Alarm.com Holdings, Inc.

Good day, and thank you for standing by. And welcome to the Alarm.com fourth quarter 2022 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, simply press star 11 again. also be advised that today's conference is being recorded. I would now like to hand the conference over to the Vice President of Investor Relations, Matthew Sargman. Please proceed.

Good afternoon. Welcome to Alarm.com's fourth quarter and full year 2022 earnings conference call. This call is being recorded. Joining us today from Alarm.com are Steve Trundle, our CEO, and Steve Valenzuela, our CFO. Before we begin, a quick reminder. Management's discussion during today's call will include forward-looking statements, which include, among others, projected financial performance and key assumptions related thereto, including with respect to the vivant dispute, potential legal spend, and cost rationalization strategies, the impact of emerging market dynamics, trends, and anticipated market demand, the impact of the COVID pandemic, challenging global supply chain dynamics, and adverse macroeconomic conditions. our business strategies, plans, and objectives, and the integration of recent acquisitions and anticipated growth prospects of our new light acquisition, continued enhancements to our platform and offerings, opportunities for growth and expansion in our current and new markets. These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. These statements are subject to risks and uncertainties, including those contained in today's earnings press release and in the risk factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2022, and in subsequent reports that we file with the SEC from time to time, including our annual report on Form 10-K for the year ended December 31, 2022, that we intend to file with the SEC 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 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. However, 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 to 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 replay will be available on our website. Let's now turn the call over to Steve Trundle. You may begin.

Thank you, Matt. Good afternoon and welcome to everyone. We're pleased to report fourth quarter and full year results that exceeded our expectations. Our full year 2022 SAS and license revenue was $520.4 million, up 13% over the last year. Our adjusted EBITDA for the full year was $146.8 million. During the year, we continued to execute on our long-term growth strategy. We expanded our platform and continued to build diversity into our revenue streams. We ended 2022 with more than 11,000 service provider partners who deliver alarm.com solutions to more than 9.1 million connected property subscribers in over 60 countries around the globe. We now also have hundreds of thousands of Noonlight personal safety subscribers. I want to thank our service provider partners, and our employees for their contributions to our 2022 performance. I will use today's call to discuss our long-term strategy, focusing on four of our key growth areas, the commercial markets, our video software initiatives, our growing international business, and our new venture businesses. These business areas collectively represented nearly 30% of our total SAS revenue in the fourth quarter. I'll begin with the commercial markets. We have made solid progress in advancing our platform so that we can further target the nearly 6 million properties that make up the commercial market in the US and Canada. The Alarm.com for Business platform addresses small and medium-sized businesses or the SMB commercial segment. And our commercial video subsidiary, OpenEye, is a leading provider of video surveillance as a service for the large-scale enterprise segment. In 2022, OpenEye's SAS revenue more than doubled as compared to 2021, and they increased total new video channel activations by over 30% over the same period. Our overall commercial account base has grown to well over half a million accounts. Our commercial product strategy is to develop software-based capabilities that will deliver unique value to commercial customers through the deep integration of security, video, analytics, access control, and energy management solutions. Increasingly, we are also offering the active shooter detection technology developed by our subsidiary business, Shooter Detection Systems. With our expanding offering we expect that a commercial property with the full suite of our solutions will generate about six times the ARPU on average of our typical residential account. Innovation in video is integral to our commercial strategy. A high percentage of commercial properties have traditional video monitoring systems and our connected solutions are driving an upgrade cycle in the market. Last year, we launched a new video analytics service tier called Business Activity Analytics. It provides enterprise business intelligence reporting for occupancy tracking, people counting, and queue monitoring. With our analytics solution, a business owner can answer questions like, what is the average wait time for my customer to check out? Or how can I manage employees and keep track of their break times? or how many people walked past a particular product display in the last day. We also launched a new stream video recorder, or SVR. It enables 24 by 7 recording and event tracking for up to 16 commercial video cameras. The SVR also enables our new third party camera support capability, which allows commercial customers to upgrade to alarm.com services without the cost of ripping and replacing all their legacy video cameras. Our video platform also continues to drive meaningful results in the residential market. About half of our new residential accounts include an alarm.com video service. This growing account base exhibits higher user engagement and significantly lower attrition profiles than accounts with only a security system. Our video team is also launching a completely wireless battery-powered version of our flagship video doorbell. the 780B. This will give our service providers some flexibility to address unusual installations where a wired power source cannot be obtained and also address some international markets where regional wiring standards don't support a wired video doorbell. The 780B includes a custom video analytics package that we developed to provide high-value capabilities while optimizing battery life. Shifting to our international business, our base of global accounts surpassed half a million in 2022. We believe we can continue to drive significant international growth by comprehensively supporting our international partners to fully operationalize alarm.com and reach full-scale deployment in the diverse range of markets they address worldwide. In 2023, we will also expand support for a wider range of legacy security control panels that are deployed in international markets so they can leverage alarm.com's technology. The final element of our strategy is the continued development of our subsidiary businesses, Energy Hub, Noon Light, Point Central, Shooter Detection Systems, and Building 36. Energy Hub provides an enterprise software solution that enables utilities to flexibly manage electricity demand by orchestrating customer-owned and enrolled distributed energy resources. These resources include devices such as smart thermostats, batteries, commercial and industrial resources, solar inverters, and electric vehicle chargers. We're investing in the expansion of Energy Hub's ecosystem of distributed energy resources. This will enable utilities to access greater electricity load capacity as they manage the growing sources of stress on the grid. Our strategy is working. Utility clients are turning to Energy Hub programs far more often. In 2022, the number of demand response events called by utilities via Energy Hub increased 80% over 2021. Last year, we acquired Noonlight, a growing SaaS business that provides context-aware event management and emergency response capabilities. Noonlight enables providers of IoT devices and mobile app-based services to easily integrate emergency response capabilities into their offerings. As a hypothetical example, a company that makes a bike helmet which detects falls could write a few lines of code to call a NoonLight API and enable a first responder incident response when there is a bike accident. NoonLight gives alarm.com a technology environment for developing capabilities that leverage our deep partnerships in the security channel to extend central station monitoring services to address new use cases. I also want to spend a moment on the new organizational structure and roles we announced in an SEC filing in late January. With my enthusiastic support, our board of directors appointed Jeff Bedell, the president of our Ventures Business and Corporate Strategy, and Dan Kershner, the president of our Platforms business. Jeff will oversee all of our venture businesses, as well as corporate development and corporate strategy. Dan will oversee all product development for our core commercial and residential platforms as well as sales and marketing for our largest market, North America. As the pace of expansion and diversification has accelerated in our business, the timing was right to formalize this structure and give Jeff and Dan more responsibility while recognizing these two strong leaders. Jeff, and Dan have been integral members of our management team for nearly 10 years. And I have had the privilege of working with them even before they joined Alarm.com. They have each played very important roles in much of the progress we have made over the last decade. I expect even more from each of them as we move forward and pursue our growth goals. In future quarters, I will begin to occasionally bring Jeff and Dan into our quarterly call so that our investors can hear from them firsthand about the key business areas they oversee. We are very fortunate to have a strong management team with a long history of working together. As CEO and a co-founder, these organizational changes do not alter my level of involvement or engagement with the company. As I noted during last quarter's call, I feel good about where we are headed and am excited about continuing to pursue our strategy and building Alarm.com well beyond $1 billion in annual revenue. I have been both president and CEO since 2003 when Alarm.com had fewer than 10 employees and no revenue. As we are now much larger, I thought it was time to better distribute and delegate decision-making and leadership so that we can move faster as a team. Before I hand things over to Steve Valenzuela, I want to also update you on the Vivint matter. As you know, Vivint notified us that it will stop paying Alarm.com the royalty fees associated with the patent license agreement that we reached with Vivint in 2013. In late 2022, we filed for arbitration under the terms of that agreement. We expect the arbitration process to take 12 to 14 months. Subsequent to our filing for arbitration, Vivint announced that it was being acquired by NRG. That deal has not yet closed, and we are closely monitoring recent events, including a $189 million jury verdict against Vivint in federal district court announced last week. We also filed a patent infringement lawsuit against Vivint in January of this year, alleging Vivint is infringing on 15 patents that we added to our portfolio subsequent to the 2013 licensing agreement. We continue to work to ensure that we fully protect our patented technology from infringement and its use without license. To conclude, I'm pleased with our performance and the meaningful contributions of our growth initiatives in 2022. Our focus will continue to be on executing our strategy to generate growth in 2023 and beyond. And with that, let me turn things over to Steve Valenzuela. Steve?