Alarm.com Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Alarm.com's fourth quarter 2020 earnings conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, David Tron, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to Alarm.com's fourth quarter 2020 earnings conference call. As a reminder, this call is being recorded. Joining us today from Alarm.com are Steve Trundle, President and CEO, and Steve Valenzuela, CFO. Before we begin, a quick reminder to our listeners. Management's discussion during the call today will include forward-looking statements, which include projected financial performance for the first quarter 2021 and full year 2021, the impact of emerging market dynamics and trends on our business and on anticipated market demand for our offerings, including new product offerings, the impact of the COVID pandemic on our global supply chain and the global economy, our business strategies, plans and objectives for future operations and integration of recent acquisitions, continued enhancements to our platform and offerings, opportunities for growth in our current markets and our plans to expand into new markets, and other forward-looking statements. These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Statements containing words such as began, believe, continue, estimate, expect, forecast, may, project, trend, will, and other similar words are intended to identify such forward-looking statements. These statements are subject to risks and uncertainties, including those contained in the risk factors section of our most recent quarterly report on Form 10-Q, Thank you. Thank you. Please note that the forward-looking statements made during this conference call speak only as of today's date, and Alarm.com undertakes no obligation to update these statements to reflect subsequent events or circumstances except to the extent required by law. Also during this call, management's commentary will include non-GAAP financial measures and provide non-GAAP guidance. Management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in understanding the company's performance and trends but notes that the presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in the financial statement tables of our earnings press release, which we have posted to our investor relations website at investors.alarm.com. This conference call is being webcast and is also available on our investor relations website. The webcast of this call will be archived and a telephone replay will also be available on our website. With these formalities out of the way, I'd now like to turn the call over to Steve Trundle. You may begin.

Thank you, David. Good afternoon and welcome to everyone. We are pleased to report fourth quarter results that exceeded our expectations. Our SAS and license revenue in the fourth quarter was $105.5 million, up 17.1% over the last year. Our adjusted EBITDA in the fourth quarter was $32.4 million. Despite the challenging global environment, the fourth quarter closes out a strong 2020 with total revenue growing 23% year over year. I want to thank our service provider partners and our employees for their resilience and contribution to our performance. We close the year with more than 10,000 service provider partners who sell and service our technology in more than 7.6 million customer properties in over 40 countries around the world. On today's call, I will review some of the key elements of our long-term strategy and highlight a few examples of the many new products and capabilities that we introduced to our markets in 2020. When we think about our strategy, A first goal is to be the defining security-oriented IoT platform for four different market segments, residential, multifamily, small business, and enterprise commercial. For each of these market segments, our vision is to provide fully integrated, best-in-class applications that span security and surveillance, automation, energy management, water management, and health. We are developing these applications for multiple geographies such that we can leverage our platform investments around the globe. We made solid progress on this vision in 2020. In the commercial market, for example, we recently released Cloud Connect. This is a two-way integration between the OpenEye cloud video platform and the Alarm.com for Business platform. Cloud Connect directly associates event data from intrusion sensors, and Access Control Readers with OpenEye's Video Surveillance as a Service product. Based on this rich set of event data, subscribers can easily customize intelligent video recording rules, set alerts to keep track of important events, and easily find video footage associated with specific activity. We also expanded our commercial market capabilities with the acquisition of shooter detection systems in December. Shooter Detection Systems, or SDS, brings a unique technology stack and strong position in the developing market for gunshot detection solutions. Their offering includes proprietary acoustic and infrared sensors and algorithms that accurately detect gunshots in an indoor setting. Our plan is to work with the existing SDS management team to expand the leadership position they have built in their developing market. Integrating SDS capabilities with our commercial platform will also unlock unique value for our service providers and their customers and expand our overall commercial market opportunity. Shifting to the residential market, we will continue to expand our platform to enable our service providers to deliver a growing array of differentiated capabilities and to expand the monitoring services they provide. In 2020, we launched the smart water valve plus meter to reduce water damage risk. We also launched FlexIO to extend the security perimeter of the home. And we introduced our connected car solution to allow homeowners to extend security monitoring and automation rules to vehicles. Lastly, on the residential side, we added a new video analytics-based capability for monitoring stations to improve alarm response efficiency. Connected Car launched in the fourth quarter and allows subscribers to track the location of vehicles, view trip histories, set speed alerts, and know if a vehicle is being used at hours when it's not supposed to be, all from within the Alarm.com mobile app. The service is enabled by an onboard cellular module and a backup battery so that it can alert the subscriber if it's removed from the vehicle's port. We're also developing an increasing array of technologies that will enhance the professional monitoring services provided by our partners. Last year, we launched visual verification people detection for monitoring stations. This new alarm verification service uses our cloud-based video analytics engine to provide monitoring station personnel with an inventory of all the people in or near a property immediately before, during, and immediately after an alarm event. Images of the inventoried people are sent directly to the monitoring station operator's interface. The capability is only activated with the customer's consent, and we believe this will help monitoring stations respond to alarms more accurately, reduce false dispatches, and add differentiated value to the monitoring services provided with alarm.com powered systems. Another tenet of our strategy is to deliver the most capable video monitoring offering in the market at a cost level that is broadly accessible. This strategy has been a focus for the last couple of years and will remain so in 2021. Our product development efforts have driven meaningful results in terms of customer engagement, installation efficiency, and growth for alarm.com and our service provider partners. Our innovations, including video analytics and our integrated video doorbell solution, continue to drive strong adoption of video service plans. As I mentioned last quarter, 40% of our new subscribers are now attaching a video service plan to their system. In the fourth quarter, we launched the alarm.com touchless doorbell, which leverages our video analytics engine to provide the market's first available video doorbell that rings without requiring physical contact with an actual doorbell button. While the capability was timely given the pandemic, We believe that consumers will continue to want capabilities that automatically alert about activity at their door, and so we expect to continue to have success with our full range of video doorbell solutions. The third key element of our strategy is the growth of our international business. As we updated you throughout 2020, our international markets have been more impacted by the COVID pandemic than the U.S. market. We believe the international markets will ultimately recover and begin to grow again, but they will likely do so unevenly. The dependencies we're monitoring in each market include the level of access to effective vaccines, the extent of the economic impacts, and the corresponding challenges to economic recovery. These dynamics are likely to be unique in each region. But as these markets recover, we believe we are in a position to grow off the solid base we have established in our international business. The final element of our strategy that I want to cover today is the way that we are expanding our addressable market by building our segment businesses. These include Point Central, Energy Hub, and Building 36. Each business is focused on an attractive opportunity. In the fourth quarter, Point Central launched a connected intercom system called Connected Retro. The product was enabled in part through our acquisition of Doorport last year. Connected Retro upgrades existing phone-based intercom systems on apartment buildings to an interactive connected system without replacing any of the existing hardware. Traditional phone-based intercoms are difficult to use and manage and create security gaps. However, the cost of replacing system hardware has impeded upgrades to connected intercom systems. Once upgraded to connected retro, property access can be securely managed and monitored with smart keys that residents can easily create directly from the Point Central mobile app to provide scheduled access for guests and delivery personnel. Each code can generate automated alerts and is tied to a 30-day audit history, allowing property managers to monitor access. Turning to Energy Hub, Energy Hub provides an enterprise software service that enables its electric utility customers to flexibly manage grid demand through its ecosystem of distributed energy resources. Energy Hub has been steadily expanding its business as well as the suite of services it offers. In 2020, over 50 energy utilities that reach more than 45 million households in the United States now use Energy Hub's technology. An area of Energy Hub's development that I want to highlight is its solution for managing electric vehicle charging stations. As EV sales increase and customer-owned EV charging stations become more pervasive, Energy utilities face a complex grid management challenge that Energy Hub is well positioned to address. Energy Hub's recent partnership with Enel X, a leading EV charger manufacturer and service provider, expands the breadth of energy resources available for utilities to manage through its SaaS platform. Energy Hub's EV charging solution can create customer incentives that induce off-peak charging and reduce strain on the grid during peak periods. Two of Energy Hub's existing customers are already taking advantage of this partnership and expanding their EV programs managed by Energy Hub. Energy Hub will continue to expand its EV charging offers and incorporate the growing range of grid-edge devices as it works towards its vision of deploying comprehensive distributed energy resource management services. To conclude, I'm pleased to report solid financial results for the quarter and the full year. It was a tough year on many fronts, but the residential market in the US and Canada has been resilient through the pandemic, and we continue to see momentum building in our commercial markets. As the global community appears to be rounding third on the pandemic, we look forward to a return to normal as 2021 progresses. And with that, let me turn things over to Steve Valenzuela. Steve?