Q1 2025 Alarm.com Holdings Inc Earnings Call

Okay.

Operator: Good day and thank you for standing by.

Speaker Change: Good day and thank you for standing by welcome to alarm Com's first quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone you all didn't hear an automated message of arts in your hand as race to withdraw your question. Please press star one.

Operator: Welcome to Alarm.com's first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session.

Operator: To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message device in your hand is raised. To withdraw your question, please press star 11 again.

Operator: Please be advised today's conference is being recorded.

Speaker Change: Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today Matthews Arvind Vice President of Investor Relations. Please go ahead.

Matthew Zartman: I would now like to hand the conference over to your speaker today, Matthew Zartman, Vice President of Investor Relations. Please go ahead. Thank you, Operator. Good afternoon, everyone.

Matthews Arvind: Thank you operator, good afternoon, everyone. Joining us today are Steve Trundle alarm Dot com CEO and Kevin Bradley our CFO during today's call, we will be making forward looking statements, which are predictions projections estimates or other statements about future events. These statements are based on current.

Matthew Zartman: Joining us today are Steve Trundle, Alarm.com's CEO, and Kevin Bradley, our CFO.

Matthew Zartman: During today's call, we will be making forward-looking statements, which are predictions, projections, estimates, or 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 quarterly report on Form 10-Q and our Form 8-K, which will be filed shortly with the SEC, along with the associated press release. This call is subject to these risk factors, and we encourage you to review them. Alarm.com assumes no obligation to update these forward-looking statements or other information that speak as of their respective date.

Matthews Arvind: 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 quarterly report on Form 10-Q, and our form 8-K, which will be filed shortly with the SEC along with the associated press release.

Matthews Arvind: This call is subject to these risk factors and we encourage you to review that alarm Dot Com assumes no obligation to update these 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 <unk>.

Matthew Zartman: In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of GAAP to non-GAAP measures can be found at today's press release on our Investor Relations website.

Matthews Arvind: Press release on our Investor Relations website.

Steve Trundle: I'll now turn the call over to Steve Trundle. Steve? Thank you, Matt. Good afternoon and welcome to everyone. We're pleased to report financial results for the first quarter that exceeded our expectations. SAS and licensed revenue in the first quarter grew to $163.8 million and adjusted EBITDA was $43.5 million. Our stronger-than-expected SAS results were driven by contributions from our growth initiatives in the commercial and energy markets and higher revenue retention on the residential side of the business. We did not see any material changes to demand during the quarter due to the evolving macro environment.

Steve Trundle: Now turn the call over to Steve Trundle, Steve.

Steve Trundle: Thank you Matt Good afternoon, and welcome to everyone. We're pleased to report financial results for the first quarter that exceeded our expectations.

Steve Trundle: SaaS and license revenue in the first quarter grew to 163 $8 million and adjusted EBITDA was $43 5 million.

Steve Trundle: Our stronger than expected SaaS results were driven by contributions from our growth initiatives in the commercial and energy markets and higher revenue retention on the residential side of the business.

Steve Trundle: We did not see any material changes to demand during the quarter due to the evolving macro environment.

Steve Trundle: Before going much further, I'd like to welcome our new CFO, Kevin Bradley. Kevin has worked his way up through our finance organization and has been with the company since 2009. For the last eight years, Kevin has been our Vice President of Financial Planning and Analysis. He has been the key financial partner for our business leaders and has been instrumental in shaping all aspects of our financial strategy. Because he already has a deep understanding of our business models, markets, and financial levers, he has been able to hit the ground running since becoming our CFO. I look forward to continuing to introduce Kevin to our investors and analysts over the coming months.

Speaker Change: A third one much further I'd like to welcome our new CFO, Kevin Bradley.

Speaker Change: Kevin has worked his way up through our finance organization and has been with the company since 2009.

Speaker Change: For the last eight years, Kevin has been our vice president of financial planning and analysis.

Speaker Change: That's been the key financial partner for our business leaders and has been instrumental in shaping all aspects of our financial strategy.

Speaker Change: Because he already has a deep understanding of our business models markets and financial levers. He has been able to hit the ground running since becoming our CFO.

Speaker Change: I look forward to continuing to introduce Kevin to our investors and analysts over the coming months.

Steve Trundle: During the quarter, I attended ISC West, our largest security industry trade event. This year, we unified our booth presentation with the full breadth of our residential and commercial solutions, including open eye, shooter detection systems, and checks. One positive takeaway from the event was that most of the service provider partners I spoke with are steadily expanding their use of our commercial services. They expect Alarm.com to continue to innovate for this market, which enables them to gain operational efficiency through more standardization around our commercial offering. And as more Alarm.com services are installed into a given commercial site, we see improved revenue retention, which is currently 98% for our commercial subscribers.

Speaker Change: During the quarter I attended ISC West our largest security industry trade event.

Speaker Change: This year, we unified our booth presentation with the full breadth of our residential and commercial solutions, including open eye shooter detection systems and checked.

Speaker Change: One positive takeaway from the event was that most of our service provider partners I spoke with our steadily expanding their use of our commercial services.

Speaker Change: They expect alarm dot com to continue to innovate for this market, which enables them to gain operational efficiency through more standardization around our commercial offerings.

Speaker Change: And as more alarm dot com services are installed into like given commercial site. We see improved revenue retention, which is currently 98% for our commercial subscribers well above our consolidated revenue retention target range of 92% to 94%.

Steve Trundle: well above our Consolidated Revenue Retention Target Range of 92 to 94%.

Steve Trundle: Turning to our video solutions, I want to provide an update on the 729 floodlight video camera product as it has now been in market for just over a year. We designed the 729 to leverage our video analytics-based proactive deterrence capabilities and our remote video monitoring software. Since launch, our partners have increasingly incorporated the 729 and associated services into their offerings. This product is being installed into nearly 4,000 properties per month now, and we're seeing strong attachment rates of our video analytics services. Over 85% of installed 729 cameras also have a subscription to access our proactive deterrent solution called PerimeterGuard.

Speaker Change: Turning to our video solutions I want to provide an update on the 729 floodlight video camera product as it has now been in market for just over a year.

Speaker Change: We designed the 729 to leverage our video analytics based proactive deterrent capabilities and our remote video monitoring software.

Speaker Change: Since launch our partners have increasingly incorporate at the 729 and associated services into their offerings.

Speaker Change: This product is being installed in the nearly 4000 properties per months now and we're seeing strong attachment rates of our video analytics services.

Speaker Change: Over 85% of installed 729 cameras also have a subscription to access our proactive deterrent solution called parameter guard.

Steve Trundle: Our video services are also beginning to take more of a hold in the international market. During the first quarter, 30% of new international accounts included video. about twice the rate of the same period a year ago.

Speaker Change: Our video services are also beginning to take more of a hold in the international markets.

Speaker Change: During the first quarter, 30% of New International accounts included video about twice the rate of the same period a year ago.

Steve Trundle: To build on that progress, we will upgrade our entry-level video camera later this year. The new 516 Wi-Fi camera will offer even better capabilities at a lower price point and should further broaden the adoption of our video analytics service in residential markets, particularly international markets.

Speaker Change: To build on that progress we will upgrade our entry level video camera later this year, the new $5 16, Wi Fi camera will offer even better capabilities at a lower price point and should further broaden the adoption of our video analytics service and residential markets, particularly internationally.

Steve Trundle: I'll now turn to an update on Energy Hub. As a quick reminder, Energy Hub supports utilities as they adapt to the long-term structural shift towards further electrification. Demand for Energy Hub's platform is growing as EV adoption, the proliferation of AI data centers, and extreme weather all stress the grid. In addition, electricity supply is increasingly difficult for utilities to manage and forecast when intermittent renewable energy sources make up a growing portion of electricity production. Energy Hub provides load flexibility solutions for managing demand and matching it to supply in real time.

Speaker Change: I'll now turn to an update on energy hub.

Speaker Change: As a quick reminder, entergy.

<unk> supports utilities as they adapt to the long term structural shift towards further electrification.

Speaker Change: Demand for energy hubs platform is growing as EV adoption, the proliferation of AI data centers and extreme weather all stressed the grid.

Speaker Change: In addition, electricity supply is increasingly difficult for utilities to manage and forecast when intermittent renewable energy sources make up a growing portion of electricity production.

Speaker Change: Energy hub provides load flexibility solutions for managing demand and matching it to supply in real time.

Steve Trundle: In the first quarter, Energy Hub announced a strategic partnership with General Motors Energy to integrate GMEVs and home battery storage solutions into the Energy Hub ecosystem. Through this program, owners of eligible GM electric vehicles will be able to receive meaningful incentives from their local utility to enroll in flexibility programs managed by Energy Hub Software. This new partnership with GM adds to the relationships that energy has with other EV makers, which include Tesla and Toyota.

Speaker Change: In the first quarter energy have announced a strategic partnership with General Motors energy to integrate G M Evs and home battery storage solutions into the energy hub ecosystem.

Speaker Change: Through this program owners of eligible GM electric vehicles will be able to receive meaningful incentives from their local utility to enroll and flexibility programs managed by energy hub software.

Speaker Change: This new partnership with G. M adds to the relationships that energy has with other EV makers, which includes Tesla and Toyota.

Steve Trundle: Over time, we expect managed charging will significantly contribute to Energy Hub's market position and strategic value to its electric utility partners.

Speaker Change: Overtime, we expect managed charging will significantly contribute to energy hubs market position and strategic value to its electric utility partners.

Steve Trundle: Lastly, I want to touch on tariffs briefly, which Kevin will expand on. U.S. tariff policies are obviously difficult to predict, and the trade environment can substantially change with little warning.

Speaker Change: Lastly, I want to touch on tariffs briefly which Kevin will expand on U S. Tariff policies are obviously difficult to predict.

Speaker Change: And the trade environment can substantially changed with little warning.

Steve Trundle: But we are in a position to effectively manage the 10% baseline tariffs that are currently in place. We have also significantly improved and diversified our supply chain over the last several years. Currently, less than 10% of our hardware revenue is derived from products shipped from China.

Speaker Change: But we are in a position to effectively manage the 10% baseline tariffs that are currently in place.

Speaker Change: We have also significantly improved and diversified our supply chain over the last several years.

Currently less than 10% of our hardware revenue is derived from products shipped from China.

Steve Trundle: In closing, I'd like to thank our service provider partners and our Alarm.com team for their dedication. and our investors for their ongoing support.

Speaker Change: In closing I'd like to thank our service provider partners and our alarm dot com team for their dedication.

Kevin Bradley: And our investors for their ongoing support with that I will turn the call over to Kevin Bradley for a review of our financial performance Kevin.

Kevin Bradley: With that, I'll turn the call over to Kevin Bradley for a review of our financial performance. Kevin? Thank you, Steve. I appreciate the opportunity and the confidence that you and the board have placed in me.

Kevin Bradley: Thank you Steve I appreciate the opportunity and the confidence that you and the board has placed in me.

Kevin Bradley: I want to share a little bit about my background as I start the process of introducing myself to our investors and analysts. Sixteen years ago, I was Alarm.com's 27th employee, settling into the company as the founding finance team member at my desk in a storage closet that also happened to serve as a hardware test lab for our engineers. Over the years since, I've been fortunate to work with Steve and many other talented people to help shape the company's strategy as it moves through various stages. Prior to our IPO 10 years ago, I stood up a formal FP&A function.

Speaker Change: I want to share a little bit about my background as I start the process of introducing myself to our investors and analysts.

Speaker Change: 16 years ago, I was alarm dot coms 2007 employee settling into the company as the founding finance team member at my desk in a storage closet that also happened to serve as a hardware test lab for our engineers over.

Speaker Change: Over the years since I've been fortunate to work with Steve and many other talented people to help shape the company strategy as it moves through various stages.

Speaker Change: Prior to our IPO 10 years ago, I stood up a formal SG&A function as part of this I created and have continued managing our earnings guidance philosophy throughout our time as a public company.

Kevin Bradley: As part of this, I created and have continued managing our earnings guidance philosophy throughout our time as a public. Thanks in no small part to his mentorship, I have been able to become a key partner to Steve and the rest of the executive management team here, providing a bridge between finance, strategy, and operational execution. I'm thankful to have the support of a strong finance and accounting team filled with tenured colleagues, and I also want to thank Steve Valenzuela for his support, particularly through the smooth transition process.

Speaker Change: Thanks in no small part to his mentorship I have been able to become a key partner to Steve and the rest of the executive management team here, providing a bridge between financial strategy and operational execution.

Speaker Change: I'm thankful to have the support of a strong finance and accounting team filled with tenured colleagues and I also want to thank Steve Valensuela for his support particularly through the smooth transition process Im excited to engage more directly with alarm dot coms investors going forward.

Kevin Bradley: I'm excited to engage more directly with Alarm.com's investors going forward. I am happy to report a strong start to 2025 on my first call. SAS and license revenue grew 9% year-over-year to $163.8 million. exceeding our first quarter guide of $160.3 million. We exceeded our guidance due to a handful of structural dynamics. Energy Hub was a primary contributor to our beat. As Steve indicated, Energy Hub's distributed energy resource management programs continue to grow rapidly, and enrollments in Q1 exceeded our expectations. Alarm.com security account creation activity in both the residential and commercial markets met our expectations during the quarter.

Speaker Change: I am happy to report a strong start to 2025 on my first call SaaS and license revenue grew 9% year over year to $163 8 million.

Speaker Change: Exceeding our first quarter guide of $163 million, we exceeded our guidance due to a handful of structural dynamics.

Speaker Change: Energy was a primary contributor to RMB as Steve indicated energy hubs distributed energy resource management programs continue to grow rapidly and enrollments in Q1 exceeded our expectations.

Speaker Change: Alarm Dot Com security account creation activity in both the residential and commercial markets met our expectations during the quarter, we did not discern any material changes in account origination activity during the quarter due to deteriorating consumer sentiment or recession fears.

Kevin Bradley: We did not discern any material changes in account origination activity during the quarter due to deteriorating consumer sentiment or recession fears.

Kevin Bradley: During the first quarter, total revenue grew 7% year-over-year to $238.8 million, and total gross profit grew 9.4% year-over-year to $160.6 million. Total operating expenses were $130.9 million during the first quarter, excluding stock-based compensation and other items we adjust from G&A for non-GAAP purposes. Total operating expenses were $114.4 million, a 4.6% increase year-over-year. R&D expense in the quarter, inclusive of stock-based compensation, was $68.4 million, up 3.7% year-over-year, excluding stock-based comp, it was $62.4 million, up 6.4% year-over-year. We are off to a nice start in driving some of the operating margin efficiency that we signaled late last year.

Speaker Change: During the first quarter total revenue grew 7% year over year to $238 8 million and total gross profit grew nine 4% year over year to $166 million.

Speaker Change: Total operating expenses were $139 million during the first quarter, excluding stock based compensation and other items, we adjust from G&A for non-GAAP purposes, total operating expenses were $114 4 million or four 6% increase year over year.

Speaker Change: R&D expense in the quarter inclusive of stock based compensation was $68 4 million up.

Speaker Change: Up three 7% year over year ex.

Speaker Change: Excluding stock based comp that was $62 $4 million.

Speaker Change: Up six 4% year over year.

Speaker Change: We are off to a nice start in driving some of the operating margin efficiency that we signaled late last year.

Kevin Bradley: Gap net income grew 18.4% year over year to $27.7 million, and our gap EPS per diluted share was $0.52. Non-gap adjusted EBITDA grew 17.5% year-over-year to $43.5 million. Non-Gap Adjusted Net Income grew 11.3% year-over-year to $30.4 million. A combination of revenue growth, revenue quality, and operating leverage contributed to our profitability. Non-GAAP adjusted EPS grew 8% year-over-year to $0.54 per diluted share. We ended the quarter with $1.19 billion of cash and cash equivalents and produced $17.9 million of free cash flow during the quarter.

Speaker Change: GAAP net income grew 18, 4% year over year to $27 7 million.

Speaker Change: And our GAAP EPS per diluted share was <unk> 52.

Speaker Change: non-GAAP adjusted EBITDA grew 17, 5% year over year to $43 $5 million.

Speaker Change: non-GAAP adjusted net income grew 11, 3% year over year to $34 million, a combination of revenue growth revenue quality and operating leverage contributed to our profitability.

Speaker Change: non-GAAP adjusted EPS grew 8% year over year to 54 cents per diluted share.

Speaker Change: We ended the quarter with $1 $1 9 billion of cash and cash equivalents and produced $17 9 million of free cash flow during the quarter.

Kevin Bradley: I want to speak for a moment about the terror. In addition to significantly reducing the company's exposure to products originating from China since 2018, we proactively built some inventory in late 2024 and early 2025 prior to liberation. We have approximately nine months on hand, which is higher than we would carry in normal time. Outside of China, we are operating as if the baseline 10% tariff will remain in place. We anticipate passing that tax through when we start selling inventory imported under the new tariff policy. Our guidance incorporates this plan. To the extent that some component of our harbor revenue becomes a pure pass-through, gross margin will be diluted slightly, even though gross profit dollars will remain unchanged.

Speaker Change: I want to speak for a moment about the tariff environment. In addition to significantly reducing the company's exposure to products originating from China. Since 2018, we proactively built some inventory in late 2024 and early 2025 prior deliberation that.

Speaker Change: We have approximately nine months on hand, which is higher than we would carry in normal times.

Speaker Change: Outside of China, we are operating as if the baseline 10% tariff will remain in place.

Speaker Change: We anticipate passing that tax through when we start selling inventory imported under the new tariff policies our guidance incorporates this plan.

Speaker Change: To the extent that some component of our hardware revenue becomes a pure pass through gross margin will be diluted slightly even though gross profit dollars will remain unchanged.

Kevin Bradley: Related to this, let me share some thoughts on PriceUSD. We and our service providers have experienced a period of hardware cost inflation in the recent past, specifically as a result of the global supply chain disruption in 2022. Over a 12-month period, the impact on Alarm.com's hardware pricing at that time exceeded $10,000. We did not see meaningful demand deterioration. We have long-term symbiotic relationships with our service provider partners.

Speaker Change: Related to this let me share some thoughts on price elasticity.

Speaker Change: And our service providers have experienced a period of hardware cost inflation in the recent past specifically as a result of the global supply chain disruptions in 2022.

Speaker Change: Over a 12 month period, the impact on alarm dot coms hardware pricing at that time exceeded 10%.

Speaker Change: We did not see meaningful demand deterioration.

Speaker Change: We have long term symbiotic relationships with our service provider partners.

Kevin Bradley: Increasing prices is not a step that we take lightly. But given our experience in 2022, we think it's possible that we can approach the market together and pass through the current baseline tariffs without dramatically impacting demand. We're also mindful to consider that the macro backdrop in 2022 was different from today. We are therefore allowing for a little bit of a wider outcome in our revised hardware revenue guidance.

Speaker Change: Increasing prices is not a step that we take lightly but given our experience in 2022, we think it's possible that we can approach the market together and pass through the current baseline tariffs without dramatically impacting demand.

Speaker Change: We're also mindful to consider that the macro backdrop in 2022 was different from today, we are therefore, allowing for a little bit of a wider outcome and our revised hardware revenue guidance.

Kevin Bradley: I'll turn now to our financial outlook. For the second quarter of 2025, we expect SAS and license revenue of $167 to $167.2 million. For the full year of 2025, we are raising our expectations for SAS and license revenue to between $675.8 and $676.2 million, an increase of $4.5 million over our prior guidance at the midpoint as a result of the structural outperformance from Q1. We are now projecting total revenue for 2025 of between $975.8 to $991.2 million, which includes estimated hardware and other revenue of $300 to $315 million. As I noted, we are implementing a wider range here as we navigate tariff and macro uncertainty.

Speaker Change: I'll turn now to our financial outlook for the second quarter of 2025, we expect SaaS and license revenue of 167 to 167 $2 million.

Speaker Change: For the full year of 2025, we are raising our expectations for SaaS and license revenue to between 675, eight and $676 2 million, an increase of $4 $5 million over our prior guidance at the midpoint as a result of the structural outperformance from Q1.

Speaker Change: We are now projected total revenue for 2025 of between 975 eight to $991 2 million.

Speaker Change: Which includes estimated hardware and other revenue of $300 million to $315 million as I noted we are implementing a wider range here as we navigate tariff and macro uncertainties.

Kevin Bradley: We are also raising our estimate for non-gap adjusted EBITDA for 2025 to between $190 and $193 million, an increase from our prior guidance of between $188 and $192 million. Non-Gap Adjusted Net Income for 2025 is projected to be $131.5 to $132.5 million. or $2.32 to $2.33 per diluted share. This is an increase from our prior guidance of $130 to $131 million or $2.28 to $2.29 per diluted share. EPS is based on an estimate of 60.5 million weighted average diluted shares outstanding. As a reminder, this share count includes a full year of dilution associated with our outstanding convertible notes on an if-converted basis of 9.125 million shares split across two issuers.

Speaker Change: We are also raising our estimate for non-GAAP adjusted EBITDA for 2025 to between $190 and $193 million an increase from our prior guidance of between 188 and $192 million.

Speaker Change: non-GAAP adjusted net income for 2025 is projected to be 131, five to $132 5 million or $2 32 to $2 33 per diluted share. This is an increase from our prior guidance of 130 to 131.

Speaker Change: Billion.

Speaker Change: Or $2 28 to $2 29 per diluted share.

Speaker Change: EPS is based on an estimate of 65 million weighted average diluted shares outstanding as a reminder, this share count includes a full year of dilution associated with our outstanding convertible notes on an if converted basis of $9 125 million shares split across two issuances.

Kevin Bradley: We currently project our non-GAAP tax rate for 2025 to remain at 21% under current tax We expect full year 2025 stock based compensation expense of $40 million to $43 million.

Speaker Change: We currently project, our non-GAAP tax rate for 2025 to remain at 21% under current tax rules.

Speaker Change: We expect full year 2025 stock based compensation expense of 40 million to $43 million.

Kevin Bradley: In closing, I'll share my conviction that Alarm.com is strongly positioned for quality growth in the large and often under-penetrated markets that we serve. The executive management team shares a long-term vision and has built a company-wide culture of collaboration, innovation, and humility that will drive Alarm.com's long-term expansion, and I am humbled and thankful to continue contributing to it.

Speaker Change: In closing I will.

Speaker Change: Sure My conviction that alarm dot com is strongly positioned for quality growth in our large and often under penetrated markets that we serve.

Speaker Change: The executive management team shares our long term vision and has built a company wide culture of collaboration innovation and humility that will drive alarm dot coms long term expansion and I am humbled and thankful to continue contributing to it with that operator, please open the call for Q&A.

Operator: With that, operator, please open the call for Q&A. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1-1 again. We will pause for a moment while we compile our Q&A roster.

Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.

Matt Bullock: Our first question comes from Matt Bullock with Bank of America. Your line is open. All right, thanks for taking the question and looking forward to working more closely together, Kevin.

Speaker Change: Our first question comes from Matt <unk> with Bank of America. Your line is open.

Speaker Change: Alright, Thanks for taking the question and looking forward to working more closely together.

Steve Trundle: My question is on commercial. Great to hear about the gross retention in that business line and the positive video attach rate trends. Sounds like you're landing larger. Could you maybe talk for a moment about recent, you know, average revenue per account trends and commercial, and then give us an update on the upsell opportunity still there?

Speaker Change: My question is on commercial grade.

Speaker Change: Great to hear about the gross retention in that business line in the positive video attach rate trends it sounds like you're landing larger could you maybe talk for a moment about recent average revenue per account trends in commercial and then give us an update on the upsell opportunity is still there.

Steve Trundle: Sure. Hey, Matt, this is Steve Trundle. Yeah, the reason we think we're seeing that retention metric look so positive is really a land and expand type of dynamic where we get into a site, let's say it's an access control location, and they install four doors, and then a year goes by, two years goes by, the business expands, and they want to install another four doors. We add to the account with that addition to the access control system, then maybe they want to add a video system. So the result of that is we're getting some positive dynamics on the ARPU, and not only on new accounts where we're installing more, but also some uplift on the base.

Speaker Change: Sure Hey, Matt This is Steve.

Speaker Change: Steve Trundle, yes.

Speaker Change: The reason, we think we're seeing that our retention metrics look so positive is is really a land and expand type of dynamic where.

Speaker Change: We get into a site, let's say, it's an access control location and they install for doors and then a year goes by tiers goes as the business expands and they want to install another four doors.

Speaker Change: We add to the account with that additional.

Speaker Change: That addition to the access control system that maybe they want to add a video system. So the result of that as we're getting some positive dynamics on the <unk> and not only on new accounts, where we're installing more but also some uplift on the base.

Steve Trundle: And the trend on ARPU there is upward. I think in the past, we've commented that the sort of the average ARPU is more than twice the average ARPU that we see on the residential side.

Speaker Change: And the trend on up on <unk> there is upward.

Speaker Change: In the past we've commented that the sort.

Speaker Change: The average <unk> is.

Speaker Change: More than twice the average <unk> that we see on the residential side and in certain situations as we get into bigger locations that can be many many many times.

Steve Trundle: And in certain situations, as we get into bigger locations, it can be many, many, many times the residential ARPU.

<unk>.

Matt Bullock: Super helpful.

Speaker Change: Sure.

Matt Bullock: And then one just quick follow up if I could here. Sounds like the the plan is to pass through some pricing on the hardware side.

Speaker Change: Super Helpful. And then one just quick follow up if I could here.

Speaker Change: It sounds like the plan is to pass through some pricing on the hardware side can you just help us think about quantifying revenue contribution from those tariff related pricing increases for 2025.

Kevin Bradley: Can you just help us think about quantifying revenue contribution from those tariff related pricing increases for 2025? embedded in the guy. Sure.

Speaker Change: Embedded in that yes sure.

Kevin Bradley: Yeah, hey, Matt, this is this is Kevin. So we, you know, we started with the fact that we were planning for about, you know, 300 plus million dollars of hardware revenue, you know, at a 25% gross margin ish. So a 10% cost increase would equate to about a seven and a half percent price increase, which if you applied that to the full 300 would lead you to something around $20 million on an annualized basis. And then we we sort of backed out the fact that that we're not doing this until halfway through the year. And not everything that we procure and sell comes from overseas.

Kevin Bradley: Yeah, Hey, Matt This is Kevin so we.

Speaker Change: We started with the fact that we were planning for about 300.

Speaker Change: <unk> million dollars of hardware revenue.

Speaker Change: At a 25% gross margin ish, so a 10% cost increase would equate to about a seven 5% price increase which if you apply that to the full 300 would lead you to is something around $20 million on an annualized basis, and then we sort of backed out the fact that debt.

Speaker Change: We're not doing this until halfway through the year.

Kevin Bradley: So you get to something that's sort of a little bit less than that as an impact on the high end, you could think about it as sort of a difference between what our midpoint used to be and what the high end is now. Really helpful.

Speaker Change: And not everything that we procure and sell comes from overseas. So you get to something that sort of a little bit less and that has an impact on the high end you could think about it as sort of a difference between what our mid point used to be and what the high end is now.

Matt Bullock: Thanks, Kevin.

Kevin Bradley: Really helpful. Thanks, Kevin.

Speaker Change: One moment for our next question.

Adam Tindle: Our next question comes from Adam Tindle with Redmond James, your line is open. Okay, thanks. Good afternoon, and congrats to Kevin as well. Looking forward to working with you. Kevin, I wanted to start with you, if I could. Obviously, this quarter, if I'm looking at the SAS revenue, we had a strong start, I think up 9 percent, close to 10 percent in the quarter on that metric. And then if we look at guidance for Q2, I think it's closer to 7 percent, and then implied in the back half of the year, kind of mid-single digits to get to the full year.

Speaker Change: Our next question comes from Adam Tindle with Raymond James Your line is open.

Adam Tindle: Okay. Thanks, good afternoon, and congrats to Kevin as well looking forward to working with you.

Adam Tindle: Kevin I wanted to start with you if I could.

Speaker Change: Obviously this quarter if im looking at the SaaS revenue, we had a strong start I think up 9% close to 10% in the quarter on that metric and then if we look at guidance for Q2, I think it's closer to 7% and then implied in the back half of the year kind of mid single digits to get to the full year.

Kevin Bradley: So, if I think about that trajectory from a SAS growth standpoint, what are the key factors driving the moderation in growth as the year progresses? I'm looking at the year-over-year comparisons, and they're kind of similar throughout the year, so I couldn't blame comps on that. And I wonder if you could also maybe tie in your expectation for ADT embedded in that. I think previously, Steve had talked about 200 basis points. I wonder if that's changing at all. Yeah, sure.

Speaker Change: If I think about that trajectory from SaaS growth standpoint, what are the key factors driving the moderation in growth as the year progresses and looking at the year over year comparisons.

Speaker Change: Kind of similar throughout the year, so couldn't blame comps on that.

Speaker Change: I Wonder if you could also maybe tie in your expectation for ADT embedded in that I think previously.

Speaker Change: Steve had talked about 200 basis points I wonder if that's changing at all.

Kevin Bradley: I'll address this and then maybe turn it over to Steve to see if he has any color on ADT. I think if we start with what the composition was of the Q1 beat, you know, Steve mentioned in his prepared remarks, as did I, that Energy Hub had a strong quarter in their thermostat demand response programs. You know, you could think about that as being about half of the Q1 outperformance, probably. And, you know, as a reminder, that business model is annual and recurring in nature, as opposed to monthly and recurring in nature. So, you know, that will show back up again next January, but it won't reoccur in future quarters.

Speaker Change: Yeah sure I'll address this and then maybe turn it over to ADT, Steve to see if he has any color on that on ADT.

Speaker Change: I think if we start with what the composition was of the Q1.

Speaker Change: Beat Steve mentioned in his prepared remarks as deny that energy hub had a had a strong quarter in their thermostat demand response programs.

Speaker Change: You could think about that as being about half of the Q1 outperformance probably and as a reminder, that business model is annual and recurring in nature as opposed to <unk>.

Speaker Change: Monthly recurring in nature so.

Speaker Change: We will show back up again next January but it wont reoccur in future quarters.

Kevin Bradley: So that's one of the reasons that it sort of steps down, principally because that performance will not reoccur in future quarters. And then the other thing is, you know, we mentioned that the revenue retention rate, you know, for the third straight quarter was at the above the high end of our range at 95%. You know, if you applied that to 1% of retention on, you know, $670 million of revenue, it's about $6, $7 million a year. The other half of our overperformance in Q1 was basically that. The way that we're modeling right now is that that metric returns to our historical range, which would be the other primary reason that you see some of that compression come out, as well as us taking a little bit, you know, you see the wide range on the hardware revenue guide.

Speaker Change: So that's one of the reasons that it sort of steps down principally because that performance will not reoccur in future quarters and then the other thing is we mentioned that the revenue retention rate for the third straight quarter was above the high end of our range at 95%.

Speaker Change: If you applied that two 1% of retention on $670 million of revenue about $67 million a year. The other half of our over performance in Q1 was basically that.

Speaker Change: And the way that we're modeling right now is that that metric.

Speaker Change: Turns to our historical range, which would be the other primary reason that you see some of that compression come out as well as us taking a little bit you see the wide range on the hardware revenue guide and.

Kevin Bradley: And we took a little bit of conservatism on the SAS line, not much, but just to allow for some possible fluctuations in demand as the year goes on.

Speaker Change: We took a little bit of conservatism on the SaaS line not much but just to allow for some possible fluctuations in demand as the year goes on.

Steve Trundle: And then, yeah, I'll jump in on ADT. I guess I'd make the point that on an annual basis, we went ahead and took the implied growth rate up by about 50 basis points coming out of this quarter. But with ADT, Adam, not a lot's changed there since last quarter, haven't seen much different. There was nothing related to ADT that impacted either our beat in the first quarter or our new guide for the year. So we're sort of following the model at this point and then watching the public remarks to kind of get updates on where they are with deployment.

Speaker Change: And then.

Speaker Change: I'll jump in on ADT, I guess I'd make the point that on an on an annual basis. We went ahead and took the implied growth rate up by about 50 basis points.

Speaker Change: Coming out of this quarter, but.

Speaker Change: With with ADT, Adam not not a lot's changed there since last quarter I haven't seen much different there is nothing related to ADT that impacted either our beat in the first quarter or a new guide.

Speaker Change: For the year. So we're sort of following the model at this point and then.

Speaker Change: Watching the public remarks to kind of get updates on.

Adam Tindle: But I think the metrics we've given there in the past in terms of how we've modeled them are still the same today. Got it. Okay. Yeah, that makes sense.

Speaker Change: Where they are deployment, but I think the metrics we've given there in the past in terms of how we've modeled them.

Speaker Change: Or still the same today.

Speaker Change: Got it okay, yes that makes sense.

Steve Trundle: And Steve, maybe just to follow up for you, just continuing this topic on a bigger picture level, if we look at the annual growth rate of the SaaS piece of the business, it's, you know, kind of in that six or 7% range and acknowledging that you guys have done a good job of outperforming that. But if we kind of think about that, how should investors think about that level of growth? Is this, you know, kind of a business that might be expected to kind of stay in that range, but continue to improve profitability? Or what would it take to push to a new level, say, getting closer to double digits, like, like in the past?

Speaker Change: Steve maybe just a follow up for you just continuing this topic on a bigger picture level. If we look at the annual growth rate of the SaaS piece of the business, it's kind of in that six or 7% range.

Speaker Change: Acknowledging that you guys have done a good job of outperforming that but if we kind of think about that how should investors think about that level of growth is this kind of a business that might.

Speaker Change: Might be expected to kind of stay in that range, but continue to improve profitability or what would it take to push to a new level say getting closer to double digits like like in the past.

Steve Trundle: Yeah, I guess, I guess what I would say is you almost have to, you really have to decompose the consolidated number a little bit. And we've, we've provided a little color on that where we at times have referenced the growth initiatives, which are Commercial Energy Hub International. Like last quarter, we indicated they were producing 26% of the SAS and growing at around 25% annually. And then Adam, as you, as you know, I mean, the residential piece in North America with some of the headwinds we've talked, we've discussed in the past, is a slower growing business.

Speaker Change: Yes, I guess I guess, what I'd say is you almost have to you really have to decompose the consolidated number a little bit and.

Speaker Change: We provided a little color on that where are we at times have referenced the growth initiatives, which are commercial energy hub International I think last quarter. We indicated they were producing 26% of the SaaS and growing at around 25% annually and then Adam as you as you know the residential piece in North America with some of the headwinds we've top.

Speaker Change: We've discussed in the past.

Steve Trundle: So what you see is sort of a tale of two worlds. One business that is more stable, probably pulling down the consolidated growth rate, that being the residential North America side, the other growing substantially. And the big if is how long will this sort of 20% plus growth hold up in the various growth initiatives? How long can we sustain that? Obviously, at some point, you know, as that, those businesses reach higher orders of scale, you could envision the potential for those, you know, those contributions having more impact on the consolidated number than they are today.

Speaker Change: As a slower growing business. So what you see as sort of a tale of two worlds one business that is more stable.

Speaker Change: Probably pulling down the consolidated growth rate that being the residential North America side, yes, they're growing substantially and the big issue is how long will this sort of 20% plus growth hold up and the various growth initiatives. How long can we sustain that obviously at some point.

Speaker Change: Is that those businesses reach higher orders of scale, you could envision the potential for.

Speaker Change: Those those contributions having more impact on the consolidated number than they are.

Steve Trundle: So that's kind of how I look at the growth rate.

Speaker Change: Today, So that's kind of how I look at the growth rate I think the second part of the questions sort of a philosophical one on.

Steve Trundle: I think the second part of the question is sort of a philosophical one on what we think about operating margin. And we have shifted a bit to a posture of pushing. You know, more operating leverage into the business, we've moved up the, the even the margins, I think, in the initial look for the year, we are the first guy to the area, like 19.4%, which is up from the prior year. So I think you'll see us continue to As we're sort of in this current growth range, I think you'll see us continue to focus some on the operating margins and make some progress there.

Speaker Change: What we think about operating margin and we have shifted a bit to a posture of pushing.

Speaker Change: More operating leverage into the business, we've moved up the.

Speaker Change: The EBIT margins I think in the initial look for the year. We are the first guy to the area like 19, 4%, which is up from the prior year. So I think youll see us continue to.

Speaker Change: As we're sort of in this.

Speaker Change: Current growth range, I think youll see us continue to.

Speaker Change: Focus on the operating margins and make some progress there.

Steve Trundle: Very helpful.

Speaker Change: Very helpful. Thanks.

Speaker Change: Yes, one moment for our next question.

Saket Kalia: Our next question comes from Saket Kalia with Barclays, your line is open. Hey, great. Hey, guys, thanks for taking my question. And Kevin, echo my welcome as well.

Speaker Change: Okay.

Speaker Change: Our next question comes from soccer career with Barclays. Your line is open.

Speaker Change: Okay, Great Hey, guys. Thanks for taking my question and Kevin Echo My welcome as well.

Kevin Bradley: Actually, maybe for you just along the lines of the last line of questioning and what Steve mentioned, I was wondering, Kevin, can you just remind us how for this quarter for Q1, how big was sort of that emerging bucket? And how fast did it grow this quarter? You know, I think Steve said 26% last quarter and it grew 25%. I can't imagine it's too different. But just to make sure we keep track of that, because it is such an important part of the growth rate going forward. How did that look here in Q1?

Speaker Change: Actually maybe for you just along the lines of the last line.

Speaker Change: Questioning and what Steve mentioned I was wondering if Kevin can you just remind us how for this quarter for Q1, how big was sort of emerging that emerging bucket.

Speaker Change: And how fast did it grow this quarter.

Speaker Change: Steve said, 26% last quarter and it grew 25 I can't imagine, it's two different but just to make sure. We keep keep track of that because it is such an important part of the growth rate going forward, how does that look here in Q1.

Kevin Bradley: Sure. As we mentioned, you know, Energy Hub had a pretty strong Q1. So I would say for the quarter, you know, maybe slightly bigger as a percentage of total revenue simply because of that over performance, but growing at about the same clip as we had indicated in the prior Yeah. Got it. No big quarter change there, but yeah. Understood, understood. That's helpful.

Speaker Change: Sure.

Speaker Change: As we mentioned.

Speaker Change: Energy you have had a pretty strong Q1, so I would say for the quarter, maybe slightly bigger as a percentage of total revenue simply because of that over performance, but growing at about the same clip as we had indicated.

Speaker Change: Indicated in the prior quarter.

Speaker Change: Yes, no got it maybe a bit quarter over quarter change there, but yes.

Speaker Change: Yes.

Steve Trundle: Steve, maybe for you just a bit higher level, it was great to hear about sort of the higher video attach internationally.

Speaker Change: Understood understood that's helpful.

Steve Trundle: Steve maybe maybe for you just a bit higher level it.

Speaker Change: It was great to hear about sort of the higher video attach internationally I'm just wanted to get just kind of a state of the union a little bit.

Steve Trundle: I just wanted to get just kind of a State of the Union a little bit on maybe, you know, one or two of your countries outside of the US. Maybe the question is, how do you feel about Alarm.com's position competitively in some of those markets as international maybe becomes a bigger part of the business in the future? Yeah, thanks. Yeah, those are I mean, the international markets. are very competitive, much like the North American market. I think we're sort of earlier inning there. We're probably in the third inning right now. And we're in the process of kind of moving from establishing the initial beachhead customers, which tend to be the larger service providers, brands people would know.

Speaker Change: And maybe one or two of your kind of your countries outside of the U S.

Speaker Change: Maybe the question is how do you feel about about alarm dotcoms positioned competitively in some of those markets as international and maybe it becomes a bigger part of the business in the future.

Speaker Change: Yes, Thanks, Brian Yes, those are I mean, the international markets.

Speaker Change: Our.

Speaker Change: Very competitive much like the North American market I think we're sort of earlier inning, there were probably in the third inning right now and we're in the process.

Speaker Change: Kind of moving from establishing the initial beachhead.

Speaker Change: Customers, which tend to be the larger the larger service providers brands people would know.

Steve Trundle: And now we're doing some of the real, you know, hard work of building out the long tail of the dealer base, rest of the world. So, you know, one of the great things here about our North American business is we have a fairly distributed, you know, long tail of dealers who contribute every month then. And internationally we haven't had the bandwidth cycles or the attention necessarily to go, you know, down into the smaller service provider segments of these markets. And we're just sort of getting started on that. That will create some tension on what we have to do with the product and what we have to do with distribution to meet the needs of that longer tail.

Speaker Change: And now we're doing some of the real.

Speaker Change: Hard work of building up the long tail of the dealer base.

Speaker Change: Rest of World. So one of the great things about our North American businesses, we have a fairly distributed.

Speaker Change: Long tail of dealers, who contribute every month.

Speaker Change: Internationally, we haven't had the bandwidth cycles, where the attention necessarily to go.

Speaker Change: Down into the smaller service provider segments of these markets and we're just sort of getting started on that that will create some tension on what we have to do with the product and what we have to do with distribution to meet the needs of that longer tail, but that's I'd say with sort of a key part of our 2025 objective is to.

Steve Trundle: But that's I'd say with sort of a key part of our 2025 objective is to build out more of that tail. I would say.

Speaker Change: Build out more of that tail I would say.

Steve Trundle: Holdings So, you know, macro level, it's early innings. We're feeling pretty good about the growth we continue to see international. It's growing faster than the domestic business, particularly strong in Latin America and Europe. But as I noted, also very competitive, particularly on cost, you see a lot of, you know, products coming in from China and elsewhere that are super, super low cost, not as capable, usually don't have a back end that enables a service provider to meet all the needs of a customer, but are there nonetheless. And thus far, we haven't seen a lot of change since, you know, the trade wars began.

Speaker Change: Yes macro level, it's early innings, we're feeling pretty good about the growth we continue to see international it's growing faster than the domestic business, particularly strong in Latin America and Europe.

Speaker Change: But as I noted also very competitive, particularly on cost you see a lot of.

Speaker Change: Products coming in from China, and elsewhere that are.

Speaker Change: Super Super low cost not as capable usually don't have a backend that enables a service provider to meet all the needs of our customer but.

Speaker Change: But are there nonetheless.

Speaker Change: Thus far we haven't seen a lot of change.

Speaker Change: The trade.

Steve Trundle: Hopefully, we don't see much change, but that's generally the state of things.

Speaker Change: Trade Wars began hopefully we don't see much change, but that's generally the state of things.

Steve Trundle: Super helpful. Thanks, guys.

Speaker Change: Super helpful. Thanks, guys.

Operator: One moment for our next question.

Speaker Change: One moment for our next question.

Speaker Change: Yes.

Billy Fitzsimmons: Our next question comes from Samad Samana with Jeffries, your line is open. Hey guys, this is Billy Fitzsimmons on for Samad. I just want to double click on macro. Steve, you were clear about how you did not discern any material changes in account origination activity during the first quarter due to deteriorating consumer sentiment or recession fears. Just as we think about the outlook in second quarter guide, were there any material changes in account origination or consumer sentiment in early April post the formal tariff analysis? Yeah, good question, Billy. I mean, we do we do watch things very closely.

Speaker Change: Our next question comes from Samad Samana with Jefferies. Your line is open.

Billings: Hey, guys. This is billings at Simmons on for some odd I just wanted to double click on macro Steve you were clear about how you did not discern any material changes in account origination activity during the first quarter.

Speaker Change: Carrier rating sort of saturated with recession fears.

Speaker Change: As we think about the outlook in the second quarter guide, where there were there any material changes in account origination.

Speaker Change: Sentiment in early April post the formal tariff announcements.

Speaker Change: Yes, good question Billy.

Speaker Change: We do we do watch things very closely.

Steve Trundle: I would say first two weeks of April looked a little different on the commercial side than the last two weeks of April to the extent, you know, we don't get too wrapped around the axle looking at week over week data. But we saw maybe the the the market take a breath and then sort of get back to business. And we really didn't see that on residential, we only saw that on commercial. So as we kind of finished out April, and coming into this report, we felt that we're not really able to discern any meaningful macro change at this moment affecting things.

Speaker Change: Say first two weeks of April looked a little different on the commercial side than the last two weeks of April to the extent, we don't get too wrapped around the axle look at week over week data, but.

Speaker Change: We saw maybe the.

Speaker Change: The.

Speaker Change: The market take a breath, and then sort of get back to business and we really didn't see that on residential we only saw that on <unk>.

Speaker Change: Commercial so as we kind of finished out April and coming into this report we felt that we're not really able to discern any meaningful macro.

Speaker Change: Change it at this moment affecting tax.

Billy Fitzsimmons: Got it. Helpful.

Kevin Bradley: And then Kevin, I'll congrats on the CFO role. You've obviously been been at the company for a while and have worked closely with Steve and team for years. But just taking a big step back and very high level, what do you kind of view as your initial priorities in CFO? Yeah. Hey, Billy, thank you very much. You know, my initial priorities, I think, are or things like this, getting sort of more intimately familiar with, you know, speaking on behalf of the company to external stakeholders. I think from an internal perspective, you know, as you said, I've been here for quite some time.

Kevin Bradley: Got it helpful and then Kevin.

Speaker Change: Congrats on the CFO role and you've obviously been at the.

Speaker Change: The company for a while and have worked closely with Steve and team for years, but just taking a big step back in very high level. What are you kind of use your initial priorities as CFO.

Speaker Change: Yeah, Hey, Billy Thank you very much.

Speaker Change: My initial priorities I think our.

Speaker Change: Are things like this getting getting sort of more intimately familiar with <unk>.

Speaker Change: Speaking of the Aftla Company to external stakeholders, I think from an internal perspective. [inaudible]

Billy Fitzsimmons: You know, I know everybody, everybody knows me. You know, I think much of the work inside the company will sort of be, you know, business as usual, with the exception of maybe getting a little bit more familiar with some other aspects of the accounting team. But my primary focus right now is, you know, getting through earnings here and then sort of getting out and, you know, beginning to become a little bit more externally focused. Perfect. Thank you both very much.

Speaker Change: You know, as you said, I've been here for quite some time. You know, I know everybody, everybody knows me. You know, I think much of the work inside the company will sort of be

Speaker Change: you know, business as usual, with the exception of maybe getting a little bit more familiar with some other aspects of the accounting team, but my primary focus right now is, you know, getting through earnings here and then sort of getting out and, you know, beginning to become a little bit more externally focused.

Perfect. Thank you both very much.

One more. One more for our next question.

Matt Filek: Your next question comes from Stephen Sheldon with Will and Blair, your line is open. Hey everyone, you have Matt Filek on for Stephen Sheldon.

Speaker Change: Your next question comes from Stephen Sheldon, with Will and Blair, your line is open.

Steve Trundle: Thank you for taking my questions and congrats on the new role, Kevin. I think you've said before that around 50% of new residential subscribers add video, with only around 30% of existing subscribers using video. And I was wondering if you could talk about some of the strategies your service providers may be using to drive higher video adoption among that existing customer base, especially since video can meaningfully expand ARPU. Yeah, that's a good question.

Speaker Change: Hey everyone, you have Matt Phyleton for Stephen Sheldon. Thank you for taking my questions and congrats on the new role, Kevin.

Speaker Change: Thank you have said before that around 50% of new residential subscribers and video.

Speaker Change: with only around 30% of existing subscribers using video. And is wondering if you could talk about some of the strategies your service providers may be using to drive higher video adoption among that existing customer base, especially since video can meaningfully expand our poo.

Steve Trundle: This is Steve speaking. I'd say at the moment, you know, it's probably a bit more of an opportunity than something we see the service providers uniformly focused on. You know, the great news is, yes, they're getting attached of greater than 50% on new installations. We're getting very high attached on video analytics there, which helps with ARPU and also the quality and the capability of the system being delivered to the consumer. The downside is the dealers are, for the most part, relatively busy. They don't have a ton of additional tech capacity out that they can use to go back and do upgrades to existing accounts.

Yeah, that's a good question. This is Steve Srieking.

Speaker Change: I'd say at the moment, it's probably a bit more of an opportunity than something we see the service providers.

Uniformly focused on...

Speaker Change: You know, the great news is, yes, they're getting attached of greater than 50% on new installations. We're getting very high attached on video analytics there.

Speaker Change: which helps with our poo and also the quality and the capability of the system being delivered to the consumer.

Speaker Change: The downside is that the dealers are for the most part relatively busy. They don't have a ton of additional tech capacity out that they can use to go back and do upgrades to existing accounts. So I haven't seen as much promotion as I would like.

Steve Trundle: So I haven't seen as much promotion as I would like of the video services back to the existing base.

Steve Trundle: What I will say is we have some product pipeline. I think there's kind of a two-pronged fork. A tactic they can use is video today is just a tool. so much better than it was four or five years ago. So I think they can go back to customers that were created four or five years ago that are coming to the end of their contract term and offer to update them and upsell them into a video service plan if they renew their service contract with the dealer. And I would expect we can get more of our dealers to run that.

Speaker Change: of the video services back to the existing base. What I will say is we have some product pipeline. I think there's, you know, kind of a two-pronged fork. A tactic they can use is, is, video today is, is just,

Speaker Change: So much better than it was four or five years ago. So...

Speaker Change: I think they can go back to customers that were created four or five years ago better.

Speaker Change: Coming to the end of their contract term and offer to update them and upsell them into a video service plan if they renew their service contract with the dealer and I would expect we can get more of our dealers to run that.

Steve Trundle: And then on the product pipeline side, We're doing a product that we think will have some relevance to a growing body of residential customers. It will be a camera that is completely wireless and also battery powered, which, you know, for a lot of use cases, traditionally people haven't loved indoor cameras, but quite a few people do have cases where they want to put one camera in one room when they're traveling and then move it to a different room when they're leaving their pet at home and that sort of thing. And that's been hard to do if you're, you know, primarily delivering a solution that needs to be plugged in all the time.

Completely wireless and also battery powered.

Speaker Change: Which, you know, for a lot of use cases, traditionally people haven't loved indoor cameras, but quite a few people do have cases where they want to put one camera in one room when they're traveling.

Speaker Change: and then moving to a different room when they're leaving their padded home and that sort of thing and that's been hard to do if you're, you know, primarily delivering a solution that needs to be plugged in all the time so I think making

Steve Trundle: So I think making, you know, getting that product to market later in the year will also help us kind of create a message to go back to that base and ideally drive some additional video up. Got it. Thank you, Steve. That's helpful color on that front.

Speaker Change: You know, getting that product to market later in the year will also help us kind of create a message to go back to that base and ideally drive some some additional video up so

Speaker Change: Got it, thank you Steve, that's helpful color on that front and then just quickly on our at a high level would it be fair to assume that?

Kevin Bradley: And then just quickly on NRR, at a high level, would it be fair to assume that NRR roughly stays at this elevated level throughout 2025 under the assumption that home sales volumes remain subdued over the remainder of the year? You want to take that one, Kevin? Sure. You know, that's not the way that we're currently modeling it. So we're modeling that that tailwind sort of was in Q1. We see it in place at least through April at this point. That's kind of what you saw a little bit in our in our Q2 guide lift, you know, but at this point, we're not assuming that it stays elevated at at that level in Q3 and Q4.

Speaker Change: and our roughly stayed at this elevated level throughout 2025 under the assumption that home sales volumes remain subdued over the remainder of the year.

You want to take that one, Kevin? Sure. Yeah.

Speaker Change: You know, that's not the way that we're currently modeling it. So we're modeling that that tailwind sort of was in Q1.

Thank you.

Speaker Change: Guide Lift. But at this point we're not assuming that it stays elevated at that level in Q3 and Q4. It may be the case that it will but that's not what's baked into our outlook currently.

Kevin Bradley: It may be the case that it will, but that's not what's baked into our outlook. Okay, got it. Thanks for clarifying that, Kevin. Thank you both. Thank you.

Speaker Change: Okay, guys, thanks for clarifying that, Kevin. Thank you both. Thank you. One moment for our next question.

Darren Aftahi: Our next question comes from Darren Aftahi with Brought to your line is open. Hey, thanks for saying my questions and congrats to Kevin as well. Look forward to work with you.

. . . . . .

Speaker Change: Our next question comes from Darren Aftahi with Brock, your light is open.

Darren Aftai: Thank you for saying my questions and congrats to Kevin as well for the work with you.

Darren Aftahi: Two, if I may just clarification on your staff guidance. He talked a lot about sort of that that pause in April and then sort of business as usual. So I guess, looking at those two spectrums, your your staff guidance, like where does that fall? Does it fall more on the business as usual side? Or is there some conservatism built in that the wind kind of blows a different way if tariffs become a bigger issue?

Darren Aftai: Clarification on your staff guidance. He talked a lot about sort of that pause in April and then sort of business as usual. So I guess looking at those two spectrums, your your staff guidance, like, where does that fall? Does it fall more on the business as usual side or is there some conservatism built in that the wind?

Darren Aftai: Kind of blows a different way if the tariffs are going to be a bigger issue.

Steve Trundle: And then secondly, in the past, you guys have talked about education of your service provider base, residential or commercial. I'm just kind of curious what the overlap is, and if there's kind of an initiative to get more of your service providers to try and sell commercial just given the ARPU uplift and the growth you've been seeing there.

Darren Aftai: And then, secondly, in the past, you guys have talked about education of your service provider base on residential or commercial.

Speaker Change: I'm just kind of curious what the overlap is and if there's kind of an initiative to get more of your service providers to try and sell commercial just given the RPU uplift and grow up even

Steve Trundle: Thanks. Sure. Hey, Darren. Yeah, I think what is baked into our model currently is on the tariff stuff. We're really, aside from widening the range on the hardware, we're not modeling that a lot of impact there, and we feel pretty good having watched all of April that things are looking okay at the moment. We're not yet trying to guess what's going to come out. If you go back to the initial presentation in the Rose Garden after Liberation Day, some of the tariffs that were presented were much higher than the baseline tariff that everyone's experiencing at the moment, which is 10 percent.

Sure. Hey, Dan.

Speaker Change: is on the tariff stuff. We're really, aside from widening the range on the hardware, we're not modeling that a lot of impact there. And we feel pretty good having watched all of April that things are looking okay at the moment.

Speaker Change: We're not yet trying to guess what's going to come out.

Speaker Change: You know, if you go back to the initial presentation in the Rose Garden after Liberation Day, some of the tariffs that were presented were much higher than the baseline tariff that everyone's experiencing at the moment, which is 10%. So we're not attempting to predict.

Steve Trundle: So we're not attempting to predict what may come to pass in July, August, that sort of thing. But based on what we see today, we feel like demand is holding up. Things look okay. And then the second piece that maybe is that element of conservatism in our guide is the model of somewhat of a return to traditional revenue retention rates. So that's... We may see that revenue retention remains elevated, and that would be positive for us.

Speaker Change: You know, what may come to pass in July , August , that sort of thing, but based on what we see today, we feel like demand is holding up. Things look okay. And then the second piece that maybe is that element of conservatism in our guide is the...

Speaker Change: The model of somewhat a return to additional revenue retention rate, so that's...

Speaker Change: You know, we may see that revenue retention remains elevated and that will be positive for us.

Steve Trundle: Your question about service providers on commercial. We still like the residential market, and it's a big market, so we don't want to be too quick to push everyone out of the residential market. Markets kind of move in ebbs and flows. As we've seen through time, there are years where residential is particularly strong, and there are years where S&B and commercial is particularly strong. The best businesses are those that can be advantaged by residential. By positive trends in one while the other might be a bit negative. So we think that the best place for most service operators to be is one where they have some diversity in their own business with, you know, 20, 30% of the business being commercial.

Speaker Change: Your question about service providers on commercial, I mean, we still like the residential market and it's a big market, so we don't want to be

Speaker Change: By positive trends in one while the other might be a bit...

Speaker Change: Negative. So we think that the best place for most service operators to be is one where they had some diversity in their own business with

You know, 20-30% of the business being commercial.

Steve Trundle: And, you know, 60% or so being residential. That said, there are an entire class of service providers who really are commercial integrators. And that's all they do. And we do have a team focused on, you know, prospecting, within that class. That's a class of service provider that we haven't, you know, through the years haven't had as much access to because we started in residential and have moved more into commercial and S&B. So we are out there working hard to continue to expand into that class of service providers that are almost exclusively commercial.

Speaker Change: and the 60% are so being residential. That said, there are an entire class of service providers who really are commercial integrators and that's all they do.

Speaker Change: You know, through the years have it had as much access to because we started in residential and it moved more into commercial SMB. So we are out there working hard to continue to expand into that class of service providers that are almost exclusively commercial.

Darren Aftahi: helpful. Thank you.

Be careful. Thank you.

Operator: One moment for our next question.

Yep.

One moment for our next question.

Jack Vander Aarde: Our next question comes from Jack Vander Aarde with Maxim Group. Your line is open. Okay, great.

Speaker Change: Our next question comes from Jack Van Der Arde, with Maxim Group, relied as open.

Steve Trundle: Welcome to Kevin. And good to see the strong results and outlook, especially when many other companies are kind of hitting pause. So great to see. Steve, I know you guys don't provide an explicit total subscriber or connected property count. In our pool is obviously increasing with strong attach rates. But can you maybe just speak in general to your install base in North America residential and in commercial? Are both of those actually growing in terms of new subscriber connections? And any impact from the Home Builder channel on subscriber growth in North American residential and commercial? Thanks.

Speaker Change: Okay, great. Welcome to Kevin and good to see the strong results and outlook especially when many other companies are kind of hitting pause. So great to see.

Speaker Change: Steve, I know you guys don't provide an explicit total subscriber or connected property count. In our poo is obviously increasing with strong attachments.

Adam Tindle: But can you maybe just speak in general to your install base in North America residential and in commercial? Are both of those actually growing in terms of new subscriber connections? In any impact from the Home Builder channel on subscriber growth?

in North American Residential and Commercial. Thanks.

Steve Trundle: Sure. Hey, Jack. Thanks for that. Yeah, the... I actually don't know the exact metric because it's not one that we're reporting. What's happened is the definition of what is a subscriber has evolved some, and in the commercial business, a subscriber can be a door or can be a video camera, and that camera may be with analytics producing the same ARPU as an entire home, and then we have subscribers on the Energy Hub side that are different in their profiles. So we add all those numbers up, we get to a number that's a little bit inconsistent with what we used to report, which is really a pure residential number.

Sure. Hey, Jack. Thanks for that. Yeah, the...

Speaker Change: I actually don't know the exact metric because it's not one that we're reporting. What's happened is the definition of what is a subscriber has...

Speaker Change: It involves, man, in the commercial business, a subscriber can be a door or can be a video camera and that camera may be with analytics producing the same arpooh as an entire home.

Speaker Change: And then we have subscribers on the Energy Hub side that are different in their profile. So we add all those

Speaker Change: numbers up, we get to a number that's a little bit inconsistent with what we used to report which is really a pure residential number. Both numbers are continuing to go up. The total number of subscribers continues to grow. We're not at a point where we're seeing over...

Steve Trundle: That said, both numbers are continuing to go up. The total number of subscribers continues to grow. We're not at a point where we're seeing a retreat on either the commercial or the residential side, so generally the outlook is that both are increasing. The housing market is a This has been a domain where we've had a bit of a headwind now for a couple of years. The elevated interest rates have reduced the frequency of moves, the frequency of new builds being permitted. It hasn't been the end of the world, but it has been a softer spot that's been a headwind new account creation for our service providers now for a couple of years.

The housing market is a ...

Speaker Change: You know, it has been a domain where we've had a bit of a headwind now for a couple of years. The elevated interest rates have reduced the frequency of moods, the frequency of...

New Builds being permitted [inaudible]

Speaker Change: Hasn't been the end of the world, but it has been a softer

Speaker Change: Spot that's been a headwind new account creation for our service providers now for a couple of years. We don't necessarily see that changing this...

Steve Trundle: We don't necessarily see that changing this year, but it continues to be impactful. The positive aspect of that is that when people are not moving, when they're staying put, then we see some benefits on the revenue retention line. Okay, great. I really appreciate the color there. That makes a lot of sense, especially on that kind of moving the definition of, the lines get blurred with the definition of what a connected subscriber is as well. So, appreciate that. And then just in general, I guess in the, you kind of touched on ADT a little bit. I don't want to go there specifically, but there's positive momentum in your channel.

Speaker Change: this year, but continues to be impactful. The positive aspect of that is that when people are not moving, when they're staying put, then we see some benefits on the revenue retention line.

Speaker Change: Okay, great. I really appreciate the color there. That makes a lot of sense, especially on that kind of moving the definition of...

Speaker Change: The lines get blurred with the definition of what a connected subscriber is as well, so I appreciate that and then just in general

Speaker Change: I guess you kind of touched on ADT a little bit. I don't want to go there specifically, but there's positive momentum in your channel, positive momentum in your marketplace.

Steve Trundle: Sounds like there's positive momentum in your marketplace. Just any updates on actual competitive landscape as it relates back to your guys' guidance that largely remains, you know, I would say incrementally positive. So, any impact on the competitive environment as it relates to your outlook? Thanks. Sure, as it relates to... Um, you know, ADT, we're still a partner with ADT, so we're not really seeing any, um... We don't really think of them as a sort of a competitive factor, I would say. If we look at the broader market and think about what's going on, particularly on the residential side, I think the thing that we pay a lot of attention to is just the proliferation of products coming across, typically from Asia that are directly sold to end consumers to solve some type of video need.

Speaker Change: Just any updates on actual competitive landscape as it relates back to your guys' guidance, that largely remains, you know, I would say incrementally positive, so any impact on the competitive environment as it relates to your outlook, thanks.

Sure, as it relates to-

Speaker Change: ATT, we're still a partner with ATT, so we're not really seeing any...

Speaker Change: You know, we don't really think of them as a sort of a competitive factor, I would say.

Speaker Change: that are directly sold and consumers to solve some type of video.

Steve Trundle: There's no doubt that quite a few people are buying cameras off of TikTok, off of other sites at low cost. And the cameras are not as functional, not as capable, don't really provide real security, but I think nonetheless represent somewhat of a competitive threat that we've monitored. I'd say the good news, though, for our investors is this is no different than... You know, for the last decade, we've seen some We have some entities selling video cameras direct to consumers at a lower price point. And we've survived that. We expect we'll continue to survive that. We think that the market is basically bifurcated into those who are serious about security and view security and video as an investment in their home, and then those that are looking for sort of a temporary point solution.

Speaker Change: Uh need there's there's no doubt that quite a few people are buying cameras off of TikTok off of other

Speaker Change: site at low cost, and the cameras are not as functional, not as capable, don't really provide real security, but I think nonetheless represents somewhat of a competitive threat that we monitor. I'd say the good news though for our investors is this is no different than

For the last decade, we've seen some...

Speaker Change: Some entities selling video cameras, direct consumers at a lower price point and we've survived that. We expect we'll continue to survive that. We think that the market is basically bifurcated into those who are...

Speaker Change: Serious about security and view, security and video as an investment in their home.

Speaker Change: and then those that are looking for sort of a temporary point solution and we want to stay focused on the former set.

Steve Trundle: And we want to stay focused on the former set. Those are the better customers. They're the more profitable customers. And they're the ones that benefit the most from our service providers' attention. So in that domain, we're feeling pretty good.

Speaker Change: Those are the better customers, they're the more profitable customers, and they're the ones that benefit the most from our service providers' attention. So in that domain, we're feeling pretty good, I would say.

Operator: Okay, fantastic. I appreciate the call there. Thanks. Thank you.

Okay, fantastic. I appreciate the color. Thanks.

Operator: And I'm not showing any further questions at this time, and as such, this does conclude today's presentation. You may now disconnect and have a wonderful day. Please see the complete disclaimer at https://sites.google.com and www.sites.google.com

Thank you.

Speaker Change: And I'm not showing any further questions at this time, and as such this does conclude today's presentation, you may now disconnect and have a wonderful day.

Speaker Change: Okay.