Q3 2025 Alarm.com Holdings Inc Earnings Call
Good day, thank you for standing by. Welcome to the alarm.com third 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 1, 1 on your telephone, you will then hear an automated message. Advising your hand is raised to withdraw your question. Please press star 1 1 again, please. Be advised. Today's conference is being recorded. I would like to hand the conference over to your speaker today. Matthew zartman, please go ahead.
Thank you, operator. Good afternoon, everyone and welcome to alarm.com third quarter 2025 earnings conference. Call this call is being recorded joining us today are Steve trundle our CEO, Kevin Bradley our CFO and Dan kersner president of our platforms business.
During today's call, we will be making forward-looking statements which are predictions projections estimates and other statements, about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, that may cause actual results to differ materially, from our current expectations.
We refer you to the risk factors. Discussed in our quarterly report on form, 10 q and our Form 8K, which will be filed shortly with the SEC along with the associated press release.
Call is subject to these risk factors and we encourage you to review them alarm.com assumes. No obligation to update forward-looking statements or other information which speak as of their respective dates. In addition, several 9 Gap, Financial measures will be discussed on the call, a Reconciliation of gaap to non-gaap measures can be found in today's press release on our investor relations website. I'll now turn the call over to Steve trundle Steve.
Thank you, Matt. Good afternoon, and welcome to everyone.
We are pleased to report financial results for the third quarter that were above our expectations.
Quarter grew to 175.4 million and adjusted ibida was 59.2 Million.
We saw better than expected performance across the business during the quarter with particular strength in our energy business.
Following my remarks Dan kersner, who is the president of our platforms business. Will walk through several new product releases and how we're increasingly applying AI to our platform and business.
And then Kevin Bradley, our CFO will review our financial results guidance and provide our early initial. Look at next year.
I'll begin with our annual partner Summit which we held here in Washington DC in early October.
We hosted about 200 key service provider Partners from around the globe.
Our team presented newly released and upcoming products while simultaneously taking the pulse on what our partners are seeing in the markets they serve
In my conversations Partners Express, nice enthusiasm. For our overall roadmap. And particularly for our new residential and commercial video products, including our upcoming battery cameras,
Our remote video monitoring capability. Delivered through our subsidiary checked. Also through strong partner interests,
Check connect Central Station, workflows, with AI driven video, analytics, to enable Central Station, operators to cost-effectively monitor live video feeds.
Deter crime before it occurs and seamlessly initiate. An emergency response when the situation calls for escalation
I also spoke to a few of our in-customers who have large commercial installations.
It was good to hear that they are pleased with the direction of our product. And the enhancements, we've been making to our multi-site access control video and intrusion software Solutions.
We continue to hear from our partners that are unified commercial Solutions are winning in the market due to the ease of managing these complex systems through a single integrated interface.
Over the last year, we've seen a healthy uptick in commercial video account creation and our commercial Access Control subscriber base increased approximately 30%.
Our growth initiatives, Commercial International and energy hub.
Collectively continue to drive SAS Revenue growth in the 20, to 25% year-over-year range and accounted for 30% of total SAS Revenue, this quarter.
I want to highlight energy hubs progress with its platform strategy which is enabling higher value services for its utility clients and reinforcing its competitive advantage and leading market share in the North American Residential Market.
As a reminder energy Hub, software platform, helps utilities match electricity demand and Supply in real time.
It does this by orchestrating distributed energy resources such as smart thermostats, residential batteries, and EVS.
To provide load flexibility.
Demand for energy. Hub is driven by the long-term grid challenges based by utilities.
these include increasing load from electrification of transportation and the growing footprint of data centers along with growing variability in generation as the grid decarbonization
Energy hubs load, flexibility Solutions are faster and more cost-effective to deploy than building new infrastructure.
The energy Hub team is focused on platform expansion to support more classes and manufacturers of edge devices.
Last month, energy Hub announced an expanded partnership with Tesla.
Owners of Tesla's wall connector EV Chargers can enroll their product in energy Hub, programs directly in the Tesla app.
A large US utility is already using the integration to accelerate EV program enrollments and it's being introduced to many of the more than 30 EV managed charging programs that energy Hub supports in North America.
The goal of energy hubs. Ecosystem expansion is to drive platform adoption by providing a single orchestration layer across device classes.
Energy Hub also provides AI-driven dynamic load shaping capabilities that increase flexibility and address a broader range of grid management use cases.
In summary, I'm pleased with our third quarter results and the continued growth we see across the business alarm.com has developed strong durable, positions, addressing diverse, and dynamic opportunities, and residential and Commercial Security, and residential energy management.
Time.
I want to thank our service provider partners, and our team for their hard work and our investors for their continued. Trust in our business.
I'll now turn things over to Dan kersner, Dan.
Thanks, Steve, I'm pleased to join our call this quarter and speak with our investors and analysts.
For context, the platform business that I lead includes product development for our core residential and commercial platforms.
Shared services for our growth Ventures and sales and marketing for North America. Our largest market
Our team drives profitable growth through Innovation, delivering new capabilities that expand our addressable market and strengthen the competitive position of our service providers.
I'll begin with an update on several products, we release recently and share some examples of how our AI is already intersecting with current elements of our service provider and subscriber offerings and platforms.
Video remains a strategic growth driver across our residential commercial and international markets.
essential to our platform strategy, because each new video capability extends system utility
Both directly and by thoughtfully integrating video with other aspects of the offering,
This approach increases SAS adoption and customer engagement and retention.
To share sensitive the scale, the platform uploads roughly a million hours of video per day.
This quarter, we introduced a variety of important updates to the lineup.
We added to our outdoor video camera lineup with the new 730 Spotlight camera.
It delivers high quality video at night through an integrated Spotlight and a 4 megapixel sensor. It also includes built-in 2A audio. So Central Station operators, can communicate directly through the camera and Bluetooth enrollment that simplifies installation.
The 7:30, also supports our intelligent video-based, proactive, deterrence capabilities.
This includes AI deterrence and upgraded video solutions that identifies individuals and delivers AI generated verbal warnings dynamically adapted to a person's clothing behavior and location.
The voice is designed to emulate a security professional and uses our service providers brand. Name to add authenticity and Authority.
We recently enhanced this feature with a broader library of human, like dynamically generated voices and built-in randomization that automatically varies tone phrasing and delivery to create more unpredictable and thus convincing deterrence messages.
Capabilities, like AI deterrence, and remote video monitoring reflect our strategy, deploy software that of all video cameras, from passive sensors, into active responsive devices that drive, higher recurring, revenue and subscriber lifetime value.
As we continue to embed AI within the core platform, we can derive more insights from the iot devices in a property and cost-effectively deliver unique value to Consumers and businesses.
Turning to our commercial Solutions, we continue to expand the reach and flexibility of our video platform.
Commercial properties often have diverse surveillance requirements which are met by a wide variety of camera form factors.
By extending our software to operate with select third-party cameras. We've made it easier for service providers to bring alarm.com video capabilities into these environments without developing proprietary Hardware.
This approach broadens, our Market coverage and enables more efficient, targeted, R&D investment, and opens additional SAS opportunities with existing commercial accounts.
Since launching this capability, we've seen strong engagement accounts that leverage our third-party camera support. Connect roughly twice, as many cameras to our video software as accounts without it.
Revenue streams. We may not have otherwise captured
We recently expanded support to include panoramic multi sensor and panel, Zoom cameras 4 factors widely used in airports parking facilities and Industrial sites. We also enabled 2-way, audio and advanced analytics for our leading camera manufacturer partners.
These Integrations enable us to attach our premium remote video. Monitoring service to a broad range of widely deployed cameras.
Another Focus for our teams in is partner, enablement.
Our service provider relationships are Cornerstone of both our durable Market position and our growth strategy. We offer enterprise grade tools that enable our partners to operate their businesses through our platform. For field installation, to ongoing, support to management in a very large Fleet of connected devices.
Last year, we launched an initial version of our generative, AI chatbot. In our technician app to help field teams quickly, troubleshoot installation issues.
We recently released an upgraded version that can handle more complex questions and multi-step workflows.
I bought increased by 2 and a half times what customer satisfaction ratings Rose? More than 70%. Over the same period.
Our goal is to provide service providers with streamlined multi-channel access to world-class support.
With more technicians using our AI augmented support offerings. Our teams can prioritize more complex challenges and first-time installations
Over time, this facilitates faster adoption of new features and enables our partners to expand their use of our commercial, residential, and video services.
Overall, I'm pleased with the progress of R&D team made this quarter and throughout the year.
These product introductions demonstrate how our platform, strategies scales innovation in efficiently across markets while creating tangible growth opportunities for our partners.
With that, I'll hand things over to Kevin to review our financials. Kevin.
Thank you, Dan. I'll begin by reviewing our third quarter Financial results. Then provide updated guidance for Q4 and full year 2025. And lastly, provide our initial thoughts on 2026.
I'm pleased to report another quarter of financial results that exceeded our expectations and consensus estimates.
Our performance reflects continued broad-based contributions across the diverse components of the business.
SAS and licensed Revenue, grew 10.1%, year-over-year to 175.4 million.
exceeding, the midpoint of our guide of 171.5 million
as Steve noted, our growth initiatives, which consists of our Commercial Energy Hub and international efforts, continued to deliver SAS Revenue growth of roughly 20 to 25% year-over-year and represented 30% of total, SAS Revenue in the quarter.
Energy Hub, delivered a particularly strong quarter with the team, both executing on new program launches and driving solid same store growth.
Total revenue grew 6.6% year-over-year to 256.4 million during the quarter and gross profit increased 8.4% to 168.88 million.
Despite some anticipated and temporary headwinds to Hardware gross margins total gross margins increased 100 basis, points year-over-year due to the improving quality of SAS, in both the alarm.com and other segments, as well as a higher weighting towards SAS overall.
Hardware gross margins were impacted as we began selling through certain inventory carrying reciprocal tariff costs towards the latter part of the quarter.
We expect this to continue into Q4 before returning to a more normal margin range in January 2026. When we modify our tariff, passed-through fees incorporate the higher reciprocal tariff rates.
We also chose to selectively use faster and more expensive shipping methods to support the recent launch of 2 of our new video cameras, the v56, and the v730 that Dan discussed.
This also contributed to some hardware gross margin compression.
But as I noted, a moment ago even with these temporary headwinds, our total gross margin rates were up 100 basis points year over year.
During the third quarter, total operating expenses including depreciation and amortization were 131.8 million.
Including depreciation and amortization as well as stock-based compensation and other items we adjust from GNA for non-gaap purposes. Total operating expenses were 113.1 million
7%. Increase year-over-year.
rise in the quarter, inclusive of stock-based compensation was 66.6 million up 7.1% year-over-year,
Gaap net income during the third quarter was 35.3 million or 65 cents per diluted share.
Non-gaap adjusted. Net income, grew 20.6% year-over-year to 42.4 million and non-gaap EPS increased by 22.6% year-over-year to 76 cents per diluted share.
Effective, August 15th, 2025 the settlement method for our convertible notes. That mature in January 2026 became locked in to the Paramount cash and as such we began removing the 3.4 million of dilutive shares. Midway through the third quarter.
Adjusted Evo grew 18.4% year-over-year to 59.2 million.
Our adjusted e bit of performance includes a 3.6 million benefit, derived from a mark-to-market, gain on a security in our treasury portfolio.
Substantially all of our treasuries held in Money Market funds, but our policy allows for a small percentage to be held in other marketable, securities.
Our fishing go to market model and growing base of durable, recurring Revenue continues to generate strong cash flow and reinforce a healthy balance sheet.
I want to remind investors of the cash flow Tailwind. That should emerge based on the federal tax, bill signed into law on July 2025, which included 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,
We continue to estimate that, this change eliminates. What would have been a little under $200 million in total cash tax payments over the next 5 years under prior law?
I'll turn now to our financial outlook for the fourth quarter of 2025, we expect SAS and licensed revenue of between 176 and 176.2 million.
As a reminder energy, hubs Revenue recurs annually and is slightly seasonally weighted toward the second half of the year. The fourth quarter is typically its largest revenue quarter in absolute dollars, but also tends to grow at a slower rate than other Quarters on a year-over-year basis.
Additionally energy, hubs strong, Q3 performance included some contributions that pulled forward from Q4.
Collectively these factors create a modest seasonal headwind to consolidate SAS growth.
for a full year 2025 we are raising our SAS and licensed Revenue Outlook to between 685.2 and 685.4 million, an increase for prior guidance of 4.1 million at the midpoint
We now expect total revenue slightly above 1 billion dollars, including 315, to 316 million of hardware and other Revenue.
We are also raising our non-gaap adjusted, Eva Outlook to 199 million.
Up from the midpoint of 195.8 million in Prior guidance.
this implies roughly a 100 basis points of margin expansion compared to 2024
We are projecting non-gaap adjusted. Net, income of 140.5 million or $2.53 per diluted share.
This is up from prior, guidance of 136 million to 136.5 million or $2.40 per deleted. Share
EPS is based on 58.9 million weighted, average diluted shares outstanding for the year.
Q Force diluted shares will be around 56.7 million as we operate through a full quarter. Without the 3.4 million dilutive shares associated with the convertible notes, due January 2026.
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 around, 35 million.
Before turning, to our preliminary view of 2026, I want to comment on our annual planning process, which is well underway.
We continue to believe that our strong returns on invested capital and the positions we've established across multiple markets support organic reinvestment as the primary component of our capital allocation framework.
As we go through our planning process each year, we begin with an analysis of all our existing initiatives to determine which ones best support ongoing investments in growth.
We also identify initiatives that we have been working on for some time. But we're progress has not developed as we have expected. That process forms a framework for reallocation within the portfolio.
This year much like last year, we are seeing that many of the higher growth areas of the business can self-fund a bit more than they did just a few years ago.
As we rotate it out of a few initiatives and assess productivity, we found ourselves in a position to let go of some existing jobs during October, which is always a difficult, but sometimes necessary decision.
While we are still focused on closing out 2025, we currently project a preliminary early, look estimate of SAS and licensed revenue of between 722 and 724 million in 2026.
Total revenue could range between 1.037 and 1.044 billion dollars.
Currently project, our non-gaap adjusted ibida for 2026 to be in the range of 210 to 212 million.
We will be working to firm up our estimates and we will provide our formal annual guidance for 2026. When we report, our fourth quarter, 2025 Financial results early next year,
As our early look estimates suggest we are complementing organic reinvestment with some margin expansion.
To that Revenue that we have today.
Our plans Beyond this will depend upon the growth profiles and Prospects of the various initiatives that we are engaged in at that time.
In the meantime, meaningful operating cash flows, continue to contribute to our strong cash position.
Affording us additional flexibility across our broader Capital allocation framework.
Closing, we're pleased with the broad-based momentum in the business that we've seen throughout the year. We believe that we're well, positioned to deliver continued Revenue growth and profitability while investing to expand our long-term opportunities. 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 1 on your telephone. If your question has been answered, you wish to move yourself from the queue. Please press star 1, 1 1. Again, we'll pause for a moment while we compile, our Q&A roster.
Our first question comes from Adam Tindle with Raymond James, your line is open.
All right, thanks. Good afternoon. Kevin I just wanted to start on the early framework for 2026. Uh, if I was just doing the math here, uh, quickly correctly, it, it implies that, the SAS Revenue growth is about 6% and I was going back through my notes and I think that's about where you initially thought, 2025 might be. And, and we're now pushing maybe closer to 9%, uh, as we uh, look to close out the year. So I guess the question would be, you know, as you formulated the initial SAS guidance in particular
What are? Maybe some of the similarities and differences in moving Parts uh in 2026 versus 2025 and what could be some uh potential upside drivers. Thanks.
Sure. Hey Adam. Um, thanks for the question. It's, um, as you noted when we first looked 2025, uh, we were first looking about 6.1%. So, very similar to what we're first looking 2026 right now. And, uh, our updated guide for 2025 is about 8 and a half 8.6%. So about 250 basis points, higher, um, throughout the course of this year, we've had the the growth initiatives, you know, contributing a little bit of under 30% of SAS revenue and growing 202%. I think, as we look forward to 2026, the expectation would be roughly. Similar in terms of growth rate profile, meaning we think it'll maintain 20 to 25% growth. Um, so that'll be consistent. Uh, when we started 2025, we noted, a, a 200 basis point headwind. Um, on the residential side, um, that has not really come to fruition this year, um, as a combination of um,
A little bit better account creation than we had anticipated at the beginning of the year, uh, as well as a, a very little bit of, uh, currency Tailwind, which probably added about 20 basis points of growth this year. So, as we look forward, we're basically pushing right, some of that, uh, growth rate headwind that we had signaled at the beginning of this year, um, on the core residential business to next year and then basically assuming no additional currency headwinds,
Got it. Thanks, that's helpful. Uh, just to follow up. Uh, for Steve. Uh, if if I could, I'm noticing obviously very strong profitability here and if I'm looking at the implied even without margin for for this year it's looking like it's going to be pushing towards 20% and the initial guidance for next year, suggests another, you know, 20% uh maybe even a little bit greater with some upside throughout the year. So very healthy profitability levels. I guess the question Steve would be your thoughts on the balance of growth and profitability going forward. Um, understand you've, you know manage that well in the past, but you're now reaching new levels of scale, you know, a billion dollar business at this point. Uh, so those, you know, um, uh, you know, incremental points in in ubar, are are very high dollars. So I just wonder if you could maybe just opine a little bit on how you're thinking about the balance of growth and profitability, thanks.
Sure, thanks, Adam. Yeah, I'd say we're still, um, primarily focused on where we can find growth and and the what type of investment we need to, you know,
Generating, you know, strong cash, flows refilling, the bucket of that initiative. And
And still able to sustain some growth.
Sure. One moment for our next question.
Our next question comes from Samad samanda with Jeffrey's your line is open.
Hey guys, this is Ashley Billy. If it's not for Samad, I I want to double click on the energy Hub business. Uh, there's obviously a ton going on the utility market right now. Data center to demand is driving, kind of record levels of Investments, and consumers are also contending with, with higher bills, in many cases as a result. And, and so maybe against this backdrop, can you just walk me through how maybe your conversations have progressed with with kind of a key customers over the course of the Year? Curious if you have any anecdotes on specific customer conversations and then can we just double click on on the commenter around? How there was a maybe a slight pull forward in that business from 4 q into 3 Q.
Hey Billy. Um sure I'll start with kind of the the the higher level question and uh about the market and um, Kevin may have a comment on the pull forward. Um, yeah, the macro Trends there are advantageous to us at the moment. The um, as you noted the the data center explosion the the uh,
Electrification of Transportation. All of these things are driving demand for electricity and it just so happens that, um, what we do in the form of a virtual power plant is, um, 1 of the least, probably the least expensive way to add capacity and also something that's actionable and can contribute almost immediately. So the the macro framework is, is great for that business. Um, and as a result, our, our key customers I think are, um, are moving much faster and getting more serious about the, the, the, um, contribution that VPP can make to their, uh, capacity challenge. So we're seeing less sort of, um,
Piloting, trials, test, and see, type of approaches, and much more, uh, folks kind of moving towards, um, this type of, of solution as a committed part of their capacity is, is what we're, what we're seeing in the market. And, um,
um, I'd say, uh, in terms of the pull forward. Um, Kevin, do you have any comments? Yeah, sure sure. Hey, Billy. Um, so that is, I would characterize it as being, you know, in the hundreds of thousands of dollars, you know, not not millions of dollars, but 1 of the, the longest running programs, that energy Hub is, is a market-based program that's that's run out of, um, run out of Texas. And and historically what happens, there is uh, we're performing, uh, against that program throughout the year, predominantly in the summer. And then, that is sort of
Settled up in Q4 um and the revenue associated with it is booked in Q4. And that's 1 of the reasons that energy Hub, has always been somewhat seasonally weighted in terms of Revenue towards Q4. Um, some of that settlement happened to occur in, uh, Q3 this year and the rest will encourage you, our current Q4. So there's just a little bit of pull forward there.
Got it guys, makes sense. Appreciate it.
Thanks.
1 moment for our next question.
Our next question comes from Stephen Sheldon with William Blair. Your line is open.
Hey, can you have Matt filic on for Stephen? Sheldon on energyhub. Can you help? Uh, give us a sense on the current growth rate and how you're thinking about the durability of that growth over the next Call It 2 to 3 years, especially in light of the strong demand you're seeing and some of the secular themes, you're benefiting from
sure, just starting with the growth rate. So we um, we don't break out each growth initiative but we commented the um, the growth rate for our growth initiatives is sort of in the 20 to 25% range. Um, overall energy Hub is probably the um,
The most meaningful contributor to that growth initiative. Uh, growth rate, meaning you can probably guess that they're a tad above that. Um,
and, and then the second part of the question, I guess, was the macro, the macro environment. What's driving it, right?
Matt, well really more. So how durable do you think that growth is in light of the secular themes? You're benefiting from
In a VPP program with us is around uh 3 to 5%. So we've got a lot of head room in terms of adding more consumers onto the platform in our core sort of thermostat driven business. At the same time, we're out there building a business, uh, around EVs and building a business around batteries. Um, we've had a couple of announcements recently on both of those fronts, um, so you've got kind of another Vector of growth there. Batteries in particular are very interesting interesting for us to work with because, um, they're even more, we're even more sort of able to control. Um, utilization of stored kilowatt hours there than we are, um, with a thermostat where we may impact actually someone's, uh, temperature in their home. So we're seeing growth there and then, of course, we have. Uh, the next thing we can do is is sign up additional utilities. We're probably you know, 30% share of the largest uh you know.
You know, 150 Utilities in North America at the moment. Meaning those that are
out there with over 100,000 meters. So we've got um, share opportunity as well.
And and then we're because we're sort of the largest in this space where the preferred partner for anyone that makes a device. Um, if someone wants to be, uh, contributing power to the grid, and they want to participate in the economics associated with that energy Hub. Is, is a, is the place to go. So I feel like the growth, you know, putting all that together, the growth story, there is durable and um, compelling and and we feel good about it going into certainly next year in 27,
Thank you. That's very helpful caller. And sounds like there's plenty of Runway there. Um, maybe shifting gears to the core residential business. I was wondering, uh, if you could maybe talk about how much of a focus subscription pricing increases have been there, um, and and how much of a focus do you expect pricing increases maybe to be over the near term?
Yeah, I'd say, you know, in the, in the history of the company, we've driven growth without much pricing. Um, that changed a couple of years ago, we began to incorporate pricing into the growth picture. Uh, that was driven by sort of the hard reality of a, of a corn inflation rate that had moved up dramatically. Um, we've continued that practice and we'll have to continue it. So pricing is part of it and, uh, you know, we're routinely surveying. Um, uh, you know, what inflation rates are and then um and moving on price, sort of in that in that, you know, ballpark range typically
Got it. That's helpful. Thank you for the questions.
Sure.
again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1, 1 on your telephone,
1 moment for our next question.
Our next question comes from Ella Smith with JP Morgan. Your line is open.
Good evening. Thank you for taking my question. So I'm curious South continues to grow as a percentage of your overall Revenue to what extent do you expect? This positive. Mix Dynamic to support your gross profit margins over a multi-year period.
Sure, um, I I, you know, at the moment, SAS has been increasingly, becoming a bigger chunk of the mix and that of course. Um, contributes to gross margin uh expansion on a percentage basis. Um,
Looking into next year. I think we, we expect that Trend to, you know, you probably continue to continue somewhat. Um, that said, um,
we we have a number of things that we're excited about that are coming to Market either right now or into next year. Um,
Dan spoke at length about some of the new form factors and new capabilities on our um, on our video product line. If we're successful, in promoting that line and driving demand, obviously, we'll we'll see higher Hardware revenues as a result of that and that mix could you know, shift a little bit. But I I don't think you're going to see it shift dramatically
From where it is today I'd say, um, um, you know, the trend line or where we are today is, is, is roughly where we'll be, it might see things move 100 or 200 basis points in terms of mix, um, on the next, uh, 12 months or so.
That's very clear. Thank you. And for a quick follow-up, how would you characterize your current m&a strategy? And do you expect to be inquisitive in 2026?
I would characterize our current strategy as, um, as active, but deliberate. Um, uh,
We are constantly assessing opportunities. Um, uh,
different size classifications. Um,
See a pace in 26. Um, that's not dissimilar from what you seen the last couple of years. And uh, we can't guarantee that we're, you know, we're we're always optimistic and we're not in a race to go to Acquisitions, but when, when we see the right fit, uh, that means Greg management team that means synergistic with our Channel synergistic, with our technology. Um, and you know, and, and honestly, synergistic at some level with the p&l when we see those things come together and we do strike. So, I, I would expect that you'll continue to see some activity next year.
Great, thank you so much.
Again, ladies and gentlemen, if you have a question or a comment at this time, please press *1, 1, 1 on your telephone.
1 moment for our next question.
Our next question comes from soccer Philly, with barklay, your line is open.
Uh, you've got
Jack at Kalia. Thank you for taking my question. I think you touched on Commercial and energy Hub a little bit out of your growth initiatives. But how are you thinking about the international opportunity into next year? How is EBS progressing and how do you see that into next year?
Hey Leslie. Um sure.
So International continues to be 1 of the, the 3 legs of the stool, in terms of growth initiatives, I would say, of the 3, we've talked about Commercial Energy Hub and International. International is probably um, uh, a bit more of the lagard of those 3. We're not making quite as much progress there as I would like to see. Um, so we're continuing to work to um, to build that out on the positive. You know, you roll the clock back, 24 months and international was 4% of Revenue. I think, when we put the cue out you'll see it be 6% of Revenue at the moment. So we are growing International and we've got a nice strong Foundation there um to continue to build off. Um, and I guess The Optimist in me says we have a lot of room to drive a little more growth than some acceleration on the international piece so that it contributes a bit more to that overall range that we articulated, which is 20 to 25%, um, on the growth initiatives.
Super helpful. Thank you.
Um, and how did macro backdrop, sort of influence those?
How did that? Yeah, yeah, yeah. Um
So, the renewal rate, you know, came in right where it was last quarter. They, they both rounded down to about 94%, you know, they were, um, I'd say, 1020 basis points above that, but rounded to 94% so that was substantially similar. Um, gross ads were sort of exactly where we expected them to be. Um, they, they were neither higher nor lower. I think we attribute, most of that to the fact that
From a housing market perspective. Um, things basically stayed where they were in Q2, they were incrementally some, um, excitement about potentially a lower rate environment that we thought might unblock that a little bit. But then I think found based on commentary from builders in the last couple of weeks that um fears about the job market have basically all butt butt offset that. And and here we are in about the same place sequentially.
Got it. Thank you so much.
1 member for our next question.
Our next question comes from Jack Vander with maximum group, your line is open.
Great. Okay. Hey Stephen, I appreciate the time joined a little bit late. Um, so try not to be too redundant. Um, 2 questions. Uh, growth businesses continue to ramp. Well, I caught some of the Q&A on energy Hub and uh, the focus on your utility power grid batteries EVS, maybe just outside of that. Can you tie that into just your perspective on the autonomous?
Robotics and delivery and drones? How does this fit into your energy Hub? And just your overall vision?
Or it does it. I know you have patents on some stuff and you guys are a patent machine over there too so just would love to get your thoughts. Maybe taking the ball step further with the autonomous delivery.
Rates. You don't want to be charging, your army of robots uh during the hour when you'll be paying Peak rate, you want to charge them at some other point in time. So, so I think that's that's all good. Whether there will be that much capacity there. And these type of batteries are not. I don't think we fully know yet. It depends on the capability of these. Um,
Autonomous devices. And then the next piece is really, you know, are are these um,
vehicles for security modes and um,
um, you know, we we continue to believe that they are, um, we currently go to market with a uh, an autonomous, uh, drone unit, for high security outdoor applications. Um and you know or seeing that product deployed in places like shipyards or big Tech parking lots, any place where you have a wide uh, amount of acreage to cover, and you have a need for high security. And it's sort of unreasonable to ask, you know, a guard to very, very quickly monitor, uh, a large property. So we're seeing uptake there. It it's, it's um, you know, it's a relatively small part of our business still, but it's, it's a place where we continue to, um, have some energy. And, and then we're watching, um, you know, for the right partnering opportunities and or write uh, organic opportunities to
Build out more in that category.
I wouldn't say it's uh it it's as important to us at the moment as some of the things we're doing with kind of AI and and core video but it's it's something that we continue to watch.
Excellent. I appreciate all the color there. I know it was a wide question, but that was a great answer. Um, not one more for it.
1 more for me, outside of the m&a. I I I heard a question on that earlier. I know that's part of the, the general strategy but just maybe look at the balance sheet and the cash that you guys do have. It's it's very noticeable, obviously, any other uses for that cash, another hot you know topic areas clearly you can't get around is the digital asset space. Treasuries just integration with blockchain is any of this on your guys's radar. Um or how do you just view the space in general?
Well, I may toss some of this 1 to Calvin but in terms of the balance sheet balance sheets. Yeah, big. As you note right now we're we're closing out 1 of the convertibles in January, uh, but we've got pretty strong cash flow uh production. So we expect to to have a nice um uh amount of capacity on the balance sheet, uh, for all of next year. Um, in terms of deployment, um, you know, certainly it's, it's primarily about Corp Dev and having uh, dried powder there. Um,
Do we consider other other types of, uh, of of assets? We give them some consideration at the moment. Um though we're pretty focused on deploying capital a way that helps us uh for the most part grow our our core business. So we're not looking to deviate um you know too much from that strategy.
Kevin, you want to?
Yeah, sure. You know, our primary motive I think with the balance sheet is
Um, for it to be a source of resilience and flexibility for for the reasons that Steve mentioned. So the primary uh, reason to to have that there is
To be able to be opportunistic in the corporate debt space. Um, you obviously, you know, CS do a little bit of buyback activity as well. Um, it's, it's useful in that domain we were, we were more active than we had been in several quarters during Q3 as as we saw the opportunity to buy it, you know it's 7 and a half percent plus cash flow yield on it. Um those are the 2 things really that we we focus on right now, in terms of use of the balance sheet, uh, less. So
Crypto or or other assets like that.
Understood, I I appreciate the color, guys. Thanks to for the time.
Sure thing.
again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1, 1 on your telephone,
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.