This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good day, and thank you for standing by. Welcome to the Alarm.com Q2 2021 Earnings Conference Call. At this time, all participants 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 Trone, Vice President, Investor Relations. Please go ahead.
spk02: Thank you. Good afternoon, everyone, and welcome to Alarm.com's second quarter 2021 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 discussion during the call today will include forward-looking statements, which include projected financial performance for the third quarter 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 anticipate, began, believe, continue, could, estimate, expect, forecast, may, plan, 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 factor section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 4, 2021, and in subsequent reports that we filed with the Securities and Exchange Commission from time to time including our quarterly report on Form 10-Q for the quarter ended June 30th, 2021, that we intend to file with the Securities and Exchange Commission shortly after this call that could cause actual results to differ materially from those contained in the forward-looking statements. Please note that the forward-looking statements made during this 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.
spk06: Thank you, David. Good afternoon and welcome to everyone. We are pleased to report solid Q2 results. Our SAS and license revenue in the second quarter was $113.2 million, up 18.3% over last year. Our adjusted EBITDA in the second quarter was $38 million. I want to thank our service provider partners and the Alarm.com team for their contributions to our results and for their ongoing performance. The residential markets in the U.S. and Canada continue to perform well during the quarter. Demand for smart home security remains strong with many new customers choosing to include our more advanced services such as video and video analytics with their installation. We also saw conditions improve in the small and medium sized business and enterprise commercial markets that we serve. Market activity for larger commercial customers, including sales pipeline opportunities, nearly returned to pre-pandemic levels during the second quarter. Our international business continues to be impacted by the ongoing pandemic. During the quarter, our global team remained focused on developing our businesses, and services so that we can take full advantage of recoveries as they occur. We are actively securing new partnerships with service providers and expanding and refining our offerings across our international markets. My focus for today's call is to provide more color on our service provider partners and to highlight how the Alarm.com platform helps them grow and supports their operations. I'll also update you on a newly released capability that we designed to enhance the monitoring services provided by our security channel partners. Earlier this summer, Alarm.com participated in ISE West, the largest security industry trade conference. I attended and met with a number of our service provider partners. Aside from enjoying the face-to-face interactions, it was also invigorating to hear firsthand how our service provider partners have continued to grow and build their businesses on the alarm.com platform. We continually innovate and expand the alarm.com platform to enable our service provider partners to deliver more valued services to their customers, grow recurring revenue, expand into new markets, and efficiently deploy and support increasingly complex systems. I thought I would spend a few minutes this quarter highlighting one of our longtime service provider partners and how they have leveraged the Alarm.com platform through time to evolve and grow their business. I believe this will provide our investors with some insight into the service provider channel relationships that we cultivate, which have been a significant driver of our success. Titan Alarm is a local dealer with a dedicated focus on the Phoenix market in Arizona. Titan's founders, Mike and Taylor Proudfit, exemplify the entrepreneurial energy and vision that we see across our service provider community. In its formative days, Titan Alarm was exclusively a residential dealer focused primarily on originating and selling new accounts to one of Alarm.com's dealer program partners. Gradually, as they built their balance sheet and borrowing capacity, they began to not only originate new Alarm.com accounts, but to retain and service those accounts so that they could build their company's recurring monthly revenues, referred to in the industry as RMR. In the last five years, Titan has more than doubled its base of RMR and continues to accelerate its growth. The backbone of Titan's growth strategy has been premium connected property services and high-touch professional support. A key selling point to their customers is the value of a single security-centric service that also connects to a wide ecosystem of connected devices. Titan has increasingly deployed our video solutions to create higher RMR accounts. Titan has also deeply integrated alarm.com's backend and servicing tools into all aspects of its installation and customer support processes. Titan's technicians have standardized on alarm.com's tools to help ensure accurate and dependable installations, and all of their new sales technician and support hires attend full training programs at the alarm.com academy. As a result, Titan has been able to efficiently service their growing base of subscriber accounts and provide a premium customer experience that differentiates them in the market. Titan's management team also uses our business intelligence insights to drive the sales, installation, and use of system capabilities that result in highly engaged long-term accounts. As a result, Titan's customers use alarm.com's most engaging and sticky capabilities at higher rates than our average service provider. Along with their attention to customer support and service, this has helped Titan maintain attrition rates that are below industry average. More recently, as alarm.com built out its commercial offering, Titan also expanded in the commercial market and has made full use of our differentiated capabilities. They adopted our integrated access control and commercial video solutions instead of the standalone offerings they previously deployed. Our enterprise dashboards have supported Titan's sales team as they have targeted multi-location businesses. The unique implementation of our auto-arming capability has also served as a key selling point to commercial customers. At the time specified by a business's security manager, our auto-arming feature performs the extra step of monitoring the property for a period of inactivity before it automatically arms the system. We designed this feature to help eliminate a common cause of false alarms and reassure commercial subscribers that their properties are secured each day. We appreciate Titan Alarm for their long-term partnership with us. We often share ideas with their management team as we attack the markets together. They are a great example of the entrepreneurial businesses that make up our service provider partner community. I also want to update you on some of our product development initiatives related to monitoring stations and alarm response events. We're continuing to develop technology that applies AI and adaptive machine learning to define the next generation of smart monitored security. We recently introduced a capability in this area called Ambient Insights for alarm response. This backend capability evaluates an alarm signal and then provides a real-time determination to the monitoring station as to the likelihood that the property owner will cancel the alarm. This will help operators prioritize multiple alarm events so they can dispatch emergency services faster to the highest priority alarms and can also help reduce false alarm dispatches. Coupled with our visual verification service, monitoring stations can provide a broad range of critical information to public safety dispatchers and first responders. For consumers, this is another differentiator of the monitoring services associated with alarm.com powered systems. For monitoring stations, more efficiently responding to alarm events can create operational capacity for extending monitoring services to more devices and systems in homes and businesses. For communities, it reduces the demand placed on first responders and supports them during emergencies while also improving overall public safety. Ambient Insights is built on our AI and adaptive machine learning platform called Insights Engine. The platform evaluates each alarm signal based on a range of data points and trends, including the history of alarm signals from the location, activity levels detected in the property prior to the alarm event, and the time of day. Leveraging the scale of our platform, we will deploy increasingly intelligent alarm signal assessments and insights. This will create more value for our subscribers in concert with our monitoring station partners. In summary, I'm pleased with our Q2 results and with our execution against our plans through the first half of 2021. Our revenue performance has been particularly strong through the pandemic period and despite challenges in the global supply chain. We plan to increase our investment in key growth areas of our business, such as international, commercial, and video. We are entering a seasonally strong recruiting and onboarding period and are commencing more traditional sales and marketing activities. I anticipate that we will be able to execute upon greater investment in those key areas in the second half of the year. Finally, 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. And with that, let me turn things over to Steve Valenzuela to review our financial results and provide guidance. Steve?
spk07: Thanks, Steve. I will begin with a review of our second quarter 2021 financial results and then provide our increased guidance before opening the call for questions. SAS and license revenue in the second quarter grew 18.3% from the same quarter last year to $113.2 million. This includes Connect software license revenue of approximately $8.3 million for the second quarter, down, as expected, from $9.8 million in the year-ago quarter. SAS and license revenue for our alarm.com segment grew 18 percent year-over-year, and our other segment grew 22 percent over the same period. Our SAS and licensed revenue visibility remains high, with a revenue renewal rate of 95 percent in the second quarter, which is above our historical range of 92 to 94 percent. As we mentioned last quarter, we believe the slightly higher revenue renewal rate could be the result of fewer people moving homes at the start of the pandemic, and we could see a return to the historic range in the next quarter or two. Part of another revenue in the second quarter was $75.7 million, up 64.7% over Q2 2020. Strong hardware sales were driven by increased adoption of our video cameras in the residential segment and improvement in our North American commercial business, with OpenEye and Alarm.com for Business recovering to pre-pandemic sales levels. Cameras and video doorbells accounted for approximately 58 percent of hardware revenue in the quarter. Sales of our thermostats increased significantly in the quarter, up over 300 percent from the year-ago quarter, and represented about 6 percent of our hardware sales. I do want to point out one thing related to our increased thermostat sales. We believe that thermostats enable the consumer to reduce energy consumption. And our smart water valve plus meter enables the consumer to better monitor and reduce water usage. And these solutions, therefore, contribute positively to a more sustainable and less polluted environment. We are pleased our service providers are increasing deployment of our solutions to more homes and businesses. And together, we believe we are making a positive contribution to improving the environment. Let me get back to the numbers. Total revenue of $188.9 million for the second quarter grew 33.3% year-over-year. Staff and license gross margin for the second quarter was 84.8%, down approximately 160 basis points from Q2 2020 gross margin, mainly due to higher revenue from our other segment, which has a slightly lower gross margin. Hardware gross margin was 20.5% for the second quarter, compared to 21.6% for the same quarter last year, mainly due to product mix and somewhat due to increased supply chain costs. The global supply chain continues to present challenges, which required us to expedite shipments and incur higher air freight costs. Total gross margin in the second quarter was 59%, down from 65.4 percent in the year-ago quarter, mainly due to the higher hardware sales and, to a lesser extent, product mix. Turning to operating expenses, R&D expenses in the second quarter were 43.5 million, compared to 36.6 million for the second quarter of 2020. We ended the second quarter with 792 employees in R&D, up from 721 employees in the same quarter last year. Total headcount increased to 1,421 employees in the second quarter compared to 1,317 employees a year ago. Sales and marketing expenses in the second quarter were 20.5 million or 10.9 percent of total revenue compared to 16.9 million or 11.9 percent of revenue in the same quarter last year. Our G&A expenses in the second quarter were $23.3 million, up from $17.4 million in the same quarter last year. G&A expense in the second quarter includes non-ordinary course litigation expense of $3.7 million, compared to $1.6 million for Q2 2020. Non-ordinary course litigation expenses are part of our adjusted measures and are excluded from our measurement of our non-GAAP financial performance. Non-GAAP adjusted EBITDA in the second quarter increased 30.1 percent year-over-year to $38 million, up from $29.2 million in the second quarter of 2020. In the second quarter, GAAP net income was $14.7 million compared to GAAP net income of $17 million for Q2 2020. Non-GAAP adjusted net income increased to $27.7 million or 54 cents per diluted share in the second quarter compared to 20.6 million or 41 cents per share for the second quarter of 2020. Turning to our balance sheet, we ended the second quarter with $662.7 million of cash and cash equivalents. In the second quarter, we generated approximately 24.1 million in cash flow from operations compared to $35.1 million for the second quarter of 2020. Our free cash flow for the second quarter was $20.8 million, compared to $31.8 million for the same quarter last year. Our operating cash flow and free cash flow are lower than Q2 2020, mainly due to proactive purchases and prepayments of hardware we made in the second quarter to address the challenges within the supply chain. On a year-to-date basis, through June 30, 2021, our free cash flow is about $3 million less than the same period last year. In the second quarter, our capital equipment purchases were about $3.3 million, down slightly from $3.4 million in the second quarter of 2020. Turning to our financial outlook, for the third quarter of 2021, we expect SAS and license revenue of $114.9 to $115.1 million. For the full year of 2021, we expect SAS and license revenue to be between $452.3 to $452.8 million, up from our prior guidance of $445.5 to $446 million. We are now projecting total revenue for 2021 of $707.3 the $717.8 million, increased from our prior guidance of $680.5 to $691 million, which includes estimated hardware and other revenue of $255 to $265 million. We continue to monitor issues around a global chip shortage, which we were able to navigate in the first half of this year, but could impact our revenue in the second half depending on how the supply shortages work out. As we look ahead to the second half of 2021, one area of focus is on our commercial markets, where we are seeing our pipeline build. We have an opportunity to continue building durable, long-term SaaS models for commercial services, as commercial properties tend to have larger physical spaces that require more devices to fully monitor The ratio of hardware to SAS revenue will skew towards hardware. We anticipate this will lead to growth in our SAS revenue for our commercial business as the subscription volumes build over time. We also expect increased hardware costs and continued challenges with the global supply chain, which we have factored into our guidance based on the information we have available today. We estimate that non-GAAP adjusted EBITDA for 2021 will be between $133 to $134.5 million, up from our prior guidance of $124 to $130 million. We have factored in more travel and trade show expenses in the back half of 2021 as we attended and exhibited at the annual ISD West trade show in July, and we expect to hold our annual partner summit in October. both of which were canceled last year due to the pandemic. We also expect that the bulk of our 2021 headcount additions will be in the third quarter of this year. Non-GAAP net income for 2021 is projected to be 93 to 93.7 million, or $1.77 to $1.79 per diluted share, up from our prior guidance of 85.6 to 90 million or $1.63 to $1.72 per diluted share. We currently project our non-GAAP tax rate for 2021 to remain at 21% under current tax rules. EPS is based on an estimate of 52.4 million weighted average diluted shares outstanding. We expect full-year 2021 stock-based compensation expense of 40 to 43 million. In summary, We are pleased how well our service providers and our alarm.com teams continue to perform during these challenging times. We are focused on executing on our business strategy and investing in our growth opportunities while continuing to deliver profitable growth. And with that, operator, please open the call for Q&A.
spk01: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Sterling Audie from JP Morgan. Your line is now open.
spk03: Yeah, thanks. Hi, guys. So curious your thoughts with the Delta variant, you know, being all the headlines here. How have you seen that already impacting your business both in North America and Europe, and how are you anticipating any potential impacts here in the coming quarter?
spk06: Hey, Sterling. You know, thus far, knock on wood, we haven't seen any impact on the service provider's ability to sell and install systems, so it's probably pretty early at the moment. We, of course... feel some impact in terms of people's willingness to meet in person, come to events, come to the office, those types of things. So people are obviously taking a more cautious stance. But it's probably early, but thus far we haven't seen any impact. If I were to anticipate, depending on how this thing goes, I don't think any of us know exactly how Delta will unfold, but if we went back to sort of the state that we were in two or three quarters ago with the pandemic, then we would see businesses probably begin to shutter some of their operations. And we may see some impact on the commercial side just at the point that we're feeling like we've recovered on commercial. But thus far, we haven't seen anything to suggest that's going to occur.
spk03: All right, great. And then how should we think about, within the context of the guidance on SaaS subscription, you know, what the momentum in the pipeline looks like on the residential side. Again, both North America, which has been strong, and Europe that you've been anticipating that, you know, uptick towards pre-pandemic levels.
spk07: Yeah, Sterling and Steve Valenzuela. So Europe continues to be impacted by COVID, and it's actually still quite a bit below the pre-COVID levels, pre-pandemic levels. We, you know, when we guide, we don't try to factor in the upside we've been seeing over the last, you know, year from COVID. So we've certainly seen good growth in residential. We've seen good growth, as we said on the call for commercial, actually coming back to pre-pandemic levels. But we do need to be cautious with our guidance. So we can't bake that into our guidance. And we also have to anticipate that, you know, there's things that can go wrong. And so, obviously, in Q2, in the first half of the year, we've seen a very good performance overall, and things have gone extremely well. Got it. Thank you. Thank you. Thanks.
spk01: Thank you. Our next question comes from the line of Saket Kalia from Barclays. Your line is now open.
spk04: Okay, great. Hey, folks, thanks for having me on the call here. Saket? Maybe. Hey, maybe first for you, Steve Trundle, you know, a lot of focus on sort of the health and commercial. Can you just remind us how much the commercial market makes up of the total business roughly? And maybe more higher level, what indicators do you look at to sort of gauge that pace of recovery?
spk06: Yeah. I mean, to answer the first question, commercial has been a growing component of the base and is just under around 10% of the business at this moment. I think if I were answering the same question a couple years ago, it would have been 7% or 8%. So you can see residential continues to grow. Commercial is growing slightly faster and gradually becoming a more meaningful chunk of the base. And we expect that will continue In terms of indicators, the indicators we're looking at are really the sales pipeline that we hear about from service providers. We have sort of a bird's-eye view on what's going on through the integrator channel with our open-eye business, which is very focused on commercial enterprise videos. So we can speak directly to our team there and find out what the inbound demand looks like How much activity are they seeing? And, you know, based on that, in the second quarter, we felt like things were almost back to sort of pre-pandemic levels. As we look forward to the next couple of quarters, you know, so far, so good. The last question was about potential delta impact. I don't think we have a crystal ball where we can absolutely anticipate what that may be. But at the moment, we continue to see the checks that we're making anyway look like they're They're still solid.
spk04: Got it. Got it. And maybe for my follow-up for you, Steve Valenzuela, again, great to hear the building pipeline in commercial and also that SaaS to hardware ratio kind of early on. I was wondering if you could just maybe as part of that just broad brush kind of touch on how the ARPU per subscriber sort of differs between commercial versus residential and perhaps maybe talk about it from a gross margin perspective as well as that part of the business grows.
spk07: Sure, a second. Yeah, absolutely. So commercial actually has a higher ARPU. So alarm.com for business, on average, the ARPU, and it's going to vary all over, is going to be about $10 per month versus on the residential side. And again, it varies quite a bit. But the average, I would say, is in the upper $5 range, $5 per month that we would charge. And these are the charges we would charge the service provider. And then, of course, the service provider charges an increased amount, of course, for the end subscriber. Typically, for a commercial business, they're going to charge over $100 to the business, and for residential, it's going to be anywhere from $35 to maybe as much as $70 per month for the end subscriber. But the good news about commercial is that it is a business that is certainly, given that there's a higher amount of ARPU, It is a little bit higher margin. The increased costs are not that significant. There are some increased costs. So the margin is a little bit higher. The good thing about both sides of the business is retention is very high. The life of a customer is very high in terms of both residential and commercial. So you're looking at an 8- to 10-year life. Got it.
spk04: Very helpful.
spk07: Yep.
spk04: Very helpful.
spk07: Thanks, guys. Thank you. Thank you.
spk01: Thank you. Our next question comes from the line of Brian Rutenberg from Imperial Capital. Your line is now open.
spk09: Yes, thank you very much. Great quarter. First question, and then I have a follow-up. In terms of what your guidance is, it looks like revenue for hardware is going to drop off significantly from second quarter to third quarter. You're anticipating that. Is there any specific area that you see that there's going to be a drop-off, or is this because of supply chain?
spk06: Yeah, good question, Brian. I think it's a combination of some belief that service providers have been attempting to sort of front-run the global chip shortage and build some inventory during the second quarter Some of it is a forecasting bias towards a slightly more conservative stance. As we've said before, we don't like to get aggressive on hardware sales forecasts, so some of it can be due to that. But I think our belief is that the second quarter was sort of exceptionally strong on hardware, and we think that service providers were building some inventory. And we also are, you know, despite having managed the supply chain activities and issues effectively to date, it's not as if we don't have to at least anticipate that we could have a surprise, you know, on some components somewhere in the quarter. So we have to allow for that possibility as well.
spk09: Great. And then maybe for Steve T., if I could hand one off on the ambient insights. how is this different than what ADT is working on? And I think that, you know, obviously cutting down on false alarms is going to be key, but is it really key to a customer making a decision at this point, or is this just you looking ahead and planning for those higher costs from police departments and municipalities?
spk06: Yeah, I think that... In terms of the first part of the question, I'm not familiar at a detailed level with what anyone other than us is working on. But for some time, we've been driving down false dispatches of alarms and giving the user a lot more control of how things are being handled during an alarm event. The most recent innovation really is geared around using a pattern of history on the property the time of day, and sort of every sensor event we have to create a probability of the alarm being real or not real. And then the monitoring stations, one of the things that's changing, probably because there's wide industry interest in this, not just alarm, but the monitoring stations are now much more postured to actually take that data. Two or three years ago, if we had said we're going to provide you the probability of an alarm being real, folks would have said, no, thank you. But today there's much more acceptance of sort of the power of what we can do with AI. And to the consumer, you know, from the monitoring station standpoint, it gives them a mechanism for driving a faster dispatch to a very high probability alarm. It doesn't mean they're going to not make the calls on a lower probability alarm. They're going to execute upon that. as well, but if they have a queue of 30, they may move the one that's highest priority and most likely to be real to the top of the queue, get the dispatch initiated quicker, and those that are lower probability, the user may have a bit more time. I mean, what we hope to see, alarms are high anxiety experiences for the end user, so no one likes to see a fire truck or a police car in front of their home if it were a false alarm, and if you give the user just a bit more time, 20, 30 seconds sometimes, to cancel the alarm before you initiate a dispatch, then that creates a lower anxiety experience for the user. And I'm hopeful that our service providers will be able to, during the sales cycle with their consumers, talk about that capability at some level and reassure the consumer that the value of monitoring is there and that there are safeguards in place to reduce false alarms.
spk09: Great. Thank you.
spk06: Sure.
spk01: Thank you. Our next question goes to the line of Darren Asahi from Roth Capital Partners. Your line is now open.
spk05: Hi, guys. Thanks for taking my question. Congrats on the quarter. Thanks, Darren. To your comment about enterprise, so it sounds like you've tried to procure as much hardware as you can just given your view into the pipeline. I'm kind of curious, like, what your comfort level is, just kind of given the current state we're in and the demand you're seeing from the commercial side. Comfort level with... Meaning, do you feel like you have enough hardware and your service provider channel has enough hardware to, you know, install the kind of demand you see in the pipeline with the commercial side?
spk06: Yeah, good question. I would say at the moment, this is an estimate, but if I were to put a number on it, I would say we're probably 90. We have out there right now about 85, 90% of what we would like to have floating around. So are there shortages of some components? Yes, there are shortages of some components. Are they materially impacting the commercial service providers today? No. A service provider can say, okay, I don't have this particular device at the moment, but I have a substitute device that is almost as good or almost as effective in this situation. I'm going to install that one. So I wouldn't say that it's blue sky, but thus far we have been able to deploy capital in securing the supply chain and keep things moving, I think, pretty effectively. And we feel like that will likely be the case as we go into Q3 and Q4. But it's not perfect, as I would say.
spk05: Got it. Fair enough. I appreciate the insight. And then the second one, I think in the last call you talked about attach rates for video installs around 70%. Just curious what that metric was in the second quarter.
spk06: The attach rate for video and installs. I think in the past we've talked about, you know, there's a couple different metrics there that we watch a little bit. One is the attach rate of video as a solution to an intrusion system. And the other is the, and it may not be answering the question, the attached rate of video analytics on every video install. So the number you stated, 70%, resonates because that is the percentage of customers who buy a video camera with one of our service plans and take video analytics, which is pretty important. That means they're getting great service. We're getting a bit higher on the ARPU, and they're really leveraging all of the R&D investment we've made in making the video experience pleasant. In terms of the attach rate, meaning what percentage of new customers are actually putting video systems on their home or their business, that right now is around 46%, and that's a healthy improvement, continues to grow. Did I answer the question? Okay.
spk01: Yeah, you did.
spk05: You did. Thank you.
spk01: Thank you. Our next question comes from the line of Jack Vander Aard from Maxim Group. Your line is now open.
spk08: Great. Guys, congrats on the solid results across the board. Thanks for taking my questions. Steve Trundle, just nice to hear commercial business momentum really picked up. It's even above pre-COVID levels. It's great to hear it. It sounds like residential in North America at least has continued to climb as well, so that's good. Just wondering if you could talk about maybe split that return of momentum between just ARPU increases because of these increasing video catches in both commercial and residential, and then also just new installations in general. Is it kind of an even balance of what's driving both the strength in those two markets, or is one kind of skewed more towards ARPU increases or new property installations?
spk06: I would say that roughly, I mean, so roughly 25% of the outperformance is driven by a wider assortment of products being installed, especially more video. So that translates into some ARPU gain and even some ARPU gain on the existing base of accounts. Quite a few of the cameras do go back to customers that have already been customers who choose to upgrade their systems. And roughly 75% of the momentum thus far is driven by higher than planned levels of installations. That's been a little lumpy, as Steve Valenzuela mentioned or we covered. We've made up for some weakness internationally with stronger performance domestically. For a while, we were making up for some weakness on the commercial side with stronger than expected residential results. Second quarter, I think it became more balanced in North America, where both commercial and residential performed nicely, and now we're sort of anxiously awaiting to see more full recovery internationally.
spk08: Great. Thank you. And then just a follow-up to that, maybe for Steve Valenzuela, just as it relates to, you know, commercial strength is rebounding. That's great to hear. And then with the subsidiary businesses, then, like with vacation rentals at Point Central and just all the subsidiary businesses in general, Juan, can you just remind me what the other software or SaaS revenue was for the quarter? And then also, what are you seeing in terms of Point Central and vacation rentals and some of these subsidiary businesses' strength? What's driving those? Is it similar to commercial? Those are returning to strength as well?
spk07: Sure, Jack. Yes. The other segment in the quarter was $8.3 million, up 22% year-over-year. continues to perform well. I will say, though, that the vacation rental business seems to be impacted more, I would say. We've seen very good growth in our energy hub, demand response for utilities. That's done really well. And it's been a bit spotty with vacation rental property management. It kind of fluctuated. And so we haven't seen the return to pre-pandemic levels in that side of the other segment. That's still been impacted.
spk06: Just to comment a little further on that, so we have a set of subsidiaries. Steve just mentioned Energy Hub. We also have Building 36, which is focused on the HVAC industry. That is growing very nicely right now, albeit off a small base. Energy Hub doing well. Point Central really consists of both the MDU space and the vacation rental space. So in one model, we're servicing customers that are installing short-term rentals, usually three-, four-, five-day type of rentals. And in the other segment, other part of Point Central, we're installing into apartment buildings for lock and thermostat control. The vacation rental stuff is actually very strong. The multifamily has been a little weaker just because you've seen in general The occupancy rates are just now sort of recovering on multifamily, and property owners have been reluctant to deploy capital until they get their occupancy up and until people are able to pay rent. So that's been a little softer, and that really is kind of the full rundown of what we're putting in that other segment.
spk08: Got it. Really appreciate the color, guys, and again, strong results. That's it for me. Thanks. Thank you.
spk01: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer