyond is there anything you can talk about if it's broadly.
About the contractor relationship that makes the outcome less likely.
Yes.
I would just I guess I would just say that our relationship with Devon has a very positive relationship where maybe I'm sorry with ADT.
We're collaborating to service.
And millions of subscribers.
<unk>.
So we're working together much more of a win win.
Oriented type of relationship and you contrast that with.
Who.
Filed a suit against us when we were on our road show.
The IPO.
Has been more or less.
Just a little bit more of a problematic relationship and.
That's probably my overall view.
Okay.
It's helpful. Thank you and if I could ask a follow up.
Can you just acquired in my balance sheet is very healthy and valuations coming down. So if you can just talk about the M&A philosophy and would you consider something larger to perhaps accelerate diversification to areas like international commercial and how do you weigh those different adjacencies. Thank you.
Yeah absolutely.
So we continue we did just finished this acquisition.
We continue to look at.
Various opportunities the opportunities are becoming I would say.
Increasingly more attractive to us now we're seeing some.
Rationalization on valuation International as you just mentioned is in fact.
A area, where we have some level of focus than have been.
Looking at various.
Opportunities that may help us accelerate what is already a pretty healthy expansion internationally, but.
But that is a domain that we are looking at we continue to look at.
The energy demand, we continue to look at video domain and then we're always looking for.
Attractive sort of aqua hire, but usually much smaller.
<unk>.
Okay.
Okay.
Does that answer your questions.
Yes. Thank you so much.
Thank you one moment for our next question.
And our next question comes from the line of Dillon Heslin from Roth. Your question. Please.
Hey, guys. Thanks for taking my question.
Just to start I.
I'm wondering if you could comment a little bit more about commercial.
The cadence of growth there.
I think.
Cutting a little bit more out of the pandemic earlier in this year, you mentioned seeing better growth. There. So I'm just curious with what the cadence looks like there and is that sort of 90% to 90% camera.
Adaptability, if you want to call. It like the main the main pain point Youre seeing in terms of trying to get better penetration.
Yes, the cadence there.
Pretty good as I mentioned last quarter, we're pretty focused on the.
Particularly the F&B Tam, which we put at around $5 5 million potential subscribers in North America.
The.
The velocity that we have with the <unk> business is strong the business continues to grow it fast.
Revenue at a nice pace.
So generally we are continuing to see good progress on the commercial and small business side in terms of the specifics.
Camera support as a meaningful ratio <unk> has done a great job through time of supporting a range of different third party manufacturers with their cloud based video solution.
In the alarm dot com commercial part of the business, which tends to service or <unk>.
Moller customer and not as much an enterprise.
We sort of think of <unk> schools.
Institutions hospitals large footprint deployments oftentimes alarm dot com typically with it.
Commercial video servicing a somewhat smaller footprint location.
Even there, though ripping out all of the existing cameras creates a real impediment to getting the software deploy you have to sell through replacement for call. It eight cameras on a restaurant to actually liked that restaurant up with commercial video solution, so being able to support a wider range of cameras.
<unk>.
At least those that have been installed since 2018, we think will allow our service providers to be a little bit more nimble and effective.
In closing a wider range of opportunities that they see.
Yes.
Great. Thank you and then as a follow up.
Look quickly at the fiscal year 'twenty two 'twenty three.
Our preliminary projections and sort of try to try to normalize for further <unk> impact.
How do you think about sort of that delta.
<unk> coming from your core SaaS business versus the contribution from new mines.
Okay.
Yes, you are already sort of normalizing and probably seen that the number we put out is not is a little higher than what you would get a few.
If you simply deducted the amount that we are taking now where the visit matter.
Yes, there is a contribution twofold. There first the core business is performing a little stronger than we probably previously expected. So there is some contribution.
From that and then there is a.
A modest contribution call it right around $5 million.
That.
We're expecting.
From noon.
Is that 5 million the annual number per quarter.
Yes that is.
Thank you.
I'll jump back in the queue.
Sure.
Thank you and as a reminder, ladies and gentlemen, if you have a question at this time. Please press star one on your telephone. Our next question comes from the line of global without Miller from William Blair. Your question. Please.
Hi, all this is will on for Matt. Thanks for taking my question. So given the current environment. How are you thinking about investments in expenses next quarter and next year are there any areas you are considering pulling back on especially in legal fees were higher than expected.
Yes.
Good question.
I'll start with that.
We will do some.
I think.
Called modest cost rationalization across the business so.
We like to produce cash and we like to produce as much cash as we can so we are going to have some higher expenses on the litigation side.
B.
Probably.
The prudent to pull in some cost elsewhere.
When we think we can do that without impacting one of our growth strategy. So.
We've already done most of that work in our initial book and.
And.
As I said there'll be some some modest.
Either cost of postponed in some cases or some cost cuts here and there, but we're not planning any sort of wholesale.
A dramatic reduction of costs, we think that the things we're investing in terms of growing the business internationally growing the commercial business.
Really launching the new light business further.
<unk>.
Are all very rational places to invest that.
Rolling over the next.
Decade, and we think that most of the higher cost in 2023.
Our temporal in nature. So you would really kind of hijacked the company be overreacted.
To those cost and then you come out of it we don't have them anymore. So that's kind of how we're thinking about it.
Alright, great. Thanks.
Thank you one moment for our next question.
And our next question comes from the line of Jack vendor Arent from Maxim Group. Your question. Please.
Hi, This is Jack it Erik calling in for Jackman Alrighty. Thanks again for taking my question.
Just a quick.
Check.
I got the 2023 range, but I was wondering is there any estimated <unk> 22 impact.
Legal expenses, and then I have one more follow up.
Yes, we do have factored in some legal expenses and our guidance for Q4 2022.
We haven't really broken that out, but it is factored into our EBITDA guidance for the quarter.
And then of course, we've got $6 million less so if you take the you could take the $6 million less from debit right that comes right off the bottom line plus there is.
Some some factor in that for legal expenses that were not assuming are adjusted out of adjusted EBITDA as well that's factored into our guidance.
And then of course, there's some some costs in there for new light as we talked about it's less than $1 million of impact on our EBITDA for Q4.
Alright.
Our guidance for Q1.
Yes.
Then I ask.
Actually I missed just for the 2023, the preliminary I missed the bottom range of EBITDA do you mind.
Okay.
The 2023 and the initial look for EBITDA, just want to clarify 2023 right Yep.
Yes.
Okay.
<unk> set a range of $110 million to $125 million adjusted EBITDA for 2023, so a wide range because of the variability of the various matters that Steve talked about.
Yes. Thank you so much and then one last question.
Or a turn.
Just wondering if you could share any color on the attach rates for video camera services and analytics on new camera installed.
Yes, the video attachment rate continues to progress.
<unk> continues to do very well the attachment rate in Q3 was over 50% for video.
And over 70% of those were video analytics. So we continue to see very good progress in video and and.
And you could tell that as well with our hardware revenue where hardware revenue is continuing to perform quite well.
Mainly driven by camera sales.
That's amazing color I'll jump back into queue. Thank you guys.
Thank you.
Thank you. This does conclude the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation you may now disconnect. Good day.
Okay.
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