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Operator
Thank you for standing by and welcome to alarm.com's first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matthew Zartman, Vice President of Strategic Communications and Investor Relations. Please go ahead, sir.
Matthew Zartman
Good afternoon, everyone, and welcome to Alarm.com's first quarter 2024 earnings conference call. Please note that this call is being recorded. Joining us today from Alarm.com are Steve Trundle, our CEO, and Steve Valenzuela, our CFO. 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 after this call with the SEC along with the associated press release. This 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 information which speak as of their respective dates. In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of the GAAP to the 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?
Steve Trundle
Thank you, Matt. Good afternoon and welcome to everyone. We are pleased to report first quarter results that exceeded our expectations. Our SAS and license revenue in the first quarter was $150.3 million, up 11% over last year. Our adjusted EBITDA for the quarter was $37 million. I want to thank our service provider partners and our employees for their contributions to our results. On today's call, I'll share a few of my observations from our participation at ISC West, the largest security trade conference in the US, and I'll also update you on some of our recently released product capabilities before turning things over to Steve Valenzuela. In April, Alarm.com had a strong presence at ISC West which was attended by nearly 30,000 security trade professionals. The conference attracts a broad set of market participants from manufacturers and technology providers to a diverse range of North American and international service providers. So I had the opportunity to hear from many of our partners and update my feel for both the market and the competition that we see. There continues to be growing interest among service providers in our full range of commercial capabilities. One example that garnered attention during the conference is our recently launched cloud-based vehicle management solution called Connected Fleet. The solution offers professional-grade fleet management capabilities, including vehicle alerts, location tracking, and fuel monitoring. Connected Fleet is also deeply integrated into our commercial software to extend operational visibility beyond the walls of the business. Alarm.com's robust enterprise reporting engine offers business management alerts and automated trip reporting. Connected Fleet also integrates with our enterprise dashboard capability, enabling businesses to seamlessly monitor and manage vehicle fleets dispersed across thousands of locations. Many of our partners indicated that Connected Fleet's product integration, along with their existing trusted relationships with commercial end customers, will allow them to cross-sell effectively into the fleet management category. We began introducing Connected Fleet to our partners in April and expect a ramp-up period as they evaluate the solution and develop their go-to-market plans. Over time, we believe that this category will contribute to our growth on the commercial side of the business similar to the gradual but steady ramp in production that we have seen with our cloud-based access control solution. Shifting to our video platform, we recently launched a new video analytics capability called Familiar Vehicle Analytics. Subscribers can tag a familiar vehicle in a video clip and personalize the AI model associated with their property to recognize that particular vehicle going forward. They can then use our rules engine to create customized video recording and notification rules based on when certain known vehicles or unknown ones are identified. Familiar vehicle analytics will be offered with our video analytics service package. We believe it will provide another high value system touch point and create meaningful subscriber engagement multiple times per day. Looking ahead, we are positioned to continue to innovate in AI, and we plan to bring additional capabilities to market that allow customers to personalize the AI models associated with their specific property. Overall, I'm pleased with our first quarter results. We continue to deliver products and capabilities that allow us to grow revenues in our increasingly diverse markets, including the residential smart home market, and the commercial security, video, access control, and fleet management markets. We also continue to build our energy business, Energy Hub, and our international business with customers in over 60 countries around the world. Each of these initiatives has reached different stages of maturity, and their operating margin structures range from negative to the high 20s. Our goal is to build out each of these areas while also producing adjusted EBITDA margins on an overall consolidated basis of 18% as we grow the business. 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. With that, I'll hand things over to Steve Valenzuela to review our financials. Steve?
Steve Valenzuela
Thanks, Steve. I'll begin with a review of our first quarter 2024 financial results and then provide our updated guidance before opening the call for questions. First quarter SAS and license revenue of $150.3 million grew 11% from the same quarter last year. Our SAS and license revenue visibility remains high, with a revenue renewal rate of 94% in the first quarter at the higher end of our expected range. Hardware and other revenue in the first quarter was $72.9 million, down slightly from $74.3 million in Q1 2023, mainly due to fewer sales of door controllers and thermostats. Total revenue of $223.3 million for the first quarter grew 6.5% year-over-year. SAS and license gross margin for the first quarter was 86.4%, up about 90 basis points from 85.5% in the year-ago quarter. Hardware growth margin was 23.1% for the first quarter, down from 23.9% in the year-ago quarter, mainly due to product mix. Total growth margin was 65.7% for the first quarter, up from 63.7% for Q1 2023, due to increased SAS margins and a higher mix of SAS revenue. Turning to operating expenses, R&D expenses in the first quarter were 66 million compared to 61.9 million in the first quarter of 2023, mainly due to increased headcount and related compensation expenses. We ended the first quarter with 1,139 employees in R&D, up from 1,042 employees in Q1 2023. Total headcount increased to 2,002 employees for the first quarter, compared to 1,858 employees in the year-ago quarter. Sales and marketing expenses in the first quarter were 25.5 million, or 11.4% of total revenue, down from 26.6 million, or 12.7% of revenue in the same quarter last year, mainly due to less program spending. Our G&A expenses in the first quarter were 29.3 million, up from 28.5 million in the year-ago quarter, mainly due to a $4 million bad debt reserve for a note receivable to a service provider who defaulted on senior loans, partially offset by lower legal expenses. In the first quarter, GAAP net income was $23.6 million, up 63% from GAAP net income of $14.4 million for Q1 2023. Non-GAAP adjusted EBITDA in the first quarter was $37 million, up 21.2% from $30.6 million for Q1 2023. Non-GAAP adjusted net income was $27.3 million, or 50 cents per diluted share in the first quarter, compared to $22 million, or 41 cents per share for the first quarter of 2023. Turning to our balance sheet, we ended the first quarter with $747.9 million of cash and cash equivalents up from $697 million at December 31, 2023. In April this year, we paid $43.5 million for our 2023 R&D tax due to the change in Section 174 of the Internal Revenue Tax Code requiring companies to capitalize their R&D costs over 5 to 15 years for tax purposes. Turn into our financial outlook for the second quarter of 2024, We expect SAS and license revenue of 153.8 to 154 million. For the full year of 2024, we are raising our expectations for SAS and license revenue to be between 624.5 to 625 million, up from our prior guidance of 622.5 to 623.5 million. We are projecting total revenue for 2024 of 914.5 to $931 million, increased from our prior guidance of $912.5 to $933.5 million, which includes estimated hardware and other revenue of $290 to $306 million. We estimate that adjusted EBITDA for 2024 will be between $164 to $166 million, up from our prior guidance of $160 to $164 million. We expect adjusted EBITDA for the second quarter of 2024 to represent approximately 22 to 23% of our annual guide. Non-GAAP net income for 2024 is projected to be $118.5 to $119.5 million, or $2.14 to $2.16 per dilute share, up from our prior guidance of $116 to $118.1 million or $2.10 to $2.14 per diluted share. EPS is based on an estimate of 55.3 million weighted average diluted shares outstanding. We currently project our non-GAAP tax rate for 2024 to remain at 21% under current tax rules. We expect full-year 2024 stock-based compensation expense of 54 to 56 million. In summary, we are focused on executing on a strategic business plan and investing in our long-term strategy while continuing to deliver profitable growth. And with that, operator, please open the call for Q&A.
Operator
Certainly. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 1-1 on your telephone. And our first question comes from the line of Darren from Roth. Your question, please.
Darren
Thank you. Steve, maybe a big picture question. Given you guys are in the machine learning space, if you kind of look at the ecosystem, and I appreciate you talked about fleet management, which sounds like it's a new product that expands. But when you think about the olive branches in this business, beyond just kind of commercial and home security, like where are we in terms of the industry and more specifically alarm relativity industry and kind of where those olive branches can go. Thank you.
Steve Trundle
Yeah, interesting question, Darren. Well, I would say big picture that we're going to continue to find purpose for new devices that collect data simply because the value of the data derived from each device is now substantially higher than it was three or four years ago before a lot of the AI activity that everyone is talking about now. So if you kind of tie it back to what we've done, the cameras, as an example, themselves were valuable three or four years ago, but they're infinitely more valuable when they can tell you if it's a family member or an unknown car or if there are people standing in line longer than you would like them to stand in line at your business. So the value of the device is getting higher. And as a result of the intelligence that could be derived from the data, take that to connected fleet, for example. When we get out there and we have a service provider partner that puts on a customer with 1,000 vehicles, the analysis now available from that data is just substantially higher. So what it means for us is, ideally, we're well-positioned to continue to look at places where we can generate and harvest and then derive intelligence from it. And with our backgrounds in software and IoT device development and increasingly in AI, I think we'll be, you know, well-positioned to discover those olive branches as the market makes room for them.
Darren
Thank you.
Operator
Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. One moment for our next question. And our next question comes from the line of Saket Kalia from Barclays. Your question, please.
Saket Kalia
Hey, great. Hey, guys. Thanks for taking my questions here. How are you?
Steve Trundle
Hey, Saket. How are you?
Saket Kalia
Hey, good. Good, Steve. Maybe first for you, Steve Valenzuela, did we talk about what percentage of the business came from emerging products? Remind me, I think it's about 25% of SaaS revenue was growing very quickly. Did you have an updated sort of rough range on that?
Steve Valenzuela
It's still about the same as what we talked about last quarter. It was about 31% of SaaS coming from the growth segment, and it grew about 26% year over year. So it's still running about the same rate.
Saket Kalia
Great. That's great. Steve, maybe for you, Just to open up the question, any updates on sort of the ADT process and what impact, if any, that's happening on the business?
Steve Trundle
Sure. Yeah, we probably take our primary cue there from what they're publicly communicating. I think they have made some progress in their rollouts. So we're just sort of benchmarking that. that and specifically their comments on their timeframes. It looks like it's a process that will continue to unfold throughout the year. We have not seen meaningful change in the dynamic to date. Continue to keep our eye on things there.
Saket Kalia
Got it. Very helpful. I'll get back in queue. Thanks, guys. Okay. Thanks, sir.
Jack Bender Arcade
Thank you.
Operator
Thank you. And as a reminder, ladies and gentlemen, if you do have a question, please press star 11. One moment for our next question. Our next question comes from the line of Jack Bender Arcade from Maxim Group. Your question, please.
Jack Bender Arcade
Hey, great, guys. Nice results. Great and great race to the outlook. Maybe a question for Steve Valenzuela on just the international business. Are you able to just like touch on what, I don't know, if there's a number of properties or just any sort of growth rate, how that business is kind of growing? I think it's been a little bit since we've had an update there.
Steve Valenzuela
Yeah, sure, Jack. So international is now 5% of total revenue that's up from 4%. So we are seeing decent growth there. It increased about 20% year over year.
Jack Bender Arcade
Excellent. Okay. And maybe just a follow up there just international verse in terms of home security, residential market, international versus domestic, just, you know, can you just kind of touch on what what what inning we're in for international relative to domestic, and when we expect that business to really grow.
Steve Trundle
Yeah, I'll take a whack at that one, Jack. I would say while we've been playing the game for quite a while now, it's probably a longer game than the domestic game in that you're dealing with a collection of many, many different markets, and everyone's playing on sort of a slightly different scoreboard. So At the moment, we're out in about 60 countries globally. Sometimes the sales cycle, and really the educational cycle, seems to take a bit longer, again, because the market's not homogenous. So I would say we're still early days. Even with some of the partners that we may have announced or talked about three years ago, we're still probably, I'd say, second, third inning there at the moment. Got it.
Jack Bender Arcade
Okay. Well, I appreciate the update, and good to see the strong results, guys. Thanks.
Darren
Thank you.
Jack Bender Arcade
Thank you.
Operator
Thank you. And as a reminder, if you have a question at this time, please press star 1-1 on your telephone.
Corey
And our next question comes from the line. Corey Carpenter from J.P. Morgan. Your question, please. You can have your line on mute.
Steve Trundle
Hello, Corey? We're struggling to hear the question, I'm afraid.
Corey
As a reminder, ladies and gentlemen, once again, if you have a question, please press star 1-1. This does question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. One moment.
Operator
And this does conclude the conference as well as the Q&A session. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.
Steve Trundle
Thank you.
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