Alarm.com Holdings, Inc.

Good day and thank you for standing by. Welcome to the Alarm.com fourth quarter and full year 2024 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'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 now like to hand the conference over to your speaker today, Matthew Zartman, Vice President, Strategic Communication and Investor Relations. Please go ahead.

Thank you, Kevin. Good afternoon, everyone. Joining us today are Steve Trundle, Alarm.com CEO, and Steve Valenzuela, our CFO. During today's call, we will be making forward-looking statements, which are predictions, projections, estimates, or 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 annual report on Form 10-K and our Form 8-K, both of which will be filed shortly 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 these forward-looking statements or other information that speak as of their respective dates. In addition, several non-GAAP 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 fourth quarter and four-year results that exceeded our expectations. Our SAS and license revenue in the fourth quarter was $165.7 million up 11.7% over the last year. Our adjusted EBITDA for the quarter was $46.4 million. I want to thank our service provider partners and our employees for their contributions to our 2024 performance. We continued to see nice momentum in the business as we finished out 2024, particularly in the commercial security and energy hub parts of our business. On today's call, I'll review our performance in the primary areas of the business and then provide more details on our recently announced acquisition of Checked. In 2024, our North American residential business continued to be the largest component of our diversified business. Our advantage in this area comes from our scale, the quality of our offerings, and the outstanding relationships we have built over the years with our service provider partners. We've been focused on this market with a sustained commitment of resources for longer than anyone else. While the market remains competitive, our service providers generally have little patience for less complete offerings. Consumer demand for professionally installed and serviced smart home security solutions remains solid. One product that we recently released for residential, and particularly for the residential rental market, is the new Pro Thermostat HQ. This unique thermostat product connects to our cloud directly via an onboard cellular communicator. The Pro HQ does not depend on a Wi-Fi network to provide connected thermostat capabilities. So a builder that builds a home and wants to remotely control the temperature and humidity of the property before it's sold now has a connected thermostat solution that does not require an internet subscription for the property. Similarly, Rental property managers frequently want to remotely manage the HVAC system for a property between tenants. These temporarily vacant properties often do not have Wi-Fi service. Property managers can now install and use the Pro Thermostat HQ to manage and monitor vacant properties all the time. Our growth initiatives also continued to scale during 2024. These include our commercial business, the international business, and energy hub. Collectively, 26% of our total SAS in 2024 was generated by these businesses. And collectively, their SAS revenue grew nearly 25% on a year-over-year basis. I'll review each of these businesses and highlight several recent developments that provide a nice backdrop for 2025. I'll start with our commercial business, which produced over $80 million in SaaS revenue in 2024. Physical security solutions continue to evolve into cloud-based software solutions that are more capable and cost-effective. Alarm.com purposefully designed our commercial offering to seamlessly integrate across access control, intrusion, and video monitoring, all into a single cohesive platform, accessible and easily managed through a single app. We believe that our solutions align with what the market wants, and our service provider partners offer the professional design, installation, and maintenance services that the commercial market requires. Included in our commercial business is OpenEye, our enterprise video business. OpenEye continues to post strong growth, generating nearly $20 million in SaaS revenue in 2024. As I have discussed on recent calls, Remote Video Monitoring Service, or RBM, should also further expand the addressable opportunity we have in the commercial market. Historically, the primary use case for video solutions was to support investigations and determine when an incident occurred and who was involved. RVM is transforming video surveillance cameras by enabling them to now also deter crime before it happens. One method that we use for deterrence is to apply AI to identify certain types of activities that appear suspicious. Our system can then engage the potential perpetrator with a generative AI voice that is dynamically tailored to the environment and the individual. We do all this in real time. Our recent acquisition of Checked takes this a step further and expands our position in the RVM space. We believe that Checked has built the best SAS software solution for control rooms to professionally monitor properties through an array of security video cameras. The Checked platform can ingest active surveillance events from nearly any video camera and enable those events to be effectively escalated and handled by control room personnel. Operators can focus on critical events, initiate deterrent activities, reduce false alarms, and speed response to threatening scenarios, and improve overall security outcomes. CHECKED also provides a bridge appliance for installation at the customer site that service providers can use to connect legacy video cameras directly to the central station control room. CHECKED supports most open-eye cameras today and will continue to support many third-party cameras. Over time, Alarm.com cameras will also be integrated into the checked control room solution. The company is small but has nice momentum in the RVM space. We've been impressed by the entrepreneurial energy and culture of the team and are very pleased that they will now be joining Alarm.com. Shifting to our international business for a moment, we continue to see solid contributions to our growth in 2024 as we expanded our product offerings and our service provider footprint in over 70 countries. In 2024, total revenue from outside of North America reached 6% of our consolidated total revenue as reported in our 10-K. We have the right set of marquee service provider partners internationally to support further growth in this area. In 2025, we'll continue to focus on growing our support for regional and local service providers to further grow and diversify our international revenue streams. The final element of our growth strategy is the continued development of our venture businesses. These SAS-based businesses consist of Energy Hub, Building 36, Point Central, and Shooter Detection Systems. Each is developing innovative IoT-enabled applications that further expand our addressable markets. I'll spend a moment discussing Energy Hub, which is the most developed of these businesses. Energy Hub provides software technology for grid-level energy management. It's now more than a $50 million SaaS business and growing nicely. The Energy Hub platform interfaces to various IoT devices to aggregate distributed energy resources, such as smart thermostats, residential batteries, electric vehicles, and charging infrastructure. Energy Hub then enables utilities to harness these grid edge devices into a virtual power plant that provides grid flexibility and load management during periods of supply and demand imbalance. In 2024, Energy Hub began introducing dynamic load shaping. This first to market capability uses machine learning algorithms to automatically dispatch granular groups of grid edge devices to provide more precise and sustained load shaping. With dynamic load shaping, utilities have greater flexibility for leveraging the virtual power plant production that Energy Hub offers. Dynamic load shaping functionality proved successful across three proof-of-concept tests last summer. Energy Hub pioneered the residential DERMS space and now manages over 1.6 million enrolled grid-edge devices for over 70 utility clients in the US. The business is in a strong position to unlock additional value streams in the rapidly evolving energy ecosystem. Finally, I would like to let our investors know that my colleague, Steve Valenzuela, our CFO, has decided that he will be retiring from Alarm.com. We are very thankful for all of Steve's contributions over the years, which I would like to recognize. Steve joined Alarm.com in November 2016. At that time, Alarm.com was a much smaller company with total revenue of just $248 million and earnings of $44 million. Under Steve's financial leadership, we have grown revenue by 280%. Today is Steve's 33rd earnings report with us and we are reporting more SaaS revenue this quarter than the business generated in the entire 12 months preceding his arrival. He has led countless calls with our investors and ensured that we always provide high-fidelity reporting on our business. As importantly, he has built a great finance team at Alarm.com that is geared up to continue executing our plan going forward. We will immediately begin a process to identify our next CFOs. We are grateful that Steve will stay with us as long as needed to support the transition to a new CFO. It's important to note that Steve's decision to leave is not due to any disagreement concerning the company's financial statements, operations, policies, or practices. So we get to have him help us for a while longer, but he will be retiring from the company this year. Steve, I've enjoyed working with you, and we thank you for your service to Alarm.com. And with that, let me turn things over to you to report on how we finished out 2024.