Q2 2025 Alarm.com Holdings Earnings Call

Speaker #2: Good day, and thank you for standing by. Welcome to the Alarm.com second quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode.

Speaker #2: After the speaker's presentation, there'll be a question and answer session. To ask a estion during the session, you'll need to press *11 on your telephone.

Speaker #2: You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised today's conference is being recorded.

Speaker #2: I would now like hand the conference over to your speaker today, Matthew Zartman, Vice President of Investor Relations. Please go head.

Speaker #3: Thank you, Kevin. Good afternoon, everyone. Joining us on today's call are Steve Trundle, Alarm.com's 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.

Speaker #3: These statements are based on current expectations and assumptions. They are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.

Speaker #3: We refer you to these risk factors discussed in our quarterly report on Form 10Q and our Form 8K, which will be filed shortly with the SEC, along with the associated press release.

Speaker #3: This call is subject to these factors, and we encourage you to review them. Alarm.com assumes no obligation to update these forward-looking statements or other information that speaks as of their respective dates.

Speaker #3: In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of GAAP and non-GAAP measures can be found in ay's press release on our Investor Relations website.

Speaker #3: I'll now turn the call over to Steve Trundle. Steve?

Speaker #4: Thank you, Matt. Good afternoon, and welcome to everyone. We're pleased to report financial results for the second quarter that were above our expectations. SaaS and licensed revenue in the second quarter grew to $170 million, an adjusted EBITDA was $48.4 million.

Speaker #4: A significant highlight of the second quarter was the celebration of our 10th-year anniversary as a publicly traded company. We were invited by NASDAQ to ring in the opening of the market on June 30th.

Speaker #4: A few of our investors have been with us throughout our entire public journey. And I am thankful for their continued support. While going public is a big deal for most tech companies, I'm even more pleased with what the team has achieved in the 10 years since.

Speaker #4: At the time of our IPO, we forecasted total annual revenues of $195 million including $139 million in SaaS and $56 million in hardware, and nearly all of that was coming from the North American residential security market.

Speaker #4: We were a good single-line business. The mission I set for the company early on was to deliver a cloud-based sensor into every property in the world.

Speaker #4: We decided to go public because we believed that we could continue to build the company and expand the business in pursuit of this mission.

Speaker #4: We wanted create more opportunities for our employees, expand to the new markets, and deliver safety, security, and energy efficiency to the world. Since our IPO, we have saved dozens of lives and have kept millions and millions of people safer than they would be in a world without Alarm.com.

Speaker #4: And we have grown the business significantly and profitably without any material dilution to our shareholders. As Kevin will present, our current revenue run rate is more than five times greater than when we went public, and places us on an annual pace of $1 billion in revenues.

Speaker #4: The diversity of the revenues that we have built across the North American international residential commercial and energy markets provides tremendous durability for the future.

Speaker #4: But we're here today to report on our quarter, so let me turn back to the business at hand. The major components of our performed well during the quarter and all contributed nicely to our better-than-expected results.

Speaker #4: Revenue outperformance particularly in hardware revenue resulted in stronger adjusted EBITDA. Our residential business continued to deliver steady growth and strong cash flow during the second quarter.

Speaker #4: We remain committed to the large residential market in the United States and Canada. Millions of potential subscribers have yet to adopt integrated video solutions, and security-based use cases continue to be the primary driver of the adoption of smart home products and services.

Speaker #4: Most consumers in the market for security desire professional services including a professionally designed, installed, and serviced system. These tend be the more serious customers and they typically engage with one of our 12,000 professional service provider partners.

Speaker #4: We are well positioned to serve the continued demand in the residential market as the provider of choice for those who are serious about security.

Speaker #4: Our channel partners serve as the sales and marketing engine for the business, enabling a highly efficient customer acquisition model. Our sales and marketing spend has remained around 12% of total revenue in recent years.

Speaker #4: Well below peer averages. At times, we will also invest into our channel to strengthen our national sales and service footprint and enable greater adoption of the full ecosystem of Alarm.com products and services for residential subscribers.

Speaker #4: We're pleased to have completed a couple of minority investments consistent with this strategy during the second quarter. Shifting to our growth initiatives, the most prominent drivers of performance continue to be the commercial, international, and energy hub businesses.

Speaker #4: Their collective contributions to our consolidated SaaS revenue approach 30% in the second quarter. Their combined year-over-year growth rate held at around 25% in line with what we have articulated in prior quarters.

Speaker #4: The commercial business continues to progress as our service provider partners and commercial integrators adopt increasing components of our unified video access control and commercial intrusion platform.

Speaker #4: One element of our commercial business is our subsidiary, OpenEye, which provides a cloud-based video surveillance platform designed for multi-site commercial and enterprise customers. OpenEye delivers enterprise video compatibility and integration with many different products in the market.

Speaker #4: The OpenEye team recently introduced new AI-powered tools to accelerate and simplify forensic video review. Subscribers can now search video footage across multiple locations and multiple cameras by visual characteristics such as a red jacket or a white pickup truck.

Speaker #4: They can also select a reference object in a video feed, and the AI software will search for similar matches. These capabilities are designed to help commercial users respond faster and more effectively to security incidents.

Speaker #4: The new features are included in OpenEye's premium services tier. I also want to quickly touch on tariffs, which Kevin will cover in more detail when he discusses our financials in a ent.

Speaker #4: Like other companies, we continue to monitor framework announcements and watch for the details in any formal trade agreements that are reached. Based on the frameworks that we've seen to date, we feel that with our current US-based and in-transit inventory positions, we're able to manage through the rest of 2025 on our plan and provide a predictable environment for our service provider partners.

Speaker #4: 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, particularly as we celebrate our 10th year as a public company.

Speaker #4: With that, I'll turn the call over to Kevin Bradley for a review of our financial performance. Kevin?

Speaker #5: Thank you, Steve. At the halfway point of the year, we continued to see good momentum during the quarter. New account origination activity during the quarter slightly exceeded our expectations despite uncertainty due to tariffs and economic conditions.

Speaker #5: SaaS and licensed revenue grew 9% year over year to $170 million, exceeding the midpoint of our guide for the second quarter of $167.1 million.

Speaker #5: Broad-based contributions from across the diverse components of the business contributed to our overperformance. Our growth initiatives, which consist of our commercial, energy hub, and international businesses, continued to deliver year-over-year SaaS revenue growth within the range of our past disclosures.

Speaker #5: Their contributions to our total SaaS revenue during the quarter approached 30%. Total revenue grew 8.8% year over year to $254.3 million, during the quarter.

Speaker #5: As Steve noted, this marks a milestone as the first quarter with an annual run rate in excess of 1 billion. Total gross profit grew 9.4% year over year to $166.8 million, and gross margins improved by 40 basis points, while revenue mix was consistent.

Speaker #5: I want to spend a moment to frame our hardware business and its financial and strategic value to our business model. As an IoT-based software business, our SaaS revenue is primarily associated with the installation of physical products, and our solutions are often based on the integration of software and hardware devices.

Speaker #5: This model creates higher barriers against end customer defection and technology disruption and distinguishes Alarm.com from typical vertical software companies as it relates to AI replacement risk or otherwise.

Speaker #5: Our hardware business can also be thought of as a structural contributor to our highly efficient SaaS revenue acquisition model. Based on our historical financials, gross profits from hardware sales cover over 50% of our sales and marketing customer acquisition costs.

Speaker #5: Along with the generally low levels of sales and marketing spending that Steve noted, the sale and installation of physical hardware products adds to the efficiency of our go-to-market model.

Speaker #5: The quality and capability of the services we enable and the value of our service provider partnerships. Total operating expenses were $134.8 million, during the second quarter.

Speaker #5: Excluding stock-based compensation and other items we adjust from G&A for non-GAAP purposes, total operating expenses were $118.3 million, a 9.1% increase year over year.

Speaker #5: R&D expense in the quarter, inclusive of stock-based compensation, was $69.1 million, up 5.1% year over year. Excluding stock-based comp, it was $63.2 million, up 8% year over year.

Speaker #5: We saw strong EBITDA and operating leverage performance in the quarter, primarily due to revenue growth and quality. GAAP net income grew 3.1% year over year to $34.6 million, and our GAAP EPS per diluted share was $0.63.

Speaker #5: Non-GAAP adjusted EBITDA grew 13% year over year to $48.4 million, non-GAAP adjusted net income grew 6.5% year over year to $34.1 million. Non-GAAP adjusted EPS grew 3.4% year over year to $0.60 per diluted share.

Speaker #5: We ended the quarter with $1.02 billion of cash and cash equivalents and produced $18.2 million of free cash flow during the quarter. This includes what was our final domestic Section 174 cash tax payment of $33.5 million, in April.

Speaker #5: I want to speak for a moment about tariffs. We implemented a price increase in early June to reflect the 10% baseline tariff. This pass-through will slightly dilute margins, but gross profit dollars will remain roughly unchanged.

Speaker #5: We have also been closely watching the recent announcements of trade frameworks with various countries and multilateral groups. As you know, these are simply frameworks for further negotiations.

Speaker #5: Once trade agreements have been finalized and we understand the fine print, we can fully evaluate potential impacts and our options. In the meantime, we have taken steps to shield ourselves and our service provider partners from the uncertain environment.

Speaker #5: The uncertainty around tariffs likely prompted some of our service provider partners to build their product inventories during the quarter and minimize near-term tariff risks.

Speaker #5: Despite this demand, we were able to maintain our inventory levels. We believe that between our current inventory and products in transit, we have largely insulated our 2025 outlook from further tariff exposure based on the framework agreements we've seen so far.

Speaker #5: We also continue to have a healthy balance sheet and strong cash flow from our growing base of durable, recurring revenue and efficient go-to-market model.

Speaker #5: Steve discussed our strategy of deploying capital to support some of our technology and channel partners in the recent minority equity investments we executed during the quarter.

Speaker #5: These strategic investments are designed to help us solidify our long-term service provider footprint while also delivering strong return characteristics on a standalone basis. As of July, these non-operating assets are generating just under a 9% cash flow yield on an annualized basis.

Speaker #5: Given the partnership structure of these businesses, these cash distributions are not characterized as taxable income for tax purposes and, when received by us, will simply be net against the new investments line item on our balance sheet.

Speaker #5: Medium term, there is other structural tailwind to our cash flow outlook given the recent change to the R&D capitalization and amortization requirements in Section 174 of the US Federal Tax Code that I'd like mention.

Speaker #5: The federal budget signed into law in early July includes a provision that allows companies to transition back to immediately and fully deducting all domestic R&D expenses incurred during the year for tax purposes.

Speaker #5: Like most companies, with intensive R&D business models, we're still evaluating the full benefit and timing. But we currently estimate that this change eliminates what would have been a little under $200 million in total cash tax payments over the next five years under prior law.

Speaker #5: This will provide additional balance sheet strength for our long-term capital allocation planning horizon. More broadly, we believe this change reinforces the long-term attractiveness of capital-efficient R&D businesses like ours.

Speaker #5: I'll now to our financial outlook. For the third quarter of 2025, we expect SaaS and licensed revenue of $171.4 to $171.6 million. For the full year of 2025, we are raising our expectations for SaaS and licensed revenue to between $681 and $681.4 million.

Speaker #5: This is an increase of 5.2 million over our prior guidance at the midpoint. Our raise is also a flow-through of our second quarter beat of $180%, reflecting the confidence we have in our second half outlook.

Speaker #5: We are now projecting total revenue for 2025 of between $990 and $996.4 million. Which includes estimated hardware and other revenue of $309 to $355 million.

Speaker #5: We are also raising our estimate for non-GAAP adjusted EBITDA for 2025 to between $195 and $196.5 million. An increase from our prior guidance of between $190 and $193 million due to the beat from the second quarter.

Speaker #5: Non-GAAP adjusted net income for 2025 is projected to be $136 to $136.5 million, or $2.40 per diluted share. This is an increase from our prior guidance of $131.5 to $132.5 million, or $2.32 to $2.33 per diluted share.

Speaker #5: EPS is based on an estimate $60.3 million, weighted average diluted shares outstanding. Down from our estimate last quarter due in part to the buybacks we executed during Q2.

Speaker #5: 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 across two issuances.

Speaker #5: We currently project our non-GAAP tax rate for 2025 to remain at 21% under current tax rules. We expect full year 2025 stock-based compensation expense of $37 million, to $38 million.

Speaker #5: In closing, I'm pleased with the broad-based momentum in the business that we've seen so far this year. We believe that we're well positioned to deliver continued revenue growth and profitability in the second half, while investing to expand our long-term growth opportunities.

Speaker #5: With that, operator, please open the call for Q&A.

Speaker #2: Thank you, ladies and gentlemen. If you have a estion or a comment at this time, please press *11 on your telephone. If your question has been answered or you wish to move ourself from the queue, please press *11 again.

Speaker #2: We'll pause for a moment while we compile our Q&A roster. Our first question comes from Matt Bullock with Bank of America, your line is open.

Speaker #6: Awesome, thanks. This is Matt Bullock. 'm for Koji Ikeda. Thanks for taking the question. I wanted to drill down a ittle bit more onto the gross levers here.

Speaker #6: Can you just help us understand what's driving the sustainability of the commercial, international, and energy hub? It feels like we've been chugging along at 25% plus for some time now, and particularly choppy software demand environment.

Speaker #6: So help me understand what's driving the success there and how sustainable that 25% growth rate is for those elements the business. Thanks.

Speaker #7: Hey. Hey, Matt. This is Steve speaking. Yeah. So there really three different areas I'm going to touch on each one. I'll start with energy.

Speaker #7: And in the energy category, there's sort of a secular trend underway where the combination of massive build-out of AI data centers with some reshoring of manufacturing underway now.

Speaker #7: It's just driving a ton of demand and a need for capacity amongst our large utility customers. And energy hub is benefiting from that secular trend.

Speaker #7: At the same time, they're expanding the range of devices that we support and the range of sort of the DERM solution we bring to market.

Speaker #7: So that appears to be a pretty durable trend at the moment. And that's helped us there. On the commercial side, it's two things, really.

Speaker #7: It's us finishing the build-out of the commercial platform. 've seen us do some of that organically, some of it inorganically. The most recent inorganic move was the acquisition of Checked and our expansion of our remote video monitoring solution.

Speaker #7: But it's also at some level driven by the unfortunate events we see in the news from time to time. In the last couple of weeks, certainly remind us of the need for commercial customers to continue to focus on security and upgrading the things they do to protect both their customers and their employees.

Speaker #7: So we think that's probably going to continue to be healthy. You've got also a technology trend there that is moving a lot of the tech from on-prem to the cloud, and we're beneficiary of that.

Speaker #7: And then on the international side, I would say it's more the thing driving growth there is more still much earlier days than the North American market and then our team doing a lot of spade work, market by market.

Speaker #7: Developing relationships with service providers, our tech team working through the nuances of what's needed for each market and bringing people sort of online and then conditioning them to go sell really a comprehensive smart security solution as opposed to some of the legacy stuff that they're they're more familiar with.

Speaker #7: So those are the three areas. And each one has a little different story, but we feel pretty good. You're right that the rowth rates have held on an aggregate basis.

Speaker #7: And as a of that, as a component of SaaS, they're oming more meaningful.

Speaker #6: Super helpful. And then just one quick follow-up, if I could. Are all three of those businesses growing around 25% or is there an outlier driving the growth there of the consolidated 25% growth?

Speaker #6: And given all those tailwinds you just outlined, is there any consideration of accelerating investments in those areas? Or is it really steady as we go in s of higher allocating capital?

Speaker #7: Right. So yeah, the combination is sort of at that 25% growth rate. The individual components are I would say plus or minus 500 bips on that is sort of the range I'd say we see.

Speaker #7: So one or two a little above, one maybe a little below. But right in that range. In terms of the way we think about investments and can we accelerate their growth, we run sort of with the consolidated number that is our baseline planning tool.

Speaker #7: And then we make decisions incrementally or individually around each growth area based on what 're seeing with their sort of growth potential and what type of investment or burn in some cases we think makes sense.

Speaker #7: So if we see further opportunities to scale up investment there, then I think we will. We sort of lock in on 25. But at the moment, 're already beginning to examine and evaluate that decision for 26.

Speaker #7: And we may see opportunities to in a couple of cases to further extend their growth with some additional investment.

Speaker #6: Really helpful. Thanks much.

Speaker #2: One moment for our next estion. Our next question comes from Adam Tyndall with Raymond James, your line is open.

Speaker #8: Okay. Thanks. Good afternoon. Steve, I just wanted to maybe start with a very high-level question. I've got a more tactical one for Kevin after this.

Speaker #8: But, given that we're celebrating sort of the 10-year anniversary on this call, and you talked about investors who have stuck with you during that time, it might be an appropriate forum for investors thinking about the next 10 years.

Speaker #8: For ou to maybe just touch at a high level, as you sort of think about that, how you would describe your vision to the investors today signing up for the next 10 years?

Speaker #7: Well, fortunately, I think the base vision or the base mission of a cloud-connected sensor in every property in the world is still holding up.

Speaker #7: That's still a lofty goal for us to shoot for. There are lots of ways we can get there. We have to find ways to get there profitably.

Speaker #7: And but I expect that hopefully, we'll able to look back 10 years from now and say that and be sort of as enthusiastic about the prior 10 years as we are sort of now.

Speaker #7: I would say that we're probably a little bit more set in some tracks that should continue for the next decade. So if you go back 10 years, we really were a single line of business.

Speaker #7: Had a nice business. But didn't have the diversity of revenues that we enjoy today. Didn't have the knowledge and experience with inorganic activity. Didn't have the balance sheet.

Speaker #7: So at this point, I think our markets are probably a little more defined. We're commercial and residential security. And energy. And I don't see us dramatically sort of shifting out of those tracks.

Speaker #7: But I think that we're in just sort of a more a better scaled position to further build those out over the next decade.

Speaker #6: Got it. And 's helpful. And maybe just a follow-up, evin. Obviously, hardware is strong. It sounds like you're ind of eyes wide open that there may have been a little bit of pull forward demand from some of the service providers.

Speaker #6: Kind of a two-part question on this. The first one would be as we think about modeling out hardware for the rest of the year, we would typically expect Q3 to be a little bit better than Q4, just on weather and.

Speaker #6: But I wonder if that pull forward dynamic makes the split between Q3 and Q4 hardware revenue a little bit different this year. And then the second part would be I know ou're not guiding to 2026, but just conceptually we're going to have to model that.

Speaker #6: And as we think about 2026, obviously, you're covered through year-end, as you mentioned, wisely. But once that kind of coverage rolls off, how do the economics change as we kind of think beyond year-end?

Speaker #8: Yeah, sure. Hey, am. So based on our guide, you can see we're implying somewhere between 150 and $150 million of hardware revenue in the second half.

Speaker #8: I think that's likely to be mostly radically split between Q3 and Q4. If you were to divide that by two, I'd probably add a couple million dollars above that average for Q3 and then put the residual in Q4.

Speaker #8: So still a little bit of a skew towards Q3, but maybe a little bit less than historical seasonality suggests. I think as we look forward to 2026, there's the potential for higher tariffs if the framework deals get codified into HDS codes.

Speaker #8: Putting that aside, I ink what you do is you'd probably say, "Hey, you know I learned about COM talked rolling through seven and a half million dollars of higher hardware revenue in the second half of the year related to the baseline tariffs." And if you annualize that, it'd probably be growth in 2026 of about seven and a half million dollars on top of what we guided to for 2025.

Speaker #8: And assume that besides that, demand and sales are probably roughly equal to what they had been in 2025. So probably somewhere between 5 and 10 million dollars higher for 2026 than now.

Speaker #6: Got it. Just real quick to wrap a bow on that. In your prepared remarks, talked about how the hardware and the profit dollars that you get from that help to cover the cost of acquiring the subscriber.

Speaker #6: And I just wonder if you're kind of thinking about the framework and the current differences in the economics and the hardware business. Are there things that you might think about differently from a business model going forward, perhaps maybe it doesn't make sense to acquire as many subs, for example, just how you're inking about that impacts the overall business model?

Speaker #6: Thanks.

Speaker #7: I don't think it's changing really the way that we're thinking about that. I ink if we have tariffs come through and it's a pure pass-through, we're going to have the same roughly the same amount of gross profit from hardware.

Speaker #7: Available to us, we think, next year than this year. I suspect that we'll probably be viewing the way that we budget sales and marketing like we typically do based on that.

Speaker #7: There's not I don't think we see sweeping structural changes to gross profit contribution from hardware. And so we'll approach revenue planning and sales and marketing budgeting I think much like we do historically.

Speaker #6: Got it. Thank you very much.

Speaker #2: Again, ladies gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. Our next question comes from Samatamana with Jeffries, our line is open.

Speaker #9: Hey, again, this is Billy from Simondon for Smod. Maybe I'll ask this. We're midway through the year, and it's been a busy week for software earnings and we're hearing very different narratives from different companies.

Speaker #9: We're mer sighting a weakening consumer, slowdowns, and other names are citing strength and improvement for the back half. So can you just level set for us what assumptions and considerations went into the back half guide?

Speaker #9: Just remind us what you're thinking around macro, deal volume, top of funnel renewals, and kind of the visibility over the next couple of arters.

Speaker #8: Sure, Billy. Yeah, I guess we don't we're not anticipating our modeling as a significant change in the macro in the back half of the year.

Speaker #8: Our experience has been, you ow, macros haven't been perfect for the first half, but have not been horrible. And part that is, you know, we're a little different probably than a lot of the other companies in that we're engaged in, you know, a business that's a visceral need that many people have.

Speaker #8: I mean, it's security. And whether ou're in a good economy or maybe a weaker economy, people in in both cases feel like it's it's a must-have type of service.

Speaker #8: And, therefore, we tend not to have quite as much volatility in our performance. when there are macro-level shifts, I'd say the macro backdrop, the one one thing we watch very carefully that is is still a backdrop to the business is new home sales.

Speaker #8: And, you know, we've seen that metric, be weak since 2023. haven't seen a dramatic change there. lately, as as new home sales pick up, then we would expect to see, two things really occur.

Speaker #8: And they sort of offset. one, you would see higher demand. the creation of more new subscribers as they move into a home and they they begin to shift to ct it.

Speaker #8: This is on the residential side. And then to offset that sum, you would see a bit, lower revenue retention as people move and sometimes cancel a service when they're no longer occupying their home.

Speaker #8: So that's an important macro metric. But generally, we think the outlook, our service providers are doing, pretty well. The outlook, for the second half is, in our view, about the same as the first half.

Speaker #9: Thanks very much, guys. Appreciate it.

Speaker #8: Thank you.

Speaker #2: One moment for our next estion. Our next question comes from Sakat Khalil with Barclays, your line is open.

Speaker #10: Hi, guys. This is Alyssa Leon for Sakat at Barclays. Thank you for taking my question. Kevin, I think you touched on this briefly, but was wondering you could give us any color on retention rates for the quarter and then maybe for the back half of the year.

Speaker #10: How should we think about the puts and takes here under different scenarios of the housing market? And maybe as a follow-up after that, what is retention look like here for commercial versus residential for the quarter?

Speaker #10: Thank ou.

Speaker #8: Sure. Thanks for the estion. Yeah, as we noted after our call last quarter, the retention rate for the consolidated company was inching towards 95%.

Speaker #8: It rounded actually up to 95%. It was 94.7. We, at the time, noted that we didn't anticipate that perpetuating for each of the rest of the quarters for this year.

Speaker #8: And that we thought it would actually return back down towards our historical range. That for the most part played out. We rounded to 94% during the second quarter.

Speaker #8: It was actually 94.1. So it came down about 60 basis points. That's still at the high end or slightly above our historical range. That we've seen.

Speaker #8: So a little bit better than we had actually anticipated. And for Q3 and Q4, you know what we're expecting is that that'll kind of be hovering around that same area, somewhere between, you know, 93.7 and 94%.

Speaker #8: It's how we're thinking about it. The things that could shift that from a macro perspective are things that Steve touched on on the prior question.

Speaker #8: Obviously, if activation rates, you know, fell, and housing market sort of ehow seized up more than it is now, that probably to higher retention than what we're ing.

Speaker #8: And vice versa. They'll probably roughly balance each other out from a revenue perspective over those two quarters. But those would be the puts and takes.

Speaker #10: Perfect. Thank you so much. Very helpful.

Speaker #2: Again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. Our next question comes from Jack van der Aarde with Maxim Group.

Speaker #2: Your line is open.

Speaker #11: Okay. Great. Great results, guys. And I appreciate the detailed update. Steve, touching on the core North America residential business, you ioned new home builds and sales, as those pick up eventually.

Speaker #11: You know, it could drive a pickup in new account activations. Maybe a near-term headwind on retention rates. But just to pick your brain, do you e home sales?

Speaker #11: Do you see an vironment where home sales do end up picking up again in 2026? Probably going to be

Speaker #11: discussion. But is that sort of a fair leads assumption that you guys are thinking ? And then just also quite curious, how many alarm residential customers own multiple alarm-connected residential properties?

Yeah, that's, that's always been a real source of strength for us. Our, our, um, subscribers that do have multiple properties. Both on the residential side, and on the, um, especially on the small business side. And, and um, so do I know the exact percentage? I I I would imagine in the commercial world that it's a pretty high percentage of subscribers. It's, it's I, you know, I would be guessing but I would would expect that it would be, you know, north of a third or or commercial accounts that are affiliated with other accounts. Um, on the residential side, it would be less than that, but still meaningful people that have second homes. Sometimes have multiple rental properties. Um, it it is a differentiating capability, it requires more of a back end, um, to provide good service across property. So, it is a, it is a fairly high percentage of subscribers. I just don't know that the exact

Percentage.

That's that's very helpful caller. I I appreciate that Steve. Um, and then maybe just a follow-up for Kevin. Um, you mentioned in June, you rolled out a 10% price, increase on the hardware. Um, have you thought about or are you actively look thinking about um, potential general price hikes on the, the base monthly rpu rate on the uh, residential or commercial fast service side of the business.

Yeah, hey Jack. Um, once like clarification, so we passed through the 10%. Uh, most of the 10% cost of the tariffs, which given our gross margin profile, wound up, being about 7 and a half percent in terms of of pricing to service providers. Um, at this point, we don't have uh, any general expectations whether in the second half of this year, or for next year to uh, to be visiting broad-based service price increases. Um, that's not currently part of our planning.

Not okay, not a moment. We yeah.

Go ahead and and I appreciate the clear the clarification on the, uh, the gross margin, um, or the cost of the terrorists, pass through on the hardware there. Um, and then maybe just internationally, um, which which, which countries or regions are are are the largest install base of of alarm customers and are there any just particular regions that are growing faster than others more? So now than that, that might just jump out at you.

Video monitoring capability that we, um, recently brought to Market. So those are, those are 2 areas where we've probably seen a little more, uh, growth than what we expected on the international side.

Okay, great. I I appreciate the color. I'll hop back in the queue.

Okay.

again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1, 1 on your telephone,

And I'm not showing any further questions this time, and as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.